UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant  

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Under §240.14a-12

Nuveen Floating Rate Income Opportunity Fund

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1)

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LOGO

IMPORTANT NOTICE TO HOLDERS OF

TAXABLE FUND PREFERRED SHARES OF

NUVEEN SENIOR INCOME FUND (NSL)

NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)

NUVEEN SHORT DURATION CREDIT OPPORTUNITIES FUND (JSD)

AND

NUVEEN FLOATING RATE INCOME FUND (JFR)

(EACH, A “FUND” AND TOGETHER, THE “FUNDS”)

MARCH 30, 2023

Although we recommend that you read the complete Proxy Statement, for your convenience, we have provided a brief overview of the proposals to be voted on.

 

Q.

Why am I receiving the enclosed Proxy Statement?

 

A.

You are receiving the Proxy Statement as a holder of Taxable Fund Preferred Shares (“TFP Shares”) of Nuveen Senior Income Fund (“Senior Income” or a “Target Fund”), Nuveen Floating Rate Income Opportunity Fund (“Floating Rate Income Opportunity” or a “Target Fund”), Nuveen Short Duration Credit Opportunities Fund (“Short Duration Credit Opportunities” or a “Target Fund”) or Nuveen Floating Rate Income Fund (the “Acquiring Fund” and together with the Target Funds, the “Funds” or each individually, a “Fund”) in connection with the solicitation of proxies by each Fund’s Board of Trustees (each, a “Board” and each Trustee, a “Board Member”) for use at the annual meeting of shareholders of each Fund (each, a “Meeting” and together, the “Meetings”).

 

  

At the Meetings, preferred shareholders of the Funds will be asked to vote on the following proposals:

 

   

(Each Fund) to approve an Agreement and Plan of Merger (the “Agreement”) pursuant to which the proposed combination of the Target Fund and the Acquiring Fund (each, a “Merger” and together, the “Mergers”) will be effected;

 

   

(Acquiring Fund only) to approve the issuance of additional common shares of the Acquiring Fund in connection with the Mergers; and

 

   

(Each Fund) to elect members of the Board. (The list of specific nominees is contained in the enclosed Proxy Statement.)

 

  

Each Fund’s Board unanimously recommends that you vote FOR each proposal that is applicable to your Fund.

Proposals Regarding the Mergers

 

Q.

Why has each Fund’s Board recommended the Merger proposals?

 

A.

Nuveen Fund Advisors, LLC (“Nuveen Fund Advisors”), a subsidiary of Nuveen, LLC (“Nuveen”) and the Funds’ investment adviser, recommended the Merger proposals as part of an ongoing initiative to streamline Nuveen’s closed-end funds line-up and eliminate overlapping products. Each Fund’s Board considered its Fund’s Merger(s) and determined that the Merger(s) would be in the best interests of its Fund. Based on information provided by Nuveen Fund Advisors, each Target Fund’s Board believes that its Fund’s proposed Merger may benefit the common shareholders of its Fund in a number of ways, including, among other things:


   

Greater secondary market liquidity and improved secondary market trading for common shares as a result of the combined fund’s greater share volume, which may lead to narrower bid-ask spreads and smaller trade-to-trade price movements;

 

   

The potential for a narrower trading discount as a result of the larger size of the combined fund and the Acquiring Fund’s common shares trading at a discount that historically has been approximately equal to or lower than that of the Target Funds’ common shares;

 

   

Increased portfolio and leverage management flexibility due to the significantly larger asset base of the combined fund; and

 

   

Assuming that each Merger is completed, lower net operating expenses (excluding the cost of leverage), as certain fixed costs are spread over the combined fund’s larger asset base which may also help to achieve fund-level management fee breakpoints (please see “Proposal No. 1—A. Synopsis—Comparative Expense Information” for more information).

 

  

With respect to holders of preferred shares of each Target Fund, each Target Fund’s Board considered that, upon the closing of the applicable Merger, holders of any preferred shares outstanding immediately prior to the closing will receive, on a one-for-one basis, newly issued preferred shares of the Acquiring Fund having substantially similar terms to those of the preferred shares of the applicable Target Fund immediately prior to the closing of the Merger.

 

  

Based on information provided by Nuveen Fund Advisors, the Acquiring Fund’s Board considered that the Acquiring Fund also may benefit from economies of scale due to a larger asset base, greater secondary market liquidity and increased portfolio and leverage management flexibility. With respect to holders of preferred shares of the Acquiring Fund, the Acquiring Fund’s Board considered that the outstanding preferred shares of the Acquiring Fund and any preferred shares of the Acquiring Fund to be issued in the Mergers would have equal priority with each other as to payment of dividends and distributions of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

 

  

For these reasons, each Fund’s Board has determined that its Fund’s Merger(s) are in the best interest of its Fund and has approved such Merger(s).

 

Q.

How will holders of TFP Shares be affected by the Mergers?

 

A.

The Acquiring Fund has one series of TFP Shares outstanding, and these shares are expected to remain outstanding following the Mergers. Each Target Fund has one series of TFP Shares outstanding. Upon the closing of each Merger, holders of any outstanding TFP Shares of the applicable Target Fund will receive, on a one-for-one basis, newly issued TFP Shares of the Acquiring Fund having substantially similar terms to those of the TFP Shares of the Target Fund immediately prior to the closing of their Target Fund’s Merger. The outstanding preferred shares of the Acquiring Fund and any preferred shares to be issued by the Acquiring Fund in the Mergers will have equal priority with each other and with any other preferred shares that the Acquiring Fund may issue in the future as to the payment of dividends and the distribution of assets upon the dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

 

  

To the extent the Acquiring Fund issues any new preferred shares in the Mergers, holders of preferred shares of the combined fund will hold a smaller percentage of the outstanding preferred shares of the combined fund as compared to their percentage holdings of their respective Fund prior to the Mergers. The characteristics and features of the TFP Shares are described in more detail in the Proxy Statement. See “Proposal No. 1—C. Information About the Mergers—Description of TFP Shares to Be Issued by the

 

ii


  Acquiring Fund” beginning on page 36, and “Additional Information About the Acquiring Fund—Description of Outstanding Acquiring Fund Series A TFP Shares” beginning on page 100.

 

Q.

Will the terms of the TFP Shares to be issued by the Acquiring Fund as part of each Merger be substantially similar to the terms of the applicable Target Fund’s outstanding TFP Shares?

 

A.

Yes. The terms of each series of TFP Shares to be issued by the Acquiring Fund as part of each Merger will be substantially similar to the terms of the applicable Target Fund’s TFP Shares outstanding as of immediately prior to the closing of such Merger, including the same:

 

   

dividend rate and dividend determination method, including applicable modes, spread adjustments, and dividend amount adjustment provisions;

 

   

mandatory and optional redemption terms, including the same final term redemption date;

 

   

voting and consent rights; and

 

   

information delivery rights.

 

  

The TFP Shares to be issued by the Acquiring Fund in the Variable Rate Demand Mode to preferred shareholders of Short Duration Credit Opportunities will have, in particular:

 

   

short-term credit ratings (without regard to rating modifiers) from one or more rating agencies;

 

   

an adjustable dividend rate set weekly by a remarketing agent;

 

   

the right of beneficial owners to give notice on any business day to tender the securities for remarketing in seven days;

 

   

provisions for mandatory tender for remarketing upon the occurrence of certain events; and

 

   

the benefit of an unconditional demand feature pursuant to a purchase agreement provided by a liquidity provider.

 

Q.

Do the Funds have similar investment objectives, policies and risks?

 

A.

The Funds have similar investment objectives, policies and risks, but there are differences. Each Fund seeks to provide current income by investing primarily in senior loans. However, there are differences between the investment objectives, policies and risks of the Funds. The principal similarities and differences between the Funds’ investment objectives, policies and risks are as follows:

 

   

Each Fund has an investment objective that includes providing current income. Short Duration Credit Opportunities’ investment objective also includes providing the potential for capital appreciation.

 

   

Each Fund is a diversified, closed-end management investment company and currently employs leverage through borrowings and the issuance of preferred shares.

 

   

All Funds may invest in below investment grade securities without limit; Short Duration Credit Opportunities has a policy of investing at least 80% of its managed assets in such securities.

 

   

Senior Income’s investments in non-U.S. issuers are limited to U.S. dollar denominated senior loans, while the other Funds’ investments in non-U.S. issuers may include both U.S. dollar and non-U.S. dollar denominated securities or debt instruments and may also include issuers in emerging markets countries.

 

 

iii


   

Floating Rate Income Opportunity and the Acquiring Fund each may not invest more than 20% of their managed assets in securities from the same industry, while Senior Income may not invest more than 25% of its managed assets in borrowers from the same industry and Short Duration Credit Opportunities has no stated policy in this regard.

 

  

See “Proposal No. 1—A. Synopsis—Comparison of the Acquiring Fund and the Target Funds—Investment Objectives and Policies” and “Proposal No. 1—A. Synopsis—Comparative Risk Information” for more information.

 

Q.

Will holders of TFP Shares of the Funds have to pay any fees or expenses in connection with the Mergers?

 

A.

No. The Funds, and indirectly their common shareholders, will bear the costs of the Mergers, whether or not the Mergers are consummated. The allocation of the costs of the Mergers to each Fund is based on the expected benefits of the Mergers to that Fund’s common shareholders following the Mergers, including operating expense savings, improvements in the secondary trading market for common shares and the impact on common share net earnings. Preferred shareholders will not bear any costs of the Mergers.

 

  

The costs of the Mergers are estimated to be $2,070,000, but the actual costs may be higher or lower than that amount. These costs represent the estimated nonrecurring expenses of the Funds in carrying out their obligations under the Agreement and consist of management’s estimate of professional service fees, printing costs and mailing charges related to the proposed Mergers. Based on the expected benefits of the Mergers to each Fund, each of Senior Income, Floating Rate Income Opportunity, Short Duration Credit Opportunities and the Acquiring Fund is expected to be allocated $705,000, $420,000, $775,000 and $170,000, respectively, of the estimated expenses in connection with the Mergers (0.31%, 0.10%, 0.51% and 0.03%, respectively, of Senior Income’s, Floating Rate Income Opportunity’s, Short Duration Credit Opportunities’ and the Acquiring Fund’s average net assets applicable to common shares for the twelve months ended July 31, 2022). If one or more Mergers are not consummated for any reason, including because the requisite shareholder approvals are not obtained, each of the Funds, and common shareholders of each of the Funds indirectly, will still bear the costs of the Mergers.

 

Q.

Will the Mergers constitute a taxable event for holders of TFP Shares?

 

A.

No. As a non-waivable condition to closing, each Fund participating in a Merger will receive an opinion of counsel, subject to certain representations, assumptions and conditions, substantially to the effect that the proposed Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. It is expected that holders of a Target Fund’s TFP Shares who receive TFP Shares of the Acquiring Fund pursuant to a Merger will recognize no gain or loss for federal income tax purposes as a direct result of the Merger. Prior to the closing of its Merger, each Target Fund expects to declare a distribution to its common shareholders of all of its undistributed net investment income and net capital gains, if any. Each Fund reports distributions to common and preferred shareholders as consisting of particular types of income (such as ordinary income and capital gain) based on each class’s proportionate share of the total distributions paid by such Fund with respect to the year. As a result, such distribution could affect the character of the distributions received by holders of a Target Fund’s TFP Shares with respect to the year in which such distribution is made for federal income tax purposes. In addition, to the extent that portfolio securities of the Target Funds are sold prior to the closing of the Mergers, the Target Funds may recognize gains or losses, which may increase or decrease the net capital gains or net investment income to be distributed by a Target Fund. However, it is not currently expected that any significant portfolio sales will occur solely in connection with the Mergers (such sales are expected to be less than 5% of the managed assets of each Target Fund).

 

iv


Q.

What will happen if the required shareholder approvals are not obtained?

 

A.

The closing of each Merger is subject to the satisfaction or waiver of certain closing conditions, which include customary closing conditions. In order for a Merger to occur, all requisite shareholder approvals must be obtained at the applicable Fund’s shareholder meeting, and certain other consents, confirmations and/or waivers from various third parties, including the liquidity provider with respect to outstanding preferred shares of the Acquiring Fund and lenders under the Acquiring Fund’s credit facility, must also be obtained. Because the closing of each Merger is contingent upon the applicable Target Fund and the Acquiring Fund obtaining such shareholder approvals and satisfying (or obtaining the waiver of) other closing conditions, it is possible that a Merger will not occur even if shareholders of a Fund entitled to vote approve the Merger and a Fund satisfies all of its closing conditions if the other Fund does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions. If a Merger is not consummated, the Board of the Target Fund involved in that Merger may take such actions as it deems in the best interests of the Fund, including conducting additional solicitations with respect to the Merger proposals or continuing to operate the Target Fund as a standalone fund. The closing of one Merger is not contingent on the closing of any other Merger.

 

  

Each series of preferred shares was issued on a private placement basis to one or a small number of institutional shareholders. To the extent that one or more preferred shareholders of a Fund owns, holds or controls, individually or in the aggregate, all or a significant portion of a Fund’s outstanding preferred shares, the approval by a Fund’s preferred shareholders required for a Merger to occur may turn on the exercise of voting or consent rights by such particular shareholder(s) and its or their determination as to the favorable view of the Merger with respect to its or their interests. The Funds exercise no influence or control over the determinations of such shareholders with respect to the Mergers; there is no guarantee that such shareholders will vote to approve a Merger proposal.

 

Q.

What is the timetable for the Mergers?

 

A.

If the shareholder approvals and other conditions to closing are satisfied (or waived), the Mergers are expected to take effect on or about June 5, 2023, or such other date as the parties may agree.

 

Q.

How does each Board recommend that holders of TFP Shares vote on the Merger proposals?

 

A.

After careful consideration, each Board has determined that its Merger proposals are in the best interests of its Fund and recommends that you vote FOR such proposal(s).

General

 

Q.

Who do I call if I have questions?

 

A.

If you need any assistance, or have any questions regarding the proposals or how to vote your shares, please call Computershare Fund Services, the proxy solicitor hired by your Fund, at 1-888-916-1752 on 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.

 

Q.

How do I vote my shares?

 

A.

You may vote by attending the Meetings, or by mail, by telephone or over the Internet:

 

   

To vote at the Meetings, please follow the instructions below for attending the Meetings, which will be held virtually.

 

v


   

To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States.

 

   

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.

 

   

To vote over the Internet prior to the Meetings, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide.

 

Q.

How can I attend the Meetings?

 

A.

The Meetings will be completely virtual meetings of shareholders, which will be conducted exclusively by webcast. You are entitled to participate in the Meetings only if you were a shareholder of record as of the close of business on January 20, 2023, or if you hold a valid proxy for the Meetings. There will be no physical location for the Meetings.

 

  

You will be able to attend the Meetings online and submit your questions during the Meetings by visiting meetnow.global/MT2MA5A. You also will be able to vote your shares online by attending the Meetings by webcast. To participate in the Meetings, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box.

 

  

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.

 

  

The online meeting will begin promptly at 2:00 p.m., Central Time, on May 8, 2023. We encourage you to access the meeting prior to the start time leaving ample time for the check in. Please follow the access instructions as outlined herein.

 

Q.

How do I register to attend the Meetings virtually on the Internet?

 

A.

If your shares are registered in your name, you do not need to register to attend the Meetings virtually on the Internet. If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Meetings virtually on the Internet.

 

  

To register to attend the Meetings online by webcast you must submit proof of your proxy power (legal proxy) reflecting your Fund holdings along with your name and email address to Computershare Fund Services. You must contact the bank or broker who holds your shares to obtain your legal proxy. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, three business days prior to the meeting date.

 

  

You will receive a confirmation of your registration by email after we receive your registration materials.

 

  

Requests for registration should be directed to us by emailing an image of your legal proxy to shareholdermeetings@computershare.com.

 

Q.

Will anyone contact me?

 

A.

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 Mergers or the other proposal and to encourage you to vote your proxy.

 

vi


  

We recognize the inconvenience of the proxy solicitation process and would not impose on you if we did not believe that each matter being proposed was important. Once your vote has been registered with the proxy solicitor, your name will be removed from the solicitor’s follow-up contact list.

 

  

Your vote is very important. We encourage you as a shareholder to participate in your Fund’s governance by returning your vote as soon as possible. If enough shareholders fail to cast their votes, a Fund may not be able to hold its Meeting or the vote on the Merger or other proposal, and will be required to incur additional solicitation costs in order to obtain sufficient shareholder participation.

 

vii


MARCH 30, 2023

NUVEEN SENIOR INCOME FUND (NSL)

NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)

NUVEEN SHORT DURATION CREDIT OPPORTUNITIES FUND (JSD)

AND

NUVEEN FLOATING RATE INCOME FUND (JFR)

(EACH, A “FUND” AND TOGETHER, THE “FUNDS”)

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 8, 2023

To the Holders of Taxable Fund Preferred Shares:

Notice is hereby given that the Annual Meeting of Shareholders of Nuveen Senior Income Fund (“Senior Income” or a “Target Fund”), Nuveen Floating Rate Income Opportunity Fund (“Floating Rate Income Opportunity” or a “Target Fund”), Nuveen Short Duration Credit Opportunities Fund (“Short Duration Credit Opportunities” or a “Target Fund”) and Nuveen Floating Rate Income Fund (the “Acquiring Fund” and together with the Target Funds, the “Funds” or each individually, a “Fund”) (each, a “Meeting” and together, the “Meetings”) will be held on May 8, 2023 at 2:00 p.m., Central Time, for the following purposes:

 

  1.

Agreement and Plan of Merger. For each Merger, shareholders of the Target Fund and the Acquiring Fund voting as set forth below will vote on a proposal to approve an Agreement and Plan of Merger pursuant to which the Target Fund would be merged with and into NFRIF Merger Sub, LLC, a Massachusetts limited liability company and wholly-owned subsidiary of the Acquiring Fund, with the issued and outstanding common and preferred shares of the Target Fund being converted into newly issued common and preferred shares of the Acquiring Fund.

 

  (a)

The common and preferred shareholders of the Target Fund voting together as a single class to approve the Agreement and Plan of Merger.

 

  (b)

The preferred shareholders of each Fund voting separately to approve the Agreement and Plan of Merger.

 

  2.

Approval of Issuance of Additional Common Shares by the Acquiring Fund. In connection with the Agreement and Plan of Merger, the common and preferred shareholders of the Acquiring Fund voting together as a single class will vote to approve the issuance of additional common shares of the Acquiring Fund.

 

  3.

Election of Board Members of each Fund.

 

  (a)

Three (3) Class II Board members are to be elected by the common and preferred shareholders, voting together as a single class, of each Fund. Board members Lancellotta, Nelson, and Toth are nominees for election by each Fund’s common and preferred shareholders.

 

  (b)

One (1) Class I Board member is to be elected by the common and preferred shareholders, voting together as a single class, of each Fund. Board member Young is the nominee for election by each Fund’s common and preferred shareholders.

 

  (c)

Two (2) Board members are to be elected by the preferred shareholders of each Fund. Board members Hunter and Moschner are nominees for election by each Fund’s preferred shareholders.

 

1


To transact such other business as may properly come before the Meetings.

The Meetings will be held in a virtual meeting format only, which will be conducted online via live webcast. Shareholders may attend and vote at the virtual Meetings by following the instructions included in the Q&A and the Proxy Statement.

Only shareholders of record of each Fund as of the close of business on January 20, 2023 are entitled to notice of and to vote at the Meetings and any and all adjournments or postponements thereof. The common shareholders of each Fund are being solicited to vote on the proposals described above by means of a separate proxy statement.

All Fund shareholders entitled to vote at the Meetings are cordially invited to attend the virtual Meetings. 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, regardless of whether or not you plan to attend your virtual Meeting. You may vote by attending your Fund’s Meeting or by mail, by telephone or over the Internet.

 

   

To vote at the Meetings, please follow the instructions below for attending the Meetings, which will be held virtually.

 

   

To vote by mail, please mark, sign, date and mail the enclosed proxy card. No postage is required if mailed in the United States.

 

   

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.

 

   

To vote over the Internet prior to the Meetings, go to the Internet address provided on your proxy card and follow the instructions, using your proxy card as a guide.

You will be able to attend and participate in the Meetings online, vote your shares electronically and submit your questions during the Meetings by visiting: meetnow.global/MT2MA5A at the Meeting date and time described in the enclosed Proxy Statement. To participate in the Meetings, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box. There is no physical location for the Meetings.

If you hold your shares through an intermediary, you will need to register at least three business days prior to the Meetings by following the instructions in the enclosed Proxy Statement.

Mark L. Winget

Vice President and Secretary

The Nuveen Closed-End Funds

 

2


NUVEEN FUNDS

333 WEST WACKER DRIVE CHICAGO, ILLINOIS 60606

(800) 257-8787

PROXY STATEMENT

FOR HOLDERS OF TAXABLE FUND PREFERRED SHARES

OF

NUVEEN SENIOR INCOME FUND (NSL)

NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)

NUVEEN SHORT DURATION CREDIT OPPORTUNITIES FUND (JSD)

AND

NUVEEN FLOATING RATE INCOME FUND (JFR)

(EACH, A “FUND” AND TOGETHER, THE “FUNDS”)

MARCH 30, 2023

This Proxy Statement is being furnished by Nuveen Senior Income Fund (“Senior Income” or a “Target Fund”), Nuveen Floating Rate Income Opportunity Fund (“Floating Rate Income Opportunity” or a “Target Fund”), Nuveen Short Duration Credit Opportunities Fund (“Short Duration Credit Opportunities” or a “Target Fund”) and Nuveen Floating Rate Income Fund (the “Acquiring Fund” and together with the Target Funds, the “Funds” or each individually, a “Fund”), each a closed-end management investment company, to holders of Taxable Fund Preferred Shares (“TFP Shares”) in connection with the solicitation of proxies by each Fund’s Board of Trustees (each a “Board” and together, the “Boards” and each trustee a “Board Member”) for use at the Annual Meeting of Shareholders of each Fund to be held on May 8, 2023, at 2:00 p.m., Central Time, and at any and all adjournments or postponements thereof (each, a “Meeting” and together, the “Meetings”). At the Meetings, holders of TFP Shares will consider the proposals described below and discussed in greater detail elsewhere in this Proxy Statement. Each Fund is organized as a Massachusetts business trust. The enclosed proxy card and this Proxy Statement are first being sent to holders of TFP Shares on or about March 31, 2023. Shareholders of record of each Fund as of the close of business on January 20, 2023 are entitled to notice of and to vote at the Meetings and any and all adjournments or postponements thereof.

The Meetings will be held in a virtual meeting format only, which will be conducted online via live webcast. There is no physical location for the Meetings. If your shares are registered in your name, you will be able to attend and participate in the Meetings online, vote your shares electronically and submit your questions during the meeting by visiting: meetnow.global/MT2MA5A at the Meeting date and time. To participate in the Meetings, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box.

If your shares are held through an intermediary, you must register to participate in the virtual Meetings. To register to attend the Meetings online by webcast, you must submit proof of your proxy power (legal proxy) reflecting your Fund holdings along with your name and email address to Computershare. You must contact the bank or broker who holds your shares to obtain your legal proxy. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, three business days prior to the meeting date. You will receive a confirmation of your registration by email after we receive your registration materials. Requests for registration should be directed to us by emailing an image of your legal proxy to shareholdermeetings@computershare.com.

This Proxy Statement explains concisely what you should know before voting on the proposals described in this Proxy Statement or investing in the Acquiring Fund. Please read it carefully and keep it for future reference.

 

 

 


On the matters coming before each 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 properly executed and timely returned and no choice is specified, the shares will be voted FOR each proposal on which the shareholder is entitled to vote. Shareholders of a Fund who execute proxies or provide voting instructions by telephone or by Internet may revoke them at any time before a vote is taken on a proposal by filing with that Fund a written notice of revocation, by delivering a duly executed proxy bearing a later date or by attending and voting at the virtual Meeting. A prior proxy can also be revoked by voting again through the toll-free number or the Internet address listed in the proxy card. However, merely attending a virtual Meeting will not revoke any previously submitted proxy.

Holders of TFP Shares of the Target Funds and Acquiring Fund voting as set forth below will vote on the following proposals:

 

Proposal No. 1.    (For each Merger, Target Fund and Acquiring Fund) To approve an Agreement and Plan of Merger that provides for: (i) the merger of the Target Fund with and into NFRIF Merger Sub, LLC, a Massachusetts limited liability company and a wholly-owned subsidiary of the Acquiring Fund (the “Merger Sub”), and (ii) the conversion of the issued and outstanding common and preferred shares of beneficial interest of the Target Fund into newly issued common and preferred shares of beneficial interest, par value $0.01 per share, of the Acquiring Fund (the “Merger”).
Proposal No. 2.    (Acquiring Fund only) To approve the issuance of additional common shares in connection with the Agreement and Plan of Merger.
Proposal No. 3.    (For each Fund) To elect (i) three (3) Class II Board Members by common and preferred shareholders, voting together as a single class, (ii) one (1) Class I Board Member by common and preferred shareholders, voting together as a single class, and (iii) two (2) Board Members by preferred shareholders voting as a single class. Board Members Lancellotta, Nelson, and Toth are Class II nominees for election by each Fund’s common and preferred shareholders. Board Member Young is a Class I nominee for election by each Fund’s common and preferred shareholders.    Board Members Hunter and Moschner are nominees for election by each Fund’s preferred shareholders.

Shareholders of each Fund are being solicited to vote on the election of Board Members who have been nominated for election at the Meeting. The common shareholders of each Fund are being solicited to vote on the proposals described above by means of a separate proxy statement.

A quorum of shareholders is required to take action at each Meeting. A majority (more than 50%) of the shares entitled to vote at a Meeting, represented in person (through participation by means of remote or “virtual” communication) or by proxy, will constitute a quorum of shareholders at that Meeting, except that for the election of the two Board Member nominees by holders of preferred shares of each Fund, 33 1/3% of the preferred shares entitled to vote and represented in person (including participation by means of remote or “virtual” communication) or by proxy will constitute a quorum. Votes cast in person (through participation by means of remote or “virtual” communication) or by proxy at each Meeting will be tabulated by the inspectors of election appointed for that Meeting. The inspectors of election will determine whether or not a quorum is present at the Meeting. “Broker non-votes” are shares held by brokers or nominees, typically in “street name,” for which the broker or nominee properly submits a proxy but that are not voted because instructions have not been received from beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary authority to vote such shares on a particular matter. For purposes of holding a meeting, all properly submitted proxies, including abstentions and broker non-votes, if any, will be counted as present for purposes of determining whether a quorum is present.

 

ii


To be approved, the proposals must be approved by the Funds’ common and preferred shareholders present and entitled to vote at a Meeting as follows:

Merger Proposals

 

Proposal No. 1.    (Each Fund) With respect to the proposal regarding the Agreement and Plan of Merger:

 

   

With respect to each Target Fund, a majority (more than 50%) of the Target Fund’s outstanding common and preferred shares voting together as a single class, and a majority of the Target Fund’s preferred shareholders voting separately; and

 

   

With respect to the Acquiring Fund, a majority (more than 50%) of the Acquiring Fund’s preferred shareholders voting separately.

 

Proposal No. 2.    (Acquiring Fund only) With respect to the proposal regarding the issuance of additional common shares in connection with the Agreement and Plan of Merger, a majority (more than 50%) of the Acquiring Fund’s votes cast, with common and preferred shares voting together as a single class, provided a quorum is present.

Board Member Election Proposals

 

Proposal No. 3.    (Each Fund) With respect to the proposal regarding the election of Board Members:

 

   

With respect to the three (3) Class II Board Members, the affirmative vote of a plurality (the greatest number of affirmative votes) of the Fund’s common and preferred shares, voting together as a single class.

 

   

With respect to the one (1) Class I Board Member, the affirmative vote of a plurality (the greatest number of affirmative votes) of the Fund’s common and preferred shares, voting together as a single class.

 

   

With respect to the two (2) Board Members elected by preferred shareholders, the affirmative vote of a plurality (the greatest number of affirmative votes) of the Fund’s preferred shares, voting separately.

Broker-dealer firms holding shares of a Fund in “street name” for the benefit of their customers and clients are generally required to request the instructions of such customers and clients on how to vote their shares before the Fund’s Meeting. The Funds understand that, under the rules of the New York Stock Exchange (the “NYSE”), such broker-dealer firms may, for certain “routine” matters, vote without instructions from their customers and clients if no instructions have been received prior to the date specified in the broker-dealer firm’s request for voting instructions. Broker non-votes typically occur when both routine and non-routine proposals are being considered at a meeting. Proposal No. 1 and Proposal No. 2 with respect to the Mergers are considered “non-routine” matters for which, under the rules of the NYSE, uninstructed shares may not be voted by broker-dealers, but Proposal No. 3 with respect to the election of Board Members is considered a “routine” matter, and

 

iii


beneficial owners who do not provide proxy instructions or who do not return a proxy card may have their shares voted by broker-dealer firms on Proposal No. 3 in the discretion of such broker-dealer firms. As a result, there may be broker non-votes received with respect to Proposals No. 1 and No. 2 at a Fund’s Meeting.

Because the approval of Proposal No. 1 requires approval of at least 50% of outstanding shares and because approval of Proposal No. 2 requires approval of at least 50% of the shares voting on the matter, abstentions and broker non-votes, if any, will have the same effect as a vote against the proposal. Because the election of Board Members does not require that a minimum percentage of a Fund’s outstanding shares be voted in favor of any nominee, assuming the presence of a quorum, abstentions will have no effect on the outcome of the vote on Proposal No. 3.

Pursuant to Rule 452 of the NYSE, certain preferred shares held in “street name” as to which voting instructions have not been received from the beneficial owners or persons otherwise entitled to vote as of one business day before a Fund’s Meeting, or, if adjourned or postponed, one business day before the day to which the Meeting is adjourned or postponed, may be voted by the broker on a proposal in the same proportion as the votes cast by all holders of such preferred shares who have voted on a proposal. Rule 452 permits proportionate voting of Short Duration Credit Opportunities’ and the Acquiring Fund’s TFP Shares with respect to a particular item if, among other things, (1) a minimum of 30% of that series of preferred shares has been voted by the holders of such shares with respect to such item, (2) less than 10% of that series of preferred shares has been voted by the holders of such shares against such item and (3) for any proposal as to which holders of common shares and preferred shares vote as a single class, holders of common shares approve a proposal. For the purpose of meeting the 30% test, abstentions will be treated as shares “voted,” and for the purpose of meeting the 10% test, abstentions will not be treated as shares “voted” against the item. Rule 452 proportionate voting applies only to certain auction rate and remarketed preferred securities. Senior Income’s and Floating Rate Income Opportunity’s TFP Shares are not remarketed, thus the proportionate voting provisions of Rule 452 do not apply to these shares.

Broker-dealers who are not members of the NYSE may be subject to other rules, which may or may not permit them to vote your shares without instruction. We urge you to provide instructions to your broker or nominee so that your votes may be counted.

Those persons who were shareholders of record of TFP Shares of a Fund as of the close of business on January 20, 2023 and entitled to vote at the Fund’s Meeting will be entitled to one vote for each share held.

As of January 20, 2023 for each Fund, the shares of the Funds issued and outstanding are as follows:

 

Fund
(Ticker Symbol)

   Common
Shares(1)
   TFP
Shares(1)

Senior Income (NSL)

   38,611,472    40,000

Floating Rate Income Opportunity (JRO)

   40,541,218    75,000

Short Duration Credit Opportunities (JSD)

   10,085,648    70,000

Acquiring Fund (JFR)

   56,918,468    100,000

 

(1)

The common shares of each Target Fund and the Acquiring Fund are listed on the NYSE. Upon the closing of the Mergers, it is expected that the common shares of the Acquiring Fund will continue to be listed on the NYSE. None of the preferred shares are currently listed on any exchange.

 

iv


PROXY STATEMENT

MARCH 30, 2023

NUVEEN SENIOR INCOME FUND (NSL)

NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)

NUVEEN SHORT DURATION CREDIT OPPORTUNITIES FUND (JSD)

AND

NUVEEN FLOATING RATE INCOME FUND (JFR)

TABLE OF CONTENTS

 

PROPOSAL NO.  1—MERGER OF EACH TARGET FUND INTO THE ACQUIRING FUND

     1  

A.    SYNOPSIS

     1  
  

Background and Reasons for the Mergers

     1  
  

Material Federal Income Tax Consequences of the Mergers

     2  
  

Comparison of the Acquiring Fund and the Target Funds

     2  
  

Comparative Risk Information

     16  
  

Comparative Expense Information

     16  
  

Comparative Performance Information

     20  

B.    RISK FACTORS

     20  

C.    INFORMATION ABOUT THE MERGERS

     20  
  

General

     20  
  

Terms of the Mergers

     21  
  

Reasons for the Mergers

     24  
  

Capitalization

     27  
  

Expenses Associated with the Mergers

     31  
  

Dissenting Shareholders’ Rights of Appraisal

     32  
  

Material Federal Income Tax Consequences of the Mergers

     32  
  

Shareholder Approval

     34  
  

Description of Common Shares to Be Issued by the Acquiring Fund; Comparison to Target Funds

     35  
  

Affiliated Brokerage and Other Fees

     36  
  

Description of TFP Shares to Be Issued by the Acquiring Fund

     36  
  

Summary Description of Massachusetts Business Trusts

     39  

D.     ADDITIONAL INFORMATION ABOUT THE INVESTMENT POLICIES

     44  
  

Comparison of the Investment Objectives and Policies of the Acquiring Fund and the Target Funds

     44  
  

Portfolio Investments

     49  

PROPOSAL NO.  2— APPROVAL OF ISSUANCE OF ADDITIONAL COMMON SHARES OF ACQUIRING FUND

     74  

PROPOSAL NO. 3—THE ELECTION OF BOARD MEMBERS

     75  
  

Board Member Investments in the Funds

     82  
  

Compensation

     83  
  

Board Leadership Structure and Risk Oversight

     85  

The Officers

     93  
  

Audit Committee Report

     97  

 

v


  

Audit and Related Fees

     98  
  

Audit Committee Pre-Approval Policies and Procedures

     98  

Appointment of the Independent Registered Public Accounting Firm

     99  

ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND

     100  
  

Annual Expenses Excluding the Costs of Leverage

     100  
  

Certain Provisions in the Acquiring Fund’s Declaration of Trust and By-Laws

     100  
  

Repurchase of Common Shares; Conversion to Open-End Fund

     100  
  

Description of Outstanding Acquiring Fund Series A TFP Shares

     100  
  

Borrowings and Priority of Payment

     102  
  

Custodian, Transfer Agent, Dividend Disbursing Agent and Redemption and Paying Agent

     103  
  

Federal Income Tax Matters Associated with Investment in the Acquiring Fund

     103  
  

Experts

     106  

GENERAL INFORMATION

     107  
  

Outstanding Shares of the Acquiring Fund and the Target Funds

     107  
  

Shareholders of the Acquiring Fund and the Target Funds

     107  
  

Expenses of Proxy Solicitation

     109  
  

Shareholder Proposals

     109  
  

Shareholder Communications

     110  
  

Fiscal Year

     110  
  

Shareholder Report Delivery

     110  
  

Additional Information About the Solicitation

     110  
  

Other Information

     111  

APPENDIX A FORM OF AGREEMENT AND PLAN OF MERGER

  

APPENDIX B CONFIDENTIAL INFORMATION MEMORANDUM

  

APPENDIX C NUMBER OF BOARD AND COMMITTEE MEETINGS HELD DURING EACH FUND’S LAST FISCAL YEAR

  

 

vi


PROPOSAL NO. 1—MERGER OF EACH TARGET FUND INTO THE ACQUIRING FUND

 

A.

SYNOPSIS

The following is a summary of certain information contained elsewhere in this Proxy Statement with respect to the proposed Mergers. More complete information is contained elsewhere in this Proxy Statement and the appendices hereto. Shareholders should read the entire Proxy Statement carefully.

Background and Reasons for the Mergers

Nuveen Fund Advisors, LLC (“Nuveen Fund Advisors” or the “Adviser”), a subsidiary of Nuveen, LLC and the Funds’ investment adviser, recommended the Merger proposals as part of an ongoing initiative to streamline Nuveen’s closed-end fund line-up and eliminate overlapping products. Each Fund’s Board considered its Fund’s Merger(s) and determined that the Merger(s) would be in the best interests of its Fund. Based on information provided by Nuveen Fund Advisors, each Target Fund’s Board believes that its Fund’s proposed Merger may benefit the common shareholders of its Fund in a number of ways, including, among other things:

 

   

Greater secondary market liquidity and improved secondary market trading for common shares as a result of the combined fund’s greater share volume, which may lead to narrower bid-ask spreads and smaller trade-to-trade price movements;

 

   

The potential for a narrower trading discount as a result of the larger size of the combined fund and the Acquiring Fund’s common shares trading at a discount that historically has been approximately equal to or lower than that of the Target Funds’ common shares;

 

   

Increased portfolio and leverage management flexibility due to the significantly larger asset base of the combined fund; and

 

   

Assuming each Merger is completed, lower net operating expenses (excluding the cost of leverage), as certain fixed costs are spread over the combined fund’s larger asset base which may also help to achieve fund-level management fee breakpoints.

With respect to holders of preferred shares of each Target Fund, the Target Fund’s Board considered that, upon the closing of the applicable Merger, holders of any preferred shares outstanding immediately prior to the closing will receive, on a one-for-one basis, newly issued preferred shares of the Acquiring Fund having substantially similar terms to those of the preferred shares of the applicable Target Fund immediately prior to the closing of the Merger.

Based on information provided by Nuveen Fund Advisors, the Acquiring Fund’s Board considered that the Acquiring Fund may also benefit from economies of scale due to a larger asset base, greater secondary market liquidity and increased portfolio and leverage management flexibility. With respect to holders of preferred shares of the Acquiring Fund, the Acquiring Fund’s Board considered that the outstanding preferred shares of the Acquiring Fund and any preferred shares of the Acquiring Fund to be issued in the Mergers would have equal priority with each other as to payment of dividends and distributions of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

For these reasons, each Fund’s Board has determined that its Fund’s Merger(s) are in the best interest of its Fund and has approved such Merger(s).

The closing of each Merger is subject to the satisfaction or waiver of certain closing conditions, which include customary closing conditions. In order for a Merger to occur, all requisite shareholder approvals must be obtained at the applicable Fund’s shareholder meeting, and certain other consents, confirmations and/or waivers

 

1


from various third parties, including the liquidity provider with respect to outstanding preferred shares of the Acquiring Fund and lenders under the Acquiring Fund’s credit facility, must also be obtained. Because the closing of each Merger is contingent upon the applicable Target Fund and the Acquiring Fund obtaining such shareholder approvals and satisfying (or obtaining the waiver of) other closing conditions, it is possible that a Merger will not occur even if shareholders of a Fund entitled to vote approve the Merger and a Fund satisfies all of its closing conditions if the other Fund does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions. If a Merger is not consummated, the Board of the Target Fund involved in that Merger may take such actions as it deems in the best interests of the Fund, including conducting additional solicitations with respect to the Merger proposals or continuing to operate the Target Fund as a standalone fund. The closing of one Merger is not contingent on the closing of any other Merger.

The TFP Shares of each Fund were issued on a private placement basis to one or a small number of institutional shareholders. To the extent that one or more preferred shareholders of a Fund owns, holds or controls, individually or in the aggregate, all or a significant portion of a Fund’s outstanding preferred shares, the approval by a Fund’s preferred shareholders required for a Merger to occur may turn on the exercise of voting or consent rights by such particular shareholder(s) and its or their determination as to the favorable view of the Merger with respect to its or their interests. The Funds exercise no influence or control over the determinations of such shareholders with respect to the Mergers; there is no guarantee that such shareholders will vote to approve a Merger proposal. For a fuller discussion of the Boards’ considerations regarding the approval of the Mergers, see “C. Information About the Mergers—Reasons for the Mergers.”

Material Federal Income Tax Consequences of the Mergers

As a non-waivable condition to closing, each Fund participating in a Merger will receive an opinion of Vedder Price P.C., subject to certain representations, assumptions and conditions, substantially to the effect that the proposed Merger will qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, it is expected that none of the Funds will generally recognize gain or loss for federal income tax purposes as a direct result of the Mergers. It is also expected that holders of a Target Fund’s TFP Shares who receive TFP Shares of the Acquiring Fund pursuant to a Merger will recognize no gain or loss for federal income tax purposes as a direct result of the Merger. Prior to the closing of each Merger, the Target Fund expects to declare a distribution to common shareholders of all of its undistributed net investment income and net capital gains, if any. Each Target Fund reports distributions to common and preferred shareholders as consisting of particular types of income (such as ordinary income and capital gain) based on each class’s proportionate share of the total distributions paid by the Fund with respect to that year. As a result, such distribution could affect the character of the distributions received by holders of TFP Shares with respect to the year in which such distribution is made for federal income tax purposes.

The foregoing discussion and the tax opinion discussed above to be received by the Funds regarding certain aspects of the Mergers, including that the Mergers will qualify as reorganizations under Section 368(a) of the Code, will rely on the position that the TFP Shares of the Acquiring Fund to be issued in the Mergers, if any, will constitute equity of the Acquiring Fund for federal income tax purposes. See “C. Information About the Mergers—Material Federal Income Tax Consequences of the Mergers.”

Comparison of the Acquiring Fund and the Target Funds

General. The Acquiring Fund and the Target Funds are diversified, closed-end management investment companies organized as Massachusetts business trusts. Set forth below is certain comparative information about the organization, capitalization and operation of the Funds.

 

2


Organization

 

Fund

   Organization
Date
   State of Organization      Entity Type  

Senior Income

   August 13, 1999      Commonwealth of Massachusetts        Business Trust  

Floating Rate Income Opportunity

   April 27, 2004      Commonwealth of Massachusetts        Business Trust  

Short Duration Credit Opportunities

   January 3, 2011      Commonwealth of Massachusetts        Business Trust  

Acquiring Fund

   January 15, 2004      Commonwealth of Massachusetts        Business Trust  

 

Capitalization—Common Shares(1)

 

Fund

   Authorized
Shares
     Shares
Outstanding(1)
     Par Value
Per Share
     Preemptive,
Conversion
or Exchange
Rights
     Rights to
Cumulative
Voting
     Exchange
on which
Common
Shares are
Listed
 

Senior Income

     Unlimited        38,611,472      $ 0.01        None        None        NYSE  

Floating Rate Income Opportunity

     Unlimited        40,541,218      $ 0.01        None        None        NYSE  

Short Duration Credit Opportunities

     Unlimited        10,085,648      $ 0.01        None        None        NYSE  

Acquiring Fund

     Unlimited        56,918,468      $ 0.01        None        None        NYSE  

 

(1)

As of December 31, 2022.

As of December 31, 2022, the Funds had outstanding the following series of preferred shares, with the Acquiring Fund’s preferred shares expected to remain outstanding following the completion of the Mergers:

 

Preferred Shares

 

Fund

   Series of
Preferred Shares
   Shares
Outstanding
     Par Value
Per Share
     Liquidation
Preference Per
Share
 

Senior Income

   Series A TFP Shares      40,000      $ 0.01      $ 1,000  

Floating Rate Income Opportunity

   Series A TFP Shares      75,000      $ 0.01      $ 1,000  

Short Duration Credit Opportunities

   Series A TFP Shares      70,000      $ 0.01      $ 1,000  

Acquiring Fund

   Series A TFP Shares      100,000      $ 0.01      $ 1,000  

Each Fund’s preferred shares are entitled to one vote per share. The TFP Shares of the Acquiring Fund to be issued in connection with the Mergers, if any, will have equal priority with the Acquiring Fund’s other outstanding preferred shares as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund. In addition, the preferred shares of the Acquiring Fund, including any preferred shares of the Acquiring Fund to be issued in connection with the Mergers, will be senior in priority to the Acquiring Fund’s common shares as to payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund. Any preferred shares of the Acquiring Fund to be issued in connection with the Mergers will have rights and preferences, including liquidation preferences, that are substantially similar to those of the corresponding Target Fund preferred shares exchanged therefor. The number of preferred shares currently outstanding may change due to market or other conditions.

Each Fund also has indebtedness outstanding under a secured revolving credit facility agreement with bank lenders. Further information on the Acquiring Fund’s credit facility is provided under “Additional Information About the Acquiring Fund— Borrowings and Priority of Payment” below. The rights of a lender under an existing credit facility or any future credit facility, and any other creditors, to receive payments of interest on and repayments of principal of any borrowings are senior to the rights of holders of preferred shares and common shares of the applicable Fund with respect to the payment of dividends and other distributions, and upon liquidation. In addition, a Fund may not be permitted to declare or make payments of dividends and other

 

3


distributions with respect to preferred shares and common shares (other than a dividend in common shares of the Fund), purchase common shares or preferred shares or redeem preferred shares unless, at such time, the Fund meets certain asset coverage requirements and no event of default or other circumstance exists under its credit facility or with respect to any other borrowings that would limit or otherwise preclude such payments. A Fund also may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Borrowings and preferred shares have seniority over the common shares. Each credit facility is secured by substantially all of the assets of the applicable Fund. The credit facility of the Acquiring Fund is referred to herein as the “Credit Facility.” Each Fund also may source leverage through other methods, including reverse repurchase agreements. See “Additional Information About the Acquiring Fund—Borrowings and Priority of Payment” below.

Investment Objectives and Policies. The Funds have similar investment objectives, policies and risks, but there are differences.

Senior Income’s investment objective is to achieve a high level of current income, consistent with preservation of capital. Floating Rate Income Opportunity’s investment objective is to achieve a high level of current income. Short Duration Credit Opportunities’ investment objective is to provide current income and the potential for capital appreciation. The Acquiring Fund’s investment objective is to achieve a high level of current income.

Each Fund is a diversified, closed-end management investment company and currently employs leverage through the issuance of preferred shares and the use of borrowing.

The following summary compares the current principal investment policies and strategies of the Acquiring Fund to the current principal investment policies and strategies of each Target Fund as of the date of this Proxy Statement.

 

Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

Principal Investment Strategy:    Principal Investment Strategy:    Principal Investment Strategy:    Principal Investment Strategy:   
The Fund invests at least 80% of its Assets(1) in adjustable rate, U.S. dollar-denominated secured and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality.    The Fund invests at least 80% of its Assets(1) in adjustable rate loans, primarily secured senior loans.    The Fund invests at least 80% of Assets(1), at time of purchase, in loans or securities in the issuing company’s capital structure that are senior to its common equity, including but not limited to debt securities and preferred securities.    The Fund invests at least 80% of its Assets(1) in secured senior loans and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality.    All Funds invest primarily in senior loans with some policy differences with respect to the types and credit quality of such securities.

 

4


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

Credit Quality:    Credit Quality:    Credit Quality:    Credit Quality:   
No more than 30% of the Fund’s Managed Assets(2) may be invested in senior loans and other debt securities that are, at the time of investment, rated CCC+ or Caa or below or that are unrated but judged to be of comparable quality.    The Fund may invest its Managed Assets(2) without limit in adjustable rate loans and other debt instruments that are, at the time of investment, rated below investment grade or unrated but judged to be of comparable quality. However, the Fund may not invest, at the time of investment, more than 30% of its Managed Assets in securities rated below CCC+ or Caa by any NRSRO that rate such security or are unrated but judged to be of comparable quality, including securities in default.    The Fund invests at least 80% of its Managed Assets(2) in corporate debt instruments that are, at the time of investment, rated below investment grade or unrated but judged by the Fund’s sub-adviser to be of comparable quality. However, the Fund may not invest, at the time of investment, more than 30% of its Managed Assets in securities rated below CCC+ or Caa by any NRSRO that rate such security or are unrated but judged to be of comparable quality, including securities in default.    The Fund may invest its Managed Assets(2) without limit in senior loans and other debt instruments that are, at the time of investment, rated below investment grade or unrated but judged to be of comparable quality. However, no more than 30% of the Fund’s Managed Assets may be invested in senior loans and other debt securities that are, at the time of investment, rated CCC+ or Caa or below by S&P, Moody’s or Fitch or that are unrated but judged to be of comparable quality.    All Funds may invest without limit in below investment grade securities; Short Duration Credit Opportunities has a policy of investing at least 80% of Managed Assets in below investment grade securities.
Average Duration:    Average Duration:    Average Duration:    Average Duration:   
No stated policy.    The Fund maintains an average duration of one year or less for its portfolio investments in adjustable rate loans and other debt instruments.    The Fund will maintain an average duration of two years or less for its portfolio (including the effect of leverage, but after the effect of derivatives used to shorten duration).    The Fund maintains an average duration of one year or less for its portfolio investments in senior loans and other debt instruments.    Senior Income does not have a stated duration policy; the other Funds have stated policies of relatively short duration.

 

5


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

Adjustable Rate Instruments    Adjustable Rate Instruments    Adjustable Rate Instruments    Adjustable Rate Instruments   

The Fund will not invest more than 10% of its Managed Assets in senior loans with interest rates that adjust less often than semi-annually.

 

The Fund’s portfolio of senior loans will at all times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less.

  

With respect to the Fund’s senior loans included in the 80% policy, such instruments will at all times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less.

 

The Fund also may invest in adjustable rate unsecured senior loans and adjustable rate secured and unsecured subordinated loans.

   The Fund will invest at least 70% of its Managed Assets in adjustable rate corporate debt instruments, including senior secured loans, second lien loans, and other adjustable rate corporate debt instruments.    With respect to the Fund’s senior loans included in the 80% policy, such instruments will at times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less.    Similar; each Fund, other than Short Duration Credit Opportunities, maintains a dollar-weighted time until the next adjustment of 90 days or less with respect to such instruments.
Other Debt or Debt-Related Instruments:    Other Debt or Debt-Related Instruments:    Other Debt or Debt-Related Instruments:    Other Debt or Debt-Related Instruments:   
The Fund may invest up to 20% of its Managed Assets, in the aggregate, in (i) other income producing securities such as investment and non-investment grade corporate debt securities, of corporate or governmental issuers; and (ii) equity securities and warrants acquired in connection with the Fund’s investments in senior loans.    The Fund may invest up to 20% of its Managed Assets in the following adjustable or fixed rate securities: (i) other debt securities such as investment and non-investment grade debt securities, fixed rate senior loans or subordinated loans, convertible securities and structured notes; (ii) mortgage-related and other asset-backed securities (including collateralized loan obligations and    No stated policy.    The Fund may invest up to 20% of its Managed Assets in (i) other debt securities such as investment and non-investment grade debt securities, convertible securities and structured notes, (ii) mortgage-related and other asset-backed securities (including collateralized loan obligations and collateralized debt obligations), and (iii) debt securities and    The Funds may invest in certain other debt or debt-related instruments, including, with respect to Senior Income and Floating Rate Income Opportunity, warrants and equity securities.

 

6


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

  

collateralized debt obligations); and (iii) debt securities and other instruments issued by government, government-related or supranational issuers.

 

No more than 5% of the Fund’s Managed Assets may be invested in each of convertible securities, mortgage-related and other asset-backed securities, and sovereign debt securities.

 

The Fund also may receive warrants and equity securities issued by an issuer or its affiliates in connection with the Fund’s other investments in such entities.

     

other instruments issued by government, government-related or supranational issuers.

 

No more than 5% of the Fund’s Managed Assets may be invested in each of convertible securities, mortgage-related and other asset-backed securities, and sovereign debt securities. The Fund also may receive warrants and equity securities issued by a borrower or its affiliates in connection with the Fund’s other investments in such entities.

  
Non-U.S. Issuers:    Non-U.S. Issuers:    Non-U.S. Issuers:    Non-U.S. Issuers:   
The Fund may invest up to 20% of its Managed Assets in U.S. dollar denominated senior loans of borrowers that are organized or located in countries outside the United States.    The Fund may invest up to 20% of its Managed Assets in securities of non-U.S. issuers that are U.S. dollar or non-U.S. dollar denominated. The Fund’s Managed Assets to be invested in adjustable rate loans and other debt instruments of non-U.S. issuers may include debt    The Fund may invest up to 20% of its Managed Assets in debt instruments of non-U.S. issuers (which term includes borrowers) that are U.S. dollar or non-U.S. dollar denominated. The Fund’s investments in debt instruments of non-U.S.    The Fund may invest up to 20% of its Managed Assets in securities of non-U.S. issuers (which includes borrowers) that are U.S. dollar or non-U.S. dollar denominated. The Fund’s Managed Assets to be invested in senior loans and other debt    Senior Income’s investments in non-U.S. issuers are limited to U.S. dollar denominated senior loans, while the other Funds’ investments in non-U.S. issuers may include both U.S. dollar and non-U.S. dollar denominated securities or debt

 

7


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

   securities of issuers located, or conducting their business in, emerging markets countries.    issuers may include debt instruments located, or conducting their business, in emerging market countries.    instruments of non-U.S. issuers may include debt securities of issuers located, or conducting their business in, emerging markets countries.    instruments and may also include issuers in emerging markets countries.
Senior Loans Secured by Collateral:    Senior Loans Secured by Collateral:    Senior Loans Secured by Collateral:    Senior Loans Secured by Collateral:   
The Fund invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral. Such collateral consists of assets and/or stock of the borrower.    The Fund invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral. Such collateral consists of assets and/or stock of the borrower.    No stated policy.    The Fund invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral.    Short Duration Credit Opportunities does not have a stated collateral policy; the other Funds’ policies are substantially the same.
Senior Loans for which Fund is Agent/Co-Agent:    Senior Loans for which Fund is Agent/Co-Agent:    Senior Loans for which Fund is Agent/Co-Agent:    Senior Loans for which Fund is Agent/Co-Agent:   
The Fund invests no more than 20% of its total assets in senior loans in which it acts as an agent or co-agent, and the size of any such individual senior loan will not exceed 5% of the Fund’s total assets.    The Fund invests no more than 20% of its total assets in senior loans in which it acts as an agent or co-agent and the size of any such individual senior loan will not exceed 5% of the Fund’s total assets.    No stated policy.    No stated policy.    Senior Income and Floating Rate Income Opportunity have identical limits on this investment type; the other Funds have no stated policy.
Single Borrower Policy:    Single Borrower Policy:    Single Borrower Policy:    Single Borrower Policy:   
The Fund does not intend to invest more than 5% of its Managed Assets in senior loans or other securities of a single borrower.    No stated policy.    No stated policy.    No stated policy.    Senior Income has a stated limited in investments in a single borrower; the other Funds do not have a stated borrower limit.

 

8


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

Industry Allocation:    Industry Allocation:    Industry Allocation:    Industry Allocation:   
The Fund will not invest more than 25% of its Managed Assets in borrowers that conduct their principal businesses in the same industry.    The Fund may not invest more than 20% of its Managed Assets in securities from an industry which generally refers to the classification of companies in the same or similar lines of business.    No stated policy.    The Fund may not invest more than 20% of its Managed Assets in securities from an industry which generally refers to the classification of companies in the same or similar lines of business.    Senior Income, Floating Rate Income Opportunity and the Acquiring Fund have similar limits on industry exposure; Short Duration Credit Opportunities has no stated policy.
iBoxx Loan Total Return Swaps:    iBoxx Loan Total Return Swaps:    iBoxx Loan Total Return Swaps:    iBoxx Loan Total Return Swaps:   
The Fund may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps.(3)    The Fund may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps.(3)    No stated policy.    The Fund may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps.(3)    Senior Income, Floating Rate Income Opportunity and the Acquiring Fund have identical policies with respect to this investment type; Short Duration Credit Opportunities has no stated policy.
Leverage:    Leverage:    Leverage:    Leverage:   
The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including through borrowings, issuing preferred shares, the issuance of debt securities, and entering into reverse repurchase agreements (effectively a borrowing). In addition, the Fund    The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including through borrowings, issuing preferred shares, the issuance of debt securities, and entering into reverse repurchase agreements (effectively a borrowing). In    The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including through borrowings, issuing preferred shares and the issuance of debt securities. In addition, the    The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including through borrowings, issuing preferred shares, the issuance of debt securities, and entering into    No material differences.

 

9


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

may use derivatives that may have the economic effect of leverage, such as certain credit default swaps, total return swaps and bond futures. The amount and sources of leverage will vary depending on market conditions.    addition, the Fund may use derivatives that may have the economic effect of leverage, such as certain credit default swaps, total return swaps and bond futures. The amount and sources of leverage will vary depending on market conditions.    Fund may use derivatives that may have the economic effect of leverage, such as certain credit default swaps, total return swaps and bond futures. The amount and sources of leverage will vary depending on market conditions.    reverse repurchase agreements (effectively a borrowing). In addition, the Fund may use derivatives that may have the economic effect of leverage, such as certain credit default swaps, total return swaps and bond futures. The amount and sources of leverage will vary depending on market conditions.   
Illiquid Securities:    Illiquid Securities:    Illiquid Securities:    Illiquid Securities:   
The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and repurchase agreements with maturities in excess of seven days.    The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.    The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.    The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.    No material differences.

 

10


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

Other Investment Companies:    Other Investment Companies:    Other Investment Companies:    Other Investment Companies:   
The Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including exchange-traded funds (“ETFs”)) that invest primarily in the types in which the Fund may invest directly.    The Fund may also invest in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in the types in which the Fund may invest directly, to the extent permitted under the 1940 Act and the rules and regulations issued thereunder and exemptive orders issued by the SEC.    The Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in the types in which the Fund may invest directly.    The Fund may also invest in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in the types in which the Fund may invest directly, to the extent permitted under the 1940 Act and the rules and regulations issued thereunder and exemptive orders issued by the SEC.    Senior Income and Short Duration Credit Opportunities each may invest up to 10% of their Managed Assets in securities of other investment companies, while Floating Rate Income Opportunity and the Acquiring Fund each may invest in securities of other investment companies to the extent permitted under the 1940 Act and the rules and regulations issued thereunder and exemptive orders issued by the SEC.
Temporary Defensive Periods:    Temporary Defensive Periods:    Temporary Defensive Periods:    Temporary Defensive Periods:   
During temporary defensive periods (e.g., times when, in the Fund’s investment adviser’s and/or the Fund’s sub-adviser’s opinion, temporary imbalances of supply and demand or other temporary dislocations in the senior loan market adversely affect the price at which senior loans are available), the Fund may invest    During temporary defensive periods (e.g., times when, in the Fund’s investment adviser’s and/or the Fund’s sub-adviser’s opinion, temporary imbalances of supply and demand or other temporary dislocations in the senior loan market adversely affect the price at which    During temporary defensive periods (e.g., times when, in the Fund’s investment adviser’s and/or the Fund’s sub-adviser’s opinion, temporary imbalances of supply and demand or other temporary dislocations in    During temporary defensive periods (e.g., times when, in the Fund’s investment adviser’s and/or the Fund’s sub-adviser’s opinion, temporary imbalances of supply and demand or other temporary dislocations in    No material differences.

 

11


Senior Income

  

Floating Rate

Income

Opportunity

  

Short Duration
Credit
Opportunities

  

Acquiring Fund

  

Differences

up to 100% of its assets in high quality, short-term securities, and in short-, intermediate-, or long-term U.S. Treasury securities.    senior loans are available), the Fund may invest up to 100% of its assets in high quality, short-term securities, and in short-, intermediate-, or long-term U.S. Treasury securities.    the senior loan market adversely affect the price at which senior loans are available), the Fund may invest up to 100% of its assets in high quality, short-term securities, and in short-, intermediate-, or long-term U.S. Treasury securities.    the senior loan market adversely affect the price at which senior loans are available), the Fund may invest up to 100% of its assets in high quality, short-term securities, and in short-, intermediate-, or long-term U.S. Treasury securities.   

 

(1)

Each Fund defines “Assets” as the net assets of the Fund plus the amount of any borrowings for investment purposes.

(2)

Each Fund defines “Managed Assets” as the total assets of the Fund, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the express purpose of creating leverage). Total assets for this purpose shall include assets attributable to the Fund’s use of leverage (whether or not those assets are reflected in the Fund’s financial statements for purposes of generally accepted accounting principles), and derivatives will be valued at their market value.

(3)

iBoxx Loan Total Return Swaps are standardized total return swaps on loan indices that are designed to provide exposure to the senior loan market.

Leverage. Each Fund currently employs leverage through the issuance of TFP Shares and secured bank borrowings (subject to investment restrictions). Each Fund also may source leverage through other methods, including reverse repurchase agreements. In addition, each Fund may use derivatives and other portfolio instruments that have the economic effect of leverage. Certain important ratios related to each Fund’s use of leverage for the last three fiscal years for which published financial statements are available are set forth below:

 

Senior Income

   2022     2021     2020  

Asset Coverage Ratio(1)

     260.29     275.14     279.27

Regulatory Leverage Ratio(2)

     38.42     36.35     35.81

Effective Leverage Ratio(3)

     38.42     36.35     35.81

 

Floating Rate Income Opportunity

   2022     2021     2020  

Asset Coverage Ratio(1)

     259.20     273.82     279.80

Regulatory Leverage Ratio(2)

     38.58     36.52     35.74

Effective Leverage Ratio(3)

     38.58     36.52     35.74

 

Short Duration Credit Opportunities

   2022     2021     2020  

Asset Coverage Ratio(1)

     260.06     274.85     279.59

Regulatory Leverage Ratio(2)

     38.45     36.38     35.77

Effective Leverage Ratio(3)

     38.45     36.38     35.77

 

Acquiring Fund

   2022     2021     2020  

Asset Coverage Ratio(1)

     260.29     274.19     279.42

Regulatory Leverage Ratio(2)

     38.42     36.47     35.79

Effective Leverage Ratio(3)

     38.42     36.47     35.79

 

(1)

A Fund’s asset coverage ratio is defined under the 1940 Act as the ratio that the value of the total assets of the Fund, less all liabilities and indebtedness not represented by preferred shares or senior securities representing indebtedness, bears to the aggregate amount of preferred shares and senior securities representing indebtedness issued by the Fund.

 

12


(2)

Regulatory leverage consists of preferred shares issued by and borrowings of a Fund. Both of these are part of a Fund’s capital structure. A Fund, however, also may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings are excluded from the calculation of a Fund’s regulatory leverage and effective leverage ratios. Regulatory leverage is subject to asset coverage limits set forth in the 1940 Act.

(3)

Effective leverage is a Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in a Fund’s portfolio that increase the Fund’s investment exposure.

Board Members and Officers. The Acquiring Fund and the Target Funds have the same Board Members and officers. The management of each Fund, including general oversight of the duties performed by the Fund’s investment adviser under an investment management agreement between the investment adviser and such Fund (each, an “Investment Management Agreement”), is the responsibility of its Board. Each Fund currently has ten (10) Board Members, each of whom is not considered an “interested person,” as defined in the 1940 Act, of the Fund.

Pursuant to each Fund’s by-laws, the Board of the Fund is divided into three classes (Class I, Class II and Class III) with staggered multi-year terms, such that typically only the members of one of the three classes stand for election each year; provided, however, that holders of preferred shares are entitled as a class to elect two Board Members at all times. The staggered board structure could delay for up to two years the election of a majority of the Board of each Fund. To the extent that one or more preferred shareholders owns, holds or controls, individually or in aggregate, all or a significant portion of a series of a Fund’s outstanding preferred shares, a few holders could exert influence on the selection of the Board as a result of the requirement that holders of preferred shares be entitled to elect two Board Members at all times. The Acquiring Fund’s board structure will remain in place following the closing of the Mergers.

Investment Adviser. Nuveen Fund Advisors, LLC (previously defined as “Nuveen Fund Advisors” or the “Adviser”) is the investment adviser to each Fund and is responsible for overseeing each Fund’s overall investment strategy, including the use of leverage, and its implementation. Nuveen Fund Advisors also is responsible for the ongoing monitoring of any sub-adviser to the Funds, managing each Fund’s business affairs and providing certain clerical, bookkeeping and other administrative services to the Funds. Nuveen Fund Advisors is located at 333 West Wacker Drive, Chicago, Illinois 60606.

Nuveen Fund Advisors, a registered investment adviser, is a subsidiary of Nuveen, LLC (“Nuveen”), the investment management arm of Teachers Insurance and Annuity Association of America (“TIAA”). TIAA is a life insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching and is the companion organization of College Retirement Equities Fund. As of December 31, 2022, Nuveen managed approximately $1.1 trillion in assets, of which approximately $147.7 billion was managed by Nuveen Fund Advisors.

Unless earlier terminated as described below, each Fund’s Investment Management Agreement with Nuveen Fund Advisors will remain in effect until August 1, 2023. Each Investment Management Agreement continues in effect from year to year so long as such continuation is approved at least annually by: (1) the Board or the vote of a majority of the outstanding voting securities of the Fund; and (2) a majority of the Board Members who are not interested persons of any party to the Investment Management Agreement, cast in person at a meeting called for the purpose of voting on such approval. Each Investment Management Agreement may be terminated at any time, without penalty, by either the Fund or Nuveen Fund Advisors upon 60 days’ written notice and is automatically terminated in the event of its assignment, as defined in the 1940 Act.

Pursuant to each Investment Management Agreement, each Fund has agreed to pay an annual management fee for the overall advisory and administrative services and general office facilities provided by Nuveen Fund Advisors. Each Fund’s management fee consists of two components—a complex-level fee, based on the aggregate amount of all eligible fund assets of Nuveen-branded closed- and open-end registered investment companies organized in the United States, and a specific fund-level fee, based only on the amount of assets of such Fund. This 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.

 

13


For Senior Income’s, Floating Rate Income Opportunity’s, Short Duration Credit Opportunities’ and the Acquiring Fund’s fiscal year ended July 31, 2022, the effective management fee rates, expressed as a percentage of average total daily managed assets (including assets attributable to leverage), were 0.80%, 0.80%, 0.80% and 0.79%, respectively.

The annual fund-level fee rate for each Fund, payable monthly, is calculated according to the following schedules:

Current Fund-Level Fee Schedules for the Funds

 

All Funds

 

Average Total Daily Managed Assets*

   Annual Fee
Rate
 

For the first $500 million

     0.6500

For the next $500 million

     0.6250

For the next $500 million

     0.6000

For the next $500 million

     0.5750

For managed assets over $2 billion

     0.5500

 

*

For this purpose, managed assets means the total assets of the Fund, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the express purpose of creating leverage). Total assets for this purpose shall include assets attributable to the Fund’s use of effective leverage (whether or not those assets are reflected in the Fund’s financial statements for purposes of U.S. generally accepted accounting principles).

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 Board Members (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, listing fees and taxes, if any.

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 eligible assets for all Nuveen-branded closed- and open-end registered investment companies organized in the United States, as stated in the table below. As of December 31, 2022, the complex-level fee rate for each Fund was 0.1590%.

The annual complex-level fee for each Fund, payable monthly, is calculated by multiplying the current complex-wide fee rate, determined according to the following schedule, by a Fund’s daily managed assets:

Complex-Level Fee Rates

 

Complex-Level Managed Asset Breakpoint  Level*

   Effective Rate at
Breakpoint Level
 

$55 billion

     0.2000

$56 billion

     0.1996

$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

 

14


Complex-Level Managed Asset Breakpoint  Level*

   Effective Rate at
Breakpoint Level
 

$250 billion

     0.1469

$300 billion

     0.1445

 

*

For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, 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 trust’s 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 open-end and closed-end funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011, but do include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year.

Sub-Adviser. Nuveen Fund Advisors has selected its wholly owned subsidiary, Nuveen Asset Management, LLC (“Nuveen Asset Management” or the “Sub-Adviser”), located at 333 West Wacker Drive, Chicago, Illinois 60606, to serve as the sub-adviser to each of the Funds pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Nuveen Asset Management (the “Sub-Advisory Agreement”). Nuveen Asset Management, a registered investment adviser, oversees day-to-day operations and manages the investment of the Funds’ assets on a discretionary basis, subject to the supervision of Nuveen Fund Advisors.

For the services provided pursuant to Senior Income’s, Floating Rate Income Opportunity’s, Short Duration Credit Opportunities’ and the Acquiring Fund’s Sub-Advisory Agreements, Nuveen Fund Advisors pays Nuveen Asset Management a portfolio management fee, payable monthly, calculated as set forth below. The sub-advisory fee is calculated as a percentage of the net management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Funds to Nuveen Fund Advisors.

 

Average Daily Managed Assets

   Percentage of
Net Management
Fee
 

Up to $125 million

     50.0

$125 million to $150 million

     47.5

$150 million to $175 million

     45.0

$175 million to $200 million

     42.5

$200 million and over

     40.0

Nuveen Fund Advisors and the Sub-Adviser retain the right to reallocate investment advisory responsibilities and fees between themselves in the future.

A discussion of the basis for the Board’s most recent approval of the current Investment Management Agreement and Sub-Advisory Agreement for Senior Income, Floating Rate Income Opportunity, Short Duration Credit Opportunities and the Acquiring Fund is included in the Funds’ Annual Report for the fiscal year ended July 31, 2022.

Portfolio Management. Subject to the supervision of Nuveen Fund Advisors, Nuveen Asset Management is responsible for execution of specific investment strategies and day-to-day investment operations. Nuveen Asset Management manages the portfolio of each Fund using a team of analysts and a portfolio manager that focuses on a specific group of funds. Scott Caraher and Kevin Lorenz, CFA are portfolio managers of the Target Funds and the Acquiring Fund. Mr. Caraher assumed portfolio management responsibility for Senior Income, Floating Rate Income Opportunity and the Acquiring Fund in 2009 and Short Duration Credit Opportunities in 2011. Mr. Lorenz assumed portfolio management responsibility for each Fund in 2020. Scott Caraher and Kevin Lorenz, CFA, will manage the combined fund upon completion of the Mergers.

 

15


Scott Caraher is Head of Senior Loans and responsible for retail and institutional bank loan-focused portfolio management and co-PM on the firm’s Long-Short Credit Strategy. When Scott joined Nuveen affiliate Symphony Asset Management in 2002, he was a gaming and industrials analyst providing long and short credit ideas to the investment team up and down the capital structure. Scott began trading loans for the platform in 2003 and in 2005 was named an associate portfolio manager on the firm’s loan strategies. He became the lead portfolio manager on the firm’s loan strategies in 2008. Prior to joining the firm, Scott was an Investment Banking Analyst in the industrial group at Deutsche Banc Alex Brown in New York.

Kevin Lorenz, CFA, is head of high yield and responsible for retail and institutional high yield bond focused portfolio management. He has served in a variety of roles since joining the firm in 1987. He has been investing in high yield over his entire career and has focused exclusively on high yield since 1995. Kevin is also a member of the global fixed income investment committee, which discusses and debates investment policy for all global fixed income products.

Comparative Risk Information

Risk is inherent in all investing. Investing in the Funds involves risk, including the risk that you may receive little or no return on your investment or that you may even lose part or all of your investment. An investment in the Funds is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before you invest in a Fund, you should consider its principal risks.

Because each Fund invests primarily in senior loans, the principal risks of an investment in each Fund are similar. However, there are differences between the Funds’ investment policies that may affect their comparative risk profiles. Short Duration Credit Opportunities invests at least 80% of its managed assets in below investment grade debt instruments, while Senior Income, Floating Rate Income Opportunity and the Acquiring Fund are not required to invest in below investment grade debt instruments. Senior Income’s investments in non-U.S. issuers are limited to U.S. dollar denominated senior loans, while the other Funds’ investments in non-U.S. issuers may include both U.S. dollar and non-U.S. dollar denominated securities or debt instruments and may also include issuers in emerging markets countries. Floating Rate Income Opportunity and the Acquiring Fund each may not invest more than 20% of their managed assets in securities from the same industry, while Senior Income may not invest more than 25% of its managed assets in borrowers from the same industry and Short Duration Credit Opportunities has no stated policy in this regard.

The principal risks of investing in the Acquiring Fund are described in more detail under the caption “Risk Factors” in the Confidential Information Memorandum accompanying this Proxy Statement as Appendix B (the “Memorandum”).

Comparative Expense Information

The purpose of the Comparative Fee Table is to assist you in understanding the various costs and expenses of investing in common shares of the Funds. The information in the table reflects the fees and expenses of Senior Income, Floating Rate Income Opportunity, Short Duration Credit Opportunities and the Acquiring Fund for the fiscal year ended July 31, 2022 and the pro forma fees and expenses of the combined fund following the Mergers for the twelve months ended July 31, 2022 assuming all Mergers were completed on July 31, 2022 and for each Merger separately.

The assets of the Funds will vary based on market conditions and other factors and may vary significantly during volatile market conditions. 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 rates of return may be greater or less than the hypothetical 5% annual return shown in the Example.

 

16


1. Comparative Fee Table(1)—Mergers of Senior Income, Floating Rate Income Opportunity and Short Duration Credit Opportunities

 

     Senior
Income
    Floating
Rate Income
Opportunity
    Short
Duration
Credit
Opportunities
    Acquiring
Fund
    Combined
Fund Pro
Forma(2)
 

Annual Expenses (as a percentage of net assets attributable to common shares)

          

Management Fees

     1.27     1.27     1.27     1.26     1.21

Fees on Preferred Shares and Interest and Related Expenses from Borrowings(3)

     0.82     0.80     0.91     0.80     0.81

Other Expenses

     0.18 %(4)      0.12 %(4)      0.21 %(4)      0.11 %(4)      0.11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Annual Expenses

     2.27     2.19     2.39     2.17     2.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The table presented above estimates what the annual expenses of the combined fund following the Mergers would be stated as a percentage of the combined fund’s net assets attributable to common shares including the costs of leverage for the twelve month annual period ended July 31, 2022. Please see “Additional Information About the Acquiring Fund—Annual Expenses Excluding the Costs of Leverage” at page 100 for additional information.

(2)

Assumes the issuance of preferred shares in the amounts set forth in the capitalization table and assumes borrowings remain at the percentage level in place during the twelve months ended July 31, 2022. Such amounts may change prior to the closing date. Please see “C. Information About the Mergers—Capitalization” at page 27.

(3)

Fees on preferred shares assume annual dividends paid and amortization of offering costs for TFP Shares, where applicable, and annual liquidity and remarketing fees for TFP Shares of Short Duration Credit Opportunities and the Acquiring Fund. The Funds’ use of leverage will increase the amount of management fees paid to the Adviser and the Sub-Adviser.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal reporting period.

Example: The following examples illustrate the expenses that a common 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. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Senior Income

   $ 23      $ 71      $ 122      $ 261  

Floating Rate Income Opportunity

   $ 22      $ 69      $ 117      $ 252  

Short Duration Credit Opportunities

   $ 24      $ 75      $ 128      $ 273  

Acquiring Fund

   $ 22      $ 68      $ 116      $ 250  

Combined Fund Pro Forma

   $ 22      $ 67      $ 114      $ 246  

2. Comparative Fee Table(1)—Merger of Senior Income Only

 

     Senior
Income
    Acquiring
Fund
    Combined
Fund Pro
Forma(2)
 

Annual Expenses (as a percentage of net assets attributable to common shares)

      

Management Fees

     1.27     1.26     1.24

Fees on Preferred Shares and Interest and Related Expenses from Borrowings(3)

     0.82     0.80     0.80

Other Expenses

     0.18 %(4)      0.11 %(4)      0.11
  

 

 

   

 

 

   

 

 

 

Total Annual Expenses

     2.27     2.17     2.15
  

 

 

   

 

 

   

 

 

 

 

(1)

The table presented above estimates what the annual expenses of the combined fund following the Merger would be stated as a percentage of the combined fund’s net assets attributable to common shares including the costs of leverage for the twelve month annual

 

17


  period ended July 31, 2022. Please see “Additional Information About the Acquiring Fund—Annual Expenses Excluding the Costs of Leverage” at page 100 for additional information.
(2)

Assumes the issuance of preferred shares in the amounts set forth in the capitalization table and assumes borrowings remain at the percentage level in place during the twelve months ended July 31, 2022. Such amounts may change prior to the closing date. Please see “C. Information About the Mergers—Capitalization” at page 27.

(3)

Fees on preferred shares assume annual dividends paid and amortization of offering costs for TFP Shares, where applicable, and annual liquidity and remarketing fees for TFP Shares of the Acquiring Fund. The TFP Shares of Senior Income, which currently are in a Variable Rate Mode, currently do not incur liquidity or remarketing fees. The Funds’ use of leverage will increase the amount of management fees paid to the Adviser and the Sub-Adviser.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal reporting period.

Example: The following examples illustrate the expenses that a common 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. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Senior Income

   $ 23      $ 71      $ 122      $ 261  

Acquiring Fund

   $ 22      $ 68      $ 116      $ 250  

Combined Fund Pro Forma

   $ 22      $ 67      $ 115      $ 248  

3. Comparative Fee Table(1)—Merger of Floating Rate Income Opportunity Only

 

     Floating Rate
Income
Opportunity
    Acquiring
Fund
    Combined
Fund Pro
Forma(2)
 

Annual Expenses (as a percentage of net assets attributable to common shares)

      

Management Fees

     1.27     1.26     1.23

Fees on Preferred Shares and Interest and Related Expenses from Borrowings(3)

     0.80     0.80     0.80

Other Expenses

     0.12 %(4)      0.11 %(4)      0.10
  

 

 

   

 

 

   

 

 

 

Total Annual Expenses

     2.19     2.17     2.13
  

 

 

   

 

 

   

 

 

 

 

(1)

The table presented above estimates what the annual expenses of the combined fund following the Merger would be stated as a percentage of the combined fund’s net assets attributable to common shares including the costs of leverage for the twelve month annual period ended July 31, 2022. Please see “Additional Information About the Acquiring Fund—Annual Expenses Excluding the Costs of Leverage” at page 100 for additional information.

(2)

Assumes the issuance of preferred shares in the amounts set forth in the capitalization table and assumes borrowings remain at the percentage level in place during the twelve months ended July 31, 2022. Such amounts may change prior to the closing date. Please see “C. Information About the Mergers—Capitalization” at page 27.

(3)

Fees on preferred shares assume annual dividends paid and amortization of offering costs for TFP Shares, where applicable, and annual liquidity and remarketing fees for TFP Shares of the Acquiring Fund. The TFP Shares of Floating Rate Income Opportunity, which currently are in a Variable Rate Mode, currently do not incur liquidity or remarketing fees. The Funds’ use of leverage will increase the amount of management fees paid to the Adviser and the Sub-Adviser.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal reporting period.

 

18


Example: The following examples illustrate the expenses that a common 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. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Floating Rate Income Opportunity

   $ 22      $ 69      $ 117      $ 252  

Acquiring Fund

   $ 22      $ 68      $ 116      $ 250  

Combined Fund Pro Forma

   $ 22      $ 67      $ 114      $ 246  

4. Comparative Fee Table(1)—Merger of Short Duration Credit Opportunities Only

 

     Short
Duration
Credit
Opportunities
    Acquiring
Fund
    Combined
Fund Pro
Forma(2)
 

Annual Expenses (as a percentage of net assets attributable to common shares)

      

Management Fees

     1.27     1.26     1.25

Fees on Preferred Shares and Interest and Related Expenses from Borrowings(3)

     0.91     0.80     0.82

Other Expenses

     0.21 %(4)      0.11 %(4)      0.11
  

 

 

   

 

 

   

 

 

 

Total Annual Expenses

     2.39     2.17     2.18
  

 

 

   

 

 

   

 

 

 

 

(1)

The table presented above estimates what the annual expenses of the combined fund following the Merger would be stated as a percentage of the combined fund’s net assets attributable to common shares including the costs of leverage for the twelve month annual period ended July 31, 2022. Please see “Additional Information About the Acquiring Fund—Annual Expenses Excluding the Costs of Leverage” at page 100 for additional information.

(2)

Assumes the issuance of preferred shares in the amounts set forth in the capitalization table and assumes borrowings remain at the percentage level in place during the twelve months ended July 31, 2022. Such amounts may change prior to the closing date. Please see “C. Information About the Mergers—Capitalization” at page 27.

(3)

Fees on preferred shares assume annual dividends paid and amortization of offering costs for TFP Shares, where applicable, and annual liquidity and remarketing fees for TFP Shares of Short Duration Credit Opportunities and the Acquiring Fund. The Funds’ use of leverage will increase the amount of management fees paid to the Adviser and the Sub-Adviser.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal reporting period.

Example: The following examples illustrate the expenses that a common 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. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Short Duration Credit Opportunities

   $ 24      $ 75      $ 128      $ 273  

Acquiring Fund

   $ 22      $ 68      $ 116      $ 250  

Combined Fund Pro Forma

   $ 22      $ 68      $ 117      $ 251  

 

19


Comparative Performance Information

Comparative total return performance for the Funds for periods ended July 31, 2022.

 

     Average Annual Total
Return
on Net Asset Value
    Average Annual Total
Return
on Market Value
 
     One
Year
    Five
Years
    Ten
Years
    One
Year
    Five
Years
    Ten
Years
 

Senior Income

     -3.03     2.05     4.19     -5.84     1.23     3.42

Floating Rate Income Opportunity

     -2.82     2.17     4.52     -3.76     1.05     4.03

Short Duration Credit Opportunities

     -3.52     1.82     3.94     -5.50     0.78     3.43

Acquiring Fund

     -2.84     2.18     4.37     -2.59     1.44     4.31

Average Annual Total Return on Net Asset Value is the combination of changes in common share 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 Fund’s market price (and not its net asset value), and therefore may be different from the price used in the calculation. Average Annual 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.

 

B.

RISK FACTORS

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 Acquiring Fund will achieve its investment objectives. Investors should consider their long-term investment goals and financial needs when making an investment decision with respect to shares of the Acquiring Fund. 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 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.

The principal risks of investing in TFP Shares of the Acquiring Fund are described under the caption “Risk Factors” in the Memorandum accompanying this Proxy Statement as Appendix B. An investment in TFP Shares of each Target Fund is also generally subject to these principal risks. The risks and special considerations discussed in the Memorandum should be considered by holders of TFP Shares of each Target Fund in their evaluation of the applicable Merger.

 

C.

INFORMATION ABOUT THE MERGERS

General

Nuveen Fund Advisors, a subsidiary of Nuveen and the Funds’ investment adviser, recommended the Merger proposals as part of an ongoing initiative to streamline Nuveen’s closed-end fund line-up and eliminate overlapping products. Each Fund’s Board considered its Fund’s Merger(s) and determined that the Merger(s) would be in the best interests of its Fund. Based on information provided by Nuveen Fund Advisors, each Target Fund’s Board believes that its Fund’s proposed Merger may benefit the common shareholders of its Fund in a number of ways, including, among other things:

 

20


   

Greater secondary market liquidity and improved secondary market trading for common shares as a result of the combined fund’s greater share volume, which may lead to narrower bid-ask spreads and smaller trade-to-trade price movements;

 

   

The potential for a narrower trading discount as a result of the larger size of the combined fund and the Acquiring Fund’s common shares trading at a discount that historically has been approximately equal to or lower than that of the Target Funds’ common shares;

 

   

Increased portfolio and leverage management flexibility due to the significantly larger asset base of the combined fund; and

 

   

Assuming each Merger is completed, lower net operating expenses (excluding the cost of leverage), as certain fixed costs are spread over the combined fund’s larger asset base which may also help to achieve fund-level management fee breakpoints.

With respect to holders of preferred shares of each Target Fund, the Target Fund’s Board considered that, upon the closing of the applicable Merger, holders of any preferred shares outstanding immediately prior to the closing will receive, on a one-for-one basis, newly issued preferred shares of the Acquiring Fund having substantially similar terms as the preferred shares of the applicable Target Fund immediately prior to the closing of the Merger.

Based on information provided by Nuveen Fund Advisors, the Acquiring Fund’s Board considered that the Acquiring Fund also may benefit from economies of scale due to a larger asset base, greater secondary market liquidity and increased portfolio and leverage management flexibility. With respect to holders of preferred shares of the Acquiring Fund, the Acquiring Fund’s Board considered that the outstanding preferred shares of the Acquiring Fund and preferred shares of the Acquiring Fund to be issued in the Mergers would have equal priority with each other as to payment of dividends and distributions of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

For these reasons, each Fund’s Board has determined that its Fund’s Merger(s) are in the best interest of its Fund and has approved such Merger(s).

The closing of each Merger is subject to the satisfaction or waiver of certain closing conditions, which include customary closing conditions. In order for a Merger to occur, all requisite shareholder approvals must be obtained at the applicable Fund’s shareholder meetings, and certain other consents, confirmations and/or waivers from various third parties, including the liquidity provider with respect to outstanding preferred shares of the Acquiring Fund and lenders under the Acquiring Fund’s Credit Facility, must also be obtained. Because the closing of each Merger is contingent upon the applicable Target Fund and the Acquiring Fund obtaining such shareholder approvals and satisfying (or obtaining the waiver of) other closing conditions, it is possible that a Merger will not occur even if shareholders of a Fund entitled to vote approve the Merger and a Fund satisfies all of its closing conditions if the other Fund does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions. If a Merger is not consummated, the Board of the Target Fund involved in that Merger may take such actions as it deems in the best interests of the Fund, including conducting additional solicitations with respect to the Merger proposals or continuing to operate the Target Fund as a standalone fund. The closing of one Merger is not contingent on the closing of any other Merger.

Terms of the Mergers

General. The Agreement and Plan of Merger by and among the Acquiring Fund, each Target Fund and the Merger Sub (the “Agreement”), in the form attached as Appendix A to this Proxy Statement, sets forth the terms of each Merger and, with respect to each Merger, provides for: (1) the merger of the Target Fund with and into the Merger Sub, with the Merger Sub continuing as the surviving company and the separate legal existence

 

21


of the Target Fund ceasing for all purposes as of the Effective Time; (2) the conversion of the issued and outstanding common shares of beneficial interest of the Target Fund into newly issued common shares of beneficial interest of the Acquiring Fund, par value $0.01 per share (with cash being received in lieu of any fractional Acquiring Fund common shares), and (3) the conversion of the issued and outstanding TFP Shares of the Target Fund into newly issued TFP Shares of the Acquiring Fund, with a par value of $0.01 per share and a liquidation preference of $1,000 per share. With respect to each Merger, as of the Effective Time, without any further action, the Merger Sub as the surviving company shall (i) succeed to and possess all rights, powers and privileges of the Merger Sub and the Target Fund, and all of the assets and property of whatever kind and character of the Target Fund and the Merger Sub shall vest in the Merger Sub, and (ii) be liable for all of the liabilities and obligations of the Target Fund and the Merger Sub. As soon as practicable following the completion of the Mergers, the Merger Sub will distribute its assets to the Acquiring Fund and the Acquiring Fund will assume the liabilities of the Merger Sub in complete liquidation and dissolution of the Merger Sub under Massachusetts law. The Merger Sub has been formed for the sole purpose of consummating the Mergers and the Merger Sub will not conduct any business prior to the closing of the Mergers, except as necessary to facilitate the Mergers.

As a result of the Mergers, and subsequent distribution of assets to the Acquiring Fund, the assets of the Acquiring Fund and the Target Funds would be combined, and the shareholders of the Target Funds would become shareholders of the Acquiring Fund. The Acquiring Fund will be the accounting survivor of the Mergers.

Each preferred shareholder of a Target Fund will receive the same number of Acquiring Fund TFP Shares having substantially similar terms as the outstanding TFP Shares of such Target Fund held by such preferred shareholder immediately prior to the closing of the Mergers. The aggregate liquidation preference of the Acquiring Fund TFP Shares received in connection with the Mergers will equal the aggregate liquidation preference of a Target Fund’s TFP Shares held immediately prior to the closing of the Mergers. The Acquiring Fund TFP Shares to be issued in connection with the Mergers will have equal priority with each other and with the Acquiring Fund’s other outstanding preferred shares as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund. In addition, the preferred shares of the Acquiring Fund, including any TFP Shares of the Acquiring Fund to be issued in connection with the Mergers, and any borrowings of the Acquiring Fund, will be senior in priority to the Acquiring Fund’s common shares as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

The closing date is expected to be on or about June 5, 2023, or such other date as the parties may agree (the “Closing Date”). Following the Mergers, each Target Fund will terminate its registration as an investment company under the 1940 Act. The Acquiring Fund will continue to operate after the Mergers as a registered closed-end management investment company, with the investment objectives and policies described in this Proxy Statement.

The aggregate net asset value, as of the Valuation Time (as defined below), of the Acquiring Fund common shares received by each Target Fund’s common shareholders in connection with the Mergers will equal the aggregate net asset value of the Target Fund common shares held by shareholders of the Target Fund as of the Valuation Time. Prior to the Valuation Time, the net asset value of each Fund will be reduced by the costs of the Mergers borne by such Fund. See “—Description of Common Shares to Be Issued by the Acquiring Fund; Comparison to Target Funds” for a description of the rights of Acquiring Fund common shareholders. However, no fractional Acquiring Fund common shares will be distributed to a Target Fund’s common shareholders in connection with a Merger. The Acquiring Fund’s transfer agent will aggregate all fractional Acquiring Fund common shares that may be due to a Target Fund’s shareholders as of the Closing Date and will sell the resulting whole shares for the account of 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 Fund’s transfer agent will act directly on behalf of the shareholders entitled to receive fractional shares and will accumulate fractional shares, sell the shares and distribute the cash proceeds net of brokerage commissions, if any, directly to the Target Fund shareholders entitled to receive the fractional shares (without interest and subject to withholding taxes). For

 

22


federal income tax purposes, Target Fund shareholders will be treated as if they received fractional share interests and then sold such interests for cash in a taxable transaction. The holding period and the aggregate tax basis of the Acquiring Fund shares received by a shareholder, including fractional share interests deemed received by a shareholder, will be the same as the holding period and aggregate tax basis of the Target Fund common shares previously held by the shareholder and exchanged therefor, provided the Target Fund shares exchanged therefor were held as capital assets at the effective time of a Merger. As a result of the Mergers, common shareholders of the Funds will hold a smaller percentage of the outstanding common shares of the combined fund as compared to their percentage holdings of their respective Fund prior to the Mergers and thus, common shareholders will hold reduced percentages of ownership in the larger combined entity than they held in the Acquiring Fund or a Target Fund individually.

Following the Mergers, each preferred shareholder of the Target Funds would own the same number of new Acquiring Fund TFP Shares with the same aggregate liquidation preference as the TFP Shares of the Target Fund held by such shareholder immediately prior to the closing of the Mergers, with substantially similar terms as the outstanding TFP Shares of the Target Fund held by such preferred shareholder immediately prior to the closing of a Merger. As a result of the Mergers, preferred shareholders of the Funds will hold reduced voting percentages of preferred shares in the combined fund than they held in the Acquiring Fund or a Target Fund individually.

The holders of TFP Shares of each Target Fund will receive the following new series of TFP Shares of the Acquiring Fund:

 

Target Fund

  

Target Fund Preferred Shares
Outstanding

  

Acquiring Fund Preferred Shares to be
Issued in the Merger

Senior Income    TFP Shares, Series A $1,000 liquidation preference per share Term Redemption Date: November 1, 2030    TFP Shares, Series B
$1,000 liquidation preference per share Term Redemption Date: November 1, 2030
Floating Rate Income Opportunity    TFP Shares, Series A $1,000 liquidation preference per share Term Redemption Date: December 1, 2030    TFP Shares, Series C
$1,000 liquidation preference per share Term Redemption Date:
December 1, 2030
Short Duration Credit Opportunities    TFP Shares, Series A
$1,000 liquidation preference per share Term Redemption Date:
November 1, 2029
   TFP Shares, Series D
$1,000 liquidation preference per share Term Redemption Date:
November 1, 2029

Valuation of Common Shares. Pursuant to the Agreement, the net asset value per share of each Target Fund and the Acquiring Fund shall be 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 referred to herein as the “Valuation Time”) using the valuation procedures of the Nuveen closed-end funds or such other valuation procedures as will be mutually agreed upon by the parties.

Acquiring Fund Common Shares to be Issued. At the effective time of the closing (the “Effective Time”), each Target Fund common share outstanding immediately prior to the Effective Time shall be converted into a number of Acquiring Fund common shares equal to one multiplied by the quotient of the net asset value per share of the Target Fund divided by the net asset value per share of the Acquiring Fund.

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 each Fund affected by the amendment as specifically authorized by such Fund’s Board; provided, however, that following the receipt of shareholder approval of the Agreement with respect to a Merger, no such amendment, modification or supplement may have the effect of changing the provisions for determining the number of Acquiring Fund shares

 

23


to be issued to a Target Fund’s shareholders under the Agreement with respect to a Merger to the detriment of such shareholders without their further approval.

Conditions. Under the terms of the Agreement, the closing of each Merger is subject to the satisfaction or waiver (if permissible) of the following closing conditions: (1) the requisite approval by the common and preferred shareholders of each Fund of the proposals with respect to the Target Fund’s Merger described in this Proxy Statement, (2) each Fund’s receipt of an opinion of counsel substantially to the effect that the merger of the Target Fund with and into the Merger Sub will qualify as a reorganization under the Code (see “—Material Federal Income Tax Consequences of the Mergers”), (3) the absence of legal proceedings challenging the Mergers, and (4) the Funds’ receipt of certain customary certificates and legal opinions. Additionally, in order for the Mergers to occur, certain other consents, confirmations and/or waivers from various third parties, including the liquidity provider with respect to outstanding preferred shares of the Acquiring Fund and lenders under the Acquiring Fund’s Credit Facility, must also be obtained.

Termination. With respect to each Merger, the Agreement may be terminated by the mutual agreement of the parties, and such termination may be effected by the Chief Administrative Officer, President or any Vice President of each Fund without further action by a Target Fund’s Board or the Acquiring Fund’s Board. In addition, a Fund may at its option terminate the Agreement with respect to its Merger at or before the closing due to: (1) a breach by the non-terminating party of any representation or warranty, or agreement to be performed at or before the closing, if not cured within 30 days of the breach and prior to the closing; (2) 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 (3) a determination by a Target Fund’s Board or the Acquiring Fund’s Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of its respective Fund involved in the Merger(s).

Reasons for the Mergers

Based on the considerations described below, the Board of Trustees of each Target Fund (each, a “Target Board” and collectively, the “Target Boards”), all of whom are not “interested persons,” as defined in the 1940 Act, and the Board of Trustees of the Acquiring Fund (the “Acquiring Board” and together with the Target Boards, the “Boards” and each individually, a “Board”), all of whom are not “interested persons,” as defined in the 1940 Act, have each determined that its Fund’s Merger(s) would be in the best interests of its Fund and that the interests of the existing shareholders of its Fund would not be diluted as a result of such Merger(s). At a meeting held on January 19, 2023 (the “Board Meeting”), each Board approved its Fund’s Merger(s) and recommended that shareholders of its Fund, as applicable, approve such Merger(s).

At and prior to the Board Meeting, including at previous meetings, Nuveen Fund Advisors made presentations and provided the Boards with information relating to the proposed Mergers and alternatives to the proposed Mergers. Prior to approving the Mergers, each Board reviewed the foregoing information with its independent legal counsel and with management, reviewed with independent legal counsel applicable law and its duties in considering such matters and met with independent legal counsel in private sessions without management present. Each Board recognized that Nuveen Fund Advisors, each Fund’s investment adviser, had recommended the Merger proposals as part of an ongoing initiative to streamline Nuveen’s closed-end fund line-up and eliminate overlapping products. Based on the foregoing, the Boards considered the following factors (as applicable), among others, in approving the Mergers and recommending that shareholders of the Funds (as applicable) approve the Mergers:

 

   

the compatibility of the Funds’ investment objectives, policies and related risks;

 

   

the consistency of portfolio management;

 

   

the larger asset base of the combined fund as a result of the Mergers and the effect of the Mergers on fees and expense ratios;

 

24


   

the potential for improved secondary market trading with respect to common shares;

 

   

the anticipated federal income tax-free nature of the Mergers;

 

   

the expected costs of the Mergers;

 

   

the terms of the Mergers and whether the Mergers would dilute the interests of the shareholders of the applicable Funds;

 

   

the effect of the Mergers on shareholder rights;

 

   

alternatives to the Mergers; and

 

   

any potential benefits of the Mergers to Nuveen Fund Advisors and its affiliates as a result of the Mergers.

Compatibility of Investment Objectives, Policies and Related Risks. Based on the information presented, the Boards noted that the Funds have similar investment objectives, policies and risks, but there are differences. For example, although each Fund has an investment objective that generally includes providing current income, Short Duration Credit Opportunities’ investment objective also includes providing the potential for capital appreciation. Further, although each Fund invests primarily in senior loans, there are certain policy differences. In its review, based on information provided by Nuveen Fund Advisors, each Board considered the anticipated impact of the Mergers on its Fund’s portfolio, including the expected effect on credit quality, and noted the similarities in portfolio composition and the degree of portfolio overlap among the Funds. The Boards also noted that each Fund may use leverage through a number of methods, including, among other things, through borrowings and the issuance of preferred shares. Moreover, in comparison to the Target Funds, the Target Boards recognized the potential for increased portfolio and leverage management flexibility afforded by the significantly larger asset base of the combined fund. With respect to principal investment risks, while the principal risks of an investment in each Fund would be similar in certain respects because each Fund invests primarily in senior loans, the differences relating to the Funds’ investment policies may affect the comparative risk profiles.

The Boards recognized that the Acquiring Fund has one series of TFP Shares outstanding, which are expected to remain outstanding following the Mergers, and each Target Fund has one series of TFP Shares outstanding. With respect to holders of preferred shares of each Target Fund, the Target Board considered that upon the closing of its Fund’s Merger, holders of any preferred shares outstanding immediately prior to the closing will receive, on a one-for-one basis, newly issued preferred shares of the Acquiring Fund having substantially similar terms to those of the preferred shares of the applicable Target Fund immediately prior to the closing of such Merger.

With respect to the Acquiring Fund, the Acquiring Board considered, based on information provided by Nuveen Fund Advisors, that the Acquiring Fund may benefit from increased portfolio and leverage management flexibility. The Acquiring Board also recognized that the outstanding preferred shares of the Acquiring Fund and any preferred shares of the Acquiring Fund to be issued in the Mergers would have equal priority with each other as to payment of dividends and distributions of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

Consistency of Portfolio Management. Each Fund has the same investment adviser and sub-adviser. In addition, each Fund has the same portfolio management team, which will continue to manage the combined fund upon completion of the Mergers. Through the Mergers, the Boards recognized that shareholders would remain invested in a closed-end management investment company that will have greater net assets and the same investment adviser, sub-adviser and portfolio managers.

 

25


Larger Asset Base of the Combined Fund; Effect of the Mergers on Fees and Expense Ratios. The Boards evaluated the fees and expense ratios of each of the Funds (including estimated expenses of the combined fund following the Mergers). It was anticipated that the Funds will benefit from the larger asset size as fixed costs are shared over a larger asset base. The Target Boards also considered that the fund-level management fee schedule of the Acquiring Fund was the same as that of each Target Fund at each breakpoint level and that, assuming each Merger is completed, the larger asset base of the combined fund may help to achieve fund-level management fee breakpoints. In addition, the Target Boards noted that, assuming each Merger is completed, it was expected that the net operating expenses per common share (i.e., expenses excluding the costs of leverage) of the combined fund would be lower than those of each Target Fund prior to the closing of the Mergers. In addition, the Acquiring Board noted that, assuming each Merger is completed, the net operating expenses per common share (i.e., expenses excluding the costs of leverage) of the combined fund were expected to be lower than those of the Acquiring Fund prior to the closing of the Mergers.

Potential for Improved Secondary Market Trading. While it is not possible to predict trading levels following the Mergers, the Target Boards noted that the Mergers are being proposed, in part, to seek to enhance the secondary trading market for the common shares with respect to the Target Funds. The Target Boards considered that, relative to the Target Funds, the combined fund’s greater share volume may result in greater secondary market liquidity and improved secondary market trading for common shares after the Mergers, which may lead to narrower bid-ask spreads and smaller trade-to-trade price movements. In addition, based on information provided by Nuveen Fund Advisors (including, among other things, average trading discounts calculated over various time periods), the Target Boards considered the potential for a narrower trading discount, relative to the Target Funds, as a result of the larger size of the combined fund and the Acquiring Fund’s common shares trading at a discount that historically has been approximately equal to or lower than that of the Target Funds’ common shares. However, the Target Boards recognized that the past trading record of the common shares of the Acquiring Fund may not necessarily be indicative of how the common shares of the combined fund will trade in the future and that no assurance can be provided regarding the trading discount of the common shares of the combined fund. Further, with respect to the Acquiring Fund, the Acquiring Board noted that such Fund may benefit from greater secondary market liquidity with respect to its common shares due to increased scale.

Anticipated Tax-Free Reorganizations; Capital Loss Carryforwards. Each Merger will be structured with the intention that it qualifies as a tax-free reorganization for federal income tax purposes, and each Fund participating in a Merger will obtain an opinion of counsel substantially to this effect (based on certain factual representations and certain customary assumptions and exclusions). In addition, the Boards considered the impact of the Mergers on the ability to use capital loss carryforwards of the Funds and applicable limitations of federal income tax rules. Further, the Boards considered that, with respect to the Target Funds, significant portfolio sales were not expected to occur solely in connection with the Mergers.

Expected Costs of the Mergers. The Boards considered the terms and conditions of the Mergers, including the estimated costs associated with the Mergers and the allocation of such costs among the Funds. Preferred shareholders will not bear any costs of the Mergers.

Terms of the Mergers and Impact on Shareholders. The terms of the Mergers are intended to avoid dilution of the interests of the existing shareholders of the applicable Funds. In this regard, each Target Board considered that each holder of common shares of its Target Fund will receive common shares of the Acquiring Fund (taking into account any fractional shares to which the shareholder would be entitled) equal in value as of the Valuation Time to the aggregate per share net asset value of that shareholder’s Target Fund common shares held as of the Valuation Time. However, no fractional common shares of the Acquiring Fund will be distributed to the Target Funds’ common shareholders in connection with the Mergers. In lieu of such fractional shares, the Target Funds’ common shareholders will receive cash. As noted above with respect to holders of preferred shares of each Target Fund, holders of any preferred shares outstanding immediately prior to the closing of the

 

26


applicable Merger will receive, on a one-for-one basis, newly issued preferred shares of the Acquiring Fund having substantially similar terms to those of the preferred shares of the applicable Target Fund immediately prior to the closing of such Merger.

In conjunction with the issuance of additional shares of the Acquiring Fund as described above, the Acquiring Board considered that the Acquiring Fund would receive additional assets and liabilities as a result of each Merger. Further, as noted above, the outstanding preferred shares of the Acquiring Fund and any preferred shares of the Acquiring Fund to be issued in the Mergers would have equal priority with each other as to payment of dividends and distributions of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

Effect on Shareholder Rights. The Boards considered that each Fund is organized as a Massachusetts business trust. In this regard, with respect to each Target Fund, there will be no change to shareholder rights under state statutory law.

Alternatives. The Target Boards considered various alternatives to the Mergers, including, among other things, keeping the status quo, liquidating the Target Funds, and merging the Target Funds into an open-end fund. In considering the status quo, the Target Boards considered Nuveen Fund Advisors’ view, among other things, that this option would not provide shareholders with the opportunity to benefit from economies of scale. In considering liquidation, the Target Boards took into account, among other things, that such alternative would be a taxable event and could be potentially disruptive to long-term shareholders. With respect to a merger into an open-end fund, the Target Boards considered, among other things, that based on the information provided by Nuveen Fund Advisors, this option may result in potentially lower earnings over time for Target Fund shareholders and may be disruptive to the acquiring open-end fund’s shareholders. In evaluating the proposed Mergers, the Target Boards considered, among other things, Nuveen Fund Advisors’ view that combining the Target Funds with a larger closed-end fund that also invests primarily in senior loans was an attractive alternative in light of certain potential benefits to shareholders of the Target Funds, as outlined above.

Potential Benefits to Nuveen Fund Advisors and Affiliates. The Boards recognized that the Mergers may result in some benefits and economies of scale for Nuveen Fund Advisors 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 each Target Fund as a separate fund in the Nuveen complex.

Conclusion. Each Board approved the Merger(s) involving its Fund, concluding that each such Merger is in the best interests of its Fund and that the interests of existing shareholders of its Fund will not be diluted as a result of the respective Merger(s).

Capitalization

The following tables set forth the unaudited equity capitalization of the Funds as of November 30, 2022, and the pro-forma combined equity capitalization of the Acquiring Fund as if the Merger(s) had occurred on that date assuming the completion of all Mergers and the completion of each Merger separately.

 

1.

Capitalization Table—Mergers of Senior Income, Floating Rate Income Opportunity and Short Duration Credit Opportunities

The table reflects pro forma exchange ratios of approximately 0.58362402, 0.98941510 and 1.47209981 common shares of the Acquiring Fund issued for each common share of Senior Income, Floating Rate Income Opportunity

 

27


and Short Duration Credit Opportunities, respectively. If the Mergers are consummated, the actual exchange ratios may vary.

 

    Senior
Income
    Floating Rate
Income
Opportunity
    Short
Duration
Credit
Opportunities
    Acquiring
Fund
    Pro
Forma
Adjustments
    Acquiring
Fund
Pro Forma(1)
 

Series A Taxable Fund Preferred (TFP) Shares, $1,000 stated value per share, at liquidation value

  $ 40,000,000     $ 75,000,000     $ 70,000,000     $ 100,000,000           $ 285,000,000  

Common Shareholders’ Equity

           

Common Shares, $0.01 par value per share; 38,611,472 shares outstanding for Senior Income, 40,541,218 shares outstanding for Floating Rate Income Opportunity, 10,085,648 shares outstanding for Short Duration Credit Opportunities, 56,918,468 shares outstanding for the Acquiring Fund and 134,412,385 shares outstanding for the Combined Fund Pro Forma

  $ 386,115     $ 405,412     $ 100,856     $ 569,185     $ (117,444) (2)     $ 1,344,124  

Paid-in surplus

    284,366,145       497,991,631       189,933,072       702,200,544       (1,952,556)(3)       1,672,538,836  

Total distributable earnings

    (77,964,505     (131,148,288     (53,480,812     (182,075,423           (444,669,028

Net assets applicable to common shares

  $ 206,787,755     $ 367,248,755     $ 136,553,116     $ 520,694,306     $ (2,070,000)     $ 1,229,213,932  

Net asset value per common share outstanding (net assets attributable to common shares, divided by common shares outstanding)

  $ 5.36     $ 9.06     $ 13.54     $ 9.15       $ 9.15  

Authorized shares:

           

Common

    Unlimited       Unlimited       Unlimited       Unlimited       Unlimited       Unlimited  

Preferred

    Unlimited       Unlimited       Unlimited       Unlimited       Unlimited       Unlimited  

 

(1)

The pro forma balances are presented as if the Mergers were effective as of November 30, 2022, are presented for informational purposes only and assume the issuance of preferred shares in the amounts set forth above, which amounts may change prior to the Closing Date. The actual Closing Date of the Mergers is expected to be on or about June 5, 2023, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Mergers.

(2)

Assumes the issuance of 22,534,773, 40,112,055 and 14,847,089 Acquiring Fund common shares to Senior Income common shareholders, Floating Rate Income Opportunity common shareholders and Short Duration Credit Opportunities common shareholders,

 

28


  respectively, in connection with the Mergers. These numbers are based on the net asset values of the Acquiring Fund and the Target Funds as of November 30, 2022, adjusted for estimated Merger costs.
(3)

Includes the impact of estimated total Merger costs of $2,070,000 which are currently expected to be borne by Senior Income, Floating Rate Income Opportunity, Short Duration Credit Opportunities and the Acquiring Fund in the amounts of $705,000, $420,000, $775,000 and $170,000, respectively.

 

2.

Capitalization Table—Merger of Senior Income Only

The table reflects a pro forma exchange ratio of approximately 0.58362402 common shares of the Acquiring Fund issued for each common share of Senior Income. If the Merger is consummated, the actual exchange ratio may vary.

 

     Senior Income     Acquiring
Fund
    Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Series A Taxable Fund Preferred (TFP) Shares, $1,000 stated value per share, at liquidation value

   $ 40,000,000     $ 100,000,000           $ 140,000,000  

Common Shareholders’ Equity:

        

Common Shares, $0.01 par value per share; 38,611,472 shares outstanding for Senior Income, 56,918,468 shares outstanding for the Acquiring Fund and 79,453,241 shares outstanding for the Combined Fund Pro Forma

   $ 386,115     $ 569,185     $ (160,768 )(2)    $ 794,532  

Paid-in surplus

     284,366,145       702,200,544       (714,232 )(3)      985,852,457  

Total distributable earnings

     (77,964,505     (182,075,423           (260,039,928

Net assets applicable to common shares

   $ 206,787,755     $ 520,694,306     $ (875,000   $ 726,607,061  

Net asset value per common share outstanding (net assets attributable to common shares, divided by common shares outstanding)

   $ 5.36     $ 9.15       $ 9.15  

Authorized shares:

        

Common

     Unlimited       Unlimited       Unlimited       Unlimited  

Preferred

     Unlimited       Unlimited       Unlimited       Unlimited  

 

(1)

The pro forma balances are presented as if the Merger was effective as of November 30, 2022, are presented for informational purposes only and assume the issuance of preferred shares in the amounts set forth above, which amounts may change prior to the Closing Date. The actual Closing Date of the Merger is expected to be on or about June 5, 2023, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Merger.

(2)

Assumes the issuance of 22,534,773 Acquiring Fund common shares to Senior Income common shareholders in connection with the Merger. These numbers are based on the net asset values of the Acquiring Fund and Senior Income as of November 30, 2022, adjusted for estimated Merger costs.

(3)

Includes the impact of estimated total Merger costs of $875,000 allocable to Senior Income and the Acquiring Fund which are currently expected to be borne by Senior Income and the Acquiring Fund in the amounts of $705,000 and $170,000, respectively.

 

29


3.

Capitalization Table—Merger of Floating Rate Income Opportunity Only

The table reflects a pro forma exchange ratio of approximately 0.98941510 common shares of the Acquiring Fund issued for each common share of Floating Rate Income Opportunity. If the Merger is consummated, the actual exchange ratio may vary.

 

     Floating Rate
Income
Opportunity
    Acquiring
Fund
    Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Series A Taxable Fund Preferred (TFP) Shares, $1,000 stated value per share, at liquidation value

   $ 75,000,000     $ 100,000,000           $ 175,000,000  

Common Shareholders’ Equity:

        

Common Shares, $0.01 par value per share; 40,541,218 shares outstanding for Floating Rate Income Opportunity, 56,918,468 shares outstanding for the Acquiring Fund and 97,030,523 shares outstanding for the Combined Fund Pro Forma

   $ 405,412     $ 569,185     $ (4,292 )(2)    $ 970,305  

Paid-in surplus

     497,991,631       702,200,544       (585,708 )(3)      1,199,606,467  

Total distributable earnings

     (131,148,288     (182,075,423           (313,223,711

Net assets applicable to common shares

   $ 367,248,755     $ 520,694,306     $ (590,000   $ 887,353,061  

Net asset value per common share outstanding (net assets attributable to common shares, divided by common shares outstanding)

   $ 9.06     $ 9.15       $ 9.15  

Authorized shares:

        

Common

     Unlimited       Unlimited       Unlimited       Unlimited  

Preferred

     Unlimited       Unlimited       Unlimited       Unlimited  

 

(1)

The pro forma balances are presented as if the Merger was effective as of November 30, 2022, are presented for informational purposes only and assume the issuance of preferred shares in the amounts set forth above, which amounts may change prior to the Closing Date. The actual Closing Date of the Merger is expected to be on or about June 5, 2023, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Merger.

(2)

Assumes the issuance of 40,112,055 Acquiring Fund common shares to Floating Rate Income Opportunity common shareholders in connection with the Merger. These numbers are based on the net asset values of the Acquiring Fund and Floating Rate Income Opportunity as of November 30, 2022, adjusted for estimated Merger costs.

(3)

Includes the impact of estimated total Merger costs of $590,000 allocable to Floating Rate Income Opportunity and the Acquiring Fund, which are currently expected to be borne by Floating Rate Income Opportunity and the Acquiring Fund in the amounts of $420,000 and $170,000, respectively.

 

30


4.

Capitalization Table—Merger of Short Duration Credit Opportunities Only

The table reflects a pro forma exchange ratio of approximately 1.47209981 common shares of the Acquiring Fund issued for each common share of Short Duration Credit Opportunities. If the Merger is consummated, the actual exchange ratio may vary.

 

     Short Duration
Credit
Opportunities
    Acquiring
Fund
    Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Series A Taxable Fund Preferred (TFP) Shares, $1,000 stated value per share, at liquidation value

   $ 70,000,000     $ 100,000,000           $ 170,000,000  

Common Shareholders’ Equity:

        

Common Shares, $0.01 par value per share; 10,085,648 shares outstanding for Short Duration Credit Opportunities, 56,918,468 shares outstanding for the Acquiring Fund and 71,765,557 shares outstanding for the Combined Fund Pro Forma

   $ 100,856     $ 569,185     $ 47,615 (2)    $ 717,656  

Paid-in surplus

     189,933,072       702,200,544       (992,615 )(3)      891,141,001  

Total distributable earnings

     (53,480,812     (182,075,423           (235,556,235

Net assets applicable to common shares

   $ 136,553,116     $ 520,694,306     $ (945,000   $ 656,302,422  

Net asset value per common share outstanding (net assets attributable to common shares, divided by common shares outstanding)

   $ 13.54     $ 9.15       $ 9.15  

Authorized shares:

        

Common

     Unlimited       Unlimited       Unlimited       Unlimited  

Preferred

     Unlimited       Unlimited       Unlimited       Unlimited  

 

(1)

The pro forma balances are presented as if the Merger was effective as of November 30, 2022, are presented for informational purposes only and assumes the issuance of preferred shares in the amounts set forth above, which amounts may change prior to the Closing Date. The actual Closing Date of the Merger is expected to be on or about June 5, 2023, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Merger.

(2)

Assumes the issuance of 14,847,089 Acquiring Fund common shares to Short Duration Credit Opportunities common shareholders in connection with the Merger. These numbers are based on the net asset values of the Acquiring Fund and Short Duration Credit Opportunities as of November 30, 2022, adjusted for estimated Merger costs.

(3)

Includes the impact of estimated total Merger costs of $945,000 allocable to Short Duration Credit Opportunities and the Acquiring Fund, which are currently expected to be borne by Short Duration Credit Opportunities and the Acquiring Fund in the amounts of $775,000 and $170,000, respectively.

Expenses Associated with the Mergers

Preferred shareholders will not bear any costs of the Mergers. The costs of the Mergers are estimated to be $2,070,000, but the actual costs may be higher or lower than that amount. These costs represent the estimated nonrecurring expenses of the Funds in carrying out their obligations under the Agreement and consist of management’s estimate of professional service fees, printing costs and mailing charges related to the proposed Mergers. Based on the expected benefits of the Mergers to each Fund, each of Senior Income, Floating Rate Income Opportunity, Short Duration Credit Opportunities and the Acquiring Fund is expected to be allocated $705,000, $420,000, $775,000 and $170,000, respectively, of the estimated expenses in connection with the Mergers (0.31%, 0.10%, 0.51% and 0.03%, respectively, of Senior Income’s, Floating Rate Income Opportunity’s, Short Duration Credit Opportunities’ and the Acquiring Fund’s average net assets applicable to common shares for the twelve months ended July 31, 2022). If one or more Mergers are not consummated for any reason, including because the requisite shareholder approvals are not obtained, each of the Funds, and common shareholders of each of the Funds indirectly, will still bear the costs of the Mergers.

 

31


The Funds have engaged Computershare Fund Services to assist in the solicitation of proxies at an estimated aggregate cost of $7,500 per Fund plus reasonable expenses, which is included in the foregoing estimate.

Dissenting Shareholders’ Rights of Appraisal

Under the charter documents of the Funds, shareholders do not have dissenters’ rights of appraisal with respect to their shares in connection with the Mergers.

Material Federal Income Tax Consequences of the Mergers

As a non-waivable condition to each Fund’s obligation to consummate the Mergers, 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 and exclusions) with respect to its Merger(s) 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:

 

  (a)

The merger of the Target Fund with and into the Merger Sub pursuant to applicable state laws will constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Target Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the merger.

 

  (b)

No gain or loss will be recognized by the Acquiring Fund or the Merger Sub upon the merger of the Target Fund with and into the Merger Sub pursuant to applicable state laws or upon the liquidation of the Merger Sub.

 

  (c)

No gain or loss will be recognized by the Target Fund upon the merger of the Target Fund with and into the Merger Sub pursuant to applicable state laws.

 

  (d)

No gain or loss will be recognized by the Target Fund shareholders upon the conversion of all their Target Fund shares solely into Acquiring Fund shares in the merger of the Target Fund with and into the Merger Sub pursuant to applicable state laws, except to the extent the Target Fund common shareholders receive cash in lieu of a fractional Acquiring Fund common share.

 

  (e)

The aggregate basis of the Acquiring Fund shares received by each Target Fund shareholder pursuant to the merger (including any fractional Acquiring Fund common share to which a Target Fund common shareholder would be entitled) will be the same as the aggregate basis of the Target Fund shares that were converted into such Acquiring Fund shares.

 

  (f)

The holding period of the Acquiring Fund shares received by each Target Fund shareholder in the merger (including any fractional Acquiring Fund common share to which a Target Fund common shareholder would be entitled) will include the period during which the shares of the Target Fund that were converted into such Acquiring Fund shares were held by such shareholder, provided the Target Fund shares are held as capital assets at the effective time of the merger.

 

  (g)

The basis of the Target Fund’s assets received by the Merger Sub in the merger will be the same as the basis of such assets in the hands of the Target Fund immediately before the merger.

 

  (h)

The holding period of the assets of the Target Fund received by the Merger Sub in the merger will include the period during which those assets were held by the Target Fund.

With respect to each Merger, the opinion addressing the federal income tax consequences of the Merger described above will rely on the assumption that the Acquiring Fund TFP Shares received in the Merger, if any,

 

32


will constitute equity of the Acquiring Fund. In that regard, special tax counsel to the Acquiring Fund will deliver an opinion to the Acquiring Fund, subject to certain representations, assumptions and conditions, substantially to the effect that any Acquiring Fund TFP Shares received in the Merger by the holders of TFP Shares of the Target Fund will qualify as equity of the Acquiring Fund for federal income tax purposes. As a result, distributions with respect to the preferred shares (other than distributions in redemption of preferred shares subject to Section 302(b) of the Code) will generally constitute dividends to the extent of the Acquiring Fund’s allocable current or accumulated earnings and profits, as calculated for federal income tax purposes. Because the treatment of a corporate security as debt or equity is determined on the basis of the facts and circumstances of each case, and no controlling precedent exists for the preferred shares issued in the Mergers, there can be no assurance that the Internal Revenue Service (“IRS”) will not question special tax counsel’s opinion and the Acquiring Fund’s treatment of the preferred shares as equity. If the IRS were to succeed in such a challenge, holders of preferred shares could be characterized as receiving taxable interest income, possibly requiring them to file amended income tax returns and retroactively to recognize additional amounts of ordinary income and pay additional tax, interest and penalties, and the tax consequences of the Mergers could differ significantly from those described in this Proxy Statement.

No opinion will be expressed as to (1) the effect of the Mergers on a Target Fund, the Acquiring Fund, the Merger Sub or any Target Fund shareholder with respect to any asset (including, without limitation, any stock held in a passive foreign investment company as defined in Section 1297(a) of the Code) as to which any gain or loss is required to be recognized under federal income tax principles (i) at the end of a taxable year (or on the termination thereof) or (ii) upon the transfer of such asset regardless of whether such transfer would otherwise be a non-taxable transaction under the Code, (2) the effect of the Mergers under the alternative minimum tax imposed under Section 55 of the Code on a direct or indirect shareholder of a Target Fund that is a corporation, and (3) any other federal tax issues (except those set forth above) and all state, local or non-U.S. tax issues of any kind.

Each opinion will be based on certain factual representations and customary assumptions. The opinion will rely on such representations and will assume the accuracy of such representations. If such representations and assumptions are incorrect, the Merger that is the subject of such opinion may not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and the Target Fund involved in such Merger and Target Fund shareholders may recognize taxable gain or loss as a result of that Merger.

Opinions of counsel are not binding upon the IRS or the courts and there can be no assurance that the IRS or a court will concur on all or any of the issues discussed above. If the Mergers occur but the IRS or the courts determine that a Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, the Target Fund involved in such Merger may recognize gain or loss on the transfer of its assets to the Acquiring Fund and/or the deemed distribution of Acquiring Fund shares to its shareholders and each shareholder of that Target Fund would recognize taxable gain or loss equal to the difference between its basis in its Target Fund shares and the fair market value of the shares of the Acquiring Fund it receives.

Each Fund designates distributions to common and preferred shareholders as consisting of particular types of income (such as ordinary income and capital gain) based on each class’s proportionate share of the total distributions paid by the Fund with respect to the year. Additional distributions may be made if necessary. As a result, such distribution could affect the character of the distributions received by holders of TFP Shares with respect to the year in which such distribution occurs for federal income tax purposes.

After the Mergers, the Acquiring Fund’s ability to use a Target Fund’s or the Acquiring Fund’s realized and unrealized pre-Merger 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 tax sooner, or pay more federal income tax, than they would have had the Mergers 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 Mergers and the amount of unrealized capital gains in the Funds at the time of the Mergers.

 

33


The table below sets forth, as of July 31, 2022 (each Fund’s tax year end), each Fund’s unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any.

 

     Senior Income      Floating Rate
Income
Opportunity
     Short Duration
Credit
Opportunities
     Acquiring Fund  

Not subject to expiration:

           

Short-Term

   $ 3,053,867      $ 4,606,728      $ 3,100,613      $ 6,507,557  

Long-Term

   $ 41,897,690      $ 69,531,297      $ 27,860,514      $ 96,717,405  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 44,951,557      $ 74,138,025      $ 30,961,127      $ 103,224,962  
  

 

 

    

 

 

    

 

 

    

 

 

 

In addition, the shareholders of the Target Funds will receive a proportionate share of any taxable income and gains (after the application of any available capital loss carryforwards) realized by the Acquiring Fund and not distributed to its shareholders prior to the closing of a Merger when such income and gains are eventually distributed by the Acquiring Fund. To the extent the Acquiring Fund sells portfolio investments after the Mergers, the Acquiring Fund may recognize gains or losses (including any built-in gain in the portfolio investments of a Target Fund or the Acquiring Fund that was unrealized at the time of the Mergers), which also may result in taxable distributions to shareholders holding shares of the Acquiring Fund, including former Target Fund preferred shareholders who hold Acquiring Fund preferred shares after the Mergers. As a result, shareholders of the Target Funds and the Acquiring Fund may receive a greater amount of taxable distributions than they would have had the Mergers not occurred.

The foregoing is intended to be only a summary of the principal federal income tax consequences of the Mergers and should not be considered to be tax advice. This description of the federal income tax consequences of the Mergers is made without regard to the particular facts and circumstances of any shareholder. There can be no assurance that the IRS or a court will concur on all or any of the issues discussed above. Shareholders are urged to consult their own tax advisers as to the specific consequences to them of the Mergers, including without limitation the federal, state, local, and non-U.S. tax consequences with respect to the foregoing matters and any other considerations that may be applicable to them.

Shareholder Approval

With respect to each Merger, the Merger is required to be approved by the affirmative vote of the holders of a majority (more than 50%) of a Target Fund’s outstanding common and preferred shares entitled to vote on the matter, voting together as a single class, and by the affirmative vote of the holders of a majority (more than 50%) of a Target Fund’s outstanding preferred shares entitled to vote on the matter, voting together as a single class. Each Merger also is required to be approved by the affirmative vote of the holders of a majority (more than 50%) of the Acquiring Fund’s outstanding preferred shares entitled to vote on the matter, voting together as a single class. Holders of each Target Fund’s common shares are being solicited separately on the foregoing proposal through a separate proxy statement. In addition, under the rules of the NYSE, the Acquiring Fund’s common and preferred shareholders are required to approve the issuance of additional Acquiring Fund common shares in connection with the Mergers—See Proposal 2.

Abstentions and broker non-votes, if any, will have the same effect as a vote against the approval of a Merger. Broker non-votes are shares held by brokers or nominees, typically in “street name,” as to which (1) instructions have not been received from the beneficial owners or persons entitled to vote and (2) the broker or nominee does not have discretionary voting power on a particular matter.

Preferred shareholders of the Funds are separately being asked to approve the Agreement as a “plan of reorganization” under the 1940 Act. Section 18(a)(2)(D) of the 1940 Act provides that the terms of preferred shares issued by a registered closed-end management investment company must contain provisions requiring approval by the vote of a majority of such shares, voting as a class, of any plan of reorganization adversely

 

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affecting such shares. Because the 1940 Act makes no distinction between a plan of reorganization that has an adverse effect as opposed to a materially adverse effect, the Funds are seeking approval of the Agreement by the holders of their preferred shares.

The closing of each Merger is subject to the satisfaction or waiver of certain closing conditions, which include customary closing conditions. In order for a Merger to occur, all requisite shareholder approvals must be obtained at the applicable Fund’s shareholder Meeting, and certain other consents, confirmations and/or waivers from various third parties, including the liquidity provider with respect to outstanding preferred shares of the Acquiring Fund and lenders under the Acquiring Fund’s Credit Facility, must also be obtained. Because the closing of each Merger is contingent upon the applicable Target Fund and the Acquiring Fund obtaining such shareholder approvals and satisfying (or obtaining the waiver of) other closing conditions, it is possible that a Merger will not occur even if shareholders of a Fund entitled to vote approve the Merger and a Fund satisfies all of its closing conditions if the other Fund does not obtain its requisite shareholder approvals or satisfy (or obtain the waiver of) its closing conditions. If a Merger is not consummated, the Board of the Target Fund involved in that Merger may take such actions as it deems in the best interests of the Fund, including conducting additional solicitations with respect to the Merger proposals or continuing to operate the Target Fund as a standalone fund. The closing of one Merger is not contingent on the closing of any other Merger.

The TFP Shares of each Fund were issued on a private placement basis to one or a small number of institutional shareholders. To the extent that one or more preferred shareholders of a Fund owns, holds or controls, individually or in the aggregate, all or a significant portion of a Fund’s outstanding preferred shares, the approval by a Fund’s preferred shareholders required for a Merger to occur may turn on the exercise of voting or consent rights by such particular shareholder(s) and its or their determination as to the favorable view of the Merger with respect to its or their interests. The Funds exercise no influence or control over the determinations of such shareholders with respect to a Merger; there is no guarantee that such shareholders will vote to approve a Merger proposal.

Description of Common Shares to Be Issued by the Acquiring Fund; Comparison to Target Funds

General

As a general matter, the common shares of the Acquiring Fund and the Target Funds have equal voting rights and equal rights with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of their Fund and have no preemptive, conversion or exchange rights, except as the Trustees may authorize, or rights to cumulative voting. Holders of whole common shares of each Fund are entitled to one vote per share on any matter on which they are entitled to vote, while each fractional share entitles its holder to a proportional fractional vote. Furthermore, the provisions set forth in each Fund’s declaration of trust and by-laws include, among other things, substantially identical super-majority voting provisions and other anti-takeover provisions, as described under “Additional Information About the Acquiring Fund—Certain Provisions in the Acquiring Fund’s Declaration of Trust and By-Laws.” The full text of each Fund’s declaration of trust and by-laws are on file with the SEC.

The Acquiring Fund’s declaration of trust authorizes an unlimited number of common shares, par value $0.01 per share. If the Mergers are consummated, the Acquiring Fund will issue additional common shares on the Closing Date to each Target Fund based on the relative per share net asset value of the Acquiring Fund and the aggregate net assets of each Target Fund that are transferred in connection with the Mergers, in each case as of the Valuation Time. The value of the Acquiring Fund’s net assets will be calculated net of the liquidation preference (including accumulated and unpaid dividends) of all of the Acquiring Fund’s outstanding preferred shares.

The terms of the Acquiring Fund common shares to be issued pursuant to the Mergers will be identical to the terms of the Acquiring Fund common shares that are then outstanding. The Acquiring Fund common shares,

 

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when issued, will be fully paid and non-assessable except as described under “Summary Description of Massachusetts Business Trusts” below.

Distributions

So long as preferred shares are outstanding, the Acquiring Fund may not declare a dividend or distribution to common shareholders (other than a dividend in common shares of the Fund) or purchase outstanding common shares unless all accumulated dividends on preferred shares have been paid and unless the asset coverage, as defined in the 1940 Act, with respect to its preferred shares at the time of the declaration of such dividend or distribution or at the time of such purchase would be at least 200% after giving effect to the dividend or distribution or purchase price. In addition, the Acquiring Fund may not declare or make payment of a dividend or distribution to common shareholders (other than a dividend in common shares of the Fund) or purchase outstanding common shares unless, at the time of the declaration or making of such dividend or distribution or at the time of such purchase, the Acquiring Fund is in compliance with certain asset coverage requirements, and no event of default exists or would occur, under the Credit Facility.

Affiliated Brokerage and Other Fees

None of the Target Funds or the Acquiring Fund paid brokerage commissions within the last fiscal year to (i) any broker that is an affiliated person of such Fund or an affiliated person of such person, or (ii) any broker an affiliated person of which is an affiliated person of such Fund, the Adviser, or the Sub-Adviser of such Fund.

Description of TFP Shares to Be Issued by the Acquiring Fund

If any of the Mergers take place, the Acquiring Fund will issue TFP Shares (“New TFP Shares”) pursuant to the Agreement if TFP Shares of the merging Target Fund are outstanding immediately prior to the closing. TFP Shares of the Target Funds are subject to redemption in accordance with the respective Target Fund’s statement establishing and fixing the rights and preferences of TFP Shares. The following description applies if New TFP Shares are issued in the Mergers.

The terms of the New TFP Shares of the applicable series will be substantially similar, as of the time of the closing of the Merger, to the terms of the TFP Shares of the applicable Target Fund outstanding immediately prior to the closing of the Merger. The aggregate liquidation preference of the New TFP Shares to be received in the Merger, if any, will equal the aggregate liquidation preference of the applicable Target Fund’s TFP Shares held immediately prior to the closing of the Merger. The economic terms of any New TFP Shares likely may not be the same as the terms of the outstanding TFP Shares of the Acquiring Fund. The number of TFP Shares of a Target Fund currently outstanding may change prior to its Merger due to market or other conditions. See also “Additional Information About the Acquiring Fund—Description of Outstanding Acquiring Fund Series A TFP Shares.”

The Acquiring Fund currently expects that the New TFP Shares issued in connection with the Senior Income Fund Merger will be designated “Series B TFP Shares,” the New TFP Shares issued in connection with the Floating Rate Income Opportunity Merger will be designated “Series C TFP Shares” and the New TFP Shares issued in connection with the Short Duration Credit Opportunities Merger will be designated “Series D TFP Shares.”

The New TFP Shares of each series will be senior in priority to the Acquiring Fund’s common shares as to the payment of dividends and as to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund. The New TFP Shares of each series will have equal priority with the other preferred shares of the Acquiring Fund, including the Acquiring Fund’s outstanding TFP Shares, any other New TFP Shares to be issued by the Acquiring Fund in the Mergers and any other preferred shares that the Acquiring Fund may issue in the future, as to the payment of dividends and as to distribution of assets upon dissolution,

 

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liquidation or winding up of the affairs of the Acquiring Fund. The rights of lenders under the Credit Facility and any other creditors to receive payments of interest on and repayments of principal of any borrowings are senior to the rights of holders of preferred shares, including the existing TFP Shares of the Acquiring Fund and any New TFP Shares, and common shares with respect to the payment of dividends and as to distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund.

New Series B TFP Shares

The TFP Shares of Senior Income are (and the new Series B TFP Shares will be) in the “Variable Rate Mode.” The Variable Rate Mode for the TFP Shares of Senior Income currently ends on October 2, 2023, subject to early transition to a new mode, or scheduled extension or transition to a new mode. A new mode may provide for the modification of the economic terms of the TFP Shares. Modified terms for a new mode may include provisions with respect to (but not limited to) optional tender provisions, mandatory tender provisions, a liquidity facility or other credit enhancement, mandatory purchase provisions, the dividend rate setting provisions (including as to any maximum rate), and, if the dividend may be determined by reference to an index, formula or other method, the manner in which it will be determined and redemption provisions.

Holders of the Series B TFP Shares will be entitled to receive cash dividends when, as and if declared by the Acquiring Fund’s Board. The amount of dividends per Series B TFP Share will equal the sum of dividends accumulated for each day but not yet paid during the relevant monthly dividend period.

The amount of dividends will be calculated monthly based on an index rate equal to one-month Term SOFR or another index plus an applicable spread. The applicable spread will be subject to adjustment in certain circumstances, including a change in the credit rating assigned to the Series B TFP Shares. The dividend rate shall in no circumstances exceed 15% per year.

The Series B TFP Shares will be subject to optional and mandatory redemption by the Fund in certain circumstances.

The Acquiring Fund will be obligated to redeem the Series B TFP Shares on the term redemption date unless earlier redeemed or repurchased by the Acquiring Fund, at a redemption price per share equal to the liquidation preference per share ($1,000) plus any accumulated but unpaid dividends (whether or not earned or declared). The outstanding TFP Shares of Senior Income have a term redemption date of November 1, 2030. The new Series B TFP Shares will have the same term redemption date as the corresponding Senior Income TFP Shares.

During the Variable Rate Mode for the Series B TFP Shares, in the event the Acquiring Fund fails to comply with asset coverage and/or effective leverage ratio requirements and any such failure is not cured within the applicable cure period, the Acquiring Fund may become obligated to redeem such number of preferred shares as are necessary to achieve compliance with such requirements. Also, during the Variable Rate Mode for the Series B TFP Shares, the Acquiring Fund will be obligated to redeem all of the outstanding Series B TFP Shares in the event a mode transition is initiated and a failed transition occurs, if such failure is not cured within the applicable cure period.

Series B TFP Shares also may be redeemed in whole at any time or in part from time to time at the option of the Acquiring Fund at a redemption price per share equal to the liquidation preference per share plus any accumulated but unpaid dividends (whether or not earned or declared).

New Series C TFP Shares

The TFP Shares of Floating Rate Income Opportunity are (and the new Series C TFP Shares will be) in the “Variable Rate Mode.” The Variable Rate Mode for the TFP Shares of Floating Rate Income currently ends on November 2, 2023, subject to early transition to a new mode, or scheduled extension or transition to a new mode. A new mode may provide for the modification of the economic terms of the TFP Shares. Modified terms

 

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for a new mode may include provisions with respect to (but not limited to) optional tender provisions, mandatory tender provisions, a liquidity facility or other credit enhancement, mandatory purchase provisions, the dividend rate setting provisions (including as to any maximum rate), and, if the dividend may be determined by reference to an index, formula or other method, the manner in which it will be determined and redemption provisions.

Holders of the Series C TFP Shares will be entitled to receive cash dividends when, as and if declared by the Acquiring Fund’s Board. The amount of dividends per Series C TFP Share will equal the sum of dividends accumulated for each day but not yet paid during the relevant monthly dividend period.

The amount of dividends will be calculated monthly based on an index rate equal to one-month Term SOFR or another index plus an applicable spread. The applicable spread will be subject to adjustment in certain circumstances, including a change in the credit rating assigned to the Series C TFP Shares. The dividend rate shall in no circumstances exceed 15% per year.

The Series C TFP Shares will be subject to optional and mandatory redemption by the Fund in certain circumstances.

The Acquiring Fund will be obligated to redeem the Series C TFP Shares on the term redemption date unless earlier redeemed or repurchased by the Acquiring Fund, at a redemption price per share equal to the liquidation preference per share ($1,000) plus any accumulated but unpaid dividends (whether or not earned or declared).The outstanding TFP Shares of Floating Rate Income Opportunity have a term redemption date of December 1, 2030. The new Series C TFP Shares will have the same term redemption date as the corresponding Floating Rate Income Opportunity TFP Shares.

During the Variable Rate Mode for the Series C TFP Shares, in the event the Acquiring Fund fails to comply with asset coverage and/or effective leverage ratio requirements and any such failure is not cured within the applicable cure period, the Acquiring Fund may become obligated to redeem such number of preferred shares as are necessary to achieve compliance with such requirements. Also, during the Variable Rate Mode for the Series C TFP Shares, the Acquiring Fund will be obligated to redeem all of the outstanding Series C TFP Shares, in the event a mode transition is initiated and a failed transition occurs, if such failure is not cured within the applicable cure period.

Series C TFP Shares also may be redeemed in whole at any time or in part from time to time at the option of the Acquiring Fund at a redemption price per share equal to the liquidation preference per share plus any accumulated but unpaid dividends (whether or not earned or declared).

New Series D TFP Shares

The TFP Shares of Short Duration Credit Opportunities are (and the new Series D TFP Shares will be) in the “Variable Rate Demand Mode.” The Variable Rate Demand Mode for the TFP Shares of Short Duration Credit Opportunities currently ends on November 1, 2029, subject to early transition to a new mode. A new mode may provide for the modification of the economic terms of the TFP Shares. Modified terms for a new mode may include provisions with respect to (but not limited to) optional tender provisions, mandatory tender provisions, a liquidity facility or other credit enhancement, mandatory purchase provisions, the dividend rate setting provisions (including as to any maximum rate), and, if the dividend may be determined by reference to an index, formula or other method, the manner in which it will be determined and redemption provisions.

Holders of the Series D TFP Shares will be entitled to receive cash dividends when, as and if declared by the Acquiring Fund’s Board. The amount of dividends per Series D TFP Share will equal the sum of dividends accumulated for each day but not yet paid during the relevant monthly dividend period.

The Series D TFP Shares will pay an adjustable dividend rate set weekly by a remarketing agent. Holders of the Series D TFP Shares will have the right to give notice on any business day to tender the securities for

 

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remarketing in seven days. The Series D TFP Shares also will be subject to a mandatory tender for remarketing upon the occurrence of certain events, such as a mode change or the non-payment of dividends by the Acquiring Fund. Should a remarketing be unsuccessful, the dividend rate will reset to a maximum rate as defined in the governing documents of the Series D TFP Shares. The dividend rate shall in no circumstances exceed 15% per year.

The Series D TFP Shares have the benefit of an unconditional demand feature pursuant to a purchase agreement provided by a bank acting as liquidity provider to ensure full and timely repayment of the liquidation preference amount plus any accumulated and unpaid dividends to holders upon the occurrence of certain events. The purchase agreement for the Series D TFP Shares will require the liquidity provider to purchase from holders all outstanding Series D TFP Shares tendered for sale that were not successfully remarketed. The liquidity provider also must purchase all outstanding Series D TFP Shares prior to termination of the purchase agreement for such series, including by reason of the failure of the liquidity provider to maintain the requisite level of short-term ratings, if the Acquiring Fund has not obtained an alternate purchase agreement before the termination date.

The obligation of the liquidity provider for the Series D TFP Shares to purchase the outstanding Series D TFP Shares pursuant to the purchase agreement for such series will run to the benefit of the holders of the Series D TFP Shares and is unconditional and irrevocable, and as such the short-term ratings assigned to the Series D TFP Shares will be directly linked to the short-term creditworthiness of the liquidity provider. The liquidity provider for the Series D TFP Shares will enter into a purchase agreement with respect to the Series D TFP Shares, subject to periodic extension by agreement with the Acquiring Fund.

The Series D TFP Shares will be subject to optional and mandatory redemption by the Fund in certain circumstances.

The Acquiring Fund will be obligated to redeem the Series D TFP Shares on the term redemption date unless earlier redeemed or repurchased by the Acquiring Fund, at a redemption price per share equal to the liquidation preference per share ($1,000) plus any accumulated but unpaid dividends (whether or not earned or declared). The outstanding TFP Shares of Short Duration Credit Opportunities have a term redemption date of November 1, 2029. The new Series D TFP Shares will have the same term redemption date as the corresponding Short Duration Credit Opportunities TFP Shares.

The Acquiring Fund will have an obligation to redeem, at a redemption price equal to $1,000 per share plus accumulated but unpaid dividends thereon (whether or not earned or declared) until, but excluding, the date fixed by the Board for redemption, Series D TFP Shares purchased by the liquidity provider pursuant to its obligations under the purchase agreement if the liquidity provider continues to be the beneficial owner for a period of six months and such shares cannot be successfully remarketed. The Acquiring Fund also will redeem, at a redemption price equal to the liquidation preference per share plus accumulated but unpaid dividends thereon (whether or not earned or declared) until, but excluding, the date fixed by the Board for redemption, such number of preferred shares as is necessary to achieve compliance, if the Acquiring Fund fails to maintain the minimum asset coverage required under the 1940 Act and the Acquiring Fund’s fee agreement with the liquidity provider for the Series D TFP Shares, and such failure is not cured by the applicable cure date.

Series D TFP Shares also may be redeemed in whole at any time or in part from time to time at the option of the Acquiring Fund at a redemption price per share equal to the liquidation preference per share plus any accumulated but unpaid dividends (whether or not earned or declared).

Summary Description of Massachusetts Business Trusts

The following description is based on relevant provisions of applicable Massachusetts law and each Fund’s governing documents. This summary does not purport to be complete and we refer you to applicable Massachusetts law and each Fund’s operative documents.

General. Each Fund is a Massachusetts business trust. A fund organized as a Massachusetts business trust is governed by the trust’s declaration of trust or similar instrument, and its by-laws (its “governing documents”).

 

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Massachusetts law allows the trustees of a business trust to set the terms of a fund’s governance in its governing documents. 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 fund’s governing documents.

Because Massachusetts law governing business trusts provides more flexibility compared to typical state corporate statutes, the Massachusetts business trust is a common form of organization for closed-end funds. However, some consider it less desirable than other entities because it relies on the terms of the applicable declaration of trust and by-laws 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 or newer statutory trust laws, such as those of Delaware, provide.

Shareholders of a Massachusetts business trust are not afforded the statutory limitation of personal liability generally afforded to shareholders of a corporation from the trust’s 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 fund’s acts or obligations. The declaration of trust of each 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. However, courts in Massachusetts have recognized limitations of a trustee’s personal liability in contract actions for the obligations of a trust contained in the trust’s declaration of trust, and declarations of trust 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 each Fund contains such provisions.

The Funds

Each Fund is organized as a Massachusetts business trust and is governed by its declaration of trust and by-laws. Under the declaration of trust of each Fund, any determination as to what is in the interests of the Fund made by the trustees 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 to the trustees. Further, the declaration of trust provides that certain determinations made in good faith by the trustees are binding upon the Fund and all shareholders, and shares are issued and sold on the condition and understanding, evidenced by the purchase of shares, that any and all such determinations will be so binding. The by-laws of each Fund provide that each shareholder of the Fund, by virtue of having become a shareholder, shall be held to have expressly assented and agreed to be bound by the terms of the Fund’s governing documents. The Funds’ declaration of trusts are substantially the same, and the Funds have adopted the same by-laws. The following is a summary of some of the key provisions of the Funds’ governing documents.

Shareholder Voting. The declaration of trust of each Fund limits shareholder voting to certain enumerated matters, including certain amendments to the declaration of trust, the election of trustees if required by the 1940 Act, the merger or consolidation of the Fund with any corporation or a reorganization or sales of assets in certain circumstances and matters required to be voted on by the 1940 Act, or, for Senior Income, a recapitalization of the Fund (under certain circumstances) and, for each Fund, with respect to such additional matters relating to the Fund as the trustees may consider necessary or desirable.

Meetings of shareholders may be called by the trustees and by the written request of shareholders owning at least 10% of the outstanding shares entitled to vote. The holders of a majority (more than 50%) of the voting power of the shares of beneficial interest of the Fund entitled to vote at a meeting will constitute a quorum for the transaction of business. Notwithstanding the foregoing, when the holders of preferred shares are entitled to elect any of a Fund’s trustees by class vote of such holders, the holders of thirty-three and one-third percent (33 1/3%) of the preferred shares entitled to vote at a meeting shall constitute a quorum for the purpose of such an election. Unless other voting provisions contained in the Fund’s governing documents or the 1940 Act apply, the

 

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affirmative vote of the holders of a majority (more than 50%) 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. The governing documents require a super-majority vote in certain circumstances with respect to a merger, consolidation or dissolution of or sale of substantially all of the assets by, the Fund, or its conversion to an open-end investment company, unless such transaction has been approved by two-thirds of the Trustees, and that the affirmative vote of a majority (more than 50%) of the shares outstanding and entitled to vote is required to elect trustees in a “contested election” (i.e., an election in which the number of trustees nominated in accordance with the by-laws exceeds the number of trustees to be elected), but that a plurality vote applies in an uncontested election.

The by-laws of each Fund provide that common shares held by a shareholder who obtains beneficial ownership of common shares in a “Control Share Acquisition” shall have the same voting rights as other common shares only to the extent authorized by the Fund’s shareholders (the “Control Share Provision”). Such authorization shall require the affirmative vote of the holders of a majority (more than 50%) of the shares of the Fund entitled to vote in the election of trustees, excluding Interested Shares. Interested Shares include shares held by Fund officers and any person who has acquired common shares in a Control Share Acquisition. The by-laws define a “Control Share Acquisition,” subject to various conditions and exceptions, generally to mean an acquisition of common shares that would give the beneficial owner, upon the acquisition of such shares, the ability to exercise voting power, but for the Control Share Provision, in the election of trustees (except for any elections of trustees by holders of preferred shares voting as a separate class) in any one of the following ranges: (i) one-tenth or more, but less than one-fifth of all voting power; (ii) one-fifth or more, but less than one-third of all voting power; (iii) one-third or more, but less than a majority of all voting power; or (iv) a majority or more of all voting power. For this purpose, all common shares acquired by a person within ninety days before or after the date on which such person acquires shares that result in a Control Share Acquisition, and all common shares acquired by such person pursuant to a plan to make a Control Share Acquisition, shall be deemed to have been acquired in the same Control Share Acquisition. Subject to various conditions and procedural requirements, including the delivery of a “Control Share Acquisition Statement” to the Fund setting forth certain required information, a shareholder who obtains or proposes to obtain beneficial ownership of common shares in a Control Share Acquisition generally may request a vote of shareholders to approve the authorization of voting rights of such shareholder with respect to such shares. See “General Information—Additional Information About the Solicitation” at page 110 for a description of certain legal matters with respect to the Control Share Provision.

Shareholder Meetings. Meetings of shareholders may be called by the trustees and must be called upon the written request of shareholders entitled to cast at least 10% of all votes entitled to be cast at the meeting. Shareholder requests for special meetings are subject to various requirements under each Fund’s by-laws, including as to the specific form of, and information required in, a shareholder’s request to call such a meeting. A shareholder may request a special meeting only to act on a matter upon which such shareholder is entitled to vote under the terms of the Fund’s governing documents, and shareholders may not request special meetings for the purpose of electing trustees.

The by-laws of each Fund authorize the trustees or the chair of a shareholder meeting to adopt rules, regulations and procedures appropriate for the proper conduct of the meeting, which may include (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on by the shareholders present or represented at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at and participation in the meeting by shareholders, their duly authorized and constituted proxies or such other persons as the chair of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; (vi) limitations on the time allotted to questions or comments by shareholders; and (vii) the extent to which, if any, other participants are permitted to speak.

The by-laws of each Fund establish qualification criteria applicable to prospective trustees and require that advance notice be given to the Fund in the event a shareholder desires to nominate a person for election to

 

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the Board or to transact any other business at a meeting of shareholders. Any notice by a shareholder must be accompanied by certain information as required by the by-laws. No shareholder proposal will be considered at any meeting of shareholders of a Fund if such proposal is submitted by a shareholder who does not satisfy all applicable requirements set forth in the by-laws, and unless otherwise required by applicable law, no matter may be considered at or brought before any meeting of shareholders unless such matter has been deemed a proper matter for shareholder action by certain officers of the Fund or by at least sixty-six and two-thirds percent (66 2/3%) of the trustees.

Election and Removal of Trustees. The declaration of trust of each Fund provides that the trustees determine the size of the Board, subject to a minimum and a maximum number. Subject to the provisions of the 1940 Act, the declaration of trust also provides that vacancies on the Board may be filled by the remaining trustees. A trustee may be removed only for cause and only by action of at least two-thirds of the remaining trustees or by action of at least two-thirds of the outstanding shares of the class or classes that elected such trustee. The by-laws of each Fund establish qualification requirements applicable to any person who is recommended, nominated, elected, appointed, qualified or seated as a trustee.

Pursuant to each Fund’s by-laws, the Fund’s Board is divided into three classes (Class I, Class II and Class III) with staggered multi-year terms, and typically only the members of one of the three classes stand for election each year. The staggered board structure could delay for up to two years the election of a majority of the Board of each Fund. The board structure of the Acquiring Fund will remain in place following the closing of the Mergers.

Issuance of Shares. Under the declaration of trust of each Fund, the trustees are permitted to issue an unlimited number of shares for such consideration and on such terms as the trustees may determine. Shareholders are not entitled to any preemptive rights or other rights to subscribe to additional shares, except as the trustees may determine. Shares are subject to such other preferences, conversion, exchange or similar rights, as the trustees may determine.

Classes. The declaration of trust of each Fund gives broad authority to the trustees to establish classes or series in addition to those currently established and to determine the rights and preferences, conversion rights, voting powers, restrictions, limitations, qualifications or terms or conditions of redemptions of the shares of the classes or series. The trustees are also authorized to terminate a class or series without a vote of shareholders under certain circumstances.

Amendments to Governing Documents. Amendments to the declaration of trust generally require the consent of shareholders owning more than 50% of shares entitled to vote, voting in the aggregate. Certain amendments may be made by the trustees without a shareholder vote, and any amendment to the voting requirements contained in the declaration of trust requires the approval of two-thirds of the outstanding common shares and preferred shares, if any, entitled to vote, voting in the aggregate and not by class except to the extent that applicable law or the declaration of trust may require voting by class. Each Fund’s by-laws may be amended or repealed, or new by-laws may be adopted, by a vote of a majority of the trustees. The by-laws of each Fund may not be amended by shareholders.

Shareholder, Trustee and Officer Liability. The declaration of trust of each Fund provides that shareholders have no personal liability for the acts or obligations of the Fund and requires the 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, each declaration of trust provides that the Fund will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, each declaration of trust provides that any person who is a trustee, officer or employee of the Fund is not personally liable to any person in connection with the affairs of the Fund, other than to the Fund and its shareholders arising from such trustee’s, officer’s or employee’s bad faith, willful misfeasance, gross negligence or reckless disregard for his or her duty. Each declaration of trust further provides for indemnification

 

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of such persons and advancement of the expenses of defending any such actions for which indemnification might be sought. Each declaration of trust also provides that the trustees may rely in good faith on expert advice.

Forum Selection. Each Fund’s by-laws provide that, unless the Fund consents in writing to the selection of an alternative forum, and except for certain claims brought under the federal securities laws, the sole and exclusive forum for any shareholder or group of shareholders to bring (i) any derivative action or proceeding brought on behalf of the Fund, (ii) any action asserting a claim for breach of any duty owed by a trustee or officer or other employee of a Fund to the Fund or to the Fund’s shareholders, (iii) any action asserting a claim arising pursuant to Massachusetts business trust law or the Fund’s governing documents, and (iv) any other action asserting a claim governed by the internal affairs doctrine, shall be within the United States District Court for the District of Massachusetts (Boston Division) or, to the extent such court does not have jurisdiction, the Business Litigation Session of the Massachusetts Superior Court in Suffolk County. Each Fund’s by-laws further provide that in any such covered action there is no right to a jury trial and the right to a jury trial is expressly waived to the fullest extent permitted by law.

Derivative and Direct Claims of Shareholders. Each Fund’s by-laws contain provisions regarding derivative and direct claims of shareholders. 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 trustees to bring an action, before the shareholder is entitled to bring or maintain a derivative action in the right of or name of or on behalf of the trust. Under the Massachusetts statute, a shareholder whose demand has been refused by the trustees may bring the claim only if the shareholder demonstrates to a court that the trustees’ decision not to pursue the requested action was not a good faith exercise of their business judgment on behalf of the Fund. The by-laws of each Fund largely incorporate the substantive elements of the Massachusetts statute and establish procedures for shareholders to bring derivative actions and for the Board to consider shareholder demands that the Fund commence a suit. In addition, the by-laws of each Fund distinguish direct actions from derivative claims and prohibit the latter from being brought directly by a shareholder.

 

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D.

ADDITIONAL INFORMATION ABOUT THE INVESTMENT POLICIES

Comparison of the Investment Objectives and Policies of the Acquiring Fund and the Target Funds

General

The Funds have similar investment objectives, but there are differences. Each Fund seeks current income, primarily through investments in senior loans.

Senior Income’s investment objective is to achieve a high level of current income, consistent with preservation of capital. As a non-fundamental policy, under normal circumstances, Senior Income invests at least 80% of its Assets in adjustable rate, U.S. dollar-denominated secured and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality. Investment grade quality securities are those securities that, at the time of investment, are rated by at least one nationally recognized statistical rating organization (“NRSRO”) within the four highest grades or unrated but judged to be of comparable quality. With respect to the Fund’s senior loans included in the 80% policy, such instruments will at all times have a dollar weighted average time until the next interest rate adjustment of 90 days or less. Senior Income invests primarily in adjustable rate U.S. dollar-denominated secured senior loans.

Floating Rate Income Opportunity’s investment objective is to achieve a high level of current income. As a non-fundamental policy, under normal circumstances, Floating Rate Income Opportunity invests at least 80% of its Assets in adjustable rate loans, primarily secured senior loans. With respect to Floating Rate Income Opportunity’s senior loans included in the 80% policy, such instruments will not at all times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less. As part of the 80% requirement, Floating Rate Income Opportunity also may invest in adjustable rate unsecured senior loans and adjustable rate secured and unsecured subordinated loans. Senior loans include floating or variable rate, U.S. dollar denominated secured and unsecured loans that hold the most senior position in the capital structure of an issuer. Adjustable rate senior loans and adjustable rate subordinated loans are sometimes collectively referred to as “adjustable rate loans.” Adjustable rate loans pay interest at rates that are redetermined periodically at short-term intervals by reference to a base lending rate, generally based on a percentage above LIBOR, SOFR, a U.S. bank’s prime or base rate, the overnight federal funds rate or another rate (of any tenor, but typically between one month and six months, and currently), plus a premium.

Short Duration Credit Opportunities’ investment objective is to provide current income and the potential for capital appreciation. As a non-fundamental policy, under normal circumstances, Short Duration Credit Opportunities invests at least 80% of Assets, at time of purchase, in loans or securities in the issuing company’s capital structure that are senior to its common equity, including but not limited to debt securities and preferred securities. Short Duration Credit Opportunities’ portfolio will be invested primarily in below investment grade adjustable rate corporate debt instruments, including senior secured loans, second lien loans, and other adjustable rate corporate debt instruments. Short Duration Credit Opportunities also may invest in other types of debt instruments and enter into short positions consisting primarily of high yield debt. Under normal circumstances, Short Duration Credit Opportunities will invest at least 70% of its Managed Assets in adjustable rate senior loans and second lien loans.

The Acquiring Fund’s investment objective is to achieve a high level of current income. As a non-fundamental policy, under normal circumstances, the Acquiring Fund invests at least 80% of its Assets in secured senior loans and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality. With respect to the Acquiring Fund’s senior loans included in the 80% policy, such instruments will at times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less.

Note that each Fund’s investment objective may not be changed without shareholder approval of the holders of a majority of the outstanding common and preferred shares voting together as a single class, and the

 

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approval of the holders of a majority of the outstanding preferred shares, voting separately as a single class. When used with respect to particular shares of a Fund, a “majority of the outstanding” shares means (1) 67% or more of the shares present at a meeting, if the holders of more than 50% of the shares are present in person (including participation by means of remote or “virtual” communication) or represented by proxy, or (2) more than 50% of the shares, whichever is less.

Also note that (1) Senior Income’s policy to invest at least 80% of its Assets in adjustable rate, U.S. dollar-denominated, secured and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality; (2) Floating Rate Income Opportunity’s policy to invest at least 80% of its Assets in adjustable rate loans; (3) Short Duration Credit Opportunities’ policy to invest at least 80% of its Assets in loans or securities in the issuing company’s capital structure that are senior to its common equity and (4) the Acquiring Fund’s policy to invest at least 80% of its Assets in secured senior loans and unsecured senior loans, which unsecured senior loans will be, at the time of investment, investment grade quality, may not be changed without 60 days’ prior written notice.

Investment Policies of the Acquiring Fund

In addition to the Acquiring Fund’s investment policies discussed above, the following non-fundamental investment policies also apply to the Acquiring Fund, under normal circumstances:

 

   

The Acquiring Fund invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral.

 

   

The Acquiring Fund may invest its Managed Assets without limit in senior loans and other debt instruments that are, at the time of investment, rated below investment grade or unrated but judged to be of comparable quality. Investment grade quality securities are those securities that, at the time of investment, are (i) rated by at least one nationally recognized statistical rating organization (“NRSRO”) within the four highest grades (BBB- or Baa3 or better) by S&P, Moody’s or Fitch, or (ii) unrated but judged to be of comparable quality. However, no more than 30% of the Acquiring Fund’s Managed Assets may be invested in senior loans and other debt securities that are, at the time of investment, rated CCC+ or Caa or below by S&P, Moody’s or Fitch or that are unrated but judged to be of comparable quality.

 

   

The Acquiring Fund may invest up to 20% of its Managed Assets in (i) other debt securities such as investment and non-investment grade debt securities, convertible securities and structured notes (other than structured notes that are designed to provide returns and risks that emulate those of senior loans, which may be treated as an investment in senior loans for purposes of the 80% requirement set forth above), (ii) mortgage-related and other asset-backed securities (including collateralized loan obligations and collateralized debt obligations), and (iii) debt securities and other instruments issued by government, government-related or supranational issuers (commonly referred to as sovereign debt securities). No more than 5% of the Acquiring Fund’s Managed Assets may be invested in each of convertible securities, mortgage-related and other asset-backed securities, and sovereign debt securities. The debt securities in which the Acquiring Fund may invest may have short-term, intermediate-term or long-term maturities. The Acquiring Fund also may receive warrants and equity securities issued by a borrower or its affiliates in connection with the Fund’s other investments in such entities.

 

   

The Acquiring Fund maintains an average duration of one year or less for its portfolio investments in senior loans and other debt instruments.

 

   

The Acquiring Fund will not invest in inverse floating rate securities.

 

   

The Acquiring Fund may invest up to 20% of its Managed Assets in securities of non-U.S. issuers (which includes borrowers) that are U.S. dollar or non-U.S. dollar denominated. The Acquiring Fund’s Managed Assets to be invested in senior loans and other debt instruments of non-U.S.

 

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issuers may include debt securities of issuers located, or conducting their business in, emerging markets countries.

 

   

The Acquiring Fund may not invest more than 20% of its Managed Assets in securities from an industry which (for the purposes of this policy) generally refers to the classification of companies in the same or similar lines of business such as the automotive, textiles and apparel, hotels, media production and consumer retailing industries. The Acquiring Fund may invest more than 20% of its Managed Assets in sectors which (for the purposes of this policy) generally refers to broader classifications of industries, such as the consumer discretionary sector which includes the automotive, textiles and apparel, hotels, media production and consumer retailing industries, provided the Fund’s investment in a particular industry within the sector does not exceed the industry limitation.

 

   

The Acquiring Fund may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps. An iBoxx Loan Total Return Swap is a specific type of total return swap on an index that is designed to provide exposure to the senior loan market. The iBoxx Loan Total Return Swap’s underlying index is the Markit iBoxx USD Liquid Leveraged Loans Total Return Index, which is one of a subset of indices designed to track the broader, rules-based Markit iBoxx USD Liquid Leveraged Loan Index. “iBoxx Loan Total Return Swaps” means total return swaps written on the Markit iBoxx USD Liquid Leveraged Loans Total Return Index.

Investment Policies of Senior Income

In addition to Senior Income’s investment policies discussed above, the following non-fundamental investment policies also apply to Senior Income, under normal circumstances:

 

   

No more than 30% of Senior Income’s Managed Assets may be invested in senior loans and other debt securities that are, at the time of investment, rated CCC+ or Caa or below by Standard & Poor’s Corporation, a division of The McGraw-Hill Companies (“S&P”), Moody’s Investor Service, Inc. (“Moody’s”) or Fitch Ratings, part of the Fitch Group (“Fitch”) or that are unrated but judged to be of comparable quality.

 

   

Senior Income invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral. Such collateral consists of assets and/or stock of the borrower.

 

   

Senior Income may invest up to 20% of its Managed Assets in U.S. dollar-denominated senior loans of borrowers that are organized or located in countries outside the United States.

 

   

Senior Income may invest up to 20% of its Managed Assets, in the aggregate, in:

 

   

other income producing securities such as investment and non-investment grade corporate debt securities, of corporate or governmental issuers; and

 

   

equity securities and warrants acquired in connection with the Fund’s investments in senior loans.

 

   

Senior Income will not invest more than 10% of its Managed Assets in senior loans with interest rates that adjust less often than semi-annually.

 

   

Senior Income’s portfolio of senior loans will at all times have a dollar-weighted average time until the next interest rate adjustment of 90 days or less. The Fund may use interest rate swaps and other investment practices to shorten the effective interest rate adjustment period of senior loans. If the Fund does so, it considers the shortened period to be the adjustment period of the senior loans.

 

   

Senior Income has no policy limiting the maturity of the senior loans that it purchases.

 

   

Senior Income does not intend to invest more than 5% of its Managed Assets in senior loans or other securities of a single borrower. In addition, the Fund will not invest more than 25% of its Managed Assets in borrowers that conduct their principal businesses in the same industry.

 

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Senior Income invests no more than 20% of its total assets in senior loans in which it acts as an agent or co-agent, and the size of any such individual senior loan will not exceed 5% of the Fund’s total assets.

 

   

Senior Income does not currently intend to invest more than 20% of its Managed Assets in participations. Participations are when the Fund acquires from a lender a portion of a lender’s rights under a loan agreement.

 

   

Senior Income will only acquire participations if the lender selling the participation, and any other persons interpositioned between the Fund and the lender, (i) at the time of investment has outstanding debt or deposit obligations rated investment grade (BBB or A-3 or higher by S&P, Baa or P-3 or higher by Moody’s or BBB or F3 or higher by Fitch or has debt or obligations that are unrated by S&P, Moody’s and Fitch and determined by the Fund’s investment adviser to be of comparable quality and (ii) has entered into an agreement which provides for the holding of assets in safekeeping for, or the prompt disbursement of assets to, the Fund.

 

   

Senior Income may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including exchange-traded funds (“ETFs”)) that invest primarily in the types in which the Fund may invest directly.

 

   

Senior Income may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps. Such swaps are standardized total return swaps on loan indices that are designed to provide exposure to the senior loan market.

Investment Policies of Floating Rate Income Opportunity

In addition to Floating Rate Income Opportunity’s investment policies discussed above, the following non-fundamental investment policies also apply to Floating Rate Income Opportunity, under normal circumstances:

 

   

Floating Rate Income Opportunity invests no more than 20% of its total assets in senior loans in which it acts as an agent or co-agent and the size of any such individual senior loan will not exceed 5% of the Fund’s total assets.

 

   

Floating Rate Income Opportunity may invest its Managed Assets without limit in adjustable rate loans and other debt instruments that are, at the time of investment, rated below investment grade or unrated but judged to be of comparable quality. Investment grade quality securities are those securities that, at the time of investment, are (i) rated by at least one NRSRO within the four highest grades (BBB- or Baa3 or better by S&P, Moody’s or Fitch, or (ii) unrated but judged to be of comparable quality. However, Floating Rate Income Opportunity may not invest, at the time of investment, more than 30% of its Managed Assets in securities rated below CCC+ or Caa by any NRSRO that rate such security or are unrated but judged to be of comparable quality, including securities in default.

 

   

Floating Rate Income Opportunity may invest up to 20% of its Managed Assets in the following adjustable or fixed rate securities: (i) other debt securities such as investment and non-investment grade debt securities, fixed rate senior loans or subordinated loans, convertible securities and structured notes (other than structured notes that are designed to provide returns and risks that emulate those of adjustable rate loans, which may be treated as an investment in adjustable rate loans for purposes of the 80% requirement set forth above); (ii) mortgage-related and other asset-backed securities (including collateralized loan obligations and collateralized debt obligations); and (iii) debt securities and other instruments issued by government, government-related or supranational issuers (commonly referred to as sovereign debt securities).

 

   

No more than 5% of Floating Rate Income Opportunity’s Managed Assets may be invested in each of convertible securities, mortgage-related and other asset- backed securities, and sovereign debt securities.

 

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Floating Rate Income Opportunity also may receive warrants and equity securities issued by an issuer or its affiliates in connection with the Fund’s other investments in such entities.

 

   

Floating Rate Income Opportunity invests at least 65% of its Managed Assets in senior loans that are secured by specific collateral. Such collateral consists of assets and/or stock of the borrower.

 

   

Floating Rate Income Opportunity maintains an average duration of one year or less for its portfolio investments in adjustable rate loans and other debt instruments.

 

   

Floating Rate Income Opportunity will not invest in inverse floating rate securities.

 

   

Floating Rate Income Opportunity may invest up to 20% of its Managed Assets in securities of non-U.S. issuers that are U.S. dollar or non-U.S. dollar denominated. The Fund’s Managed Assets to be invested in adjustable rate loans and other debt instruments of non-U.S. issuers may include debt securities of issuers located, or conducting their business in, emerging markets countries.

 

   

Floating Rate Income Opportunity may not invest more than 20% of its Managed Assets in securities from an industry which (for these purposes ) generally refers to the classification of companies in the same or similar lines of business such as the automotive, textiles and apparel, hotels, media production and consumer retailing industries. Floating Rate Income Opportunity may invest more than 20% of its Managed Assets in sectors which (for these purposes) generally refers to broader classifications of industries, such as the consumer discretionary sector which includes the automotive, textiles and apparel, hotels, media production and consumer retailing industries, provided the Fund’s investment in a particular industry within the sector does not exceed the industry limitation.

 

   

Floating Rate Income Opportunity may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps. An iBoxx Loan Total Return Swap is a specific type of total return swap on an index that is designed to provide exposure to the senior loan market. The iBoxx Loan Total Return Swap’s underlying index is the Markit iBoxx USD Liquid Leveraged Loans Total Return Index, which is one of a subset of indices designed to track the broader, rules-based Markit iBoxx USD Liquid Leveraged Loan Index. “iBoxx Loan Total Return Swaps” means total return swaps written on the Markit iBoxx USD Liquid Leveraged Loans Total Return Index.

Investment Policies of Short Duration Credit Opportunities

In addition to Short Duration Credit Opportunities’ investment policies discussed above, the following non-fundamental investment policies also apply to Short Duration Credit Opportunities, under normal circumstances:

 

   

Short Duration Credit Opportunities invests at least 70% of its Managed Assets in adjustable rate corporate debt instruments, including senior secured loans, second lien loans, and other adjustable rate corporate debt instruments.

 

   

Short Duration Credit Opportunities may invest in high yield debt and other debt instruments as described herein in an aggregate amount of up to 30% of its Managed Assets.

 

   

Short Duration Credit Opportunities invests at least 80% of its Managed Assets in corporate debt instruments that are, at the time of investment, rated below investment grade or unrated but judged by the Fund’s sub-adviser to be of comparable quality. Investment grade quality securities are those securities that, at the time of investment, are (i) rated by at least one NRSRO within the four highest grades (BBB- or Baa3 or better by S&P, Moody’s or Fitch, or (ii) unrated but judged to be of comparable quality. However, Short Duration Credit Opportunities may not invest, at the time of investment, more than 30% of its Managed Assets in securities rated below CCC+ or Caa by any NRSRO that rate such security or are unrated but judged to be of comparable quality, including securities in default.

 

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Short Duration Credit Opportunities may enter into short positions, consisting primarily of high yield debt, either directly or through the use of derivatives, including credit default swaps, creating a negative investment exposure or hedging existing long (positive) investment exposure in a notional amount up to 20% of its Managed Assets.

 

   

Short Duration Credit Opportunities will maintain an average duration of two years or less for its portfolio (including the effect of leverage, but after the effect of derivatives used to shorten duration). “Average duration” and “average portfolio duration” are each defined to be the modified duration of the Fund’s portfolio, which is the measure of a debt instrument’s or a portfolio’s price sensitivity with respect to changes in market yields adjusted to reflect the effect of the Fund’s use of leverage.

 

   

Short Duration Credit Opportunities may invest up to 20% of its Managed Assets in debt instruments of non-U.S. issuers (which term includes borrowers) that are U.S. dollar or non-U.S. dollar denominated. The Fund’s investments in debt instruments of non-U.S. issuers may include debt instruments located, or conducting their business, in emerging market countries.

 

   

Short Duration Credit Opportunities may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in the types in which the Fund may invest directly.

Use of Leverage

Each Fund uses leverage to pursue its investment objective. The Funds may use leverage to the extent permitted by the 1940 Act. The Funds may source leverage through a number of methods including through borrowings, issuing preferred shares of beneficial interest, the issuance of debt securities, and entering into reverse repurchase agreements (effectively a borrowing). In addition, the Funds may use derivatives that may have the economic effect of leverage, such as certain credit default swaps, total return swaps and bond futures. The amount and sources of leverage will vary depending on market conditions.

Temporary Defensive Periods

During temporary defensive periods (e.g., times when, in the Adviser’s and/or the Sub-Adviser’s opinion, temporary imbalances of supply and demand or other temporary dislocations in the senior loan market adversely affect the price at which senior loans are available), each Fund may invest up to 100% of its assets in high quality, short-term securities, and in short-, intermediate- or long-term U.S. Treasury securities. There can be no assurance that such techniques will be successful. Accordingly, during such periods, the Funds may not achieve their investment objectives.

Portfolio Investments

The Acquiring Fund’s portfolio is composed principally of the following investments.

Senior Loans

The Acquiring Fund may invest in (i) senior loans made by banks or other financial institutions to borrowers, (ii) assignments of such interests in senior loans, or (iii) participation interests in senior loans. senior loans hold the most senior position in the capital structure of a borrower, are typically secured with specific collateral and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debt holders and stockholders of the borrower. The capital structure of a borrower may include senior loans, senior and junior subordinated debt, preferred stock and common stock issued by the borrower, typically in descending order of seniority with respect to claims on the borrower’s assets. The proceeds of senior loans primarily are used by borrowers to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock

 

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repurchases, re-financings, internal growth and for other corporate purposes. A senior loan is typically originated, negotiated and structured by a U.S. or non-U.S. commercial bank, insurance company, finance company or other financial institution (“Agent”) for a lending syndicate of financial institutions which typically includes the Agent (“Lenders”). The Agent typically administers and enforces the senior loan on behalf of the other Lenders in the syndicate. In addition, an institution, typically but not always the Agent, holds any collateral on behalf of the Lenders. The Acquiring Fund normally will rely primarily on the Agent to collect principal of and interest on a senior loan. Also, the Acquiring Fund usually will rely on the Agent to monitor compliance by the borrower with the restrictive covenants in a loan agreement.

Senior loans in which the Acquiring Fund invests generally pay interest at rates that are redetermined periodically at short-term intervals by reference to a base lending rate, plus a premium. senior loans typically have rates of interest that are redetermined either daily, monthly, quarterly or semiannually by reference to a base lending rate plus a premium or credit spread. These base lending rates are primarily LIBOR (of any tenor, but typically between one month and six months, and currency), and secondarily the prime rate offered by one or more major U.S. banks and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders. The frequency of how often a senior loan resets its interest rate will impact how closely such senior loans track current market interest rates. The senior loans held by the Acquiring Fund will have a dollar-weighted average period until the next interest rate adjustment of approximately 90 days or less. As a result, as short-term interest rates increase, interest payable to the Acquiring Fund from its investments in senior loans should increase, and as short-term interest rates decrease, interest payable to the Acquiring Fund from its investments in senior loans should decrease. The Acquiring Fund may utilize derivative instruments to shorten the effective interest rate redetermination period of senior loans in its portfolio. senior loans typically have a stated term of between one and eight years.

The Acquiring Fund primarily purchases senior loans by assignment from a participant in the original syndicate of lenders or from subsequent assignees of such interests. The purchaser of an assignment typically succeeds to all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender.

The Acquiring Fund may purchase participation interests in the original syndicate making senior loans. Loan participation interests typically represent direct participations in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The Acquiring Fund may participate in such syndications, or can buy part of a senior loan, becoming a part Lender. When purchasing a participation interest, the Acquiring Fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary. The participation interests in which the Acquiring Fund may invest may not be rated by any NRSRO. See “Risk Factors—Senior Loan Risks.”

Although senior loans have the most senior position in a borrower’s capital structure and are often secured by specific collateral, they are typically below investment grade quality and may have below investment grade ratings; these ratings are associated with securities having speculative characteristics. Senior loans rated below investment grade may therefore be regarded as “junk,” despite their senior capital structure position or specific collateral pledged to secure such loans. The Acquiring Fund may purchase and retain in its portfolio senior loans where the borrowers have experienced, or may be perceived to be likely to experience, credit problems, including involvement in or recent emergence from bankruptcy reorganization proceedings or other forms of debt restructuring. Such investments may provide opportunities for enhanced income as well as capital appreciation. At times, in connection with the restructuring of a senior loan either outside of bankruptcy court or in the context of bankruptcy court proceedings, the Acquiring Fund may determine or be required to accept equity securities or junior debt securities in exchange for all or a portion of a senior loan. See “—Warrants and Equity Securities.” Given the Acquiring Fund’s policy to invest up to 30% of its Managed Assets in senior loans

 

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and other debt securities that are, at the time of investment, rated CCC+ or Caa or below by S&P, Moody’s or Fitch, the Acquiring Fund may invest no more than 30% of its Managed Assets in borrowers that, at the time of investment, have filed for protection under the federal bankruptcy laws or that have had involuntary bankruptcy petitions filed against them by creditors. Investment rating limitations are considered to apply only at the time of investment and the Acquiring Fund is under no obligation to sell securities as a result of changes in market values or ratings. You should expect the Acquiring Fund’s net asset value to fluctuate as a result of changes in the credit quality of borrowers and other factors. A serious deterioration in the credit quality of one or more borrowers could cause a permanent decrease in the Acquiring Fund’s net asset value. See “Risk Factors—Loan Participation Risk.”

Non-Senior Loan Investments

Second Lien Loans and Unsecured Loans. The Acquiring Fund may invest in second lien loans and other unsecured loans. Such loans are made by public and private corporations and other non-governmental borrowers for a variety of purposes. As in the case of senior loans, the Acquiring Fund may purchase interests in second lien loans and unsecured loans through assignments or participations.

Second lien loans have similar characteristics as senior loans except that such interests are second in lien property rather than first. Second lien loans are second in priority of payment to one or more senior loans of the related borrower and are typically secured by a second priority security interest or lien to or on specified collateral securing the borrower’s obligation under the interest. They typically have similar protections and rights as senior loans. Second lien loans are not (and by their terms cannot become) subordinate in priority of payment to any obligation of the related borrower other than senior loans of such borrower. Second lien loans may feature fixed or floating rate interest payments. Because second lien loans are second to senior loans, they present a greater degree of investment risk but often pay interest at higher rates reflecting this additional risk. In addition, second lien loans of below investment grade quality share many of the risk characteristics of other below investment grade debt instruments.

Unsecured loans generally have lower priority in right of payment compared to holders of secured interests of the borrower. Unsecured loans are not secured by a security interest or lien to or on specified collateral securing the borrower’s obligation under the interest. Unsecured loans by their terms may be or may become subordinate in right of payment to other obligations of the borrower, including senior loans, second lien loans and other interests. Unsecured loans may have fixed or adjustable floating rate interest payments. Because unsecured loans are subordinate to senior loans and other secured debt of the borrower, they present a greater degree of investment risk but often pay interest at higher rates reflecting this additional risk. Such investments generally are of below investment grade quality. Unsecured loans of below investment grade quality share the same risks of other below investment grade debt instruments.

Corporate Bonds. Corporate bonds generally are used by corporations to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest and normally must repay the amount borrowed on or before maturity. Certain bonds are “perpetual” in that they have no maturity date. The Acquiring Fund may invest in bonds and other debt securities of any quality.

Structured Notes. The Acquiring Fund may utilize structured notes, which are privately negotiated debt obligations or economically equivalent instruments where the principal and/or interest to be received by the investor is determined by reference to the performance of a benchmark asset, market or interest rate (an “embedded index”), such as selected securities or loans, an index of securities or loans, or specified interest rates, or the differential performance of two assets or markets. Structured notes may be issued by corporations, including banks, as well as by governmental agencies. Structured notes frequently are assembled in the form of medium-term notes, but a variety of forms are available and may be used in particular circumstances. The terms of such structured notes normally provide that their principal and/or interest payments are to be adjusted upwards or index while the structured notes are outstanding. As a result, the interest and/or principal payments that may

 

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be made on a structured product may vary widely, depending on a variety of factors, including the volatility of the embedded index and the effect of changes in the embedded index on principal and/or interest payments. If the Acquiring Fund invests in structured notes that are designed to provide returns and risks that emulate those of senior loans, the Acquiring Fund may treat the value of (or, if applicable, the notional amount of) such investment as an investment in senior loans for purposes of determining compliance with the requirement set forth above that at least 80% of the Acquiring Fund’s Assets be invested under normal market circumstances in senior loans, except to the extent that the value (or notional amount) of such investments exceeds 5% of the Acquiring Fund’s Managed Assets. Any such investment amounts that exceed 5% of Managed Assets will be treated as a type of “other debt instruments” which, in the aggregate, are limited to 20% of Managed Assets. The rate of return on structured notes may be determined by applying a multiplier to the performance or differential performance of the referenced index(es) or other asset(s). Application of the multiplier involves leverage that will serve to magnify the potential for gain and the risk of loss. The Sub-Adviser may utilize structured notes for investment purposes and also for risk management purposes, such as to reduce the duration and interest rate sensitivity of the Acquiring Fund’s portfolio. While structured notes may offer the potential for a favorable rate of return from time to time, they also entail certain risks. Structured notes may be less liquid than other debt securities, and the price of structured notes may be more volatile. In some cases, depending on the terms of the embedded index, a structured note may provide that the principal and/or interest payments may be adjusted below zero. Structured notes also may involve significant credit risk and risk of default by the counterparty. Although structured notes are not necessarily illiquid, the Adviser believes that currently most structured notes are illiquid. Like other sophisticated strategies, the Acquiring Fund’s use of structured notes may not work as intended. If the value of the embedded index changes in a manner other than that expected by the Sub-Adviser, principal and/or interest payments received on the structured notes may be substantially less than expected. Also, if the Sub-Adviser uses structured notes to reduce the duration of the Acquiring Fund’s portfolio, this may limit the Acquiring Fund’s return when having a longer duration of the Acquiring Fund’s portfolio, this may limit the Acquiring Fund’s return when having a longer duration would be beneficial (for instance, when interest rates decline).

U.S. Government Securities. U.S. Government securities include (1) U.S. Treasury obligations, which differ in their interest rates, maturities and times of issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury notes (maturities of one year to ten years) and U.S. Treasury bonds (generally maturities of greater than ten years) and (2) obligations issued or guaranteed by U.S. Government agencies and instrumentalities that are supported by any of the following: (i) the full faith and credit of the U.S. Treasury, (ii) the right of the issuer to borrow an amount limited to a specific line of credit from the U.S. Treasury, (iii) discretionary authority of the U.S. Government to purchase certain obligations of the U.S. Government agency or instrumentality or (iv) the credit of the agency or instrumentality. The Acquiring Fund also may invest in any other security or agreement collateralized or otherwise secured by U.S. Government securities. Agencies and instrumentalities of the U.S. Government include but are not limited to: Federal Land Banks, Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks, Federal Home Loan Banks, FHLMC, FNMA, GNMA, Student Loan Marketing Association, United States Postal Service, Small Business Administration, Tennessee Valley Authority and any other enterprise established or sponsored by the U.S. Government. Because the U.S. Government generally is not obligated to provide support to its instrumentalities, the Acquiring Fund will invest in obligations issued by these instrumentalities only if the Sub-Adviser determines that the credit risk with respect to such obligations is minimal.

The principal of and/or interest on certain U.S. Government securities which may be purchased by the Acquiring Fund could be (i) payable in non-U.S. currencies rather than U.S. dollars or (b) increased or diminished as a result of changes in the value of the U.S. dollar relative to the value of non-U.S. currencies. The value of such portfolio securities may be affected by changes in the exchange rate between foreign currencies and the U.S. dollar.

Commercial Paper. Commercial paper represents short-term unsecured promissory notes issued in bearer form by corporations such as banks or bank holding companies and finance companies. The rate of return on

 

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commercial paper may be linked or indexed to the level of exchange rates between the U.S. dollar and a foreign currency or currencies.

Warrants and Equity Securities. The Acquiring Fund may acquire equity securities and warrants issued by a borrower or its affiliates as part of a package of investments in the borrower or its affiliates issued in connection with a senior loan of the borrower. The Acquiring Fund also may convert a warrant so acquired into the underlying security. Investments in warrants and equity securities entail certain risks in addition to those associated with investments in senior loans. The value of these securities may be affected more rapidly, and to a greater extent, by company-specific developments and general market conditions. These risks may increase fluctuations in the Acquiring Fund’s net asset value. The Acquiring Fund may possess material non-public information about a borrower as a result of its ownership of a senior loan of such borrower. Because of prohibitions on trading in securities of issuers while in possession of such information the Acquiring Fund might be unable to enter into a transaction in a security of such a borrower when it would otherwise be advantageous to do so.

Repurchase Agreements. For cash management purposes, the Acquiring Fund may invest in repurchase agreements. A repurchase agreement is a contractual agreement whereby the seller of securities (U.S. Government securities or municipal bonds) agrees to repurchase the same security at a specified price on a future date agreed upon by the parties. The agreed-upon repurchase price determines the yield during the Acquiring Fund’s holding period. Repurchase agreements are considered to be loans collateralized by the underlying security that is the subject of the repurchase contract. The Acquiring Fund will only enter into repurchase agreements with registered securities dealers or domestic banks that, in the opinion of the Sub-Adviser, present minimal credit risk. The risk to the Acquiring Fund is limited to the ability of the issuer to pay the agreed-upon repurchase price on the delivery date; however, although the value of the underlying collateral at the time the transaction is entered into always equals or exceeds the agreed-upon repurchase price, if the value of the collateral declines there is a risk of loss of both principal and interest. In the event of default, the collateral may be sold but the Acquiring Fund might incur a loss if the value of the collateral declines, and might incur disposition costs or experience delays in connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced with respect to the seller of the security, realization upon the collateral by the Acquiring Fund may be delayed or limited. The Sub-Adviser will monitor the value of the collateral at the time the transaction is entered into and at all times subsequent during the term of the repurchase agreement in an effort to determine that such value always equals or exceeds the agreed-upon repurchase price. In the event the value of the collateral declines below the repurchase price, the Sub-Adviser will demand additional collateral from the issuer to increase the Sub-Adviser of the collateral to at least that of the repurchase price, including interest.

Convertible Securities. Convertible securities are bonds, debentures, notes, preferred securities or other securities that may be converted or exchanged (by the holder or the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio or predetermined price (the “conversion price”). Convertible securities have general characteristics similar to both debt securities and common stock. The interest paid on convertible securities may be fixed or floating rate. Floating rate convertible securities may specify an interest rate or rates that are conditioned upon changes to the market price of the underlying common stock. Convertible securities also may be issued in zero coupon form with an original issue discount. See “—Zero Coupon and Payment-In-Kind Securities.” Although to a lesser extent than with debt securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock and, therefore, will also react to variations in the general market for common stock. Depending upon the relationship of the conversion price to the market value of the underlying common stock, a convertible security may trade more like a common stock than a debt instrument. A convertible security generally entitles the holder to receive interest paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Convertible securities rank senior to common stock in a corporation’s capital structure and, therefore, generally entail less risk than the corporation’s common stock, although the extent to which such risk is reduced depends in

 

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large measure upon the degree to which the convertible security sells above its value as a debt obligation. Before conversion, convertible securities have characteristics similar to non-convertible debt obligations and can provide for a stable stream of income with generally higher yields than common stock. However, convertible securities fall below debt obligations of the same issuer in order of preference or priority in the event of a liquidation, and are typically unrated or rated lower than such debt obligations. In addition, contingent payment convertible securities allow the issuer to claim deductions based on its nonconvertible cost of debt which generally will result in deductions in excess of the actual cash payments made on the securities (and accordingly, holders will recognize income in amounts in excess of the cash payments received). There can be no assurance of current income because the issuers of the convertible securities may default on their obligations. The convertible securities in which the Acquiring Fund may invest may be below investment grade quality.

Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar credit quality because of the potential for capital appreciation. A convertible security, in addition to providing current income, offers the potential for capital appreciation through the conversion feature, which enables the holder to benefit from any increases in the market price of the underlying common stock. The common stock underlying convertible securities may be issued by a different entity than the issuer of the convertible securities.

The value of convertible securities is influenced by both the yield of non-convertible securities of comparable issuers and by the value of the underlying common stock. The value of a convertible security viewed without regard to its conversion feature (i.e., strictly on the basis of its yield) is sometimes referred to as its “investment value.” The investment value of the convertible security typically will fluctuate based on the credit quality of the issuer and will fluctuate inversely with changes in prevailing interest rates. However, at the same time, the convertible security will be influenced by its “conversion value,” which is the market value of the underlying common stock that would be obtained if the convertible security were converted. Conversion value fluctuates directly with the price of the underlying common stock, and will therefore be subject to risks relating to the activities of the issuer and/or general market and economic conditions. Depending upon the relationship of the conversion price to the market value of the underlying security, a convertible security may trade more like an equity security than a debt instrument.

If, because of a low price of the common stock, the conversion value is substantially below the investment value of the convertible security, the price of the convertible security is governed principally by its investment value. If the conversion value of a convertible security increases to a point that approximates or exceeds its investment value, the value of the security will be principally influenced by its conversion value. A convertible security will sell at a premium over its conversion value to the extent investors place value on the right to acquire the underlying common stock while holding a fixed-income security.

Mandatory convertible securities are distinguished as a subset of convertible securities because the conversion is not optional and the conversion price at maturity (or redemption) is based solely upon the market price of the underlying common stock, which may be significantly less than par or the price (above or below par) paid. Mandatory convertible securities may be called for conversion by the issuer after a particular date and under certain circumstances (including at a specified price) established upon its issuance. For these reasons, the risks associated with the investing in mandatory convertible securities most closely resemble the risks inherent in common stock. Mandatory convertible securities customarily pay a higher coupon yield to compensate for the potential risk of additional price volatility and loss upon redemption. Since the correlation of common stock risk increases as the security approaches its redemption date, there can be no assurance that the higher coupon will compensate for the potential loss. If a mandatory convertible security is called for conversion, the Acquiring Fund will be required to either convert it into the underlying common stock or sell it to a third party, which may have an adverse effect on the Acquiring Fund’s ability to achieve its investment objective. Convertible securities generally offer lower interest or dividend yields than non-convertible fixed-income securities of similar credit quality because of the potential for capital appreciation. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible

 

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security’s market value also tends to reflect the market price of the common stock of the issuing company, particularly when the stock price is greater than the convertible security’s conversion price. The conversion price is defined as the predetermined price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock. As the market price of the underlying common stock declines below the conversion price, the price of the convertible security tends to be increasingly influenced more by the yield of the convertible security than by the market price of the underlying common stock.

Mortgage-Related and Other Asset-Backed Securities. Mortgage-related securities are debt instruments that provide periodic payments consisting of interest and/or principal that are derived from or related to payments of interest and/or principal on underlying mortgages. Additional payments on mortgage-related securities may be made out of unscheduled prepayments of principal resulting from the sale of the underlying property, or from refinancing or foreclosure, net of fees or costs that may be incurred. The mortgage-related securities in which the Acquiring Fund invests will typically pay variable rates of interest, although the Acquiring Fund may invest in fixed-rate obligations as well.

The Acquiring Fund may invest in certain asset-backed securities as discussed below. Asset-backed securities are payment claims that are securitized in the form of negotiable paper that is issued by a financing company (generally called a special purpose vehicle or “SPV”). These securitized payment claims are, as a rule, corporate financial assets brought into a pool according to specific diversification rules. The SPV is a company founded solely for the purpose of securitizing these claims and its only asset is the risk arising out of this diversified asset pool. On this basis, marketable securities are issued which, due to the diversification of the underlying risk, generally represent a lower level of risk than the original assets. The redemption of the securities issued by the SPV takes place at maturity out of the cash flow generated by the collected claims.

A collateralized loan obligation (“CLO”) is a structured credit security issued by an SPV that was created to reapportion the risk and return characteristics of a pool of assets. The assets, typically senior loans, are used as collateral supporting the various debt tranches issued by the SPV. The key feature of the CLO structure is the prioritization of the cash flows from a pool of debt securities among the several classes of CLO holders, thereby creating a series of obligations with varying rates and maturities appealing to a wide range of investors. CLOs generally are secured by an assignment to a trustee under an indenture pursuant to which the bonds are issued of collateral consisting of a pool of debt instruments, usually, non-investment grade bank loans. Payments with respect to the underlying debt securities generally are made to the trustee under the indenture. CLOs are designed to be retired as the underlying debt instruments are repaid. In the event of sufficient early prepayments on such debt instruments, the class or series of CLO first to mature generally will be retired prior to maturity. Therefore, although in most cases the issuer of CLOs will not supply additional collateral in the event of such prepayments, there will be sufficient collateral to secure their priority with respect to other CLO tranches that remain outstanding. The credit quality of these securities depends primarily upon the quality of the underlying assets, their priority with respect to other CLO tranches and the level of credit support and/or enhancement provided.

The underlying assets (e.g., loans) are subject to prepayments which shorten the securities’ maturity and may lower their return. If the credit support or enhancement is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value of these securities also may change because of changes in the market’s perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or fund providing the credit support or enhancement.

The Acquiring Fund also may invest in collateralized debt obligations (“CDOs”). A CDO is a structured credit security issued by an SPV that was created to reapportion the risk and return characteristics of a pool of assets. The assets, typically non-investment grade bonds, leveraged loans, and other asset-backed obligations, are used as collateral supporting the various debt and equity tranches issued by the SPV. CDOs operate similarly to CLOs and are subject to the same inherent risks.

Generally, rising interest rates tend to extend the duration of fixed-rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, mortgage-

 

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related securities held by the Acquiring Fund may exhibit additional volatility. This is known as extension risk. The Sub-Adviser expects that the Acquiring Fund will focus its mortgage-related investments principally in adjustable rate mortgage-related and other asset- backed securities, which should minimize the Acquiring Fund’s overall sensitivity to interest rate volatility and extension risk. However, because interest rates on most adjustable rate mortgage-related and other asset-backed securities typically only reset periodically (e.g., monthly or quarterly), changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuation in the market value of these securities, including declines in market value as interest rates rise. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. This can reduce the Acquiring Fund’s returns because the Acquiring Fund may have to reinvest that money at lower prevailing interest rates. Below investment grade securities frequently have call features that allow an issuer to redeem a security at dates prior to its stated maturity at a specified price (typically greater than par) only if certain prescribed conditions are met (commonly referred to as call protection). An issuer may redeem a lower grade security if, for example, the issuer can refinance the debt at a lower cost due to declining interest rates or an improvement in the credit standing of the issuer. senior loans typically have no such call protection. For premium bonds (bonds acquired at prices that exceed their par or principal value) purchased by the Acquiring Fund, prepayment risk may be increased. The Acquiring Fund’s investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets.

Sovereign Debt Securities. The Acquiring Fund may invest in debt securities and other instruments that are issued by, or that are related to, government, government-related and supranational issuers, including those located, or conducting their business, in emerging markets countries.

The ability of a non-U.S. sovereign issuer, especially in an emerging market country, to make timely and ultimate payments on its debt obligations will be strongly influenced by the sovereign issuer’s balance of payments, including export performance, its access to international credits and investments, fluctuations of interest rate and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its export in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a sovereign issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks and multinational organizations. There may be no bankruptcy proceedings similar to those in the U.S. by which defaulted interest may be collected.

Additional factors that may influence the ability or willingness to service debt include, but are not limited to, a country’s cash flow situation, the availability or sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, and its government’s policy towards the International Monetary Fund, the International Bank for Reconstruction and Development and other international agencies to which a government debtor may be subject. The Acquiring Fund may invest in debt securities issued by issuers located, or conducting their business in, emerging market countries, and investments in such debt securities are particularly speculative. Heightened risks of investing in emerging markets sovereign debt include:

 

   

Risk of default by a governmental issuer or guarantor. In the event of a default, the Acquiring Fund may have limited legal recourse against the issuer and/or guarantor.

 

   

Risk of restructuring certain debt obligations. This may include reducing and rescheduling interest and principal payments or requiring lenders to extend additional credit, which may adversely affect the value of these investments.

In addition, risks of investing in emerging markets securities include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity, significant price volatility, restrictions on

 

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foreign investment, and possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales, future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Acquiring Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging markets countries.

Below Investment Grade Securities. Investments in below investment grade securities, commonly referred to as junk bonds or high yield debt, generally provide greater income and increased opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility and principal and income risk, including the possibility of issuer default and bankruptcy. Issuers of below investment grade securities may be highly leveraged and may not have available to them more traditional methods of financing. Securities in the lowest investment grade category also may be considered to possess some speculative characteristics by certain rating agencies. In addition, analysis of the creditworthiness of issuers of below investment grade securities may be more complex than for issuers of higher quality securities.

Below investment grade securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade securities. A projection of an economic downturn or of a period of rising interest rates, for example, could cause a decline in lower-grade security prices because the advent of a recession could lessen the ability of an issuer to make principal and interest payments on its debt obligations. If an issuer of below investment grade securities defaults, in addition to risking payment of all or a portion of interest and principal, the Acquiring Fund may incur additional expenses to seek recovery. In the case of below investment grade securities structured as zero coupon or payment-in-kind securities, their market prices will normally be affected to a greater extent by interest rate changes, and therefore tend to be more volatile than securities which pay interest currently and in cash. The Sub-Adviser seeks to reduce these risks through diversification, credit analysis and attention to current developments and trends in both the economy and financial markets.

The secondary market for below investment grade securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the Acquiring Fund’s ability to dispose of a particular security. There are fewer dealers in the market for below investment grade securities than for investment grade obligations. The prices quoted by different dealers may vary significantly and the spread between the bid and ask price is generally much larger than for higher quality instruments. Under adverse market or economic conditions, the secondary market for below investment grade securities could contract further, independent of any specific adverse changes in the condition of a particular issuer, and these instruments may become illiquid. As a result, the Acquiring Fund could find it more difficult to sell these securities or may be able to sell the securities only at prices lower than if such securities were widely traded. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the Acquiring Fund’s net asset value.

Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of below investment grade securities, especially in a thinly traded market. When secondary markets for below investment grade securities are less liquid than the market for investment grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements of judgment may play a greater role in the valuation because there is less reliable, objective data available. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly and the Acquiring Fund may have greater difficulty selling its portfolio securities. The Acquiring Fund will be more dependent on the Sub-Adviser’s research and analysis when investing in below investment grade securities. The Sub-Adviser seeks to minimize the risks of investing in all securities through in-depth credit analysis and attention to current developments in interest rates and market conditions.

 

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The ratings of Moody’s, S&P and Fitch represent their opinions as to the quality of the securities they rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, in the case of debt obligations, certain debt obligations with the same maturity, coupon and rating may have different yields while debt obligations with the same maturity and coupon with different ratings may have the same yield. For these reasons, the use of credit ratings as the sole method of evaluating lower-grade securities can involve certain risks. For example, credit ratings evaluate the safety of principal and interest payments, not the market value risk of lower-grade securities. Also, credit rating agencies may fail to change credit ratings in a timely fashion to reflect events since the security was last rated. The Sub-Adviser does not rely solely on credit ratings when selecting securities for the Acquiring Fund, and develops its own independent analysis of issuer credit quality.

The Acquiring Fund’s credit quality policies apply only at the time a security is purchased, and the Acquiring Fund is not required to dispose of a security in the event that a rating agency or the Sub-Adviser downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell such a security, the Sub-Adviser may consider such factors as its assessment of the credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such security by other rating agencies. However, analysis of the creditworthiness of issuers of below investment grade securities may be more complex than for issuers of higher quality debt securities.

Debtor-In-Possession Financings. The Acquiring Fund may invest in debtor-in-possession financings (commonly called “DIP financings”). DIP financings are arranged when an entity seeks the protections of the bankruptcy court under chapter 11 of the U.S. Bankruptcy Code. These financings allow the entity to continue its business operations while reorganizing under chapter 11. Such financings are senior liens on unencumbered security (i.e., security not subject to other creditors’ claims). There is a risk that the entity will not emerge from chapter 11 and be forced to liquidate its assets under chapter 7 of the Bankruptcy Code. In such event, the Acquiring Fund’s only recourse will be against the property securing the DIP financing.

Securities Issued by Non-U.S. Issuers

General. The Acquiring Fund may invest in securities of non-U.S. Issuers that are U.S. dollar or non-U.S. dollar denominated. The Acquiring Fund may invest in any region of the world and invest in companies operating in developed countries such as Canada, Japan, Australia, New Zealand and most Western European countries. An “emerging market” country is any country determined to have an emerging markets economy, considering, among other things, factors such as whether the country has a low-to-middle income economy according to the World Bank or its related organizations, the country’s credit rating, its political and economic stability and the development of its financial and capital markets. These countries generally include countries located in Latin America, the Caribbean, Asia, Africa, the Middle East and Eastern and Central Europe. Securities of non-U.S. Issuers include ADRs, Global Depositary Receipts (GDRs) or other securities representing underlying shares of non-U.S. Issuers. Positions in those securities are not necessarily denominated in the same currency as the common stock into which they may be converted. ADRs are receipts typically issued by an American bank or trust company evidencing ownership of the underlying securities. GDRs are U.S. dollar- denominated receipts evidencing ownership of non-U.S. securities. Generally, ADRs, in registered form, are designed for the U.S. securities markets and GDRs, in bearer form, are designed for use in non-U.S. securities markets. The Acquiring Fund may invest in sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the Acquiring Fund is likely to bear its proportionate share of the expenses of the depository and it may have greater difficulty in receiving shareholder communications than it would have with a sponsored ADR.

Investors should understand and consider carefully the risks involved in investing in securities of non-U.S. Issuers. Investing in securities of non-U.S. Issuers involves certain considerations comprising both risks and opportunities not typically associated with investing in securities of U.S. Issuers. These considerations include: (i) less publicly available information about non-U.S. Issuers or markets due to less rigorous disclosure or accounting standards or regulatory practices; (ii) many non-U.S. markets are smaller, less liquid and more

 

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volatile, meaning that, in a changing market, the Sub-Adviser may not be able to sell the Acquiring Fund’s portfolio securities at times, in amounts or at prices it considers reasonable; (iii) potential adverse effects of fluctuations in currency exchange rates or controls on the value of the Acquiring Fund’s investments; (iv) the economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession; (v) the impact of economic, political, social or diplomatic developments may adversely affect the securities markets; (vi) withholding and other non-U.S. taxes may decrease the Acquiring Fund’s return; (vii) certain non-U.S. countries may impose restrictions on the ability of non-U.S. Issuers to make payments of principal and/or interest to investors located outside the U.S. due to blockage of foreign currency exchanges or otherwise; and (viii) possible seizure, expropriation or nationalization of the company or its assets. These risks are more pronounced to the extent that the Acquiring Fund invests a significant amount of its investments in issuers located in one region and to the extent that the Acquiring Fund invests in securities of issuers in emerging markets.

Although the Acquiring Fund may hedge its exposure to certain of these risks, including the foreign currency exchange rate risk, there can be no assurance that the Acquiring Fund will enter into hedging transactions at any time or at times or under circumstances in which it might be advisable to do so.

Debt Obligations of Non-US Governments. An investment in debt obligations of non-U.S. governments and their political subdivisions (sovereign debt) involves special risks that are not present in corporate debt obligations. The non-U.S. Issuer of the sovereign debt or the non-U.S. governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Acquiring Fund may have limited recourse in the event of a default. During periods of economic uncertainty, the market prices of sovereign debt may be more volatile than prices of debt obligations of U.S. Issuers. In the past, certain non-U.S. countries have encountered difficulties in servicing their debt obligations, withheld payments of principal and interest and declared moratoria on the payment of principal and interest on their sovereign debt.

A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its non-U.S. currency reserves, the availability of sufficient non-U.S. currency, the relative size of the debt service burden, the sovereign debtor’s policy toward its principal international lenders and local political constraints. Sovereign debtors may also be dependent on expected disbursements from non-U.S. governments, multilateral agencies and other entities to reduce principal and interest arrearages on their debt. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance or repay principal or interest when due may result in the cancellation of third-party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to service its debts.

Eurodollar Instruments and Yankee Bonds. The Acquiring Fund may invest in Eurodollar instruments and Yankee bonds. Yankee bonds are U.S. dollar denominated bonds typically issued in the U.S. by non-U.S. governments and their agencies and non-U.S. banks and corporations. These investments involve risks that are different from investments in securities issued by U.S. Issuers, including potential unfavorable political and economic developments, non-U.S. withholding or other taxes, seizure of non-U.S. deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest.

Zero Coupon and Payment-In-Kind Securities

The Acquiring Fund’s 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. Payment-in-kind securities (“PIKs”) pay dividends or interest in the form of additional securities of the issuer, rather than in cash. Each of these instruments is typically issued and traded at a deep discount from its face amount. 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

 

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credit quality of the issuer. The market prices of zero coupon bonds and PIKs 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. In order to qualify for treatment as a regulated investment company (“RIC”) under the Code, the Acquiring Fund must generally distribute for each year at least 90% of its net investment income, including the original issue discount accrued on zero coupon bonds and PIKs. Because the Acquiring Fund will not on a current basis receive cash payments from the issuer of these securities in respect of any accrued original issue discount, in some years the Acquiring Fund may have to distribute cash obtained from selling portfolio holdings of the Acquiring Fund in order to avoid unfavorable tax consequences. In some circumstances, such sales might be necessary in order to satisfy cash distribution requirements even though investment considerations might otherwise make it undesirable for the Acquiring Fund to sell securities at such time. Under many market conditions, investments in zero coupon bonds and PIKs may be illiquid, making it difficult for the Acquiring Fund to dispose of them or determine their current value.

When-Issued and Delayed-Delivery Transactions

The Acquiring Fund may purchase and sell interests in senior loans and other portfolio securities on a “when issued” or “delayed delivery” basis, making payment or taking delivery at a later date, normally within 15-45 days of the trade date. On such transactions the payment obligation and the interest rate are fixed at the time the buyer enters into the commitment. Beginning on the date the Acquiring Fund enters into a commitment to purchase securities on a when- issued or delayed delivery basis, the Acquiring Fund is required under rules of the SEC to maintain in a separate account liquid assets, consisting of cash, cash equivalents or liquid securities having a market value at all times of at least equal to the amount of any delayed payment commitment. The Acquiring Fund may enter into contracts to purchase securities on a forward basis (i.e., where settlement will occur more than 60 days from the date of the transaction) only to the extent that the Acquiring Fund specifically collateralizes such obligations with a security that is expected to be called or mature within sixty days before or after the settlement date of the forward transaction. The commitment to purchase securities on a when issued, delayed delivery or forward basis may involve an element of risk because no interest accrues on the bonds prior to settlement and at the time of delivery the market value may be less than their cost.

No Inverse Floating Rate Securities

The Acquiring Fund will not invest in inverse floating rate securities, which are securities that pay interest at rates that vary inversely with changes in prevailing interest rates and which represent a leveraged investment in an underlying security.

Derivatives

The Acquiring Fund may invest in derivative instruments including total return swaps; interest rate swaps; credit default swaps; interest rate caps; interest rate floors; interest rate collars; swaptions; credit-linked notes; securities indices; other indices or other financial instruments; stock and bond index futures; futures contracts on securities; options on securities; options on futures contracts; options on stock and bond indexes; interest rate futures; exchange-traded and over-the-counter options on securities or indices; index linked securities; currency exchange transactions; financial futures; options on financial futures; index futures; index options; index options on futures contracts; interest rate options; interest rate option on futures contracts; short sales; structured notes; options on U.S. Treasury security or U.S. Government Agency securities; U.S. Treasury security or U.S. Government Agency security futures contracts; and options on U.S. Treasury security or U.S. Government Agency security futures contracts.

The Acquiring Fund may invest in certain derivative instruments as a hedging technique to protect against potential adverse changes in the market value of portfolio securities. The Acquiring Fund also may use derivatives to attempt to protect the net asset value of the Acquiring Fund, to facilitate the sale of certain

 

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portfolio securities, to manage the Acquiring Fund’s effective interest rate exposure, or as a means of gaining investment exposure.

Total Return Swaps. Such instruments may include total return swaps whose prices, in The Sub-Adviser’s opinion, correlate with the prices of the senior loan instruments, in which the Acquiring Fund may primarily invest. Total return swaps are contracts in which one party agrees to make payments of the total return from the underlying asset(s), which may include indices, securities or baskets of securities during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from other underlying asset(s).

The Acquiring Fund may utilize total return swaps as a component of “synthetic” investments. A “synthetic” investment is comprised of two components that, when combined, replicate or emulate the economic exposure of a third investment. The Acquiring Fund may use the combination of a total return swap and cash equivalents to replicate or emulate exposure to senior loans. The cash equivalent market value effectively represents the “principal” portion of such “synthetic” senior loan exposure, and the total return swap market value (not notional value) represents the “interest” and/or “return” portion of such senior loan exposure. When combined, these two components provide the investment profile of a direct investment in senior loans.

For purposes of the investment policy requiring the Acquiring Fund to invest at least 80% of its Assets in senior loans, the Acquiring Fund will treat only the positive valuation of the total return swap portion of a synthetic investment as counting towards the 80% policy, and will value such swap using mark-to-market principles in accordance with generally accepted accounting principles. In the event that applicable rules or SEC guidance change, the Acquiring Fund may, to the extent permitted, incorporate such change in the calculation of a synthetic investment as a “senior loan” for purposes of the Acquiring Fund’s 80% policy.

The Acquiring Fund may invest up to 5% of its Managed Assets in iBoxx Loan Total Return Swaps (as defined below). An iBoxx Loan Total Return Swap is a specific type of total return swap on an index that is designed to provide exposure to the senior loan market. The iBoxx Loan Total Return Swap’s underlying index is the Markit iBoxx USD Liquid Leveraged Loans Total Return Index, which is one of a subset of indices designed to track the broader, rules-based Markit iBoxx USD Liquid Leveraged Loan Index. “iBoxx Loan Total Return Swaps” means total return swaps written on the Markit iBoxx USD Liquid Leveraged Loans Total Return Index. Markit, which is not affiliated with Nuveen Investments or the Acquiring Fund, created this rules-based index to seek to track the broader senior loan market with a smaller subset of the more liquid index constituents (i.e., constituents with greater transparent price discovery, smaller bid-offer spreads, and larger tradeable sizes at particular price quotes). The Acquiring Fund believes that iBoxx Loan Total Return Swaps provide an efficient and cost-effective basis for obtaining exposure to the senior loan market. These total return swaps use standardized trading and short form, electronic conformations, which offer increased efficiency and lower costs than traditional total return swaps, which use variable or customized trading documentation and paper confirmations. The Acquiring Fund anticipates using iBoxx Loan Total Return Swaps as a component of “synthetic investments” that, when combined with cash equivalents, replicate or emulate exposure to senior loans, as described above. iBoxx Loan Total Return Swaps share risks that are similar to other derivative instruments in which the Acquiring Fund may invest. See “Risk Factors—Derivatives Risk, Including the Risk of Swaps.”

Interest Rate Swaps. Interest rate swaps involve the exchange by the Acquiring Fund with a counterparty of their respective commitments to pay or receive interest of different rates and tenors, such as an exchange of fixed-rate payments for floating rate payments. The Acquiring Fund will usually enter into interest rate swaps on a net basis; that is, the two payment streams will be netted out in a cash settlement on the payment date or dates specified in the instrument, with the Acquiring Fund receiving or paying, as the case may be, only the net amount of the two payments.

Other derivative instruments that may be used, or other transactions that may be entered into, by the Acquiring Fund may include the purchase or sale of futures contracts on securities, credit-linked notes, securities

 

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indices, other indices or other financial instruments; options on futures contracts; exchange-traded and over-the-counter options on securities or indices; index-linked securities; total return swaps; and currency exchange transactions. Some, but not all, of the derivative instruments may be traded and listed on an exchange. The positions in derivatives will be marked-to-market daily at the closing price established on the exchange or at a fair value.

There is no assurance that these derivative strategies will be available at any time, that the Adviser and the Sub-Adviser will determine to use them for the Acquiring Fund or, if used, that the strategies will be successful.

Derivatives and Hedging Strategies

The Acquiring Fund may periodically engage in hedging transactions, and otherwise use various types of derivative instruments, described below, to reduce risk, to effectively gain particular market exposures, to seek to enhance returns, and to reduce transaction costs, among other reasons.

“Hedging” is a term used for various methods of seeking to preserve portfolio capital value by offsetting price changes in one investment through making another investment whose price should tend to move in the opposite direction.

A “derivative” is a financial contract whose value is based on (or “derived” from) a traditional security (such as a stock or a bond), an asset (such as a commodity like gold), or a market index. Some forms of derivatives may trade on exchanges, while non-standardized derivatives, which tend to be more specialized and complex, trade in “over-the-counter” or a one-on-one basis. It may be desirable and possible in various market environments to partially hedge the portfolio against fluctuations in market value due to market interest rate or credit quality fluctuations, or instead to gain a desired investment exposure, by entering into various types of derivative transactions, including financial futures and index futures as well as related put and call options on such instruments, structured notes, or interest rate swaps on taxable or tax-exempt securities or indexes (which may be “forward- starting”), credit default swaps, and options on interest rate swaps, among others.

These transactions present certain risks. In particular, the imperfect correlation between price movements in the futures contract and price movements in the securities being hedged creates the possibility that losses on the hedge by the Acquiring Fund may be greater than gains in the value of the securities in the Acquiring Fund’s portfolio. In addition, futures and options markets may not be liquid in all circumstances. As a result, in volatile markets, the Acquiring Fund may not be able to close out the transaction without incurring losses substantially greater than the initial deposit. Finally, the potential deposit requirements in futures contracts create an ongoing greater potential financial risk than do options transactions, where the exposure is limited to the cost of the initial premium. Losses due to hedging transactions will reduce yield. Net gains, if any, from hedging and other portfolio transactions will be distributed as taxable distributions to shareholders, including shareholders of TFP Shares.

Short Sales. The Acquiring Fund may make short sales of securities if, at all times when a short position is open, the Acquiring Fund owns at least an equal amount of such securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the same issuer as, and equal in amount to, the securities sold short. This technique is called selling short “against the box.”

In a short sale, the Acquiring Fund will not deliver from its portfolio the securities sold and will not receive immediately the proceeds from the sale. Instead, the Acquiring Fund will borrow the securities sold short from a broker-dealer through which the short sale is executed and the broker-dealer will deliver such securities, on behalf of the Acquiring Fund, to the purchaser of such securities. Such broker-dealer will be entitled to retain the proceeds from the short sale until the Acquiring Fund delivers to such broker-dealer the securities sold short. In addition, the Acquiring Fund will be required to pay the broker-dealer the amount of any dividends paid on

 

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shares sold short. Finally, to secure its obligation to deliver to such broker-dealer the securities sold short, the Acquiring Fund must deposit and continuously maintain in a separate account with its custodian an equivalent amount of the securities sold short or securities convertible into or exchangeable for such securities without the payment of additional consideration. The Acquiring Fund is said to have a short position in the securities sold until it delivers to the broker-dealer the securities sold, at which time the Acquiring Fund will receive the proceeds of the sale. Because the Acquiring Fund ordinarily will want to continue to hold securities in its portfolio that are sold short, the Acquiring Fund will normally close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short, rather than delivering portfolio securities.

Short sales may protect the Acquiring Fund against the risk of losses in the value of its portfolio securities because any unrealized losses with respect to such portfolio securities should be wholly or partially offset by a corresponding gain in the short position. However, any potential gain in such portfolio securities should be wholly or partially offset by a corresponding loss in the short position. The extent to which such gains or losses are offset will depend upon the amount of securities sold short relative to the amount the Acquiring Fund owns, either directly or indirectly, and, in the case where the Acquiring Fund owns convertible securities, changes in the conversion premium. The Acquiring Fund will incur transaction costs in connection with short sales.

In addition to enabling the Acquiring Fund to hedge against market risk, short sales may afford the Acquiring Fund an opportunity to earn additional current income to the extent the Acquiring Fund is able to enter into arrangements with broker- dealers through which the short sales are executed to receive income with respect to the proceeds of the short sales during the period the Acquiring Fund’s short positions remain open.

The Code imposes constructive sale treatment for federal income tax purposes on certain hedging strategies with respect to appreciated financial positions. Under these rules, the Acquiring Fund will recognize gain, but not loss, with respect to securities if it enters into short sales or “offsetting notional principal contracts” (as defined by the Code) with respect to, or futures or forward contracts to deliver, the same or substantially identical property, or if it enters into such transactions and then acquires the same or substantially identical property.

Options on Securities. In order to hedge against adverse market shifts, the Acquiring Fund may purchase put and call options on stock, bonds or other securities. In addition, the Acquiring Fund may seek to hedge a portion of its portfolio investments through writing (i.e., selling) covered put and call options. A put option embodies the right of its purchaser to compel the writer of the option to purchase from the option holder an underlying security or its equivalent at a specified price at any time during the option period. In contrast, a call option gives the purchaser the right to buy the underlying security covered by the option or its equivalent from the writer of the option at the stated exercise price at any time during the option period.

As a holder of a put option, the Acquiring Fund will have the right to sell the securities underlying the option and as the holder of a call option, the Acquiring Fund will have the right to purchase the securities underlying the option, in each case at their exercise price at any time during the option period prior to the option’s expiration date. The Acquiring Fund may choose to exercise the options it holds, permit them to expire or terminate them prior to their expiration by entering into closing sale or purchase transactions. In entering into a closing sale or purchase transaction, the Acquiring Fund would sell an option of the same series as the one it has purchased. The ability of the Acquiring Fund to enter into a closing sale transaction with respect to options purchased and to enter into a closing purchase transaction with respect to options sold depends on the existence of a liquid secondary market. There can be no assurance that a closing purchase or sale transaction can be effected when the Acquiring Fund so desires. The Acquiring Fund’s ability to terminate option positions established in the over-the-counter market may be more limited than in the case of exchange-traded options and may also involve the risk that securities dealers participating in such transactions would fail to meet their obligations to the Acquiring Fund.

 

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In purchasing a put option, the Acquiring Fund seeks to benefit from a decline in the market price of the underlying security, while in purchasing a call option, the Acquiring Fund seeks to benefit from an increase in the market price of the underlying security. If an option purchased is not sold or exercised when it has remaining value, or if the market price of the underlying security 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, the option will expire worthless. For the purchase of an option to be profitable, the market price of the underlying security 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. Because option premiums paid by the Acquiring Fund are small in relation to the market value of the instruments underlying the options, buying options can result in additional amounts of leverage to the Acquiring Fund. The leverage caused by trading in options could cause the Acquiring Fund’s net asset value to be subject to more frequent and wider fluctuation than would be the case if the Acquiring Fund did not invest in options.

The Acquiring Fund will receive a premium when it writes put and call options, which increases the Acquiring Fund’s return on the underlying security in the event the option expires unexercised or is closed out at a profit. By writing a call, the Acquiring Fund will limit its opportunity to profit from an increase in the market value of the underlying security above the exercise price of the option for as long as the Acquiring Fund’s obligation as the writer of the option continues. Upon the exercise of a put option written by the Acquiring Fund, the Acquiring Fund may suffer an economic loss equal to the difference between the price at which the Acquiring Fund is required to purchase the underlying security 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 the Acquiring Fund, the Acquiring Fund may suffer an economic loss equal to an amount not less than the excess of the security’s market value at the time of the option exercise over the Acquiring Fund’s acquisition cost of the security, less the sum of the premium received for writing the option and the difference, if any, between the call price paid to the Acquiring Fund and the Acquiring Fund’s acquisition cost of the security. Thus, in some periods the Acquiring Fund might receive less total return and in other periods greater total return from its hedged positions than it would have received from its underlying securities unhedged.

Options on Stock and Bond Indexes. The Acquiring Fund may purchase put and call options on stock and bond indexes to hedge against risks of market-wide price movements affecting its assets. In addition, the Acquiring Fund may write covered put and call options on stock and bond indexes. A stock or bond index measures the movement of a certain group of stocks or bonds by assigning relative values to the stocks or bonds included in the index. Options on a stock or bond index are similar to options on securities. Because no underlying security can be delivered, however, the option represents the holder’s right to obtain from the writer, in cash, a fixed multiple of the amount by which the exercise price exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the exercise date. The advisability of using stock or bond index options to hedge against the risk of market-wide movements will depend on the extent of diversification of the Acquiring Fund’s investments and the sensitivity of its investments to factors influencing the underlying index. The effectiveness of purchasing or writing stock or bond index options as a hedging technique will depend upon the extent to which price movements in the Acquiring Fund’s investments correlate with price movements in the stock or bond index selected. In addition, successful use by the Acquiring Fund of options on stock or bond indexes will be subject to the ability of the Sub-Adviser to predict correctly changes in the relationship of the underlying index to the Acquiring Fund’s portfolio holdings. No assurance can be given that the Sub-Adviser’s judgment in this respect will be correct.

Stock and Bond Index Futures Contracts. The Acquiring Fund may purchase and sell stock index futures as a hedge against movements in the equity markets. Stock and bond index futures contracts are agreements in which one party agrees to deliver to the other an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock or bond index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of securities is made. For example, if the Sub-Adviser expects general stock or bond market prices to decline, it might sell a futures contract on a particular stock or bond index. If that index does in fact decline, the value of some or all of the securities in the

 

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Acquiring Fund’s portfolio may also be expected to decline, but that decrease would be offset in part by the increase in the value of the Acquiring Fund’s position in such futures contract. If, on the other hand, the Sub-Adviser expects general stock or bond market prices to rise, it might purchase a stock or bond index futures contract as a hedge against an increase in prices of particular securities it wants ultimately to buy. If in fact the stock or bond index does rise, the price of the particular securities intended to be purchased may also increase, but that increase would be offset in part by the increase in the value of the Acquiring Fund’s futures contract resulting from the increase in the index. The Acquiring Fund may purchase futures contracts on a stock or bond index to enable the Sub-Adviser to gain immediate exposure to the underlying securities market pending the investment in individual securities of the Acquiring Fund’s portfolio.

Under regulations of the Commodity Futures Trading Commission (“CFTC”), the Acquiring Fund and the Adviser have claimed an exclusion from registration as a commodity pool and as a commodity trading advisor under the Commodity Exchange Act (the “CEA”) and, therefore, neither the Acquiring Fund nor the Adviser, or their officers and directors, are subject to the registration requirements of the CEA. The Acquiring Fund reserves the right to engage in transactions involving futures and options thereon to the extent allowed by CFTC regulations in effect from time to time and in accordance with the Acquiring Fund’s policies. In addition, certain provisions of the Code may limit the extent to which the Acquiring Fund may enter into futures contracts or engage in options transactions.

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). With respect to options purchased by the Acquiring Fund, there are no daily cash payments made by the Acquiring Fund to reflect changes in the value of the underlying contract; however, the value of the option does change daily and that change would be reflected in the net asset value of the Acquiring Fund

Other Futures Contracts and Options on Futures Contracts. The Acquiring Fund’s use of derivative instruments also may include (i) U.S. Treasury security or U.S. Government Agency security futures contracts; (ii) options on U.S. Treasury security or U.S. Government Agency security futures contracts; (iii) interest rate futures contracts; (iv) index call option on futures contracts; (v) index put option on futures contracts; (vi) interest rate call option on futures contracts; and (vii) interest rate put option on futures contracts. All such instruments must be traded and listed on an exchange. U.S. Treasury and U.S. Government Agency futures contracts are standardized contracts for the future delivery of a U.S. Treasury Bond or U.S. Treasury Note or a U.S. Government Agency security or their equivalent at a future date at a price set at the time of the contract. An option on a U.S. Treasury or U.S. Government Agency futures contract, as contrasted with the direct investment in such a contract, gives the purchaser of the option the right, in return for the premium paid, to assume a position in a U.S. Treasury or U.S. Government Agency futures contract at a specified exercise price at any time on or before the expiration date of the option. An interest rate future is a contract where the buyer and seller agree to the future delivery of any interest-bearing asset with the price locked in for a future date. A call option on futures is a contract where the buyer has the right to enter into a specified futures contract at a certain price in the future. A put option on futures is a contract where the buyer has the right to sell a specified futures contract at a certain price in the future. An index call option on futures is a contract where the buyer has the right to assume a particular futures position at a certain price in the future. An index put option on futures is a contract where the buyer has the right to assume a particular futures position at a certain price in the future. An interest rate call option on futures is a contract where the buyer has the right to assume a particular futures position at a certain price in the future. An interest rate put option on futures is contract where the buyer has the right to assume a particular futures position at a certain price in the future. 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 writer’s future margin account, which represents the amount by which the market price of the futures contract exceeds the exercise price of the option on the futures contract.

Risks Associated with Futures Contracts and Options on Futures Contracts. Futures prices are affected by many factors, such as current and anticipated short-term interest rates, changes in volatility of the underlying

 

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instrument and the time remaining until expiration of the contract. A purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. While the Acquiring Fund may enter into futures contracts and options on futures contracts for hedging purposes, the use of futures contracts and options on futures contracts might result in a poorer overall performance for the Acquiring Fund than if it had not engaged in any such transactions. If, for example, the Acquiring Fund had insufficient cash, it might have to sell a portion of its underlying portfolio of securities in order to meet daily variation margin requirements on its futures contracts or options on futures contracts at a time when it might be disadvantageous to do so. There may be an imperfect correlation between the Acquiring Fund’s portfolio holdings and futures contracts or options on futures contracts entered into by the Acquiring Fund, which may prevent the Acquiring Fund from achieving the intended hedge or expose the Acquiring Fund to risk of loss. The degree of imperfection of correlation depends on circumstances such as: variations in speculative market demand for futures, futures options and the related securities, including technical influences in futures and futures options trading and differences between the securities markets and the securities underlying the standard contracts available for trading. Futures prices are affected by many factors, such as current and anticipated short-term interest rates, changes in volatility of the underlying instrument and the time remaining until the expiration of the contract. Further, the Acquiring Fund’s use of futures contracts and options on futures contracts to reduce risk involves costs and will be subject to the Sub-Adviser’s ability to predict correctly changes in interest rate relationships or other factors. A decision as to whether, when and how to use futures contracts 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 stock price or interest rate trends. No assurance can be given that the Sub-Adviser’s judgment in this respect will be correct.

Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of the current trading session. Once the daily limit has been reached in a futures contract subject to the limit, no more trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses because the limit may work to prevent the liquidation of unfavorable positions. For example, futures prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of positions and subjecting some holders of futures contracts to substantial losses. Stock index futures contracts are not normally subject to such daily price change limitations.

The Acquiring Fund may invest in other options. An option is an instrument that gives the holder of the instrument the right, but not the obligation, to buy or sell a predetermined number of specific securities (i.e. preferred stocks, common stocks or bonds) at a stated price within the expiration period of the instrument, which is generally less than 12 months from its issuance. If the right is not exercised after a specified period but prior to the expiration, the option expires. Both put and call options may be used by the Acquiring Fund.

Structured Notes. The Acquiring Fund may use structured notes and similar instruments for hedging purposes. Structured notes are privately negotiated debt obligations or economically equivalent instruments where the principal and/or interest is determined by reference to the performance of a benchmark asset, market or interest rate (an “embedded index”), such as selected securities or loans, an index of securities or loans or specified interest rates or the differential performance of two assets or markets. The terms of such structured instruments normally provide that their principal and/or interest payments are to be adjusted upwards or downwards (but not ordinarily below zero) to reflect changes in the embedded index while the structured instruments are outstanding. As a result, the interest and/or principal payments that may be made on a structured product may vary widely, depending on a variety of factors, including the volatility of the embedded index and the effect of changes in the embedded index on principal and/or interest payments. The rate of return on structured notes may be determined by applying a multiplier to the performance or differential performance of the referenced index(es) or other asset(s). Application of a multiplier involves leverage that will serve to magnify the potential for gain and the risk of loss.

 

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The Acquiring Fund may purchase and sell various other kinds of financial futures contracts and options thereon. Futures contracts may be based on various debt securities and securities indices. Such transactions involve a risk of loss or depreciation due to unanticipated adverse changes in securities prices, which may exceed the Acquiring Fund’s initial investment in these contracts. The Acquiring Fund will only purchase or sell futures contracts or related options in compliance with the rules of the CFTC. These transactions involve transaction costs. There can be no assurance that the Acquiring Fund’s use of futures will be advantageous to the Acquiring Fund. Guidelines established by one or more NRSROs that rate any preferred shares issued by the Acquiring Fund may limit use of these transactions.

Credit-Linked Notes. The Acquiring Fund may invest in credit-linked notes (“CLN”) for risk management purposes, including diversification. A CLN is a derivative instrument that is a synthetic obligation between two or more parties where the payment of principal and/or interest is based on the performance of some obligation (a reference obligation). In addition to credit risk of the reference obligation and interest rate risk, the buyer/seller of the CLN is subject to counterparty risk. See “Risk Factors—Counterparty Risk.”

Swaps. Swap contracts may be purchased or sold to hedge against fluctuations in securities prices, interest rates or market conditions, to change the duration of the overall portfolio, or to mitigate default risk. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) to be exchanged or “swapped” between the parties, which returns are calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or in a “basket” of securities representing a particular index.

Swaptions. A swaption is an over-the-counter traded option that gives the seller the right, but not the obligation, to enter into an interest rate swap at a set rate on an agreed upon future date. Although the typical swaption is an option on an interest rate swap, a swaption could be an option on any type of swap. In return for this flexibility, the purchaser of the swaption pays a premium determined by taking into account the duration of the option period, the term and strike rate of the swap and the volatility of interest rates. If interest rates fall, the purchaser of the swaption will let the swaption expire and transact an interest rate swap at the prevailing market rate. There are three styles of swaptions: American, in which the holder is allowed to enter the swap on any day that fall within a range of two dates; Bermudian, in which the holder is allowed to enter the swap on a sequence of dates; and European, in which the holder is allowed to enter the swap on one specified date.

Credit Default Swaps. The Acquiring Fund may enter into credit default swap contracts for risk management purposes, including diversification. When the Acquiring Fund is the buyer of a credit default swap contract, the Acquiring Fund is entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return, the Acquiring Fund would pay the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the Acquiring Fund would have spent the stream of payments and received no benefit from the contract. When the Acquiring Fund is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay upon default of the referenced debt obligation. As the seller, the Acquiring Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Acquiring Fund would be subject to investment exposure on the notional amount of the swap. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the transaction. The tax treatment of certain credit default swaps is uncertain.

Interest Rate Swaps. The Acquiring Fund will enter into interest rate and total return swaps only on a net basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). If the other party to an interest rate swap defaults, the Fund’s risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive. The Acquiring Fund will not enter into any interest

 

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rate swap unless the claims-paying ability of the other party thereto is considered to be investment grade by the Adviser. If there is a default by the other party to such a transaction, the Acquiring Fund will have contractual remedies pursuant to the agreements related to the transaction.

These instruments are traded in the over-the-counter market. The Acquiring Fund may use interest rate swaps for risk management purposes only and not as a speculative investment and would typically use interest rate swaps to shorten the average interest rate reset time of the Acquiring Fund’s holdings. Interest rate swaps involve the exchange by the Acquiring Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating rate payments). The use of interest rate swaps is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Sub-Adviser is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Acquiring Fund would be unfavorably affected.

Total Return Swaps. As stated above, the Acquiring Fund will enter into total return swaps only on a net basis. Total return swaps are contracts in which one party agrees to make payments of the total return from the underlying asset(s), which may include securities, baskets of securities, or securities indices during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from other underlying asset(s).

Currency Exchange Transactions. The Acquiring Fund may enter into currency exchange transactions to hedge the Acquiring Fund’s exposure to foreign currency exchange rate risk in the event the Acquiring Fund invests in non-U.S. dollar denominated securities of non-U.S. Issuers. The Acquiring Fund’s currency transactions will be limited to portfolio hedging involving portfolio positions. Portfolio hedging is the use of a forward contract with respect to a portfolio security position denominated or quoted in a particular currency. A forward contract is an agreement to purchase or sell a specified currency at a specified future date (or within a specified time period) and price set at the time of the contract. Forward contracts are usually entered into with banks, foreign exchange dealers or broker-dealers, are not exchange- traded, and are usually for less than one year, but may be renewed. At the maturity of a forward contract to deliver a particular currency, the Acquiring Fund may either sell the portfolio security related to such contract and make delivery of the currency, or it may retain the security and either acquire the currency on the spot market or terminate its contractual obligation to deliver the currency by purchasing an offsetting contract with the same currency trader obligating it to purchase on the same maturity date the same amount of the currency.

It is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of a forward contract. Accordingly, it may be necessary for the Acquiring Fund to purchase additional currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of currency that the Acquiring Fund is obligated to deliver and if a decision is made to sell the security and make delivery of the currency. Conversely, it may be necessary to sell on the spot market some of the currency received upon the sale of the portfolio security if its market value exceeds the amount of currency the Acquiring Fund is obligated to deliver.

If the Acquiring Fund retains the portfolio security and engages in an offsetting transaction, the Acquiring Fund will incur a gain or a loss to the extent that there has been movement in forward contract prices. If the Acquiring Fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the currency. Should forward prices decline during the period between the Acquiring Fund’s entering into a forward contract for the sale of a currency and the date it enters into an offsetting contract for the purchase of the currency, the Acquiring Fund will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Acquiring Fund will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. A default on the contract would deprive the Fund of unrealized profits or force the Fund to cover its commitments for purchase or sale of currency, if any, at the current market price.

 

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Hedging against a decline in the value of a currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. Such transactions also preclude the opportunity for gain if the value of the hedged currency should rise. Moreover, it may not be possible for the Fund to hedge against a devaluation that is so generally anticipated that the Fund is not able to contract to sell the currency at a price above the devaluation level it anticipates. The cost to the Fund of engaging in currency exchange transactions varies with such factors as the currency involved, the length of the contract period, and prevailing market conditions. Since currency exchange transactions are usually conducted on a principal basis, no fees or commissions are involved.

Other Hedging Transactions. The Acquiring Fund may invest in relatively new instruments without a significant trading history for purposes of hedging the Acquiring Fund’s portfolio risks. As a result, there can be no assurance that an active secondary market will develop or continue to exist.

Limitations on the Use of Futures, Options on Futures and Swaps. The Adviser has claimed, with respect to the Acquiring Fund, the exclusion from the definition of “commodity pool operator” under the CEA provided by CFTC Regulation 4.5 and is therefore not currently subject to registration or regulation as such under the CEA with respect to the Acquiring Fund. In addition, the Sub-Adviser has claimed the exemption from registration as a commodity trading advisor provided by CFTC Regulation 4.14(a)(8) and is therefore not currently subject to registration or regulation as such under the CEA with respect to the Acquiring Fund. In February 2012, the CFTC announced substantial amendments to certain exemptions, and to the conditions for reliance on those exemptions, from registration as a commodity pool operator. Under amendments to the exemption provided under CFTC Regulation 4.5, if the Acquiring Fund uses futures, options on futures, or swaps other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums on these positions (after taking into account unrealized profits and unrealized losses on any such positions and excluding the amount by which options that are “in-the-money” at the time of purchase are “in-the-money”) may not exceed 5% of the Acquiring Fund’s net asset value, or alternatively, the aggregate net notional value of those positions may not exceed 100% of the Acquiring Fund’s net asset value (after taking into account unrealized profits and unrealized losses on any such positions). The CFTC amendments to Regulation 4.5 took effect on December 31, 2012, and the Acquiring Fund intends to comply with amended Regulation 4.5’s requirements such that the Adviser will not be required to register as a commodity pool operator with the CFTC with respect to the Acquiring Fund. The Acquiring Fund reserves the right to employ futures, options on futures and swaps to the extent allowed by CFTC regulations in effect from time to time and in accordance with the Acquiring Fund’s policies. However, the requirements for qualification as a RIC under Subchapter M of the Code may limit the extent to which the Acquiring Fund may employ futures, options on futures or swaps.

Illiquid Securities

The Acquiring Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.

Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the 1933 Act. Where registration is required, the Acquiring Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Acquiring Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Acquiring Fund might obtain a less favorable price than that which prevailed when it decided to sell. Illiquid securities will be priced at fair value as determined in good faith by the Board or its designee.

 

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Short-Term/Long-Term Debt Securities; Temporary Defensive Positions

During temporary defensive periods (e.g., during periods of adverse market, economic or political conditions), the Acquiring Fund may invest up to 100% of its Managed Assets in cash equivalents and investment grade debt securities, including obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities. In such a case, the Acquiring Fund may not pursue or achieve its investment objective. These investments are defined to include, without limitation, the following:

 

  (1)

U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest that are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities. U.S. government agency securities include securities issued by (a) the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, and the Government National Mortgage Association, whose securities are supported by the full faith and credit of the United States; (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities are supported by the right of the agency to borrow from the U.S. Treasury; (c) the Federal National Mortgage Association, whose securities are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality; and (d) the Student Loan Marketing Association, whose securities are supported only by its credit. While the U.S. government provides financial support to such U.S. government-sponsored agencies or instrumentalities, no assurance can be given that it always will do so since it is not so obligated by law. The U.S. government, its agencies, and instrumentalities do not guarantee the market value of their securities. Consequently, the value of such securities may fluctuate.

 

  (2)

Certificates of Deposit issued against funds deposited in a bank or a savings and loan association. Such certificates are for a definite period of time, earn a specified rate of return, and are normally negotiable. 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 (“FDIC”) regulations, the maximum insurance payable as to any one certificate of deposit is $250,000; therefore, certificates of deposit purchased by the Acquiring Fund may not be fully insured.

 

  (3)

Repurchase agreements, which involve purchases of debt securities. At the time the Acquiring Fund purchases securities pursuant to a repurchase agreement, it simultaneously agrees to resell and redeliver such securities to the seller, who also simultaneously agrees to buy back the securities at a fixed price and time. This assures a predetermined yield for the Acquiring Fund during its holding period, since the resale price is always greater than the purchase price and reflects an agreed-upon market rate. Such actions afford an opportunity for the Acquiring Fund to invest temporarily available cash. The Acquiring Fund may enter into repurchase agreements only with respect to obligations of the U.S. government, its agencies or instrumentalities; certificates of deposit; or bankers’ acceptances in which the Acquiring Fund may invest. Repurchase agreements may be considered loans to the seller, collateralized by the underlying securities. The risk to the Acquiring Fund is limited to the ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default, the repurchase agreement provides that the Acquiring Fund is entitled to sell the underlying collateral. If the seller defaults under a repurchase agreement when the value of the underlying collateral is less than the repurchase price, the Acquiring Fund could incur a loss of both principal and interest. The Adviser monitors the value of the collateral at the time the action is entered into and at all times during the term of the repurchase agreement. The Adviser does so in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon repurchase price to be paid to the Acquiring Fund. If the seller were to be subject to a federal bankruptcy proceeding, the ability of the Acquiring Fund to liquidate the collateral could be delayed or impaired because of certain provisions of the bankruptcy laws.

 

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  (4)

Commercial paper, which consists of short-term unsecured promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Master demand notes are direct lending arrangements between the Acquiring Fund and a corporation. There is no secondary market for such notes. However, they are redeemable by the Acquiring Fund at any time. The Sub-Adviser will consider the financial condition of the corporation (e.g., earning power, cash flow, and other liquidity measures) and will continuously monitor the corporation’s ability to meet all of its financial obligations, because the Acquiring Fund’s liquidity might be impaired if the corporation were unable to pay principal and interest on demand. Investments in commercial paper will be limited to commercial paper rated in the highest categories by an NRSRO and which mature within one year of the date of purchase or carry a variable or floating rate of interest.

Other Investment Companies

The Acquiring Fund may invest in securities of other open- or closed-end investment companies that invest primarily in securities of the types in which the Acquiring Fund may invest directly. In addition, the Acquiring Fund may invest a portion of its Managed Assets in pooled investment vehicles (other than investment companies) that invest primarily in securities of the types in which the Acquiring Fund may invest directly. The Acquiring Fund generally expects that it may invest in other investment companies and/or other pooled investment vehicles either during periods when it has large amounts of uninvested cash, such as the period shortly after the Acquiring Fund receives the proceeds of a large purchase of common shares, preferred shares and/or borrowings, or during periods when there is a shortage of attractive securities of the types in which the Acquiring Fund may invest in directly available in the market. The Acquiring Fund may invest in investment companies that are advised by the Adviser or its affiliates to the extent permitted by applicable law and/or pursuant to exemptive relief from the SEC. As an investor in an investment company, the Acquiring Fund will bear its ratable share of that investment company’s expenses, and would remain subject to payment of the Acquiring Fund’s advisory and administrative fees with respect to assets so invested. The Sub-Adviser will take expenses into account when evaluating the investment merits of an investment in the investment company relative to available securities of the types in which the Acquiring Fund may invest directly. In addition, the securities of other investment companies also may be leveraged and therefore will be subject to the same leverage risks described herein. The Acquiring Fund will consider the investments of underlying investment companies when determining compliance with Rule 35d-1 under the 1940 Act. Moreover, the Acquiring Fund will consider the investments of underlying investment companies when determining compliance with its own concentration policy, to the extent the Acquiring Fund has sufficient information about such investments.

Lending of Portfolio Securities

To increase its income, the Acquiring Fund may lend its portfolio securities to broker-dealers and banks. Any such loan must be continuously secured by collateral in cash or cash equivalents maintained on a current basis in an amount at least equal to the market value of the securities loaned by the Acquiring Fund. The Acquiring Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned through payments from the borrower. The Acquiring Fund would also receive an additional return that may be in the form of a fixed fee or a percentage of the collateral. The Acquiring Fund may pay reasonable fees to persons unaffiliated with the Acquiring Fund for services in arranging these loans. The Acquiring Fund would have the right to call the loan and obtain the securities loaned at any time on notice of not more than five business days. As with other extensions of credit, risks of delay in recovery or even loss of rights in the collateral exist should the borrower of the financial instruments fail financially. However, the loans would be made only to firms deemed by the Sub-Adviser to be creditworthy and when, in the judgment of the Sub-Adviser, the consideration which can be earned currently from loans of this type justifies the attendant risk. The creditworthiness of firms to which the Acquiring Fund lends its portfolio holdings will be monitored on an ongoing basis by the Sub-Adviser. Although no specific policy limits the percentage of the Acquiring Fund’s assets which the Acquiring Fund may lend, under current SEC guidance the Acquiring Fund may not have on loan at any given time securities representing more than one-third of its total asset value.

 

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The Acquiring Fund would not have the right to vote the securities during the existence of the loan but would call the loan to permit voting of the securities, if, in the Sub-Adviser’s judgment, a material event requiring a shareholder vote would otherwise occur before the loan was repaid. In the event of bankruptcy or other default of the borrower, the Acquiring Fund could experience both delays in liquidating the loan collateral or recovering the loaned securities and losses, including (a) possible decline in the value of the collateral or in the value of the securities loaned during the period while the Acquiring Fund seeks to enforce its rights thereto, (b) possible subnormal levels of income and lack of access to income during this period, and (c) expenses of enforcing its rights.

Portfolio Trading and Turnover Rate

Portfolio trading may be undertaken to accomplish the investment objective of the Acquiring Fund in relation to actual and anticipated movements in interest rates. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what the Sub-Adviser believes to be a temporary price disparity between the two securities. Temporary price disparities between two comparable securities may result from supply and demand imbalances where, for example, a temporary oversupply of certain securities may cause a temporarily low price for such securities, as compared with other securities of like quality and characteristics. A security also may be sold when the Sub-Adviser anticipates a change in the price of such security, the Sub-Adviser believes the price of a security has reached or is near a realistic maximum, or there are other securities that the Sub-Adviser believes are more attractive given the Acquiring Fund’s investment objective. The Acquiring Fund also may engage to a limited extent in short-term trading consistent with its investment objective. Securities may be sold in anticipation of a market decline or purchased in anticipation of a market rise and later sold, but the Acquiring Fund will not engage in trading solely to recognize a gain.

Subject to the foregoing, the Acquiring Fund will attempt to achieve its investment objective by prudent selection of securities with a view to holding them for investment. While there can be no assurance thereof, the Acquiring Fund anticipates that its annual portfolio turnover rate will generally not exceed 50%. However, the rate of turnover will not be a limiting factor when the Acquiring Fund deems it desirable to sell or purchase securities. Therefore, depending on market conditions, the annual portfolio turnover rate of the Acquiring Fund may exceed 50% in particular years. A higher portfolio turnover rate results in correspondingly greater brokerage commissions and other transactional expenses that are borne by the Acquiring Fund. High portfolio turnover may result in the realization of net short-term capital gains by the Acquiring Fund which, when distributed to shareholders, will be taxable as ordinary income. For the fiscal year ended July 31, 2022, the Acquiring Fund’s portfolio turnover rate was 37%.

Interest Rate Transactions

The Acquiring Fund expects that the Acquiring Fund’s portfolio investments in senior loans and other adjustable rate debt instruments in which the Acquiring Fund may invest will serve as a hedge against the risk that common share net income and/or returns may decrease due to rising market dividend or interest rates on any preferred shares or borrowings. If market conditions are deemed favorable, the Acquiring Fund also may enter into interest rate swap or cap transactions to attempt to protect itself from such interest rate risk on the remaining amount of any outstanding preferred shares and/or borrowings. Interest rate swaps involve the Acquiring Fund’s agreement with the swap counterparty to pay a fixed rate payment in exchange for the counterparty agreeing to pay the Acquiring Fund a payment at a variable rate that is expected to approximate the rate on the Acquiring Fund’s variable rate payment obligation on borrowings or any variable rate preferred shares, such as the TFP Shares. The payment obligations would be based on the notional amount of the swap. The Acquiring Fund may use an interest rate cap, which would require it to pay a premium to the cap counterparty and would entitle it, to the extent that a specified variable rate index exceeds a predetermined fixed rate, to receive from the counterparty payment of the difference based on the notional amount. The Acquiring Fund would use interest rate swaps or caps only with the intent to reduce or eliminate the risk that an increase in short-term interest rates could have on common share net earnings as a result of leverage.

 

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Because senior loans and other adjustable rate debt instruments in which the Acquiring Fund may invest and the Acquiring Fund’s preferred shares and borrowings generally pay interest or dividends based on short-term market interest rates, the Acquiring Fund’s investments in senior loans and other adjustable rate debt instruments may potentially offset the leverage risks borne by the Acquiring Fund relating to the fluctuations on common share income due to variations in the preferred share dividend rate and/or the interest rate on borrowings. The Acquiring Fund will usually enter into swaps or caps on a net basis; that is, the two payment streams will be netted out in a cash settlement on the payment date or dates specified in the instrument, with the Acquiring Fund receiving or paying, as the case may be, only the net amount of the two payments.

The use of interest rate swaps and caps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. Depending on the state of interest rates in general, the Acquiring Fund’s use of interest rate swaps or caps could enhance or harm the overall performance on the common shares. To the extent there is a decline in interest rates, the value of the interest rate swap or cap could decline, and could result in a decline in the net asset value of the common shares. In addition, if short-term interest rates are lower than the Acquiring Fund’s fixed rate of payment on the interest rate swap, the swap will reduce common share net earnings. If, on the other hand, short-term interest rates are higher than the fixed rate of payment on the interest rate swap, the swap will enhance common share net earnings. Buying interest rate caps could enhance the performance of the common shares by providing a maximum leverage expense. Buying interest rate caps could also decrease the net earnings of the common shares in the event that the premium paid by the Acquiring Fund to the counterparty exceeds the additional amount the Acquiring Fund would have been required to pay had it not entered into the cap agreement. The Acquiring Fund will not enter into interest rate swap or cap transactions in an aggregate notional amount that exceeds the remainder of the outstanding amount of the Acquiring Fund’s leverage, less the amount of senior loans in the Acquiring Fund’s portfolio. The Acquiring Fund has no current intention of selling an interest rate swap or cap. The Acquiring Fund will monitor its interest rate swap and cap transactions with a view to insuring that it remains in compliance with all applicable tax requirements.

Interest rate swaps and caps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the Acquiring Fund is contractually obligated to make. If the counterparty defaults, the Acquiring Fund would not be able to use the anticipated net receipts under the swap or cap to offset the interest payments on borrowings or dividend payments on the TFP Shares. Depending on whether the Acquiring Fund would be entitled to receive net payments from the counterparty on the swap or cap, which in turn would depend on the general state of short-term interest rates at that point in time, such a default could negatively impact the performance of the common shares. Although this will not guarantee that the counterparty does not default, the Acquiring Fund will not enter into an interest rate swap or cap transaction with any counter-party that the Adviser believes does not have the financial resources to honor its obligation under the interest rate swap or cap transaction. Further, the Adviser will continually monitor the financial stability of a counterparty to an interest rate swap or cap transaction in an effort to proactively protect the Acquiring Fund’s investments.

In addition, at the time the interest rate swap or cap transaction reaches its scheduled termination date, there is a risk that the Acquiring Fund would not be able to obtain a replacement transaction or that the terms of the replacement would not be as favorable as on the expiring transaction. If this occurs, it could have a negative impact on the performance of the Acquiring Fund’s common shares. The Acquiring Fund may choose or be required to prepay any borrowings or redeem some or all of the TFP Shares. This redemption would likely result in the Acquiring Fund seeking to terminate early all or a portion of any swap or cap transaction. Such early termination of a swap could result in termination payment by or to the Acquiring Fund. An early termination of a cap could result in a termination payment to the Acquiring Fund.

Each Board recommends that shareholders vote FOR the approval of the Agreement and Plan of Merger.

 

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PROPOSAL NO. 2— APPROVAL OF ISSUANCE OF ADDITIONAL COMMON SHARES OF ACQUIRING FUND

Detailed information regarding each proposed Merger of a Target Fund with and into the Merger Sub is described above under “Proposal No. 1.” Preferred shareholders of the Acquiring Fund are urged to read the disclosure under that proposal for important information about each proposed Merger.

The Agreement sets forth the terms of each Merger and, with respect to each Merger, provides for: (1) the merger of the Target Fund with and into the Merger Sub, with the Merger Sub continuing as the surviving company and the separate legal existence of the Target Fund ceasing for all purposes as of the Effective Time; (2) the conversion of the issued and outstanding common shares of beneficial interest of the Target Fund into newly issued common shares of beneficial interest of the Acquiring Fund, par value $0.01 per share (with cash being received in lieu of any fractional Acquiring Fund common shares), and (3) the conversion of the issued and outstanding TFP Shares of the Target Fund into newly issued TFP Shares of the Acquiring Fund, with a par value of $0.01 per share and a liquidation preference of $1,000 per share. Subject to notice of issuance, the Acquiring Fund expects to list such common shares on the NYSE. As soon as practicable following the completion of the Mergers, the Merger Sub will distribute its assets to the Acquiring Fund, and the Acquiring Fund will assume the liabilities of the Merger Sub, in complete liquidation and dissolution of the Merger Sub under Massachusetts law. Following its Merger, a Target Fund will terminate its registration as an investment company under the 1940 Act.

Based on information from Nuveen Fund Advisors, LLC, the Funds’ investment adviser, the proposed Mergers are intended to benefit shareholders in a number of ways, including, among other things: (i) greater secondary market liquidity and improved secondary market trading for common shares as a result of the combined fund’s greater share volume, which may lead to narrower bid-ask spreads and smaller trade-to-trade price movements; (ii) increased portfolio and leverage management flexibility due to the significantly larger asset base of the combined fund; and (iii) assuming each Merger is completed, lower net operating expenses (excluding the cost of leverage), as certain fixed costs are spread over the combined fund’s larger asset base which may also help to achieve fund-level management fee breakpoints.

The aggregate net asset value, as of the Valuation Time, of the Acquiring Fund common shares received by each Target Fund’s common shareholders in connection with the Mergers will equal the aggregate net asset value of the Target Fund common shares held by shareholders of the Target Fund as of the Valuation Time. Prior to the Valuation Time, the net asset value of each Fund will be reduced by the estimated costs of the Mergers borne by such Fund. However, no fractional Acquiring Fund common shares will be distributed to a Target Fund’s common shareholders in connection with a Merger. The Acquiring Fund’s transfer agent will aggregate all fractional Acquiring Fund common shares that may be due to a Target Fund’s shareholders as of the Closing Date and will sell the resulting whole shares for the account of 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 Fund’s transfer agent will act directly on behalf of the shareholders entitled to receive fractional shares and will accumulate fractional shares, sell the shares and distribute the cash proceeds net of brokerage commissions, if any, directly to the Target Fund shareholders entitled to receive the fractional shares (without interest and subject to withholding taxes). As a result of the Mergers, common shareholders of the Funds will hold a smaller percentage of the outstanding common shares of the combined fund as compared to their percentage holdings of their respective Fund prior to the Mergers and thus, common shareholders will hold reduced percentages of ownership in the larger combined entity than they held in the Acquiring Fund or a Target Fund individually.

The Mergers will result in no reduction in net asset value of the Acquiring Fund’s common shares, other than to reflect the costs of the Mergers. It is expected that no gain or loss will be recognized by the Acquiring Fund for federal income tax purposes as a direct result of the Mergers. It is not currently expected that any significant portfolio sales of a Target Fund will occur solely in connection with a Merger.

 

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The Acquiring Fund will continue to operate following the Mergers as a registered closed-end management investment company with the investment objective and policies described in this Proxy Statement.

While applicable state and federal law does not require the shareholders of the Acquiring Fund to approve the Mergers, applicable NYSE rules require shareholder approval of additional Acquiring Fund common shares to be issued in connection with each Merger.

Shareholder approval of the issuance of additional common shares of the Acquiring Fund requires the affirmative vote of a majority (more than 50%) of the votes cast on the proposal, provided a quorum is present. Because the approval of Proposal No. 2 requires the approval of at least 50% of the Acquiring Fund’s shares cast on the matter, abstentions and broker non-votes, if any, will have the same effect as a vote against the proposal. Broker non-votes are shares held by brokers or nominees, typically in “street name,” as to which (1) instructions have not been received from the beneficial owners or persons entitled to vote and (2) the broker or nominee does not have discretionary authority to vote such shares.

The consummation of each Merger is contingent on the satisfaction or waiver of all closing conditions, including approval of the Merger proposals (Proposal Nos. 1 and 2) by the applicable Fund’s 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 Mergers.

PROPOSAL NO. 3—THE ELECTION OF BOARD MEMBERS

Pursuant to the governing documents of each Fund, the Board is divided into three classes (Class I, Class II and Class III), to be elected by the holders of the outstanding shares to serve until the third succeeding annual meeting of shareholders subsequent to their election or thereafter, in each case until their successors have been duly elected and qualified. The common shareholders of each Fund are being solicited to vote on this Proposal No. 3 by means of a separate proxy statement.

For each Fund, four (4) Board Members are to be elected by holders of common and preferred shares, voting together as a single class. Current Board Members Lancellotta, Nelson and Toth have been designated as Class II Board Members and are nominees for election at the Annual Meeting to serve for a term expiring at the 2026 annual meeting of shareholders or until their successors have been duly elected and qualified. Current Board Member Young, previously designated as a Class II Board Member, has been designated as a Class I Board Member and is a nominee for election at the Annual Meeting to serve for a term expiring at the 2025 annual meeting of shareholders or until his successor has been duly elected and qualified. Current Board Members Hunter and Moschner are nominees to be elected by holders of preferred shares for a term expiring at the next annual meeting or until their successors have been duly elected and qualified.

Board Members Evans, Medero, Thornton and Wolff are current and continuing Board Members. Board Member Wolff has been designated as a Class I Board Member for a term expiring at the 2025 annual meeting of shareholders or until her successor has been duly elected and qualified. Board Members Evans, Medero and Thornton have been designated as Class III Board Members for a term expiring at the 2024 annual meeting of shareholders or until their successors have been duly elected and qualified.

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 to serve or for good cause will not serve, the proxies will be voted for substitute nominees, if any, designated by the Fund’s present Board.

 

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Current Class I Board Member Wolff was last elected at the annual meeting of shareholders held on April 8, 2022. Current Class II Board Members Nelson, Toth and Young were last elected at the annual meeting of shareholders held on April 22, 2020. Board Member Lancellotta was appointed to the Board of each Fund as a Class II Board Member effective June 1, 2021. Class III Board Members Evans and Thornton were last elected at the annual meeting of shareholders held on April 6, 2021. Board Member Medero was appointed to the Board of each Fund as a Class III Board Member effective June 1, 2021. Board Members Hunter and Moschner were last elected at the annual meeting of shareholders held on April 8, 2022.

Each of the Board Members and Board Member nominees is not an “interested person,” as defined in the 1940 Act, of each Fund or of Nuveen Fund Advisors, LLC (previously defined as “Nuveen Fund Advisors” or the “Adviser”), the investment adviser to each Fund, and has never been an employee or director of the Adviser, Nuveen, the Adviser’s parent company, or any affiliate. Accordingly, such Board Members are deemed “Independent Board Members.”

For each Fund, the affirmative vote of a plurality (the greatest number of affirmative votes) of the shares present and entitled to vote at the Meeting will be required to elect each Board Member of that Fund. When there are four (4) nominees for election to the Board, as is the case here, a vote by plurality means the four nominees with the highest number of affirmative votes, regardless of the votes withheld for the nominees, will be elected. Because the election of Board Members does not require that a minimum percentage of the Fund’s outstanding common shares be voted in favor of any nominee, assuming the presence of a quorum, abstentions and broker non-votes will have no effect on the outcome of the election of a Fund’s Board Members. The affirmative vote of a plurality of each Fund’s preferred shares, voting separately, will be required to elect Board Members Hunter and Moschner.

The Board of each Fund unanimously recommends that shareholders vote FOR the election of each Board Member designated as a Board Member nominee.

Board Nominees/Board Members

 

Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

Board Members/Nominees who are not “interested persons” of the Funds

Terence J. Toth c/o Nuveen
333 West
Wacker
Drive
Chicago,
IL 60606
1959
   Chair of the Board; Board Member    Term: Class II Board Member until 2023 annual shareholder meeting and nominee as Class II Board Member until 2026    Formerly, Co-Founding Partner, Promus Capital (investment advisory firm) (2008-2017); formerly, Director of Quality Control Corporation (manufacturing) (2012-2021); formerly, Director of Fulcrum IT Services LLC (information technology services firm to government entities) (2010-2019); formerly, Director, LogicMark LLC (health services) (2012-2016); formerly, Director, Legal &    142    None

 

76


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

      annual shareholder meeting

Length of Service:
Since 2008, Chair of the Board since July 2018
   General Investment Management America, Inc. (asset management) (2008-2013); formerly, CEO and President, Northern Trust Global Investments (financial services) (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (financial services) (since 1994); Chair of the Board of the Kehrein Center for the Arts (philanthropy) (since 2021); Member of Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (philanthropy) (since 2012) and is Chair of its Investment Committee; formerly, Member, Chicago Fellowship Board (philanthropy) (2005-2016); 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).      
Jack B. Evans
c/o Nuveen
333
West Wacker Drive Chicago,
IL 60606
1948
   Board Member    Term: Class III Board Member until 2024 annual shareholder meeting

Length of Service:
Since 1999
   Chairman (since 2019), formerly, President (1996-2019), The Hall-Perrine Foundation (private philanthropic corporation); Life Trustee of Coe College; formerly, Director, Public Member, American Board of Orthopaedic Surgery (2015-2020); Director (1997-2003) Federal Reserve Bank of Chicago; President and Chief Operating Officer (1972-1995), SCI Financial Group, Inc. (regional financial services firm); Member and President Pro Tem of the Board of Regents for the    142    Formerly, Director and Chairman (2009-2021), United Fire Group, a publicly held company; Director (2000-2004), Alliant Energy

 

77


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

         State of Iowa University System (2007-2013); Director (1996-2015), The Gazette Company (media and publishing).      
William C.
Hunter
c/o Nuveen
333
West Wacker Drive Chicago,
IL 60606
1948
   Board Member   

Term: Annual Member until 2023 annual shareholder meeting and nominee for term until 2024 annual shareholder meeting

Length of Service:
Since 2004

   Dean Emeritus, formerly, Dean (2006-2012), Tippie College of Business, University of Iowa; past Director (2005-2015) and past President (2010-2014) of Beta Gamma Sigma, Inc., The International Business Honor Society; formerly, Director (1997-2007), Credit Research Center at Georgetown University; formerly, Dean and Distinguished Professor of Finance (2003-2006), School of Business at the University of Connecticut; previously, Senior Vice President and Director of Research (1995-2003) at the Federal Reserve Bank of Chicago.    142    Director (since 2009) of Wellmark, Inc.; formerly, Director (2004-2018) of Xerox Corporation.

Amy B. R. Lancellotta

c/o Nuveen
333 West Wacker Drive

   Board Member    Term: Class II Board Member until 2023    Formerly, Managing Director, Independent Directors Council (IDC) (supports the fund independent director community and is part of the Investment    142    None

Chicago, IL 60606

1959

     

annual shareholder meeting and nominee for Class II Board Member until 2026 annual shareholder meeting

 

Length of Service: Since 2021

   Company Institute (ICI), which represents regulated investment companies) (2006-2019); formerly, various positions with ICI (1989-2006); Member of the Board of Directors, Jewish Coalition Against Domestic Abuse (JCADA) (since 2020).      

 

78


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

Joanne T. Medero

c/o Nuveen
333 West Wacker Drive
Chicago, IL 60606

1954

   Board Member   

Term: Class III Board Member until 2024 annual shareholder meeting

Length of Service: Since 2021

   Formerly, Managing Director, Government Relations and Public Policy (2009-2020) and Senior Advisor to the Vice Chairman (2018-2020), BlackRock, Inc. (global investment management firm); formerly, Managing Director, Global Head of Government Relations and Public Policy, Barclays Group (IBIM) (investment banking, investment management and wealth management businesses) (2006-2009); formerly, Managing Director, Global General Counsel and Corporate Secretary, Barclays Global Investors (global investment management firm) (1996-2006); formerly, Partner, Orrick, Herrington & Sutcliffe LLP (law firm) (1993-1995); formerly, General Counsel, Commodity Futures Trading Commission (government agency overseeing U.S. derivatives markets) (1989-1993); formerly, Deputy Associate Director/Associate Director for Legal and Financial Affairs, Office of Presidential Personnel, The   

142

   None
         White House (1986-1989); Member of the Board of Directors, Baltic-American Freedom Foundation (seeks to provide opportunities for citizens of the Baltic states to gain education and professional development through exchanges in the U.S.) (since 2019).      
Albin F. Moschner
c/o Nuveen
333 West
   Board Member    Term: Annual Board Member    Founder and Chief Executive Officer, Northcroft Partners, LLC (management consulting) (since 2012); previously, held positions   

142

   Formerly, Chairman (2019) and Director

 

79


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

Wacker Drive Chicago,
IL 60606
1952
      until 2023 annual shareholder meeting and nominee for term until 2024 annual shareholder meeting

Length of Service:
Since 2016
   at Leap Wireless International, Inc. (consumer wireless services), including Consultant (2011-2012), Chief Operating Officer (2008-2011) and Chief Marketing Officer (2004-2008); formerly, President, Verizon Card Services division of Verizon Communications, Inc. (telecommunications services) (2000-2003); formerly, President, One Point Services at One Point Communications (telecommunications services) (1999-2000); formerly, Vice Chairman of the Board, Diba, Incorporated (internet technology provider) (1996-1997); formerly, various executive positions (1991-1996), including Chief Executive Officer (1995-1996) of Zenith Electronics Corporation (consumer electronics).       (2012-2019), USA Technologies, Inc., a provider of solutions and services to facilitate electronic payment transactions; formerly, Director, Wintrust Financial Corporation (1996-2016).
John K. Nelson
c/o Nuveen
333 West Wacker Drive Chicago,
IL 60606
1962
   Board Member    Term: Class II Board Member until 2023 annual shareholder meeting and nominee for    Member of Board of Directors of Core12 LLC (private firm which develops branding, marketing and communications strategies for clients) (since 2008); served on The President’s Council of Fordham University (2010-2019) and previously a Director of the Curran Center for Catholic   

142

   None
     

Class II Board Member term until 2026 annual shareholder meeting

 

Length of Service:
Since 2013

   American Studies (2009-2018); formerly, senior external advisor to the Financial Services practice of Deloitte Consulting LLP (2012-2014); former Chair of the Board of Trustees of Marian University (2010-2014 as trustee, 2011-2014 as Chair); formerly Chief Executive Officer of ABN AMRO Bank N.V., North America, and Global Head of the Financial Markets Division (2007-2008), with various      

 

80


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

         executive leadership roles in ABN AMRO Bank N.V. between 1996 and 2007.      

Matthew Thornton III

c/o Nuveen
333 West Wacker Drive

Chicago, IL 60606

1958

   Board Member   

Term: Class III Board Member until 2024 annual shareholder meeting

 

Length of Service: Since 2020

   Formerly, Executive Vice President and Chief Operating Officer (2018-2019), FedEx Freight Corporation, a subsidiary of FedEx Corporation (“FedEx”) (provider of transportation, e-commerce and business services through its portfolio of companies); formerly, Senior Vice President, U.S. Operations (2006-2018), Federal Express Corporation, a subsidiary of FedEx; formerly, Member of the Board of Directors (2012-2018), Safe Kids Worldwide® (non-profit organization dedicated to preventing childhood injuries).   

142

   Member of the Board of Directors (since 2014), The Sherwin-Williams Company (develops, manufactures, distributes and sells paints, coatings and related products); Member of the Board of Directors (since 2020), Crown Castle International (provider of communications infrastructure).
Margaret L. Wolff
c/o Nuveen
333 West Wacker Drive Chicago, IL 60606
1955
   Board Member    Term: Class I Board Member until 2025 annual shareholder meeting

Length of Service:
Since 2016
   Formerly, Of Counsel (2005-2014), Skadden, Arps, Slate, Meagher & Flom LLP (Mergers & Acquisitions Group) (legal services); Member of the Board of Trustees of New York-Presbyterian Hospital (since 2005); Member (since 2004), formerly, Chair (2015-2022) of the Board of Trustees of The John A. Hartford Foundation (philanthropy dedicated to   

142

   Formerly, Member of the Board of Directors (2013-2017) of Travelers Insurance Company of Canada and The

 

81


Name, Business
Address
and Year of Birth

  

Position(s)
Held with
Fund

  

Current
Term of
Office and
Length of
Time
Served
with Funds
in the
Fund
Complex;
Nominee(1)

  

Principal
Occupation(s)
During Past Five Years

  

Number
of
Portfolios
in Fund
Complex
Overseen
by Board
Member

  

Other
Directorships
Held by
Board
Member
During the
Past Five
Years

         improving the care of older adults); formerly, Member (2005-2015) and Vice Chair (2011-2015) of the Board of Trustees of Mt. Holyoke College.       Dominion of Canada General Insurance Company (each, a part of Travelers Canada, the Canadian operation of The Travelers Companies, Inc.).
Robert L. Young c/o Nuveen
333 West Wacker Drive Chicago, IL 60606
1963
   Board Member   

Term: Class II Board Member until 2023 annual shareholder meeting and

nominee as

Class I

Board

Member

until 2025

annual

shareholder

meeting

Length of Service:
Since 2017

   Formerly, Chief Operating Officer and Director, J.P. Morgan Investment Management Inc. (financial services) (2010-2016); formerly, President and Principal Executive Officer (2013-2016), and Senior Vice President and Chief Operating Officer (2005-2010), of J.P. Morgan Funds; formerly, Director and various officer positions for J.P. Morgan Investment Management Inc. (formerly, JPMorgan Funds Management, Inc. and formerly, One Group Administrative Services) and JPMorgan Distribution Services, Inc. (financial services) (formerly, One Group Dealer Services, Inc.) (1999-2017).   

142

   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.

Board Member Investments in the Funds

In order to create an appropriate identity of interests between Board Members and shareholders, the Boards of Directors/Trustees of the Nuveen funds have adopted a governance principle pursuant to which each Board Member is expected to invest, either directly or on a deferred basis, at least the equivalent of one year of compensation in the funds in the Nuveen fund complex.

 

82


The following table sets forth for each Board Member the dollar range of equity securities beneficially owned in each Fund and all Nuveen funds overseen by the Board Member as of December 31, 2022. The information as to beneficial ownership is based on statements furnished by each Board Member/nominee.

Dollar Range of Equity Securities

 

Name of Board Member/Nominee

   Senior
Income
   Floating
Rate
Income
Opportunity
   Short
Duration
Credit
Opportunities
   Acquiring
Fund
   Family of
Investment
Companies(1)
Jack B. Evans    $0    $10,001-$50,000    $10,001-$50,000    $0    Over $100,000
William C. Hunter    $0    $0    $0    $0    Over $100,000
Amy B.R. Lancellotta    $0    $0    $0    $0    $10,001-$50,000
Joanne T. Medero    $0    $0    $0    $0    Over $100,000
Albin F. Moschner    $0    $10,001-$50,000    $0      Over $100,000    Over $100,000
John K. Nelson    $0    $0    $0    $0    Over $100,000
Matthew Thornton III    $0    $0    $0    $0    Over $100,000
Terence J. Toth    $0    $0    $10,001-$50,000    $0    Over $100,000
Margaret L. Wolff    $0    $0    $0    $0    Over $100,000
Robert L. Young    $0    $0    $0    $0    Over $100,000

 

(1)

The amounts reflect the aggregate dollar range of equity securities beneficially owned by the Board Member/nominee of the Funds and in all Nuveen Funds overseen by each Board Member/nominee.

No Independent Board Member or his or her immediate family member owns beneficially or of record any security of Nuveen Fund Advisors, Nuveen Asset Management, LLC, the Funds’ sub-adviser (previously defined as “Nuveen Asset Management” or the “Sub-Adviser”), 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 February 28, 2023, each Board Member’s individual beneficial shareholdings of each Fund constituted less than 1% of the outstanding shares of the Fund. As of February 28, 2023, the Board Members and executive officers as a group beneficially owned less than 1% of the outstanding shares of each Fund. Information regarding beneficial owners that, to the knowledge of the Funds, own 5% or more of any class of shares of any Fund is provided under “General Information—Shareholders of the Target Funds and the Acquiring Fund.”

Compensation

Effective January 1, 2023, independent trustees received a $210,000 annual retainer, increased from $205,000 as of January 1, 2022, plus they received; (a) a fee of $7,250, increased from $7,000 as of January 1, 2022, 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 $3,000 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 at Audit Committee meetings, Closed-End Fund Committee meetings and Investment Committee meetings; (d) a fee of $5,000 per meeting for attendance in person or by telephone at Compliance, Risk Management and Regulatory Oversight Committee meetings; (e) a fee of $1,250 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 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. In addition to the payments described above, the Chair of the Board received $140,000 and the chairpersons of the Audit Committee, the Dividend Committee, the Compliance, Risk Management and Regulatory Oversight Committee, the Nominating and Governance Committee and the Closed-End Funds Committee received $20,000 each as additional retainers. Independent trustees also received a fee of $5,000, increased from $2,500 as of January 1, 2022, per day for site visits to entities that provide services to the Nuveen funds on days on which no Board meeting was held. Per meeting fees

 

83


for unscheduled Committee meetings or meetings of Ad Hoc or Special Assignment Committees will be determined by the Chair of such Committee based on the complexity or time commitment associated with the particular meeting. As of January 1, 2022, when Ad Hoc Committees are 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 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 Nuveen funds on the basis of relative net assets, although management may have, in its discretion, established a minimum amount to be allocated to each fund. In certain instances fees and expenses were allocated only to those Nuveen funds that were discussed at a given meeting.

The Funds do not have retirement or pension plans. Certain Nuveen funds (the “Participating Funds”) participate in a deferred compensation plan (the “Deferred Compensation Plan”) that permits an Independent Board Member to elect to defer receipt of all or a portion of his or her compensation as an Independent Board Member. The deferred compensation of a participating Independent Board Member is credited to a book reserve account of the Participating Fund when the compensation would otherwise have been paid to such Independent Board Member. The value of an Independent Board Member’s deferral account at any time is equal to the value that the account would have had if contributions to the account had been invested and reinvested in shares of one or more of the eligible Nuveen funds. At the time for commencing distributions from an Independent Board Member’s deferral account, the Independent Board Member may elect to receive distributions in a lump sum or over a period of five years. The Participating Fund will not be liable for any other fund’s obligations to make distributions under the Deferred Compensation Plan.

The Funds have no employees. The officers of the Funds and the Board Members of each Fund who are not Independent Board Members serve without any compensation from the Funds. The Funds’ Chief Compliance Officer’s (“CCO”) compensation, which is composed of base salary and incentive compensation, is paid by the Adviser, with review and input by the Board. The Funds reimburse the Adviser for an allocable portion of the Adviser’s cost of the CCO’s incentive compensation.

The table below shows, for each Independent Board Member/nominee, the aggregate compensation paid by each Fund to the Independent Board Member/nominee for its last fiscal year.

Aggregate Compensation from the Funds*

 

Fund Name

  Jack B.
Evans
    William C.
Hunter
    Amy B.R.
Lancellotta
    Joanne T.
Medero
    Albin F.
Moschner
    John K.
Nelson
    Matthew
Thornton III
    Terence J.
Toth
    Margaret
L. Wolff
    Robert L.
Young
 

Senior Income

  $ 821     $ 790     $ 734     $ 744     $ 875     $ 847     $ 772     $ 1,035     $ 808     $ 799  

Floating Rate Income Opportunity

  $ 1,457     $ 1,403     $ 1,303     $ 1,320     $ 1,553     $ 1,503     $ 1,371     $ 1,836     $ 1,434     $ 1,418  

Short Duration Credit Opportunities

  $ 546     $ 526     $ 488     $ 495     $ 582     $ 563     $ 514     $ 688     $ 537     $ 531  

Acquiring Fund

  $ 2.062     $ 1,985     $ 1,844     $ 1,867     $ 2,197     $ 2,126     $ 1,940     $ 2,599     $ 2,029     $ 2,007  

Total Compensation from Nuveen Funds Paid to Board Members/ Nominees

  $ 408,231     $ 415,750     $ 117,500     $ 117,500     $ 420,050     $ 434,500     $ 335,500     $ 499,050     $ 425,836     $ 350,055  

 

*

Includes deferred fees. Pursuant to the Deferred Compensation Plan with certain Participating Funds, deferred amounts are treated as though an equivalent dollar amount has been invested in shares of one or more Participating Funds. Total deferred fees for the Participating Funds (including the return from the assumed investment in the Participating Funds) payable are:

 

84


Fund Name

  Jack B.
Evans
    William
C. Hunter
    Amy B.R.
Lancellotta
    Joanne T.
Medero
    Albin F.
Moschner
    John K.
Nelson
    Matthew
Thornton III
    Terence J.
Toth
    Margaret
L. Wolff
    Robert L.
Young
 

Senior Income

  $ 72       —       $ 126     $ 190       —         —         —         —       $ 315     $ 677  

Floating Rate Income Opportunity

  $ 127       —       $ 223     $ 338       —         —         —         —       $ 560     $ 1,202  

Short Duration Credit Opportunities

  $ 48       —       $ 84     $ 127       —         —         —         —       $ 210     $ 451  

Acquiring Fund

  $ 180       —       $ 316     $ 478       —         —         —         —       $ 792     $ 1,701  

Board Leadership Structure and Risk Oversight

The Board of each Fund 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 board members who serves 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, diversity (including, among other things, gender, race and ethnicity), 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 candidate’s particular background, skills and experience, among other things, but also whether such background, skills and experience enhance the Board’s 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 (including, among other things, gender, race and ethnicity), skills, experience and views among Board 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 and risk management). The Board believes it is more efficient to have a single board review and oversee common policies and procedures which increases the Board’s knowledge and expertise with respect to the many aspects of fund operations that are complex-wide in nature. The unitary structure also enhances the Board’s 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 Chair who is an Independent Board Member. The Board recognizes that a chair 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 Board’s focus on the long-term interests of shareholders. The Board recognizes that a chair 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 Mr. Toth as the independent Chair of the Board. Pursuant to the Fund’s By-Laws, the Chair shall perform all duties incident to the office of Chair of the Board and such other duties as from time to time may be assigned to him or her by the Board Members or the By-Laws.

Although the Board has direct responsibility over various matters (such as advisory contracts and underwriting contracts), 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

 

85


risk oversight. More specifically, with respect to risk oversight, the Board has delegated matters relating to valuation, compliance and investment risk to certain committees (as summarized below). 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 Fund’s operations. The Board has established seven standing committees: the Executive Committee, the Dividend Committee, the Audit Committee, the Compliance, Risk Management and Regulatory Oversight Committee, the Investment 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. For more information on the Board, please visit www.nuveen.com/fundgovernance.

Executive Committee. 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 Mr. Toth, Chair, Mr. Nelson and Mr. Young. The number of Executive Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Dividend Committee. The Dividend Committee is authorized to declare distributions on each Fund’s shares, including, but not limited to, regular and special dividends, capital gains and ordinary income distributions. The Dividend Committee operates under a written charter adopted and approved by the Board. The members of the Dividend Committee are Mr. Young, Chair, Mr. Nelson, Ms. Lancellotta and Mr. Thornton. The number of Dividend Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Audit Committee. 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. 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 Board’s general supervision of such actions, the Audit Committee addresses any valuation issues, oversees the Funds’ pricing procedures and actions taken by Nuveen’s internal valuation group which provides regular reports to the Audit 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 of 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 and reviews 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. 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 Mr. Nelson, Chair, Mr. Evans, Mr. Moschner, Ms. Wolff and Mr. Young, each of whom is an Independent Board Member of the Funds. The number of Audit Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Compliance, Risk Management and Regulatory Oversight Committee. The Compliance, Risk Management and Regulatory Oversight Committee (the “Compliance Committee”) is responsible for the

 

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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 general risks related to investments which are not reviewed by other committees, such as liquidity and derivatives usage; risks related to product structure elements, such as leverage; techniques that may be used to address the foregoing risks, such as hedging and swaps and Fund operational risk and risks related to the overall operation of the Nuveen enterprise and, in each case, the controls designed to address or mitigate such risks. In assessing issues brought to the Compliance Committee’s 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. 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 Ms. Wolff, Chair, Dr. Hunter, Ms. Lancellotta, Ms. Medero, Mr. Thornton and Mr. Toth. The number of Compliance Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Nominating and Governance Committee. 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 Board and committee structures have been developed over the years and the Nominating and Governance Committee believes these structures have provided efficient and effective governance, the Nominating and Governance 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 Nominating and Governance 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 Board’s 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 William Siffermann, Manager of Fund Board Relations, Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. The Nominating and Governance Committee sets appropriate standards and

 

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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 candidate’s qualifications, each candidate must meet certain basic requirements, including relevant skills and experience, time availability (including the time requirements for due diligence meetings with 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 and is composed entirely of Independent Board Members, who are also “independent” as defined by NYSE listing standards. The members of the Nominating and Governance Committee are Mr. Toth, Chair, Mr. Evans, Dr. Hunter, Ms. Lancellotta, Ms. Medero, Mr. Moschner, Mr. Nelson, Mr. Thornton, Ms. Wolff and Mr. Young. The number of Nominating and Governance Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Investment Committee. The Investment Committee is responsible for the oversight of Fund performance, investment risk management and other portfolio-related matters affecting the Funds which are not otherwise the jurisdiction of the other Board committees. As part of such oversight, the Investment Committee reviews each Fund’s investment performance and investment risks, which may include, but is not limited to, an evaluation of Fund performance relative to investment objectives, benchmarks and peer group; a review of risks related to portfolio investments, such as exposures to particular issuers, market sectors, or types of securities, as well as consideration of other factors that could impact or are related to Fund performance; and an assessment of Fund objectives, policies and practices as such may relate to Fund performance. In assessing issues brought to the committee’s attention or in reviewing an investment policy, technique or strategy, the Investment Committee evaluates the risks to the Funds in adopting or recommending a particular approach or resolution compared to the anticipated benefits to the Funds and their shareholders.

In fulfilling its obligations, the Investment Committee receives quarterly reports from the investment oversight and the investment risk groups at Nuveen. Such groups also report to the full Board on a quarterly basis and the full Board participates in further discussions with fund management at its quarterly meetings regarding matters relating to Fund performance and investment risks, including with respect to the various drivers of performance and Fund use of leverage and hedging. Accordingly, the Board directly and/or in conjunction with the Investment Committee oversees the investment performance and investment risk management of the Funds. The Investment Committee operates under a written charter adopted and approved by the Board. This committee is composed of the independent Trustees of the Funds. Accordingly, the members of the Investment Committee are Dr. Hunter, Chair, Mr. Evans, Ms. Lancellotta, Ms. Medero, Mr. Moschner, Mr. Nelson, Mr. Thornton, Mr. Toth, Ms. Wolff and Mr. Young. The Investment Committee of each Fund held no meetings during its last fiscal year.

Closed-End Funds Committee. The Closed-End Funds Committee was established by the Board in 2012 and is responsible for assisting the Board in the oversight and monitoring of the Nuveen funds that are registered as closed-end management investment companies (“Closed-End Funds”). The Closed-End Funds Committee may review and evaluate matters related to the formation and the 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 Closed-End Funds Committee receives updates on the secondary closed-end fund market and evaluates the premiums and discounts of the Nuveen closed-end funds, including the Funds, at each quarterly meeting. The

 

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Closed-End Funds Committee reviews, among other things, the premium and discount trends in the broader closed-end fund market, by asset category and by closed-end fund; the historical total return performance data for the Nuveen closed-end funds, including the Funds, based on net asset value and price over various periods; the volatility trends in the market; the use of leverage by the Nuveen closed-end funds, including the Funds; the distribution data of the Nuveen closed-end funds, including the Funds, and as compared to peer averages; and a summary of common share issuances, if any, and share repurchases, if any, during the applicable quarter by the Nuveen closed-end funds, including the Funds. The Closed-End Funds Committee regularly engages in more in-depth discussions of premiums and discounts of the Nuveen closed-end funds. Additionally, the Closed-End Funds Committee members participate in in-depth workshops to explore, among other things, actions to address discounts of the Nuveen closed-end funds, potential share repurchases and available leverage strategies and their use. The Closed-End Funds Committee operates under a written charter adopted and approved by the Board. The members of the Closed-End Funds Committee are Mr. Evans, Chair, Dr. Hunter, Ms. Lancellotta, Mr. Nelson, Mr. Toth and Ms. Wolff. The number of Closed-End Funds Committee meetings of each Fund held during its last fiscal year is shown in Appendix C.

Board Member Attendance. The number of regular quarterly meetings and special meetings held by the Board of each Fund during the Fund’s last fiscal year is shown in Appendix C. During the last fiscal year, each Board Member attended 75% or more of each Fund’s 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 shareholders 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 https://www.nuveen.com/fund-governance.

Board Diversification and Board Member Qualifications. In determining that a particular Board Member was qualified to serve on the Board, the Board considered each Board Member’s 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.

Jack B. Evans

Mr. Evans has served as Chairman (since 2019), formerly, President from 1996-2019 of the Hall-Perrine Foundation, a private philanthropic corporation. Mr. Evans was formerly President and Chief Operating Officer (1972-1995) 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 from 1997 to 2003 as well as a Director of Alliant Energy from 2000 to 2004 and Member and President Pro Tem of the Board of Regents for the State of Iowa University System from 2007 to 2013. Mr. Evans is a Life Trustee of Coe College and formerly served as Chairman of the Board of United Fire Group from 2009 to 2021, served as a Director and Public Member of the American Board of Orthopaedic Surgery from 2015 to 2020 and served on the Board of The Gazette Company from 1996 to 2015. He has a Bachelor of Arts from Coe College and an M.B.A. from the University of Iowa. Mr. Evans joined the Board in 1999.

 

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William C. Hunter

Dr. Hunter became Dean Emeritus of the Henry B. Tippie College of Business at the University of Iowa in 2012, after having served as Dean of the College since July 2006. He had been Dean and Distinguished Professor of Finance at the University of Connecticut School of Business from 2003 to 2006. From 1995 to 2003, he was the Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago. He has held faculty positions at Emory University, Atlanta University, the University of Georgia and Northwestern University. He has consulted with numerous foreign central banks and official agencies in Europe, Asia, Central America and South America. He has been a Director of Wellmark, Inc. since 2009. He is a past Director (2005-2015) and a past President (2010-2014) of Beta Gamma Sigma, Inc., The International Business Honor Society, and a past Director (2004-2018) of the Xerox Corporation. Dr. Hunter received his PhD (1978) and MBA (1970) from Northwestern University and his BS from Hampton University (1970). Dr. Hunter joined the Board in 2004.

Amy B. R. Lancellotta

After 30 years of service, Ms. Lancellotta retired at the end of 2019 from the Investment Company Institute (ICI), which represents regulated investment companies on regulatory, legislative and securities industry initiatives that affect funds and their shareholders. From November 2006 until her retirement, Ms. Lancellotta served as Managing Director of ICI’s Independent Directors Council (IDC), which supports fund independent directors in fulfilling their responsibilities to promote and protect the interests of fund shareholders. At IDC, Ms. Lancellotta was responsible for all ICI and IDC activities relating to the fund independent director community. In conjunction with her responsibilities, Ms. Lancellotta advised and represented IDC, ICI, independent directors and the investment company industry on issues relating to fund governance and the role of fund directors. She also directed and coordinated IDC’s education, communication, governance and policy initiatives. Prior to serving as Managing Director of IDC, Ms. Lancellotta held various other positions with ICI beginning in 1989. Before joining ICI, Ms. Lancellotta was an associate at two Washington, D.C. law firms. In addition, since 2020, she has been a member of the Board of Directors of the Jewish Coalition Against Domestic Abuse (JCADA), an organization that seeks to end power-based violence, empower survivors and ensure safe communities. Ms. Lancellotta received a B.A. degree from Pennsylvania State University in 1981 and a J.D. degree from the National Law Center, George Washington University (currently known as George Washington University Law School) in 1984. Ms. Lancellotta joined the Board in 2021.

Joanne T. Medero

Ms. Medero has over 30 years of financial services experience and, most recently, from December 2009 until her retirement in July 2020, she was a Managing Director in the Government Relations and Public Policy Group at BlackRock, Inc. (BlackRock). From July 2018 to July 2020, she was also Senior Advisor to BlackRock’s Vice Chairman, focusing on public policy and corporate governance issues. In 1996, Ms. Medero joined Barclays Global Investors (BGI), which merged with BlackRock in 2009. At BGI, she was a Managing Director and served as Global General Counsel and Corporate Secretary until 2006. Then, from 2006 to 2009, Ms. Medero was a Managing Director and Global Head of Government Relations and Public Policy at Barclays Group (IBIM), where she provided policy guidance and directed legislative and regulatory advocacy programs for the investment banking, investment management and wealth management businesses. Before joining BGI, Ms. Medero was a Partner at Orrick, Herrington & Sutcliffe LLP from 1993 to 1995, where she specialized in derivatives and financial markets regulation issues. Additionally, she served as General Counsel of the Commodity Futures Trading Commission (CFTC) from 1989 to 1993 and, from 1986 to 1989, she was Deputy Associate Director/Associate Director for Legal and Financial Affairs at The White House Office of Presidential Personnel. Further, from 2006 to 2010, Ms. Medero was a member of the CFTC Global Markets Advisory Committee and she has been actively involved in financial industry associations, serving as Chair of the Steering Committee of the SIFMA (Securities Industry and Financial Markets Association) Asset Management Group (2016-2018) and Chair of the CTA (Commodity Trading Advisor), CPO (Commodity Pool Operator) and Futures

 

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Committee of the Managed Funds Association (2010-2012). Currently, Ms. Medero chairs the Corporations, Antitrust and Securities Practice Group of The Federalist Society for Law and Public Policy (since 2010 and from 2000 to 2002). In addition, since 2019, she has been a member of the Board of Directors of the Baltic-American Freedom Foundation, which seeks to provide opportunities for citizens of the Baltic states to gain education and professional development through exchanges in the United States. Ms. Medero received a B.A. degree from St. Lawrence University in 1975 and a J.D. degree from the National Law Center, George Washington University (currently known as George Washington University Law School) in 1978. Ms. Medero joined the Board in 2021.

Albin F. Moschner

Mr. Moschner is a consultant in the wireless industry and, in July 2012, founded Northcroft Partners, LLC, a management consulting firm that provides operational, management and governance solutions. Prior to founding Northcroft Partners, LLC, Mr. Moschner held various positions at Leap Wireless International, Inc., a provider of wireless services, where he was a consultant from February 2011 to July 2012, Chief Operating Officer from July 2008 to February 2011, and Chief Marketing Officer from August 2004 to June 2008. Before he joined Leap Wireless International, Inc., Mr. Moschner was President of the Verizon Card Services division of Verizon Communications, Inc. from 2000 to 2003, and President of One Point Services at One Point Communications from 1999 to 2000. Mr. Moschner also served at Zenith Electronics Corporation as Director, President and Chief Executive Officer from 1995 to 1996, and as Director, President and Chief Operating Officer from 1994 to 1995. Mr. Moschner was formerly Chairman (2019) and a member of the Board of Directors (2012-2019) of USA Technologies, Inc. and, from 1996 until 2016, he was a member of the Board of Directors of Wintrust Financial Corporation. In addition, he is emeritus (since 2018) of the Advisory Boards of the Kellogg School of Management (1995-2018) and the Archdiocese of Chicago Financial Council (2012-2018). Mr. Moschner received a Bachelor of Engineering degree in Electrical Engineering from The City College of New York in 1974 and a Master of Science degree in Electrical Engineering from Syracuse University in 1979. Mr. Moschner joined the Board in 2016.

John K. Nelson

Mr. Nelson is on the Board of Directors of Core12, LLC. (since 2008), a private firm which develops branding, marketing, and communications strategies for clients. Mr. Nelson has extensive experience in global banking and markets, having served in several senior executive positions with ABN AMRO Holdings N.V. and its affiliated entities and predecessors, including LaSalle Bank Corporation from 1996 to 2008, ultimately serving as Chief Executive Officer of ABN AMRO N.V. North America. During his tenure at the bank, he also served as Global Head of its Financial Markets Division, which encompassed the bank’s Currency, Commodity, Fixed Income, Emerging Markets, and Derivatives businesses. He was a member of the Foreign Exchange Committee of the Federal Reserve Bank of the United States and during his tenure with ABN AMRO served as the bank’s representative on various committees of The Bank of Canada, European Central Bank, and The Bank of England. Mr. Nelson previously served as a senior, external advisor to the financial services practice of Deloitte Consulting LLP (2012-2014). At Fordham University, he served as a director of The President’s Council (2010-2019) and previously served as a director of The Curran Center for Catholic American Studies (2009-2018). He served as a trustee and Chairman of The Board of Trustees of Marian University (2011-2013). Mr. Nelson is a graduate of Fordham University, holding a BA in Economics and an MBA in Finance. Mr. Nelson joined the Board in 2013.

Matthew Thornton III

Mr. Thornton has over 40 years of broad leadership and operating experience from his career with FedEx Corporation (“FedEx”), which, through its portfolio of companies, provides transportation, e-commerce and business services. In November 2019, Mr. Thornton retired as Executive Vice President and Chief Operating Officer of FedEx Freight Corporation (FedEx Freight), a subsidiary of FedEx, where, from May 2018 until his

 

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retirement, he had been responsible for day-to-day operations, strategic guidance, modernization of freight operations and delivering innovative customer solutions. From September 2006 to May 2018, Mr. Thornton served as Senior Vice President, U.S. Operations at Federal Express Corporation (FedEx Express), a subsidiary of FedEx. Prior to September 2006, Mr. Thornton held a range of positions of increasing responsibility with FedEx, including various management positions. In addition, Mr. Thornton currently (since 2014) serves on the Board of Directors of The Sherwin-Williams Company, where he is a member of the Audit Committee and the Nominating and Corporate Governance Committee, and the Board of Directors of Crown Castle International (since 2020), where he is a member of the Strategy Committee and the Compensation Committee. Formerly (2012-2018), he was a member of the Board of Directors of Safe Kids Worldwide®, a non-profit organization dedicated to the prevention of childhood injuries. Mr. Thornton is a member (since 2014) of the Executive Leadership Council (ELC), the nation’s premier organization of global black senior executives. He is also a member of the National Association of Corporate Directors (NACD). Mr. Thornton has been recognized by Black Enterprise on its 2017 list of the Most Powerful Executives in Corporate America and by Ebony on its 2016 Power 100 list of the world’s most influential and inspiring African Americans. Mr. Thornton received a B.B.A. degree from the University of Memphis in 1980 and an M.B.A. from the University of Tennessee in 2001. Mr. Thornton joined the Board in 2020.

Terence J. Toth

Mr. Toth, the Nuveen Funds’ Independent Chair, was a Co-Founding Partner of Promus Capital (2008-2017). From 2012 to 2021, he was a Director of Quality Control Corporation, from 2008 to 2013, he was a Director of Legal & General Investment Management America, Inc. 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 as Chair of the Board of the Kehrein Center for the Arts (since 2021) and is on the Board of Catalyst Schools of Chicago since 2008. He is on the Mather Foundation Board since 2012 and is Chair of its Investment Committee and previously served as a Director of LogicMark LLC (2012-2016) and of Fulcrum IT Service LLC (2010-2019). 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. Mr. Toth joined the Board in 2008.

Margaret L. Wolff

Ms. Wolff retired from Skadden, Arps, Slate, Meagher & Flom LLP in 2014 after more than 30 years of providing client service in the Mergers & Acquisitions Group. During her legal career, Ms. Wolff devoted significant time to advising boards and senior management on U.S. and international corporate, securities, regulatory and strategic matters, including governance, shareholder, fiduciary, operational and management issues. Ms. Wolff has been a trustee of New York-Presbyterian Hospital since 2005 and, since 2004, she has served as a trustee of The John A. Hartford Foundation (a philanthropy dedicated to improving the care of older adults) where she formerly served as Chair from 2015 to 2022. From 2013 to 2017, she was a Board member of Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company (each of which is a part of Travelers Canada, the Canadian operation of The Travelers Companies, Inc.). From 2005 to 2015, she was a trustee of Mt. Holyoke College and served as Vice Chair of the Board from 2011 to 2015. Ms. Wolff received her Bachelor of Arts from Mt. Holyoke College and her Juris Doctor from Case Western Reserve University School of Law. Ms. Wolff joined the Board in 2016.

Robert L. Young

Mr. Young has more than 30 years of experience in the investment management industry. From 1997 to 2017, he held various positions with J.P. Morgan Investment Management Inc. (“J.P. Morgan Investment”) and

 

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its affiliates (collectively, “J.P. Morgan”). Most recently, he served as Chief Operating Officer and Director of J.P. Morgan Investment (from 2010 to 2016) and as President and Principal Executive Officer of the J.P. Morgan Funds (from 2013 to 2016). As Chief Operating Officer of J.P. Morgan Investment, Mr. Young led service, administration and business platform support activities for J.P. Morgan’s domestic retail mutual fund and institutional commingled and separate account businesses, and co-led these activities for J.P. Morgan’s global retail and institutional investment management businesses. As President of the J.P. Morgan Funds, Mr. Young interacted with various service providers to these funds, facilitated the relationship between such funds and their boards, and was directly involved in establishing board agendas, addressing regulatory matters, and establishing policies and procedures. Before joining J.P. Morgan, Mr. Young, a former Certified Public Accountant (CPA), was a Senior Manager (Audit) with Deloitte & Touche LLP (formerly, Touche Ross LLP), where he was employed from 1985 to 1996. During his tenure there, he actively participated in creating, and ultimately led, the firm’s midwestern mutual fund practice. Mr. Young holds a Bachelor of Business Administration degree in Accounting from the University of Dayton and, from 2008 to 2011, he served on the Investment Committee of its Board of Trustees. Mr. Young joined the Board in 2017.

Board Member Terms. For each Fund, shareholders will be asked to elect Board Members as each Board Member’s term expires, and with respect to Board Members elected by holders of common shares, such Board Members shall be elected for a term generally expiring at the time of the third succeeding annual meeting of shareholders 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.

 

Name,
Address and Year of Birth

  

Position(s)
Held with
Fund

  

Term of Office
and Length of
Time Served(1)

  

Principal Occupation(s) During Past 5 Years(2)

David J. Lamb
333 West Wacker Drive

Chicago, IL 60606
1963

   Chief Administrative Officer    Term: Indefinite Length of Service: Since 2015    Managing Director of Nuveen Fund Advisors, LLC (since 2019); Senior Managing Director (since 2021), formerly, Managing Director (2020-2021) of Nuveen Securities, LLC; Senior Managing Director (since 2021), formerly, Managing Director (2017-2021), Senior Vice President (2006-2017) of Nuveen.
Brett E. Black
333 West Wacker Drive
Chicago, IL 60606
1972
   Vice President and Chief Compliance Officer    Term: Indefinite
Length of Service: Since 2022
   Enterprise Senior Compliance Officer of Nuveen (since 2022); formerly, Vice President (2014-2022), Chief Compliance Officer (2017-2022), Deputy Chief Compliance Officer (2014-2017) of BMO Funds, Inc.

Mark J. Czarniecki

901 Marquette Avenue

Minneapolis, MN 55402

1979

   Vice President and Assistant Secretary    Term: Indefinite Length of Service: Since 2013    Managing Director (since 2022), formerly, Vice President (2016-2022) and Assistant Secretary (since 2016) of Nuveen Securities, LLC; Managing Director (since 2022), formerly, Vice President (2017-2022) and Assistant Secretary (since 2017) of Nuveen Fund Advisors, LLC; Managing Director (since 2022), formerly, Vice President (2018-2022), Associate General Counsel

 

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Name,
Address and Year of Birth

  

Position(s)
Held with
Fund

  

Term of Office
and Length of
Time Served(1)

  

Principal Occupation(s) During Past 5 Years(2)

         and Assistant Secretary (since 2018) of Nuveen Asset Management, LLC; Managing Director and Associate General Counsel (since January 2022), formerly, Vice President and Associate General Counsel of Nuveen (2013-2021).

Diana R. Gonzalez

8500 Andrew Carnegie Blvd.

Charlotte, NC 28262

1978

   Vice President and Assistant Secretary    Term: Indefinite Length of Service: Since 2017    Vice President and Assistant Secretary of Nuveen Fund Advisors (since 2017); Vice President, Associate General Counsel and Assistant Secretary of Nuveen Asset Management, LLC (since 2022); Vice President and Associate General Counsel of Nuveen (since 2017); formerly, Associate General Counsel of Jackson National Asset Management (2012-2017).

Nathaniel T. Jones

333 West Wacker Drive

Chicago, IL 60606

1979

   Vice President and Treasurer    Term: Indefinite Length of Service: Since 2016    Senior Managing Director (since 2021), formerly, Managing Director (2017-2021), Senior Vice President (2016-2017) of Nuveen; Managing Director (since 2015) of Nuveen Fund Advisors, LLC; Chartered Financial Analyst.

Tina M. Lazar

333 West Wacker Drive

Chicago, IL 60606

1961

   Vice President    Term: Indefinite Length of Service: Since 2002    Managing Director (since 2017), formerly, Senior Vice President (2014-2017) of Nuveen Securities, LLC.

Brian J. Lockhart

333 West Wacker Drive

Chicago, IL 60606

1974

   Vice President    Term: Indefinite
Length of Service: Since 2019
   Managing Director (since 2019) of Nuveen Fund Advisors, LLC; Senior Managing Director (since 2021), formerly, Managing Director (2017-2021), Vice President (2010-2017) of Nuveen; Head of Investment Oversight (since September 2017), formerly, Team Leader of Manager Oversight (2015-2017); Chartered Financial Analyst and Certified Financial Risk Manager.

John M. McCann

8500 Andrew Carnegie Blvd.

Charlotte, NC 28262

1975

   Vice President and Assistant Secretary    Term: Indefinite
Length of Service: Since 2022
   Managing Director and Assistant Secretary of Nuveen Fund Advisors, LLC (since 2021); Managing Director, Associate General Counsel and Assistant Secretary of Nuveen Asset Management, LLC (since 2021); Managing Director (since 2021) and Assistant Secretary (since 2016) of TIAA SMA Strategies LLC; Managing Director (since 2019, formerly, Vice President and Director), Associate General Counsel and Assistant Secretary) of the College Retirement Equities Fund, TIAA Separate Account VA-1, TIAA-CREF Funds and TIAA-CREF Life Funds; Managing Director (since 2018), formerly, Vice President and Director, Associate General Counsel and Assistant Secretary of Teachers Insurance and Annuity Association of America, Teacher Advisors LLC and TIAA-CREF Investment Management, LLC; Vice President (since 2017), Associate General Counsel and Assistant Secretary (since 2011) of Nuveen Alternative Advisors LLC; General Counsel and Assistant Secretary of Covariance Capital Management, Inc. (2014-2017).

 

94


Name,
Address and Year of Birth

  

Position(s)
Held with
Fund

  

Term of Office
and Length of
Time Served(1)

  

Principal Occupation(s) During Past 5 Years(2)

Kevin J. McCarthy

333 West Wacker Drive

Chicago, IL 60606

1966

   Vice President and Assistant Secretary    Term: Indefinite
Length of Service: Since 2007
   Senior Managing Director (since 2017) and Secretary and General Counsel (since 2016) of Nuveen Investments, Inc., formerly, Executive Vice President (2016-2017); Senior Managing Director (since 2017) and Assistant Secretary (since 2008) of Nuveen Securities, LLC, formerly Executive Vice President (2016-2017); Senior Managing Director (since 2017), Secretary (since 2016) of Nuveen Fund Advisors, LLC, formerly, Co-General Counsel (2011-2020), Executive Vice President (2016-2017); Senior Managing Director (since 2017), Secretary (since 2016) of Nuveen Asset Management, LLC, formerly Associate General Counsel (2011-2020), Executive Vice President (2016-2017); formerly, Vice President (2007-2021) and Secretary (2016-2021), of NWQ Investment Management Company, LLC and Santa Barbara Asset Management, LLC; Vice President and Secretary of Winslow Capital Management, LLC (since 2010); Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Alternative Investments, LLC.

Jon Scott Meissner

8500 Andrew Carnegie Blvd.

Charlotte, NC 28262

1973

   Vice President and Assistant Secretary    Term: Indefinite
Length of Service: Since 2019
   Managing Director of Mutual Fund Tax and Financial Reporting groups at Nuveen (since 2017); Managing Director (since 2019) of Nuveen Fund Advisors, LLC; Senior Director of Teachers Advisors, LLC and TIAA-CREF Investment Management, LLC (since 2016); Senior Director (since 2015) Mutual Fund Taxation to the TIAA-CREF Funds, the TIAA-CREF Life Funds, the TIAA Separate Account VA-1 and the CREF Accounts; has held various positions with TIAA since 2004.
William A. Siffermann
333 West Wacker Drive
Chicago, IL 60606
1975
   Vice President    Term: Indefinite
Length of Service: Since 2017
   Managing Director (since 2017), formerly, Senior Vice President (2016-2017).

Trey S. Stenersen

8500 Andrew Carnegie Blvd.

Charlotte, NC 28262

1965

   Vice President    Term: Indefinite
Length of Service: Since 2022
   Senior Managing Director of Teacher Advisors LLC and TIAA-CREF Investment Management, LLC (since 2018); Senior Managing Director (since 2019) and Chief Risk Officer (since 2022), formerly Head of Investment Risk Management (2017-2022) of Nuveen; Senior Managing Director (since 2018) of Nuveen Alternative Advisors LLC.

 

95


Name,
Address and Year of Birth

  

Position(s)
Held with
Fund

  

Term of Office
and Length of
Time Served(1)

  

Principal Occupation(s) During Past 5 Years(2)

E. Scott Wickerham
8500 Andrew Carnegie Blvd.

Charlotte, NC 28262
1973

   Vice President and Controller    Term: Indefinite
Length of Service: Since 2019
   Senior Managing Director, Head of Public Investment Finance at Nuveen (since 2019), formerly, Managing Director, Senior Managing Director (since 2019), of Nuveen Fund Advisors, LLC; Principal Financial Officer, Principal Accounting Officer and Treasurer (since 2017) of the TIAA-CREF Funds, the TIAA-CREF Life Funds, the TIAA Separate Account VA-1 and Principal Financial Officer, Principal Accounting Officer (since 2020) and Treasurer (since 2017) to the CREF Accounts; has held various positions with TIAA since 2006.
Mark L. Winget
333 West Wacker Drive
Chicago, IL 60606
1968
   Vice President and Secretary    Term: Indefinite
Length of Service: Since 2008
   Vice President and Assistant Secretary of Nuveen Securities, LLC (since 2008); Vice President and Assistant Secretary of Nuveen Fund Advisors, LLC (since 2019); Vice President, Associate General Counsel and Assistant Secretary of Nuveen Asset Management, LLC (since 2020); Vice President (since 2010) and Associate General Counsel (since 2019) of Nuveen.

Rachael Zufall

8500 Andrew Carnegie Blvd.

Charlotte, NC 28262

1973

   Vice President and Assistant Secretary    Term: Indefinite
Length of Service: Since 2022
   Managing Director (since 2017), Associate General Counsel and Assistant Secretary (since 2014) of the CREF Accounts, TIAA Separate Account VA-1, TIAA-CREF Funds and TIAA-CREF Life Funds; Managing Director (since 2017), Associate General Counsel and Assistant Secretary (since 2011) of Teacher Advisors, LLC and TIAA-CREF Investment Management, LLC; Managing Director of Nuveen, LLC and of TIAA (since 2017).

 

(1)

Length of Time Served indicates the year the individual became an officer of a fund in the Nuveen fund complex.

(2)

Information as of December 31, 2022.

 

96


Audit Committee Report

The Audit Committee of each 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 each Fund’s financial statements and (3) the independent registered public accounting firm’s qualifications, performance and independence. In its oversight capacity, the Audit Committee reviews each Fund’s annual financial statements with both management and the independent registered public accounting firm and the Audit Committee meets periodically with the independent registered public accounting firm and internal auditors to consider their evaluation of each Fund’s financial and internal controls. The Audit Committee also selects, retains, evaluates and may replace each Fund’s independent registered public accounting firm. The Audit Committee is currently composed of six Independent Board Members and operates under a written charter adopted and approved by each Board. Each Audit Committee member meets the independence and experience requirements, as applicable, of the NYSE, Section 10A of the 1934 Act and the rules and regulations of the SEC.

The Audit Committee, in discharging its duties, has met with and held discussions with management and each Fund’s independent registered public accounting firm. The Audit Committee has also reviewed and discussed the audited financial statements with management. Management has represented to the independent registered public accounting firm that each Fund’s financial statements were prepared in accordance with generally accepted accounting principles. The Audit 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 Auditor’s Communication With Those Charged With Governance), which supersedes SAS No. 61 (Communication with Audit Committees). Each Fund’s independent registered public accounting firm provided to the Audit Committee the written disclosure required by Public Company Accounting Oversight Board Rule 3526 (Communications with Audit Committees Concerning Independence), and the Audit Committee discussed with representatives of the independent registered public accounting firm their firm’s independence. As provided in the Audit Committee Charter, it is not the Audit Committee’s responsibility to determine, and the considerations and discussions referenced above do not ensure, that each Fund’s financial statements are complete and accurate and presented in accordance with generally accepted accounting principles.

Based on the Audit Committee’s 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 Audit Committee, the Audit Committee has recommended that the audited financial statements be included in each Fund’s Annual Report.

The current members of the Audit Committee are:

Jack B. Evans

Albin F. Moschner

John K. Nelson, Chair

Margaret L. Wolff

Robert L. Young

 

97


Audit and Related Fees

The following tables provide the aggregate fees billed during each Fund’s last two fiscal years by each Fund’s 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”).

 

    Audit Fees(1)     Audit Related Fees(2)     Tax Fees(3)     All Other Fees(4)  
    Fund     Fund     Adviser and
Adviser
Entities
    Fund     Adviser and
Adviser
Entities
    Fund     Adviser and
Adviser
Entities
 
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
    Fiscal
Year
Ended
2022
    Fiscal
Year
Ended
2021
 

Senior Income

  $ 45,950     $ 43,960     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Floating Rate Income Opportunity

  $ 45,950     $ 43,960     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Short Duration Credit Opportunities

  $ 36,040     $ 34,430     $ —       $ 24,000     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —