PORTFOLIO OF INVESTMENTS (UNAUDITED)
NUVEEN SENIOR INCOME FUND (NSL)
October 31, 2001
RATINGS*
PRINCIPAL -------------------- STATED MARKET
AMOUNT (000) DESCRIPTION MOODY'S S&P MATURITY** VALUE
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VARIABLE RATE SENIOR LOAN INTERESTS(1) AND INTEREST
BEARING SECURITIES - 128.8%
AEROSPACE/DEFENSE - 6.8% (4.9% OF TOTAL ASSETS)
$ 4,975 DeCrane Aircraft Holdings, Inc., Term Loan D B2 B+ 12/17/06 $ 4,893,881
10,975 The Fairchild Corporation, Term Loan B Ba3 BB- 04/30/06 9,054,378
2,985 United Defense Industries, Inc., Term Loan B B1 BB- 08/13/09 2,985,467
1,377 Vought Aircraft Industries, Inc., Term Loan A NR NR 06/30/06 1,239,130
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18,172,856
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AUTOMOTIVE - 4.9% (3.5% OF TOTAL ASSETS)
1,224 Federal-Mogul Corporation, Term Loan A Caa1 D 02/24/04 608,163
3,551 Federal-Mogul Corporation, Term Loan B Caa1 D 02/24/05 1,776,207
3,996 Metaldyne Corporation/Metalyc Company, LLC, Term Loan B Ba3 BB- 11/28/08 3,250,080
9,415 MetalForming Technologies, Inc., Term Loan B NR NR 06/30/06 6,590,220
1,356 Tenneco Auto, Inc. B2 B+ 09/30/05 682,993
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12,907,663
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BEVERAGE, FOOD & TOBACCO - 10.4% (7.5% OF TOTAL ASSETS)
1,730 Cott Corporation, Purchase Money Term Loan NR NR 12/31/06 1,736,488
200 Cott Corporation, Working Capital Term Loan NR NR 12/31/06 200,750
9,168 Dr. Pepper/Seven Up Bottling Group, Inc., Term Loan B NR NR 10/07/07 9,144,674
1,911 Eagle Family Foods, Inc., Term Loan B1 B 12/31/05 1,741,138
3,990 Flowers Foods, Inc., Term Loan B Ba2 BBB- 03/26/07 4,000,973
1,995 Interstate Bakeries Corporation, Term Loan B Ba1 BBB- 07/19/07 1,999,988
3,530 Merisant Company, Term Loan B Ba3 BB- 03/30/07 3,531,260
5,500 Pinnacle Foods Corporation, Term Loan Ba3 BB- 05/22/08 5,496,563
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27,851,834
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BROADCASTING/CABLE - 2.0% (1.4% OF TOTAL ASSETS)
2,000 Century Cable Holdings, LLC, Term Loan B Ba3 BB 12/31/09 1,937,500
3,333 Charter Communications Operating, LLC, Incremental Term Loan Ba3 BB+ 09/18/08 3,251,157
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5,188,657
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BROADCASTING/RADIO - 1.7% (1.3% OF TOTAL ASSETS)
4,667 Citadel Broadcasting Company, Term Loan B NR NR 06/26/09 4,647,708
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BUILDINGS & REAL ESTATE - 6.1% (4.3% OF TOTAL ASSETS)
10,872 NRT, Inc., Term Loan Ba3 NR 07/31/04 10,691,217
3,000 Washington Group International, Bond (a)(b) C D 07/01/10 450,000
7,960 Washington Group International, Term Loan B (b) Caa3 NR 07/07/07 4,999,875
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16,141,092
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CARGO TRANSPORTATION - 3.4% (2.4% OF TOTAL ASSETS)
8,843 North American Van Lines, Term Loan B B1 B+ 11/18/07 8,079,834
856 RailAmerica, Inc., Term Loan B Ba3 BB- 12/31/06 859,432
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8,939,266
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CHEMICALS, PLASTICS & RUBBER - 3.1% (2.2% OF TOTAL ASSETS)
2,000 Ineos US Finance, LLC, Term Loan C Ba3 BB 06/30/09 1,930,000
2,000 OM Group, Inc., Term Loan B Ba3 BB 04/01/07 1,979,500
4,286 Resolution Performance Products, LLC, Term Loan B Ba3 BB- 11/14/08 4,285,714
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8,195,214
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CONSTRUCTION MATERIALS - 2.6% (1.8% OF TOTAL ASSETS)
16,667 California Pollution Control Financing Authority, CanFibre
of Riverside Project, Bonds (a)(b)(c) NR NR 07/01/14 1,326,667
9,000 California Pollution Control Financing Authority, CanFibre
of Riverside Project, Bonds (a)(b)(c) NR NR 07/01/19 716,400
7,000 CanFibre of Lackawana, LLC, Construction Loan (a)(b)(c) NR NR 12/01/13 -
1,200 CanFibre of Lackawana, LLC, Letter of Credit (a)(b)(c) NR NR 12/01/13 -
10,000 CanFibre of Riverside, Inc., Letter of Credit (a)(b)(c) NR NR 07/01/09 -
533 CanFibre of Riverside, Inc., Working Capital
Loan (a)(b)(c) NR NR 12/31/01 -
860 Mueller Group, Inc., Term Loan B B1 B+ 08/16/06 844,311
3,528 Mueller Group, Inc., Term Loan C B1 B+ 08/16/07 3,469,533
493 Mueller Group, Inc., Term Loan D B1 B+ 08/16/07 483,881
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6,840,792
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CONTAINERS, PACKAGING & GLASS - 7.8% (5.6% OF TOTAL ASSETS)
2,592 Graham Packaging Company, Term Loan B B2 B 01/31/06 2,417,054
2,147 Graham Packaging Company, Term Loan C B2 B 01/31/07 2,002,702
3,729 Greif Bros. Corporation, Term Loan B Ba3 BB 02/28/08 3,724,745
2,800 Stone Container Corporation, Term Loan C Ba3 B+ 10/01/03 2,786,269
2,579 Stone Container Corporation, Term Loan D Ba3 B+ 10/01/03 2,565,997
3,950 Tekni-Plex, Inc., Term Loan B B1 B+ 06/21/08 3,831,500
3,983 United States Can Company, Term Loan B B1 BB- 10/04/08 3,644,736
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20,973,003
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DIVERSIFIED MANUFACTURING - 6.9% (4.9% OF TOTAL ASSETS)
5,404 Blount, Inc., Term Loan B B3 B 06/30/06 4,782,541
3,013 Dayco Products, LLC, Term Loan B Ba3 BB- 05/31/07 2,963,623
2,970 GenTek, Inc., Term Loan C B1 BB- 10/31/07 2,665,575
4,462 UCAR Finance, Inc., Term Loan B Ba3 NR 12/31/07 4,308,819
5,458 Western Industries Holding, Inc., Term Loan B NR NR 06/23/06 3,547,778
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18,268,336
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ECOLOGICAL - 0.4% (0.3% OF TOTAL ASSETS)
1,000 Stericycle, Inc., Term Loan B NR BB- 09/30/07 1,003,125
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ELECTRONICS/ELECTRONIC SERVICES - 1.5% (1.0% OF TOTAL ASSETS)
3,960 Seagate Technology Holdings, Inc., Term Loan B NR BB+ 11/22/06 3,856,050
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FARMING & AGRICULTURAL - 1.8% (1.3% OF TOTAL ASSETS)
4,786 Shemin Holdings Corporation, Term Loan B NR NR 01/28/07 4,731,875
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FINANCE & BANKING - 0.3% (0.2% OF TOTAL ASSETS)
2,368 The Finova Group, Inc., Revolver 2003 (a)(b) NR NR 11/15/09 888,000
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HEALTHCARE - 2.5% (1.8% OF TOTAL ASSETS)
1,714 Community Health Systems, Inc., Term Loan B NR B+ 12/31/03 1,722,321
1,714 Community Health Systems, Inc., Term Loan C NR B+ 12/31/04 1,722,589
1,264 Community Health Systems, Inc., Term Loan D NR B+ 12/31/05 1,273,912
2,000 Triad Hospitals, Inc., Term Loan B Ba3 B+ 09/30/08 2,013,500
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6,732,322
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HEALTHCARE & BEAUTY AIDS - 1.2% (0.9% OF TOTAL ASSETS)
3,182 Advance PCS, Term Loan B Ba3 BB 10/02/07 3,185,826
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HOTELS, MOTELS, INNS & GAMING - 9.3% (6.7% OF TOTAL ASSETS)
4,000 Alliance Gaming Corporation, LLC, Term Loan B1 B+ 12/31/06 3,982,500
2,000 Extended Stay America, Inc., Term Loan B Ba3 BB- 01/15/08 1,964,000
3,069 Isle of Capri Casinos, Inc., Term Loan B Ba2 BB- 03/02/06 3,006,051
2,685 Isle of Capri Casinos, Inc., Term Loan C Ba2 BB- 03/02/07 2,630,294
5,000 Mandalay Resort Group, Term Loan Ba1 NR 08/18/06 4,975,000
2,770 Wyndham International, Inc., Increasing Rate Loan NR NR 06/30/04 2,199,834
7,563 Wyndham International, Inc., Term Loan B NR NR 06/30/06 6,133,327
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24,891,006
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INSURANCE - 6.7% (4.8% OF TOTAL ASSETS)
10,000 Conseco, Inc., Term Loan NR NR 12/31/03 8,000,000
4,900 GAB Robbins North America, Inc., Term Loan B NR NR 12/01/05 4,777,500
5,000 Tack Holdings Corp., Term Loan B NR NR 03/31/07 4,981,250
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17,758,750
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LEISURE & ENTERTAINMENT - 6.8% (4.8% OF TOTAL ASSETS)
3,907 Bally Total Fitness Holding Corporation, Term Loan B1 B+ 11/10/04 3,913,992
3,398 Fitness Holdings Worldwide, Inc., Term Loan B NR B 11/02/06 3,134,977
6,462 Fitness Holdings Worldwide, Inc., Term Loan C NR B 11/02/07 5,960,873
5,000 Six Flags Theme Parks, Inc., Term Loan B Ba2 BB- 09/30/05 5,006,719
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18,016,561
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NATURAL RESOURCES/OIL & GAS - 2.6% (1.9% OF TOTAL ASSETS)
7,000 Tesoro Petroleum Corp., Term Loan B Ba2 BBB- 12/31/07 7,008,020
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NON-DURABLE CONSUMER PRODUCTS - 3.3% (2.3% OF TOTAL ASSETS)
4,355 Hartz Mountain Corporation, Term Loan B1 BB- 12/31/07 4,349,687
5,061 Norwood Promotional Products, Inc., Term Loan B NR NR 05/31/06 2,277,637
4,527 Norwood Promotional Products, Inc., Term Loan C NR NR 11/30/06 2,036,932
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8,664,256
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PERSONAL & MISCELLANEOUS SERVICES - 3.0% (2.2% OF TOTAL ASSETS)
4,000 Adams Outdoor Advertising Limited Partnership,
Term Loan B B1 B+ 02/01/08 3,997,500
4,058 Weight Watchers International, Inc., Transferable Loan
Certificate Facility Ba1 BB- 09/30/06 4,065,817
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8,063,317
-----------------------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING - 4.5% (3.2% OF TOTAL ASSETS)
6,965 American Media Operations, Inc., Term Loan B-1 Ba3 B+ 04/01/07 6,828,965
5,000 PRIMEDIA, Inc., Term Loan B NR BB- 06/30/09 4,206,250
998 TransWestern Publishing Company, LLC, Term Loan B Ba3 B+ 06/27/08 996,877
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12,032,092
-----------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS & FOOD SERVICE - 2.5% (1.8% OF TOTAL ASSETS)
3,250 Dominos Pizza, Inc., Term Loan B B1 B+ 12/21/06 3,269,133
3,259 Dominos Pizza, Inc., Term Loan C B1 B+ 12/21/07 3,278,587
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6,547,720
-----------------------------------------------------------------------------------------------------------------------------------
RETAIL/CATALOG - 1.6% (1.1% OF TOTAL ASSETS)
4,633 Micro Warehouse, Inc., Term Loan B B1 B+ 01/31/07 4,170,043
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RETAIL/SPECIALTY - 1.5% (1.1% OF TOTAL ASSETS)
4,000 Rite Aid Corporation, Term Loan B1 BB- 06/27/05 3,972,222
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RETAIL/STORES - 4.4% (3.2% OF TOTAL ASSETS)
2,840 HMV Media Group PLC, Term Loan C B2 B+ 03/28/06 2,684,182
1,958 HMV Media Group PLC, Term Loan D B2 B+ 08/28/06 1,849,909
2,939 Rent-A-Center, Term Loan D Ba2 BB- 12/31/07 2,925,989
2,182 SDM Corporation, Term Loan C Ba3 BB 02/04/08 2,184,703
2,182 SDM Corporation, Term Loan E Ba3 BB 02/04/09 2,184,703
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11,829,486
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TELECOMMUNICATIONS/CELLULAR/PCS - 4.6%
(3.3% OF TOTAL ASSETS)
484 Airgate PCS, Inc., Tranche 1 Loan NR NR 06/06/07 475,248
2,573 Airgate PCS, Inc., Tranche 2 Loan NR NR 09/30/08 2,484,853
10,000 Centennial Cellular Operating Company, LLC, Term Loan A B1 B+ 11/30/06 9,375,000
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12,335,101
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TELECOMMUNICATIONS/COMPETITIVE LOCAL EXCHANGE CARRIER
(CLEC) - 1.7% (1.2% OF TOTAL ASSETS)
5,000 RCN Corporation, Term Loan B B2 B+ 06/03/07 3,575,000
5,000 Teligent, Inc., Delayed Term Loan (a)(b) Caa2 D 06/30/06 344,444
5,000 WCI Capital Corporation, Term Loan B (a)(b) NR D 09/30/07 476,786
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4,396,230
-----------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS/HYBRID - 0.7% (0.5% OF TOTAL ASSETS)
2,000 Nextel Partners Operating Company, Term Loan B B1 B- 01/29/08 1,772,500
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TELECOMMUNICATIONS/SATELLITE - 0.6%
(0.4% OF TOTAL ASSETS)
1,824 Satelites Mexicanos, SA DE CV, Loan B1 B+ 06/30/04 1,666,680
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TELECOMMUNICATIONS/WIRELESS MESSAGING - 0.4%
(0.3% OF TOTAL ASSETS)
7,231 Arch Wireless Holding, Inc., Term Loan C (a)(b) NR CC 06/30/06 1,105,802
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TEXTILES & LEATHER - 3.5% (2.5% OF TOTAL ASSETS)
9,700 Norcross Safety Products, LLC, Term Loan NR NR 09/30/04 9,215,000
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TRANSPORTATION/RAIL MANUFACTURING - 1.5%
(1.1% OF TOTAL ASSETS)
3,970 Kansas City Southern Railway Company, Term Loan B Ba1 BB+ 12/29/06 3,988,299
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UTILITIES - 6.2% (4.5% OF TOTAL ASSETS)
7,000 AES EDC Funding II, LLC, Term Loan NR NR 10/06/03 6,744,063
2,008 AES Texas Funding III, LLC, Term Loan NR NR 03/31/02 1,970,048
3,940 TNP Enterprises, Inc., Term Loan Ba2 BB+ 03/30/06 3,954,775
3,960 Western Resources, Inc., Term Loan B NR NR 03/17/03 3,900,600
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16,569,486
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Total Variable Rate Senior Loan Interests and
Interest Bearing Securities (cost $387,671,250) 342,526,190
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EQUITIES - 0.0%
CanFibre of Lackawana, LLC, Income Participation
Certificates, 13 units (a)(b)(c) 07/01/14 -
CanFibre of Riverside, Inc., Income Participation
Certificates, 17 units (a)(b)(c) 07/01/14 -
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Total Equity (cost $0) -
--------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 9.7%
COMMERCIAL PAPER:
5,682 Chevron Phillips Chemical Company, yielding 2.85% P2 A2 11/01/01 5,682,000
4,251 Conagra Foods, Inc., yielding 2.75% P2 A2 11/02/01 4,250,675
4,824 Illinois Power Company, yielding 2.92% P2 A2 11/01/01 4,824,000
5,993 Kraft Foods, Inc., yielding 2.50% P1 A1 10/31/01 5,993,000
5,000 Phillips Petroleum, Co., yielding 2.90% P2 A2 11/05/01 4,998,390
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Total Short-Term Investments (cost $25,748,065) 25,748,065
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $413,419,315) - 138.5% 368,274,255
--------------------------------------------------------------------------------------------------------------------
Borrowings Payable - (38.7)%+ (103,000,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.2% 572,371
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Net Assets - 100% $ 265,846,626
====================================================================================================================
NR Not rated.
* Bank loans rated 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.
(1) Senior Loans in which the Fund invests generally pay
interest at rates which are periodically redetermined
by reference to a base lending rate plus a premium.
These base lending rates are generally (i) the lending
rate offered by one or more major European banks, such
as the London Inter-Bank Offered Rate ("LIBOR"), (ii)
the prime rate offered by one or more major United
States banks, and (iii) the certificate of deposit
rate. Senior loans are generally considered to be
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.
(a) At or subsequent to October 31, 2001, this issue was
non-income producing.
(b) At or subsequent to October 31, 2001, this issue was
under the protection of the federal bankruptcy court.
(c) Position has a zero cost basis and was acquired as part
of a workout program.
+ Borrowings payable as a percentage of total gross
assets is 27.7%.
See accompanying notes to financial statements.
Statement of Net Assets October 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $413,419,315) $368,274,255
Cash 360,993
Interest receivable 2,896,580
Other assets 54,720
--------------------------------------------------------------------------------
Total assets 371,586,548
--------------------------------------------------------------------------------
LIABILITIES
Borrowings payable 103,000,000
Management fees 126,089
Taxable Auctioned Preferred Share dividends payable 43,748
Common Share dividends payable 2,032,892
Other liabilities 537,193
--------------------------------------------------------------------------------
Total liabilities 105,739,922
--------------------------------------------------------------------------------
Net assets $265,846,626
================================================================================
Taxable Auctioned Preferred Shares, at liquidation value $ 46,000,000
================================================================================
Taxable Auctioned Preferred Shares outstanding 1,840
================================================================================
Common Shares outstanding 29,722,631
================================================================================
Net asset value per Common Share outstanding (net assets
less Preferred Shares at liquidation value, divided by
Common Shares outstanding) $ 7.40
================================================================================
See accompanying notes to financial statements.
Statement of Operations Three Months Ended October 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 7,417,462
Fees 82,391
--------------------------------------------------------------------------------
Total investment income 7,499,853
--------------------------------------------------------------------------------
EXPENSES
Management fees 816,851
Taxable Auctioned Preferred Shares - auction fees 28,986
Taxable Auctioned Preferred Shares - dividend disbursing
agent fees 2,521
Shareholders' servicing agent fees and expenses 3,034
Interest expense 901,915
Custodian's fees and expenses 78,512
Trustees' fees and expenses 8,808
Professional fees 79,324
Shareholders' reports - printing and mailing expenses 10,718
Stock exchange listing fees 7,913
Investor relations expense 15,254
Other expenses 122,124
--------------------------------------------------------------------------------
Total expenses 2,075,960
Expense waivers from the Adviser (432,452)
--------------------------------------------------------------------------------
Net expenses 1,643,508
--------------------------------------------------------------------------------
Net investment income 5,856,345
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investment transactions (766,536)
Change in net unrealized appreciation (depreciation)
of investments (20,063,503)
--------------------------------------------------------------------------------
Net gain (loss) from investments (20,830,039)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(14,973,694)
================================================================================
See accompanying notes to financial statements.
Statement of Changes in Net Assets (Unaudited)
THREE
MONTHS
ENDED YEAR ENDED
10/31/01 7/31/01
------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 5,856,345 $ 32,357,125
Net realized gain (loss) from investment transactions (766,536) (17,495,522)
Change in net unrealized appreciation (depreciation) of investments (20,063,503) (20,933,991)
------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (14,973,694) (6,072,388)
------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From undistributed net investment income:
Common Shareholders (6,567,658) (30,435,376)
Taxable Auctioned Preferred Shareholders (378,979) (2,582,741)
From accumulated net realized gains from investment transactions:
Common Shareholders -- (497,923)
Taxable Auctioned Preferred Shareholders -- (14,027)
------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (6,946,637) (33,530,067)
------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common Shares issued to shareholders due to reinvestment of distributions 125,531 765,230
------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (21,794,800) (38,837,225)
Net assets at the beginning of period 287,641,426 326,478,651
------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $265,846,626 $287,641,426
========================================================================================================================
Balance of undistributed net investment income at the end of period $ 505,971 $ 1,596,263
========================================================================================================================
See accompanying notes to financial statements.
Statement of Cash Flows Three Months Ended October 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
CHANGE IN NET ASSETS FROM OPERATIONS $(14,973,694)
--------------------------------------------------------------------------------
Adjustments to Reconcile the Change in Net Assets
from Operations to Net Cash provided by Operating Activities:
Decrease in investments at value 22,148,865
Decrease in interest receivable 484,689
Decrease in other assets 18,112
Decrease in management fees (6,137)
Decrease in other liabilities (207,430)
--------------------------------------------------------------------------------
Net cash provided by operating activities 7,464,405
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common Shareholders (6,755,909)
Cash distributions paid to Taxable Auctioned
Preferred Shareholders (358,855)
--------------------------------------------------------------------------------
Net cash used for financing activities (7,114,764)
--------------------------------------------------------------------------------
NET INCREASE IN CASH 349,641
Cash at the beginning of period 11,352
--------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ 360,993
================================================================================
See accompanying notes to financial statements.
Notes to Financial Statements (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Senior Income Fund (the "Fund") is a non-diversified, closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund is listed on the New York Stock Exchange and trades
under the ticker symbol "NSL". The Fund was organized as a Massachusetts
business trust on August 13, 1999.
The Fund seeks to provide a high level of current income, consistent with
preservation of capital by investing primarily in senior secured loans whose
interest rates float or adjust periodically based on a benchmark interest rate
index. The Fund seeks to increase the income available for distribution to
Common Shareholders by utilizing financial leverage.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Investment Valuation
The prices of senior loans and bonds in the Fund's investment portfolio are
provided by independent pricing services approved by the Fund's Board of
Trustees. The pricing service providers typically value senior loans and bonds
at the mean of the highest bona fide bid and lowest bona fide ask prices when
current quotations are readily available. Senior loans and bonds for which
current quotations are not readily available are valued at fair value using a
wide range of market data and other information and analysis, including credit
characteristics considered relevant by such pricing service providers to
determine valuations. The Board of Trustees of the Fund has approved procedures
which permit the Adviser to override the price provided by the independent
pricing service. There were no price overrides during the three months ended
October 31, 2001. 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 generally not listed on any
exchange and the secondary market for those senior loans is comparatively
illiquid relative to markets for other fixed income securities. Because of the
comparatively illiquid markets, the value of a senior loan may differ
significantly from the value that would have been used had there been an active
market for that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts. Facility fees on senior
loans purchased are treated as market discounts. Market premiums and discounts
are amortized over the expected life of each respective borrowing. Fees consists
primarily of amendment fees. Amendment fees are earned as compensation for
reviewing and accepting changes to the original credit agreement.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its net investment income to its shareholders. Therefore, no federal income
tax provision is required.
Dividends and Distributions to Shareholders
The Fund intends to declare and pay monthly distributions to Common
Shareholders. Generally payment is made or reinvestment is credited to
shareholder accounts on the first business day after month-end. 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.
Notes to Financial Statements (Unaudited) (continued)
Distributions to shareholders of net investment income, and net realized capital
gains 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 accounting principles generally accepted in the United
States. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income and/or distributions in excess of net realized gains
from investment transactions, where applicable. Permanent differences between
financial and tax basis reporting have been identified and appropriately
reclassified. During the fiscal year ended July 31, 2001, permanent differences
relating to expenses which are not deductible for tax purposes totaling $82,779
were reclassified from undistributed net investment income to capital.
Taxable Auctioned Preferred Shares
The Fund has issued and outstanding 1,840 Series TH $25,000 stated value Taxable
Auctioned Preferred Shares. The dividend rate paid on the Taxable Auctioned
Preferred Shares may change every 28 days, as set by the auction agent.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the three months ended October 31, 2001.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from those estimates.
Change in Accounting Policy
Effective August 1, 2001, the Fund adopted the provisions of the new AICPA Audit
and Accounting Guide for Investment Companies. As required by the guide, the
Fund began presenting paydown gains and losses on mortgage and asset-backed
securities as interest income. Prior to adopting the new guide, the Fund
presented paydown gains and losses on mortgage and asset-backed securities
together with realized gain/loss from investment transactions. This change in
accounting has no effect on the total net assets or net asset value of the Fund.
Interest income increased by $45,238 and realized gain/loss decreased by the
same amount for the three months ended October 31, 2001.
The Statement of Changes in Net Assets and Financial Highlights for the prior
periods have not been restated to reflect this change in presentation.
2. FUND SHARES
During the three months ended October 31, 2001, 13,566 Common Shares were issued
to shareholders due to reinvestment of distributions.
During the fiscal year ended July 31, 2001, 81,022 Common Shares were issued to
shareholders due to reinvestment of distributions.
3. DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a dividend distribution of $.0670 per Common Share from its
net investment income which was paid on December 3, 2001, to shareholders of
record on November 15, 2001.
The Fund also declared a dividend distribution of $.0550 per Common Share from
its net investment income which will be paid on December 28, 2001, to
shareholders of record on December 15, 2001.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
three months ended October 31, 2001, aggregated $32,599,025 and $54,162,827,
respectively.
At October 31, 2001, the cost of investments owned for federal income tax
purposes was $430,981,931.
5. UNREALIZED APPRECIATION (DEPRECIATION)
At October 31, 2001, net unrealized depreciation of investments for federal
income tax purposes aggregated $62,707,676 of which $2,054,251 related to
appreciated investments and $64,761,927 related to depreciated investments.
6. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with Nuveen Senior Loan Asset
Management Inc. (the "Adviser"), a wholly owned subsidiary of the John Nuveen
Company, the Fund pays an annual management fee, payable monthly, of .8500 of
1%, which is based upon the average daily managed assets of the Fund. "Managed
assets" shall mean the average daily gross asset value of the Fund, minus the
sum of the Fund's accrued and unpaid dividends on any outstanding Taxable
Auctioned Preferred Shares and accrued liabilities (other than the principal
amount of any borrowings incurred, commercial paper or notes issued by the Fund
and the liquidation preference of any outstanding Taxable Auctioned Preferred
Shares).
The Adviser has agreed to waive part of its management fees or reimburse certain
expenses of the Fund in an amount equal to .45% of the average daily managed
assets for the period October 29, 1999 (commencement of operations) through
October 31, 2004, .35% of the average daily managed assets for the year ended
October 31, 2005, .25% of the average daily managed assets for the year ended
October 31, 2006, .15% of the average daily managed assets for the year ended
October 31, 2007, .10% of the average daily managed assets for the year ended
October 31, 2008, and .05% of the average daily managed assets for the year
ended October 31, 2009. The Adviser has not agreed to reimburse the Fund for any
portion of its fees and expenses beyond October 31, 2009.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
7. COMPOSITION OF NET ASSETS
At October 31, 2001, net assets consisted of:
--------------------------------------------------------------------------------
Taxable Auctioned Preferred Shares, $25,000 stated
value per share, at liquidation value $ 46,000,000
Common Shares, $.01 par value per share 297,226
Paid-in surplus 282,450,547
Balance of undistributed net investment income 505,971
Accumulated net realized gain (loss) from investment transactions (18,262,058)
Net unrealized appreciation (depreciation) of investments (45,145,060)
--------------------------------------------------------------------------------
Net assets $265,846,626
================================================================================
Authorized shares:
Common Unlimited
Taxable Auctioned Preferred Unlimited
================================================================================
8. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Fund had unfunded loan commitments of $6 million as of October 31, 2001. The
Fund generally will maintain with its custodian short-term investments and/or
cash having an aggregate value at least equal to the amount of unfunded loan
commitments.
9. SENIOR LOAN PARTICIPATION COMMITMENTS
The Fund invests primarily in assignments, participations, or acts as a party to
the primary lending syndicate of a Variable Rate Senior Loan interest to
corporations, partnerships, and other entities. 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, but not with the borrower directly. As such, the Fund assumes the
credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower. There were no such
participation commitments as of October 31, 2001.
10. BORROWINGS
In accordance with its 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.
On May 23, 2000, the Fund entered into a $150 million commercial paper program
with Nuveen Funding, L.L.C., a Delaware limited liability company whose sole
purpose is the issuance of commercial paper. Nuveen Funding, L.L.C. has the
authority to issue a maximum of $150 million of commercial paper, at a discount,
with maturities of up to 180 days, the proceeds of which are used to make
advances to the Fund. This line of credit is secured by the assets of the Fund.
For the three months ended October 31, 2001, the average daily balance of
borrowings under the commercial paper program agreement was $103.1 million with
an average interest rate of 3.47%.
The Fund has entered into a $155 million revolving credit agreement with
Deutsche Bank AG which expires May 2002. Interest on borrowings is charged at a
rate of either the Fed Funds rate plus .50%, LIBOR plus .50% or the Prime Rate.
An unused commitment fee of .125% is charged on the unused portion of the
facility. During the three months ended October 31, 2001, there were no
borrowings under the revolving credit agreement and, therefore, there was no
outstanding revolving credit balance at October 31, 2001.
Cash paid for interest during the three months ended October 31, 2001, was
$977,614.
Financial Highlights (Unaudited)
Selected data for a Common Share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------- ---------------------------------------------------------------
Net Net
Net Investment Investment Capital Capital
Realized/ Income to Income to Gains to Gains to
Beginning Net Unrealized Common Preferred Common Preferred
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) Total holders holders+ holders holders+ Total
====================================================================================================================================
Year Ended 7/31:
2002(b) $8.13 $ .20 $ (.70) $(.50) $ (.22) $(.01) $ -- $-- $ (.23)
2001 9.47 1.09 (1.29) (.20) (1.03) (.09) (.02) -- (1.14)
2000(a) 9.55 .75 (.12) .63 (.66) (.02) -- -- (.68)
====================================================================================================================================
Total Returns
-----------------
Based
Ending Based on
Net Ending on Net
Offering Asset Market Market Asset
Costs Value Value Value** Value**
=========================================================================================================
Year Ended 7/31:
2002(b) $-- $7.40 $8.6700 (10.79)% (6.34)%
2001 -- 8.13 9.9600 15.35 (3.30)
2000(a) (.03) 9.47 9.6250 3.21 6.20
=========================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------
Before Waiver
----------------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Ending Net Assets Net Assets Total Total
Net Applicable Applicable Net Assets Net Assets
Assets to Common to Common Including Including
(000) Shares++ Shares++ Preferred++ Preferred++
===============================================================================================================
Year Ended 7/31:
2002(b) $265,847 3.56%* 9.30%* 2.97%* 7.76%*
2001 287,641 4.32 11.74 3.67 9.98
2000(a) 326,479 3.81* 9.82* 3.67* 9.47*
===============================================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------
After Waiver***
---------------------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses Income to Expenses Income to
to Average Average to Average Average
Net Assets Net Assets Total Total
Applicable Applicable Net Assets Net Assets Portfolio
to Common to Common Including Including Turnover
Shares++ Shares++ Preferred++ Preferred++ Rate
===========================================================================================================
Year Ended 7/31:
2002(b) 2.82%* 10.05%* 2.35%* 8.38%* 9%
2001 3.62 12.44 3.08 10.57 52
2000(a) 3.21* 10.42* 3.10* 10.04* 40
===========================================================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gain distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the
combination of reinvested dividend income, reinvested capital gain
distributions, if any, and changes in net asset value per share. Total
returns are not annualized.
*** After expense waivers from the investment adviser.
+ The amounts shown are based on Common Share equivalents.
++ Ratios do not reflect the effect of dividend payments to Taxable Auctioned
Preferred Shareholders; income ratios reflect income earned on assets
attributable to Taxable Auctioned Preferred Shares. Each Ratio of Expenses
to Average Net Assets and each Ratio of Net Investment Income to Average
Net Assets includes the effect of the interest expense paid on bank
borrowings of:
Ratio of Interest Ratio of Interest
Expense Expense to
to Average Average Total
Net Assets Net Assets
Applicable to Including
Common Shares Preferred
------------------------------------------
2002(b) 1.55%* 1.29%*
2001 2.19 1.86
2000(a) 2.04* 1.96*
(a) For the period October 29, 1999 (commencement of operations) through July
31, 2000.
(b) For the three months ended October 31, 2001.
See accompanying notes to financial statements.