As filed with the Securities and Exchange Commission on May 22, 2012
File No. 333-180523
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
x
Pre-Effective Amendment No. 1
¨
Post-Effective Amendment No.
NUVEEN ENERGY MLP TOTAL RETURN FUND
(Exact Name of Registrant as Specified in Charter)
333 West
Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices, Zip Code)
Registrants Telephone
Number, including Area Code
(800) 257-8787
Kevin J.
McCarthy
Vice President and Secretary
Nuveen Investments
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
Copy to:
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Deborah Bielicke Eades
Vedder Price P.C.
222 North LaSalle Street
Chicago, Illinois 60601
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Eric F. Fess
Chapman and Cutler LLP
111 West Monroe Street
Chicago, Illinois 60603
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Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Title of Securities Being Registered
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Amount Being
Registered(1)
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Proposed
Maximum
Offering Price
Per Unit(1)
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Proposed
Maximum Aggregate
Offering Price(1)
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Amount of
Registration Fee
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Common Shares, $.01 Par Value Per Share
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18,200,000 Shares
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$16.98
(2)
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$309,036,000.00
(2)
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$35,415.53
(3)
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(1)
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Estimated solely for the purpose of calculating the registration fee.
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(2)
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Net asset value per share of common shares on May 15, 2012.
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(3)
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A registration fee of $103.66 was previously paid in connection with the initial filing.
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The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall
become effective on such date as the Securities and Exchange Commission, action pursuant to said Section 8(a), may determine.
IMPORTANT NOTICE TO SHAREHOLDERS OF
NUVEEN ENERGY MLP TOTAL RETURN FUND (JMF)
AND
MLP & STRATEGIC EQUITY FUND INC. (MTP)
(EACH, A FUND AND TOGETHER, THE FUNDS)
, 2012
Although we recommend that you read the complete Joint Proxy Statement/Prospectus, for your convenience, we have
provided a brief overview of the issues to be voted on.
Q.
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Why am I receiving this Joint Proxy Statement/Prospectus?
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A.
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You are receiving this Joint Proxy Statement/Prospectus in connection with the annual shareholder meetings of the Funds. The following proposals will be considered:
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the election of members of the Board of Directors or Board of Trustees, as applicable, for each Fund (the list of specific nominees is contained in the
enclosed Joint Proxy Statement/Prospectus); and
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the reorganization of MLP & Strategic Equity Fund Inc. into Nuveen Energy MLP Total Return Fund.
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Proposal Regarding the Reorganization
Q.
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What actions have each Funds Board of Directors or Board of Trustees, as applicable, approved?
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A.
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Each Funds Board of Directors or Board of Trustees (each, a Board), as applicable, has approved a proposal to merge MLP & Strategic Equity
Fund Inc. (the Acquired Fund) into Nuveen Energy MLP Total Return Fund (the Acquiring Fund) (the Reorganization).
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Q.
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Why has the Board recommended this proposal?
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A.
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The Board believes that the proposal would benefit shareholders of both Funds through the potential for enhanced competitiveness, lower fees and administrative expenses
(exclusive of leverage) and improved secondary market trading. The Acquiring Fund and the Acquired Fund have similar investment objectives and policies and similar portfolio compositions. The Funds are managed by the same adviser, subadviser and
portfolio managers. Based on these considerations, the Board has determined that the proposed Reorganization would be in the best interests of each Fund.
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Q.
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How will the Reorganization affect Fund expenses?
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A.
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The Acquiring Fund is leveraged, and will maintain such leverage following the Reorganization, while the Acquired Fund currently does not use leverage. As a result, the
Acquiring Fund has higher total operating expenses than the Acquired Fund primarily due to the costs of leverage. Total operating expenses of the combined fund (exclusive of leverage) are expected to be lower than the total operating expenses
(exclusive of leverage) of the Acquiring Fund or Acquired Fund. The Acquired Fund has higher current and deferred income tax expenses than the Acquiring Fund as of the most recent fiscal period.
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Q.
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What are the potential benefits of the Reorganization?
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A.
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The investment adviser to the Funds and the Board believe that the proposed Reorganization is expected to offer the following potential benefits:
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Lower fees and operating expenses
per common share (excluding costs of leverage) from greater economies of scale as the combined funds
size results in the same or lower effective management fee rate on managed assets and allows fixed operating expenses to be spread over a larger asset base.
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Improved secondary market trading
as the combined funds greater market liquidity may lead to narrower bid-ask spreads and smaller
trade-to-trade price movements, and the potential for higher common share net earnings and enhanced total returns over time may lead to higher common share market prices relative to net asset value.
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Greater investment flexibility
as a result of the larger assets of the combined fund and the use of a leveraged investment strategy.
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Q.
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Will the Reorganization impact Fund distributions to common shareholders?
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A.
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The Reorganization is not expected to adversely impact the current distribution rate to common shareholders of the Acquiring Fund. Currently, the Acquiring
Funds distribution rate is higher than the Acquired Funds distribution rate, primarily resulting from differences in portfolio composition, lower Acquiring Fund fees and operating expenses and increased common net earnings from the
Acquiring Funds leveraged investment strategy.
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Q.
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Do the Funds have similar investment objectives and policies?
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A.
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Yes. The Funds have similar investment objectives, policies and risks but there are some differences. The Funds investment adviser is Nuveen Fund Advisors,
Inc., a wholly-owned subsidiary of Nuveen Investments, Inc. Both Funds are managed by FAMCO MLP, a registered investment adviser and a division of Advisory Research Inc. (FAMCO MLP or Subadviser), a wholly-owned subsidiary of
Piper Jaffray Companies. In 2012, the FAMCO MLP team and its business was transferred from Fiduciary Asset Management Inc. to its affiliated investment adviser, Advisory Research Inc. James J. Cunnane Jr., CFA, chief investment officer at
FAMCO MLP, and Quinn T. Kiley, senior portfolio manager, co-manage both Funds. The Acquiring Fund invests its assets primarily in master limited partnerships (MLPs) in the energy sector. The Acquired Fund invests substantially all of its
assets in MLPs operating in the energy infrastructure sector of the market.
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The Acquiring Fund is a non-diversified fund, while the Acquired Fund is a diversified fund. The Acquiring Fund currently uses leverage in the form of debt borrowings,
while the Acquired Fund does not engage in leverage. The Acquired Fund is subject to certain investment restrictions that are not applicable to the Acquiring Fund, which are discussed in the enclosed Joint Proxy Statement/Prospectus.
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Q.
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What specific proposals will I be asked to vote on in connection with the proposed Reorganization?
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A.
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Shareholders of the Acquired Fund will be asked to vote on an Agreement and Plan of Reorganization. Shareholders of the Acquiring Fund will be asked to vote on
the issuance of common shares in connection with the Reorganization. In each case, common shareholders will vote as a single class with respect to their Fund.
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Q.
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Will shareholders of the Acquired Fund receive new shares in exchange for their current shares?
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A.
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Yes. Upon the closing of the Reorganization, the Acquired Fund will transfer all of its assets to the Acquiring Fund in exchange for common shares of the
Acquiring Fund, and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund. The Acquired Fund will then be liquidated, dissolved and terminated in accordance with applicable law.
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Acquired Fund shareholders will become shareholders of the Acquiring Fund. Holders of common shares of the Acquired Fund will receive newly issued common shares of the
Acquiring Fund, the aggregate net asset value of which will be equal to the aggregate net asset value of the common shares of the Acquired Fund held immediately prior to the Reorganization (including for this purpose fractional Acquiring Fund shares
to which shareholders would be entitled). Fractional shares will be sold on the open market and shareholders will receive cash in lieu of such fractional shares.
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Current shareholders of the Acquiring Fund will remain shareholders of the Acquiring Fund.
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Q.
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Does the Reorganization constitute a taxable event for the Acquired Fund shareholders?
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A.
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No. The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes. It is expected that you will
recognize no gain or loss for federal income tax purposes as a direct result of the Reorganization, except that gain or loss may be recognized with respect to any cash received in lieu of fractional Acquiring Fund common shares. To the extent that
portfolio securities are sold in connection with the Reorganization, the Acquired Fund may realize capital gains or losses. Unless the Acquired Fund has capital losses to offset such gains, the gains will be taxable to the Acquired Fund and may
reduce its net asset value. However, it is not expected that any significant portfolio sales by the Acquired Fund will occur prior to the close of the Reorganization (less than 5% of the assets of the Acquired Fund). Following the close of the
Reorganization, the combined fund anticipates employing additional cash proceeds from the implementation of leverage for the combined fund to make new investments or increase existing investment positions in the portfolio, where desirable, and, in
this connection, also expects to sell or reduce certain other investments. Had this repositioning occurred as of March 15, 2012, it would have resulted in portfolio turnover of up to 15% of the combined funds assets.
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Q.
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How will the Reorganization affect deferred tax assets of the Funds?
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A.
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Because each Fund is taxed as a corporation, each Fund records a deferred tax asset (an amount that can be used to offset future taxable income) or a deferred
tax liability (a tax due in the future). These deferred tax assets are attributable to net operating losses, realized capital losses and unrealized losses on investments. Utilization of a deferred tax asset is dependent on whether there will be
sufficient future taxable income within the carryforward periods to realize a portion or all of the deferred tax benefit.
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Any net deferred tax asset or liability is included in each Funds net asset value and will be calculated as of the valuation time and will impact the number of
shares exchanged in the Reorganization. As a result of the Reorganization, the Acquiring Fund will succeed to the net deferred tax assets or net deferred tax liabilities, if any, of the Acquired Fund, but will be subject to the limitations imposed
by Section 382 of the U.S. Internal Revenue Code of 1986, as amended. This may result in the Acquiring Fund being able to utilize more or less of the tax
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benefits than reflected in the Acquired Funds net deferred tax asset as calculated as of the valuation time.
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Q.
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Will I have to pay any direct fees or expenses in connection with the Reorganization?
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A.
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No. The Reorganization is expected to result in benefits for each Fund. The costs of the Reorganization will be allocated between the Funds ratably based on
the relative benefits of the Reorganization to each Fund during the first year following the Reorganization. Common shareholders will indirectly bear the costs of the Reorganization (whether or not the Reorganization is consummated). The costs of
the Reorganization are estimated to be $214,000 for the Acquiring Fund and $327,000 for the Acquired Fund.
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Q.
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What is the timetable for the Reorganization?
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A.
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If the shareholder voting and other conditions to closing are satisfied (or waived), the Reorganization is expected to take effect on or about August 20, 2012 or
as soon as practicable thereafter.
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Q.
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How does the Board recommend that I vote on the Reorganization-related proposals?
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A.
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After careful consideration, the Board has determined that the Reorganization is in the best interests of each Fund and recommends that you vote FOR your
Funds proposal.
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General
Q.
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Who do I call if I have questions?
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A.
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If you need any assistance, or have any questions regarding the proposals or how to vote your shares, please call Computershare Fund Services, the Funds
proxy solicitor, at (866) 300-0742 weekdays during its business hours of 9:00 a.m. to 11:00 p.m. and Saturdays 12:00 p.m. to 6:00 p.m. Eastern time. Please have your proxy materials available when you call.
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Q.
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How do I vote my shares?
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A.
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You may vote by mail, by telephone or over the Internet:
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To vote by mail
, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States.
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To vote by telephone
, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as
a guide.
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To vote over the Internet
, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide.
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Q.
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Will anyone contact me?
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A.
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You may receive a call from Computershare Fund Services, the proxy solicitor hired by your Fund, to verify that you received your proxy materials, to answer any
questions you may have about the proposals and to encourage you to vote your proxy.
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We recognize the inconvenience of the proxy solicitation process and would not impose on you if we did not believe that the matters being proposed were important. Once
your vote has been registered with the proxy solicitor, your name will be removed from the solicitors follow-up contact list.
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Your vote is very important. We encourage you as a shareholder to participate in your Funds governance by returning your vote as soon as possible. If enough
shareholders fail to cast their votes, your Fund may not be able to hold its meeting or the vote on each issue, and will be required to incur additional solicitation costs in order to obtain sufficient shareholder participation.
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[ ], 2012
NUVEEN ENERGY MLP TOTAL RETURN FUND (JMF)
AND
MLP & STRATEGIC EQUITY FUND INC. (MTP)
(EACH, A FUND AND TOGETHER, THE FUNDS)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 12, 2012
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the Annual Meeting) of each of Nuveen Energy MLP Total Return
Fund (Energy MLP Total Return or the Acquiring Fund) and MLP & Strategic Equity Fund Inc. (MLP & Strategic Equity or the Acquired Fund) will be held in the offices of Nuveen
Investments, Inc. (Nuveen or Nuveen Investments), 333 West Wacker Drive, Chicago, Illinois 60606, on Thursday, July 12, 2012, at
2:00 p.m.
, Central time, for the following purposes:
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1.
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Election of Board Members
. For shareholders of each Fund to elect members of the Board of Directors or Board of Trustees, as applicable
(each, a Board and each Director or Trustee, a Board Member) as follows:
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(a)
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For Energy MLP Total Return, three (3) Board Members to be elected by the holders of common shares voting as a single class; and
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(b)
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For MLP & Strategic Equity, ten (10) Board Members to be elected by the holders of common shares voting as a single class.
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2.
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Agreement and Plan of Reorganization
. The common shareholders of the Acquired Fund voting as a single class to approve an Agreement and
Plan of Reorganization pursuant to which the Acquired Fund would: (i) transfer all of its assets to the Acquiring Fund in exchange solely for common shares of the Acquiring Fund, and the Acquiring Funds assumption of all of the
liabilities of the Acquired Fund; (ii) distribute such shares of the Acquiring Fund to the common shareholders of the Acquired Fund (with cash being issued in lieu of fractional common shares), and (iii) liquidate, dissolve and terminate
in accordance with applicable law.
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3.
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Approval of Issuance of Common Shares by the Acquiring Fund
. The common shareholders of the Acquiring Fund voting as a single class to
approve the issuance of additional common shares in connection with the Reorganization pursuant to the Agreement and Plan of Reorganization.
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4.
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To transact such other business as may properly come before the Annual Meeting.
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Only shareholders of record as of the close of business on May 15, 2012 are entitled to notice of and to vote at the Annual Meeting or adjournments or postponements thereof.
All shareholders are cordially invited to attend the Annual Meeting. In order to avoid delay
and additional expense for the Funds, and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend the Annual Meeting. You may vote by mail, by telephone or over the Internet.
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To vote by mail
, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States.
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To vote by telephone
, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as
a guide.
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To vote over the Internet
, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide.
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Kevin J. McCarthy
Vice President and Secretary
The Nuveen Funds
The information contained in this Joint Proxy Statement/Prospectus is not complete and may
be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Joint Proxy Statement/Prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not permitted.
NUVEEN FUNDS
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(800) 257-8787
Subject to completion, dated
, 2012
JOINT PROXY STATEMENT/PROSPECTUS
(COMMON SHAREHOLDERS)
NUVEEN ENERGY MLP TOTAL RETURN FUND (JMF) AND
MLP & STRATEGIC EQUITY FUND INC. (MTP)
(EACH, A
FUND AND TOGETHER, THE FUNDS)
, 2012
This Joint Proxy Statement/Prospectus is being furnished to the common shareholders of each of Nuveen Energy MLP Total
Return Fund (Energy MLP Total Return or the Acquiring Fund) and MLP & Strategic Equity Fund Inc. (MLP & Strategic Equity or the Acquired Fund), each a closed-end management investment
company, in connection with the solicitation of proxies by each Funds Board of Directors or Board of Trustees, as applicable (each, a Board and each Director or Trustee, as applicable, a Board Member) for use at the
Annual Meeting of Shareholders of each Fund to be held in the offices of Nuveen Investments, Inc. (Nuveen or Nuveen Investments), 333 West Wacker Drive, Chicago, Illinois 60606, on Thursday, July 12, 2012, at
2:00 p.m.
, Central time, and at any and all adjournments or postponements thereof (each, an Annual Meeting and together, the Annual Meetings) to consider the proposals listed below and discussed in greater
detail elsewhere in this Joint Proxy Statement/Prospectus. The Acquiring Fund is organized as a Massachusetts business trust, while the Acquired Fund is organized as a Maryland corporation. The enclosed proxy and this Joint Proxy
Statement/Prospectus are first being sent to shareholders of the Funds on or about
May
_
, 2012. Shareholders of record of the Funds as of the close of business on May 15, 2012 are entitled to notice of, and to vote at, the
Annual Meeting and any and all adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus explains
concisely what you should know before voting on the proposals described in this Joint Proxy Statement/Prospectus or investing in the Acquiring Fund. Please read it carefully and keep it for future reference.
The securities offered by this Joint Proxy Statement/Prospectus have not been approved or disapproved by the Securities and Exchange
Commission (SEC), nor has the SEC passed upon the accuracy or adequacy of this Joint Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense.
On the matters coming before each Annual Meeting as to which a choice has been specified by shareholders on the accompanying proxy card,
the shares will be voted accordingly where such proxy card is properly executed, timely received and not properly revoked (pursuant to the instructions below). If a proxy is returned and no choice is specified, the shares will be voted
FOR
the proposals. Shareholders of a Fund who execute proxies may revoke them at any time before they are voted by filing with that Fund a written notice of revocation, by delivering a duly executed proxy bearing a later
date, or by attending the Annual Meeting and voting in person. Merely attending the Annual Meeting, however, will not revoke any previously submitted proxy.
The Board of each Fund has determined that the use of this Joint Proxy Statement/Prospectus for the Annual Meeting is in the best
interests of each Fund and its shareholders in light of the similar matters being considered and voted on by the shareholders.
The following table indicates which shareholders are solicited to vote with respect to each matter:
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For Energy MLP Total Return,
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1(a)
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the common shareholders voting as a single class to elect three (3) Class III Board Members, and
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3
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the common shareholders voting as a single class to approve the issuance of additional common shares in connection with the reorganization pursuant to the Agreement and Plan of
Reorganization.
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For MLP & Strategic Equity,
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1(b)
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the common shareholders voting as a single class to elect ten (10) Board Members, and
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2
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the common shareholders voting as a single class to approve the Agreement and Plan of Reorganization.
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A quorum of shareholders is required to take action at each Annual Meeting. A majority of the shares
entitled to vote at each Annual Meeting, represented in person or by proxy, will constitute a quorum of shareholders at that Annual Meeting. Votes cast by proxy or in person at an Annual Meeting will be tabulated by the inspectors of election
appointed for that Annual Meeting. The inspectors of election will determine whether or not a quorum is present at the Annual Meeting. The inspectors of election will treat abstentions and broker non-votes (i.e., shares held by brokers
or nominees, typically in street name, as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote, and (ii) the broker or nominee does not have discretionary voting power on a
particular matter) as present for purposes of determining a quorum.
For Energy MLP Total Return, the affirmative vote of a
plurality of the shares present and entitled to vote at the Annual Meeting will be required to elect the Board Members of that Fund. For purposes of determining the approval of the proposal to elect nominees for Energy MLP Total Return, abstentions
and broker non-votes will have no effect on the election of Board Members. For MLP & Strategic Equity, the affirmative vote of a majority of the shares outstanding and entitled to vote at the Annual Meeting will be required to elect the
Board Members of that Fund. For purposes of determining the approval of the proposal to elect nominees for MLP & Strategic Equity, abstentions and broker non-votes do not count as votes FOR the proposal and have the same effect
as votes AGAINST the proposal.
Those persons who were shareholders of record at the close of business on
May 15, 2012 will be entitled to one vote for each share held and a proportionate fractional vote for each fractional share held.
ii
As of May 15, 2012, the shares of the Funds issued and outstanding were as follows:
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Fund, Ticker Symbol*
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Common Shares
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Nuveen Energy MLP Total Return, JMF
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23,800,246
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MLP & Strategic Equity Inc., MTP
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14,810,750
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*
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Each Funds common shares are listed on the New York Stock Exchange (NYSE).
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The reorganization seeks to combine two Funds that have similar investment objectives, policies and risks to achieve certain economies of
scale and other operational efficiencies for the Funds (the Reorganization). The Agreement and Plan of Reorganization between the Acquired Fund and Acquiring Fund (the Agreement) provides for: (i) the Acquiring
Funds acquisition of all of the assets of the Acquired Fund in exchange solely for newly issued common shares of the Acquiring Fund, par value $0.01 per share (Acquiring Fund Common Shares), and the Acquiring Funds assumption
of all of the liabilities of the Acquired Fund; (ii) the pro rata distribution of the Acquiring Fund Common Shares received by the Acquired Fund to its common shareholders; and (iii) the liquidation, dissolution and termination of the
Acquired Fund. The aggregate net asset value of Acquiring Fund Common Shares received by the Acquired Fund in the Reorganization will equal the aggregate net asset value of Acquired Fund common shares held by shareholders of the Acquired Fund
immediately prior to the Reorganization. No fractional Acquiring Fund Common Shares will be issued to the Acquired Funds shareholders and, in lieu of such fractional shares, the Acquired Funds shareholders will receive cash in an amount
equal to the value received for such shares in the open market, which may be higher or lower than net asset value.
The
Acquiring Fund will continue to operate after the Reorganization as a registered closed-end investment company with the investment objective and policies described in this Joint Proxy Statement/Prospectus.
The Reorganization is required to be approved by the affirmative vote of the holders of a majority of the outstanding shares of the
Acquired Fund, voting as a single class. In addition, common shareholders of the Acquiring Fund voting as a single class are being asked to approve the issuance of additional common shares of the Acquiring Fund in connection with the Reorganization.
The closing of the Reorganization is contingent upon certain conditions being satisfied or waived. Shareholders of the
Acquired Fund must approve the Reorganization of their Fund into the Acquiring Fund. The Acquiring Fund also must obtain shareholder approval of the issuance of common shares in the Reorganization in order for the Reorganization to occur. Because
the closing of the Reorganization is contingent on the Acquired Fund and the Acquiring Fund satisfying (or obtaining the waiver of) their respective closing conditions, it is possible that the Reorganization will not occur, even if shareholders of
your Fund approve the Reorganization and your Fund satisfies all of its closing conditions. If the requisite shareholder approvals are not obtained, each Funds Board may take such actions as it deems in the best interest of its Fund including
conducting additional solicitations with respect to the applicable proposal or continuing to operate the Acquired Fund as a stand-alone fund.
This Joint Proxy Statement/Prospectus concisely sets forth the information shareholders of the Funds should know before voting on the proposals and constitutes an offering of common shares of the
Acquiring Fund only. Please read it carefully and retain it for future reference.
iii
The following documents have been filed with the SEC and are incorporated into this Joint
Proxy Statement/Prospectus by reference:
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(i)
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the Statement of Additional Information relating to the proposed Reorganization, dated
, 2012 (the Reorganization SAI);
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(ii)
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the audited financial statements and related independent registered public accounting firms report for the Acquiring Fund and the financial highlights for the
Acquiring Fund contained in the Funds Annual Report for the fiscal year ended November 30, 2011;
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(iii)
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the audited financial statements and related independent registered public accounting firms report for the Acquired Fund and the financial highlights for the
Acquired Fund contained in the Funds Annual Report for the fiscal period ended November 30, 2011 (for the period November 1, 2011 through November 30, 2011);* and
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(iv)
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the audited financial statements and related independent registered public accounting firms report for the Acquired Fund and the financial highlights for the
Acquired Fund contained in the Funds Annual Report for the fiscal year ended October 31, 2011.
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*
Effective November 1, 2011, the Acquired Fund changed its fiscal and tax year ends from October 31 to November 30.
No other parts of the Funds Annual Reports are incorporated by reference herein.
Copies of the foregoing may be obtained without charge by calling (800) 257-8787 or writing the Funds at 333 West Wacker Drive, Chicago, Illinois 60606. If you wish to request a copy of the
Reorganization SAI, please ask for the Reorganization SAI. In addition, the Acquiring Fund will furnish, without charge, a copy of its most recent Annual Report to a shareholder upon request. Any such request should be directed to the
Acquiring Fund by calling (800) 257-8787 or by writing the Acquiring Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the 1934 Act), and the Investment Company Act of 1940, as amended (the
1940 Act), and in accordance therewith file reports and other information with the SEC. Reports, proxy statements, registration statements and other information filed by the Funds, including the Registration Statement relating to
the Acquiring Fund on Form N-14 of which this Joint Proxy Statement/Prospectus is a part, may be inspected without charge and copied (for a duplication fee at prescribed rates) at the SECs public reference room at 100 F Street, N.E.,
Washington, D.C. 20549 or at the SECs New York Regional Office (3 World Financial Center, Suite 400, New York, New York 10281) or Chicago Regional Office (175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604). You may call the SEC at
(202) 551-8090 for information about the operation of the public reference room. You may obtain copies of this information, with payment of a duplication fee, by electronic request at the following e-mail address:
publicinfo@sec.gov
, or
by writing the SECs Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may also access reports and other information about the Funds on the EDGAR
database on the SECs Internet site at
http://www.sec.gov
.
Each Funds common shares are listed on the NYSE.
Reports, proxy statements and other information concerning the Funds can be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005.
iv
This Joint Proxy Statement/Prospectus serves as a prospectus of the Acquiring Fund in
connection with the issuance of Acquiring Fund Common Shares in the Reorganization. No person has been authorized to give any information or make any representation not contained in this Joint Proxy Statement/Prospectus and, if so given or made,
such information or representation must not be relied upon as having been authorized. This Joint Proxy Statement/Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to
any person to whom, it is unlawful to make such offer or solicitation.
v
JOINT PROXY STATEMENT/PROSPECTUS
, 2012
NUVEEN ENERGY MLP TOTAL RETURN FUND (JMF)
AND
MLP & STRATEGIC EQUITY FUND INC. (MTP)
TABLE OF
CONTENTS
vi
TABLE OF CONTENTS
(continued)
vii
PROPOSAL NO. 1THE E
LECTION OF BOARD MEMBERS
(SHAREHOLDERS OF EACH FUND)
Pursuant to Energy MLP Total Returns organizational documents, the Board is divided
into three classes (Class I, Class II and Class III) with staggered terms, to be elected by the holders of the outstanding common shares and any outstanding preferred shares (if issued), voting as a single class, to serve until the third
succeeding annual meeting subsequent to their election or thereafter, in each case until their successors have been duly elected and qualified. At this Annual Meeting, holders of common shares are entitled to elect three (3) Board Members
designated as Class III Board Members. Board Members Bremner, Evans and Schneider have been designated as Class III Board Members and as nominees for Board membership for a term expiring at the annual meeting of shareholders in 2015 or
until their successors have been duly elected and qualified. Board Members Hunter, Kundert, Stockdale, Stringer, Toth and Amboian are current and continuing Board Members. Board Members Amboian, Kundert and Toth have been designated as Class II
Board Members for a term expiring at the annual meeting of shareholders in 2014 or until their successors have been duly elected and qualified. Board Members Hunter, Stockdale, Stone and Stringer have been designated as Class I Board Members for a
term expiring at the annual meeting of shareholders in 2013 or until their successors have been duly elected and qualified.
Pursuant to the organizational documents of MLP & Strategic Equity, all Board Members are to be elected to serve until the next
annual meeting or until their successors have been duly elected and qualified. Accordingly, for MLP & Strategic Equity, ten (10) Board Members are to be elected by all shareholders. Board Members Amboian, Bremner, Evans, Kundert,
Hunter, Schneider, Stockdale, Stone, Stringer and Toth are nominees for election by all shareholders.
It is the intention of
the persons named in the enclosed proxy to vote the shares represented thereby for the election of the nominees listed in the table below unless the proxy is marked otherwise. Each of the nominees has agreed to serve as a Board Member of each Fund
if elected. However, should any nominee become unable or unwilling to accept nomination for election, the proxies will be voted for substitute nominees, if any, designated by that Funds present Board.
For Energy MLP Total Return, each Board Member except for Board Member Stringer was appointed by the initial shareholder of the Fund as
of November 16, 2010. On January 2, 2011, Ms. Stringer was appointed as a Board Member for the Funds. For MLP & Strategic Equity, each Board Member was last elected to the Board at the annual meeting of shareholders held on
May 6, 2011.
Other than Mr. Amboian, no Board Member nominee is an interested person, as defined in the
1940 Act, of the Funds or of their investment adviser, Nuveen Fund Advisors, Inc. (the Adviser), and has never been an employee or director of Nuveen Investments, the Advisers parent company, or any affiliate. Accordingly, such
Board Members are deemed Independent Board Members.
For Energy MLP Total Return, the affirmative vote of a
plurality of the shares present and entitled to vote at the Annual Meeting will be required to elect the Board Members of that Fund. For purposes of determining the approval of the proposal to elect nominees for Energy MLP Total Return, abstentions
and broker non-votes will have no effect on the election of Board Members. For MLP & Strategic Equity, the affirmative vote of a majority of the shares outstanding and entitled to vote at the Annual Meeting will be required to elect the
Board Members of that Fund. For purposes of determining the approval of the proposal to elect nominees for MLP & Strategic Equity, abstentions and broker non-votes do not count as votes FOR the proposal and have the same effect
as votes AGAINST the proposal.
The Board unanimously recommends that shareholders vote FOR the election of the nominees
named below.
Board Nominees/Board Members
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Independent Board Members/Nominees
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Bremner
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(8/22/40)
|
|
Chairman
of Board
and
Board
Member
|
|
Term: Annual
or Class III
Board
Member until
2015
Length of
Service: Since
1996;
Chairman of
the Board
since 2008;
Lead
Independent
Director
(2005-2008)
|
|
Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the
Investment Company Institute.
|
|
231
|
|
None
|
|
|
|
|
|
|
Jack B. Evans
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(10/22/48)
|
|
Board
Member
|
|
Term: Annual
or Class III
Board
Member until
2015
Length of
Service:
Since
1999
|
|
President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Member of the Board of Regents for the State of Iowa University System; Director, Source
Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc. (a regional
financial services firm).
|
|
231
|
|
Director
and
Chairman,
United
Fire
Group, a
publicly
held
company.
|
2
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
William C. Hunter
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(3/6/48)
|
|
Board
Member
|
|
Term: Annual
or Class I
Board
Member until
2013
Length of
Service: Since
2004
|
|
Dean (since 2006), Tippie College of Business, University of Iowa; Director (since 2005) and President-Elect, Beta Gamma Sigma International, Inc., the International Business Honor
Society; Director (since 2009) of Wellmark, Inc. ; formerly, Director (1997-2007), Credit Research Center at Georgetown University; formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut
(2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003).
|
|
231
|
|
Director of
Xerox
Corporation
(since
2004).
|
3
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
David J. Kundert
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(10/28/42)
|
|
Board
Member
|
|
Term: Annual
or Class II
Board
Member until
2014
Length of
Service: Since
2005
|
|
Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors
Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Bank One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; Member of the Wisconsin Bar
Association; Member of Board of Directors, Friends of Boerner Botanical Gardens; Member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation.
|
|
231
|
|
None
|
4
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
William J. Schneider
(2)
c/o Nuveen Investments, Inc.
333 West
Wacker Drive
Chicago, IL 60606
(9/24/44)
|
|
Board
Member
|
|
Term: Annual
or Class III
Board
Member until
2015
Length of
Service: Since
1996
|
|
Chairman of Miller-Valentine Partners Ltd., a real estate investment company; Member, Mid-America Health System Board; Member, University of Dayton Business School Advisory Council;
formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine Group; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory
Council, Cleveland Federal Reserve Bank.
|
|
231
|
|
None
|
|
|
|
|
|
|
Judith M. Stockdale
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(12/29/47)
|
|
Board
Member
|
|
Term: Annual
or Class I
Board
Member until
2013
Length of
Service: Since
1997
|
|
Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
|
|
231
|
|
None
|
|
|
|
|
|
|
Carole E. Stone
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(6/28/47)
|
|
Board
Member
|
|
Term: Annual
or Class I
Board
Member until
2013
Length of
Service: Since
2007
|
|
Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing
Association Oversight Board (2005-2007).
|
|
231
|
|
Director,
Chicago
Board
Options
Exchange
(since
2006).
|
5
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Virginia L. Stringer
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(8/16/44)
|
|
Board
Member
|
|
Term: Annual
or Class I
Board
Member until
2013
Length of
Service: Since
2011
|
|
Board Member, Mutual Fund Directors Forum; Governance consultant and non-profit board member; former Member, Governing Board, Investment Company Institutes Independent
Directors Council; former Owner and President, Strategic Management Resources, Inc., a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury
Company.
|
|
231
|
|
Previously,
Independent
Director
(1987-
2010) and
Chair
(1997-
2010),
First
American
Fund
Complex.
|
6
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Terence J. Toth
(3)
c/o Nuveen Investments, Inc.
333 West
Wacker Drive
Chicago, IL 60606
(9/29/59)
|
|
Board
Member
|
|
Term: Annual
or Class II
Board
Member until
2014
Length of
Service: Since
2008
|
|
Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust
Global Investments (2004- 2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); Member: Goodman Theatre Board (since 2004),
Chicago Fellowship Board (since 2005), Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (since 2012) and a member of its investment committee; formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust
Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004).
|
|
231
|
|
None
|
7
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Non-Independent Board Member/Nominee
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. Amboian
(4)
c/o Nuveen Investments, Inc.
333 West
Wacker Drive
Chicago, IL 60606
(6/14/61)
|
|
Board
Member
|
|
Term: Annual
or Class II
Board
Member until
2014
Length of
Service: Since
2008
|
|
Chief Executive Officer and Chairman (since 2007) and Director (since 1999), formerly, President (1999-2007) of Nuveen Investments, Inc.; Chief Executive Officer (since 2007) of
Nuveen Investments Advisers Inc.; Director (since 1998), formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc.
|
|
231
|
|
None
|
(1)
|
Length of Time Served indicates the year in which the individual became a Board Member of a fund in the Nuveen Fund complex.
|
(2)
|
Mr. Schneider is one of several owners and managing members in two limited liability companies and a general partner and one member of the governing body of a
general partnership, each engaged in real estate ownership activities. In connection with their ordinary course of investment activities, court appointed receivers have been named for certain individual properties owned by such entities. The
individual properties for which a receiver has been appointed represent an immaterial portion of the portfolio assets owned by these entities.
|
(3)
|
Mr. Toth serves as a director on the Board of Directors of the Mather Foundation (the Foundation) and is a member of its investment committee. The
Foundation is the parent of the Mather LifeWays organization, a non-profit charitable organization. Prior to Mr. Toth joining the Board of the Foundation, the Foundation selected Gresham Investment Management (Gresham), an affiliate
of Nuveen Fund Advisors, Inc., to manage a portion of the Foundations investment portfolio, and pursuant to this selection, the Foundation has invested that portion of its investment portfolio in a private commodity pool managed by Gresham.
|
(4)
|
Interested person as defined in the 1940 Act, by reason of his positions with Nuveen Investments, Inc. and certain of its subsidiaries.
|
The dollar range of equity securities beneficially owned by each Board Member in each Fund and all Nuveen funds
overseen by the Board Members as of January 31, 2012 is set forth in Appendix C. The number of shares of each Fund beneficially owned by each Board Member and by the Board Members and officers of the Funds as a group as of January 31,
2012 is set forth in Appendix C. On December 31, 2011, Board Members and executive officers as a group beneficially owned approximately 1,200,000 shares of all funds managed by the Adviser (including shares held by the Board Members
through the Deferred Compensation Plan for Independent Board Members and by executive officers in Nuveens 401(k)/profit sharing plan). As of April 30, 2012, each Board Members individual beneficial shareholdings of each Fund constituted
less than 1% of the outstanding shares of each Fund. As of April 30, 2012, the Board Members and executive officers as a group beneficially owned less than 1% of the outstanding shares of each Fund. As of
May 15, 2012, no shareholder
8
beneficially owned more than 5% of any class of shares of any Fund
, except as provided under General InformationShareholders of the Acquiring Fund and the Acquired
Fund.
Compensation
Prior to January 1, 2012, each Independent Board Member received a $120,000 annual retainer plus (a) a fee of $4,500 per day
for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance was
required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where
in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at
Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (e) a
fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; and (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings)
where in-person attendance was required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance was not required, and $100 per meeting when the Executive
Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees were received for meetings held on days on which regularly scheduled Board meetings were held. In addition to the
payments described above, the Chairman of the Board received $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee received $10,000 each and the chairperson of
the Nominating and Governance Committee received $5,000 as additional retainers. Independent Board Members also received a fee of $3,000 per day for site visits to entities that provide services to the Nuveen funds on days on which no Board meeting
was held. When ad hoc committees were organized, the Nominating and Governance Committee at the time of formation determined compensation to be paid to the members of such committee; however, in general such fees were $1,000 per meeting for
attendance in person or by telephone at any ad hoc committee meetings where in-person attendance was required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required. The annual
retainer, fees and expenses were allocated among the funds managed by the Adviser, on the basis of relative net assets, although fund management might have, in its discretion, established a minimum amount to be allocated to each fund.
Effective January 1, 2012, each Independent Board Member receives a $130,000 annual retainer plus (a) a fee of $4,500 per day
for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance is
required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where
in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at
Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (e) a
9
fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; (f) a fee of $500 per meeting for attendance in person or by telephone at all other
committee meetings ($1,000 for shareholder meetings) where in-person attendance is required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance is not
required, and $100 per meeting when the Executive Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees are received for meetings held on days on which regularly
scheduled Board meetings are held; and (g) a fee of $2,500 per meeting for attendance in person or by telephone at Closed-End Funds Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or
in person at such meetings where in-person attendance is not required; provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held. In addition to the payments described above, the Chairman of
the Board receives $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $12,500 each and the chairperson of the Nominating and Governance Committee
receives $5,000 as additional retainers. Independent Board Members also receive a fee of $3,000 per day for site visits to entities that provide services to the Nuveen funds on days on which no Board meeting is held. When ad hoc committees are
organized, the Nominating and Governance Committee will at the time of formation determine compensation to be paid to the members of such committee; however, in general, such fees will be $1,000 per meeting for attendance in person or by telephone
at ad hoc committee meetings where in-person attendance is required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required. The annual retainer, fees and expenses are allocated among
the Nuveen funds on the basis of relative net assets, although management may, in its discretion, establish a minimum amount to be allocated to each Fund.
The boards of certain Nuveen funds (the Participating Funds) established a Deferred Compensation Plan for Independent Board Members (Deferred Compensation Plan). Under the Deferred
Compensation Plan, Independent Board Members of the Participating Funds may defer receipt of all, or a portion, of the compensation they earn for their services to the Participating Funds, in lieu of receiving current payments of such compensation.
Any deferred amount is treated as though an equivalent dollar amount had been invested in shares of one or more eligible Nuveen funds.
10
The table below shows, the aggregate compensation paid by each Fund to each Independent
Board Member/Nominee for its last fiscal year:
Aggregate Compensation from the Funds
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Robert P.
Bremner
|
|
|
Jack B.
Evans
|
|
|
William C.
Hunter
|
|
|
David J.
Kundert
|
|
|
William J.
Schneider
|
|
|
Judith M.
Stockdale
|
|
|
Carole E.
Stone
|
|
|
Virginia L.
Stringer
|
|
|
Terence J.
Toth
|
|
Energy MLP Total Return
|
|
$
|
1,261
|
|
|
$
|
2,463
|
|
|
$
|
880
|
|
|
$
|
956
|
|
|
$
|
931
|
|
|
$
|
2,470
|
|
|
$
|
919
|
|
|
$
|
857
|
|
|
$
|
2,476
|
|
MLP & Strategic Equity*
for fiscal year end Oct. 31, 2011
|
|
|
5,439
|
|
|
|
5,885
|
|
|
|
667
|
|
|
|
2,712
|
|
|
|
5,243
|
|
|
|
1,373
|
|
|
|
704
|
|
|
|
455
|
|
|
|
3,390
|
|
for fiscal period end Nov. 30, 2011
|
|
|
5,439
|
|
|
|
5,884
|
|
|
|
667
|
|
|
|
2,710
|
|
|
|
5,243
|
|
|
|
1,371
|
|
|
|
704
|
|
|
|
455
|
|
|
|
3,390
|
|
Total Compensation from Nuveen Funds Paid to Board Members/ Nominees
(2)
|
|
$
|
329,731
|
|
|
$
|
260,124
|
|
|
$
|
218,576
|
|
|
$
|
244,966
|
|
|
$
|
259,415
|
|
|
$
|
248,033
|
|
|
$
|
245,650
|
|
|
$
|
175,000
|
|
|
$
|
263,891
|
|
(1)
|
Includes deferred fees. Pursuant to the Deferred Compensation Plan, deferred amounts are treated as though an equivalent dollar amount has been invested in shares of
one or more eligible Nuveen Funds. Total deferred fees for the Funds (including the return from the assumed investment in the eligible Nuveen Funds) payable are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Robert P.
Bremner
|
|
|
Jack B.
Evans
|
|
|
William C.
Hunter
|
|
|
David J.
Kundert
|
|
|
William J.
Schneider
|
|
|
Judith M.
Stockdale
|
|
|
Carole E.
Stone
|
|
|
Virginia L.
Stringer
|
|
|
Terence J.
Toth
|
|
Energy MLP Total Return
|
|
$
|
136
|
|
|
$
|
547
|
|
|
$
|
638
|
|
|
$
|
692
|
|
|
|
|
|
|
$
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity* for fiscal year end Oct. 31, 2011
|
|
|
66
|
|
|
|
153
|
|
|
|
298
|
|
|
|
336
|
|
|
|
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for fiscal period end Nov. 30, 2011
|
|
|
65
|
|
|
|
152
|
|
|
|
298
|
|
|
|
334
|
|
|
|
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Based on the total compensation paid, including deferred fees (including the return from the assumed investment in the eligible Nuveen Funds), to the Board Members for
the calendar year ended December 31, 2011 for services to the Nuveen open-end and closed-end Funds advised by the Adviser.
|
*
|
Effective November 1, 2011, MLP & Strategic Equity changed its fiscal and tax year ends from October 31 to November 30. Accordingly, amounts are
shown for MLP & Strategic Equity for both the fiscal year ended October 31, 2011 and the fiscal period ended November 30, 2011.
|
Board Leadership Structure and Risk Oversight
The Board of each Fund (together, the Board) oversees the operations and management of the Fund, including the duties
performed for the Fund by the Adviser. The Board has adopted a unitary board structure. A unitary board consists of one group of directors who serve on the board of every fund in the complex. In adopting a unitary board structure, the Board Members
seek to provide effective governance through establishing a board, the overall composition of which will, as a body, possess the appropriate skills, independence and experience to oversee the Funds business. With this overall framework in
mind, when the Board, through its Nominating and Governance Committee discussed below, seeks nominees for the Board, the Board Members consider, not only the candidates particular background, skills and experience, among other things, but also
whether such background, skills and experience enhance the Boards diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent Board Members. The Nominating and
Governance Committee believes that the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any specific policy on
diversity or any particular definition of diversity.
The Board believes the unitary board structure enhances good and
effective governance, particularly given the nature of the structure of the investment company complex. Funds in the same complex generally are served by the same service providers and personnel and are governed by the
11
same regulatory scheme which raises common issues that must be addressed by the Board Members across the fund complex (such as compliance, valuation, liquidity, brokerage, trade allocation or
risk management). The Board believes it is more efficient to have a single board review and oversee common policies and procedures which increases the Boards knowledge and expertise with respect to the many aspects of fund operations that are
complex-wide in nature. The unitary structure also enhances the Boards influence and oversight over the Adviser and other service providers.
In an effort to enhance the independence of the Board, the Board also has a Chairman that is an Independent Board Member. The Board recognizes that a chairman can perform an important role in setting the
agenda for the Board, establishing the boardroom culture, establishing a point person on behalf of the Board for Fund management, and reinforcing the Boards focus on the long-term interests of shareholders. The Board recognizes that a chairman
may be able to better perform these functions without any conflicts of interests arising from a position with Fund management. Accordingly, the Board Members have elected Robert P. Bremner as the independent Chairman of the Board. Specific
responsibilities of the Chairman include: (i) presiding at all meetings of the Board and of the shareholders; (ii) seeing that all orders and resolutions of the Board Members are carried into effect; and (iii) maintaining records of
and, whenever necessary, certifying all proceedings of the Board Members and the shareholders.
Although the Board has direct
responsibility over various matters (such as advisory contracts, underwriting contracts and Fund performance), the Board also exercises certain of its oversight responsibilities through several committees that it has established and which report
back to the full Board. The Board believes that a committee structure is an effective means to permit Board Members to focus on particular operations or issues affecting the Funds, including risk oversight. More specifically, with respect to risk
oversight, the Board has delegated matters relating to valuation and compliance to certain committees (as summarized below) as well as certain aspects of investment risk. In addition, the Board believes that the periodic rotation of Board Members
among the different committees allows the Board Members to gain additional and different perspectives of a Funds operations. The Board has established six standing committees: the Executive Committee, the Dividend Committee, the Audit
Committee, the Compliance, Risk Management and Regulatory Oversight Committee, the Nominating and Governance Committee and the Closed-End Funds Committee. The Board may also from time to time create ad hoc committees to focus on particular issues as
the need arises. The membership and functions of the standing committees are summarized below.
The Executive Committee, which
meets between regular meetings of the Board, is authorized to exercise all of the powers of the Board. The members of the Executive Committee are Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian. The number of Executive
Committee meetings of each Fund held during its last fiscal year and, with respect to the Acquired Fund, held during the fiscal period of November 1, 2011 through November 30, 2011, is shown in Appendix D.
The Dividend Committee is authorized to set the amount of distributions on each Funds shares including, but not limited to, regular
and special dividends, capital gains and ordinary income distributions. The members of the Dividend Committee are Jack B. Evans, Chair, Judith M. Stockdale and Terence J. Toth. The number of Dividend Committee meetings of each Fund held during
its last
fiscal year and, with respect to the Acquired Fund, held during the fiscal period of November 1, 2011 through November 30, 2011, is shown in Appendix D.
The Board has an Audit Committee, in accordance with Section 3(a)(58)(A) of the 1934 Act, that is composed of Independent Board Members who are also independent as that term is defined in
12
the listing standards pertaining to closed-end funds of the NYSE, NYSE Amex or NASDAQ Stock Market, LLC (NASDAQ), as applicable. The Audit Committee assists the Board in: the
oversight and monitoring of the accounting and reporting policies, processes and practices of the Funds, and the audits of the financial statements of the Funds; the quality and integrity of the financial statements of the Funds; the Funds
compliance with legal and regulatory requirements relating to the Funds financial statements; the independent auditors qualifications, performance and independence; and the pricing procedures of the Funds and the internal valuation group
of Nuveen. It is the responsibility of the Audit Committee to select, evaluate and replace any independent auditors (subject only to Board and, if applicable, shareholder ratification) and to determine their compensation. The Audit Committee is also
responsible for, among other things, overseeing the valuation of securities comprising the Funds portfolios. Subject to the Boards general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the
Funds pricing procedures and actions taken by Nuveens internal valuation group which provides regular reports to the committee, reviews any issues relating to the valuation of the Funds securities brought to its attention, and
considers the risks to the Funds in assessing the possible resolutions to these matters. The Audit Committee may also consider any financial risk exposures for the Funds in conjunction with performing its functions.
To fulfill its oversight duties, the Audit Committee receives annual and semi-annual reports and has regular meetings with the external
auditors for the Funds and the internal audit group at Nuveen. The Audit Committee also may review in a general manner the processes the Board or other Board committees have in place with respect to risk assessment and risk management as well as
compliance with legal and regulatory matters relating to the Funds financial statements. The Audit Committee operates under a written Audit Committee Charter (the Charter) adopted and approved by the Board, which Charter conforms
to the listing standards of the NYSE, NYSE Amex or NASDAQ, as applicable. Members of the Audit Committee are independent (as set forth in the Charter) and free of any relationship that, in the opinion of the Board Members, would interfere with their
exercise of independent judgment as an Audit Committee member. The members of the Audit Committee are Robert P. Bremner, David J. Kundert, Chair, William J. Schneider, Carole E. Stone and Terence J. Toth, each of whom is an
Independent Board Member of the Funds. A copy of the Charter is attached as Appendix E. The number of Audit Committee Meetings of each Fund held during its last fiscal year and, with respect to the Acquired Fund, held during the fiscal period
of November 1, 2011 through November 30, 2011, is shown in Appendix D.
The Compliance, Risk Management and
Regulatory Oversight Committee (the Compliance Committee) is responsible for the oversight of compliance issues, risk management and other regulatory matters affecting the Funds that are not otherwise under or within the jurisdiction of
the other committees. The Board has adopted and periodically reviews policies and procedures designed to address the Funds compliance and risk matters. As part of its duties, the Compliance Committee reviews the policies and procedures
relating to compliance matters and recommends modifications thereto as necessary or appropriate to the full Board; develops new policies and procedures as new regulatory matters affecting the Funds arise from time to time; evaluates or considers any
comments or reports from examinations from regulatory authorities and responses thereto; and performs any special reviews, investigations or other oversight responsibilities relating to risk management, compliance and/or regulatory matters as
requested by the Board.
In addition, the Compliance Committee is responsible for risk oversight, including, but not limited
to, the oversight of risks related to investments and operations. Such risks include, among other things, exposures to particular issuers, market sectors, or types of securities; risks related to product
13
structure elements, such as leverage; and techniques that may be used to address those risks, such as hedging and swaps. In assessing issues brought to the Compliance Committees attention
or in reviewing a particular policy, procedure, investment technique or strategy, the Compliance Committee evaluates the risks to the Funds in adopting a particular approach or resolution compared to the anticipated benefits to the Funds and their
shareholders. In fulfilling its obligations, the Compliance Committee meets on a quarterly basis, and at least once a year in person. The Compliance Committee receives written and oral reports from the Funds Chief Compliance Officer
(CCO) and meets privately with the CCO at each of its quarterly meetings. The CCO also provides an annual report to the full Board regarding the operations of the Funds and other service providers compliance programs, as well
as any recommendations for modifications thereto. The Compliance Committee also receives reports from the investment services group of Nuveen regarding various investment risks. Notwithstanding the foregoing, the full Board also participates in
discussions with management regarding certain matters relating to investment risk, such as the use of leverage and hedging. The investment services group therefore also reports to the full Board at its quarterly meetings regarding, among other
things, Fund performance and the various drivers of such performance. Accordingly, the Board directly and/or in conjunction with the Compliance Committee oversees matters relating to investment risks. Matters not addressed at the committee level are
addressed directly by the full Board. The Compliance Committee operates under a written charter adopted and approved by the Board. The members of the Compliance Committee are Jack B. Evans, William C. Hunter, William J. Schneider, Judith M.
Stockdale, Chair, and Virginia L. Stringer. The number of Compliance Committee meetings of each Fund held during its last fiscal year and, with respect to the Acquired Fund, held during the fiscal period of November 1, 2011 through November 30,
2011, is shown in Appendix D.
The Nominating and Governance Committee is responsible for seeking, identifying and
recommending to the Board qualified candidates for election or appointment to the Board. In addition, the Nominating and Governance Committee oversees matters of corporate governance, including the evaluation of Board performance and processes, the
assignment and rotation of committee members, and the establishment of corporate governance guidelines and procedures, to the extent necessary or desirable, and matters related thereto. Although the unitary and committee structure has been developed
over the years and the Nominating and Governance Committee believes the structure has provided efficient and effective governance, the committee recognizes that as demands on the Board evolve over time (such as through an increase in the number of
Funds overseen or an increase in the complexity of the issues raised), the committee must continue to evaluate the Board and committee structures and their processes and modify the foregoing as may be necessary or appropriate to continue to provide
effective governance. Accordingly, the Nominating and Governance Committee has a separate meeting each year to, among other things, review the Board and committee structures, their performance and functions, and recommend any modifications thereto
or alternative structures or processes that would enhance the Boards governance over the Funds business.
In
addition, the Nominating and Governance Committee, among other things, makes recommendations concerning the continuing education of Board Members; monitors performance of legal counsel and other service providers; establishes and monitors a process
by which security holders are able to communicate in writing with Board Members; and periodically reviews and makes recommendations about any appropriate changes to Board Member compensation. In the event of a vacancy on the Board, the Nominating
and Governance Committee receives suggestions from various sources, including shareholders, as to suitable candidates. Suggestions should be sent in writing to Lorna Ferguson, Manager of Fund Board Relations, Nuveen, 333 West Wacker Drive, Chicago,
IL 60606. The Nominating and Governance Committee sets appropriate standards and requirements for nominations for new Board Members and each nominee is evaluated using the same standards.
14
However, the Nominating and Governance Committee reserves the right to interview any and all candidates and to make the final selection of any new Board Members. In considering a candidates
qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence site visits to internal and external sub-advisers and service
providers) and, if qualifying as an Independent Board Member candidate, independence from the Adviser, sub-advisers, underwriters or other service providers, including any affiliates of these entities. These skill and experience requirements may
vary depending on the current composition of the Board, since the goal is to ensure an appropriate range of skills, diversity and experience, in the aggregate. Accordingly, the particular factors considered and weight given to these factors will
depend on the composition of the Board and the skills and backgrounds of the incumbent Board Members at the time of consideration of the nominees. All candidates, however, must meet high expectations of personal integrity, independence, governance
experience and professional competence. All candidates must be willing to be critical within the Board and with management and yet maintain a collegial and collaborative manner toward other Board Members. The Nominating and Governance Committee
operates under a written charter adopted and approved by the Board, a copy of which is available on the Funds website at www.nuveen.com/CEF/Info/Shareholder/, and is composed entirely of Independent Board Members, who are also
independent as defined by NYSE, NYSE Amex or NASDAQ listing standards, as applicable. Accordingly, the members of the Nominating and Governance Committee are Robert P. Bremner, Chair, Jack B. Evans, William C. Hunter, David J.
Kundert, William J. Schneider, Judith M. Stockdale, Carole E. Stone, Virginia L. Stringer and Terence J. Toth. The number of Nominating and Governance Committee meetings of each Fund held during its last fiscal year and, with respect
to the Acquired Fund, held during the fiscal period of November 1, 2011 through November 30, 2011, is shown in Appendix D.
Effective January 1, 2012, the Board approved the creation of the Closed-End Funds Committee. The Closed-End Funds Committee is
responsible for assisting the Board in the oversight and monitoring of the Nuveen Funds that are registered as closed-end investment companies (Closed-End Funds). The committee may review and evaluate matters related to the formation and
initial presentation to the Board of any new Closed-End Fund and may review and evaluate any matters relating to any existing Closed-End Fund. The committee operates under a written charter adopted and approved by the Board. The members of the
Closed-End Funds Committee are Robert P. Bremner, Jack B. Evans, William C. Hunter, William J. Schneider, Chair, and Carole E. Stone.
The number of regular quarterly meetings and special meetings held by the Board of each Fund its last fiscal year and, with respect to the Acquired Fund, held during the fiscal period of November 1, 2011
through November 30, 2011, is shown in Appendix D. During the last fiscal year, each Board Member attended 75% or more of each Funds Board meetings and the committee meetings (if a member thereof) held during the period for which such
Board Member was a Board Member. The policy of the Board relating to attendance by Board Members at annual meetings of the Funds and the number of Board Members who attended the last annual meeting of shareholders of each Fund is posted on the
Funds website at www.nuveen.com/CEF/Info/Shareholder/.
Board Diversification and Board Member
Qualifications
In determining that a particular Board Member was qualified to serve on the Board, the Board considers
each Board Members background, skills, experience and other attributes in light of the composition of the Board with no particular factor controlling. The Board believes that Board Members need to have the ability to critically review,
evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in
15
order to exercise effective business judgment in the performance of their duties, and the Board believes each Board Member satisfies this standard. An effective Board Member may achieve this
ability through his or her educational background; business, professional training or practice; public service or academic positions; experience from service as a board member or executive of investment funds, public companies or significant private
or not-for-profit entities or other organizations; and/or other life experiences. Accordingly, set forth below is a summary of the experiences, qualifications, attributes, and skills that led to the conclusion, as of the date of this document, that
each Board Member should serve in that capacity. References to the experiences, qualifications, attributes and skills of Board Members are pursuant to requirements of the SEC, do not constitute holding out the Board or any Board Member as having any
special expertise or experience and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
John P. Amboian
Mr. Amboian, an interested Board Member of
the Funds, joined Nuveen in June 1995 and became Chief Executive Officer in July 2007 and Chairman in November 2007. Prior to this, since 1999, he served as President with responsibility for the firms product, marketing, sales,
operations and administrative activities. Mr. Amboian initially served Nuveen as Executive Vice President and Chief Financial Officer. Prior to joining Nuveen, Mr. Amboian held key management positions with two consumer product firms
affiliated with the Phillip Morris Companies. He served as Senior Vice President of Finance, Strategy and Systems at Miller Brewing Company. Mr. Amboian began his career in corporate and international finance at Kraft Foods, Inc., where he
eventually served as Treasurer. He received a Bachelors degree in economics and a Master of Business Administration (MBA) from the University of Chicago. Mr. Amboian serves on the Board of Directors of Nuveen and is a Board
Member or Trustee of the Investment Company Institute Board of Governors, Boys and Girls Clubs of Chicago, Childrens Memorial Hospital and Foundation, the Council on the Graduate School of Business (University of Chicago), and the North Shore
Country Day School Foundation. He is also a member of the Civic Committee of the Commercial Club of Chicago and the Economic Club of Chicago.
Robert P. Bremner
Mr. Bremner, the Boards Independent
Chairman, is a private investor and management consultant in Washington, D.C. His biography of William McChesney Martin, Jr., a former chairman of the Federal Reserve Board, was published by Yale University Press in November 2004. From
1994 to 1997, he was a Senior Vice President at Samuels International Associates, an international consulting firm specializing in governmental policies, where he served in a part-time capacity. Previously, Mr. Bremner was a partner in the LBK
Investors Partnership and was chairman and majority stockholder with ITC Investors Inc., both private investment firms. He currently serves on the Board and as Treasurer of the Humanities Council of Washington D.C. and is a Board Member of the
Independent Directors Council affiliated with the Investment Company Institute. From 1984 to 1996, Mr. Bremner was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He began his career at the World Bank in
Washington D.C. He graduated with a Bachelor of Science degree from Yale University and received his MBA from Harvard University.
Jack B. Evans
President of the Hall-Perrine Foundation, a private
philanthropic corporation, since 1996, Mr. Evans was formerly President and Chief Operating Officer of the SCI Financial Group, Inc., a regional financial services firm headquartered in Cedar Rapids, Iowa. Formerly, he was a member of
16
the Board of the Federal Reserve Bank of Chicago as well as a Director of Alliant Energy. Mr. Evans is Chairman of the Board of United Fire Group, sits on the Board of the Source Media
Group, is a Member of the Board of Regents for the State of Iowa University System, and is a Life Trustee of Coe College. He has a Bachelor of Arts degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective July 1, 2006. He had been Dean and Distinguished Professor of Finance at the
University of Connecticut School of Business since June 2003. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago. While there he served as the Banks Chief Economist and was
an Associate Economist on the Federal Reserve Systems Federal Open Market Committee (FOMC). In addition to serving as a Vice President in charge of financial markets and basic research at the Federal Reserve Bank in Atlanta, he held faculty
positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. A past Director of the Credit Research Center at Georgetown University and past President of the Financial Management Association
International, he has consulted with numerous foreign central banks and official agencies in Western Europe, Central and Eastern Europe, Asia, Central America and South America. From 1990 to 1995, he was a U.S. Treasury Advisor to Central and
Eastern Europe. He has been a Director of the Xerox Corporation since 2004. He is Director and President-Elect of Beta Gamma Sigma, Inc., the International Business Honor Society.
David J. Kundert
Mr. Kundert retired in 2004 as Chairman of JPMorgan Fleming Asset Management, as President and CEO of Banc One Investment Advisors Corporation, and as President of One Group Mutual Funds. Prior to
the merger between Bank One Corporation and JPMorgan Chase and Co., he was Executive Vice President, Bank One Corporation and, since 1995, the Chairman and CEO, Banc One Investment Management Group. From 1988 to 1992, he was President and CEO of
Bank One Wisconsin Trust Company. Currently, Mr. Kundert is a Director of the Northwestern Mutual Wealth Management Company. He started his career as an attorney for Northwestern Mutual Life Insurance Company. Mr. Kundert has served on the
Board of Governors of the Investment Company Institute and is currently a member of the Wisconsin Bar Association. He is on the Board of the Greater Milwaukee Foundation and chairs its Investment Committee. He received his Bachelor of Arts degree
from Luther College and his Juris Doctor from Valparaiso University.
William J. Schneider
Mr. Schneider is currently Chairman, formerly Senior Partner and Chief Operating Officer (retired, December 2004) of
Miller-Valentine Partners Ltd., a real estate investment company. He was formerly a Director and Past Chair of the Dayton Development Coalition. He was formerly a member of the Community Advisory Board of the National City Bank in Dayton as well as
a former member of the Business Advisory Council of the Cleveland Federal Reserve Bank. Mr. Schneider is a member of the Business Advisory Council for the University of Dayton College of Business. Mr. Schneider was an independent Trustee
of the Flagship Funds, a group of municipal open-end funds. He also served as Chair of the Miami Valley Hospital and as Chair of the Finance Committee of its parent holding company. Mr. Schneider has a Bachelor of Science in Community Planning
from the University of Cincinnati and a Masters of Public Administration from the University of Dayton.
17
Judith M. Stockdale
Ms. Stockdale is currently Executive Director of the Gaylord and Dorothy Donnelley Foundation, a private foundation working in land
conservation and artistic vitality in the Chicago region and the Lowcountry of South Carolina. Her previous positions include Executive Director of the Great Lakes Protection Fund, Executive Director of Openlands, and Senior Staff Associate at the
Chicago Community Trust. She has served on the Boards of the Land Trust Alliance, the National Zoological Park, the Governors Science Advisory Council (Illinois), the Nancy Ryerson Ranney Leadership Grants Program, Friends of Ryerson Woods and
the Donors Forum. Ms. Stockdale, a native of the United Kingdom, has a Bachelor of Science degree in geography from the University of Durham (UK) and a Master of Forest Science degree from Yale University.
Carole E. Stone
Ms. Stone retired from the New York State Division of the Budget in 2004, having served as its Director for nearly five years and as Deputy Director from 1995 through 1999. Ms. Stone is
currently on the Board of Directors of the Chicago Board Options Exchange, CBOE Holdings, Inc. and C2 Options Exchange, Incorporated. She has also served as the Chair of the New York Racing Association Oversight Board, as Chair of the Public
Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. Ms. Stone has a Bachelor of Arts from Skidmore
College in Business Administration.
Virginia L. Stringer
Ms. Stringer served as the independent chair of the Board of the First American Funds from 1997 to 2010, having joined that Board in
1987. Ms. Stringer serves on the board of the Mutual Fund Directors Forum. She is a recipient of the Outstanding Corporate Director award from Twin Cities Business Monthly and the Minnesota Chapter of the National Association of Corporate
Directors. Ms. Stringer is the past board chair of the Oak Leaf Trust, director of the Saint Paul Riverfront Corporation and also served as President of the Minneapolis Clubs Governing Board. She is a director and former board chair of
the Minnesota Opera and a Life Trustee and former board member of the Voyageur Outward Bound School. She also served as a trustee of Outward Bound USA. She was appointed by the Governor of Minnesota to the Board on Judicial Standards and also served
on a Minnesota Supreme Court Judicial Advisory Committee to reform the states judicial disciplinary process. She is a member of the International Womens Forum and attended the London Business School as an International Business Fellow.
Ms. Stringer also served as board chair of the Human Resource Planning Society, the Minnesota Womens Campaign Fund and the Minnesota Womens Economic Roundtable. Ms. Stringer is the retired founder of Strategic Management
Resources, a consulting practice focused on corporate governance, strategy and leadership. She has twenty-five years of corporate experience, having held executive positions in general management, marketing and human resources with IBM and the
Pillsbury Company.
Terence J. Toth
Mr. Toth has served as a Director of Legal & General Investment Management America, Inc. (since 2008) and as a Managing
Partner at Promus Capital (since 2008). From 2004 to 2007, he was Chief Executive Officer and President of Northern Trust Global Investments, and Executive Vice
18
President of Quantitative Management & Securities Lending from 2000 to 2004. He also formerly served on the Board of the Northern Trust Mutual Funds. He joined Northern Trust in 1994
after serving as Managing Director and Head of Global Securities Lending at Bankers Trust (1986 to 1994) and Head of Government Trading and Cash Collateral Investment at Northern Trust from 1982 to 1986. He currently serves on the Boards of the
Goodman Theatre, Chicago Fellowship, and the Mather Foundation, and is Chairman of the Board of Catalyst Schools of Chicago. Mr. Toth graduated with a Bachelor of Science degree from the University of Illinois, and received his MBA from New
York University. In 2005, he graduated from the CEO Perspectives Program at Northwestern University.
Board Member
Terms.
For MLP & Strategic Equity, all Board Members are elected annually. For Energy MLP Total Return, shareholders will be asked to elect Board Members as each Board Members term expires, and with respect
to Board Members elected by holders of common shares such Board Member shall be elected for a term expiring at the time of the third succeeding annual meeting subsequent to their election or thereafter in each case when their respective successors
are duly elected and qualified. These provisions could delay for up to two years the replacement of a majority of the Board.
The Officers
The following table sets forth information with respect to each officer of the Funds. Officers receive no
compensation from the Funds. The officers are elected by the Board on an annual basis to serve until successors are elected and qualified. Unless otherwise noted, the following information is as of
May 15, 2012
.
|
|
|
|
|
|
|
|
|
Name, Address and
Birth date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served
by Officer
|
Gifford R. Zimmerman
333 West Wacker Drive
Chicago, IL 60606
(9/9/56)
|
|
Chief
Administrative
Officer of
Acquiring
Fund,
President of
Acquired
Fund
|
|
Term/Annual
Length of
Service: Since
1988
|
|
Managing Director (since 2002) and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since
2011) of Nuveen Fund Advisors, Inc.; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011);
Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Managing Director, Associate General Counsel and Assistant
Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of Santa Barbara Asset Management, LLC (since 2006) and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief
Compliance Officer (since 2006) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst.
|
|
231
|
19
|
|
|
|
|
|
|
|
|
Name, Address and
Birth date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served
by Officer
|
William Adams IV
333 West Wacker Drive
Chicago, IL 60606
(6/9/55)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Senior Executive Vice President, Global Structured Products, formerly, Executive Vice President (1999-2010) of Nuveen Securities, LLC; Co-President of Nuveen Fund Advisors, Inc.
(since 2011); President (since 2011), formerly, Managing Director ( 2010-2011) of Nuveen Commodities Asset Management, LLC.
|
|
131
|
|
|
|
|
|
Cedric H. Antosiewicz
333 West Wacker Drive
Chicago, IL 60606
(1/11/62)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Managing Director (since 2004) of Nuveen Securities LLC.
|
|
131
|
|
|
|
|
|
Margo L. Cook
333 West Wacker Drive
Chicago, IL 60606
(4/11/64)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2009
|
|
Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); Managing Director - Investment Services of Nuveen Commodities Asset
Management, LLC (since August 2011); previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst.
|
|
231
|
|
|
|
|
|
Lorna C. Ferguson
333 West Wacker Drive
Chicago, IL 60606
(10/24/45)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
1998
|
|
Managing Director (since 2004) of Nuveen Securities, LLC; Managing Director (since 2005) of Nuveen Fund Advisors, Inc.
|
|
231
|
|
|
|
|
|
Stephen D. Foy
333 West Wacker Drive
Chicago, IL 60606
(5/31/54)
|
|
Vice President
and Controller
|
|
Term/Annual
Length of
Service: Since
1993
|
|
Senior Vice President (since 2010); formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Securities, LLC; Vice President (2005-2010) of Nuveen Fund
Advisors, Inc.; Certified Public Accountant.
|
|
231
|
|
|
|
|
|
Scott S. Grace
333 West Wacker Drive
Chicago, IL 60606
(8/20/70)
|
|
Vice President
and Treasurer
|
|
Term/Annual
Length of
Service: Since
2009
|
|
Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer of Nuveen Investments Advisers Inc.,
Nuveen Investments Holdings, Inc., Nuveen Fund Advisors, Inc. and (since 2011), of Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC
and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior
Associate in Morgan Stanleys Global Financial Services Group (2000-2003); Chartered Accountant Designation.
|
|
231
|
20
|
|
|
|
|
|
|
|
|
Name, Address and
Birth date
|
|
Position(s) Held
with Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served
by Officer
|
Walter M. Kelly
333 West Wacker Drive
Chicago, IL 60606
(2/24/70)
|
|
Chief Compliance
Officer and Vice
President
|
|
Term/Annual
Length of
Service: Since
2003
|
|
Senior Vice President (since 2008) of Nuveen Investment Holdings, Inc.; Senior Vice President (since 2008), formerly, Vice President, of Nuveen Securities, LLC; Senior Vice
President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, Inc.
|
|
231
|
|
|
|
|
|
Tina M. Lazar
333 West Wacker Drive
Chicago, IL 60606
(8/27/61)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2002
|
|
Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.
|
|
231
|
|
|
|
|
|
Kevin J. McCarthy
333 West Wacker Drive
Chicago, IL 60606
(3/26/66)
|
|
Vice President
and Secretary
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Managing Director and Assistant Secretary (since 2008), formerly, Vice President (2007-2008) of Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since
2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen Investments
Advisers Inc., NWQ Investment Management Company, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC and (since 2010) Winslow Capital Management, Inc.; Vice President and Secretary (since 2010) of Nuveen
Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007).
|
|
231
|
21
|
|
|
|
|
|
|
|
|
Name, Address and
Birth date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time Served
(1)
|
|
Principal
Occupation(s) During
Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served
by Officer
|
Kathleen L. Prudhomme
901 Marquette Avenue
Minneapolis, MN 55402
(3/30/53)
|
|
Vice
President
and
Assistant
Secretary
|
|
Term/Annual
Length of
Service: Since
2011
|
|
Managing Director and Assistant Secretary of Nuveen Securities, LLC (since 2011); Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund
Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
|
|
231
|
(1)
|
Length of Time Served indicates the year the individual became an officer of a fund in the Nuveen fund complex.
|
PROPOSAL NO. 2REORGANIZATION OF THE ACQUIRED FUND INTO THE ACQUIRING FUND (ACQUIRED FUND
SHAREHOLDERS ONLY)
The following
is a summary of certain information contained elsewhere in this Joint Proxy Statement/Prospectus with respect to the proposed Reorganization and is qualified in its entirety by reference to the more complete information contained in this Joint Proxy
Statement/Prospectus and in the Reorganization SAI and the appendices thereto. Shareholders should read the entire Joint Proxy Statement/Prospectus carefully. Certain capitalized terms used but not defined in this summary are defined elsewhere in
the text of this Joint Proxy Statement/Prospectus.
Background and Reasons for the Reorganization
At meetings held on February 27-29, 2012, the Boards approved a proposal to merge the Acquired Fund into the
Acquiring Fund. The Acquiring Fund and the Acquired Fund have similar investment objectives and policies, and similar portfolio compositions. The proposed Reorganization is intended to enhance the secondary trading market for common shares of the
Funds and result in lower Fund operating expenses (excluding the costs of leverage) as fixed administrative costs are spread over a larger asset base. Each Board has determined that the proposed Reorganization would be in the best interests of its
Fund. The closing of the Reorganization is contingent upon certain conditions being satisfied or waived. Shareholders of the Acquired Fund must approve the Reorganization of their Fund into the Acquiring Fund in order for the Reorganization to
occur. The Acquiring Fund also must obtain the shareholder approvals described in this Joint Proxy Statement/Prospectus with respect to the Reorganization in order for the Reorganization to occur. Because the closing of the Reorganization is
contingent on each Fund satisfying (or obtaining the waiver of) its respective closing conditions, it is possible that the Reorganization will not occur, even if shareholders of your Fund approve the Reorganization and your Fund satisfies all of its
closing conditions. If the requisite shareholder approvals are not obtained, each Funds Board may take such actions as it deems in the best interest of the Fund including conducting additional solicitations with respect to the proposals or
continuing to operate the Fund as a stand-alone fund. For a fuller discussion of the Boards considerations regarding
22
the approval of the Reorganization, see Proposal No. 2Information About the ReorganizationReasons for the Reorganization.
Material Federal Income Tax Consequences of the Reorganization
As a condition to closing, the Funds will receive an opinion of Vedder Price P.C. to the effect that the proposed Reorganization will
qualify as a tax-free reorganization under Section 368(a)(1) of the U.S. Internal Revenue Code of 1986, as amended (the Code). Accordingly, it is expected that no Fund will recognize gain or loss for federal income tax purposes as a
direct result of the Reorganization. To the extent that portfolio securities are sold in connection with the Reorganization, the Acquired Fund may realize capital gains or losses. Unless the Acquired Fund has capital losses to offset such gains, the
gains will be taxable to the Acquired Fund and may reduce its net asset value. However, it is not expected that any significant portfolio sales by the Acquired Fund will occur prior to the close of Reorganization (less than 5% of the assets of the
Acquired Fund). Following the close of the Reorganization, the combined fund anticipates employing additional cash proceeds from the implementation of leverage for the combined fund to make new investments or increase existing investment positions
in the portfolio, where desirable, and, in this connection, also expects to sell or reduce certain other investments. Had this repositioning occurred as of March 15, 2012, it would have resulted in portfolio turnover of up to 15% of the combined
funds assets. It is expected that shareholders of the Acquired Fund who receive Acquiring Fund Common Shares pursuant to the Reorganization will recognize no gain or loss for federal income tax purposes, except that gain or loss may be
recognized with respect to any cash received in lieu of fractional Acquiring Fund Common Shares being issued.
Comparison of the Acquiring Fund and the Acquired Fund
General
. The Acquiring Fund and
the Acquired Fund are closed-end management investment companies. The Acquiring Fund is a non-diversified management investment company, while the Acquired Fund is a diversified management investment company. Each Funds common shares are
listed and traded on the NYSE. The Acquiring Fund was organized on September 27, 2010 as a business trust under the laws of the Commonwealth of Massachusetts. The Acquired Fund was organized on February 9, 2007 as a corporation under the
general laws of the State of Maryland.
Investment Objectives and Policies
. The Acquiring Fund
and Acquired Fund have similar investment objectives and policies. The Acquiring Funds investment objective is to provide tax-advantaged total return, while the Acquired Funds investment objective is to provide a high level of after-tax
total return.
The Acquiring Fund seeks to achieve its objective by investing primarily in a portfolio of master limited
partnerships (MLPs) in the energy sector. Under normal market circumstances, the Acquiring Fund will invest at least 80% of its Managed Assets in MLPs in the energy sector. Managed Assets means the total assets of the
Acquiring Fund, including assets attributable to the Funds use of leverage, minus the sum of its accrued liabilities (other than Acquiring Fund liabilities incurred for the express purpose of creating leverage). The Acquired Fund seeks to
achieve its objective primarily by investing substantially all of its net assets in a portfolio of MLPs operating in the energy infrastructure sector of the market. Under normal circumstances, at least 80% of the Funds net assets (including
any borrowings for investment purposes) will be invested in MLPs and equity securities. For each Fund, the applicable 80% policy is non-fundamental and may be changed without shareholder approval, provided that the Fund provides shareholders with at
least 60 days prior notice.
23
An MLP consists of a general partner and limited partners (or in the case of MLPs organized
as limited liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the MLP. The limited partners or members, through their
ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. The Funds consider investments in MLPs to include investments
that offer economic exposure to publicly traded and private MLPs in the form of equity securities of MLPs, securities of entities holding primarily general partner or managing member interests in MLPs, securities that are derivatives of interests in
MLPs and debt securities of MLPs. The Funds consider an entity to be part of the energy sector if it derives at least 50% of its revenues from the business of exploring, developing, producing, gathering, transporting, processing, storing, refining,
distributing, mining or marketing natural gas, natural gas liquids, crude oil, refined petroleum products or coal.
Each Fund
may purchase both domestic and international MLPs. Each Funds investment in MLPs may include ownership of MLP common units and MLP subordinated units. Each Fund also may purchase MLP I-Shares (together with the MLPs, the MLP
Entities). MLP I-Shares are pay-in-kind securities created as a means to facilitate institutional ownership of MLPs by simplifying the tax and administrative implications of the MLP structure. Generally, when an MLP pays its quarterly cash
distribution to unitholders, holders of I-Shares do not receive a cash distribution; rather, they receive a dividend of additional I-Shares from the MLP of comparable value to the cash distribution paid to each unitholder. Each Fund may purchase
interests in MLP Entities on an exchange or may utilize non-public market transactions to obtain its holdings, including but not limited to privately negotiated purchases of securities from the issuers themselves, broker-dealers, or other qualified
institutional buyers.
Each Fund is authorized to invest in certain derivative instruments, including futures, options and
swap contracts. Although each Fund is authorized to invest in such derivative instruments, and may do so in the future, they did not invest in any such investments during the fiscal periods ended November 30, 2011.
Leverage.
Each Fund may utilize the following forms of leverage: (a) portfolio investments that have
the economic effect of leverage, including but not limited to investments in futures, options and inverse floating rate securities, (b) the issuance of preferred shares, and (c) borrowings to the extent permitted by the 1940 Act. However,
while the Acquired Fund has no present intention of borrowing money for investment purposes, the Acquiring Fund seeks to enhance investment returns through debt borrowings. For this purpose, the Acquiring Fund entered into a $130 million (maximum
commitment amount) prime brokerage facility with Deutsche Bank as a means of financial leverage. On April 29, 2011, the Acquiring Fund began to draw on this borrowing facility. As of November 30, 2011, the Funds outstanding balance
on these borrowings was $125 million. For the period April 29, 2011 through November 30, 2011, the average daily balance outstanding and annual interest rate on these borrowings were $115,937,500 and 1.18%, respectively. As of
November 30, 2011, the Acquiring Funds leverage ratio was 23.37% of its Managed Assets, as a result of its leverage strategy. The Acquiring Fund currently expects to maintain a similar leverage ratio, relative to its Managed Assets
(including assets attributable to the Acquired Fund), following the close of the Reorganization.
In order to maintain this
borrowing facility, the Acquiring Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities held in the Acquiring Funds portfolio of investments. Interest charged on the
drawn portion of the facility is calculated at a rate per annum equal to 3-Month LIBOR (London Inter-Bank Offered Rate) plus .85%.
24
In addition, the Acquiring Fund accrues a commitment fee of .50% per annum on the unused portion of the maximum commitment amount.
The Acquiring Fund anticipates that its leverage ratio will vary from time to time; however, the Acquiring Fund
generally intends to limit its leverage ratio to
33
1
/
3
% of its Managed Assets. Neither Fund
currently intends to issue preferred shares or debt securities.
Board Members and
Officers.
The Acquiring Fund and the Acquired Fund have the same Board Members and officers. The management of each Fund, including general supervision of the duties performed by the Adviser under the Investment Management
Agreement for each Fund, is the responsibility of its Board. Each Fund currently has ten (10) directors or trustees, as applicable, one (1) of whom is an interested person, as defined in the 1940 Act, of the Funds, and nine
(9) of whom are not interested persons (the Independent Board Members). The names and business addresses of the Board Members and officers of the Funds and their principal occupations and other affiliations during the past five
years are set forth under Proposal 1Board Nominees/Board Members.
While the Acquiring Fund and Acquired
Fund have the same Board Members, the Funds have different board structures. Pursuant to the Acquiring Funds By-Laws, its Board of Trustees is divided into three classes (Class I, Class II and Class III) with staggered multi-year terms, such
that only the members of one of the three classes stands for election each year. This provision of the By-Laws could delay for up to two years the replacement of a majority of the Board. In contrast to the Acquiring Funds staggered board
structure, all members of the Board of Directors of the Acquired Fund stand for election each year.
Investment
Adviser
. Nuveen Fund Advisors, Inc. (Nuveen Fund Advisors or the Adviser) (formerly known as, Nuveen Asset Management), is the investment adviser to each Fund and is responsible for managing each
Funds overall investment strategy, monitoring the performance of each Funds subadviser and overseeing each Funds use of leverage. Nuveen Fund Advisors also is responsible for managing each Funds business affairs and providing
certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606.
The Adviser, a registered investment adviser, is a wholly-owned subsidiary of Nuveen Investments, Inc. Founded in 1898, Nuveen Investments and its affiliates had approximately $220 billion of assets under
management as of December 31, 2011. On November 13, 2007, Nuveen Investments was acquired by investors led by Madison Dearborn Partners, LLC (the MDP Acquisition).
Each Fund is dependent upon services and resources provided by its investment adviser, Nuveen Fund Advisors, and therefore the investment
advisers parent, Nuveen Investments. Nuveen Investments significantly increased its level of debt in connection with the MDP Acquisition. While Nuveen Investments believes that monies generated from operations and cash on hand will be adequate
to fund debt service requirements, capital expenditures and working capital requirements for the foreseeable future, there can be no assurance that Nuveen Investments business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable Nuveen Investments to pay its indebtedness (with scheduled maturities beginning in 2014) or to fund its other liquidity needs. Nuveen Investments believes that potential adverse changes
to its overall financial position and business operations would not adversely affect its or its affiliates portfolio management operations and would not otherwise adversely affect its ability to fulfill its obligations to the Funds under the
investment management agreements.
25
Pursuant to an Investment Management Agreement between the Adviser and each Fund, each
Funds management fee is separated into two componentsa complex-level component, based on the aggregate amount of all qualifying assets of funds managed by Nuveen Fund Advisors, and a fund-level component, based only on the
amount of managed assets within such Fund. The amount of qualifying assets is calculated based upon the aggregate daily Managed Assets of all Nuveen-sponsored open-end and closed-end Funds (collectively, the Nuveen Funds) (as
Managed Assets is defined in each Nuveen Funds investment management agreement, which, with respect to the closed-end funds, generally includes assets attributable to any preferred shares that may be outstanding and any
borrowings), but excluding assets attributable to (i) investments by Nuveen Funds in other Nuveen Funds and (ii) the amount, as of January 1, 2011, of managed assets in excess of $2 billion in the Funds that were added to the Nuveen
Fund family on that date in connection with Nuveen Fund Advisors assumption of the management of the former First American Funds. The pricing structure enables the Funds shareholders to benefit from growth in assets within each
individual fund as well as from growth of complex-wide assets managed by Nuveen Fund Advisors.
The annual fund-level fee for
each Fund is based upon the average daily Managed Assets of each Fund as follows:
Management Fee Schedule for the Acquiring
Fund and the Acquired Fund
|
|
|
|
|
|
|
|
|
Average Daily Managed Assets*
|
|
Acquiring
Fund-Level
Fee Rate
|
|
|
Acquired
Fund-Level
Fee Rate
|
|
First $500 Million
|
|
|
0.9000
|
%
|
|
|
0.9200
|
%
|
Next $500 Million
|
|
|
0.8750
|
%
|
|
|
0.8950
|
%
|
Next $500 Million
|
|
|
0.8500
|
%
|
|
|
0.8700
|
%
|
Next $500 Million
|
|
|
0.8250
|
%
|
|
|
0.8450
|
%
|
For managed assets over $2 billion
|
|
|
0.8000
|
%
|
|
|
0.8200
|
%
|
The management fee compensates the Adviser for overall investment advisory and administrative
services and general office facilities. Each Fund pays all of its other costs and expenses of its operations, including compensation of its trustees (other than those affiliated with the Adviser), custodian, transfer agency and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing shares, expenses of issuing any preferred shares, expenses of preparing, printing and distributing shareholder reports, notices, proxy statements and reports to
governmental agencies, and taxes, if any.
Due to the increased size of the combined fund, the effective management fee rate
as a percentage of average daily Managed Assets for the combined fund is expected to be the same or lower than the current management fee rate for each of the Acquiring and Acquired Fund. Each Fund also pays a complex-level fee to Nuveen Fund
Advisors, which is payable monthly and is in addition to the fund-level fee. The complex-level fee is based on the aggregate daily amount of total Managed Assets for all Nuveen sponsored funds in the U.S., as stated in the table below. As of
November 30, 2011, the effective complex-level fee rate was 0.1774%.
The complex-level fee rate is as follows:
Complex-Level Fee Rates
|
|
|
|
|
Complex-Level Managed Asset Breakpoint Level*
|
|
Effective Rate
at Breakpoint
Level
|
|
$ 55 billion
|
|
|
0.2000
|
%
|
$ 56 billion
|
|
|
0.1996
|
%
|
26
|
|
|
|
|
Complex-Level Asset Breakpoint Level*
|
|
Effective Rate
at Breakpoint
Level
|
|
$ 57 billion
|
|
|
0.1989
|
%
|
$ 60 billion
|
|
|
0.1961
|
%
|
$ 63 billion
|
|
|
0.1931
|
%
|
$ 66 billion
|
|
|
0.1900
|
%
|
$ 71 billion
|
|
|
0.1851
|
%
|
$ 76 billion
|
|
|
0.1806
|
%
|
$ 80 billion
|
|
|
0.1773
|
%
|
$ 91 billion
|
|
|
0.1691
|
%
|
$125 billion
|
|
|
0.1599
|
%
|
$200 billion
|
|
|
0.1505
|
%
|
$250 billion
|
|
|
0.1469
|
%
|
$300 billion
|
|
|
0.1445
|
%
|
*
|
The complex-level fee is calculated based upon the aggregate daily eligible assets of all Nuveen Funds. Eligible assets do not include assets attributable
to investments in other Nuveen Funds or assets in excess of $2 billion added to the Nuveen fund complex in connection with Nuveen Fund Advisors assumption of the management of the former First American Funds effective January 1, 2011.
With respect to closed-end funds, eligible assets include assets managed by Nuveen Fund Advisors that are attributable to financial leverage. For these purposes, financial leverage includes the use of preferred stock and borrowings and certain
investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by issuance of floating rate
securities, subject to an agreement by Nuveen Fund Advisors as to certain funds to limit the amount of such assets for determining eligible assets for determining eligible assets in certain circumstances.
|
A discussion of the basis for the Boards initial approval of the Acquiring Funds Investment Management Agreement and
Investment Sub-Advisory Agreement (discussed below) is included in the Funds Annual Report for the fiscal year ended November 30, 2011. A discussion of the basis for the Boards initial approval of the Acquired Funds Investment
Management Agreement and Investment Sub-Advisory Agreement (discussed below) is included in the Acquired Funds Annual Report for the fiscal year ended October 31, 2010. (Effective November 1, 2011, the Acquired Fund changed its
fiscal and tax year ends from October 31 to November 30.)
Sub-Adviser.
Nuveen
Fund Advisors has selected FAMCO MLP to serve as sub-adviser to each of the Funds. FAMCO MLP, a registered investment adviser, is a division of Advisory Research Inc. (ARI). ARI was founded in 1974 and is a wholly-owned subsidiary of
Piper Jaffray Companies, a publicly traded company listed on the New York Stock Exchange, trading under the symbol PJC. On March 30, 2012, the FAMCO MLP team and its business was transferred from Fiduciary Asset Management Inc. to its affiliated
investment adviser, ARI. All personnel that had previously comprised FAMCO MLP, including investment management, research, trading, client servicing and compliance personnel, were relocated within ARI. FAMCO MLP is dedicated to managing Master
Limited Partnerships (MLPs) and energy infrastructure strategies for open-end and closed-end management investment companies, public and corporate pension plans, endowments and foundations and private wealth individuals. FAMCO MLP is located at 8235
Forsyth Boulevard, Suite 700, St. Louis, Missouri 63105. As of February 29, 2012, FAMCO MLP manages approximately $3.0 billion of MLP and energy infrastructure assets, which includes the assets of three publicly traded MLP closed-end funds
(including the Acquired Fund and the Acquiring Fund).
27
Pursuant to an Investment Sub-Advisory Agreement with respect to each Fund, between the
Adviser and FAMCO MLP (or its affiliates), the Subadviser furnishes an investment program in respect of, makes investment decisions for, and places all orders for the purchase and sale of securities for each Funds investment portfolio, all on
behalf of each Fund and consistent with each Funds investment objective, policies and restrictions. For the services provided under each Investment Sub-Advisory Agreement, the Adviser pays the Sub-Adviser a per annum portfolio management fee
equal to 0.50% of each Funds managed assets and payable monthly.
Portfolio
Management.
Subject to the supervision of Nuveen Fund Advisors, FAMCO has day-to-day responsibility for managing each Funds direct investments in MLPs and other permitted investments.
James J. Cunnane, Jr. and Quinn T. Kiley serve as each Funds portfolio managers and are primarily responsible for the
day-to-day management of each Funds portfolio. Messrs. Cunnane and Kiley have served as each Funds portfolio managers since the inception of each FundJune 29, 2007 for the Acquired Fund and February 24, 2011 with respect to the
Acquiring Fund.
James J. Cunnane Jr., CFA | Managing Director, Chief Investment Officer
Mr. Cunnane is the Managing Director and Chief Investment Officer of FAMCO MLP. He oversees the firms MLP and energy infrastructure
product lines and chairs the Risk Management Committee. He joined the FAMCO MLP team in 1996. Mr. Cunnane currently serves as a portfolio manager for three publicly traded closed-end mutual funds: the Fiduciary/Claymore MLP Opportunity Fund, the MLP
& Strategic Equity Fund, Inc. and the Nuveen Energy MLP Total Return Fund. He also serves as a portfolio manager for the FAMCO MLP & Energy Income Fund, an open-end mutual fund, as well as a privately offered open-end mutual fund. Mr.
Cunnane holds a B.S. in finance from Indiana University and is a Chartered Financial Analyst (CFA) charterholder. He serves on the finance council and investment committee of the Archdiocese of St. Louis and on the Board of Directors of
St. Patricks Center.
Quinn T. Kiley | Managing Director, Senior Portfolio Manager
Mr. Kiley is the Managing Director and Senior Portfolio Manager of FAMCO MLP and his responsibilities include portfolio management of
various energy infrastructure assets and oversight of the energy infrastructure research process. He joined the FAMCO MLP team in 2005. Mr. Kiley serves as a portfolio manager for three publicly traded closed-end mutual funds: the Fiduciary/Claymore
MLP Opportunity Fund, the MLP & Strategic Equity Fund, Inc. and the Nuveen Energy MLP Total Return Fund. He also serves as a portfolio manager for the FAMCO MLP & Energy Income Fund, an open-end mutual fund, as well as a privately offered
open-end mutual fund. Prior to joining the FAMCO MLP team, Mr. Kiley served as Vice President of Corporate & Investment Banking at Banc of America Securities in New York. He was responsible for executing strategic advisory and financing
transactions for clients in the Energy & Power sectors. Mr. Kiley holds a B.S. with Honors in Geology from Washington & Lee University, a M.S. in Geology from the University of Montana, a Juris Doctorate from Indiana University School of
Law, and a M.B.A. from the Kelley School of Business at Indiana University. Mr. Kiley has been admitted to the New York State Bar.
The Reorganization SAI provides additional information about the portfolio managers compensation, other accounts managed by the portfolio managers, and the portfolio managers ownership of securities
in the Funds.
28
Comparative Expense Information
The purpose of the comparative fee table is to assist you in understanding the various costs and expenses of investing in shares of the
Funds. The information in the table is based upon annualized expenses for each Funds fiscal year ended November 30, 2011, adjusted as described in footnote 1 below, and the pro-forma expenses for the 12 months ended November 30, 2011
for the combined fund. The figures in the Example are not necessarily indicative of past or future expenses, and actual expenses may be greater or less than those shown. The Funds actual rate of return may be greater or less than the
hypothetical 5% annual return shown in the Example.
Comparative Fee
Table
(1)
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Acquiring
Fund
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Acquired
Fund
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Combined
Fund Pro
Forma
(2)
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Annual Expenses (as a percentage of net assets applicable to common shares)
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Management Fees
(5)
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1.49
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%
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1.08
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%
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1.48
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%
(3)
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Interest Payments on Borrowings
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|
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0.53
|
%
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0.00
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%
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|
0.53
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%
(3)
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Other Expenses
|
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|
0.12
|
%
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|
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0.13
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%
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|
|
0.10
|
%
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Current Income Tax Expense
|
|
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0.00
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%
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|
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0.41
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%
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|
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0.16
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%
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Deferred Income Tax Expense
(4)
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|
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0.00
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%
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9.72
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%
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|
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3.79
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%
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Total Annual Expenses
(5)
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2.14
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%
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11.34
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%
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|
6.06
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%
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(1)
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Annual Expenses (as a percentage of net assets applicable to common shares) are based on the annualized expenses of the Acquiring Fund for the period from inception
(February 24, 2011) through November 30, 2011 and the Acquired Fund expenses for the 12 months ended November 30, 2011. Management Fees and Interest Payments on Borrowings have been adjusted to reflect estimated borrowings for the current
period in an amount equal to 39% of average net assets applicable to common shares (or 32% and 26% of average Managed Assets of the Acquiring Fund and the Combined Fund Pro Forma, respectively) for the Acquiring Fund and the Combined Fund Pro Forma,
respectively. Other Expenses for the Acquiring Fund and the Acquired Fund have been adjusted for the short fiscal period, and change in fiscal year, respectively, for the fiscal period ended November 30, 2011. Other Expenses for the Combined Fund
Pro Forma are estimated for the current period. It is important for you to understand that a decline in a Funds average net assets applicable to common shares during the current fiscal year due to recent market volatility or other factors
could cause each Funds expense ratio for such Funds current fiscal year to be higher than the expense information presented.
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(2)
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The Combined Fund Pro Forma figures assume the consummation of the Reorganization on November 30, 2011 and reflect average net assets applicable to common shares
for both the Acquiring Fund and Acquired Fund for the period ended November 30, 2011. Pro forma expenses do not include the expenses to be borne by the Funds in connection with the Reorganization, which are estimated to be $214,000 (0.05% of
net assets applicable to common shares) for the Acquiring Fund and $327,000 (0.12% of net assets applicable to common shares) for the Acquired Fund.
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(3)
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Management Fees and Interest Payments on Borrowings have been adjusted to reflect estimated borrowings for the current period in an amount equal to approximately 39% of
average net assets (or 32% and 26% of average Managed Assets of the Acquiring Fund and the Combined Fund Pro Forma, respectively) applicable to common shares for the Acquiring Fund and the Combined Fund Pro Forma at an estimated fee of 0.50% on the
unused portion of the credit line and an annual interest rate of 1.35% on amounts borrowed.
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29
(4)
|
Deferred Income Tax Expense represents an estimate of the potential tax liability of the Funds if the Funds were to recognize the unrealized appreciation of their
portfolio assets based on the market value and tax basis of assets as of November 30, 2011. Actual income tax expense (if any) will be incurred over many years depending on if and when investment gains are realized, the then-current tax basis of
assets, the level of net loss carryforwards and other factors. Total annual operating expenses (as a percentage of net assets and excluding Current and Deferred Income Tax Expense) for the Acquiring Fund, Acquired Fund and Combined Fund Pro Forma
were 2.14%, 1.21% and 2.11%, respectively.
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(5)
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Assuming that the Acquired Fund had engaged in borrowing at the same levels as the Acquiring Fund, Management Fees for the Acquiring Fund, Acquired Fund and Combined
Fund Pro Forma would have been 1.49%, 1.53% and 1.48%, respectively. Under the same assumption, Total Annual Expenses for the Acquiring Fund, Acquired Fund and Combined Fund Pro Forma would have been 2.14%, 2.19% and 2.11%, respectively.
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Example
: The following examples illustrate the expenses that a shareholder
would pay on a $1,000 investment that is held for the time periods provided in the table. The examples assume that all dividends and other distributions are reinvested and that Total Annual Expenses remain the same. The examples also assume a 5%
annual return.
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1 Year
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3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
Acquiring Fund
|
|
$
|
22
|
|
|
$
|
67
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|
|
$
|
115
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|
|
$
|
247
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Acquired Fund
|
|
$
|
110
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|
|
$
|
309
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$
|
484
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$
|
832
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Combined Fund Pro Forma
|
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$
|
60
|
|
|
$
|
179
|
|
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$
|
295
|
|
|
$
|
575
|
|
Comparative Perfor
mance Information
Comparative total return performance for the Funds for periods ended November 30, 2011:
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Total Return
on Net Asset Value*
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Total Return
on Market Value*
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Three
Month
|
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Six
Month
|
|
|
One
Year
|
|
|
Since
Inception
|
|
|
Three
Month
|
|
|
Six
Month
|
|
|
One
Year
|
|
|
Since
Inception
|
|
Acquiring Fund
|
|
|
5.15
|
%
|
|
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-0.80
|
%
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|
N/A
|
|
|
|
-4.76
|
%
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|
-2.29
|
%
|
|
|
-5.84
|
%
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|
|
N/A
|
|
|
|
-11.94
|
%
|
Acquired Fund
|
|
|
3.67
|
%
|
|
|
2.07
|
%
|
|
|
5.50
|
%
|
|
|
4.89
|
%
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|
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-1.02
|
%
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|
|
-3.69
|
%
|
|
|
-3.81
|
%
|
|
|
1.78
|
%
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*
|
All total returns presented are cumulative with the exception of the one year and since inception returns for the Acquired Fund, which are annualized.
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Total Return on Net Asset Value is the combination of changes in net asset value, reinvested dividend income at
net asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net
asset value. The actual reinvestment price for the last dividend declared in the period may often be based on the Funds market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total
Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The
last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take
place over several days, and in some instances it may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Past performance information is not necessarily indicative of future
results.
30
Deferred Tax Assets
and Liabilities
Because each Fund is taxed as a corporation, each Fund records in its financial statements a deferred tax asset (an amount that can be
used to offset future taxable income) or a deferred tax liability (a tax due in the future). These deferred tax assets are attributable to net operating losses, realized capital losses, and unrealized losses on investments. Deferred tax liabilities
are attributable to net operating income, realized capital gains, and unrealized gains on investments. Utilization of a deferred tax asset is dependent on whether there will be sufficient future taxable income within the carryforward periods to
realize a portion or all of the deferred tax benefit.
Any net deferred tax asset or liability is included in each Funds
net asset value and will be calculated as of the valuation time and will impact the number of shares exchanged in the Reorganization. As a result of the Reorganization, the Acquiring Fund will succeed to the net deferred tax assets or net deferred
tax liabilities, if any, of the Acquired Fund, but will be subject to the limitations imposed by Code Section 382. This may result in the Acquiring Fund being able to utilize more or less of the tax benefits than reflected in the Acquired
Funds net deferred tax assets or net deferred tax liabilities, if any, as calculated as of the valuation time.
As
of November 30, 2011, the gross deferred tax asset, valuation allowance, net deferred tax asset/(liability), and net deferred tax asset/(liability) as a percentage of net assets applicable to common shares for each Fund are as stated below.
|
|
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|
|
|
|
|
|
|
|
Acquiring Fund
|
|
|
Acquired Fund
|
|
Gross Deferred Tax Asset/(Liability)
|
|
$
|
7,716,655
|
|
|
$
|
(24,320,796
|
)
|
Valuation Allowance
|
|
|
(7,716,655
|
)
|
|
|
(1,187,919
|
)
|
Net Deferred Tax Asset/(Liability)
|
|
|
-0
|
-
|
|
|
(25,508,715
|
)
|
Net Deferred Tax Liability As a Percentage of Net Assets Applicable to Common Shares
|
|
|
0
|
%
|
|
|
9.69
|
%
|
An
investment in the Acquiring Fund may not be appropriate for all investors. The Acquiring Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will
achieve its investment objective. Investors should consider their long-term investment goals and financial needs when making an investment decision with respect to the Acquiring Fund. The Acquiring Funds performance and the value of its
investments will vary in response to changes in interest rates, inflation, the financial condition of a security issuer, ratings on a security and other market factors. An investment in the Acquiring Fund is intended to be a long-term investment,
and you should not view the Fund as a trading vehicle. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of fund dividends and distributions, if applicable.
Because the Funds have similar investment strategies, the principal risks of each Fund are similar. The principal risks of
investing in the Acquiring Fund are described below. An investment in the Acquired Fund is also generally subject to each of these principal risks, with certain limited exceptions. The Acquired Fund, as a diversified management investment company,
is not subject to Non-Diversification Risk. In addition, Limited Operating History, below pertains only to the Acquiring Fund, in light of its February 24, 2011 inception date. Further, to the extent the Acquiring
31
Fund currently employs a leveraging strategy to enhance current distributions and total return potential, its shareholders are subject to Leverage Risks below to a greater extent than
shareholders of the Acquired Fund which, though it reserves the right to do so, does not currently use such a strategy. The risks and special considerations listed below should be considered by shareholders of each Fund in their evaluation of the
Reorganizations.
Limited Operating History
The Acquiring Fund is a recently organized, non-diversified, closed-end management investment company and has a limited history of operations.
Investment and Market Risk
An investment in the Acquiring Funds
common shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Your investment in common shares represents an indirect investment in MLPs and other securities owned by the Acquiring Fund,
which could be purchased directly. Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Acquiring Fund dividends and distributions, if applicable.
Market Discount from Net Asset Value and Expected Reductions in Net Asset Value
Shares of closed-end investment companies like the Acquiring Fund frequently trade at prices lower than their net asset value, which
creates a risk of loss for investors when they sell shares purchased in the initial public offering. This characteristic is a risk separate and distinct from the risk that the Acquiring Funds net asset value could decrease as a result of
investment activities. Shares of closed-end investment companies like the Acquiring Fund have during some periods traded at prices higher than net asset value and have during other periods traded at prices lower than net asset value. Whether
investors will realize gains or losses upon the sale of the common shares will depend not upon the Acquiring Funds net asset value but entirely upon whether the market price of the common shares at the time of sale is above or below the
investors purchase price for the common shares. Furthermore, management may have difficulty meeting the Acquiring Funds investment objective and managing its portfolio when the underlying securities are redeemed or sold during periods of
market turmoil and as investors perceptions regarding closed-end funds or their underlying investments change. Because the market price of the common shares will be determined by factors such as relative supply of and demand for the common
shares in the market, general market and economic conditions, and other factors beyond the control of the Acquiring Fund, the Acquiring Fund cannot predict whether the common shares will trade at, below or above net asset value or at, below or above
the value of the common shares at the closing of the Reorganization. The common shares are designed primarily for long-term investors, and you should not view the Acquiring Fund as a vehicle for short-term trading purposes.
Risks Related to Investments in MLP Units
An investment in MLP units involves risks that differ from a similar investment in equity securities, such as common stock, of a corporation. Holders of MLP units have the rights typically afforded to
limited partners in a limited partnership. As compared to common stockholders of a corporation, holders of MLP units have more limited control and limited rights to vote on matters affecting the partnership. There are certain tax risks associated
with an investment in MLP units
32
(described further below). Additionally, conflicts of interest may exist among common unit holders, subordinated unit holders and the general partner or managing member of an MLP; for example a
conflict may arise as a result of incentive distribution payments.
2012 U.S. Federal Budget Risk
The proposed United States federal budget for fiscal year 2012 calls for the elimination of approximately $46 billion in tax incentives
widely used by oil, gas and coal companies and the imposition of new fees on certain energy producers. The elimination of such tax incentives and imposition of such fees could adversely affect MLPs in which the Acquiring Fund invests and the energy
sector generally.
Tax Risks
Much of the benefit the Acquiring Fund derives from its investment in equity securities of MLPs is a result of MLPs generally being treated as partnerships for U.S. federal income tax purposes.
Partnerships do not pay U.S. federal income tax at the partnership level. Rather, each partner of a partnership, in computing its U.S. federal income tax liability, will include its allocable share of the partnerships income, gains, losses,
deductions, expenses and credits. A change in current tax law, or a change in the business of a given MLP, could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result in such MLP being required to
pay U.S. federal income tax on its taxable income. The classification of an MLP as a corporation for U.S. federal income tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP and causing any such
distributions received by the Acquiring Fund to be taxed as dividend income to the extent of the MLPs current or accumulated earnings and profits. Thus, if any of the MLPs owned by the Acquiring Fund were treated as corporations for U.S.
federal income tax purposes, the after-tax return to the Acquiring Fund with respect to its investment in such MLPs would be materially reduced, which could cause a substantial decline in the value of the common shares.
To the extent that the Acquiring Fund invests in the equity securities of an MLP, the Acquiring Fund will be a partner in such MLP.
Accordingly, the Acquiring Fund will be required to include in its taxable income the Acquiring Funds allocable share of the income, gains, losses, deductions, expenses and credits recognized by each such MLP, regardless of whether the MLP
distributes cash to the Acquiring Fund. Historically, MLPs have been able to offset a significant portion of their income with tax deductions. The Acquiring Fund will incur a current tax liability on its allocable share of an MLPs income and
gains that is not offset by the MLPs tax deductions, losses and credits, or the Acquiring Funds net operating loss carryforwards, if any. The portion, if any, of a distribution received by the Acquiring Fund from an MLP that does not
exceed the MLPs adjusted tax basis in the MLP is essentially treated as a return of capital. However, those distributions will reduce the Acquiring Funds adjusted tax basis in the equity securities of the MLP, which will result in an
increase in the amount of gain (or decrease in the amount of loss) that will be recognized by the Acquiring Fund for tax purposes upon the sale of any such equity securities or upon subsequent distributions in respect of such equity securities. The
percentage of an MLPs income and gains that is offset by tax deductions, losses and credits will fluctuate over time for various reasons. A significant slowdown in acquisition activity or capital spending by MLPs held in the Acquiring
Funds portfolio could result in a reduction of accelerated depreciation generated by new acquisitions, which may result in increased current tax liability for the Acquiring Fund.
33
The Acquiring Fund may engage in hedges or similar transactions with respect to its MLP
interests. The tax accounting for such transactions may not be clear, leaving the possibility that the Internal Revenue Service (the IRS) could disagree with the Acquiring Funds treatment. If the IRS were to prevail in a challenge,
the Acquiring Fund might be exposed to a deferral of tax losses, acceleration of gain, changes in the character of income or gain, or other adverse consequences, including a change in the Acquiring Funds determination of the amount of its
earnings and profits for purposes of determining taxability of dividends.
The Acquiring Fund will accrue deferred income
taxes for its future tax liability associated with the difference between the tax basis of an MLP security and the fair market value of the MLP security. Upon the Acquiring Funds sale of an MLP security, the Acquiring Fund may be liable for
previously deferred taxes. The Acquiring Fund will rely to some extent on information provided by MLPs, which may not necessarily be timely, to estimate deferred tax liability for purposes of financial statement reporting and determining its net
asset value. From time to time, the Acquiring Fund will modify its estimates or assumptions regarding its deferred tax liability as new information becomes available.
The Acquiring Funds earnings and profits may be calculated using accounting methods that are different from those used for calculating taxable income. Because of these differences, the Acquiring
Fund may make distributions out of its current or accumulated earnings and profits, which will be treated as dividends, in years in which the Acquiring Funds distributions exceed its taxable income.
Affiliated Party Risk
Certain MLPs in which the Acquiring Fund may invest depend upon their parent or sponsor entities for the majority of their revenues. Were
their parent or sponsor entities to fail to make such payments or satisfy their obligations, the revenues and cash flows of such MLPs and ability of such MLPs to make distributions to unit holders, such as the Acquiring Fund, would be adversely
affected.
Equity Securities Risk
A substantial percentage of the Acquiring Funds assets will be invested in equity securities, including MLP common units, MLP subordinated units, MLP preferred units, equity securities of MLP
affiliates, including I-Shares, and common stocks of other issuers. Equity risk is the risk that MLP units or other equity securities held by the Acquiring Fund will fall due to general market or economic conditions, perceptions regarding the
industries in which the issuers of securities held by the Acquiring Fund participate, changes in interest rates, and the particular circumstances and performance of particular companies whose securities the Acquiring Fund holds. The price of an
equity security of an issuer may be particularly sensitive to general movements in the stock market, or a drop in the stock market may depress the price of most or all of the equity securities held by the Acquiring Fund. In addition, equity
securities held by the Acquiring Fund may decline in price if the issuer fails to make anticipated distributions or dividend payments.
MLP subordinated units typically are convertible to MLP common units at a one-to-one ratio. The price of MLP subordinated units is typically tied to the price of the corresponding MLP common unit, less a
discount. The size of the discount depends upon a variety of factors, including the likelihood of conversion, the length of time remaining until conversion and the size of the block of subordinated units being purchased or sold.
34
I-Shares represent an indirect investment in MLP I-units. Prices and volatilities of
I-Shares tend to correlate to the price of common units. I-Shares are subject to the same risks as MLP common units.
Energy Sector Risks
Because the Acquiring Fund will invest at least 80% of its Managed Assets in MLPs in the energy sector, concentration in
the energy sector may present more risks than if the Acquiring Fund were invested in numerous sectors of the economy. A downturn in the energy sector could have a larger impact on the Acquiring Fund than on a fund that does not concentrate in the
sector. At times, the performance of securities of companies in the energy sector may lag the performance of other sectors or the broader market as a whole. In addition, there are several specific risks associated with investments in the energy
sector, including the following.
Commodity Price Risk.
MLPs and other entities operating in the
energy sector may be affected by fluctuations in the prices of energy commodities, including, for example, natural gas, natural gas liquids, crude oil and coal in the short- and long-term. Fluctuations in energy commodity prices would impact
directly companies that own such energy commodities and could impact indirectly companies that engage in transportation, storage, processing, distribution or marketing of such energy commodities. Fluctuations in energy commodity prices can result
from changes in general economic conditions or political circumstances (especially of key energy producing and consuming countries); market conditions; weather patterns; domestic production levels; volume of imports; energy conservation; domestic
and foreign governmental regulation; international politics; policies of OPEC; taxation; tariffs; and the availability and costs of local, intrastate and interstate transportation methods. The energy sector as a whole may also be impacted by the
perception that the performance of energy sector companies is directly linked to commodity prices. High commodity prices may drive further energy conservation efforts, and a slowing economy may adversely impact energy consumption, which may
adversely affect the performance of MLPs and other companies operating in the energy sector. Recent economic and market events have fueled concerns regarding potential liquidations of commodity futures and options positions.
Depletion Risk.
MLPs and other entities engaged in the exploration, development, management or production
of energy commodities face the risk that commodity reserves are depleted over time. Such companies seek to increase their reserves through expansion of their current businesses, acquisitions, further development of their existing sources of energy
commodities, exploration of new sources of energy commodities or by entering into long-term contracts for additional reserves; however, there are risks associated with each of these potential strategies. If such companies fail to acquire additional
reserves in a cost-effective manner and at a rate at least equal to the rate at which their existing reserves decline, their financial performance may suffer. Additionally, failure to replenish reserves could reduce the amount and affect the tax
characterization of the distributions paid by such companies.
Supply and Demand Risk.
MLPs and
other entities operating in the energy sector could be adversely affected by reductions in the supply of or demand for energy commodities. The volume of production of energy commodities and the volume of energy commodities available for
transportation, storage, processing or distribution could be affected by a variety of factors, including depletion of resources; depressed commodity prices; catastrophic events; labor relations; increased environmental or other governmental
regulation; equipment malfunctions and maintenance difficulties; import volumes; international politics, policies of OPEC; and increased competition from alternative energy
35
sources. Alternatively, a decline in demand for energy commodities could result from factors such as adverse economic conditions (especially in key energy-consuming countries); increased
taxation; increased environmental or other governmental regulation; increased fuel economy; increased energy conservation or use of alternative energy sources; legislation intended to promote the use of alternative energy sources; or increased
commodity prices.
Regulatory Risk.
The energy sector is highly regulated. MLPs and other
entities operating in the energy sector are subject to significant regulation of nearly every aspect of their operations by federal, state and local governmental agencies. Such regulation can change over time in both scope and intensity. For
example, a particular by-product may be declared hazardous by a regulatory agency and unexpectedly increase production costs. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under
them, and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future which would likely increase compliance
costs and may adversely affect the financial performance of MLPs.
Specifically, the operations of wells, gathering systems,
pipelines, refineries and other facilities are subject to stringent and complex federal, state and local environmental laws and regulations. These include, for example:
|
|
|
the federal Clean Air Act and comparable state laws and regulations that impose obligations related to air emissions;
|
|
|
|
the federal Clean Water Act and comparable state laws and regulations that impose obligations related to discharges of pollutants into regulated bodies
of water;
|
|
|
|
the Resource Conservation and Recovery Act (RCRA) and comparable state laws and regulations that impose requirements for the handling and
disposal of waste from facilities; and
|
|
|
|
the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), also known as Superfund, and
comparable state laws and regulations that regulate the cleanup of hazardous substances that may have been released at properties currently or previously owned or operated by MLPs or at locations to which they have sent waste for disposal.
|
Failure to comply with these laws and regulations may trigger a variety of administrative, civil and
criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes, including RCRA, CERCLA, the federal Oil
Pollution Act and analogous state laws and regulations, impose strict, joint and several liability for costs required to clean up and restore sites where hazardous substances have been disposed of or otherwise released. Moreover, it is not uncommon
for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the release of hazardous substances or other waste products into the environment.
There is an inherent risk that MLPs may incur environmental costs and liabilities due to the nature of their businesses and the
substances they handle. For example, an accidental release from wells or energy infrastructure assets could subject them to substantial liabilities for environmental
36
cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for related violations of
environmental laws or regulations. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly increase compliance costs and remediation costs. MLPs may not be able to recover these costs from
insurance.
Voluntary initiatives and mandatory controls have been adopted or are being discussed both in the United States
and worldwide to reduce emissions of greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels, and methane, the major constituent of natural gas, which many scientists and policymakers believe contribute to global
climate change. These measures and future measures could result in increased costs to certain companies in which the Acquiring Fund may invest to operate and maintain facilities and administer and manage a greenhouse gas emissions program and may
reduce demand for fuels that generate greenhouse gases and that are managed or produced by companies in which the Acquiring Fund may invest.
In the wake of a Supreme Court decision holding that the Environmental Protection Agency (the EPA) EPA has some legal authority to deal with climate change under the Clean Air Act, the EPA and
the Department of Transportation jointly wrote regulations to cut gasoline use and control greenhouse gas emissions from cars and trucks. These measures, and other programs addressing greenhouse gas emissions, could reduce demand for energy or raise
prices, which may adversely affect the total return of certain of the Acquiring Funds investments.
Acquisition
Risk.
MLP investments owned by the Acquiring Fund may depend on their ability to make acquisitions that increase adjusted operating surplus per unit in order to increase distributions to unit holders. The ability of such
MLPs to make future acquisitions is dependent on their ability to identify suitable targets, negotiate favorable purchase contracts, obtain acceptable financing and outbid competing potential acquirers. To the extent that such MLPs are unable to
make future acquisitions, or such future acquisitions fail to increase the adjusted operating surplus per unit, their growth and ability to make distributions will be limited.
There are risks inherent in any acquisition, including erroneous assumptions regarding revenues, acquisition expenses, operating expenses, cost savings and synergies; assumption of unknown liabilities;
indemnification; customer losses; key employee defections; distraction from other business operations; and unanticipated difficulties in operating or integrating new product areas and geographic regions.
Weather and Other Catastrophic Events Risk.
Weather plays a role in the seasonality of some MLPs cash
flows. MLPs in the propane industry, for example, rely on the winter season to generate almost all of their earnings. In an unusually warm winter season, propane MLPs experience decreased demand for their product. Although most MLPs can reasonably
predict seasonal weather demand based on normal weather patterns, extreme weather conditions, such as the hurricanes that severely damaged cities along the U.S. Gulf Coast in recent years, demonstrate that no amount of preparation can protect an MLP
from the unpredictability of the weather or possible climate change. The damage done by extreme weather also may serve to increase many MLPs insurance premiums and could adversely affect such companies financial condition and ability to
pay distributions to shareholders.
Catastrophic Event Risk.
In addition, MLPs and other
entities operating in the energy sector are subject to many dangers inherent in the production, exploration, management, transportation,
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processing and distribution of natural gas, natural gas liquids, crude oil, refined petroleum and petroleum products and other hydrocarbons. These dangers include leaks, fires, explosions, damage
to facilities and equipment resulting from natural disasters, inadvertent damage to facilities and equipment and terrorist acts. Since the September 11th terrorist attacks, the U.S. government has issued warnings that energy assets,
specifically U.S. pipeline infrastructure, may be targeted in future terrorist attacks. These dangers give rise to risks of substantial losses as a result of loss or destruction of commodity reserves; damage to or destruction of property, facilities
and equipment; pollution and environmental damage; and personal injury or loss of life. Any occurrence of such catastrophic events could bring about a limitation, suspension or discontinuation of operations in the energy sector. MLPs and other
entities operating in the energy sector may not be fully insured against all risks inherent in their business operations and therefore accidents and catastrophic events could adversely affect such companies financial condition and ability to
pay distributions to shareholders.
Recent Developments Risk.
A sustained economic slowdown may
adversely affect the ability of MLPs to sustain their historical distribution levels, which in turn, may adversely affect the Funds ability to sustain distributions at historical levels. MLPs that have historically relied heavily on outside
capital to fund their growth have been impacted by the slowdown in capital markets. The recovery of the MLP sector is dependent on several factors including the recovery of the financial sector, the general economy and the commodity markets.
Measures taken by the U.S. Government to stimulate the U.S. economy may not be successful or may not have the intended effect. Additionally, if the credit market continues to weaken, the Acquiring Funds access to capital may be impacted by
these market developments.
Industry Specific Risks
MLPs and other entities operating in the energy sector are also subject to risks that are specific to the industry they serve.
Pipelines.
Pipeline companies are subject to the demand for natural gas, natural gas liquids, crude oil or refined products in the markets they serve, changes in the
availability of products for gathering, transportation, processing or sale due to natural declines in reserves and production in the supply areas serviced by the companies facilities, sharp decreases in crude oil or natural gas prices that
cause producers to curtail production or reduce capital spending for exploration activities, and environmental regulation. Demand for gasoline, which accounts for a substantial portion of refined product transportation, depends on price, prevailing
economic conditions in the markets served, and demographic and seasonal factors. Companies that own interstate pipelines are subject to regulation by FERC with respect to the tariff rates they may charge for transportation services. An adverse
determination by FERC with respect to the tariff rates of such companies could have a material adverse effect on their business, financial condition, results of operations and cash flows and their ability to pay cash distributions or dividends. In
addition, FERC has a tax allowance policy, which permits such companies to include in their cost of service an income tax allowance to the extent that their owners have an actual or potential tax liability on the income generated by them. If
FERCs income tax allowance policy were to change in the future to disallow a material portion of the income tax allowance taken by such interstate pipeline companies, it would adversely impact the maximum tariff rates that such companies are
permitted to charge for their transportation services, which would in turn could adversely affect such companies financial condition and ability to pay distributions to shareholders.
Gathering and Processing.
Gathering and processing companies are subject to natural declines in the
production of oil and natural gas fields, which utilize their gathering and processing
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facilities as a way to market their production, prolonged declines in the price of natural gas or crude oil, which curtails drilling activity and therefore production, and declines in the prices
of natural gas liquids and refined petroleum products, which cause lower processing margins. In addition, some gathering and processing contracts subject the gathering or processing company to direct commodities price risk.
Midstream.
Midstream MLPs and other entities that provide crude oil, refined product and natural gas
services are subject to supply and demand fluctuations in the markets they serve which may be impacted by a wide range of factors including fluctuating commodity prices, weather, increased conservation or use of alternative fuel sources, increased
governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, and economic conditions, among others.
Exploration and Production.
Exploration, development and production companies are particularly vulnerable
to declines in the demand for and prices of crude oil and natural gas. Reductions in prices for crude oil and natural gas can cause a given reservoir to become uneconomic for continued production earlier than it would if prices were higher,
resulting in the plugging and abandonment of, and cessation of production from, that reservoir. In addition, lower commodity prices not only reduce revenues but also can result in substantial downward adjustments in reserve estimates. The accuracy
of any reserve estimate is a function of the quality of available data, the accuracy of assumptions regarding future commodity prices and future exploration and development costs and engineering and geological interpretations and judgments.
Different reserve engineers may make different estimates of reserve quantities and related revenue based on the same data. Actual oil and gas prices, development expenditures and operating expenses will vary from those assumed in reserve estimates,
and these variances may be significant. Any significant variance from the assumptions used could result in the actual quantity of reserves and future net cash flow being materially different from those estimated in reserve reports. In addition,
results of drilling, testing and production and changes in prices after the date of reserve estimates may result in downward revisions to such estimates. Substantial downward adjustments in reserve estimates could have a material adverse effect on a
given exploration and production companys financial position and results of operations. In addition, due to natural declines in reserves and production, exploration and production companies must economically find or acquire and develop
additional reserves in order to maintain and grow their revenues and distributions.
Propane.
Propane MLPs are subject to earnings variability based upon weather conditions in the markets they
serve, fluctuating commodity prices, increased use of alternative fuels, increased governmental or environmental regulation, and accidents or catastrophic events, among others.
Coal.
MLP entities and other entities with coal assets are subject to supply and demand fluctuations in the
markets they serve, which may be impacted by a wide range of factors including fluctuating commodity prices, the level of their customers coal stockpiles, weather, increased conservation or use of alternative fuel sources, increased
governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, mining accidents or catastrophic events, health claims and economic conditions, among others.
Marine Shipping.
Marine shipping (or tanker companies) are exposed to many of the same risks as
other energy companies. In addition, the highly cyclical nature of the industry may lead to volatile changes in charter rates and vessel values, which may adversely affect the earnings of tanker
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companies in the Acquiring Funds portfolio. Fluctuations in charter rates and vessel values result from changes in the supply and demand for tanker capacity and changes in the supply and
demand for oil and oil products. Historically, the tanker markets have been volatile because many conditions and factors can affect the supply and demand for tanker capacity. Changes in demand for transportation of oil over longer distances and
supply of tankers to carry that oil may materially affect revenues, profitability and cash flows of tanker companies. The successful operation of vessels in the charter market depends upon, among other things, obtaining profitable spot charters and
minimizing time spent waiting for charters and traveling unladen to pick up cargo. The value of tanker vessels may fluctuate and could adversely affect the value of tanker company securities in the Acquiring Funds portfolio. Declining tanker
values could affect the ability of tanker companies to raise cash by limiting their ability to refinance their vessels, thereby adversely impacting tanker company liquidity. Tanker company vessels are at risk of damage or loss because of events such
as mechanical failure, collision, human error, war, terrorism, piracy, cargo loss and bad weather. In addition, changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to
time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes, boycotts and government requisitioning of vessels. These sorts of events could interfere with shipping lanes and result in market disruptions and a
significant loss of tanker company earnings.
Limited Availability of Investments Risk
Investments of the Acquiring Funds capital may be delayed if suitable investments are unavailable at the time. The trading market
and volumes for securities of MLPs and energy companies may at times be less liquid than the market for other securities. Prior to the time the proceeds of this offering are invested, such proceeds may be invested in short-term money market
instruments and U.S. government securities, pending investment in securities of MLPs or energy companies. Income received by the Acquiring Fund from these securities would subject the Acquiring Fund to corporate tax before any distributions to
common shareholders. As a result, the return and yield on the common shares for the period immediately following any offering pursuant to this prospectus may be lower than when the Acquiring Fund is fully invested in accordance with its investment
objective and policies.
Interest Rate Risk
Rising interest rates could increase the costs of capital thereby increasing operating costs and reducing the ability of MLPs and other entities to carry out acquisitions or expansions in a cost-effective
manner. As a result, rising interest rates could negatively affect the financial performance of MLPs and other entities operating in the energy sector. Rising interest rates may also impact the price of the securities of MLPs as the yields on
alternative investments increase. During periods of declining interest rates, the market price of debt securities generally rises. Conversely, during periods of rising interest rates, the market price of such debt securities generally declines.
Inflation Risk
Inflation risk is the risk that the value of assets or income from investment will be worth less in the future, as inflation decreases the value of money. As inflation increases, the real value of the
common shares and distributions on those shares can decline. In addition, during any periods of rising inflation, interest rates on any borrowings by the Acquiring Fund would likely increase, which would tend to further reduce returns to the holders
of common shares.
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Deflation Risk
Deflation risk is the risk that prices throughout the economy decline over time, which may have an adverse effect on the market valuation of companies, their assets and revenues. In addition, deflation
may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Acquiring Funds portfolio.
Liquidity Risk
Although the equity securities of the MLPs in which the
Acquiring Fund invests generally trade on major stock exchanges, certain securities owned by the Acquiring Fund may trade less frequently, particularly those of MLPs and other issuers with smaller capitalizations. Securities with limited trading
volumes may display volatile or erratic price movements. Also, the Acquiring Fund may be one of the largest investors in certain sub-sectors of the energy or natural resource sectors. Thus, it may be more difficult for the Acquiring Fund to buy and
sell significant amounts of such securities without an unfavorable impact on prevailing market prices. Larger purchases or sales of these securities by the Acquiring Fund in a short period of time may cause abnormal movements in the market price of
these securities. As a result, these securities may be difficult to dispose of at a fair price at the times when the Subadviser believes it is desirable to do so.
Small Capitalization Risk
The Acquiring Fund may invest in securities of
MLPs and other issuers that have comparatively smaller capitalizations relative to issuers whose securities are included in major equity benchmark indexes, which presents unique investment risks. These companies often have limited product lines,
markets, distribution channels or financial resources, and the management of such companies may be dependent upon one or a few key people. The market movements of equity securities issued by MLPs with smaller capitalizations may be more abrupt or
erratic than the market movements of equity securities of larger, more established companies or the stock market in general. Historically, smaller capitalization companies have sometimes gone through extended periods when they did not perform as
well as larger companies. In addition, equity securities of smaller capitalization companies generally are less liquid than those of larger companies. This means that the Acquiring Fund could have greater difficulty selling such securities at the
time and price that the Acquiring Fund would like.
Competition Risk
A number of alternatives to use as vehicles for investment in a portfolio of energy MLPs and their affiliates currently exist, including
other publicly traded investment companies, structured notes and private funds. In addition, recent tax law changes have increased the ability of regulated investment companies or other institutions to invest in MLPs. These competitive conditions
may adversely impact the Acquiring Funds ability to meet its investment objective, which in turn could adversely impact its ability to make distributions.
Restricted Securities Risk
The Acquiring Fund may invest up to 30% of its
Managed Assets in unregistered or otherwise restricted securities. Because the sale of the securities is not registered under the Securities Act, the securities are restricted and cannot be immediately resold by the investors into the
public markets.
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Restricted securities are often purchased at a discount from the market price of unrestricted securities of the same issuer reflecting the fact that such securities may not be readily marketable
without some time delay. Such securities are often more difficult to value and the sale of such securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter markets. Until the Acquiring Fund can sell such securities into the public markets, its holdings will be less liquid and any sales will need to be made pursuant to an
exemption under the Securities Act.
Contractual restrictions on the resale of securities result from negotiations between the
issuer and purchaser of such securities and therefore vary substantially in length and scope. To dispose of a restricted security that the Acquiring Fund has a contractual right to sell, the Acquiring Fund may first be required to cause the security
to be registered. A considerable period may elapse between a decision to sell the securities and the time when the Acquiring Fund would be permitted to sell, during which time the Acquiring Fund would bear market risks.
Cash Flow Risk
The
Acquiring Fund expects that a substantial portion of the cash flow it receives will be derived from its investments in equity securities of MLPs. The amount and tax characterization of cash available for distribution by an MLP depends upon the
amount of cash generated by such entitys operations. Cash available for distribution by MLPs will vary widely from quarter to quarter and is affected by various factors affecting the entitys operations. In addition to the risks described
herein, operating costs, capital expenditures, acquisition costs, construction costs, exploration costs and borrowing costs may reduce the amount of cash that an MLP has available for distribution in a given period.
Capital Market Risk
Global financial markets and economic conditions have been, and continue to be, volatile due to a variety of factors, including
significant write-offs in the financial services sector. As a result, the cost of raising capital in the debt and equity capital markets has increased substantially while the ability to raise capital from those markets has diminished significantly.
In particular, as a result of concerns about the general stability of financial markets and specifically the solvency of lending counterparties, the cost of raising capital from the credit markets generally has increased as many lenders and
institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance debt on existing terms or at all and reduced, or in some cases ceased to provide, funding to borrowers. In addition, lending
counterparties under existing revolving credit facilities and other debt instruments may be unwilling or unable to meet their funding obligations. Due to these factors, MLPs may be unable to obtain new debt or equity financing on acceptable terms or
at all. If funding is not available when needed, or is available only on unfavorable terms, MLPs may not be able to meet their obligations as they come due. Moreover, without adequate funding, MLPs may be unable to execute their growth strategies,
complete future acquisitions, take advantage of other business opportunities or respond to competitive pressures, any of which could have a material adverse effect on their revenues and results of operations.
Valuation Risk
The
Acquiring Fund is subject to valuation risk from its estimates of deferred tax asset or liability and from its investments in certain securities for which market prices may be unavailable.
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Market prices generally will be unavailable for some of the Acquiring Funds
investments, including restricted or unregistered securities of certain MLPs and private companies, MLP subordinated units and direct ownership of general partner or managing member interests. The value of such securities will be determined by fair
valuations determined by the Acquiring Funds Board or its designee in accordance with procedures governing the valuation of portfolio securities adopted by the Acquiring Funds Board. Proper valuation of such securities may require more
reliance on the judgment of the Subadviser than valuation of securities for which an active trading market exists.
In
addition, as a limited partner in the MLPs, the Acquiring Fund includes its allocable share of the MLPs taxable income in computing its own taxable income. Deferred income taxes in the financial statements of the Acquiring Fund reflect
(i) taxes on unrealized gains/losses, which are attributable to the temporary difference between fair market value and the tax basis of the Acquiring Funds assets, (ii) the net tax effects of temporary differences between the
carrying amounts of such assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (iii) the net tax benefit of accumulated net operating losses. To the extent the Acquiring Fund has a deferred tax
asset, consideration is given as to whether or not a valuation allowance is required. The need to establish a valuation allowance for deferred tax assets is assessed periodically by the Acquiring Fund based on the criterion established by ASC Topic
740 that it is more likely than not that some portion or all of the deferred tax asset will not be realized. In the assessment for a valuation allowance, consideration is given to all positive and negative evidence related to the realization of the
deferred tax asset. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability (which are highly dependent on future MLP cash distributions), the duration of
statutory carryforward periods and the associated risk that operating loss or capital loss carryforwards may expire unused.
The Acquiring Fund may rely to some extent on information provided by the MLPs, which may not necessarily be timely, to estimate taxable
income allocable to the MLP units held in the portfolio and to estimate the associated deferred tax asset or liability. Such estimates are made in good faith. From time to time, as new information becomes available, the Acquiring Fund modifies its
estimates or assumptions regarding the deferred tax asset or liability.
Deferred tax assets may constitute a relatively high
percentage of the Acquiring Funds net asset value. Any valuation allowance required against such deferred tax assets or future adjustments to a valuation allowance may reduce the Acquiring Funds deferred tax assets and could have a
material impact on the Acquiring Funds net asset value and results of operations in the period the valuation allowance is recorded or adjusted.
Below Investment Grade Risk
The Acquiring Fund may invest up to 30%
(measured at the time of investment) of its Managed Assets in debt securities that are of below investment grade quality. Securities of below investment grade quality, commonly referred to as junk bonds, are regarded as having predominately
speculative characteristics with respect to the issuers capacity to pay interest and repay principal when due, and are more susceptible to default or decline in market value due to adverse economic and business developments than investment
grade securities. Also, to the extent that the rating assigned to a security in the Acquiring Funds portfolio is downgraded by any NRSRO, the market price and liquidity of such security may be adversely affected. The secondary market for high
yield securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse
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effect on the Acquiring Funds ability to dispose of a particular security. The market values for securities of below investment grade quality tend to be volatile, and these securities are
less liquid than investment grade securities. For these reasons, an investment in the Acquiring Fund, compared with a portfolio consisting solely of investment grade securities, may experience the following:
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increased price sensitivity resulting from a deteriorating economic environment and changing interest rates;
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greater risk of loss due to default or declining credit quality;
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adverse issuer specific events that are more likely to render the issuer unable to make interest and/or principal payments; and
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the possibility that a negative perception of the below investment grade market develops, resulting in the price and liquidity of below investment
grade securities becoming depressed, and this negative perception could last for a significant period of time.
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See
RisksMarket Discount From Net Asset Value and Expected Reductions in Net Asset Value.
Leverage Risk
The Acquiring Fund anticipates using leverage to enhance current distributions and total return potential. The
Acquiring Fund intends to use financial leverage through bank borrowings or the issuance of debt or other senior securities, including preferred shares, though the Fund has no current intention to issue preferred shares. The Acquiring Fund
anticipates that its leverage ratio will vary from time to time; however, the Acquiring Fund generally intends to limit its leverage ratio to 33
1
/
3
% of Managed Assets. The use of leverage creates special risks for common shareholders, including potential interest rate risks and the likelihood of greater
volatility of net asset value and market price of, and distributions on, the common shares. If the Acquiring Fund enters into a credit facility, the Acquiring Fund may be required to prepay outstanding amounts or incur a penalty rate of interest
upon the occurrence of certain events of default. The Acquiring Fund would also likely have to indemnify the lenders under the credit facility against liabilities they may incur in connection therewith. In addition, the Acquiring Fund expects that
any credit facility would contain covenants that, among other things, likely would limit the Acquiring Funds ability to pay distributions in certain circumstances, incur additional debt, change certain of its investment policies and engage in
certain transactions, including mergers and consolidations, and require asset coverage ratios in addition to those required by the 1940 Act. The Acquiring Fund may be required to pledge its assets and to maintain a portion of its assets in cash or
high-grade securities as a reserve against interest or principal payments and expenses. The Acquiring Fund will pay (and common shareholders will bear) any costs and expenses relating to the Acquiring Funds use of leverage, which will result
in a reduction in the net asset value of the common shares. The Acquiring Fund may, based on its assessment of market conditions, change the leverage ratio. Such changes may impact net investment income and the valuation of the Acquiring Funds
common shares in the secondary market. To the extent that the Acquiring Fund is required or elects to prepay any debt, the Acquiring Fund may need to liquidate investments to fund such prepayments. Liquidations at times of adverse economic
conditions may result in capital loss and reduce returns to common shareholders.
Furthermore, the Acquiring Fund pays
Nuveen Fund Advisors a management fee (who in turn pays a fee to the Subadviser) based on Managed Assets. Nuveen Fund Advisors, in consultation with the Subadviser, will decide whether and how much to leverage the Acquiring Fund based solely on the
44
assessment of whether such use of leverage will advance the Acquiring Funds investment objective. However, the fact that a decision to increase the Acquiring Funds leverage will have
the effect of increasing Managed Assets and therefore Nuveen Fund Advisors and the Subadvisers management fees means that Nuveen Fund Advisors may have an incentive to effect, and the Subadviser may have an incentive to recommend, an increase
in the Acquiring Funds use of leverage. Nuveen Fund Advisors, in consultation with the Subadviser, will only increase the Acquiring Funds use of leverage when it determines that such increase is consistent with the Acquiring Funds
investment objective and will periodically review the Acquiring Funds performance and use of leverage with the Acquiring Funds Board. There is no assurance that the Acquiring Fund will utilize leverage or that the Acquiring Funds
leverage strategy will be successful.
Risks Associated with Options on Securities
There are several risks associated with transactions in options on securities. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. As the writer of a covered call option, the Acquiring Fund forgoes, during the
options life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must deliver the underlying security at the exercise price. There can be no assurance that a liquid market will exist when the Acquiring Fund seeks to close out an option
position. If trading were suspended in an option purchased by the Acquiring Fund, the Acquiring Fund would not be able to close out the option. If the Acquiring Fund were unable to close out a covered call option that it had written on a security,
it would not be able to sell the underlying security unless the option expired without exercise.
Derivatives Risk
The Acquiring Funds use of derivatives involves risks different from, and possibly greater than, the risks associated with
investing directly in the investments underlying the derivatives. If the Acquiring Fund invests in a derivative instrument, it can lose more than the principal amount invested. Whether the Acquiring Funds use of derivatives is successful will
depend on, among other things, if Nuveen Fund Advisors and the Subadviser correctly forecast market values, interest rates and other applicable factors. If Nuveen Fund Advisors and the Subadviser incorrectly forecast these and other factors, the
investment performance of the Acquiring Fund will be unfavorably affected. In addition, the derivatives market is largely unregulated. It is possible that developments in the derivatives market could adversely affect the Acquiring Funds
ability to successfully use derivative instruments.
Derivative transactions may subject the Acquiring Fund to increased risk
of principal loss due to imperfect correlation between the values of the derivatives and the underlying securities or unexpected price or interest rate movements. The Acquiring Fund also will be subject to credit risk with respect to the
counterparties to the derivatives contracts purchased by the Acquiring Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Acquiring Fund may
experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Acquiring Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
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Derivatives involve investment exposure that may exceed their original cost, and a small investment in derivatives could result in a potentially unlimited loss to the Acquiring Fund under certain
circumstances.
Counterparty Risk
Changes in the credit quality of the companies that serve as the Acquiring Funds counterparties with respect to derivatives, and other transactions supported by another partys credit may
affect the value of those instruments. Certain entities that have served as counterparties in the markets for these transactions have recently incurred significant losses and financial hardships including bankruptcy as a result of exposure to
sub-prime mortgages and other lower quality credit investments that have experienced recent defaults or otherwise suffered extreme credit deterioration. As a result, such hardships have reduced these entities capital and called into question
their continued ability to perform their obligations under such transactions. By using derivatives or other transactions, the Acquiring Fund assumes the risk that its counterparties could experience similar financial hardships. In the event of
insolvency of a counterparty, the Acquiring Fund may sustain losses or be unable to liquidate a derivatives position.
Reliance on
Investment Adviser
The Acquiring Fund is dependent upon services and resources provided by Nuveen Fund Advisors, and
therefore Nuveen Fund Advisors parent, Nuveen Investments. Nuveen Investments has a substantial amount of indebtedness. Nuveen Investments, through its own business or the financial support of its affiliates, may not be able to generate
sufficient cash flow from operations or ensure that future borrowings will be available in an amount sufficient to enable it to pay its indebtedness with scheduled maturities beginning in 2014 or to fund its other liquidity needs. Nuveen
Investments failure to satisfy the terms of its indebtedness, including covenants therein, may generally have an adverse effect on the financial condition of Nuveen Investments. In addition, the Acquiring Fund is dependent on the
Subadvisers expertise in managing the Acquiring Funds portfolio, including MLPs.
Non-Diversification Risk
Because the Acquiring Fund is classified as non-diversified under the 1940 Act, it can invest a greater portion of its assets
in obligations of a single issuer than a diversified fund. As a result, the Acquiring Fund may be more susceptible than a diversified fund to any single corporate, economic, political, geographic or regulatory occurrence.
Anti-Takeover Provisions
The Acquiring Funds Declaration of Trust and By-Laws include provisions that could limit the ability of other entities or persons to acquire control of the Acquiring Fund or convert the Acquiring
Fund to open-end status. These provisions 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.
C.
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INFORMATION ABOUT THE REORGANIZATION
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General
At meetings held on February 27-29, 2012, the Board approved a proposal to merge the Acquired Fund into the Acquiring Fund. As noted above, the Acquiring Fund and the Acquired Fund
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have similar investment objectives, policies and portfolio compositions. With respect to the proposed Reorganization, it is intended that the combination of the Funds will enhance the secondary
trading market for common shares of the Funds and will result in a lower expense ratio (excluding the costs of leverage) as a result of the increased size of the combined fund. However, the combined fund will have a higher expense ratio than the
Acquired Fund including the costs of leverage. The closing of the Reorganization is contingent upon certain conditions being satisfied. Shareholders of the Acquired Fund must approve the Reorganization of their Fund into the Acquiring Fund. The
Acquiring Fund also must obtain the shareholder approvals with respect to the issuance of common shares in connection with the Reorganization in order for the Reorganization to occur. Because the closing of the Reorganization is contingent on both
Funds satisfying (or obtaining the waiver of) their respective closing conditions, it is possible that the Reorganization will not occur, even if shareholders of your Fund approve the requisite proposals and your Fund satisfies all of its closing
conditions. If the Reorganization is not consummated, each Funds Board may take such actions as it deems in the best interest of the Fund, including conducting additional solicitations with respect to the proposals or continuing to operate the
Acquired Fund as a stand-alone fund.
Terms of the Reorganization
General.
The Agreement and Plan of Reorganization between the Acquired Fund and the Acquiring Fund (the
Agreement) sets forth the terms of the Reorganization, under which (i) the Acquiring Fund will acquire all of the assets of the Acquired Fund in exchange for newly issued Acquiring Fund Common Shares, and the Acquiring Funds
assumption of all of the liabilities of the Acquired Fund, and (ii) the Acquired Fund will distribute the Acquiring Fund Common Shares received by the Acquired Fund to its common shareholders as part of the liquidation, dissolution and
termination of the Acquired Fund in accordance with applicable law. No fractional Acquiring Fund Common Shares will be issued to the Acquired Funds shareholders, and in lieu of such fractional shares, the Acquired Funds shareholders will
receive cash. As a result of the Reorganization, the assets of the Acquiring Fund and the Acquired Fund would be combined, and the shareholders of the Acquired Fund would become shareholders of the Acquiring Fund. If Proposals 2 and 3 are approved
at the shareholder meeting, the closing date of the Reorganization is expected to be the close of business on or about
August 20, 2012, or such other date as the parties may agree (the Closing Date). Following the Reorganization,
the Acquired Fund would terminate its registration as an investment company under the 1940 Act.
Following the
Reorganization, common shareholders of the Acquired Fund would own common shares of the Acquiring Fund (including for this purpose any fractional shares to which they would be entitled) with an aggregate net asset value immediately after the
Reorganization equal to the aggregate net asset value of the Acquired Fund common shares outstanding immediately prior to the Reorganization. See Proposal No. 2Information About the ReorganizationDescription of Common Shares
Issued by the Acquiring Fund for a description of the rights of such shareholders. No fractional Acquiring Fund Common Shares, however, will be issued in connection with the Reorganization. In the event there are fractional Acquiring Fund
Common Shares due an Acquired Fund shareholder on the Closing Date after the Acquired Funds common shares have been exchanged for Acquiring Fund common shares, the Acquiring Funds transfer agent will aggregate such fractional Acquiring
Fund Common Shares and sell the resulting whole on the NYSE for the account holders of all such fractional interests at a value that may be higher or lower than net asset value, and each such holder will be entitled to a pro rata share of the
proceeds from such sale. With respect to the aggregation and sale of fractional common shares, the Acquiring Funds transfer agent will act directly
47
on behalf of the shareholders entitled to receive fractional shares and will accumulate such fractional shares, sell the shares and distribute the cash proceeds directly to shareholders entitled
to receive the fractional shares (without interest and subject to withholding taxes). For federal income tax purposes, shareholders will be treated as if they received such fractional share interests and then sold such interests for cash. The
holding period and the aggregate tax basis of such fractional share interests received by a shareholder will be the same as the holding period and aggregate tax basis of the Acquired Fund common shares previously held by the shareholder and
exchanged therefor, provided the Acquired Fund shares exchanged therefor were held as capital assets. As a result of the Reorganization, common shareholders of the Funds would hold reduced percentages of ownership in the larger combined entity than
they held in the Acquiring Fund or Acquired Fund individually.
Valuation of Assets and
Liabilities.
If the Reorganization is approved and the other closing conditions are satisfied or waived, the value of the net assets of the Acquired Fund shall be the value of its assets, less its liabilities, computed as
of the close of regular trading on the NYSE on the business day immediately prior to the Closing Date (such time and date being hereinafter called the Valuation Time). The value of the Acquired Funds assets shall be determined by
using the valuation procedures adopted by the Board of the Acquired Fund or such other valuation procedures as shall be mutually agreed upon by the parties.
Amendments.
Under the terms of the Agreement, the Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the officers
of each Fund as specifically authorized by each Funds Board; provided, however, that following the meeting of the shareholders of the Funds called by each Fund, no such amendment, modification or supplement may have the effect of changing the
provisions for determining the number of Acquiring Fund Shares to be issued to the Acquired Fund shareholders under the Agreement to the detriment of such shareholders without their further approval.
Conditions.
Under the terms of the Agreement, the closing of the Reorganization is conditioned upon
(a) approval by the shareholders of each Fund of the proposals in this Joint Proxy Statement/Prospectus related to the Reorganization, (b) the Funds receipt of an opinion to the effect that the Reorganization will qualify as a
reorganization under the Code, (c) the absence of legal proceedings challenging the Reorganization and (d) the Funds receipt of certain customary certificates and legal opinions.
Termination
. The Agreement may be terminated by the mutual agreement of the parties and such termination
may be effected by each Funds Chief Administrative Officer or the Vice President without further action by the Board. In addition, any Fund may at its option terminate the Agreement at or before the Closing Date due to (a) a breach by the
other party of any representation, warranty, or agreement contained herein to be performed at or before the Closing Date, if not cured within 30 days; (b) a condition precedent to the obligations of the terminating party that has not been met
and it reasonably appears it will not or cannot be met; or (c) a determination by the Board that the consummation of the transactions contemplated herein is not in the best interests of a Fund.
Reasons for the Reorganization
Based on the considerations below, the Board of each Fund, including the Board Members who are not interested persons (as defined in the 1940 Act) of the Funds (the Independent Board
Members), has determined that the Reorganization would be in the best interests of the applicable Fund and that the interests of the existing shareholders of the applicable Fund would not be diluted
48
with respect to net asset value as a result of the Reorganization. The Board of each Fund approved the Reorganization and the Board of the Acquired Fund recommends that shareholders of the
Acquired Fund approve the Reorganization.
In preparation for meetings of the Boards held on February 27-29, 2012 (together
the Meeting) at which the Reorganization was proposed, the Adviser provided the Boards with information regarding the proposed Reorganization, including the rationale therefor and alternatives considered to the Reorganization. Prior to
approving the Reorganization, the Independent Board Members reviewed the foregoing information with their independent legal counsel and with management, reviewed with independent legal counsel applicable law and their duties in considering such
matters, and met with independent legal counsel in a private session without management present. The Boards considered a number of principal factors presented at the time of the Meeting or prior meetings in reaching their determinations, including
the following:
|
|
|
the compatibility of the Funds investment objectives, policies and related risks;
|
|
|
|
consistency of portfolio management;
|
|
|
|
improved economies of scale and the potential for a lower expense ratio (excluding the costs of leverage);
|
|
|
|
improved secondary market trading;
|
|
|
|
the anticipated tax-free nature of the Reorganization;
|
|
|
|
the potential effects of any deferred tax assets and liabilities;
|
|
|
|
the expected costs of the Reorganization;
|
|
|
|
the terms of the Reorganization and whether the Reorganization would dilute the interests of shareholders of the Funds;
|
|
|
|
the effect of the Reorganization on shareholder rights; and
|
|
|
|
any potential benefits of the Reorganization to the Adviser and its affiliates as a result of the Reorganization.
|
Compatibility of Investment Objectives, Policies and Related Risks.
Based on the information presented, the
Boards noted that the investment objectives, policies and risks of the Funds are similar, although there are some differences. The Boards noted that the Acquiring Fund is a non-diversified fund while the Acquired Fund is a diversified fund.
The Boards observed that the Acquiring Funds investment objective is to provide tax-advantaged total return, while the
Acquired Funds investment objective is to provide a high level of after-tax total return. The Boards also noted the Acquiring Fund seeks to achieve its objective by investing primarily in MLPs in the energy sector and that under normal market
circumstances, the Acquiring Fund will invest at least 80% of its Managed Assets in MLPs in the energy sector. The Boards recognized that the Acquired Fund seeks to achieve its objective primarily by investing substantially all of its net assets in
a portfolio of MLPs operating in the energy infrastructure sector of the market. The Board also noted that under normal circumstances, at least 80% of the Acquired Funds net assets (including any borrowings for investment purposes) will be
invested in MLPs and equity securities.
49
The Boards considered the portfolio composition of each Fund and the impact of the
Reorganization on each Funds portfolio. The Boards also considered that the Acquiring Fund used leverage in the form of debt borrowings, while the Acquired Fund is not leveraged. The Boards noted that the Acquired Fund, as an unleveraged fund
in the MLP closed-end fund category, was unusual and that investors in MLP closed-end funds currently appeared to prefer leveraged MLP strategies. In this regard, the Boards considered managements discussion of the potential benefits to
shareholders from the enhanced competitiveness of the combined investment portfolio of the Funds and the use of a leveraged investment strategy.
Because the Funds have similar investment strategies, the principal risks of each Fund are also similar. However, the Acquiring Fund, as a non-diversified management investment company, is subject to
non-diversification risk. Further, to the extent the Acquiring Fund employs a leveraging strategy, its shareholders are subject to risks associated with leverage, whereas the Acquired Fund does not currently use such a strategy (although it reserves
the right to do so). In addition, the Acquiring Fund, which was launched in February 2011, has a more limited offering history than does the Acquired Fund, which was organized in 2007.
Consistency of Portfolio Management.
The Boards noted that each Fund has the same investment adviser,
sub-adviser and portfolio managers. Through the Reorganization, the Boards recognized that shareholders will remain invested in a closed-end management investment company that will have greater net assets and benefits from potential economies of
scale; the same investment adviser, sub-adviser and portfolio managers; and similar investment objectives and investment strategies.
Improved Economies of Scale and Potential for a Lower Expense Ratio (Excluding the Costs of Leverage).
The Boards considered the fees and expense ratios of each of the Funds
(including estimated expenses of the Acquiring Fund following the Reorganization). As a result of the greater economies of scale from the larger asset size of the Acquiring Fund after the Reorganization, the Boards noted that it was expected that
the effective management fee rate as a percentage of average daily Managed Assets for the combined fund would be the same as or lower than the current management fee rate for each of the Acquiring Fund and Acquired Fund, and that operating expenses
(excluding the costs of leverage) of the combined fund would be lower than that of the Acquiring Fund and Acquired Fund prior to the Reorganization. It is anticipated that the Funds will benefit from the larger asset size as fixed costs are shared
over a larger asset base. In addition, the Boards noted the Advisers position that the greater asset size of the combined fund after the Reorganization and the use of a leveraged investment strategy may provide greater investment flexibility
and improve the combined funds competitiveness among its peers.
Improved Secondary Market
Trading.
While it is not possible to predict trading levels at the time the Reorganization closes, the Boards noted that the Reorganization is being proposed, in part, to seek to enhance the secondary trading market for
the common shares of the Funds. The Boards noted that certain secondary market benefits may arise as a result of the combined funds larger size. The Boards considered that the potential for higher common share net earnings and enhanced total
returns over time may contribute to higher common share market prices relative to net asset value, and the Acquiring Funds greater market liquidity after the Reorganization may lead to narrower bid-ask spreads and smaller trade-to-trade price
movements.
Anticipated Tax-Free Reorganization.
The Reorganization will be structured with
the intention that it qualify as tax-free reorganization for federal income tax purposes, and the Funds will obtain an opinion of counsel to this effect (based on certain factual representations and certain customary assumptions).
50
Deferred Tax Asset and Liability Considerations.
The
Boards noted that unlike traditional closed-end funds that qualify as regulated investment companies (RICs) for federal income tax purposes, both Funds are treated as C corporations for federal income tax purposes and are,
therefore, subject to corporate taxation at the entity level. Accordingly, each Fund records in its financial statements a deferred tax asset (an amount that can be used to offset future taxable income) or a deferred tax liability (a tax due in the
future). Any net deferred tax asset or liability is included in each Funds net asset value, including at the Valuation Time for the Reorganization, and thus impacts the number of shares to be exchanged in the Reorganization. Further, the
Boards noted that as a result of the Reorganization, the Acquiring Fund would succeed to the net deferred tax assets or net deferred tax liabilities, if any, of the Acquired Fund, but would be subject to limitations imposed under the Internal
Revenue Code of 1986, as amended.
Expected Costs of the Reorganization.
The Boards considered
the terms and conditions of the Agreement, including the estimated costs associated with the Reorganization and the allocation of such costs between the Acquiring Fund and the Acquired Fund. The Boards noted, however, that, assuming the
Reorganization is consummated, the Adviser anticipated that the projected costs of the Reorganization may be recovered over time.
Terms of the Reorganization and Impact on Shareholders.
The terms of the Reorganization are intended to avoid dilution of the interests of the existing shareholders of the
Funds. In this regard, the Boards considered that each holder of common shares of the Acquired Fund would own common shares of the Acquiring Fund (taking into account any fractional shares to which the shareholder would be entitled) having a value
equal to the aggregate per share net asset value of that shareholders Acquired Fund common shares immediately prior to the closing of the Reorganization. No fractional common shares of the Acquiring Fund, however, will be issued to
shareholders in connection with the Reorganization and, in lieu of such fractional shares, the Acquired Funds common shareholders will receive cash.
Effect on Shareholder Rights.
The Boards considered that the Acquiring Fund is organized as a Massachusetts business trust, while the Acquired Fund is organized as a Maryland
corporation. As a general matter, the holders of each Funds common shares have equal voting rights and equal rights with respect to the payment of dividends and distribution of assets upon liquidation and have no preemptive, conversion or
exchange rights.
Potential Benefits to the Adviser and its Affiliates.
The Boards
recognized that the Reorganization may result in some benefits and economies for the Adviser and its affiliates. These may include, for example, a reduction in the level of operational expenses incurred for administrative, compliance and portfolio
management services as a result of the elimination of the Acquired Fund as a separate Fund in the Nuveen complex.
Conclusion.
The Boards, including the Independent Board Members, approved the Reorganization, concluding
that the Reorganization is in the best interests of the Acquiring Fund and the Acquired Fund and that the interests of existing shareholders of each Fund will not be diluted as a result of the Reorganization.
Capitalization
The following table sets forth the unaudited capitalization of the Funds as of November 30, 2011 and the pro-forma combined capitalization of the combined fund as if the Reorganization had occurred
on that date. The table reflects a pro forma exchange ratio of approximately 1.0313 common shares of the Acquiring Fund issued for each common share of the Acquired Fund. If the Reorganization is consummated, the actual exchange ratio may vary.
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shareholders Equity
|
|
Acquiring
Fund
|
|
|
Acquired
Fund
|
|
|
Pro Forma
Adjustments
|
|
|
Combined
Fund
Pro
Forma
(1)
|
|
Common Shares, $.01 par value per share for the Acquiring Fund, 23,800,246 shares outstanding; $.001 par value per share for the
Acquired Fund, 14,810,750 shares outstanding and $.01 par value for the combined Fund pro forma, 39,074,111 shares outstanding
|
|
$
|
238,002
|
|
|
$
|
14,811
|
|
|
$
|
137,928
|
(2)
|
|
$
|
390,741
|
|
Paid-in surplus
|
|
|
430,526,658
|
|
|
|
221,198,223
|
|
|
|
(678,928
|
)
(3)
|
|
|
651,045,953
|
|
Accumulated net investment income (loss), net of tax
|
|
|
(5,516,747
|
)
|
|
|
4,267,893
|
|
|
|
|
|
|
|
(1,248,854
|
)
|
Accumulated net realized gain (loss), net of tax
|
|
$
|
(19,664,936
|
)
|
|
$
|
(42,631,086
|
)
|
|
$
|
|
|
|
$
|
(62,296,022
|
)
|
Net unrealized appreciation (depreciation), net of tax
|
|
|
4,321,642
|
|
|
|
80,397,095
|
|
|
|
|
|
|
|
84,718,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common shares
|
|
$
|
409,904,619
|
|
|
$
|
263,246,936
|
|
|
$
|
(541,000
|
)
|
|
$
|
672,610,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per common share outstanding (net assets applicable to common shares, divided by common shares
outstanding)
|
|
$
|
17.22
|
|
|
$
|
17.77
|
|
|
|
|
|
|
$
|
17.21
|
|
Authorized Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Unlimited
|
|
|
|
100,000,000
|
|
|
|
|
|
|
|
Unlimited
|
|
(1)
|
The pro forma balances are presented as if the Reorganization was effective as of November 30, 2011, and are presented for information purposes only. The actual
closing date of the Reorganization is expected to be , at which time the results would be reflective of the actual composition of shareholders equity as of that date.
|
(2)
|
Assumes the issuance of 15,273,865 Acquiring Fund Common Shares in exchange for the net assets of the Acquired Fund. These numbers are based on the net asset value of
the Acquiring Fund and Acquired Fund as of November 30, 2011, adjusted for estimated Reorganization costs and distributions, if any.
|
(3)
|
Includes the impact of estimated total Reorganization costs of $541,000, which will be borne by the shareholders of the Acquiring Fund and the Acquired Fund in the
amounts of $214,000 and $327,000, respectively.
|
Expenses Associated with the Reorganization
In evaluating the Reorganization, management of the Funds estimated the amount of expenses the Funds would incur to
be approximately $541,000, which includes additional stock exchange listing fees, SEC registration fees, legal and accounting fees, proxy solicitation and distribution costs. The expenses of the Reorganization will be allocated between the Funds
ratably based on the relative benefits of the Reorganization comprised of forecasted cost savings and distribution increases, if any, to each Fund during the first year following the Reorganization and paid out of each Funds net assets
applicable to common shares. These estimated expenses will be borne by the Acquiring Fund and the Acquired Fund in the amounts of $214,000 and $327,000, respectively (whether or not the Reorganization is consummated).
Additional solicitation may be made by letter or telephone by officers or employees of Nuveen Investments or the Adviser, or by dealers
and their representatives. The Funds have engaged Computershare Fund Services to assist in the solicitation of proxies at an estimated cost of
$10,000 per Fund plus reasonable expenses, which is included in the estimate above.
Reorganization expenses have been or will be expensed prior to the Closing Date. Management of the Funds expects that increased net
earnings resulting from reduced operating expenses due to
52
economies of scale should allow the recovery of the projected costs of the Reorganization within approximately
13 months
after the Closing Date with respect to each Fund.
Dissenting Shareholders Rights of Appraisal
Under the Funds charter documents, shareholders of the Acquired Fund and Acquiring Fund do not have dissenters rights of
appraisal with respect to the Reorganization.
Material Federal Income Tax Consequences of the Reorganization
The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes.
As a condition to each Funds obligation to consummate the Reorganization, each Fund will receive a tax opinion from Vedder Price P.C. (which opinion will be based on certain factual representations and certain customary assumptions) with
respect to the Reorganization substantially to the effect that, on the basis of the existing provisions of the Code, current administrative rules and court decisions, for federal income tax purposes:
|
1.
|
The transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for Acquiring Fund shares and the assumption by the Acquiring Fund of
all the liabilities of the Acquired Fund, followed by the distribution to the Acquired Fund shareholders of all the Acquiring Fund shares received by the Acquired Fund in complete liquidation of the Acquired Fund will constitute a
reorganization within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the Acquired Fund will each be a party to a reorganization, within the meaning of Section 368(b) of the Code, with respect
to the Reorganization.
|
|
2.
|
No gain or loss will be recognized by the Acquiring Fund upon the receipt of all of the assets of the Acquired Fund solely in exchange for Acquiring Fund shares and the
assumption by the Acquiring Fund of all the liabilities of the Acquired Fund.
|
|
3.
|
No gain or loss will be recognized by the Acquired Fund upon the transfer of all of the Acquired Funds assets to the Acquiring Fund solely in exchange for
Acquiring Fund shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of all such Acquiring Fund shares to the Acquired Fund shareholders solely in
exchange for such shareholders shares of the Acquired Fund in complete liquidation of the Acquired Fund.
|
|
4.
|
No gain or loss will be recognized by the Acquired Fund shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund shares in the
Reorganization, except with respect to any cash received in lieu of a fractional Acquiring Fund Share.
|
|
5.
|
The aggregate basis of the Acquiring Fund shares received by each Acquired Fund shareholder pursuant to the Reorganization (including any fractional
Acquiring Fund share to which a shareholder would be entitled) will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such shareholder. The holding period of the Acquiring Fund shares received by each Acquired Fund
shareholder (including any fractional Acquiring Fund share to which a shareholder would be entitled) will include the period during which the Acquired Fund shares exchanged therefor were held by such
|
53
|
shareholder, provided such Acquired Fund shares are held as capital assets at the time of the Reorganization.
|
|
6.
|
The basis of the Acquired Funds assets acquired by the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund immediately before the
Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund.
|
No opinion will be expressed as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with
respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination thereof) under a mark-to-market system of accounting, (B) any Acquired
Fund shareholder that is required to recognize unrealized gains and losses for U.S. federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a
passive foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
If an Acquired Fund shareholder receives cash in lieu of a fractional Acquiring Fund share, the shareholder will be treated as having
received the fractional Acquiring Fund share pursuant to the Reorganization and then as having sold that fractional Acquiring Fund share for cash. As a result, each such Acquired Fund shareholder generally will recognize gain or loss equal to the
difference between the amount of cash received and the basis in the fractional Acquiring Fund share to which the shareholder is entitled. This gain or loss generally will be a capital gain or loss and generally will be long-term capital gain or loss
if, as of the effective time of the Reorganization, the holding period for the shares (including the holding period of Acquired Fund shares surrendered therefor) is more than one year. The deductibility of capital losses is subject to limitations.
Any cash received in lieu of a fractional share may be subject to backup withholding taxes.
After the Reorganization, the
combined funds ability to use the Acquired Funds or the Acquiring Funds pre-Reorganization capital losses may be limited under certain federal income tax rules applicable to reorganizations of this type. Therefore, in certain
circumstances, shareholders may pay federal income taxes sooner, or pay more federal income taxes, than they would have had the Reorganization not occurred. The effect of these potential limitations, however, will depend on a number of factors
including the amount of the losses, the amount of gains to be offset, the exact timing of the Reorganization and the amount of unrealized capital gains in the Funds at the time of the Reorganization. As of November 30, 2011, the Funds had
capital loss carryforwards as follows:
|
|
|
|
|
|
|
|
|
|
|
Acquiring
Fund
|
|
|
Acquired
Fund
|
|
Capital loss carryforwards
|
|
$
|
19,379,268
|
|
|
$
|
19,682,180
|
|
If not applied, the capital loss carryforwards will expire as follows:
|
|
|
|
|
|
|
|
|
Expiration Date
|
|
Acquiring
Fund
|
|
|
Acquired
Fund
|
|
Nov. 30, 2013
|
|
$
|
|
|
|
$
|
19,645,804
|
|
Nov. 30, 2014
|
|
|
|
|
|
|
36,376
|
|
Nov. 30, 2016
|
|
$
|
19,379,268
|
|
|
$
|
|
|
54
As of November 30, 2011, the Funds had net operating loss carryforwards as follows:
|
|
|
|
|
|
|
|
|
|
|
Acquiring
Fund
|
|
|
Acquired
Fund
|
|
Net operating loss carryforwards
|
|
$
|
5,516,747
|
|
|
$
|
14,395,353
|
|
If not applied, the net operating loss carryforwards will expire as follows:
|
|
|
|
|
|
|
|
|
Expiration Date
|
|
Acquiring
Fund
|
|
|
Acquired
Fund
|
|
Nov. 30, 2028
|
|
$
|
|
|
|
$
|
11,001,074
|
|
Nov. 30, 2029
|
|
|
|
|
|
|
1,440,597
|
|
Nov. 30, 2030
|
|
|
|
|
|
|
1,953,682
|
|
Nov. 30, 2031
|
|
$
|
5,516,747
|
|
|
$
|
|
|
This description of the federal income tax consequences of the Reorganization is made without regard to
the particular facts and circumstances of any shareholder. Shareholders are urged to consult their own tax advisers as to the specific consequences to them of the Reorganization, including the applicability and effect of state, local, non-U.S. and
other tax laws.
The foregoing is intended to be only a summary of the principal federal income tax consequences of the
Reorganization and should not be considered to be tax advice. There can be no assurance that the IRS will concur on all or any of the issues discussed above. Acquired Fund shareholders are urged to consult their own tax advisers regarding the
federal, state and local tax consequences with respect to the foregoing matters and any other considerations which may be applicable to them.
Votes Required
The Reorganization is required to be approved by the affirmative vote of the holders of a majority (more than 50%) of the outstanding shares of the Acquired Fund, voting as a single class.
In addition, common shareholders of the Acquiring Fund voting as a single class are being asked to approve the issuance of additional common shares of the Acquiring Fund in connection with the Reorganization. See Proposal
No. 3Approval of Additional Common Shares of Acquiring Fund for a description of the votes required for such share issuance.
Abstentions and broker non-votes will have the same effect as a vote against the approval of the Agreement and Plan of Reorganization. Broker non-votes are shares held by brokers or nominees for which the
brokers or nominees have executed proxies as to which (i) the broker or nominee does not have discretionary voting power and (ii) the broker or nominee has not received instructions from the beneficial owner or other person who is entitled
to instruct how the shares will be voted.
The closing of the Reorganization is contingent upon certain conditions being
satisfied or waived. Shareholders of the Acquired Fund must approve the Reorganization of their Fund into the Acquiring Fund. The Acquiring Fund also must obtain the shareholder approvals described in this Joint Proxy Statement/Prospectus with
respect to the Reorganization in order for the Reorganization to occur. Because the closing of the Reorganization is contingent on both the Acquired Fund and the Acquiring Fund satisfying (or obtaining the waiver of) their respective closing
conditions, it is possible that the Reorganization will not occur, even if shareholders of your Fund approve the Reorganization
55
and your Fund satisfies all of its closing conditions. If the requisite shareholder approvals are not obtained, each Funds Board may take such actions as it deems in the best interest of
the Fund including conducting additional solicitations with respect to the proposals or continuing to operate the Fund as a stand-alone fund.
Comparison of Massachusetts Business Trusts and Maryland Corporations
The
following description is based on relevant provisions of applicable Massachusetts law and the Maryland General Corporation Law (the MGCL) and each Funds governing documents. This summary does not purport to be complete and we refer
you to applicable Massachusetts law, the MGCL and each Funds governing documents.
In General
The Acquiring Fund is a Massachusetts business trust. A fund organized as a Massachusetts business trust is governed by the trusts
declaration of trust or similar instrument. Massachusetts law allows the trustees of a business trust to set the terms of a funds governance in its declaration. All power and authority to manage the fund and its affairs generally reside with
the trustees, and shareholder voting and other rights are limited to those provided to the shareholders in the declaration. Because Massachusetts law governing business trusts provides more flexibility compared to typical state corporate statutes,
the Massachusetts business trust has become a common form of organization for funds. However, some consider it less desirable than other forms of organization because it relies on the terms of the applicable declaration and judicial interpretations
rather than statutory provisions for substantive issues, such as the personal liability of shareholders and trustees, and does not provide the level of certitude that corporate laws like the MGCL, or newer statutory trust laws, such as that of
Delaware, provide.
The Acquired Fund is a Maryland corporation. A fund organized as a Maryland corporation is governed both
by the MGCL and the corporations charter and bylaws. For a Maryland corporation, unlike a Massachusetts business trust, the MGCL prescribes many aspects of corporate governance.
Stockholders of a Maryland corporation generally are shielded from personal liability for the corporations debts or obligations.
Shareholders of a Massachusetts business trust, on the other hand, are not afforded the statutory limitation of personal liability generally afforded to stockholders of a corporation from the trusts liabilities. Instead, the declaration of
trust of a fund organized as a Massachusetts business trust typically provides that a shareholder will not be personally liable, and further provides for indemnification to the extent that a shareholder is found personally liable, for the
funds acts or obligations. The Declaration of Trust of the Acquiring Fund contains such provisions.
Similarly, the
trustees of a Massachusetts business trust are not afforded statutory protection from personal liability for the obligations of the trust. The directors of a Maryland corporation, on the other hand, generally are shielded from personal liability for
the corporations acts or obligations by the MGCL. Courts in Massachusetts have, however, recognized limitations of a trustees personal liability in contract actions for the obligations of a trust contained in the trusts
declaration, and declarations may also provide that trustees may be indemnified out of the assets of the trust to the extent held personally liable. The Declaration of Trust of the Acquiring Fund contains such provisions.
56
Massachusetts Business Trusts
The Acquiring Fund is governed by its Declaration of Trust and By-Laws. Under the Declaration of Trust, any determination as to what is
in the interests of the Acquiring Fund made by the Trustees of the Acquiring Fund in good faith is conclusive, and in construing the provisions of the Declaration of Trust, there is a presumption in favor of a grant of power and authority to the
Trustees. Further, the Declaration of Trust provides that certain determinations made in good faith by the Trustees of the Acquiring Fund are binding upon the Acquiring Fund and all shareholders, and shares of beneficial interest in the Acquiring
Fund are issued and sold on the condition and understanding, evidenced by the purchase of shares, that any and all such determinations shall be so binding. The following is a summary of some of the key provisions of the Acquiring Funds
governing documents.
Shareholder Voting
The 1940 Act requires a vote of shareholders on matters that Congress has determined might have a material effect on shareholders and their investments. For example, shareholder consent is required under
the 1940 Act to approve new investment advisory agreements in many cases, an increase in an advisory fee, changes to fundamental policies, the election of directors or trustees in certain circumstances, and the merger or reorganization of a fund in
certain circumstances, particularly where the merger or consolidation involves an affiliated party. The Declaration of Trust requires a shareholder vote on matters in addition to those required under the 1940 Act, such as certain mergers,
consolidations and sales of assets, derivative actions (to the same extent as shareholders of a Massachusetts business corporation) and certain amendments to the Declaration of Trust. Shareholders have no power to vote on any matter except as
required by applicable law, the governing documents, or as otherwise determined by the Trustees.
The
Acquiring Fund holds annual meetings of shareholders in accordance with the requirements of the exchange on which its shares trade. Under the By-Laws of the Acquiring Fund, special meetings of the shareholders for any purpose or purposes may be
called by certain officers of the Fund or at least sixty-six and two-thirds percent (66
2/
3
%) of the
Trustees, and must be called at the written request, stating the purpose or purposes of the meeting, of shareholders entitled to cast at least ten percent (10%) of all the votes entitled to be cast at the meeting. The By-Laws also provide that the
holders of a majority of the voting power of the shares entitled to vote at a meeting shall constitute a quorum for the transaction of business. Except as may otherwise be required by the 1940 Act, the Declaration of Trust or the By-Laws, the
Declaration of Trust provides that the affirmative vote of the holders of a majority, except in the case of the election of Trustees which shall only require a plurality, of the shares present in person or by proxy and entitled to vote at a meeting
of shareholders at which a quorum is present is required to approve a matter.
Election and Removal of Trustees
The Declaration of Trust provides that the Trustees determine the size of the Board, subject to a minimum of two and a
maximum of fifteen. Each Trustee shall hold office until the next meeting of shareholders called for the purpose of considering the election or re-election of such Trustee or of a successor to such Trustee, and until his successor is elected and
qualified, and any Trustee who is appointed by the Trustees in the interim to fill a vacancy shall have the same remaining term as that of his or her predecessor, if any, or such term as the Trustees may determine. The Declaration of Trust also
provides that any vacancy resulting from a newly created Trusteeship or the death, resignation,
57
retirement, removal, or incapacity of a Trustee may be filled by the affirmative vote or consent of a majority of the Trustees then in office. Trustees are elected by a plurality vote of the
shareholders. A Trustee may be removed from office only for cause by action of at least two-thirds of the remaining Trustees or by action of at least two-thirds of the outstanding shares.
Issuance of Shares
Under the Declaration of Trust, the Trustees are permitted to issue an unlimited number of shares of beneficial interest in the Acquiring Fund for such consideration and on such terms as the Trustees may
determine. Shares are subject to such other preferences, conversion, exchange or similar rights, as the Trustees may determine.
Amendments to Declaration of Trust
Under the Declaration of Trust, amendments to the Declaration of Trust generally require the consent of shareholders owning more than fifty percent (50%) of the shares entitled to vote, although
certain amendments may be made by the Trustees without a shareholder vote.
Shareholder, Trustee and Officer Liability
The Declaration of Trust provides that shareholders have no personal liability for any debt or obligation of the
Acquiring Fund and require the Acquiring Fund to indemnify a shareholder from any loss or expense arising solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. In
addition, the Acquiring Fund will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, the Declaration of Trust provides that any person who is a Trustee, officer or employee of
the Acquiring Fund is not personally liable to any person in connection with the affairs of the Acquiring Fund, other than to the Acquiring Fund and its shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard
of his or her duty. The Declaration of Trust further provides for indemnification of such persons and advancement of the expenses of defending any such actions for which indemnification might be sought. The Declaration of Trust also provides that
the Trustees may rely in good faith on expert advice.
Preemptive Rights
Pursuant to the Declaration of Trust, shareholders of the Acquiring Fund have no preemptive rights or other rights to subscribe to
additional shares, except as the Trustees may determine.
Derivative Actions
Massachusetts has what is commonly referred to as a universal demand statute, which requires that a shareholder make a
written demand on the board, requesting the board members to bring an action, before the shareholder is entitled to bring or maintain a court action or claim on behalf of the entity.
Maryland Corporations
A Maryland corporation is governed by the MGCL, its charter and bylaws. Some of the key provisions of the MGCL and the Acquired Funds Charter and By-Laws are summarized below.
58
Stockholder Voting
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, or engage in a share exchange, merger or
consolidation, or transfer of assets unless approved by a vote of stockholders. Depending on the circumstances and the charter of the corporation, there may be various exceptions to these votes. Unless its charter provides otherwise, each
outstanding share of stock of a Maryland corporation, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders. The Acquired Funds Articles of Incorporation, as amended or supplemented (the
Charter), provide that each share of common stock shall be entitled to one vote. A Maryland corporation may, but is not obligated to, issue fractional shares of stock. The By-Laws authorize the Board of Directors to issue fractional
stock on such terms and conditions as it may determine.
Election and Removal of Directors
Stockholders of a Maryland corporation generally are entitled to elect and remove directors. Under the Charter and By-Laws of the
Acquired Fund, each Director shall be elected by the affirmative vote of the holders of a majority of the shares of stock outstanding and entitled to vote thereon. Each share may be voted for as many individuals as there are Directors to be elected
and for whose election the share is entitled to be voted.
Under the By-Laws of the Acquired Fund a special meeting of
stockholders may be called by certain officers of the Acquired Fund, by the Board of Directors or by the secretary of the Acquired Fund upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to
be cast at such meeting. The Charter of the Acquired Fund provides that any Director, or the entire Board of Directors, may be removed from office at any time only for cause and only by the affirmative vote of at least two-thirds of the votes
entitled to be cast generally in the election of Directors. For this purpose, cause means, with respect to any particular Director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such
Director caused demonstrable, material harm to the Acquired Fund through bad faith or active and deliberate dishonesty. Subject to the requirements of the 1940 Act, a vacancy on the Board of Directors may be filled only by a majority of the
remaining Directors, even if the remaining Directors do not constitute a quorum. Any Director elected to fill a vacancy serves for the remainder of the full term of the class in which the vacancy occurred and until a successor is elected and
qualifies.
Amendments to the Charter
Under the MGCL, stockholders generally are entitled to vote on amendments to the Charter of the corporation. However, unless prohibited in the charter, the board of directors of a Maryland corporation is
authorized, without a vote of the stockholders, to amend the charter to change the name of the corporation, to change the name or other designation of any class or series of stock and to change the par value of any class or series of stock. Under
the MGCL, however, a change in the name or other designation of a class or series of stock may not change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, or terms or conditions of redemption of
the stock. The board of directors of a Maryland corporation may, however, if authorized by the charter, without a vote of the stockholders, classify or reclassify any unissued stock by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such stock. The Charter of the Acquired Fund authorizes the Board of Directors to do so.
59
Issuance of Stock
A Maryland corporation has the power to issue stock of any class authorized by its charter. Prior to issuance of stock, the board of
directors of a Maryland corporation is required to adopt a resolution authorizing the issuance and setting the minimum consideration for the stock or a formula for its determination.
Stockholder, Director and Officer Liability
Under the MGCL, stockholders are not personally liable for debts or obligations of a corporation, except to the extent that the subscription price or other agreed consideration for the stock has not been
paid. The MGCL provides that a director who has met his or her statutory standard of conduct has no liability for reason of being or having been a director. The MGCL also provides that a corporation may indemnify and advance expenses to any director
made a party to any proceeding by reason of service as a director, subject to certain exceptions, and the Charter and By-Laws require the Acquired Fund to do so. The indemnification provisions and the limitation on liability of Directors are both
subject to any limitations of the 1940 Act, which generally provides that no director or officer shall be protected from liability to the corporation or its stockholders by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office. The provisions governing the advance of expenses are also subject to applicable requirements of the 1940 Act or rules thereunder.
Preemptive Rights
Stockholders of the Acquired Fund have no preemptive rights to purchase or subscribe for any additional shares of stock of the Acquired Fund, except as may be provided by the Board of Directors in setting
the terms of classified or reclassified shares of stock or as may otherwise be provided by contract.
Derivative Actions
Under Maryland law, applicable case law at the time a particular action is sought to be brought derivatively by
stockholders on behalf of a Maryland corporation will establish the requirements and limitations with respect to such stockholder derivative actions.
The foregoing is only a summary of certain rights of shareholders under the governing documents of the Acquiring Fund and the Acquired Fund and under applicable state law, and is not a complete
description of provisions contained in those sources. Shareholders should refer to the provisions of those documents and state law directly for a more thorough description.
Description of Common Shares Issued by the Acquiring Fund
General
Under the Acquiring Funds Declaration of Trust,
the Acquiring Fund is authorized to issue an unlimited number of common shares, which have a par value of $.01 per share. As a general matter, the holders of common shares of each Fund have equal voting rights and equal rights with respect to the
payment of dividends and distribution of assets upon liquidation and have no preemptive, conversion or exchange rights.
60
All Acquiring Fund common shares to be offered under this Joint Proxy
Statement/Prospectus will, when issued, be fully paid and, subject to matters discussed under Additional Information About the FundsCertain Provisions in the Acquiring Fund Declaration of Trust and By-Laws, non-assessable by the
Acquiring Fund. If the Acquiring Fund issues preferred shares, the common shareholders will not be entitled to receive any cash distributions from the Acquiring Fund unless all accrued dividends on preferred shares have been paid, and unless asset
coverage (as defined in the 1940 Act) with respect to preferred shares would be at least 200% after giving effect to the distributions.
Acquiring Fund common shares to be offered under this Joint Proxy Statement/Prospectus have been approved for listing on the NYSE, subject to notice of issuance. The Acquiring 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 Acquiring Fund will not issue share certificates.
Unlike open-end funds, closed-end funds like the Funds do not continuously offer shares and do not provide daily redemptions. Rather, if
a common shareholder determines to buy additional common shares or sell shares already held, the common shareholder may conveniently do so by trading on the exchange through a broker or otherwise. Shares of closed-end investment companies may
frequently trade on an exchange at prices lower than net asset value. Shares of closed-end investment companies like the Funds have, during some periods, traded at prices higher than net asset value and, during other periods, have traded at prices
lower than net asset value. Because the market value of the common shares may be influenced by such factors as dividend levels (which are in turn affected by expenses), dividend stability, net asset value, relative demand for and supply of such
shares in the market, general market and economic conditions, and other factors beyond the Acquiring Funds control, the Acquiring Fund cannot guarantee that common shares will trade at a price equal to or higher than net asset value in the
future. The common shares are designed primarily for long-term investors, and investors in the common shares should not view the Acquiring Fund as a vehicle for trading purposes. The full text of the Funds charter documents is on file with the
SEC and may be obtained as described on page iv.
Distributions
The Acquiring Funds quarterly distributions are set pursuant to a managed distribution program. Under that program, the Fund may
source its distributions from the following: net distributable cash flow, net realized gains, unrealized gains, and, in certain cases, a return of capital. Net distributable cash flow consists primarily of distributions received from a Funds
investments in shares of MLPs, less payments on any of its leveraging instruments and other Fund expenses (including taxes paid at the Fund level since each Fund is taxed as a C corporation). Currently, the Funds intend to distribute
substantially all of their net distributable cash flow received without sourcing incremental amounts from other components.
For purposes of determining the income tax characterization of the Funds distributions, amounts in excess of the Funds
current and accumulated earnings and profits for federal income tax purposes are characterized as a return of capital. Distributions attributable to earnings and profits for federal income tax purposes are characterized as taxable ordinary
dividends. The Fund will calculate its earnings and profits based on its taxable period ended November 30 and will report the character of its distributions to shareholders shortly after the end of the calendar year. The primary components of
61
the Funds annual earnings and profits calculation are: income, loss and other flow-through items (including earnings and profits adjustments) reported by the MLPs on Schedule K-1,
realized gain or loss on sales of Fund investments and deductible operating expenses. In addition, the Fund will recognize income (and increase its earnings and profits) should it receive a distribution from an MLP that exceeds its income tax basis
in that MLP. Distributions from any given MLP are treated as a return of capital to the extent of a Funds income tax basis in that MLP.
The character of the Funds distributions for U.S. GAAP purposes, which can often differ from the tax character, is based on estimates of the sources of those distributions (which can be from a
combination of income and/or a return of capital) made at the time such distributions are received, which in turn are based upon a historical review of information available from each MLP and other industry sources. The Funds accounting
characterization of the estimates may subsequently be revised based on information received from MLPs after their tax reporting periods conclude.
The Fund reserves the right to change the distribution policy and the basis for establishing the rate of its quarterly distributions at any time and may do so without prior notice to its common
shareholders.
Dividend Reinvestment Plan
Under the Acquiring Funds Dividend Reinvestment Plan (the Plan), you may elect to have all dividends and distributions
on your common shares automatically reinvested by State Street Bank and Trust Company (the Plan Agent) in additional common shares under the Plan. Generally, the terms of the Acquiring Funds Dividend Reinvestment Plan are identical
to the terms of the Acquired Funds Dividend Reinvestment 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 State Street Bank and Trust Company as dividend paying agent.
If you decide to participate
in the Plan of the Acquiring Fund, the number of common shares you will receive will be determined as follows:
(1) If common shares are trading at or above net asset value at the time of valuation, the
Acquiring Fund will issue new shares at the then current market price; or
(2) If common shares are trading below net asset value at the time of valuation, the Plan
Agent will receive the dividend or distribution in cash and will purchase common shares in the open market, on the NYSE 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 Acquiring 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 valuation date. Interest will not be paid on any
uninvested cash payments.
If the Plan Agent begins purchasing Acquiring Fund shares on the open market while shares are
trading below net asset value, but the Funds shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market
62
purchases and may invest the uninvested portion of the distribution in newly issued Fund shares at a price equal to the greater of the shares net asset value or 95% of the shares
market value.
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 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 such dividends and distributions. The Acquiring Fund reserves the right to amend or terminate the Plan if in the judgment of the Board of the
Acquiring Fund the change is warranted. There is no direct service charge to participants in the Plan; however, the Acquiring Fund reserves the right to amend the Plan to include a service charge payable by the participants. If you hold your common
shares with a brokerage firm that does not participate in the Plan, you will not be able to participate in the Plan and any dividend reinvestment may be effected on different terms than those described above. Additional information about the Plan
may be obtained from State Street Bank and Trust Company, Attn: Computershare Nuveen Investments, P.O. Box 43071, Providence, Rhode Island 02940-3071, (800) 257-8787.
63
Common Share Price Data
The following table sets forth the high and low sales prices for each Funds common shares for the periods indicated.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquiring Fund
|
|
|
|
Market Price
|
|
|
Net Asset Value
|
|
|
Premium/Discount
|
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
February 2012
|
|
$
|
18.83
|
|
|
$
|
16.53
|
|
|
$
|
19.03
|
|
|
$
|
17.19
|
|
|
|
0.16
|
%
|
|
|
-7.07
|
%
|
November 2011
|
|
$
|
17.54
|
|
|
$
|
14.22
|
|
|
$
|
17.41
|
|
|
$
|
14.86
|
|
|
|
5.92
|
%
|
|
|
-6.19
|
%
|
August 2011
|
|
$
|
19.31
|
|
|
$
|
15.52
|
|
|
$
|
18.50
|
|
|
$
|
14.31
|
|
|
|
8.46
|
%
|
|
|
-3.64
|
%
|
May 2011
|
|
$
|
20.15
|
|
|
$
|
17.49
|
|
|
$
|
19.38
|
|
|
$
|
17.03
|
|
|
|
10.47
|
%
|
|
|
0.16
|
%
|
February 2011
(1)
|
|
$
|
20.01
|
|
|
$
|
20.00
|
|
|
$
|
19.10
|
|
|
$
|
19.06
|
|
|
|
4.98
|
%
|
|
|
4.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Fund
|
|
|
|
Market Price
|
|
|
Net Asset Value
|
|
|
Premium/Discount
|
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
February 2012
|
|
$
|
18.26
|
|
|
$
|
15.65
|
|
|
$
|
19.20
|
|
|
$
|
17.65
|
|
|
|
-4.30
|
%
|
|
|
-12.31
|
%
|
November 2011
(2)
|
|
$
|
16.30
|
|
|
$
|
15.36
|
|
|
$
|
17.77
|
|
|
$
|
17.20
|
|
|
|
-7.60
|
%
|
|
|
-12.96
|
%
|
October 2011
|
|
$
|
17.00
|
|
|
$
|
14.60
|
|
|
$
|
17.76
|
|
|
$
|
15.60
|
|
|
|
-3.07
|
%
|
|
|
-11.22
|
%
|
July 2011
|
|
$
|
17.69
|
|
|
$
|
16.70
|
|
|
$
|
18.31
|
|
|
$
|
17.29
|
|
|
|
-2.52
|
%
|
|
|
-5.97
|
%
|
April 2011
|
|
$
|
19.50
|
|
|
$
|
17.63
|
|
|
$
|
18.56
|
|
|
$
|
17.71
|
|
|
|
6.15
|
%
|
|
|
-3.78
|
%
|
January 2011
|
|
$
|
17.95
|
|
|
$
|
17.08
|
|
|
$
|
18.04
|
|
|
$
|
17.40
|
|
|
|
0.96
|
%
|
|
|
-2.57
|
%
|
October 2010
|
|
$
|
18.47
|
|
|
$
|
16.55
|
|
|
$
|
18.58
|
|
|
$
|
16.59
|
|
|
|
5.74
|
%
|
|
|
-2.48
|
%
|
July 2010
|
|
$
|
17.84
|
|
|
$
|
14.70
|
|
|
$
|
17.58
|
|
|
$
|
14.61
|
|
|
|
8.71
|
%
|
|
|
-3.36
|
%
|
April 2010
|
|
$
|
18.00
|
|
|
$
|
14.59
|
|
|
$
|
16.67
|
|
|
$
|
14.75
|
|
|
|
8.32
|
%
|
|
|
-2.34
|
%
|
January 2010
|
|
$
|
16.41
|
|
|
$
|
13.87
|
|
|
$
|
15.79
|
|
|
$
|
13.42
|
|
|
|
10.14
|
%
|
|
|
-0.26
|
%
|
October 2009
|
|
$
|
14.80
|
|
|
$
|
12.04
|
|
|
$
|
13.93
|
|
|
$
|
12.30
|
|
|
|
8.70
|
%
|
|
|
-2.41
|
%
|
July 2009
|
|
$
|
13.06
|
|
|
$
|
11.00
|
|
|
$
|
12.94
|
|
|
$
|
10.99
|
|
|
|
5.50
|
%
|
|
|
-2.47
|
%
|
(1)
|
The Acquiring Funds inception date was February 24, 2011.
|
(2)
|
For the period November 1, 2011 through November 30, 2011.
|
On
May 15, 2012, the closing sale prices of the Acquiring Fund and the Acquired Fund common shares were $
18.18 and $
16.79, respectively. These prices represent a
premium to net
asset value of the Acquiring Fund of
7.07% and a discount to net asset value of the Acquired Fund of
5.19%.
Common shares of each Fund have historically traded at both a premium and discount to net asset value. It is not possible to state
whether Acquiring Fund Common Shares will trade at a premium or discount to net asset value following the Reorganization, or what the extent of any such premium or discount might be.
64
D.
|
ADDITIONAL INFORMATION ABOUT THE INVESTMENT POLICIES
|
Comparison of the Investment Objectives and Policies of the Acquiring Fund and the Acquired Fund
General
The Acquiring Fund and Acquired Fund have similar investment objectives. The Acquiring Funds investment objective is to provide tax-advantaged total return. The Acquired Funds investment
objective is to provide a high level of after-tax total return. Each Funds investment objective is a fundamental policy of the Fund and may not be changed, without the approval of the holders of a majority of the outstanding common shares and
preferred shares, if any, voting as a single class, and, if applicable, of the holders of a majority of the outstanding preferred shares voting as a separate class.
Investment Policies
The Acquiring Fund and Acquired Fund have
similar investment policies. The Acquired Fund pursues its investment objective by investing substantially all of its net assets in publicly traded master limited partnerships (MLPs) operating in the energy infrastructure sector of the
market. The Acquiring Fund seeks to achieve its investment objective by investing primarily in a portfolio of MLPs in the energy sector. The Funds consider investments in MLPs to include investments that offer economic exposure to publicly traded
and private MLPs in the form of equity securities of MLPs, securities of entities holding primarily general partner or managing member interests in MLPs, securities that are derivatives of interests in MLPs, including I-Shares, and debt securities
of MLPs. For as long as Energy MLP is in the name of the Acquiring Fund, the Acquiring Fund will invest at least 80% of its Managed Assets in MLPs in the energy sector. The Fund considers an entity to be part of the energy sector if it
derives at least 50% of its revenues from the business of exploring, developing, producing, gathering, transporting, processing, storing, refining, distributing, mining or marketing natural gas, natural gas liquids (including propane), crude oil,
refined petroleum products or coal. Under normal circumstances, at least 80% of the Acquired Funds net assets (including borrowings for investment purposes) will be invested in MLPs and equities. The Funds may not change their policy to invest
at least 80% of their assets as described above unless they provide shareholders with at least 60 days written notice of such change.
MLPs combine the tax benefits of limited partnerships with the liquidity of publicly traded securities. The Funds believe that as a result of the federal income tax characterization of cash distributions
made by MLPs to their investors (such as the Funds) a significant portion of the Funds income will be tax-deferred, which will allow distributions by each Fund to its shareholders to include high levels of tax-deferred income.
The Acquiring Fund may invest up to 20% of its Managed Assets in securities of issuers that are not MLPs. This 20% allocation may be in
any of the securities described in this Joint Proxy Statement/Prospectus and the Reorganization SAI, including securities of non-MLP companies engaged primarily in the energy sector. Such issuers may be treated as corporations for U.S. federal
income tax purposes and, therefore, may not offer the tax benefits of investing in MLPs.
The Acquiring Fund is a
non-diversified management investment company, while the Acquired Fund is a diversified management investment company.
65
The Acquired Fund is also subject to a fundamental policy that does not apply to the
Acquiring Fund. The Acquired Fund may not make investments for the purpose of exercising control or management. However, the Acquiring Fund is subject to a non-fundamental policy, which may be changed by its Board, that prohibits the Acquiring Fund
from purchasing securities of companies for the purpose of exercising control, except to the extent that exercise by the Acquiring Fund of its rights under loan agreements would be deemed to constitute exercising control.
Portfolio Investments
Each Funds portfolio will be composed principally of the following investments.
Master Limited Partnerships
Each Fund invests primarily in energy
sector MLPs. Entities commonly referred to as MLPs are generally organized under state law as limited partnerships or limited liability companies. The securities issued by many MLPs are listed and traded on a securities exchange. An MLP
typically issues general partner and limited partner interests, or managing member and member interests. The general partner or managing member manages and often controls, has an ownership stake in, and is normally eligible to receive incentive
distribution payments from, the MLP. If publicly traded, MLPs must derive at least 90% of their gross income from qualifying sources as described in Section 7704 of the Code in order to be treated as partnerships for U.S. federal income tax
purposes.
These qualifying sources include interest, dividends, real estate rents, gain from the sale or disposition of real
property, income and gain from mineral or natural resources activities, income and gain from the transportation or storage of certain fuels, and, in certain circumstances, income and gain from commodities or futures, forwards and options with
respect to commodities. Mineral or natural resources activities include exploration, development, production, processing, mining, refining, marketing and transportation (including pipelines) of oil and gas, minerals, geothermal energy, fertilizer,
timber or industrial source carbon dioxide. The general partner or managing member may be structured as a private or publicly traded corporation or other entity. The general partner or managing member typically control the operations and management
of the entity through an up to 2% general partner or managing member interest in the entity plus, in many cases, ownership of some percentage of the outstanding limited partner or member interests. The limited partners or members, through their
ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. Due to their structure as partnerships for U.S. federal
income tax purposes and the expected character of their income, MLPs generally do not pay federal income taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level
tax and tax on corporate dividends). Currently, most MLPs operate in the energy, natural resources or real estate sectors.
MLPs are typically structured such that common units and general partner or managing member interests have first priority to receive the
minimum quarterly distribution (the MQD). Common and general partner or managing member interests also accrue arrearages in distributions to the extent the MQD is not paid. Once common units and general partner or managing member
interests have been paid, subordinated units generally receive distributions; however, subordinated units generally do not accrue arrearages. The subordinated units are normally owned by the owners or affiliates of the general partner or managing
member and convert on a one for one basis into common units, generally in three to five years after the MLPs initial public offering or after certain distribution
66
levels have been exceeded. Distributable cash in excess of the MQD is distributed to both common and subordinated units generally on a pro rata basis. The general partner or managing member is
also normally eligible to receive incentive distributions if the general partner or managing member operates the business in a manner which results in payment of per unit distributions that exceed threshold levels above the MQD. As the general
partner or managing member increases cash distributions to the limited partners or members, the general partner or managing member receives an increasingly higher percentage of the incremental cash distributions. A common arrangement provides that
the general partner or managing member can reach a tier where it receives 50% of every incremental dollar distributed by the MLP. These incentive distributions encourage the general partner or managing member to increase the partnerships cash
flow and raise the quarterly cash distribution by pursuing steady cash flow investment opportunities, streamlining costs and acquiring assets. Such results benefit all security holders of the MLP.
The Alerian MLP Index, a composite of 50 energy MLPs calculated by Standard & Poors using a float-adjusted market
capitalization methodology, serves as a primary index for the energy MLP market.
MLP Equity Securities
Equity securities issued by MLPs currently consist of common units, subordinated units and preferred units, as
described more fully below.
MLP Common Units
. The common units of many MLPs are listed and
traded on U.S. securities exchanges, including the NYSE and the NASDAQ. Each Fund will purchase such common units through open market transactions and underwritten offerings, but may also acquire common units through direct placements and privately
negotiated transactions. Holders of MLP common units typically have very limited control and voting rights. Holders of such common units are typically entitled to receive the MQD, including arrearage rights, from the issuer. Generally, an MLP must
pay (or set aside for payment) the MQD to holders of common units before any distributions may be paid to subordinated unit holders. In addition, incentive distributions are typically not paid to the general partner or managing member unless the
quarterly distributions on the common units exceed specified threshold levels above the MQD. In the event of a liquidation, common unit holders are intended to have a preference to the remaining assets of the issuer over holders of subordinated
units. MLPs also issue different classes of common units that may have different voting, trading, and distribution rights. Each Fund may invest in different classes of common units.
MLP Subordinated Units
. Subordinated units, which, like common units, represent limited partner or member
interests, are not typically listed or traded on an exchange. Each Fund may purchase outstanding subordinated units through negotiated transactions directly with holders of such units or newly issued subordinated units directly from the issuer.
Holders of such subordinated units are generally entitled to receive a distribution only after the MQD and any arrearages from prior quarters have been paid to holders of common units. Holders of subordinated units typically have the right to
receive distributions before any incentive distributions are payable to the general partner or managing member. Subordinated units generally do not provide arrearage rights. Most MLP subordinated units are convertible into common units after the
passage of a specified period of time or upon the achievement by the issuer of specified financial goals. MLPs also issue different classes of subordinated units that may have different voting, trading, and distribution rights. Each Fund may invest
in different classes of subordinated units.
67
MLP Preferred Units
. MLP preferred units are not typically
listed or traded on an exchange. Each Fund may purchase MLP preferred units through negotiated transactions directly with MLPs, affiliates of MLPs and institutional holders of such units. Holders of MLP preferred units can be entitled to a wide
range of voting and other rights, depending on the structure of each separate security.
Other MLP Equity Securities
Each Fund may invest in equity securities issued by affiliates of MLPs, including the general partners or managing
members of MLPs. Such issuers may be organized and/or taxed as corporations and therefore may not offer the advantageous tax characteristics of MLP units. Each Fund intends to purchase such other MLP equity securities through market transactions,
but may also do so through direct placements.
I-Shares
. I-Shares represent an ownership
interest issued by an MLP affiliate. The MLP affiliate uses the proceeds from the sale of I-Shares to purchase limited partnership interests in the MLP in the form of I-units. Thus, I-Shares represent an indirect interest in a MLP limited
partnership interest. I-units have similar features as MLP common units in terms of voting rights, liquidation preference and distribution. I-Shares themselves have limited voting rights and are similar in that respect to MLP common units. I-Shares
differ from MLP common units primarily in that instead of receiving cash distributions, holders of I-Shares will receive distributions of additional I-Shares in an amount equal to the cash distributions received by common unit holders. I-Shares are
traded on the NYSE. For purposes of the Acquiring Funds policy to invest at least 80% of its Managed Assets in MLPs in the energy sector, securities that are derivatives of interests in MLPs include I-Shares and other derivative securities
that have economic characteristics of MLP securities.
MLP General Partner or Managing Member
Interests
. The general partner or managing member interest in MLPs is typically retained by the original sponsors of an MLP, such as its founders, corporate partners and entities that sell assets to the MLP. The holder of
the general partner or managing member interest can be liable in certain circumstances for amounts greater than the amount of the holders investment in the general partner or managing member. General partner or managing member interests often
confer direct board participation rights in, and in many cases control over the operations of, the MLP. General partner or managing member interests can be privately held or owned by publicly traded entities. General partner or managing member
interests receive cash distributions, typically in an amount of up to 2% of available cash, which is contractually defined in the partnership or limited liability company agreement. In addition, holders of general partner or managing member
interests typically receive incentive distribution rights (IDRs), which provide them with an increasing share of the entitys aggregate cash distributions upon the payment of per common unit distributions that exceed specified
threshold levels above the MQD. Due to the IDRs, general partners of MLPs have higher distribution growth prospects than their underlying MLPs, but quarterly incentive distribution payments would also decline at a greater rate than the decline rate
in quarterly distributions to common and subordinated unit holders in the event of a reduction in the MLPs quarterly distribution. The ability of the limited partners or members to remove the general partner or managing member without cause is
typically very limited. In addition, some MLPs permit the holder of IDRs to reset, under specified circumstances, the incentive distribution levels and receive compensation in exchange for the distribution rights given up in the reset.
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MLP Industries
MLPs in the energy sector can generally be classified into the following industries:
Pipeline MLPs
. Pipeline MLPs are common carrier transporters of natural gas, natural gas liquids (primarily
propane, ethane, butane and natural gasoline), crude oil or refined petroleum products (gasoline, diesel fuel and jet fuel). Pipeline MLPs also may operate ancillary businesses such as storage and marketing of such products. Pipeline MLPs derive
revenue from capacity and transportation fees. Historically, pipeline output has been less exposed to cyclical economic forces due to its low cost structure and government-regulated nature. In addition, most pipeline MLPs have limited direct
commodity price exposure because they do not own the product being shipped.
Processing
MLPs
. Processing MLPs are gatherers and processors of natural gas as well as providers of transportation, fractionation and storage of natural gas liquids (NGLs). Processing MLPs derive revenue from providing
services to natural gas producers, which require treatment or processing before their natural gas commodity can be marketed to utilities and other end user markets. Revenue for the processor is fee based, although it is not uncommon to have some
participation in the prices of the natural gas and NGL commodities for a portion of revenue.
Gathering and Processing
MLPs
. Gathering and processing companies are subject to natural declines in the production of oil and natural gas fields, which utilize their gathering and processing facilities as a way to market their production,
prolonged declines in the price of natural gas or crude oil, which curtails drilling activity and therefore production, and declines in the prices of natural gas liquids and refined petroleum products, which cause lower processing margins. In
addition, some gathering and processing contracts subject the gathering or processing company to direct commodities price risk.
Midstream MLPs
. Midstream MLPs and energy companies that provide crude oil, refined product and natural gas
services are subject to supply and demand fluctuations in the markets they serve which will be impacted by a wide range of factors including, fluctuating commodity prices, weather, increased conservation or use of alternative fuel sources, increased
governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, and economic conditions, among others.
Propane MLPs
. Propane MLPs are distributors of propane to homeowners for space and water heating. Propane
MLPs derive revenue from the resale of the commodity on a margin over wholesale cost. The ability to maintain margin is a key to profitability. Propane serves a small portion of the household energy needs in the United States, largely for homes
beyond the geographic reach of natural gas distribution pipelines. A majority of annual cash flow is earned during the winter heating season (October through March). Accordingly, volumes are weather dependent, but have utility type functions similar
to electricity and natural gas.
Exploration and Production MLPs
. Exploration and production
MLPs include MLPs that are engaged in the exploration, development, production and acquisition of crude oil and natural gas properties. Exploration and production MLP cash flows generally depend on the volume of crude oil and natural gas produced
and the realized prices received for crude oil and natural gas sales.
Coal MLPs
. Coal MLPs own,
lease and manage coal reserves. Coal MLPs derive revenue from production and sale of coal, or from royalty payments related to leases to coal producers.
69
Electricity generation is the primary use of coal in the United States. Demand for electricity and supply of alternative fuels to generators are the primary drivers of coal demand. Coal MLPs are
subject to operating and production risks, such as: the MLP or a lessee meeting necessary production volumes; federal, state and local laws and regulations which may limit the ability to produce coal; the MLPs ability to manage production
costs and pay mining reclamation costs; and the effect on demand that the Environmental Protection Agencys standards set in the 1990 Clean Air Act or other laws, regulations or trends have on coal-end users.
Marine Shipping MLPs
. Marine shipping MLPs are primarily marine transporters of natural gas, crude oil or
refined petroleum products. Marine shipping MLPs derive revenue from charging customers for the transportation of these products utilizing the MLPs vessels. Transportation services are typically provided pursuant to a charter or contract, the
terms of which vary depending on, for example, the length of use of a particular vessel, the amount of cargo transported, the number of voyages made, the parties operating a vessel or other factors.
MLPs are subject to various federal, state and local environmental laws and health and safety laws as well as laws and regulations
specific to their particular activities. These laws and regulations address: health and safety standards for the operation of facilities, transportation systems and the handling of materials; air and water pollution requirements and standards; solid
waste disposal requirements; land reclamation requirements; and requirements relating to the handling and disposition of hazardous materials. MLPs are subject to the costs of compliance with such laws applicable to them, and changes in such laws and
regulations may adversely affect their results of operations.
Restricted Securities and Securities with Limited Trading
Markets
Each Fund may invest in restricted securities and securities with limited trading markets. The Acquiring Fund
may invest up to 30% of its Managed Assets in unregistered or otherwise restricted securities, including private investments in public equity (PIPEs). PIPE investors purchase securities directly from a publicly traded company in a
private placement transaction, typically at a discount to the market price of the companys common stock. Because the sale of the securities is not pre-registered with the SEC, the securities are restricted and cannot be immediately
resold by the investors into the public markets. Accordingly, the company will agree as part of the PIPE deal promptly to register the restricted securities with the SEC. PIPE investments may be deemed illiquid.
If the Acquiring Fund were to assume substantial positions in securities with limited trading markets, the activities of the Acquiring
Fund could have an adverse effect upon the liquidity and marketability of such securities and the Acquiring Fund might not be able to dispose of its holdings in those securities at then current market prices. Circumstances could also exist when
portfolio securities might have to be sold by the Acquiring Fund at times which otherwise might be considered to be disadvantageous so that the Acquiring Fund might receive lower proceeds from such sales than it had expected to realize. Investments
in securities which are restricted (i.e. unregistered or subject to contractual or other legal restrictions on resale) may involve added expenses to the Acquiring Fund should the Acquiring Fund be required to bear registration costs with
respect to such securities. The Acquiring Fund could also be delayed in disposing of such securities which might have an adverse effect upon the price and timing of sales and the liquidity of the Acquiring Fund. Restricted securities and securities
for which there is a limited trading market may be significantly more difficult to value due to the unavailability of reliable market quotations for such securities, and investment in such securities may have an adverse impact on the Acquiring
Funds net asset value. The Acquiring Fund
70
may purchase Rule 144A securities for which there may be a secondary market of qualified institutional buyers as contemplated by Rule 144A under the Securities Act of 1933, as amended (the
1933 Act).
Non-MLP Equity Securities
Each Fund may also invest in non-MLP equity securities, which with respect to the Acquiring Fund may constitute up to 20% of its Managed
Assets. Non-MLP equity securities include common and preferred stock, convertible securities, warrants and depository receipts of companies that are organized as corporations, limited liability companies or limited partnerships (other than MLPs).
Common Stock
. Common stock generally represents an equity ownership interest in an issuer.
Although common stocks have historically generated higher average total returns than fixed-income securities over the long term, common stocks also have experienced significantly more volatility in those returns and may under-perform relative to
fixed-income securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by a Fund. Also, prices of common stocks are sensitive to general movements in the
stock market and a drop in the stock market may depress the price of common stocks to which a Fund has exposure. Common stock prices fluctuate for several reasons including changes in investors perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, or the occurrence of political or economic events which effect the issuers. In addition, common stock prices may be particularly sensitive to rising interest rates, which increases
borrowing costs and the costs of capital.
Preferred Stock
. Preferred stock has a preference
over common stock in liquidation (and generally as to dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion
element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similarly stated yield characteristics. The market value of preferred
stock will also generally reflect whether (and if so when) the issuer may force holders to sell their preferred shares back to the issuer and whether (and if so when) the holders may force the issuer to buy back their preferred shares. Generally,
the right of the issuer to repurchase the preferred stock tends to reduce any premium that the preferred stock might otherwise trade at due to interest rate or credit factors, while the right of the holders to require the issuer to repurchase the
preferred stock tends to reduce any discount that the preferred stock might otherwise trade at due to interest rate or credit factors. In addition, some preferred stocks are non-cumulative, meaning that the dividends do not accumulate and need not
ever be paid. A portion of a Funds portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have an obligation to make up any arrearages to its shareholders. There is no assurance that dividends or
distributions on non-cumulative preferred stocks in which a Fund invests will be declared or otherwise paid. Preferred stock of certain companies offers the opportunity for capital appreciation as well as periodic income. This may be particularly
true in the case of companies that have performed below expectations. If a companys performance has been poor enough, its preferred stock may trade more like common stock than like other fixed income securities, which may result in above
average appreciation if the companys performance improves.
71
Convertible Securities
. A convertible security is a preferred
stock, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A
convertible security generally entitles the holder to receive the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have
characteristics similar to both fixed income and equity securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the
underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a
corporations capital structure but are usually subordinated to comparable non-convertible securities. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the
market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.
Warrants and Rights
. Each Fund may invest in warrants or rights (including those acquired in units or
attached to other securities) that entitle the holder to buy equity securities at a specific price for a specific period of time but will do so only if such equity securities are deemed appropriate by the Subadviser for inclusion in a Funds
portfolio.
Debt Securities
Each Fund may invest in debt securities, including, but not limited to, structured notes or exchange-traded notes issued by MLPs in the energy sector, that are designed to provide exposure to the MLP
market. The Acquiring Fund may invest up to 30% of its Managed Assets in debt securities of MLPs and other issuers of any maturity. Debt securities may have fixed or variable principal payments and all types of interest rate and dividend payment and
reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features. Each Fund has the flexibility to invest in debt securities that are below investment grade quality (that is, rated Ba
or lower by Moodys Investors Service, Inc. (Moodys), BB+ or lower by Standard & Poors Financial Services, LLC, a subsidiary of The McGraw Hill Companies, Inc. (S&P) or Fitch Ratings, Inc.
(Fitch), or comparably rated by another nationally recognized statistical rating organization (NRSRO)). These debt securities are commonly referred to as high yield securities or junk bonds. Each Fund
may invest in debt securities without regard to their ratings. Issuers of securities rated Ba/BB+ are regarded as having current capacity to make principal and interest payments but are subject to business, financial or economic conditions which
could adversely affect such payment capacity. Debt securities rated Baa3 or BBB- or above are considered investment grade securities. Debt securities rated below investment grade quality are obligations of issuers that are considered
predominately speculative with respect to the issuers capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and
bankruptcy and increased market price volatility. Debt securities rated below investment grade tend to be less marketable than higher-quality securities because the market for them is less broad.
Hedging Techniques
In certain market environments, each Fund anticipates it will use various hedging techniques consistent with its top-down investment style with the goal of enhancing its risk-adjusted total return
72
over the longer term. In those circumstances, each Fund will seek to mitigate key risks associated with investments in MLPs including equity securities risk, interest rate risk, commodity price
risk and regulatory risk, which, among other factors, could adversely affect market valuations of specific securities or certain sectors of the energy MLP market place, or the overall portfolio. In turn, such risks could adversely affect the
secondary market price of each Funds shares. To execute its hedging operations, each Fund may sell call options, buy call or put options, invest in structured notes or exchange-traded notes or use other derivatives developed in the future.
Certain of the potential hedging techniques are discussed more fully below. Each Funds use of hedging techniques will be market driven and discretionary, based primarily upon the proprietary analytical methods and qualitative judgments of the
Subadviser coupled with the oversight of Nuveen Fund Advisors. There can be no assurance that the hedging techniques, as they may be developed and implemented by each Fund, will be successful in mitigating risk or achieving the goal of enhancing
each Funds risk-adjusted total return over the longer term.
Each Fund may sell call options on a portion of the
Funds portfolio of equity securities and on MLP-based securities indices or certain exchange-traded notes. The extent of each Funds equity call option writing activity (which may at times be little or none, and at other times, may be on
a substantial portion of the Funds Managed Assets) will depend on market conditions and an ongoing assessment of the attractiveness (from a risk-adjusted total return standpoint) of writing call options. Generally, the Funds do not intend to
sell call options for the express purpose of generating option premiums to enhance distributions to shareholders. To seek to hedge a portion of the Funds equity securities risk, the Funds may buy call or put options on a portion of the
Funds portfolio of equity securities and on MLP-based securities indices or certain exchange-traded notes. In addition, the Funds may make limited short-term investments in structured notes or exchange-traded notes that are designed to provide
short exposure to the energy MLP market. To seek to hedge a portion of the Funds commodity market risk, the Funds may buy put or call options on energy commodity futures.
Each Funds use of derivatives such as the purchase of put or call options may generate costs that would reduce such Funds net
asset value. These capital costs may be offset over time by gains generated from hedging. The potential to achieve such gains will depend largely on the Subadvisers investment capabilities in executing the Funds hedging techniques.
Other Investment Techniques
. The Funds may use a variety of other investment techniques to seek
to achieve their investment objectives, to enhance return, or as a substitute for a position in an underlying asset. From time to time, the Funds may invest in certain derivative instruments such as options, futures, swaps and short sales. In
addition, each Fund may purchase securities of other investment companies (for the Acquiring Fund, up to 10% of its Managed Assets), the assets of which consist primarily of securities issued by MLPs in the energy sector. Such investments in
derivatives or other investment companies are not expected to offer the same tax benefits of investing directly in MLPs.
Temporary Defensive Positions
. At times the Subadviser may judge that conditions in the markets for
securities of MLP entities make pursuing the Acquiring Funds primary investment strategy inconsistent with the best interests of its shareholders. At such times the Subadviser may, temporarily, use alternative strategies primarily designed to
reduce fluctuations in the value of the Acquiring Funds assets. During temporary defensive periods or in order to keep the Acquiring Funds cash fully invested, including during the period when the net proceeds of this offering of Common
Shares are first being invested, the Acquiring Fund may deviate from its investment policies and
73
objective. During such periods, the Acquiring Fund may invest up to 100% of its Managed Assets in cash or high quality, short-term investments. There can be no assurance that such strategies will
be successful. While the Acquired Fund does not intend to depart from its investment strategy in respect of its investments in MLPs in response to adverse market, economic or political conditions by engaging in transactions or strategies that would
involve selling MLP interests in order to purchase the securities of other issuers or by seeking other temporary defensive positions such as cash, it may utilize short-term investments for cash management purposes.
Leverage
Each Fund may utilize the following forms of leverage: (a) portfolio investments that have the economic effect of leverage, including but not limited to investments in futures, options and inverse
floating rate securities, (b) the issuance of preferred shares, and (c) borrowings to the extent permitted by the 1940 Act. While both Funds are permitted to use leverage, only the Acquiring Fund currently employs a leverage strategy to
enhance investment returns primarily through debt borrowings. The Acquiring Fund anticipates that its leverage ratio will vary from time to time; however, the Acquiring Fund generally intends to limit its leverage ratio to 33
1
/
3
% of its Managed Assets. As of November 30, 2011, the Acquiring
Funds leverage ratio was 23.37% of its Managed Assets. The Acquiring Fund currently expects to maintain a similar leverage ratio, relative to its Managed Assets (including assets attributable to the Acquired Fund), following the close of the
Reorganization.
Neither Fund currently intends to issue preferred shares or debt securities. In addition, both Funds
may borrow for temporary, emergency or other purposes as permitted by the 1940 Act. The Funds may not use leverage at all times and the amount of leverage may vary depending upon a number of factors, including Nuveen Fund Advisors and the
Subadvisers outlook for the market and the costs that the Funds would incur as a result of such leverage. The use of leverage involves increased risk. There is no assurance that the Funds will utilize leverage or that the Funds leverage
strategy will be successful.
Under the 1940 Act, each Fund is not permitted to incur indebtedness,
including through the issuance of debt securities, unless immediately thereafter the total asset value of the Funds portfolio is at least 300% of the aggregate amount of outstanding indebtedness (i.e., the aggregate amount of outstanding debt
may not exceed 33
1
/
3
% of the Funds Managed
Assets). In addition, each Fund is not permitted to declare any cash distribution on its Common Shares unless, at the time of such declaration, the net asset value of the Funds portfolio (determined deducting the amount of such distribution)
is at least 300% of the aggregate amount of such outstanding indebtedness. If a Fund borrows money, the Fund intends, to the extent possible, to retire outstanding debt from time to time to maintain coverage of any outstanding indebtedness of at
least 300%.
Changes in the value of each Funds portfolio securities, including costs attributable to borrowings
or preferred shares, will be borne entirely by the common shareholders. If there is a net decrease (or increase) in the value of a Funds investment portfolio, the leverage will decrease (or increase) the net asset value per common share to a
greater extent than if the Fund were not leveraged.
Utilization of leverage is a speculative investment technique and
involves certain risks to the common shareholders. These include increased variability of the Funds net income, distributions and/or net asset value in relation to market changes. So long as the Fund is able to realize a higher net return on
its investment portfolio than the then-current cost of any leverage together with other related
74
expenses, the effect of the leverage will be to cause common shareholders to realize a higher rate of return than if the Fund were not so leveraged. On the other hand, to the extent that the
then-current cost of any leverage, together with other related expenses, approaches the net return on the Funds investment portfolio, the benefit of leverage to common shareholders will be reduced, and if the then-current cost of any leverage
together with related expenses were to exceed the net return on the Funds portfolio, the Funds leveraged capital structure would result in a lower rate of return to common shareholders than if the Fund were not so leveraged.
Under the 1940 Act, a Fund is not permitted to issue preferred shares unless immediately after such issuance the value of the Funds
asset coverage is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the Funds assets less all liabilities other than borrowings and outstanding preferred shares).
In addition, a Fund is not permitted to declare any cash dividend or other distribution on its common shares unless, at the
time of such declaration, the value of the Funds assets less liabilities other than borrowings and outstanding preferred shares satisfies the above-referenced 200% coverage requirement. if preferred shares are issued, the Funds intend, to the
extent possible, to purchase or redeem preferred shares from time to time to the extent necessary in order to maintain coverage of at least 200%.
Each Fund pays to Nuveen Fund Advisors a management fee (who in turn pays a fee to the Subadviser) based on Managed Assets. Nuveen Fund Advisors, in consultation with the Subadviser, will decide whether
and how much to leverage the Fund based solely on the assessment of whether such use of leverage will advance the Funds investment objective. However, the fact that a decision to increase a Funds leverage will have the effect of
increasing Managed Assets and therefore Nuveen Fund Advisors and the Subadvisers management fees means that Nuveen Fund Advisors may have an incentive to effect, and the Subadviser may have an incentive to recommend, an increase in a
Funds use of leverage. Nuveen Fund Advisors, in consultation with the Subadviser, will only increase a Funds use of leverage when it determines that such increase is consistent with a Funds investment objective, and will
periodically review the Funds performance and use of leverage with the Board.
The Board of the Acquired Fund recommends
that shareholders of the Acquired Fund vote FOR the approval of the Reorganization.
PROPOSAL NO. 3ISSUANCE OF ADDITIONAL COMMON SHARES OF
ACQUIRING FUND
(ACQUIRING FUND SHAREHOLDERS ONLY)
In connection with the proposed
Reorganization, the Acquiring Fund will issue additional Acquiring Fund Common Shares and, subject to notice of issuance, list such shares on the NYSE. The Acquiring Fund will acquire all of the assets of the Acquired Fund in exchange for newly
issued Acquiring Fund Common Shares and the assumption of all of the liabilities of the Acquired Fund. The Acquired Fund will distribute Acquiring Fund Common Shares to its common shareholders and will then terminate its registration under the 1940
Act and dissolve under applicable state law. The Acquiring Funds Board, based upon its evaluation of all relevant information, approved the Reorganization, concluding that the Reorganization is in the best interests of the Acquiring Fund and
that the interests of existing shareholders of the Acquiring Fund will not be diluted as a result of the Reorganization.
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The aggregate net asset value of Acquiring Fund Common Shares to be issued in the
Reorganization will equal the aggregate net asset value of the Acquired Funds common shares held immediately prior to the Reorganization. Prior to the closing of the Reorganization, the net asset value of the Acquired Fund and the Acquiring
Fund will be reduced by the costs of the Reorganization borne by such Fund. No fractional Acquiring Fund Common Shares will be issued to the Acquired Funds shareholders and, in lieu of such fractional shares, the Acquired Funds
shareholders will receive cash in an amount equal to the value received for such shares in the open market, which may be higher or lower than net asset value. The Reorganization will result in no reduction in net asset value of the Acquiring
Funds common shares, other than to reflect the costs of the Reorganization. No gain or loss will be recognized by the Acquiring Fund for federal income tax purposes as a direct result of the Reorganization. The Acquiring Fund will continue to
operate as a registered closed-end management investment company with the investment objective and policies described in this Joint Proxy Statement/Prospectus.
While applicable state and federal law does not require the common shareholders of the Acquiring Fund to approve the issuance of additional Acquiring Fund Common Shares, applicable NYSE rules require the
common shareholders of the Acquiring Fund to approve the issuance of additional Acquiring Fund Common Shares to be issued in connection with the Reorganization.
Shareholder approval of the issuance of additional Acquiring Fund Common Shares requires the affirmative vote of a majority of the votes cast on the proposal, provided that a quorum is present.
Abstentions and broker non-votes will have no effect on the proposal. Broker non-votes are shares held by brokers or nominees for which the brokers or nominees have executed proxies as to which (i) the broker or nominee does not have
discretionary voting power and (ii) the broker or nominee has not received instructions from the beneficial owner or other person who is entitled to instruct how the shares will be voted.
The consummation of the Reorganization is contingent on the satisfaction or waiver of all closing conditions including approval of the
Reorganization by the Acquired Funds shareholders.
The Board of the Acquiring Fund recommends that shareholders of the
Acquiring Fund vote FOR the approval of the issuance of additional Acquiring Fund Common Shares in connection with the Reorganization.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Certain Provisions in the Acquiring Funds Declaration of Trust and By-Laws
Under Massachusetts law,
shareholders could, under certain circumstances, be held personally liable for the obligations of the Acquiring Fund. However, the Acquiring Fund Declaration of Trust 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 Acquiring Funds Declaration of Trust 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 Acquiring Fund would be unable to meet its obligations. The Acquiring Fund believes that the likelihood of such circumstances is remote.
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The Acquiring Fund Declaration of Trust 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 Acquiring Fund Declaration of Trust requires a vote by holders of at least two-thirds of the common shares and preferred shares
(if any), voting 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 Funds assets (other than in
the regular course of the Funds 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 Acquiring Fund Declaration of Trust or the Acquiring Funds
By-Laws, in which case the affirmative vote of the holders of at least a majority of the Funds common shares and preferred shares outstanding at the time, voting 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. Approval of shareholders is not required,
however, for any transaction, whether deemed a merger, consolidation, reorganization or otherwise, where the Fund issues shares in connection with the acquisition of assets from any other investment company or similar entity. In the case of the
conversion of the Acquiring 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 Acquiring Funds 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 Acquiring Fund Declaration of Trust or the Acquiring Funds By-Laws, the affirmative vote of the holders of at least a majority of the Acquiring Funds preferred shares outstanding at
the time, voting as a separate class. 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 as a single class. The votes required to approve the conversion of the
Acquiring 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 Acquiring
Funds Board believes that the provisions of the Acquiring Fund Declaration of Trust relating to such higher votes are in the best interest of the Acquiring Fund.
The Declaration of Trust provides that the obligations of the Acquiring Fund are not binding upon the Funds trustees individually, but only upon the assets and property of the Fund, and that the
trustees shall not be liable for errors of judgment or mistakes of fact or law. Nothing in the Acquiring Fund Declaration of Trust, however, protects a trustee against any liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
In
addition, the By-laws require the Board be divided into three classes with staggered terms. See the Reorganization SAI under Management of the Funds. This provision of the By-laws could delay for up to two years the replacement of a
majority of the Board.
The provisions of the Acquiring Fund Declaration of Trust and By-laws described above could have the
effect of depriving the common shareholders of opportunities to sell their common shares at a
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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 Acquiring Fund to
negotiate with its management regarding the price to be paid and facilitating the continuity of the Funds investment objective and policies. The Acquiring Funds Board has considered the foregoing anti-takeover provisions and concluded
that they are in the best interests of the Fund.
The Acquiring Fund Declaration of Trust provides that common shareholders
shall have no right to acquire, purchase or subscribe for any shares or securities of the Fund, other than such right, if any, as the Funds Board in its discretion may determine. As of the date of this Joint Proxy Statement/Prospectus, no
preemptive rights have been granted by the Board.
Reference should be made to the Acquiring Funds Declaration of Trust
on file with the SEC for the full text of these provisions.
Repurchase of Common Shares; Conversion to
Open-End Fund
Each Fund is a closed-end management investment company, and as such its shareholders will not have the
right to cause the Fund to redeem their shares. Instead, the common shares of each Fund trade in the open market at a price that is a function of several factors, including dividend levels (which are in turn affected by expenses), net asset value,
call protection, dividend stability, portfolio credit quality, relative demand for and supply of such shares in the market, general market and economic conditions and other factors. Because shares of closed-end management investment companies may
frequently trade at prices lower than net asset value, each Funds Board 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.
Neither the Acquiring Fund nor the Acquired Fund can assure you that its Board will decide to take any of these actions, or that share repurchases or tender offers will actually reduce market discount.
If a Fund converted to an open-end investment company, it would be required to redeem all preferred shares then outstanding (requiring in
turn that it liquidate a portion of its investment portfolio), and the common shares would no longer be listed on the NYSE. In contrast to a closed-end management investment company, shareholders of an open-end management investment company may
require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less any redemption charge that is in effect at the time of redemption. See Certain
Provisions in the Acquiring Funds Declaration of Trust and By-Laws above for a discussion of the voting requirements applicable to the conversion of a Fund to an open-end management investment 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 a Funds 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 a
Funds shares should trade at a discount, the Board may determine that, in the interest of the Fund, no action should be
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taken. See the Reorganization SAI under Repurchase of Common Shares; Conversion to Open-End Fund for a further discussion of possible action to reduce or eliminate such discount to
net asset value.
Custodian and Transfer Agent
The custodian of the assets of each Fund is State Street Bank and Trust Company (State Street), One Lincoln Street, Boston,
Massachusetts 02110. The custodian performs custodial, fund accounting and portfolio accounting services. Each Funds transfer, shareholder services and dividend paying agent is also State Street, 250 Royall Street, Canton, Massachusetts 02021.
State Street has subcontracted the transfer agency servicing of the Funds to Computershare, Inc.
Federal
Income Tax Matters Associated with Investment in the Funds
The following information is meant as a general summary of
certain federal income tax matters for U.S. shareholders. Please see the Reorganization SAI for additional information. Investors should rely on their own tax adviser for advice about the particular federal, state and local tax consequences to them
of investing in the Funds. Except where noted, this summary deals only with common shares of the Funds held as capital assets. This summary does not represent a detailed description of the United States federal income tax consequences applicable to
a holder of common shares of the Funds if such holder is subject to special treatment under the United States federal income tax laws, including if the holder is:
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a dealer in securities or currencies;
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt organization;
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a person holding shares of a Fund as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;
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a trader in securities that has elected the mark-to-market method of accounting for its securities;
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a person liable for alternative minimum tax;
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a partnership or other pass-through entity for United States federal income tax purposes; or
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a U.S. Holder (as defined below) whose functional currency is not the United States dollar.
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As used herein, the term U.S. Holder means a beneficial owner of common shares
of a Fund that is, for United States federal income tax purposes:
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an individual citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to United States federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the
authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
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As used herein, the term non-U.S. Holder means a beneficial owner of common shares of a Fund that is neither a U.S. Holder
nor a partnership (or other entity treated as a partnership for United States federal income tax purposes).
The discussion
below is based upon the provisions of the Code and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified, possibly with retroactive effect, so as to result in United
States federal income tax consequences different from those discussed below.
If a partnership holds common shares of a Fund,
the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Investors that are partners in a partnership holding common shares of a Fund should consult their tax advisors.
This summary does not contain a detailed description of all the United States federal income tax consequences applicable to the Funds or
to investors in light of their particular circumstances, and does not address the effects of any state, local or non-United States tax laws. Investors should consult their own tax advisors concerning the United States federal income tax consequences
to them of acquiring, owning or disposing of common shares in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.
Taxation of the Funds
Each Fund is treated as a regular corporation, or a C corporation, for United States federal income tax purposes. Accordingly, each Fund generally is subject to United States federal income
tax on its taxable income at the graduated rates applicable to corporations (currently at a maximum rate of 35%). Such taxable income generally includes, among other items, all of the Funds net income from its investments in the equity
securities of MLPs, other types of equity securities, derivatives, debt securities, royalty trusts and foreign securities less Fund expenses. Each Fund may be subject to a 20% alternative minimum tax on its alternative minimum taxable income to the
extent that the alternative minimum tax exceeds the Funds regular income tax liability. A Funds payment of corporate income tax or alternative minimum tax could materially reduce the amount of cash available for the Fund to make
distributions on its common shares. In addition, distributions to common shareholders of a Fund
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will be taxed under United States federal income tax laws applicable to corporate distributions, and thus each Funds taxable income will be subject to a double layer of taxation. As a
regular corporation, each Fund may also be subject to state income tax or foreign tax by reason of its investments in equity securities of MLPs.
If a Fund is eligible and determines that doing so is in the best interest of its shareholders, the Fund may in the future elect to be treated as a regulated investment company under Subchapter M of the
Code for federal income tax purposes. A Fund may make such an election, for example, if changes to the Code made it possible for the Fund to qualify as a regulated investment company despite its concentration in MLP securities. Making such an
election would generally, among other things, require that a Fund either (i) be subject to corporate-level taxes on any net built-in gains actually recognized over a ten-year period or (ii) recognize and pay tax on unrealized gains as of
the last day of the Funds last taxable year as a C corporation.
MLP Equity Securities
MLPs are generally characterized as publicly traded partnerships for United States federal income tax
purposes because MLPs are typically organized as limited partnerships or limited liability companies that are publicly traded. The Code generally requires all publicly traded partnerships to be treated as corporations for United States federal
income tax purposes. If, however, a publicly traded partnership derives at least 90% of its gross income from qualifying sources as described in Section 7704 of the Code, the publicly traded partnership will be taxed as a partnership for United
States federal income tax purposes. These qualifying sources include interest, dividends, real estate rents, gain from the sale or disposition of real property, income and gain from mineral or natural resources activities, income and gain from the
transportation or storage of certain fuels, and, in certain circumstances, income and gain from commodities or futures, forwards and options with respect to commodities. Mineral or natural resources activities include exploration, development,
production, processing, mining, refining, marketing and transportation (including pipelines) of oil and gas, minerals, geothermal energy, fertilizer, timber or industrial source carbon dioxide. Each Fund intends to invest in MLPs only if such MLPs
are taxed as partnerships for United States federal income tax purposes, and references in this discussion to MLPs include only MLPs that are so taxed.
When a Fund invests in the equity securities of an MLP, the Fund will be a partner in such MLP. Accordingly, a Fund will be required to include in its taxable income its allocable share of the income,
gains, losses and deductions recognized by each such MLP, whether or not the MLP distributes cash to the Fund. A distribution from an MLP is treated as a tax-free return of capital to the extent of a Funds basis in its MLP interest and as gain
from the sale or exchange of the MLP interest to the extent the distribution exceeds the Funds basis in its MLP interest. Based upon a review of the historic results of the type of MLPs in which the Funds invest and intend to invest, each Fund
expects that the cash distributions it receives with respect its investments in equity securities of MLPs will exceed the taxable income allocated to the Fund from such MLPs. No assurance, however, can be given in this regard. If this expectation is
not realized, a Fund will have a larger corporate income tax expense than expected, which will result in less cash available to distribute to common shareholders.
In addition, for purposes of calculating a Funds alternative minimum taxable income, the Funds allocable share of certain percentage-depletion deductions and intangible drilling costs of the
MLPs in which the Fund invests may be treated as items of tax preference. Such items will increase a Funds alternative minimum taxable income and increase the likelihood that the Fund may be subject to the alternative minimum tax.
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U.S. Holders
Taxation of Dividends
. The gross amount of distributions by a Fund in respect of its common shares will be
taxable to a U.S. Holder as dividend income to the extent the distributions are paid out of the Funds current or accumulated earnings and profits, as determined under United States federal income tax principles. Subject to certain holding
period and other requirements, such dividend income will generally be eligible for the dividends received deduction in the case of corporate U.S. Holders and, in the case of dividends paid in taxable years beginning on or before December 31,
2012, will generally be treated as qualified dividend income for non-corporate U.S. Holders (including individuals) and will be eligible for the reduced rates of taxation.
To the extent that the amount of any distribution exceeds a Funds current and accumulated earnings and profits for a taxable year,
as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the common shares (thereby increasing the amount of gain, or
decreasing the amount of loss, to be recognized by a U.S. Holder on a subsequent disposition of the common shares), and the balance in excess of adjusted basis will be taxed as capital gain. Any such capital gain will be long-term capital gain if
such U.S. Holder has held the applicable common shares for more than one year.
A corporations earnings and profits are
generally calculated by making certain adjustments to the corporations reported taxable income. Based upon the historic performance of MLPs in which the Funds invest and intend to invest, each Fund anticipates that the distributed cash from
the MLPs in its portfolio will exceed its earnings and profits. Thus, each Fund anticipates that only a portion of its distributions will be treated as dividends to its common shareholders for United States federal income tax purposes, although no
assurance can be given in this regard.
A Funds earnings and profits may be calculated using accounting methods that are
different from those used for calculating taxable income. For instance, a Fund may use a less accelerated method of depreciation and depletion for purposes of computing its earnings and profits than the method used for purposes of calculating the
taxable income of the MLP. In that case, a Funds earnings and profits would not be increased solely by its allocable share of the MLPs taxable income, but would also have to be increased for the amount by which the more accelerated
depreciation and depletion methods used for purposes of computing taxable income exceed the less accelerated methods used for purposes of computing earnings and profits. Because of these differences, a Fund may make distributions out of its current
or accumulated earnings and profits, treated as dividends, in years in which the Funds distributions exceed its taxable income.
Distributions will be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional common shares of a Fund. Common shareholders receiving
distributions in the form of additional common shares of a Fund will be treated as receiving a distribution in an amount equal to either the cash that they would have received if they had elected to receive the distribution in cash or, if the
distribution is invested in newly issued shares of the Fund, the fair market value of the shares issued to the shareholder.
Taxation of Capital Gains
. A U.S. Holder generally will recognize taxable gain or loss on any sale,
exchange or other taxable disposition of common shares in an amount equal to the difference between the amount realized for the common shares and the holders adjusted basis in such common shares. Such gain or loss will generally be capital
gain or loss. Capital gains of non-corporate U.S.
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Holders (including individuals) derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
Tax on Net Investment Income
. For taxable years beginning after December 31,
2012, an additional 3.8% Medicare tax will be imposed on net investment income of U.S. individuals, estates and trusts to the extent that such persons modified adjusted gross income (in the case of an individual) or
adjusted gross income (in the case of an estate or trust) exceeds a threshold amount. For this purpose, net investment income will generally include interest, dividends (including dividends paid with respect to a Funds
common shares), annuities, royalties, rent, net gain attributable to the disposition of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of a Funds common shares) and certain
other income, but will be reduced by any deductions properly allocable to such income or net gain. Shareholders are advised to consult their own tax advisors regarding this additional taxation of net investment income.
Information Reporting and Backup Withholding
. In general, information reporting will apply to distributions
in respect of common shares of a Fund and the proceeds from the sale, exchange or other disposition of common shares of a Fund that are paid to a U.S. Holder within the United States (and in certain cases, outside the United States), unless the
holder is an exempt recipient. A backup withholding tax (currently at a maximum rate of 28%, but scheduled to increase to 31% after 2012) may apply to such payments if the holder fails to provide a taxpayer identification number (generally on an IRS
Form W-9) or certification of other exempt status or fails to report in full dividend and interest income. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or as a
credit against a U.S. Holders United States federal income tax liability provided the required information is timely furnished to the IRS.
Non-U.S. Holders
The following discussion is a summary of certain
United States federal income tax consequences that will apply to non-U.S. Holders. Special rules may apply to certain non-U.S. Holders, such as controlled foreign corporations, passive foreign investment companies and certain
expatriates, among others, that are subject to special treatment under the Code. Such non-U.S. Holders should consult their own tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to
them.
Taxation of Dividends
. The gross amount of distributions by a Fund in respect of its
common shares will be treated as dividends to the extent paid out of the Funds current or accumulated earnings and profits, as determined under United States federal income tax principles. Dividends paid to a non-U.S. Holder generally will be
subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by a
non-U.S. Holder within the United States (and, if required by an applicable income tax treaty, are attributable to a United States permanent establishment) are not subject to the withholding tax, provided certain certification and disclosure
requirements (generally on an IRS Form W-8ECI) are satisfied. Instead, such dividends are subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. Holder were a United States person as defined under the
Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
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A non-U.S. Holder who wishes to claim the benefits of an applicable income tax treaty or
avoid backup withholding (as discussed below) for dividends will be required (a) to complete IRS Form W-8BEN (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the
Code and, if applicable, is eligible for treaty benefits or (b) if common shares of a Fund are held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain non-U.S. Holders that are pass-through entities rather than corporations or individuals.
A non-U.S. Holder eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for
refund with the IRS.
If the amount of a distribution to a non-U.S. Holder exceeds a Funds current and accumulated
earnings and profits, such excess will be treated first as a tax-free return of capital to the extent of the non-U.S. Holders basis in the common shares of a Fund, and then as capital gain. As discussed above under the caption U.S.
HoldersTaxation of Dividends, each Fund expects that only a portion of its distributions to its common shareholders with respect to its common shares will be treated as dividends for United States federal income tax purposes, although no
assurance can be given in this regard. Capital gain recognized by a non-U.S. Holder as a consequence of a distribution by a Fund in excess of its current and accumulated earnings and profits will generally not be subject to United States federal
income tax, except as described below under the caption Taxation of Capital Gains.
Taxation of Capital
Gains
. A non-U.S. Holder generally will not be subject to United States federal income tax on any gain realized on the disposition of common shares of a Fund unless:
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the gain is effectively connected with a trade or business of the non-U.S. Holder in the United States (and, if required by an applicable income tax
treaty, is attributable to a United States permanent establishment of the non-U.S. Holder);
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the non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain
other conditions are met; or
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the Fund is or has been a United States real property holding corporation for United States federal income tax purposes.
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An individual non-U.S. Holder described in the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated United States federal income tax rates. An individual non-U.S. Holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. Holder that is a foreign corporation falls under the first bullet point immediately above,
the holder will be subject to tax on its net gain in the same manner as if the holder were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings
and profits or at such lower rate as may be specified by an applicable income tax treaty.
A Fund may be a United States
real property holding corporation for United States federal income tax purposes. With respect to the third bullet point above, if a Fund is or becomes a United
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States real property holding corporation, so long as the Funds common shares are regularly traded on an established securities market (such as the NYSE), only a non-U.S. Holder who
holds or held (at any time during the shorter of the five-year period preceding the date of disposition or the holders holding period) more than 5% (directly or indirectly as determined under applicable attribution rules of the Code) of the
Funds common shares will be subject to United States federal income tax as described in the third bullet point above on the disposition of the Funds common shares.
Information Reporting and Backup Withholding
. Each Fund must report annually to the IRS and to each non-U.S. Holder the amount of distributions paid to such holder (whether
treated as dividends or a return of capital) and the tax withheld with respect to such distributions. Copies of the information returns reporting such distributions and withholding may also be made available to the tax authorities in the country in
which the non-U.S. Holder resides under the provisions of an applicable income tax treaty.
A non-U.S. Holder will be subject
to backup withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is a non-U.S. Holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as
defined under the Code), or such holder otherwise establishes an exemption. Dividends subject to withholding of United States federal income tax as described under the caption Non-U.S. HoldersTaxation of Dividends above will
not be subject to backup withholding.
Information reporting and, depending on the circumstances, backup withholding will
apply to the proceeds of a sale of common shares of a Fund within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S.
Holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a refund or as a credit against a non-U.S. Holders
United States federal income tax liability provided the required information is timely furnished to the IRS.
Non-U.S. Holders
should consult their tax advisor regarding the application of the information reporting and backup withholding rules to them.
Additional Withholding Requirements
. Under recently enacted legislation, the relevant withholding agent may
be required to withhold 30% of any dividends and the proceeds of a sale of common shares of a Fund paid after December 31, 2012 to (i) a foreign financial institution unless such foreign financial institution agrees to verify, report and
disclose its United States accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial
United States owners or provides the name, address and taxpayer identification number of each substantial United States owner and such entity meets certain other specified requirements.
Investment by Tax-Exempt Investors
Employee benefit plans and most other organizations exempt from United States federal income tax, including individual retirement accounts and other retirement plans, are subject to United States federal
income tax on unrelated business taxable income (UBTI). Because each Fund is a
85
corporation for United States federal income tax purposes, an owner of shares of a Fund will not report on its federal income tax return any of the Funds items of income, gain, loss and
deduction. Therefore, a tax-exempt investor generally will not have UBTI attributable to its ownership or sale of shares of a Fund unless its ownership of shares is debt-financed. In general, shares of a Fund would be debt-financed if a tax-exempt
owner of the shares incurs debt to acquire the shares or otherwise incurs or maintains a debt that would not have been incurred or maintained if the shares had not been acquired.
Other Taxation
Each Funds shareholders may be subject to state, local and foreign taxes on distributions received from the Fund. Shareholders are advised to consult their own tax advisors with respect to the
particular tax consequences to them of an investment in the Funds.
Net Asset Value
Each Funds net asset value per share is determined as of the close of the regular session trading (normally 4:00 p.m. Eastern
time) on each day the NYSE is open for business. Net asset value is calculated by taking the market value of a Funds total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total
number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share. All valuations are subject to review by such Funds Board or its delegate.
In determining net asset value, expenses are accrued and applied daily and securities and other assets for which market quotations are
available are valued at market value. The prices of municipal bonds are provided by a pricing service approved by such Funds Board. When market price quotes are not readily available (which is usually the case for municipal securities), the
pricing service, or, in the absence of a pricing service for a particular security, the Board of such Fund, or its designee, may establish fair market value using a wide variety of market data including yields or prices of municipal bonds of
comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from securities dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis,
including the obligors credit characteristics considered relevant by the pricing service or the Boards designee.
In computing net asset value, Acquiring Fund and Acquired Fund will review the valuation of the obligation for income taxes separately
for current taxes and deferred taxes due to the differing impact of each on (i) the anticipated timing of required tax payments and (ii) the impact of each on the treatment of distributions by Acquiring Fund and Acquired Fund to their
stockholders.
The allocation between current and deferred income taxes is determined based upon the value of assets reported
for book purposes compared to the respective net tax bases of assets for federal income tax purposes. It is anticipated that cash distributions from MLPs in which Acquiring Fund and Acquired Fund invest will not equal the amount of taxable income
allocable to Acquiring Fund or Acquired Fund primarily as a result of depreciation and amortization deductions recorded by MLPs. This may result, in effect, in a portion of the cash distribution received by Acquiring Fund or Acquired Fund not being
treated as income for federal income tax purposes. The relative portion of such distributions not treated as income for tax purposes will vary among MLPs, and also will vary year by year for each MLP, but in each case will reduce Acquiring
Funds and Acquired Funds remaining tax basis, if any, in the particular MLP. The Adviser will be able to directly confirm the portion of each distribution recognized as taxable income when it receives annual tax reporting information
from each MLP.
86
Legal Opinions
Certain legal matters in connection with the issuance of common shares pursuant to the Agreement and Plan of Reorganization will be
passed upon by Bingham McCutchen, LLP, Boston, Massachusetts.
Experts
The financial statements of the Acquiring Fund and the Acquired Fund appearing in each Funds Annual Report for the period ended
November 30, 2011 are incorporated by reference herein. In addition, the Acquired Funds financial statements appearing in its Annual Report for the year ended October 31, 2011 are incorporated by reference herein. (Effective
November 1, 2011, the Acquired Fund changed its fiscal and tax year ends from October 31 to November 30.) The financial statements have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
set forth in such reports thereon and incorporated herein by reference. Such financial statements are incorporated by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
PricewaterhouseCoopers LLP provides auditing services to the Acquiring Fund and the Acquired Fund. The principal business address of PricewaterhouseCoopers LLP is 1 North Wacker Drive, Chicago, Illinois 60606.
GENERA
L INFORMATION
Outstanding Shares of the Ac
quiring Fund and the Acquired Fund
The following table sets forth the number of outstanding common shares and certain other share information, of each Fund as of May 15, 2012.
|
|
|
|
|
|
|
(1)
Title of Class
|
|
(2)
Shares Authorized
|
|
(3)
Shares Held by Fund
for its Own Account
|
|
(4)
Shares Outstanding
Exclusive of Shares
Shown under (3)
|
Acquiring Fund:
|
|
|
|
|
|
|
Common shares
|
|
Unlimited
|
|
|
|
23,800,246
|
Acquired Fund:
|
|
|
|
|
|
|
Common shares
|
|
100,000,000
|
|
|
|
14,810,750
|
The Acquiring Funds common shares are listed and trade on the NYSE under the symbol JMF, and
the Acquired Funds common shares are listed and trade on the NYSE under the symbol MTP.
87
Shareholders of the Acquiring Fund and the Acquired Fund
As of May 15, 2012, the trustees and officers of each Fund as a group owned less than 1% of the total outstanding common shares.
The following chart lists each shareholder or group of shareholders who beneficially owned more than 5% of any class of
shares for each Fund as of May 15, 2012:*
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Pro Forma
|
Fund and Class
|
|
Shareholder Name and Address
|
|
Number of
Shares
Owned*
|
|
Percentage
Owned*
|
|
Corresponding
Class of
Combined
Fund
|
|
All
Shares of
Combined
Fund
|
|
|
|
|
|
|
Acquiring Fund
Common Shares
|
|
First Trust Portfolios L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
First
Trust Advisors L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton,
Illinois 60187
The Charger Corporation
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
1,395,693
|
|
5.90%
|
|
Common
Shares
|
|
10.57%
|
|
|
|
|
|
|
Acquired Fund
Common Shares
|
|
First Trust Portfolios L.P.
(a)
120 East
Liberty Drive, Suite 400
Wheaton, Illinois 60187
First Trust Advisors
L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton,
Illinois 60187
The Charger Corporation
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
2,640,612
|
|
17.90%
|
|
Common
Shares
|
|
10.57%
|
*
|
The information presented is based on Schedule 13G filings made on or before May 15, 2012.
|
(a)
|
First Trust Portfolios L.P., First Trust Advisors L.P. and The Charger Corporation filed their schedule 13G jointly and did not differentiate holdings as to each
entity.
|
Audit Committee
Report
The Audit Committee of each Funds Board is responsible for the oversight and monitoring of (1) the accounting and reporting
policies, processes and practices, and the audit of the financial statements, of each Fund, (2) the quality and integrity of the Funds financial statements and (3) the independent registered public accounting firms
qualifications, performance and independence. In its oversight capacity, the committee reviews each Funds annual financial statements with both management and the independent registered public accounting firm and the committee meets
periodically with the independent registered public accounting firm and internal auditors to consider their evaluation of each Funds financial and internal controls. The committee also selects, retains, evaluates and may replace each
Funds independent registered public accounting firm. The committee is currently composed of five Independent Board Members and operates under a written charter adopted and approved by each Board. Each committee member meets the independence
and
88
experience requirements, as applicable, of the NYSE, NYSE Amex, NASDAQ, Section 10A of the 1934 Act and the rules and regulations of the SEC.
The committee, in discharging its duties, has met with and held discussions with management and each Funds independent registered
public accounting firm. The committee has also reviewed and discussed the audited financial statements with management. Management has represented to the independent registered public accounting firm that each Funds financial statements were
prepared in accordance with generally accepted accounting principles. The committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards (SAS)
No. 114 (The Auditors Communication With Those Charged With Governance), which supersedes SAS No. 61 (Communication with Audit Committees). Each Funds independent registered public accounting firm provided to the committee the
written disclosure required by Public Company Accounting Oversight Board Rule 3526 (Communications with Audit Committees Concerning Independence), and the committee discussed with representatives of the independent registered public accounting firm
their firms independence. As provided in the Audit Committee Charter, it is not the committees responsibility to determine, and the considerations and discussions referenced above do not ensure, that each Funds financial statements
are complete and accurate and presented in accordance with generally accepted accounting principles.
Based on the
committees review and discussions with management and the independent registered public accounting firm, the representations of management and the report of the independent registered public accounting firm to the committee, the committee has
recommended that the audited financial statements be included in each Funds Annual Report.
The current members of the
committee are:
Robert P. Bremner
David J. Kundert
William J. Schneider
Carole E. Stone
Terence J. Toth
Each Funds Board has appointed PricewaterhouseCoopers LLP as independent registered public accounting firm of each Fund for its current fiscal year.
89
Audit and Related Fees.
The following tables provide the
aggregate fees billed during the Acquired Funds last three fiscal years and, with respect to the Acquiring Fund, its last fiscal year, by each Funds independent registered public accounting firm for engagements directly related to the
operations and financial reporting of each Fund, including those relating (i) to each Fund for services provided to the Fund and (ii) to the Adviser and certain entities controlling, controlled by, or under common control with the Adviser
that provide ongoing services to each Fund (Adviser Entities).
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
(1)
|
|
|
Audit Related
Fees
(2)
|
|
|
|
Fund
|
|
|
Fund
|
|
|
Adviser and
Adviser Entities
|
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
Acquiring Fund
(6)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
48,718
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
Acquired Fund
(7)
|
|
|
50,500
|
|
|
|
47,653
|
|
|
|
32,200
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
(3)
|
|
|
All Other
Fees
(4)
|
|
|
|
Fund
|
|
|
Adviser and
Adviser Entities
|
|
|
Fund
|
|
|
Adviser and
Adviser Entities
|
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(5)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(5)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
Acquiring Fund
(6)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
17,500
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
Acquired Fund
(7)
|
|
|
35,000
|
|
|
|
17,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
Audit Fees are the aggregate fees billed for professional services for the audit of the Funds annual financial statements and services provided in
connection with statutory and regulatory filings or engagements.
|
(2)
|
Audit Related Fees are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or review of
financial statements and are not reported under Audit Fees.
|
(3)
|
Tax Fees are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning.
|
(4)
|
All Other Fees are the aggregate fees billed for products and services for agreed upon procedures, engagements performed for leveraged funds.
|
(5)
|
The Acquired Fund changed its fiscal year end from October to November in November 2011.
|
(6)
|
The Fund commenced operations on February 24, 2011.
|
(7)
|
Nuveen became the investment adviser to the Fund, and the Fund became part of the Nuveen complex, effective October 6, 2010.
|
90
Non-Audit Fees.
The following tables provide the aggregate
non-audit fees billed by each Funds independent registered accounting firm for services rendered to each Fund, the Adviser and the Adviser Entities during the Acquired Funds last three fiscal years and, with respect to the Acquiring
Fund, its last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Audit
Fees Billed to Fund
|
|
|
Total Non-Audit Fees Billed to Adviser
and Adviser Entities
(Engagements
Related Directly to the Operations and
Financial Reporting of Fund)
|
|
|
|
Fiscal
Year
Ended
2010
(1)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(1)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(1)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(1)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
Acquiring Fund
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
17,500
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
Acquired Fund
(3)
|
|
|
35,000
|
|
|
|
17,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Audit Fees Billed
to Adviser and Adviser
Entities
(All Other Engagements)
|
|
|
Total
|
|
|
|
Fiscal
Year
Ended
2010
(1)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(1)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
|
Fiscal
Year
Ended
2010
(1)
|
|
|
Fiscal
Year
Ended
Oct. 31,
2011
(1)
|
|
|
Fiscal
Year/
Period
Ended
Nov. 30,
2011
|
|
Acquiring Fund
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
17,500
|
|
Acquired Fund
(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
35,000
|
|
|
|
17,500
|
|
|
|
0
|
|
(1)
|
The Acquired Fund changed its fiscal year end from October 31 to November 30 in November 2011.
|
(2)
|
The Fund commenced operations on February 24, 2011.
|
(3)
|
Nuveen became the investment adviser to the Fund, and the Fund became part of the Nuveen complex, effective October 6, 2010.
|
Audit Committee Pre-Approval Policies and Procedures.
Generally, the Audit Committee must approve each
Funds independent registered public accounting firms engagements (i) with the Fund for audit or non-audit services and (ii) with the Adviser and Adviser Entities for non-audit services if the engagement relates directly to the
operations and financial reporting of the Fund. Regarding tax and research projects conducted by the independent registered public accounting firm for each Fund and the Adviser and Adviser Entities (with respect to the operations and financial
reporting of each Fund), such engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee Chairman for his/her verbal approval prior to
engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000.
The Audit Committee has approved in advance all audit services and non-audit services that the independent registered public accounting
firm provided to each Fund and to the Adviser and Adviser Entities (with respect to the operations and financial reporting of each Fund). None of the services rendered by the independent registered public accounting firm to each Fund or the Adviser
or Adviser Entities were pre-approved by the Audit Committee pursuant to the pre-approval exception under Rule 2-01(c)(7)(i)(C) or Rule 2-01(c)(7)(ii) of Regulation S-X.
91
Section 16(a) Beneficial Interest Reporting Compliance
Section 30(h) of the 1940 Act and Section 16(a) of the 1934 Act require Board Members and officers, the Adviser, affiliated
persons of the Adviser and persons who own more than 10% of a registered class of a Funds equity securities to file forms reporting their affiliation with that Fund and reports of ownership and changes in ownership of that Funds shares
with the SEC and the NYSE or NYSE Amex, as applicable. These persons and entities are required by SEC regulation to furnish the Funds with copies of all Section 16(a) forms they file. Based on a review of these forms furnished to each Fund,
each Fund believes that its Board Members and officers, the Adviser and affiliated persons of the Adviser have complied with all applicable Section 16(a) filing requirements during its last fiscal year. To the knowledge of management of the
Funds, no shareholder of a Fund owns more than 10% of a registered class of a Funds equity securities, except as provided above in the section entitled Shareholders of the Acquiring Fund and the Acquired Fund.
Expenses of Proxy Solicitation
The cost of preparing, printing and mailing the enclosed proxy, accompanying notice and proxy statement and all other costs in connection with the solicitation of proxies will be paid by the Funds pro
rata based on the projected net benefit and cost savings to each Fund. Additional solicitation may be made by letter or telephone by officers or employees of Nuveen or the Adviser, or by dealers and their representatives. Any additional costs of
solicitation will be paid by the Fund that requires additional solicitation.
Shareholder Proposals
To be considered for presentation at the annual meeting of shareholders of the Funds to be held
in 2013, shareholder proposals submitted pursuant to Rule 14a-8 under the 1934 Act must be received at the offices of the Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later than February 28, 2013, which each Fund believes to be a
reasonable time before each Fund expects to send its proxy statement for the 2013 annual meeting. A shareholder wishing to provide notice in the manner prescribed by Rule 14a-4(c)(1) of a proposal submitted outside of the process of Rule 14a-8 for
the annual meeting must, pursuant to each Funds By-Laws, submit such written notice to the Fund with respect to the Acquiring Fund by the later of 45 days prior to the 2013 annual meeting date or the tenth business day following the date the
2013 annual meeting date is first publicly disclosed, and with respect to the Acquired Fund, not earlier than the
150
th
day prior to the date of 2013 annual meeting and not
later than the 120
th
day prior to the date of such annual
meeting or the 10
th
day following the day on which public
announcement of the date of such meeting is first made. Timely submission of a proposal does not mean that such proposal will be included in a proxy statement.
If all proposals are approved and the Reorganization is consummated, the Acquired Fund will cease to exist and will not hold its 2013 annual meeting. If the Reorganization is not approved or is not
consummated, the Acquired Fund will hold its 2013 annual meeting of shareholders, expected to be held in July 2013.
Shareholder Communications
Fund shareholders who want to communicate with the Board or any individual Board Member
should write to the attention of Lorna Ferguson, Manager of Fund Board Relations, Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. The letter should indicate that you are a Fund shareholder and
92
note the Fund or Funds that you own. If the communication is intended for a specific Board Member and so indicates, it will be sent only to that Board Member. If a communication does not indicate
a specific Board Member it will be sent to the Independent Chairman and the outside counsel to the Independent Board Members for further distribution as deemed appropriate by such persons.
Fiscal Year
The fiscal year end for each
Fund is November 30. Effective November 1, 2011, the Acquired Fund changed its fiscal and tax year from October 31 to November 30.
Annual Report Delivery
Annual reports will
be sent to shareholders of record of each Fund following each Funds fiscal year end. Each Fund will furnish, without charge, a copy of its annual report and/or semi-annual report as available upon request. Such written or oral requests should
be directed to such Fund at 333 West Wacker Drive, Chicago, Illinois 60606 or by calling 1-800-257-8787.
Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting to Be Held on July 12, 2012
Each Funds Proxy
Statement is available at
http://www.nuveenproxy.com/ProxyInfo/CEF/Default.aspx
. For more information, shareholders may also contact the applicable Fund at the address and phone number set forth above.
Please note that only one annual report or proxy statement may be delivered to two or more shareholders of a Fund who share an address,
unless the Fund has received instructions to the contrary. To request a separate copy of an annual report or proxy statement, or for instructions as to how to request a separate copy of such documents or as to how to request a single copy if
multiple copies of such documents are received, shareholders should contact the applicable Fund at the address and phone number set forth above.
Other Information
Management of the Funds
does not intend to present and does not have reason to believe that others will present any items of business at the Annual Meetings, except as described in this Joint Proxy Statement/Prospectus. However, if other matters are properly presented at
the meetings for a vote, the proxies will be voted upon such matters in accordance with the judgment of the persons acting under the proxies.
A list of shareholders of each Fund entitled to be present and to vote at the Annual Meetings will be available at the offices of the Funds, 333 West Wacker Drive, Chicago, Illinois, for inspection by any
shareholder of the Funds during regular business hours for ten days prior to the date of the Annual Meetings.
For the
Acquiring Fund, a majority of the shares entitled to vote at the Annual Meeting, represented in person or by proxy, shall constitute a quorum for the transaction of business. With respect to the Acquired Fund, a majority of the shares entitled to
vote on a matter at the Annual Meeting, represented in person or by proxy, shall constitute a quorum for the transaction of business with respect to such matter. In the absence of a quorum for a particular matter, business may proceed
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on any other matter or matters which may properly come before the Meeting if there shall be present, in person or by proxy, a quorum of shareholders in respect of such other matters. The chairman
of the meeting may, whether or not a quorum is present, propose one or more adjournments of the Annual Meeting on behalf of a Fund without further notice to permit further solicitation of proxies. With respect to the Acquiring Fund, any such
adjournment will require the affirmative vote of the holders of a majority of the shares of the Fund present in person or by proxy and entitled to vote at the session of the Annual Meeting to be adjourned. With respect to the Acquired Fund, the
chairman of the meeting may adjourn the meeting to a date not more than 120 days after the original record date without notice other than announcement at the meeting. Abstentions and broker non-votes will be treated as shares that are present for
purposes of determining the presence of a quorum for transacting business at the Annual Meeting.
Broker-dealer firms
holding shares in street name for the benefit of their customers and clients will request the instruction of such customers and clients on how to vote their shares on the proposals. The NYSE has taken the position that broker-dealers
that are members of the NYSE and that have not received instructions from a customer prior to the date specified in the broker-dealers request for voting instructions may not vote such customers shares on the proposals other than the
election of directors. A signed proxy card or other authorization by a beneficial owner of shares of a Fund that does not specify how the beneficial owners shares are to be voted on a proposal may be deemed to be an instruction to vote such
shares in favor of the proposal.
IF YOU CANNOT BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND RETURN THE
ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Kevin J. McCarthy
Vice President and Secretary
The Nuveen Funds
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APPENDIX A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF
REORGANIZATION (the Agreement) is made as of this [ ] day of [ ], 2012 by and between Nuveen
Energy MLP Total Return Fund, a Massachusetts business trust (the Acquiring Fund) and MLP & Strategic Equity Fund Inc., a Maryland corporation (the Acquired Fund). The Acquiring Fund and the Acquired Fund may be
referred to together herein as the Funds.
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code), and the Treasury Regulations promulgated thereunder. The reorganization of the Acquired Fund into the Acquiring Fund
will consist of: (i) the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for newly issued voting common shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund (Acquiring
Fund Common Shares) and the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund; and (ii) the distribution of all the Acquiring Fund Common Shares to the holders of common shares of the Acquired Fund as part of
the complete liquidation, dissolution, and termination of the Acquired Fund as provided herein, all upon the terms and conditions set forth in this Agreement (the Reorganization).
WHEREAS
, each Fund is a closed-end, management investment company registered under the Investment Company Act of 1940, as amended
(the 1940 Act), and the Acquired Fund owns securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS
, the Acquiring Fund is authorized to issue the Acquiring Fund Common Shares; and
WHEREAS
, the Board of Trustees of the Acquiring Fund (the Acquiring Fund Board) has determined that the Reorganization is in the best interests of the Acquiring Fund and that the
interests of the existing shareholders of the Acquiring Fund will not be diluted as a result of the Reorganization, and the Board of Directors of the Acquired Fund (the Acquired Fund Board) has determined that the Reorganization is in
the best interests of the Acquired Fund and that the interests of the existing shareholders of the Acquired Fund will not be diluted as a result of the Reorganization.
NOW, THEREFORE
, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR
ACQUIRING FUND
COMMON SHARES AND THE ASSUMPTION OF THE LIABILITIES OF
THE ACQUIRED FUND AND TERMINATION AND LIQUIDATION OF
THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein and on the basis of the representations and warranties
contained herein, the Acquired Fund agrees to transfer all of
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its assets, as set forth in Section 1.2, to the Acquiring Fund. In consideration therefor, the Acquiring Fund agrees: (i) to issue and deliver to the Acquired Fund the number of
Acquiring Fund Common Shares computed in the manner set forth in Section 2.3, and (ii) to assume all of the liabilities of the Acquired Fund, if any, as set forth in Section 1.3. Such transactions shall take place at the closing
provided for in Section 3.1 (the Closing).
1.2 ASSETS TO BE
TRANSFERRED. The Acquired Fund shall transfer all of its assets to the Acquiring Fund, including, without limitation, cash, securities, commodities, interests in futures, dividends or interest receivables owned by the Acquired
Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund as of the Valuation Time.
The
Acquired Fund will, within a reasonable period of time before the Closing Date, furnish the Acquiring Fund with a list of the Acquired Funds portfolio securities and other investments. The Acquiring Fund will, within a reasonable period of
time before the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Funds list referred to above that do not conform to the Acquiring Funds investment objective, policies, and restrictions. The
Acquired Fund, if requested by the Acquiring Fund, will dispose of securities on the Acquiring Funds list before the Closing Date. In addition, if it is determined that the portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Acquired Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such
investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of
the Acquired Fund Board or Nuveen Fund Advisors, Inc., the investment adviser to the Acquired Fund (the Advisor), such disposition would adversely affect the status of the Reorganization as a reorganization as such term is
used in the Code or would otherwise not be in the best interests of the Acquired Fund.
1.3 LIABILITIES TO BE ASSUMED. The Acquired Fund will endeavor to
discharge all of its known liabilities and obligations to the extent possible before the Closing Date. Notwithstanding the foregoing, the liabilities not so discharged shall be assumed by the Acquiring Fund, which assumed liabilities shall include
all of the Acquired Funds liabilities, debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not arising in the ordinary course of business, whether or not determinable at
the Closing Date, and whether or not specifically referred to in this Agreement.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing
Date as is practicable but in no event later than 12 months after the Closing Date (the Liquidation Date): (a) the Acquired Fund will distribute in complete liquidation of the Acquired Fund, pro rata to its common shareholders of
record, determined as of the Valuation Time, as such term is defined in Section 2.1 (the Acquired Fund Shareholders), all of the Acquiring Fund Common Shares received by the Acquired Fund pursuant to Section 1.1 (together with
any dividends declared with respect thereto to holders of record as of a time after the Valuation Time and payable prior to the Liquidation Date (Interim Dividends)); and (b) the Acquired Fund will thereupon proceed to dissolve and
terminate as set forth in Section 1.7 below. Such distribution will be accomplished by the transfer of the Acquiring Fund Common Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the
share records of the Acquiring Fund in the names of Acquired Fund Shareholders and representing such shareholders pro rata share of the Acquiring Fund Common Shares received by the Acquired Fund, and by paying to the shareholders of the
Acquired Fund any Interim Dividends on
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such transferred shares. All issued and outstanding common shares of the Acquired Fund will simultaneously be canceled on the books of the Acquired Fund. The Acquiring Fund shall not issue
certificates representing Acquiring Fund Common Shares in connection with such transfer.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Common Shares
will be shown on the books of the Acquiring Funds transfer agent. Acquiring Fund Common Shares will be issued simultaneously to the Acquired Fund, in an amount computed in the manner set forth in this Agreement, to be distributed to Acquired
Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer
taxes payable upon the issuance of Acquiring Fund Common Shares in a name other than the registered holder of the Acquired Funds common shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Common Shares are to be issued and transferred.
1.7 TERMINATION. The Acquired Fund shall completely liquidate and
be dissolved, terminated and have its affairs wound up in accordance with Maryland state law, promptly following the Closing Date and the making of all distributions pursuant to Section 1.4.
1.8 REPORTING. Any reporting responsibility of the Acquired Fund
including, without limitation, the responsibility for filing of regulatory reports, tax returns or other documents with the Securities and Exchange Commission (the Commission), the New York Stock Exchange (NYSE) or any state
securities commission and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund, including all books and records required to be maintained under the
1940 Act, and the rules and regulations thereunder, shall be available to the Acquiring Fund from and after the Closing Date and shall be turned over to the Acquiring Fund as soon as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF
ASSETS. The value of the net assets of the Acquired Fund shall be the value of its assets, less its liabilities, computed as of the close of regular trading on the NYSE on the business day immediately prior to the Closing Date
(such time and date being hereinafter called the Valuation Time), using the valuation procedures adopted by the Acquired Funds Board of Directors or such other valuation procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per
Acquiring Fund Common Share shall be computed as of the Valuation Time, using the valuation procedures adopted by the Acquiring Funds Board of Directors or such other valuation procedures as shall be mutually agreed upon by the parties.
2.3 COMMON SHARES TO BE ISSUED. The number of
Acquiring Fund Common Shares to be issued in exchange for the Acquired Funds assets transferred to the Acquiring Fund shall be determined by dividing the value of such assets transferred to the Acquiring Fund (net of the liabilities of the
Acquired Fund that are assumed by the Acquiring Fund) determined in accordance
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with Section 2.1, by the net asset value of an Acquiring Fund Common Share determined in accordance with Section 2.2. No fractional Acquiring Fund Common Shares will be issued to the
Acquired Funds shareholders and, in lieu of such fractional shares, the Acquired Funds shareholders will receive cash. The aggregate net asset value of Acquiring Fund Common Shares received by the Acquired Fund in the Reorganization will
equal the aggregate net asset value of Acquired Fund common shares held by shareholders of the Acquired Fund immediately prior to the Reorganization. In the event there are fractional Acquiring Fund Common Shares due an Acquired Fund shareholder on
the Closing Date after the Acquired Funds assets have been exchanged for Acquiring Fund Common Shares, the Acquiring Funds transfer agent will aggregate such fractional common shares and sell the resulting whole on the NYSE for the
account holders of all such fractional interests, and each such holder will be entitled to a pro rata share of the proceeds from such sale. With respect to the aggregation and sale of fractional common shares, the Acquiring Funds transfer
agent will act directly on behalf of the shareholders entitled to receive fractional shares and will accumulate such fractional shares, sell the shares and distribute the cash proceeds net of brokerage commissions, if any, directly to shareholders
entitled to receive the fractional shares (without interest and subject to withholding taxes).
2.4 EFFECT OF SUSPENSION IN TRADING. In the event that at the
Valuation Time, either: (a) the NYSE or another primary exchange on which the portfolio securities of the Acquiring Fund or the Acquired Fund are purchased or sold shall be closed to trading or trading on such exchange shall be restricted; or
(b) trading or the reporting of trading on the NYSE or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Acquired Fund is impracticable, the Valuation Time shall be postponed
until the first business day after the day when trading is fully resumed and reporting is restored.
2.5 COMPUTATIONS OF NET ASSETS. All computations of net asset value
in this Article II shall be made by or under the direction of State Street Bank and Trust Company (State Street) in accordance with its regular practice as custodian of the Funds.
ARTICLE III
CLOSINGS AND CLOSING DATE
3.1 CLOSING DATE. The Closing shall occur on
August 20, 2012
or such other date as the parties may agree (the Closing Date). Unless otherwise provided, all acts taking place at the Closing shall be deemed to take place as of 8:00 a.m. The Closing shall be held as of 8:00 a.m. Central
time at the offices of Vedder Price P.C. in Chicago, Illinois or at such other time and/or place as the parties may agree.
3.2 CUSTODIANS CERTIFICATE. The Acquired Fund shall cause
State Street, as custodian for the Acquired Fund (the Custodian), to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that: (a) the Acquired Funds portfolio securities, cash, and any
other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes, including all applicable federal and state stock transfer stamps, if any, shall have been paid, or provision for
payment shall have been made, in conjunction with the delivery of portfolio securities by the Acquired Fund.
3.3 TRANSFER AGENTS CERTIFICATE. The Acquired Fund shall
cause State Street, as transfer agent for the Acquired Fund, to deliver to the Acquiring Fund at the Closing a certificate of
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an authorized officer stating that its records contain the names and addresses of all of the Acquired Fund Shareholders, and the number and percentage ownership of outstanding common shares owned
by each Acquired Fund Shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver or cause State Street, its transfer agent, to issue and deliver to the Acquired Fund a confirmation evidencing the Acquiring Fund Common
Shares to be credited on the Closing Date to the Secretary of the Acquired Fund or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Common Shares have been credited to the Acquired Funds account on the books of the
Acquiring Fund.
3.4 DELIVERY OF ADDITIONAL ITEMS. At
the Closing, each party shall deliver to the other parties such bills of sale, checks, assignments, share certificates, receipts and other documents, if any, as such other parties or their counsel may reasonably request to effect the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Acquired Fund represents and warrants as follows:
(a) The Acquired Fund is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland.
(b) The Acquired Fund is
registered as a closed-end management investment company under the 1940 Act, and such registration is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery, and performance of this Agreement (subject to shareholder approval) will not result in, the
violation of any provision of the Acquired Funds Articles of Incorporation, as amended or supplemented (the Articles of Incorporation), or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Acquired Fund is a party or by which it is bound.
(d) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, the
Acquired Fund has no material contracts or other commitments that will be terminated with liability to it before the Closing Date.
(e) No litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or to its knowledge
threatened against the Acquired Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its business, or the ability of the Acquired Fund to carry out the
transactions contemplated by this Agreement. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(f) The financial statements of the Acquired Fund as of November 30, 2011, and for the fiscal period then ended have been prepared in accordance with
generally accepted accounting
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principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as of November 30, 2011, and there are
no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(g) The financial statements of the Acquired Fund as of October 31, 2011, and for
the fiscal year then ended have been prepared in accordance with generally accepted accounting principles, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of the Acquired Fund as
of October 31, 2011, and there are no known contingent liabilities of the Acquired Fund as of such date that are not disclosed in such statements.
(h) Since the date of the financial statements referred to in subsection (f) above, there have been no material adverse changes in the Acquired
Funds financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no known contingent liabilities of the Acquired Fund arising after such date. For the purposes of this
subsection (h), a decline in the net asset value of the Acquired Fund shall not constitute a material adverse change.
(i) All federal, state, local and other tax returns and reports of the Acquired Fund required by law to be filed by it (taking into account permitted
extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquired Fund required to be paid (whether or not shown on any such return or report) have been
paid, or provision shall have been made for the payment thereof and any such unpaid taxes, as of the date of the financial statements referred to in subsection (f) above, are properly reflected thereon. To the best of the Acquired Funds
knowledge, no tax authority is currently auditing or preparing to audit the Acquired Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against the Acquired Fund.
(j) The authorized capital of the Acquired Fund consists of 100,000,000 shares of
common stock, par value $0.001 per share. All issued and outstanding shares of the Acquired Fund are duly and validly issued and outstanding, fully paid and non-assessable by the Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing, be held by the persons and in the amounts set forth in the records of the Acquired Funds transfer agent as provided in Section 3.3. The Acquired Fund has no outstanding options, warrants or
other rights to subscribe for or purchase any shares of the Acquired Fund, and has no outstanding securities convertible into shares of the Acquired Fund.
(k) At the Closing, the Acquired Fund will have good and marketable title to the Acquired Funds assets to be transferred to the Acquiring Fund pursuant
to Section 1.2, and full right, power, and authority to sell, assign, transfer, and deliver such assets, and the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933, as amended (the 1933 Act), except those restrictions as to which the Acquiring Fund has received notice and necessary documentation at or prior to the Closing.
(l) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquired Fund, including the determinations of the Acquired Fund Board required by Rule 17a-8(a) of the 1940 Act. Subject to approval by shareholders, this Agreement constitutes a valid and
binding obligation of the Acquired Fund, enforceable in
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accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors rights and to general equity
principles.
(m) The information to be furnished by the Acquired Fund for use
in no-action letters, applications for orders, registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and regulations.
(n) From the effective date of the Registration Statement (as defined in
Section 5.7) through the time of the meeting of shareholders and on the Closing Date, any written information furnished by the Acquired Fund with respect to the Acquired Fund for use in the Proxy Materials (as defined in Section 5.7), or
any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not misleading.
(o) For its taxable year ended October 31, 2007, the Acquired Fund elected to, and did
qualify as, a regulated investment company under the Code. For each subsequent taxable year of its operations (including the taxable year ending on the Closing Date), the Acquired Fund has been, and will be (in the case of the short taxable year
ending with the Closing Date), treated as a corporation for federal income tax purposes. Immediately before the Closing, the Acquired Fund will meet the requirements of Section 368(a)(2)(F)(ii) of the Code.
(p) The Acquired Funds net operating loss carryforward and capital loss
carryforward, if any, will not be subject to limitation and Code Sections 382 or 383 as of the time immediately before the Closing.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents and warrants as follows:
(a) The Acquiring Fund is a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) The
Acquiring Fund is registered as a closed-end management investment company under the 1940 Act, and such registration is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in a violation of the Acquiring Funds
Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquiring Fund is a party or by which it is bound.
(d) No litigation, administrative proceeding or investigation of or before any court or
governmental body is presently pending or to its knowledge threatened against the Acquiring Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of its
business or the ability of the Acquiring Fund to carry out the transactions contemplated by this Agreement. The Acquiring Fund knows of no facts that might form the basis for the institution of such proceedings and it is not a party to or subject to
the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
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(e) The financial statements of the
Acquiring Fund as of November 30, 2011 and for the fiscal year then ended have been prepared in accordance with generally accepted accounting principles and have been audited by independent auditors, and such statements (copies of which have
been furnished to the Acquired Fund) fairly reflect the financial condition of the Acquiring Fund as of November 30, 2011, and there are no known contingent liabilities of the Acquiring Fund as of such date that are not disclosed in such
statements.
(f) Since the date of the financial statements referred to in
subsection (e) above, there have been no material adverse changes in the Acquiring Funds financial condition, assets, liabilities or business (other than changes occurring in the ordinary course of business) and there are no known
contingent liabilities of the Acquiring Fund arising after such date. For the purposes of this subsection (f), a decline in the net asset value of the Acquiring Fund shall not constitute a material adverse change.
(g) All federal, state, local and other tax returns and reports of the Acquiring Fund
required by law to be filed by it (taking into account permitted extensions for filing) have been timely filed and are complete and correct in all material respects. All federal, state, local and other taxes of the Acquiring Fund required to be paid
(whether or not shown on any such return or report) have been paid or provision shall have been made for their payment and any such unpaid taxes, as of the date of the financial statements referred to in subsection (e) above, are properly
reflected thereon. To the best of the Acquiring Funds knowledge, no tax authority is currently auditing or preparing to audit the Acquiring Fund, and no assessment for taxes, interest, additions to tax or penalties has been asserted against
the Acquiring Fund.
(h) The authorized capital of the Acquiring Fund
consists of an unlimited number of common and preferred shares of beneficial interest, par value $0.01 per share. All issued and outstanding shares of beneficial interest of the Acquiring Fund are duly and validly issued and outstanding, fully paid
and non-assessable by the Acquiring Fund (recognizing that under Massachusetts law, Acquiring Fund shareholders, under certain circumstances, could be held personally liable for the obligations of the Acquiring Fund). The Acquiring Fund has no
outstanding options, warrants, or other rights to subscribe for or purchase shares of beneficial interest of the Acquiring Fund, and has no outstanding securities convertible into shares of beneficial interest of the Acquiring Fund.
(i) The execution, delivery and performance of this Agreement have been duly authorized
by all necessary action on the part of the Acquiring Fund, including the determinations of the Acquiring Fund Board required pursuant to Rule 17a-8(a) of the 1940 Act. Subject to approval by shareholders, this Agreement constitutes a valid and
binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors rights and to general
equity principles.
(j) The Acquiring Fund Common Shares to be issued and
delivered to the Acquired Fund for the account of Acquired Fund Shareholders pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized. When so issued and delivered, such shares will be duly and validly issued
shares of beneficial interest of the Acquiring Fund, and will be fully paid and non-assessable by the Acquiring Fund.
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(k) The information to be furnished by the
Acquiring Fund for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with federal securities and other laws and regulations.
(l) From the effective date of the Registration Statement (as defined in
Section 5.7) through the time of the meeting of shareholders and on the Closing Date, any written information furnished by the Acquiring Fund with respect to the Acquiring Fund for use in the Proxy Materials (as defined in Section 5.7), or
any other materials provided in connection with the Reorganization, does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not misleading.
(m) For
each taxable year of its operations (including the taxable year that includes the Closing Date), the Acquiring Fund has been, and will be (in the case of the taxable year that includes the Closing Date), treated as a corporation for federal income
tax purposes. Immediately before the Closing, the Acquiring Fund will meet the requirements of Section 368(a)(2)(F)(ii) of the Code.
(n) The Acquiring Funds net operating loss carryforward and capital loss carryforward, if any, will not be subject to limitation under Code Sections
382 or 383 as of the time immediately before the Closing.
(o) The Acquiring
Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and any state securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE FUNDS
5.1 OPERATION IN ORDINARY COURSE. Subject to Section 1.2, the
Acquiring Fund and the Acquired Fund will operate its respective business in the ordinary course between the date of this Agreement and the Closing Date, it being understood that such ordinary course of business will include customary dividends and
distributions.
5.2 APPROVAL OF SHAREHOLDERS. The
Acquiring Fund and the Acquired Fund will call a meeting of their respective shareholders to consider and act upon this Agreement (or transactions contemplated thereby) and to take all other appropriate action necessary to obtain approval of the
transactions contemplated herein.
5.3 INVESTMENT
REPRESENTATION. The Acquired Fund covenants that the Acquiring Fund Common Shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution, other than in connection with the
Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Funds shares.
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5.5 FURTHER
ACTION. Subject to the provisions of this Agreement, each Fund will take or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable,
but in any case within 60 days after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund and which shall be certified by the Acquired Funds Controller, a
statement of the earnings and profits of the Acquired Fund for federal income tax purposes, as well as any net operating loss carryovers and capital loss carryovers, that will be carried over to the Acquiring Fund pursuant to Section 381 of the
Code.
5.7 PREPARATION OF REGISTRATION STATEMENT AND PROXY
MATERIALS. The Funds will prepare and file with the Commission a registration statement on Form N-14 relating to the Acquiring Fund Common Shares to be issued to Acquired Fund Shareholders (the Registration
Statement). The Registration Statement shall include a proxy statement of the Funds and a prospectus of the Acquiring Fund relating to the transaction contemplated by this Agreement. The Registration Statement shall be in compliance with the
1933 Act, the Securities Exchange Act of 1934, as amended (the 1934 Act), and the 1940 Act, as applicable. Each party will provide the other party with the materials and information necessary to prepare the proxy statement and related
materials (the Proxy Materials), for inclusion therein, in connection with the meetings of the Funds shareholders to consider the approval of this Agreement and the transactions contemplated herein.
5.8 TAX STATUS OF REORGANIZATION. The intention of the parties is
that the Reorganization will qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither the Acquired Fund nor the Acquiring Fund shall take any action, or cause any action to be taken (including, without limitation,
the filing of any tax return), that is inconsistent with such treatment or that results in the failure of the transactions to qualify as a reorganization within the meaning of Section 368(a) of the Code. At or prior to the Closing Date, the
parties to this Agreement will take such action, or cause such action to be taken, as is reasonably necessary to enable counsel to render the tax opinion contemplated in Section 8.6.
ARTICLE VI
CONDITION PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations
of the Acquired Fund to consummate the transactions provided for herein shall be subject to the fulfillment or waiver of the following condition:
6.1 All representations, covenants, and warranties of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquiring Fund shall have delivered to the Acquired Fund a certificate executed in the Acquiring Funds name by the
Acquiring Funds Chief Administrative Officer or Vice President and its Controller, in form and substance satisfactory to the Acquired Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquired Fund shall
reasonably request.
A-10
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided for herein shall be subject to the fulfillment or waiver of the following conditions:
7.1 All representations, covenants, and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in the Acquired Funds name by the Acquired Funds Chief Administrative Officer or Vice President and the Controller, in form and substance satisfactory to the Acquiring Fund and dated as of the
Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement of the
Acquired Funds assets and liabilities, together with a list of the Acquired Funds portfolio securities showing the tax basis of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the
Controller of the Acquired Fund.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT
The obligations of the Acquired Fund and the Acquiring Fund hereunder shall also be subject to the fulfillment or waiver of the following conditions:
8.1 This Agreement and the transactions contemplated herein shall have been approved by
the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with applicable law and the provisions of the Acquired Funds Articles of Incorporation and By-Laws. In addition, this Agreement, the issuance of
Acquiring Fund Common Shares and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of beneficial interest of the Acquiring Fund in accordance with applicable law, the
requirements of the applicable exchanges and the provisions of the Acquiring Funds Declaration of Trust and By-Laws.
8.2 On the Closing Date, the Commission shall not have issued an unfavorable report under
Section 25(b) of the 1940 Act, or instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action, suit or other proceeding shall
be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents, orders, and permits of
federal, state and local regulatory authorities (including those of the Commission and of state securities authorities, including any necessary no-action positions and exemptive orders from such federal and state authorities) to permit
consummation of the transactions contemplated herein shall have been obtained.
A-11
8.4 The Registration Statement shall have
become effective under the 1933 Act, and no stop orders suspending the effectiveness thereof shall have been issued. To the best knowledge of the parties to this Agreement, no investigation or proceeding for that purpose shall have been instituted
or be pending, threatened or contemplated under the 1933 Act.
8.5 The Funds
shall have received on the Closing Date an opinion from Vedder Price P.C. dated as of the Closing Date, substantially to the effect that:
(a) The Acquiring Fund has been formed as a voluntary association with transferable shares of beneficial interest commonly referred to as a
Massachusetts business trust, and is existing under the laws of the Commonwealth of Massachusetts and, as far as such counsel knows, has the power as a business trust to own all of its properties and assets and to carry on its business
as presently conducted, in each case as described in the Joint Proxy Statement/Prospectus included in the Registration Statement.
(b) The Acquired Fund is a corporation validly existing and in good standing under the laws of the State of Maryland.
(c) Each Fund is registered as a closed-end management investment company under the 1940
Act, and, to such counsels knowledge, such registration under the 1940 Act is in full force and effect.
(d) Assuming that the Acquiring Fund Common Shares will be issued in accordance with the
terms of this Agreement, the Acquiring Fund Common Shares to be issued and delivered to the Acquired Fund on behalf of its Acquired Fund Shareholders as provided by this Agreement are duly authorized and upon such delivery will be validly issued and
outstanding and fully paid and non-assessable by the Acquiring Fund, except that, as described in the Registration Statement, shareholders of the Acquiring Fund may, under certain circumstances, be held personally liable for its obligations, and no
shareholder of the Acquiring Fund has, as such holder, any preemptive rights to acquire, purchase or subscribe for any securities of the Acquiring Fund under the Acquiring Funds Declaration of Trust, By-Laws or Massachusetts law.
(e) The Registration Statement is effective and, to such counsels knowledge, no
stop order under the 1933 Act pertaining thereto has been issued.
(f) To the
knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States, the Commonwealth of Massachusetts or the State of Maryland as applicable, is required for consummation by the Funds
of the transactions contemplated herein, except as have been obtained.
(g) With respect to each Fund, the execution and delivery of the Agreement by the Fund,
did not, and the performance of the Funds obligations pursuant to the terms of the Agreement will not, violate the Funds Declaration of Trust or Articles of Incorporation, as applicable, or By-Laws (assuming approval of shareholders of
the Funds has been obtained.
Insofar as the opinions expressed above relate to matters that are governed by the law of the
Commonwealth of Massachusetts, Vedder Price P.C. may rely on the opinion of Bingham McCutchen LLP. Insofar as the opinions expressed above relate to matters that are governed by the law of the State of Maryland, Vedder Price P.C. may rely on the
opinion of K&L Gates LLP.
A-12
8.6 The Funds shall have received on the
Closing Date an opinion of Vedder Price P.C. addressed to the Acquiring Fund and the Acquired Fund substantially to the effect that for federal income tax purposes.
(a) The transfer of all of the Acquired Funds assets to the Acquiring Fund in exchange solely for Acquiring Fund Common Shares and the assumption by
the Acquiring Fund of all the liabilities of the Acquired Fund followed by the pro rata distribution to Acquired Fund Shareholders of all the Acquiring Fund Common Shares received by the Acquired Fund in complete liquidation of the Acquired Fund
will constitute a reorganization within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Acquired Fund will each be a party to a reorganization, within the meaning of Section 368(b) of the
Code, with respect to the Reorganization.
(b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of all of the assets of the Acquired Fund solely in exchange for Acquiring Fund Common Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund.
(c) No gain or loss will be recognized by the Acquired Fund upon the transfer of all of
its assets to the Acquiring Fund solely in exchange for Acquiring Fund Common Shares and the assumption by the Acquiring Fund of all the liabilities of the Acquired Fund or upon the distribution (whether actual or constructive) of such Acquiring
Fund Common Shares to Acquired Fund Shareholders solely in exchange for such shareholders shares of the Acquired Fund in complete liquidation of the Acquired Fund.
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund shares solely for Acquiring Fund Common
Shares in the Reorganization, except with respect to any cash received in lieu of a fractional Acquiring Fund Common Share.
(e) The aggregate basis of the Acquiring Fund Common Shares received by each Acquired
Fund Shareholder pursuant to the Reorganization (including any fractional Acquiring Fund Common Share to which such shareholder would be entitled) will be the same as the aggregate basis of the Acquired Fund shares exchanged therefor by such
shareholder. The holding period of the Acquiring Fund Common Shares received by each Acquired Fund Shareholder (including any fractional Acquiring Fund Common Share to which such shareholder would be entitled) will include the period during which
the Acquired Fund shares exchanged therefor were held by such shareholder, provided such Acquired Fund shares are held as capital assets at the time of the Reorganization.
(f) The basis of the Acquired Funds assets transferred to the Acquiring Fund will be the same as the basis of such assets to the Acquired Fund
immediately before the Reorganization. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund.
No opinion will be expressed as to (1) the effect of the Reorganization on (A) the Acquired Fund or the Acquiring Fund with
respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination thereof) under a mark-to-market system of accounting, (B) any Acquired
Fund Shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting, or (C) the Acquired Fund or the Acquiring Fund with respect to any stock held in a passive
A-13
foreign investment company as defined in Section 1297(a) of the Code or (2) any other federal tax issues (except those set forth above) and all state, local or foreign tax issues of any
kind.
Such opinion shall be based on customary assumptions and such representations as Vedder Price P.C. may reasonably
request of the Funds, and the Acquired Fund and the Acquiring Fund will cooperate to make and certify the accuracy of such representations.
8.7 Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in Section 8.6
or any conditions derived from the requirements of applicable law, exchanges or the governing documents of the Funds.
ARTICLE IX
EXPENSES
9.1 The
expenses incurred in connection with the Reorganization will be allocated between the Funds pro rata based on the projected net benefit to each Fund and each Fund shall have accrued such expenses as liabilities of such Fund on or before the Closing
Date. Reorganization expenses include, without limitation: (a) expenses associated with the preparation and filing of the Registration Statement and other Proxy Materials; (b) postage; (c) printing; (d) accounting fees;
(e) legal fees incurred by each Fund; (f) solicitation costs of the transactions; and (g) other related administrative or operational costs.
9.2 Each party represents and warrants to the other party that there is no person or entity entitled to receive any brokers fees or similar fees or
commission payments in connection with the transactions provided for herein.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that neither party has made to the other party any representation, warranty and/or covenant not set forth herein, and that this
Agreement constitutes the entire agreement between the parties.
10.2 The
representations, warranties, and covenants contained in this Agreement or in any document delivered pursuant to or in connection with this Agreement shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This
Agreement may be terminated by the mutual agreement of the parties and such termination may be effected by each Funds Chief Administrative Officer or any Vice President without further action by the Acquired Fund Board or Acquiring Fund Board.
In addition, this Agreement may be terminated at or before the Closing Date due to:
(a) a breach by the non-terminating party of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not cured within 30 days;
A-14
(b) a condition precedent to the obligations
of the terminating party that has not been met or waived and it reasonably appears that it will not or cannot be met; or
(c) a determination by the Acquired Fund Board or the Acquiring Fund Board that the
consummation of the transactions contemplated herein is not in the best interests of the Acquired Fund or Acquiring Fund, respectively.
11.2 In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Acquiring Fund
Board, the Acquired Fund Board, the Acquired Fund, the Acquiring Fund, or either Funds officers.
ARTICLE XII
AMENDMENTS
12.1 This
Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the officers of each Fund as specifically authorized by each Funds Board of Directors or Trustees, as applicable; provided,
however, that following the meeting of the shareholders of the Funds called by each Fund pursuant to Section 5.2 of this Agreement, no such amendment, modification or supplement may have the effect of changing the provisions for determining the
number of Acquiring Fund Common Shares to be issued to the Acquired Fund Shareholders under this Agreement to the detriment of such shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The article and section headings
contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
13.4 This Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and assigns, but, except as provided in this section, no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either party without the written
consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation, other than the parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
13.5 It is expressly agreed
that the obligations of the Acquiring Fund hereunder shall not be binding upon any members of the Acquiring Fund Board, shareholders, nominees, officers, agents,
A-15
or employees of the Acquiring Fund personally, but shall bind only the property of the Acquiring Fund, as provided in the Funds Declaration of Trust, which is on file with the Secretary of
State of the Commonwealth of Massachusetts. The execution and delivery of this Agreement have been authorized by the Acquiring Fund Board, and this Agreement has been signed by authorized officers of the Acquiring Fund acting as such. Neither the
authorization by such Board members nor the execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of the Acquiring
Fund as provided in the Funds Declaration of Trust.
[
Remainder of Page Intentionally Left Blank
]
A-16
IN WITNESS WHEREOF
, the parties have duly executed this Agreement, all as of the date
first written above.
|
|
|
NUVEEN ENERGY MLP TOTAL RETURN
FUND
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
ACKNOWLEDGED:
|
|
|
MLP & STRATEGIC EQUITY FUND INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
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ACKNOWLEDGED:
A-17
APPENDIX B
FINANCIAL HIGHLIGHTS
Information contained in the tables below under the headings Per Share Operating Performance and Ratios/Supplemental Data shows the operating performance for the life of the Fund.
Acquiring Fund
The following financial highlights table is intended to help you understand the Funds financial performance. Certain information reflects financial results from a single Fund share outstanding
throughout each period. The information in the financial highlights is derived from the Funds financial statements. The Funds annual financial statements as of November 30, 2011, including the financial highlights for the time period
then ended, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm. The Annual Report may be obtained without charge by calling (800) 257-8787.
|
|
|
|
|
|
|
Year Ended November 30,
|
|
Per Share Operating
Performance
|
|
2011(f)
|
|
Beginning Net Asset Value
|
|
$
|
19.10
|
|
Investment Operations:
|
|
|
|
|
Net Investment Income (Loss)(a)
|
|
|
(0.24
|
)
|
Net Realized/ Unrealized Gain (Loss)
|
|
|
(0.65
|
)
|
|
|
|
|
|
Total
|
|
|
(0.89
|
)
|
|
|
|
|
|
Less Distributions:
|
|
|
|
|
Net Investment Income
|
|
|
0.00
|
|
Return of Capital
|
|
|
(0.95
|
)
|
|
|
|
|
|
Total
|
|
|
(0.95
|
)
|
|
|
|
|
|
Offering Costs
|
|
|
(0.04
|
)
|
Ending Net Asset Value
|
|
$
|
17.22
|
|
|
|
|
|
|
Ending Market Value
|
|
$
|
16.66
|
|
Total Returns:
|
|
|
|
|
Based on Market Value(b)
|
|
|
(11.94
|
)%
|
Based on Net Asset Value(b)
|
|
|
(4.76
|
)%
|
Ratios/Supplemental Data
|
|
|
|
|
Ending Net Assets (000)
|
|
$
|
409,905
|
|
Ratios to Average Net Assets
|
|
|
|
|
Before Reimbursement/Income Taxes/Tax Benefit Expense:
|
|
|
|
|
Expenses
|
|
|
(1.78
|
)%*
|
Net Investment Income (Loss)
|
|
|
(1.78
|
)%*
|
Ratios to Average Net Assets
|
|
|
|
|
After Reimbursement(c)(d)(e):
|
|
|
|
|
Expenses
|
|
|
(1.78
|
)%*
|
Net Investment Income (Loss)
|
|
|
(1.78
|
)%*
|
Ratios to Average Net Assets
|
|
|
|
|
Current and Deferred Tax Benefit (Expense)
|
|
|
0.00
|
%*
|
Portfolio Turnover Rate
|
|
|
46
|
%
|
Borrowings at End of Period:
|
|
|
|
|
Aggregate Amount Outstanding (000)
|
|
$
|
125,000
|
|
Asset Coverage Per $1000
|
|
$
|
4,280
|
|
B-1
(a)
|
Per share Net Investment Income (Loss) is calculated using the average daily shares method.
|
(b)
|
Total Return Based on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains
distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending
market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in
the calculation. Total returns are not annualized.
|
|
Total Return Based on Net Asset Value is the combination of changes in net asset value, reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvest price for
the last dividend declared in the period may often be based on the Funds market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
(c)
|
After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Funds net cash on deposit
with the custodian bank, where applicable.
|
(d)
|
Expenses ratios include current and deferred tax benefit (expense) allocated to net investment income (loss) and deferred tax benefit (expense) allocated to realized
and unrealized gain (loss). Net Investment Income (Loss) ratios exclude deferred tax benefit (expense) allocated to realized and unrealized gain (loss).
|
(e)
|
Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings, as described in Footnote 7Borrowing
Arrangements in the most recent shareholder report.
|
|
Each ratio includes the effect of all interest expense, costs and fees paid on borrowings as follows:
|
|
|
|
Ratiosof Borrowings Interest Expense to Average
Net Assets
|
2011(f)
|
|
0.30%*
|
(f)
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
Acquired Fund
The following financial highlights table is intended to help you understand the Acquired Funds financial performance. Certain
information reflects financial results from a single Fund share outstanding throughout each period. The information in the financial highlights is derived from the Funds financial statements. The Funds annual financial statements as of
November 30, 2011, including the financial highlights for each of the five years in the period then ended, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm. The Annual Reports may be obtained without
charge by calling (800) 257-8787.
MLP & Strategic Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
November 30,
|
|
|
Year Ended October 31,
|
|
Per Share Operating
Performance
|
|
2011(e)
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007(f)
|
|
Beginning Net Asset Value
|
|
$
|
17.75
|
|
|
$
|
17.44
|
|
|
$
|
13.47
|
|
|
$
|
11.70
|
|
|
$
|
18.06
|
|
|
$
|
19.10
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income (Loss)(a)
|
|
|
(0.01
|
)
|
|
|
(0.21
|
)
|
|
|
(0.14
|
)
|
|
|
(0.15
|
)
|
|
|
(0.09
|
)
|
|
|
0.04
|
|
Net Realized/ Unrealized Gain (Loss)
|
|
|
0.03
|
|
|
|
1.45
|
|
|
|
4.95
|
|
|
|
2.82
|
|
|
|
(5.07
|
)
|
|
|
(0.74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0.02
|
|
|
|
1.24
|
|
|
|
4.81
|
|
|
|
2.67
|
|
|
|
(5.16
|
)
|
|
|
(0.70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
0.00
|
|
|
|
(0.59
|
)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.03
|
)
|
Return of Capital
|
|
|
0.00
|
|
|
|
(0.34
|
)
|
|
|
(0.84
|
)
|
|
|
(0.90
|
)
|
|
|
(1.20
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0.00
|
|
|
|
(0.93
|
)
|
|
|
(0.84
|
)
|
|
|
(0.90
|
)
|
|
|
(1.20
|
)
|
|
|
(0.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering Costs
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.04
|
)
|
Ending Net Asset Value
|
|
$
|
17.77
|
|
|
$
|
17.75
|
|
|
$
|
17.44
|
|
|
$
|
13.47
|
|
|
$
|
11.70
|
|
|
$
|
18.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Market Value
|
|
$
|
16.15
|
|
|
$
|
16.35
|
|
|
$
|
17.41
|
|
|
$
|
14.42
|
|
|
$
|
13.00
|
|
|
$
|
16.24
|
|
Total Returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Market Value(b)
|
|
|
(1.22
|
)%
|
|
|
(0.82
|
)%
|
|
|
26.91
|
%
|
|
|
20.47
|
%
|
|
|
(12.82
|
)%
|
|
|
(17.37
|
)%
|
Based on Net Asset Value(b)
|
|
|
0.11
|
%
|
|
|
7.25
|
%
|
|
|
36.28
|
%
|
|
|
25.04
|
%
|
|
|
(29.45
|
)%
|
|
|
(3.77
|
)%
|
B-2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
November 30,
|
|
|
Year Ended October 31,
|
|
|
|
2011(e)
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007(f)
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Net Assets (000)
|
|
$
|
263,247
|
|
|
$
|
262,851
|
|
|
$
|
258,158
|
|
|
$
|
198,284
|
|
|
$
|
170,399
|
|
|
$
|
262,603
|
|
Ratios to Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Reimbursement/Income Taxes/Tax Benefit Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
(1.45
|
)%*
|
|
|
(1.20
|
)%
|
|
|
(1.31
|
)%
|
|
|
(1.35
|
)%
|
|
|
(1.33
|
)%
|
|
|
(1.35
|
)%*
|
Net Investment Income (Loss)
|
|
|
(1.45
|
)%*
|
|
|
(1.20
|
)%
|
|
|
(1.31
|
)%
|
|
|
(1.32
|
)%
|
|
|
(0.62
|
)%
|
|
|
0.62
|
%*
|
Ratios to Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After Reimbursement(c)(d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
(2.52
|
)%*
|
|
|
(4.93
|
)%
|
|
|
(8.36
|
)%
|
|
|
(1.35
|
)%
|
|
|
(1.33
|
)%
|
|
|
(1.35
|
)%*
|
Net Investment Income (Loss)
|
|
|
(0.66
|
)%*
|
|
|
(1.17
|
)%
|
|
|
(0.86
|
)%
|
|
|
(1.32
|
)%
|
|
|
(0.62
|
)%
|
|
|
0.62
|
%*
|
Ratios to Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current and Deferred Tax Benefit (Expense)
|
|
|
(1.13
|
)%*
|
|
|
(3.73
|
)%
|
|
|
(7.05
|
)%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Portfolio Turnover Rate
|
|
|
20
|
%
|
|
|
37
|
%
|
|
|
16
|
%
|
|
|
38
|
%
|
|
|
5
|
%
|
|
|
0
|
%
|
(a)
|
Per share Net Investment Income (Loss) is calculated using the average daily shares method.
|
(b)
|
For the fiscal years ended subsequent to October 31, 2009, where applicable, Total Return Based on Market Value is the combination of changes in the market price
per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the
first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the
market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
|
|
For the fiscal years ended subsequent to October 31, 2009, where applicable, Total Return Based on Net Asset Value is the combination of changes in net asset
value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is
assumed to be reinvested at the ending net asset value. The actual reinvest price for the last dividend declared in the period may often be based on the Funds market price (and not its net asset value), and therefore may be different from the
price used in the calculation. Total returns are not annualized.
|
|
For the period June 29, 2007, (commencement of operations) through October 31, 2009, MLP & Strategic Equitys (MTP) Total Returns Based on
Market Value and Net Asset Value reflect the performance of the Fund based on a calculation approved by Fund management of IQ Advisors. Total returns based on the calculations described above may have produced substantially different results. Total
returns are not annualized.
|
(c)
|
After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Funds net cash on deposit
with the custodian bank, where applicable.
|
(d)
|
Expenses ratios include current and deferred tax benefit (expense) allocated to net investment income (loss) and deferred tax benefit (expense) allocated to realized
and unrealized gain (loss). Net Investment Income (Loss) ratios exclude deferred tax benefit (expense) allocated to realized and unrealized gain (loss).
|
(e)
|
For the one month ended November 30, 2011.
|
(f)
|
For the period June 29, 2007 (commencement of operations) through October 31, 2007.
|
B-3
APPENDIX C
BENEFICIAL OWNERSHIP
Beneficial Ownership
The following table lists the dollar range of equity securities beneficially owned by each Board Member and Board Member Nominee and for
the Board Members and Board Member Nominees as a group in each Fund and in all Nuveen funds overseen by the Board Member nominee as of January 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
Board Member Nominees
|
|
Nuveen Energy
MLP Total
Return
|
|
|
MLP & Strategic
Equity
|
|
|
Aggregate Dollar Range of
Securities in All Registered
Investment
Companies
Overseen by Board
Member/Nominees in
Family of Investment
Companies
(1)
|
|
Board Members/Nominees who are not interested persons of the Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert P. Bremner
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Jack B. Evans
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
William C. Hunter
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
David J. Kundert
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
William J. Schneider
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Judith M. Stockdale
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Carole E. Stone
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Virginia L. Stringer
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
Terrence J. Toth
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
|
|
|
|
Board Member/Nominee who is an interested person of the Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. Amboian
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Over $
|
100,000
|
|
(1)
|
The amounts reflect the aggregate dollar range of equity securities and the number of shares beneficially owned by the Board Member/Nominees in the Funds and in all
Nuveen funds overseen by the Board Member/Nominees.
|
C-1
The following table sets forth, for each Board Member and Board Member Nominee and for
the Board Members and Board Member Nominees and officers as a group, the amount of shares beneficially owned in each Fund as of January 31, 2012. The information as to beneficial ownership is based on statements furnished by each Board Member and
officer.
|
|
|
|
|
|
|
|
|
Board Member Nominees
|
|
Nuveen Energy
MLP Total
Return
|
|
|
MLP & Strategic
Equity
|
|
Board Members/Nominees who are not interested persons of the Funds
|
|
|
|
|
|
|
|
|
Robert P. Bremner
|
|
|
None
|
|
|
|
None
|
|
Jack B. Evans
|
|
|
None
|
|
|
|
None
|
|
William C. Hunter
|
|
|
None
|
|
|
|
None
|
|
David J. Kundert
|
|
|
None
|
|
|
|
None
|
|
William J. Schneider
|
|
|
None
|
|
|
|
None
|
|
Judith M. Stockdale
|
|
|
None
|
|
|
|
None
|
|
Carole E. Stone
|
|
|
None
|
|
|
|
None
|
|
Virginia L. Stringer
|
|
|
None
|
|
|
|
None
|
|
Terrence J. Toth
|
|
|
None
|
|
|
|
None
|
|
|
|
|
Board Member/Nominee who is an interested person of the Funds
|
|
|
|
|
|
|
|
|
John P. Amboian
|
|
|
None
|
|
|
|
None
|
|
|
|
|
Board Members and Officers as a Group
|
|
|
None
|
|
|
|
None
|
|
C-2
APPEND
IX D
NUMBER OF BOARD AND COMMITTEE MEETINGS HELD DURING
EACH FUNDS LAST FISCAL YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Regular
Board
Meeting
|
|
|
Special
Board
Meeting
|
|
|
Executive
Committee
Meeting
|
|
|
Dividend
Committee
Meeting
|
|
Energy MLP Total Return
|
|
|
5
|
|
|
|
3
|
|
|
|
1
|
|
|
|
3
|
|
MLP & Strategic Equity
for fiscal year ended October 31, 2011
|
|
|
6
|
|
|
|
3
|
|
|
|
0
|
|
|
|
7
|
|
for fiscal period ended November 30, 2011
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Compliance,
Risk
Management
and
Regulatory
Oversight
Committee
Meeting
|
|
|
Nominating
and
Governance
Committee
Meeting
|
|
|
Audit
Committee
Meeting
|
|
Energy MLP Total Return
|
|
|
3
|
|
|
|
5
|
|
|
|
5
|
|
MLP & Strategic Equity
for fiscal year ended October 31, 2011
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
for fiscal period ended November 30, 2011
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
*
|
Effective November 1, 2011, MLP & Strategic Equity Fund changed its fiscal and tax year ends from October 31 to November 30. Accordingly, information is provided
for MLP & Strategic Equity Fund for both the fiscal year end October 31, 2011 and the fiscal period end November 30, 2011 (covering the period from November 1, 2011 through November 30, 2011).
|
The Closed-End Funds Committee of the Boards of Trustees/Directors of the Funds was established by the Boards effective January 1, 2012,
after the close of each Funds last fiscal period end.
D-1
APPE
NDIX E
NUVEEN FUND BOARD
AUDIT COMMITTEE CHARTER
I. Organization and Membership
There shall be a committee of each Board of Directors/Trustees (the Board) of the Nuveen Management Investment Companies (the
Funds or, individually, a Fund) to be known as the Audit Committee. The Audit Committee shall be comprised of at least three Directors/Trustees. Audit Committee members shall be independent of the Funds and free of any
relationship that, in the opinion of the Directors/Trustees, would interfere with their exercise of independent judgment as an Audit Committee member. In particular, each member must meet the independence and experience requirements applicable to
the Funds of the exchanges on which shares of the Funds are listed, Section 10A of the Securities Exchange Act of 1934 (the Exchange Act), and the rules and regulations of the Securities and Exchange Commission (the
Commission). Each such member of the Audit Committee shall have a basic understanding of finance and accounting, be able to read and understand fundamental financial statements, and be financially literate, and at least one such member
shall have accounting or related financial management expertise, in each case as determined by the Directors/Trustees, exercising their business judgment (this person may also serve as the Audit Committees financial expert as
defined by the Commission). The Board shall appoint the members and the Chairman of the Audit Committee, on the recommendation of the Nominating and Governance Committee. The Audit Committee shall meet periodically but in any event no less
frequently than on a semi-annual basis. Except for the Funds, Audit Committee members shall not serve simultaneously on the audit committees of more than two other public companies.
II. Statement of Policy, Purpose and Processes
The Audit Committee shall
assist the Board in oversight and monitoring of (1) the accounting and reporting policies, processes and practices, and the audits of the financial statements, of the Funds; (2) the quality and integrity of the financial statements of the
Funds; (3) the Funds compliance with legal and regulatory requirements, (4) the independent auditors qualifications, performance and independence; and (5) oversight of the Pricing Procedures of the Funds and the Valuation
Group. In exercising this oversight, the Audit Committee can request other committees of the Board to assume responsibility for some of the monitoring as long as the other committees are composed exclusively of independent directors.
In doing so, the Audit Committee shall seek to maintain free and open means of communication among the Directors/Trustees, the
independent auditors, the internal auditors and the management of the Funds. The Audit Committee shall meet periodically with Fund management, the Funds internal auditor, and the Funds independent auditors, in separate executive
sessions. The Audit Committee shall prepare reports of the Audit Committee as required by the Commission to be included in the Funds annual proxy statements or otherwise.
The Audit Committee shall have the authority and resources in its discretion to retain special legal, accounting or other consultants to
advise the Audit Committee and to otherwise discharge its responsibilities, including appropriate funding as determined by the Audit Committee for compensation to independent auditors engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for a Fund, compensation to advisers employed by
E-1
the Audit Committee, and ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties, as determined in its discretion. The Audit Committee
may request any officer or employee of Nuveen Investments, Inc. (or its affiliates) (collectively, Nuveen) or the Funds independent auditors or outside counsel to attend a meeting of the Audit Committee or to meet with any members
of, or consultants to, the Audit Committee. The Funds independent auditors and internal auditors shall have unrestricted accessibility at any time to Committee members.
Responsibilities
Fund management has the primary responsibility to
establish and maintain systems for accounting, reporting, disclosure and internal control.
The independent auditors have the
primary responsibility to plan and implement an audit, with proper consideration given to the accounting, reporting and internal controls. Each independent auditor engaged for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Funds shall report directly to the Audit Committee. The independent auditors are ultimately accountable to the Board and the Audit Committee. It is the ultimate responsibility of the Audit Committee to
select, appoint, retain, evaluate, oversee and replace any independent auditors and to determine their compensation, subject to ratification of the Board, if required. These Audit Committee responsibilities may not be delegated to any other
Committee or the Board.
The Audit Committee is responsible for the following:
With respect to Fund financial statements:
|
1.
|
Reviewing and discussing the annual audited financial statements and semi-annual financial statements with Fund management and the independent auditors including major
issues regarding accounting and auditing principles and practices, and the Funds disclosures in its periodic reports under Managements Discussion and Analysis.
|
|
2.
|
Requiring the independent auditors to deliver to the Chairman of the Audit Committee a timely report on any issues relating to the significant accounting policies,
management judgments and accounting estimates or other matters that would need to be communicated under Statement on Auditing Standards (SAS) No. 90, Audit Committee Communications (which amended SAS No. 61, Communication with Audit
Committees), that arise during the auditors review of the Funds financial statements, which information the Chairman shall further communicate to the other members of the Audit Committee, as deemed necessary or appropriate in the
Chairmans judgment.
|
|
3.
|
Discussing with management the Funds press releases regarding financial results and dividends, as well as financial information and earnings guidance provided to
analysts and rating agencies. This discussion may be done generally, consisting of discussing the types of information to be disclosed and the types of presentations to be made. The Chairman of the Audit Committee shall be authorized to have these
discussions with management on behalf of the Audit Committee.
|
|
4.
|
Discussing with management and the independent auditors (a) significant financial reporting issues and judgments made in connection with the
preparation and
|
E-2
|
presentation of the Funds financial statements, including any significant changes in the Funds selection or application of accounting principles and any major issues as to the
adequacy of the Funds internal controls and any special audit steps adopted in light of material control deficiencies; and (b) analyses prepared by Fund management and/or the independent auditor setting forth significant financial
reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
|
|
5.
|
Discussing with management and the independent auditors the effect of regulatory and accounting initiatives on the Funds financial statements.
|
|
6.
|
Reviewing and discussing reports, both written and oral, from the independent auditors and/or Fund management regarding (a) all critical accounting policies and
practices to be used; (b) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative treatments and disclosures, and
the treatment preferred by the independent auditors; and (c) other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.
|
|
7.
|
Discussing with Fund management the Funds major financial risk exposures and the steps management has taken to monitor and control these exposures, including the
Funds risk assessment and risk management policies and guidelines. In fulfilling its obligations under this paragraph, the Audit Committee may review in a general manner the processes other Board committees have in place with respect to risk
assessment and risk management.
|
|
8.
|
Reviewing disclosures made to the Audit Committee by the Funds principal executive officer and principal financial officer during their certification process for
the Funds periodic reports about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Funds
internal controls. In fulfilling its obligations under this paragraph, the Audit Committee may review in a general manner the processes other Board committees have in place with respect to deficiencies in internal controls, material weaknesses, or
any fraud associated with internal controls.
|
With respect to the independent auditors:
|
1.
|
Selecting, appointing, retaining or replacing the independent auditors, subject, if applicable, only to Board and shareholder ratification; and compensating, evaluating
and overseeing the work of the independent auditor (including the resolution of disagreements between Fund management and the independent auditor regarding financial reporting).
|
|
2.
|
Meeting with the independent auditors and Fund management to review the scope, fees, audit plans and staffing for the audit, for the current year. At
the conclusion of the audit, reviewing such audit results, including the independent auditors evaluation of the Funds financial and internal controls, any comments or recommendations of the independent auditors, any audit problems or
difficulties and managements response,
|
E-3
|
including any restrictions on the scope of the independent auditors activities or on access to requested information, any significant disagreements with management, any accounting
adjustments noted or proposed by the auditor but not made by the Fund, any communications between the audit team and the audit firms national office regarding auditing or accounting issues presented by the engagement, any significant changes
required from the originally planned audit programs and any adjustments to the financial statements recommended by the auditors.
|
|
3.
|
Pre-approving all audit services and permitted non-audit services, and the terms thereof, to be performed for the Funds by their independent auditors, subject to the de
minimis exceptions for non-audit services described in Section 10A of the Exchange Act that the Audit Committee approves prior to the completion of the audit, in accordance with any policies or procedures relating thereto as adopted by the
Board or the Audit Committee. The Chairman of the Audit Committee shall be authorized to give pre-approvals of such non-audit services on behalf of the Audit Committee.
|
|
4.
|
Obtaining and reviewing a report or reports from the independent auditors at least annually (including a formal written statement delineating all relationships between
the auditors and the Funds consistent with Independent Standards Board Standard 1, as may be amended, restated, modified or replaced) regarding (a) the independent auditors internal quality-control procedures; (b) any material issues
raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years, respecting one or more independent audits carried
out by the firm; (c) any steps taken to deal with any such issues; and (d) all relationships between the independent auditor and the Funds and their affiliates, in order to assist the Audit committee in assessing the auditors
independence. After reviewing the foregoing report[s] and the independent auditors work throughout the year, the Audit Committee shall be responsible for evaluating the qualifications, performance and independence of the independent auditor
and their compliance with all applicable requirements for independence and peer review, and a review and evaluation of the lead partner, taking into account the opinions of Fund management and the internal auditors, and discussing such reports with
the independent auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
|
|
5.
|
Reviewing any reports from the independent auditors mandated by Section 10A(b) of the Exchange Act regarding any illegal act detected by the independent
auditor (whether or not perceived to have a material effect on the Funds financial statements) and obtaining from the independent auditors any information about illegal acts in accordance with Section 10A(b).
|
|
6.
|
Ensuring the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit
as required by law, and further considering the rotation of the independent auditor firm itself.
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7.
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Establishing and recommending to the Board for ratification policies for the Funds, Fund managements or the Fund advisers hiring of employees or
former employees of the independent auditor who participated in the audits of the Funds.
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E-4
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8.
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Taking, or recommending that the Board take, appropriate action to oversee the independence of the outside auditor.
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With respect to any internal auditor:
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1.
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Reviewing the proposed programs of the internal auditor for the coming year. It is not the obligation or responsibility of the Audit Committee to confirm the
independence of any Nuveen internal auditors performing services relating to the Funds or to approve any termination or replacement of the Nuveen Manager of Internal Audit.
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2.
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Receiving a summary of findings from any completed internal audits pertaining to the Funds and a progress report on the proposed internal audit plan for the Funds, with
explanations for significant deviations from the original plan.
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With respect to pricing and valuation oversight:
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1.
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The Board has responsibilities regarding the pricing of a Funds securities under the 1940 Act. The Board has delegated this responsibility to the Committee to
address valuation issues that arise between Board meetings, subject to the Boards general supervision of such actions. The Committee is primarily responsible for the oversight of the Pricing Procedures and actions taken by the internal
Valuation Group (Valuation Matters). The Valuation Group will report on Valuation Matters to the Committee and/or the Board of Directors/Trustees, as appropriate.
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2.
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Performing all duties assigned to it under the Funds Pricing Procedures, as such may be amended from time to time.
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3.
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Periodically reviewing and making recommendations regarding modifications to the Pricing Procedures as well as consider recommendations by the Valuation Group regarding
the Pricing Procedures.
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4.
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Reviewing any issues relating to the valuation of a Funds securities brought to the Committees attention, including suspensions in pricing, pricing
irregularities, price overrides, self-pricing, NAV errors and corrections thereto, and other pricing matters. In this regard, the Committee should consider the risks to the Funds in assessing the possible resolutions of these Valuation Matters.
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5.
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Evaluating, as it deems necessary or appropriate, the performance of any pricing agent and recommending changes thereto to the full Board.
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6.
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Reviewing any reports or comments from examinations by regulatory authorities relating to Valuation Matters of the Funds and considering managements responses to
any such comments and, to the extent the Committee deems necessary or appropriate, proposing to management and/or the full Board the modification of the Funds policies and procedures relating to such matters. The Committee, if deemed necessary
or desirable, may also meet with regulators.
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7.
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Meeting with members of management of the Funds, outside counsel, or others in fulfilling its duties hereunder, including assessing the continued
appropriateness and
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E-5
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adequacy of the Pricing Procedures, eliciting any recommendations for improvements of such procedures or other Valuation Matters, and assessing the possible resolutions of issues regarding
Valuation Matters brought to its attention.
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8.
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Performing any special review, investigations or oversight responsibilities relating to Valuation as requested by the Board of Directors/Trustees.
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9.
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Investigating or initiating an investigation of reports of improprieties or suspected improprieties in connection with the Funds policies and procedures relating
to Valuation Matters not otherwise assigned to another Board committee.
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Other responsibilities:
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1.
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Reviewing with counsel to the Funds, counsel to Nuveen, the Fund advisers counsel and independent counsel to the Board legal matters that may have a material
impact on the Funds financial statements or compliance policies.
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2.
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Receiving and reviewing periodic or special reports issued on exposure/controls, irregularities and control failures related to the Funds.
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3.
|
Reviewing with the independent auditors, with any internal auditor and with Fund management, the adequacy and effectiveness of the accounting and financial controls of
the Funds, and eliciting any recommendations for the improvement of internal control procedures or particular areas where new or more detailed controls or procedures are desirable. Particular emphasis should be given to the adequacy of such internal
controls to expose payments, transactions or procedures that might be deemed illegal or otherwise improper.
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4.
|
Reviewing the reports of examinations by regulatory authorities as they relate to financial statement matters.
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5.
|
Discussing with management and the independent auditor any correspondence with regulators or governmental agencies that raises material issues regarding the Funds
financial statements or accounting policies.
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6.
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Obtaining reports from management with respect to the Funds policies and procedures regarding compliance with applicable laws and regulations.
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7.
|
Reporting regularly to the Board on the results of the activities of the Audit Committee, including any issues that arise with respect to the quality or integrity of
the Funds financial statements, the Funds compliance with legal or regulatory requirements, the performance and independence of the Funds independent auditors, or the performance of the internal audit function.
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8.
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Performing any special reviews, investigations or oversight responsibilities requested by the Board.
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9.
|
Reviewing and reassessing annually the adequacy of this charter and recommending to the Board approval of any proposed changes deemed necessary or advisable by the
Audit Committee.
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E-6
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10.
|
Undertaking an annual review of the performance of the Audit Committee.
|
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11.
|
Establishing procedures for the receipt, retention and treatment of complaints received by the Funds regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission of concerns regarding questionable accounting or auditing matters by employees of Fund management, the investment adviser, administrator, principal underwriter, or any other provider of
accounting-related services for the Funds, as well as employees of the Funds.
|
Although the Audit Committee
shall have the authority and responsibilities set forth in this Charter, it is not the responsibility of the Audit Committee to plan or conduct audits or to determine that the Funds financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. That is the responsibility of management and the independent auditors. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent auditors or to ensure compliance with laws and regulations.
E-7
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
EVERY SHAREHOLDERS VOTE IS IMPORTANT
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EASY VOTING OPTIONS:
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|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours
|
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VOTE BY PHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours
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VOTE BY MAIL
Vote, sign and date this Proxy Card
and
return in the postage-paid envelope
|
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VOTE IN PERSON
Attend Shareholder Meeting
333 West Wacker Dr.
Chicago, IL 60606
on July 12, 2012
|
Please detach at perforation before mailing.
|
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NUVEEN ENERGY MLP TOTAL RETURN FUND
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 12,
2012
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PROXY
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|
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COMMON SHARES
THIS PROXY IS BEING SOLICITED BY THE BOARD OF TRUSTEES
. The undersigned shareholder(s) of the Nuveen Energy MLP Total Return Fund, revoking previous proxies, hereby appoints Gifford R. Zimmerman,
Kevin J. McCarthy and Kathleen Prudhomme, or any one of them true and lawful attorneys with power of substitution of each, to vote all shares of Nuveen Energy MLP Total Return Fund which the undersigned is entitled to vote, at the Annual
Meeting of Shareholders to be held on July 12, 2012, at 2:00 p.m. Central time, at the offices of Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois, 60606, and at any adjournment thereof as indicated on the reverse side.
In their discretion, the proxy holders named above are authorized to vote upon such other matters as may properly come before the meeting or any
adjournment thereof.
Receipt of the Notice of the Annual Meeting and the accompanying Proxy Statement/Prospectus is hereby
acknowledged. The shares of Nuveen Energy MLP Total Return Fund represented hereby will be voted as indicated or FOR the proposal if no choice is indicated.
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VOTE VIA THE INTERNET: www.proxy-direct.com
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VOTE VIA THE TELEPHONE: 1-800-337-3503
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Note
: Please sign exactly as your name(s) appear(s) on this card. When signing as attorney, executor, administrator, trustee, guardian or as custodian for a
minor, please sign your name and give your full title as such. If signing on behalf of a corporation, please sign the full corporate name and your name and indicate your title. If you are a partner signing for a partnership, please sign the
partnership name, your name and indicate your title. Joint owners should each sign these instructions. Please sign, date and return.
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Signature and Title, if applicable
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Signature (if held jointly)
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Date
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JMF_23609_Com_051612
|
EVERY SHAREHOLDERS VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the
Nuveen Energy MLP Total Return Fund
Shareholders Meeting to Be Held on July 12, 2012.
The Proxy
Statement and Proxy Card for this meeting are available at:
www.proxy-direct.com/nuv23609
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS
PROXY CARD
Please detach at perforation before
mailing.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting.
Properly executed proxies will be voted as specified. If no other specification is made, such shares will be voted FOR each
proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK.
Example:
¢
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1.
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Election of Board Members:
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FOR
ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT
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Class III:
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01. Robert P. Bremner
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¨
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¨
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¨
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02. Jack B. Evans
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03. Williams J. Schneider
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the box FOR ALL EXCEPT and write the nominees number
on the line provided below.
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FOR
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AGAINST
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ABSTAIN
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3.
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To approve the issuance of additional common shares in connection with the reorganization of MLP & Strategic Equity Fund Inc. into Nuveen Energy MLP Total Return Fund
pursuant to an Agreement and Plan of Reorganization.
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¨
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¨
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¨
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WE URGE TO SIGN, DATE AND MAIL
THIS PROXY PROMPTLY
JMF_23609_Com_051612
EVERY SHAREHOLDERS VOTE IS IMPORTANT
|
|
|
|
|
|
|
EASY VOTING OPTIONS:
|
|
|
|
|
|
|
|
VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
Follow the on-screen instructions
available 24 hours
|
|
|
|
|
|
|
|
VOTE BY PHONE
Call 1-800-337-3503
Follow the recorded instructions
available 24 hours
|
|
|
|
|
|
|
|
VOTE BY MAIL
Vote, sign and date this Proxy Card
and
return in the postage-paid envelope
|
|
|
|
|
|
|
|
VOTE IN PERSON
Attend Shareholder Meeting
333 West Wacker Dr.
Chicago, IL 60606
on July 12, 2012
|
Please detach at perforation before mailing.
|
|
|
|
|
|
|
MLP & STRATEGIC EQUITY FUND
INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 12, 2012
|
|
PROXY
|
|
|
|
|
COMMON SHARES
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
. The undersigned shareholder(s) of the MLP & Strategic Equity Fund Inc., revoking previous proxies, hereby appoints Gifford R. Zimmerman,
Kevin J. McCarthy and Kathleen Prudhomme, or any one of them true and lawful attorneys with power of substitution of each, to vote all shares of MLP & Strategic Equity Fund Inc. which the undersigned is entitled to vote, at the Annual
Meeting of Shareholders to be held on July 12, 2012, at 2:00 p.m. Central time, at the offices of Nuveen Investments, 333 West Wacker Drive, Chicago, Illinois, 60606, and at any adjournment thereof as indicated on the reverse side.
In their discretion, the proxy holders named above are authorized to vote upon such other matters as may properly come before the meeting or any
adjournment thereof.
Receipt of the Notice of the Annual Meeting and the accompanying Proxy Statement/Prospectus is hereby
acknowledged. The shares of MLP & Strategic Equity Fund Inc. represented hereby will be voted as indicated or FOR the proposal if no choice is indicated.
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VOTE VIA THE INTERNET: www.proxy-direct.com
|
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VOTE VIA THE TELEPHONE: 1-800-337-3503
|
|
|
|
|
|
|
|
|
|
Note
: Please sign exactly as your name(s) appear(s) on this card. When signing as attorney, executor, administrator, trustee, guardian or as custodian for a
minor, please sign your name and give your full title as such. If signing on behalf of a corporation, please sign the full corporate name and your name and indicate your title. If you are a partner signing for a partnership, please sign the
partnership name, your name and indicate your title. Joint owners should each sign these instructions. Please sign, date and return.
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Signature and Title, if applicable
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Signature (if held jointly)
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Date
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|
|
MTP_23609_Com_051612
|
EVERY SHAREHOLDERS VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the
MLP & Strategic Equity Fund Inc.
Shareholders Meeting to Be Held on July 12, 2012.
The Proxy Statement
and Proxy Card for this meeting are available at:
www.proxy-direct.com/nuv23609
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS
PROXY CARD
Please detach at
perforation before mailing.
In their discretion, the proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting.
Properly executed proxies will be voted as specified. If no other specification is made, such shares will
be voted FOR each proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example:
¢
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
Election of Board Members:
|
|
FOR
ALL
|
|
WITHHOLD
ALL
|
|
FOR ALL
EXCEPT
|
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01. John P. Amboian
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06.
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William J. Schneider
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¨
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¨
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¨
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02. Robert P. Bremner
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07.
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Judith M. Stockdale
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03. Jack B. Evans
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08.
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Carole E. Stone
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04. William C. Hunter
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09.
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Virginia L. Stringer
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05. David J. Kundert
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10.
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Terence J. Toth
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the box FOR ALL EXCEPT and write the
nominees number on the line provided below.
|
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FOR
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AGAINST
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ABSTAIN
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2.
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To approve an Agreement and Plan of Reorganization pursuant to which MLP & Strategic Equity Fund Inc. (the Acquired Fund) would: (i) transfer all of
its assets to Nuveen Energy MLP Total Return Fund (the Acquiring Fund) in exchange solely for common shares of the Acquiring Fund, and the Acquiring Funds assumption of all of the liabilities of the Acquired Fund; (ii) distribute
such shares of the Acquiring Fund to the common shareholders of the Acquired Fund (with cash being issued in lieu of fractional common shares); and (iii) liquidate, dissolve and terminate in accordance with applicable law.
|
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¨
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¨
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¨
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WE URGE TO SIGN, DATE AND MAIL
THIS PROXY PROMPTLY
MTP_23609_Com_051612
The information in this Statement of Additional Information is not complete and may be
changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE REORGANIZATION OF
NUVEEN ENERGY MLP TOTAL RETURN FUND (JMF)
AND
MLP & STRATEGIC EQUITY FUND INC. (MTP)
(EACH, A FUND AND TOGETHER, THE FUNDS)
This Statement of Additional Information (SAI) is available to shareholders of MLP & Strategic Equity Fund Inc. in
connection with the proposed reorganization of their Fund (the Acquired Fund) into Nuveen Energy MLP Total Return Fund (the Acquiring Fund), pursuant to an Agreement and Plan of Reorganization (the Agreement) that
provides for (i) the Acquiring Funds acquisition of all of the assets of the Acquired Fund in exchange for newly issued common shares of the Acquiring Fund, par value $0.01 per share (Acquiring Fund Common Shares), and the
Acquiring Funds assumption of all of the liabilities of the Acquired Fund, and (ii) the distribution of the Acquiring Fund Common Shares received by the Acquired Fund to its common shareholders, as part of the liquidation, dissolution and
termination of the Acquired Fund in accordance with applicable law.
This SAI is not a prospectus and should be read in
conjunction with the Joint Proxy Statement/Prospectus filed on Form N-14 with the Securities and Exchange Commission (the SEC) dated , 2012
relating to the proposed Reorganization of the Acquired Fund into the Acquiring Fund (the Joint Proxy Statement/Prospectus). A copy of the Joint Proxy Statement/Prospectus and other information may be obtained without charge by calling
(800) 257-8787, by writing to the Funds or from the Funds website (http://www.nuveen.com). The information contained in, or that can be accessed through, the Funds website is not part of the Joint Proxy Statement/Prospectus or this
SAI. You may also obtain a copy of the Joint Proxy Statement/Prospectus on the SECs website (http://www.sec.gov). Capitalized terms used but not defined in this SAI have the meanings ascribed to them in the Joint Proxy Statement/Prospectus.
This SAI is dated
, 2012.
TABLE OF CONTENTS
i
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Joint Proxy Statement/Prospectus concerning the investment objectives,
policies, and techniques of the Funds.
The Acquiring Fund and Acquired Fund have similar investment objectives. The
Acquiring Funds investment objective is to provide tax-advantaged total return. The Acquired Funds investment objective is to provide a high level of after-tax total return. Each Funds investment objective is a fundamental policy
of the Fund and may not be changed without the approval of the holders of a majority of the outstanding common shares and preferred shares, if any, voting as a single class, and, if applicable, of the holders of a majority of the outstanding
preferred shares voting as a separate class.
The investment policies described below, except as set forth under
Investment Restrictions, are not fundamental policies and may be changed by the Funds Board of Directors or Board of Trustees, as applicable (each, a Board and each Director or Trustee, as applicable, a Board
Member) without the approval of shareholders.
Investment Policies
The Acquiring Fund and Acquired Fund have similar investment policies, but there are some differences. The Acquired Fund pursues its
investment objective by investing substantially all of its net assets in publicly traded master limited partnerships (MLPs) operating in the energy infrastructure sector of the market. The Acquiring Fund seeks to achieve its investment
objective by investing primarily in a portfolio of MLPs in the energy sector. The Funds consider investments in MLPs to include investments that offer economic exposure to publicly traded and private MLPs in the form of equity securities of MLPs,
securities of entities holding primarily general partner or managing member interests in MLPs, securities that are derivatives of interests in MLPs, including I-Shares, and debt securities of MLPs. For as long as Energy MLP is in the
name of the Acquiring Fund, the Acquiring Fund will invest at least 80% of its Managed Assets in MLPs in the energy sector. The Fund considers an entity to be part of the energy sector if it derives at least 50% of its revenues from the business of
exploring, developing, producing, gathering, transporting, processing, storing, refining, distributing, mining or marketing natural gas, natural gas liquids (including propane), crude oil, refined petroleum products or coal. Under normal
circumstances, at least 80% of the Acquired Funds net assets (including borrowings for investment purposes) will be invested in MLPs and equities. The Funds may not change their policy to invest at least 80% of their assets as described above
unless they provide shareholders with at least 60 days written notice of such change.
MLPs combine the tax
benefits of limited partnerships with the liquidity of publicly traded securities. The Funds believe that as a result of the federal income tax characterization of cash distributions made by MLPs to their investors (such as the Funds) a significant
portion of the Funds income will be tax-deferred, which will allow distributions by each Fund to its shareholders to include high levels of tax-deferred income.
The Acquiring Fund may invest up to 20% of its Managed Assets in securities of issuers that are not MLPs. This 20% allocation may be in any of the securities described in the Joint Proxy
Statement/Prospectus and the Reorganization SAI, including securities of non-MLP companies engaged primarily in the energy sector. Such issuers may be treated as corporations for U.S. federal income tax purposes and, therefore, may not offer the tax
benefits of investing in MLPs.
1
PORTFOLIO COMPOSITION
In addition to and supplementing the Joint Proxy Statement/Prospectus, each Funds portfolio will be composed principally of the
investments described below.
Master Limited Partnerships
Each Fund invests primarily in energy sector MLPs. Entities commonly referred to as MLPs are generally organized under state
law as limited partnerships or limited liability companies. The securities issued by many MLPs are listed and traded on a securities exchange. An MLP typically issues general partner and limited partner interests, or managing member and member
interests. The general partner or managing member manages and often controls, has an ownership stake in, and is normally eligible to receive incentive distribution payments from, the MLP. If publicly traded, MLPs must derive at least 90% of their
gross income from qualifying sources as described in Section 7704 of the Code in order to be treated as partnerships for U.S. federal income tax purposes.
These qualifying sources include interest, dividends, real estate rents, gain from the sale or disposition of real property, income and gain from mineral or natural resources activities, income and gain
from the transportation or storage of certain fuels, and, in certain circumstances, income and gain from commodities or futures, forwards and options with respect to commodities. Mineral or natural resources activities include exploration,
development, production, processing, mining, refining, marketing and transportation (including pipelines) of oil and gas, minerals, geothermal energy, fertilizer, timber or industrial source carbon dioxide. The general partner or managing member may
be structured as a private or publicly traded corporation or other entity. The general partner or managing member typically control the operations and management of the entity through an up to 2% general partner or managing member interest in the
entity plus, in many cases, ownership of some percentage of the outstanding limited partner or member interests. The limited partners or members, through their ownership of limited partner or member interests, provide capital to the entity, are
intended to have no role in the operation and management of the entity and receive cash distributions. Due to their structure as partnerships for U.S. federal income tax purposes and the expected character of their income, MLPs generally do not pay
federal income taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level tax and tax on corporate dividends). Currently, most MLPs operate in the energy, natural
resources or real estate sectors.
MLPs are typically structured such that common units and general partner or managing member
interests have first priority to receive the minimum quarterly distribution (previously defined as MQD). Common and general partner or managing member interests also accrue arrearages in distributions to the extent the MQD is not paid.
Once common units and general partner or managing member interests have been paid, subordinated units generally receive distributions; however, subordinated units generally do not accrue arrearages. The subordinated units are normally owned by the
owners or affiliates of the general partner or managing member and convert on a one for one basis into common units, generally in three to five years after the MLPs initial public offering or after certain distribution levels have been
exceeded. Distributable cash in excess of the MQD is distributed to both common and subordinated units generally on a pro rata basis. The general partner or managing member is also normally eligible to receive incentive distributions if the general
partner or managing member operates the business in a manner which results in payment of per unit distributions that exceed threshold levels above the MQD. As the general partner or managing member increases cash distributions to the limited
partners or members, the general partner or managing member receives an
2
increasingly higher percentage of the incremental cash distributions. A common arrangement provides that the general partner or managing member can reach a tier where it receives 50% of every
incremental dollar distributed by the MLP. These incentive distributions encourage the general partner or managing member to increase the partnerships cash flow and raise the quarterly cash distribution by pursuing steady cash flow investment
opportunities, streamlining costs and acquiring assets. Such results benefit all security holders of the MLP.
The Alerian MLP
Index, a composite of 50 energy MLPs calculated by Standard & Poors using a float-adjusted market capitalization methodology, serves as a primary index for the energy MLP market.
Securities
MLP Equity Securities
Equity securities issued by MLPs currently
consist of common units, subordinated units and preferred units, as described more fully below.
MLP Common
Units
. The common units of many MLPs are listed and traded on U.S. securities exchanges, including the NYSE and the NASDAQ. Each Fund will purchase such common units through open market transactions and underwritten
offerings, but may also acquire common units through direct placements and privately negotiated transactions. Holders of MLP common units typically have very limited control and voting rights. Holders of such common units are typically entitled to
receive the MQD, including arrearage rights, from the issuer. Generally, an MLP must pay (or set aside for payment) the MQD to holders of common units before any distributions may be paid to subordinated unit holders. In addition, incentive
distributions are typically not paid to the general partner or managing member unless the quarterly distributions on the common units exceed specified threshold levels above the MQD. In the event of a liquidation, common unit holders are intended to
have a preference to the remaining assets of the issuer over holders of subordinated units. MLPs also issue different classes of common units that may have different voting, trading, and distribution rights. Each Fund may invest in different classes
of common units.
MLP Subordinated Units.
Subordinated units, which, like common units,
represent limited partner or member interests, are not typically listed or traded on an exchange. Each Fund may purchase outstanding subordinated units through negotiated transactions directly with holders of such units or newly issued subordinated
units directly from the issuer. Holders of such subordinated units are generally entitled to receive a distribution only after the MQD and any arrearages from prior quarters have been paid to holders of common units. Holders of subordinated units
typically have the right to receive distributions before any incentive distributions are payable to the general partner or managing member. Subordinated units generally do not provide arrearage rights. Most MLP subordinated units are convertible
into common units after the passage of a specified period of time or upon the achievement by the issuer of specified financial goals. MLPs also issue different classes of subordinated units that may have different voting, trading, and distribution
rights. Each Fund may invest in different classes of subordinated units.
MLP Preferred
Units.
MLP preferred units are not typically listed or traded on an exchange. Each Fund may purchase MLP preferred units through negotiated transactions directly with MLPs,
3
affiliates of MLPs and institutional holders of such units. Holders of MLP preferred units can be entitled to a wide range of voting and other rights, depending on the structure of each separate
security.
Other MLP Equity Securities
Each Fund may invest in equity securities issued by affiliates of MLPs, including the general partners or managing members of MLPs. Such issuers may be organized and/or taxed as corporations and therefore
may not offer the advantageous tax characteristics of MLP units. Each Fund intends to purchase such other MLP equity securities through market transactions, but may also do so through direct placements.
I-Shares
. I-Shares represent an ownership interest issued by an MLP affiliate. The MLP affiliate uses the
proceeds from the sale of I-Shares to purchase limited partnership interests in the MLP in the form of I-units. Thus, I-Shares represent an indirect interest in a MLP limited partnership interest. I-units have similar features as MLP common units in
terms of voting rights, liquidation preference and distribution. I-Shares themselves have limited voting rights and are similar in that respect to MLP common units. I-Shares differ from MLP common units primarily in that instead of receiving cash
distributions, holders of I-Shares will receive distributions of additional I-Shares in an amount equal to the cash distributions received by common unit holders. I-Shares are traded on the NYSE. For purposes of the Acquiring Funds policy to
invest at least 80% of its Managed Assets in MLPs in the energy sector, securities that are derivatives of interests in MLPs include I-Shares and other derivative securities that have economic characteristics of MLP securities.
MLP General Partner or Managing Member Interests.
The general partner or managing member interest in MLPs
is typically retained by the original sponsors of an MLP, such as its founders, corporate partners and entities that sell assets to the MLP. The holder of the general partner or managing member interest can be liable in certain circumstances for
amounts greater than the amount of the holders investment in the general partner or managing member. General partner or managing member interests often confer direct board participation rights in, and in many cases control over the operations
of, the MLP. General partner or managing member interests can be privately held or owned by publicly traded entities. General partner or managing member interests receive cash distributions, typically in an amount of up to 2% of available cash,
which is contractually defined in the partnership or limited liability company agreement. In addition, holders of general partner or managing member interests typically receive incentive distribution rights (IDRs), which provide them
with an increasing share of the entitys aggregate cash distributions upon the payment of per common unit distributions that exceed specified threshold levels above the MQD. Due to the IDRs, general partners of MLPs have higher distribution
growth prospects than their underlying MLPs, but quarterly incentive distribution payments would also decline at a greater rate than the decline rate in quarterly distributions to common and subordinated unit holders in the event of a reduction in
the MLPs quarterly distribution. The ability of the limited partners or members to remove the general partner or managing member without cause is typically very limited. In addition, some MLPs permit the holder of IDRs to reset, under
specified circumstances, the incentive distribution levels and receive compensation in exchange for the distribution rights given up in the reset.
MLP Industries
MLPs in the energy sector can
generally be classified into the following industries:
4
Pipeline MLPs.
Pipeline MLPs are common carrier transporters
of natural gas, natural gas liquids (primarily propane, ethane, butane and natural gasoline), crude oil or refined petroleum products (gasoline, diesel fuel and jet fuel). Pipeline MLPs also may operate ancillary businesses such as storage and
marketing of such products. Pipeline MLPs derive revenue from capacity and transportation fees. Historically, pipeline output has been less exposed to cyclical economic forces due to its low cost structure and government-regulated nature. In
addition, most pipeline MLPs have limited direct commodity price exposure because they do not own the product being shipped.
Processing MLPs.
Processing MLPs are gatherers and processors of natural gas as well as providers of
transportation, fractionation and storage of natural gas liquids (NGLs). Processing MLPs derive revenue from providing services to natural gas producers, which require treatment or processing before their natural gas commodity can be
marketed to utilities and other end user markets. Revenue for the processor is fee based, although it is not uncommon to have some participation in the prices of the natural gas and NGL commodities for a portion of revenue.
Gathering and Processing MLPs.
Gathering and processing companies are subject to natural declines in the
production of oil and natural gas fields, which utilize their gathering and processing facilities as a way to market their production, prolonged declines in the price of natural gas or crude oil, which curtails drilling activity and therefore
production, and declines in the prices of natural gas liquids and refined petroleum products, which cause lower processing margins. In addition, some gathering and processing contracts subject the gathering or processing company to direct
commodities price risk.
Midstream MLPs.
Midstream MLPs and energy companies that provide crude
oil, refined product and natural gas services are subject to supply and demand fluctuations in the markets they serve which will be impacted by a wide range of factors including, fluctuating commodity prices, weather, increased conservation or use
of alternative fuel sources, increased governmental or environmental regulation, depletion, rising interest rates, declines in domestic or foreign production, accidents or catastrophic events, and economic conditions, among others.
Propane MLPs.
Propane MLPs are distributors of propane to homeowners for space and water heating. Propane
MLPs derive revenue from the resale of the commodity on a margin over wholesale cost. The ability to maintain margin is a key to profitability. Propane serves a small portion of the household energy needs in the United States, largely for homes
beyond the geographic reach of natural gas distribution pipelines. A majority of annual cash flow is earned during the winter heating season (October through March). Accordingly, volumes are weather dependent, but have utility type functions
similar to electricity and natural gas.
Exploration and Production MLPs.
Exploration and
production MLPs include MLPs that are engaged in the exploration, development, production and acquisition of crude oil and natural gas properties. Exploration and production MLP cash flows generally depend on the volume of crude oil and natural gas
produced and the realized prices received for crude oil and natural gas sales.
Coal MLPs.
Coal
MLPs own, lease and manage coal reserves. Coal MLPs derive revenue from production and sale of coal, or from royalty payments related to leases to coal producers. Electricity generation is the primary use of coal in the United States. Demand for
electricity and supply of alternative fuels to generators are the primary drivers of coal demand. Coal MLPs are subject to operating and production risks, such as: the MLP or a lessee meeting necessary production volumes;
5
federal, state and local laws and regulations which may limit the ability to produce coal; the MLPs ability to manage production costs and pay mining reclamation costs; and the effect on
demand that the Environmental Protection Agencys standards set in the 1990 Clean Air Act or other laws, regulations or trends have on coal-end users.
Marine Shipping MLPs.
Marine shipping MLPs are primarily marine transporters of natural gas, crude oil or refined petroleum products. Marine shipping MLPs derive revenue from
charging customers for the transportation of these products utilizing the MLPs vessels. Transportation services are typically provided pursuant to a charter or contract, the terms of which vary depending on, for example, the length of use of a
particular vessel, the amount of cargo transported, the number of voyages made, the parties operating a vessel or other factors.
MLPs typically achieve distribution growth by internal and external means. MLPs achieve growth internally by experiencing higher commodity volume driven by the economy and population, and through the
expansion of existing operations including increasing the use of underutilized capacity, pursuing projects that can leverage and gain synergies with existing infrastructure and pursuing so called greenfield projects. External growth is
achieved by making accretive acquisitions. MLPs also may achieve external growth due to higher commodity prices.
MLPs are
subject to various federal, state and local environmental laws and health and safety laws as well as laws and regulations specific to their particular activities. These laws and regulations address: health and safety standards for the operation of
facilities, transportation systems and the handling of materials; air and water pollution requirements and standards; solid waste disposal requirements; land reclamation requirements; and requirements relating to the handling and disposition of
hazardous materials. MLPs are subject to the costs of compliance with such laws applicable to them, and changes in such laws and regulations may adversely affect their results of operations.
MLPs operating interstate pipelines and storage facilities are subject to substantial regulation by the Federal Energy Regulatory
Commission (FERC), which regulates interstate transportation rates, services and other matters regarding natural gas pipelines including: the establishment of rates for service; regulation of pipeline storage and liquified natural gas
facility construction; issuing certificates of need for companies intending to provide energy services or constructing and operating interstate pipeline and storage facilities; and certain other matters. FERC also regulates the interstate
transportation of crude oil, including: regulation of rates and practices of oil pipeline companies; establishing equal service conditions to provide shippers with equal access to pipeline transportation; and establishment of reasonable rates for
transporting petroleum and petroleum products by pipeline.
MLPs may be subject to liability relating to the release of
substances into the environment, including liability under federal Superfund and similar state laws for investigation and remediation of releases and threatened releases of hazardous materials, as well as liability for injury and
property damage for accidental events, such as explosions or discharges of materials causing personal injury and damage to property. Such potential liabilities could have a material adverse effect upon the financial condition and results of
operations of MLPs.
MLPs are subject to numerous business related risks, including: deterioration of business fundamentals
reducing profitability due to development of alternative energy sources, consumer sentiment with respect to global warming, changing demographics in the markets served, unexpectedly prolonged and precipitous changes in commodity prices and increased
competition that reduces the
6
MLPs market share; the lack of growth of markets requiring growth through acquisitions; disruptions in transportation systems; the dependence of certain MLPs upon the energy exploration and
development activities of unrelated third parties; availability of capital for expansion and construction of needed facilities; a significant decrease in natural gas production due to depressed commodity prices or otherwise; the inability of MLPs to
successfully integrate recent or future acquisitions; and the general level of the economy.
Restricted
Securities and Securities with Limited Trading Markets
Each Fund may invest in restricted securities and securities
with limited trading markets. The Acquiring Fund may invest up to 30% of its Managed Assets in unregistered or otherwise restricted securities, including private investments in public equity (PIPEs). PIPE investors purchase securities
directly from a publicly traded company in a private placement transaction, typically at a discount to the market price of the companys common stock. Because the sale of the securities is not registered with the SEC, the securities are
restricted and cannot be immediately resold by the investors into the public markets. Accordingly, the company will agree as part of the PIPE deal promptly to register the restricted securities with the SEC. PIPE investments may be
deemed illiquid pending an effective registration statement.
If the Acquiring Fund were to assume substantial positions in
securities with limited trading markets, the activities of the Acquiring Fund could have an adverse effect upon the liquidity and marketability of such securities and the Acquiring Fund might not be able to dispose of its holdings in those
securities at then current market prices. Circumstances could also exist when portfolio securities might have to be sold by the Acquiring Fund at times which otherwise might be considered to be disadvantageous so that the Acquiring Fund might
receive lower proceeds from such sales than it had expected to realize. Investments in securities which are restricted (i.e. unregistered or subject to contractual or other legal restrictions on resale) may involve added expenses to the
Acquiring Fund should the Acquiring Fund be required to bear registration costs with respect to such securities. The Acquiring Fund could also be delayed in disposing of such securities, which might have an adverse effect upon the price and timing
of sales and the liquidity of the Acquiring Fund. Restricted securities and securities for which there is a limited trading market may be significantly more difficult to value due to the unavailability of reliable market quotations for such
securities, and investment in such securities may have an adverse impact on the Acquiring Funds net asset value. As more fully described below, the Acquiring Fund may purchase Rule 144A securities for which there may be a secondary market of
qualified institutional buyers as contemplated by Rule 144A under the Securities Act of 1933, as amended (the 1933 Act).
Rule 144A Securities
The Acquiring Fund may purchase Rule 144A
securities for which there is a secondary market of qualified institutional buyers, as defined in Rule 144A promulgated under the 1933 Act. Rule 144A provides an exemption from the registration requirements of the 1933 Act for the resale of certain
restricted securities to qualified institutional buyers.
The Board has determined that Rule 144A securities may be considered
liquid securities if so determined by the Subadviser. The Subadviser has adopted policies and procedures for the purpose of determining whether securities that are eligible for resales under Rule 144A are liquid or illiquid. Pursuant to those
policies and procedures, the Subadviser may make the determination as to whether a
7
particular security is liquid or illiquid with consideration to be given to, among other things, the frequency of trades and quotes for the security, the number of dealers willing to sell the
security, the number of potential purchasers, dealer undertakings to make a market in the security, the nature of the security and the time needed to dispose of the security.
To the extent that liquid Rule 144A securities that the Acquiring Fund holds become illiquid, due to the lack of sufficient qualified institutional buyers or market or other conditions, the percentage of
the Acquiring Funds assets invested in illiquid assets would increase. The Subadviser will monitor the Acquiring Funds investments in Rule 144A securities and will consider appropriate measures to enable the Acquiring Fund to meet any
investment limitations and to maintain sufficient liquidity for operating purposes.
Non-MLPs
Each Fund may also invest in companies that are not organized as MLPs. Non-MLP companies may include companies that operate energy
assets but which are organized or taxed as corporations rather than in partnership form. Generally, the partnership form is more suitable for companies that operate assets which generate more stable cash flows. Companies that operate
midstream assets (e.g., transporting, processing, storing, distributing and marketing) tend to generate more stable cash flows than those that engage in exploration and development or delivery of products to the end consumer. Non-MLP
companies also may include companies that provide services directly related to the generation of income from energy-related assets, such as oil drilling services, pipeline construction and maintenance, and compression services.
Non-MLP Equity Securities
Each Fund may also invest in non-MLP equity securities, which may constitute up to 20% of its Managed Assets with respect to the Acquiring Fund. Non-MLP equity securities include common and preferred
stock, convertible securities, warrants and depository receipts of companies that are organized as corporations, limited liability companies or limited partnerships (other than MLPs).
Common Stock.
Common stock generally represents an equity ownership interest in an issuer. Although common
stocks have historically generated higher average total returns than fixed-income securities over the long term, common stocks also have experienced significantly more volatility in those returns and may under-perform relative to fixed-income
securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by a Fund. Also, prices of common stocks are sensitive to general movements in the stock market and
a drop in the stock market may depress the price of common stocks to which a Fund has exposure. Common stock prices fluctuate for several reasons including changes in investors perceptions of the financial condition of an issuer or the general
condition of the relevant stock market, or the occurrence of political or economic events which effect the issuers. In addition, common stock prices may be particularly sensitive to rising interest rates, which increases borrowing costs and the
costs of capital.
Preferred Stock.
Preferred stock has a preference over common stock in
liquidation (and generally as to dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely
with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is
8
junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior
debt security with similarly stated yield characteristics. The market value of preferred stock will also generally reflect whether (and if so when) the issuer may force holders to sell their preferred shares back to the issuer and whether (and if so
when) the holders may force the issuer to buy back their preferred shares. Generally, the right of the issuer to repurchase the preferred stock tends to reduce any premium that the preferred stock might otherwise trade at due to interest rate or
credit factors, while the right of the holders to require the issuer to repurchase the preferred stock tends to reduce any discount that the preferred stock might otherwise trade at due to interest rate or credit factors. In addition, some preferred
stocks are non-cumulative, meaning that the dividends do not accumulate and need not ever be paid. A portion of a Funds portfolio may include investments in non-cumulative preferred securities, whereby the issuer does not have an obligation to
make up any arrearages to its shareholders. There is no assurance that dividends or distributions on non-cumulative preferred stocks in which a Fund invests will be declared or otherwise paid. Preferred stock of certain companies offers the
opportunity for capital appreciation as well as periodic income. This may be particularly true in the case of companies that have performed below expectations. If a companys performance has been poor enough, its preferred stock may trade more
like common stock than like other fixed income securities, which may result in above average appreciation if the companys performance improves.
Convertible Securities.
A convertible security is a preferred stock, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock
or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both fixed income and equity securities. The value of convertible securities tends to decline as
interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of
common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporations capital structure but are usually subordinated to comparable non-convertible securities. Convertible securities
generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.
Warrants and Rights.
Each Fund may invest in warrants or rights (including those acquired in
units or attached to other securities) that entitle the holder to buy equity securities at a specific price for a specific period of time but will do so only if such equity securities are deemed appropriate by the Subadviser for inclusion in a
Funds portfolio.
Royalty Income Trusts
The Acquiring Fund may invest in royalty trusts. However, such investments do not count towards the Acquiring Funds 80% policy.
Royalty income trusts are publicly traded investment vehicles that gather income on royalties and pay out almost all cash flows to stockholders as distributions. Royalty income trusts typically have no physical operations and no management or
employees. Typically royalty trusts own the rights to royalties on the production and sales of a natural resource, including oil, gas, minerals and timber. As these deplete, production and cash flows steadily decline, which may decrease
distributions. Royalty trusts are, in some respects, similar to certain MLPs and include risks similar to those MLPs.
9
Debt Securities
Each Fund may invest in debt securities, including, but not limited to, structured notes or exchange-traded notes issued by MLPs in the
energy sector, that are designed to provide exposure to the MLP market. The Acquiring Fund may invest up to 30% of its Managed Assets in debt securities of MLPs and other issuers of any maturity. Debt securities may have fixed or variable principal
payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate, zero coupon, contingent, deferred, payment in kind and auction rate features. Each Fund has the flexibility to invest in debt
securities that are below investment grade quality (that is, rated Ba or lower by Moodys Investors Service, Inc. (Moodys), BB+ or lower by Standard & Poors Financial Services, LLC, a subsidiary of The McGraw
Hill Companies, Inc. (S&P) or Fitch Ratings, Inc. (Fitch), or comparably rated by another nationally recognized statistical rating organization (NRSRO). These debt securities are commonly referred to as
high yield securities or junk bonds. Each Fund may invest in debt securities without regard to their ratings. Issuers of securities rated Ba/BB+ are regarded as having current capacity to make principal and interest payments
but are subject to business, financial or economic conditions which could adversely affect such payment capacity. Debt securities rated Baa3 or BBB- or above are considered investment grade securities. Debt securities rated below
investment grade quality are obligations of issuers that are considered predominately speculative with respect to the issuers capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater
investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Debt securities rated below investment grade tend to be less marketable than higher-quality securities because the market for them is
less broad.
A general description of Moodys, S&Ps and Fitchs ratings of bonds is set forth in
Appendix A hereto. The ratings of Moodys, S&P and Fitch generally represent their opinions as to the quality of the bonds they rate. It should be emphasized, however, that such ratings are relative and subjective, are not absolute
standards of quality, are subject to change and do not evaluate the market risk and liquidity of the securities. Consequently, bonds with the same maturity, coupon and rating may have different yields while obligations of the same maturity and
coupon with different ratings may have the same yield.
If a security satisfies a Funds minimum rating criteria at the
time of purchase and is subsequently downgraded below such rating, such Fund will not be required to dispose of such security. If a downgrade occurs, the Subadviser will consider what action, including the sale of such security, is in the best
interest of us and our shareholders.
Securities Rated Below Investment Grade
Under rating agency guidelines, medium- and lower-rated securities and comparable unrated securities will likely have some quality and
protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Medium- and lower-rated securities may have poor prospects of ever attaining any real investment standing, may have a current
identifiable vulnerability to default or be in default, may be unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions, and/or may be likely to be in default or
not current in the payment of interest or principal. Such securities are considered speculative with respect to the issuers capacity to pay interest and repay principal in accordance with the terms of the obligations. Accordingly, it is
possible that these types of factors could reduce the value of securities held by a Fund with a commensurate effect on the value of such Funds shares.
10
The secondary markets for high yield securities are generally not as liquid as the secondary
markets for higher rated securities. The secondary markets for high yield securities are concentrated in relatively few market makers and participants in the market are mostly institutional investors, including insurance companies, banks, other
financial institutions and mutual funds. In addition, the trading volume for high yield securities is generally lower than that for higher-rated securities, and the secondary markets could contract under adverse market or economic conditions
independent of any specific adverse changes in the condition of a particular issuer. These factors may have an adverse effect on the ability of a Fund to dispose of particular portfolio investments, may adversely affect such Funds net asset
value per share and may limit the ability of such Fund to obtain accurate market quotations for purposes of valuing securities and calculating net asset value. If a Fund is not able to obtain precise or accurate market quotations for a particular
security, it will become more difficult to value such Funds portfolio securities, and a greater degree of judgment may be necessary in making such valuations. Less liquid secondary markets may also affect the ability of a Fund to sell
securities at their fair value. If the secondary markets for high yield securities contract due to adverse economic conditions or for other reasons, certain liquid securities in a Funds portfolio may become illiquid and the proportion of a
Funds assets invested in illiquid securities may significantly increase.
Prices for high yield securities may be
affected by legislative and regulatory developments. These laws could adversely affect a Funds net asset value and investment practices, the secondary market for high yield securities, the financial condition of issuers of these securities and
the value of outstanding high yield securities. For example, federal legislation requiring the divestiture by federally insured savings and loan associations of their investments in high yield bonds and limiting the deductibility of interest by
certain corporate issuers of high yield bonds adversely affected the market in the past. See RisksBelow Investment Grade Risk in the Prospectus.
Zero Coupon Securities
A Funds investments in debt
securities may be in the form of a zero coupon bond. Zero coupon bonds are debt obligations that do not entitle the holder to any periodic payments of interest for the entire life of the obligation. When held to its maturity, its return comes from
the difference between the purchase price and its maturity value. These instruments are typically issued and traded at a deep discount from their face amounts. The amount of the discount varies depending on such factors as the time remaining until
maturity of the securities, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. The market prices of zero coupon bonds generally are more volatile than the market prices of debt instruments that
pay interest currently and in cash and are likely to respond to changes in interest rates to a greater degree than do other types of securities having similar maturities and credit quality. Under many market conditions, investments in zero coupon
bonds may be illiquid, making it difficult for a Fund to dispose of them or determine their current value.
Variable
Rate Obligations
Each Fund may invest in variable rate obligations. Variable rate obligations bear interest at rates
that are not fixed, but vary with changes in specified market rates or indexes, such as the prime rate, and at specified intervals. Such obligations include, but are not limited to, variable rate master demand notes, which are unsecured instruments
issued pursuant to an agreement between the issuer and the holder that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate.
11
Certain of the variable rate obligations that may be purchased by a Fund may carry a demand
feature that would permit the holder to tender them back to the issuer of the instrument or to a third party at par value prior to maturity. Some of the demand instruments that may be purchased by a Fund may not trade in a secondary market and would
derive their liquidity solely from the ability of the holder to demand repayment from the issuer or third party providing credit support. If a demand instrument is not traded in a secondary market, a Fund will nonetheless treat the instrument as
readily marketable for the purposes of determining whether the instrument is an illiquid security unless the demand feature has a notice period of more than seven days in which case the instrument will be characterized as not
readily marketable and therefore illiquid. The Subadviser will monitor on an ongoing basis the ability of an issuer of a demand instrument to pay principal and interest on demand.
A Funds right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Fund
elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument or the third party providing credit support to make payment when due, except when such demand instruments permit same day settlement. To
facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Funds custodian subject to a sub-custodian agreement approved by the Fund between that bank and such Funds custodian.
U.S. Government Obligations
Securities issued or guaranteed by U.S. Government agencies and instrumentalities include obligations that are supported by: (a) the full faith and credit of the U.S. Treasury (e.g., direct
pass-through certificates of the Government National Mortgage Association (Ginnie Maes)); (b) the limited authority of the issuer or guarantor to borrow from the U.S. Treasury (e.g., obligations of Federal Home Loan Banks); or
(c) only the credit of the issuer or guarantor (e.g., obligations of the Federal Home Loan Mortgage Corporation). In the case of obligations not backed by the full faith and credit of the U.S. Treasury, the agency issuing or guaranteeing the
obligation is principally responsible for ultimate repayment.
Agencies and instrumentalities that issue or guarantee debt
securities and that have been established or sponsored by the U.S. Government include, in addition to those identified above, the Bank for Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the Federal Intermediate Credit Banks,
the Federal Land Banks, the Federal National Mortgage Association and the Student Loan Marketing Association.
Loans of
Portfolio Securities
Each Funds Board may authorize the Fund to lend portfolio securities to brokers or dealers
or other financial institutions although it has no current intention to do so. The procedure for the lending of securities will include the following features and conditions. The borrower of the securities will deposit cash or liquid securities with
the Fund in an amount equal to a minimum of 100% of the market value of the securities lent. The Fund will invest the cash collateral in short-term debt securities or cash equivalents and earn the interest thereon. A negotiated portion of the income
so earned may be paid to the borrower and/or the broker who arranged the loan. If the Fund receives securities as collateral, the Fund will receive a fee from the borrower. If the value of the collateral drops below the required minimum at any time,
the borrower may be called upon to post additional collateral. If the additional collateral is not paid, the loan will be immediately due and the Fund may use the collateral or its own
12
cash to replace the securities by purchase in the open market charging any loss to the borrower. These will be demand loans and may be terminated by the Fund at any time. The Fund
will receive any dividends and interest paid on the securities lent and the loans will be structured to assure that the Fund will be able to exercise its voting rights on the securities.
Derivatives
Each Fund may use various investment strategies described below to hedge market risks (such as broad or specific market movements), to manage the effective maturity or duration of debt instruments held by
the Fund, or to seek to increase the Funds income or gain.
Each Fund may purchase and sell stock or bond index futures
contracts; purchase and sell (or write) exchange listed and over-the-counter (OTC) put and call options on securities, futures contracts, indexes and other financial instruments; enter into forward transactions, equity or debt swaps and
related transactions; and invest in indexed securities and other similar transactions, which may be developed to the extent that the Subadviser determines that they are consistent with the Funds investment objective and policies and applicable
regulatory requirements (collectively, these transactions are referred to as Derivatives). Each Funds interest rate transactions may take the form of swaps, caps, floors, collars and other combinations of options, forwards, swaps
and/or futures.
Each Fund is not a commodity pool (
i.e.,
a pooled investment vehicle which trades in
commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission (CFTC)) in reliance on the Section 4.5 exemption under the Commodity Exchange Act, and Derivatives
involving futures contracts and options on futures contracts will be purchased, sold or entered into only for bona fide hedging purposes, provided that the Fund may enter into such transactions for purposes other than bona fide hedging if,
immediately thereafter,
(i) its pro rata share of the sum of the amount
of initial margin deposits on futures contracts entered into by the Fund and premiums paid for unexpired options with respect to such contracts does not exceed 5% of the liquidation value of the Funds net assets, after taking into account
unrealized profits and unrealized losses on such contracts and options (in the case of an option that is in-the-money at the time of purchase, the in-the-money amount may be excluded in calculating the 5% limitation); or
(ii) the aggregate notional value (
i.e.,
the size of the contract, in
contract units, times the current market price (futures position) or strike price (options position) of each such unit) of the contract, does not exceed the liquidation value of the Fund, after taking into account unrealized profits and unrealized
losses on such contracts and options.
On February 9, 2012, the CFTC adopted amendments to its rules that, once
effective, may affect the ability of the Funds to continue to claim the 4.5 exclusion. A fund that seeks to claim the exclusion after the effectiveness of the amended rules would be limited in its ability to use futures and options on futures or
commodities or engage in swap transactions. If the Funds were no longer able to claim the exclusion, Nuveen Fund Advisors would be required to register as a commodity pool operator. In addition, the Funds and the Nuveen Fund Advisors
would be subject to regulation under the Commodity Exchange Act, which would impose additional disclosure, reporting and recordkeeping rules on the Funds and could increase expenses of the Funds. Certain of the rules that would apply to
13
the Funds if they become subject to CFTC regulation have not yet been adopted, and it is unclear what effect such rules would have on the Funds if they are adopted.
Derivatives involve special risks, including possible default by the other party to the transaction, illiquidity and, to the extent
Nuveen Fund Advisors and the Subadvisers views as to certain market movements are incorrect, the risk that the use of Derivatives could result in significantly greater losses than if they had not been used.
Futures Contracts.
Each Fund may trade futures contracts: (1) on domestic and foreign exchanges on
bond indexes; and (2) on domestic and, to the extent permitted by the CFTC, foreign exchanges on single stocks and stock indexes. Futures contracts are generally bought and sold on the commodities exchanges on which they are listed with payment
of initial and variation margin as described below. The sale of a futures contract creates a firm obligation by the Fund, as seller, to deliver to the buyer the specific type of financial instrument called for in the contract at a specific future
time for a specified price (or with respect to certain instruments, the net cash amount). The Funds use of financial futures contracts and options thereon will in all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the CFTC. Maintaining a futures contract or selling an option on a futures contract will typically require the Fund to deposit with a financial intermediary, as security for its obligations, an amount of cash
or other specified assets (initial margin) that initially is from 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets (variation margin) may be required to be
deposited thereafter daily as the mark-to-market value of the futures contract fluctuates. In addition, the value of all futures contracts sold by the Fund (adjusted for the historical volatility relationship between the Fund and the contracts) will
not exceed the total market value of the Funds securities. In addition, the value of the Funds long futures and options positions (futures contracts on stock or bond indexes, and call options on such futures contracts) will not exceed
the sum of: (a) liquid assets segregated for this purpose; (b) cash proceeds on existing investments due within thirty days; and (c) accrued profits on the particular futures or options positions.
Options.
In order to hedge against adverse market shifts or to increase income or gain, each Fund may
purchase put and call options or write covered put and call options on securities or fixed income instruments or on futures contracts on securities or stock indexes. A call option is covered if, so long as a Fund is obligated
as the writer of the option, it will: (i) own the underlying investment subject to the option; (ii) own securities convertible or exchangeable without the payment of any consideration into the securities subject to the option;
(iii) own a call option on the relevant security with an exercise price no higher than the exercise price on the call option written or (iv) deposit with its custodian in a segregated account liquid assets having a value equal to the
excess of the value of the security or index that is the subject of the call over the exercise price. A put option is covered if, to support its obligation to purchase the underlying investment if a put option that a Fund writes is
exercised, such Fund will either (a) deposit with its custodian in a segregated account liquid assets having a value at least equal to the exercise price of the underlying investment or (b) continue to own an equivalent number of puts of
the same series (that is, puts on the same underlying investment having the same exercise prices and expiration dates as those written by the Fund), or an equivalent number of puts of the same class (that is, puts on the same
underlying investment) with exercise prices greater than those that it has written (or, if the exercise prices of the puts it holds are less than the exercise prices of those it has written, it will deposit the difference with its custodian in a
segregated account). Parties to options transactions must make certain payments and/or set aside certain amounts of assets in connection with each transaction, as described below.
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In all cases, except for certain options on interest rate futures contracts, by writing a
call, a Fund will limit its opportunity to profit from an increase in the market value of the underlying investment above the exercise price of the option for as long as such Funds obligation as writer of the option continues. By writing a
put, a Fund will limit its opportunity to profit from a decrease in the market value of the underlying investment below the exercise price of the option for as long as such Funds obligation as writer of the option continues. Upon the exercise
of a put option written by a Fund, such Fund may suffer an economic loss equal to the difference between the price at which the Fund is required to purchase the underlying investment and its market value at the time of the option exercise, less the
premium received for writing the option. Upon the exercise of a call option written by a Fund, such Fund may suffer an economic loss equal to an amount not less than the excess of the investments market value at the time of the option exercise
over the Funds acquisition cost of the investment, less the sum of the premium received for writing the option and the positive difference, if any, between the call price paid to the Fund and the Funds acquisition cost of the investment.
In all cases except for certain options on interest rate futures contracts, in purchasing a put option, a Fund will seek to
benefit from a decline in the market price of the underlying investment, while in purchasing a call option, a Fund will seek to benefit from an increase in the market price of the underlying investment. If an option purchased is not sold or
exercised when it has remaining value, or if the market price of the underlying investment remains equal to or greater than the exercise price, in the case of a put, or remains equal to or below the exercise price, in the case of a call, during the
life of the option, a Fund will lose its investment in the option. For the purchase of an option to be profitable, the market price of the underlying investment must decline sufficiently below the exercise price, in the case of a put, and must
increase sufficiently above the exercise price, in the case of a call, to cover the premium and transaction costs.
In the
case of certain options on interest rate futures contracts, a Fund may purchase a put option in anticipation of a rise in interest rates, and purchase a call option in anticipation of a fall in interest rates. By writing a covered call option on
interest rate futures contracts, a Fund will limit its opportunity to profit from a fall in interest rates. By writing a covered put option on interest rate futures contracts, a Fund will limit its opportunity to profit from a rise in interest
rates.
Each Fund may choose to exercise the options it holds, permit them to expire or terminate them prior to their
expiration by entering into closing transactions. A Fund may enter into a closing purchase transaction in which the Fund purchases an option having the same terms as the option it had written or a closing sale transaction in which the Fund sells an
option having the same terms as the option it had purchased. A covered option writer unable to effect a closing purchase transaction will not be able to sell the underlying security until the option expires or the underlying security is delivered
upon exercise, with the result that the writer will be subject to the risk of market decline in the underlying security during such period. Should a Fund choose to exercise an option, the Fund will purchase in the open market the securities,
commodities or commodity futures contracts underlying the exercised option.
Exchange-listed options on securities and
currencies, with certain exceptions, generally settle by physical delivery of the underlying security or currency, although in the future, cash settlement may become available. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option. Index options are cash settled for the net amount, if
any, by which the option is in-the-money (that is, the amount by which
15
the value of the underlying instrument exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option) at the time the option is exercised.
Put options and call options typically have similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following general discussion relates to each of the particular types of options discussed in greater detail below. In addition, many Derivatives involving options require
segregation of Fund assets in special accounts.
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer of the option the obligation to buy, the underlying security, index, currency or other instrument at the exercise price. A Funds purchase of a put option on a security, for example, might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar instrument) against a substantial decline in the market value of such instrument by giving the Fund the right to sell the instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right to buy, and the seller the obligation to sell, the underlying instrument at the exercise price. A Funds purchase of a call option on a security, financial futures
contract, index, currency or other instrument might be intended to protect the Fund against an increase in the price of the underlying instrument that it intends to purchase in the future by fixing the price at which it may purchase the instrument.
An American style put or call option may be exercised at any time during the option exercised period. A European style put or call option may be exercised only upon expiration. A Bermudan style put or call option
may be exercised at any time on fixed dates occurring during the term of the option. Exchange-listed options are issued by a regulated intermediary such as the Options Clearing Corporation (the OCC), which guarantees the performance of
the obligations of the parties to the options. The discussion below uses the OCC as an example, but is also applicable to other similar financial intermediaries.
Index options are cash settled for the net amount, if any, by which the option is in-the-money (that is, the amount by which the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price of the option) at the time the option is exercised. Frequently, rather than taking or making delivery of the underlying instrument through the process of exercising the
option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option.
A Funds ability to close out its position as a purchaser or seller of an OCC-issued or exchange-listed put or call option is dependent, in part, upon the liquidity of the particular option market.
Among the possible reasons for the absence of a liquid option market on an exchange are: (1) insufficient trading interest in certain options, (2) restrictions on transactions imposed by an exchange, (3) trading halts, suspensions or
other restrictions imposed with respect to particular classes or series of options or underlying securities, including reaching daily price limits, (4) interruption of the normal operations of the OCC or an exchange, (5) inadequacy of the
facilities of an exchange or the OCC to handle current trading volume, or (6) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the relevant market for that
option on that exchange would cease to exist, although any such outstanding options on that exchange would continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the option markets close before the
16
markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that would not be reflected in the corresponding option markets.
OTC options are purchased from or sold to securities dealers, financial institutions or other parties (collectively referred
to as Counterparties and individually referred to as a Counterparty) through a direct bilateral agreement with the Counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance
mechanics, all of the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guaranties and security, are determined by negotiation of the parties. It is anticipated that the Fund will generally only
enter into OTC options that have cash settlement provisions, although it will not be required to do so.
Unless the parties
provide for it, no central clearing or guaranty function is currently expected to be involved in an OTC option. As a result, if a Counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it
has entered into with a Fund or fails to make a cash settlement payment due in accordance with the terms of that option, the Fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Thus, the
Subadviser must assess the creditworthiness of each such Counterparty or any guarantor or credit enhancement of the Counterpartys credit to determine the likelihood that the terms of the OTC option will be met. Each Fund will enter into OTC
option transactions only with U.S. government securities dealers recognized by the Federal Reserve Bank of New York as primary dealers, or broker-dealers, domestic or foreign banks, or other financial institutions that the Subadviser
deems to be creditworthy. In the absence of a change in the current position of the SEC, OTC options purchased by a Fund and the amount of the Funds obligation pursuant to an OTC option sold by the Fund (the cost of the sell-back plus the
in-the-money amount, if any) or the value of the assets held to cover such options will be deemed illiquid.
If a Fund sells a
call option, it is foregoing its participation in the appreciation in the value of the underlying asset; however, the premium that it receives may serve as a partial hedge, to the extent of the option premium, against an increase in the value of the
underlying securities or instruments held by the Fund and may increase the Funds income. Similarly, the sale of put options can also provide gains for the Fund.
Each Fund may purchase and sell call options on securities that are traded on U.S. and foreign securities exchanges and in the OTC markets, and on securities indexes, currencies and futures contracts. All
calls sold by the Fund must be covered (that is, the Fund must own the securities or futures contract subject to the call), or must otherwise meet the asset segregation requirements described below for so long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against loss, a call sold by the Fund will expose the Fund during the term of the option to possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or instrument that it might otherwise have sold.
Each Fund reserves the right to purchase or sell options on instruments and indexes which may be developed in the future to the extent
consistent with applicable law and the Funds investment objective and the restrictions set forth herein.
Each Fund may
purchase and sell put options on securities (whether or not it holds the securities in its portfolio) and on securities indexes, currencies and futures contracts. In selling put
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options, a Fund faces the risk that it may be required to buy the underlying security at a disadvantageous price above the market price.
Options on Futures Contracts.
Each Fund may purchase put and call options and write covered put and call
options on futures contracts on stock indexes traded on domestic and, to the extent permitted by the CFTC, foreign exchanges, in order to hedge all or a portion of its investments or to increase income or gain and may enter into closing transactions
in order to terminate existing positions. There is no guarantee that such closing transactions can be effected. An option on a stock index futures contract, as contrasted with the direct investment in such a contract, gives the purchaser the right,
in return for the premium paid, to assume a position in the underlying contract at a specified exercise price at any time on or before the expiration date of the option. Upon exercise of an option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writers futures margin account. The potential loss related to the purchase of an option on a futures contract is limited to the premium
paid for the option (plus transaction costs). While the price of the option is fixed at the point of sale, the value of the option does change daily and the change would be reflected in the net asset value of the Fund.
The purchase of an option on a financial futures contract involves payment of a premium for the option without any further obligation on
the part of the Fund. If the Fund exercises an option on a futures contract it will be obligated to post initial margin (and potentially variation margin) for the resulting futures position just as it would for any futures position. Futures
contracts and options thereon are generally settled by entering into an offsetting transaction, but no assurance can be given that a position can be offset prior to settlement or that delivery will occur.
Risk Factors.
Derivatives have special risks associated with them, including possible default by the
counterparty to the transaction, illiquidity and, to the extent Nuveen Fund Advisors and Subadvisers views as to certain market movements are incorrect, the risk that the use of the Derivatives could result in losses greater than if they
had not been used. Use of put and call options could result in losses to the Fund, force the purchase or sale, as the case may be, of written portfolio securities at inopportune times or for prices higher than (in the case of written put options) or
lower than (in the case of written call options) current market values, or cause the Fund to hold a security it might otherwise sell.
The use of futures and options transactions entails certain special risks. In particular, the variable degree of correlation between price movements of futures contracts and price movements in the related
securities position of a Fund could create the possibility that losses on the hedging instrument are greater than gains in the value of the Funds position. In addition, futures and options markets could be illiquid in some circumstances and
certain OTC options could have no markets. As a result, in certain markets, the Fund might not be able to close out a transaction without incurring substantial losses. Although the Funds use of futures and options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the hedged position, at the same time it will tend to limit any potential gain to the Fund that might result from an increase in value of the position. There is also the risk
of loss by the Fund of margin deposits in the event of bankruptcy of a broker with whom the Fund has an open position in a futures contract or option thereon. Finally, the daily variation margin requirements for futures contracts create a greater
ongoing potential financial risk than would purchases of options, in which case the exposure is limited to the cost of the initial premium. However, because option premiums paid by the Fund are small in relation to the market value of the
investments
18
underlying the options, buying options can result in large amounts of leverage. This leverage offered by trading in options could cause the Funds net asset value to be subject to more
frequent and wider fluctuation than would be the case if the Fund did not invest in options. See Leverage in the Prospectus.
Because the amount of interest and/or principal payments which the issuer of indexed securities is obligated to make is linked to the prices of other securities, securities indexes, currencies, or other
financial indicators, such payments may be significantly greater or less than payment obligations in respect of other types of debt securities. As a result, an investment in indexed securities may be considered speculative. Moreover, the performance
of indexed securities depends to a great extent on the performance of, and may be more volatile than, the security, currency, or other instrument to which they are indexed, and may also be influenced by interest rate changes in the United States and
abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuers creditworthiness deteriorates.
Losses resulting from the use of Derivatives will reduce the Funds net asset value, and possibly income, and the losses can be
greater than if Derivatives had not been used. See RisksDerivatives Risk in the Joint Proxy Statement/Prospectus.
Use of Segregated and Other Special Accounts
. Use of many Derivatives by a Fund will require, among other things, that the Fund segregate liquid assets with its custodian, or
a designated sub-custodian, to the extent the Funds obligations are not otherwise covered through ownership of the underlying security or financial instrument. In general, either the full amount of any obligation by the Fund to pay
or deliver securities or assets must be covered at all times by the securities or instruments required to be delivered, or, subject to any regulatory restrictions, an amount of liquid assets at least equal to the current amount of the obligation
must be segregated with the custodian or subcustodian in accordance with established procedures. The segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate
them. A call option on securities written by the Fund, for example, will require the Fund to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or to segregate liquid high
grade debt obligations sufficient to purchase and deliver the securities if the call is exercised. A call option sold by the Fund on an index will require the Fund to own portfolio securities that correlate with the index or to segregate liquid high
grade debt obligations equal to the excess of the index value over the exercise price on a current basis. A put option on securities written by the Fund will require the Fund to segregate liquid high grade debt obligations equal to the exercise
price.
OTC options entered into by a Fund, including those on securities, financial instruments or indexes, and OCC-issued
and exchange-listed index options will generally provide for cash settlement, although the Fund will not be required to do so. As a result, when the Fund sells these instruments it will segregate an amount of assets equal to its obligations under
the options. OCC-issued and exchange-listed options sold by the Fund other than those described above generally settle with physical delivery, and the Fund will segregate an amount of assets equal to the full value of the option. OTC options
settling with physical delivery or with an election of either physical delivery or cash settlement will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option on a futures contract, the Fund must deposit the initial margin and, in some instances, the daily variation margin in addition to segregating liquid assets
19
sufficient to meet its obligations to purchase or provide securities or currencies, or to pay the amount owed at the expiration of an index-based futures contract. The Fund will accrue the net
amount of the excess, if any, of its obligations relating to swaps over its entitlements with respect to each swap on a daily basis and will segregate with its custodian, or designated sub-custodian, an amount of liquid assets having an aggregate
value equal to at least the accrued excess. Caps, floors and collars require segregation of liquid assets with a value equal to the Funds net obligation, if any.
Derivatives may be covered by means other than those described above when consistent with applicable regulatory policies. The Fund may also enter into offsetting transactions so that its combined
position, coupled with any segregated assets, equals its net outstanding obligation in related Derivatives. A Fund could purchase a put option, for example, if the strike price of that option is the same or higher than the strike price of a put
option sold by the Fund. Moreover, instead of segregating assets if it holds a futures contract or forward contract, a Fund could purchase a put option on the same futures contract or forward contract with a strike price as high or higher than the
price of the contract held. Other derivatives may also be offset in combinations. If the offsetting transaction terminates at the time of or after the primary transaction, no segregation is required, but if it terminates prior to that time, assets
equal to any remaining obligation would need to be segregated.
Other Investment Companies
Each Fund may invest in securities of other open- or closed-end investment companies to the extent that such investments are consistent
with the Funds investment objective and policies and are permissible under the Investment Company Act of 1940, as amended (the 1940 Act). The 1940 Act imposes the following restrictions on investments in other investment companies:
(i) the Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) the Fund may not invest more than 5% of its total assets in securities issued by another investment company; and
(iii) the Fund may not invest more than 10% of its total assets in securities issued by other investment companies. These limitations do not apply to the purchase of shares of any investment company (i) in connection with a merger,
consolidation, reorganization or acquisition of substantially all the assets of another investment company, (ii) pursuant to any exemption granted under the 1940 Act, or (iii) with respect to purchases of shares of money market funds.
Each Fund may invest in other investment companies either during periods when it has large amounts of uninvested cash,
such as the period shortly after the Fund receives the proceeds of the offering of its common shares, during periods when there is a shortage of attractive securities available in the market, or when the Subadviser believes share prices of other
investment companies offer attractive values. The Fund may invest in investment companies that are advised by the Subadviser or its affiliates to the extent permitted by applicable law and/or pursuant to exemptive relief from the SEC. As a
stockholder in an investment company, the Fund would indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company, and would remain subject to payment of the Funds management fees and
other expenses with respect to assets so invested. Stockholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. The Subadviser will take expenses into account when evaluating the
investment merits of an investment in an investment company relative to available investments in other securities. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage
risks described in the Prospectus and herein. The net asset value and market value of leveraged shares will be more volatile and the yield to stockholders will tend to fluctuate more than the yield generated by unleveraged shares.
20
Foreign Securities
Investors should recognize that investing in the securities of foreign issuers involves special considerations which are not typically
associated with investing in the securities of U.S. issuers. Investments in securities of foreign issuers may involve risks arising from differences between U.S. and foreign securities markets, including less volume, much greater price volatility in
and illiquidity of certain foreign securities markets, different trading and settlement practices and less governmental supervision and regulation, from changes in currency exchange rates, from high and volatile rates of inflation, from economic,
social and political conditions such as wars, terrorism, civil unrest and uprisings, and, as with domestic multinational corporations, from fluctuating interest rates.
There may be less publicly-available information about a foreign issuer than about a U.S. issuer, and foreign issuers may not be subject to the same accounting, auditing and financial record-keeping
standards and requirements as U.S. issuers. In particular, the assets and profits appearing on the financial statements of an emerging market country issuer may not reflect its financial position or results of operations in the way they would be
reflected had the financial statements been prepared in accordance with U.S. generally accepted accounting principles. In addition, for an issuer that keeps accounting records in local currency, inflation accounting rules may require, for both tax
and accounting purposes, that certain assets and liabilities be restated on the issuers balance sheet in order to express items in terms of currency of constant purchasing power. Inflation accounting may indirectly generate losses or profits.
Consequently, financial data may be materially affected by restatements for inflation and may not accurately reflect the real condition of those issuers and securities markets. Finally, in the event of a default in any such foreign obligations, it
may be more difficult for the Fund to obtain or enforce a judgment against the issuers of such obligations.
Other investment
risks include the possible imposition of foreign withholding or other taxes on certain amounts of the Funds income, the possible seizure or nationalization of foreign assets and the possible establishment of exchange controls, expropriation,
confiscatory taxation, other foreign governmental laws or restrictions which might affect adversely payments due on securities held by the Fund, the lack of extensive operating experience of eligible foreign subcustodians and legal limitations on
the ability of the Fund to recover assets held in custody by a foreign subcustodian in the event of the subcustodians bankruptcy.
There generally is less governmental supervision and regulation of exchanges, brokers and issuers in foreign countries than there is in the United States. For example, there may be no comparable
provisions under certain foreign laws to insider trading and similar investor protection securities laws that apply with respect to securities transactions consummated in the United States. Further, brokerage commissions and other transaction costs
on foreign securities exchanges generally are higher than in the United States.
In some countries, banks or other financial
institutions may constitute a substantial number of the leading companies or companies with the most actively traded securities. The 1940 Act limits the Funds ability to invest in any equity security of an issuer which, in its most recent
fiscal year, derived more than 15% of its revenues from securities related activities, as defined by the rules thereunder. These provisions may also restrict the Funds investments in certain foreign banks and other financial
institutions.
Foreign markets have different clearance and settlement procedures, and in certain markets there have been
times when settlements have failed to keep pace with the volume of securities
21
transactions, making it difficult to conduct such transactions. Further, satisfactory custodial services for investment securities may not be available in some countries having smaller, emerging
capital markets, which may result in the Fund incurring additional costs and delays in transporting such securities outside such countries. Delays in settlement or other problems could result in periods when assets of the Fund are uninvested and no
return is earned thereon. The inability of the Fund to make intended security purchases due to settlement problems or the risk of intermediary counterparty failures could cause the Fund to forego attractive investment opportunities. The inability to
dispose of a portfolio security due to settlement problems could result either in losses to the Fund due to subsequent declines in the value of such portfolio security or, if the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.
Rules adopted under the 1940 Act permit the Fund to maintain its foreign securities and
cash in the custody of certain eligible non-U.S. banks and securities depositories. Certain banks in foreign countries may not be eligible sub-custodians, as defined in the 1940 Act, for the Fund, in which event the Fund may be precluded
from purchasing securities in certain foreign countries in which it otherwise would invest or which may result in the Funds incurring additional costs and delays in providing transportation and custody services for such securities outside of
such countries. The Fund may encounter difficulties in effecting on a timely basis portfolio transactions with respect to any securities of issuers held outside their countries. Other banks that are eligible foreign sub-custodians may be recently
organized or otherwise lack extensive operating experience. In addition, in certain countries there may be legal restrictions or limitations on the ability of the Fund to recover assets held in custody by foreign sub-custodians in the event of the
bankruptcy of the sub-custodian.
Certain of the risks associated with international investments and investing in smaller
capital markets are heightened for investments in emerging market countries. For example, some of the currencies of emerging market countries have experienced devaluation relative to the U.S. dollar, and major adjustments have been made periodically
in certain of such currencies. Certain of such countries face serious exchange constraints. In addition, governments of many emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government owns or controls many companies. Accordingly, government actions in the future could have a significant effect on economic conditions in developing countries which could affect private sector companies and
consequently, the value of certain securities held in the Funds portfolio.
Investment in certain emerging market
securities is restricted or controlled to varying degrees which may at times limit or preclude investment in certain emerging market securities and increase the costs and expenses of the Fund. Certain emerging market countries require governmental
approval prior to investments by foreign persons, limit the amount of investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that may have less advantageous
rights than other classes, restrict investment opportunities in issuers in industries deemed important to national interests and/or impose additional taxes on foreign investors.
The manner in which foreign investors may invest in companies in certain emerging market countries, as well as limitations on such
investments, also may have an adverse impact on the operations of the Fund. For example, the Fund may be required in some countries to invest initially through a local broker or other entity and then have the shares purchased re-registered in the
name of the Fund. Re-registration may in some instances not occur on a timely basis, resulting in a delay during which the Fund may be denied certain of its rights as an investor.
22
Certain emerging market countries may require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign investors which could adversely affect the Fund. In addition, if a deterioration occurs in the countrys balance of payments, it could impose temporary restrictions on
foreign capital remittances. Investing in local markets in emerging market countries may require the Fund to adopt special procedures, seek local government approvals or take other actions, each of which may involve additional costs to the Fund.
With respect to investments in certain emerging market countries, different legal standards may have an adverse impact on the
Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholders investment, the notion of limited liability is less clear in
certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of shareholders of U.S. corporations.
Certain markets are in only the earliest stages of development. There is also a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of
industries, as well as a high concentration of investors and financial intermediaries. Many of such markets also may be affected by developments with respect to more established markets in the region. Brokers in emerging market countries typically
are fewer in number and less capitalized than brokers in the United States. These factors, combined with the U.S. regulatory requirements for investment companies and the restrictions on foreign investment, result in potentially fewer investment
opportunities for the Fund and may have an adverse impact on the investment performance of the Fund.
Hedging Techniques
In certain market environments, each Fund anticipates it will use various hedging techniques consistent with its
top-down investment style with the goal of enhancing its risk-adjusted total return over the longer term. In those circumstances, each Fund will seek to mitigate key risks associated with investments in MLPs including equity securities risk,
interest rate risk, commodity price risk and regulatory risk, which, among other factors, could adversely affect market valuations of specific securities or certain sectors of the energy MLP market place, or the overall portfolio. In turn, such
risks could adversely affect the secondary market price of each Funds shares. To execute its hedging operations, each Fund may sell call options, buy call or put options, invest in structured notes or exchange-traded notes or use other
derivatives developed in the future. Certain of the potential hedging techniques are discussed more fully below. Each Funds use of hedging techniques will be market driven and discretionary, based primarily upon the proprietary analytical
methods and qualitative judgments of the Subadviser coupled with the oversight of Nuveen Fund Advisors. There can be no assurance that the hedging techniques, as they may be developed and implemented by each Fund, will be successful in mitigating
risk or achieving the goal of enhancing each Funds risk-adjusted total return over the longer term.
Each Fund may sell
call options on a portion of the Funds portfolio of equity securities and on MLP-based securities indices or certain exchange-traded notes. The extent of each Funds equity call option writing activity (which may at times be little or
none, and at other times, may be on a substantial portion of the Funds Managed Assets) will depend on market conditions and an ongoing assessment of the attractiveness (from a risk-adjusted total return standpoint) of writing call options.
Generally, the Funds do not intend to sell call options for the express purpose of generating option premiums to
23
enhance distributions to shareholders. To seek to hedge a portion of the Funds equity securities risk, the Funds may buy call or put options on a portion of the Funds portfolio of
equity securities and on MLP-based securities indices or certain exchange-traded notes. In addition, the Funds may make limited short-term investments in structured notes or exchange-traded notes that are designed to provide short exposure to the
energy MLP market. To seek to hedge a portion of the Funds commodity market risk, the Funds may buy put or call options on energy commodity futures.
Each Funds use of derivatives such as the purchase of put or call options may generate costs that would reduce such Funds net asset value. These capital costs may be offset over time by gains
generated from hedging. The potential to achieve such gains will depend largely on the Subadvisers investment capabilities in executing the Funds hedging techniques.
Other Investment Techniques
. The Funds may use a variety of other investment techniques to seek to achieve
their investment objectives, to enhance return, or as a substitute for a position in an underlying asset. From time to time, the Funds may invest in certain derivative instruments such as options, futures, swaps and short sales. In addition, each
Fund may purchase securities of other investment companies (for the Acquiring Fund, up to 10% of its Managed Assets), the assets of which consist primarily of securities issued by MLPs in the energy sector. Such investments in derivatives or other
investment companies are not expected to offer the same tax benefits of investing directly in MLPs.
Temporary Defensive
Positions.
At times the Subadviser may judge that conditions in the markets for securities of MLP entities make pursuing the Acquiring Funds primary investment strategy inconsistent with the best interests of its
shareholders. At such times the Subadviser may, temporarily, use alternative strategies primarily designed to reduce fluctuations in the value of the Acquiring Funds assets. During temporary defensive periods or in order to keep the Acquiring
Funds cash fully invested, including during the period when the net proceeds of this offering of Common Shares are first being invested, the Acquiring Fund may deviate from its investment policies and objective. During such periods, the
Acquiring Fund may invest up to 100% of its Managed Assets in cash or cash equivalents. There can be no assurance that such strategies will be successful. While the Acquired Fund does not intend to depart from its investment strategy in respect of
its investments in MLPs in response to adverse market, economic or political conditions by engaging in transactions or strategies that would involve selling MLP interests in order to purchase the securities of other issuers or by seeking other
temporary defensive positions such as cash, it may utilize short-term investments for cash management purposes.
Cash and cash
equivalents are defined to include, without limitation, the following:
(1) Non-U.S. government securities which have received the highest investment-grade credit
rating and U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest that are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies or instrumentalities. U.S. government
agency securities include securities issued by (a) the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States; (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities are supported by the right of the agency to
borrow from the U.S. Treasury; (c) the Federal National Mortgage Association, whose securities are supported by the discretionary authority of the U.S.
24
Government to purchase certain obligations of the agency or instrumentality; and (d) the Student Loan Marketing Association, whose securities are supported only by its credit. While the U.S.
Government provides financial support to such U.S. Government-sponsored agencies or instrumentalities, no assurance can be given that it always will do so since it is not so obligated by law. The U.S. Government, its agencies and instrumentalities
do not guarantee the market value of their securities. Consequently, the value of such securities may fluctuate.
(2) Certificates of deposit issued against funds deposited in a bank or a savings and loan
association. Such certificates are for a definite period of time, earn a specified rate of return, and are normally negotiable. The issuer of a certificate of deposit agrees to pay the amount deposited plus interest to the bearer of the certificate
on the date specified thereon. Under current Federal Deposit Insurance Corporation regulations, the maximum insurance payable as to any one certificate of deposit is $250,000; therefore, certificates of deposit purchased by the Fund may not be fully
insured.
(3) Commercial paper, which consists of short-term unsecured
promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Investments in commercial paper will be limited to commercial paper rated in the highest categories by an NRSRO and which
mature within one year of the date of purchase or carry a variable rate of interest. Master demand notes are direct lending arrangements between the Fund and a corporation. There is no secondary market for such notes. However, they are redeemable by
the Fund at any time. The Subadviser will consider the financial condition of the corporation (e.g., earning power, cash flow, and other liquidity measures) and will continuously monitor the corporations ability to meet all of its financial
obligations, because the Funds liquidity might be impaired if the corporation were unable to pay principal and interest on demand.
(4) The Acquiring Fund may invest in bankers acceptances, which are short-term credit instruments used to finance commercial transactions. Generally,
an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then accepted by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset or it may be sold in the secondary market at the going rate of interest for a specific maturity.
(5) The Acquiring Fund may invest in bank time deposits, which are monies kept on deposit
with banks or savings and loan associations for a stated period of time at a fixed rate of interest. There may be penalties for the early withdrawal of such time deposits, in which case the yields of these investments will be reduced.
(6) The Acquiring Fund may invest in shares of money market funds in accordance with the
provisions of the 1940 Act, the rules thereunder and interpretations thereof.
Leverage
Each Fund may utilize the following forms of leverage: (a) portfolio investments that have the economic effect of leverage,
including but not limited to investments in futures, options and inverse floating rate securities, (b) the issuance of preferred shares, and (c) borrowings to the extent permitted by the 1940 Act. While both Funds are permitted to use
leverage, only the Acquiring Fund currently employs a leverage strategy to enhance investment returns primarily through debt borrowings. The
25
Acquiring Fund anticipates that its leverage ratio will vary from time to time; however, the Acquiring Fund generally intends to limit its leverage ratio to 33
1
/
3
% of its Managed Assets. As of November 30, 2011, the Acquiring
Funds leverage ratio was 23.37% of its Managed Assets. The Acquiring Fund currently expects to maintain a similar leverage ratio, relative to its Managed Assets (including assets attributable to the Acquired Fund), following the close of the
Reorganization.
Neither Fund currently intends to issue preferred shares or debt securities. In addition, both Funds
may borrow for temporary, emergency or other purposes as permitted by the 1940 Act. The Funds may not use leverage at all times and the amount of leverage may vary depending upon a number of factors, including Nuveen Fund Advisors and the
Subadvisers outlook for the market and the costs that the Funds would incur as a result of such leverage. The use of leverage involves increased risk. There is no assurance that the Funds will utilize leverage or that the Funds leverage
strategy will be successful.
Under the 1940 Act, each Fund is not permitted to incur indebtedness,
including through the issuance of debt securities, unless immediately thereafter the total asset value of the Funds portfolio is at least 300% of the aggregate amount of outstanding indebtedness (i.e., the aggregate amount of outstanding debt
may not exceed 33
1
/
3
% of the Funds Managed
Assets). In addition, each Fund is not permitted to declare any cash distribution on its common shares unless, at the time of such declaration, the net asset value of the Funds portfolio (determined deducting the amount of such distribution)
is at least 300% of the aggregate amount of such outstanding indebtedness. If a Fund borrows money, the Fund intends, to the extent possible, to retire outstanding debt from time to time to maintain coverage of any outstanding indebtedness of at
least 300%.
Changes in the value of each Funds portfolio securities, including costs attributable to borrowings
or preferred shares, will be borne entirely by the common shareholders. If there is a net decrease (or increase) in the value of a Funds investment portfolio, the leverage will decrease (or increase) the net asset value per common share to a
greater extent than if the Fund were not leveraged.
Utilization of leverage is a speculative investment technique and
involves certain risks to the common shareholders. These include increased variability of the Funds net income, distributions and/or net asset value in relation to market changes. So long as the Fund is able to realize a higher net return on
its investment portfolio than the then-current cost of any leverage together with other related expenses, the effect of the leverage will be to cause common shareholders to realize a higher rate of return than if the Fund were not so leveraged. On
the other hand, to the extent that the then-current cost of any leverage, together with other related expenses, approaches the net return on the Funds investment portfolio, the benefit of leverage to common shareholders will be reduced, and if
the then-current cost of any leverage together with related expenses were to exceed the net return on the Funds portfolio, the Funds leveraged capital structure would result in a lower rate of return to common shareholders than if the
Fund were not so leveraged.
Under the 1940 Act, a Fund is not permitted to issue preferred shares unless immediately after
such issuance the value of the Funds asset coverage is at least 200% of the liquidation value of the outstanding preferred shares (i.e., such liquidation value may not exceed 50% of the Funds assets less all liabilities other than
borrowings and outstanding preferred shares).
In addition, a Fund is not permitted to declare any cash dividend or other
distribution on its common shares unless, at the time of such declaration, the value of the Funds assets less liabilities other
26
than borrowings and outstanding preferred shares satisfies the above-referenced 200% coverage requirement. If preferred shares are issued, the Funds intend, to the extent possible, to purchase or
redeem preferred shares from time to time to the extent necessary in order to maintain coverage of at least 200%.
Each Fund
pays to Nuveen Fund Advisors a management fee (who in turn pays a fee to the Subadviser) based on its Managed Assets. Nuveen Fund Advisors, in consultation with the Subadviser, will decide whether and how much to leverage the Fund based solely on
the assessment of whether such use of leverage will advance the Funds investment objective. However, the fact that a decision to increase a Funds leverage will have the effect of increasing Managed Assets and therefore Nuveen Fund
Advisors and the Subadvisers management fees means that Nuveen Fund Advisors may have an incentive to effect, and the Subadviser may have an incentive to recommend, an increase in a Funds use of leverage. Nuveen Fund Advisors, in
consultation with the Subadviser, will only increase a Funds use of leverage when it determines that such increase is consistent with a Funds investment objective, and will periodically review the Funds performance and use of
leverage with the Board.
INVESTMENT R
ESTRICTIONS
In addition to each Funds investment objective, the following investment restrictions are fundamental policies for the Funds and
may not be changed without the approval of the holders of a majority of the outstanding common shares and preferred shares, if any, of such Fund, voting as a single class, and, if applicable, of the holders of a majority of the outstanding preferred
shares, voting separately. For this purpose, a majority of the outstanding shares means the vote of (1) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy; or (2) more than 50% of the outstanding voting securities, whichever is less.
Except as described below, each Fund may not:
|
|
|
Acquiring Fund
|
|
Acquired Fund
|
|
|
1) Issue senior securities, as defined in the 1940 Act, except as permitted by the 1940 Act;
|
|
1) Issue senior securities or borrow money except as permitted by Section 18 of the 1940 Act or otherwise as permitted
by applicable law;
|
|
|
2) Act as underwriter of another issuers securities, except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the 1933 Act, in connection with the purchase and sale of portfolio securities;
|
|
2) Underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the 1933 Act in
selling portfolio securities;
|
|
|
3) Invest more than 25% of its total assets in securities of issuers in any one industry other than issuers in the energy
industry;
1
|
|
3) Invest more than 25% of its total assets (taken at market value at the time of each investment) in the securities of
issuers in any one industry; provided that nothing in this limitation will prevent the Fund from investing substantially all of its net assets in the Energy Related Industries;
|
1
|
For purposes of this restriction, governments and their political subdivisions are not members of any industry.
|
27
|
|
|
Acquiring Fund
|
|
Acquired Fund
|
|
|
4) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent the Fund from purchasing or selling options, futures contracts or derivative instruments or from investing in securities or other instruments backed by physical commodities);
|
|
4) Purchase or sell real estate, commodities or commodity contracts, except that, to the extent permitted by applicable law,
the Fund may (i) invest in securities directly or indirectly secured by real estate or interests therein or issued by entities that invest in real estate or interests therein; (ii) invest in securities directly or indirectly secured by
timber, oil, natural gas, coal, electricity or other energy related commodities or securities issued by entities that invest in or hold such commodities; and (iii) purchase and sell forward contracts, financial futures contracts and options
thereon;
|
|
|
5) Make loans, except as permitted by the 1940 Act and exemptive orders granted under the 1940 Act;
|
|
5) Make loans to other persons, except that (i) the Fund may issue preferred stock; (ii) the Fund will not be
deemed to be making a loan to the extent that the Fund takes short positions using forward contracts, purchases bonds, debentures or other debt securities, preferred securities, commercial paper, pass through instruments, bank loan participation
interests, corporate loans, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments; and (iii) the Fund may lend its portfolio securities in an amount not in excess of 33
1
/
3
% of its total assets, taken at market value, provided that such
loans shall be made in accordance with applicable law;
|
|
|
6) Borrow money, except as permitted by the 1940 Act and exemptive orders granted under the 1940 Act;
and
|
|
6) Make investments for the purpose of exercising control or management; and
|
|
|
7) Purchase or sell real estate, but this shall not prevent the Fund from investing in municipal securities secured by real
estate or interests therein or foreclosing upon and selling such real estate.
|
|
7) Make any investment inconsistent with the Funds classification as a diversified company under the Investment
Company Act.
|
All swap agreements and other derivative instruments that were not classified as commodities or
commodity contracts prior to July 21, 2010 are not deemed to be commodities or commodity contracts for purposes of restriction No. 4 above with respect to the Acquired Fund.
The Acquiring Fund is a non-diversified management company, while the Acquired Fund is a diversified investment management company.
Consequently, as to 75% of the Acquired Funds total assets, the Fund may not (i) purchase the securities of any one issuer (other than cash, securities of
28
other investment companies and securities issued by the U.S. government or its agencies or instrumentalities) if immediately after such purchase, more than 5% of the value of the Funds
total assets would be invested in securities of such issuer or (ii) purchase more than 10% of the outstanding voting securities of such issuer.
Subject to certain exemptions, under the 1940 Act, each Fund may invest up to 10% of its total assets in the aggregate in shares of other investment companies and up to 5% of its total assets in any one
investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a stockholder in any investment company, each Fund will bear its ratable
share of that investment companys expenses and will remain subject to payment of each Funds management, advisory and administrative fees with respect to assets so invested. Holders of common shares of each Fund would therefore be subject
to duplicative expenses to the extent a Fund invests in other investment companies. In addition, the securities of other investment companies may be leveraged and therefore will be subject to the same leverage risks described herein.
In addition to the foregoing fundamental investment policies, each Fund is also subject to the following non-fundamental restrictions and
policies, which may be changed by the Board of Trustees or Board of Directors, as applicable. Each Fund may not:
|
|
|
Acquiring Fund
|
|
Acquired Fund
|
|
|
1) Purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act or any
exemptive relief obtained thereunder;
|
|
1) Purchase securities of other investment companies, except to the extent that such purchases are permitted by applicable
law, including any exemptive orders issued by the SEC;
|
|
|
2) Act as underwriter of another issuers securities, except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the 1933 Act, in connection with the purchase and sale of portfolio securities; and
|
|
2) Mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by
the Fund except as may be necessary in connection with borrowings mentioned in investment restriction number 1 above or except as may be necessary in connection with transactions described above; and
|
|
|
3) Purchase securities of companies for the purpose of exercising control, except to the extent that exercise by the Fund of
its rights under loan agreements would be deemed to constitute exercising control.
|
|
3) Purchase any securities on margin except as may be necessary in connection with transactions described under
Investment Strategy above and except that the Fund may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio investments (the deposit or payment by the Fund of initial or variation margin
in connection with forward contracts and financial futures contracts and options thereon is not considered the purchase of a security on margin).
|
29
The restrictions and other limitations set forth above will apply only at the time of
purchase of securities and will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities.
Por
tfolio Turnover
It is not the policy of
either Fund to engage in transactions with the objective of seeking profits from short-term trading. However, each Fund may engage in active and frequent trading when Nuveen Fund Advisors and the Subadviser each believes such trading is, in light of
prevailing economic and market conditions, in the best interests of such Funds shareholders. Frequent trading also increases transaction costs, which could detract from a Funds performance.
For the fiscal years/period ended November 30, 2011 for each Fund and, October 31, 2011 and October 31, 2010 for the
Acquired Fund, the portfolio turnover rates of each Fund were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Fiscal
Period Ended
Nov. 30,
2011
|
|
|
Fiscal Year
Ended Oct.
31,
2011
|
|
|
Fiscal Year
Ended Oct.
31,
2010
|
|
Acquiring Fund
|
|
|
46
|
%
(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
Acquired Fund
|
|
|
20
|
%
(2)
|
|
|
37
|
%
|
|
|
16
|
%
|
(1)
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
(2)
|
For the period November 1, 2011 through November 30, 2011. Effective November 1, 2011, the Acquired Fund changed its fiscal and tax year ends from
October 31 to November 30. Accordingly, rates are shown for the Acquired Fund for both the fiscal year ended October 31, 2011 and the fiscal period ended November 30, 2011.
|
There are no limits on the rate of portfolio turnover, and investments may be sold without regard to length of time held when investment
considerations warrant such action. A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by a Fund. In addition, high portfolio turnover may result in the
realization of capital gains by a Fund on which income tax may be imposed and which may increase the amount of the Funds distributions that will be taxable as dividends.
MANAGEMENT OF THE FUNDS
Trustees and Officers
The management of the Funds, including general supervision of the duties performed for each Fund under its investment management agreement with Nuveen Fund Advisors (the Management Agreement),
is the responsibility of the Board of each Fund. (The same Board and officers oversee each Fund.) The number of board members of the Funds is nine, one of whom is an interested person (as the term interested person is defined
in the 1940 Act) and eight of whom are not interested persons (referred to herein as independent trustees). None of the independent board members has ever been a trustee, director or employee of, or consultant to, Nuveen Investments,
Inc. (Nuveen Investments), Nuveen Fund Advisors, Inc., FAMCO MLP or their affiliates.
Pursuant to the
Acquiring Funds organizational documents, the Board is divided into three classes, Class I, Class II and Class III, to be elected by the holders of the outstanding common shares
30
and any outstanding preferred shares, voting as a single class, to serve until the third succeeding annual meeting subsequent to their election or thereafter, in each case until their successors
have been duly elected and qualified. Board Members Bremner, Evans and Schneider have been designated as Class III Board Members and as nominees for Board membership for a term expiring at the annual meeting of shareholders in 2015 or until
their successors have been duly elected and qualified. Board Members Hunter, Kundert, Stockdale, Stringer, Toth and Amboian are current and continuing Board Members. Board Members Amboian, Kundert and Toth have been designated as Class II Board
Members for a term expiring at the annual meeting of shareholders in 2014 or until their successors have been duly elected and qualified. Board Members Hunter, Stockdale, Stone and Stringer have been designated as Class I Board Members for a term
expiring at the annual meeting of shareholders in 2013 or until their successors have been duly elected and qualified.
Pursuant to the organizational documents of the Acquired Fund, all Board Members are to be elected to serve until the next annual meeting
or until their successors shall have been duly elected and qualified.
The officers of the Funds serve annual terms and
are elected on an annual basis. The names, business addresses and birthdates of the board members and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and
other directorships they hold are set forth below. As of
March 30, 2012, the board members of the Funds are directors or trustees, as the case may be, of
98 Nuveen-sponsored open-end funds (the Nuveen Mutual Funds) and
133
Nuveen-sponsored closed-end funds (collectively with the Nuveen Mutual Funds, the Nuveen Funds).
31
Board Nominees/Boa
rd Members
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by Board
Member/
Nominee
During the
Past
Five
Years
|
Independent Board Members/Nominees
|
|
|
|
|
|
|
Robert P. Bremner
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(8/22/40)
|
|
Chairman
of Board
and
Board
Member
|
|
Term: Annual or Class III Board Member until 2015
Length of Service:
Since 1996;
Chairman of the Board since 2008; Lead Independent Director
(2005-2008)
|
|
Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C; Board Member, Independent Directors Council affiliated with the Investment
Company Institute.
|
|
231
|
|
None
|
|
|
|
|
|
|
Jack B. Evans
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(10/22/48)
|
|
Board
Member
|
|
Term: Annual or Class III Board Member until 2015
Length of Service:
Since 1999
|
|
President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Member of the Board of Regents for the State of Iowa University System; Director, Source
Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc. (a regional
financial services firm).
|
|
231
|
|
Director
and
Chairman,
United
Fire
Group, a
publicly
held
company.
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by
Board
Member/
Nominee
|
|
|
Other
Directorships
Held by Board
Member/
Nominee
During the
Past
Five
Years
|
William C. Hunter
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(3/6/48)
|
|
Board
Member
|
|
Term: Annual or Class I Board Member until 2013
Length of Service: Since 2004
|
|
Dean (since 2006), Tippie College of Business, University of Iowa; Director (since 2005) and President-Elect, Beta Gamma Sigma International, Inc., the International Business
Honor Society; Director (since 2009) of Wellmark, Inc. ; formerly, Director (1997-2007), Credit Research Center at Georgetown University; formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut
(2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003).
|
|
|
231
|
|
|
Director of
Xerox
Corporation
(since
2004).
|
33
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length
of
Time
Served
(1)
|
|
Principal
Occupation(s) During Past
Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past Five
Years
|
David J. Kundert
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(10/28/42)
|
|
Board
Member
|
|
Term: Annual or Class II Board Member until 2014
Length of Service: Since 2005
|
|
Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors
Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Bank One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; Member of the Wisconsin Bar
Association; Member of Board of Directors, Friends of Boerner Botanical Gardens; Member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation.
|
|
231
|
|
None
|
34
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length
of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past Five
Years
|
William J. Schneider
(2)
c/o Nuveen Investments, Inc.
333 West Wacker
Drive
Chicago, IL 60606
(9/24/44)
|
|
Board
Member
|
|
Term: Annual or Class III Board Member until 2015
Length of Service: Since 1996
|
|
Chairman of Miller-Valentine Partners Ltd., a real estate investment company; Member, Mid-America Health System Board; Member, University of Dayton Business School Advisory Council;
formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine Group; formerly, Member, Dayton Philharmonic Orchestra Association; formerly, Director, Dayton Development Coalition; formerly, Member, Business Advisory
Council, Cleveland Federal Reserve Bank.
|
|
231
|
|
None
|
|
|
|
|
|
|
Judith M. Stockdale
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(12/29/47)
|
|
Board
Member
|
|
Term: Annual or Class I Board Member until 2013
Length of Service:
Since 1997
|
|
Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
|
|
231
|
|
None
|
35
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length
of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past Five
Years
|
Carole E. Stone
c/o Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(6/28/47)
|
|
Board
Member
|
|
Term: Annual or Class I Board Member until 2013
Length of Service: Since 2007
|
|
Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing
Association Oversight Board (2005-2007).
|
|
231
|
|
Director, Chicago Board Options Exchange (since 2006).
|
|
|
|
|
|
|
Virginia L. Stringer c/o
Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, IL 60606
(8/16/44)
|
|
Board
Member
|
|
Term: Annual or Class I Board Member until 2013
Length of Service: Since 2011
|
|
Board Member, Mutual Fund Directors Forum; Governance consultant and non-profit board member; former Member, Governing Board, Investment Company Institutes Independent
Directors Council; former Owner and President, Strategic Management Resources, Inc., a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury
Company.
|
|
231
|
|
Previously, Independent Director (1987-2010) and Chair (1997-2010), First American Fund Complex.
|
36
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Terence J. Toth
(3)
c/o Nuveen Investments, Inc.
333 West Wacker
Drive
Chicago, IL 60606
(9/29/59)
|
|
Board
Member
|
|
Term: Annual or Class II Board Member until 2014
Length of Service: Since 2008
|
|
Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global
Investments (2004- 2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); Member: Goodman Theatre Board (since 2004), Chicago
Fellowship Board (since 2005), and Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (since 2012) and a member of its investment committee; formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust
Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004).
|
|
231
|
|
None
|
37
|
|
|
|
|
|
|
|
|
|
|
Name, Address and
Birth Date
|
|
Position(s)
Held with
Fund
|
|
Term of
Office and
Length of
Time
Served
(1)
|
|
Principal
Occupation(s) During
Past Five
Years
|
|
Number of
Portfolios
in Fund
Complex
Overseen
by Board
Member/
Nominee
|
|
Other
Directorships
Held by
Board
Member/
Nominee
During the
Past
Five
Years
|
Non-Independent Board Member/Nominee
|
|
|
|
|
|
|
|
|
|
|
|
|
John P. Amboian
(4)
c/o Nuveen Investments, Inc.
333 West Wacker
Drive
Chicago, IL 60606
(6/14/61)
|
|
Board
Member
|
|
Term: Annual or Class II Board Member until 2014
Length of Service: Since 2008
|
|
Chief Executive Officer and Chairman (since 2007) and Director (since 1999), formerly, President (1999-2007) of Nuveen Investments, Inc.; Chief Executive Officer (since 2007) of
Nuveen Investments Advisers Inc.; Director (since 1998), formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc.
|
|
231
|
|
None
|
(1)
|
Length of Time Served indicates the year in which the individual became a Board Member of a fund in the Nuveen Fund complex.
|
(2)
|
Mr. Schneider is one of several owners and managing members in two limited liability companies and a general partner and one member of the governing body of a
general partnership, each engaged in real estate ownership activities. In connection with their ordinary course of investment activities, court appointed receivers have been named for certain individual properties owned by such entities. The
individual properties for which a receiver has been appointed represent an immaterial portion of the portfolio assets owned by these entities.
|
(3)
|
Mr. Toth serves as a director on the Board of Directors of the Mather Foundation (the Foundation) and is a member of its investment committee. The
Foundation is the parent of the Mather LifeWays organization, a non-profit charitable organization. Prior to Mr. Toth joining the Board of the Foundation, the Foundation selected Gresham Investment Management (Gresham), an affiliate
of Nuveen Fund Advisors, Inc., to manage a portion of the Foundations investment portfolio, and pursuant to this selection, the Foundation has invested that portion of its investment portfolio in a private commodity pool managed by Gresham.
|
(4)
|
Interested person as defined in the 1940 Act, by reason of his positions with Nuveen Investments, Inc. and certain of its subsidiaries.
|
38
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Birth Date
|
|
Position(s) Held
with Fund
|
|
Term of Office
and Length of
Time Served
(1)
|
|
Principal Occupation(s)
During Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served by
Officer
|
|
Gifford R. Zimmerman
333 West Wacker Drive
Chicago, IL 60606
(9/9/56)
|
|
Chief
Administrative
Officer of the
Acquiring
Fund,
President of
the Acquired
Fund
|
|
Term/Annual
Length of
Service: Since
1988
|
|
Managing Director (since 2002) and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since
2011) of Nuveen Fund Advisors, Inc.; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011);
Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002); Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Managing Director, Associate General Counsel and Assistant
Secretary of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of Santa Barbara Asset Management, LLC (since 2006) and of Winslow Capital Management, Inc. (since 2010); Chief Administrative Officer and Chief
Compliance Officer (since 2006) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst.
|
|
|
231
|
|
|
|
|
|
|
William Adams IV
333 West Wacker Drive
Chicago, IL 60606
(6/9/55)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Senior Executive Vice President, Global Structured Products, formerly, Executive Vice President (1999-2010) of Nuveen Securities, LLC; Co-President of Nuveen Fund Advisors, Inc.
(since 2011); President (since 2011), formerly, Managing Director (2010-2011) of Nuveen Commodities Asset Management, LLC.
|
|
|
131
|
|
39
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Birth Date
|
|
Position(s) Held
with Fund
|
|
Term of Office
and Length of
Time Served
(1)
|
|
Principal Occupation(s)
During Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served by
Officer
|
|
Cedric H. Antosiewicz
333 West Wacker Drive
Chicago, IL 60606
(1/11/62)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Managing Director (since 2004) of Nuveen Securities LLC.
|
|
|
131
|
|
|
|
|
|
|
Margo L. Cook
333 West Wacker Drive
Chicago, IL 60606
(4/11/64)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2009
|
|
Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); previously, Head of Institutional Asset Management (2007-2008) of
Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst.
|
|
|
231
|
|
|
|
|
|
|
Lorna C. Ferguson
333 West Wacker Drive
Chicago, IL 60606
(10/24/45)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
1998
|
|
Managing Director (since 2004) of Nuveen Securities, LLC; Managing Director (since 2005) of Nuveen Fund Advisors, Inc.
|
|
|
231
|
|
|
|
|
|
|
Stephen D. Foy
333 West Wacker Drive
Chicago, IL 60606
(5/31/54)
|
|
Vice President
and Controller
|
|
Term/Annual
Length of
Service: Since
1993
|
|
Senior Vice President (since 2010); formerly, Vice President (1993-2010) and Funds Controller (since 1998) of Nuveen Securities, LLC; Vice President (2005-2010) of Nuveen Fund
Advisors, Inc.; Certified Public Accountant.
|
|
|
231
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Birth Date
|
|
Position(s) Held
with Fund
|
|
Term of Office
and Length of
Time Served
(1)
|
|
Principal Occupation(s)
During Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served by
Officer
|
|
Scott S. Grace
333 West Wacker Drive
Chicago, IL 60606
(8/20/70)
|
|
Vice President
and Treasurer
|
|
Term/Annual
Length of Service:
Since 2009
|
|
Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer of Nuveen Investments Advisers Inc.,
Nuveen Investments Holdings, Inc., Nuveen Fund Advisors, Inc. and (since 2011) of Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC
and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior
Associate in Morgan Stanleys Global Financial Services Group (2000-2003); Chartered Accountant Designation.
|
|
|
231
|
|
|
|
|
|
|
Walter M. Kelly
333 West Wacker Drive
Chicago, IL 60606
(2/24/70)
|
|
Chief Compliance
Officer and Vice
President
|
|
Term/Annual
Length of Service:
Since 2003
|
|
Senior Vice President (since 2008) of Nuveen Investments Holdings, Inc.; Senior Vice President (since 2008), formerly, Vice President, of Nuveen Securities, LLC; Senior Vice
President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, Inc.
|
|
|
231
|
|
41
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Birth Date
|
|
Position(s) Held
with Fund
|
|
Term of Office
and Length of
Time Served
(1)
|
|
Principal Occupation(s)
During Past 5
Years
|
|
Number of
Portfolios
in Fund
Complex
Served by
Officer
|
|
Tina M. Lazar 333
West Wacker Drive
Chicago, IL 60606
(8/27/61)
|
|
Vice President
|
|
Term/Annual
Length of
Service: Since
2002
|
|
Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.
|
|
|
231
|
|
|
|
|
|
|
Kevin J. McCarthy
333 West Wacker Drive
Chicago, IL 60606
(3/26/66)
|
|
Vice President
and Secretary
|
|
Term/Annual
Length of
Service: Since
2007
|
|
Managing Director and Assistant Secretary (since 2008), formerly, Vice President (2007-2008) of Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since
2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Vice President and Assistant Secretary of Nuveen Investments
Advisers Inc., NWQ Investment Management Company, LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC and (since 2010) Winslow Capital Management, Inc.; Vice President and Secretary (since 2010) of Nuveen
Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007).
|
|
|
231
|
|
Kathleen L. Prudhomme
901 Marquette Avenue
Minneapolis, MN 55402
(3/30/53)
|
|
Vice President
and Assistant
Secretary
|
|
Term/Annual
Length of
Service: Since
2011
|
|
Managing Director and Assistant Secretary of Nuveen Securities, LLC (since 2011); Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors,
Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
|
|
|
231
|
|
(1)
|
Length of Time Served indicates the year the individual became an officer of a fund in the Nuveen fund complex.
|
42
BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHT
The Board of each Fund (together, the Board) oversees the operations and management of the Fund, including
the duties performed for the Fund by the Adviser. The Board has adopted a unitary board structure. A unitary board consists of one group of directors who serve on the board of every fund in the complex. In adopting a unitary board structure, the
Board Members seek to provide effective governance through establishing a board, the overall composition of which will, as a body, possess the appropriate skills, independence and experience to oversee the Funds business. With this overall
framework in mind, when the Board, through its Nominating and Governance Committee discussed below, seeks nominees for the Board, the Board Members consider, not only the candidates particular background, skills and experience, among other
things, but also whether such background, skills and experience enhance the Boards diversity and at the same time complement the Board given its current composition and the mix of skills and experiences of the incumbent Board Members. The
Nominating and Governance Committee believes that the Board generally benefits from diversity of background, experience and views among its members, and considers this a factor in evaluating the composition of the Board, but has not adopted any
specific policy on diversity or any particular definition of diversity.
The Board believes the unitary board structure
enhances good and effective governance, particularly given the nature of the structure of the investment company complex. Funds in the same complex generally are served by the same service providers and personnel and are governed by the same
regulatory scheme which raises common issues that must be addressed by the Board Members across the fund complex (such as compliance, valuation, liquidity, brokerage, trade allocation or risk management). The Board believes it is more efficient to
have a single board review and oversee common policies and procedures which increases the Boards knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances
the Boards influence and oversight over the Adviser and other service providers.
In an effort to enhance the
independence of the Board, the Board also has a Chairman that is an Independent Board Member. The Board recognizes that a chairman can perform an important role in setting the agenda for the Board, establishing the boardroom culture, establishing a
point person on behalf of the Board for Fund management, and reinforcing the Boards focus on the long-term interests of shareholders. The Board recognizes that a chairman may be able to better perform these functions without any conflicts of
interests arising from a position with Fund management. Accordingly, the Board Members have elected Robert P. Bremner as the independent Chairman of the Board. Specific responsibilities of the Chairman include: (i) presiding at all meetings of
the Board and of the shareholders; (ii) seeing that all orders and resolutions of the Board Members are carried into effect; and (iii) maintaining records of and, whenever necessary, certifying all proceedings of the Board Members and the
shareholders.
Although the Board has direct responsibility over various matters (such as advisory contracts, underwriting
contracts and Fund performance), the Board also exercises certain of its oversight responsibilities through several committees that it has established and which report back to the full Board. The Board believes that a committee structure is an
effective means to permit Board Members to focus on particular operations or issues affecting the Funds, including risk oversight. More specifically, with respect to risk oversight, the Board has delegated matters relating to valuation and
compliance to certain committees (as summarized below) as well as certain aspects of investment risk. In addition, the Board believes that the periodic rotation of Board Members among the different
43
committees allows the Board Members to gain additional and different perspectives of a Funds operations. The Board has established six standing committees: the Executive Committee, the
Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee, the Nominating and Governance Committee and the Closed-End Funds Committee. The Board may also from time to time create ad hoc committees to
focus on particular issues as the need arises. The membership and functions of the standing committees are summarized below.
The Executive Committee, which meets between regular meetings of the Board, is authorized to exercise all of the powers of the Board. The
members of the Executive Committee are Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian. The number of Executive Committee meetings of each Fund held during its last fiscal year is shown in Appendix D.
The Dividend Committee is authorized to declare distributions on each Funds shares including, but not limited to, regular and
special dividends, capital gains and ordinary income distributions. The members of the Dividend Committee are Jack B. Evans, Chair, Judith M. Stockdale and Terence J. Toth. The number of Dividend Committee meetings of each Fund held during its
last fiscal year is shown in Appendix D.
The Board has an Audit Committee, in accordance with Section 3(a)(58)(A)
of the 1934 Act, that is composed of Independent Board Members who are also independent as that term is defined in the listing standards pertaining to closed-end funds of the NYSE, NYSE Amex or NASDAQ Stock Market, LLC
(NASDAQ), as applicable. The Audit Committee assists the Board in: the oversight and monitoring of the accounting and reporting policies, processes and practices of the Funds, and the audits of the financial statements of the Funds; the
quality and integrity of the financial statements of the Funds; the Funds compliance with legal and regulatory requirements relating to the Funds financial statements; the independent auditors qualifications, performance and
independence; and the pricing procedures of the Funds and the internal valuation group of Nuveen. It is the responsibility of the Audit Committee to select, evaluate and replace any independent auditors (subject only to Board and, if applicable,
shareholder ratification) and to determine their compensation. The Audit Committee is also responsible for, among other things, overseeing the valuation of securities comprising the Funds portfolios. Subject to the Boards general
supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Funds pricing procedures and actions taken by Nuveens internal valuation group which provides regular reports to the committee, reviews any
issues relating to the valuation of the Funds securities brought to its attention, and considers the risks to the Funds in assessing the possible resolutions to these matters. The Audit Committee may also consider any financial risk exposures
for the Funds in conjunction with performing its functions.
To fulfill its oversight duties, the Audit Committee receives
annual and semi-annual reports and has regular meetings with the external auditors for the Funds and the internal audit group at Nuveen. The Audit Committee also may review in a general manner the processes the Board or other Board committees have
in place with respect to risk assessment and risk management as well as compliance with legal and regulatory matters relating to the Funds financial statements. The Audit Committee operates under a written Audit Committee Charter (the
Charter) adopted and approved by the Board, which Charter conforms to the listing standards of the NYSE, NYSE Amex or NASDAQ, as applicable. Members of the Audit Committee are independent (as set forth in the Charter) and free of any
relationship that, in the opinion of the Board Members, would interfere with their exercise of independent judgment as an Audit Committee member. The members of the Audit Committee are
44
Robert P. Bremner, David J. Kundert, Chair, William J. Schneider, Carole E. Stone and Terence J. Toth, each of whom is an Independent Board Member of the Funds. A copy of the
Charter is attached as Appendix E. The number of Audit Committee Meetings of each Fund held during its last fiscal year and, with respect to the Acquired Fund, held during the fiscal period of November 1, 2011 through November 30, 2011, is
shown in Appendix D.
The Compliance, Risk Management and Regulatory Oversight Committee (the Compliance
Committee) is responsible for the oversight of compliance issues, risk management and other regulatory matters affecting the Funds that are not otherwise under or within the jurisdiction of the other committees. The Board has adopted and
periodically reviews policies and procedures designed to address the Funds compliance and risk matters. As part of its duties, the Compliance Committee reviews the policies and procedures relating to compliance matters and recommends
modifications thereto as necessary or appropriate to the full Board; develops new policies and procedures as new regulatory matters affecting the Funds arise from time to time; evaluates or considers any comments or reports from examinations from
regulatory authorities and responses thereto; and performs any special reviews, investigations or other oversight responsibilities relating to risk management, compliance and/or regulatory matters as requested by the Board.
In addition, the Compliance Committee is responsible for risk oversight, including, but not limited to, the oversight of risks related to
investments and operations. Such risks include, among other things, exposures to particular issuers, market sectors, or types of securities; risks related to product structure elements, such as leverage; and techniques that may be used to address
those risks, such as hedging and swaps. In assessing issues brought to the Compliance Committees attention or in reviewing a particular policy, procedure, investment technique or strategy, the Compliance Committee evaluates the risks to the
Funds in adopting a particular approach or resolution compared to the anticipated benefits to the Funds and their shareholders. In fulfilling its obligations, the Compliance Committee meets on a quarterly basis, and at least once a year in person.
The Compliance Committee receives written and oral reports from the Funds Chief Compliance Officer (CCO) and meets privately with the CCO at each of its quarterly meetings. The CCO also provides an annual report to the full Board
regarding the operations of the Funds and other service providers compliance programs, as well as any recommendations for modifications thereto. The Compliance Committee also receives reports from the investment services group of Nuveen
regarding various investment risks. Notwithstanding the foregoing, the full Board also participates in discussions with management regarding certain matters relating to investment risk, such as the use of leverage and hedging. The investment
services group therefore also reports to the full Board at its quarterly meetings regarding, among other things, Fund performance and the various drivers of such performance. Accordingly, the Board directly and/or in conjunction with the Compliance
Committee oversees matters relating to investment risks. Matters not addressed at the committee level are addressed directly by the full Board. The Compliance Committee operates under a written charter adopted and approved by the Board. The members
of the Compliance Committee are Jack B. Evans, William C. Hunter, William J. Schneider, Judith M. Stockdale, Chair, and Virginia L. Stringer. The number of Compliance Committee meetings of each Fund held during its last fiscal year is shown in
Appendix D.
The Nominating and Governance Committee is responsible for seeking, identifying and recommending to the
Board qualified candidates for election or appointment to the Board. In addition, the Nominating and Governance Committee oversees matters of corporate governance, including the evaluation of Board performance and processes, the assignment and
rotation of committee members, and the establishment of corporate governance guidelines and procedures, to the extent necessary or
45
desirable, and matters related thereto. Although the unitary and committee structure has been developed over the years and the Nominating and Governance Committee believes the structure has
provided efficient and effective governance, the committee recognizes that as demands on the Board evolve over time (such as through an increase in the number of Funds overseen or an increase in the complexity of the issues raised), the committee
must continue to evaluate the Board and committee structures and their processes and modify the foregoing as may be necessary or appropriate to continue to provide effective governance. Accordingly, the Nominating and Governance Committee has a
separate meeting each year to, among other things, review the Board and committee structures, their performance and functions, and recommend any modifications thereto or alternative structures or processes that would enhance the Boards
governance over the Funds business.
In addition, the Nominating and Governance Committee, among other things, makes
recommendations concerning the continuing education of Board Members; monitors performance of legal counsel and other service providers; establishes and monitors a process by which security holders are able to communicate in writing with Board
Members; and periodically reviews and makes recommendations about any appropriate changes to Board Member compensation. In the event of a vacancy on the Board, the Nominating and Governance Committee receives suggestions from various sources,
including shareholders, as to suitable candidates. Suggestions should be sent in writing to Lorna Ferguson, Manager of Fund Board Relations, Nuveen, 333 West Wacker Drive, Chicago, IL 60606. The Nominating and Governance Committee sets appropriate
standards and requirements for nominations for new Board Members and each nominee is evaluated using the same standards. However, the Nominating and Governance Committee reserves the right to interview any and all candidates and to make the final
selection of any new Board Members. In considering a candidates qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence
site visits to internal and external sub-advisers and service providers) and, if qualifying as an Independent Board Member candidate, independence from the Adviser, sub-advisers, underwriters or other service providers, including any affiliates of
these entities. These skill and experience requirements may vary depending on the current composition of the Board, since the goal is to ensure an appropriate range of skills, diversity and experience, in the aggregate. Accordingly, the particular
factors considered and weight given to these factors will depend on the composition of the Board and the skills and backgrounds of the incumbent Board Members at the time of consideration of the nominees. All candidates, however, must meet high
expectations of personal integrity, independence, governance experience and professional competence. All candidates must be willing to be critical within the Board and with management and yet maintain a collegial and collaborative manner toward
other Board Members. The Nominating and Governance Committee operates under a written charter adopted and approved by the Board, a copy of which is available on the Funds website at www.nuveen.com/CEF/Info/Shareholder/, and is composed
entirely of Independent Board Members, who are also independent as defined by NYSE, NYSE Amex or NASDAQ listing standards, as applicable. Accordingly, the members of the Nominating and Governance Committee are Robert P. Bremner, Chair,
Jack B. Evans, William C. Hunter, David J. Kundert, William J. Schneider, Judith M. Stockdale, Carole E. Stone, Virginia L. Stringer and Terence J. Toth. The number of Nominating and Governance Committee meetings of each Fund held
during its last fiscal year is shown in Appendix D.
Effective January 1, 2012, the Board approved the creation of
the Closed-End Funds Committee. The Closed-End Funds Committee is responsible for assisting the Board in the oversight and monitoring of the Nuveen Funds that are registered as closed-end investment companies (Closed-End Funds). The
committee may review and evaluate matters related to the formation and
46
initial presentation to the Board of any new Closed-End Fund and may review and evaluate any matters relating to any existing Closed-End Fund. The committee operates under a written charter
adopted and approved by the Board. The members of the Closed-End Funds Committee are Robert P. Bremner, Jack B. Evans, William C. Hunter, William J. Schneider, Chair, and Carole E. Stone.
The number of regular quarterly meetings and special meetings held by the Board of each Fund during the Funds last fiscal year is
shown in Appendix D. During the last fiscal year, each Board Member attended 75% or more of each Funds Board meetings and the committee meetings (if a member thereof) held during the period for which such Board Member was a Board Member.
The policy of the Board relating to attendance by Board Members at annual meetings of the Funds and the number of Board Members who attended the last annual meeting of shareholders of each Fund is posted on the Funds website at
www.nuveen.com/CEF/Info/Shareholder/.
Board Diversification an
d Board Member Qualifications
In determining that a particular Board Member was qualified to serve on the Board, the Board considers each Board Members
background, skills, experience and other attributes in light of the composition of the Board with no particular factor controlling. The Board believes that Board Members need to have the ability to critically review, evaluate, question and discuss
information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties, and the Board believes each Board Member satisfies
this standard. An effective Board Member may achieve this ability through his or her educational background; business, professional training or practice; public service or academic positions; experience from service as a board member or executive of
investment funds, public companies or significant private or not-for-profit entities or other organizations; and/or other life experiences. Accordingly, set forth below is a summary of the experiences, qualifications, attributes, and skills that led
to the conclusion, as of the date of this document, that each Board Member should serve in that capacity. References to the experiences, qualifications, attributes and skills of Board Members are pursuant to requirements of the SEC, do not
constitute holding out the Board or any Board Member as having any special expertise or experience and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
John P. Amboian
Mr. Amboian, an interested Board Member of the Funds, joined Nuveen in June 1995 and became Chief Executive Officer in July 2007 and Chairman in November 2007. Prior to this, since
1999, he served as President with responsibility for the firms product, marketing, sales, operations and administrative activities. Mr. Amboian initially served Nuveen as Executive Vice President and Chief Financial Officer. Prior to
joining Nuveen, Mr. Amboian held key management positions with two consumer product firms affiliated with the Phillip Morris Companies. He served as Senior Vice President of Finance, Strategy and Systems at Miller Brewing Company.
Mr. Amboian began his career in corporate and international finance at Kraft Foods, Inc., where he eventually served as Treasurer. He received a Bachelors degree in economics and a Master of Business Administration (MBA) from
the University of Chicago. Mr. Amboian serves on the Board of Directors of Nuveen and is a Board Member or Trustee of the Investment Company Institute Board of Governors, Boys and Girls Clubs of Chicago, Childrens Memorial Hospital and
Foundation, the Council on the Graduate School of Business (University of Chicago), and the North Shore Country Day School Foundation. He is also a member of the Civic Committee of the Commercial Club of Chicago and the Economic Club of Chicago.
47
Robert P. Bremner
Mr. Bremner, the Boards Independent Chairman, is a private investor and management consultant in Washington, D.C. His
biography of William McChesney Martin, Jr., a former chairman of the Federal Reserve Board, was published by Yale University Press in November 2004. From 1994 to 1997, he was a Senior Vice President at Samuels International Associates, an
international consulting firm specializing in governmental policies, where he served in a part-time capacity. Previously, Mr. Bremner was a partner in the LBK Investors Partnership and was chairman and majority stockholder with ITC Investors
Inc., both private investment firms. He currently serves on the Board and as Treasurer of the Humanities Council of Washington D.C. and is a Board Member of the Independent Directors Council affiliated with the Investment Company Institute. From
1984 to 1996, Mr. Bremner was an independent Trustee of the Flagship Funds, a group of municipal open-end funds. He began his career at the World Bank in Washington D.C. He graduated with a Bachelor of Science degree from Yale University and
received his MBA from Harvard University.
Jack B. Evans
President of the Hall-Perrine Foundation, a private philanthropic corporation, since 1996, Mr. Evans was formerly President and
Chief Operating Officer of the SCI Financial Group, Inc., a regional financial services firm headquartered in Cedar Rapids, Iowa. Formerly, he was a member of the Board of the Federal Reserve Bank of Chicago as well as a Director of Alliant Energy.
Mr. Evans is Chairman of the Board of United Fire Group, sits on the Board of the Source Media Group, is a Member of the Board of Regents for the State of Iowa University System, and is a Life Trustee of Coe College. He has a Bachelor of Arts
degree from Coe College and an MBA from the University of Iowa.
William C. Hunter
Mr. Hunter was appointed Dean of the Henry B. Tippie College of Business at the University of Iowa effective July 1, 2006. He
had been Dean and Distinguished Professor of Finance at the University of Connecticut School of Business since June 2003. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago. While
there he served as the Banks Chief Economist and was an Associate Economist on the Federal Reserve Systems Federal Open Market Committee (FOMC). In addition to serving as a Vice President in charge of financial markets and basic research
at the Federal Reserve Bank in Atlanta, he held faculty positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. A past Director of the Credit Research Center at Georgetown University and past
President of the Financial Management Association International, he has consulted with numerous foreign central banks and official agencies in Western Europe, Central and Eastern Europe, Asia, Central America and South America. From 1990 to 1995, he
was a U.S. Treasury Advisor to Central and Eastern Europe. He has been a Director of the Xerox Corporation since 2004. He is a Director and President-Elect of Beta Gamma Sigma, Inc., the International Business Honor Society.
David J. Kundert
Mr. Kundert retired in 2004 as Chairman of JPMorgan Fleming Asset Management, as President and CEO of Banc One Investment Advisors Corporation, and as President of One Group Mutual Funds. Prior to
the merger between Bank One Corporation and JPMorgan Chase and Co., he
48
was Executive Vice President, Bank One Corporation and, since 1995, the Chairman and CEO, Banc One Investment Management Group. From 1988 to 1992, he was President and CEO of Bank One Wisconsin
Trust Company. Currently, Mr. Kundert is a Director of the Northwestern Mutual Wealth Management Company. He started his career as an attorney for Northwestern Mutual Life Insurance Company. Mr. Kundert has served on the Board of Governors
of the Investment Company Institute and is currently a member of the Wisconsin Bar Association. He is on the Board of the Greater Milwaukee Foundation and chairs its Investment Committee. He received his Bachelor of Arts degree from Luther College
and his Juris Doctor from Valparaiso University.
William J. Schneider
Mr. Schneider is currently Chairman, formerly Senior Partner and Chief Operating Officer (retired, December 2004) of
Miller-Valentine Partners Ltd., a real estate investment company. He was formerly a Director and Past Chair of the Dayton Development Coalition. He was formerly a member of the Community Advisory Board of the National City Bank in Dayton as well as
a former member of the Business Advisory Council of the Cleveland Federal Reserve Bank. Mr. Schneider is a member of the Business Advisory Council for the University of Dayton College of Business. Mr. Schneider was an independent Trustee
of the Flagship Funds, a group of municipal open-end funds. He also served as Chair of the Miami Valley Hospital and as Chair of the Finance Committee of its parent holding company. Mr. Schneider has a Bachelor of Science in Community Planning
from the University of Cincinnati and a Masters of Public Administration from the University of Dayton.
Judith M.
Stockdale
Ms. Stockdale is currently Executive Director of the Gaylord and Dorothy Donnelley Foundation, a
private foundation working in land conservation and artistic vitality in the Chicago region and the Lowcountry of South Carolina. Her previous positions include Executive Director of the Great Lakes Protection Fund, Executive Director of Openlands,
and Senior Staff Associate at the Chicago Community Trust. She has served on the Boards of the Land Trust Alliance, the National Zoological Park, the Governors Science Advisory Council (Illinois), the Nancy Ryerson Ranney Leadership Grants
Program, Friends of Ryerson Woods and the Donors Forum. Ms. Stockdale, a native of the United Kingdom, has a Bachelor of Science degree in geography from the University of Durham (UK) and a Master of Forest Science degree from Yale University.
Carole E. Stone
Ms. Stone retired from the New York State Division of the Budget in 2004, having served as its Director for nearly five years and as Deputy Director from 1995 through 1999. Ms. Stone is
currently on the Board of Directors of the Chicago Board Options Exchange, CBOE Holdings, Inc. and C2 Options Exchange, Incorporated. She has also served as the Chair of the New York Racing Association Oversight Board, as Chair of the Public
Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. Ms. Stone has a Bachelor of Arts from Skidmore
College in Business Administration.
Virginia L. Stringer
Ms. Stringer served as the independent chair of the Board of the First American Funds from 1997 to 2010, having joined that Board in
1987. Ms. Stringer serves on the board of the Mutual Fund
49
Directors Forum. She is a recipient of the Outstanding Corporate Director award from Twin Cities Business Monthly and the Minnesota Chapter of the National Association of Corporate Directors.
Ms. Stringer is the past board chair of the Oak Leaf Trust, director of the Saint Paul Riverfront Corporation and also served as President of the Minneapolis Clubs Governing Board. She is a director and former board chair of the Minnesota
Opera and a Life Trustee and former board member of the Voyageur Outward Bound School. She also served as a trustee of Outward Bound USA. She was appointed by the Governor of Minnesota to the Board on Judicial Standards and also served on a
Minnesota Supreme Court Judicial Advisory Committee to reform the states judicial disciplinary process. She is a member of the International Womens Forum and attended the London Business School as an International Business Fellow.
Ms. Stringer also served as board chair of the Human Resource Planning Society, the Minnesota Womens Campaign Fund and the Minnesota Womens Economic Roundtable. Ms. Stringer is the retired founder of Strategic Management
Resources, a consulting practice focused on corporate governance, strategy and leadership. She has twenty-five years of corporate experience, having held executive positions in general management, marketing and human resources with IBM and the
Pillsbury Company.
Terence J. Toth
Mr. Toth has served as a Director of Legal & General Investment Management America, Inc. (since 2008) and as a Managing
Partner at Promus Capital (since 2008). From 2004 to 2007, he was Chief Executive Officer and President of Northern Trust Global Investments, and Executive Vice President of Quantitative Management & Securities Lending from 2000 to 2004. He
also formerly served on the Board of the Northern Trust Mutual Funds. He joined Northern Trust in 1994 after serving as Managing Director and Head of Global Securities Lending at Bankers Trust (1986 to 1994) and Head of Government Trading and Cash
Collateral Investment at Northern Trust from 1982 to 1986. He currently serves on the Boards of the Goodman Theatre, Chicago Fellowship, and the Mather Foundation, and is Chairman of the Board of Catalyst Schools of Chicago. Mr. Toth graduated
with a Bachelor of Science degree from the University of Illinois, and received his MBA from New York University. In 2005, he graduated from the CEO Perspectives Program at Northwestern University.
Board Member Terms.
For MLP & Strategic Equity, all Board Members are elected annually. For Energy
MLP Total Return, shareholders will be asked to elect Board Members as each Board Members term expires, and with respect to Board Members elected by holders of common shares, such Board Member shall be elected for a term expiring at the time
of the third succeeding annual meeting subsequent to their election or thereafter in each case when their respective successors are duly elected and qualified. These provisions could delay for up to two years the replacement of a majority of the
Board.
Independent Chairman
The Board Members have elected Robert P. Bremner as the Independent Chairman of the Board. Specific responsibilities of the Chairman
include (a) presiding at all meetings of the Board and of the shareholders; (b) seeing that all orders and resolutions of the trustees are carried into effect; and (c) maintaining records of and, whenever necessary, certifying all
proceedings of the trustees and the shareholders.
50
Share
Ownership
The following table sets forth the dollar range of equity securities beneficially owned by each board member as of January 31,
2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Trustee
|
|
Dollar Range of
Equity Securities
in the Acquiring
Fund
|
|
|
Dollar Range of
Equity Securities
in the Acquired
Fund
|
|
|
Aggregate Dollar Range of
Equity Securities in All
Registered
Investment
Companies Overseen by Board
Member in Family of
Investment Companies
|
|
John P. Amboian
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
Robert P. Bremner
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
Jack B. Evans
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
William C. Hunter
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
David J. Kundert
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
William S. Schneider
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
Judith M. Stockdale
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
Carole E. Stone
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
Terence J. Toth
|
|
|
None
|
|
|
|
None
|
|
|
Over $
|
100,000
|
|
No board member who is not an interested person of the Funds or his immediate family member owns
beneficially or of record, any security of Nuveen Fund Advisors, Nuveen Asset Management, Nuveen or any person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with Nuveen Fund
Advisors, Nuveen Asset Management or Nuveen.
As of May 15, 2012, the officers and trustees of the Funds, in the
aggregate, own less than 1% of the Acquiring Funds equity securities.
The following chart lists each
shareholder or group of shareholders who beneficially owned more than 5% of any class of shares for each Fund as of May 15, 2012*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Pro Forma
|
|
Fund and Class
|
|
Shareholder Name and Address
|
|
Number of
Shares
Owned*
|
|
|
Percentage
Owned*
|
|
|
Corresponding
Class of
Combined
Fund
|
|
All Shares of
Combined
Fund
|
|
Acquiring Fund Common Shares
|
|
First Trust Portfolios
L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
1,395,693
|
|
|
|
5.90
|
%
|
|
Common
Shares
|
|
|
10.57
|
%
|
|
|
|
|
|
|
|
|
First Trust Advisors L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Charger Corporation
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Pro Forma
|
|
Fund and Class
|
|
Shareholder Name and Address
|
|
Number of
Shares
Owned*
|
|
|
Percentage
Owned*
|
|
|
Corresponding
Class of
Combined
Fund
|
|
All Shares of
Combined
Fund
|
|
Acquired Fund Common Shares
|
|
First Trust Portfolios L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
2,640,612
|
|
|
|
17.90
|
%
|
|
Common
Shares
|
|
|
10.57
|
%
|
|
|
|
|
|
|
|
|
First Trust Advisors L.P.
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Charger Corporation
(a)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
The information presented is based on Schedule 13G filings made on or before May 15, 2012.
|
(a)
|
First Trust Portfolios L.P., First Trust Advisors L.P. and The Charger Corporation filed their schedule 13G jointly and did not differentiate holdings as to each
entity.
|
Compensation
Prior to January 1, 2012, each Independent Board Member received a $120,000 annual retainer plus (a) a fee of $4,500 per day
for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance was
required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where
in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at
Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance was required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance was not required; (e) a
fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; and (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings)
where in-person attendance was required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance was not required, and $100 per meeting when the Executive
Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees were received for meetings held on days on which regularly scheduled Board meetings were held. In addition to the
payments described above, the Chairman of the Board received $75,000, the chairpersons of the Audit Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee received $10,000 each and the chairperson of
the Nominating and Governance Committee received $5,000 as additional retainers. Independent Board Members also received a fee of $3,000 per day for site visits to entities that provide services to the Nuveen funds on days on which no Board meeting
was held. When ad hoc committees were organized, the Nominating and Governance Committee at the time of formation determined compensation to be paid to the members of such committee; however, in general such fees were $1,000 per meeting for
attendance in person or by telephone at any ad hoc committee meetings where in-person attendance was required and $500 per meeting for attendance by telephone
52
or in person at such meetings where in-person attendance was not required. The annual retainer, fees and expenses were allocated among the funds managed by the Adviser, on the basis of relative
net assets, although fund management might have, in its discretion, established a minimum amount to be allocated to each fund.
Effective January 1, 2012, each Independent Board Member receives a $130,000 annual retainer plus (a) a fee of $4,500 per day
for attendance in person or by telephone at regularly scheduled meetings of the Board; (b) a fee of $3,000 per meeting for attendance in person or by telephone at special, non-regularly scheduled Board meetings where in-person attendance is
required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (c) a fee of $2,500 per meeting for attendance in person or by telephone at Audit Committee meetings where
in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (d) a fee of $2,500 per meeting for attendance in person or by telephone at
Compliance, Risk Management and Regulatory Oversight Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required; (e) a
fee of $1,000 per meeting for attendance in person or by telephone at Dividend Committee meetings; (f) a fee of $500 per meeting for attendance in person or by telephone at all other committee meetings ($1,000 for shareholder meetings) where
in-person attendance is required and $250 per meeting for attendance by telephone or in person at such committee meetings (excluding shareholder meetings) where in-person attendance is not required, and $100 per meeting when the Executive Committee
acts as pricing committee for IPOs, plus, in each case, expenses incurred in attending such meetings, provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held; and (g) a fee of $2,500 per
meeting for attendance in person or by telephone at Closed-End Funds Committee meetings where in-person attendance is required and $2,000 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not
required; provided that no fees are received for meetings held on days on which regularly scheduled Board meetings are held. In addition to the payments described above, the Chairman of the Board receives $75,000, the chairpersons of the Audit
Committee, the Dividend Committee and the Compliance, Risk Management and Regulatory Oversight Committee receive $12,500 each and the chairperson of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent Board
Members also receive a fee of $3,000 per day for site visits to entities that provide services to the Nuveen funds on days on which no Board meeting is held. When ad hoc committees are organized, the Nominating and Governance Committee will at the
time of formation determine compensation to be paid to the members of such committee; however, in general, such fees will be $1,000 per meeting for attendance in person or by telephone at ad hoc committee meetings where in-person attendance is
required and $500 per meeting for attendance by telephone or in person at such meetings where in-person attendance is not required. The annual retainer, fees and expenses are allocated among the Nuveen funds on the basis of relative net assets,
although management may, in its discretion, establish a minimum amount to be allocated to each Fund.
The boards of certain
Nuveen funds (the Participating Funds) established a Deferred Compensation Plan for Independent Board Members (Deferred Compensation Plan). Under the Deferred Compensation Plan, Independent Board Members of the Participating
Funds may defer receipt of all, or a portion, of the compensation they earn for their services to the Participating Funds, in lieu of receiving current payments of such compensation. Any deferred amount is treated as though an equivalent dollar
amount had been invested in shares of one or more eligible Nuveen funds.
53
The table below shows, the aggregate compensation paid by each Fund to each Independent
Board Member/Nominee for its last fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Compensation from the
Funds
(1)
|
|
Fund
|
|
Robert P.
Bremner
|
|
|
Jack B.
Evans
|
|
|
William C.
Hunter
|
|
|
David J.
Kundert
|
|
|
William J.
Schneider
|
|
|
Judith M.
Stockdale
|
|
|
Carole E.
Stone
|
|
|
Virginia L.
Stringer
|
|
|
Terence J.
Toth
|
|
Energy MLP Total Return
|
|
$
|
1,261
|
|
|
$
|
2,463
|
|
|
$
|
880
|
|
|
$
|
956
|
|
|
$
|
931
|
|
|
$
|
2,470
|
|
|
$
|
919
|
|
|
$
|
857
|
|
|
$
|
2,476
|
|
MLP & Strategic Equity* for fiscal year end Oct. 31, 2011
|
|
|
5,439
|
|
|
|
5,885
|
|
|
|
667
|
|
|
|
2,712
|
|
|
|
5,243
|
|
|
|
1,373
|
|
|
|
704
|
|
|
|
455
|
|
|
|
3,390
|
|
for fiscal period end Nov. 30, 2011
|
|
|
5,439
|
|
|
|
5,884
|
|
|
|
667
|
|
|
|
2,710
|
|
|
|
5,243
|
|
|
|
1,371
|
|
|
|
704
|
|
|
|
455
|
|
|
|
3,390
|
|
Total Compensation from Nuveen Funds Paid to Board Members/ Nominees
(2)
|
|
$
|
329,731
|
|
|
$
|
260,124
|
|
|
$
|
218,576
|
|
|
$
|
244,966
|
|
|
$
|
259,415
|
|
|
$
|
248,033
|
|
|
$
|
245,650
|
|
|
$
|
175,000
|
|
|
$
|
263,891
|
|
(1)
|
Includes deferred fees. Pursuant to the Deferred Compensation Plan, deferred amounts are treated as though an equivalent dollar amount has been invested in shares of
one or more eligible Nuveen Funds. Total deferred fees for the Funds (including the return from the assumed investment in the eligible Nuveen Funds) payable are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Robert P.
Bremner
|
|
|
Jack B.
Evans
|
|
|
William C.
Hunter
|
|
|
David J.
Kundert
|
|
|
William J.
Schneider
|
|
|
Judith M.
Stockdale
|
|
|
Carole E.
Stone
|
|
|
Virginia L.
Stringer
|
|
|
Terence J.
Toth
|
|
Energy MLP Total Return
|
|
$
|
136
|
|
|
$
|
547
|
|
|
$
|
638
|
|
|
$
|
692
|
|
|
|
|
|
|
$
|
1,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity* for fiscal year end Oct. 31, 2011
|
|
|
66
|
|
|
|
153
|
|
|
|
298
|
|
|
|
336
|
|
|
|
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for fiscal period end Nov. 30, 2011
|
|
|
65
|
|
|
|
152
|
|
|
|
298
|
|
|
|
334
|
|
|
|
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Based on the total compensation paid, including deferred fees (including the return from the assumed investment in the eligible Nuveen Funds), to the Board Members for
the calendar year ended December 31, 2011 for services to the Nuveen open-end and closed-end Funds advised by the Adviser.
|
*
|
Effective November 1, 2011, MLP & Strategic Equity changed its fiscal and tax year ends from October 31 to November 30. Accordingly, amounts are
shown for MLP & Strategic Equity for both the fiscal year end October 31, 2011 and the fiscal period end November 30, 2011.
|
The Funds have no employees. Their officers are compensated by Nuveen Investments or its affiliates.
INVESTMENT ADVISER AND SUB-ADVISER
Investment Adviser
Nuveen Fund Advisors, Inc. (Nuveen Fund Advisors or the Adviser),
(formerly known as, Nuveen Asset Management), is the investment adviser to each Fund and is responsible for managing each Funds overall investment strategy, monitoring the performance of each Funds subadviser and overseeing each
Funds use of leverage. Nuveen Fund Advisors also is responsible for managing each Funds business affairs and providing certain clerical, bookkeeping and other administrative services. Nuveen Fund Advisors is located at 333 West Wacker
Drive, Chicago, Illinois 60606.
The Adviser, a registered investment adviser, is a wholly-owned subsidiary of Nuveen
Investments, Inc. Founded in 1898, Nuveen Investments and its affiliates had approximately $198 billion of assets under management as of September 30, 2011. On November 13, 2007, Nuveen Investments was acquired by investors led by Madison
Dearborn Partners, LLC (the MDP Acquisition).
Nuveen Investments provides high-quality investment services
designed to help secure the long-term goals of institutions and high net-worth investors as well as the consultants and financial advisers who serve them. Nuveen Investments markets its growing range of specialized investment solutions under the
high-quality brands of NWQ, Nuveen, Santa Barbara, Symphony, Tradewinds and Winslow Capital.
54
The total dollar amounts paid to Nuveen Fund Advisors by each Fund under each Funds
Management Agreement for the last fiscal period, with respect to the Acquiring Fund, and for the last three fiscal periods, with respect to the Acquired Fund are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
11/30/2011
|
|
|
10/31/2011
|
|
|
10/31/2010
(3)
|
|
|
10/31/2009
(3)
|
|
Acquiring Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Advisory Fees
|
|
$
|
4,073,073
|
(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Waiver
|
|
$
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Net Advisory Fees
|
|
$
|
4,073,073
|
(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Acquired Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Advisory Fees
|
|
$
|
234,206
|
(2)
|
|
$
|
2,848,754
|
|
|
$
|
2,658,817
|
|
|
$
|
1,832,359
|
|
Waiver
|
|
$
|
(12,688
|
)
(2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Net Advisory Fees
|
|
$
|
221,518
|
(2)
|
|
$
|
2,848,754
|
|
|
$
|
2,658,817
|
|
|
$
|
1,832,359
|
|
(1)
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
(2)
|
For the period November 1, 2011 through November 30, 2011. Effective November 1, 2011, the Acquired Fund changed its fiscal and tax year ends from
October 31 to November 30. Accordingly, fees are shown for the Acquired Fund for both the fiscal year end October 31, 2011 and the fiscal period end November 30, 2011.
|
(3)
|
After the close of business on October 6, 2010, Nuveen Fund Advisors assumed the role of investment adviser for the Acquiring Fund for the IQ Investment Advisers LLC.
|
Sub-Adviser
Nuveen Fund Advisors has selected FAMCO MLP to serve as sub-adviser to each of the Funds. FAMCO MLP, a registered investment adviser, is a division of Advisory Research Inc. (ARI). ARI was
founded in 1974 and is a wholly-owned subsidiary of Piper Jaffray Companies, a publicly traded company listed on the New York Stock Exchange, trading under the symbol PJC. On March 30, 2012, the FAMCO MLP team and its business was transferred from
Fiduciary Asset Management Inc. to its affiliated investment adviser, ARI. All personnel that had previously comprised FAMCO MLP, including its investment management, research, trading, client servicing and compliance personnel, were relocated
within ARI. FAMCO MLP manages approximately $3.0 billion of MLP and energy infrastructure assets, which included the assets of three publicly traded MLP closed-end funds (including the Acquired Fund and the Acquiring Fund), as of
February 29, 2012.
For the services provided pursuant to an investment sub-advisory agreement between Nuveen
Fund Advisors and FAMCO MLP (the Sub-Advisory Agreement), Nuveen Fund Advisors pays FAMCO MLP a per annum portfolio management fee equal to 0.50% of each Funds managed assets and payable monthly.
PORTFOLIO MANAGERS
Unless otherwise indicated, the information below is provided as of the date of this SAI.
Portfolio Management
. Subject to the supervision of Nuveen Fund Advisors, FAMCO MLP has day-to-day responsibility for managing each Funds direct investments in MLPs and
other permitted investments.
James J. Cunnane, Jr. and Quinn T. Kiley serve as each Funds portfolio
managers and are primarily responsible for the day-to-day management of each Funds portfolio. Messrs. Cunnane and
55
Kiley have served as each Funds Portfolio Managers since the inception of each Fund - June 29, 2007 for the Acquired Fund and February 24, 2011 with respect to the Acquiring Fund.
Mr. Cunnane is the Managing Director and Chief Investment Officer of FAMCO MLP. He oversees the firms MLP and
energy infrastructure product lines and chairs the Risk Management Committee. He joined the FAMCO MLP team in 1996. Mr. Cunnane currently serves as a portfolio manager for three publicly traded closed-end mutual funds (which, in addition to the
Acquired Fund and the Acquiring Fund, includes the Fiduciary/Claymore MLP Opportunity Fund). He also serves as a portfolio manager for the FAMCO MLP & Energy Income Fund, an open-end mutual fund, as well as a privately offered open-end mutual
fund. Mr. Cunnane holds a B.S. in finance from Indiana University and is a Chartered Financial Analyst (CFA) charterholder. He serves on the finance council and investment committee of the Archdiocese of St. Louis and on the Board of Directors of
St. Patricks Center.
Mr. Kiley is the Managing Director and Senior Portfolio Manager of FAMCO MLP and his
responsibilities include portfolio management of various energy infrastructure assets and oversight of the energy infrastructure research process. He joined the FAMCO MLP team in 2005. Mr. Kiley serves as a portfolio manager for three publicly
traded closed-end mutual funds (which, in addition to the Acquired Fund and the Acquiring Fund, includes the Fiduciary/Claymore MLP Opportunity Fund). He also serves as a portfolio manager for the FAMCO MLP & Energy Income Fund, an open-end
mutual fund, as well as a privately offered open-end mutual fund. Prior to joining the FAMCO MLP team, Mr. Kiley served as Vice President of Corporate & Investment Banking at Banc of America Securities in New York. He was responsible for
executing strategic advisory and financing transactions for clients in the Energy & Power sectors. Mr. Kiley holds a B.S. with Honors in Geology from Washington & Lee University, a M.S. in Geology from the University of Montana, a Juris
Doctorate from Indiana University School of Law, and a M.B.A. from the Kelley School of Business at Indiana University. Mr. Kiley has been admitted to the New York State Bar.
In addition to serving as a portfolio manager to the Funds, Mr. Cunnane is also primarily responsible for the day-to-day portfolio
management of the following accounts. Information is provided as of
December 31, 2011
unless otherwise indicated:
|
|
|
|
|
|
|
|
|
Type of Account Managed
|
|
Number of
Accounts (Total)
|
|
|
Assets (Total)
|
|
Registered Investment Company
|
|
|
3
|
|
|
$
|
939,240,530
|
|
Other Pooled Investment Vehicles
|
|
|
4
|
|
|
$
|
65,258,650
|
|
Other Accounts
|
|
|
387
|
|
|
$
|
862,946,843
|
|
|
|
|
|
|
|
|
|
|
Type of Account Managed
|
|
Number of
Accounts with
Performance-
based Fees
|
|
|
Assets (Accounts
with
Performance-
based Fees)
|
|
Registered Investment Company
|
|
|
0
|
|
|
$
|
0
|
|
Other Pooled Investment Vehicles
|
|
|
1
|
|
|
$
|
21,597,247
|
|
Other Accounts
|
|
|
0
|
|
|
$
|
0
|
|
56
In addition to serving as a portfolio manager to the Funds, Mr. Kiley is also
primarily responsible for the day-to-day portfolio management of the following accounts. Information is provided as of
December 31, 2011
unless otherwise indicated:
|
|
|
|
|
|
|
|
|
Type of Account Managed
|
|
Number of
Accounts (Total)
|
|
|
Assets
(Total)
|
|
Registered Investment Company
|
|
|
3
|
|
|
$
|
939,240,530
|
|
Other Pooled Investment Vehicles
|
|
|
4
|
|
|
$
|
65,258,650
|
|
Other Accounts
|
|
|
387
|
|
|
$
|
862,946,843
|
|
|
|
|
|
|
|
|
|
|
Type of Account Managed
|
|
Number of
Accounts with
Performance-
based Fees
|
|
|
Assets (Accounts
with
Performance-
based Fees)
|
|
Registered Investment Company
|
|
|
0
|
|
|
$
|
0
|
|
Other Pooled Investment Vehicles
|
|
|
1
|
|
|
$
|
21,597,247
|
|
Other Accounts
|
|
|
0
|
|
|
$
|
0
|
|
Portfolio Manager Compensation
As of November 30, 2011, the portfolio managers compensation consisted of the following elements:
Base Salary.
The primary portfolio managers are paid a base salary which is set at a level determined to be
appropriate based upon the portfolio managers experience and responsibilities through the use of independent compensation surveys of the investment management industry.
Annual Bonus.
The portfolio managers annual bonus is determined by the CEO of the Subadviser pursuant to a specific company formula. It is not based on the performance
of the registrant or other managed accounts.
The monies paid are directly derived from a pool created from the
Subadvisers earnings. The bonus is payable in a combination of cash and restricted Piper Jaffray Companies stock.
Beneficial Ownership of Securities
The following table discloses the dollar range of equity securities of each Fund beneficially owned by the portfolio managers as of November 30, 2011:
|
|
|
|
|
|
|
|
|
Name of Portfolio Manager
|
|
Dollar Range of
Equity Securities
in the Acquiring
Fund
|
|
|
Dollar Range of
Equity Securities
in the Acquired
Fund
|
|
James J. Cunnane, Jr.
|
|
|
None
|
|
|
|
None
|
|
Quinn T. Kiley
|
|
$
|
10,001-$50,000
|
|
|
$
|
10,001-$50,000
|
|
Potential Conflicts of Interest
Nuveen Fund Advisors, the Subadviser and the portfolio managers have interests which may conflict with the interests of the Funds. There
is no guarantee that the policies and procedures adopted by Nuveen Fund Advisors, the Subadviser and the Funds will be able to identify or mitigate these conflicts of interest.
57
Some examples of material conflicts of interest include:
Allocation of Limited Time and Attention.
A portfolio manager who is responsible for managing multiple
funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. A portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of
those funds and accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. Such a portfolio manager may make general determinations across multiple funds, rather than tailoring a unique
approach for each fund. The effects of this conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.
Allocation of Limited Investment Opportunities; Aggregation of Orders.
If a portfolio manager identifies a
limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit a Funds ability to take full advantage of the investment
opportunity. Additionally, the Subadviser may aggregate transaction orders for multiple accounts for purpose of execution. Such aggregation may cause the price or brokerage costs to be less favorable to a particular client than if similar
transactions were not being executed concurrently for other accounts. In addition, the Subadvisers trade allocation policies may result in a Funds orders not being fully executed or being delayed in execution.
Pursuit of Differing Strategies.
At times, a portfolio manager may determine that an investment opportunity
may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In
these cases, the portfolio manager may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other
funds and/or accounts. For example, a portfolio manager may determine that it would be in the interest of another account to sell a security that a Fund holds long, potentially resulting in a decrease in the market value of the security held by a
Fund.
Cross Trades.
Portfolio managers may manage funds that engage in cross trades, where one
of the managers funds or accounts sells a particular security to another fund or account managed by the same manager. Cross trades may pose conflicts of interest because of, for example, the possibility that one account sells a security to
another account at a higher price than an independent third party would pay or otherwise enters into a transaction that it would not enter into with an independent party, such as the sale of a difficult-to-obtain security.
Selection of Broker/Dealers.
Portfolio managers may select or influence the selection of the brokers and
dealers that are used to execute securities transactions for the funds and/or accounts that they supervise. In addition to executing trades, some brokers and dealers provide the Subadviser with brokerage and research services, These services may be
taken into account in the selection of brokers and dealers whether a broker is being selected to effect a trade on an agency basis for a commission or whether a dealer is being selected to effect a trade on a principal basis. This may result in the
payment of higher brokerage fees and/or execution at a less favorable price than might have otherwise been available. The services obtained may ultimately be more beneficial to certain of the managers funds or accounts than to others (but not
necessarily to the funds that pay the increased commission or incur the less favorable execution). A decision as to the selection of brokers and dealers could therefore yield disproportionate costs and benefits among the funds and/or accounts
managed.
58
Variation in Financial and Other Benefits.
A conflict of
interest arises where the financial or other benefits available to a portfolio manager differ among the funds and/or accounts that he or she manages. If the amount or structure of the investment managers management fee and/or a portfolio
managers compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager might be motivated to help certain funds and/or accounts
over others. Similarly, the desire to maintain assets under management or to enhance the portfolio managers performance record or to derive other rewards, financial or otherwise, could influence the portfolio manager in affording preferential
treatment to those funds and/or accounts that could most significantly benefit the portfolio manager. A portfolio manager may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of
investments to favor such funds and/or accounts. Also, a portfolio managers or Nuveen Fund Advisors or the Subadvisers desire to increase assets under management could influence the portfolio manager to keep a fund open for new
investors without regard to potential benefits of closing the fund to new investors. Additionally, the portfolio manager might be motivated to favor funds and/or accounts in which he or she has an ownership interest or in which the investment
manager and/or its affiliates have ownership interests. Conversely, if a portfolio manager does not personally hold an investment in the fund, the portfolio managers conflicts of interest with respect to the Fund may be more acute.
Related Business Opportunities.
Nuveen Fund Advisors or its affiliates may provide more services (such as
distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of funds and/or accounts that
provide greater overall returns to the investment manager and its affiliates.
A portfolio manager may also face other
potential conflicts of interest in managing the Fund, and the description above is not a complete description of every conflict of interest that could be deemed to exist in managing both a Fund and the other accounts listed above.
Code of Ethics
The Funds, Nuveen Fund Advisors, the Subadviser, Nuveen Investments and other related entities have adopted codes of ethics under Rule 17j-1 under the 1940 Act that essentially prohibit certain of their
personnel, including the Funds portfolio managers, from engaging in personal investments that compete or interfere with, or attempt to take advantage of a clients, including the Funds, anticipated or actual portfolio transactions,
and are designed to assure that the interests of clients, including Fund shareholders, are placed before the interests of personnel in connection with personal investment transactions. Personnel subject to a code of ethics may invest in securities
for their personnel investment accounts, including securities that may be purchased or held by the Funds, but only so long as such investments are made in accordance with a codes requirements. Text-only versions of the codes of ethics of the
Funds, Nuveen Fund Advisors and the Subadvisor can be viewed online or downloaded from the EDGAR Database on the SECs internet web site at www.sec.gov. You may also review and copy those documents by visiting the SECs Public Reference
Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090. In addition, copies of those codes of ethics may be obtained, after mailing the appropriate duplicating fee, by
writing to the SECs Public Reference Section, 100 F Street, N.E., Washington, DC 20549-0102 or by e-mail request at publicinfo@sec.gov.
59
PROXY VOTING POLICIES AND PROCEDURES
Nuveen Fund Advisors has delegated to the Subadviser the authority to vote all proxies relating to each Funds portfolio securities
pursuant to the proxy voting policies and procedures set out in Appendix B hereto. Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ending June 30 of each year is
available starting August 31 of that year without charge, upon request, by calling toll free 1-877-449-4742 or through the SECs website at http://www.sec.gov. This reference to the website does not incorporate the contents of the website
into this prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Pursuant to the Management Agreement and the Sub-Advisory Agreement, each of Nuveen Fund Advisors and the Subadviser is authorized to
place orders pursuant to its investment determinations for each Fund either directly with the issuer or with any broker or dealer, foreign currency dealer, futures commission merchant or others selected by it. The general policy of Nuveen Fund
Advisors and the Subadviser in selecting brokers and dealers is to obtain the best results achievable in the context of a number of factors which are considered both in relation to individual trades and broader trading patterns, including the
reliability of the broker/dealer, the competitiveness of the price and the commission, the research services received and whether the broker/dealer commits its own capital.
In connection with the selection of such brokers or dealers and the placing of such orders, subject to applicable law, brokers or dealers may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934 Act)) to each Fund and/or the other accounts over which Nuveen Fund Advisors, the Subadviser or their affiliates exercise
investment discretion. Nuveen Fund Advisors and the Subadviser are authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for a Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that transaction if Nuveen Fund Advisors or the Subadviser, as applicable, determines in good faith that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. Investment research services include information and analysis on particular companies and industries as well as market or economic trends and portfolio strategy, market quotations
for portfolio evaluations, analytical software and similar products and services. If a research service also assists Nuveen Fund Advisors or the Subadviser in a non-research capacity (such as bookkeeping or other administrative functions), then only
the percentage or component that provides assistance to Nuveen Fund Advisors or the Subadviser in the investment decision making process may be paid in commission dollars. This determination may be viewed in terms of either that particular
transaction or the overall responsibilities that Nuveen Fund Advisors or the Subadviser, as applicable, and its affiliates have with respect to accounts over which they exercise investment discretion. Nuveen Fund Advisors and the Subadviser may also
have arrangements with brokers pursuant to which such brokers provide research services to Nuveen Fund Advisors or the Subadviser, as applicable, in exchange for a certain volume of brokerage transactions to be executed by such brokers. While the
payment of higher commissions increases a Funds costs, Nuveen Fund Advisors and the Subadviser do not believe that the receipt of such brokerage and research services significantly reduces its expenses as Nuveen Fund Advisors or the
Subadviser, as applicable. Arrangements for the receipt of research services from brokers may create conflicts of interest.
60
Research services furnished to Nuveen Fund Advisors or the Subadviser by brokers that effect
securities transactions for the fund may be used by Nuveen Fund Advisors or the Subadviser, as applicable, in servicing other investment companies and accounts which it manages. Similarly, research services furnished to Nuveen Fund Advisors or the
Subadviser by brokers who effect securities transactions for other investment companies and accounts which Nuveen Fund Advisors or the Subadviser manages may be used by Nuveen Fund Advisors or the Subadviser, as applicable, in servicing each Fund.
Not all of these research services are used by the Nuveen Fund Advisors or the Subadviser in managing any particular account, including the Funds.
Each Fund contemplates that, consistent with the policy of obtaining the best net results, brokerage transactions may be conducted through affiliated broker/dealers, as defined in the 1940
Act. The Board has adopted procedures in accordance with Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such affiliates are reasonable and fair in the context of the market in which such affiliates operate.
In certain instances there may be securities that are suitable as an investment for a Fund as well as for one or more of
Nuveen Fund Advisors or the Subadvisers other clients. Investment decisions for each Fund and for Nuveen Fund Advisors or the Subadvisers other clients are made with a view to achieving their respective investment objectives.
It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more clients are
selling the same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could
adversely affect the price of or the size of the position obtainable in a security for the fund. When purchases or sales of the same security for a Fund and for other portfolios managed by Nuveen Fund Advisors or the Subadviser, as applicable, occur
contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantages available to large volume purchases or sales.
Although the Funds do not have any restrictions on portfolio turnover, it is not the Funds policy to engage in transactions with the objective of seeking profits from short-term trading. The
portfolio turnover rate is calculated by dividing the lesser of sales or purchases of portfolio securities by the average monthly value of a Funds portfolio securities. For purposes of this calculation, portfolio securities exclude all
securities having a maturity when purchased of one year or less. A high rate of portfolio turnover involves correspondingly greater transaction costs than a lower rate, which costs are borne by a Fund and its shareholders. The following table sets
forth the aggregate amount of brokerage commissions paid by each Fund for the last three fiscal years (or such shorter period, as applicable):
Fiscal Year/Period Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30,
2011
|
|
|
October 31,
2011
|
|
|
October 31,
2010
(3)
|
|
|
October 31,
2009
|
|
Acquiring Fund
|
|
$
|
733,617
|
(1)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Acquired Fund
|
|
$
|
73,968
|
(2)
|
|
$
|
166,524
|
|
|
$
|
39,081
|
|
|
$
|
185,982
|
|
(1)
|
The aggregate brokerage commissions paid by the Acquiring Fund is calculated from February 24, 2011 (commencement of operations) through November
30, 2011.
|
61
(2)
|
For the period November 1, 2011 through November 30, 2011. Effective November 1, 2011, the Acquiring Fund changed its fiscal and tax year ends from
October 31 to November 30. Accordingly, amounts are shown for the Acquiring Fund for both the fiscal year end October 31, 2011 and the fiscal period end November 30, 2011.
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After the close of business on October 6, 2010, Nuveen Fund Advisors assumed the role of investment adviser for the Acquiring Fund from IQ Investment Advisers LLC.
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RE
PURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
Although it is under no obligation to do so, each Fund reserves the right to repurchase its shares on the open market in accordance with
the 1940 Act and the rules and regulations thereunder. Subject to its investment limitations, each Fund may borrow to finance the repurchase of shares or to make a tender offer. Interest on any borrowings to finance share repurchase transactions or
the accumulation of cash by a Fund in anticipation of share repurchases or tenders will reduce such Funds net income. Any share repurchase, tender offer or borrowing that might be approved by the Funds Board would also have to comply
with the 1934 Act and the 1940 Act and the rules and regulations thereunder.
The repurchase by a Fund of its shares at prices
below net asset value may result in an increase in the net asset value of those shares that remain outstanding. However, there can be no assurance that share repurchases or tenders at or below net asset value will result in a Funds shares
trading at a price equal to their net asset value. In addition, a purchase by a Fund of its common shares will decrease the Funds total assets, which would likely have the effect of increasing the Funds expense ratio.
If a Fund converted to an open-end investment company, the common shares would no longer be listed on the NYSE or elsewhere. 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 the 1940 Act or the rules thereunder) at their net asset
value, less any redemption charge that is in effect at the time of redemption. In order to avoid maintaining large cash positions or liquidating favorable investments to meet redemptions, an open-end investment company typically engages in a
continuous offering of its shares. Open-end investment companies are thus subject to periodic asset in-flows and out-flows that can complicate portfolio management.
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 a Funds portfolio, the impact of any action that might be taken on a Fund or its shareholders, and market considerations. Based on these considerations, even if a Funds shares should trade at a discount, the Board may determine that,
in the interest of such Fund and its shareholders, no action should be taken.
The Acquiring Fund Declaration of Trust
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 Acquiring Fund Declaration of Trust requires a vote by holders of at least
two-thirds of the common shares and preferred shares, voting 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 Funds assets (other than in the regular
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course of the Funds 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 Acquiring Fund
Declaration of Trust or the Acquiring Funds By-Laws, in which case the affirmative vote of the holders of at least a majority of the Funds common shares and preferred shares (if any) outstanding at the time, voting 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. In the case of the conversion of the Acquiring 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 Acquiring Funds 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 Acquiring Fund Declaration of Trust or the Acquiring Funds By-Laws, the affirmative vote of the holders of at least a majority of the Acquiring
Funds preferred shares outstanding at the time, voting as a separate class. 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 as a single class. The
votes required to approve the conversion of the Acquiring 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 Acquiring Funds Board believes that the provisions of the Acquiring Fund Declaration of Trust relating to such higher votes are in the best interest of the Acquiring Fund.
FEDERAL INCOME TAX MATTERS
The following is a general summary of certain U.S. federal income tax consequences that may be relevant to a shareholder that acquires, holds and/or disposes of common shares of a Fund. This discussion
only addresses U.S. federal income tax consequences to shareholders who hold their common shares as capital assets and does not address all of the U.S. federal income tax consequences that may be relevant to particular shareholders in light of their
individual circumstances. In addition, the discussion does not address any state, local, or foreign tax consequences. The discussion reflects applicable tax laws of the United States as of the date of this SAI, which tax laws may be changed or
subject to new interpretations by the courts or the Internal Revenue Service (the IRS) retroactively or prospectively. No attempt is made to present a detailed explanation of all U.S. federal income tax concerns affecting a Fund and its
shareholders, and the discussion set forth herein does not constitute tax advice. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES TO THEM OF INVESTING IN A FUND, INCLUDING THE APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS.
This summary does not
represent a detailed description of the United States federal income tax consequences applicable to a shareholder if such holder is subject to special treatment under the United States federal income tax laws, including if the holder is:
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a dealer in securities or currencies;
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt organization;
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a person holding shares of a Fund as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;
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a trader in securities that has elected the mark-to-market method of accounting for its securities;
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a person liable for alternative minimum tax;
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a partnership or other pass-through entity for United States federal income tax purposes; or
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a U.S. Holder (as defined below) whose functional currency is not the United States dollar.
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As used herein, the term U.S. Holder means a beneficial owner of common shares of a Fund that is for United States federal
income tax purposes:
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an individual citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to United States federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the
authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
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As used herein, the term non-U.S. Holder means a beneficial owner of common shares of a Fund that is neither a U.S. Holder
nor a partnership (or other entity treated as a partnership for United States federal income tax purpose).
The discussion
below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the Code), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified,
possibly with retroactive effect, so as to result in United States federal income tax consequences different from those discussed below.
If a partnership holds common shares of a Fund, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Investors that are partners in a
partnership holding common shares of a Fund should consult their tax advisors.
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This summary does not contain a detailed description of all the United States federal income
tax consequences applicable to the Funds or to investors in light of their particular circumstances, and does not address the effects of any state, local or non-United States tax laws. Investors should consult their own tax advisors concerning the
United States federal income tax consequences to them of acquiring, owning and disposing of common shares of the Funds in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.
Taxation of the Fund
Each Fund is treated as a regular corporation, or a C corporation, for United States federal income tax purposes. Accordingly, each Fund generally will be subject to United States federal
income tax on its taxable income at the graduated rates applicable to corporations (currently at a maximum rate of 35%). Such taxable income would generally include, among other items, all of a Funds net income from its investments in the
equity securities of MLPs, other types of equity securities, derivatives, debt securities, royalty trusts and foreign securities less Fund expenses. Each Fund may be subject to a 20% alternative minimum tax on its alternative minimum taxable income
to the extent that the alternative minimum tax exceeds the Funds regular income tax liability. Each Funds payment of corporate income tax or alternative minimum tax could materially reduce the amount of cash available for the Fund to
make distributions on its common shares. In addition, distributions to common shareholders of a Fund will be taxed under United States federal income tax laws applicable to corporate distributions, and thus the Funds taxable income will be
subject to a double layer of taxation. As a regular corporation, each Fund may also be subject to state income tax or foreign tax by reason of its investments in equity securities of MLPs.
The income from equity securities of certain MLPs is treated as qualifying income for purposes of qualifying as a regulated investment
company under the Code. However, a regulated investment company may not invest more than 25% of its assets in the equity securities of MLPs. Thus, neither Fund expects to be eligible to elect to be treated as a regulated investment company, because
each Fund intends to invest more than 25% of its assets in the equity securities of MLPs.
Certain of the Funds
Investments
MLP Equity Securities
. MLPs are generally characterized as publicly
traded partnerships for United States federal income tax purposes, because MLPs are typically organized as limited partnerships or limited liability companies that are publicly traded. The Code generally requires all publicly traded
partnerships to be treated as corporations for United States federal income tax purposes. If, however, a publicly traded partnership satisfies specific requirements, the publicly traded partnership will be taxed as a partnership for United States
federal income tax purposes. Each Fund intends to invest in MLPs that satisfy (and references in this discussion to MLPs include only those MLPs that satisfy) these requirements. Under these requirements, an MLP is required to derive at least 90% of
its gross income for each taxable year from specified sources of qualifying income, such as interest, dividends, real property rents, gain from the sale or disposition of real property, gains on sales of certain capital assets, and in certain
limited circumstances, income and gain from commodities or futures, forwards and options with respect to commodities. Qualifying income also includes income and gains derived from mineral or natural resources (including energy related) activities,
including the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil, or products thereof), or the marketing of any mineral or natural resource (including fertilizer,
geothermal energy, and timber), industrial source carbon dioxide, or the transportation or storage of certain fuels (including alcohol, biodiesel and alternative fuels).
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If the MLPs are taxed as partnerships, the MLPs will be taxed differently from corporations
for United States federal income tax purposes. A corporation is required to pay United States federal income tax on its income, and, to the extent the corporation makes distributions to its stockholders in the form of dividends from current or
accumulated earnings and profits, its stockholders are required to pay United States federal income tax on such dividends. For this reason, it is said that corporate income is taxed at two levels. MLPs, in contrast, are generally taxed as
partnerships for United States federal income tax purposes if they meet the income requirements discussed above. In such case, no United States federal income tax would be imposed at the MLP entity level. Instead, the partnerships items of
taxable income, gain, loss, deductions, expenses and credits are generally allocated among all the partners in proportion to their interests in the partnership. Each partner is required to include in income its allocable shares of these tax items.
Partnership income is thus said to be taxed only at one levelat the partner level.
Although distributions from MLPs
resemble corporate dividends, they are treated differently for United States federal income tax purposes. A distribution from an MLP is treated as a tax-free return of capital to the extent of the partners tax basis in its MLP interest and as
gain from the sale or exchange of the MLP interest to the extent the distribution exceeds the partners tax basis in its MLP interest. When a Fund invests in the equity securities of an MLP, the Fund will be a partner in such MLP. Accordingly,
a Fund will be required to include in its taxable income the Funds allocable share of the income, gains, losses and deductions recognized by each such MLP, whether or not the MLP distributes cash to the Fund. Based upon a review of the
historic results of the type of MLPs in which the Funds invest and intend to invest, each Fund expects that the cash distributions it will receive with respect its investments in equity securities of MLPs will exceed the taxable income allocated to
the Fund from such MLPs. No assurance, however, can be given in this regard. If this expectation is not realized, a Fund will have more corporate income tax expense than expected, which will result in less cash available to distribute to its common
shareholders.
Each Fund will recognize gain or loss on the sale, exchange or other taxable disposition of an equity security
of an MLP equal to the difference between the amount realized by the Fund on the sale, exchange or other taxable disposition and the Funds adjusted basis in such equity security. Any such gain will be subject to United States federal income
tax at the regular graduated corporate rates (currently at a maximum rate of 35%). Because each Fund will be taxed as a regular corporation, it will not be eligible for reduced rates of taxation with respect to such gain, even if such gain is
long-term capital gain. The amount realized by a Fund generally will be the amount paid by the purchaser of the equity security plus the portion of the Funds allocable share, if any, of the MLPs debt that will be allocated to the
purchaser as a result of the sale, exchange or other taxable disposition. Each Funds adjusted basis in its equity securities in an MLP is generally equal to the amount the Fund paid for the equity securities, (x) increased by the
Funds allocable share of the MLPs net taxable income and the Funds allocable share of the MLPs debt, if any, and (y) decreased by the Funds allocable share of the MLPs net losses, reductions in the
Funds allocable share of the MLPs debt, if any, and any distributions received by the Fund from the MLP. Although any distribution by an MLP to a Fund in excess of the Funds allocable share of such MLPs net taxable income
generally will not be taxable to the extent the distribution does not exceed the Funds basis in the MLP, such distribution will reduce the Funds basis and thus increase the amount of gain (or decrease the amount of loss) that will be
recognized on the sale of an equity security in the MLP by the Fund or on a subsequent distribution by the MLP to the Fund.
Each Funds allocable share of certain percentage-depletion deductions and intangible drilling costs of the MLPs in which the Fund
invests may be treated as items of tax preference for purposes of
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calculating the Funds alternative minimum taxable income. Such items will increase a Funds alternative minimum taxable income and increase the likelihood that the Fund may be subject
to the alternative minimum tax.
Other Investments
. A Funds transactions in foreign
currencies, forward contracts, options and futures contracts (including options and futures contracts on foreign currencies), to the extent permitted, will be subject to special provisions of the Code (including provisions relating to hedging
transactions and straddles) that, among other things, may affect the character of gains and losses realized by the Fund ( i.e., may affect whether gains or losses are ordinary or capital or short-term versus long-term), accelerate
recognition of income to the Fund and defer Fund losses. These provisions also (a) will require a Fund to mark-to-market certain types of the positions in its portfolio (i.e., treat them as if they were closed out at the end of each year) and
(b) may cause a Fund to recognize income without receiving a corresponding amount of cash. If a Fund invests in debt obligations having original issue discount, the Fund may recognize taxable income from such investments in excess of any cash
received from the investments.
Foreign Investments
. Dividends or other income (including, in
some cases, capital gains) received by a Fund from investments in non-United States securities may be subject to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or
eliminate such taxes in some cases. Foreign taxes paid by a Fund will reduce the return from the Funds investments. Shareholders will not be entitled to claim credits or deductions on their own tax returns for foreign taxes paid by a Fund.
U.S. Holders
Taxation of Dividends
The gross amount of distributions by a Fund
in respect of its common shares will be taxable to a U.S. Holder as dividend income to the extent the distributions are paid out of the Funds current or accumulated earnings and profits, as determined under United States federal income tax
principles. Subject to certain holding period and other requirements, such dividend income will generally be eligible for the dividends received deduction in the case of corporate U.S. Holders and, in the case of dividends paid in taxable years
beginning on or before December 31, 2012, will generally be treated as qualified dividend income for non-corporate U.S. Holders (including individuals) and will be eligible for reduced rates of taxation.
To the extent that the amount of any distribution exceeds a Funds current and accumulated earnings and profits for a taxable year,
as determined under United States federal income tax principles, the distribution to a holder of common shares will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the common shares (thereby increasing
the amount of gain, or decreasing the amount of loss, to be recognized by a U.S. Holder on a subsequent disposition of such common shares), and the balance in excess of adjusted basis will be taxed as capital gain. Any such capital gain will be
long-term capital gain if such U.S. Holder has held the applicable common shares for more than one year.
A corporations
earnings and profits are generally calculated by making certain adjustments to the corporations reported taxable income. Based upon the historic performance of the MLPs in which the Funds have invested or which are similar to such investments,
each Fund anticipates that the distributed cash from the MLPs in its portfolio will exceed its earnings and profits. Thus, each Fund
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anticipates that only a portion of its distributions will be treated as dividends to its common shareholders for United States federal income tax purposes, although no assurance can be given in
this regard.
Each Funds earnings and profits may be calculated using accounting methods that are different from those
used for calculating taxable income. For instance, a Fund may use a less accelerated method of depreciation and depletion for purposes of computing its earnings and profits than the method used for purposes of calculating the taxable income of the
MLP. In that case, a Funds earnings and profits would not be increased solely by its allocable share of the MLPs taxable income, but would also have to be increased for the amount by which the more accelerated depreciation and depletion
methods used for purposes of computing taxable income exceed the less accelerated methods used for purposes of computing earnings and profits. Because of these differences, a Fund may make distributions out of its current or accumulated earnings and
profits, treated as dividends, in years in which the Funds distributions exceed its taxable income.
Distributions will
be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional common shares of a Fund. Common shareholders receiving distributions in the form of additional common shares of a Fund will
be treated as receiving a distribution in an amount equal to either the cash that they would have received if they had elected to receive the distribution in cash or, if the distribution is invested in newly issued shares of the Fund, the fair
market value of the shares issued to the shareholder.
Taxation of Capital Gains
A U.S. Holder generally will recognize taxable gain or loss on any sale, exchange or other taxable disposition of common shares in an
amount equal to the difference between the amount realized for the common shares and the holders adjusted basis in such common shares. Generally, a U.S. Holders adjusted basis in the common shares will be equal to the cost of the
holders common shares, reduced by adjustments for distributions paid by the Fund in excess of its earnings and profits (i.e., returns of capital). Such gain or loss will generally be capital gain or loss. Capital gains of non-corporate U.S.
Holders (including individuals) derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Tax on Net Investment Income
For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on net investment income of U.S. individuals, estates and trusts to the extent that
such persons modified adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an estate or trust) exceeds a threshold amount. For this purpose, net investment income
will generally include interest, dividends (including dividends paid with respect to a Funds common shares), annuities, royalties, rent, net gain attributable to the disposition of property not held in a trade or business (including net gain
from the sale, exchange or other taxable disposition of a Funds common shares) and certain other income, but will be reduced by any deductions properly allocable to such income or net gain. Shareholders are advised to consult their own tax
advisors regarding this additional taxation of net investment income.
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Non-U.S. Holders
The following discussion is a summary of certain United States federal income tax consequences that will apply to non-U.S. Holders.
Special rules may apply to certain non-U.S. Holders, such as controlled foreign corporations, passive foreign investment companies and certain expatriates, among others, that are subject to special treatment under the Code.
Such non-U.S. Holders should consult their own tax advisors to determine the United States federal, state, local and other tax consequences that may be relevant to them.
Taxation of Dividends
The gross amount of distributions by a Fund
in respect of its common shares will be treated as dividends to the extent paid out of the Funds current or accumulated earnings and profits, as determined under United States federal income tax principles. Dividends paid to a non-U.S. Holder
generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or
business by a non-U.S. Holder within the United States (and, if required by an applicable income tax treaty, are attributable to a United States permanent establishment) are not subject to the withholding tax, provided certain certification and
disclosure requirements (generally on an IRS Form W-8ECI) are satisfied. Instead, such dividends are subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. Holder were a United States person as
defined under the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax
treaty.
A non-U.S. Holder who wishes to claim the benefits of an applicable income tax treaty or avoid backup withholding (as
discussed below) for dividends will be required (a) to complete IRS Form W-8BEN (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and, if applicable, is
eligible for treaty benefits or (b) if shares are held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury regulations. Special certification and other requirements
apply to certain non-U.S. Holders that are pass-through entities rather than corporations or individuals.
A non-U.S. Holder
eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
If the amount of a distribution to a non-U.S. Holder exceeds a Funds current and accumulated earnings and profits, such excess will
be treated first as a tax-free return of capital to the extent of the non-U.S. Holders basis in its shares, and then as capital gain. As discussed above under the caption U.S. HoldersTaxation of Dividends, each Fund
expects that only a portion of its distributions to its shareholders with respect to its common shares will be treated as dividends for United States federal income tax purposes, although no assurance can be given in this regard. Capital gain
recognized by a non-U.S. Holder as a consequence of a distribution by a Fund in excess of its current and accumulated earnings and profits will generally not be subject to United States federal income tax, except as described below under the caption
Taxation of Capital Gains.
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Taxation of Capital Gains
A non-U.S. Holder generally will not be subject to United States federal income tax on any gain realized on the disposition of shares of
a Fund unless:
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the gain is effectively connected with a trade or business of the non-U.S. Holder in the United States (and, if required by an applicable income tax
treaty, is attributable to a United States permanent establishment of the non-U.S. Holder);
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the non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain
other conditions are met; or
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the Fund is or has been a United States real property holding corporation for United States federal income tax purposes.
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An individual non-U.S. Holder described in the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated United States federal income tax rates. An individual non-U.S. Holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. Holder that is a foreign corporation falls under the first bullet point immediately above,
the holder will be subject to tax on its net gain in the same manner as if the holder were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings
and profits or at such lower rate as may be specified by an applicable income tax treaty.
A Fund may be a United States
real property holding corporation for United States federal income tax purposes. With respect to the third bullet point above, if a Fund is or becomes a United States real property holding corporation, so long as the Funds
common shares are regularly traded on an established securities market (such as the NYSE), only a non-U.S. Holder who holds or held (at any time during the shorter of the five-year period preceding the date of disposition or the holders
holding period) more than 5% (directly or indirectly as determined under applicable attribution rules of the Code) of the Funds common shares will be subject to United States federal income tax as described in the third bullet point above on
the disposition of common shares.
Information Reporting and Backup Withholding
U.S. Holders
In general, information reporting will apply to distributions in respect of a Funds shares and the proceeds from the sale, exchange or other disposition of a Funds shares that are paid to a
U.S. Holder within the United States (and in certain cases, outside the United States), unless the holder is an exempt recipient. A backup withholding tax (currently at a maximum rate of 28%, but scheduled to increase to 31% after 2012) may apply to
such payments if the holder fails to provide a taxpayer identification number (generally on an IRS Form W-9) or certification of other exempt status or fails to report in full dividend and interest income.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or as a
credit against a U.S. Holders United States federal income tax liability provided the required information is timely furnished to the IRS.
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Non-U.S. Holders
Each Fund must report annually to the IRS and to each non-U.S. Holder the amount of distributions paid to such holder (whether treated as
dividends or a return of capital) and the tax withheld with respect to such distributions. Copies of the information returns reporting such distributions and withholding may also be made available to the tax authorities in the country in which the
non-U.S. Holder resides under the provisions of an applicable income tax treaty.
A non-U.S. Holder will be subject to backup
withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is a non-U.S. Holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined
under the Code), or such holder otherwise establishes an exemption. Dividends subject to withholding of United States federal income tax as described under the caption Non-U.S. HoldersTaxation of Dividends above will not be
subject to backup withholding.
Information reporting and, depending on the circumstances, backup withholding will apply to
the proceeds of a sale of shares of a Fund within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. Holder (and the
payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a refund or as a credit against a non-U.S. Holders
United States federal income tax liability provided the required information is timely furnished to the IRS.
Non-U.S. Holders
should consult their tax advisor regarding the application of the information reporting and backup withholding rules to them.
Additional Withholding Requirements
Under recently enacted legislation, the relevant withholding agent may be required to withhold 30% of any dividends and the proceeds of a sale of shares of a Fund paid after December 31, 2012 to
(i) a foreign financial institution unless such foreign financial institution agrees to verify, report and disclose its United States accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity that
is the beneficial owner of the payment unless such entity certifies that it does not have any substantial United States owners or provides the name, address and taxpayer identification number of each substantial United States owner and such entity
meets certain other specified requirements.
Investment by Tax-Exempt Investors
Employee benefit plans and most other organizations exempt from United States federal income tax, including individual retirement
accounts and other retirement plans, are subject to United States federal income tax on unrelated business taxable income (UBTI). Because each Fund is a corporation for United States federal income tax purposes, an owner of shares of a
Fund will not report on its federal income tax return any of the Funds items of income, gain, loss and deduction. Therefore, a tax-exempt investor generally will not have UBTI attributable to its ownership or sale of shares of a Fund unless
its ownership of shares is debt-financed. In general, shares of a Fund would be debt-financed if the tax-exempt owner of the shares incurs debt to acquire the shares or otherwise incurs or maintains a debt that would not have been incurred or
maintained if the shares had not been acquired.
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Other Taxation
Each Funds shareholders may be subject to state, local and foreign taxes on distributions received from the Fund. Shareholders are
advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in the Funds.
EXPERTS
The financial statements of the Acquiring Fund and the Acquired Fund appearing in each Funds Annual Report for the year ended November 30, 2011 and, with respect to the Acquired Fund, the
fiscal year ended October 31, 2011 are incorporated by reference herein. The financial statements have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as set forth in such reports thereon and
incorporated herein by reference. Such financial statements are incorporated by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing. PricewaterhouseCoopers LLP provides auditing services
to the Funds. The principal business address of PricewaterhouseCoopers LLP is 1 North Wacker Drive, Chicago, Illinois 60606.
CUSTODIAN AND TRANSFER AGENT
The custodian
of the assets of the Funds is State Street Bank and Trust Company (State Street), One Lincoln Street, Boston, Massachusetts 02110. The custodian performs custodial, fund accounting and portfolio accounting services. Each Funds
transfer, shareholder services and dividend paying agent is also State Street, 250 Royall Street, Canton, Massachusetts 02021. State Street has subcontracted the transfer agency servicing of the Funds to Computershare, Inc.
ADDITIONAL INFORMATION
A Registration Statement on Form N-14, including amendments thereto, relating to the shares of the Acquiring Fund offered hereby, has been filed by the Acquiring Fund with the SEC, Washington, D.C. The
Joint Proxy Statement/Prospectus and this SAI 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 Acquiring Fund and the shares
offered hereby, reference is made to the Acquiring Funds Registration Statement. Statements contained in the Joint Proxy Statement/Prospectus and this SAI 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 SECs principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the SEC upon the payment of certain fees prescribed by the SEC.
72
Pro Forma Financial Statements for the Reorganization of MLP & Strategic Equity Fund Inc. into
Nuveen Energy MLP Total Return Fund
Pro Forma Portfolio of Investments
(Unaudited)
November 30, 2011
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|
|
|
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|
Shares/Units
|
|
|
|
Nuveen
Energy
MLP
Total
Return
Fund
(Acquiring
Fund)
|
|
|
MLP &
Strategic
Equity Fund Inc.
(Acquired
Fund)
|
|
|
Pro Forma
Leverage
Adjustments
(1)
|
|
|
Leverage
Adjusted
Acquired
Fund
|
|
|
Pro Forma
Combined
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368,020
|
|
|
|
21,916
|
|
|
|
6,141
|
|
|
|
28,057
|
|
|
|
396,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
64,000
|
|
|
|
17,933
|
|
|
|
81,933
|
|
|
|
89,933
|
|
|
|
|
|
|
|
|
53,406
|
|
|
|
14,964
|
|
|
|
68,370
|
|
|
|
68,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,000
|
|
|
|
37,550
|
|
|
|
10,521
|
|
|
|
48,071
|
|
|
|
162,071
|
|
|
|
|
|
|
|
|
69,296
|
|
|
|
19,416
|
|
|
|
88,712
|
|
|
|
88,712
|
|
|
|
|
145,450
|
|
|
|
21,100
|
|
|
|
5,912
|
|
|
|
27,012
|
|
|
|
172,462
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
5,044
|
|
|
|
23,044
|
|
|
|
23,044
|
|
|
|
|
295,000
|
|
|
|
87,700
|
|
|
|
24,573
|
|
|
|
112,273
|
|
|
|
407,273
|
|
|
|
|
191,200
|
|
|
|
145,563
|
|
|
|
40,786
|
|
|
|
186,349
|
|
|
|
377,549
|
|
|
|
|
239,441
|
|
|
|
128,381
|
|
|
|
35,972
|
|
|
|
164,353
|
|
|
|
403,794
|
|
|
|
|
|
|
|
|
45,300
|
|
|
|
12,693
|
|
|
|
57,993
|
|
|
|
57,993
|
|
|
|
|
739,770
|
|
|
|
46,500
|
|
|
|
13,029
|
|
|
|
59,529
|
|
|
|
799,299
|
|
|
|
|
|
|
|
|
94,061
|
|
|
|
26,356
|
|
|
|
120,417
|
|
|
|
120,417
|
|
|
|
|
|
|
|
|
128,815
|
|
|
|
36,093
|
|
|
|
164,908
|
|
|
|
164,908
|
|
|
|
|
624,245
|
|
|
|
306,557
|
|
|
|
85,896
|
|
|
|
392,453
|
|
|
|
1,016,698
|
|
|
|
|
457,600
|
|
|
|
332,200
|
|
|
|
93,081
|
|
|
|
425,281
|
|
|
|
882,881
|
|
|
|
|
1,271,665
|
|
|
|
258,553
|
|
|
|
72,446
|
|
|
|
330,999
|
|
|
|
1,602,664
|
|
|
|
|
|
|
|
|
173,188
|
|
|
|
48,527
|
|
|
|
221,715
|
|
|
|
221,715
|
|
|
|
|
838,350
|
|
|
|
365,557
|
|
|
|
102,428
|
|
|
|
467,985
|
|
|
|
1,306,335
|
|
|
|
|
782,215
|
|
|
|
351,414
|
|
|
|
98,465
|
|
|
|
449,879
|
|
|
|
1,232,094
|
|
|
|
|
215,125
|
|
|
|
122,690
|
|
|
|
34,377
|
|
|
|
157,067
|
|
|
|
372,192
|
|
|
|
|
758,240
|
|
|
|
135,964
|
|
|
|
38,097
|
|
|
|
174,061
|
|
|
|
932,301
|
|
|
|
|
|
|
|
|
105,695
|
|
|
|
29,615
|
|
|
|
135,310
|
|
|
|
135,310
|
|
|
|
|
942,455
|
|
|
|
221,875
|
|
|
|
62,169
|
|
|
|
284,044
|
|
|
|
1,226,499
|
|
|
|
|
645,211
|
|
|
|
223,455
|
|
|
|
62,611
|
|
|
|
286,066
|
|
|
|
931,277
|
|
|
|
|
64,880
|
|
|
|
34,960
|
|
|
|
9,796
|
|
|
|
44,756
|
|
|
|
109,636
|
|
|
|
|
81,000
|
|
|
|
172,048
|
|
|
|
48,207
|
|
|
|
220,255
|
|
|
|
301,255
|
|
|
|
|
|
|
|
|
173,150
|
|
|
|
48,516
|
|
|
|
221,666
|
|
|
|
221,666
|
|
|
|
|
171,950
|
|
|
|
47,375
|
|
|
|
13,274
|
|
|
|
60,649
|
|
|
|
232,599
|
|
|
|
|
372,000
|
|
|
|
10,000
|
|
|
|
2,802
|
|
|
|
12,802
|
|
|
|
384,802
|
|
|
|
|
22,000
|
|
|
|
13,000
|
|
|
|
3,643
|
|
|
|
16,643
|
|
|
|
38,643
|
|
|
|
|
10,000
|
|
|
|
150,800
|
|
|
|
42,254
|
|
|
|
193,054
|
|
|
|
203,054
|
|
|
|
|
|
|
|
|
269,006
|
|
|
|
75,374
|
|
|
|
344,380
|
|
|
|
344,380
|
|
|
|
|
693,815
|
|
|
|
15,800
|
|
|
|
4,427
|
|
|
|
20,227
|
|
|
|
714,042
|
|
|
|
|
|
|
|
|
40,003
|
|
|
|
11,209
|
|
|
|
51,212
|
|
|
|
51,212
|
|
|
|
|
649,265
|
|
|
|
228,849
|
|
|
|
64,123
|
|
|
|
292,972
|
|
|
|
942,237
|
|
|
|
|
1,309,505
|
|
|
|
289,713
|
|
|
|
81,176
|
|
|
|
370,889
|
|
|
|
1,680,394
|
|
|
|
|
|
|
|
|
281,026
|
|
|
|
78,742
|
|
|
|
359,768
|
|
|
|
359,768
|
|
|
|
|
|
|
|
|
84,470
|
|
|
|
23,668
|
|
|
|
108,138
|
|
|
|
108,138
|
|
|
|
|
471,550
|
|
|
|
301,250
|
|
|
|
84,409
|
|
|
|
385,659
|
|
|
|
857,209
|
|
|
|
|
394,645
|
|
|
|
144,999
|
|
|
|
40,628
|
|
|
|
185,627
|
|
|
|
580,272
|
|
|
|
|
159,335
|
|
|
|
280,469
|
|
|
|
78,586
|
|
|
|
359,055
|
|
|
|
518,390
|
|
|
|
|
417,000
|
|
|
|
52,875
|
|
|
|
14,815
|
|
|
|
67,690
|
|
|
|
484,690
|
|
73
Appendix A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Description
(2)
|
|
Nuveen
Energy MLP
Total Return Fund
(Acquiring Fund)
|
|
|
MLP &
Strategic
Equity Fund Inc.
(Acquired
Fund)
|
|
|
Pro
Forma
Leverage
Adjustments
(1)
|
|
|
Leverage
Adjusted
Acquired
Fund
|
|
|
Other
Pro Forma
Adjustments
|
|
Pro Forma
Combined
Fund
|
|
Master Limited Partnerships & MLP Affiliates 133.8% (99.7% of Total
Investments)
|
|
|
|
|
Energy Equipment & Services 1.3% (1.0% of Total Investments)
|
|
Exterran Partners LP
|
|
$
|
7,989,714
|
|
|
$
|
475,796
|
|
|
$
|
133,316
|
|
|
$
|
609,112
|
|
|
|
|
$
|
8,598,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utilities 1.1% (0.8% of Total Investments)
|
|
|
|
|
AmeriGas Partners, LP
|
|
|
351,040
|
|
|
|
2,808,320
|
|
|
|
786,880
|
|
|
|
3,595,200
|
|
|
|
|
|
3,946,240
|
|
Suburban Propane Partners LP
|
|
|
|
|
|
|
2,483,379
|
|
|
|
695,833
|
|
|
|
3,179,212
|
|
|
|
|
|
3,179,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gas Utilities
|
|
|
351,040
|
|
|
|
5,291,699
|
|
|
|
1,482,713
|
|
|
|
6,774,412
|
|
|
|
|
|
7,125,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 131.4% (97.9% of Total Investments)
|
|
|
|
|
Alliance Holding GP LP
|
|
|
5,777,520
|
|
|
|
1,903,034
|
|
|
|
533,223
|
|
|
|
2,436,257
|
|
|
|
|
|
8,213,777
|
|
Alliance Resource Partners LP
|
|
|
|
|
|
|
4,951,199
|
|
|
|
1,387,307
|
|
|
|
6,338,506
|
|
|
|
|
|
6,338,506
|
|
American Midstream Partners LP
|
|
|
2,740,278
|
|
|
|
397,524
|
|
|
|
111,385
|
|
|
|
508,909
|
|
|
|
|
|
3,249,187
|
|
Boardwalk Pipline Partners LP
|
|
|
|
|
|
|
467,280
|
|
|
|
130,930
|
|
|
|
598,210
|
|
|
|
|
|
598,210
|
|
Breitburn Energy Partners, LP
|
|
|
5,457,500
|
|
|
|
1,622,450
|
|
|
|
454,604
|
|
|
|
2,077,054
|
|
|
|
|
|
7,534,554
|
|
Buckeye Partners LP
|
|
|
12,198,560
|
|
|
|
9,286,919
|
|
|
|
2,602,159
|
|
|
|
11,889,078
|
|
|
|
|
|
24,087,638
|
|
Buckeye Partners LP, Class B Shares, (3), (4), (5)
|
|
|
13,947,623
|
|
|
|
7,478,292
|
|
|
|
2,095,389
|
|
|
|
9,573,681
|
|
|
|
|
|
23,521,304
|
|
Chesapeake Midstream Partners LP
|
|
|
|
|
|
|
1,187,313
|
|
|
|
332,681
|
|
|
|
1,519,994
|
|
|
|
|
|
1,519,994
|
|
Copano Energy LLC
|
|
|
24,486,387
|
|
|
|
1,539,150
|
|
|
|
431,264
|
|
|
|
1,970,414
|
|
|
|
|
|
26,456,801
|
|
Crestwood Midstream Partners LP
|
|
|
|
|
|
|
2,809,602
|
|
|
|
787,240
|
|
|
|
3,596,842
|
|
|
|
|
|
3,596,842
|
|
Crestwood Midstream Partners LP, Class C Shares, (3), (4), (5)
|
|
|
|
|
|
|
3,651,402
|
|
|
|
1,023,109
|
|
|
|
4,674,511
|
|
|
|
|
|
4,674,511
|
|
DCP Midstream Partners LP
|
|
|
26,786,353
|
|
|
|
13,154,361
|
|
|
|
3,685,801
|
|
|
|
16,840,162
|
|
|
|
|
|
43,626,515
|
|
El Paso Pipeline Partners LP
|
|
|
14,995,552
|
|
|
|
10,886,194
|
|
|
|
3,050,269
|
|
|
|
13,936,463
|
|
|
|
|
|
28,932,015
|
|
Enbridge Energy Management LLC, (4)
|
|
|
39,383,465
|
|
|
|
8,237,499
|
|
|
|
2,308,115
|
|
|
|
10,545,614
|
|
|
|
|
|
49,929,079
|
|
Enbridge Energy Partners LP
|
|
|
|
|
|
|
5,363,632
|
|
|
|
1,502,869
|
|
|
|
6,866,501
|
|
|
|
|
|
6,866,501
|
|
Energy Transfer Equity LP
|
|
|
29,585,372
|
|
|
|
12,900,507
|
|
|
|
3,614,672
|
|
|
|
16,515,179
|
|
|
|
|
|
46,100,551
|
|
Enterprise Products Partners LP
|
|
|
35,582,960
|
|
|
|
15,985,823
|
|
|
|
4,479,166
|
|
|
|
20,464,989
|
|
|
|
|
|
56,047,949
|
|
EV Energy Partners, LP
|
|
|
14,682,281
|
|
|
|
8,373,593
|
|
|
|
2,346,248
|
|
|
|
10,719,841
|
|
|
|
|
|
25,402,122
|
|
Genesis Energy LP
|
|
|
19,782,482
|
|
|
|
3,547,301
|
|
|
|
993,940
|
|
|
|
4,541,241
|
|
|
|
|
|
24,323,723
|
|
Holly Energy Partners LP
|
|
|
|
|
|
|
5,889,325
|
|
|
|
1,650,166
|
|
|
|
7,539,491
|
|
|
|
|
|
7,539,491
|
|
Inergy LP
|
|
|
22,788,562
|
|
|
|
5,364,938
|
|
|
|
1,503,235
|
|
|
|
6,868,173
|
|
|
|
|
|
29,656,735
|
|
Kinder Morgan Management LLC, (4)
|
|
|
45,661,582
|
|
|
|
15,813,910
|
|
|
|
4,430,996
|
|
|
|
20,244,906
|
|
|
|
|
|
65,906,488
|
|
LRR Energy LP
|
|
|
1,226,232
|
|
|
|
660,744
|
|
|
|
185,138
|
|
|
|
845,882
|
|
|
|
|
|
2,072,114
|
|
Magellan Midstream Partners LP
|
|
|
5,182,380
|
|
|
|
11,007,631
|
|
|
|
3,084,296
|
|
|
|
14,091,927
|
|
|
|
|
|
19,274,307
|
|
MarkWest Energy Partners LP
|
|
|
|
|
|
|
9,287,766
|
|
|
|
2,602,396
|
|
|
|
11,890,162
|
|
|
|
|
|
11,890,162
|
|
Natural Resource Partners LP
|
|
|
4,732,064
|
|
|
|
1,303,760
|
|
|
|
365,309
|
|
|
|
1,669,069
|
|
|
|
|
|
6,401,133
|
|
NGL Energy Partners LP
|
|
|
7,990,560
|
|
|
|
214,800
|
|
|
|
60,186
|
|
|
|
274,986
|
|
|
|
|
|
8,265,546
|
|
NuStar Energy LP
|
|
|
1,206,480
|
|
|
|
712,920
|
|
|
|
199,757
|
|
|
|
912,677
|
|
|
|
|
|
2,119,157
|
|
NuStar GP Holdings LLC
|
|
|
296,900
|
|
|
|
4,477,252
|
|
|
|
1,254,509
|
|
|
|
5,731,761
|
|
|
|
|
|
6,028,661
|
|
ONEOK Partners LP
|
|
|
|
|
|
|
13,600,943
|
|
|
|
3,810,932
|
|
|
|
17,411,875
|
|
|
|
|
|
17,411,875
|
|
Oxford Resource Partners LP
|
|
|
12,231,958
|
|
|
|
278,554
|
|
|
|
78,050
|
|
|
|
356,604
|
|
|
|
|
|
12,588,562
|
|
Pioneer Southwest Energy Partners LP
|
|
|
|
|
|
|
1,216,491
|
|
|
|
340,856
|
|
|
|
1,557,347
|
|
|
|
|
|
1,557,347
|
|
Plains All American Pipeline LP
|
|
|
42,111,328
|
|
|
|
14,843,146
|
|
|
|
4,158,992
|
|
|
|
19,002,138
|
|
|
|
|
|
61,113,466
|
|
Regency Energy Partners LP
|
|
|
30,131,710
|
|
|
|
6,666,296
|
|
|
|
1,867,870
|
|
|
|
8,534,166
|
|
|
|
|
|
38,665,876
|
|
Spectra Energy Partners, LP
|
|
|
|
|
|
|
8,506,657
|
|
|
|
2,383,532
|
|
|
|
10,890,189
|
|
|
|
|
|
10,890,189
|
|
Sunoco Logistics Partners LP
|
|
|
|
|
|
|
8,722,372
|
|
|
|
2,443,975
|
|
|
|
11,166,347
|
|
|
|
|
|
11,166,347
|
|
Targa Resources Partners LP
|
|
|
17,697,272
|
|
|
|
11,305,913
|
|
|
|
3,167,873
|
|
|
|
14,473,786
|
|
|
|
|
|
32,171,058
|
|
TC PipeLines LP
|
|
|
18,777,209
|
|
|
|
6,899,052
|
|
|
|
1,933,088
|
|
|
|
8,832,140
|
|
|
|
|
|
27,609,349
|
|
74
Pro Forma Portfolio of Investments (continued)
November 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares/Units
|
|
|
|
Nuveen
Energy
MLP
Total
Return
Fund
(Acquiring
Fund)
|
|
|
MLP &
Strategic
Equity Fund Inc.
(Acquired
Fund)
|
|
|
Pro Forma
Leverage
Adjustments
(1)
|
|
|
Leverage
Adjusted
Acquired
Fund
|
|
|
Pro Forma
Combined
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,170
|
|
|
|
83,063
|
|
|
|
23,274
|
|
|
|
106,337
|
|
|
|
412,507
|
|
|
|
|
162,660
|
|
|
|
118,426
|
|
|
|
33,182
|
|
|
|
151,608
|
|
|
|
314,268
|
|
|
|
|
300,000
|
|
|
|
326,420
|
|
|
|
91,462
|
|
|
|
417,882
|
|
|
|
717,882
|
|
|
|
|
507,330
|
|
|
|
195,822
|
|
|
|
54,869
|
|
|
|
250,691
|
|
|
|
758,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount (000)
|
|
|
|
|
Nuveen
Energy
MLP
Total
Return
Fund
(Acquiring
Fund)
|
|
|
|
MLP &
Strategic
Equity Fund
(Acquired
Fund)
|
|
|
|
Pro Forma
Leverage
Adjustments
(1)
|
|
|
|
Leverage
Adjusted
Acquired
Fund
|
|
|
|
Pro Forma
Combined
Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$627
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$ 627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,724
|
|
|
|
483
|
|
|
|
2,207
|
|
|
|
2,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$627
|
|
|
|
$1,724
|
|
|
|
$483
|
|
|
|
$2,207
|
|
|
|
$2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Description
(2)
|
|
Nuveen
Energy MLP
Total Return Fund
(Acquiring Fund)
|
|
|
MLP &
Strategic
Equity Fund
(Acquired
Fund)
|
|
|
Pro
Forma
Leverage
Adjustments
(1)
|
|
|
Leverage
Adjusted
Acquired
Fund
|
|
|
Other
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined
Fund
|
|
Teekay Offshore Partners LP, (3), (5)
|
|
$
|
4,005,682
|
|
|
$
|
7,050,991
|
|
|
$
|
1,975,660
|
|
|
$
|
9,026,651
|
|
|
|
|
|
|
$
|
13,032,333
|
|
Teekay Offshore Partners LP
|
|
|
11,630,130
|
|
|
|
1,474,684
|
|
|
|
413,201
|
|
|
|
1,887,885
|
|
|
|
|
|
|
|
13,518,015
|
|
Teekay LNG Partners LP
|
|
|
9,855,612
|
|
|
|
2,673,798
|
|
|
|
749,188
|
|
|
|
3,422,986
|
|
|
|
|
|
|
|
13,278,598
|
|
TransMontaigne Partners LP
|
|
|
4,972,516
|
|
|
|
3,620,283
|
|
|
|
1,014,389
|
|
|
|
4,634,672
|
|
|
|
|
|
|
|
9,607,188
|
|
Western Gas Partners LP
|
|
|
11,304,000
|
|
|
|
12,299,506
|
|
|
|
3,446,274
|
|
|
|
15,745,780
|
|
|
|
|
|
|
|
27,049,780
|
|
Williams Partners LP
|
|
|
29,455,580
|
|
|
|
11,369,425
|
|
|
|
3,185,669
|
|
|
|
14,555,094
|
|
|
|
|
|
|
|
44,010,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
526,664,090
|
|
|
|
279,004,232
|
|
|
|
78,175,908
|
|
|
|
357,180,140
|
|
|
|
|
|
|
|
883,844,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Limited Partnerships & MLP Affiliates (cost $530,683,202, $197,648,966, $253,029,428 and $783,712,630,
respectively)
|
|
|
535,004,844
|
|
|
|
284,771,727
|
|
|
|
79,791,937
|
|
|
|
364,563,664
|
|
|
|
|
|
|
|
899,568,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investments 0.4% (0.3% of Total Investments)
|
|
|
|
|
|
|
|
|
|
Repurchase Agreement with State Street Bank, dated 11/30/11, 0.010%, due 12/01/11, repurchase price $627,050, collateralized by
$640,000 U.S. Treasury
Bills, 0.000%, due 12/29/11, value $639,990
|
|
|
627,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
627,050
|
|
Repurchase Agreement with State Street Bank, dated 11/30/11, 0.010%, due 12/01/11, repurchase price $1,724,016, collateralized by
$1,760,000 U.S. Treasury Bills, 0.000%, due 12/29/11, value $1,759,972; if the Reorganization had taken place, the Repurchase Agreement with State Street Bank would have had a repurchase price $2,207,079, collateralized by $2,253,146, value
$2,253,110
|
|
|
|
|
|
|
1,724,016
|
|
|
|
483,063
|
|
|
|
2,207,079
|
|
|
|
|
|
|
|
2,207,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (cost $627,050, $1,724,016, $2,207,079 and $2,834,129, respectively)
|
|
|
627,050
|
|
|
|
1,724,016
|
|
|
|
483,063
|
|
|
|
2,207,079
|
|
|
|
|
|
|
|
2,834,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments (cost $531,310,252, $199,372,982, $255,236,507 and $786,546,759, respectively)
134.2%
|
|
|
535,631,894
|
|
|
|
286,495,743
|
|
|
|
80,275,000
|
|
|
|
366,770,743
|
|
|
|
|
|
|
|
902,402,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings Payable (30.5)% (6), (7)
|
|
|
(125,000,000
|
)
|
|
|
|
|
|
|
(80,275,000
|
)
|
|
|
(80,275,000
|
)
|
|
|
|
|
|
|
(205,275,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets Less Liabilities (3.7)%
|
|
|
(727,275
|
)
|
|
|
(23,248,807
|
)
|
|
|
|
|
|
|
(23,248,807
|
)
|
|
|
(541,000
|
)
(8)
|
|
|
(24,517,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets 100%
|
|
$
|
409,904,619
|
|
|
$
|
263,246,936
|
|
|
|
|
|
|
$
|
263,246,936
|
|
|
$
|
(541,000
|
)
|
|
$
|
672,610,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For portfolio compliance purposes, the industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.
|
(1)
|
Leverage adjustments represent the impact of applying borrowings to the assets acquired from the Acquired Fund in the Reorganization. The Acquired Fund is assumed to
leverage its net assets at a level consistent with that of the Acquiring Fund on November 30, 2011 (a borrowings level of approximately 30% of net assets). This results in assumed borrowings totaling $80,275,000 as of November 30, 2011 for
the Leverage Adjusted Acquired Fund. The proceeds from these borrowings are assumed to be invested in the securities held by the Acquired Fund on November 30, 2011, and have been allocated to each holding on a pro rata basis according to each
securitys proportion of total investments. It is assumed that each securitys average cost per share or unit is still applicable for the additional shares of units.
|
(2)
|
All percentages shown in the Portfolio of Investments are based on net assets on the Pro Forma Combined Fund unless otherwise noted.
|
(3)
|
For fair value measurement disclosure purposes, Master Limited Partnership & MLP Affiliates are categorized as Level 2.
|
(4)
|
Distributions are paid in-kind.
|
(5)
|
Security is restricted and may be resold only in transactions exempt from registration, normally to qualified institutional buyers.
|
(6)
|
Borrowings Payable as a percentage of total investments is 23.3% for the Acquiring Fund, 21.9% for the Leverage Adjusted Acquired Fund and 22.7% for the Pro Forma
Combined Fund (or 23.3%, 23.4%, and 23.4% of managed assets as of November 30, 2011, for the Acquiring Fund, the Leverage Adjusted Acquired Fund, and the Pro Forma Combined Fund, respectively).
|
(7)
|
The Acquiring Fund and the Pro Forma Combined Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of
November 30, 2011, investments with a value of $339,292,082 had been pledged as collateral for Borrowings by the Acquired Fund. If the Reorganization had taken place, the Combined Fund may have pledged a larger amount of investments as
collateral for Borrowings.
|
(8)
|
Non-recurring costs associated with the proposed Reorganization, which are estimated to be $541,000, of which $214,000 will be borne by the Acquiring Fund and $327,000
will be borne by the Acquired Fund.
|
76
Pro Forma Statement of Assets and Liabilities
(Unaudited)
November 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuveen
Energy MLP
Total Return
(Acquiring Fund)
|
|
|
MLP &
Strategic
Equity Fund Inc.
(Acquired Fund)
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined Fund
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at value (cost $531,310,252, $199,372,982 and $786,546,759, respectively)
|
|
$
|
535,631,894
|
|
|
$
|
286,495,743
|
|
|
$
|
80,275,000
|
(a)
|
|
$
|
902,402,637
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from Master Limited Partnerships (MLPs)
|
|
|
245,427
|
|
|
|
131,591
|
|
|
|
|
|
|
|
377,018
|
|
Investments sold
|
|
|
-
|
|
|
|
3,796,824
|
|
|
|
|
|
|
|
3,796,824
|
|
Other assets
|
|
|
10,036
|
|
|
|
2,039
|
|
|
|
|
|
|
|
12,075
|
|
Total assets
|
|
|
535,887,357
|
|
|
|
290,426,197
|
|
|
|
80,275,000
|
|
|
|
906,588,554
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
125,000,000
|
|
|
|
-
|
|
|
|
80,275,000
|
(a)
|
|
|
205,275,000
|
|
Payables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
138,013
|
|
|
|
-
|
|
|
|
|
|
|
|
138,013
|
|
Federal income tax
|
|
|
-
|
|
|
|
213,759
|
|
|
|
|
|
|
|
213,759
|
|
State income tax
|
|
|
-
|
|
|
|
930,906
|
|
|
|
|
|
|
|
930,906
|
|
Net deferred tax liability
|
|
|
-
|
|
|
|
25,508,715
|
|
|
|
|
|
|
|
25,508,715
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State franchise tax
|
|
|
118,219
|
|
|
|
9,878
|
|
|
|
|
|
|
|
128,097
|
|
Management fees
|
|
|
468,499
|
|
|
|
221,518
|
|
|
|
|
|
|
|
690,017
|
|
Other
|
|
|
258,007
|
|
|
|
294,485
|
|
|
|
|
|
|
|
552,492
|
|
Reorganization costs
|
|
|
-
|
|
|
|
-
|
|
|
|
541,000
|
(b)
|
|
|
541,000
|
|
Total liabilities
|
|
|
125,982,738
|
|
|
|
27,179,261
|
|
|
|
80,816,000
|
|
|
|
233,977,999
|
|
Net assets
|
|
$
|
409,904,619
|
|
|
$
|
263,246,936
|
|
|
$
|
(541,000
|
)
|
|
$
|
672,610,555
|
|
Shares outstanding
|
|
|
23,800,246
|
|
|
|
14,810,750
|
|
|
|
463,115
|
(c)
|
|
|
39,074,111
|
|
Net asset value per share outstanding
|
|
$
|
17.22
|
|
|
$
|
17.77
|
|
|
|
|
|
|
$
|
17.21
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares, $.01 and $.001 par value per share, respectively
|
|
$
|
238,002
|
|
|
$
|
14,811
|
|
|
$
|
137,928
|
(c)
|
|
$
|
390,741
|
|
Paid-in surplus
|
|
|
430,526,658
|
|
|
|
221,198,223
|
|
|
|
(678,928
|
) (b)
|
|
|
651,045,953
|
|
Accumulated net investment income (loss), net of tax
|
|
|
(5,516,747
|
)
|
|
|
4,267,893
|
|
|
|
|
|
|
|
(1,248,854
|
)
|
Accumulated net realized gain (loss), net of tax
|
|
|
(19,664,936
|
)
|
|
|
(42,631,086
|
)
|
|
|
|
|
|
|
(62,296,022
|
)
|
Net unrealized appreciation (depreciation), net of tax
|
|
|
4,321,642
|
|
|
|
80,397,095
|
|
|
|
|
|
|
|
84,718,737
|
|
Net assets
|
|
$
|
409,904,619
|
|
|
$
|
263,246,936
|
|
|
$
|
(541,000
|
)
|
|
$
|
672,610,555
|
|
Authorized shares
|
|
|
Unlimited
|
|
|
|
100,000,000
|
|
|
|
|
|
|
|
Unlimited
|
|
(a)
|
Represents the impact of applying the leverage level for the Acquiring Fund as of November 30, 2011 (calculated to be approximately 30%) to the net assets of the
Acquired Fund as of November 30, 2011.
|
(b)
|
Non-recurring costs associated with the proposed Reorganization, which are estimated to be $541,000, of which $214,000 will be borne by the Acquiring Fund and $327,000
will be borne by the Acquired Fund.
|
(c)
|
The pro forma statements assume the issuance by the Acquiring Fund of 15,273,865 shares in exchange for the assets and liabilities of the Acquired Fund after reduction
for the costs associated with the proposed Reorganization.
|
See accompanying notes to financial statements.
77
Pro Forma Statement of Operations
(Unaudited)
For the period from February 24, 2011 (commencement of operations of the Acquiring Fund) through November 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuveen
Energy MLP
Total Return
(Acquiring Fund)
|
|
|
MLP &
Strategic
Equity Fund Inc.
(Acquired Fund)
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma
Combined Fund
|
|
Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from MLPs
|
|
$
|
23,593,819
|
|
|
$
|
12,169,015
|
|
|
$
|
2,670,042
|
(a)
|
|
$
|
38,432,876
|
|
Less: Return of capital on distributions from MLPs
|
|
|
(23,593,819
|
)
|
|
|
(12,169,015
|
)
|
|
|
(2,670,042
|
) (a)
|
|
|
(38,432,876
|
)
|
Interest
|
|
|
1,224
|
|
|
|
1,177
|
|
|
|
258
|
(a)
|
|
|
2,659
|
|
Total investment income
|
|
|
1,224
|
|
|
|
1,177
|
|
|
|
258
|
|
|
|
2,659
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
4,073,073
|
|
|
|
1,836,103
|
|
|
|
801,804
|
(b)
|
|
|
6,710,980
|
|
Shareholders servicing agent fees and expenses
|
|
|
104
|
|
|
|
183
|
|
|
|
|
|
|
|
287
|
|
Interest expense on borrowings
|
|
|
928,957
|
|
|
|
-
|
|
|
|
596,852
|
(c)
|
|
|
1,525,809
|
|
Custodians fees and expenses
|
|
|
58,424
|
|
|
|
35,854
|
|
|
|
(3,318
|
) (d)
|
|
|
90,960
|
|
Directors/ Trustees fees and expenses
|
|
|
16,617
|
|
|
|
17,542
|
|
|
|
|
|
|
|
34,159
|
|
Professional fees
|
|
|
133,890
|
|
|
|
63,542
|
|
|
|
(49,534
|
) (d)
|
|
|
147,898
|
|
Shareholders reports - printing and mailing expenses
|
|
|
108,304
|
|
|
|
97,817
|
|
|
|
(25,729
|
) (d)
|
|
|
180,392
|
|
Stock exchange listing fees
|
|
|
-
|
|
|
|
219
|
|
|
|
|
|
|
|
219
|
|
Investor relations expense
|
|
|
63,720
|
|
|
|
44,358
|
|
|
|
|
|
|
|
108,078
|
|
Franchise tax expense
|
|
|
118,219
|
|
|
|
58,493
|
|
|
|
|
|
|
|
176,712
|
|
Other expenses
|
|
|
21,488
|
|
|
|
23,222
|
|
|
|
(5,873
|
) (d)
|
|
|
38,837
|
|
Total expenses before custodian fee credit and expense reimbursement
|
|
|
5,522,796
|
|
|
|
2,177,333
|
|
|
|
1,314,202
|
|
|
|
9,014,331
|
|
Custodian fee credit
|
|
|
(4,825
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
(4,866
|
)
|
Net expenses
|
|
|
5,517,971
|
|
|
|
2,177,292
|
|
|
|
1,314,202
|
|
|
|
9,009,465
|
|
Net investment income (loss) before taxes
|
|
|
(5,516,747
|
)
|
|
|
(2,176,115
|
)
|
|
|
(1,313,944
|
)
|
|
|
(9,006,806
|
)
|
Deferred tax benefit
|
|
|
-
|
|
|
|
948,548
|
|
|
|
2,533,836
|
(e)
|
|
|
3,482,384
|
|
Current tax (expense)
|
|
|
-
|
|
|
|
(942,267
|
)
|
|
|
|
|
|
|
(942,267
|
)
|
Net investment income (loss)
|
|
|
(5,516,747
|
)
|
|
|
(2,169,834
|
)
|
|
|
1,219,892
|
|
|
|
(6,466,689
|
)
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from investments before taxes
|
|
|
(19,664,936
|
)
|
|
|
48,374,642
|
|
|
|
|
|
|
|
28,709,706
|
|
Deferred tax (expense)/benefit
|
|
|
-
|
|
|
|
(19,332,501
|
)
|
|
|
7,275,708
|
(e)
|
|
|
(12,056,793
|
)
|
Net realized gain (loss) from investments
|
|
|
(19,664,936
|
)
|
|
|
29,042,141
|
|
|
|
7,275,708
|
|
|
|
16,652,913
|
|
Change in net unrealized appreciation (depreciation) of investments before taxes
|
|
|
4,321,642
|
|
|
|
(40,314,627
|
)
|
|
|
24,411,475
|
(f)
|
|
|
(11,581,510
|
)
|
Deferred tax (expense)/benefit
|
|
|
-
|
|
|
|
16,682,863
|
|
|
|
(10,753,241
|
) (e)
|
|
|
5,929,622
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
4,321,642
|
|
|
|
(23,631,764
|
)
|
|
|
13,658,234
|
|
|
|
(5,651,888
|
)
|
Net realized and unrealized gain (loss)
|
|
|
(15,343,294
|
)
|
|
|
5,410,377
|
|
|
|
20,933,942
|
|
|
|
11,001,025
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
(20,860,041
|
)
|
|
$
|
3,240,543
|
|
|
$
|
22,153,834
|
|
|
$
|
4,534,336
|
|
(a)
|
Reflects an expected increase in the Acquired Funds investment income due to the assumed leveraging of the assets to be acquired from the Acquired Fund as part of
the Pro Forma Combined Fund. It assumes borrowings on the assets acquired from the Acquired Fund in an amount equal to 22% of average net assets, based on the debt borrowings of the Acquiring Fund during the period.
|
(b)
|
Reflects the impact of applying the Acquiring Funds fund-level management fee rates to the Pro Forma Combined Fund, as well as the increase in managed net assets
due to the assumed leveraging of the Acquired Funds assets by the Pro Forma Combined Fund. It assumes borrowings on the assets of the Acquired Fund in an amount equal to 22% of average net assets, based on the level of borrowings of the
Acquiring Fund during the period.
|
(c)
|
Reflects the expected increase in the interest expense on borrowings due to the Pro Forma Combined Fund leveraging the assets acquired from the Acquired Fund. It
assumes borrowings on the assets acquired from the Acquired Fund in an amount equal to 22% of average net assets, based on the borrowings of the Acquiring Fund during the period.
|
(d)
|
Reflects the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganization.
|
(e)
|
The deferred tax (expense)/benefit reflected in the pro forma adjustments includes amounts attributable to the Acquiring Funds operations for the period from
February 24, 2011 through November 30, 2011. This treatment takes into account that the valuation allowance adjustments reflected in the Acquiring Funds operating income for the period February 24, 2011 through November 30,
2011 would not apply on a consolidated (i.e. including the Acquired Funds operations) basis.
|
(f)
|
Reflects the expected increase in the change in net unrealized appreciation of investments before taxes due to the assumed investment by the Pro Forma Combined Fund of
the proceeds from leveraging the assets acquired from the Acquired Fund. This increase is based on the assumed increase in market value and costs presented in the Pro Forma Portfolio of Investments.
|
See accompanying notes to financial statements.
78
Notes to Pro Forma Financial Statements
(Unaudited)
1. Basis of Combination
The accompanying unaudited pro forma financial statements are presented to show the effect of the proposed reorganization of MLP & Strategic
Equity Fund Inc. (the Acquired Fund) into the Nuveen Energy MLP Total Return Fund (the Acquiring Fund) (the Reorganization). The unaudited pro forma financial information is for informational purposes only and
does not purport to be indicative of the financial condition that actually would have resulted if the Reorganization had been consummated. These pro forma numbers have been estimated in good faith based on information regarding the Acquired Fund and
Acquiring Fund as of November 30, 2011.
Under the terms of the Reorganization, the combination of the Acquired Fund and the
Acquiring Fund (the Pro Forma Combined Fund) will be accounted for as a tax-free reorganization; therefore, no gain or loss will be recognized by the Acquiring Fund or its shareholders, except with respect to cash received for fractional
shares, as a result of the Reorganization. The Acquired Fund and the Acquiring Fund are registered closed-end management investment companies. The Reorganization would be accomplished by an acquisition of all the assets and the assumption of all the
liabilities of the Acquired Fund by the Acquiring Fund in exchange for shares of the Acquiring Fund and the distribution of such shares to the Acquired Funds shareholders in complete liquidation of the Acquired Fund. The Pro Forma Statement of
Assets and Liabilities and the Pro Forma Statement of Operations are presented for the Acquiring Fund, Acquired Fund and the Pro Forma Combined Fund for the period from February 24, 2011 (commencement of operations for the Acquiring Fund)
through November 30, 2011 (the Reporting Period). Following the Reorganization, the Pro Forma Combined Fund will engage in leverage consistent with the historical practices of the Acquiring Fund. Accordingly to reflect the impact of
a leveraged portfolio, the Pro Forma Combined Fund statements show separately (i) the adjustments resulting from leverage, assuming that the Acquired Fund had engaged in leverage at the same time, and to the same degree as, the Acquiring Fund; and
(ii) other adjustments resulting from the Reorganization. During the Reporting Period, the Acquired Fund changed its fiscal year and accordingly incurred costs related to two audits of its financial statements. The Acquired Fund statements reflect
adjustments to eliminate duplicative costs resulting from the change of fiscal year end. The Schedule of Investments for the Combined Pro Forma Fund assumes that additional securities were purchased in proportion to the holdings of the Acquired Fund
as of the end of the Reporting Period, and such securities were assigned a cost basis equal to the average cost basis of the holdings of the Acquired Fund as of the end of the Reporting Period.
Following the acquisition, the Acquiring Fund will be the surviving fund. The surviving fund will have the portfolio management team, portfolio
composition, strategies, investment objective, expense structure and policies/restrictions of the Acquiring Fund. In accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), the reorganization
will be accounted for as a tax-free reorganization for federal income tax purposes. For financial reporting purposes, the historical cost basis of investment securities will be carried forward to the surviving fund to align ongoing reporting of the
realized and unrealized gains and losses of the surviving fund. If the Reorganization had occurred as of November 30, 2011, the Acquiring Fund would not have been required to dispose of securities of the Acquired Fund in order comply with its
investment policies and restrictions, and would not have sold any material portion of the securities in the Acquired Funds portfolio solely as a result of the Reorganization.
Whether or not the Reorganization is consummated, the funds intend to reposition their portfolios in light of market conditions and other factors. In order to minimize portfolio turnover arising from such
repositioning, the funds intend to implement the repositioning in connection with the receipt of additional leverage
79
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
proceeds following the Reorganization. Portfolio turnover of the Pro Forma Combined Fund in connection with the repositioning is expected to be up to approximately 15% of the total assets of the
Pro Forma Combined Fund.
The accompanying pro forma financial statements and notes to financial statements should be read in conjunction
with the financial statements of the Acquired Fund and the Acquiring Fund included in their annual reports dated November 30, 2011 and, for the Acquired Fund, its report dated October 31, 2011.
2. General Information and Significant Accounting Policies
No significant accounting policies will change as a result of the Reorganization, specifically policies regarding security valuation or compliance with Subchapter M of the Internal Revenue Code of 1986,
as amended. No significant changes to any existing contracts of the Acquiring Fund are expected as a result of the Reorganization.
The
Pro Forma Combined Funds common shares trade on the New York Stock Exchange, and the common shares to be issued in the Reorganization will trade, under the symbol JMF. The Pro Forma Combined Fund is registered under the Investment Company Act
of 1940, as amended, as a closed-end, registered investment company.
The Pro Forma Combined Fund seeks to provide tax-advantaged total
return by investing primarily in a portfolio of publicly traded master limited partnerships (MLPs) in the energy sector.
The
following is a summary of significant accounting policies followed by the Pro Forma Combined Fund in the preparation of its financial statements in accordance with U.S. GAAP.
Investment Valuation
Common stocks and other equity-type securities, such as MLPs, are
valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market
(NASDAQ) are valued, except as indicated below, at the NASDAQ Official Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given
day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price.
Repurchase agreements are valued at
contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Certain
securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds Board of Trustees or its designee at fair value. These securities generally include, but are not
limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been
formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Funds net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or
80
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the securitys fair value. As
a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities,
which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows
or collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the
significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Board of Trustees or its designee.
Master Limited Partnerships
An MLP consists of a general partner and limited partners (or
in the case of MLPs organized as limited liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the MLP. The limited
partners or members, through their ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity, and receive cash distributions.
The Pro Forma Combined Fund may purchase both domestic and international MLPs. The Pro Forma Combined Funds investment in MLPs may include
ownership of MLP common units and MLP subordinated units. The Pro Forma Combined Fund also may purchase MLP I-Shares (together with the MLPs, the MLP Entities). MLP I-Shares are pay-in-kind securities created as a means to facilitate
institutional ownership of MLPs by simplifying the tax and administrative implications of the MLP structure. Generally, when an MLP pays its quarterly cash distribution to unitholders, holders of I-Shares do not receive a cash distribution; rather,
they receive a dividend of additional I-Shares from the MLP of comparable value to the cash distribution paid to each unitholder. The Pro Forma Combined Fund may purchase interests in MLP Entities on an exchange or may utilize non-public market
transactions to obtain its holdings, including, but not limited to, privately negotiated purchases of securities from the issuers themselves, broker-dealers, or other qualified institutional buyers.
Investment Transactions
Investment
transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes.
Investment Income
Dividend income is
recorded on the ex-dividend date, or for foreign securities, when information is available. Interest income is recognized on the accrual basis.
The Pro Forma Combined Fund records the character of distributions received from MLPs based on estimates made at the time such distributions are
received. These estimates are based upon a historical review of information available from each MLP and other industry sources. The Pro Forma Combined Funds characterization of the estimates may subsequently be revised based on information
received from MLPs after their tax reporting periods conclude. Distributions, recognized as Distributions from MLPs on the Statement of Operations, are offset by amounts characterized as return of capital from the MLP entities, which are
recognized as Return of capital on distributions from MLPs on the Statement of Operations.
81
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
Income Taxes
The Pro Forma Combined Fund is treated as a regular corporation, or C corporation, for U.S. federal income tax purposes. Accordingly, the Pro Forma Combined Fund is generally subject to U.S.
federal income tax on its taxable income at statutory rates applicable to corporations (currently at a maximum rate of 35%). The Pro Forma Combined Fund may be subject to a 20% federal alternative minimum tax on its federal alternative minimum
taxable income to the extent that the alternative minimum tax exceeds its regular federal income tax.
The Pro Forma Combined Fund invests its
assets primarily in MLPs, which generally are treated as partnerships for federal income tax purposes. As a limited partner in the MLPs, the Pro Forma Combined Fund includes its allocable share of the MLPs taxable income in computing its own
taxable income. The Pro Forma Combined Funds tax expense or benefit is recognized on the Statement of Operations based on the component of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized
gains/(losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and
income tax purposes and (iii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years
such temporary differences are realized or otherwise settled. To the extent the Pro Forma Combined Fund has a deferred tax asset, consideration is given to whether or not a valuation allowance is required. The determination of whether a valuation
allowance is required is based on the evaluation criterion provided by ASC 740, Income Taxes (ASC 740), that it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized. Among the factors considered
in assessing the Pro Forma Combined Funds valuation allowance are: the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods and the associated risk
that operating and capital loss carryforwards may expire unused.
For all open tax years and all major taxing jurisdictions, management of the
Pro Forma Combined Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the
last four tax year ends and the interim tax period since then). Furthermore, management of the Pro Forma Combined Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits
will significantly change in the next twelve months.
Refer to Footnote 3 Income Tax Information for further details regarding the Pro
Forma Combined Funds income tax information.
Dividends and Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. GAAP.
The Pro Forma Combine Funds quarterly distributions are set pursuant to a
managed distribution program. Under that program, the Pro Forma Combined Fund may source its distributions from the following: net distributable cash flow, net realized gains, unrealized gains, and, in certain cases, a return of the Pro Forma
Combined Funds principal. Net distributable cash flow consists primarily of distributions received from the
82
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
Pro Forma Combined Funds investments in shares of energy MLPs, less payments on any of its leveraging instruments and other fund expenses (including taxes paid at the Pro Forma Combined
Fund level since it is taxed as an ordinary C corporation). Currently, the Pro Forma Combined Fund intends to distribute substantially all of its net distributable cash flow received without sourcing incremental amounts from other
components.
Derivative Financial Instruments
The Pro Forma Combined Fund is authorized to invest in certain derivative instruments, including futures, options and swap contracts. Although the Pro Forma Combined Fund is authorized to invest in such
derivative instruments, and may do so in the future, it did not invest in any such investments during the period ended November 30, 2011.
Repurchase Agreements
In connection
with transactions in repurchase agreements, it is the Pro Forma Combined Funds policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase
transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
Custodian Fee Credit
The Pro Forma Combined Fund has an arrangement with the custodian
bank whereby certain custodian fees and expenses are reduced by net credits earned on its cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for
any days on which the Pro Forma Combined Fund overdraws its account at the custodian bank.
Indemnifications
Under the Pro Forma Combined Funds organizational documents, its officers and trustees are indemnified against certain liabilities arising out of
the performance of their duties to the Pro Forma Combined Fund. In addition, in the normal course of business, the Pro Forma Combined Fund enters into contracts that provide general indemnifications to other parties. The Pro Forma Combined
Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against it that have not yet occurred. However, the Pro Forma Combined Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
3. Income Tax Information
The following information is presented on an income tax basis.
The amounts presented in this footnote assume that the Reorganization took place on November 30, 2011, and do not take into account the expected increase in borrowings for the Pro Forma Combined Fund that is presented in the Pro Forma Statement
of Assets and Liabilities and the Pro Forma Statement of Operations.
83
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
At
November 30, 2011, the cost and unrealized appreciation and unrealized depreciation of investments at November 30, 2011, as determine on a federal income tax basis, were as follows:
|
|
|
|
|
Cost of investments
|
|
$
|
716,244,691
|
|
Gross Unrealized:
|
|
|
|
|
Appreciation
|
|
$
|
135,748,030
|
|
Depreciation
|
|
|
(29,865,084
|
)
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
105,882,946
|
|
At November 30, 2011, the Pro Forma Combined Funds tax year end, the Pro Forma Combined Fund had net operating
loss carryforwards available for federal income tax purposes to be applied against future taxable income, if any. If not applied, the carryforwards will expire as follows:
|
|
|
|
|
Expiration:
|
|
|
|
|
November 30, 2028
|
|
$
|
11,001,074
|
|
November 30, 2029
|
|
|
1,440,597
|
|
November 30, 2030
|
|
|
1,953,682
|
|
November 30, 2031
|
|
|
5,516,747
|
|
Total
|
|
$
|
19,912,100
|
|
At November 30, 2011, the Pro Forma Combined Funds tax year end, the Pro Forma Combined Fund had unused
capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
|
|
|
|
|
Expiration:
|
|
|
|
|
November 30, 2013
|
|
$
|
19,645,804
|
|
November 30, 2014
|
|
|
36,376
|
|
November 30, 2016
|
|
|
19,379,268
|
|
Total
|
|
$
|
39,061,448
|
|
Components of the Pro Forma Combined Funds deferred tax assets and liabilities as of its tax year end of
November 30, 2011, are as follows:
|
|
|
|
|
Description
|
|
Deferred Benefit
(Liability)*
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforward (tax basis)
|
|
$
|
8,216,246
|
|
Capital loss carryforward (tax basis)
|
|
|
14,630,119
|
|
Tax credit carryforward - AMT
|
|
|
214,554
|
|
Other
|
|
|
3,756
|
|
|
|
$
|
23,064,675
|
|
Deferred tax liabilities:
|
|
|
|
|
Accumulated net unrealized gain on investments (tax basis)
|
|
$
|
(39,668,816
|
)
|
Net deferred taxes before valuation allowance
|
|
$
|
(16,604,141
|
)
|
Less: valuation allowance
|
|
|
(8,904,574
|
)
|
Net deferred tax assets (liabilities)
|
|
$
|
(25,508,715
|
)
|
84
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
|
|
|
|
|
Changes in the valuation allowance were as follows*:
|
|
|
|
|
Balance at the beginning of period
|
|
$
|
1,344,212
|
|
Provision to return
|
|
|
(44,930
|
)
|
Change in state tax deferred rate
|
|
|
(111,363
|
)
|
Initial allowance recorded
|
|
|
7,716,655
|
|
Balance at the end of period
|
|
$
|
8,904,574
|
|
*
|
For the period February 24, 2011 through November 30, 2011.
|
4. Management Fees and Other Transactions with Affiliates
The Pro Forma Combined
Funds management fee consists of two components a fund-level fee, based only on the amount of assets within the Pro Forma Combined Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by
Nuveen Fund Advisors, Inc. (the Adviser). This pricing structure enables Nuveen fund shareholders to benefit from growth in the assets within their respective fund as well as from growth in the amount of complex-wide assets managed by
the Adviser.
The annual fund-level fee for the Pro Forma Combined Fund, payable monthly, is calculated according to the following schedule:
|
|
|
|
|
Average Daily Managed Assets*
|
|
Fund-Level
Fee Rate
|
|
For the first $500 million
|
|
|
.9000
|
%
|
For the next $500 million
|
|
|
.8750
|
|
For the next $500 million
|
|
|
.8500
|
|
For the next $500 million
|
|
|
.8250
|
|
For managed assets over $2 billion
|
|
|
.8000
|
|
The annual complex-level fee for the Pro Forma Combined Fund, payable monthly is calculated according to the following
schedule:
|
|
|
|
|
Complex-Level Managed Asset Breakpoint Level*
|
|
Effective Rate at
Breakpoint Level
|
|
$55 billion
|
|
|
.2000
|
%
|
$56 billion
|
|
|
.1996
|
|
$57 billion
|
|
|
.1989
|
|
$60 billion
|
|
|
.1961
|
|
$63 billion
|
|
|
.1931
|
|
$66 billion
|
|
|
.1900
|
|
$71 billion
|
|
|
.1851
|
|
$76 billion
|
|
|
.1806
|
|
$80 billion
|
|
|
.1773
|
|
$91 billion
|
|
|
.1691
|
|
$125 billion
|
|
|
.1599
|
|
$200 billion
|
|
|
.1505
|
|
$250 billion
|
|
|
.1469
|
|
$300 billion
|
|
|
.1445
|
|
85
Notes to Pro Forma Financial Statements
(Unaudited)
(continued)
*
|
For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these
purposes, financial leverage includes the funds use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including
the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining
managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds that constitute eligible assets. Eligible assets do not include assets attributable to
investments in other Nuveen funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Advisers assumption of the management of the former First American Funds effective January 1, 2011. As of
November 30, 2011, the complex-level fee rate for each Fund was 0.1774%.
|
The management fee compensates the Adviser
for overall investment advisory and administrative services and general office facilities. The Adviser is responsible for the Pro Forma Combined Funds overall strategy and asset allocation decisions. The Adviser has entered into an investment
sub-advisory agreement with Fiduciary Asset Management, LLC (FAMCO), under which FAMCO manages the investment portfolio for the Pro Forma Combined Fund. FAMCO is compensated for its services from the management fees paid to the Adviser.
The Pro Forma Combined Fund pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers,
all of whom receive remuneration for their services to the Pro Forma Combined Fund from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised
funds.
5. New Accounting Pronouncements
Fair Value Measurements and Disclosures
On May 12, 2011, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04 (ASU No. 2011-04) modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting
Standards Board (IASB) issued International Financial Reporting Standard (IFRS) 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures.
Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2 and the reasons for the transfers and ii) for Level 3 fair value measurements, a) quantitative information about
significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those
inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the
implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
86
Closed-End Funds
Nuveen Investments Closed-End Funds
Seeking to provide a high level of after-tax total return.
Annual Report
November 30, 2011
MLP & Strategic Nuveen Energy MLP Total
Equity Fund Inc. Return Fund
MTP JMF
LIFE IS COMPLEX.
Nuveen makes things e-simple.
It only takes a minute to sign up for e-Reports. Once enrolled, youll receive an e-mail as soon as your Nuveen Fund information is ready. No more waiting for delivery by regular
mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.
Free e-Reports right to your e-mail!
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If you receive your
Nuveen Fund distributions and statements from your financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess
If you receive your Nuveen Fund distributions and statements directly from Nuveen.
Table of Contents
Chairmans
Letter to Shareholders
Dear Shareholders,
These are perplexing times for investors. The global economy continues to struggle. The solutions being implemented in the eurozone to deal with the debt crises of many of its member countries are not yet
seen as sufficient by the financial markets. The political paralysis in the U.S. has prevented the compromises necessary to deal with the fiscal imbalance and government spending priorities. The efforts by individual consumers, governments and
financial institutions to reduce their debts are increasing savings but reducing demand for the goods and services that drive employment. These developments are undermining the rebuilding of confidence by consumers, corporations and investors that
is so essential to a resumption of economic growth.
Although it is painfully slow, progress is being made. In Europe, the turnover of a
number of national governments reflects the realization by politicians and voters alike that leaders who practiced business as usual had to be replaced by leaders willing to face problems and accept the hard choices needed to resolve them. The
recent coordinated efforts by central banks in the U.S. and Europe to provide liquidity to the largest European banks indicates that these monetary authorities are committed to facilitating a recovery in the European banking sector.
In the U.S., the failure of the congressionally appointed Debt Reduction Committee was a blow to those who hoped for a bipartisan effort to finally begin
addressing the looming fiscal crisis. Nevertheless, Congress and the administration cannot ignore the issue for long. The Bush era tax cuts are scheduled to expire on December 31, 2012, and six months later the $1.2 trillion of mandatory
across-the-board spending cuts under the Budget Control Act of 2011 begin to go into effect. Any legislative modification would require bipartisan support and the prospects for a bipartisan solution are unclear. The impact of these two developments
would be a mixed blessing: a meaningful reduction in the annual budget deficit at the cost of slowing the economic recovery.
It is in these
particularly volatile markets that professional investment management is most important. Skillful investment teams who have experienced challenging markets and remain committed to their investment disciplines are critical to the success of an
investors long-term objectives. In fact, many long-term investment track records are built during challenging markets when managers are able to protect investors against these economic crosscurrents. Experienced investment teams know that
volatile markets put a premium on companies and investment ideas that will weather the short-term volatility and that compelling values and opportunities are opened up when markets overreact to negative developments. By maintaining appropriate time
horizons, diversification and relying on practiced investment teams, we believe that investors can achieve their long-term investment objectives.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to
continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
January 20, 2012
Portfolio Managers Comments
Certain statements in this report are forward-looking statements. Discussions of specific investments
are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or
occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update
publicly or revise any forward-looking statements or views expressed herein.
Ratings shown are the highest rating given by one of the
following national rating agencies: Standard & Poors Group, Moodys Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below
investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
MLP & Strategic Equity Fund (MTP)
Nuveen Energy MLP Total Return Fund (JMF)
The Funds investment adviser is Nuveen
Fund Advisors, Inc., an affiliate of Nuveen Investments. Both Funds are managed by Fiduciary Asset Management Inc. (FAMCO), a wholly-owned affiliate of Piper Jaffray Investment Management Inc. James J. Cunnane Jr., CFA, chief investment officer at
FAMCO, and Quinn T. Kiley, senior portfolio manager, co-manage both Funds. Collectively, the team has over 25 years of experience managing Master Limited Partnerships (MLPs). Here they discuss market conditions, their investment strategies and the
performance of the Funds for their respective periods ended November 30, 2011.
While this is an annual report, neither Fund is
reviewing a full twelve months of performance. Effective November 1, 2011, MTP changed its fiscal and tax year ends from October 31 to November 30. The inception date for JMF was February 24, 2011.
What were the general market conditions and trends over the course of the period?
During the period from JMFs inception in February 2011 through November 30, 2011, the U.S. economys recovery from recession remained slow. The Federal Reserve (Fed) maintained its efforts
to improve the overall economic environment by continuing to hold the benchmark fed funds rate at the record low level of zero to 0.25% that it had established in December 2008. At its September 2011 meeting, the central bank stated that economic
conditions would likely warrant keeping this rate at exceptionally low levels at least through mid-2013. The Fed also announced that it would extend the average maturity of its U.S. Treasury holdings by purchasing $400 billion of
Treasury securities with maturities of six to thirty years and selling an equal amount of Treasury securities with maturities of three years or less. The goals of this program, which the Fed expects to complete by the end of June 2012, are to lower
longer-term interest rates, support a stronger economic recovery and help ensure that inflation remains at levels consistent with the Feds mandates of maximum employment and price stability.
In the third quarter of 2011, the U.S. economy, as measured by the U.S. gross domestic product (GDP), grew at an annual rate of 2.5% and posted the ninth
consecutive quarter of positive growth. The Consumer Price Index (CPI) rose 3.4% year-over-year as of November 2011, while the core CPI (which excludes food and energy) increased 2.2%, edging just above the Feds unofficial objective of 2.0% or
lower for this inflation measure. Unemployment numbers remained high, although the unemployment rate started to trend lower toward the end of the period. The U.S. Bureau of Labor Statistics
reported that the U.S. unemployment rate fell to 8.6% in November 2011. The housing market also continued to be a major weak spot. For the twelve months ended October 2011 (the most recent data
available at the time this report was prepared), the average home price in the 20 major metropolitan areas measured by the Standard & Poors (S&P)/Case-Shiller Index lost 3.4% from one year earlier. In addition, the U.S. economic
picture continued to be clouded by concerns about the European debt crisis and the efforts to reduce the federal deficit.
For the one-month
period since the last shareholder report for MTP, markets generally remained skittish as the eurozone crisis persisted. Due to this uncertainty, there was little momentum or direction in the markets.
What was the general market environment for Master Limited Partnerships (MLPs)?
The market environment for MLPs was somewhat complex during the approximately nine-month period between JMFs inception in late February 2011 and November 30, 2011. MLPs and other domestic
energy companies had exhibited strong performance as the economic recovery continued and development of non-conventional oil and gas reserves occurred at a torrid pace. This growth led to significant capital opportunities for MLPs, and the capital
markets were supportive with equity and debt offerings for MLPs on pace for record issuance in 2011. However, despite this fundamental strength, macro-economic and political concerns were a dominant force, causing significant volatility in the
equity markets. MLPs were able to deliver gains, but the upside potential was limited due to general investor uncertainty.
Significant
volatility was experienced shortly after the Fund was launched when rumors occurred of a U.S. Treasury Department recommendation to change tax policy and make all large partnerships taxable at the entity level. While there was no real substance to
these rumors, markets reacted swiftly with MLPs selling off sharply. The market saw more volatility during the third quarter of 2011 when Standard & Poors downgraded of the U.S. sovereign credit rating from AAA to AA+. Effectively all
gains made during the previous nine months were erased in August and September, only to have the pendulum swing back during October allowing the MLP markets to post gains during the nine month period of 1.0% for the Alerian MLP Index compared to a
(4.5)% loss for the S&P 500 Index.
For MTPs one month reporting period, after experiencing the biggest monthly gains since 2009,
the MLP markets were relatively flat in November. In part, this unimpressive month can be attributed to the most active equity offering calendar of the year. Twelve deals took place during the month, including two initial public offerings.
What strategies were used to manage the Funds during their respective reporting periods?
JMF launched on February 24, 2011. Since its inception, the proceeds from the Funds initial public offering have been invested in publicly
traded MLPs operating primarily in the energy sector with the main objective of providing a tax-advantaged total return. The Fund invested with a focus on higher yielding MLPs with the goal of earning and growing the Funds distribution to
shareholders and a belief that yield would comprise the majority of returns during this period.
Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the
deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares.
For additional information, see
the Performance Overview page for your Fund in this report.
*
|
One-year and since inception returns for MTP are annualized; the one-month return for MTP and since inception return for JMF are cumulative.
|
**
|
Refer to Glossary of Terms used in this Report for definitions.
|
***
|
Since inception returns for MTP and its comparative indexes are from 6/29/07; since inception returns for JMF and its comparative indexes are from 2/24/11.
|
****
|
Fund is not reporting on performance for the one-month period ended November 30, 2011.
|
We maintained our preference for holding MLPs that own pipelines and other infrastructure facilities. This
came from our belief in the expected growth of production from nonconventional oil and gas reserves throughout the United States. This potential increase in production from new regions, combined with what we believe to be an increasingly favorable
policy shift towards domestic natural gas consumption, could result in the need for higher utilization rates of existing infrastructure and the need for new pipelines as well. We believe this environment is supportive of MLP cash flows and
valuations. Distribution growth has always been an important factor in MLP valuations, and we believe a potential increase in mergers and acquisition activity could increase some MLP distributions, which in turn could result, in some cases, in
greater distributions to investors. We continued to position the portfolio to take advantage of these types of industry fundamentals and trends, with a primary goal of earning our distribution while seeking capital appreciation.
This annual report for MTP covers a one-month period as a result of a change in the Funds fiscal year end from October 31 to November 30.
During the one-month period, the Fund executed a trading strategy designed to utilize significant tax loss carry-forwards against unrealized gains in the portfolio while maintaining favorable exposure to the MLP asset class. The Fund participated in
a private placement during the month, as well. The Fund purchased restricted units of Teekay Offshore Partners LP, an owner operator of vessels engaged in the production, storage and transportation of oil.
In this environment, how did the Funds perform?
Returns for the Funds, as well as for comparative indexes, are presented in the accompanying table.
Average Annual Total Returns on Net Asset Value*
For periods ended 11/30/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-Month
|
|
|
1-Year
|
|
|
Since
Inception***
|
|
MTP
|
|
|
0.11
|
%
|
|
|
5.50
|
%
|
|
|
4.89
|
%
|
Alerian MLP Index**
|
|
|
-0.24
|
%
|
|
|
9.54
|
%
|
|
|
10.02
|
%
|
S&P 500 Index**
|
|
|
-0.22
|
%
|
|
|
7.83
|
%
|
|
|
-2.05
|
%
|
|
|
|
|
JMF****
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-4.76
|
%
|
Alerian MLP Index**
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
2.98
|
%
|
S&P 500 Index**
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-3.03
|
%
|
MTP outperformed the Alerian MLP Index and the S&P 500 Index for the month of November, 2011. In a mixed month for
performance, the gathering & processing and marine sectors produced gains, while other sectors retreated during the period. Kinder Morgan Management LLC and Western Gas Partners LP were the largest positive contributors to the Funds
performance. The Funds continued underweight positions in several large MLPs in the Alerian MLP Index were a drag on performance.
Over the nine month period since its inception, JMFs return trailed the performance of both indexes.
JMF implemented its leverage strategy in early May through the use of bank borrowings, which magnified the months negative performance. In addition, as a new issue, JMFs net asset value (NAV) had comparatively very little benefit from
the NAV support experienced by many of the more seasoned funds in the MLP market. These more seasoned funds generally had unrealized portfolio gains and an associated deferred tax liability. As the market retreated, the NAV declines of these
seasoned funds were partially, but meaningfully, offset by a reduction in their deferred tax liabilities. Together, the effects of leverage and the relative absence of a deferred tax liability had a greater effect on JMF than the effects of sector
selection.
At the portfolio level, JMFs holdings are smaller in market capitalization than the Alerian MLP Index and tend to be
slightly more commodity sensitive. These allocations detracted from performance during the period relative to the Alerian MLP Index, which is based upon the fifty largest, most liquid MLPs and significantly concentrated in the largest constituents.
The Alerian MLP Index has 58% of its weight in the largest quintile of MLPs by market capitalization compared to the Fund holding less than 32% in this same quintile. The underperformance at the portfolio level can be almost entirely attributed to
this underweight position, which was originated due to the low yielding nature of these large cap MLPs.
RISK CONSIDERATIONS
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the
Federal Deposit Insurance Corporation. Shares of closed-end funds are subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.
Investment and Market Risk.
An investment in common shares is subject to investment risk, including the possible loss of the entire principal
amount that you invest. Your investment in common shares represents an indirect investment in the corporate securities owned by the Fund, which generally trade in the over-the-counter markets. Your common shares at any point in time may be worth
less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Tax Risk.
The
Funds investment program and the tax treatment of Fund distributions may be affected by IRS interpretations of the Internal Revenue Code and future changes in tax laws and regulations, including changes resulting from the sunset
provisions that may apply to the favorable tax treatment of tax-advantaged dividends. There can be no assurance as to the percentage of a Funds distributions that will qualify as tax-advantaged dividends.
Price Risk.
This refers to the fact that shares of closed-end investment companies like the Funds have during some periods traded at prices higher
than net asset value and have during other periods traded at prices lower than net asset value. The Funds cannot predict whether the common shares will trade at, above or below net asset value.
Energy Sector Risk.
Because the Funds invest primarily in energy sector MLPs, concentration in this sector may present more risks than if the
Funds were invested in numerous sectors of the economy.
MLP Units Risk.
An investment in MLP units involves risks that differ from a similar investment in
equity securities. Holders of MLP units have the rights typically afforded to limited partners in a limited partnership. As compared to common stockholders of a corporation, holders of MLP units have more limited control and limited rights to vote
on matters affecting the partnership.
Non-Diversification and Concentration Risk.
The Funds are able to invest a greater portion of
their assets in obligations of a single issuer than a diversified fund. A nondiversified fund, or one with a portfolio concentrated in a particular industry or geographical region, may be affected disproportionately by the performance of
a single security or relatively few securities as a result of adverse economic, regulatory, or market occurrences.
Leverage Risk.
A
Funds use of leverage creates the possibility of higher volatility for the Funds per share NAV, market price, and distributions. Leverage risk can be introduced through structural leverage (issuing preferred shares or debt borrowings at
the Fund level) or through certain derivative investments held in a Funds portfolio. Leverage typically magnifies the total return of a Funds portfolio, whether that return is positive or negative. The use of leverage creates an
opportunity for increased common share net income, but there is no assurance that a Funds leveraging strategy will be successful.
Inverse Floater Risk.
The funds invest in inverse floaters. Due to their leveraged nature, these investments can greatly increase a funds
exposure to interest rate risk and credit risk. In addition, investments in inverse floaters involve the risk that the fund could lose more than its original principal investment.
Share Distribution
and Price Information
Distribution Information
The following information regarding your Funds distributions is current as of November 30, 2011, and likely will vary over time based on the Funds investment activities and portfolio
investment value changes.
MTP did not make a distribution during the one-month period ended November 30, 2011. JMF declared its first
quarterly distribution to shareholders of $.3160 per share payable May 16, 2011, and that quarterly amount remained stable during the remainder of the reporting period.
The Funds quarterly distributions are set pursuant to a managed distribution program. Under that program, the Funds may source their distributions from the following: net distributable cash flow,
net realized gains, unrealized gains, and, in certain cases, a return of Fund principal. Net distributable cash flow consists primarily of distributions received from a Funds investments in shares of energy Master Limited Partnerships (MLPs),
less payments on any of its leveraging instruments and other Fund expenses (including taxes paid at the Fund level since each Fund is taxed as an ordinary C corporation). Currently, the Funds intend to distribute substantially all of
their net distributable cash flow received without sourcing incremental amounts from other components. For additional information regarding the managed distribution program please visit the distribution section of each Funds website at
www.nuveen.com.
For purposes of determining the income tax characterization of each Funds distributions, amounts in excess of each
Funds earnings and profits for federal income tax purposes are characterized as a return of capital. Distributions attributable to earnings and profits for federal income tax purposes are characterized as taxable ordinary dividends. Each Fund
will calculate its earnings and profits based on its taxable period ended November 30 and will report the character of its distributions to shareholders shortly after the end of the calendar year. The primary components of each Funds
annual earnings and profits calculation are: income, loss and other flow-through items (including earnings and profits adjustments) reported by the MLPs on Schedule K-1, realized gain or loss on sales of Fund investments and deductible operating
expenses. In addition, a Fund will recognize income (and increase its earnings and profits) should it receive a distribution from an MLP that exceeds its income tax basis. Distributions from any given MLP are treated as a return of capital to the
extent of a Funds income tax basis in that MLP.
The following table provides estimated information regarding each Funds distributions and actual
total return performance for the period ended November 30, 2011. This information is intended to help you better understand whether the Funds returns for the specified time period were sufficient to meet the Funds distributions.
|
|
|
|
|
|
|
|
|
As of November 30, 2011
|
|
MTP*
|
|
|
JMF**
|
|
Inception date
|
|
6/29/07
|
|
|
2/24/11
|
|
Period ended November 30, 2011
|
|
|
|
|
|
|
|
|
Per share distribution
|
|
|
|
|
|
|
|
|
From net investment income
|
|
$
|
|
|
|
$
|
|
|
Return of capital
|
|
|
|
|
|
|
0.95
|
|
|
|
|
|
|
|
|
|
|
Total per share distribution
|
|
$
|
|
|
|
$
|
0.95
|
|
|
|
|
|
|
|
|
|
|
Annualized distribution rate on NAV
|
|
|
|
%
|
|
|
7.36
|
%
|
Average annual total returns***:
|
|
|
|
|
|
|
|
|
1-Month on NAV
|
|
|
0.11
|
%
|
|
|
N/A
|
|
1-Year on NAV
|
|
|
5.50
|
%
|
|
|
N/A
|
|
Since inception on NAV
|
|
|
4.89
|
%
|
|
|
-4.76
|
%
|
*
|
For the period November 1, 2011 through November 30, 2011.
|
**
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
***
|
Returns less than 1-year are cumulative.
|
Price Information
The Funds have not
repurchased any of their outstanding shares since the inception of their repurchase programs.
As of November 30, 2011, the Funds
share prices were trading at (+) premiums or (-) discounts to their NAVs as shown in the accompanying table.
|
|
|
|
|
|
|
|
|
Fund
|
|
11/30/11
(-)Discount
|
|
|
Average*
(+) Premium/(-)Discount
|
|
MTP
|
|
|
(-) 9.12
|
%
|
|
|
(-) 9.47
|
%
|
JMF
|
|
|
(-) 3.25
|
%
|
|
|
(+)1.47
|
%
|
*
|
MTPs average is for the period November 1, 2011 through November 30, 2011. JMFs average is for the period February 24, 2011 (commencement of
operations) through November 30, 2011.
|
Fund Snapshot
|
|
|
|
|
Share Price
|
|
$
|
16.15
|
|
Net Asset Value (NAV)
|
|
$
|
17.77
|
|
Premium/(Discount) to NAV
|
|
|
-9.12
|
%
|
Current Distribution Rate
1
|
|
|
5.87
|
%
|
Net Assets ($000)
|
|
$
|
263,247
|
|
Average Annual Total Return
(Inception 6/29/07)
|
|
|
|
|
|
|
|
|
|
|
On Share
Price
|
|
|
On
NAV
|
|
1-Month (Cumulative)
|
|
|
-1.22
|
%
|
|
|
0.11
|
%
|
1-Year
|
|
|
-3.81
|
%
|
|
|
5.50
|
%
|
Since Inception
|
|
|
1.78
|
%
|
|
|
4.89
|
%
|
Portfolio Composition
(as a % of total investments)
2
|
|
|
|
|
Oil, Gas & Consumable Fuels
|
|
|
97.4
|
%
|
Gas Utilities
|
|
|
1.8
|
%
|
Short-Term Investments
|
|
|
0.6
|
%
|
Energy Equipment & Services
|
|
|
0.2
|
%
|
Ten Largest Master Limited
Partnerships & MLP Affiliates
Holdings
(as a % of total investments)
2, 4
|
|
|
|
|
Enterprise Products Partners LP
|
|
|
5.6
|
%
|
Kinder Morgan Management LLC
|
|
|
5.6
|
%
|
Plains All American Pipeline LP
|
|
|
5.2
|
%
|
ONEOK Partners LP
|
|
|
4.8
|
%
|
DCP Midstream Partners LP
|
|
|
4.6
|
%
|
Energy Transfer Equity LP
|
|
|
4.5
|
%
|
Western Gas Partners LP
|
|
|
4.3
|
%
|
Williams Partners LP
|
|
|
4.0
|
%
|
Targa Resources Partners LP
|
|
|
4.0
|
%
|
Magellan Midstream Partners LP
|
|
|
3.7
|
%
|
|
|
|
MTP
Performance
OVERVIEW
|
|
MLP & Strategic
Equity Fund Inc.
as of November 30, 2011
|
Portfolio Allocation
(as a % of total investments)
2
2010-2011 Dividends Per Share
3
Share Price Performance
Weekly Closing Price
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within
this Funds Performance Overview page.
1
|
Current Distribution Rate is based on the Funds current annualized quarterly distribution divided by the Funds current market price. The Funds
quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the fiscal year the Funds cumulative net ordinary income and net realized gains are less than the amount of the
Funds distributions, a return of capital for tax purposes.
|
2
|
Holdings are subject to change.
|
3
|
Effective February 1, 2011, the Fund began paying distributions to shareholders quarterly, with its first quarterly distribution of $.2370 per share payable
May 16, 2011.
|
4
|
Excluding short-term investments.
|
|
|
|
JMF
Performance
OVERVIEW
|
|
Nuveen Energy
MLP Total Return
Fund
|
|
|
as of November 30, 2011
|
Portfolio Allocation (as a % of total
investments)
2
2011 Quarterly Dividends Per Share
Share Price Performance
Weekly Closing Price
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within
this Funds Performance Overview page.
1
|
Current Distribution Rate is based on the Funds current annualized quarterly distribution divided by the Funds current market price. The Funds
quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the fiscal year the Funds cumulative net ordinary income and net realized gains are less than the amount of the
Funds distributions, a return of capital for tax purposes.
|
2
|
Holdings are subject to change.
|
3
|
Excluding short-term investments.
|
|
|
|
|
|
|
|
Fund Snapshot
|
|
|
|
|
|
|
Share Price
|
|
|
|
$
|
16.66
|
|
Net Asset Value (NAV)
|
|
|
|
$
|
17.22
|
|
Premium/(Discount) to NAV
|
|
|
|
|
-3.25
|
%
|
Current Distribution Rate
1
|
|
|
|
|
7.59
|
%
|
Net Assets Applicable to Common Shares ($000)
|
|
|
|
$
|
409,905
|
|
|
|
|
Leverage
|
|
|
|
|
|
|
Structural Leverage
|
|
|
|
|
23.37
|
%
|
Effective Leverage
|
|
|
|
|
23.37
|
%
|
|
|
|
Cumulative Total Return
|
|
|
|
|
|
|
(Inception 2/24/11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On Share Price
|
|
On NAV
|
|
Since Inception
|
|
-11.94%
|
|
|
-4.76
|
%
|
|
|
|
|
|
|
|
|
|
|
Portfolio Composition
|
|
|
|
|
|
|
(as a % of total investments)
2
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels
|
|
|
|
|
98.3
|
%
|
Energy Equipment & Services
|
|
|
|
|
1.5
|
%
|
Short-Term Investments
|
|
|
|
|
0.1
|
%
|
Gas Utilities
|
|
|
|
|
0.1
|
%
|
|
Ten Largest Master Limited
|
|
Partnerships & MLP Affiliates
|
|
Holdings
|
|
|
|
|
|
|
(as a % of total investments)
2, 3
|
|
|
|
|
|
|
Kinder Morgan Management LLC
|
|
|
|
|
8.5
|
%
|
Plains All American Pipeline LP
|
|
|
|
|
7.9
|
%
|
Enbridge Energy Management LLC
|
|
|
|
|
7.4
|
%
|
Enterprise Products Partners LP
|
|
|
|
|
6.7
|
%
|
Regency Energy Partners LP
|
|
|
|
|
5.6
|
%
|
Energy Transfer Equity LP
|
|
|
|
|
5.5
|
%
|
Williams Partners LP
|
|
|
|
|
5.5
|
%
|
DCP Midstream Partners LP
|
|
|
|
|
5.0
|
%
|
Copano Energy LLC
|
|
|
|
|
4.6
|
%
|
Inergy LP
|
|
|
|
|
4.3
|
%
|
|
|
|
|
|
Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
|
To the Board of Directors/Trustees and Shareholders of
MLP & Strategic Equity Fund Inc. and Nuveen Energy MLP Total Return Fund:
In our
opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and of cash flows and the financial highlights present fairly, in all
material respects, the financial position of MLP & Strategic Equity Fund Inc. and Nuveen Energy MLP Total Return Fund (hereinafter referred to as the Funds) at November 30, 2011, the results of each of their operations, the
changes in each of their net assets and of cash flows for Nuveen Energy MLP Total Return Fund, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management; our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2011 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial highlights of MLP & Strategic Equity Fund Inc. for the year ended October 31, 2008 and the period ended October 31, 2007 were audited by other
independent auditors whose report, dated December 26, 2008, expressed an unqualified opinion on those statements.
PricewaterhouseCoopers
LLP
Chicago, IL
January 27,
2012
|
|
|
MTP
|
|
MLP & Strategic Equity Fund Inc.
Portfolio of INVESTMENTS
|
|
|
November 30, 2011
|
|
|
|
|
|
|
|
Shares/
Units
|
|
Description (1)
|
|
Value
|
|
|
|
Master Limited Partnerships & MLP Affiliates 108.1% (99.4% of Total Investments)
|
|
|
|
|
|
|
|
|
|
Energy Equipment & Services 0.2% (0.2% of Total Investments)
|
|
|
|
|
|
|
|
21,916
|
|
Exterran Partners LP
|
|
$
|
475,796
|
|
|
|
|
|
|
|
|
|
|
Gas Utilities 2.0% (1.8% of Total Investments)
|
|
|
|
|
|
|
|
64,000
|
|
AmeriGas Partners LP
|
|
|
2,808,320
|
|
53,406
|
|
Suburban Propane Partners LP
|
|
|
2,483,379
|
|
|
|
|
|
|
|
|
|
|
Total Gas Utilities
|
|
|
5,291,699
|
|
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 105.9% (97.4% of Total Investments)
|
|
|
|
|
|
|
|
37,550
|
|
Alliance Holding GP LP
|
|
|
1,903,034
|
|
69,296
|
|
Alliance Resource Partners LP
|
|
|
4,951,199
|
|
21,100
|
|
American Midstream Partners LP
|
|
|
397,524
|
|
18,000
|
|
Boardwalk Pipeline Partners LP
|
|
|
467,280
|
|
87,700
|
|
Breitburn Energy Partners LP
|
|
|
1,622,450
|
|
145,563
|
|
Buckeye Partners LP
|
|
|
9,286,919
|
|
128,381
|
|
Buckeye Partners LP, Class B Shares, (2), (3), (4)
|
|
|
7,478,292
|
|
45,300
|
|
Chesapeake Midstream Partners LP
|
|
|
1,187,313
|
|
46,500
|
|
Copano Energy LLC
|
|
|
1,539,150
|
|
94,061
|
|
Crestwood Midstream Partners LP
|
|
|
2,809,602
|
|
128,815
|
|
Crestwood Midstream Partners LP, Class C Shares, (2), (3), (4)
|
|
|
3,651,402
|
|
306,557
|
|
DCP Midstream Partners LP
|
|
|
13,154,361
|
|
332,200
|
|
El Paso Pipeline Partners LP
|
|
|
10,886,194
|
|
258,553
|
|
Enbridge Energy Management LLC, (3)
|
|
|
8,237,499
|
|
173,188
|
|
Enbridge Energy Partners LP
|
|
|
5,363,632
|
|
365,557
|
|
Energy Transfer Equity LP
|
|
|
12,900,507
|
|
351,414
|
|
Enterprise Products Partners LP
|
|
|
15,985,823
|
|
122,690
|
|
EV Energy Partners, LP
|
|
|
8,373,593
|
|
135,964
|
|
Genesis Energy LP
|
|
|
3,547,301
|
|
105,695
|
|
Holly Energy Partners LP
|
|
|
5,889,325
|
|
221,875
|
|
Inergy LP
|
|
|
5,364,938
|
|
34,960
|
|
LRR Energy LP
|
|
|
660,744
|
|
223,455
|
|
Kinder Morgan Management LLC, (3)
|
|
|
15,813,910
|
|
172,048
|
|
Magellan Midstream Partners LP
|
|
|
11,007,631
|
|
173,150
|
|
MarkWest Energy Partners LP
|
|
|
9,287,766
|
|
47,375
|
|
Natural Resource Partners LP
|
|
|
1,303,760
|
|
10,000
|
|
NGL Energy Partners LP
|
|
|
214,800
|
|
13,000
|
|
NuStar Energy LP
|
|
|
712,920
|
|
150,800
|
|
NuStar GP Holdings LLC
|
|
|
4,477,252
|
|
269,006
|
|
ONEOK Partners LP
|
|
|
13,600,943
|
|
15,800
|
|
Oxford Resource Partners LP
|
|
|
278,554
|
|
40,003
|
|
Pioneer Southwest Energy Partners LP
|
|
|
1,216,491
|
|
228,849
|
|
Plains All American Pipeline LP
|
|
|
14,843,146
|
|
289,713
|
|
Regency Energy Partners LP
|
|
|
6,666,296
|
|
281,026
|
|
Spectra Energy Partners LP
|
|
|
8,506,657
|
|
84,470
|
|
Sunoco Logistics Partners LP
|
|
|
8,722,372
|
|
301,250
|
|
Targa Resources Partners LP
|
|
|
11,305,913
|
|
144,999
|
|
TC PipeLines LP
|
|
|
6,899,052
|
|
280,469
|
|
Teekay Offshore Partners LP, (2), (4)
|
|
|
7,050,991
|
|
52,875
|
|
Teekay Offshore Partners LP
|
|
|
1,474,684
|
|
83,063
|
|
Teekay LNG Partners LP
|
|
|
2,673,798
|
|
|
|
|
MTP
|
|
MLP & Strategic Equity Fund Inc. (continued)
Portfolio of INVESTMENTS November 30, 2011
|
|
|
|
|
|
|
|
Shares/
Units
|
|
Description (1)
|
|
Value
|
|
|
|
Oil, Gas & Consumable Fuels
(continued)
|
|
|
|
|
|
|
|
118,426
|
|
TransMontaigne Partners LP
|
|
$
|
3,620,283
|
|
326,420
|
|
Western Gas Partners LP
|
|
|
12,299,506
|
|
195,822
|
|
Williams Partners LP
|
|
|
11,369,425
|
|
|
|
|
|
|
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
279,004,232
|
|
|
|
|
|
|
|
|
|
|
Total Master Limited Partnerships & MLP Affiliates (cost $197,648,966)
|
|
|
284,771,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount (000)
|
|
Description (1)
|
|
Coupon
|
|
|
Maturity
|
|
|
Value
|
|
|
|
Short-Term Investments 0.7% (0.6% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 1,724
|
|
Repurchase Agreement with State Street Bank, dated 11/30/11, repurchase price $1,724,016, collateralized by $1,760,000 U.S.
Treasury Bills, 0.000%, due 12/29/11, value $1,759,972
|
|
|
0.010
|
%
|
|
|
12/01/11
|
|
|
$
|
1,724,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (cost $1,724,016)
|
|
|
|
|
|
|
|
|
|
|
1,724,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments (cost $199,372,982) 108.8%
|
|
|
|
|
|
|
|
|
|
|
286,495,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets Less Liabilities (8.8)%
|
|
|
|
|
|
|
|
|
|
|
(23,248,807
|
)
|
|
|
Net Assets 100%
|
|
|
|
|
|
|
|
|
|
$
|
263,246,936
|
|
For Fund portfolio compliance purposes, the Funds industry classifications refer to any one or more
of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry
sub-classifications into sectors for reporting ease.
(1)
|
All percentages shown in the Portfolio of Investments are based on net assets unless otherwise noted.
|
(2)
|
For fair value measurement disclosure purposes, Master Limited Partnership & MLP Affiliates categorized as Level 2. See Notes to Financial Statements, Footnote
1 - General Information and Significant Accounting Policies, Investment Valuation for more information.
|
(3)
|
Distributions are paid in-kind.
|
(4)
|
Security is restricted and may be resold only in transactions exempt from registration, normally to qualified institutional buyers.
|
See accompanying notes to financial statements.
|
|
|
JMF
|
|
Nuveen Energy MLP Total Return Fund
|
|
|
Portfolio of INVESTMENTS
|
November 30, 2011
|
|
|
|
|
|
|
|
|
Shares/
Units
|
|
|
Description (1)
|
|
Value
|
|
|
|
|
|
Master Limited Partnerships & MLP Affiliates 130.5% (99.9% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
Energy Equipment & Services 1.9% (1.5% of Total Investments)
|
|
|
|
|
|
|
|
|
368,020
|
|
|
Exterran Partners LP
|
|
$
|
7,989,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utilities 0.1% (0.1% of Total Investments)
|
|
|
|
|
|
|
|
|
8,000
|
|
|
AmeriGas Partners LP
|
|
|
351,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 128.5% (98.3% of Total Investments)
|
|
|
|
|
|
|
|
|
114,000
|
|
|
Alliance Holding GP LP
|
|
|
5,777,520
|
|
|
145,450
|
|
|
American Midstream Partners LP
|
|
|
2,740,278
|
|
|
295,000
|
|
|
Breitburn Energy Partners LP
|
|
|
5,457,500
|
|
|
191,200
|
|
|
Buckeye Partners LP
|
|
|
12,198,560
|
|
|
239,441
|
|
|
Buckeye Partners LP, Class B Shares, (2), (3), (4)
|
|
|
13,947,623
|
|
|
739,770
|
|
|
Copano Energy LLC
|
|
|
24,486,387
|
|
|
624,245
|
|
|
DCP Midstream Partners LP
|
|
|
26,786,353
|
|
|
457,600
|
|
|
El Paso Pipeline Partners LP
|
|
|
14,995,552
|
|
|
1,271,665
|
|
|
Enbridge Energy Management LLC, (3)
|
|
|
39,383,465
|
|
|
838,350
|
|
|
Energy Transfer Equity LP
|
|
|
29,585,372
|
|
|
782,215
|
|
|
Enterprise Products Partners LP
|
|
|
35,582,960
|
|
|
215,125
|
|
|
EV Energy Partners, LP
|
|
|
14,682,281
|
|
|
758,240
|
|
|
Genesis Energy LP
|
|
|
19,782,482
|
|
|
942,455
|
|
|
Inergy LP
|
|
|
22,788,562
|
|
|
645,211
|
|
|
Kinder Morgan Management LLC, (3)
|
|
|
45,661,582
|
|
|
64,880
|
|
|
LRR Energy LP
|
|
|
1,226,232
|
|
|
81,000
|
|
|
Magellan Midstream Partners LP
|
|
|
5,182,380
|
|
|
171,950
|
|
|
Natural Resource Partners LP
|
|
|
4,732,064
|
|
|
372,000
|
|
|
NGL Energy Partners LP
|
|
|
7,990,560
|
|
|
22,000
|
|
|
NuStar Energy LP
|
|
|
1,206,480
|
|
|
10,000
|
|
|
NuStar GP Holdings LLC
|
|
|
296,900
|
|
|
693,815
|
|
|
Oxford Resource Partners LP
|
|
|
12,231,958
|
|
|
649,265
|
|
|
Plains All American Pipeline LP
|
|
|
42,111,328
|
|
|
1,309,505
|
|
|
Regency Energy Partners LP
|
|
|
30,131,710
|
|
|
471,550
|
|
|
Targa Resources Partners LP
|
|
|
17,697,272
|
|
|
394,645
|
|
|
TC PipeLines LP
|
|
|
18,777,209
|
|
|
159,335
|
|
|
Teekay Offshore Partners LP, (2), (4)
|
|
|
4,005,682
|
|
|
417,000
|
|
|
Teekay Offshore Partners LP
|
|
|
11,630,130
|
|
|
306,170
|
|
|
Teekay LNG Partners LP
|
|
|
9,855,612
|
|
|
162,660
|
|
|
TransMontaigne Partners, LP
|
|
|
4,972,516
|
|
|
300,000
|
|
|
Western Gas Partners LP
|
|
|
11,304,000
|
|
|
507,330
|
|
|
Williams Partners LP
|
|
|
29,455,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
526,664,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Master Limited Partnerships & MLP Affiliates (cost $530,683,202)
|
|
|
535,004,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JMF
|
|
Nuveen Energy MLP Total Return Fund (continued)
|
|
|
Portfolio of INVESTMENTS November 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount (000)
|
|
|
Description (1)
|
|
Coupon
|
|
|
Maturity
|
|
|
Value
|
|
|
|
|
|
Short-Term Investments 0.1% (0.1% of Total Investments)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 627
|
|
|
Repurchase Agreement with State Street Bank, dated 11/30/11, repurchase price $627,050, collateralized by $640,000 U.S.
Treasury Bills, 0.000%, due 12/29/11, value $639,990
|
|
|
0.010
|
%
|
|
|
12/01/11
|
|
|
$
|
627,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (cost $627,050)
|
|
|
|
|
|
|
|
|
|
|
627,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments (cost $531,310,252) 130.7%
|
|
|
|
|
|
|
|
|
|
|
535,631,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings (30.5)% (5), (6)
|
|
|
|
|
|
|
|
|
|
|
(125,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets Less Liabilities (0.2)%
|
|
|
|
|
|
|
|
|
|
|
(727,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets 100%
|
|
|
|
|
|
|
|
|
|
$
|
409,904,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Fund portfolio compliance purposes, the Funds industry classifications refer to any one or more
of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry
sub-classifications into sectors for reporting ease.
(1)
|
All percentages shown in the Portfolio of Investments are based on net assets unless otherwise noted.
|
(2)
|
For fair value measurement disclosure purposes, Master Limited Partnership & MLP Affiliates categorized as Level 2. See Notes to Financial Statements, Footnote
1 - General Information and Significant Accounting Policies, Investment Valuation for more information.
|
(3)
|
Distributions are paid in-kind.
|
(4)
|
Security is restricted and may be resold only in transactions exempt from registration, normally to qualified institutional buyers.
|
(5)
|
Borrowings as a percentage of Total Investments is 23.3%.
|
(6)
|
The Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of November 30, 2011, investments with
a value of $339,292,082 have been pledged as collateral for Borrowings.
|
See accompanying notes to financial
statements.
|
|
|
|
|
Statement of
|
|
|
ASSETS & LIABILITIES
|
November 30, 2011
|
|
|
|
|
|
|
|
|
|
|
MLP
&
Strategic
Equity
(MTP)
|
|
|
Energy
MLP
Total
Return
(JMF)
|
|
Assets
|
|
|
|
|
|
|
|
|
Investments, at value (cost $199,372,982 and $531,310,252, respectively)
|
|
$
|
286,495,743
|
|
|
$
|
535,631,894
|
|
Receivables:
|
|
|
|
|
|
|
|
|
Distributions from Master Limited Partnerships (MLPs)
|
|
|
131,591
|
|
|
|
245,427
|
|
Investments sold
|
|
|
3,796,824
|
|
|
|
|
|
Other assets
|
|
|
2,039
|
|
|
|
10,036
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
290,426,197
|
|
|
|
535,887,357
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
125,000,000
|
|
Payables:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
138,013
|
|
Federal income tax
|
|
|
213,759
|
|
|
|
|
|
State income tax
|
|
|
930,906
|
|
|
|
|
|
Net deferred tax liability
|
|
|
25,508,715
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
State franchise tax
|
|
|
9,878
|
|
|
|
118, 219
|
|
Management fees
|
|
|
221,518
|
|
|
|
468,499
|
|
Other
|
|
|
294,485
|
|
|
|
258,007
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
27,179,261
|
|
|
|
125,982,738
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
$
|
263,246,936
|
|
|
$
|
409,904,619
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
|
14,810,750
|
|
|
|
23,800,246
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share outstanding
|
|
$
|
17.77
|
|
|
$
|
17.22
|
|
|
|
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
|
|
|
|
Shares, $.001 and $.01 par value per share, respectively
|
|
$
|
14,811
|
|
|
$
|
238,002
|
|
Paid-in surplus
|
|
|
221,198,223
|
|
|
|
430,526,658
|
|
Accumulated net investment income (loss), net of tax
|
|
|
4,267,893
|
|
|
|
(5,516,747
|
)
|
Accumulated net realized gain (loss), net of tax
|
|
|
(42,631,086
|
)
|
|
|
(19,664,936
|
)
|
Net unrealized appreciation (depreciation), net of tax
|
|
|
80,397,095
|
|
|
|
4,321,642
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
$
|
263,246,936
|
|
|
$
|
409,904,619
|
|
|
|
|
|
|
|
|
|
|
Authorized shares
|
|
|
100,000,000
|
|
|
|
Unlimited
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity (MTP)
|
|
|
Energy MLP Total
Return (JMF)
|
|
|
|
One Month
Ended
11/30/11
|
|
|
Year
Ended
10/31/11
|
|
|
For the Period
2/24/11
(commencement
of operations)
through 11/30/11
|
|
Investment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from MLPs
|
|
$
|
2,680,011
|
|
|
$
|
15,115,040
|
|
|
$
|
23,593,819
|
|
Less: Return of capital on distributions from MLPs
|
|
|
(2,680,011
|
)
|
|
|
(15,115,040
|
)
|
|
|
(23,593,819
|
)
|
Interest
|
|
|
72
|
|
|
|
1,892
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
|
|
72
|
|
|
|
1,892
|
|
|
|
1,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
(234,206
|
)
|
|
|
(2,848,754
|
)
|
|
|
(4,073,073
|
)
|
Shareholders servicing agent fees and expenses
|
|
|
(17
|
)
|
|
|
(7,099
|
)
|
|
|
(104
|
)
|
Interest expense on borrowings
|
|
|
|
|
|
|
|
|
|
|
(928,957
|
)
|
Custodians fees and expenses
|
|
|
(2,978
|
)
|
|
|
(46,124
|
)
|
|
|
(58,424
|
)
|
Directors/Trustees fees and expenses
|
|
|
(696
|
)
|
|
|
(26,371
|
)
|
|
|
(16,617
|
)
|
Professional fees
|
|
|
(33,229
|
)
|
|
|
(93,625
|
)
|
|
|
(133,890
|
)
|
Shareholders reportsprinting and mailing expenses
|
|
|
(16,952
|
)
|
|
|
(81,493
|
)
|
|
|
(108,304
|
)
|
Stock exchange listing fees
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
Investor relations expense
|
|
|
(3,564
|
)
|
|
|
(40,794
|
)
|
|
|
(63,720
|
)
|
Franchise tax expense
|
|
|
(9,878
|
)
|
|
|
|
|
|
|
(118,219
|
)
|
Other expenses
|
|
|
(9,351
|
)
|
|
|
(7,219
|
)
|
|
|
(21,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses before custodian fee credit and expense reimbursement
|
|
|
(310,889
|
)
|
|
|
(3,151,479
|
)
|
|
|
(5,522,796
|
)
|
Custodian fee credit
|
|
|
23
|
|
|
|
19
|
|
|
|
4,825
|
|
Expense reimbursement
|
|
|
12,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses
|
|
|
(298,178
|
)
|
|
|
(3,151,460
|
)
|
|
|
(5,517,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) before taxes
|
|
|
(298,106
|
)
|
|
|
(3,149,568
|
)
|
|
|
(5,516,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit
|
|
|
684,362
|
|
|
|
676,861
|
|
|
|
|
|
Current tax (expense)
|
|
|
(527,699
|
)
|
|
|
(605,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(141,443
|
)
|
|
|
(3,077,977
|
)
|
|
|
(5,516,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from investments before taxes
|
|
|
36,954,000
|
|
|
|
14,713,908
|
|
|
|
(19,664,936
|
)
|
Deferred tax (expense)/benefit
|
|
|
(15,723,000
|
)
|
|
|
(4,650,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from investments
|
|
|
21,231,000
|
|
|
|
10,063,568
|
|
|
|
(19,664,936
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized appreciation (depreciation) of investments before taxes
|
|
|
(36,019,417
|
)
|
|
|
16,510,736
|
|
|
|
4,321,642
|
|
Deferred tax (expense)/benefit
|
|
|
15,325,359
|
|
|
|
(5,218,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(20,694,058
|
)
|
|
|
11,292,508
|
|
|
|
4,321,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain (loss)
|
|
|
536,942
|
|
|
|
21,356,076
|
|
|
|
(15,343,294
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
395,499
|
|
|
$
|
18,278,099
|
|
|
$
|
(20,860,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
|
|
|
|
|
Statement of
|
|
|
Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
|
|
One Month
Ended
11/30/11
|
|
|
Year
Ended
10/31/11
|
|
|
Year
Ended
10/31/10
|
|
|
For the
Period
2/24/11
(commencement
of operations)
through 11/30/11
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
(141,443
|
)
|
|
$
|
(3,077,977
|
)
|
|
$
|
(2,047,329
|
)
|
|
$
|
(5,516,747
|
)
|
Net realized gain (loss) from investments
|
|
|
21,231,000
|
|
|
|
10,063,568
|
|
|
|
3,949,654
|
|
|
|
(19,664,936
|
)
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(20,694,058
|
)
|
|
|
11,292,508
|
|
|
|
69,084,607
|
|
|
|
4,321,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
|
395,499
|
|
|
|
18,278,099
|
|
|
|
70,986,932
|
|
|
|
(20,860,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
|
|
|
|
(8,719,354
|
)
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
|
|
|
|
(5,053,525
|
)
|
|
|
(12,405,256
|
)
|
|
|
(22,473,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in net assets from distributions to shareholders
|
|
|
|
|
|
|
(13,772,879
|
)
|
|
|
(12,405,256
|
)
|
|
|
(22,473,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Share Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of shares, net of offering costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,006,600
|
|
Proceeds from shares issued to shareholders due to reinvestment of distributions
|
|
|
|
|
|
|
188,523
|
|
|
|
1,292,066
|
|
|
|
3,131,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from Fund share transactions
|
|
|
|
|
|
|
188,523
|
|
|
|
1,292,066
|
|
|
|
453,138,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets
|
|
|
395,499
|
|
|
|
4,693,743
|
|
|
|
59,873,742
|
|
|
|
409,804,344
|
|
Net assets at the beginning of period
|
|
|
262,851,437
|
|
|
|
258,157,694
|
|
|
|
198,283,952
|
|
|
|
100,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets at the end of period
|
|
$
|
263,246,936
|
|
|
$
|
262,851,437
|
|
|
$
|
258,157,694
|
|
|
$
|
409,904,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated net investment income (loss), net of tax at the end of period
|
|
$
|
4,267,893
|
|
|
$
|
(6,901,946
|
)
|
|
$
|
(10,090,869
|
)
|
|
$
|
(5,516,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
|
|
|
|
|
|
|
Energy MLP Total
Return (JMF)
|
|
|
|
For the
Period
2/24/11
(commencement
of operations)
through 11/30/11
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
Net Increase (Decrease) in Net Assets from Operations
|
|
$
|
(20,860,041
|
)
|
Adjustments to reconcile the net increase (decrease) in net assets from operations to net cash provided by (used in) operating
activities:
|
|
|
|
|
Purchases of investments
|
|
|
(809,319,834
|
)
|
Proceeds from sales and maturities of investments
|
|
|
235,377,877
|
|
Return of capital distributions from MLPs
|
|
|
23,593,819
|
|
Proceeds from (Purchase of) short-term investments, net
|
|
|
(627,050
|
)
|
(Increase) Decrease in:
|
|
|
|
|
Receivable for distributions from MLPs
|
|
|
(245,427
|
)
|
Other assets
|
|
|
(10,036
|
)
|
Increase (Decrease) in:
|
|
|
|
|
Payable for interest
|
|
|
138,013
|
|
Accrued state franchise tax expense
|
|
|
118,219
|
|
Accrued management fees
|
|
|
468,499
|
|
Accrued other expenses
|
|
|
258,007
|
|
Net realized (gain) loss from investments
|
|
|
19,664,936
|
|
Change in net unrealized (appreciation) depreciation of investments
|
|
|
(4,321,642
|
)
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(555,764,660
|
)
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
Increase (Decrease) in borrowings
|
|
|
125,000,000
|
|
Cash distributions paid to shareholders
|
|
|
(19,342,215
|
)
|
Proceeds from sale of shares, net of offering costs
|
|
|
450,006,600
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
555,664,385
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
(100,275
|
)
|
Cash at the beginning of period
|
|
|
100,275
|
|
|
|
|
|
|
Cash at the End of Period
|
|
$
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
Cash paid by Energy MLP Total Return (JMF) for interest on borrowings during the period ended November 30, 2011 was $682,952.
Non-cash financing activities not included herein consist of reinvestments of share distributions of $3,131,769.
See accompanying notes to financial statements.
Intentionally Left Blank
Selected data for a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Net
Asset
Value
|
|
|
Net
Investment
Income
(Loss)(a)
|
|
|
Net
Realized/
Unrealized
Gain
(Loss)
|
|
|
Total
|
|
|
Net
Investment
Income
|
|
|
Return
of
Capital
|
|
|
Total
|
|
|
Offering
Costs
|
|
|
Ending
Net
Asset
Value
|
|
|
Ending
Market
Value
|
|
MLP & Strategic Equity (MTP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 11/30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011(f)
|
|
$
|
17.75
|
|
|
$
|
(.01
|
)
|
|
$
|
.03
|
|
|
$
|
.02
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17.77
|
|
|
$
|
16.15
|
|
Year Ended 10/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
17.44
|
|
|
|
(.21
|
)
|
|
|
1.45
|
|
|
|
1.24
|
|
|
|
(.59
|
)
|
|
|
(.34
|
)
|
|
|
(.93
|
)
|
|
|
|
|
|
|
17.75
|
|
|
|
16.35
|
|
2010
|
|
|
13.47
|
|
|
|
(.14
|
)
|
|
|
4.95
|
|
|
|
4.81
|
|
|
|
|
|
|
|
(.84
|
)
|
|
|
(.84
|
)
|
|
|
|
|
|
|
17.44
|
|
|
|
17.41
|
|
2009
|
|
|
11.70
|
|
|
|
(.15
|
)
|
|
|
2.82
|
|
|
|
2.67
|
|
|
|
|
|
|
|
(.90
|
)
|
|
|
(.90
|
)
|
|
|
|
|
|
|
13.47
|
|
|
|
14.42
|
|
2008
|
|
|
18.06
|
|
|
|
(.09
|
)
|
|
|
(5.07
|
)
|
|
|
(5.16
|
)
|
|
|
|
|
|
|
(1.20
|
)
|
|
|
(1.20
|
)
|
|
|
|
|
|
|
11.70
|
|
|
|
13.00
|
|
2007(g)
|
|
|
19.10
|
|
|
|
.04
|
|
|
|
(.74
|
)
|
|
|
(.70
|
)
|
|
|
(.03
|
)
|
|
|
(.27
|
)
|
|
|
(.30
|
)
|
|
|
(.04
|
)
|
|
|
18.06
|
|
|
|
16.24
|
|
Energy MLP Total Return (JMF)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 11/30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011(h)
|
|
|
19.10
|
|
|
|
(.24
|
)
|
|
|
(.65
|
)
|
|
|
(.89
|
)
|
|
|
|
|
|
|
(.95
|
)
|
|
|
(.95
|
)
|
|
|
(.04
|
)
|
|
|
17.22
|
|
|
|
16.66
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings at the End of Period
|
|
|
|
Aggregate
Amount
Outstanding
(000)
|
|
|
Asset
Coverage
Per $1,000
|
|
Energy MLP Total Return (JMF)
|
|
|
|
|
|
|
|
|
Year Ended 11/30:
|
|
|
|
|
|
|
|
|
2011(h)
|
|
$
|
125,000
|
|
|
$
|
4,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
Ratios to Average
Net Assets Before
Reimbursement/Income Taxes/
|
|
|
Ratios to Average
Net Assets After
|
|
|
Ratios
to Average
|
|
|
|
|
Total Returns
|
|
|
|
|
|
Tax Benefit (Expense)
|
|
|
Reimbursement(c)(d)(e)
|
|
|
Net Assets
|
|
|
|
|
Based on
Market
Value(b)
|
|
|
Based on
Net
Asset
Value(b)
|
|
|
Ending
Net
Assets
(000)
|
|
|
Expenses
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Expenses
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Current and
Deferred
Tax
Benefit
(Expense)
|
|
|
Portfolio
Turnover
Rate
|
|
|
(1.22
|
)%
|
|
|
.11
|
%
|
|
$
|
263,247
|
|
|
|
(1.45
|
)%*
|
|
|
(1.45
|
)%*
|
|
|
(2.52
|
)%*
|
|
|
(.66
|
)%*
|
|
|
(1.13
|
)%*
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
(.82
|
)
|
|
|
7.25
|
|
|
|
262,851
|
|
|
|
(1.20
|
)
|
|
|
(1.20
|
)
|
|
|
(4.93
|
)
|
|
|
(1.17
|
)
|
|
|
(3.73
|
)
|
|
|
37
|
|
|
26.91
|
|
|
|
36.28
|
|
|
|
258,158
|
|
|
|
(1.31
|
)
|
|
|
(1.31
|
)
|
|
|
(8.36
|
)
|
|
|
(.86
|
)
|
|
|
(7.05
|
)
|
|
|
16
|
|
|
20.47
|
|
|
|
25.04
|
|
|
|
198,284
|
|
|
|
(1.35
|
)
|
|
|
(1.32
|
)
|
|
|
(1.35
|
)
|
|
|
(1.32
|
)
|
|
|
|
|
|
|
38
|
|
|
(12.82
|
)
|
|
|
(29.45
|
)
|
|
|
170,399
|
|
|
|
(1.33
|
)
|
|
|
(.62
|
)
|
|
|
(1.33
|
)
|
|
|
(.62
|
)
|
|
|
|
|
|
|
5
|
|
|
(17.37
|
)
|
|
|
(3.77
|
)
|
|
|
262,603
|
|
|
|
(1.35
|
)*
|
|
|
.62
|
*
|
|
|
(1.35
|
)*
|
|
|
.62
|
*
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11.94
|
)
|
|
|
(4.76
|
)
|
|
|
409,905
|
|
|
|
(1.78
|
)*
|
|
|
(1.78
|
)*
|
|
|
(1.78
|
)*
|
|
|
(1.78
|
)*
|
|
|
|
*
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Per share Net Investment Income (Loss) is calculated using the average daily shares method.
|
(b)
|
For the fiscal years ended subsequent to October 31, 2009, where applicable, Total Return Based on Market Value is the combination of changes in the market price
per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the
first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the
market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
|
For the fiscal years ended subsequent to October 31, 2009, where applicable, Total Return Based on Net Asset Value is the combination of changes in net asset value, reinvested dividend income at net
asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net
asset value. The actual reinvest price for the last dividend declared in the period may often be based on the Funds market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total
returns are not annualized.
For the period June 29, 2007, (commencement of operations) through October 31, 2009,
MLP & Strategic Equitys (MTP) Total Returns Based on Market Value and Net Asset Value reflect the performance of the Fund based on a calculation approved by Fund management of IQ Advisors. Total returns based on the calculations
described above may have produced substantially different results. Total returns are not annualized.
(c)
|
After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Funds net cash on deposit
with the custodian bank, where applicable.
|
(d)
|
Expenses ratios include current and deferred tax benefit (expense) allocated to net investment income (loss) and deferred tax benefit (expense) allocated to realized
and unrealized gain (loss). Net Investment Income (Loss) ratios exclude deferred tax benefit (expense) allocated to realized and unrealized gain (loss).
|
|
|
|
|
|
(e)
|
|
|
|
Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings, as described in Footnote 7 Borrowing
Arrangements.
|
|
|
|
|
Each ratio includes the effect of all interest expense, costs and fees paid on borrowings as follows:
|
|
|
|
|
|
|
|
Ratios of Borrowings Interest Expense
to Average Net Assets
|
|
Energy MLP Total Return (JMF)
|
|
|
|
|
Year Ended 11/30:
|
|
|
|
|
2011(h)
|
|
|
.30
|
%*
|
(f)
|
For the one month ended November 30, 2011.
|
(g)
|
For the period June 29, 2007 (commencement of operations) through October 31, 2007.
|
(h)
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
See accompanying
notes to financial statements.
|
|
|
|
|
Notes to
|
|
|
FINANCIAL STATEMENTS
|
1. General Information and Significant Accounting Policies
General Information
The funds covered in this report and their corresponding New York Stock Exchange (NYSE) symbols are MLP & Strategic
Equity Fund Inc. (MTP) and Nuveen Energy MLP Total Return Fund (JMF) (each a Fund and collectively the Funds). The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end, registered
investment companies.
Effective January 1, 2011, the Funds adviser, Nuveen Asset Management, a wholly-owned subsidiary of Nuveen
Investments, Inc. (Nuveen), changed its name to Nuveen Fund Advisors, Inc. (the Adviser).
Prior to its commencement
of operations on February 24, 2011, Energy MLP Total Return (JMF) had no operations other than those related to organizational matters, the initial capital contribution of $100,275, and the recording of the Funds organizational expenses
($11,000) and its reimbursement by the Adviser.
Effective November 1, 2011, MLP & Strategic Equity (MTP) changed its fiscal and
tax year ends from October 31 to November 30. This change did not affect the objective, investment strategy or portfolio management of the Fund.
MLP & Strategic Equitys (MTP) investment objective is to provide a high level of after-tax total return. The Fund pursues its investment objective by investing substantially all of its net
assets in publicly traded master limited partnerships (MLPs) operating in the energy infrastructure sector of the market. Energy MLP Total Returns (JMF) investment objective is to provide tax-advantaged total return. The Fund seeks
to achieve its investment objective by investing primarily in a portfolio of MLPs in the energy sector. Under normal market circumstances, the Fund will invest at least 80% of its managed assets (as defined in Footnote 7 Management Fees and
Other Transactions with Affiliates) in MLPs in the energy sector. The Funds consider investments in MLPs to include investments that offer economic exposure to publicly traded and private MLPs in the form of equity securities of MLPs, securities of
entities holding primarily general partner or managing member interests in MLPs, securities that are derivatives of interests in MLPs and debt securities of MLPs. Further, the Funds consider an entity to be part of the energy sector if it derives at
least 50% of its revenues from the business of exploring, developing, producing, gathering, transporting, processing, storing, refining, distributing, mining or marketing natural gas, natural gas liquids, crude oil, refined petroleum products or
coal.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of their financial statements in accordance with accounting principles generally accepted in the
United States (U.S. GAAP).
Investment Valuation
Common stocks and other equity-type securities, such as MLPs, are valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as
Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market (NASDAQ) are valued, except as indicated below, at the NASDAQ Official Closing Price and are generally classified as Level 1. However,
securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as
Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be
valued by the Funds Board of Directors/Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the
Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market
quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but
before the calculation of a Funds net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as
provided by the pricing service, is not deemed to reflect the securitys fair value. As a general
principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in
determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security
dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. These securities are generally classified as Level 2
or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds Board of Directors/Trustees or its designee.
Refer to Footnote 2 Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting
period.
Master Limited Partnerships
An MLP consists of a general partner and limited partners (or in the case of MLPs organized as limited liability companies, a managing member and members). The general partner or managing member typically
controls the operations and management of the MLP and has an ownership stake in the MLP. The limited partners or members,through their ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in
the operation and management of the entity and receive cash distributions.
Each Fund may purchase both domestic and international MLPs. Each
Funds investment in MLPs may include ownership of MLP common units and MLP subordinated units. Each Fund also may purchase MLP I-Shares (together with the MLPs, the MLP Entities). MLP I-Shares are pay-in-kind securities created as
a means to facilitate institutional ownership of MLPs by simplifying the tax and administrative implications of the MLP structure. Generally, when an MLP pays its quarterly cash distribution to unitholders, holders of I-Shares do not receive a cash
distribution; rather, they receive a dividend of additional I-Shares from the MLP of comparable value to the cash distribution paid to each unitholder. Each Fund may purchase interests in MLP Entities on an exchange or may utilize non-public market
transactions to obtain its holdings, including but not limited to privately negotiated purchases of securities from the issuers themselves, broker-dealers, or other qualified institutional buyers.
Investment Transactions
Investment
transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes.
Investment Income
Dividend income is
recorded on the ex-dividend date, or for foreign securities, when information is available. Interest income is recognized on the accrual basis.
Each Fund records the character of distributions received from MLPs based on estimates made at the time such distributions are received. These estimates
are based upon a historical review of information available from each MLP and other industry sources. Each Funds characterization of the estimates may subsequently be revised based on information received from MLPs after their tax reporting
periods conclude. Distributions, recognized as Distributions from MLPs on the Statement of Operations, are offset by amounts characterized as return of capital from the MLP entities, which are recognized as Return of capital on
distributions from MLPs on the Statement of Operations. For the periods ended November 30, 2011, each Fund estimated and characterized 100% of its distributions from MLPs as return of capital.
Income Taxes
Each Fund is treated as a
regular corporation, or C corporation, for U.S. federal income tax purposes. Accordingly, each Fund is generally subject to U.S. federal income tax on its taxable income at statutory rates applicable to corporations (currently at a
maximum rate of 35%). The estimated effective state income tax rate for MLP & Strategic Equity (MTP) and Energy MLP Total Return (JMF) are 5.36% and 1.99%, respectively. Each Fund may be subject to a 20% federal alternative minimum tax on
its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.
Each
Funds income tax provision consists of the following as of November 30, 2011, the Funds tax year end:
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
Current tax expense (benefit):
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
213,759
|
|
|
$
|
|
|
State
|
|
|
313,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense (benefit)
|
|
$
|
527,699
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to
|
|
|
FINANCIAL STATEMENTS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
Deferred tax expense (benefit):
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(100,871
|
)
|
|
$
|
|
|
State
|
|
|
(185,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax expense (benefit)
|
|
$
|
(286,721
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation between the federal statutory income tax rate of 35% and the effective tax rate on net investment
income (loss) and realized and unrealized gain (loss) follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return
(JMF)
|
|
Description
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
Application of statutory income tax rate
|
|
$
|
222,767
|
|
|
|
35.00
|
%
|
|
$
|
(7,301,014
|
)
|
|
|
35.00
|
%
|
State income taxes net of federal benefit
|
|
|
34,127
|
|
|
|
5.36
|
|
|
|
(415,641
|
)
|
|
|
1.99
|
|
Effect of permanent differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of valuation allowance
|
|
|
(15,916
|
)
|
|
|
(2.50
|
)
|
|
|
7,716,655
|
|
|
|
(36.99
|
)
|
Effect of other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
240,978
|
|
|
|
37.86
|
%
|
|
$
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each Fund invests its assets primarily in MLPs, which generally are treated as partnerships for Federal income tax
purposes. As a limited partner in the MLPs, each Fund includes its allocable share of the MLPs taxable income in computing its own taxable income. Each Funds tax expense or benefit is recognized on the Statement of Operations based on
the component of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains/(losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes and (iii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred
tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled. To the extent a Fund has a deferred tax asset, consideration is given to
whether or not a valuation allowance is required. The determination of whether a valuation allowance is required is based on the evaluation criterion provided by ASC 740, Income Taxes (ASC 740) that it is more-likely-than-not that some
portion or all of the deferred tax asset will not be realized. Among the factors considered in assessing each Funds valuation allowance: the nature, frequency and severity of current and cumulative losses, forecasts of future profitability,
the duration of statutory carryforward periods and the associated risk that operating and capital loss carryforwards may expire unused.
Components of the Funds deferred tax assets and liabilities as of November 30, 2011, the
Funds tax year end, are as follows:
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic*
Equity (MTP)
|
|
|
Energy MLP**
Total Return (JMF)
|
|
Description
|
|
Deferred
Benefit
(Liability)
|
|
|
Deferred
Benefit
(Liability)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward (tax basis)
|
|
$
|
6,239,879
|
|
|
$
|
1,976,367
|
|
Capital loss carryforward (tax basis)
|
|
|
7,379,877
|
|
|
|
7,250,242
|
|
Tax credit carryforwardAMT
|
|
|
214,554
|
|
|
|
|
|
Other
|
|
|
3,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,838,066
|
|
|
$
|
9,226,609
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accumulated net unrealized gain on investments (tax basis)
|
|
$
|
(38,158,862
|
)
|
|
$
|
(1,509,954
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred taxes before valuation allowance
|
|
$
|
(24,320,796
|
)
|
|
$
|
7,716,655
|
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(1,187,919
|
)
|
|
|
(7,716,655
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
(25,508,715
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the valuation allowance were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of period
|
|
$
|
1,203,835
|
|
|
$
|
|
|
Provision to return
|
|
|
(15,916
|
)
|
|
|
|
|
Initial allowance recorded
|
|
|
|
|
|
|
7,716,655
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of period
|
|
$
|
1,187,919
|
|
|
$
|
7,716,655
|
|
|
|
|
|
|
|
|
|
|
*
|
For the period November 1, 2011 through November 30, 2011.
|
**
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions
that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of
the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
At November 30, 2011, the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
Cost of investments
|
|
$
|
184,648,771
|
|
|
$
|
531,595,920
|
|
|
|
|
|
|
|
|
|
|
Gross unrealized:
|
|
|
|
|
|
|
|
|
Appreciation
|
|
$
|
102,029,248
|
|
|
$
|
33,718,782
|
|
Depreciation
|
|
|
(182,276
|
)
|
|
|
(29,682,808
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
101,846,972
|
|
|
$
|
4,035,974
|
|
|
|
|
|
|
|
|
|
|
At November 30, 2011, the Funds tax year end, the Funds had net operating loss carryforwards available for
federal income tax purposes to be applied against future taxable income, if any. If not applied, the carryforwards will expire as follows:
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
Expiration:
|
|
|
|
|
|
|
|
|
November 30, 2028
|
|
$
|
11,001,074
|
|
|
$
|
|
|
November 30, 2029
|
|
|
1,440,597
|
|
|
|
|
|
November 30, 2030
|
|
|
1,953,682
|
|
|
|
|
|
November 30, 2031
|
|
|
|
|
|
|
5,516,747
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,395,353
|
|
|
$
|
5,516,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to
|
|
|
FINANCIAL STATEMENTS (continued)
|
At November 30, 2011, the Funds tax year end, the Funds had unused capital loss carryforwards
available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
Expiration:
|
|
|
|
|
|
|
|
|
November 30, 2013
|
|
$
|
19,645,804
|
|
|
$
|
|
|
November 30, 2014
|
|
|
36,376
|
|
|
|
|
|
November 30, 2016
|
|
|
|
|
|
|
19,379,268
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,682,180
|
|
|
$
|
19,379,268
|
|
|
|
|
|
|
|
|
|
|
Dividends and Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
The Funds quarterly distributions are set pursuant to a managed distribution program. Under that program, the Funds may source their
distributions from the following: net distributable cash flow, net realized gains, unrealized gains, and, in certain cases, a return of Fund principal. Net distributable cash flow consists primarily of distributions received from a Funds
investments in shares of energy MLPs, less payments on any of its leveraging instruments and other Fund expenses (including taxes paid at the Fund level since each Fund is taxed as an ordinary C corporation). Currently, the Funds
intend to distribute substantially all of their net distributable cash flow received without sourcing incremental amounts from other components.
For purposes of determining the income tax characterization of each Funds distributions, amounts in excess of each Funds earnings and profits for federal income tax purposes are characterized
as a return of capital. Distributions attributable to earnings and profits for federal income tax purposes are characterized as taxable ordinary dividends. Each Fund will calculate its earnings and profits based on its taxable period ended
November 30 and will report the character of its distributions to shareholders shortly after the end of the calendar year. The primary components of each Funds annual earnings and profits calculation are: income, loss and other
flow-through items (including earnings and profits adjustments) reported by the MLPs on Schedule K-1, realized gain or loss on sales of Fund investments and deductible operating expenses. In addition, a Fund will recognize income (and increase its
earnings and profits) should it receive a distribution from an MLP which exceeds its income tax basis. Distributions from any given MLP are treated as a return of capital to the extent of a Funds income tax basis in that MLP.
The character of each Funds distributions for U.S. GAAP purposes, which can often differ from the tax character, is based on estimates of the
sources of those distributions (which can be from a combination of income and/or a return of capital) made at the time such distributions are received, which in turn are based upon a historical review of information available from each MLP and other
industry sources. The Funds accounting characterization of the estimates may subsequently be revised based on information received from MLPs after their tax reporting periods conclude. It is currently estimated that 100% of each Funds
distributions during the period ended November 30, 2011, will be characterized for U.S. GAAP purposes as a return of capital.
Derivative Financial Instruments
Each
Fund is authorized to invest in certain derivative instruments, including futures, options and swap contracts. Although each Fund is authorized to invest in such derivative instruments, and may do so in the future, they did not invest in any such
investments during the periods ended November 30, 2011.
Organizational and Offering Costs
The Adviser has agreed to reimburse all Energy MLP Total Returns (JMF) organizational expenses (approximately $11,000) and to pay all offering costs
(other than the sales load) that exceed $.04 per share. The Funds share of offering costs ($944,400) was recorded as a reduction of proceeds from the sale of shares.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the
principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
Custodian Fee Credit
Each Fund has an
arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Funds cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for
cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.
Indemnifications
Under the Funds organizational documents, its officers and directors/trustees are indemnified against certain liabilities arising
out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that provide general indemnifications to other parties. The Funds maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value
Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an
orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish
classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources
independent of the reporting entity.
Unobservable inputs reflect the reporting entitys own assumptions about the assumptions market
participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
|
|
|
Level 1
|
|
Quoted prices in active markets for identical securities.
|
|
|
Level 2
|
|
Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
|
|
|
Level 3
|
|
Significant unobservable inputs (including managements assumptions in determining the fair value of investments).
|
The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in
those securities. The following is a summary of each Funds fair value measurements as of November 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity (MTP)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited Partnerships & MLP Affiliates*
|
|
$
|
266,591,042
|
|
|
$
|
18,180,685
|
|
|
$
|
|
|
|
$
|
284,771,727
|
|
Short-Term Investments
|
|
|
|
|
|
|
1,724,016
|
|
|
|
|
|
|
|
1,724,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
266,591,042
|
|
|
$
|
19,904,701
|
|
|
$
|
|
|
|
$
|
286,495,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy MLP Total Return (JMF)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited Partnerships & MLP Affiliates*
|
|
$
|
517,051,539
|
|
|
$
|
17,953,305
|
|
|
$
|
|
|
|
$
|
535,004,844
|
|
Short-Term Investments
|
|
|
|
|
|
|
627,050
|
|
|
|
|
|
|
|
627,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
517,051,539
|
|
|
$
|
18,580,355
|
|
|
$
|
|
|
|
$
|
535,631,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Refer to the Funds Portfolio of Investments for industry breakdown of Master Limited Partnerships & MLP Affiliates classified as Level 2.
|
During the periods ended November 30, 2011, the Funds recognized no significant transfers to or from Level 1, Level 2 or
Level 3.
3. Derivative Instruments and Hedging Activities
The Funds records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds investments in derivatives may
represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. The Funds did not invest in derivative instruments during the periods ended November 30, 2011.
|
|
|
|
|
Notes to
|
|
|
FINANCIAL STATEMENTS (continued)
|
4. Fund Shares
During the fiscal year ended October 31, 2011, MLP & Strategic Equitys (MTP) Board of Directors approved a share repurchase program allowing the Fund to repurchase up to 10% of its
outstanding shares. During the period February 24, 2011 (commencement of operations) through November 30, 2011, Energy MLP Total Returns (JMF) Board of Trustees approved a share repurchase program allowing the Fund to repurchase up
to 10% of its outstanding shares. The Funds have not repurchased any of their outstanding shares since the inceptions of their share repurchase programs.
Transactions in shares were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic Equity (MTP)
|
|
|
Energy MLP
Total Return (JMF)
|
|
|
|
One Month
Ended
11/30/11
|
|
|
Year Ended
10/31/11
|
|
|
Year Ended
10/31/10
|
|
|
For the Period
2/24/11
(commencement of
operations)
through
11/30/11
|
|
Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,610,000
|
|
Issued to shareholders due to reinvestment of distributions
|
|
|
|
|
|
|
10,620
|
|
|
|
82,529
|
|
|
|
184,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,620
|
|
|
|
82,529
|
|
|
|
23,794,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Investments Transactions
Purchases and sales (excluding short-term investments) during the fiscal year ended November 30, 2011,
|
|
|
|
|
|
|
|
|
|
|
MLP & Strategic
Equity (MTP)*
|
|
|
Energy MLP
Total Return (JMF)**
|
|
Purchases
|
|
$
|
56,000,726
|
|
|
$
|
809,319,834
|
|
Sales
|
|
|
61,316,859
|
|
|
|
235,377,877
|
|
*
|
For the period November 1, 2011 through November 30,2011.
|
**
|
For the period February 24, 2011 (commencement of operations) through November 30, 2011.
|
6. Management Fees and Other Transactions with Affiliates
Each Funds management fee consists of two components a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all
eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their respective Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
|
|
|
|
|
|
|
|
|
Average Daily Managed Assets *
|
|
MLP & Strategic Equity (MTP)
Fund-Level Fee Rate
|
|
|
Energy MLP Total Return (JMF)
Fund-Level Fee Rate
|
|
For the first $500 million
|
|
|
.9200
|
%
|
|
|
.9000
|
%
|
For the next $500 million
|
|
|
.8950
|
|
|
|
.8750
|
|
For the next $500 million
|
|
|
.8700
|
|
|
|
.8500
|
|
For the next $500 million
|
|
|
.8450
|
|
|
|
.8250
|
|
For managed assets over $2 billion
|
|
|
.8200
|
|
|
|
.8000
|
|
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following
schedule:
|
|
|
|
|
Complex-Level Managed Asset Breakpoint Level *
|
|
Effective Rate at Breakpoint Level
|
|
$55 billion
|
|
|
.2000
|
%
|
$56 billion
|
|
|
.1996
|
|
$57 billion
|
|
|
.1989
|
|
$60 billion
|
|
|
.1961
|
|
$63 billion
|
|
|
.1931
|
|
$66 billion
|
|
|
.1900
|
|
$71 billion
|
|
|
.1851
|
|
$76 billion
|
|
|
.1806
|
|
$80 billion
|
|
|
.1773
|
|
$91 billion
|
|
|
.1691
|
|
$125 billion
|
|
|
.1599
|
|
$200 billion
|
|
|
.1505
|
|
$250 billion
|
|
|
.1469
|
|
$300 billion
|
|
|
.1445
|
|
*
|
For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these
purposes, financial leverage includes the funds use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including
the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining
managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds that constitute eligible assets. Eligible assets do not include assets attributable to
investments in other Nuveen funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Advisers assumption of the management of the former First American Funds effective January 1, 2011. As of
November 30, 2011, the complex-level fee rate for each Fund was .1774%.
|
The management fee compensates the Adviser for
overall investment advisory and administrative services and general office facilities. The Adviser is responsible for each Funds overall strategy and asset allocation decisions. The Adviser has entered into investment sub-advisory agreements
with Fiduciary Asset Management, LLC (FAMCO), under which FAMCO manages the investment portfolios for the Funds. FAMCO is compensated for its services to the Funds from the management fees paid to the Adviser.
The Adviser has agreed to reimburse expenses so that MLP & Strategic Equitys (MTP) total operating expenses do not exceed 1.35% through
August 1, 2012, of the Funds average daily managed assets.
The Funds pay no compensation directly to those of its
directors/trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Funds from the Adviser or its affiliates. The Board of Directors/Trustees has adopted a deferred compensation plan
for independent directors/trustees that enables directors/trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated
as though equal dollar amounts had been invested in shares of select Nuveen advised funds.
7. Borrowing Arrangements
Energy MLP Total Return (JMF) has entered into a $130 million (maximum commitment amount) prime brokerage facility with Deutsche Bank as a means of
financial leverage. On April 29, 2011, the Fund began to draw on this borrowing facility. As of November 30, 2011, the Funds outstanding balance on these borrowings was $125 million. For the period April 29, 2011 through
November 30, 2011, the average daily balance outstanding and annual interest rate on these borrowings were $115,937,500 and 1.18%, respectively.
In order to maintain this borrowing facility, the Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities held in the Funds
portfolio of investments. Interest charged on the used portion of these borrowings is calculated at a rate per annum equal to 3-Month LIBOR (London Inter-bank Offered Rate) plus .85%. In addition, the Fund accrues a commitment fee of .50% per
annum on the unused portion of the maximum commitment amount. The Fund also paid a .05% one-time closing fee on the maximum commitment amount, which was fully expensed during the current reporting period.
Interest expense, commitment and closing fees are recognized as a component of Interest expense on borrowings on the Statement of Operations.
8. New Accounting Pronouncements
Fair Value Measurements and Disclosures
On May 12, 2011, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04 (ASU No. 2011-04) modifying Topic 820,
Fair Value Measurements and Disclosures
. At the same time, the International
Accounting Standards Board (IASB) issued International Financial Reporting Standard (IFRS) 13, Fair Value Measurement. The objective of the
|
|
|
|
|
Notes to
|
|
|
FINANCIAL STATEMENTS (continued)
|
FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically,
ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2 and the reasons for the transfers and ii) for Level 3 fair value measurements, a) quantitative information about significant
unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might
result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this
guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.
Annual Investment Management
Agreement Approval Process (Unaudited)
The Board of Trustees (the
Board,
and each Trustee, a
Board Member
)
of the Nuveen Energy MLP Total Return Fund (the
Fund
) is responsible for approving advisory arrangements for the Fund and, at meetings held on November 17, 2010 and December 7, 2010 (together, the
Meeting
), was asked to approve the advisory arrangements on behalf of the Fund. At the Meeting, the Board Members, including the Board Members who are not parties to the advisory agreements or interested persons of any
such parties (the
Independent Board Members
), considered and approved the investment management agreement (the
Investment Management Agreement
) between the Fund and Nuveen Fund Advisors, Inc. (formerly known as
Nuveen Asset Management) (the
Adviser
) and the investment sub-advisory agreement (the
Sub-Advisory Agreement
) between the Adviser and Fiduciary Asset Management Inc. (the
Sub-Adviser
), on
behalf of the Fund. The Adviser and the Sub-Adviser are each hereafter a
Fund Adviser.
The Investment Management Agreement and the Sub-Advisory Agreement are each hereafter an
Advisory Agreement.
To assist the Board in its evaluation of an Advisory Agreement with a Fund Adviser at the Meeting, the Independent Board Members had received, in
adequate time in advance of the Meeting or at prior meetings, materials which outlined, among other things:
|
|
|
the nature, extent and quality of services expected to be provided by the Fund Adviser;
|
|
|
|
the organization of the Fund Adviser, including the responsibilities of various departments and key personnel;
|
|
|
|
the expertise and background of the Fund Adviser with respect to the Funds investment strategy;
|
|
|
|
certain performance-related information (as described below);
|
|
|
|
the profitability of Nuveen Investments, Inc. (
Nuveen
) (which incorporated Nuveens wholly-owned affiliated sub-advisers) and
certain financial information of the parent company of the Sub-Adviser;
|
|
|
|
the proposed management fees of the Fund Adviser, including comparisons of such fees with the management fees of comparable funds;
|
|
|
|
the expected expenses of the Fund, including comparisons of the Funds expected expense ratio with the expense ratios of comparable funds; and
|
|
|
|
the soft dollar practices of the Fund Adviser, if any.
|
At the Meeting, the Adviser made a presentation to and responded to questions from the Board. During the Meeting, the Independent Board Members also met privately with
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
their legal counsel to review the Boards duties under the Investment Company Act of 1940 (the
1940 Act
), the general principles of state law in reviewing and approving advisory contracts, the standards used by courts in determining whether investment company boards of directors have fulfilled their duties, factors to be
considered in voting on advisory contracts and an advisers fiduciary duty with respect to advisory agreements and compensation. It is with this background that the Independent Board Members considered the Advisory Agreements. As outlined in
more detail below, the Independent Board Members considered all factors they believed relevant with respect to the Fund, including the following: (a) the nature, extent and quality of the services to be provided by the Fund Adviser;
(b) investment performance, as described below; (c) the profitability of Nuveen and its affiliates and certain financial information of the parent company of the Sub-Adviser; (d) the extent to which economies of scale would be
realized; and (e) whether fee levels reflect these economies of scale for the benefit of Fund investors.
A.
|
Nature, Extent and Quality of Services
|
The Independent Board Members considered the nature, extent and quality of the respective Fund Advisers services, including advisory services and
administrative services. As the Adviser already serves as adviser to other Nuveen funds overseen by the Board Members, the Board has a good understanding of such Fund Advisers organization, operations and personnel. As the Independent Board
Members meet regularly throughout the year to oversee the Nuveen funds, including funds currently advised by the Adviser, the Independent Board Members have relied upon their knowledge from their meetings and any other interactions throughout the
year of the Adviser and its services in evaluating the Investment Management Agreement. In addition, the Independent Board Members recognized that the Sub-Adviser acts as sub-adviser to the MLP & Strategic Equity Fund Inc. (the
MLP & Strategic Equity Fund
). In October 2010, the Adviser became the investment adviser to the MLP & Strategic Equity Fund (which had previously been advised by IQ Investment Advisors LLC), and such fund (along
with certain other funds that were previously advised by IQ Investment Advisors LLC) became part of the Nuveen fund complex.
At the Meeting
and at prior meetings, the Independent Board Members reviewed materials outlining, among other things, the respective Fund Advisers organization and business; the types of services that the Fund Adviser or its affiliates provide to the Nuveen
funds and are expected to provide to the Fund; and the experience of the Fund Adviser with applicable investment strategies. Further, the Independent Board Members have considered the background, experience and track record of the Fund
Advisers investment personnel.
In addition to advisory services, the Independent Board Members considered the quality of any
administrative or non-advisory services to be provided. In this regard, the Adviser is expected to provide the Fund with such administrative and other services (exclusive of, and in addition to, any such services provided by others for the Fund) and
officers and other personnel as are necessary for the operations of the Fund. In addition to investment management services, the Adviser and its affiliates will provide the Fund with a wide range of services, including, among other things, product
management, fund
administration, oversight of service providers, shareholder services, administration of Board relations,
regulatory and portfolio compliance and legal support. The Independent Board Members also recognized that the Adviser would oversee the Sub-Adviser.
In addition to the foregoing services, the Independent Board Members also noted the additional services that the Adviser or its affiliates provide to closed-end funds, including, in particular,
Nuveens continued commitment to supporting the secondary market for the common shares of its closed-end funds through a variety of programs designed to raise investor and analyst awareness and understanding of closed-end funds. These efforts
include maintaining an investor relations program to provide timely information and education to financial advisers and investors; providing marketing for the closed-end funds; maintaining and enhancing a closed-end fund website; participating in
conferences; and having direct communications with analysts and financial advisors.
In evaluating the services expected to be provided by the
Sub-Adviser, the Independent Board Members noted that the Sub-Advisory Agreement was essentially an agreement for portfolio management services only and the Sub-Adviser was not expected to supply other significant administrative services to the
Fund. The Board Members recognized the Sub-Advisers experience in Master Limited Partnership (MLP) investment products. In addition, the Sub-Adviser made a presentation and, in December 2010, certain of the Independent Board Members visited
the offices of the Sub-Adviser.
Based on their review, the Independent Board Members found that, overall, the nature, extent and quality of
services expected to be provided to the Fund under each Advisory Agreement were satisfactory.
B.
|
Investment Performance
|
The Fund is new
and therefore does not have its own performance history. The Independent Board Members were provided, however, with certain information relating to the investment performance of the Sub-Advisers MLP Composite, including, among other things,
returns for the third quarter of 2010, and the 2010 year-to-date, one-year, three-year, five-year, seven-year, ten-year, and since inception (March 31, 1995) periods as of September 30, 2010, as well as, for the periods available, corresponding
returns of the relevant benchmark index.
C.
|
Fees, Expenses and Profitability
|
In
evaluating the management fees and expenses that the Fund was expected to bear, the Independent Board Members considered, among other things, the Funds proposed management fee structure, its proposed sub-advisory fee arrangement, and its
expected expense ratios in absolute terms as well as compared with the fees and expense ratios of comparable funds. The Independent Board Members also considered the fund-level breakpoint schedule and the complex-wide breakpoint schedule (described
in further detail below). Based on their review of the fee and expense information provided, the Independent Board Members determined that
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
the Funds management fees were reasonable in light of the nature, extent and quality of services to be provided to the Fund.
|
2.
|
Comparisons with the Fees of Other Clients
|
Due to their experience with other Nuveen funds, the Board Members were familiar with the fees the Adviser assesses to other clients. Such other clients include separately managed accounts (both retail
and institutional accounts) and funds that are not offered by Nuveen but are sub-advised by one of Nuveens investment management teams. In evaluating the comparisons of fees, the Independent Board Members have noted, at the Meeting or at prior
meetings, that the fee rates charged to a fund (such as the Fund) and charged to other clients vary, among other things, because of the different services involved and the additional regulatory and compliance requirements associated with registered
investment companies, such as the Fund. Accordingly, the Independent Board Members have considered the differences in the product types, including, but not limited to, the services to be provided, the structure and operations, product distribution
and costs thereof, portfolio investment policies, investor profiles, account sizes and regulatory requirements. The Independent Board Members have noted, in particular, that the range of services as described above to be provided to a fund (such as
the Fund) is much more extensive than that provided to separately managed accounts. Given the inherent differences in the products, particularly the extensive services to be provided to the Fund, the Independent Board Members believe such facts
justify the different levels of fees.
In considering the advisory fees of the Sub-Adviser, the Independent Board Members
considered that the Sub-Adviser did not currently charge a lower advisory or sub-advisory fee to any other client to which it provides comparable services as those it expects to provide to the Fund.
|
3.
|
Profitability of Fund Advisers
|
In conjunction with its review of fees at prior meetings, the Independent Board Members have considered the profitability of Nuveen for its advisory activities (which incorporated Nuveens
wholly-owned affiliated sub-advisers) and its financial condition. At the Meeting or prior meetings, the Independent Board Members reviewed the revenues and expenses of Nuveens advisory activities, the allocation methodology used in preparing
the profitability data and an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability. They also were provided with the Form 10-K filed by Nuveen on March 31, 2010 (for the period ending
December 31, 2009) and the Form 8-K filed by Nuveen on November 12, 2010. The Independent Board Members have also considered, at the Meeting or at prior meetings, Nuveens revenues for advisory activities, expenses, and profit margin
compared to that of various unaffiliated management firms with similar amounts of assets under management and relatively comparable asset composition prepared by Nuveen.
In reviewing profitability, the Independent Board Members have recognized the subjective nature of determining profitability, which may be affected by numerous factors, including the allocation of
expenses. Further, the Independent Board
Members have recognized the difficulties in making comparisons as the profitability of
other advisers generally is not publicly available and the profitability information that is available for certain advisers or management firms may not be representative of the industry and may be affected by, among other things, the advisers
particular business mix, capital costs, types of funds managed and expense allocations. Notwithstanding the foregoing, the Independent Board Members have reviewed Nuveens methodology and assumptions for allocating expenses across product lines
to determine profitability. In reviewing profitability, the Independent Board Members have recognized Nuveens investment in its fund business. Based on their review, the Independent Board Members concluded that Nuveens level of
profitability for its advisory activities was reasonable in light of the services to be provided.
With respect to the
Sub-Adviser, an indirect wholly-owned subsidiary of Piper Jaffray Companies, the Independent Board Members were provided with the Form 10-Q filed by Piper Jaffray Companies on November 3, 2010 for the quarterly period ending September 30,
2010, which included its financial statements on a consolidated basis. Given, among other things, the fees that the Sub-Adviser assesses to other clients and that the sub-advisory fee is established through arms-length negotiations, the
Independent Board Members were satisfied that the Sub-Advisers level of profitability was reasonable in light of the services expected to be provided to the Fund.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered any other amounts expected to be paid to a Fund Adviser by the Fund as well as any indirect benefits
(such as soft dollar arrangements, if any) the respective Fund Adviser and its affiliates are expected to receive that are directly attributable to their management of the Fund, if any. See Section E below for additional information on indirect
benefits a Fund Adviser may receive as a result of its relationship with the Fund. Based on their review of the overall fee arrangements of the Fund, the Independent Board Members determined that the advisory fees and expected expenses of the Fund
were reasonable.
D.
|
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
|
With respect to economies of scale, the Independent Board Members have recognized the potential benefits resulting from the costs of a fund being spread over a larger asset base, although economies of
scale are difficult to measure and predict with precision, particularly on a fund-by-fund basis. The Independent Board Members therefore considered whether the Fund could be expected to benefit from any economies of scale. One method to help ensure
that shareholders share in these benefits is to include breakpoints in the advisory fee schedule. Generally, management fees for funds in the Nuveen complex are comprised of a fund-level component and a complex-level component. Accordingly, the
Independent Board Members received and reviewed the schedule of proposed advisory fees for the Fund, including fund-level breakpoints thereto. In this regard, however, given that the Fund is a closed-end fund, the Independent Board Members noted
that although the Fund may from time to time make additional share offerings, the growth in its assets will occur primarily through appreciation of its investment portfolio.
Annual Investment Management Agreement
Approval Process (Unaudited) (continued)
In addition to fund-level advisory fee breakpoints, the Board also considered the Funds complex-wide
fee arrangement. Pursuant to the complex-wide fee arrangement, the fees of the funds in the Nuveen complex, including the Fund, are generally reduced as the assets in the fund complex reach certain levels. In evaluating the complex-wide fee
arrangement, the Independent Board Members have considered that the complex-wide fee arrangement seeks to provide the benefits of economies of scale to fund shareholders when total fund complex assets increase, even if assets of a particular fund
are unchanged or have decreased. The approach reflects the notion that some of Nuveens costs are attributable to services provided to all its funds in the complex and therefore all funds benefit if these costs are spread over a larger asset
base. Based on their review, the Independent Board Members concluded that the breakpoint schedules and complex-wide fee arrangement were acceptable and reflect economies of scale to be shared with the Funds shareholders.
In evaluating fees,
the Independent Board Members also considered information regarding potential fall out or ancillary benefits that a Fund Adviser or its affiliates may receive as a result of its relationship with the Fund. In this regard, the Independent
Board Members have considered any revenues received by affiliates of the Adviser for serving as agent at Nuveens trading desk.
In
addition to the above, the Independent Board Members considered whether the Fund Advisers will receive any benefits from soft dollar arrangements whereby a portion of the commissions paid by the Fund for brokerage may be used to acquire research
that may be useful to a Fund Adviser in managing the assets of the Fund and other clients. With respect to the Adviser, the Independent Board Members noted that the Adviser does not currently have any soft dollar arrangements; however, to the extent
certain bona fide agency transactions that occur on markets that traditionally trade on a principal basis and riskless principal transactions are considered as generating commissions, the Adviser intends to comply with the applicable
safe harbor provisions. With respect to the Sub-Adviser, the Independent Board Members considered that the Sub-Adviser may participate in soft dollar arrangements, and therefore may benefit from such arrangements to the extent it receives research
from brokers that execute the Funds portfolio transactions.
Based on their review, the Independent Board Members concluded that any
indirect benefits received by a Fund Adviser as a result of its relationship with the Fund were reasonable and within acceptable parameters.
The Independent Board Members
did not identify any single factor discussed previously as all-important or controlling. The Board Members, including a majority of the Independent Board Members, concluded that the terms of the Investment Management Agreement and the Sub-Advisory
Agreement were fair and reasonable, that the respective Fund Advisers fees are reasonable in light of the services to be provided to the Fund and that the Investment Management Agreement and Sub-Advisory Agreement should be and were approved
on behalf of the Fund.
Board Members & Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set at ten. None of the board members who are not interested persons of the Funds (referred to herein as independent board members) has ever been a
director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the board members and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of
portfolios each oversees and other directorships they hold are set forth below.
|
|
|
|
|
|
|
|
|
|
|
Name, Birthdate
and Address
|
|
Position(s) Held with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members:
|
|
|
|
|
|
n
|
|
ROBERT P. BREMNER
(2)
|
|
|
|
|
|
|
|
|
8/22/40
|
|
Chairman of
|
|
|
|
Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council (affiliated
with the Investment Company Institute.)
|
|
|
|
|
333 W. Wacker Drive
|
|
the Board
|
|
1996
|
|
|
|
|
|
Chicago, IL 60606
|
|
and Board Member
|
|
|
|
|
239
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|
n
|
|
JACK B. EVANS
|
|
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|
|
|
|
|
|
|
|
10/22/48
|
|
Board Member
|
|
|
|
President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; member of
the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago;
formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm.
|
|
|
|
|
333 W. Wacker Drive
|
|
|
|
1999
|
|
|
|
|
|
Chicago, IL 60606
|
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|
239
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|
n
|
|
WILLIAM C. HUNTER
|
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|
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|
|
|
|
3/6/48
|
|
Board Member
|
|
2004
|
|
Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International
Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal
Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University.
|
|
|
|
|
333 W. Wacker Drive
|
|
|
|
|
|
|
|
|
|
Chicago, IL 60606
|
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|
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|
|
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|
|
239
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|
|
Board Members & Officers (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
Name, Birthdate
and Address
|
|
Position(s) Held with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members (continued):
|
|
|
|
|
|
n
|
|
DAVID J. KUNDERT
(2)
|
|
|
|
|
|
|
|
|
10/28/42
333 W. Wacker Drive
Chicago, IL
60606
|
|
Board Member
|
|
|
|
Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment
Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; member of the Wisconsin
Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation.
|
|
|
|
|
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|
|
2005
|
|
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239
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|
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|
|
n
|
|
WILLIAM J. SCHNEIDER
(2)
|
|
|
|
|
|
|
|
|
9/24/44
|
|
Board Member
|
|
|
|
Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine
Group; member, University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal
Reserve Bank.
|
|
|
|
|
333 W. Wacker Drive
|
|
|
|
1997
|
|
|
|
|
|
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
239
|
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|
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|
|
|
n
|
|
JUDITH M. STOCKDALE
|
|
|
|
|
|
|
|
|
12/29/47
333 W.
Wacker Drive
|
|
Board Member
|
|
|
|
Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
|
|
|
|
|
|
|
|
1997
|
|
|
239
|
|
|
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
n
|
|
CAROLE E. STONE
(2)
|
|
|
|
|
|
|
|
|
6/28/47
|
|
Board Member
|
|
|
|
Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on
Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Over-sight Board (2005-2007).
|
|
|
|
|
333 W. Wacker Drive
|
|
|
|
2007
|
|
|
|
|
|
Chicago, IL 60606
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n
|
|
VIRGINIA L. STRINGER
|
|
|
|
|
|
|
|
|
8/16/44
333 W. Wacker
Drive
Chicago, IL 60606
|
|
Board Member
|
|
2011
|
|
Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institutes Independent Directors Council; governance consultant and
non-profit board member; former Owner and President, Strategic Management Resources, Inc. a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury
Company; Independent Director, First American Fund Complex (1987-2010) and Chair (1997-2010).
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
239
|
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|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Birthdate
and Address
|
|
Position(s) Held with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members (continued):
|
|
|
|
|
|
n
|
|
TERENCE J. TOTH
(2)
|
|
|
|
|
|
|
|
|
9/29/59
333 W. Wacker Drive
Chicago, IL
60606
|
|
Board Member
|
|
|
|
Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern
Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004),
Chicago Fellowship Board (since 2005) and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007),
Northern Trust Securities Inc. Board (2003- 2007) and Northern Trust Hong Kong Board (1997-2004).
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
Interested Board Member:
|
|
|
|
|
|
|
|
|
|
|
|
n
|
|
JOHN P. AMBOIAN
(3)
|
|
|
|
|
|
|
|
|
6/14/61
333 W.
Wacker Drive
Chicago, IL 60606
|
|
Board Member
|
|
|
|
Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc., formerly, President (1999-2007); Chief Executive Officer (since
2007) of Nuveen Investments Advisers, Inc.; Director (since 1998) formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc.
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
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|
|
239
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Name, Birthdate
and Address
|
|
Position(s) Held with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds:
|
|
|
|
|
|
n
|
|
GIFFORD R. ZIMMERMAN
|
|
|
|
|
|
|
|
|
9/9/56
333 W.
Wacker Drive
Chicago, IL 60606
|
|
Chief
Administrative
Officer
|
|
|
|
Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary
(since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of
Nuveen Asset Management, LLC (since 2011); Managing Director, Associate General Counsel and Assistant Secretary, of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since
2002), Nuveen Investments Advisers Inc. (since 2002), Tradewinds Global Investors LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital
Management Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2006) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst.
|
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|
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|
1988
|
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|
239
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|
|
|
|
|
|
Board Members & Officers (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
Name, Birthdate
and Address
|
|
Position(s) Held with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds (continued):
|
|
|
|
|
|
n
|
|
WILLIAM ADAMS IV
|
|
|
|
|
|
|
|
|
6/9/55
|
|
Vice President
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Senior Executive Vice President, Global Structured Products (since 2010), formerly, Executive Vice President (1999-2010) of Nuveen Securities, LLC; Co-President of
Nuveen Fund Advisors, Inc. (since 2011); President (since August 2011), formerly, Managing Director (2010-2011) of Nuveen Commodities Asset Management, LLC.
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333 W. Wacker Drive
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2007
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Chicago, IL 60606
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133
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n
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CEDRIC H. ANTOSIEWICZ
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1/11/62
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Vice President
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Managing Director of Nuveen Securities, LLC.
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333 W. Wacker Drive
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2007
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133
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Chicago, IL 60606
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MARGO L. COOK
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4/11/64
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Vice President
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2009
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Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); Managing Director-Investment Services of Nuveen
Commodities Asset Management, LLC (since August 2011), previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial
Analyst.
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333 W. Wacker Drive
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Chicago, IL 60606
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239
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n
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LORNA C. FERGUSON
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10/24/45
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Vice President
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1998
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Managing Director (since 2005) of Nuveen Fund Advisors, Inc. and Nuveen Securities, LLC (since 2004).
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333 W. Wacker Drive
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239
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Chicago, IL 60606
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n
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STEPHEN D. FOY
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5/31/54
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Vice President
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1998
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Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Funds Controller of Nuveen Securities, LLC; Vice President of Nuveen Fund Advisors, Inc.;
Chief Financial Officer of Nuveen Commodities Asset Management, LLC; (since 2010) Certified Public Accountant.
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333 W. Wacker Drive
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and Controller
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Chicago, IL 60606
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239
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SCOTT S. GRACE
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8/20/70
333 W.
Wacker Drive
Chicago, IL 60606
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Vice President
and
Treasurer
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2009
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Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Fund
Advisors, Inc., Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings Inc. and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds
Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President
(2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanleys Global Financial Services Group (2000-2003); Chartered Accountant Designation.
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239
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Name, Birthdate
and Address
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Position(s) Held with
the Funds
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Year First
Elected or
Appointed
(4)
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Principal Occupation(s)
During Past 5 Years
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Number of Portfolios
in Fund Complex
Overseen by
Officer
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Officers of the Funds (continued):
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n
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WALTER M. KELLY
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2/24/70
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Chief Compliance
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Senior Vice President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, Inc.
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333 W. Wacker Drive
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Officer and
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2003
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Chicago, IL 60606
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Vice President
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239
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n
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TINA M. LAZAR
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8/27/61
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Vice President
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Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.
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333 W. Wacker Drive
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2002
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239
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Chicago, IL 60606
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KEVIN J. MCCARTHY
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3/26/66
333 W. Wacker
Drive
Chicago, IL 60606
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Vice President
and
Secretary
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Managing Director (since 2008), formerly,
Vice President (2007-2008), Nuveen
Securities, LLC; Managing Director (since
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2007
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2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel
(since 2011) of Nuveen Asset Management, LLC; Managing Director (since 2008), and Assistant Secretary, Nuveen Investment Holdings, Inc.; Vice President (since 2007) and Assistant Secretary of Nuveen Investments Advisers Inc., NWQ Investment
Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital
Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007).
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239
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n
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KATHLEEN L. PRUDHOMME
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3/30/53
901 Marquette Avenue Minneapolis, MN 55402
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Vice President and Assistant Secretary
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Managing Director, Assistant Secretary and Co- General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General
Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Securities, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
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2011
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239
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(1)
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The Board Members serve a one year term to serve until the next annual meeting or until their successors shall have been duly elected and qualified. The first year
elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen Complex.
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(2)
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Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate
of the Adviser.
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(3)
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Mr. Amboian is an interested Director because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen
Funds.
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(4)
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Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed
to any fund in the Nuveen Complex.
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Reinvest Automatically,
Easily and Conveniently
Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account.
Nuveen Closed-End Funds Automatic Reinvestment Plan
Your Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares.
By choosing to reinvest, youll be able to invest money regularly and automatically, and watch your investment grow through the power of compounding. Just like distributions in cash, there may be
times when income or capital gains taxes may be payable on distributions that are reinvested.
It is important to note that an automatic
reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each month youll receive a statement showing your total distributions, the date of
investment, the shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on
the open market. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Funds shares subsequently trade at or above their net asset value before the Plan Agent is able to
complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares net asset value or 95% of the
shares market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid
on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of
fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than
those charged on individual transactions.
Flexible
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change.
You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your financial advisor if his or her firm will participate on your behalf.
Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct
service charge to participants in the Plan at this time.
Call today to start reinvesting distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at
(800) 257-8787.
Glossary of Terms
Used in this Report
|
|
|
Alerian MLP Index:
A composite of the 50 most prominent energy Master Limited Partnerships. The index, which is calculated using a
float-adjusted, capitalization- weighted methodology, is disseminated real-time on a price-return basis, and the corresponding total-return index is disseminated daily. The index returns assume reinvestment of dividends, but do not reflect any
applicable sales charges. You cannot invest directly in an index.
|
|
|
|
Average Annual Total Return:
This is a commonly used method to express an investments performance over a particular, usually multi-year
time period. It expresses the return that would have been necessary each year to equal the investments actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any)
over the time period being considered.
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|
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Current Distribution Rate:
An investments current annualized distribution divided by its current market price.
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|
|
|
Effective Leverage:
Effective leverage is a Funds effective economic leverage, and includes both structural leverage and the leverage
effects of certain derivative investments in the Funds portfolio. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in addition to any structural leverage.
|
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|
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Leverage:
Using borrowed money to invest in securities or other assets.
|
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|
|
Net Asset Value (NAV):
The net market value of all securities held in a portfolio.
|
|
|
|
Net Asset Value (NAV) Per Share:
The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by
taking the Funds total assets (securities, cash, and accrued earnings), subtracting the Fundss liabilities, and dividing by the number of shares outstanding.
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S&P 500 Index:
An unmanaged index generally considered representative of the U.S. stock market. The index returns assume reinvestment of
dividends, but do not reflect any applicable sales charges. You cannot invest directly in an index.
|
|
|
|
Structural Leverage:
Structural Leverage consists of preferred shares or debt issued by the Fund. Both of these are part of a Funds
capital structure. Structural leverage is sometimes referred to as 40 Act Leverage and is subject to asset coverage limits set in the Investment Company Act of 1940.
|
Notes
Additional Fund Information
Board of Directors/Trustees
John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M. Stockdale
Carole E. Stone
Virginia L. Stringer
Terence J. Toth
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive Chicago, IL 60606
Custodian
State Street Bank
& Trust Company
Boston, MA
Transfer Agent and Shareholder Services
State Street Bank
& Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
Legal Counsel
Chapman and Cutler LLP Chicago, IL
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Chicago, IL
Quarterly Portfolio of Investments and Proxy Voting Information
You may obtain (i) each Funds quarterly portfolio of investments, (ii) information regarding how each Fund voted proxies relating to
portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that each Fund used to determine how to vote proxies relating to portfolio securities without
charge, upon request, by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveens website at www.nuveen.com.
You may
also obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SECs Public
Reference Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SECs Public Reference Section at
100 F Street NE, Washington, D.C. 20549.
CEO Certification Disclosure
Each Funds Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.
Each Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of
the Sarbanes-Oxley Act.
Share Information
Each Fund intends to repurchase shares of its own common stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Funds repurchased
shares of their common stock as shown in the accompanying table.
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Common Shares
Repurchased
|
|
MTP
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JMF
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|
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Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
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Nuveen Investments makes it easy, with the ultimate online resource.
|
|
|
|
|
At nuveen.com/understand, you have access to comprehensive educational tools, video libraries and daily pricing for Nuveens more than 130 closed-end fundsso you can
stay up to date on the latest income-investing news and information.
|
|
|
|
|
All the tools and resources you need on closed-end funds are just a click away.
www.nuveen.com/understand
|
There are risks inherent in any investment, including market risk, interest rate risk, credit risk, and the possible loss
of principal. There can be no assurance that fund objectives will be achieved and income is not guaranteed. Closed-end funds frequently trade at a discount to their net asset value. Diversification does not ensure against loss.
Nuveen Investments:
Serving Investors for Generations
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, IL
60606
www.nuveen.com/performance
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable
investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who
serve them. We market our growing range of specialized investment solutions under the high-quality brands of Nuveen Asset Management, NWQ, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, Nuveen Investments managed approximately
$207 billion of assets as of October 31, 2011.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor,
or call us at
(800) 257-8787
. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where
applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or
Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606
. Please read the
prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at:
www.nuveen.com/cef
EAN-A-1111D
Closed-End Funds
Nuveen Investments
Closed-End Funds
Seeking to provide a high level of after-tax total return.
Annual Report
October 31, 2011
MLP & Strategic
Equity Fund Inc.
MTP
Nuveen makes things e-simple.
It only takes a minute to sign up for e-Reports. Once enrolled, youll receive an e-mail as soon as your Nuveen Fund information is ready. No more waiting for delivery by regular mail. Just click on
the link within the e-mail to see the report and save it on your computer if you wish.
Free e-Reports right to your e-mail!
www.investordelivery.com
If you receive your Nuveen Fund dividends and statements from your financial advisor or brokerage account.
OR
www.nuveen.com/accountaccess
If you receive your Nuveen Fund dividends and statements directly from Nuveen.
Table of Contents
Chairmans
Letter to Shareholders
Dear Shareholders,
These are perplexing times for investors. The global economy continues to struggle. The solutions being implemented in the eurozone to deal with the debt crises of many of its member countries are not yet
seen as sufficient by the financial markets. The political paralysis in the U.S. has prevented the compromises necessary to deal with the fiscal imbalance and government spending priorities. The efforts by individual consumers, governments and
financial institutions to reduce their debts are increasing savings but reducing demand for the goods and services that drive employment. These developments are undermining the rebuilding of confidence by consumers, corporations and investors that
is so essential to a resumption of economic growth.
Although it is painfully slow, progress is being made. In Europe, the turnover of a
number of national governments reflects the realization by politicians and voters alike that leaders who practiced business as usual had to be replaced by leaders willing to face problems and accept the hard choices needed to resolve them. The
recent coordinated efforts by central banks in the U.S. and Europe to provide liquidity to the largest European banks indicates that these monetary authorities are committed to facilitating a recovery in the European banking sector.
In the U.S., the failure of the congressionally appointed Debt Reduction Committee was a blow to those who hoped for a bipartisan effort to finally begin
addressing the looming fiscal crisis. Nevertheless, Congress and the administration cannot ignore the issue for long. The Bush era tax cuts are scheduled to expire on December 31, 2012, and six months later the $1.2 trillion of mandatory
across-the-board spending cuts under the Budget Control Act of 2011 begin to go into effect. Any legislative modification would require bipartisan support and the prospects for a bipartisan solution are unclear. The impact of these two developments
would be a mixed blessing: a meaningful reduction in the annual budget deficit at the cost of slowing the economic recovery.
It is in these
particularly volatile markets that professional investment management is most important. Skillful investment teams who have experienced challenging markets and remain committed to their investment disciplines are critical to the success of an
investors long-term objectives. In fact, many long-term investment track records are built during challenging markets when managers are able to protect investors against these economic crosscurrents. Experienced investment teams know that
volatile markets put a premium on companies and investment ideas that will weather the short-term volatility and that compelling values and opportunities are opened up when markets overreact to negative developments. By maintaining appropriate time
horizons, diversification and relying on practiced investment teams, we believe that investors can achieve their long-term investment objectives.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to
continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairmean of the Board
December 21, 2011
Nuveen
Investments
4
Portfolio Managers Comments
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as
recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those
anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements
or views expressed herein.
Ratings shown are the highest rating given by one of the following national rating agencies:
Standard & Poors Group, Moodys Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Bonds
backed by U.S. Government or agency securities are given an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
The Funds investment adviser is Nuveen Fund Advisors, Inc., an affiliate of Nuveen Investments. The Funds portfolio is managed by Fiduciary Asset Management Inc. (FAMCO), a wholly-owned
affiliate of Piper Jaffray Investment Management Inc. James J. Cunnane Jr., CFA, chief investment officer at FAMCO and Quinn T. Kiley, senior portfolio manager, co-manage the Fund. Collectively, the team has over 25 years of experience managing
Master Limited Partnerships (MLPs). Here they discuss their investment strategies and the performance of the Fund for the twelve-month period ended October 31, 2011.
What were the general market conditions and trends over the course of the period?
During
this period, the U.S. economys recovery from recession remained slow. The Federal Reserve (Fed) maintained its efforts to improve the overall economic environment by continuing to hold the benchmark fed funds rate at the record low level of
zero to 0.25% that it had established in December 2008. At its September 2011 meeting, the central bank stated that economic conditions would likely warrant keeping this rate at exceptionally low levels at least through mid-2013. The Fed
also announced that it would extend the average maturity of its U.S. Treasury holdings by purchasing $400 billion of these securities with maturities of six to thirty years and selling an equal amount of U.S. Treasury securities with maturities of
three years or less. The goals of this program, which the Fed expects to complete by the end of June 2012, are to lower longer-term interest rates, support a stronger economic recovery and help ensure that inflation remains at levels consistent with
the Feds mandates of maximum employment and price stability.
In the third quarter of 2011, the U.S. economy, as measured by the U.S.
gross domestic product (GDP), grew at an annualized rate of 2.0%, the best growth number since the fourth quarter of 2010 and the ninth consecutive quarter of positive growth. The Consumer Price Index (CPI) rose 3.5% year-over-year as of October
2011, while the core CPI (which excludes food and energy) increased 2.1%, edging just above the Feds unofficial objective of 2.0% or lower for this inflation measure. Unemployment numbers remained high, as October 2011 marked the seventh
straight month with a national jobless number of 9.0% or higher. However, after the reporting period came to a close, the U.S. unemployment rate fell to 8.6% in November 2011. While the dip was a step in the right direction, it was partly due to a
number of individuals dropping out of the hunt for work. The housing market also continued to be a major weak spot. For the twelve months ended September 2011 (the most recent data available at the time this report was prepared), the average home
price in the Standard & Poors/Case-Shiller Index lost 3.6%, with 18 of the 20 major metropolitan areas reporting losses. In addition, the U.S. economic picture continued to be clouded by concerns about the European debt crisis and
efforts to reduce the federal deficit.
Nuveen
Investments
5
What was the market environment for the Master Limited Partnerships (MLPs) over the period?
The market environment for MLPs was somewhat complex during this twelve-month period. MLPs and other domestic energy companies exhibited
strong performance for much of the year as the economic recovery continued and development of non-conventional oil and gas reserves occurred at a torrid pace. This growth led to significant capital opportunities for MLPs, and the capital markets
were supportive, with equity and debt offerings for MLPs on pace for record issuance in 2011. However, despite this fundamental strength, macro-economic and political concerns were a dominant force, causing significant volatility in the equity
markets. MLPs were able to deliver gains, but the upside generally was limited due to general investor uncertainty.
The most significant
volatility was experienced during the last quarter when the domestic debt crisis came to a climax with Standard & Poors downgrading U.S. sovereign credit rating from AAA to AA+. Effectively all gains made during the previous nine
months were erased in August and September; only to have the pendulum swing back during October allowing the markets to post gains during the twelve-month period of 11.9% for the Alerian MLP Index and 8.1% for the S&P 500 Index.
What strategies were used to manage the Fund during the twelve-month period ended October 31, 2011?
Over this period, the Funds investment objective remains unchangedto provide a high level of after-tax total return. We attempt to achieve
this by investing in a portfolio of publicly traded MLPs operating primarily in the energy infrastructure sector of the market. An important focus in the Fund has been to limit the portfolios exposure to those securities we deem to be of low
quality, and this focus continued. We continued to prefer holding MLPs that own natural gas infrastructure facilities, and over the past year more than half of the portfolio has been invested in these types of MLPs. This comes from our belief in the
expected growth of production from non-conventional reserves throughout the United States. This increase in production from new regions has significantly increased the need for infrastructure and services surrounding natural gas liquids (NGLs), like
ethane, that are associated with natural gas production. Because NGLs are sold at a price that is a percent of crude oil prices, current high crude oil prices have caused producers to focus on those non-conventional reserves that contain a high
amount of NGLs. We believe this back drop is supportive of MLP cash flows and growth in distributions to investors. While distribution growth has always been an important factor in MLP valuations; MLP investors mirrored the broader market and
focused on high yield MLPs more than growth oriented MLPs during the reporting period. We continued to position the portfolio to take advantage of these types of industry fundamentals and trends, trying to identify the best value propositions to
gain exposure to the characteristics we seek.
Nuveen
Investments
6
Past performance is not predictive of future results. Current performance may be higher or lower than the
data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares.
For additional information, see the Performance Overview page in this report.
*
|
Fund inception was 6/29/07.
|
**
|
Refer to Glossary of Terms used in this Report for definitions.
|
In this environment, how did the Fund perform over the period?
Returns for the Fund, as
well as for comparative indexes, are presented in the accompanying table.
Average Annual Total Returns on Net Asset Value
For periods ended 10/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since
|
|
|
|
1-Year
|
|
|
Inception*
|
|
MTP
|
|
|
7.25
|
%
|
|
|
4.95
|
%
|
Alerian MLP Index **
|
|
|
11.92
|
%
|
|
|
10.20
|
%
|
S&P 500 Index **
|
|
|
8.09
|
%
|
|
|
-2.34
|
%
|
The Funds return lagged the Alerian MLP Index (Index) and the S&P 500 Index for the twelve-month
reporting period. As a diversified Fund under the Investment Company Act of 1940, portfolio positions above 5% of common assets must aggregate to less than 25% of common assets. As a result, the Funds portfolio will be less concentrated in the
largest MLPs than the Alerian MLP Index itself. In a period of positive performance for large caps, the Fund tends to underperform due to this restriction. The two largest MLPs in the Index are Enterprise Product Partners L.P. and Kinder Morgan
Energy Partners, L.P.; 14.8% and 9.9% of the Index during the reporting period, respectively. The relative negative contribution to returns from the underweight positions in these two names more than overcame positive contribution to returns
elsewhere in the portfolio.
The Funds portfolio performance benefited from several holdings during the period. Williams Partners L.P.
performed well over the reporting period. The Fund held a position more than double the Index weight. The Fund participated in three private placements during the period investing $18.9 million in the restricted units of Buckeye Partners L.P.,
Crestwood Midstream Partners, L.P. and Regency Energy Partners LP., each of which outpaced the Index return. Additionally, the Fund benefited from holding a significantly underweight position in Energy Transfer Partners L.P., a large cap MLP that
produced negative returns for the period. We opted instead to own its general partner Energy Transfer Equity L.P. which posted gains. Generally, the overweight positions in those MLPs that own natural gas infrastructure led to outperformance during
the period, as well.
The Funds portfolio performance was constrained by several MLP holdings and themes during the reporting period. As
noted, investors favored those MLPs that generated the highest yield, and the highest yielding MLPs significantly outperformed the lowest yielding MLPs. The Funds portfolio is positioned towards higher growth, higher quality MLPs, which tend
to be lower yielding.
FISCAL AND TAX YEAR END CHANGE
Effective November 1, 2011, the Funds fiscal and tax year ends changed from October 31 to November 30. As a result, the Fund will prepare an annual report for the one-month period
ended November 30, 2011. This change in fiscal year end did not affect the objective, investment strategy or portfolio management of the Fund.
Nuveen
Investments
7
RISK CONSIDERATIONS
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Shares of closed-end funds are
subject to investment risks, including the possible loss of principal invested. Past performance is no guarantee of future results.
Investment and Market Risk
.
An investment in common shares is subject to investment risk, including the possible loss of the entire
principal amount that you invest. Your investment in common shares represents an indirect investment in the corporate securities owned by the Fund, which generally trade in the over-the-counter markets. Your common shares at any point in time may be
worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Tax
Risk.
The Fund invests primarily in MLPs that pay no separate corporate level tax because they qualify as partnerships under current tax law. A change in law could reduce the cash available for Fund shareholder distributions or the tax treatment
of those distributions.
Price Risk.
This refers to the fact that shares of closed-end investment companies like the Fund have during
some periods traded at prices higher than net asset value and have during other periods traded at prices lower than net asset value. The Fund cannot predict whether the common shares will trade at, above or below net asset value.
Energy Sector Risk.
Because the Fund invests primarily in energy sector MLPs, concentration in this sector may present more risks than if the Fund
were invested in numerous sectors of the economy.
MLP Units Risk.
An investment in MLP units involves risks that differ from a similar
investment in equity securities. Holders of MLP units have the rights typically afforded to limited partners in a limited partnership. As compared to common stockholders of a corporation, holders of MLP units have more limited control and limited
rights to vote on matters affecting the partnership.
Non-Diversification and Concentration Risk:
This Fund is able to invest a greater
portion of its assets in obligations of a single issuer than a diversified fund. A non-diversified fund, or one with a portfolio concentrated in a particular industry or geographical region, may be affected disproportionately by the
performance of a single security or relatively few securities as a result of adverse economic, regulatory, or market occurrences.
Nuveen
Investments
8
Share Distribution
and Share Price Information
The
following information regarding your Funds distributions is current as of October 31, 2011, and likely will vary over time based on the Funds investment activities and portfolio investment value changes.
During the twelve-month reporting period, the Fund increased its monthly distribution to shareholders during January.
Effective February 1, 2011,
the Fund changed from paying distributions on a monthly basis to paying on a quarterly basis, with its first quarterly distribution of .2370 per share payable to shareholders during May 2011.
Some of the important factors affecting the
amount and composition of these distributions are summarized below.
The Fund has a managed distribution program. The goal of this program is
to provide shareholders with relatively consistent and predictable cash flow by systematically converting the Funds expected long-term return potential into regular distributions. As a result, regular distributions throughout the year are
likely to include a portion of expected long-term gains (both realized and unrealized), along with net investment income.
Important points to
understand about the managed distribution program are:
|
|
|
The Fund seeks to establish a relatively stable distribution rate that roughly corresponds to the projected total return from its investment strategy
over an extended period of time. However, you should not draw any conclusions about the Funds past or future investment performance from its current distribution rate.
|
|
|
|
Actual returns will differ from projected long-term returns (and therefore the Funds distribution rate), at least over shorter time periods. Over
a specific timeframe, the difference between actual returns and total distributions will be reflected in an increasing (returns exceed distributions) or a decreasing (distributions exceed returns) Fund net asset value.
|
|
|
|
Each distribution is expected to be paid from some or all of the following sources:
|
|
|
|
net investment income (regular interest and dividends),
|
|
|
|
realized capital gains, and
|
|
|
|
unrealized gains, or, in certain cases, a return of principal (non-taxable distributions).
|
|
|
|
A non-taxable distribution is a payment of a portion of the Funds capital. When the Funds returns exceed distributions, it may represent
portfolio gains generated, but not realized as a taxable capital gain. In periods when the Funds return falls short of distributions, the shortfall will represent a portion of your original principal, unless the shortfall is offset during
other time periods over the life of your investment (previous or subsequent) when the Funds total return exceeds distributions.
|
Nuveen
Investments
9
|
|
|
Because distribution source estimates are updated during the year based on the Funds performance and forecast for its current fiscal year,
estimates on the nature of your distributions provided at the time distributions are paid may differ from both the tax information reported to you in your Funds IRS From 1099 statement provided at year end, as well as the ultimate economic
sources of distributions over the life of your investment.
|
The following table provides estimated information regarding the
Funds distributions and actual total return performance for the twelve months ended October 31, 2011. This information is intended to help you better understand whether the Funds returns for the specified time period were sufficient
to meet the Funds distributions.
|
|
|
|
|
As of 10/31/11
|
|
MTP
|
|
Inception date
|
|
|
6/29/07
|
|
Fiscal year ended October 31, 2011:
|
|
|
|
|
Per share distribution:
|
|
|
|
|
From net investment income
|
|
$
|
0.59
|
|
From realized capital gains*
|
|
|
0.00
|
|
Return of capital
|
|
|
0.34
|
|
|
|
|
|
|
Total per share distribution
|
|
$
|
0.93
|
|
|
|
|
|
|
Distribution rate on NAV
|
|
|
5.24
|
%
|
Average annual total returns:
|
|
|
|
|
1- Year on NAV
|
|
|
7.25
|
%
|
Since inception on NAV
|
|
|
4.95
|
%
|
*
|
Note that because the Fund is treated as a regular corporation for U.S. federal income tax purposes, no portion of the Funds distributions are eligible for
designation as capital gain dividends. Consequently, the tax characterization (i.e. Form 1099 reporting) of the Funds distribution will be either ordinary dividend or return of capital.
|
Share Repurchases and Share Price Information
During the twelve-month reporting period, the Funds Board of Directors approved a share repurchase program allowing the Fund to repurchase up to 10% of its outstanding shares. The Fund has not
repurchased any of its outstanding shares since the inception of its repurchase program.
As of October 31, 2011, the Funds share
price was trading at a (-) discount of -7.89%, compared with an average discount of -2.39% for the entire twelve-month period.
Nuveen
Investments
10
MTP
Performance
OVERVIEW
MLP & Strategic Equity Fund Inc.
as of
October 31, 2011
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Funds
Performance Overview page.
1
|
Current Distribution Rate is based on the Funds current annualized quarterly distribution divided by the Funds current market price. The Funds
quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the fiscal year the Funds cumulative net ordinary income and net realized gains are less than the amount of the
Funds distributions, a return of capital for tax purposes.
|
2
|
Holdings are subject to change.
|
3
|
Effective February 1, 2011, the Fund began paying distributions to shareholders quarterly, with its first quarterly distribution of $.2370 per share payable
May 16, 2011.
|
Fund Snapshot
|
|
|
|
|
Common Share Price
|
|
$
|
16.35
|
|
Common Share Net Asset Value (NAV)
|
|
$
|
17.75
|
|
Premium/(Discount) to NAV
|
|
|
-7.89
|
%
|
Current Distribution Rate
1
|
|
|
5.80
|
%
|
Net Assets Applicable to Common Shares ($000)
|
|
$
|
262,851
|
|
Nuveen
Investments
11
Average Annual Total Return
(Inception 6/29/07)
|
|
|
|
|
|
|
|
|
|
|
On Share Price
|
|
|
On NAV
|
|
1- Year
|
|
|
-0.82
|
%
|
|
|
7.25
|
%
|
Since Inception
|
|
|
2.10
|
%
|
|
|
4.95
|
%
|
Portfolio Composition
(as a % of total investments)
2
|
|
|
|
|
Oil, Gas & Consumable Fuels
|
|
|
97.6
|
%
|
Gas Utilities
|
|
|
2.2
|
%
|
Energy Equipment & Services
|
|
|
0.2
|
%
|
Ten Largest Master Limited
Partnerships & MLP Affiliates
Holdings
(as a % of total investments)
2
|
|
|
|
|
Plains All American Pipeline LP
|
|
|
7.0
|
%
|
ONEOK Partners LP
|
|
|
5.7
|
%
|
Magellan Midstream Partners LP
|
|
|
5.7
|
%
|
Enterprise Products Partners LP
|
|
|
5.5
|
%
|
Kinder Morgan Management LLC
|
|
|
5.0
|
%
|
Williams Partners LP
|
|
|
5.0
|
%
|
DCP Midstream Partners LP
|
|
|
4.6
|
%
|
Western Gas Partners LP
|
|
|
4.2
|
%
|
El Paso Pipeline Partners LP
|
|
|
4.0
|
%
|
Spectra Energy Partners LP
|
|
|
3.9
|
%
|
Nuveen
Investments
12
MTP
Shareholder MEETING REPORT
The annual meeting of shareholders was held in the offices of Nuveen Investments on May 6, 2011; at this meeting the shareholders were asked to vote on the election of Board Members.
|
|
|
|
|
|
|
MTP
|
|
|
|
Common
|
|
|
|
Shares
|
|
Approval of the Board Members was reached as follows:
|
|
|
|
|
John P. Amboian
|
|
|
|
|
For
|
|
|
12,310,816
|
|
Withhold
|
|
|
242,602
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Robert P. Bremner
|
|
|
|
|
For
|
|
|
12,333,268
|
|
Withhold
|
|
|
220,150
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Jack B. Evans
|
|
|
|
|
For
|
|
|
12,329,550
|
|
Withhold
|
|
|
223,868
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
William C. Hunter
|
|
|
|
|
For
|
|
|
12,334,035
|
|
Withhold
|
|
|
219,383
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
David J. Kundert
|
|
|
|
|
For
|
|
|
12,306,076
|
|
Withhold
|
|
|
247,342
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
William J. Schneider
|
|
|
|
|
For
|
|
|
12,335,618
|
|
Withhold
|
|
|
217,800
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Judith M. Stockdale
|
|
|
|
|
For
|
|
|
12,331,538
|
|
Withhold
|
|
|
221,880
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Carole E. Stone
|
|
|
|
|
For
|
|
|
12,312,559
|
|
Withhold
|
|
|
240,859
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Virginia L. Stringer
|
|
|
|
|
For
|
|
|
12,285,963
|
|
Withhold
|
|
|
267,455
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Terence J. Toth
|
|
|
|
|
For
|
|
|
12,330,803
|
|
Withhold
|
|
|
222,615
|
|
|
|
|
|
|
Total
|
|
|
12,553,418
|
|
|
|
|
|
|
Nuveen
Investments
13
Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board
of Directors and Shareholders of
MLP & Strategic Equity Fund Inc.:
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of MLP & Strategic Equity Fund Inc. (hereafter referred to as the Fund) at October 31, 2011, the results
of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2011 by
correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the year ended October 31, 2008 and the period ended October 31, 2007 were audited by other independent auditors whose
report, dated December 26, 2008, expressed an unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Chicago, IL
December 28, 2011
Nuveen
Investments
14
MTP
MLP & Strategic Equity Fund Inc.
Portfolio of INVESTMENTS
October 31, 2011
|
|
|
|
|
|
|
|
|
Shares/
Units
|
|
|
Description (1)
|
|
Value
|
|
|
|
|
|
Master Limited Partnerships & MLP Affiliates 111.0%
|
|
|
|
|
|
|
|
|
|
|
|
Energy Equipment & Services 0.2%
|
|
|
|
|
|
|
|
|
21,916
|
|
|
Exterran Partners LP
|
|
$
|
539,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utilities 2.5%
|
|
|
|
|
|
|
|
|
88,650
|
|
|
AmeriGas Partners LP
|
|
|
3,964,428
|
|
|
53,406
|
|
|
Suburban Propane Partners LP
|
|
|
2,527,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gas Utilities
|
|
|
6,491,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, Gas & Consumable Fuels 108.3%
|
|
|
|
|
|
|
|
|
29,550
|
|
|
Alliance Holdings GP LP
|
|
|
1,430,220
|
|
|
79,296
|
|
|
Alliance Resource Partners LP
|
|
|
6,020,945
|
|
|
167,304
|
|
|
Boardwalk Pipeline Partners LP
|
|
|
4,781,548
|
|
|
145,563
|
|
|
Buckeye Partners LP
|
|
|
9,832,781
|
|
|
128,381
|
|
|
Buckeye Partners LP, Class B Shares, (2), (3), (4)
|
|
|
7,888,835
|
|
|
93,061
|
|
|
Crestwood Midstream Partners LP
|
|
|
2,752,744
|
|
|
126,285
|
|
|
Crestwood Midstream Partners LP, Class C Shares, (2), (3), (4)
|
|
|
3,533,216
|
|
|
308,557
|
|
|
DCP Midstream Partners LP
|
|
|
13,557,995
|
|
|
351,800
|
|
|
El Paso Pipeline Partners LP
|
|
|
11,725,494
|
|
|
272,904
|
|
|
Enbridge Energy Management LLC, (3)
|
|
|
8,410,901
|
|
|
189,263
|
|
|
Enbridge Energy Partners LP
|
|
|
5,761,166
|
|
|
265,557
|
|
|
Energy Transfer Equity LP
|
|
|
10,157,555
|
|
|
5,573
|
|
|
Energy Transfer Partners LP
|
|
|
260,371
|
|
|
360,889
|
|
|
Enterprise Products Partners LP
|
|
|
16,178,654
|
|
|
108,790
|
|
|
EV Energy Partners LP
|
|
|
8,097,240
|
|
|
115,964
|
|
|
Genesis Energy LP
|
|
|
3,060,290
|
|
|
105,695
|
|
|
Holly Energy Partners LP
|
|
|
5,941,116
|
|
|
23,835
|
|
|
Inergy LP
|
|
|
684,303
|
|
|
220,855
|
|
|
Kinder Morgan Management LLC, (3)
|
|
|
14,629,465
|
|
|
258,248
|
|
|
Magellan Midstream Partners LP
|
|
|
16,504,630
|
|
|
113,150
|
|
|
MarkWest Energy Partners LP
|
|
|
5,638,265
|
|
|
99,075
|
|
|
Natural Resource Partners LP
|
|
|
2,932,620
|
|
|
90,649
|
|
|
NuStar Energy LP
|
|
|
5,203,253
|
|
|
118,500
|
|
|
NuStar GP Holdings LLC
|
|
|
3,774,225
|
|
|
334,586
|
|
|
ONEOK Partners LP
|
|
|
16,729,300
|
|
|
50,003
|
|
|
Pioneer Southwest Energy Partners LP
|
|
|
1,372,582
|
|
|
308,849
|
|
|
Plains All American Pipeline LP
|
|
|
20,374,767
|
|
|
269,038
|
|
|
Regency Energy Partners LP
|
|
|
6,236,301
|
|
|
368,626
|
|
|
Spectra Energy Partners LP
|
|
|
11,456,896
|
|
|
79,470
|
|
|
Sunoco Logistics Partners LP
|
|
|
7,810,312
|
|
|
316,250
|
|
|
Targa Resources Partners LP
|
|
|
11,353,375
|
|
|
117,774
|
|
|
TC PipeLines LP
|
|
|
5,365,783
|
|
|
52,875
|
|
|
Teekay Offshore Partners LP
|
|
|
1,394,843
|
|
|
83,063
|
|
|
Teekay LNG Partners LP
|
|
|
2,915,511
|
|
|
118,426
|
|
|
TransMontaigne Partners LP
|
|
|
4,195,833
|
|
Nuveen
Investments
15
|
|
|
|
|
|
|
Shares/
Units
|
|
Description (1)
|
|
Value
|
|
|
|
Oil, Gas & Consumable Fuels
(continued)
|
|
|
|
|
|
|
|
346,420
|
|
Western Gas Partners LP
|
|
$
|
12,193,984
|
|
245,822
|
|
Williams Partners LP
|
|
|
14,584,619
|
|
|
|
|
|
|
|
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
284,741,938
|
|
|
|
|
|
|
|
|
Total Investments (cost $168,630,494) 111.0%
|
|
|
291,772,672
|
|
|
|
|
|
|
|
|
Other Assets Less Liabilities (11.0)%
|
|
|
(28,921,235
|
)
|
|
|
|
|
|
|
|
Net Assets 100%
|
|
$
|
262,851,437
|
|
|
|
|
|
|
|
|
For Fund portfolio compliance purposes, the Funds industry classifications refer to any one or more
of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry
sub-classifications into sectors for reporting ease.
(1)
|
All percentages shown in the Portfolio of Investments are based on net assets.
|
(2)
|
For fair value measurement disclosure purposes, Master Limited Partnership & MLP Affiliate categorized as Level 2. See Notes to Financial Statements, Footnote
1 - General Information and Significant Accounting Policies, Investment Valuation for more information.
|
(3)
|
Distributions are paid in-kind.
|
(4)
|
Security is restricted and may be resold only in transactions exempt from registration, normally to qualified institutional buyers.
|
See accompanying notes to financial statements.
Nuveen
Investments
16
Statement of
ASSETS & LIABILITIES
October 31, 2011
|
|
|
|
|
Assets
|
|
|
|
|
Investments, at value (cost $168,630,494)
|
|
$
|
291,772,672
|
|
Receivable for distributions
|
|
|
1,348,930
|
|
Other assets
|
|
|
2,278
|
|
|
|
|
|
|
Total assets
|
|
|
293,123,880
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Cash overdraft
|
|
|
3,348,433
|
|
Payable for state taxes
|
|
|
577,716
|
|
Net deferred tax liability
|
|
|
25,795,435
|
|
Accrued expenses:
|
|
|
|
|
Management fees
|
|
|
276,758
|
|
Other
|
|
|
274,101
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,272,443
|
|
|
|
|
|
|
Net assets
|
|
$
|
262,851,437
|
|
|
|
|
|
|
Shares outstanding
|
|
|
14,810,750
|
|
|
|
|
|
|
Net asset value per share outstanding
|
|
$
|
17.75
|
|
|
|
|
|
|
Net assets consist of:
|
|
|
|
|
Shares, $.001 par value per share
|
|
$
|
14,811
|
|
Paid-in surplus
|
|
|
221,198,223
|
|
Accumulated net investment (loss), net of tax
|
|
|
(6,901,946
|
)
|
Accumulated net realized gain (loss), net of tax
|
|
|
(52,550,804
|
)
|
Net unrealized appreciation (depreciation), net of tax
|
|
|
101,091,153
|
|
|
|
|
|
|
Net assets
|
|
$
|
262,851,437
|
|
|
|
|
|
|
Authorized shares
|
|
|
100,000,000
|
|
|
|
|
|
|
See accompanying notes to financial statements.
Nuveen
Investments
17
Statement of
OPERATIONS
Year Ended October 31, 2011
|
|
|
|
|
Investment Income
|
|
|
|
|
Distributions from master limited partnerships
|
|
$
|
15,115,040
|
|
Less: Return of capital on distributions
|
|
|
(15,115,040
|
)
|
Interest
|
|
|
1,892
|
|
|
|
|
|
|
Total investment income
|
|
|
1,892
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
Management fees
|
|
|
(2,848,754
|
)
|
Shareholders servicing agent fees and expenses
|
|
|
(7,099
|
)
|
Custodians fees and expenses
|
|
|
(46,124
|
)
|
Directors fees and expenses
|
|
|
(26,371
|
)
|
Professional fees
|
|
|
(93,625
|
)
|
Shareholders reports printing and mailing expenses
|
|
|
(81,493
|
)
|
Investor relations expense
|
|
|
(40,794
|
)
|
Other expenses
|
|
|
(7,219
|
)
|
|
|
|
|
|
Total expenses before custodian fee credit
|
|
|
(3,151,479
|
)
|
Custodian fee credit
|
|
|
19
|
|
|
|
|
|
|
Net expenses
|
|
|
(3,151,460
|
)
|
|
|
|
|
|
Net investment income (loss) before taxes
|
|
|
(3,149,568
|
)
|
|
|
|
|
|
Deferred tax benefit
|
|
|
676,861
|
|
Current tax expense
|
|
|
(605,270
|
)
|
|
|
|
|
|
Net investment income (Loss)
|
|
|
(3,077,977
|
)
|
|
|
|
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
Net realized gain (loss) from investments before taxes
|
|
|
14,713,908
|
|
Deferred tax expense
|
|
|
(4,650,340
|
)
|
|
|
|
|
|
Net realized gain (loss) from investments
|
|
|
10,063,568
|
|
|
|
|
|
|
Change in net unrealized appreciation (depreciation) of investments before taxes
|
|
|
16,510,736
|
|
Deferred tax expense
|
|
|
(5,218,228
|
)
|
|
|
|
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
11,292,508
|
|
|
|
|
|
|
Net realized and unrealized gain (Loss)
|
|
|
21,356,076
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
18,278,099
|
|
|
|
|
|
|
See accompanying notes to financial statements.
Nuveen
Investments
18
Statement of
Changes in Net Assets
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
10/31/11
|
|
|
Year
Ended
10/31/10
|
|
Operations
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
(3,077,977
|
)
|
|
$
|
(2,047,329
|
)
|
Net realized gain (loss) from investments
|
|
|
10,063,568
|
|
|
|
3,949,654
|
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
11,292,508
|
|
|
|
69,084,607
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
|
18,278,099
|
|
|
|
70,986,932
|
|
|
|
|
|
|
|
|
|
|
Distributions to Shareholders
|
|
|
|
|
|
|
|
|
From net investment income
|
|
|
(8,719,354
|
)
|
|
|
|
|
Return of capital
|
|
|
(5,053,525
|
)
|
|
|
(12,405,256
|
)
|
|
|
|
|
|
|
|
|
|
Decrease in net assets from distributions to shareholders
|
|
|
(13,772,879
|
)
|
|
|
(12,405,256
|
)
|
|
|
|
|
|
|
|
|
|
Fund Share Transactions
|
|
|
|
|
|
|
|
|
Proceeds from shares issued to shareholders due to reinvestment of distributions
|
|
|
188,523
|
|
|
|
1,292,066
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from Fund share transactions
|
|
|
188,523
|
|
|
|
1,292,066
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets
|
|
|
4,693,743
|
|
|
|
59,873,742
|
|
Net assets at the beginning of period
|
|
|
258,157,694
|
|
|
|
198,283,952
|
|
|
|
|
|
|
|
|
|
|
Net assets at the end of period
|
|
$
|
262,851,437
|
|
|
$
|
258,157,694
|
|
|
|
|
|
|
|
|
|
|
Accumulated net investment (loss), net of tax at end of period
|
|
$
|
(6,901,946
|
)
|
|
$
|
(10,090,869
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements.
Nuveen
Investments
19
Intentionally Left Blank
Nuveen
Investments
20
Financial
HIGHLIGHTS
Selected data for a share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Net
|
|
|
Realized/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
|
|
|
|
|
Net
|
|
|
Investment
|
|
|
Unrealized
|
|
|
|
|
|
Net
|
|
|
Return
|
|
|
|
|
|
|
|
|
Net
|
|
|
Ending
|
|
|
|
Asset
|
|
|
Income
|
|
|
Gain
|
|
|
|
|
|
Investment
|
|
|
of
|
|
|
|
|
|
Offering
|
|
|
Asset
|
|
|
Market
|
|
|
|
Value
|
|
|
(Loss)(a)
|
|
|
(Loss)
|
|
|
Total
|
|
|
Income
|
|
|
Capital
|
|
|
Total
|
|
|
Costs
|
|
|
Value
|
|
|
Value
|
|
Year Ended 10/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
$
|
17.44
|
|
|
$
|
(.21
|
)
|
|
$
|
1.45
|
|
|
$
|
1.24
|
|
|
$
|
(.59
|
)
|
|
$
|
(.34
|
)
|
|
$
|
(.93
|
)
|
|
$
|
|
|
|
$
|
17.75
|
|
|
$
|
16.35
|
|
2010
|
|
|
13.47
|
|
|
|
(.14
|
)
|
|
|
4.95
|
|
|
|
4.81
|
|
|
|
|
|
|
|
(.84
|
)
|
|
|
(.84
|
)
|
|
|
|
|
|
|
17.44
|
|
|
|
17.41
|
|
2009
|
|
|
11.70
|
|
|
|
(.15
|
)
|
|
|
2.82
|
|
|
|
2.67
|
|
|
|
|
|
|
|
(.90
|
)
|
|
|
(0.90
|
)
|
|
|
|
|
|
|
13.47
|
|
|
|
14.42
|
|
2008
|
|
|
18.06
|
|
|
|
(.09
|
)
|
|
|
(5.07
|
)
|
|
|
(5.16
|
)
|
|
|
|
|
|
|
(1.20
|
)
|
|
|
(1.20
|
)
|
|
|
|
|
|
|
11.70
|
|
|
|
13.00
|
|
2007(e)
|
|
|
19.10
|
|
|
|
.04
|
|
|
|
(.74
|
)
|
|
|
(.70
|
)
|
|
|
(.03
|
)
|
|
|
(.27
|
)
|
|
|
(0.30
|
)
|
|
|
(.04
|
)
|
|
|
18.06
|
|
|
|
16.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuveen
Investments
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes/
|
|
|
Ratios to Average
|
|
|
|
|
|
|
|
|
|
Total Returns
|
|
|
|
|
|
Tax Benefit (Expense)(c)
|
|
|
Net Assets(c)(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on
|
|
|
Ending
|
|
|
|
|
|
Net
|
|
|
|
|
|
Net
|
|
|
Current and
|
|
|
|
|
|
|
Based on
|
|
|
Net
|
|
|
Net
|
|
|
|
|
|
Investment
|
|
|
|
|
|
Investment
|
|
|
Deferred Tax
|
|
|
Portfolio
|
|
|
|
Market
|
|
|
Asset
|
|
|
Assets
|
|
|
|
|
|
Income
|
|
|
|
|
|
Income
|
|
|
Benefit
|
|
|
Turnover
|
|
|
|
Value(b)
|
|
|
Value(b)
|
|
|
(000)
|
|
|
Expenses
|
|
|
(Loss)
|
|
|
Expenses
|
|
|
(Loss)
|
|
|
(Expense)
|
|
|
Rate
|
|
Year Ended 10/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
(.82
|
)%
|
|
|
7.25
|
%
|
|
$
|
262,851
|
|
|
|
(1.20
|
)%
|
|
|
(1.20
|
)%
|
|
|
(4.93
|
)%
|
|
|
(1.17
|
)%
|
|
|
(3.73
|
)%
|
|
|
37
|
%
|
2010
|
|
|
26.91
|
|
|
|
36.28
|
|
|
|
258,158
|
|
|
|
(1.31
|
)
|
|
|
(1.31
|
)
|
|
|
(8.36
|
)
|
|
|
(.86
|
)
|
|
|
(7.05
|
)
|
|
|
16
|
|
2009
|
|
|
20.47
|
|
|
|
25.04
|
|
|
|
198,284
|
|
|
|
(1.35
|
)
|
|
|
(1.32
|
)
|
|
|
(1.35
|
)
|
|
|
(1.32
|
)
|
|
|
|
|
|
|
38
|
|
2008
|
|
|
(12.82
|
)
|
|
|
(29.45
|
)
|
|
|
170,399
|
|
|
|
(1.33
|
)
|
|
|
(.62
|
)
|
|
|
(1.33
|
)
|
|
|
(.62
|
)
|
|
|
|
|
|
|
5
|
|
2007(e)
|
|
|
(17.37
|
)
|
|
|
(3.77
|
)
|
|
|
262,603
|
|
|
|
(1.35
|
)*
|
|
|
.62
|
*
|
|
|
(1.35
|
)*
|
|
|
.62
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Per share Net Investment (Loss) is calculated using the average daily shares method.
|
(b)
|
For the fiscal years ended subsequent to October 31, 2009, Total Return Based on Market Value is the combination of changes in the market price per share and the
effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of
the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the
actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
|
For the
fiscal years ended subsequent to October 31, 2009, Total Return Based on Net Asset Value is the combination of changes in net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset
value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvest price for the last dividend declared in
the period may often be based on the Funds market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total returns are not annualized.
For the period June 29, 2007, (commencement of operations) through October 31, 2009, Total Returns Based on Market Value and Net Asset Value
reflect the performance of the Fund based on a calculation approved by Fund management of IQ Advisors. Total returns based on the calculations described above may have produced substantially different results. Total returns are not annualized.
(c)
|
Ratios do not reflect the effect of custodian fee credits earned on the Funds net cash on deposit with the custodian bank, where applicable.
|
(d)
|
Expenses ratios include current and deferred tax benefit (expense) allocated to net investment income (loss) and deferred tax expense allocated to realized and
unrealized gain (loss). Net Investment Income (Loss) ratios exclude deferred tax expense allocated to realized and unrealized gain (loss).
|
(e)
|
For the period June 29, 2007 (commencement of operations) through October 31, 2007.
|
See accompanying notes to
financial statements.
Nuveen
Investments
22
Notes to
FINANCIAL STATEMENTS
1. General Information and Significant Accounting Policies
General Information
MLP & Strategic Equity Fund Inc. (the Fund) is a closed-end management investment company registered under the Investment Company Act
of 1940, as amended. The Funds shares are listed on the New York Stock Exchange (NYSE) under the symbol MTP. After the close of business on October 6, 2010, Nuveen Asset Management, a wholly-owned subsidiary of
Nuveen Investments, Inc. (Nuveen), assumed the role of investment adviser for the Fund from IQ Investment Advisers LLC (IQ Advisors) following a vote by Fund shareholders on September 30, 2010. The transition from IQ
Advisors to the Advisor did not result in any change to the Funds investment objective or principal investment strategies.
Effective
January 1, 2011, the Funds adviser, Nuveen Asset Management, changed its name to Nuveen Fund Advisors, Inc. (the Adviser).
The Funds investment objective is to provide a high level of after-tax total return. The Fund pursues its investment objective by investing substantially all of its net assets in publicly traded
master limited partnerships (MLPs) operating in the energy infrastructure sector of the market.
Significant Accounting
Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements
in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
Investment Valuation
Common stocks and other equity-type securities, such as MLPs, are valued at the last sales price on the securities exchange on which such
securities are primarily traded and are generally classified as Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market (NASDAQ) are valued, except as indicated below, at the NASDAQ Official
Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the
quoted bid price. Investments in open-end funds are valued at their respective net asset values on the valuation date. These investment vehicles are generally classified as Level 1.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds Board of Directors or its designee at fair
value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a
market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source;
a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Funds net asset value (as may be the case in non-U.S. markets on
which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the securitys fair value. As a general
principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may
include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or
collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the
significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds Board of Directors or its designee.
Refer to Footnote 2 Fair Value Measurements for further details on the leveling of securities held by the Fund as of the end of the reporting period.
Nuveen
Investments
23
Master Limited Partnerships
The Fund may purchase both domestic and international MLPs. The Funds investment in MLPs may include ownership of MLP common units and MLP subordinated units. The Fund also may purchase MLP I-Shares
(together with the MLPs, the MLP Entities). MLP I-Shares are pay-in-kind securities created as a means to facilitate institutional ownership of MLPs by simplifying the tax and administrative implications of the MLP structure. Generally,
when an MLP pays its quarterly cash distribution to unitholders, holders of I-Shares do not receive a cash distribution; rather, they receive a dividend of additional I-Shares from the MLP of comparable value to the cash distribution paid to each
unitholder. The Fund may purchase interests in MLP Entities on an exchange or may utilize non-public market transactions to obtain its holdings, including but not limited to privately negotiated purchases of securities from the issuers themselves,
broker-dealers, or other qualified institutional buyers.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific
identification method, which is the same basis used for federal income tax purposes.
Investment Income
Dividend income is recorded on the ex-dividend date, or for foreign securities, when information is available. Interest income is recognized on the
accrual basis.
The Fund records the character of distributions received from MLPs based on estimates made at the time such distributions are
received. These estimates are based upon a historical review of information available from each MLP and other industry sources. The Funds characterization of the estimates may subsequently be revised based on information received from MLPs
after their tax reporting periods conclude. Distributions, recognized as Distributions from master limited partnerships on the Statement of Operations, are offset by amounts characterized as return of capital from the MLP entities. For
the fiscal year ended October 31, 2011, the Fund estimated and characterized 100% of its distributions from MLPs as return of capital. No adjustments were made to the Funds prior year return of capital estimate based on the 2010 tax
reporting information received by the Fund subsequent to the end of the fiscal period.
Income Taxes
The Fund is treated as a regular corporation, or C corporation, for U.S. federal income tax purposes. Accordingly, the Fund is generally
subject to U.S. federal income tax on its taxable income at statutory rates applicable to corporations (currently at a maximum rate of 35%). The estimated effective state income tax rate is (1.12)%. The Fund may be subject to a 20% federal
alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.
The Funds income tax provision consists of the following as of October 31, 2011, the Funds tax year end:
|
|
|
|
|
Current tax expense (benefit):
|
|
|
|
|
Federal
|
|
$
|
795
|
|
State
|
|
|
604,475
|
|
|
|
|
|
|
Total current tax expense (benefit)
|
|
$
|
605,270
|
|
|
|
|
|
|
Deferred tax expense (benefit):
|
|
|
|
|
Federal
|
|
$
|
9,580,165
|
|
State
|
|
|
(388,458
|
)
|
|
|
|
|
|
Total deferred tax expense (benefit)
|
|
$
|
9,191,707
|
|
|
|
|
|
|
The reconciliation between the federal statutory income tax rate of 35% and the effective tax rate on net investment
income (loss) and realized and unrealized gain (loss) follows:
|
|
|
|
|
|
|
|
|
Description
|
|
Amount
|
|
|
Rate
|
|
Application of statutory income tax rate
|
|
$
|
9,826,277
|
|
|
|
35.00
|
%
|
State income taxes net of federal benefit
|
|
|
(314,111
|
)
|
|
|
(1.12
|
)
|
Effect of permanent differences
|
|
|
10,201
|
|
|
|
.04
|
|
Effect of valuation allowance
|
|
|
318,562
|
|
|
|
1.13
|
|
Effect of other items
|
|
|
(43,952
|
)
|
|
|
(.16
|
)
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
9,796,977
|
|
|
|
34.89
|
%
|
|
|
|
|
|
|
|
|
|
The Fund invests its assets primarily in MLPs, which generally are treated as partnerships for Federal income tax
purposes. As a limited partner in the MLPs, the Fund includes its allocable share of the MLPs taxable income in computing its own taxable income. The Funds tax expense or benefit is recognized on the Statement of Operations based on the
component of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Such temporary differences are
Nuveen
Investments
24
Notes to
FINANCIAL STATEMENTS
(continued)
principally: (i) taxes on unrealized gains/(losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes and (iii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets and
liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled. To the extent the Fund has a deferred tax asset, consideration is given to whether or
not a valuation allowance is required. The determination of whether a valuation allowance is required is based on the evaluation criterion provided by ASC 740, Income Taxes (ASC 740) that it is more-likely-than-not that some portion or
all of the deferred tax asset will not be realized. Among the factors considered in assessing the Funds valuation allowance: the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration
of statutory carryforward periods and the associated risk that operating and capital loss carryforwards may expire unused.
Components of the
Funds deferred tax assets and liabilities as of October 31, 2011, the Funds tax year end, are as follows:
|
|
|
|
|
|
|
Deferred
|
|
|
|
Benefit
|
|
Description
|
|
(Liability)
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforward (tax basis)
|
|
$
|
10,020,124
|
|
Capital loss carryforward (tax basis)
|
|
|
16,969,501
|
|
|
|
|
|
|
|
|
$
|
26,989,625
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Accumulated net unrealized gain on investments (tax basis)
|
|
$
|
(51,581,225
|
)
|
|
|
|
|
|
Net deferred taxes before valuation allowance
|
|
$
|
(51,581,225
|
)
|
|
|
|
|
|
Less: valuation allowance
|
|
|
(1,203,835
|
)
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
(25,795,435
|
)
|
|
|
|
|
|
|
Changes in the valuation allowance were as follows:
|
|
|
|
|
|
|
Balance, October 31, 2010
|
|
$
|
885,273
|
|
Provision to return
|
|
|
(42,361
|
)
|
Change in state tax deferred rate
|
|
|
360,923
|
|
|
|
|
|
|
Balance, October 31, 2011
|
|
$
|
1,203,835
|
|
|
|
|
|
|
For all open tax years and all major taxing
jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e.,
generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will
significantly change in the next twelve months.
At October 31, 2011,
the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:
|
|
|
|
|
|
|
Cost of investments
|
|
$
|
153,903,487
|
|
|
|
|
|
|
Gross unrealized:
|
|
|
|
|
Appreciation
|
|
$
|
137,881,699
|
|
Depreciation
|
|
|
(12,514
|
)
|
|
|
|
|
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
137,869,185
|
|
|
|
|
|
|
Nuveen
Investments
25
As of the tax year ended October 31, 2011, the Fund had a net operating loss carryforward of
$25,094,589 of which $8,390,692 expires in 2028, $13,309,618 expires in 2029, $1,440,597 expires in 2030 and $1,953,682 expires in 2031.
As
of the tax year ended October 31, 2011, the Fund had a net capital loss carryforward of $45,327,694 of which $21,869,195 expires in 2013, $23,422,123 expires in 2014 and $36,376 expires in 2015.
The net operating loss and capital loss expiration dates detailed above will be affected by the Funds change to a November 30 tax year end,
effective November 30, 2011. The change in tax year will result in the dates of expiry being accelerated by approximately one year.
Dividends and Distributions to Shareholders
Distributions to shareholders are recorded on the ex-dividend. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
During the period November 1, 2010 through January 31, 2011, distributions were declared and paid by the Fund on a monthly basis.
Effective February 1, 2011, the Fund makes quarterly cash distributions of a stated dollar amount per share. Subject to approval and oversight by the Funds Board of Directors, the Fund seeks to maintain a stable distribution level
designed to deliver the long-term return potential of the Funds investment strategy through regular quarterly distributions (a Managed Distribution Program). Total distributions during the fiscal year generally will be made from
the Funds net investment income, net realized capital gains and net unrealized capital gains in the Funds portfolio, if any. The portion of distributions paid attributed to net unrealized gains, if any, is distributed from the
Funds assets and is treated by shareholders as a non-taxable distribution (Return of Capital) for tax purposes. In the event that total distributions during the fiscal year exceed the Funds total return on net asset value,
the difference will reduce net asset value per share. If the Funds total return on net asset value exceeds total distributions during the fiscal year, the excess will be reflected as an increase in net asset value per share. The final
determination of the source and character of all distributions for the fiscal year are made after the end of the fiscal year and are reflected in the financial statements contained in the annual report as of October 31 each year.
Derivative Financial Instruments
The
Fund is authorized to invest in certain derivative instruments, including futures, options and swap contracts. Although the Fund is authorized to invest in such derivative instruments, and may do so in the future, it did not invest in any such
investments during the fiscal year ended October 31, 2011.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on the Funds cash
on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which the Fund overdraws its account at the custodian bank.
Indemnifications
Under the Funds
organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide
general indemnifications to other parties. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior
claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value
is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is
used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would
use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entitys own assumptions about the assumptions market
participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
Level 1 Quoted prices in active markets for identical securities.
Level 2 Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3 Significant unobservable inputs (including managements assumptions in determining the fair value of investments).
Nuveen
Investments
26
Notes to
FINANCIAL STATEMENTS
(continued)
The inputs or methodologies used for valuing securities are not an indication of the risk associated
with investing in those securities. The following is a summary of the Funds fair value measurements as of October 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Master Limited Partnerships & MLP Affiliates*
|
|
$
|
280,350,621
|
|
|
$
|
11,422,051
|
|
|
$
|
|
|
|
$
|
291,772,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Refer to the Funds Portfolio of Investments for industry breakdown of Master Limited Partnerships & MLP Affiliates classified as Level 2.
|
During the fiscal year ended October 31, 2011, the Fund recognized no significant transfers to or from Level 1, Level 2 or
Level 3.
3. Derivative Instruments and Hedging Activities
The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds investments in derivatives may
represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. The Fund did not invest in derivative instruments during the fiscal year ended October 31, 2011.
4. Fund Shares
During the fiscal year
ended October 31, 2011, the Funds Board of Directors approved a share repurchase program allowing the Fund to repurchase up to 10% of its outstanding shares. The Fund has not repurchased any of its outstanding shares since the inception
of its share repurchase program.
Transactions in shares were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
10/31/11
|
|
|
Year
Ended
10/31/10
|
|
Shares issued to shareholders due to reinvestment of distributions
|
|
|
10,620
|
|
|
|
82,529
|
|
|
|
|
|
|
|
|
|
|
5. Investments Transactions
Purchases and sales (excluding short-term investments) during the fiscal year ended October 31, 2011, aggregated $109,023,566 and $106,405,272, respectively.
6. Management Fees and Other Transactions with Affiliates
The Funds management fee consists of two components a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all fund
assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
|
|
|
|
|
Average Daily Managed Assets *
|
|
Fund-Level Fee Rate
|
|
For the first $500 million
|
|
|
.9200
|
%
|
For the next $500 million
|
|
|
.8950
|
|
For the next $500 million
|
|
|
.8700
|
|
For the next $500 million
|
|
|
.8450
|
|
For managed assets over $2 billion
|
|
|
.8200
|
|
|
|
|
|
|
Nuveen
Investments
27
The annual complex-level fee, payable monthly, is calculated according to the following schedule:
|
|
|
|
|
Complex-Level Managed Asset Breakpoint Level *
|
|
Effective Rate at Breakpoint
Level
|
|
$ 55 billion
|
|
|
.2000
|
%
|
$ 56 billion
|
|
|
.1996
|
|
$ 57 billion
|
|
|
.1989
|
|
$ 60 billion
|
|
|
.1961
|
|
$ 63 billion
|
|
|
.1931
|
|
$ 66 billion
|
|
|
.1900
|
|
$ 71 billion
|
|
|
.1851
|
|
$ 76 billion
|
|
|
.1806
|
|
$ 80 billion
|
|
|
.1773
|
|
$ 91 billion
|
|
|
.1691
|
|
$ 125 billion
|
|
|
.1599
|
|
$ 200 billion
|
|
|
.1505
|
|
$ 250 billion
|
|
|
.1469
|
|
$ 300 billion
|
|
|
.1445
|
|
|
|
|
|
|
*
|
For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these
purposes, financial leverage includes the funds use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including
the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining
managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds that constitute eligible assets. Eligible assets do not include assets attributable to
investments in other Nuveen funds or assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Advisers assumption of the management of the former First American Funds effective January 1, 2011. As of
October 31, 2011, the complex-level fee rate for the Fund was .1759%.
|
The management fee compensates the Adviser for
overall investment advisory and administrative services and general office facilities. The Adviser is responsible for each Funds overall strategy and asset allocation decisions. The Adviser has entered into an investment sub-advisory agreement
with Fiduciary Asset Management, LLC (FAMCO). FAMCO is compensated for its services to the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its directors who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Fund from the Adviser or
its affiliates. The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain
Nuveen advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised funds.
7. New Accounting Pronouncements
Fair Value Measurements and Disclosures
On May 12, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2011-04 (ASU No. 2011-04) modifying Topic 820,
Fair Value Measurements and Disclosures
. At the same time, the International Accounting Standards Board (IASB) issued International Financial Reporting
Standard (IFRS) 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the
amounts of any transfers between Level 1 and Level 2 and the reasons for the transfers and ii) for Level 3 fair value measurements, a) quantitative information about significant unobservable inputs used, b) a description of the valuation processes
used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The
effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts
and footnote disclosures, if any.
8. Subsequent Events
Effective November 1, 2011, the Funds fiscal and tax year ends changed from October 31 to November 30. As a result, the Fund will prepare an annual report for the one-month period
ended November 30, 2011. This change in fiscal year end did not affect the objective, investment strategy or portfolio management of the Fund.
Nuveen
Investments
28
Board Members & Officers
(Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set at ten. None of the board members who are not interested persons of the Funds (referred to herein as independent board members) has ever been a
director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the board members and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of
portfolios each oversees and other directorships they hold are set forth below.
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s)
Held with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members:
|
|
|
|
|
|
|
|
|
|
¡
ROBERT P. BREMNER
(2)
|
|
|
|
|
|
|
|
|
|
|
|
8/22/40 333 W. Wacker Drive Chicago, IL 60606
|
|
Chairman of
the Board
and Board
Member
|
|
1996
Class
III
|
|
Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council affiliated with the
Investment Company Institute.
|
|
|
241
|
|
|
|
|
|
¡
JACK B. EVANS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/22/48 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
1999
Class
III
|
|
President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; member of the Board of
Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President
and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm.
|
|
|
241
|
|
|
|
|
¡
WILLIAM C. HUNTER
|
|
|
|
|
|
|
|
|
|
|
|
3/6/48 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
2004
Class
I
|
|
Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International Honor Society;
Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank
of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University.
|
|
|
241
|
|
Nuveen
Investments
29
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s)
Held with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members (continued):
|
|
|
|
|
|
|
|
¡
DAVID J. KUNDERT
(2)
|
|
|
|
|
|
|
|
|
|
|
|
10/28/42 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
2005
Class
II
|
|
Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors
Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; member of the Wisconsin Bar
Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation.
|
|
|
241
|
|
|
|
|
¡
WILLIAM J. SCHNEIDER
(2)
|
|
|
|
|
|
|
|
|
|
|
|
9/24/44 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
1997
Class III
|
|
Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller-Valentine Group; member,
University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal Reserve
Bank.
|
|
|
241
|
|
|
|
|
¡
JUDITH M. STOCKDALE
|
|
|
|
|
|
|
|
|
|
|
|
12/29/47 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
1997
Class
I
|
|
Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994).
|
|
|
241
|
|
|
|
|
|
¡
CAROLE E. STONE
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/28/47 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
2007
Class
I
|
|
Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public
Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007).
|
|
|
241
|
|
|
|
|
¡
VIRGINIA L. STRINGER
|
|
|
|
|
|
|
|
|
|
|
|
8/16/44 333 W. Wacker Drive Chicago, IL 60606
|
|
Board
Member
|
|
2011
|
|
Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institutes Independent Directors Council; governance consultant and non-profit board
member; former Owner and President, Strategic Management Resources, Inc. a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company; Independent
Director, First American Fund Complex (1987-2010) and Chair (1997-2010).
|
|
|
241
|
|
Nuveen
Investments
30
Board Members & Officers (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s) Held
with
the Funds
|
|
Year First
Elected or
Appointed
and Term
(1)
|
|
Principal Occupation(s)
Including other Directorships
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Board Member
|
|
Independent Board Members (continued):
|
|
|
|
|
|
|
|
|
|
¡
TERENCE J. TOTH
(2)
|
|
|
|
|
|
|
|
|
|
|
|
9/29/59 333 W. Wacker Drive Chicago, IL 60606
|
|
Board Member
|
|
2008
Class II
|
|
Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global
Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004), Chicago
Fellowship Board (since 2005) and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern
Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004).
|
|
|
241
|
|
Interested Board Member:
|
|
|
|
|
|
|
|
|
|
¡
JOHN P. AMBOIAN
(3)
|
|
|
|
|
|
|
|
|
|
|
|
6/14/61 333 W. Wacker Drive Chicago, IL 60606
|
|
Board Member
|
|
2008
Class II
|
|
Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc., formerly, President (1999-2007); Chief Executive Officer (since 2007) of
Nuveen Investments Advisers, Inc.; Director (since 1998) formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc.
|
|
|
241
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s) Held
with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds:
|
|
|
|
|
|
|
|
|
|
¡
GIFFORD R. ZIMMERMAN
|
|
|
|
|
|
|
|
|
|
|
|
9/9/56 333 W. Wacker Drive Chicago, IL 60606
|
|
Chief
Administrative
Officer
|
|
1988
|
|
Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of
Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset
Management, LLC (since 2011); Managing Director, Associate General Counsel and Assistant Secretary, of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Nuveen
Investments Advisers Inc. (since 2002), Tradewinds Global Investors LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management Inc. (since
2010); Chief Administrative Officer and Chief Compliance Officer (since 2010) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst.
|
|
|
241
|
|
Nuveen
Investments
31
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s)
Held with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds (continued):
|
|
|
|
|
|
|
|
|
|
¡
WILLIAM ADAMS IV
|
|
|
|
|
|
|
|
|
|
|
|
6/9/55 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
|
|
2007
|
|
Senior Executive Vice President, Global Structured Products (since 2010), formerly, Executive Vice President (1999-2010) of Nuveen Securities, LLC; Co-President of Nuveen Fund
Advisors, Inc. (since 2011); formerly, Managing Director (2010-2011) of Nuveen Commodities Asset Management, LLC.
|
|
|
133
|
|
|
|
|
¡
CEDRIC H. ANTOSIEWICZ
|
|
|
|
|
|
|
|
|
|
|
|
1/11/62 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
|
|
2007
|
|
Managing Director of Nuveen Securities, LLC.
|
|
|
133
|
|
|
|
|
¡
MARGO L. COOK
|
|
|
|
|
|
|
|
|
|
|
|
4/11/64 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
|
|
2009
|
|
Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); Managing Director-Investment Services of Nuveen Commodities Asset
Management, LLC (since August 2011), previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst.
|
|
|
241
|
|
|
|
|
¡
LORNA C. FERGUSON
|
|
|
|
|
|
|
|
|
|
|
|
10/24/45 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
|
|
1998
|
|
Managing Director (since 2005) of Nuveen Fund Advisors, Inc. and Nuveen Securities, LLC (since 2004).
|
|
|
241
|
|
|
|
|
¡
STEPHEN D. FOY
|
|
|
|
|
|
|
|
|
|
|
|
5/31/54 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
and
Controller
|
|
1998
|
|
Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Funds Controller of Nuveen Securities, LLC; Vice President of Nuveen Fund Advisors, Inc.; Chief
Financial Officer of Nuveen Commodities Asset Management, LLC; (since 2010) Certified Public Accountant.
|
|
|
241
|
|
|
|
|
¡
SCOTT S. GRACE
|
|
|
|
|
|
|
|
|
|
|
|
8/20/70 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice
President
and
Treasurer
|
|
2009
|
|
Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Fund Advisors, Inc.,
Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings Inc. and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global
Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of
Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanleys Global Financial Services Group (2000-2003); Chartered Accountant Designation.
|
|
|
241
|
|
Nuveen
Investments
32
Board Members & Officers (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s)
Held with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds (continued):
|
|
|
|
|
|
|
|
|
|
¡
WALTER M. KELLY
|
|
|
|
|
|
|
|
|
|
|
|
2/24/70 333 W. Wacker Drive Chicago, IL 60606
|
|
Chief Compliance Officer and Vice President
|
|
2003
|
|
Senior Vice President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, Inc.
|
|
|
241
|
|
|
|
|
¡
TINA M. LAZAR
|
|
|
|
|
|
|
|
|
|
|
|
8/27/61 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice President
|
|
2002
|
|
Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc.
|
|
|
241
|
|
|
|
|
¡
LARRY W. MARTIN
|
|
|
|
|
|
|
|
|
|
|
|
7/27/51 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice President and Assistant Secretary
|
|
1997
|
|
Senior Vice President (since 2010), formerly, Vice President (1993-2010), Assistant Secretary and Assistant General Counsel of Nuveen Securities, LLC; Senior Vice President (since
2011) of Nuveen Asset Management, LLC: Senior Vice President (since 2010), formerly, Vice President (2005-2010), and Assistant Secretary of Nuveen Investments, Inc.; Senior Vice President (since 2010), formerly Vice President (2005-2010), and
Assistant Secretary (since 1997) of Nuveen Fund Advisors, Inc., Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002), NWQ Investment Management Company, LLC, Symphony Asset Management, LLC (since 2003), Tradewinds
Global Investors, LLC, Santa Barbara Asset Management LLC (since 2006), Nuveen HydePark Group, LLC and Nuveen Investment Solutions, Inc. (since 2007), and of Winslow Capital Management, Inc. (since 2010); Vice President and Assistant Secretary of
Nuveen Commodities Asset Management, LLC (since 2010).
|
|
|
241
|
|
|
|
|
¡
KEVIN J. MCCARTHY
|
|
|
|
|
|
|
|
|
|
|
|
3/26/66 333 W. Wacker Drive Chicago, IL 60606
|
|
Vice President and Secretary
|
|
2007
|
|
Managing Director (since 2008), formerly, Vice President (2007-2008), Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel
(since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director (since 2008), and Assistant Secretary, Nuveen Investment Holdings, Inc.;
Vice President (since 2007) and Assistant Secretary of Nuveen Investments Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC,
Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell,
Boyd & Lloyd LLP (1997-2007).
|
|
|
241
|
|
Nuveen
Investments
33
|
|
|
|
|
|
|
|
|
|
|
Name,
Birthdate
and
Address
|
|
Position(s)
Held with
the Funds
|
|
Year First
Elected or
Appointed
(4)
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of Portfolios
in Fund Complex
Overseen by
Officer
|
|
Officers of the Funds (continued):
|
|
|
|
|
|
|
|
|
|
¡
KATHLEEN L. PRUDHOMME
|
|
|
|
|
|
|
|
|
|
|
|
3/30/53
901
Marquette
Avenue
Minneapolis,
MN 55402
|
|
Vice
President
and Assistant
Secretary
|
|
2011
|
|
Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since
2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Securities, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010).
|
|
|
241
|
|
(1)
|
Board Members serve three year terms. The Board of Trustees is divided into three classes. Class I, Class II, and Class III, with each being elected to serve until the
third succeeding annual shareholders meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed. The first year elected or appointed represents the year in which the board member
was first elected or appointed to any fund in the Nuveen Complex.
|
(2)
|
Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate
of the Adviser.
|
(3)
|
Mr. Amboian is an interested trustee because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen
Funds.
|
(4)
|
Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed
to any fund in the Nuveen Complex.
|
Nuveen
Investments
34
Reinvest Automatically,
Easily and Conveniently
Nuveen makes
reinvesting easy. A phone call is all it takes to set up your reinvestment account.
Nuveen Closed-End Funds Automatic Reinvestment
Plan
Your Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares.
By choosing to reinvest, youll be able to invest money regularly and automatically, and watch your investment grow through the power of
compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each month youll
receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on
the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares
are trading at less than net asset value, shares for your account will be purchased on the open market. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Funds shares
subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a
price equal to the greater of the shares net asset value or 95% of the shares market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be
invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may
exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases
will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions.
Nuveen
Investments
35
Flexible
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change.
You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your financial advisor if his or her firm will participate on your behalf.
Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct
service charge to participants in the Plan at this time.
Call today to start reinvesting distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at
(800) 257-8787.
Nuveen
Investments
36
Glossary of Terms
Used in this Report
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Alerian MLP Index:
A composite of the 50 most prominent energy Master Limited Partnerships. The index, which is calculated using a
float-adjusted, capitalization-weighted methodology, is disseminated real-time on a price-return basis, and the corresponding total-return index is disseminated daily. The index returns assume reinvestment of dividends, but do not reflect any
applicable sales charges. You cannot invest directly in an index.
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Average Annual Total Return:
This is a commonly used method to express an investments performance over a particular, usually multi-year
time period. It expresses the return that would have been necessary each year to equal the investments actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any)
over the time period being considered.
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Current Distribution Rate:
An investments current annualized distribution divided by its current market price.
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Net Asset Value (NAV):
The net market value of all securities held in a portfolio.
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Net Asset Value (NAV) Per Share:
The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by
taking the Funds total assets (securities, cash, and accrued earnings), subtracting the Fundss liabilities, and dividing by the number of shares outstanding.
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S&P 500 Index:
An unmanaged index generally considered representative of the U.S. stock market. The index returns assume reinvestment of
dividends, but do not reflect any applicable sales charges. You cannot invest directly in an index.
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Nuveen
Investments
37
Notes
Nuveen
Investments
38
Other Useful Information
Board of Directors
John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M.
Stockdale
Carole E. Stone
Virginia
L. Stringer
Terence J. Toth
Fund Manager
Nuveen Fund Advisors, Inc.
333 West Wacker Drive
Chicago, IL
60606
Custodian
State
Street Bank & Trust Company
Boston, MA
Transfer Agent and
Shareholder Services
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
Legal Counsel
Chapman and
Cutler LLP
Chicago, IL
Independent Registered
Public
Accounting Firm
Pricewaterhouse/Coopers LLP
Chicago, IL
Quarterly Portfolio of Investments and Proxy Voting Information
You may obtain (i) the Funds quarterly portfolio of investments, (ii) information regarding how the Fund voted proxies relating to
portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Fund used to determine how to vote proxies relating to portfolio securities without charge,
upon request, by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveens website at www.nuveen.com.
You may also
obtain this and other Fund information directly from the Securities and Exchange Commission (SEC). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SECs Public Reference
Room in Washington, D.C. Call the SEC at (202) 942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SECs Public Reference Section at 100 F
Street NE, Washington, D.C. 20549.
CEO Certification Disclosure
The Funds Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.
The Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of
the Sarbanes-Oxley Act.
Share Information
The Fund intends to repurchase shares of its own common stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Fund repurchased shares
of its common stock as shown in the accompanying table.
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Common Shares
Repurchased
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MTP
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Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
Nuveen
Investments
39
Nuveen Investments makes it easy, with the ultimate online resource.
At nuveen.com/understand, you have access to comprehensive educational tools, video libraries and daily pricing for Nuveens more than 130*
closed-end fundsso you can stay up to date on the latest income-investing news and information.
All the tools and resources you need
on closed-end funds are just a click away.
www.nuveen.com/understand
*
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There are risks inherent in any investment, including market risk, interest rate risk, credit risk, and the possible loss of principal. There can be no assurance that
fund objectives will be achieved and income is not guaranteed. Closed-end funds frequently trade at a discount to their net asset value. Diversification does not ensure against loss.
|
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have
relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral
components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments is a global investment management firm that seeks to help secure the long-term goals of institutions and high net worth investors as
well as the consultants and financial advisors who serve them. We market our growing range of specialized investment solutions under the high-quality brands of NWQ, Nuveen Asset Management, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In
total, Nuveen Investments managed approximately $207 billion of assets as of October 31, 2011.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your
financial advisor, or call us at
(800) 257-8787
. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any
investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or
Nuveen Investments, 333 W. Wacker Dr., Chicago,
IL 60606
. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at:
www.nuveen.com/cef
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, IL 60606
www.nuveen.com/performance
EAN-F-1011D
PART C
OTHER INFORMATION
Item 15. Indemnification
Section 4 of Article XII of Registrants Declaration of Trust provides as follows: Subject to the exceptions and limitations contained in this Section 4, every person who is, or has
been, a Trustee, officer, employee or agent of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a Covered Person), shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection
with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement
thereof. No indemnification shall be provided hereunder to a Covered Person: (a) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (b) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the best interests of the Trust; or (c) in the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or a reasonable determination, based on a review of readily available facts (as opposed to a full trial-type inquiry), that he did not engage in such conduct: (i) by a vote of a
majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (ii) by written opinion of independent legal counsel. The rights of indemnification herein
provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a
Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel other than Covered Persons may be entitled by
contract or otherwise under law. Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding subject to a claim for indemnification under this Section 4 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 4, provided that either: (a) such
undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or (b) a majority of the Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this Section 4, a Disinterested Trustee is one (x) who is not an Interested Person of the Trust (including, as such
Disinterested Trustee, anyone who has been exempted from being an Interested Person by any rule, regulation or order of the Commission), and (y) against whom none of such actions, suits or other proceedings or another action, suit or other
proceeding on the same or similar grounds is then or has been pending. As used in this Section 4, the words claim, action,
C-1
suit or proceeding shall apply to all claims, actions, suits, proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the word
liability and expenses shall include without limitation, attorneys fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
The trustees and officers of the Registrant are covered by Investment Trust Errors and Omission policies in the aggregate amount of
$70,000,000 (with a $2,500,000 deductible for operational failures (after the deductible is satisfied, the insurer would cover 80% of any operational failure claims and the Fund would be liable for 20% of any such claims) and $1,000,000 for all
other claims) against liability and expenses of claims of wrongful acts arising out of their position with the Registrant, except for matters which involved willful acts, bad faith, gross negligence and willful disregard of duty (i.e., where the
insured did not act in good faith for a purpose he or she reasonably believed to be in the best interest of the Registrant or where he or she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, (the 1933 Act) may be
permitted to the officers, trustees or controlling persons of the Registrant pursuant to the Declaration of Trust of the Registrant or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by
an officer or trustee or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such officer, trustee or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Item 16. Exhibits.
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Exhibit
Number
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Description
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1
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Declaration of Trust of Registrant dated September 27, 2010. (1)
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2
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By-Laws of Registrant, Amended and Restated as of November 18, 2009 (and adopted with respect to the Fund by the initial Trustee on September 27, 2010). (1)
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3
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Not applicable.
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4
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Form of Agreement and Plan of Reorganization is filed herewith as Appendix A to Part A of this Registration Statement.
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5
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Not applicable.
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6(a)
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Investment Management Agreement dated January 20, 2011. (3)
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6(b)
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Investment Sub-Advisory Agreement dated January 20, 2011. (3)
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7
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Not applicable.
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C-2
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Exhibit
Number
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Description
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8
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Not applicable.
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9(a)
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Amended and Restated Master Custodian Agreement between the Nuveen Funds and State Street Bank and Trust Company, dated February 25, 2005. (2)
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9(b)
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Appendix A to Custodian Agreement, dated January 20, 2011. (3)
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10
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Not applicable.
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11
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Opinion and Consent of Counsel is filed herewith.
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12
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Form of Opinion and Consent of Vedder Price P.C. supporting the tax matters and consequences to shareholders discussed in the Joint Proxy Statement/Prospectus is filed
herewith.
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13
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Not applicable.
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14
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Consent of Independent Auditor is filed herewith.
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15
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Not applicable.
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16
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Powers of Attorney. (4)
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17
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Form of Proxy Card is filed herein and appears following the Proxy Statement/Prospectus included in this registration statement.
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(1)
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Filed on October 6, 2010 with Registrants Registration Statement on Form N-2 (File No. 333-169775) and incorporated by reference herein.
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(2)
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Filed on January 26, 2011 with Registrants Pre-Effective Amendment No. 1 to its Registration Statement on Form N-2 (File No. 333-169775) and
incorporated by reference herein.
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(3)
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Filed on February 23, 2011 with Registrants Pre-Effective Amendment No. 2 to its Registration Statement on Form N-2 (File No. 333-169775) and
incorporated by reference herein.
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(4)
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Filed on April 3, 2012 with Registrants Registration Statement on Form N-14 (File No. 333-180523).
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Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the 1933 Act, the reoffering prospectus will contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
C-3
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of
Chicago, the State of Illinois, on the 21st day of May, 2012.
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NUVEEN ENERGY MLP TOTAL RETURN FUND
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By:
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/s/ Kevin J. McCarthy
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Kevin J. McCarthy
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Vice President and Secretary
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As required by the Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated:
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Signature
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Capacity
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Date
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/s/ Stephen D. Foy
Stephen D. Foy
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Vice President and
Controller
(principal financial and accounting officer)
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May 21, 2012
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/s/ Gifford R. Zimmerman
Gifford R. Zimmerman
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Chief Administrative Officer
(principal executive officer)
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May 21, 2012
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Robert P. Bremner*
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Chairman of the Board and Trustee
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)
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)
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John P. Amboian*
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Trustee
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)
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)
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Jack B. Evans*
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Trustee
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)
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)
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William C. Hunter*
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Trustee
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)
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By: /s/ Mark L. Winget
Mark L. Winget
Attorney-in-Fact
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)
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David J. Kundert*
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Trustee
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)
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)
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William J. Schneider*
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Trustee
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)
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)
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Judith M. Stockdale*
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Trustee
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)
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)
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Carole E. Stone*
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Trustee
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)
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)
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Virginia L. Stringer*
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Trustee
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)
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)
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Terence J. Toth*
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Trustee
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)
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*
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An original power of attorney authorizing, among others, Mark L. Winget, Kevin J. McCarthy and Gifford R. Zimmerman, to execute this registration statement, and
amendments thereto, for each of the trustees of the Registrant on whose behalf this registration statement is filed, has been executed and previously filed and is incorporated herein by reference.
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EXHIBIT INDEX
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Exhibit
Number
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Description
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11
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Opinion and Consent of Counsel
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12
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Form of Tax Opinion
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14
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Consent of Independent Auditor
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