QUARTERLY REPORT October 31, 2004
(Unaudited)
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN SENIOR INCOME FUND
NSL
High current income
from a portfolio of
senior corporate loans
NSL Quarterly Report
For the three months ended 10/31/04
Portfolio Managers' Perspective
The Fund is managed by Gunther Stein and Lenny Mason of Symphony Asset
Management, LLC, an affiliate of Nuveen Investments. Gunther and Lenny have more
than 25 years of combined investment management experience, much of it in
evaluating and purchasing senior corporate loans and other high-yield debt. Here
they review the prevailing economic conditions and performance of the Fund for
the three months ended October 31, 2004.
WHAT WERE THE MAJOR ECONOMIC AND MARKET FACTORS DURING THE THREE-MONTH PERIOD
ENDED OCTOBER 31, 2004?
Over this period, the U.S. economy continued to show signs of moderate growth.
The Gross Domestic Product (GDP) grew at an annual rate of 3.9% in the third
quarter of 2004, compared with a 3.3% annual rate in the second quarter of 2004.
Despite rising energy prices and several increases in the short-term fed funds
rate, inflation expectations generally remained in check. As one result, the
yield of the 10-year U. S. Treasury note fell over the course of the period,
reaching 4.09% on October 31, 2004, compared with 4.45% three months earlier.
The slow pace of economic growth, ambiguous employment statistics and
uncertainty about the Presidential election all combined to keep interest rates
relatively low.
In this relatively low interest rate environment, the leveraged loan market
provided modest returns. For the three-month period ended October 31, 2004, the
CSFB Leveraged Loan Index1 posted a return of 1.04%. Leveraged loan new issue
volume remained strong during the quarter, with a large proportion of the new
loans being used to fund M&A activities.
WHAT WERE YOUR PRIMARY STRATEGIES AND FOCUSES FOR MANAGING THE FUND DURING THE
REPORTING PERIOD?
We continued to employ a value-oriented investment management strategy. Our
purchase and sale decisions were based on a range of factors, including an
assessment of each company's credit fundamentals, cash flow and asset quality.
Due to the strong new-issue calendar, we tended to focus on purchasing new,
higher-quality loans with what we considered to be solid business fundamentals,
sound asset coverage, and above average yield. We also continued to monitor the
entire portfolio, eliminating positions which we thought possessed mounting
credit problems, limited upside potential or significant downside risk.In
particular, we selectively reduced exposure to distressed credits that had
already realized meaningful price appreciation.
1 The CSFB Leveraged Loan Index, consists of approximately $150 billion of
tradable term loans with at least one year to maturity and rated BBB or
lower.
IN THIS ENVIRONMENT, HOW DID THE FUND PERFORM?
For the three months ended October 31, 2004, the Fund produced a cumulative
total return on net asset value (NAV) of 2.68%. As noted, the CSFB Leveraged
Loan Index posted a cumulative return of 1.04% over the same period.
The Fund's performance relative to the CSFB Index benefited from the Fund's use
of leverage. Leveraging can add volatility to a Fund's net asset value and share
price. However, during periods when a leveraged Fund's investments perform well
and leveraging costs are relatively low, such as the environment during this
three-month period, this strategy also can provide opportunities for net asset
value appreciation and enhanced income for common shareholders.
WHAT SECURITIES PRODUCED POSITIVE PERFORMANCE OVER THE THREE MONTHS?
Several credits contributed to the Fund's performance over this time
period. These included issues from Washington Group, Western Industries
and Mirant Corporation.
WERE THERE ANY SECURITIES THAT HURT PERFORMANCE OVER THIS PERIOD?
Issues from GenTek, Sealy Mattress, Meridan Automotive Systems and MetalForming
Technologies all hurt the Fund's overall performance during this period.
WHAT ABOUT DIVIDENDS AND SHARE PRICE?
With short-term interest rates remaining near historically low levels during
this three-month period, the leveraged structure of the Fund continued to
support its dividend-paying capabilities. The extent of this benefit is tied in
part to at which the Fund can borrow and the short-term rates the Fund pays its
FundPreferred(R) shareholders. During periods of low short-term rates, the Fund
generally borrows at relatively lower rates or pays relatively lower dividends
to its FundPreferred shareholders, which can leave more earnings to support
common share dividends. These lower borrowing rates and FundPreferred rates,
coupled with the recent increases in the fed funds rate, allowed the Fund to
raise its monthly dividend once during this three-month period.
The Fund seeks to pay stable dividends at rates that reflect its past results
and projected future performance. During certain periods, the Fund may pay
dividends at a rate that may be more or less than the amount of net investment
income actually earned by the Fund during the period. If the Fund has
cumulatively earned more than it has paid in dividends, it holds the excess in
reserve as undistributed net investment income (UNII) as part of the Fund's NAV.
Conversely, if the Fund has cumulatively paid dividends in excess of its
earnings, the excess constitutes negative UNII that is likewise reflected in the
Fund's NAV. The Fund will, over time, pay all of its net investment income as
dividends to shareholders. As of October 31, 2004, the Fund had a positive UNII
balance for both financial statement and tax purposes.
As of October 31, 2004, the Fund was trading at an 8.91% premium to its net
asset value, compared with an average premium of 15.78% for the entire
three-month reporting period.
Nuveen Senior Income Fund
NSL
Performance
OVERVIEW As of October 31, 2004
PORTFOLIO ALLOCATION
(as a % of total investments)
Variable Rate Senior Loan Interests 83.8%
Corporate and Municipal Bonds 6.7%
Repurchase Agreements 9.4%
Equities 0.1%
2003-2004 MONTHLY DIVIDENDS PER SHARE
Nov 0.043
Dec 0.043
Jan 0.043
Feb 0.043
Mar 0.043
Apr 0.043
May 0.043
Jun 0.043
Jul 0.043
Aug 0.043
Sep 0.046
Oct 0.046
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
11/1/03 8.89
8.80
8.74
8.84
8.95
8.98
9.30
9.23
9.38
9.28
9.27
9.26
9.32
9.45
9.45
9.42
9.45
9.40
9.36
9.55
9.83
9.80
9.95
9.71
9.70
9.93
10.05
9.90
9.80
9.62
9.59
9.69
9.70
9.71
9.72
9.74
9.80
9.82
9.91
9.97
9.90
9.83
9.94
9.94
10.04
9.94
9.90
9.91
9.90
9.65
9.32
10/31/04 9.29
FUND SNAPSHOT
------------------------------------
Share Price $9.29
------------------------------------
Common Share
Net Asset Value $8.53
------------------------------------
Premium/(Discount) to NAV 8.91%
------------------------------------
Latest Dividend $.0460
------------------------------------
Market Yield 5.94%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $254,027
------------------------------------
ANNUALIZED TOTAL RETURN
(Inception 10/26/99)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
3-month
(Cumulative) -4.90% 2.68%
------------------------------------
1-Year 10.98% 12.78%
------------------------------------
5-Year 6.84% 6.53%
------------------------------------
Since Inception 6.94% 6.50%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Media 16.9%
------------------------------------
Hotels, Restaurants & Leisure 13.0%
------------------------------------
Auto Components 8.4%
------------------------------------
Containers & Packaging 6.6%
------------------------------------
Healthcare Providers & Services 4.1%
------------------------------------
Household Durables 3.9%
------------------------------------
Personal Products 3.5%
------------------------------------
Insurance 3.5%
------------------------------------
Oil & Gas 3.1%
------------------------------------
Commercial Services & Supplies 3.0%
------------------------------------
Chemicals 2.5%
------------------------------------
Food Products 2.5%
------------------------------------
Machinery 2.5%
------------------------------------
Healthcare Equipment & Supplies 2.4%
------------------------------------
Aerospace & Defense 2.1%
------------------------------------
Electric Utilities 1.8%
------------------------------------
Road & Rail 1.8%
------------------------------------
Other 18.4%
------------------------------------
TOP FIVE ISSUERS
(excluding repurchase agreements)
(as a % of total investments)
------------------------------------
Metro-Goldwyn-Mayer (MGM) 2.9%
------------------------------------
Smurfit-Stone Container
Corporation 2.8%
------------------------------------
Conseco, Inc. 2.7%
------------------------------------
Norwood Promotional
Products, Inc. 2.5%
------------------------------------
Federal-Mogul Corporation 2.4%
------------------------------------
Nuveen Senior Income Fund (NSL)
Portfolio of
INVESTMENTS October 31, 2004
(Unaudited)
Ratings*
Principal ------------ Stated Market
Amount (000) Description (1) Moody's S&P Maturity** Value
--------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 137.5% (82.9% of total assets)
Aerospace & Defense - 3.5% (2.1% of total assets)
$ 1,510 DeCrane Aircraft Holdings, Inc., Term Loan D B3 B- 12/17/06 $ 1,510,003
3,968 United Defense Industries Inc., Term Loan B Ba2 BB+ 08/13/09 4,007,151
224 Vought Aircraft Industries, Inc., Term Loan B Ba3 B+ 06/30/07 226,550
156 Vought Aircraft Industries, Inc., Term Loan C Ba3 B+ 06/30/08 158,183
2,933 Vought Aircraft Industries, Inc., Term Loan X Ba3 B+ 12/31/06 2,958,884
--------------------------------------------------------------------------------------------------------------------------
8,860,771
--------------------------------------------------------------------------------------------------------------------------
Airlines - 2.4% (1.4% of total assets)
6,000 United Air Lines, Inc., DIP Term Loan (Tranche B) NR NR 06/30/05 6,067,500
--------------------------------------------------------------------------------------------------------------------------
Auto Components - 13.8% (8.3% of total assets)
4,224 Federal-Mogul Corporation, Term Loan A (b) NR NR 02/24/04 3,931,416
5,551 Federal-Mogul Corporation, Term Loan B (b) NR NR 02/24/05 5,181,255
1,995 Mark IV Industries, Inc., Term Loan B B1 BB- 06/23/11 2,027,419
4,488 Meridian Automotive Systems, Inc., Tranche B Term Loan B2 B+ 08/28/10 4,184,594
8,286 Metaldyne Company LLC, Term Loan D B2 BB- 12/31/09 8,266,706
3,046 MetalForming Technologies, Inc., Term Loan A NR NR 09/30/07 2,512,760
1,122 MetalForming Technologies, Inc., Term Loan B (PIK) NR NR 09/30/07 532,929
2,448 Plastech Engineered Products, Inc., Term Loan B Ba3 BB- 03/31/10 2,489,591
3,422 Tenneco Automotive Inc., Term Loan B B1 B+ 12/12/10 3,486,584
1,552 Tenneco Automotive Inc., Term Loan B-1 B1 B+ 12/12/10 1,581,465
857 United Components, Inc., Term Loan C B1 BB- 06/30/10 868,981
--------------------------------------------------------------------------------------------------------------------------
35,063,700
--------------------------------------------------------------------------------------------------------------------------
Beverages - 2.5% (1.5% of total assets)
6,372 Dr. Pepper/Seven UP Bottling Group, Inc., Term Loan B B1 NR 12/19/10 6,464,554
--------------------------------------------------------------------------------------------------------------------------
Building Products- 0.8% (0.5% of total assets)
2,000 Nortek, Inc., Term Loan B B1 B+ 08/27/11 2,031,667
--------------------------------------------------------------------------------------------------------------------------
Chemicals - 4.2% (2.5% of total assets)
1,657 Buckeye Technologies, Inc., Term Loan B B1 BB- 03/15/08 1,682,207
2,000 Huntsman International LLC, Term Loan NR B 03/31/10 2,031,042
2,000 Rockwood Specialties Group, Inc., Term Loan B B1 B+ 07/30/12 2,022,656
3,387 Shemin Holdings Corporation, Term Loan B NR NR 01/28/07 3,336,595
1,500 Wellman, Inc., First Lien Term Loan B1 B+ 02/10/09 1,526,563
--------------------------------------------------------------------------------------------------------------------------
10,599,063
--------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 4.9% (2.9% of total assets)
6,384 Allied Waste North America, Inc., Term Loan B B1 BB 01/15/10 6,457,776
3,990 National Equipment Services, Inc., Term Loan B3 B 08/17/10 3,994,983
1,940 Williams Scotsman, Inc., Term Loan B1 B+ 12/31/06 1,966,879
--------------------------------------------------------------------------------------------------------------------------
12,419,638
--------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 1.2% (0.8% of total assets)
1,955 Anthony Crane Rental, L.P., Revolver (b) NR NR 07/22/04 1,573,827
1,982 Anthony Crane Rental, L.P., Term Loan (b) NR NR 07/23/04 1,595,313
--------------------------------------------------------------------------------------------------------------------------
3,169,140
--------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 10.8% (6.5% of total assets)
2,500 Boise Cascade Holdings, L.L.C., Term Loan B (d) Ba3 BB 10/29/11 2,545,704
2,500 Boise Cascade Holdings, L.L.C., Term Loan C (d) Ba3 BB 10/28/10 2,522,768
6,453 Graham Packaging Company, L.P., Term Loan B B2 B 10/07/11 6,551,318
2,000 Graham Packaging Company, L.P., Term Loan C B2 CCC+ 03/15/12 2,049,584
5,000 Smurfit-Stone Container Corporation, New Issue Term Loan B (d) Ba3 BB- 11/01/11 5,089,063
5,285 Smurfit-Stone Container Corporation, Term Loan B Ba3 NR 06/30/09 5,315,423
251 Smurfit-Stone Container Corporation, Term Loan C Ba3 NR 06/30/09 253,180
2,985 United States Can Company, Term Loan B B2 B 01/15/10 2,988,731
--------------------------------------------------------------------------------------------------------------------------
27,315,771
--------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 2.2% (1.4% of total assets)
5,695 RCN Corporation, Term Loan B B3 NR 06/03/07 5,678,382
5,000 WCI Capital Corp., Term Loan B (a)(b) NR NR 09/30/07 12,500
--------------------------------------------------------------------------------------------------------------------------
5,690,882
--------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 3.0% (1.8% of total assets)
2,000 Allegheny Energy Supply Company, LLC, Term Loan (d) B1 B+ 03/08/11 2,034,584
5,500 Mirant Corporation, Revolver (b) NR NR 07/15/03 3,437,500
2,000 Reliant Energy, Inc., Term Loan B (d) NR NR 03/31/07 2,035,833
--------------------------------------------------------------------------------------------------------------------------
7,507,917
--------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.8% (0.5% of total assets)
1,713 Sensus Metering Systems Inc., Term Loan B-1 B2 B+ 12/17/10 1,729,817
257 Sensus Metering Systems Inc., Term Loan B-2 B2 B+ 12/17/10 259,473
--------------------------------------------------------------------------------------------------------------------------
1,989,290
--------------------------------------------------------------------------------------------------------------------------
Food Products - 4.1% (2.4% of total assets)
1,863 Birds Eye Foods, Inc., Term Loan B B1 B+ 08/20/08 1,888,646
1,875 Constellation Brands, Inc., Term Loan B Ba1 BB 11/30/08 1,886,216
3,415 Del Monte Corporation, Term Loan B Ba3 BB- 12/20/10 3,479,809
2,000 Dole Holding Company, LLC, Term Loan B3 B 07/22/10 2,031,875
993 Michael Foods, Inc., Term Loan B B1 B+ 11/20/10 1,007,077
--------------------------------------------------------------------------------------------------------------------------
10,293,623
--------------------------------------------------------------------------------------------------------------------------
Healthcare Equipment & Supplies - 4.0% (2.4% of total assets)
1,636 Advanced Medical Optics, Inc., Term Loan B B1 BB- 06/25/09 1,660,950
3,063 Kinetic Concepts, Inc., Term Loan B-1 B1 BB- 08/11/10 3,102,264
3,381 Mariner Health Care, Inc., Term Loan Ba3 BB- 01/02/10 3,393,850
1,980 Quintiles Transnational Corp., Term Loan B B1 BB- 06/26/08 2,005,988
--------------------------------------------------------------------------------------------------------------------------
10,163,052
--------------------------------------------------------------------------------------------------------------------------
Healthcare Providers & Services - 6.7% (4.1% of total assets)
5,000 Alpharma Operating Corporation, Term Loan A B1 B+ 10/05/07 4,974,220
5,430 Community Health Systems, Inc., Term Loan Ba3 BB- 08/19/11 5,453,273
1,995 IASIS Healthcare LLC, Term Loan B B1 B+ 06/22/11 2,024,509
2,616 Triad Hospitals, Inc., Term Loan B Ba2 BB 09/30/08 2,655,595
2,000 Vanguard Health Holding Company I, LLC, Term Loan B B2 B 09/23/11 2,035,626
--------------------------------------------------------------------------------------------------------------------------
17,143,223
--------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 16.4% (9.9% of total assets)
6,948 24 Hour Fitness Worldwide, Inc., Term Loan B B1 B 07/01/09 7,038,686
4,536 Alliance Gaming Corporation, Term Loan B Ba3 BB- 09/05/09 4,589,677
2,061 Ameristar Casinos, Inc., Term Loan B-1 Ba3 BB- 12/20/06 2,087,096
2,000 Argosy Gaming Company, Term Loan B Ba1 BB 07/31/08 2,017,500
1,612 Isle of Capri Casinos, Inc., Term Loan Ba2 BB- 04/26/08 1,632,464
5,955 Jack in the Box Inc., Term Loan Ba2 BB 01/09/10 6,040,603
7,990 OpBiz, LLC, Term Loan A NR NR 08/31/10 7,730,023
19 OpBiz, LLC, Term Loan B (PIK) NR NR 08/31/10 17,965
3,205 Penn National Gaming, Inc., Term Loan D Ba3 BB- 09/01/07 3,260,224
1,043 Wyndham International, Inc., Term Loan I NR NR 06/30/06 1,045,667
6,168 Wyndham International, Inc., Term Loan II NR NR 04/01/06 6,190,702
--------------------------------------------------------------------------------------------------------------------------
41,650,607
--------------------------------------------------------------------------------------------------------------------------
Household Durables - 4.7% (2.8% of total assets)
5,310 Jostens IH Corp., Term Loan B B1 B+ 07/29/10 5,396,638
2,000 Knoll, Inc., Term Loan Ba3 BB- 09/29/11 2,027,500
4,375 Sealy Mattress Company, Term Loan C B2 B+ 08/06/12 4,437,891
--------------------------------------------------------------------------------------------------------------------------
11,862,029
--------------------------------------------------------------------------------------------------------------------------
Household Products - 0.6% (0.3% of total assets)
1,548 Western Industries Holding Inc., Term Loan B NR NR 06/23/06 1,455,226
--------------------------------------------------------------------------------------------------------------------------
Insurance - 5.7% (3.5% of total assets),
9,975 Conseco, Inc., Term Loan B2 BB- 06/22/10 10,184,889
4,600 GAB Robbins North America, Inc., Term Loan B NR NR 12/01/05 4,370,000
--------------------------------------------------------------------------------------------------------------------------
14,554,889
--------------------------------------------------------------------------------------------------------------------------
Machinery - 3.2% (2.0% of total assets)
2,000 Dresser-Rand Group Inc., Term Loan (d) B1 B+ 10/10/10 2,031,875
1,904 EaglePicher Incorporated, Term Loan B B2 B+ 08/07/09 1,916,166
2,233 Rexnord Corporation, Replacement Term Loan B1 B+ 11/25/09 2,254,935
2,003 Terex Corporation, Incremental Term Loan C B1 BB- 12/31/09 2,029,730
--------------------------------------------------------------------------------------------------------------------------
8,232,706
--------------------------------------------------------------------------------------------------------------------------
Marine - 0.9% (0.6% of total assets)
2,382 American Commercial Lines LLC, Term Loan C NR NR 06/30/07 2,383,823
--------------------------------------------------------------------------------------------------------------------------
Media - 26.9% (16.3% of total assets)
6,274 American Media Operations, Inc., Term Loan C Ba3 B+ 04/01/07 6,372,321
2,000 Cablevision Systems Corp, Floating Rate Note,
4.500% plus six-month LIBOR B3 B+ 04/01/09 2,120,000
1,506 CanWest Media Inc., Term Loan E Ba3 B+ 06/18/09 1,526,802
4,000 Century Cable Holdings, LLC, Discretionary Term Loan (b) NR NR 12/31/09 3,942,918
1,640 Century Cable Holdings, LLC, Revolver (b) NR NR 10/25/10 1,610,275
2,000 Century Cable Holdings, LLC, Revolver (b) NR NR 10/25/10 1,963,750
4,988 Charter Communications Operating, LLC, Term Loan B B2 B 04/07/11 4,955,129
2,635 Dex Media East, LLC, Term Loan B Ba2 BB- 11/10/08 2,673,231
5,081 Dex Media West, LLC, Term Loan B Ba2 BB- 03/09/10 5,159,938
2,000 Emmis Operating Company, Term Loan Ba2 B+ 11/10/11 2,021,500
2,000 Freedom Communications, Inc., Term Loan B Ba3 BB 05/18/12 2,033,500
1,995 Gray Television, Inc., Term Loan C Ba2 B+ 12/31/10 2,022,431
2,444 Lamar Media Corp., Tranche D Ba2 BB- 06/30/10 2,468,508
2,000 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B NR NR 04/26/11 2,009,500
2,500 PRIMEDIA Inc., Floating Rate Note,
5.375% plus three-month LIBOR, 144A B3 B 05/15/10 2,606,250
2,377 PRIMEDIA Inc., Term Loan B NR B 06/30/09 2,301,826
2,000 PRIMEDIA Inc., Term Loan C NR B 12/31/09 1,970,000
4,988 R.H. Donnelley Inc., Term Loan Ba3 NR 06/30/11 5,065,951
3,000 Rainbow Media Holdings LLC, Term Loan Ba2 BB+ 03/31/12 3,052,500
7,718 Regal Cinemas Corporation, Term Loan Ba3 BB- 11/10/10 7,822,379
1,748 Sun Media Corporation, Term Loan B Ba2 BB 02/07/09 1,761,263
2,985 WMG Acquisition Corp., Term Loan B1 B+ 02/27/11 3,031,108
--------------------------------------------------------------------------------------------------------------------------
68,491,080
--------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 2.1% (1.2% of total assets)
5,169 Amsted Industries Incorporated, Term Loan B B1 BB- 10/15/10 5,223,792
--------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 2.4% (1.4% of total assets)
2,000 Headwaters Incorporated, Term Loan B B3 B- 09/01/12 2,048,750
1,995 Pride Offshore, Inc., Term Loan Ba1 BB+ 07/07/11 2,020,768
1,941 Tesoro Petroleum Corporation, Term Loan B Ba2 BBB- 04/15/08 2,001,879
--------------------------------------------------------------------------------------------------------------------------
6,071,397
--------------------------------------------------------------------------------------------------------------------------
Personal Products - 5.7% (3.4% of total assets)
7,239 Norwood Promotional Products, Inc., Term Loan A NR NR 08/16/09 7,021,480
5,263 Norwood Promotional Products, Inc., Term Loan B NR NR 08/16/11 2,486,751
1,990 Prestige Brands, Inc., Term Loan B B1 B 04/06/11 2,010,314
2,925 Sola International Inc., Term Loan B Ba3 BB- 12/11/09 2,965,219
--------------------------------------------------------------------------------------------------------------------------
14,483,764
--------------------------------------------------------------------------------------------------------------------------
Road & Rail - 3.0% (1.8% of total assets)
7,520 Laidlaw Inc., Term Loan B-1 Ba3 BB+ 06/19/09 7,645,727
--------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0% (0.0% of total assets)
1,363 Micro Warehouse, Inc., Term Loan B (b) NR NR 01/30/07 27,260
--------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 1.0% (0.6% of total assets)
2,481 Nextel Finance Company, Term Loan E Ba1 BB+ 12/15/10 2,491,273
--------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $354,513,082) 349,353,364
----------------------------------------------------------------------------------------------------------
Ratings*
Principal ----------- Stated Market
Amount (000) Description (1) Moody's S&P Maturity Value
--------------------------------------------------------------------------------------------------------------------------
CORPORATE and MUNICIPAL BONDS - 11.0% (6.7% of total assets)
Hotels, Restaurants & Leisure - 4.8% (2.9% of total assets)
$ 1,900 Mandalay Resort Group, 6.450% Ba2 BB+ 02/01/06 1,968,875
7,148 MGM Grand, 6.950% Ba1 BB+ 02/01/05 7,255,220
1,500 MGM Grand, 7.250% Ba1 BB+ 10/15/06 1,605,000
1,443 Park Place Entertainment, 7.875% Ba2 BB- 12/15/05 1,516,954
--------------------------------------------------------------------------------------------------------------------------
12,346,049
--------------------------------------------------------------------------------------------------------------------------
Household Durables - 1.7% (1.0% of total assets)
1,000 D.R. Horton, Inc., 10.500% Ba1 BB+ 04/01/05 1,041,250
3,000 Standard Pacific Corporation, 6.500% Ba2 BB 10/1/08 3,157,500
--------------------------------------------------------------------------------------------------------------------------
4,198,750
--------------------------------------------------------------------------------------------------------------------------
Machinery - 0.9% (0.5% of total assets)
2,000 Navistar International, Series B, 9.375% Ba3 BB- 06/01/06 2,170,000
--------------------------------------------------------------------------------------------------------------------------
Media - 0.8% (0.5% of total assets)
1,930 AMC Entertainment, 9.875% B3 CCC+ 02/01/12 2,074,750
--------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 2.7% (1.7% of total assets)
6,417 Tesoro Petroleum Corporation, 8.000% Ba2 BBB- 04/15/08 7,010,573
--------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% (0.1% of total assets)
656 California Pollution Control Finance Authority,
CanFibre of Riverside Project (a)(b)(c) NR NR 07/01/19 85,306
1,215 California Pollution Control Finance Authority,
CanFibre of Riverside Project (a)(b)(c) NR NR 07/01/14 157,974
--------------------------------------------------------------------------------------------------------------------------
243,280
--------------------------------------------------------------------------------------------------------------------------
Total Corporate and Municipal Bonds (cost $27,557,295) 28,043,402
----------------------------------------------------------------------------------------------------------
Market
Shares (000) Description (1) Value
--------------------------------------------------------------------------------------------------------------------------
EQUITIES - 0.1% (0.0% of total assets)
Diversified Telecommunication Services - 0.1% (0.0% of total assets)
7 Arch Wireless Holding Inc.(a) 210,537
--------------------------------------------------------------------------------------------------------------------------
Total Equities (cost $34,119) 210,537
----------------------------------------------------------------------------------------------------------
Principal Market
Amount (000) Description (1) Value
--------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 15.4% (9.3% of total assets)
$ 15,099 State Street Bank, 1.740%, dated 10/29/04, due 11/01/04, 15,098,608
repurchase price $15,100,797, collateralized by $13,645,000
U.S. Treasury Notes, 0.000%, due 08/15/10, value $15,401,794
24,000 State Street Bank, 1.740%, dated 10/29/04, due 11/01/04, 24,000,000
repurchase price $24,003,480, collateralized by $24,480,000
U.S. Treasury Notes, 1.625%, due 03/31/05, value $24,480,000
--------------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $39,098,608) 39,098,608
----------------------------------------------------------------------------------------------------------
Total Investments (cost $421,203,104) -- 164.0% (98.9% of total assets) 416,705,911
----------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (5.4%) (13,678,721)
----------------------------------------------------------------------------------------------------------
Borrowings Payable -- (40.5%)+ (103,000,000)
----------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value -- (18.1%) (46,000,000)
----------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares -- 100% $ 254,027,190
==========================================================================================================
(1) All percentages shown in the Portfolio of Investments are based
on net assets applicable to Common shares unless otherwise noted.
(2) Senior Loans in which the Fund invests generally pay interest at
rates which are periodically adjusted by reference to a base
short-term, floating lending rate plus a premium. These base
lending rates are generally (i) the lending rate referenced by
the London Inter-Bank Offered Rate ("LIBOR"), or (ii) the prime
rate offered by one or more major United States banks.
Senior loans may be considered restricted in that the Fund
ordinarily is contractually obligated to receive approval from
the Agent Bank and/or Borrower prior to the disposition of a
Senior Loan.
* Ratings below Baa by Moody's Investor Service, Inc. or BBB by
Standard & Poor's Group are considered to be below investment
grade.
** Senior Loans in the Fund's portfolio generally are subject to
mandatory and/or optional prepayment. Because of these mandatory
prepayment conditions and because there may be significant
economic incentives for a Borrower to prepay, prepayments of
Senior Loans in the Fund's portfolio may occur. As a result, the
actual remaining maturity of Senior Loans held in the Fund's
portfolio may be substantially less than the stated maturities
shown. The Fund estimates that the actual average maturity of the
Senior Loans held in its portfolio will be approximately 18-24
months.
(a) At or subsequent to October 31, 2004, this issue was non-income
producing.
(b) At or subsequent to October 31, 2004, this issue was under the
protection of the federal bankruptcy court.
(c) On January 1, 2002, CFR Holdings, Inc. (an entity formed by
Nuveen for the benefit of the Nuveen Funds owning various
interests in CanFibre of Riverside) took possession of the
CanFibre of Riverside assets on behalf of the various Nuveen
Funds. CFR Holdings, Inc. determined that a sale of the facility
was in the best interest of shareholders and proceeded
accordingly.
(d) Purchased on a when-issued or delayed delivery basis.
NR Not rated.
144A 144A securitites are those which are exempt from registration
under Rule 144A of the Securities Act of 1933, as amended. These
securities may only be resold in transactions exempt from
registration which are normally those transactions with qualified
intstitutional buyers.
(PIK) In lieu of cash payment, interest accrued on "Payment in Kind"
investment increases principal outstanding.
+ Borrowings payable as a percentage of total assets is (24.4%).
See accompanying notes to financial statements.
Statement of
ASSETS and LIABILITIES October 31, 2004 (Unaudited)
----------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $382,104,496) $ 377,607,303
Repurchase agreements (at cost, which approximates
market value) 39,098,608
Receivables:
Interest 1,911,321
Investments sold 2,641,939
Other assets 90,365
----------------------------------------------------------------------------------------------
Total assets 421,349,536
----------------------------------------------------------------------------------------------
LIABILITIES
Borrowings payable 103,000,000
Payable for investments purchased 17,815,000
Accrued expenses:
Management fees 134,508
Other 332,800
Preferred share dividends payable 40,038
---------------------------------------------------------------------------------------------
Total liabilities 121,322,346
---------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 46,000,000
---------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 254,027,190
=============================================================================================
Common shares outstanding 29,786,870
=============================================================================================
Net asset value per Common share outstanding (net assets applicable
to Common shares, divided by Common shares outstanding) $ 8.53
==============================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
----------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 297,869
Paid-in surplus 282,932,331
Undistributed net investment income 5,170,094
Accumulated net realized gain (loss) from investments (29,875,911)
Net unrealized appreciation (depreciation) of investments (4,497,193)
----------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 254,027,190
==============================================================================================
Authorized shares:
Common Unlimited
Preferred Unlimited
==============================================================================================
See accompanying notes to financial statements.
Statement of
OPERATIONS Three Months Ended October 31, 2004 (Unaudited)
--------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $7,101,399
Fees 403,951
--------------------------------------------------------------------------------------------
Total investment income 7,505,350
--------------------------------------------------------------------------------------------
EXPENSES
Management fees 854,528
Preferred shares - auction fees 28,986
Preferred shares - dividend disbursing agent fees 1,512
Shareholders' servicing agent fees and expenses 2,130
Interest expense 436,428
Commitment fees 93,913
Custodian's fees and expenses 37,103
Trustees' fees and expenses 2,521
Professional fees 26,718
Shareholders' reports - printing and mailing expenses 16,680
Stock exchange listing fees 3,069
Investor relations expense 10,971
Other expenses 6,901
--------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense waivers 1,521,460
Custodian fee credit (126)
Expense waivers from the Adviser (455,493)
--------------------------------------------------------------------------------------------
Net expenses 1,065,841
--------------------------------------------------------------------------------------------
Net investment income 6,439,509
--------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investments 138,146
Change in net unrealized appreciation (depreciation) of investments 344,280
--------------------------------------------------------------------------------------------
Net gain from Investments 482,426
--------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (196,160)
--------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $6,725,775
============================================================================================
See accompanying notes to financial statements.
Statement of
CHANGES in NET ASSETS (Unaudited)
THREE MONTHS ENDED YEAR ENDED
10/31/04 7/31/04
-------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,439,509 $ 19,081,581
Net realized gain (loss) from investments 138,146 (2,007,822)
Change in net unrealized appreciation
(depreciation) of investments 344,280 16,691,236
Distributions to Preferred Shareholders
from net investment income (196,160) (538,267)
-------------------------------------------------------------------------------------
Net increase in net assets applicable to
Common shares from operations 6,725,775 33,226,728
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (4,021,017) (15,362,547)
-------------------------------------------------------------------------------------
Decrease in net assets applicable
to Common shares from distributions
to Common shareholders (4,021,017) (15,362,547)
-------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 44,017 194,711
-------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from
capital transactions 44,017 194,711
-------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares 2,748,775 18,058,892
Net assets applicable to Common shares
at the beginning of period 251,278,415 233,219,523
-------------------------------------------------------------------------------------
Net assets applicable to Common shares
at the end of period $254,027,190 $251,278,415
=====================================================================================
Undistributed
net investment income
at the end of period $ 5,170,094 $ 2,947,762
=====================================================================================
See accompanying notes to financial statements.
Statement of
CASH FLOWS (Unaudited)
THREE MONTHS ENDED
10/31/04
----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 6,725,775
Adjustments to Reconcile the Net Increase in Net Assets Applicable to Common Shares
from Operations to Net Cash provided by Operating Activities:
Purchase of investment securities (129,852,493)
Purchases of short-term investment securities, net (28,468,522)
Proceeds from disposition of investment securities 150,368,741
Accretion/Amortization of bond discounts and premiums, net 27,046
Decrease in interest receivable 531,882
Increase in receivable from investments sold (2,636,939)
Increase in other assets (12,834)
Increase in payable for investments purchased 9,713,850
Decrease in management fees payable (1,143)
Increase in Preferred share dividends payable 21,893
Increse in other liabilities 24,435
Net realized gain from investments (138,146)
Change in net unrealized appreciation (depreciation) of investments (344,280)
Net realized gain from paydowns (1,982,265)
----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,977,000
----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (3,977,000)
----------------------------------------------------------------------------------------------------------
Net cash used in financing activities (3,977,000)
----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of period --
----------------------------------------------------------------------------------------------------------
CASH at the END of PERIOD --
==========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest on bank borrowings during the three months ended
October 31, 2004, was $391,422
Noncash financing activities not included herein consist of reinvestments
of distributions of $44,017.
See accompanying notes to financial statements.
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Fund covered in this report and its corresponding Common share New York
Stock Exchange symbol is Nuveen Senior Income Fund (NSL). The Fund is registered
under the Investment Company Act of 1940, as amended, as a closed-end management
investment company.
The Fund seeks to provide a high level of current income by investing primarily
in senior loans whose interest rates float or adjust periodically based on a
benchmark interest rate index.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of senior loans, bonds and other securities in the Fund's investment
portfolio are generally provided by one or more independent pricing services
approved by the Fund's Board of Trustees. The pricing services typically value
exchange-listed securities at the last sales price on that day; and value senior
loans, bonds and other securities traded in the over-the-counter market at the
mean of the highest bona fide bid and lowest bona fide ask prices when current
quotations are readily available. The pricing services may value senior loans,
bonds and other securities for which current quotations are not readily
available at fair value using a wide range of market data and other information
and analysis, including the obligor's credit characteristics considered relevant
by such pricing service to determine valuations. The Board of Trustees of the
Fund has approved procedures which permit the Adviser to determine the fair
value of investments for which the applicable pricing service or services is not
providing a price, using market data and other factors such as the obligor's
credit characteristics, and to override the price provided by the independent
pricing service in certain limited circumstances. Short-term investments which
mature within 60 days are valued at amortized cost, which approximates market
value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that loan.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from investment transactions are determined on the
specific identification method. Investments purchased on a when-issued or
delayed delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At October 31, 2004, the
Fund had outstanding when-issued and delayed delivery purchase commitments of
$16,005,000.
Investment Income
Interest income, which includes the amortization of premiums and accretion
of discounts for financial reporting purposes, is recorded on an accrual basis.
Interest income also includes paydown gains and losses on senior loans. Fee
income consists
Notes to
FINANCIAL STATEMENTS (Unaudited)(continued)
primarily of amendment fees. Amendment fees are earned as compensation for
evaluating and accepting changes to the original loan agreement and are
recognized when received.
Income Taxes
The Fund intends to distribute all net investment income and net capital gains
to shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal income tax provision is required.
Dividends and Distributions to Common Shareholders
The Fund intends to declare monthly income distributions to Common shareholders.
Net realized capital gains from investment transactions, if any, are distributed
to shareholders not less frequently than annually. Furthermore, capital gains
are distributed only to the extent they exceed available capital loss
carryforwards.
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Preferred Shares
The Fund has issued and outstanding 1,840 shares of Series Th Preferred shares,
$25,000 stated value per share, as a means of effecting financial leverage. The
dividend rate paid on the Preferred shares is determined every 28 days, pursuant
to a dutch auction process overseen by the auction agent, and is payable at or
near the end of each rate period. The Fund has also affected financial leverage
by borrowing, as described in footnote 8 below.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common shares were as follows:
THREE MONTHS ENDED YEAR ENDED
10/31/04 7/31/04
----------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of
distributions 4,668 22,048
==========================================================
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
three months ended October 31, 2004, aggregated $129,852,493 and $150,368,741,
respectively.
Notes to
FINANCIAL STATEMENTS (Unaudited)(continued)
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses on investments and
timing differences in recognizing certain gains and losses on investment
transactions.
At October 31, 2004, the cost of investments was $421,219,854.
The net unrealized depreciation of investments at October 31, 2004, aggregated
$4,513,943 of which $6,652,941 related to appreciated investments and
$11,166,884 related to depreciated investments.
The tax components of undistributed net ordinary income and net realized gains
at July 31, 2004, the Fund's last fiscal year end, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $4,246,542
Undistributed net long-term capital gains --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any. Undistributed net
ordinary income (on a tax basis) has not been reduced for the dividend
declared on July 1, 2004, paid on August 2, 2004.
The tax character of distributions paid during the fiscal year ended July 31,
2004, the Fund's last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
2004
------------------------------------------------------------------------------
Distributions from net ordinary income ** $15,890,967
Distributions from net long-term capital gains --
==============================================================================
** Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
At July 31, 2004, the Fund's last fiscal year end, the Fund had an unused
capital loss carryforwards of $28,018,967 available to be applied against future
capital gains, if any. If not applied, $17,314,712 of the carryforward will
expire in the year 2010 and $10,704,255 will expire in 2011.
The Fund elected to defer $ $1,978,340 of net realized losses from investments
incurred from November 1, 2003 through July 31, 2004 ("post-October losses") in
accordance with Federal income tax regulations. Post-October losses were treated
as having arisen on the first day of the current fiscal year.
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
As approved by the Board of Trustees, effective August 1, 2004, a complex-wide
management fee structure was adopted for all funds sponsored by Nuveen
Institutional Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Nuveen Investments, Inc. ("Nuveen") and its affiliates. This fee structure
separates each fund's management fee into two components - a complex-level
component, based on the aggregate amount of all funds assets managed by the
Adviser and its affiliates, and a specific fund-level component, based only on
the amount of assets within each individual fund. This pricing structure enables
Nuveen fund shareholders to benefit from growth in the assets within each
individual fund as well as from growth in the amount of complex-wide assets
managed by the Adviser and its affiliates. Under no circumstances will this
pricing structure result in a fund paying management fees at a rate higher than
would otherwise have been applicable had the complex-wide management fee
structure not been implemented. As a consequence of this new management fee
structure, the funds' effective management fees were reduced by approximately
.006% as of November 30, 2004.
Effective August 1, 2004, the annual fund-level fee, payable monthly, for the
Fund is based upon the average daily net assets (including net assets
attributable to leverage) as follows:
AVERAGE DAILY NET ASSETS (INCLUDING NET
ASSETS ATTRIBUTABLE TO LEVERAGE) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $1 billion .6500%
For the next $1 billion .6375
For the next $3 billion .6250
For the next $5 billion .6000
For net assets over $10 billion .5750
================================================================================
Effective August 1, 2004, the annual complex-level fee, payable monthly, which
is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S.,
is based on the aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
The Fund paid a .8500% annual management fee through July 31, 2004, payable
monthly, which were based upon the average daily Managed Assets of the Fund.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Symphony Asset Management, LLC ("Symphony"),
an indirect wholly owned subsidiary of Nuveen, under which Symphony manages the
investment portfolio of the Fund. Symphony is compensated for its services to
the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
Notes to
FINANCIAL STATEMENTS (Unaudited)(continued)
For the first ten years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
OCTOBER 31, OCTOBER 31,
--------------------------------------------------------------------------------
1999* .45% 2005 .35%
2000 .45 2006 .25
2001 .45 2007 .15
2002 .45 2008 .10
2003 .45 2009 .05
2004 .45
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond October 31, 2009.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At October 31, 2004, the Fund had unfunded loan commitments of
$737,142.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower.
The Fund had the following participation commitments outstanding at October 31,
2004:
COUNTERPARTY COMMITMENT AMOUNT MARKET VALUE
--------------------------------------------------------------------------------
Bear, Stearns & Co., Inc. $2,000,000 $1,963,750
Morgan Stanley 1,640,000 1,610,275
================================================================================
8. BORROWINGS
In accordance with the Fund's current investment policies, the Fund may utilize
financial leverage for investment purposes in an amount currently anticipated to
represent approximately 40% of the Fund's total assets, and in no event
exceeding 50% of the Fund's total assets.
The Fund has entered into a commercial paper program with Bank One's conduit
financing agency, Falcon Asset Securitization Corp. ("Falcon"), whose sole
purpose is the issuance of high grade commercial paper. Falcon uses the proceeds
to make advances to the Fund and to many other borrowers who comprise Falcon's
total borrowing base. For the three months ended October 31, 2004, the average
daily balance of borrowings under the commercial paper program agreement was
$103 million with an average interest rate of 1.66%.
Notes to
FINANCIAL STATEMENTS (Unaudited)(continued)
The Fund has also entered into a $110 million liquidity facility. If the
facility is utilized, interest on the borrowings would be charged a variable
interest rate. An unused commitment fee of .095% on 102% of the unused portion
of the $110 million facility is charged. There were no borrowings under the
revolving credit agreement during the three months ended October 31, 2004.
9. SUBSEQUENT EVENTS
The Fund declared a $.0460 Common share dividend distribution from its net
investment income which was paid on December 1, 2004, to shareholders of record
on November 15, 2004.
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Net Investment Capital
Common Realized/ Income to Gains to
Share Net Unrealized Preferred Preferred
Net Asset Investment Investment Share- Share-
Value Income Gain (Loss) holders+ holders+ Total
======================================================================================================
------------------------------------------------------------------------------------------------------
Three Months
Ended 10/31/04 $8.44 $ .22 $ .02 $(.01) $ -- $ .23
Year Ended 7/31:
2004 7.84 .64 .50 (.02) -- 1.12
2003 7.38 .60 .41 (.02) -- .99
2002 8.13 .68 (.71) (.04) -- (.07)
2001 9.47 1.09 (1.29) (.09) -- (.29)
2000(a) 9.55 .75 (.12) (.02) -- .61
======================================================================================================
Less Distributions Total Returns
--------------------------------- ---------------------
Based
Net Offering on
Investment Capital Costs Ending Common
Income to Gains to and Preferred Common Based Share
Common Common Share Share Ending on Net
Share- Share- Underwriting Net Asset Market Market Asset
holders holders Total Discounts Value Value Value** Value**
=========================================================================================================================
-------------------------------------------------------------------------------------------------------------------------
Three Months
Ended 10/31/04 $ (.14) $ -- $ (.14) $ -- $ 8.53 $9.2900 (4.90)% 2.68%
Year Ended 7/31:
2004 (.52) -- (.52) -- 8.44 9.9100 24.50 14.61
2003 (.53) -- (.53) -- 7.84 8.4300 25.93 14.25
2002 (.68) -- (.68) -- 7.38 7.2000 (21.16) (.65)
2001 (1.03) (.02) (1.05) -- 8.13 9.9600 15.35 (3.30)
2000(a) (.66) -- (.66) (.03) 9.47 9.6250 3.21 6.20
=========================================================================================================================
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
Before Credit/Waiver After Credit/Waiver***
------------------------------ ------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
===========================================================================================================================
---------------------------------------------------------------------------------------------------------------------------
Three Months
Ended 10/31/04 $254,027 2.39%* 9.40%* 1.67%* 10.11%* 34%
Year Ended 7/31:
2004 251,278 2.23 7.10 1.50 7.83 91
2003 233,220 2.66 7.57 1.90 8.33 80
2002 219,459 3.12 8.20 2.37 8.95 64
2001 241,641 4.32 11.74 3.62 12.44 52
2000(a) 280,479 3.81* 9.82* 3.21* 10.42* 40
===========================================================================================================================
Preferred Stock at End of Period Borrowings at End of Period
---------------------------------------------------- ---------------------------------
Aggregate Liquidation Asset Aggregate Asset
Amount and Market Coverage Amount Coverage
Outstanding (000) Value Per Share Per Share Outstanding (000) Per $1,000
=============================================================================================================
-------------------------------------------------------------------------------------------------------------
Three Months
Ended 10/31/04 $46,000 $25,000 $163,058 $103,000 $3,466
Year Ended 7/31:
2004 46,000 25,000 161,564 103,000 3,440
2003(b) 46,000 25,000 151,750 103,000 3,264
2002(b) 46,000 25,000 144,271 103,000 3,131
2001(b) 46,000 25,000 156,327 103,000 3,346
2000(a) 46,000 25,000 177,434 105,000 3,671
=============================================================================================================
* Annualized.
** Total Investment 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. Total Return on Common Share 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. Total returns are not annualized.
*** After custodian fee credit and expense waivers from the Adviser, where
applicable.
+ The amounts shown are based on Common share equivalents.
++ o Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
o Income ratios reflect income earned on assets attributable to
Preferred shares.
o Each ratio includes the effect of the interest expense paid on bank
borrowings as follows:
Ratio of Interest
Expense to Average
Net Assets Applicable to
Common Shares
------------------------
Three Months
Ended
10/31/04 .69%*
Year Ended
7/31:
2004 .48
2003 .74
2002 1.09
2001 2.19
2000(a) 2.04*
(a) For the period October 26, 1999 (commencement of operations) through July
31, 2000.
(b) Unaudited.
See accompanying notes to financial statements.
Reinvest Automatically
EASILY AND CONVENIENTLY
SIDEBAR TEXT: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
Other Useful
INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) quarterly portfolio of investments and (ii) information
regarding how the Funds voted proxies relating to portfolio securities held
during the most recent 12-month period ended June 30, 2004, are available
without charge, upon request, by calling Nuveen Investments toll-free at (800)
257-8787 or on Nuveen's web site at www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Institutional
Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the three months ended October 31, 2004. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.