Edgar Filing: NUVEEN FLOATING RATE INCOME FUND

As filed with the Securities and Exchange Commission on March 24, 2004

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1933 Act File No. 333-112179

1940 Act File No. 811-21494

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2

(Check appropriate box or boxes)

[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

[X] Pre-Effective Amendment No. 5

[ ] Post-Effective Amendment No. _

and

[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

[X] Amendment No. 5

Nuveen Floating Rate Income Fund
Exact Name of Registrant as Specified in Declaration of Trust

333 West Wacker Drive, Chicago, Illinois 60606
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)

(800) 257-8787
Registrant's Telephone Number, including Area Code

Jessica R. Droeger
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service

Copies of Communications to:

Stacy H. Winick Eric F. Fess Sarah E. Cogan, Esq.
Bell, Boyd & Lloyd PLLC Chapman and Cutler LLP Simpson Thacher & Bartlett LLP
1615 L Street, N.W., Suite 1200 111 W. Monroe 425 Lexington Avenue
Washington, DC 20036 Chicago, IL 60603 New York, NY 10017

Approximate Date of Proposed Public Offering:

As soon as practicable after the effective date of this Registration Statement

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If any of the securities being registered on this form are offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]

It is proposed that this filing will become effective (check appropriate
box)

[X] when declared effective pursuant to section 8(c)

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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

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Proposed Maximum
Title of Securities Being Amount Proposed Maximum Aggregate Offering Amount of
Registered Being Registered Offering Price Per Unit Price (1) Registration Fee*
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Common Shares, $0.01 par value 48,000,000 Shares $15.00 $720,000,000 $91,223.31
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*$7,601.31 of which has been previously paid.

(1) Estimated solely for the purpose of calculating the registration fee.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.

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This information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

Subject to completion, dated ________, 2004

PROSPECTUS
[LOGO] NUVEEN
Investments

__________ Shares

Nuveen Floating Rate Income Fund

Common Shares
$15.00 per share

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Investment Objective. The Fund is a newly organized, diversified,
closed-end management investment company. The Fund's investment objective is to
achieve a high level of current income.

No Prior History. Because the Fund is newly organized, its common shares
have no history of public trading. Shares of closed-end investment companies
frequently trade at a discount from their net asset value, which creates a risk
of loss for investors when they sell shares purchased in the initial public
offering.

Portfolio Contents. Under normal market circumstances, the Fund will invest
at least 80% of its Managed Assets (as defined on page 5 of the Prospectus) in
adjustable rate secured senior loans and adjustable rate unsecured senior
loans, which unsecured senior loans will be, at the time of investment,
investment grade quality.
(continued on following page)

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Investing in common shares involves certain risks. See "Risks" beginning on
page 30.

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

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Per Share Total/(3)/
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Public Offering Price $15.000
Sales Load/(1)/ $ 0.675
Estimated Offering Expenses/(2)/ $ 0.030
Proceeds to the Fund $14.295

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(1)Certain underwriters that may also participate in any future offering of
preferred shares of the Fund may receive additional compensation in that
offering based on their participation in this offering. See "Underwriting."
(2)Total expenses of issuance and distribution (other than underwriting
discounts and commissions) are estimated to be $ . Nuveen
Investments, LLC has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $0.03 per share.
(3)The Fund has granted the underwriters an option to purchase up to
additional common shares at the Public Offering Price less the
Sales Load, solely to cover over-allotments, if any. If such option is
exercised in full, the total Public Offering Price, Sales Load, Estimated
Offering Expenses and Proceeds to the Fund will be $ , $ ,
$ and $ , respectively. See "Underwriting."

The underwriters expect to deliver the common shares to purchasers on or
about , 2004.

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Citigroup Nuveen Investments, LLC
A.G. Edwards & Sons, Inc. Wachovia Securities
Advest, Inc. Ferris, Baker Watts
Incorporated
J.J.B. Hilliard, W.L. Lyons, Inc. Janney Montgomery Scott LLC
McDonald Investments Inc. Oppenheimer
Quick & Reilly, Inc. RBC Capital Markets
Ryan Beck & Co. Stifel, Nicolaus & Company
Incorporated
SunTrust Robinson Humphrey

, 2004

The Fund will invest at least 65% of its Managed Assets in adjustable rate
senior loans that are secured by specific collateral. Senior loans are made to
U.S. or non-U.S. corporations, partnerships and other business entities that
operate in various industries and geographical regions. Senior loans pay
interest at rates that are redetermined periodically at short-term intervals on
the basis of an adjustable base lending rate plus a premium. The Fund may
invest a substantial portion of its Managed Assets in senior loans and other
debt instruments that are, at the time of investment, rated below investment
grade or unrated but judged to be of comparable quality. Securities of below
investment grade quality are regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal
and are commonly referred to as junk bonds. Because of the protective features
of senior loans (being senior in a borrower's capital structure and, in certain
instances, secured by specific collateral), the Fund's subadviser believes,
based on its experience, that senior loans tend to have more favorable loss
recovery rates compared to most other types of below investment grade
obligations that are subordinated and unsecured.

Leverage. Following the completion of this offering, the Fund intends to
seek to increase the Fund's common share net income by utilizing financial
leverage by offering preferred shares of beneficial interest and/or by
borrowing or issuing commercial paper or notes and investing the proceeds in
the manner described above. The Fund currently anticipates that leverage will
represent approximately 38% of the Fund's Managed Assets. There is no assurance
that the Fund will utilize leverage or that the Fund's leverage strategy will
be successful.

Adviser and Subadviser. Nuveen Institutional Advisory Corp., the Fund's
investment adviser, will be responsible for determining the Fund's overall
investment strategy and its implementation, including the use of leverage and
hedging. Symphony Asset Management, LLC will be the Fund's subadviser
responsible for managing the Fund's Managed Assets.

The Fund's common shares have been approved for listing on the New York
Stock Exchange, subject to notice of issuance. The trading or "ticker" symbol
is "JFR."

You should read this Prospectus, which contains important information about
the Fund, before deciding whether to invest and retain it for future reference.
A Statement of Additional Information, dated , 2004, and as it may
be supplemented, containing additional information about the Fund, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this Prospectus. You may request a free copy of
the Statement of Additional Information, the table of contents of which is on
page 53 of this Prospectus, by calling (800) 257-8787 or by writing to the
Fund, or you may obtain a copy (and other information regarding the Fund) from
the Securities and Exchange Commission's web site (http://www.sec.gov).

The Fund's common shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.

You should rely only on the information contained or incorporated by
reference in this Prospectus. The Fund has not authorized anyone to provide you
with different information. The Fund is not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the
information contained in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.

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TABLE OF CONTENTS

Page
----

Prospectus Summary........................................... 4
Summary of Fund Expenses..................................... 15
The Fund..................................................... 17
Use of Proceeds.............................................. 17
The Fund's Investments....................................... 17
Use of Leverage.............................................. 26
Hedging Transactions......................................... 28
Risks........................................................ 31
Management of the Fund....................................... 38
Net Asset Value.............................................. 40
Distributions................................................ 42
Dividend Reinvestment Plan................................... 43
Description of Shares........................................ 44
Certain Provisions in the Declaration of Trust............... 46
Repurchase of Fund Shares; Conversion to Open-End Fund....... 47
Tax Matters.................................................. 48
Underwriting................................................. 50
Custodian and Transfer Agent................................. 53
Legal Opinions............................................... 53
Table of Contents for the Statement of Additional Information 54

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Until , 2004 (25 days after the date of this Prospectus), all
dealers that buy, sell or trade the common shares, whether or not participating
in this offering, may be required to deliver a Prospectus. This is in addition
to the dealers' obligation to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This is only a summary. You should review the more detailed information
contained elsewhere in this Prospectus and in the Statement of Additional
Information to understand the offering fully.

The Fund.............. Nuveen Floating Rate Income Fund (the "Fund") is a
newly organized, diversified, closed-end management
investment company.

The Offering.......... The Fund is offering common shares of
beneficial interest at $15.00 per share through a
group of underwriters (the "Underwriters") led by
Citigroup Global Markets Inc., Nuveen Investments,
LLC ("Nuveen"), A.G. Edwards & Sons, Inc., Wachovia
Capital Markets, LLC, Advest, Inc., Ferris, Baker
Watts, Incorporated, J.J.B. Hilliard, W.L. Lyons,
Inc., Janney Montgomery Scott LLC, McDonald
Investments Inc., a KeyCorp Company, Oppenheimer &
Co. Inc., Quick & Reilly, Inc. A FleetBoston
Financial Company, RBC Capital Markets Corporation,
Ryan Beck & Co., Inc., Stifel, Nicolaus & Company,
Incorporated and SunTrust Capital Markets, Inc. The
common shares of beneficial interest are called
"Common Shares" in this Prospectus. You must
purchase at least 100 Common Shares in this
offering. The Fund has given the Underwriters an
option to purchase up to additional Common
Shares to cover orders in excess of Common
Shares. See "Underwriting." Nuveen has agreed to pay
(i) all organizational expenses and (ii) offering
costs (other than sales load) that exceed $0.03 per
Common Share.

Investment Objective
and Policies.......... The Fund's investment objective is to achieve a high
level of current income. The Fund's investment
objective and certain investment policies are
considered fundamental and may not be changed
without shareholder approval. The Fund cannot assure
you that it will attain its investment objective.
See "The Fund's Investments" and "Risks."

Under normal market circumstances, the Fund will
invest at least 80% of its Managed Assets in
adjustable rate secured senior loans and adjustable
rate unsecured senior loans (collectively referred
to as "Senior Loans"), which unsecured Senior Loans
will be, at the time of investment, investment grade
quality. The Fund will invest at least 65% of its
Managed Assets in Senior Loans that are secured by
specific collateral. Senior Loans pay interest at
rates that are redetermined periodically at
short-term intervals by reference to a base lending
rate, primarily the London-Interbank Offered Rate
("LIBOR"), plus a premium. The Fund may invest a
substantial portion of its Managed Assets in Senior
Loans and other debt instruments that are, at the
time of investment, rated below investment grade or
unrated but judged to be of comparable quality.
Securities (which term for purposes of this
Prospectus includes Senior Loans) of below
investment grade quality are regarded as having
predominately speculative characteristics with
respect to capacity to pay interest and repay
principal and are commonly referred to as "junk
bonds." Senior Loans are made to U.S. or non- U.S.
corporations, partnerships and other business
entities ("Borrowers") that operate in various
industries and geographical regions. It is
anticipated that the proceeds of the Senior Loans in

which the Fund will invest will be used by Borrowers
to finance leveraged buyouts, recapitalizations,
mergers, acquisitions, stock repurchases,
refinancings, internal growth and for other
corporate purposes.

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

Investment grade quality securities are those
securities that, at the time of investment, are (i)
rated by at least one nationally recognized
statistical rating organization ("NRSRO") within the
four highest grades (BBB- or Baa3 or better by
Standard & Poor's Corporation, a division of The
McGraw-Hill Companies ("S&P"), Moody's Investors
Service, Inc. ("Moody's") or Fitch Ratings
("Fitch")), or (ii) unrated but judged to be of
comparable quality. The Fund may purchase Senior
Loans and other debt securities that are rated below
investment grade or that are unrated but judged to
be of comparable quality. No more than 10% of the
Fund's Managed Assets may be invested in Senior
Loans and other debt securities that are, at the
time of investment, rated CCC+ or Caa or below by
S&P, Moody's or Fitch or that are unrated but judged
to be of comparable quality. See "The Fund's
Investments--Portfolio Composition" and
"Risks--Below Investment Grade Risk."

The Fund's assets, including assets attributable to
any FundPreferred shares (as defined below on page
7) that may be outstanding and the principal amount
of any Borrowings (also as defined below on page 7),
are called "Managed Assets."

Nuveen Institutional Advisory Corp. ("NIAC"), the
Fund's adviser, will be responsible for determining
the Fund's overall investment strategy and its
implementation, including the use of leverage and
hedging. Symphony Asset Management, LLC ("Symphony")
will be the Fund's subadviser responsible for
managing the Fund's Managed Assets.

Under normal circumstances:

. The Fund expects to maintain an average
duration of one year or less for its portfolio
investments in Senior Loans and other

debt instruments. See "The Fund's
Investments--Investment Objective and Policies"
for a description of duration.

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

. The Fund may invest up to 20% of its Managed
Assets in securities of non-U.S. issuers (which
term for purposes of this Prospectus includes
Borrowers) that are U.S. dollar or non-U.S.
dollar denominated. Initially, the Fund does
not intend to invest in non-U.S. dollar
denominated securities. The Fund's Managed
Assets to be invested in Senior Loans and other
debt instruments of non-U.S. issuers may
include debt securities of issuers located, or
conducting their business in, emerging markets
countries. Initially, the Fund does not intend
to invest in securities of emerging markets
issuers.

. The Fund may not invest more than 20% of its
Managed Assets in securities from an industry
which (for the purposes of this Prospectus)
generally refers to the classification of
companies in the same or similar lines of
business such as the automotive, textiles and
apparel, hotels, media production and consumer
retailing industries.

. The Fund may invest more than 20% of its
Managed Assets in sectors which (for the
purposes of this Prospectus) generally refers
to broader classifications of industries, such
as the consumer discretionary sector which
includes the automotive, textiles and apparel,
hotels, media production and consumer retailing
industries, provided the Fund's investment in a
particular industry within the sector does not
exceed the industry limitation.

. The Fund may invest up to 50% of its Managed
Assets in securities and other instruments
that, at the time of investment, are illiquid
(i.e., securities that are not readily
marketable).

In pursuing its objective of high current income, the
Fund will invest in Senior Loans and other debt
instruments that may involve significant credit
risk. As part of its efforts to manage this risk and
the potential impact of such risk on the overall
value and returns of the Fund's portfolio, Symphony
will implement its credit management strategy that
includes (i) a focus on Senior Loans that are
secured by specific assets, (ii) rigorous and
on-going bottom-up fundamental analysis of issuers,
and (iii) overall portfolio diversification.
Symphony will perform its own credit and research
analysis of issuers, taking into consideration,
among other things, the entity's financial resources
and operating history, its sensitivity to economic
conditions and trends, the ability of its
management, its debt maturity schedules and
borrowing requirements, its anticipated cash flow,
interest and asset coverage, and its earnings
prospects. Even with these efforts, because of the
greater degree of credit risk within the portfolio,
the Fund's net asset value could decline over time.
In an effort to help preserve the Fund's overall
capital, Symphony will seek to enhance

portfolio value by investing in securities it
believes to be undervalued, which, if successful,
can mitigate the potential loss of value due to
credit events over time.

During temporary defensive periods or in order to keep
the Fund's cash fully invested, the Fund may deviate
from its investment objective and invest all or a
portion of its assets in investment grade debt
securities, including obligations issued or
guaranteed by the U.S. government, its agencies and
instrumentalities. In addition, upon Symphony's
recommendation that a change would be in the best
interests of the Fund and upon concurrence by NIAC,
and subject to approval of the Board of Trustees of
the Fund, Symphony may deviate from its investment
guidelines noted above. For a more complete
discussion of the Fund's portfolio composition, see
"The Fund's Investments."

Proposed Use of
Leverage.............. Following the completion of this offering, the Fund
intends to seek to increase Common Share net income
by utilizing financial leverage by offering
preferred shares of beneficial interest
("FundPreferred(TM) shares") and/or by borrowing or
issuing commercial paper or notes (collectively,
"Borrowings") and investing the proceeds in the
manner described above. The Fund currently
anticipates that FundPreferred shares and/or
Borrowings will represent approximately 38% of the
Fund's Managed Assets. There is no assurance that
the Fund will issue FundPreferred shares or incur
Borrowings.

There is no guarantee that the Fund's leverage
strategy will be successful. See "Risks--Leverage
Risk." FundPreferred shares will pay dividends based
on short-term rates, which will be reset frequently.
Interest on Borrowings may be at a fixed or floating
rate, but generally will be based on short-term
rates. The Fund intends to seek to enhance Common
Share net income through the use of leverage by
issuing FundPreferred shares or Borrowings at
generally lower short-term rates applicable to
financings of high credit quality and investing the
proceeds of such leverage at generally higher
short-term rates applicable to financings of low
credit quality, like Senior Loans. The lower credit
quality of the Fund's portfolio investments
increases the likelihood of loss from default or
decline in financial capacity by Borrowers. See
"Risks--Senior Loan Risks--Borrower Credit Risk" and
"Risks--Below Investment Grade Risk." So long as the
rate of return, net of applicable Fund expenses, on
the Fund's portfolio investments exceeds the
FundPreferred share dividend rate or the interest
rate on any Borrowings, the investment of the
proceeds of FundPreferred shares or Borrowings will
generate more income than will be needed to make
dividend or interest payments on FundPreferred
shares or Borrowings. If so, the excess will be
available to pay higher dividends to Common
Shareholders.

fluctuations on Common Share income due to
variations in the FundPreferred share dividend rate
and/or the interest rate on Borrowings. See "Use of
Leverage."

Investment Adviser and
Subadviser............ NIAC will be the Fund's investment adviser,
responsible for determining the Fund's overall
investment strategy and its implementation,
including the use of leverage and hedging.

NIAC, a registered investment adviser, is a wholly
owned subsidiary of Nuveen Investments, Inc. Founded
in 1898, Nuveen Investments, Inc. and its affiliates
had approximately $95 billion of assets under
management as of December 31, 2003. According to
Thomson Wealth Management, Nuveen is the leading
sponsor of closed-end exchange-traded funds as
measured by the number of funds (106) and the amount
of fund assets under management (approximately $47.1
billion) as of December 31, 2003.

Symphony, a registered investment adviser, is an
indirect wholly owned subsidiary of Nuveen
Investments, Inc. Founded in 1994, Symphony had
approximately $2.9 billion in assets under
management as of December 31, 2003. Symphony
specializes in the management of market neutral
equity and debt strategies and Senior Loan and other
debt portfolios.

NIAC and Symphony will sometimes individually be
referred to as an "Adviser" and collectively be
referred to as the "Advisers."

NIAC will receive an annual fee, payable monthly, in a
maximum amount equal to .85% of the Fund's average
daily Managed Assets (as previously defined, Managed
Assets include assets attributable to any
FundPreferred shares that may be outstanding and the
principal amount of any Borrowings), with lower fee
levels for assets that exceed $500 million. NIAC
will pay a portion of that fee to Symphony. The
Advisers have contractually agreed to reimburse the
Fund for fees and expenses in the amount of .32% of
average daily Managed Assets of the Fund for the
first five full years of the Fund's operations
(through March 31, 2009), and in a declining amount
for an additional three years (through March 31,
2012). For more information on fees and expenses,
including fees attributable to Common Shares, see
"Management of the Fund."

Distributions.......... Commencing with the Fund's first dividend, the Fund
intends to make regular monthly cash distributions
to Common Shareholders based on the past and
projected performance of the Fund. The Fund's Common
Share dividend rate will depend on a number of
factors, including the net earnings on the Fund's
portfolio investments, the rate at which such net
earnings change as a result of changes in short-term
market interest rates, the rate at which dividends
are payable on FundPreferred shares or interest is
payable on Borrowings, and the rate at which such
FundPreferred share dividend or Borrowing interest
rates change. As portfolio and market conditions
change, the rate of dividends on the Common Shares
and the Fund's dividend policy could change. Over
time, the Fund will distribute all of its net
investment income and net short-term capital

gains (after it pays accrued dividends on, or
redeems or liquidates, any outstanding FundPreferred
shares, if any, and makes interest and required
principal payments on Borrowings, if any). In
addition, at least annually, the Fund intends to
distribute net long-term capital gains, if any, to
you so long as the net long-term capital gains are
not necessary to pay accrued dividends on, or redeem
or liquidate, any FundPreferred shares or pay
interest on, or repay, any Borrowings.

The Fund expects to declare its initial Common Share
distribution approximately 45 days, and to pay that
distribution approximately 60 to 90 days, from the
completion of this offering, depending on market
conditions. In most circumstances, Common
Shareholders may elect to automatically reinvest
some or all of their distributions in additional
Common Shares under the Fund's Dividend Reinvestment
Plan. See "Distributions" and "Dividend Reinvestment
Plan."

Listing............... The Common Shares have been approved for listing on
the New York Stock Exchange, subject to notice of
issuance. See "Description of Shares--Common
Shares." The trading or "ticker" symbol of the
Common Shares is "JFR." Because of this exchange
listing, the Fund may sometimes be referred to in
public communications as a "closed-end
exchange-traded fund" or "exchange-traded fund."

Custodian and Transfer
Agent................. State Street Bank and Trust Company will serve as
custodian and transfer agent for the Fund. See
"Custodian and Transfer Agent."

Market Discount from

Net Asset Value and
Expected Reductions in
Net Asset Value....... Shares of closed-end investment companies frequently
trade at prices lower than net asset value, which
creates a risk of loss for investors when they sell
shares purchased in the initial public offering.
This characteristic is a risk separate and distinct
from the risk that the Fund's net asset value could
decrease as a result of investment activities.
Shares of closed-end investment companies like the
Fund have during some periods traded at prices
higher than net asset value and have during other
periods traded at prices lower than net asset value.
The Fund cannot predict whether Common Shares will
trade at, above or below net asset value. Net asset
value of the Fund and the net asset value per Common
Share will be reduced immediately following this
offering by the sales load and the amount of
organization and offering expenses paid by the Fund.
See "Use of Proceeds," "Use of Leverage," "Risks,"
"Description of Shares," "Repurchase of Fund Shares;
Conversion to Open-End Fund" and the Statement of
Additional Information under "Repurchase of Fund
Shares; Conversion to Open-End Fund." The net asset
value per Common Share also will be reduced by any
costs associated with the issuance of FundPreferred
shares or any Borrowings. The Common Shares are
designed primarily for long-term investors, and you
should not view the Fund as a vehicle for trading
purposes.

Special
Tax Considerations.... Dividends with respect to the Common Shares generally
will not constitute "qualified dividend income" for
federal income tax

purposes and thus generally will not be eligible for
taxation at long-term capital gain tax rates (except
in the case of capital gain dividends).

Special Risk
Considerations........ No Prior History. The Fund is a newly organized,
diversified, closed-end management investment
company with no history of operations.

Investment and Market Risk. An investment in the
Fund's Common Shares is subject to investment risk,
including the possible loss of the entire principal
amount that you invest. Your investment in Common
Shares represents an indirect investment in the
securities owned by the Fund, most of which are not
traded on a national securities exchange, NASDAQ (as
defined below) or in the over-the-counter markets.
The value of these securities, like other market
investments, may move up or down, sometimes rapidly
and unpredictably.

Your Common Shares at any point in time may be worth
less than your original investment, even after
taking into account the reinvestment of Fund
dividends and distributions. The Fund likely will
use leverage, which magnifies the securities market
risks described above. See "Use of Leverage" and
"Risks--Investment and Market Risk."

Senior Loan Risks.

Borrower Credit Risk. Borrowers under Senior Loans
may default on their obligations to pay principal or
interest when due. This non- payment would result in
a reduction of income to the Fund, a reduction in
the value of a Senior Loan experiencing non-payment
and, potentially, a decrease in the net asset value
of the Fund. Although under normal circumstances at
least 65% of the Fund's Managed Assets will be
invested in Senior Loans that are secured by
specific collateral, there can be no assurance that
liquidation of such collateral would satisfy the
Borrower's obligation in the event of non-payment of
scheduled interest or principal or that such
collateral could be readily liquidated. In the event
of bankruptcy of a Borrower, the Fund could
experience delays or limitations with respect to its
ability to realize the benefits of any collateral
securing a Senior Loan. The Fund is subject to the
same inherent risks described above with respect to
issuers of other debt instruments in which the Fund
may invest, although it is not expected that those
debt instruments will be secured by collateral.

Senior Loan Interest Rate Risk. Because the
interest rates of Senior Loans reset frequently, if
market interest rates fall, the loans' interest
rates will be reset to lower levels, potentially
reducing the Fund's income. Because both Senior
Loans and the Fund's FundPreferred shares and
Borrowings generally pay interest or dividends based
on short-term market interest rates, the Fund's
investments in Senior Loans may potentially offset
the leverage risks borne by the Fund relating to the
fluctuations on Common Share income due to
variations in the FundPreferred share dividend rate
and/or the interest rate on Borrowings. See "Use of
Leverage." The Fund is subject to the same inherent
risks described above with respect to other
adjustable rate debt instruments in which the Fund
may invest.

Participation Risks. The Fund also may purchase a
participation interest in a Senior Loan and by doing
so acquire some or all of the interest of a bank or
other lending institution in a Senior Loan to a
Borrower. A participation typically will result in
the Fund having a contractual relationship only with
the lender, not the Borrower. As a result, the Fund
assumes the credit risk of the lender selling the
participation in addition to the credit risk of the
Borrower. By purchasing a participation, the Fund
will have the right to receive payments of
principal, interest and any fees to which it is
entitled only from the lender selling the
participation and only upon receipt by the lender of
the payments from the Borrower. See "Risks--Senior
Loan Risk" and "Risks--Below Investment Grade Risk."

Other Risks Associated with Senior Loans. Many
Senior Loans in which the Fund may invest may not be
rated by an NRSRO, generally will not be registered
with the Securities and Exchange Commission and
generally will not be listed on a securities
exchange. In addition, the amount of public
information available with respect to Senior Loans
generally may be less extensive than that available
for registered and exchange-listed securities.
Economic and other events (whether real or
perceived) can reduce the demand for certain Senior
Loans or Senior Loans generally, which may reduce
market prices and cause the Fund's net asset value
per share to fall. The frequency and magnitude of
such changes cannot be predicted. No active trading
market currently exists for some Senior Loans in
which the Fund may invest and, thus, those loans may
be illiquid. As a result, such Senior Loans
generally are more difficult to value than more
liquid securities for which a trading market exists.

Below Investment Grade Risk. The Fund may purchase
Senior Loans and other debt instruments that are
rated below investment grade or that are unrated but
judged to be of comparable quality. Securities of
below investment grade quality are regarded as
having predominately speculative characteristics
with respect to capacity to pay interest and repay
principal, and are commonly referred to as "junk
bonds." Issuers of lower rated securities may be
highly leveraged and may not have available to them
more traditional methods of financing. The prices of
these lower grade securities are typically more
sensitive to negative developments, such as a
decline in the issuer's revenues or a general
economic downturn, than are the prices of higher
rated securities. The secondary market for lower
rated securities, including some Senior Loans, may
not be as liquid as the secondary market for more
highly rated securities, a factor which may have an
adverse effect on the Fund's ability to dispose of a
particular security. See "Risks--Below Investment
Grade Risk."

Leverage Risk. The Fund's use of leverage through the
issuance of FundPreferred shares or Borrowings
creates an opportunity for increased Common Share
net income but also creates special risks for Common
Shareholders, including the major risks listed
below. In

addition, there is no assurance that the Fund's
leveraging strategy, if utilized, will be
successful. The Fund will pay (and Common
Shareholders will bear) any costs and expenses
relating to the issuance and ongoing maintenance of
any FundPreferred shares (for example, distribution
related expenses such as a participation fee paid at
what the Fund expects will be an annual rate of
0.25% of FundPreferred share liquidation preference
to broker-dealers successfully participating in
FundPreferred share auctions) and Borrowings.

Leverage creates two major types of risks for Common
Shareholders:

. the likelihood of greater volatility of net
asset value and market price of Common Shares
because changes in the value of the Fund's
portfolio investments, including investments
purchased with the proceeds of the issuance of
FundPreferred shares or Borrowings, are borne
entirely by the Common Shareholders; and

. the possibility either that (i) Common Share
income will fall if the dividend rate on
FundPreferred shares or the interest rate on
any Borrowings rises and there is no
corresponding increase, or a lagging increase,
in the interest rates on investments in the
Fund's portfolio, or (ii) Common Share income
will fluctuate because the dividend rate on
FundPreferred shares or the interest rate on
any Borrowings varies. Because both Senior
Loans and the Fund's FundPreferred shares and
Borrowings generally pay interest or dividends
based on short-term market interest rates, the
Fund's investments in Senior Loans may
potentially offset the leverage risks borne by
the Fund relating to the fluctuations on Common
Share income due to variations in the
FundPreferred share dividend rate and/or the
interest rate on Borrowings.

If the Fund seeks an investment grade rating from a
NRSRO for any FundPreferred shares, commercial paper
or notes issued by the Fund (which the Fund expects
to do), asset coverage or portfolio composition
provisions in addition to and more stringent than
those required by the 1940 Act may be imposed in
connection with the issuance of such a rating. Any
lender from which the Fund borrows may require
additional asset coverage and portfolio composition
provisions as well as restrictions on the Fund's
investment practices.

See "Risks--Leverage Risk."

Non-U.S. Issuer Risk. The Fund may invest up to 20%
of its Managed Assets in securities of non-U.S.
issuers that are U.S. dollar or non-U.S. dollar
denominated. Initially, the Fund does not intend to
invest in non-U.S. dollar denominated securities.
Investments in securities of non-U.S. issuers
involve special risks not presented by investments
in securities of U.S. issuers, including the
following: less publicly available information about
non-U.S. issuers or markets due to less rigorous
disclosure or accounting standards or regulatory
practices; many non-U.S. markets are smaller, less
liquid and more volatile;

potential adverse effects of fluctuations in
currency exchange rates or controls on the value of
the Fund's investments; the economies of non-U.S.
countries may grow at slower rates than expected or
may experience a downturn or recession; the impact
of economic, political, social or diplomatic events;
possible seizure of a company's assets; restrictions
imposed by non-U.S. countries limiting the ability
of non-U.S. issuers to make payments of principal
and/or interest due to blockages of foreign currency
exchanges or otherwise; and withholding and other
non-U.S. taxes may decrease the Fund's return. These
risks are more pronounced to the extent that the
Fund invests a significant portion of its assets in
companies located in one region and to the extent
that the Fund invests in securities of issuers in
emerging markets countries. In addition, economic,
political and social developments may significantly
disrupt the financial markets or interfere with the
Fund's ability to enforce its rights against
non-U.S. issuers. See "Risks--Non-U.S. Securities
Risk."

Currency Risk. The Fund may invest up to 20% of its
Managed Assets in securities of non-U.S. issuers
that are non-U.S. dollar denominated. However,
initially the Fund does not intend to invest in such
securities. Investments by the Fund in
non-U.S.-dollar denominated securities will be
subject to currency risk. Currency risk is the risk
that fluctuations in the exchange rates between the
U.S. dollar and non-U.S. currencies may negatively
affect an investment. The value of securities
denominated in non-U.S. currencies may fluctuate
based on changes in the value of those currencies
relative to the U.S. dollar, and a decline in
applicable foreign exchange rates could reduce the
value of such securities held by the Fund.

Illiquid Securities Risk. The Fund may invest up to
50% of its Managed Assets in securities that, at the
time of investment, are illiquid. Illiquid
securities are not readily marketable and may
include some restricted securities. Illiquid
securities involve the risk that the securities will
not be able to be sold at the time desired by the
Fund or at prices approximating the value at which
the Fund is carrying the securities on its books.

Interest Rate Risk. Interest rate risk is the risk
that fixed-income securities will decline in value
because of changes in market interest rates. When
market interest rates rise, the market value of such
securities generally will fall. The Fund's
investment in such securities means that the net
asset value and market price of Common Shares will
tend to decline if market interest rates rise.
Market interest rates in the U.S. and in certain
other countries in which the Fund may invest
currently are near historically low levels. Because
the Fund will invest at least 80% of its Managed
Assets in Senior Loans and will maintain an average
portfolio duration of one year or less, the Fund is
intended to have a relatively low level of interest
rate risk. However, because interest rates on Senior
Loans and other adjustable rate debt instruments
typically only reset periodically (e.g., monthly or
quarterly), changes in prevailing interest rates
(and particularly sudden and significant changes)
can be expected to cause some fluctuation in the
market value of these securities,

including declines in market value as interest rates
rise. See "Risks--Investment and Market Risk" and
"Risks--Interest Rate Risk."

Regulatory Risk. To the extent that legislation or
state or federal regulators that regulate certain
financial institutions impose additional
requirements or restrictions with respect to the
ability of such institutions to make loans,
particularly in connection with highly leveraged
transactions, the availability of Senior Loans for
investment may be adversely affected. Further, such
legislation or regulation could depress the market
value of Senior Loans.

Market Disruption Risk. Certain events have a
disruptive effect on the securities markets, such as
terrorist attacks (including the terrorist attacks
in the U.S. on September 11, 2001), war and other
geopolitical events. The Fund cannot predict the
effects of similar events in the future on the U.S.
economy. Lower rated securities tend to be more
volatile than higher rated securities so that these
events and any actions resulting from them may have
a greater impact on the prices and volatility of
lower rated securities than on higher rated
securities.

Inflation Risk. Inflation risk is the risk that the
value of assets or income from investment will be
worth less in the future as inflation decreases the
value of money. As inflation increases, the real
value of the Common Shares and distributions can
decline. In addition, during any periods of rising
inflation, FundPreferred share dividend rates would
likely increase, which, without a corresponding
increase in the interest rates on investments in the
Fund's portfolio, would reduce returns to Common
Shareholders. Inflation risk is mitigated to a
certain degree by the Fund's investments in Senior
Loans and other adjustable rate debt instruments,
because increases in inflation have historically
been accompanied by increases in the adjustable
rates of interest of such securities.

Deflation Risk. Deflation risk is the risk that
prices throughout the economy decline over time,
which may have an adverse effect on the market
valuation of companies, their assets and revenues.
In addition, deflation may have an adverse effect on
the creditworthiness of issuers and may make issuer
default more likely, which may result in a decline
in the value of the Fund's portfolio.

Anti-Takeover Provisions. The Fund's Declaration of
Trust (the "Declaration") includes provisions that
could limit the ability of other entities or persons
to acquire control of the Fund or convert the Fund
to open-end status. These provisions could have the
effect of depriving the Common Shareholders of
opportunities to sell their Common Shares at a
premium over the then current market price of the
Common Shares. See "Certain Provisions in the
Declaration of Trust" and "Risks--Anti-Takeover
Provisions."

SUMMARY OF FUND EXPENSES

The Annual Expenses table below assumes the issuance of FundPreferred shares
in an amount equal to 38% of the Fund's Managed Assets (after their issuance),
and shows Fund expenses as a percentage of net assets attributable to Common
Shares.

Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage of offering price)...... 4.50%
Offering Expenses Borne by the Fund (as a percentage of offering
price)/(1)(2)/................................................ .20%
Dividend Reinvestment Plan Fees................................. None/(3)/

Percentage of
Net Assets
Attributable to
Common Shares/(5)/
-----------------
Annual Expenses
Management Fees/(4)/............................................ 1.37%
Other Expenses/(4)/............................................. .32%
Interest Payments on Borrowings/(4)/............................ - %
----
Total Annual Expenses/(4)/...................................... 1.69%
Fee and Expense Reimbursement (Years 1-5)....................... (.52)%/(6)/
----
Total Net Annual Expenses (Years 1-5)/(4)/...................... 1.17%/(6)/
====

--------

(1)Nuveen has agreed to pay (i) all organizational expenses and (ii) offering
costs (other than sales load) that exceed $0.03 per Common Share.

(2)If the Fund utilizes leverage through the issuance of FundPreferred shares,
costs associated therewith will effectively be borne by the Common
Shareholders and result in a reduction of the net asset value of the Common
Shares. Assuming the issuance of FundPreferred shares in the amount equal to
38% of the Fund's Managed Assets (after issuance), the offering costs
thereof are estimated to be approximately $0.19 per Common Share (1.30% of
the estimated proceeds from the Fund's Common Share offering, after
deducting offering costs).

(3)You will be charged a $2.50 service charge and pay brokerage charges if you
direct State Street Bank and Trust Company, as agent for the Common
Shareholders (the "Plan Agent") to sell your Common Shares held in a
dividend reinvestment account.

(4)In the event the Fund, as an alternative to issuing FundPreferred shares in
an amount equal to 38% of the Fund's Managed Assets, utilizes leverage
through Borrowings in an amount equal to approximately 33 1/3% of the Fund's
Managed Assets (including the aggregate amount obtained from leverage) and
FundPreferred shares in an amount equal to approximately 4 2/3% of the
Fund's Managed Assets (including the aggregate amount obtained from
leverage), it is estimated that, as a percentage of net assets attributable
to Common Shares, the Management Fee would be 1.37%, Other Expenses would be
.32%, Interest Payments on Borrowings (assuming an interest rate of 2.00%,
which interest rate is subject to change based on prevailing market
conditions) would be 1.08%, Total Annual Expenses would be 2.77% and Total
Net Annual Expenses would be 2.25%. Based on the total net annual expenses
and in accordance with the example below, the expenses for years 1, 3, 5 and
10 would be $81, $126, $173 and $323, respectively.

(5)Stated as percentages of net assets attributable to Common Shares. Assuming
no issuance of FundPreferred shares or Borrowings, the Fund's expenses would
be estimated to be as follows:

Percentage of
Net Assets
Attributable to
Common Shares
---------------

Annual Expenses
Management Fees........................... .85%
Other Expenses............................ .20%
Interest Payments on Borrowings........... None
-----------
Total Annual Expenses..................... 1.05%
Fees and Expense Reimbursement (Years 1-5) (.32)%/(6)/
-----------
Total Net Annual Expenses (Years 1-5)..... .73%/(6)/
===========

(6)The Advisers have contractually agreed to reimburse the Fund for fees and
expenses in the amount of .32% of average daily Managed Assets for the first
5 full years of the Fund's operations, .24% of average daily Managed Assets
in year 6, .16% in year 7 and .08% in year 8. Assuming the issuance of
FundPreferred shares or Borrowings in an aggregate amount equal to 38% of
the Fund's Managed Assets (including the aggregate amount obtained from
leverage) and calculated as a percentage of net assets attributable to
Common Shares, those amounts would be .52% for the first 5 full years, .39%
in year 6, .26% in year 7 and .13% in year 8. Without the reimbursement,
"Total Annual Expenses" would be estimated to be 1.69% of average daily net
assets attributable to Common Shares (or, assuming no issuance of
FundPreferred shares or Borrowings, 1.05% of average daily net assets).

The purpose of the table above is to help you understand all fees and
expenses that you, as a Common Shareholder, would bear directly or indirectly.
The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations and assume that the Fund issues approximately
33,300,000 Common Shares. See "Management of the Fund" and "Dividend
Reinvestment Plan."

The following example illustrates the expenses (including (i) the sales load
of $45, (ii) estimated offering expenses of this offering of $2, and (iii) the
estimated FundPreferred share offering costs assuming FundPreferred shares are
issued representing 38% of the Fund's Managed Assets (after issuance) in an
aggregate amount of $13) that you would pay on a $1,000 investment in Common
Shares, assuming (1) total annual expenses of 1.17% of net assets attributable
to Common Shares in years 1 through 5, increasing to 1.69% in years 9 and 10
and (2) a 5% annual return:/(1)/

1 Year 3 Years 5 Years 10 Years/(2)/
------ ------- ------- ------------

$71 $95 $121 $216

The example should not be considered a representation of future expenses.
Actual expenses may be higher or lower.
--------
(1)The example assumes that the estimated Other Expenses set forth in the
Annual Expenses table are accurate, that fees and expenses increase as
described in note 2 below and that all dividends and distributions are
reinvested at Common Share net asset value. Actual expenses may be greater
or less than those assumed. Moreover, the Fund's actual rate of return may
be greater or less than the hypothetical 5% return shown in the example.

(2)Assumes reimbursement of fees and expenses of .24% of average daily Managed
Assets in year 6, .16% in year 7 and .08% in year 8. The Advisers have not
agreed to reimburse the Fund for any portion of its fees and expenses beyond
March 31, 2012. See footnote 6 above and "Management of the Fund--Investment
Management Agreement."

THE FUND

The Fund is a newly organized, diversified, closed-end management investment
company registered under the 1940 Act. The Fund was organized as a
Massachusetts business trust on January 15, 2004, pursuant to a Declaration
governed by the laws of The Commonwealth of Massachusetts. As a newly organized
entity, the Fund has no operating history. The Fund's principal office is
located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone
number is (800) 257-8787.

USE OF PROCEEDS

The net proceeds of the offering of Common Shares will be approximately
$ ($ if the Underwriters exercise the over-allotment option
in full) after payment of the estimated organization and offering costs. Nuveen
has agreed to pay (i) all organizational expenses and (ii) offering costs
(other than sales load) that exceed $0.03 per Common Share. The Fund will
invest the net proceeds of the offering in accordance with the Fund's
investment objective and policies as stated below. It is presently anticipated
that the Fund will be able to invest substantially all of the net proceeds in
Senior Loans and other securities that meet the Fund's investment objective and
policies within approximately two to three months after the completion of the
offering. Pending such investment, it is anticipated that the proceeds will be
invested in short-term or long-term securities issued by the U.S. government or
its agencies or instrumentalities or in high quality, short-term money market
instruments.

THE FUND'S INVESTMENTS

Investment Objective and Policies

The Fund's investment objective is to achieve a high level of current
income. There can be no assurance that the Fund's investment objective will be
achieved.

In pursuing its objective of high current income, the Fund will invest in
Senior Loans and other debt instruments that may involve significant credit
risk. As part of its efforts to manage this risk and the potential impact of
such risk on the overall value and returns of the Fund's portfolio, Symphony
will implement its credit management strategy that includes (i) a focus on
Senior Loans that are secured by specific assets, (ii) rigorous and on-going
bottom-up fundamental analysis of issuers, and (iii) overall portfolio
diversification. Symphony will perform its own credit and research analysis of
issuers, taking into consideration, among other things, the entity's financial
resources and operating history, its sensitivity to economic conditions and
trends, the ability of its management, its debt maturity schedules and
borrowing requirements, its anticipated cash flow, interest and asset coverage,
and its earnings prospects. Even with these efforts, because of the greater
degree of credit risk within the portfolio, the Fund's net asset value could
decline over time. In an effort to help preserve the Fund's overall capital,
Symphony will seek to enhance portfolio value by investing in securities it
believes to be undervalued, which, if successful, can mitigate the potential
loss of value due to credit events over time.

NIAC will be responsible for determining the Fund's overall investment
strategy and its implementation, including the use of leverage and hedging.
Symphony will be the Fund's subadviser responsible for managing the Fund's
Managed Assets. See "Management of the Fund."

Under normal market circumstances, the Fund will invest at least 80% of its
Managed Assets in secured Senior Loans and unsecured Senior Loans, which
unsecured Senior Loans will be, at the time of investment, investment grade
quality. The Fund will invest at least 65% of its Managed Assets in Senior
Loans that are secured by specific collateral. Investment in adjustable rate
instruments such as Senior

Loans is expected to minimize changes in the underlying principal value of such
investments, and therefore, the Fund's net asset value, resulting from changes
in market interest rates. The Fund may invest up to 20% of its Managed Assets
in (i) other debt securities such as investment and non-investment grade debt
securities, convertible securities and structured notes, (other than structured
notes that are designed to provide returns and risks that emulate those of
Senior Loans, which may be treated as an investment in Senior Loans for
purposes of the 80% requirement set forth above) (ii) mortgage-related and
other asset-backed securities (including collateralized loan obligations and
collateralized debt obligations), and (iii) debt securities and other
instruments issued by government, government-related or supranational issuers.
No more than 5% of the Fund's Managed Assets may be invested in each of
convertible securities, mortgage-related and other asset-backed securities, and
sovereign debt securities. The debt securities in which the Fund may invest may
have short-term, intermediate-term or long-term maturities. The Fund also may
receive warrants and equity securities issued by a Borrower or its affiliates
in connection with the Fund's other investments in such entities. The Fund may
invest a substantial portion of its Managed Assets in Senior Loans and other
debt instruments that are, at the time of investment, rated below investment
grade or unrated but judged to be of comparable quality.

Investment grade quality securities are those securities that, at the time
of investment, are (i) rated by at least one NRSRO within the four highest
grades (BBB- or Baa3 or better by S&P, Moody's or Fitch), or (ii) unrated but
judged to be of comparable quality. No more than 10% of the Fund's Managed
Assets may be invested in Senior Loans and other debt securities rated CCC+ or
Caa or below by S&P, Moody's or Fitch or that are unrated but judged to be of
comparable quality. Securities of below investment grade quality are regarded
as having predominately speculative characteristics with respect to capacity to
pay interest and repay principal, and are commonly referred to as "junk bonds."
See Appendix A in the Statement of Additional Information for a description of
security ratings.

The Fund's policy under normal circumstances of investing at least 80% of
its Managed Assets in secured Senior Loans and unsecured Senior Loans, which
unsecured Senior Loans will be, at the time of investment, investment grade
quality, is not considered to be fundamental by the Fund and can be changed
without a vote of the Common Shareholders. However, this policy may only be
changed by the Fund's Board following the provision of 60 days prior written
notice to Common Shareholders.

Under normal market circumstances, Symphony expects to maintain an average
duration of one year or less for the Fund's portfolio investments in Senior
Loans and other debt instruments. In comparison to maturity (which is the date
on which a debt instrument ceases and the issuer is obligated to repay the
principal amount), duration is a measure of the price volatility of a debt
instrument as a result of changes in market rates of interest, based on the
weighted average timing of the instrument's expected principal and interest
payments. Duration differs from maturity in that it considers a security's
yield, coupon payments, principal payments and call features in addition to the
amount of time until the security finally matures. As the value of a security
changes over time, so will its duration. Prices of securities with shorter
durations (such as the anticipated average duration of one year or less for the
Fund's portfolio investments as described above) tend to be less sensitive to
interest rate changes than securities with longer durations. In general, the
value of a portfolio of securities with a shorter duration can be expected to
be less sensitive to interest rate changes than a portfolio with a longer
duration.

The Fund may invest up to 20% of its Managed Assets in securities of
non-U.S. issuers that are U.S. dollar or non-U.S. dollar denominated.
Initially, the Fund does not intend to invest in non-U.S. dollar denominated
securities. The Fund may not invest more than 20% of its Managed Assets in
securities from an industry which (for the purposes of this Prospectus)
generally refers to the classification of companies in the same or similar
lines of business such as the automotive, textiles and apparel, hotels, media
production and consumer retailing industries. The Fund may invest more than 20%
of its Managed Assets in sectors which (for the purposes of this Prospectus)
generally refers to broader classifications of industries, such as the consumer
discretionary sector which includes the automotive, textiles and

apparel, hotels, media production and consumer retailing industries, provided
the Fund's investment in a particular industry within the sector does not
exceed the industry limitation. In addition, the Fund may invest up to 50% of
its Managed Assets in securities and other instruments that, at the time of
investment, are illiquid (i.e., securities that are not readily marketable).

For a more complete discussion of the Fund's initial portfolio composition,
see "--Portfolio Composition and Other Information."

The Fund cannot change its investment objective without the approval of the
holders of a "majority of the outstanding" Common Shares and FundPreferred
shares voting together as a single class, and of the holders of a "majority of
the outstanding" FundPreferred shares voting as a separate class. When used
with respect to particular shares of the Fund, a "majority of the outstanding"
shares means (i) 67% or more of the shares present at a meeting, if the holders
of more than 50% of the shares are present or represented by proxy or (ii) more
than 50% of the shares, whichever is less. See "Description of
Shares--FundPreferred Shares--Voting Rights" and the Statement of Additional
Information under "Description of Shares--FundPreferred Shares--Voting Rights"
for additional information with respect to the voting rights of holders of
FundPreferred shares.

Overall Fund Management

NIAC is the Fund's investment adviser, responsible for the Fund's overall
investment strategy and its implementation.

NIAC will oversee Symphony in its management of the Fund's portfolio. This
oversight will include ongoing evaluation of Symphony's investment performance,
portfolio allocations, quality of investment process and personnel, compliance
with Fund and regulatory guidelines, trade allocation and execution, and other
factors.

NIAC will also oversee the Fund's use of leverage, and efforts to minimize
the costs and mitigate the risks to Common Shareholders associated with using
financial leverage. See "Use of Leverage" and "Hedging Transactions" below.
This effort may involve making adjustments to investment policies in an attempt
to minimize costs and mitigate risks.

Symphony Investment Philosophy and Process

Investment Philosophy. Symphony believes that managing risk, particularly
for volatile assets such as Senior Loans and other forms of high yield debt, is
of paramount importance. Symphony believes that a combination of fundamental
credit analysis and valuation information that is available from the equity
markets provide a means of identifying what it believes to be superior
investment candidates. Additionally, Symphony focuses primarily on liquid
securities to help ensure that exit strategies remain available under different
market conditions.

Investment Process. In identifying Senior Loans and other securities for
potential purchase, Symphony combines quantitative screening and fundamental
and relative value analysis. Symphony screens the identified investment
candidates for liquidity constraints and favorable capital structures. The
investment team then performs rigorous bottom-up fundamental analysis to
identify investments with sound industry fundamentals, cash flow sufficiency
and asset quality. The final portfolio is constructed using risk management and
monitoring systems to ensure proper diversification.

Portfolio Composition and Other Information

The Fund's portfolio will be composed principally of the following
investments. A more detailed description of the Fund's investment policies and
restrictions and more detailed information about the Fund's portfolio
investments are contained in the Statement of Additional Information.

Senior Loans. The Fund may invest (i) in Senior Loans made by banks or
other financial institutions to Borrowers, (ii) assignments of such interests
in Senior Loans or (iii) participation interests in Senior Loans. Senior Loans
hold the most senior position in the capital structure of a Borrower, are
typically secured with specific collateral and have a claim on the assets
and/or stock of the Borrower that is senior to that held by subordinated debt
holders and stockholders of the Borrower. The capital structure of a Borrower
may include Senior Loans, senior and junior subordinated debt, preferred stock
and common stock issued by the Borrower, typically in descending order of
seniority with respect to claims on the Borrower's assets. The proceeds of
Senior Loans primarily are used by Borrowers to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, refinancings,
internal growth and for other corporate purposes. A Senior Loan is typically
originated, negotiated and structured by a U.S. or non-U.S. commercial bank,
insurance company, finance company or other financial institution ("Agent") for
a lending syndicate of financial institutions which typically includes the
Agent ("Lenders"). The Agent typically administers and enforces the Senior Loan
on behalf of the other Lenders in the syndicate. In addition, an institution,
typically but not always the Agent, holds any collateral on behalf of the
Lenders. The Fund normally will rely primarily on the Agent to collect
principal of and interest on a Senior Loan. Also, the Fund usually will rely on
the Agent to monitor compliance by the Borrower with the restrictive covenants
in a loan agreement.

Senior Loans in which the Fund will invest generally pay interest at rates
that are redetermined periodically at short-term intervals by reference to a
base lending rate, plus a premium. Senior Loans typically have rates of
interest that are redetermined either daily, monthly, quarterly or
semi-annually by reference to a base lending rate plus a premium or credit
spread. These base lending rates are primarily LIBOR, and secondarily the prime
rate offered by one or more major U.S. banks (the "Prime Rate") and the
certificate of deposit ("CD") rate or other base lending rates used by
commercial lenders. As adjustable rate loans, the frequency of how often a
Senior Loan resets its interest rate will impact how closely such Senior Loans
track current market interest rates. The Senior Loans held by the Fund will
have a dollar-weighted average period until the next interest rate adjustment
of approximately 90 days or less. As a result, as short-term interest rates
increase, interest payable to the Fund from its investments in Senior Loans
should increase, and as short-term interest rates decrease, interest payable to
the Fund from its investments in Senior Loans should decrease. The Fund may
utilize derivative instruments to shorten the effective interest rate
redetermination period of Senior Loans in its portfolio. Senior Loans typically
have a stated term of between one and eight years. In the experience of
Symphony, the average life of Senior Loans in recent years has been
approximately two years because of prepayments.

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

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

The Fund may purchase and retain in its portfolio Senior Loans where the
Borrowers have experienced, or may be perceived to be likely to experience,
credit problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, the Fund may determine or be required to accept equity securities
or junior debt securities in exchange for all or a portion of a Senior Loan.
See "--Non-Senior Loan Investments--Warrants and Equity Securities."

Non-Senior Loan Investments. The Fund may invest in debt instruments and
other securities as described below:

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

Structured Notes. The Fund may utilize structured notes and similar
instruments for investment purposes and also for hedging purposes. Structured
notes are privately negotiated debt obligations or economically equivalent
instruments where the principal and/or interest is determined by reference to
the performance of a benchmark asset, market or interest rate (an "embedded
index"), such as selected securities or loans, an index of securities or loans,
or specified interest rates, or the differential performance of two assets or
markets. The interest and/or principal payments that may be made on a
structured product may vary widely, depending on a variety of factors,
including the volatility of the embedded index and the effect of changes in the
embedded index on principal and/or interest payments. If the Fund invests in
structured notes that are designed to provide returns and risks that emulate
those of Senior Loans, the Fund may treat the value of (or, if applicable, the
notional amount of) such investment as an investment in Senior Loans for
purposes of determining compliance with the requirement set forth above that at
least 80% of the Fund's Managed Assets be invested under normal market
circumstances in Senior Loans, except to the extent that the value (or notional
amount) of such investments exceeds 5% of the Fund's Managed Assets. Any such
investment amounts that exceed 5% of the Fund's Managed Assets will be treated
as a type of "other debt instruments" which, in the aggregate, are limited to
20% of the Fund's Managed Assets.

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

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

Commercial Paper. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by corporations such as banks or bank
holding companies and finance companies. The rate of return on commercial paper
may be linked or indexed to the level of exchange rates between the U.S. dollar
and a foreign currency or currencies.

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

Repurchase Agreements. The Fund may enter into repurchase agreements (the
purchase of a security coupled with an agreement to resell that security at a
higher price) with respect to its permitted investments. The Fund's repurchase
agreements will provide that the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase price,
including any accrued interest earned on the agreement, and will be marked to
market daily.

Other Securities. The Fund may invest in convertible securities,
mortgage-related and other asset-backed securities, and sovereign debt
securities, each of which are discussed in more detail in the Statement of
Additional Information.

Securities Issued by Non-U.S. Issuers. The Fund may invest up to 20% of its
Managed Assets in securities of non-U.S. issuers that are U.S. dollar or
non-U.S. dollar denominated. Initially, the Fund does not intend to invest in
non-U.S. dollar denominated securities. The Fund's Managed Assets to be
invested in Senior Loans and other debt instruments of non-U.S. issuers may
include debt securities of issuers located, or conducting their business in,
emerging markets countries. Initially, the Fund does not intend to invest in
securities of emerging market issuers. The Fund may invest in any region of the
world and invest in companies operating in developed countries such as Canada,
Japan, Australia, New Zealand and most Western European countries. As used in
this Prospectus, an "emerging market" country is any country determined to have
an emerging markets economy, considering, among other things, factors such as
whether the country has a low-to-middle-income economy according to the World
Bank or its related organizations, the country's credit rating, its political
and economic stability and the development of its financial and capital
markets. These countries generally include countries located in Latin America,
the Caribbean, Asia, Africa, the Middle East and Eastern and Central Europe.

Zero Coupon Bonds. The Fund's investments in debt securities may be in the
form of a zero coupon bond. A zero coupon bond is a bond that does not pay
interest for the entire life of the obligation. Zero coupon bonds allow an
issuer to avoid or delay the need to generate cash to meet current interest
payments and, as a result, may involve greater credit risk than bonds that pay
interest currently. The Fund would be required to distribute the income on any
of these instruments as it accrues, even though the Fund will not receive any
of the income on a current basis. Thus, the Fund may have to sell other

investments, including when it may not be advisable to do so, to make income
distributions to its Common Shareholders.

When-Issued and Delayed Delivery Transactions. The Fund may buy and sell
securities on a when-issued or delayed delivery basis, making payment or taking
delivery at a later date, normally within 15 to 45 days of the trade date. This
type of transaction may involve an element of risk because no interest accrues
on the securities prior to settlement and, because securities are subject to
market fluctuations, the value of the securities at time of delivery may be
less (or more) than their cost. A separate account of the Fund will be
established with its custodian consisting of cash equivalents or liquid
securities having a market value at all times at least equal to the amount of
any delayed payment commitment.

No Inverse Floating Rate Securities. The Fund will not invest in inverse
floating rate securities, which are securities that pay interest at rates that
vary inversely with changes in prevailing interest rates and which represent a
leveraged investment in an underlying security.

Hedging Transactions. The Fund may use derivatives or other transactions
for the purpose of hedging the portfolio's exposure to high yield credit risk,
foreign currency exchange rate risk and the risk of increases in interest
rates. The specific derivative instruments to be used, or other transactions to
be entered into, each for hedging purposes may include the purchase or sale of
futures contracts on securities, credit-linked notes, securities indices, other
indices or other financial instruments; options on futures contracts;
exchange-traded and over-the-counter options on securities or indices;
index-linked securities; swaps; and currency exchange transactions. Some, but
not all, of the derivative instruments may be traded and listed on an exchange.
The positions in derivatives will be marked-to- market daily at the closing
price established on the exchange or at a fair value. See "Risks--Hedging
Risk," "Hedging Transactions," "Risks--Counterparty Risk" and "Other Investment
Policies and Techniques" in the Fund's Statement of Additional Information for
further information on hedging transactions.

Illiquid Securities. The Fund may invest up to 50% of its Managed Assets
in securities and other instruments that, at the time of investment, are
illiquid (i.e., securities that are not readily marketable). For this purpose,
illiquid securities may include, but are not limited to, restricted securities
(securities the disposition of which is restricted under the federal securities
laws), securities that may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"), that are deemed to
be illiquid, and certain repurchase agreements. The Board of Trustees or its
delegate has the ultimate authority to determine which securities are liquid or
illiquid for purposes of this 50% limitation. The Board of Trustees has
delegated to the Advisers the day-to-day determination of the illiquidity of
any security held by the Fund, although it has retained oversight and ultimate
responsibility for such determinations. No definitive liquidity criteria are
used. The Board of Trustees has directed the Advisers when making liquidity
determinations to look for such factors as (i) the nature of the market for a
security (including the institutional private resale market; the frequency of
trades and quotes for the security; the number of dealers willing to purchase
or sell the security; the amount of time normally needed to dispose of the
security; and the method of soliciting offers and the mechanics of transfer),
(ii) the terms of certain securities or other instruments allowing for the
disposition to a third party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), and (iii) other relevant factors.

conditions were to develop, the Fund might obtain a less favorable price than
that which prevailed when it decided to sell. Illiquid securities will be
priced at fair value as determined in good faith by the Board of Trustees or
its delegate. If, through the appreciation of illiquid securities or the
depreciation of liquid securities, the Fund should be in a position where more
than 50% of the value of its Managed Assets is invested in illiquid securities,
including restricted securities that are not readily marketable, the Fund will
take such steps as are deemed advisable, if any, to protect liquidity.

Short-Term/Long-Term Debt Securities; Defensive Position; Invest-Up
Period. During temporary defensive periods or in order to keep the Fund's
cash fully invested, including the period during which the net proceeds of the
offering of Common Shares or FundPreferred shares are being invested, the Fund
may deviate from its investment objective and invest all or any portion of its
assets in investment grade debt securities, including obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities. In such
a case, the Fund may not pursue or achieve its investment objective. In
addition, upon Symphony's recommendation that a change would be in the best
interests of the Fund and upon concurrence by NIAC, and subject to approval by
the Board of Trustees of the Fund, Symphony may deviate from its investment
guidelines discussed herein.

Other Investment Companies. The Fund may invest up to 10% of its Managed
Assets in securities of other open- or closed-end investment companies that
invest primarily in securities of the types in which the Fund may invest
directly. In addition, the Fund may invest a portion of its Managed Assets in
pooled investment vehicles (other than investment companies) that invest
primarily in securities of the types in which the Fund may invest directly. The
Fund generally expects that it may invest in other investment companies and/or
pooled investment vehicles either during periods when it has large amounts of
uninvested cash, such as the period shortly after the Fund receives the
proceeds of the offering of its Common Shares or FundPreferred shares and/or
Borrowings, or during periods when there is a shortage of attractive securities
of the types in which the Fund may invest in directly available in the market.
As an investor in an investment company, the Fund will bear its ratable share
of that investment company's expenses, and would remain subject to payment of
the Fund's advisory and administrative fees with respect to assets so invested.
Common Shareholders would therefore be subject to duplicative expenses to the
extent the Fund invests in other investment companies. Symphony will take
expenses into account when evaluating the investment merits of an investment in
the investment company relative to available securities of the types in which
the Fund may invest directly. In addition, the securities of other investment
companies also may be leveraged and therefore will be subject to the same
leverage risks described herein. As described in the section entitled
"Risks--Leverage Risk," the net asset value and market value of leveraged
shares will be more volatile and the yield to shareholders will tend to
fluctuate more than the yield generated by unleveraged shares. The Fund will
treat its investments in such investment companies as investments in Senior
Loans for all purposes, such as for purposes of determining compliance with the
requirement set forth above that at least 80% of the Fund's Managed Assets be
invested under normal market circumstances in Senior Loans.

Lending of Portfolio Securities. The Fund may lend its portfolio securities
to broker-dealers and banks. Any such loan must be continuously secured by
collateral in cash or cash equivalents maintained on a current basis in an
amount at least equal to the market value of the securities loaned by the Fund.
The Fund would continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned through payments from the borrower,
although such amounts received from the borrower would not be eligible to be
treated as tax-advantaged dividends. The Fund would also receive an additional
return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund may pay reasonable fees to persons unaffiliated with the
Fund for services in arranging these loans. The Fund would have the right to
call the loan and obtain the securities loaned at any time on notice of not
more than five business days. The Fund would not have the right to vote the
securities during the existence of the loan but would call the loan to permit
voting of the securities, if, in an Adviser's

judgment, a material event requiring a shareholder vote would otherwise occur
before the loan was repaid. In the event of bankruptcy or other default of the
borrower, the Fund could experience both delays in liquidating the loan
collateral or recovering the loaned securities and losses, including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.

Portfolio Turnover. The Fund may engage in portfolio trading when
considered appropriate, but short-term trading will not be used as the primary
means of achieving the Fund's investment objective. Although the Fund cannot
accurately predict its annual portfolio turnover rate, it is not expected to
exceed 50% under normal circumstances. However, there are no limits on the rate
of portfolio turnover, and investments may be sold without regard to length of
time held when, in the opinion of Symphony, investment considerations warrant
such action. A higher portfolio turnover rate results in correspondingly
greater brokerage commissions and other transactional expenses that are borne
by the Fund. High portfolio turnover may result in the realization of net
short-term capital gains by the Fund which, when distributed to shareholders,
will be taxable as ordinary income. See "Tax Matters."

USE OF LEVERAGE

Following the completion of this offering, the Fund intends to seek to
increase Common Share net income by issuing FundPreferred shares and/or
Borrowings and investing the proceeds in the manner described herein. The
Fund's Board of Trustees has authorized an offering of FundPreferred shares
representing approximately 38% of the Fund's Managed Assets that the Fund
expects will likely be issued within approximately one and one-half to two
months after completion of the offering of Common Shares. The amount of
outstanding FundPreferred shares may vary with prevailing market or economic
conditions. The timing and terms of any leverage transactions will be
determined by the Fund's Board of Trustees. Unless and until the Fund uses
leverage, this section will not apply.

Because both Senior Loans and the Fund's FundPreferred shares and Borrowings
generally pay interest or dividends based on short-term market interest rates,
the Fund's investments in Senior Loans may potentially offset the leverage
risks borne by the Fund relating to the fluctuations on Common Share income due
to variations in the FundPreferred share dividend rate and/or the interest rate
on Borrowings.

The Fund intends to apply for ratings from a NRSRO (most likely S&P, Moody's
and/or Fitch) for any FundPreferred shares and commercial paper or notes it may
issue. The Fund anticipates that any FundPreferred shares that it intends to
issue initially would be given ratings of at least AA/Aa by such NRSROs as S&P
("AA"), Moody's ("Aa") or Fitch ("AA").

FundPreferred shares and Borrowings will each have seniority over the Common
Shares. The issuance of FundPreferred shares and/or use of Borrowings will
leverage the Common Shares. There is no assurance that the Fund's leveraging
strategy will be successful.

Changes in the value of the Fund's portfolio investments, including
investments purchased with the proceeds from the issuance of FundPreferred
shares or Borrowings, will be borne entirely by the Common Shareholders. If
there is a net decrease (or increase) in the value of the Fund's investment
portfolio, the leverage will decrease (or increase) the net asset value per
Common Share to a greater extent than if the Fund were not leveraged. During
periods in which the Fund uses leverage, the fees paid to NIAC (and to
Symphony) for advisory services will be higher than if the Fund did not use
leverage because the fees paid will be calculated on the basis of the Fund's
Managed Assets, which includes the proceeds from the issuance of FundPreferred
shares and Borrowings.

Under the 1940 Act, the Fund is not permitted to issue its own preferred
shares unless immediately after the issuance the value of the Fund's total net
assets is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the Fund's total
assets less liabilities other than borrowings). In addition, the Fund is not
permitted to declare any cash dividend or other distribution on its Common
Shares unless, at the time of such declaration, the value of the Fund's total
assets less liabilities other than borrowings is at least 200% of such
liquidation value. If FundPreferred shares are issued, the Fund intends, to the
extent possible, to purchase or redeem FundPreferred shares from time to time
to the extent necessary in order to maintain coverage of any FundPreferred
shares of at least 200%. If FundPreferred shares are outstanding, two of the
Fund's trustees will be elected by the holders of FundPreferred shares, voting
separately as a class. The remaining trustees of the Fund will be elected by
holders of Common Shares and FundPreferred shares voting together as a single
class. In the event the Fund failed to pay dividends on FundPreferred shares
for two years, FundPreferred shares would be entitled to elect a majority of
the trustees of the Fund. The failure to pay dividends or make distributions
could result in the Fund ceasing to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), which could
have a material adverse effect on the value of the Common Shares.

Under the 1940 Act, the Fund generally is not permitted to issue commercial
paper or notes or borrow unless immediately after the borrowing or commercial
paper or note issuance the value of the

Fund's total assets less liabilities other than the principal amount
represented by commercial paper, notes or borrowings, is at least 300% of such
principal amount. In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Common Shares unless, at the time of such
declaration, the value of the Fund's total assets, less liabilities other than
the principal amount represented by commercial paper, notes or borrowings, is
at least 300% of such principal amount. If the Fund borrows, the Fund intends,
to the extent possible, to maintain the required asset coverage. Failure to
maintain certain asset coverage requirements could result in an event of
default and entitle the debt holders to elect a majority of the Board of
Trustees.

The Fund may be subject to certain restrictions imposed by either guidelines
of one or more NRSROs that may issue ratings for FundPreferred shares,
commercial paper or notes, or, if the Fund borrows from a lender, by the
lender. These guidelines may impose asset coverage or portfolio composition
requirements that are more stringent than those imposed on the Fund by the 1940
Act. It is not anticipated that these covenants or guidelines will impede the
Advisers from managing the Fund's portfolio in accordance with the Fund's
investment objective and policies. In addition to other considerations, to the
extent that the Fund believes that the covenants and guidelines required by the
NRSROs or lenders would impede its ability to meet its investment objective, or
if the Fund is unable to obtain the rating on FundPreferred shares (expected to
be at least AA/Aa), the Fund will not issue FundPreferred shares.

Assuming the utilization of leverage by issuing FundPreferred shares in an
amount currently anticipated to represent approximately 38% of the Fund's
Managed Assets, at a dividend or payment rate of 2.00% payable on such
leverage, the income generated by the Fund's portfolio (net of non-leverage
expenses) must exceed .76% in order to cover such dividend payments or payment
rates and other expenses specifically related to FundPreferred shares. Of
course, these numbers are merely estimates, used for illustration. Actual
dividend or payment rates may vary frequently and may be significantly higher
or lower than the rate estimated above.

The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on Common Share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of investments held in
the Fund's portfolio net of expenses) of -10%, -5%, 0%, 5% and 10%. These
assumed investment portfolio returns are hypothetical figures and are not
necessarily indicative of the investment portfolio returns expected to be
experienced by the Fund. The table further reflects the issuance of
FundPreferred shares representing 38% of the Fund's Managed Assets, and the
Fund's currently projected annual dividend rate or payment rate set by an
interest rate transaction of 2.00%. See "Risks--Leverage Risk."

Assumed Portfolio Total Return (Net of
Expenses)........................... (10.00)% (5.00)% 0.00 % 5.00% 10.00%
Common Share Total Return............. (17.35)% (9.29)% (1.23)% 6.84% 14.90%

Common Share total return is comprised of two elements -- the Common Share
dividends paid by the Fund (the amount of which is largely determined by the
net investment income of the Fund after paying dividends on FundPreferred
shares) and gains or losses on the value of the securities the Fund owns. As
required by the Securities and Exchange Commission rules, the table assumes
that the Fund is more likely to suffer capital losses than to enjoy capital
appreciation.

HEDGING TRANSACTIONS

The Fund may use derivatives or other transactions solely for the purpose of
hedging a portion of its portfolio holdings or in connection with the Fund's
anticipated use of leverage through its sale of FundPreferred shares or
Borrowings.

Portfolio Hedging Transactions. The Fund may use derivatives or other
transactions solely for purposes of hedging the portfolio's exposure to high
yield credit risk, foreign currency exchange rate risk and the risk of
increases in interest rates. The specific derivative instruments to be used, or
other transactions to be entered into, each for hedging purposes, may include
the purchase or sale of futures contracts on securities, credit-linked notes,
securities indices, other indices or other financial instruments; options on
futures contracts; exchange-traded and over-the-counter options on securities
or indices; index-linked securities; swaps; and currency exchange transactions.
Some, but not all, of the derivative instruments may be traded and listed on an
exchange. The positions in derivatives will be marked-to-market daily at the
closing price established on the relevant exchange or at a fair value. For a
complete discussion of these derivative securities, see the Statement of
Additional Information.

There may be an imperfect correlation between changes in the value of the
Fund's portfolio holdings and hedging positions entered into by the Fund, which
may prevent the Fund from achieving the intended hedge or expose the Fund to
risk of loss. In addition, the Fund's success in using hedging instruments is
subject to Symphony's ability to predict correctly changes in the relationships
of such hedge instruments to the Fund's portfolio holdings or other factors,
and there can be no assurance that Symphony's judgment in this respect will be
correct. Consequently, the use of hedging transactions might result in a poorer
overall performance for the Fund, whether or not adjusted for risk, than if the
Fund had not hedged its portfolio holdings. In addition, there can be no
assurance that the Fund will enter into hedging or other transactions at times
or under circumstances in which it which it would be advisable to do so. See
"Risks--Hedging Risk."

Futures Contracts and Options on Futures Contracts. The Fund's use of
derivative instruments may include (i) U.S. Treasury security or U.S.
Government Agency security futures contracts and (ii) options on U.S. Treasury
security or U.S. Government Agency security futures contracts. All such
instruments must be traded and listed on an exchange. U.S. Treasury and U.S.
Government Agency futures contracts are standardized contracts for the future
delivery of a U.S. Treasury Bond or U.S. Treasury Note or a U.S. Government
Agency security or their equivalent at a future date at a price set at the time
of the contract. An option on a U.S. Treasury or U.S. Government Agency futures
contract, as contrasted with the direct investment in such a contract, gives
the purchaser of the option the right, in return for the premium paid, to
assume a position in a U.S. Treasury or U.S. Government Agency futures contract
at a specified exercise price at any time on or before the expiration date of
the option. Upon exercise of an option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's future margin account,
which represents the amount by which the market price of the futures contract
exceeds the exercise price of the option on the futures contract.

The Fund may purchase and sell various other kinds of financial futures
contracts and options thereon. Futures contracts may be based on various debt
securities and securities indices (such as the Municipal Bond Index traded on
the Chicago Board of Trade). Such transactions involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices, which
may exceed the Fund's initial investment in these contracts. The Fund will only
purchase or sell futures contracts or related options in compliance with the
rules of the Commodity Futures Trading Commission. These transactions involve
transaction costs. There can be no assurance that the Fund's use of futures
will be advantageous to the Fund. Guidelines established by one or more NRSROs
that rate any FundPreferred shares issued by the Fund may limit use of these
transactions.

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

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

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

Interest Rate Swaps. The Fund will enter into interest rate and total
return swaps only on a net basis, i.e., the two payment streams are netted out,
with the Fund receiving or paying, as the case may be, only the net amount of
the two payments. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest (e.g.,
an exchange of fixed rate payments for floating rate payments). The Fund will
only enter into interest rate swaps on a net basis. If the other party to an
interest rate swap defaults, the Fund's risk of loss consists of the net amount
of payments that the Fund is contractually entitled to receive. The net amount
of the excess, if any, of the Fund's obligations over its entitlements will be
maintained in a segregated account by the Fund's custodian. The Fund will not
enter into any interest rate swap unless the claims-paying ability of the other
party thereto is considered to be investment grade by the Advisers. If there is
a default by the other party to such a transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction.
These instruments are traded in the over-the-counter market.

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

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

Currency Exchange Transactions. The Fund may enter into currency exchange
transactions to hedge the Fund's exposure to foreign currency exchange rate
risk in the event the Fund invests in non-U.S. dollar denominated securities of
non-U.S. issuers as described in this Prospectus. The Fund's currency
transactions will be limited to portfolio hedging involving portfolio
positions. Portfolio hedging is the use of a forward contract with respect to a
portfolio security position denominated or quoted in a particular currency. A
forward contract is an agreement to purchase or sell a specified currency at a
specified future date (or within a specified time period) and price set at the
time of the contract. Forward contracts are usually entered into with banks,
foreign exchange dealers or broker-dealers, are not exchange-traded, and are
usually for less than one year, but may be renewed.

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

Other Hedging Transactions. The Fund also may invest in relatively new
instruments without a significant trading history for purposes of hedging the
Fund's portfolio risks. See "Other Investment Policies and Techniques" in the
Fund's Statement of Additional Information for further information on hedging
transactions.

Interest Rate Transactions. The Fund expects that the Fund's portfolio
investments in Senior Loans and other adjustable rate debt instruments will
serve as a hedge against the risk that Common Share net income and/or returns
may decrease due to rising market dividend or interest rates on FundPreferred
shares or Borrowings.

RISKS

The Fund is a diversified, closed-end management investment company designed
primarily as a long-term investment and not as a trading vehicle. The Fund is
not intended to be a complete investment program and, due to the uncertainty
inherent in all investments, there can be no assurance that the Fund will
achieve its investment objective. Your Common Shares at any point in time may
be worth less than your original investment, even after taking into account the
reinvestment of Fund dividends and distributions.

No Prior History

The Fund is a newly organized, diversified, closed-end management investment
company and has no operating history.

Investment and Market Risk

An investment in the Fund's Common Shares is subject to investment risk,
including the possible loss of the entire principal amount that you invest.
Your investment in Common Shares represents an indirect investment in the
securities owned by the Fund, most of which are not traded on a national
securities exchange, NASDAQ or in the over-the-counter markets. The value of
these securities, like other market investments, may move up or down, sometimes
rapidly and unpredictably.

Your Common Shares at any point in time may be worth less than your original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. The Fund likely will use leverage, which magnifies the
securities market risks described above. See "Use of Leverage."

Senior Loan Risks

Borrower Credit Risk. Senior Loans and other adjustable rate debt
instruments are subject to the risk of non-payment of scheduled interest or
principal. Such non-payment would result in a reduction of income to the Fund,
a reduction in the value of the investment and a potential decrease in the net
asset value of the Fund. Although under normal circumstances at least 65% of
the Fund's Managed Assets will be invested in Senior Loans that are secured by
specific collateral, there can be no assurance that the liquidation of any
collateral securing a Senior Loan would satisfy the Borrower's obligation in
the event of non-payment of scheduled interest or principal payments, or that
such collateral could be readily liquidated. In the event of bankruptcy of a
Borrower, the Fund could experience delays or limitations with respect to its
ability to realize the benefits of the collateral securing a Senior Loan. The
collateral securing a Senior Loan may lose all or substantially all of its
value in the event of bankruptcy of a Borrower. Some Senior Loans are subject
to the risk that a court, pursuant to fraudulent conveyance or other similar
laws, could subordinate such Senior Loans to presently existing or future
indebtedness of the Borrower or take other action detrimental to the holders of
Senior Loans, including, in certain circumstances, invalidating such Senior
Loans or causing interest previously paid to be refunded to the Borrower. If
interest were required to be refunded, it would negatively affect the Fund's
performance.

In evaluating the creditworthiness of Borrowers, Symphony may consider, and
may rely in part, on analyses performed by others. Borrowers may have
outstanding debt obligations that are rated below investment grade by a NRSRO.
Many of the Senior Loans in the Fund will have been assigned ratings below
investment grade quality. Because of the protective features of Senior Loans,
Symphony believes that Senior Loans tend to have more favorable loss recovery
rates as compared to more junior types of below investment grade debt
obligations. Symphony does not view ratings as the determinative factor in its
investment decisions and relies more upon its credit analysis abilities than
upon ratings.

The Fund is subject to the same inherent risks described above with respect
to issuers of other debt instruments in which the Fund may invest, although it
is not expected that these debt instruments will be secured by collateral.

Senior Loan Interest Rate Risk. When interest rates decline, the value of a
fund invested in fixed rate obligations can be expected to rise. Conversely,
when interest rates rise, the value of a fund invested in fixed rate
obligations can be expected to decline. Although changes in prevailing interest
rates can be expected to cause some fluctuations in the value of Senior Loans
(due to the fact that adjustable rates on Senior Loans only reset
periodically), the value of Senior Loans and other adjustable rate debt
instruments is substantially less sensitive to changes in market interest rates
than fixed rate instruments. As a result, the Advisers expect the Fund's policy
of investing at least 80% of its Managed Assets in Senior Loans will make the
Fund less volatile and its net asset value less sensitive to changes in market
interest rates than if the Fund invested exclusively in fixed rate obligations.
Similarly, because interest rates on most Senior Loans and other adjustable
rate instruments typically only reset periodically (e.g., monthly or
quarterly), a sudden and significant increase in market interest rates may
cause a decline in the value of these investments and in the Fund's net asset
value. Other factors (including, but not limited to, rating downgrades, credit
deterioration, a large downward movement in stock prices, a disparity in supply
and demand of certain Senior Loans and other securities or market conditions
that reduce liquidity) can reduce the value of Senior Loans and other debt
obligations, impairing the Fund's net asset value.

Risks in Senior Loan Valuation. The Fund uses an independent pricing
service to value most Senior Loans and other debt securities at their market
value or at a fair value determined by the independent pricing service. The
Fund will use the fair value method to value loans or other securities if the
independent pricing service is unable to provide a market or fair value for
them or if the market or fair value provided by the independent pricing service
is deemed unreliable, or if events occurring after the close of a securities
market and before the Fund values its Managed Assets would materially affect
net asset value. A security that is fair valued may be valued at a price higher
or lower than actual market quotations or the value determined by other funds
using their own fair valuation procedures. Because non-U.S. securities may
trade on days when Common Shares are not priced, net asset value can change at
times when Common Shares cannot be sold.

Agent Risk. A financial institution's employment as an Agent under a Senior
Loan might be terminated in the event that it fails to observe a requisite
standard of care or becomes insolvent. A successor Agent would generally be
appointed to replace the terminated Agent, and assets held by the Agent under
the loan agreement would likely remain available to holders of such
indebtedness. However, if assets held by the terminated Agent for the benefit
of the Fund were determined to be subject to the claims of the Agent's general
creditors, the Fund might incur certain costs and delays in realizing payment
on a Senior Loan or loan participation and could suffer a loss of principal
and/or interest. In situations involving other interposed financial
institutions (e.g., an insurance company or government agency) similar risks
may arise.

Participation Risk. The Fund also may purchase a participation interest in
a Senior Loan and by doing so acquire some or all of the interest of a bank or
other lending institution in a Senior Loan to a Borrower. A participation
typically will result in the Fund having a contractual relationship only with
the Lender, not the Borrower. As a result, the Fund assumes the credit risk of
the Lender selling the participation in addition to the credit risk of the
Borrower. By purchasing a participation, the Fund will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the participation and only upon receipt by the
Lender of the payments from the Borrower. In the event of insolvency or
bankruptcy of the Lender selling the participation, the Fund may be treated as
a general creditor of the Lender and may not have a senior claim to the
Lender's interest in the Senior Loan. If the Fund only acquires a participation
in the loan made by a third party, the Fund may not be able to control the
exercise of any remedies that the Lender would have under the Senior

Loan. Such third party participation arrangements are designed to give Senior
Loan investors preferential treatment over high yield investors in the event of
a deterioration in the credit quality of the issuer. Even when these
arrangements exist, however, there can be no assurance that the principal and
interest owed on the Senior Loan will be repaid in full.

Prepayment Risk. During periods of declining interest rates or for other
purposes, Borrowers may exercise their option to prepay principal earlier than
scheduled, forcing the Fund to reinvest in lower yielding securities. This is
known as call or prepayment risk. In addition, below investment grade
securities frequently have call features that allow an issuer to redeem a
security at dates prior to its stated maturity at a specified price (typically
greater than par) only if certain prescribed conditions are met (commonly
referred to as call protection). An issuer may redeem a lower grade security
if, for example, the issuer can refinance the debt at a lower cost due to
declining interest rates or an improvement in the credit standing of the
issuer. Senior Loans typically have no such call protection. For premium bonds
(bonds acquired at prices that exceed their par or principal value) purchased
by the Fund, prepayment risk may be increased.

Other Risks Associated with Senior Loans. Many Senior Loans in which the
Fund will invest may not be rated by a NRSRO, will not be registered with the
Securities and Exchange Commission or any state securities commission and will
not be listed on any national securities exchange. In addition, the amount of
public information available with respect to Senior Loans generally may be less
extensive than that available for registered or exchange listed securities.
Economic and other events (whether real or perceived) can reduce the demand for
certain Senior Loans or Senior Loans generally, which may reduce market prices
and cause the Fund's net asset value per share to fall. The frequency and
magnitude of such changes cannot be predicted. No active trading market may
exist for some Senior Loans and some Senior Loans may be subject to
restrictions on resale. A secondary market may be subject to irregular trading
activity, wide bid/ask spreads and extended trade settlement periods, which may
impair the ability to realize full value and thus cause a material decline in
the Fund's net asset value. During periods of limited supply and liquidity of
Senior Loans, the Fund's yield may be lower.

Below Investment Grade Risk

The Fund may purchase Senior Loans and other debt instruments that are rated
below investment grade or that are unrated but judged to be of comparable
quality by Symphony. No more than 10% of the Fund's Managed Assets may be
invested in securities rated CCC+ or Caa or below by S&P, Moody's or Fitch or
that are unrated but judged to be of comparable quality. Securities of below
investment grade quality are regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal,
and are commonly referred to as "junk bonds." Issuers of lower grade securities
may be highly leveraged and may not have available to them more traditional
methods of financing. The prices of these lower grade securities are typically
more sensitive to negative developments, such as a decline in the issuer's
revenues or a general economic downturn, than are the prices of higher grade
securities. The secondary market for lower grade securities, including some
Senior Loans, may not be as liquid as the secondary market for more highly
rated securities, a factor which may have an adverse effect on the Fund's
ability to dispose of a particular security. There are fewer dealers in the
market for lower grade securities than for investment grade obligations. The
prices quoted by different dealers for lower grade securities may vary
significantly and the spread between the bid and ask price for such securities
is generally much larger than for higher quality instruments. Under adverse
market or economic conditions, the secondary market for lower grade securities
could contract further, independent of any specific adverse changes in the
condition of a particular issuer, and these instruments may become illiquid. As
a result, the Fund could find it more difficult to sell these securities or may
be able to sell the securities only at prices lower than if such securities
were widely traded. Prices realized upon the sale of such lower rated or
unrated securities, under these circumstances, may be less than the prices used
in calculating the Fund's net asset value.

Leverage Risk

Utilization of leverage is a speculative investment technique and involves
certain risks to the holders of Common Shares. These include higher volatility
of the net asset value of the Common Shares, the likelihood of more volatility
in the market value of the Common Shares and the possibility either that the
Common Share income will fall if the dividend rate on FundPreferred shares or
the interest rate on Borrowings rises and there is no corresponding increase,
or a lagging increase, in the interest rates on investments in the Fund's
portfolio, or that Common Share income will fluctuate because the dividend rate
on FundPreferred shares or the interest rate on Borrowings varies.

So long as the Fund is able to realize a higher net return on its investment
portfolio than the cost of any leverage together with other related expenses,
the effect of the leverage will be to cause holders of Common Shares to realize
higher net return than if the Fund were not so leveraged. On the other hand, to
the extent that the cost of any leverage, together with other related expenses,
approaches the net return on the Fund's investment portfolio, the benefit of
leverage to holders of Common Shares will be reduced, and if the cost of any
leverage were to exceed the net return on the Fund's portfolio, the Fund's
leveraged capital structure would result in a lower Common Share net income
than if the Fund were not so leveraged. There can be no assurance that the
Fund's leverage strategy will be successful. The Fund will pay (and Common
Shareholders will bear) any costs and expenses relating to the issuance and
ongoing maintenance of any FundPreferred shares (for example, distribution
related expenses such as a participation fee paid at what it expects will be an
annual rate of 0.25% of FundPreferred share liquidation preference to
broker-dealers successfully participating in FundPreferred share auctions) and
Borrowings.

Any decline in the net asset value of the Fund's investments will be borne
entirely by Common Shareholders. Therefore, if the market value of the Fund's
portfolio declines, the use of leverage by the Fund will result in a greater
decrease in net asset value to Common Shareholders than if the Fund were not
leveraged. Such greater net asset value decrease also will tend to cause a
greater decline in the market price for the Common Shares. To the extent that
the Fund is required or elects to redeem any FundPreferred shares or prepay any
Borrowings, the Fund may need to liquidate investments to fund such redemptions
or prepayments. Liquidation at times of adverse economic conditions may result
in capital loss and reduce returns to Common Shareholders.

Non-U.S. Issuer Risk

The Fund may invest up to 20% of its Managed Assets in Senior Loans and
other debt instruments of non-U.S. issuers that are U.S. dollar or non-U.S.
dollar denominated. Initially, the Fund does not intend to invest in non-U.S.
dollar denominated securities. The Fund's Managed Assets to be invested in debt
securities of non-U.S. issuers may include debt securities of issuers located,
or conducting their business in, emerging markets countries. Initially, the
Fund does not intend to invest in securities of emerging markets issuers.
Investments in securities of non-U.S. issuers involve special risks not
presented by investments in securities of U.S. issuers, including the
following: (i) less publicly available information about non-U.S. issuers or
markets due to less rigorous disclosure or accounting standards or regulatory
practices; (ii) many non-U.S. markets are smaller, less liquid and more
volatile, meaning that, in a changing market, Symphony may not be able to sell
the Fund's portfolio securities at times, in amounts or at prices it considers
reasonable; (iii) potential adverse effects of fluctuations in currency
exchange rates or controls on the value of the Fund's investments; (iv) the
economies of non-U.S. countries may grow at slower rates than expected or may
experience a downturn or recession; (v) the impact of economic, political,
social or diplomatic events; (vi) possible seizure, expropriation or
nationalization of the company or its assets; (vii) certain non-U.S. countries
may impose restrictions on the ability of non-U.S. issuers to make payments of
principal and/or interest to investors located outside the U.S., due to
blockage of foreign currency exchanges or otherwise; and (viii) withholding and
other non-U.S. taxes may decrease the Fund's return. These risks are more
pronounced to the extent that the Fund invests a significant amount of its
assets in

companies located in one region and to the extent that the Fund invests in
securities of issuers in emerging markets. Although the Fund may hedge its
exposure to certain of these risks, including the foreign currency exchange
rate risk, there can be no assurance that the Fund will enter into hedging
transactions at any time or at times or under circumstances in which it might
be advisable to do so.

Economies and social and political climates in individual countries may
differ unfavorably from the United States. Non-U.S. economies may have less
favorable rates of growth of gross domestic product, rates of inflation,
currency valuation, capital reinvestment, resource self-sufficiency and balance
of payments positions. Many countries have experienced substantial, and in some
cases extremely high, rates of inflation for many years. Unanticipated
economic, political and social developments may also affect the values of the
Fund's investments and the availability to the Fund of additional investments
in such countries.

Currency Risk

The Fund may invest up to 20% of its Managed Assets in securities of
non-U.S. issuers that are non-U.S. dollar denominated. However, initially the
Fund does not intend to invest in such securities. Investments by the Fund in
non-U.S.-dollar denominated securities will be subject to currency risk.
Currency risk is the risk that fluctuations in the exchange rates between the
U.S. dollar and non-U.S. currencies may negatively affect an investment. The
value of securities denominated in non-U.S. currencies may fluctuate based on
changes in the value of those currencies relative to the U.S. dollar, and a
decline in applicable foreign exchange rates could reduce the value of such
securities held by the Fund. The values of non-U.S. investments and the
investment income derived from them also may be affected unfavorably by changes
in currency exchange control regulations. In addition, although a portion of
the Fund's investment income may be received or realized in non-U.S.
currencies, the Fund will be required to compute and distribute its income in
U.S. dollars. This means that if the exchange rate for any such non-U.S.
currency declines after the Fund's income has been earned and translated into
U.S. dollars but before the Fund receives payment, the Fund could be required
to liquidate portfolio securities to make such distributions.

Illiquid Securities Risk

The Fund may invest up to 50% of its Managed Assets in securities and other
instruments that, at the time of investment, are illiquid. Illiquid securities
are securities that are not readily marketable and may include some restricted
securities, which are securities that may not be resold to the public without
an effective registration statement under the Securities Act or, if they are
unregistered, may be sold only in a privately negotiated transaction or
pursuant to an exemption from registration. Illiquid securities involve the
risk that the securities will not be able to be sold at the time desired by the
Fund or at prices approximating the value at which the Fund is carrying the
securities on its books.

Interest Rate Risk

Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. When market interest rates
rise, the market value of such securities generally will fall. The Fund's
investment in such securities means that the net asset value and market price
of Common Shares will tend to decline if market interest rates rise. Market
interest rates in the U.S. and certain other countries in which the Fund may
invest currently are near historically low levels. Because the Fund will invest
at least 80% of its Managed Assets in Senior Loans and will maintain an average
portfolio duration of one year or less, the Fund is intended to have a
relatively low level of interest rate risk. However, because interest rates on
most Senior Loans and other adjustable rate instruments typically only reset
periodically (e.g., monthly or quarterly), changes in prevailing interest rates
(and particularly sudden and significant changes) can be expected to cause some
fluctuation in the market value of these securities, including declines in
market value as interest rates rise.

Regulatory Risk

To the extent that legislation or state or federal regulators that regulate
certain financial institutions impose additional requirements or restrictions
with respect to the ability of such institutions to make loans, particularly in
connection with highly leveraged transactions, the availability of Senior Loans
for investment may be adversely affected. Further, such legislation or
regulation could depress the market value of Senior Loans.

Market Discount From Net Asset Value

Shares of closed-end investment companies frequently trade at a discount
from their net asset value, which creates a risk of loss for investors when
they sell shares purchased in the initial public offering. This characteristic
is a risk separate and distinct from the risk that the Fund's net asset value
could decrease as a result of its investment activities. Shares of closed-end
investment companies like the Fund have during some periods traded at prices
higher than net asset value and have during other periods traded at prices
lower than net asset value. The net asset value of the Common Shares will be
reduced immediately following this offering by the amount of sales load and the
amount of organization and offering costs paid by the Fund. The net asset value
of the Common Shares will also be reduced by any costs associated with the
issuance of FundPreferred shares or any Borrowings. Whether investors will
realize gains or losses upon the sale of the Common Shares will depend not upon
the Fund's net asset value but entirely upon whether the market price of the
Common Shares at the time of sale is above or below the investor's purchase
price for the Common Shares. Because the market price of the Common Shares will
be determined by factors such as relative supply of and demand for the Common
Shares in the market, general market and economic conditions, and other factors
beyond the control of the Fund, the Fund cannot predict whether the Common
Shares will trade at, below or above net asset value or at, below or above the
initial public offering price.

Hedging Risk

The Fund may use derivatives or other transactions solely for purposes of
hedging the portfolio's exposure to high yield credit risk, foreign currency
exchange rate risk and the risk of increases in interest rates that could
result in poorer overall performance for the Fund. There may be an imperfect
correlation between the Fund's portfolio holdings and such derivatives, which
may prevent the Fund from achieving the intended consequences of the applicable
transaction or expose the Fund to risk of loss. Further, the Fund's use of
derivatives or other transactions to reduce risk involves costs and will be
subject to Symphony's ability to predict correctly changes in the relationships
of such hedging instruments to the Fund's portfolio holdings or other factors.
No assurance can be given that Symphony's judgment in this respect will be
correct. Consequently, the use of hedging transactions might result in a poorer
overall performance for the Fund, whether or not adjusted for risk, than if the
Fund had not hedged its portfolio holdings. In addition, no assurance can be
given that the Fund will enter into hedging transactions at times or under
circumstances in which it would be advisable to do so.

There are several risks associated with the use of futures contracts and
options on futures contracts. A purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
There may be an imperfect correlation between the Fund's portfolio holdings and
futures contracts or options on futures contracts entered into by the Fund,
which may prevent the Fund from achieving the intended hedge or expose the Fund
to risk of loss. The degree of imperfection of correlation depends on
circumstances such as: variations in speculative market demand for futures,
futures options and the related securities, including technical influences in
futures and futures options trading and differences between the securities
markets and the securities underlying the standard contracts available for
trading. Further, the Fund's use of futures contracts and options on futures
contracts to reduce risk involves costs and will be subject to Symphony's
ability to predict correctly changes in interest rate relationships or other
factors. See "Hedging Transactions" and "Other Investment Policies and
Techniques" in the Fund's Statement of Additional Information. The Fund will

use derivatives or other transactions described above solely for purposes of
hedging the Fund's portfolio risks.

Counterparty Risk

The Fund may be subject to credit risk with respect to the counterparties to
certain derivative agreements entered into by the Fund. If a counterparty
becomes bankrupt or otherwise fails to perform its obligations under a
derivative contract due to financial difficulties, the Fund may experience
significant delays in obtaining any recovery under the derivative contract in a
bankruptcy or other reorganization proceeding. The Fund may obtain only a
limited recovery or may obtain no recovery in such circumstances.

Repurchase Agreement Risk

With respect to repurchase agreements, if the party agreeing to repurchase
specific securities should default, the Fund may seek to sell the securities
which it holds. This could involve transaction costs or delays in addition to a
loss on the securities if their value should fall below their repurchase price.
Repurchase agreements maturing in more than seven days are considered to be
illiquid securities.

Market Disruption Risk

Certain events have a disruptive effect on the securities markets, such as
terrorist attacks (including the terrorist attacks in the U.S. on September 11,
2001), war and other geopolitical events. The Fund cannot predict the effects
of similar events in the future on the U.S. economy. Lower rated securities
tend to be more volatile than higher rated securities so that these events and
any actions resulting from them may have a greater impact on the prices and
volatility of lower rated securities than on higher rated securities.

Inflation Risk

Inflation risk is the risk that the value of assets or income from
investment will be worth less in the future as inflation decreases the value of
money. As inflation increases, the real value of the Common Shares and
distributions can decline. In addition, during any periods of rising inflation,
FundPreferred share dividend rates and interest rates on Borrowings would
likely increase, which, without a corresponding increase in the interest rates
on investments in the Fund's portfolio, would reduce returns to Common
Shareholders. Inflation risk is mitigated to a certain degree by the Fund's
investments in Senior Loans and other adjustable rate debt instruments because
increases in inflation have historically been accompanied by increases in the
adjustable rates of interest of such securities.

Deflation Risk

Deflation risk is the risk that prices throughout the economy decline over
time, which may have an adverse effect on the market valuation of companies,
their assets and revenues, and the valuation of real estate. In addition,
deflation may have an adverse effect on the creditworthiness of issuers and may
make issuer default more likely, which may result in a decline in the value of
the Fund's portfolio.

Certain Affiliations

Certain broker-dealers may be considered to be affiliated persons of the
Fund, NIAC, Symphony and/or Nuveen. Absent an exemption from the Securities and
Exchange Commission or other regulatory relief, the Fund is generally precluded
from effecting certain principal transactions with affiliated brokers, and its
ability to purchase securities being underwritten by an affiliated broker or a
syndicate including an affiliated broker, or to utilize affiliated brokers for
agency transactions, is subject to restrictions. This could limit the Fund's
ability to engage in securities transactions, purchase certain Senior Loans and
take advantage of market opportunities. In addition, unless and until the
underwriting syndicate is broken in connection with the initial public offering
of the Common Shares, the Fund will

be precluded from effecting principal transactions with brokers who are members
of the syndicate. See also "Management of the Fund--Investment Adviser and
Subadviser."

Anti-Takeover Provisions

The Fund's Declaration includes provisions that could limit the ability of
other entities or persons to acquire control of the Fund or convert the Fund to
open-end status. These provisions could have the effect of depriving the Common
Shareholders of opportunities to sell their Common Shares at a premium over the
then current market price of the Common Shares. See "Certain Provisions in the
Declaration of Trust."

MANAGEMENT OF THE FUND

Trustees and Officers

The Board of Trustees is responsible for the management of the Fund,
including supervision of the duties performed by the Advisers. The names and
business addresses of the trustees and officers of the Fund and their principal
occupations and other affiliations during the past five years are set forth
under "Management of the Fund" in the Statement of Additional Information.

Investment Adviser and Subadviser

NIAC will be responsible for the Fund's overall investment strategy and its
implementation, including portfolio allocations, and the use of leverage and
hedging. NIAC also is responsible for the ongoing monitoring of Symphony,
managing the Fund's business affairs and providing certain clerical,
bookkeeping and other administrative services.

NIAC, 333 West Wacker Drive, Chicago, Illinois 60606, a registered
investment adviser, is a wholly owned subsidiary of Nuveen Investments, Inc.
Founded in 1898, Nuveen Investments, Inc. and its affiliates had approximately
$95 billion of assets under management as of December 31, 2003. Nuveen
Investments, Inc. is a publicly-traded company and a majority-owned subsidiary
of The St. Paul Companies, Inc. ("St. Paul"), a publicly-traded company that is
principally engaged in providing property-liability insurance through
subsidiaries.

Symphony, 555 California Street, Suite 2975, San Francisco, CA 94104, is the
Fund's subadviser responsible for managing the Fund's Managed Assets. Symphony
specializes in the management of market neutral equity and debt strategies and
Senior Loan and other debt portfolios. Symphony, a registered investment
adviser, commenced operations in 1994 and had approximately $2.9 billion in
assets under management as of December 31, 2003. Symphony is an indirect wholly
owned subsidiary of Nuveen.

Gunther Stein and Lenny Mason are the portfolio managers at Symphony
responsible for investing the Fund's Managed Assets. Mr. Stein is the Director
of Fixed Income Strategies of Symphony and has been lead portfolio manager for
high yield strategies at Symphony since 1999. He also is a Vice President of
NIAC. Prior to joining Symphony in 1999, Mr. Stein was a high yield portfolio
manager at Wells Fargo. Mr. Mason is a fixed income portfolio manager at
Symphony. He also is a Vice President of NIAC. Prior to joining Symphony in
2001, Mr. Mason was a Managing Director of FleetBoston's Technology and
Communications Group. Mr. Stein and Mr. Mason also are co-portfolio managers of
other closed-end funds sponsored by Nuveen.

subject to customary closing conditions, including approval by the shareholders
of both companies as well as certain regulatory approvals.

If this merger transaction were to constitute a change of control of NIAC or
Symphony it would operate as an "assignment", as defined in the 1940 Act, of
the Fund's investment management agreement (as discussed further below) with
NIAC and the investment subadvisory agreement between NIAC and Symphony
(together, the "Nuveen advisory agreements"), which would cause the Nuveen
advisory agreements to terminate. In the event of such a termination, it is
expected that the Fund's Board would meet to consider both interim Nuveen
advisory agreements (as permitted under the 1940 Act) and new Nuveen advisory
agreements, the latter of which, if approved by the Board, would be submitted
to a vote of the Fund's shareholders and take effect only upon such approval.
There is no assurance that these approvals would be obtained. The Fund and the
Advisers currently expect that they will receive advice of counsel to the
effect that the merger will not constitute a change of control of the Advisers
and will not operate as an "assignment", and that therefore the Nuveen advisory
agreements would not terminate as a result of the merger. There is no assurance
that the Fund will receive such advice of counsel.

As a result of the current ownership by Citigroup Inc. ("Citigroup") and its
affiliates of voting securities of Travelers and St. Paul, if the transaction
occurs on currently contemplated terms, Citigroup may indirectly own a
sufficient percentage of voting securities of the combined entity to make
Citigroup an indirect affiliate of Nuveen, NIAC, Symphony and the Fund. Such an
affiliation could result, pursuant to the 1940 Act, in restrictions on
transactions between the Fund and Citigroup and possibly its affiliates. In
particular, principal trades between the Fund and Citigroup and its affiliates
could be prohibited. Although NIAC does not believe that any potential
inability to so trade with Citigroup or its affiliates would have a material
adverse effect on the Advisers' ability to perform their obligations under the
Nuveen advisory agreements with the Fund or on the Fund's ability to pursue its
investment objective and policies as described in this Prospectus, there can be
no assurance that it would not.

Investment Management Agreement

Pursuant to an investment management agreement between NIAC and the Fund,
the Fund has agreed to pay an annual management fee for the services and
facilities provided by NIAC, payable on a monthly basis, according to the
following schedule:

Average Daily Managed Assets// Management Fee
------------------------------ --------------

Up to $500 million............ .8500%
$500 million to $1.0 billion.. .8250%
$1.0 billion to $1.5 billion.. .8000%
$1.5 billion to $2.0 billion.. .7750%
$2.0 billion and over......... .7500%

If the Fund utilizes leverage through the issuance of FundPreferred shares
in an aggregate amount equal to 38% of the Fund's total assets (including the
amount obtained from leverage), the management fee calculated as a percentage
of net assets attributable to Common Shares would be as follows:

Net Assets Attributable to Common Shares Management Fee
---------------------------------------- --------------

Up to $500 million................ 1.3710%
$500 million to $1.0 billion...... 1.3306%
$1.0 billion to $1.5 billion...... 1.2903%
$1.5 billion to $2.0 billion...... 1.2500%
Over $2.0 billion................. 1.2097%

Pursuant to an investment sub-advisory agreement between NIAC and Symphony,
Symphony will receive from NIAC a management fee equal to the portion specified
below of the management fee payable by the Fund to NIAC (net of the
reimbursements described below), payable on a monthly basis:

Percentage of Net
Average Daily Managed Assets Management Fee
---------------------------- -----------------

Up to $125 million.......... 50.0%
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over....... 40.0%

In addition to the fee of NIAC, the Fund pays all other costs and expenses
of its operations, including compensation of its trustees (other than those
affiliated with NIAC), custodian, transfer agency and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of
repurchasing shares, expenses of issuing any FundPreferred shares, expenses
associated with any Borrowings, expenses of preparing, printing and
distributing shareholder reports, notices, proxy statements and reports to
governmental agencies, and taxes, if any.

For the first eight full years of the Fund's operation, the Advisers have
contractually agreed to reimburse the Fund for fees and expenses in the
amounts, and for the time periods, set forth below:

Percentage Percentage
Reimbursed Reimbursed
Year Ending (as a percentage of (as a percentage of
March 31, Managed Assets) Year Ending March 31, Managed Assets)
----------- ------------------- --------------------- -------------------

2004/(1)/ .32% 2009 .32%
2005 .32% 2010 .24%
2006 .32% 2011 .16%
2007 .32% 2012 .08%
2008 .32%

--------
(1)From the commencement of operations.

The Advisers have not agreed to reimburse the Fund for any portion of its
fees and expenses beyond March 31, 2012.

NET ASSET VALUE

The Fund will determine the net asset value of its shares daily, as of the
close of regular session trading on the New York Stock Exchange (normally 4:00
p.m. eastern time). Net asset value is computed by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding. In addition, accrued payments to the
Fund under such transactions will be assets of the Fund and accrued payments by
the Fund will be liabilities of the Fund.

The Fund uses an independent pricing service to value most Senior Loans and
other debt securities at their market value or at a fair value determined by
the independent pricing service.

The Fund will use the fair value method to value loans or other securities
if the independent pricing service is unable to provide a market or fair value
for them or if the market value provided by the independent pricing service is
deemed unreliable, or if events occurring after the close of a securities
market and before the Fund values its Managed Assets would materially affect
net asset value. A security that is fair valued may be valued at a price higher
or lower than actual market quotations or the value determined by other funds
using their own fair value procedures.

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

It is expected that the Fund's net asset value will fluctuate as a function
of interest rate and credit factors. Because of the short-term nature of such
instruments, however, the Fund's net asset value is expected to fluctuate less
in response to changes in interest rates than the net asset values of
investment companies with portfolios consisting primarily of longer term
fixed-income securities.

Non-loan holdings (other than debt securities, including short term
obligations) may be valued on the basis of prices furnished by one or more
pricing services that determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities will be valued at the last sale price on the exchange that is the
primary market for such securities, or the average of the last quoted bid price
and asked price for those securities for which the over-the-counter market is
the primary market or for listed securities in which there were no sales during
the day. Marketable securities listed on the NASDAQ National Market System are
valued at the NASDAQ official closing price. The value of interest rate swaps
will be based upon a dealer quotation.

Debt securities for which the over-the-counter market is the primary market
are normally valued on the basis of prices furnished by one or more pricing
services at the mean between the latest available bid and asked prices.
Over-the-counter options are valued at the mean between the bid and asked
prices provided by dealers. Financial futures contracts listed on commodity
exchanges and exchange-traded options are valued at closing settlement prices.
Short-term obligations having remaining maturities of less than 60 days are
valued at amortized cost, which approximates value, unless the Board of
Trustees determines that under particular circumstances such method does not
result in fair value. Debt securities (other than short-term obligations) may
be valued on the basis of valuations furnished by a pricing service that
determines valuations based upon market transactions for normal,
institutional-size trading units of such securities. Securities for which there
is no such quotation or valuation and all other assets are valued at fair value
as determined in good faith by or at the direction of the Fund's Board of
Trustees.

Generally, trading in many foreign securities that the Fund may hold will be
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Fund generally will be computed as of such times.
Occasionally, events affecting the value of foreign securities may occur
between such times and the close of the New York Stock Exchange, which will not
be reflected in the computation of the

Fund's net asset value (unless the Fund deems that such events would materially
affect its net asset value, in which case an adjustment would be made and
reflected in such computation). The Fund may rely on an independent fair
valuation service in making any such adjustment. Foreign securities and
currency held by the Fund will be valued in U.S. dollars; such values will be
computed by the custodian based on foreign currency exchange rate quotations
supplied by an independent quotation service.

DISTRIBUTIONS

Commencing with the first dividend, the Fund intends to make regular monthly
cash distributions to Common Shareholders at a rate that reflects the past and
projected performance of the Fund. Distributions can only be made from net
investment income and net short-term capital gains after paying any accrued
dividends to FundPreferred shareholders, if any, and any interest and required
principal payments on Borrowings, if any. The Fund's Common Share dividend rate
will depend on a number of factors, including the net earnings on the Fund's
portfolio investments, the rate at which such net earnings change as a result
of changes in short-term market interest rates, the rate at which dividends are
payable on FundPreferred shares or interest is payable on Borrowings, and the
rate at which such FundPreferred share dividend or Borrowings interest rates
change. The net investment income of the Fund consists of all income (other
than net short-term and long-term capital gains) less all expenses of the Fund.
Expenses of the Fund are accrued each day. Over time, all the net investment
income and net short-term capital gains of the Fund will be distributed. At
least annually, the Fund also intends to distribute net long-term capital
gains, if any, after paying any accrued dividends or making any redemption or
liquidation payments to FundPreferred shareholders or making interest and
required principal payments on Borrowings. Initial distributions to Common
Shareholders are expected to be declared approximately 45 days, and paid
approximately 60 to 90 days, from the completion of this offering, depending on
market conditions. Although it does not now intend to do so, the Board of
Trustees may change the Fund's dividend policy and the amount or timing of the
distributions, based on a number of factors, including the amount of the Fund's
undistributed net investment income and net short-term capital gains and
historical and projected net investment income and net short-term capital gains
and the amount of the expenses, and dividend and interest rates on outstanding
FundPreferred shares and Borrowings.

The Fund intends to initially distribute less than the entire amount of net
investment income and net short-term capital gains earned in a particular
period. The undistributed net investment income and net short-term capital
gains would be available to supplement future distributions. As a result, the
distributions paid by the Fund for any particular monthly period may be more or
less than the amount of net investment income and net short-term capital gains
actually earned by the Fund during the period. Undistributed net investment
income and net short-term capital gains will be added to the Fund's net asset
value and, correspondingly, distributions from undistributed net investment
income and net short-term capital gains will be deducted from the Fund's net
asset value.

DIVIDEND REINVESTMENT PLAN

If your Common Shares are registered directly with the Fund or if you hold
your Common Shares with a brokerage firm that participates in the Fund's
Dividend Reinvestment Plan (the "Plan") you may elect to have all dividends,
including any capital gain dividends, on your Common Shares automatically
reinvested by the Plan Agent in additional Common Shares under the Plan. You
may elect to participate in the Plan by completing the Dividend Reinvestment
Plan application. If you do not participate in the Plan, you will receive all
distributions in cash paid by check mailed directly to you or your brokerage
firm by State Street Bank and Trust Company, as dividend paying agent.

Under the Plan, the number of Common Shares you will receive will be
determined as follows:

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

(2) If Common Shares are trading below net asset value at the time of
valuation, the Plan Agent will receive the dividend or distribution in cash
and will purchase Common Shares in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts. It is possible that
the market price for the Common Shares may increase before the Plan Agent
has completed its purchases. Therefore, the average purchase price per share
paid by the Plan Agent may exceed the market price at the time of valuation,
resulting in the purchase of fewer shares than if the dividend or
distribution had been paid in Common Shares issued by the Fund. The Plan
Agent will use all dividends and distributions received in cash to purchase
Common Shares in the open market within 30 days of the valuation date.
Interest will not be paid on any uninvested cash payments.

You may withdraw from the Plan at any time by giving written notice to the
Plan Agent. If you withdraw or the Plan is terminated, you will receive whole
shares in your account under the Plan and you will receive a cash payment for
any fraction of a share in your account. If you wish, the Plan Agent will sell
your shares and send you the proceeds, minus brokerage commissions and a $2.50
service fee.

The Plan Agent maintains all shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. Any proxy you receive will include all
Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or
distributions in Common Shares. However, all participants will pay a pro rata
share of brokerage commissions incurred by the Plan Agent when it makes open
market purchases.

Automatically reinvesting dividends and distributions does not mean that you
do not have to pay income taxes due upon receiving dividends and distributions.

As noted above, if you hold your Common Shares with a brokerage firm that
does not participate in the Plan, you will not be able to participate in the
Plan and any dividend reinvestment may be effected on different terms than
those described above. Consult your financial advisor for more information.

The Fund reserves the right to amend or terminate the Plan if in the
judgment of the Board of Trustees the change is warranted. There is no direct
service charge to participants in the Plan; however, the Fund reserves the
right to amend the Plan to include a service charge payable by the
participants. Additional information about the Plan may be obtained from State
Street Bank and Trust Company, Attn: Equiserve Nuveen Investments, P.O. Box
43071, Providence, Rhode Island 02940-3071, (800) 257-8787.

DESCRIPTION OF SHARES

Common Shares

The Declaration authorizes the issuance of an unlimited number of Common
Shares. The Common Shares being offered have a par value of $0.01 per share
and, subject to the rights of holders of FundPreferred shares, if issued, have
equal rights to the payment of dividends and the distribution of assets upon
liquidation. The Common Shares being offered will, when issued, be fully paid
and, subject to matters discussed in "Certain Provisions in the Declaration of
Trust," non-assessable, and will have no preemptive or conversion rights or
rights to cumulative voting. Whenever the Fund issues FundPreferred shares
and/or incurs Borrowings, the Common Shareholders will not be entitled to
receive any cash distributions from the Fund unless all accrued dividends on
FundPreferred shares and interest on Borrowings have been paid, and (i) unless
asset coverage (as defined in the 1940 Act) with respect to FundPreferred
shares would be at least 200% after giving effect to the distributions and
(ii) unless asset coverage (again, as defined in the 1940 Act) with respect to
any Borrowings would be at least 300% after giving effect to the distributions.
See "--FundPreferred Shares" below.

The Common Shares have been approved for listing on the New York Stock
Exchange, subject to notice of issuance. The Fund intends to hold annual
meetings of shareholders so long as the Common Shares are listed on a national
securities exchange and such meetings are required as a condition to such
listing. The Fund will not issue share certificates.

The Fund's net asset value per share generally increases when interest rates
decline, and decreases when interest rates rise, and these changes are likely
to be greater because the Fund, if market conditions are deemed favorable,
likely will have a leveraged capital structure. Net asset value will be reduced
immediately following the offering by the amount of the sales load and offering
expenses paid by the Fund. Nuveen has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than sales load) that exceed $0.03 per
Common Share. See "Use of Proceeds."

Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a shareholder
determines to buy additional Common Shares or sell shares already held, the
shareholder may conveniently do so by trading on the exchange through a broker
or otherwise. Shares of closed-end investment companies may frequently trade on
an exchange at prices lower than net asset value. Shares of closed-end
investment companies like the Fund have, during some periods, traded at prices
higher than net asset value and, during other periods, have traded at prices
lower than net asset value. Because the market value of the Common Shares may
be influenced by such factors as dividend levels (which are in turn affected by
expenses), call protection, dividend stability, portfolio credit quality, net
asset value, relative demand for and supply of such shares in the market,
general market and economic conditions, and other factors beyond the control of
the Fund, the Fund cannot assure you that Common Shares will trade at a price
equal to or higher than net asset value in the future. The Common Shares are
designed primarily for long-term investors, and investors in the Common Shares
should not view the Fund as a vehicle for trading purposes. See "Use of
Leverage" and the Statement of Additional Information under "Repurchase of Fund
Shares; Conversion to Open-End Fund."

FundPreferred Shares

The Declaration authorizes the issuance of an unlimited number of
FundPreferred shares in one or more classes or series, with rights as
determined by the Board of Trustees, by action of the Board of Trustees without
the approval of the Common Shareholders.

The Fund's Board of Trustees has authorized an offering of FundPreferred
shares (representing approximately 38% of the Fund's Managed Assets) that the
Fund expects will likely be issued within

approximately one and one-half to two months after completion of the offering
of Common Shares. Any final decision to issue FundPreferred shares is subject
to market conditions and to the Board's continuing belief that leveraging the
Fund's capital structure through the issuance of FundPreferred shares is likely
to achieve the benefits to the Common Shareholders described in this
Prospectus. The Board has determined that the FundPreferred shares, at least
initially, would likely pay cumulative dividends at rates determined over
relatively shorter-term periods (such as 7 days), by providing for the periodic
redetermination of the dividend rate through an auction or remarketing
procedure. The Board of Trustees has indicated that the preference on
distribution, liquidation preference, voting rights and redemption provisions
of the FundPreferred shares will likely be as stated below.

Limited Issuance of FundPreferred Shares. Under the 1940 Act, the Fund can
issue FundPreferred shares with an aggregate liquidation value of up to
one-half of the value of the Fund's total net assets, measured immediately
after issuance of the FundPreferred shares. "Liquidation value" means the
original purchase price of the shares being liquidated plus any accrued and
unpaid dividends. In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Common Shares unless the liquidation
value of the FundPreferred shares is less than one-half of the value of the
Fund's total net assets (determined after deducting the amount of such dividend
or distribution) immediately after the distribution. If the Fund sells all the
Common Shares and FundPreferred shares discussed in this Prospectus, the
liquidation value of the FundPreferred shares is expected to be approximately
38% of the value of the Fund's total net assets.

Distribution Preference. The FundPreferred shares have complete priority
over the Common Shares as to distribution of assets.

Voting Rights. FundPreferred shares are required to be voting shares and to
have equal voting rights with Common Shares. Except as otherwise indicated in
this Prospectus or the Statement of Additional Information and except as
otherwise required by applicable law, holders of FundPreferred shares will vote
together with Common Shareholders as a single class.

Holders of FundPreferred shares, voting as a separate class, will be
entitled to elect two of the Fund's trustees (following the establishment of
the Fund by an initial trustee, the Declaration provides for a total of no less
than two and no more than twelve trustees). The remaining trustees will be
elected by Common Shareholders and holders of FundPreferred shares, voting
together as a single class. In the unlikely event that two full years of
accrued dividends are unpaid on the FundPreferred shares, the holders of all
outstanding FundPreferred shares, voting as a separate class, will be entitled
to elect a majority of the Fund's trustees until all dividends in arrears have
been paid or declared and set apart for payment. In order for the Fund to take
certain actions or enter into certain transactions, a separate class vote of
holders of FundPreferred shares will be required, in addition to the single
class vote of the holders of FundPreferred shares and Common Shares. See the
Statement of Additional Information under "Description of Shares--FundPreferred
Shares--Voting Rights."

Redemption, Purchase and Sale of FundPreferred Shares. The terms of the
FundPreferred shares provide that they may be redeemed by the issuer at certain
times, in whole or in part, at the original purchase price per share plus
accumulated dividends. Any redemption or purchase of FundPreferred shares by
the Fund will reduce the leverage applicable to Common Shares, while any
issuance of shares by the Fund will increase such leverage. See "Use of
Leverage."

The discussion above describes the Board of Trustees' present intention with
respect to a possible offering of FundPreferred shares. The terms of the
FundPreferred shares may be the same as, or different from, the terms described
above, subject to applicable law and the Fund's Declaration.

Borrowings

The Declaration authorizes the Fund, without approval of the Common
Shareholders, to borrow money. In this connection, the Fund may issue notes or
other evidence of indebtedness (including bank borrowings or commercial paper)
and may secure any such borrowings by mortgaging, pledging or otherwise
subjecting as security the Fund's assets. In connection with such borrowing,
the Fund may be required to maintain minimum average balances with the lender
or to pay a commitment or other fee to maintain a line of credit. Any such
requirements will increase the cost of borrowing over the stated interest rate.
Under the requirements of the 1940 Act, the Fund, immediately after any such
borrowings, must have an "asset coverage" of at least 300%. With respect to any
such borrowings, asset coverage means the ratio which the value of the total
assets of the Fund, less all liabilities and indebtedness not represented by
senior securities (as defined in the 1940 Act), bears to the aggregate amount
of such borrowing represented by senior securities issued by the Fund. Certain
types of borrowing may result in the Fund being subject to certain restrictions
imposed by guidelines of one or more rating agencies which may issue ratings
for commercial paper or notes issued by the Fund. Such restrictions may be more
stringent than those imposed by the 1940 Act.

The rights of lenders to the Fund to receive interest on and repayment of
principal of any such borrowings will be senior to those of the Common
Shareholders, and the terms of any such borrowings may contain provisions which
limit certain activities of the Fund, including the payment of dividends to
Common Shareholders in certain circumstances. Further, the 1940 Act does (in
certain circumstances) grant to the lenders to the Fund certain voting rights
in the event of default in the payment of interest on or repayment of
principal. In the event that such provisions would impair the Fund's status as
a regulated investment company under the Code, the Fund, subject to its ability
to liquidate its relatively illiquid portfolio, intends to repay the
borrowings. Any borrowing will likely be ranked senior or equal to all other
existing and future borrowings of the Fund. The Fund also may borrow up to an
additional 5% of its total assets for temporary purposes. See "Investment
Restrictions" in the Statement of Additional Information.

CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the
Declaration contains an express disclaimer of shareholder liability for debts
or obligations of the Fund and requires that notice of such limited liability
be given in each agreement, obligation or instrument entered into or executed
by the Fund or the trustees. The Declaration further provides for
indemnification out of the assets and property of the Fund for all loss and
expense of any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations. The Fund believes that the likelihood of such
circumstances is remote.

reorganization of the Fund, or a series or class of the Fund, (3) a sale, lease
or transfer of all or substantially all of the Fund's assets (other than in the
regular course of the Fund's investment activities), (4) in certain
circumstances, a termination of the Fund, or a series or class of the Fund, or
(5) a removal of trustees by shareholders, and then only for cause, unless,
with respect to (1) through (4), such transaction has already been authorized
by the affirmative vote of two-thirds of the total number of trustees fixed in
accordance with the Declaration or the By-laws, in which case the affirmative
vote of the holders of at least a majority of the Fund's Common Shares and
FundPreferred shares outstanding at the time, voting together as a single
class, is required; provided, however, that where only a particular class or
series is affected (or, in the case of removing a trustee, when the trustee has
been elected by only one class), only the required vote by the applicable class
or series will be required. Approval of shareholders is not required, however,
for any transaction, whether deemed a merger, consolidation, reorganization or
otherwise whereby the Fund issues shares in connection with the acquisition of
assets (including those subject to liabilities) from any other investment
company or similar entity. In the case of the conversion of the Fund to an
open-end investment company, or in the case of any of the foregoing
transactions constituting a plan of reorganization which adversely affects the
holders of FundPreferred shares, the action in question will also require the
affirmative vote of the holders of at least two-thirds of the FundPreferred
shares outstanding at the time, voting as a separate class, or, if such action
has been authorized by the affirmative vote of two-thirds of the total number
of trustees fixed in accordance with the Declaration or the By-laws, the
affirmative vote of the holders of at least a majority of the FundPreferred
shares outstanding at the time, voting as a separate class. None of the
foregoing provisions may be amended except by the vote of at least two-thirds
of the Common Shares and FundPreferred shares, voting together as a single
class. The votes required to approve the conversion of the Fund from a
closed-end to an open-end investment company or to approve transactions
constituting a plan of reorganization which adversely affects the holders of
FundPreferred shares are higher than those required by the 1940 Act. The Board
of Trustees believes that the provisions of the Declaration relating to such
higher votes are in the best interest of the Fund and its shareholders. See the
Statement of Additional Information under "Certain Provisions in the
Declaration of Trust."

The provisions of the Declaration described above could have the effect of
depriving the Common Shareholders of opportunities to sell their Common Shares
at a premium over the then current market price of the Common Shares by
discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. The overall effect of these provisions is
to render more difficult the accomplishment of a merger or the assumption of
control by a third party. They provide, however, the advantage of potentially
requiring persons seeking control of the Fund to negotiate with its management
regarding the price to be paid and facilitating the continuity of the Fund's
investment objective and policies. The Board of Trustees of the Fund has
considered the foregoing anti-takeover provisions and concluded that they are
in the best interests of the Fund and its Common Shareholders.

Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.

REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Common Shares will trade in the open market at a price that will be a function
of several factors, including dividend levels (which are in turn affected by
expenses), net asset value, call protection, dividend stability, portfolio
credit quality, relative demand for and supply of such shares in the market,
general market and economic conditions and other factors. Because shares of
closed-end investment companies may frequently trade at prices lower than net
asset value, the Fund's Board of Trustees has currently determined that, at
least annually, it will consider

action that might be taken to reduce or eliminate any material discount from
net asset value in respect of Common Shares, which may include the repurchase
of such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the Fund
to an open-end investment company. The Fund cannot assure you that its Board of
Trustees will decide to take any of these actions, or that share repurchases or
tender offers will actually reduce market discount.

If the Fund converted to an open-end investment company, it would be
required to redeem all FundPreferred shares then outstanding (requiring in turn
that it liquidate a portion of its investment portfolio), and the Common Shares
would no longer be listed on the New York Stock Exchange. In contrast to a
closed-end investment company, shareholders of an open-end investment company
may require the company to redeem their shares at any time (except in certain
circumstances as authorized by the 1940 Act or the rules thereunder) at their
net asset value, less any redemption charge that is in effect at the time of
redemption. See the Statement of Additional Information under "Repurchase of
Fund Shares; Conversion to Open-End Fund" for a discussion of the voting
requirements applicable to the conversion of the Fund to an open-end investment
company.

Before deciding whether to take any action if the Common Shares trade below
net asset value, the Board of Trustees would consider all relevant factors,
including the extent and duration of the discount, the liquidity of the Fund's
portfolio, the impact of any action that might be taken on the Fund or its
shareholders, and market considerations. Based on these considerations, even if
the Fund's shares should trade at a discount, the Board of Trustees may
determine that, in the interest of the Fund and its shareholders, no action
should be taken. See the Statement of Additional Information under "Repurchase
of Fund Shares; Conversion to Open-End Fund" for a further discussion of
possible action to reduce or eliminate such discount to net asset value.

TAX MATTERS

The following discussion of federal income tax matters is based on the
advice of Bell, Boyd & Lloyd LLC, special counsel to the Fund.

The discussions below and certain disclosure in the Statement of Additional
Information provide general tax information related to an investment in the
Common Shares. Because tax laws are complex and often change, you should
consult your tax advisor about the tax consequences of an investment in the
Fund. The following tax discussion assumes that you are a U.S. shareholder and
that you hold the Common Shares as a capital asset.

Dividends paid to you out of the Fund's "investment company taxable income"
(which includes dividends the Fund receives, interest income, and net
short-term capital gain) will be taxable to you as ordinary income to the
extent of the Fund's earnings and profits, except as described below with
respect to "qualified dividend income". Distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if any,
are taxable to you as long-term capital gains, regardless of how long you have
held the Common Shares. A distribution of an amount in excess of the Fund's
earnings and profits is treated as a non-taxable return of capital that reduces
your tax basis in your Common Shares; any such distributions in excess of your
basis are treated as gain from a sale of your shares. The tax treatment of your
dividends and distributions will be the same regardless of whether they were
paid to you in cash or reinvested in additional Common Shares.

A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid during January of the following
year.

Each year, we will notify you of the tax status of dividends and other
distributions.

If you sell Common Shares, you may realize a capital gain or loss which will
be long-term or short-term, depending on your holding period for the shares.

We may be required to withhold federal income tax from all taxable
distributions payable if you:

. fail to provide us with your correct taxpayer identification number;

. fail to make required certifications; or

. have been notified by the Internal Revenue Service that you are subject to
backup withholding.

As modified by the Jobs and Growth Tax Relief Reconciliation Act of 2003
(the "Act"), the backup withholding rate is 28% for amounts paid through 2010,
after which time the rate will increase to 31% absent legislative change. This
withholding is not an additional tax. Any amounts withheld may be credited
against your federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.

Federal tax law imposes an alternative minimum tax with respect to
individuals and corporations. Under current law, it is not expected that you
will be subject to alternative minimum tax as a result of your investment in
the Fund.

The Fund intends to elect to be treated and to qualify annually as a
regulated investment company under the Code. If the Fund so qualifies and
distributes each year to its shareholders at least 90% of its investment
company taxable income, the Fund will not be required to pay federal income
taxes on any income it distributes to shareholders. If the Fund distributes
less than an amount equal to the sum of 98% of its ordinary income and 98% of
its capital gain net income and such amounts from previous years that were not
distributed, then the Fund will be subject to a non-deductible 4% excise tax on
the undistributed amounts. Fund distributions also may be subject to state and
local taxes. You should consult with your own tax advisor regarding the
particular consequences to you of investing in the Fund.

The Fund may invest in convertible securities or other securities the
federal income tax treatment of which is uncertain or subject to
recharacterization by the Internal Revenue Service. To the extent the tax
treatment of such securities or their income differs from the tax treatment
expected by the Fund, it could affect the timing or character of income
recognized by the Fund, requiring the Fund to purchase or sell securities, or
otherwise change its portfolio, in order to comply with the tax rules
applicable to regulated investment companies under the Code.

The Act reduced the maximum tax rate on long-term capital gains of
noncorporate investors from 20% to 15%. The Act also reduced to 15% the maximum
tax rate on "qualified dividend income" of a noncorporate investor. To the
extent the Fund distributes amounts of dividends, including capital gain
dividends, eligible for the reduced rates, it will identify the relevant
amounts in its annual tax information reports to its shareholders. However, it
is not expected that a significant amount of the distributions paid with
respect to the Common Shares will constitute "qualified dividend income"
eligible for taxation at the reduced rates. Without further legislative change,
the rate reductions enacted by the Act will lapse, and the previous rates will
be reinstated, for taxable years beginning on or after January 1, 2009.

UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Fund has agreed to sell to such Underwriter, the number of
Common Shares set forth opposite the name of such Underwriter.

Number of
Underwriters Shares
------------ ------------

Citigroup Global Markets Inc..........................................
Nuveen Investments, LLC...............................................
A.G. Edwards & Sons, Inc..............................................
Wachovia Capital Markets, LLC.........................................
Advest, Inc...........................................................
Ferris, Baker Watts, Incorporated.....................................
J.J.B. Hilliard, W.L. Lyons, Inc......................................
Janney Montgomery Scott LLC...........................................
McDonald Investments Inc., a KeyCorp Company..........................
Oppenheimer & Co. Inc.................................................
Quick & Reilly, Inc. A FleetBoston Financial Company..................
RBC Capital Markets Corporation.......................................
Ryan Beck & Co., Inc..................................................
Stifel, Nicolaus & Company, Incorporated..............................
SunTrust Capital Markets, Inc.........................................
------------
Total..............................................................
============

The underwriting agreement provides that the obligations of the several
Underwriters to purchase the Common Shares included in this offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to purchase all the Common Shares
(other than those covered by the over-allotment option described below) if they
purchase any of the Common Shares. The representatives have advised the Fund
that the Underwriters do not intend to confirm any sales to any accounts over
which they exercise discretionary authority.

The Underwriters, for whom Citigroup Global Markets Inc., Nuveen
Investments, LLC, A.G. Edwards & Sons, Inc., Wachovia Capital Markets, LLC,
Advest, Inc., Ferris, Baker Watts, Incorporated, J.J.B. Hilliard, W.L. Lyons,
Inc., Janney Montgomery Scott LLC, McDonald Investments Inc., a KeyCorp
Company, Oppenheimer & Co. Inc., Quick & Reilly, Inc. A FleetBoston Financial
Company, RBC Capital Markets Corporation, Ryan Beck & Co., Inc., Stifel,
Nicolaus & Company, Incorporated and SunTrust Capital Markets, Inc. are acting
as representatives, propose to offer some of the Common Shares directly to the
public at the public offering price set forth on the cover page of this
Prospectus and some of the Common Shares to certain dealers at the public
offering price less a concession not in excess of $0.45 per Common Share. The
sales load the Fund will pay of $0.675 per share is equal to 4.5% of the
initial offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per Common Share on sales to
certain other dealers. If all of the Common Shares are not sold at the initial
offering price, the representatives may change the public offering price and
other selling terms. Investors must pay for any Common Shares purchased on or
before , 2004. In connection with this offering, Nuveen may perform
clearing services without charge for brokers and dealers for whom it regularly
provides clearing services that are participating in the offering as members of
the selling group.

The Fund has granted to the Underwriters an option, exercisable for 45 days
from the date of this Prospectus, to purchase up to additional Common
Shares at the public offering price less the sales load. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if
any, in connection with this offering. To the extent such option is exercised,
each

Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional Common Shares approximately proportionate to such
Underwriter's initial purchase commitment.

The Fund and the Advisers have each agreed that, for a period of 180 days
from the date of this Prospectus, they will not, without the prior written
consent of Citigroup Global Markets Inc., on behalf of the Underwriters,
dispose of or hedge any Common Shares or any securities convertible into or
exchangeable for Common Shares. Citigroup Global Markets Inc. in its sole
discretion may release any of the securities subject to these agreements at any
time without notice.

Prior to the offering, there has been no public market for the Common
Shares. Consequently, the initial public offering price for the Common Shares
was determined by negotiation among the Fund, NIAC and the representatives.
There can be no assurance, however, that the price at which the Common Shares
will sell in the public market after this offering will not be lower than the
price at which they are sold by the Underwriters or that an active trading
market in the Common Shares will develop and continue after this offering. The
Common Shares have been approved for listing on the New York Stock Exchange,
subject to notice of issuance.

The following table shows the sales load that the Fund is to pay to the
Underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the Underwriters' option to purchase
additional Common Shares:

Paid by Fund
--------------------
Full
No Exercise Exercise
----------- --------

Per share $ $
Total.... $ $

The Fund and the Advisers have each agreed to indemnify the several
Underwriters or to contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.

Nuveen has agreed to pay (i) all organizational expenses and (ii) offering
costs (other than sales load) that exceed $0.03 per share.

In addition, the Fund has agreed to reimburse the Underwriters for certain
expenses incurred by the Underwriters in the offering.

Certain Underwriters participating in the Common Share offering may be
invited, some period of time after completion of this offering, to participate
in the offering of FundPreferred shares and will receive compensation for their
participation in that FundPreferred share offering. The number of Common Shares
purchased by each Underwriter in this offering may be a factor in
determining (i) whether that Underwriter is selected to participate in the
offering of FundPreferred shares, (ii) the number of FundPreferred shares
allocated to that Underwriter in such offering, and (iii) the amount of
additional FundPreferred share underwriting compensation available to that
Underwriter. The offering costs associated with the issuance of FundPreferred
shares are currently estimated to be approximately % of the aggregate amount
of the FundPreferred share offering. These costs will effectively be borne by
the Common Shareholders.

Certain Underwriters may make a market in the Common Shares after trading in
the Common Shares has commenced on the New York Stock Exchange. No Underwriter
is, however, obligated to conduct market-making activities and any such
activities may be discontinued at any time without notice, at the sole
discretion of the Underwriter. No assurance can be given as to the liquidity
of, or the trading market for, the Common Shares as a result of any
market-making activities undertaken by any Underwriter. This Prospectus is to
be used by any Underwriter in connection with the offering and,

during the period in which a prospectus must be delivered, with offers and
sales of the Common Shares in market-making transactions in the
over-the-counter market at negotiated prices related to prevailing market
prices at the time of the sale.

In connection with the requirements for listing the Fund's Common Shares on
the New York Stock Exchange, the Underwriters have undertaken to sell lots of
100 or more Common Shares to a minimum of 2,000 beneficial owners in the United
States. The minimum investment requirement is 100 Common Shares.

The Underwriters have advised the Fund that, pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended, certain persons participating
in the offering may engage in transactions, including stabilizing bids,
covering transactions or the imposition of penalty bids, which may have the
effect of stabilizing or maintaining the market price of the Common Shares on
the New York Stock Exchange at a level above that which might otherwise prevail
in the open market. A "stabilizing bid" is a bid for or purchase of the Common
Shares on behalf of an Underwriter for the purpose of fixing or maintaining the
price of the Common Shares. A "covering transaction" is a bid for or purchase
of the Common Shares on behalf of an Underwriter to reduce a short position
incurred by the Underwriters in connection with the offering. A "penalty bid"
is a contractual arrangement whereby if, during a specified period after the
issuance of the Common Shares, the Underwriters purchase Common Shares in the
open market for the account of the underwriting syndicate and the Common Shares
purchased can be traced to a particular Underwriter or member of the selling
group, the underwriting syndicate may require the Underwriter or selling group
member in question to purchase the Common Shares in question at the cost price
to the syndicate or may recover from (or decline to pay to) the Underwriter or
selling group member in question any or all compensation (including, with
respect to a representative, the applicable syndicate management fee)
applicable to the Common Shares in question. As a result, an Underwriter or
selling group member and, in turn, brokers may lose the fees that they
otherwise would have earned from a sale of the Common Shares if their customer
resells the Common Shares while the penalty bid is in effect. The Underwriters
are not required to engage in any of these activities, and any such activities,
if commenced, may be discontinued at any time.

The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of the
Underwriters to the Fund or the Advisers if, prior to the delivery of and
payment for the Common Shares, (i) trading in the Fund's Common Shares shall
have been suspended by the Securities and Exchange Commission or the New York
Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices for trading in
securities generally shall have been established on the New York Stock
Exchange, (ii) a commercial banking moratorium shall have been declared by
either federal or state authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets in the United States is such as to make it, in the sole
judgment of the representatives, impracticable or inadvisable to proceed with
the offering or delivery of the Common Shares as contemplated by the Prospectus
(exclusive of any supplement thereto).

A Prospectus in electronic format may be available on the websites
maintained by one or more of the Underwriters. The representatives may agree to
allocate a number of Common Shares to the Underwriters for sale to their online
brokerage account holders. The representatives will allocate Common Shares to
Underwriters that may make Internet distributions on the same basis as other
allocations. In addition, Common Shares may be sold by the Underwriters to
securities dealers who resell Common Shares to online brokerage account holders.

The Fund anticipates that from time to time certain of the Underwriters may
act as brokers or dealers in connection with the execution of the Fund's
portfolio transactions after they have ceased to be Underwriters and, subject
to certain restrictions, may act as brokers while they are Underwriters.

Prior to the public offering of Common Shares, NIAC purchased Common Shares
from the Fund in an amount satisfying the net worth requirements of Section
14(a) of the 1940 Act. As of the date of this Prospectus, NIAC owned 100% of
the outstanding Common Shares. NIAC may be deemed to control the Fund until
such time as it owns less than 25% of the outstanding Common Shares, which is
expected to occur as of the completion of the offering of Common Shares.

Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606, one of the
representatives of the Underwriters, is an affiliate of NIAC.

The principal business address of Citigroup Global Markets Inc. is 388
Greenwich Street, New York, New York 10013.

CUSTODIAN AND TRANSFER AGENT

The custodian of the assets of the Fund is State Street Bank and Trust
Company, One Federal Street, Boston, Massachusetts 02110. The Custodian
performs custodial, fund accounting and portfolio accounting services. The
Fund's transfer, shareholder services and dividend paying agent is also State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.

LEGAL OPINIONS

Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Bell, Boyd & Lloyd LLC, Chicago, Illinois, and for the
Underwriters by Simpson Thacher & Bartlett LLP. Bell, Boyd & Lloyd LLC and
Simpson Thacher & Bartlett LLP may rely as to certain matters of Massachusetts
law on the opinion of Bingham McCutchen LLP, Boston, Massachusetts.

TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION

Page
----

Use of Proceeds....................................... 3
Investment Objective.................................. 3
Investment Restrictions............................... 3
Investment Policies and Techniques.................... 7
Overall Fund Management............................... 8
Symphony Investment Philosophy and Process............ 9
Portfolio Composition................................. 10
Other Investment Policies and Techniques.............. 15
Management of the Fund................................ 27
Investment Advisers................................... 36
Portfolio Transactions and Brokerage.................. 40
Distributions......................................... 42
Description of Shares................................. 43
Certain Provisions in the Declaration of Trust........ 48
Repurchase of Fund Shares; Conversion to Open-End Fund 50
Tax Matters........................................... 52
Experts............................................... 60
Custodian and Transfer Agent.......................... 60
Additional Information................................ 60
Report of Independent Auditors........................ 61
Financial Statements.................................. 62
Appendix A--Ratings of Investments.................... A-1

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

Nuveen Floating Rate Income Fund

Common Shares

--------

PROSPECTUS

, 2004

--------

Citigroup

Nuveen Investments, LLC
A.G. Edwards & Sons, Inc.
Wachovia Securities
Advest, Inc.
Ferris, Baker Watts
Incorporated
J.J.B. Hilliard, W.L. Lyons, Inc.
Janney Montgomery Scott LLC
McDonald Investments Inc.
Oppenheimer
Quick & Reilly, Inc.
RBC Capital Markets
Ryan Beck & Co.
Stifel, Nicolaus & Company
Incorporated
SunTrust Robinson Humphrey

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

EPR-JFR-0304D

SUBJECT TO COMPLETION, DATED _____________, 2004

The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.

NUVEEN FLOATING RATE INCOME FUND

STATEMENT OF ADDITIONAL INFORMATION

Nuveen Floating Rate Income Fund (the "Fund") is a newly organized,
diversified, closed-end management investment company.

This Statement of Additional Information relating to common shares of the
Fund ("Common Shares") does not constitute a prospectus, but should be read in
conjunction with the Fund's Prospectus relating thereto dated ___________, 2004
(the "Prospectus"). This Statement of Additional Information does not include
all information that a prospective investor should consider before purchasing
Common Shares. Investors should obtain and read the Fund's Prospectus prior to
purchasing such shares. A copy of the Fund's Prospectus may be obtained without
charge by calling (800) 257-8787. You may also obtain a copy of the Fund's
Prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascribed to them in the Prospectus.

TABLE OF CONTENTS

Page
----

Use of Proceeds...............................................................3
Investment Objective..........................................................3
Investment Restrictions ......................................................3
Investment Policies and Techniques............................................7
Overall Fund Management.......................................................8
Symphony Investment Philosophy and Process ...................................9
Portfolio Composition .......................................................10
Other Investment Policies and Techniques.....................................15
Management of the Fund.......................................................27
Investment Advisers..........................................................36
Portfolio Transactions and Brokerage.........................................40
Distributions ...............................................................42
Description of Shares........................................................43
Certain Provisions in the Declaration of Trust...............................48
Repurchase of Fund Shares; Conversion to Open-End Fund.......................50
Tax Matters..................................................................52
Experts......................................................................60
Custodian and Transfer Agent.................................................60
Additional Information.......................................................60
Report of Independent Auditors...............................................61
Financial Statements.........................................................62
Ratings of Investments (Appendix A)........................................ A-1

This Statement of Additional Information is dated ____________, 2004.

USE OF PROCEEDS

The net proceeds of the offering of Common Shares of the Fund will be
approximately: $ ($ if the Underwriters exercise the
over-allotment option in full) after payment of organization and offering costs.

For the Fund, Nuveen has agreed to pay (i) all organizational expenses and
(ii) offering costs (other than sales load) that exceed $0.03 per Common Share.

Pending investment in Senior Loans and other debt instruments that meet the
Fund's investment objective and policies, the net proceeds of the offering will
be invested in short-term or long-term securities issued by the U.S. government
or its agencies or instrumentalities or in high quality, short-term money market
instruments.

INVESTMENT OBJECTIVE

The Fund's investment objective is to achieve a high level of
current income.

In pursuing its objective of high current income, the Fund will invest in
Senior Loans and other debt instruments that may involve significant credit
risk. As part of its efforts to manage this risk and the potential impact of
such risk on the overall value and returns of the Fund's portfolio, Symphony
will implement its credit management strategy that includes (i) a focus on
Senior Loans that are secured by specific assets, (ii) rigorous and on-going
bottom-up fundamental analysis of issuers, and (iii) overall portfolio
diversification. Symphony will perform its own credit and research analysis of
issuers, taking into consideration, among other things, the entity's financial
resources and operating history, its sensitivity to economic conditions and
trends, the ability of its management, its debt maturity schedules and borrowing
requirements, its anticipated cash flow, interest and asset coverage, and its
earnings prospects. Even with these efforts, because of the greater degree of
credit risk within the portfolio, the Fund's net asset value could decline over
time. In an effort to help preserve the Fund's overall capital, Symphony will
seek to enhance portfolio value by investing in securities it believes to be
undervalued, which, if successful, can mitigate the potential loss of value due
to credit events over time.

The Fund cannot change its investment objective without the approval of the
holders of a "majority of the outstanding" Common Shares and FundPreferred/TM/
shares voting together as a single class, and of the holders of a "majority of
the outstanding" FundPreferred shares voting as a separate class. When used with
respect to particular shares of the Fund, a "majority of the outstanding" shares
means (i) 67% or more of the shares present at a meeting, if the holders of more
than 50% of the shares are present or represented by proxy, or (ii) more than
50% of the shares, whichever is less. See "Description of Shares--FundPreferred
Shares--Voting Rights" in the Fund's Prospectus and "Description of
Shares--FundPreferred Shares--Voting Rights" in this Statement of Additional
Information for additional information with respect to the voting rights of
holders of FundPreferred shares.

INVESTMENT RESTRICTIONS

Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding Common
Shares and, if issued, FundPreferred shares voting together as a single class,
and of the holders of a majority of the outstanding FundPreferred shares voting
as a separate class:

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

(2) Borrow money, except as permitted by the Investment
Company Act of 1940 and exemptive orders granted under the Investment
Company Act of 1940;

(3) Act as underwriter of another issuer's securities, except
to the extent that the Fund may be deemed to be an underwriter within
the meaning of the Securities Act of 1933 in connection with the
purchase and sale of portfolio securities or acting as an agent or one
of a group of co-agents in originating Senior Loans;

(4) Invest more than 25% of its total assets in securities of
issuers in any one industry provided, however, that such limitation
shall not apply to obligations issued or guaranteed by the United
States Government or by its agencies or instrumentalities, and provided
further that for purposes of this limitation, the term "issuer" shall
not include a lender selling a participation to the Fund together with
any other person interpositioned between such lender and the Fund with
respect to a participation;

(5) Purchase or sell real estate, except pursuant to the
exercise by the Fund of its rights under loan agreements and except to
the extent that interests in Senior Loans the Fund may invest in are
considered to be interests in real estate, and this shall not prevent
the Fund from investing in securities of companies that deal in real
estate or are engaged in the real estate business, including real
estate investment trusts, and securities secured by real estate or
interests therein and the Fund may hold and sell real estate or
mortgages on real estate acquired through default, liquidation, or
other distributions of an interest in real estate as a result of the
Fund's ownership of such securities;

(6) Purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments except pursuant
to the exercise by the Fund of its rights under loan agreements and
except to the extent that interests in Senior Loans the Fund may invest
in are considered to be interests in commodities and this shall not
prevent the Fund from purchasing or selling options, futures contracts,
derivative instruments or from investing in securities or other
instruments backed by physical commodities;

(7) Make loans except as permitted by the Investment Company
Act of 1940 and exemptive orders granted under the Investment Company
Act of 1940; and

(8) With respect to 75% of the value of the Fund's total
assets, purchase any securities (other than obligations issued or
guaranteed by the United States Government or by its agencies or
instrumentalities), if as a result more than 5% of the Fund's total
assets would then be invested in securities of a single issuer or if as
a result the Fund would hold more than 10% of the outstanding voting
securities of any single issuer, and provided further that for purposes
of this restriction, the term "issuer" includes both the borrower under
a loan agreement and the lender selling a participation to the Fund
together with any other persons interpositioned between such lender and
the Fund with respect to a participation.

For purposes of the foregoing and "Description of Shares--
FundPreferred Shares--Voting Rights" below, "majority of the outstanding," when
used with respect to particular shares of the Fund, means (i) 67% or more of the
shares present at a meeting, if the holders of more than 50% of the shares are
present or represented by proxy, or (ii) more than 50% of the shares, whichever
is less.

For the purpose of applying the limitation set forth in subparagraph
(8) above, a governmental issuer shall be deemed the single issuer of a security
when its assets and revenues are separate from other governmental entities and
its securities are backed only by its assets and revenues. Similarly, in the
case of a non-governmental issuer, if the security is backed only by the assets
and revenues of the non-governmental issuer, then such non-governmental issuer
would be deemed to be the single issuer. Where a security is also backed by the
enforceable obligation of a superior or unrelated governmental or other entity
(other than a bond insurer), it shall also be included in the

computation of securities owned that are issued by such governmental or other
entity. Where a security is guaranteed by a governmental entity or some other
facility, such as a bank guarantee or letter of credit, such a guarantee or
letter of credit would be considered a separate security and would be treated as
an issue of such government, other entity or bank. When a municipal bond is
insured by bond insurance, it shall not be considered a security that is issued
or guaranteed by the insurer; instead, the issuer of such municipal bond will be
determined in accordance with the principles set forth above.

Under the Investment Company Act of 1940, the Fund may invest only up
to 10% of its Managed Assets in the aggregate in shares of other investment
companies and only up to 5% of its Managed Assets in any one investment company,
provided the investment does not represent more than 3% of the voting stock of
the acquired investment company at the time such shares are purchased. As a
stockholder in any investment company, the Fund will bear its ratable share of
that investment company's expenses, and will remain subject to payment of the
Fund's management, advisory and administrative fees with respect to assets so
invested. Holders of Common Shares would therefore be subject to duplicative
expenses to the extent the Fund invests in other investment companies. In
addition, the securities of other investment companies may also be leveraged and
will therefore be subject to the same leverage risks described herein. As
described in the Prospectus in the section entitled "Risks," the net asset value
and market value of leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated by unleveraged
shares.

In addition to the foregoing fundamental investment policies, the Fund
is also subject to the following non-fundamental restrictions and policies,
which may be changed by the Board of Trustees. The Fund may not:

(1) Sell securities short, except that the Fund may make short
sales of securities if, at all times when a short position is open, the
Fund owns at least an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issuer as, and equal in amount
to, the securities sold short, and provided that transactions in
options, futures contracts, options on futures contracts, or other
derivative instruments are not deemed to constitute selling securities
short.

(2) Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company Act of 1940
or any exemptive relief obtained thereunder. The Fund will rely on
representations of borrowers in loan agreements in determining whether
such borrowers are investment companies.

(3) Purchase securities of companies for the purpose of
exercising control, except to the extent that exercise by the Fund of
its rights under loan agreements would be deemed to constitute
exercising control.

The restrictions and other limitations set forth above will apply only
at the time of purchase of securities and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of an
acquisition of securities.

The Fund may be subject to certain restrictions imposed by either
guidelines of one or more nationally recognized statistical rating organizations
("NRSROs") that may issue ratings for FundPreferred shares, commercial paper or
notes, or, if the Fund borrows from a lender, by the lender. These guidelines
may impose asset coverage or portfolio composition requirements that are more
stringent than those imposed on the Fund by the 1940 Act. It is not anticipated
that these covenants or guidelines will impede Symphony from managing the Fund's
portfolio in accordance with the Fund's investment objective and policies. In
addition to other considerations, to the extent that the Fund believes that the
covenants and guidelines required by the NRSROs or lenders would impede its
ability to meet its investment objective, or if the Fund is unable to obtain the
rating on FundPreferred shares (expected to be at least AA/Aa), the Fund will
not issue FundPreferred shares.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Fund's
investment objective, policies, and techniques that are described in the Fund's
Prospectus.

The Fund's investment objective is to achieve a high level of
current income.

In pursuing its objective of high current income, the Fund will invest in
Senior Loans and other debt instruments that may involve significant credit
risk. As part of its efforts to manage this risk and the potential impact of
such risk on the overall value and returns of the Fund's portfolio, Symphony
will implement its credit management strategy that includes (i) a focus on
Senior Loans that are secured by specific assets, (ii) rigorous and on-going
bottom-up fundamental analysis of issuers, and (iii) overall portfolio
diversification. Symphony will perform its own credit and research analysis of
issuers, taking into consideration, among other things, the entity's financial
resources and operating history, its sensitivity to economic conditions and
trends, the ability of its management, its debt maturity schedules and borrowing
requirements, its anticipated cash flow, interest and asset coverage, and its
earnings prospects. Even with these efforts, because of the greater degree of
credit risk within the portfolio, the Fund's net asset value could decline over
time. In an effort to help preserve the Fund's overall capital, Symphony will
seek to enhance portfolio value by investing in securities it believes to be
undervalued, which, if successful, can mitigate the potential loss of value due
to credit events over time.

Under normal market circumstances, the Fund will invest at least 80% of its
Managed Assets in adjustable rate secured Senior Loans and adjustable rate
unsecured Senior Loans (collectively referred to as "Senior Loans"), which
unsecured Senior Loans will be, at the time of investment, investment grade
quality. The Fund will invest at least 65% of its Managed Assets in Senior Loans
that are secured by specific collateral. Senior Loans pay interest at rates that
are redetermined periodically at short-term intervals by reference to a base
lending rate, primarily the London-Interbank offered rate ("LIBOR"), plus a
premium. The Fund may invest a substantial portion of its Managed Assets in
Senior Loans and other debt instruments that are, at the time of investment,
rated below investment grade or unrated but judged to be of comparable quality.
Senior Loans are made to U.S. or non-U.S. corporations, partnerships and other
business entities ("Borrowers") that operate in various industries and
geographical regions. It is anticipated that the proceeds of the Senior Loans in
which the Fund will invest will be used by Borrowers to finance leveraged
buyouts, recapitalizations, mergers, acquisitions, stock repurchases,
refinancings, internal growth and for other corporate purposes.

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

Investment grade quality securities are those securities that, at the time
of investment, are (i) rated by at least one NRSRO within the four highest
grades (BBB- or Baa3 or better by Standard & Poor's Corporation, a division of
The McGraw-Hill Companies ("S&P"), Moody's Investors Service, Inc.("Moody's") or
Fitch Ratings ("Fitch")), or (ii) unrated but judged to be of comparable
quality. The Fund may purchase Senior Loans and other debt securities that are
rated below investment grade or that are unrated but judged to be of comparable
quality. No more than 10% of the Fund's Managed Assets may be invested in Senior
Loans and other debt securities that are, at the time of investment, rated CCC+
or Caa or below by S&P, Moody's or Fitch or that are unrated but judged to be of
comparable quality.

Under normal circumstances:

. The Fund expects to maintain an average duration of one year or less
for its portfolio investments in Senior Loans and other debt
instruments. See "The Fund's Investments - Investment Objectives and
Policies" in the Fund's Prospectus for a description of duration.

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

. The Fund may invest up to 20% of its Managed Assets in securities of
non-U.S. issuers (which term for purposes of this Statement of
Additional Information includes Borrowers) that are U.S. dollar or
non-U.S. dollar denominated. Initially, the Fund does not intend to
invest in non-U.S. dollar denominated securities. The Fund's Managed
Assets to be invested in Senior Loans and other debt instruments of
non-U.S. issuers may include debt securities of issuers located, or
conducting their business in, emerging markets countries. Initially,
the Fund does not intend to invest in securities of emerging markets
issuers.

. The Fund may not invest more than 20% of its Managed Assets in
securities from an industry which (for the purposes of this
Statement of Additional Information) generally refers to the
classification of companies in the same or similar lines of business
such as the automotive, textiles and apparel, hotels, media production
and consumer retailing industries.

. The Fund may invest more than 20% of its Managed Assets in sectors
which (for the purposes of this Statement of Additional Information)
generally refers to broader classifications of industries, such as the
consumer discretionary sector which includes the automotive, textiles
and apparel, hotels, media production and consumer retailing
industries, provided the Fund's investment in a particular industry
within the sector does not exceed the industry limitation.

. The Fund may invest up to 50% of its Managed Assets in securities and
other instruments that, at the time of investment, are illiquid (i.e.,
securities that are not readily marketable).

Following the competition of this offering, the Fund intends to seek to
increase the Fund's Common Share net income by utilizing financial leverage by
offering preferred shares of beneficial interest ("FundPreferred shares")
and/or by borrowing or issuing commercial paper or notes (collectively,
"Borrowings") and investing the proceeds in the manner described above. The Fund
currently anticipates that FundPreffered shares and/or Borrowings will represent
approximately 38% of the Fund's Managed Assets. There is no assurance that the
Fund will issue FundPreferred shares or incur Borrowings.

OVERALL FUND MANAGEMENT

NIAC is responsible for the Fund's overall investment strategy and its
implementation, including the use of leverage and hedging.

NIAC will oversee Symphony in its management of the Fund's portfolio. This
oversight will include ongoing evaluation of Symphony's investment performance,
quality of investment process and personnel, compliance with Fund and regulatory
guidelines, trade allocation and execution, and other factors.

NIAC will also oversee the Fund's use of leverage, and efforts to minimize
the costs and mitigate the risks to Common Shareholders associated with using
financial leverage. See "Use of Leverage" and "Hedging Transactions" in the
Fund's Prospectus. This effort may involve making adjustments to investment
policies in an attempt to minimize costs and mitigate risks.

SYMPHONY INVESTMENT PHILOSOPHY AND PROCESS

Investment Philosophy. Symphony believes that managing risk, particularly
for volatile assets such as Senior Loans and other forms of high yield debt, is
of paramount importance. Symphony believes that a combination of fundamental
credit analysis and valuation information that is available from the equity
markets provide a means of identifying what it believes to be superior
investment candidates. Additionally, Symphony focuses primarily on liquid
securities to ensure that exit strategies remain available under different
market conditions.

Investment Process. In identifying Senior Loans and other securities for
potential purchase, Symphony combines quantitative screening and fundamental and
relative value analysis. Symphony screens the identified investment candidates
for liquidity constraints and favorable capital structures. The investment team
then performs rigorous bottom-up fundamental analysis to identify investments
with sound industry fundamentals, cash flow sufficiency and asset quality. The
final portfolio is constructed using risk management and monitoring systems to
ensure proper diversification.

PORTFOLIO COMPOSITION

The Fund's portfolio will be composed principally of the investments
described below.

Senior Loans. Senior loans, as with the other types of securities in which
the Fund may invest, are counted for purposes of various other limitations
described in this Statement of Additional Information, including the limitation
on investing no more than 50% of the Fund's Managed Assets in illiquid
securities, to the extent such Senior Loans are deemed to be illiquid.

Senior loans, like most other debt obligations, are subject to the risk of
default. Default in the payment of interest or principal on a senior loan
results in a reduction in income to the Fund, a reduction in the value of the
senior loan and a decrease in the Fund's net asset value. This decrease in the
Fund's net asset value would be magnified by the Fund's use of leverage. The
risk of default increases in the event of an economic downturn or a substantial
increase in interest rates. An increased risk of default could result in a
decline in the value of Senior Loans and in the Fund's net asset value.

Many Senior Loans in which the Fund may invest may not be rated by an
NRSRO, generally will not be registered with the Securities and Exchange
Commission and generally will not be listed on a securities exchange. In
addition, the amount of public information available with respect to senior
loans generally may be less extensive than that available for registered and
exchange-listed securities. Economic and other events (whether real or
perceived) can reduce the demand for certain Senior Loans or Senior Loans
generally, which may reduce market prices and cause the Fund's net asset value
per share to fall. The frequency and magnitude of such changes cannot be
predicted. Senior loans may not be rated at the time that the Fund purchases
them. If a senior loan is rated at the time of purchase, Symphony may consider
the rating when evaluating the senior loan but may not view ratings as a
determinative factor in investment decisions. As a result, the Fund is more
dependent on Symphony's credit analysis abilities. Because of the protective
terms of most Senior Loans, it is possible that the Fund is more likely to
recover more of its investment in a defaulted senior loan than would be the case
for most other types of defaulted debt securities.

In the case of collateralized Senior Loans, there is no assurance that sale
of the collateral would raise enough cash to satisfy the borrower's payment
obligation or that the collateral can or will be liquidated. In the event of
bankruptcy, liquidation may not occur and the court may not give lenders the
full benefit of their senior positions. If the terms of a senior loan do not
require the borrower to pledge additional collateral in the event of a decline
in the value of the original collateral, the Fund will be exposed to the risk
that the value of the collateral will not at all times equal or exceed the
amount of the borrower's obligations under the senior loan. To the extent that a
senior loan is collateralized by stock in the borrower or its subsidiaries, such
stock may lose all of its value in the event of bankruptcy of the borrower.
Uncollateralized Senior Loans involve a greater risk of loss. Some Senior Loans
in which the Fund may invest are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate such Senior Loans
to presently existing or future indebtedness of the borrower or take other
action detrimental to the holders of Senior Loans, such as the Fund, including,
under certain circumstances, invalidating such Senior Loans. Lenders commonly
have certain obligations pursuant to the loan agreement, which may include the
obligation to make additional loans or release collateral in certain
circumstances.

The amount of public information with respect to Senior Loans generally may
be less extensive than that available for more widely rated, registered and
exchange-listed securities. Economic and other events (whether real or
perceived) can reduce the demand for certain Senior Loans or Senior Loans
generally, which may reduce market prices and cause the Fund's net asset value
per share to fall. The frequency and magnitude of such changes cannot be
predicted. In addition, there is no minimum rating or other independent
evaluation of a borrower or its securities limiting the Fund's investments.
Symphony may rely exclusively or primarily on its own evaluation of borrower
credit quality in selecting Senior Loans for purchase. As a result, the Fund is
particularly dependent on the analytical abilities of Symphony.

No active trading market currently exists for some of the Senior Loans in
which the Fund may invest and, thus, those loans may be illiquid. Liquidity
relates to the ability of the Fund to sell an investment in a timely manner at a
price approximately equal to its value on the Fund's books. The illiquidity of
some Senior Loans may impair the Fund's ability to realize the full value of its
assets in the event of a voluntary or involuntary liquidation of such assets.
Because of the lack of an active trading market, illiquid securities are also
difficult to value and prices provided by external pricing services may not
reflect the true fair value of the securities. The risks of illiquidity are
particularly important when the Fund's operations require cash, and may in
certain circumstances require that the Fund sell other investments or borrow to
meet short-term cash requirements. To the extent that a secondary market does
exist for certain Senior Loans, the market may be subject to irregular trading
activity, wide bid/ask spreads and extended trade settlement periods. The market
for Senior Loans could be disrupted in the event of an economic downturn or a
substantial increase or decrease in interest rates. This could result in
increased volatility in the market and in the Fund's net asset value and market
price per share.

If legislation or state or federal regulators impose additional
requirements or restrictions on the ability of financial institutions to make
loans that are considered highly leveraged transactions, the availability of
Senior Loans for investment by the Fund may be adversely affected. In addition,
such requirements or restrictions could reduce or eliminate sources of financing
for certain borrowers. This would increase the risk of default. If legislation
or federal or state regulators require financial institutions to dispose of
Senior Loans that are considered highly leveraged transactions or subject such
Senior Loans to increased regulatory scrutiny, financial institutions may
determine to sell such Senior Loans. Such sales could result in prices that, in
the opinion of Symphony, do not represent fair value. If the Fund attempts to
sell a senior loan at a time when a financial institution is engaging in such a
sale, the price the Fund could get for the senior loan may be adversely
affected.

Any lender, which could include the Fund, is subject to the risk that a
court could find the lender liable for damages in a claim by a borrower arising
under the common laws of tort or contracts or anti-fraud provisions of certain
securities laws for actions taken or omitted to be taken by the lenders under
the relevant terms of a loan agreement or in connection with actions with
respect to the collateral underlying the senior loan.

The Fund may purchase participations in Senior Loans. By purchasing a
participation interest in a loan, the Fund acquires some or all of the interest
of a bank or other financial institution in a loan to a corporate borrower.
Under a participation, the Fund generally will have rights that are more limited
than the rights of lenders or of persons who acquire a senior loan by
assignment. In a participation, the Fund typically has a contractual
relationship with the lender selling the participation, but not with the
borrower. As a result, the Fund assumes the credit risk of the lender selling
the participation in addition to the credit risk of the borrower. In the event
of insolvency of the lender selling the participation, the Fund may be treated
as a general creditor of the lender and may not have a senior claim to the
lenders' interest in the senior loan. A lender selling a participation and other
persons interpositioned between the lender and the Fund with respect to
participations will likely conduct their principal business activities in the
banking, finance and financial services industries.

Non-Senior Loan Investments. The Fund may invest in debt instruments and
other securities as described below:

Structured Notes. The Fund may use structured notes, which are privately
negotiated debt obligations or economically equivalent instruments where the
principal and/or interest is determined by reference to the performance of a
benchmark asset, market or interest rate (an "embedded index"), such as selected
securities or loans, an index of securities or loans, or specified interest
rates, or the differential performance of two assets or markets. Structured
notes may be issued by corporations, including banks, as well as by governmental
agencies. Structured notes frequently are assembled in the form of medium-term
notes, but a variety of forms are available and may be used in particular
circumstances. The terms of such structured notes normally provide that their
principal and/or interest payments are to be adjusted upwards or index while the
structured notes are outstanding. As a result, the interest and/or principal
payments that may be made on a structured product may vary widely, depending on
a variety factors, including the volatility of the embedded index and the effect
of changes in the embedded index on principal and/or interest payments. If the
Fund invests in structured notes that are designed to provide returns and risks
that emulate those of senior loans, the Fund may treat the value of (or, if
applicable, the notional amount of) such investment as an investment in Senior
Loans for purposes of determining compliance with the requirement set forth
above that at least 80% of the Fund's Managed Assets be invested under normal
market circumstances in Senior Loans, except to the extent that the value (or
notional amount) of such investments exceeds 5% of the Fund's Managed Assets.
Any such investment amounts that exceed 5% of Managed Assets will be treated as
a type of "other debt instruments" which, in the aggregate, are limited to 20%
of Managed Assets. The rate of return on structured notes may be determined by
applying a multiplier to the performance or differential performance of the
referenced index(es) or other asset(s). Application of the multiplier involves
leverage that will serve to magnify the potential for gain and the risk of loss.

Symphony may utilize structured notes for investment purposes and also for
risk management purposes, such as to reduce the duration and interest rate
sensitivity of the Fund's portfolio. While structured notes may offer the
potential for a favorable rate of return from time to time, they also entail
certain risks. Structured notes may be less liquid than other debt securities,
and the price of structured notes may be more volatile. In some cases, depending
on the terms of the embedded index, a structured note may provide that the
principal and/or interest payments may be adjusted below zero. Structured notes
also may involve significant credit risk and risk of default by the
counterparty. Although structured notes are not necessarily illiquid, NIAC
believes that currently most structured notes are illiquid. Like other
sophisticated strategies, the Fund's use of structured notes may not work as
intended. If the value of the embedded index changes in a manner other than that
expected by Symphony, principal and/or interest payments received on the
structured notes may be substantially less than expected. Also, if Symphony uses
structured notes to reduce the duration of the Fund's portfolio, this may limit
the Fund's return when having a longer duration of the Fund's portfolio, this
may limit the Fund's return when having a longer duration would be beneficial
(for instance, when interest rates decline).

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

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

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

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

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

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

Convertible Securities. Convertible securities are bonds, debentures,
notes, preferred securities or other securities that may be converted or
exchanged (by the holder or the issuer) into shares of the underlying common
stock (or cash or securities of equivalent value) at a stated exchange ratio or
predetermined price (the "conversion price"). Convertible securities have
general characteristics similar to both debt securities and common stocks. The
interest paid on convertible securities may be fixed or floating rate. Floating
rate convertible securities may specify an interest rate or rates that are
conditioned upon changes to the market price of the underlying common stock.
Convertible securities also may be issued in zero coupon form with an original
issue discount. See "Other Investment Policies and Techniques-Zero Coupon and
Payment-In-Kind Securities." Although to a lesser extent than with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the market value of
the underlying common stocks and, therefore, will also react to variations in
the general market for common stocks. Depending upon the relationship of the
conversion price to the market value of the underlying common stock, a
convertible security may trade more like a common stock than a debt instrument.

A convertible security generally entitles the holder to receive interest
paid or accrued until the convertible security matures or is redeemed, converted
or exchanged. Convertible securities rank senior to common stock in a
corporation's capital structure and, therefore, generally entail less risk than
the corporation's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a debt obligation. Before conversion,
convertible securities have characteristics similar to non-convertible debt
obligations and can provide for a stable stream of income with generally higher
yields than common stocks. However, convertible securities fall below debt
obligations of the same issuer in order of preference or priority in the event
of a liquidation, and are typically unrated or rated lower than such debt
obligations. In addition, contingent payment convertible securities allow the
issuer to claim deductions based on its nonconvertible cost of debt which
generally will result in deductions in excess of the actual cash payments made
on the securities (and accordingly, holders will recognize income in amounts in
excess of the cash payments received). There can be no assurance of current
income because the issuers of the convertible securities may default on their
obligations. The convertible securities in which the Fund may invest may be
below investment grade quality. See "--Below Investment Grade Securities" above.

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

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

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

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

Convertible securities generally offer lower interest or dividend yields
than non-convertible fixed-income securities of similar credit quality because
of the potential for capital appreciation. The market values of convertible
securities tend to decline as interest rates increase and, conversely, to
increase as interest rates decline. However, a convertible security's market
value also tends to reflect the market price of the common stock of the issuing
company, particularly when the stock price is greater than the convertible
security's conversion price. The conversion price is defined as the
predetermined price or exchange ratio at which the convertible security can be
converted or exchanged for the underlying common stock. As the market price of
the underlying common stock declines below the conversion price, the price of
the convertible security tends to be increasingly influenced more by the yield
of the convertible security than by the market price of the underlying common
stock.

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

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

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

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

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

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

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

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

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

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

OTHER INVESTMENT POLICIES AND TECHNIQUES

REPURCHASE AGREEMENTS

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

SOVEREIGN DEBT SECURITIES

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

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

Additional factors that may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability or sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, and its
government's policy towards the International Monetary Fund, the International
Bank for Reconstruction and Development and other international agencies to
which a government debtor may be subject.

The Fund may invest in debt securities issued by issuers located, or
conducting their business in, emerging markets countries, and investments in
such debt securities are particularly speculative. Heightened risks of investing
in emerging markets sovereign debt include:

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

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

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

SECURITIES ISSUED BY NON-U.S. ISSUERS

The Fund may invest up to 20% of its Managed Assets in securities of
non-U.S. issuers that are U.S. dollar or non-U.S. dollar denominated. Initially,
the Fund does not intend to invest in non-U.S. dollar denominated securities.
The Fund may invest in any region of the world and invest in companies operating
in developed countries such as Canada, Japan, Australia, New Zealand and most
Western European countries. Initially, the Fund does not intend to invest in
securities of emerging market issuers. As used in this Statement of Additional
Information, an "emerging market" country is any country determined to have an
emerging markets economy, considering, among other things, factors such as
whether the country has a low-to-middle income economy according to the World
Bank or its related organizations, the country's credit rating, its political
and economic stability and the development of its financial and capital markets.
These countries generally include countries located in Latin America, the
Caribbean, Asia, Africa, the Middle East and Eastern and Central Europe.

Securities of non-U.S. issuers include ADRs, Global Depositary Receipts
(GDRs) or other securities representing underlying shares of non-U.S. issuers.
Positions in those securities are not necessarily denominated in the same
currency as the common stocks into which they may be converted. ADRs are
receipts typically issued by an American bank or trust company evidencing
ownership of the underlying securities. GDRs are U.S. dollar- denominated
receipts evidencing ownership of non-U.S. securities. Generally, ADRs, in
registered form, are designed for the U.S. securities markets and GDRs, in
bearer form, are designed for use in non-U.S. securities markets. The Fund may
invest in sponsored or unsponsored ADRs. In the case of an unsponsored ADR, the
Fund is likely to bear its proportionate share of the expenses of the depository
and it may have greater difficulty in receiving shareholder communications than
it would have with a sponsored ADR.

Investors should understand and consider carefully the risks involved in
investing in securities of non-U.S. issuers. Investing in securities of non-U.S.
issuers involves certain considerations comprising both risks and opportunities
not typically associated with investing in securities of U.S. issuers. These
considerations include: (i) less publicly available information about non-U.S.
issuers or markets due to less rigorous disclosure or accounting standards or
regulatory practices; (ii) many non-U.S. markets are smaller, less liquid and
more volatile, meaning that, in a changing market, Symphony may not be able to
sell the Fund's portfolio securities at times, in amounts or at prices it
considers reasonable; (iii) potential adverse effects of fluctuations in
currency exchange rates or controls on the value of the Fund's investments; (iv)
the economies of non-U.S. countries may grow at slower rates than expected or
may experience a downturn or recession; (v) the impact of economic, political,
social or diplomatic developments may adversely affect the securities markets;
(vi) withholding and other non-U.S. taxes may decrease the Fund's return; (vii)
certain non-U.S. countries may impose restrictions on the ability of non-U.S.
issuers to make payments of principal and/or interest to investors located
outside the U.S. due to blockage of foreign currency exchanges or otherwise; and
(viii) possible seizure, expropriation or nationalization of the company or its
assets. These risks are more pronounced to the extent that the Fund invests a
significant amount of its investments in issuers located in one region and to
the extent that the Fund invests in securities of issuers in emerging markets.
Although the Fund may hedge its exposure to certain of these risks, including
the foreign currency exchange rate risk, there can be no assurance that the Fund
will enter into hedging transactions at any time or at times or under
circumstances in which it might be advisable to do so.

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

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

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

ZERO COUPON AND PAYMENT-IN-KIND SECURITIES

The Fund's investments in debt securities may be in the form of a zero
coupon bond. Zero coupon bonds are debt obligations that do not entitle the
holder to any periodic payments of interest for the entire life of the
obligation. When held to its maturity, its return comes from the difference
between the purchase price and its maturity value. Payment-in-kind securities
("PIKs") pay dividends or interest in the form of additional securities of the
issuer, rather than in cash. Each of these instruments is typically issued and
traded at a deep discount from its face amount. The amount of the discount
varies depending on such factors as the time remaining until maturity of the
securities, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer. The market prices of zero coupon bonds
and PIKs generally are more volatile than the market prices of debt instruments
that pay interest currently and in cash and are likely to respond to changes in
interest rates to a greater degree than do other types of securities having
similar maturities and credit quality. In order to satisfy a requirement for
qualification to be taxed as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"), an investment company, such as
the Fund, must distribute each year at least 90% of its investment company
taxable income, including the original issue discount accrued on zero coupon
bonds and PIKs. Because the Fund will not on a current basis receive cash
payments from the issuer of these securities in respect of any accrued original
issue discount, in some years the Fund may have to distribute cash obtained from
selling other portfolio holdings of the Fund in order to avoid unfavorable tax
consequences. In some circumstances, such sales might be necessary in order to
satisfy cash distribution requirements to its Common Shareholders even though
investment considerations might otherwise make it undesirable for the Fund to
sell securities at such time. Under many market conditions, investments in zero
coupon bonds and PIKs may be illiquid, making it difficult for the Fund to
dispose of them or determine their current value.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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

NO INVERSE FLOATING RATE SECURITIES

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

HEDGING TRANSACTIONS

As a non-fundamental policy that can be changed by the Board of Trustees,
the use of derivatives and other transactions solely for purposes of hedging the
portfolio will be restricted to reducing the portfolio's exposure to lower grade
credit risk, foreign currency exchange rate risk and the risk of increases in
interest rates. The specific derivative instruments to be used, or other
transactions to be entered into, for hedging purposes may include the purchase
or sale of futures contracts on securities, credit-linked notes, securities
indices, other indices or other financial instruments; options on futures
contracts; exchange-traded and over-the-counter options on securities or
indices; index-linked securities; swaps; and currency exchange transactions.
Some, but not all, of the derivative instruments may be traded and listed on an
exchange. The positions in derivatives will be marked-to-market daily at the
closing price established on the relevant exchange or at a fair value.

There may be an imperfect correlation between changes in the value of the
Fund's portfolio holdings and hedging positions entered into by the Fund, which
may prevent the Fund from achieving the intended hedge or expose the Fund to
risk of loss. In addition, the Fund's success in using hedging instruments is
subject to Symphony's ability to predict correctly changes in the relationships
of such hedge instruments to the Fund's portfolio holdings or other factors, and
there can be no assurance that Symphony's judgment in this respect will be
correct. Consequently, the use of hedging transactions might result in a poorer
overall performance for the Fund, whether or not adjusted for risk, than if the
Fund had not hedged its portfolio holdings. In addition, there can be no
assurance that the Fund will enter into hedging or other transactions at times
or under circumstances in which it would be advisable to do so. See
"Risks--Hedging Risks" in the Fund's Prospectus.

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

In a short sale, the Fund will not deliver from its portfolio the
securities sold and will not receive immediately the proceeds from the sale.
Instead, the Fund will borrow the securities sold short from a broker-dealer
through which the short sale is executed and the broker-dealer will deliver such
securities, on behalf of the Fund, to the purchaser of such securities. Such
broker-dealer will be entitled to retain the proceeds from the short sale until
the Fund delivers to such broker-dealer the securities sold short. In addition,
the Fund will be required to pay the broker-dealer the amount of any dividends
paid on shares sold short. Finally, to secure its obligation to deliver to such
broker-dealer the securities sold short, the Fund must deposit and continuously
maintain in a separate account with its custodian an equivalent amount of the
securities sold short or securities convertible into or exchangeable for such
securities without the payment of additional consideration. The Fund is said to
have a short position in the securities sold until it delivers to the
broker-dealer the securities sold, at which time the Fund will receive the
proceeds of the sale. Because the Fund ordinarily will want to continue to hold
securities in its portfolio that are sold short, the Fund will normally close
out a short position by purchasing on the open market and delivering to the
broker-dealer an equal amount of the securities sold short, rather than
delivering portfolio securities.

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

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

The Code imposes constructive sale treatment for federal income tax
purposes on certain hedging strategies with respect to appreciated financial
positions. Under these rules, taxpayers will recognize gain, but not loss, with
respect to securities if they enter into short sales or "offsetting notional
principal contracts" (as defined by the Code) with respect to, or futures or
forward contracts to deliver, the same or substantially identical property, or
if they enter into such transactions and then acquire the same or substantially
identical property. The Secretary of Treasury is authorized to promulgate
regulations that will treat as constructive sales certain transactions that have
substantially the same effect as these transactions. See "Tax Matters."

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

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

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

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

security. Thus, in some periods the Fund might receive less total return and in
other periods greater total return from its hedged positions than it would have
received from its underlying securities unhedged.

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

When the Fund writes an option on a stock or bond index, it will establish
a segregated account with its custodian in which the Fund will deposit liquid
securities in an amount equal to the market value of the option, and will
maintain the account while the option is open.

Stock and Bond Index Futures Contracts. The Fund may purchase and sell
stock index futures as a hedge against movements in the equity markets. Stock
and bond index futures contracts are agreements in which one party agrees to
deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or bond index at the close
of the last trading day of the contract and the price at which the agreement is
made. No physical delivery of securities is made.

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

Under regulations of the Commodity Futures Trading Commission ("CFTC")
currently in effect, which may change from time to time, with respect to futures
contracts purchased by the Fund, the Fund will set aside in a segregated account
liquid securities with a value at least equal to the value of instruments
underlying such futures contracts less the amount of initial margin on deposit
for such contracts. The current view of the staff of the Securities and Exchange
Commission is that the Fund's long and short positions in futures contracts must
be collateralized with cash or certain liquid assets held in a segregated
account or "covered" in order to counter the impact of any potential leveraging.

Parties to a futures contract must make "initial margin" deposits to secure
performance of the contract. There are also requirements to make "variation
margin" deposits from time to time as the value of the futures contract
fluctuates. The Fund and NIAC have claimed, respectively, an exclusion from
registration as a commodity pool and as a commodity trading advisor under the
Commodity Exchange Act (CEA) and, therefore, neither the Fund nor NIAC, or their
officers and directors, are subject to the registration requirements of the CEA.
The Fund reserves the right to engage in transactions involving futures and
options thereon to the extent allowed by CFTC regulations in effect from time to
time and in accordance with the Fund's policies. In addition, certain provisions
of the Code may limit the extent to which the Fund may enter into futures
contracts or engage in options transactions. See "Tax Matters."

The potential loss related to the purchase of an option on a futures
contract is limited to the premium paid for the option (plus transaction costs).

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

Other Futures Contracts and Options on Futures Contracts. The Fund's use of
derivative instruments also may include (i) U.S. Treasury security or U.S.
Government Agency security futures contracts and (ii) options on U.S. Treasury
security or U.S. Government Agency security futures contracts. All such
instruments must be traded and listed on an exchange. U.S. Treasury and U.S.
Government Agency futures contracts are standardized contracts for the future
delivery of a U.S. Treasury Bond or U.S. Treasury Note or a U.S. Government
Agency security or their equivalent at a future date at a price set at the time
of the contract. An option on a U.S. Treasury or U.S. Government Agency futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser of the option the right, in return for the premium paid, to assume a
position in a U.S. Treasury or U.S. Government Agency futures contract at a
specified exercise price at any time on or before the expiration date of the
option. Upon exercise of an option, the delivery of the futures position by the
writer of the option to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's future margin account, which
represents the amount by which the market price of the futures contract exceeds
the exercise price of the option on the futures contract.

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

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

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

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

The Fund may purchase and sell various other kinds of financial futures
contracts and options thereon. Futures contracts may be based on various debt
securities and securities indices (such as the Municipal Bond Index traded on
the Chicago Board of Trade). Such transactions involve a risk of loss or
depreciation due to unanticipated adverse changes in securities prices, which
may exceed the Fund's initial investment in these contracts. The Fund will only
purchase or sell futures contracts or related options in compliance with the
rules of the Commodity Futures Trading Commission. These transactions involve
transaction costs. There can be no assurance that the Fund's use of futures will
be advantageous to the Fund. Guidelines established by one or more NRSROs that
rate any FundPreferred shares issued by the Fund may limit use of these
transactions.

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

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

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

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

securities of non-U.S. issuers as described in this Statement of Additional
Information. The Fund's currency transactions will be limited to portfolio
hedging involving portfolio positions. Portfolio hedging is the use of a forward
contract with respect to a portfolio security position denominated or quoted in
a particular currency. A forward contract is an agreement to purchase or sell a
specified currency at a specified future date (or within a specified time
period) and price set at the time of the contract. Forward contracts are usually
entered into with banks, foreign exchange dealers or broker-dealers, are not
exchange-traded, and are usually for less than one year, but may be renewed.

At the maturity of a forward contract to deliver a particular currency, the
Fund may either sell the portfolio security related to such contract and make
delivery of the currency, or it may retain the security and either acquire the
currency on the spot market or terminate its contractual obligation to deliver
the currency by purchasing an offsetting contract with the same currency trader
obligating it to purchase on the same maturity date the same amount of the
currency.

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

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

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

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

ILLIQUID SECURITIES

The Fund may invest up to 50% of its Managed Assets in securities and other
instruments that, at the time of investment, are illiquid (i.e., securities that
are not readily marketable). For this purpose, illiquid securities may include,
but are not limited to, restricted securities (securities the disposition of
which is restricted under the federal securities laws), securities that may only
be resold pursuant to Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), that are deemed to be illiquid, and certain repurchase
agreements. The Board of Trustees or its delegate has the ultimate authority to
determine which securities are liquid or illiquid for purposes of this 50%
limitation. The Board of Trustees has delegated to Symphony the day-to-day
determination of the illiquidity of any security held by the Fund, although it
has retained oversight and ultimate responsibility for such determinations. No
definitive liquidity criteria are used. The Board of Trustees has directed
Symphony when making liquidity determinations to look for such factors as (i)
the nature of the market for a security (including the institutional private
resale market; the frequency of trades and quotes for the security; the number
of dealers willing to purchase or sell the security; the amount of time normally
needed to dispose of the security; and the method of soliciting offers and the
mechanics of transfer), (ii) the terms of certain securities or other
instruments allowing for the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand instruments), and (iii) other
relevant factors.

Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than that which prevailed when it decided to
sell. Illiquid securities will be priced at fair value as determined in good
faith by the Board of Trustees or its delegate. If, through the appreciation of
illiquid securities or the depreciation of liquid securities, the Fund should be
in a position where more than 50% of the value of its Managed Assets is invested
in illiquid securities, including restricted securities that are not readily
marketable, the Fund will take such steps as are deemed advisable, if any, to
protect liquidity.

Short-Term/Long-Term Debt Securities; Defensive Position; Invest-Up Period.
During temporary defensive purposes or in order to keep the Fund's cash on hand
fully invested, including the period during which the net proceeds of the
offering are being invested, the Fund may invest up to 100% of its Managed
Assets in cash equivalents and investment grade debt securities, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities. In addition, upon Symphony's recommendation that a change
would be in the best interests of the Fund and upon concurrence by NIAC, and
subject to approval of the Board of Trustees of the Fund, Symphony may deviate
from its investment guidelines discussed herein. In such a case, the Fund may
not pursue or achieve its investment objective. These investments are defined
to include, without limitation, the following:

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

(2) Certificates of Deposit issued against funds deposited in
a bank or a savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and are
normally negotiable. The issuer of a certificate of deposit agrees to
pay the amount deposited plus interest to the bearer of the certificate
on the date specified thereon. Under current FDIC regulations, the
maximum insurance payable as to any one certificate of deposit is
$100,000; therefore, certificates of deposit purchased by the Fund may
not be fully insured.

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

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

OTHER INVESTMENT COMPANIES

The Fund may invest up to 10% of its Managed Assets in securities of other
open- or closed-end investment companies that invest primarily in securities of
the types in which the Fund may invest directly. In addition, the Fund may
invest a portion of its Managed Assets in pooled investment vehicles (other than
investment companies) that invest primarily in securities of the types in which
the Fund may invest directly. The Fund generally expects that it may invest in
other investment companies and/or other pooled investment vehicles either during
periods when it has large amounts of uninvested cash, such as the period shortly
after the Fund receives the proceeds of the offering of its Common Shares,
FundPreferred shares and/or Borrowings, or during periods when there is a
shortage of attractive securities of the types in which the Fund may invest in
directly available in the market. As an investor in an investment company, the
Fund will bear its ratable share of that investment company's expenses, and
would remain subject to payment of the Fund's advisory and administrative fees
with respect to assets so invested. Common Shareholders would therefore be
subject to duplicative expenses to the extent the Fund invests in other
investment companies. Symphony will take expenses into account when evaluating
the investment merits of an investment in the investment company relative to
available securities of the types in which the Fund may invest directly. In
addition, the securities of other investment companies also may be leveraged and
therefore will be subject to the same leverage risks described herein. As
described in the section entitled "Risks," the net asset value and market value
of leveraged shares will be more volatile and the yield to shareholders will
tend to fluctuate more than the yield generated by unleveraged shares. The Fund
will treat its investments in such investment companies as investments in Senior
Loans for all purposes, such as for purposes of determining compliance with the
requirement set forth above that at least 80% of the Fund's Managed Assets be
invested under normal market circumstances in Senior Loans.

LENDING OF PORTFOLIO SECURITIES

The Fund may lend its portfolio securities to broker-dealers and banks. Any
such loan must be continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the market value of
the securities loaned by the Fund. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned through payments from the borrower. The Fund would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund may pay reasonable fees to persons unaffiliated with the
Fund for services in arranging these loans. The Fund would have the right to
call the loan and obtain the securities loaned at any time on notice of not more
than five business days. The Fund would not have the right to vote the
securities during the existence of the loan but would call the loan to permit
voting of the securities, if, in Symphony's judgment, a material event requiring
a shareholder vote would otherwise occur before the loan was repaid. In the
event of bankruptcy or other default of the borrower, the Fund could experience
both delays in liquidating the loan collateral or recovering the loaned
securities and losses, including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) expenses of
enforcing its rights.

PORTFOLIO TRADING AND TURNOVER RATE

Portfolio trading may be undertaken to accomplish the investment objective
of the Fund in relation to actual and anticipated movements in interest rates.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what Symphony believes to be
a temporary price disparity between the two securities. Temporary price
disparities between two comparable securities may result from supply and demand
imbalances where, for example, a temporary oversupply of certain securities may
cause a temporarily low price for such securities, as compared with other
securities of like quality and characteristics. A security may also be sold when
Symphony anticipates a change in the price of such security, Symphony believes
the price of a security has reached or is near a realistic maximum, or there are
other securities that Symphony believes are more attractive given the Fund's
investment objective.

The Fund may also engage to a limited extent in short-term trading
consistent with its investment objective. Securities may be sold in anticipation
of a market decline or purchased in anticipation of a market rise and later
sold, but the Fund will not engage in trading solely to recognize a gain.
Subject to the foregoing, the Fund will attempt to achieve its investment
objective by prudent selection of securities with a view to holding them for
investment. While there can be no assurance thereof, the Fund anticipates that
its annual portfolio turnover rate will generally not exceed 50%. However, the
rate of turnover will not be a limiting factor when the Fund deems it desirable
to sell or purchase securities. Therefore, depending upon market conditions, the
annual portfolio turnover rate of the Fund may exceed 50% in particular years. A
higher portfolio turnover rate results in correspondingly greater brokerage
commissions and other transactional expenses that are borne by the Fund. High
portfolio turnover may result in the realization of net short-term capital gains
by the Fund which, when distributed to shareholders, will be taxable as ordinary
income.

INTEREST RATE TRANSACTIONS

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

Because both Senior Loans and the Fund's FundPreferred shares and
Borrowings generally pay interest or dividends based on short-term market
interest rates, the Fund's investments in Senior Loans may potentially offset
the leverage risks borne by the Fund relating to the fluctuations on Common
Share income due to variations in the FundPreferred share dividend rate and/or
the interest rate on Borrowings.

The Fund will usually enter into swaps or caps on a net basis; that is,
the two payment streams will be netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. The Fund intends to
maintain in a segregated account with its custodian cash or liquid securities
having a value at least equal to the Fund's net payment obligations under any
swap transaction, marked-to-market daily.

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

Interest rate swaps and caps do not involve the delivery of securities
or other underlying assets or principal. Accordingly, the risk of loss with
respect to interest rate swaps is limited to the net amount of interest payments
that the Fund is contractually obligated to make. If the counterparty defaults,
the Fund would not be able to use the anticipated net receipts under the swap or
cap to offset the interest payments on Borrowings or dividend payments on the
FundPreferred shares. Depending on whether the Fund would be entitled to receive
net payments from the counterparty on the swap or cap, which in turn would
depend on the general state of short-term interest rates at that point in time,
such a default could negatively impact the performance of the Common Shares.

Although this will not guarantee that the counterparty does not
default, the Fund will not enter into an interest rate swap or cap transaction
with any counter-party that NIAC believes does not have the financial resources
to honor its obligation under the interest rate swap or cap transaction.
Further, NIAC will continually monitor the financial stability of a counterparty
to an interest rate swap or cap transaction in an effort to proactively protect
the Fund's investments.

In addition, at the time the interest rate swap or cap transaction
reaches its scheduled termination date, there is a risk that the Fund would not
be able to obtain a replacement transaction or that the terms of the replacement
would not be as favorable as on the expiring transaction. If this occurs, it
could have a negative impact on the performance of the Fund's Common Shares.

The Fund may choose or be required to prepay any Borrowings or redeem
some or all of the FundPreferred shares. This redemption would likely result in
the Fund seeking to terminate early all or a portion of any swap or cap
transaction. Such early termination of a swap could result in termination
payment by or to the Fund. An early termination of a cap could result in a
termination payment to the Fund.

MANAGEMENT OF THE FUND

TRUSTEES AND OFFICERS

The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees of the Fund. The number of trustees of the Fund is
currently set at 15. None of the trustees who are not "interested persons" of
the Fund has ever been a director or employee of, or consultant to, Nuveen,
Symphony or their affiliates. The Trustees serve annual terms until the next
annual shareholder meeting. The names and business addresses of the trustees and
officers of the Fund, their principal occupations and other affiliations during
the past five years, the number of portfolios each oversees and other
directorships they hold are set forth below.

Positions and Offices Principal Occupations, Including Number of Portfolios
with the Fund and Year First Other Directorships Held, During in Fund Complex
Name and Address Birthdate Elected or Appointed Past Five Years Overseen by Trustee
---------------- --------- -------------------- --------------- -------------------

Trustee who is an "interested person" of the Fund:

Timothy R. Schwertfeger* 03/28/49 Chairman of the Board Chairman and Director (since 1996) 143
333 West Wacker Drive and Trustee, 2003 of Nuveen Investments, Inc.,
Chicago, IL 60606 Nuveen Investments, LLC, Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.

_______________________________

* Mr. Schwertfeger is an "interested person" of the Fund, as defined in the
Investment Company Act of 1940, because he is an officer and director of
Nuveen Investments, Inc., Nuveen Investments, LLC and NIAC.

Chairman and Director (since 1997)
of Nuveen Asset Management, Inc.;
Director (since 1996) of Institutional
Capital Corporation; Chairman and
Director (since 1999) of Rittenhouse
Asset Management, Inc.; Chairman of
Nuveen Investments Advisers Inc. (since
2002).

Trustees who are not "interested persons" of the Fund:

William E. Bennett 10/16/46 Trustee, 2004 Private Investor; previously, 143
333 West Wacker Drive President and Chief Executive
Chicago, IL 60606 Officer, Draper & Kramer, Inc.,
a private company that handles
mortgage banking, real estate
development, pension advisory
and real estate management
(1995 - 1998); prior thereto,
Executive Vice President and
Chief Credit Officer, First Chicago
Corporation and its principal subsidiary,
The First National Bank of Chicago.

Robert P. Bremner 8/22/40 Trustee, 2004 Private Investor and Management Consultant. 143
333 West Wacker Drive
Chicago, Il 60606

Lawrence H. Brown 7/29/34 Trustee, 2004 Retired (since 1989) as Senior Vice President 143
333 West Wacker Drive of The Northern Trust Company; Director,
Chicago, Il 60606 Community Advisory Board for Highland Park
and Highwood, United Way of the North Shore
(since 2002).

Jack B. Evans 10/22/48 Trustee, 2004 President, The Hall-Perrine 143
333 West Wacker Drive Foundation, a private philanthropic
Chicago, IL 60606 corporation (since 1996); Director,
Alliant Energy; Director and Vice
Chairman, United Fire & Casualty
Company; Director, Federal Reserve
Bank of Chicago; formerly, President and
Chief Operating Officer, SCI
Financial Group, Inc., a regional
financial services firm.

William C. Hunter(2) 3/6/48 Trustee, 2004 Dean and Distinguished Professor of Finance, 35
School of Business at the University of
Connecticut (since 2003); previously, Senior
Vice President and Director of Research at
the Federal Reserve Bank of Chicago (1995-2003);
Director (since 1997), Credit Research Center
at Georgetown University. Director of Xerox
Corporation (since 2004).

Anne E. Impellizzeri(1) 1/26/33 Trustee, 2004 Retired, formerly Executive Director (1998- 143
333 West Wacker Drive 2001) of Manitoga (Center for Russel Wright's
Chicago, IL 60606 Design with Nature); formerly, President and
Executive Officer of Blanton-Peale Institutes
Chief of Religion and Health (since 1990);
prior thereto, Vice President, Metropolitan
Life Insurance Co.

William L. Kissick(1) 7/29/32 Trustee, 2004 Professor Emeritus, School of Medicine 143
333 West Wacker Drive and the Wharton School of Management and
Chicago, IL 60606 former Chairman, Leonard Davis
Institute of Health Economics,
University of Pennsylvania; Adjunct Professor,
Health Policy and Management, Yale University.

Thomas E. Leafstrand(1) 11/11/31 Trustee, 2004 Retired; previously, Vice President 143
333 West Wacker Drive in charge of Municipal Underwriting
Chicago, IL 60606 and Dealer Sales at The Northern
Trust Company.

Peter R. Sawers(1) 4/3/33 Trustee, 2004 Adjunct Professor of Business and Economics, 143
333 West Wacker Drive University of Dubuque, Iowa; formerly (1991-
Chicago, IL 60606 2000) Adjunct Professor, Lake Forest Graduate
School of Management, Lake Forest, Illinois;
prior thereto, Executive Director, Towers
Perrin Australia, a management consulting firm;
Chartered Financial Analyst; Director, Executive
Service Corps of Chicago, a not-for-profit
organization; Certified Management Consultant.

William J. Schneider 9/24/44 Trustee, 2004 Senior Partner and Chief Operating Officer, 143
333 West Wacker Drive Miller-Valentine Group, Vice President,
Chicago, IL 60606 Miller-Valentine Realty, a construction
company; Chair, Miami Valley Hospital; Chair,
Dayton Development Coalition; formerly Member,
Community Advisory Board, National City Bank,
Dayton, Ohio and Business Advisory Council,
Cleveland Federal Reserve Bank.

Judith M. Stockdale 12/29/47 Trustee, 2004 Executive Director, Gaylord and Dorothy 143
333 West Wacker Drive Donnelley Foundation (since 1994); prior
Chicago, IL 60606 thereto, Executive Director, Great Lakes
Protection Fund (from 1990 to 1994)

Sheila W. Wellington(1) 2/24/32 Trustee, 2004 Clinical Professor of Management, Stern/NYU 143
333 West Wacker Drive Business School (since 2003); formerly,
Chicago, IL 60606 President (1993-2003) of Catalyst (a not-
for-profit organization focusing on women's
leadership development in business and the
professions).

(1) Mr. Leafstrand and Ms. Wellington are expected to retire effective July,
2004 pursuant to the Fund's retirement policy. Messrs. Sawers and Kissick
and Ms. Impellizzeri are also expected to retire effective July, 2004.

(2) Dr. Hunter is also a trustee designee of 108 funds and is expected to
become a trustee of those funds in July, 2004.

Positions and Offices Principal Occupations, Including Number of Portfolios
with the Fund and Year First Directorships Held, During in Fund Complex
Name and Address Birthdate Elected or Appointed Past Five Years Overseen by Officer
---------------- --------- -------------------- --------------- -------------------

Officers of the Fund:

Gifford R. Zimmerman 9/9/56 Chief Administrative Managing Director (since 2002), Assistant 143
333 West Wacker Drive Officer, 2004 Secretary and Associate General Counsel,
Chicago, IL 60606 formerly, Vice President and Assistant General
Counsel of Nuveen Investments, LLC; Managing
Director (since 2002), General Counsel
and Assistant Secretary, formerly, Vice
President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Managing
Director (since 2002), Assistant Secretary and
Associate General Counsel, formerly, Vice President
(since 2000), of Nuveen Asset Management, Inc.;
Assistant Secretary of Nuveen Investments, Inc.
(since 1994); Assistant Secretary of NWQ
Investment Management Company, LLC. (since 2002);
Vice President and Assistant Secretary of Nuveen
Investments Advisers Inc. (since 2002); Managing
Director, Associate General Counsel and Assistant
Secretary of Rittenhouse Asset Management, Inc.
(since May 2003); Chartered Financial Analyst.

Michael T. Atkinson 2/3/66 Vice President and Vice President (since 2002), 143
333 West Wacker Drive Assistant Secretary, formerly Assistant Vice President
Chicago, IL 60606 2004 (since 2000), previously, Associate
of Nuveen Investments, LLC.

Peter H. D'Arrigo 11/28/67 Vice President and Vice President of Nuveen Investments, LLC 143
333 West Wacker Drive Treasurer, 2004 (since 1999), prior thereto, Assistant
Chicago, IL 60606 Vice President (from 1997); Vice
President and Treasurer (since 1999)
of Nuveen Investments, Inc.; Vice President
and Treasurer (since 1999) of Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp.;
Vice President and Treasurer of Nuveen Asset
Management, Inc. (since 2002) and of Nuveen
Investments Advisers Inc.; Assistant Treasurer
of NWQ Investment Management Company, LLC.
(since 2002); Vice President and Treasurer of
Nuveen Rittenhouse Asset Management, Inc. (since
May, 2003); Chartered Financial Analyst.

Susan M. DeSanto 9/8/54 Vice President, 2004 Vice President of Nuveen Advisory 143
333 West Wacker Drive Corp. (since 2001); previously, Vice
Chicago, IL 60606 President of Van Kampen Investment
Advisory Corp. (since 1998); prior
thereto, Assistant Vice President of
Van Kampen Investment Advisory Corp.
(since 1994).

Jessica R. Droeger 9/24/64 Vice President and Vice President (since 2002) 143
333 West Wacker Drive Secretary, 2004 and Assistant General Counsel (since
Chicago, IL 60606 1998); formerly, Assistant Vice
President (since 1998), of Nuveen Investments,
LLC; Vice President (since 2002) and
Assistant Secretary (since 1998), formerly
Assistant Vice President, of Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp.

Lorna C. Ferguson 10/24/45 Vice President, 2004 Managing Director, formerly, Vice President 143
333 West Wacker Drive of Nuveen Investments, LLC; Managing Director
Chicago, IL 60606 (since 2004) formerly, Vice President (since
1998) of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.

William M. Fitzgerald 3/2/64 Vice President, 2004 Managing Director (since 2002) of Nuveen 143
333 West Wacker Drive Investments, LLC; Managing Director (since
Chicago, IL 60606 2001), formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp. (since 1995); Managing
Director of Nuveen Asset Management, Inc.
(since 2001); Vice President of Nuveen
Investments Advisers Inc. (since 2002);
Chartered Financial Analyst.

Stephen D. Foy 5/31/54 Vice President and Vice President (since 1993) and Funds 143
333 West Wacker Drive Controller, 2004 Controller (since 1998) of Nuveen Investments,
Chicago, IL 60606 LLC; Vice President and Funds Controller
(since 1998) of Nuveen Investments, Inc.;
Certified Public Accountant.

David J. Lamb 3/22/63 Vice President, 2004 Vice President (since 2000) of 143
333 West Wacker Drive Nuveen Investments, LLC, previously
Chicago, IL 60606 Assistant Vice President (since
1999); prior thereto, Associate
of Nuveen Investments, LLC; Certified
Public Accountant.

Tina M. Lazar 8/27/61 Vice President, 2004 Vice President (since 1999), previously 143
333 West Wacker Drive Assistant Vice President (since 1993)
Chicago, IL 60606 of Nuveen Investments, LLC.

Larry W. Martin 7/27/51 Vice President and Vice President, Assistant Secretary 143
333 West Wacker Drive Assistant Secretary, and Assistant General Counsel of
Chicago, IL 60606 2004 Nuveen Investments, LLC; Vice President and
Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp.;

Assistant Secretary of Nuveen Investments,
Inc. and (since 1997) of Nuveen Asset
Management, Inc.; Vice President (since
2000), Assistant Secretary and Assistant
General Counsel (since 1998) of Rittenhouse
Asset Management, Inc.; Vice President and
Assistant Secretary of Nuveen Investments
Advisers Inc. (since 2002); Assistant
Secretary of NWQ Investment Management
Company, LLC. (since 2002).

Edward F. Neild, IV 7/7/65 Vice President, 2004 Managing Director (since 2002) 143
333 W. Wacker Drive of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 1997), formerly
Vice President (since 1996) of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.; Managing Director of Nuveen
Asset Management, Inc. (since 1999); Chartered
Financial Analyst.

The Board of Trustees has five standing committees: the executive
committee, the audit committee, the nominating and governance committee, the
dividend committee and the compliance, risk management and regulatory oversight
committee. Because the Fund is newly organized, none of the committees have met
during the Fund's last fiscal year. The executive committee met once prior to
the commencement of the Fund's operations.

Robert P. Bremner, Anne E. Impellizzeri and Timothy R. Schwertfeger,
Chair, serve as members of the executive committee of the Board of Trustees of
the Fund. The executive committee, which meets between regular meetings of the
Board of Trustees, is authorized to exercise all of the powers of the Board of
Trustees.

The audit committee monitors the accounting and reporting policies and
practices of the Funds, the quality and integrity of the financial statements of
the Funds, compliance by the Funds with legal and regulatory requirements and
the independence and performance of the external and internal auditors. The
members of the audit committee are William E. Bennett, Robert P. Bremner,
Lawrence H. Brown, Jack B. Evans, Thomas E. Leafstrand, William J. Schneider,
Chair, and Peter R. Sawers.

The nominating and governance committee is responsible for Board
selection and tenure; selection and review of committees; and Board education
and operations. In addition, the committee monitors performance of legal counsel
and other service providers; periodically reviews and makes recommendations
about any appropriate changes to trustee compensation; and has the resources and
authority to discharge its responsibilities--including retaining special counsel
and other experts or consultants at the expense of the Fund. In the event of a
vacancy on the Board, the nominating and governance committee receives
suggestions from various sources (including shareholders) as to suitable
candidates. Suggestions should be sent in writing to Lorna Ferguson, Vice
President for Board Relations, Nuveen Investments, LLC, 333 West Wacker Drive,
Chicago, IL 60606. The nominating and governance committee sets appropriate
standards and requirements for nominations for new trustees and reserves the
right to interview all candidates and to make

the final selection of any new trustees. The members of the nominating and
governance committee are William E. Bennett, Robert P. Bremner, Chair, Lawrence
H. Brown, Jack B. Evans, William C. Hunter, Anne E. Impellizzeri, William L.
Kissick, Thomas E. Leafstrand, Peter R. Sawers, William J. Schneider, Judith M.
Stockdale and Sheila W. Wellington.

The dividend committee is authorized to declare distributions on the
Fund's shares including, but not limited to, regular and special dividends,
capital gains and ordinary income distributions. The members of the dividend
committee are Timothy R. Schwertfeger, Chair, Lawrence H. Brown, Jack B. Evans
and Thomas E. Leafstrand.

The compliance, risk management and regulatory oversight committee
is responsible for the oversight of compliance issues, risk management, and
other regulatory matters affecting the Fund which are not otherwise the
jurisdiction of the other board committees. As part of its duties regarding
compliance matters the committee is responsible for the oversight of the
Pricing Procedures of the Fund and the Valuation Group. The members of the
compliance, risk management and regulatory oversight committee are William E.
Bennett, Chair, Lawrence H. Brown, William C. Hunter, Thomas E. Leafstrand,
and Judith M. Stockdale.

The trustees, except William C. Hunter, are also trustees of 6 Nuveen
open-end funds and 14 closed-end funds managed by NIAC and 30 open-end and 93
closed-end funds managed by Nuveen Advisory Corp. ("NAC"). William C. Hunter is
also trustee of 35 closed-end funds managed by NAC. None of the independent
trustees, nor any of their immediate family members, has ever been a director,
officer, or employee of, or a consultant to, NIAC, Nuveen or their affiliates.
In addition, none of the independent trustees owns beneficially or of record,
any security of NIAC, Nuveen or any person (other than a registered investment
company) directly or indirectly controlling, controlled by or under common
control with NIAC or Nuveen.

The Common Shareholders of the Fund will elect trustees at the next
annual meeting of Common Shareholders, unless any FundPreferred shares are
outstanding at that time, in which event holders of FundPreferred shares,
voting as a separate class, will elect two trustees, and the remaining trustees
shall be elected by Common Shareholders and holders of FundPreferred shares,
voting together as a single class. Holders of FundPreferred shares will be
entitled to elect a majority of the Fund's trustees under certain circumstances.
See "Description of Shares - FundPreferred Shares - Voting Rights." The
following table sets forth the dollar range of equity securities beneficially
owned by each trustee as of December 31, 2003:

Aggregate Dollar Range of Equity Securities in All
Dollar Range of Equity Securities Registered Investment Companies Overseen by Trustee
Name of Trustee in the Fund in Family of Investment Companies
--------------- ----------- ---------------------------------

Timothy R. Schwertfeger $0 Over $100,000

William E. Bennett $0 Over $100,000

Robert P. Bremner $0 Over $100,000

Lawrence H. Brown $0 Over $100,000

Jack B. Evans $0 Over $100,000

William C. Hunter $0 $0

Anne E. Impellizzeri $0 Over $100,000

William L. Kissick $0 Over $100,000

Thomas E. Leafstrand $0 Over $100,000

Peter R. Sawers $0 Over $100,000

William S. Schneider $0 Over $100,000

Judith M. Stockdale $0 Over $100,000

Sheila W. Wellington $0 Over $100,000

No trustee who is not an interested person of the Fund owns
beneficially or of record, any security of NIAC, Nuveen, Symphony, Citigroup
Global Markets, Inc. or any person (other than a registered investment company)
directly or indirectly controlling, controlled by or under common control with
NIAC, Nuveen, Symphony or Citigroup Global Markets, Inc.

The following table sets forth estimated compensation to be paid by the
Fund projected during the Fund's first full fiscal year after commencement of
operation. The Fund does not have a retirement or pension plan. The officers and
trustees affiliated with Nuveen serve without any compensation from the Fund.
The Fund has a deferred compensation plan (the "Plan") that

permits any trustee who is not an "interested person" of the Fund to elect to
defer receipt of all or a portion of his or her compensation as a trustee. The
deferred compensation of a participating trustee is credited to a book reserve
account of the Fund when the compensation would otherwise have been paid to the
trustee. The value of the trustee's deferral account at any time is equal to the
value that the account would have had if contributions to the account had been
invested and reinvested in shares of one or more of the eligible Nuveen funds.
At the time for commencing distributions from a trustee's deferral account, the
trustee may elect to receive distributions in a lump sum or over a period of
five years. The Fund will not be liable for any other fund's obligations to make
distributions under the Plan.

Estimated Aggregate Total Compensation from Amount of Total Compensation
Name of Trustee Compensation from Fund* Fund and Fund Complex** That Has Been Deferred
--------------- ----------------------- ----------------------- ----------------------------

Timothy R. Schwertfeger $ - $ - $ -

William E. Bennett 861 73,417 53,773

Robert P. Bremner 861 99,200 11,438

Lawrence H. Brown 895 100,750 -

Jack B. Evans 895 70,583 14,211

William C. Hunter - - -

Anne E. Impellizzeri 641 95,550 73,800

William L. Kissick 641 65,083 20,513

Thomas E. Leafstrand 895 71,133 38,471

Peter R. Sawers 861 95,750 73,029

William S. Schneider 881 98,750 76,066

Judith M. Stockdale 641 94,000 18,204

Sheila W. Wellington 641 61,583 46,174

____________________________

* Based on the estimated compensation to be earned by the independent trustees
for the 12-month period ending 12/31/2005, representing the Fund's first full
fiscal year, for services to the Fund.

**Based on the compensation paid to the trustees for the one year period ending
12/31/03 for services to the Nuveen open-end and closed-end funds.

The Fund has no employees. Its officers are compensated by Nuveen
Investments, Inc. or its affiliates.

Nuveen Investments, Inc. maintains charitable contributions programs to
encourage the active support and involvement of individuals in the civic
activities of their community. These programs include a matching contributions
program and a direct contributions program. The Independent Board Members of the
funds managed by NIAC are eligible to participate in the charitable
contributions program of Nuveen Investments, Inc. Under the matching program,
Nuveen Investments, Inc. will match the personal contributions of a Board Member
to Section 501(c)(3) organizations up to an aggregate maximum amount of $10,000
during any calendar year. Under its direct (non-matching) program, Nuveen
Investments, Inc. makes contributions to qualifying Section 501(c)(3)
organizations, as approved by the Corporate Contributions Committee of Nuveen
Investments, Inc. The Independent Board Members are also eligible to submit
proposals to the committee requesting that contributions be made under this
program to Section 501(c)(3) organizations identified by the Board Member, in an
aggregate amount not to exceed $5,000 during any calendar year. Any contribution
made by Nuveen Investments, Inc. under the direct program is made solely at the
discretion of the Corporate Contributions Committee.

INVESTMENT ADVISERS

NIAC will be responsible for determining the Fund's overall investment
strategy and its implementation, including the use of leverage and hedging. NIAC
also is responsible for the ongoing monitoring of the Symphony, managing the
Fund's business affairs and providing certain clerical, bookkeeping and other
administrative services to the Fund. For additional information regarding the
management services performed by NIAC, see "Management of the Fund" in the
Fund's Prospectus.

NIAC, 333 West Wacker Drive, Chicago, Illinois 60606, a registered
investment adviser, is a wholly owned subsidiary of Nuveen Investments, Inc.
According to data from Thomson Wealth Management, Nuveen Investments, Inc. is
the leading sponsor of closed-end exchange-traded funds as measured by number of
funds (106) and fund assets under management (approximately $47.1 billion) as of
December 31, 2003. Founded in 1898, Nuveen Investments, Inc. and its affiliates
had approximately $95 billion in assets under management as of December 31,
2003. Nuveen Investments, Inc. is a publicly-traded company and a majority owned
subsidiary of The St. Paul Companies, Inc. ("St. Paul"). St. Paul is a
publicly-traded company located in St. Paul, Minnesota, and is principally
engaged in providing property-liability insurance through subsidiaries.

Nuveen Investments, Inc. provides investment services to financial advisors
serving high-net-worth clients and institutional clients. Nuveen Investments
today markets its capabilities--which include tax-free investing,
separately-managed accounts and market-neutral alternative investment
portfolios--under four distinct brands: Nuveen, NWQ, Rittenhouse and Symphony.
Nuveen Investments, Inc. is listed on the New York Stock Exchange and trades
under the symbol "JNC".

Nuveen Investment, Inc. disclosed the following information in its annual
report on Form 10-K, which was filed with the Securities and Exchange Commission
on March 15, 2004: Nuveen Investments, Inc. has received from the Securities and
Exchange Commission the following requests for information, each of which Nuveen
Investments, Inc. believes was sent broadly to several investment-management
firms: a September 4, 2003 letter regarding mutual fund "market timing" and
related topics, a September 11, 2003 letter regarding the valuation of portfolio
securities of funds that invest at least a majority of assets in securities that
trade in non-U.S. markets and frequent trading in such funds, a January 29, 2004
letter regarding mutual fund revenue sharing and fund portfolio brokerage
commissions, and a February 4, 2004 letter regarding high yield municipal bond
funds. In addition, Nuveen Investments, Inc. received a subpoena dated November
4, 2003 from the Securities Division of the Commonwealth of Massachusetts in
connection with a proceeding brought by the Securities Division against the
Boston, Massachusetts office of a national broker-dealer firm. Nuveen
Investments, Inc. has responded to the Securities and Exchange Commission
requests of September 4, September 11, January 29 and February 4 and is
continuing to respond to various related follow up requests. Nuveen Investments,
Inc. has also responded to the subpoena from the Massachusetts Securities
Division. In responding to these various requests, Nuveen Investments, Inc. has
identified certain deficiencies in its historical e-mail archives, and it is
taking steps to improve its overall record retention practices. Nuveen
Investments, Inc. has from time to time discovered instances where shareholders
of open-end funds managed by affiliates of Nuveen Investments, Inc. traded in
and out of a fund more frequently than appropriate. In addition, during the
process of responding to the requests referenced above, Nuveen Investments, Inc.
identified certain additional instances where open-end fund shareholders were
able to trade in and out of a fund more frequently than appropriate, which
occurred in most cases because they traded in dollar amounts below the
monitoring threshold established to implement the fund's policy. In the regular
course of its business, whenever Nuveen Investments, Inc. has identified
inappropriate trading activity in a fund, it has taken steps to terminate the
related account.

Symphony, 555 California Street, Suite 2975, San Francisco, CA 94104, is
the Fund's subadviser responsible for managing the Fund's Managed Assets.
Symphony specializes in the management of market-neutral equity and debt
strategies and Senior Loan and other debt portfolios. Symphony, a registered
investment adviser, commenced operations in 1994 and had approximately $2.9
billion in assets under management as of December 31, 2003. Symphony is an
indirect wholly owned subsidiary of Nuveen.

Gunther Stein and Lenny Mason are the portfolio managers at Symphony
responsible for investing its portion of the Fund's Managed Assets. Mr. Stein is
the Director of Fixed Income Strategies at Symphony and has been lead portfolio
manager for high yield strategies at Symphony since 1999. He is also a Vice
President of NIAC. Prior to joining Symphony in 1999, Mr. Stein was a high yield
portfolio manager at Wells Fargo. Mr. Mason is a fixed income portfolio manager
at Symphony. He is also a Vice President of NIAC. Prior to joining Symphony in
2001, Mr. Mason was a Managing Director in FleetBoston's Technology and
Communications Group. Mr. Stein and Mr. Mason also are co-portfolio managers of
other closed-end funds sponsored by Nuveen.

On November 17, 2003, St. Paul and Travelers Property Casualty Corp.
("Travelers") announced that they have signed a definitive merger agreement,
under which holders of Travelers common stock will each receive common shares of
St. Paul in exchange for their Travelers shares. The transaction is subject to
customary closing conditions, including approval by the shareholders of both
companies as well as certain regulatory approvals.

If this merger transaction were to constitute a change of control of NIAC
or Symphony (the "Nuveen Advisers") it would operate as an "assignment", as
defined in the 1940 Act, of the Fund's investment management agreement (as
discussed further below) with NIAC and the investment subadvisory agreements
between NIAC and Symphony (the "Nuveen advisory agreement"), which would cause
the Nuveen advisory agreements to terminate. In the event of such a termination,
it is expected that the Fund's Board would meet to consider both interim Nuveen
advisory agreement (as permitted under the 1940 Act) and new Nuveen advisory
agreement, the latter of which, if approved by the Board, would be submitted to
a vote of the Fund's shareholders and take effect only upon such approval. There
is no assurance that these approvals would be obtained. The Fund and the Nuveen
Advisers currently expect that they will receive advice of counsel to the effect
that the merger will not constitute a change of control of the Nuveen Advisers
and will not operate as an "assignment", and that therefore the Nuveen advisory
agreement would not terminate as a result of the merger. There is no assurance
that the Fund will receive such advice of counsel.

As a result of the current ownership by Citigroup Inc. ("Citigroup") and
its affiliates of voting securities of Travelers and St. Paul, if the
transaction occurs on currently contemplated terms, Citigroup may indirectly own
a sufficient percentage of voting securities of the combined entity to make
Citigroup an indirect affiliate of Nuveen, NIAC and the Fund. Such an
affiliation could result, pursuant to the 1940 Act, in restrictions on
transactions between the Fund and Citigroup and possibly its affiliates. In
particular, principal trades between the Fund and Citigroup and its affiliates
could be prohibited. Such a prohibition could have an adverse impact on the
Fund's ability to efficiently invest its portfolio. NIAC does not believe,
however, that any potential inability to so trade with Citigroup or its
affiliates would have a material adverse effect on the Advisers' ability to
perform their obligations under the Nuveen advisory agreements with the Fund or
on the Fund's ability to pursue its investment objective and policies as
described in the Prospectus.

Pursuant to an investment management agreement between NIAC and the
Fund, the Fund has agreed to pay an annual management fee for the services and
facilities provided by NIAC, payable on a monthly basis, according to the
following schedule:

Average Daily Managed Assets Management
Fee
---
Up to $500 million.................................................. .8500%
$500 million to $1.0 billion........................................ .8250%
$1.0 billion to $1.5 billion........................................ .8000%
$1.5 billion to $2.0 billion........................................ .7750%
$2.0 billion and over............................................... .7500%

If the Fund utilizes leverage through the issuance of FundPreferred
shares in an aggregate amount equal to 38% of the Fund's Managed Assets, the
management fee calculated as a percentage of net assets attributable to Common
Shares would be as follows:

Net Assets Attributable to Common Shares Management
---------------------------------------- Fee
---

Up to $500 million ................................................ 1.3710%
$500 million to $1.0 billion ...................................... 1.3306%
$1.0 billion to $1.5 billion ...................................... 1.2903%
$1.5 billion to $2.0 billion ...................................... 1.2500%
Over $2.0 billion ................................................. 1.2097%

Pursuant to investment sub-advisory agreements between NIAC and
Symphony, Symphony will receive from NIAC a management fee equal to the portion
specified below of the management fee payable by the Fund to NIAC (net of the
reimbursements described below), payable on a monthly basis:

Average Daily Managed Assets Percentage of Net
Management Fee
-----------------
Up to $125 million ........................................... 50.0%
$125 million to $150 million ................................. 47.5%
$150 million to $175 million ................................. 45.0%
$175 million to $200 million ................................. 42.5%
$200 million and over ........................................ 40.0%

In addition to the fee of NIAC, the Fund pays all other costs and
expenses of its operations, including compensation of its trustees (other than
those affiliated with NIAC), custodian, transfer agency and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing
shares, expenses associated with any Borrowings, expenses of issuing any
FundPreferred shares, expenses of preparing, printing and distributing
shareholder reports, notices, proxy statements and reports to governmental
agencies, and taxes, if any. All fees and expenses are accrued daily and
deducted before payment of dividends to investors.

For the first eight full years of the Fund's operation, the Advisers
have contractually agreed to reimburse the Fund for fees and expenses
in the amounts, and for the time periods, set forth below:

Percentage Percentage
Reimbursed Reimbursed
(as a percentage (as a percentage
Year Ending of Managed Year Ending of Managed
March 31, Assets) March 31, Assets)
------------ ------------ ------------ ------------

2004(1) .32% 2009 .32%
2005 .32% 2010 .24%
2006 .32% 2011 .16%
2007 .32% 2012 .08%
2008 .32%

__________
(1) From the commencement of operations.

The Advisers have not agreed to reimburse the fund for any portion of
its fees and expenses beyond March 31, 2012.
38

Unless earlier terminated as described below, the Fund's investment
management agreement with NIAC and the Fund's investment sub-advisory agreement
(the "management agreements") will remain in effect until August 1, 2005. The
management agreements continue in effect from year to year so long as such
continuation is approved at least annually by (1) the Board of Trustees or the
vote of a majority of the outstanding voting securities of the Fund, and (2) a
majority of the trustees who are not interested persons of any party to the
investment management agreement, cast in person at a meeting called for the
purpose of voting on such approval. The investment management agreement may be
terminated at any time, without penalty, by either the Fund or NIAC upon 60 days
written notice, and is automatically terminated in the event of its assignment
as defined in the 1940 Act. The investment sub-advisory agreement may be
terminated at any time, without penalty, by the Fund, NIAC or Symphony thereto
upon 60 days written notice after the initial term of the agreement, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.

The management agreements have been approved by a majority of the
independent trustees of the Fund and the sole shareholder of the Fund. The
independent trustees have determined that the terms of the Fund's management
agreements are fair and reasonable and that the agreements are in the Fund's
best interests. The independent trustees believe that the management agreements
will enable the Fund to obtain high quality investment management services at a
cost that they deem appropriate, reasonable, and in the best interests of the
Fund and its shareholders. In making such determination, the independent
trustees met independently from the interested trustee of the Fund and any
officers of NIAC, Symphony and their affiliates. The independent trustees also
relied upon the assistance of counsel to the independent trustees.

In evaluating the investment management agreement between the Fund and
NIAC, the independent trustees reviewed materials furnished by NIAC at the
annual advisory contract renewal meeting held in May 2003, including information
regarding NIAC, its affiliates and its personnel, operations and financial
condition. In evaluating the investment sub-advisory agreement, the independent
trustees reviewed materials furnished by Symphony in May 2003, including
information regarding Symphony, its respective affiliates and personnel,
operations and financial condition. The independent trustees reviewed additional
information furnished by Symphony in July 2003. The independent trustees also
reviewed, among other things, the nature and quality of services to be provided
by NIAC and Symphony, the proposed fees to be charged by NIAC and Symphony for
investment management services, the profitability to NIAC and Symphony of their
relationships with the Fund, fall-out benefits to NIAC and Symphony from that
relationship, economies of scale achieved by NIAC and Symphony, the experience
of the investment advisory and other personnel providing services to the Fund,
the historical quality of the services provided by NIAC and Symphony and
comparative fees and expense ratios of investment companies with similar
objective and strategies managed by other investment advisers, and other factors
that the independent trustees deemed relevant. The independent trustees, at
various times, discussed with representatives of NIAC and Symphony the Fund's
operations and each of NIAC's and Symphony's ability to provide advisory and
other services to the Fund.

The Fund, NIAC, Nuveen, Symphony, and other related entities have
adopted codes of ethics which essentially prohibit certain of their personnel,
including the Fund's portfolio managers, from engaging in personal investments
which compete or interfere with, or attempt to take advantage of a client's,
including the Fund's, anticipated or actual portfolio transactions, and are
designed to assure that the interests of clients, including Fund shareholders,
are placed before the interests of personnel in connection with personal
investment transactions. Text-only versions of the codes of ethics of the Fund,
NIAC, Nuveen and Symphony can be viewed online or downloaded from the EDGAR
Database on the SEC's internet web site at www.sec.gov. You may also review and
copy those documents by visiting the SEC's Public Reference Room in Washington,
DC. Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 202-942-8090. In addition, copies of those codes of ethics
may be obtained, after mailing the appropriate duplicating fee, by writing to
the SEC's Public Reference Section, 450 5th Street, N.W., Washington, DC
20549-0102 or by e-mail request at publicinfo@sec.gov.

The Fund is responsible for voting proxies on securities held in its
portfolio. When the Fund receives a proxy, the decision regarding how to vote
such proxy will be made by Symphony in accordance with Symphony's proxy voting
procedures.

The Fund has granted to Symphony the authority to vote proxies on its
behalf. A senior member of Symphony is responsible for oversight of the Fund's
proxy voting process. Symphony has engaged the services of Institutional
Shareholder Services, Inc. ("ISS") to make recommendations to Symphony on the
voting of proxies relating to securities held by the Fund. ISS provides voting
recommendations based upon established guidelines and practices. Symphony
reviews ISS recommendations and frequently follows the ISS recommendations.
However, on selected issues, Symphony may not vote in accordance with the ISS
recommendations when it believes that specific ISS recommendations are not in
the best economic interest of the Fund. If Symphony manages the assets of a
company or its pension plan and any of Symphony's clients hold any securities of
that company, Symphony will vote proxies relating to such company's securities
in accordance with the ISS recommendations to avoid any conflict of interest. If
a client requests Symphony to follow specific voting guidelines or additional
guidelines, Symphony will review the request and inform the client only if
Symphony is not able to follow the client's request.

Symphony has adopted the ISS Proxy Voting Guidelines. While these
guidelines are not intended to be all-inclusive, they do provide guidance on
Symphony's general voting policies.

When required by applicable regulations, information regarding how the Fund
voted proxies relating to portfolio securities will be available without charge
by calling (800) 257-8787 or by accessing the Securities and Exchange
Commission's website at http://www.sec.gov.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to the supervision of the Board of Trustees, Symphony, with
respect to the securities for which it is responsible, is responsible for
decisions to buy and sell securities for the Fund, the negotiation of the prices
to be paid for principal trades and the allocation of transactions among various
dealer firms. Transactions on stock exchanges involve the payment by the Fund of
brokerage commissions. There generally is no stated commission in the case of
securities traded in the over-the-counter market but the price paid by the Fund
usually includes an undisclosed dealer commission or mark-up. In certain
instances, the Fund may make purchases of underwritten issues at prices which
include underwriting fees.

Portfolio securities may be purchased directly from an underwriter or in
the over-the-counter market from the principal dealers in such securities,
unless it appears that a better price or execution may be obtained through other
means. Portfolio securities will not be purchased from Nuveen or its affiliates
or affiliates of Symphony except in compliance with the 1940 Act.

With respect to interests in Senior Loans, the Fund generally will engage
in privately negotiated transactions for purchase or sale in which Symphony will
negotiate on behalf of the Fund, although a more developed market may exist for
many Senior Loans. The Fund may be required to pay fees, or forgo a portion of
interest and any fees payable to the Fund, to the lender selling participations
or assignments to the Fund. Symphony will determine the lenders from whom the
Fund will purchase assignments and participations by considering their
professional ability, level of service, relationship with the borrower,
financial condition, credit standards and quality of management. See "Risks" in
the Prospectus.

It is the policy of Symphony to seek the best execution under the
circumstances of each trade. Symphony will evaluate price as the primary
consideration, with the financial condition, reputation and responsiveness of
the dealer considered secondary in determining best execution. Given the best
execution obtainable, it will be Symphony's practice to select dealers which, in
addition, furnish research information (primarily credit analyses of issuers and
general economic reports) and statistical and other services to Symphony. It is
not possible to place a dollar value on information and statistical and other
services received from dealers. Since it is only supplementary to Symphony's own
research efforts, the receipt of research information is not expected to reduce
significantly Symphony's expenses. While Symphony will be primarily responsible
for the placement of the business of the Fund, the policies and practices of
Symphony in this regard must be consistent with the foregoing and will, at all
times, be subject to review by the Board of Trustees of the Fund.

Symphony may manage other investment accounts and investment companies for
other clients that may invest in the same types of securities as the Fund and
which may have investment objectives similar to those of the Fund. Symphony
seeks to allocate portfolio transactions equitably whenever concurrent decisions
are made to purchase or sell assets or securities by the Fund and another
advisory account. If an aggregated order cannot be filled completely,
allocations will generally be made on a pro rata basis. An order may not be
allocated on a pro rata basis where, for example (i) consideration is given to
portfolio managers who have been instrumental in developing or negotiating a
particular investment; (ii) consideration is given to an account with
specialized investment policies that coincide with the particulars of a specific
investment; (iii) pro rata allocation would result in odd-lot or de minimis
amounts being allocated to a portfolio or other client; or (iv) where the
Adviser reasonably determines that departure from a pro rata allocation is
advisable. There may also be instances where the Fund will not participate at
all in a transaction that is allocated among other accounts. While these
allocation procedures could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of the
Board of Trustees that the benefits available from Symphony's management
outweigh any disadvantage that may arise from Symphony's larger management
activities and its need to allocate securities.

DISTRIBUTIONS

Commencing with the first dividend, the Fund intends to make regular
monthly cash distributions to Common Shareholders at a rate that reflects the
past and projected performance of the Fund. The Fund's Common Share dividend
rate will depend on a number of factors, including the net earnings on the
Fund's portfolio investments, the rate at which such net earnings change as a
result of changes in short-term market interest rates, the rate at which
dividends are payable on FundPreferred shares or interest is payable on
Borrowings, and the rate at which such FundPreferred share dividend or Borrowing
interest rates change. Distributions can only be made from net investment income
and net short-term capital gains after paying any interest and required
principal payments on Borrowings or accrued dividends to FundPreferred
shareholders, if any. The net investment income of the Fund consists of all
income (other than net long-term and short-term capital gains) less all expenses
of the Fund. Expenses of the Fund are accrued each day. Over time, the Fund will
distribute all of it net investment income and net short-term capital gains
(after it pays accrued dividends on, or redeems or liquidates any outstanding
FundPreferred shares, if any, and makes interest and required principal payments
on Borrowings, if any). At least annually, the Fund also intends to distribute
net long-term capital gains, if any, after making interest and required
principal payments on Borrowings, if any, and paying any accrued dividends or
making any redemption or liquidation payments to FundPreferred shareholders, if
any. The Fund expects to declare its initial Common Share distribution
approximately 45 days, and to pay that distribution approximately 60 to 90 days,
from the completion of this offering, depending on market conditions. The Board
of Trustees may change the Fund's dividend policy and the amount or timing of
the distributions, and net short-term capital gains based on a number of
factors, including the amount of the Fund's undistributed net investment income
and net short-term capital gains and historical and projected net investment
income and net short-term capital gains and the amount of the expenses and
dividend rates and interest on outstanding FundPreferred shares and Borrowings.

The Fund intends to initially distribute less than the entire amount of net
investment income and net short-term capital gains earned in a particular
period. The undistributed net investment income and net short-term capital gains
would be available to supplement future distributions. As a result, the
distributions paid by the Fund for any particular monthly period may be more or
less than the amount of net investment income and net short-term capital gains
actually earned by the Fund during the period. Undistributed net investment
income and net short-term capital gains will be added to the Fund's net asset
value and, correspondingly, distributions from undistributed net investment
income and net short-term capital gains will be deducted from the Fund's net
asset value.

For tax purposes, the Fund is currently required to allocate net
capital gain and other taxable income, if any, between Common Shares and
FundPreferred shares in proportion to total dividends paid to each class for the
year in which such net capital gain or other taxable income is realized. For
information relating to the impact of the issuance of FundPreferred shares on
the distributions made by a Fund to Common Shareholders, see the Fund's
Prospectus under "Use of Leverage."

While any FundPreferred shares are outstanding, the Fund may not
declare any cash dividend or other distribution on its Common Shares unless at
the time of such declaration (1) all accumulated dividends on the FundPreferred
shares have been paid and (2) the net asset value of the Fund's portfolio
(determined after deducting the amount of such dividend or other distribution)
is at least 200% of the liquidation value of any outstanding FundPreferred
shares. This latter limitation on the Fund's ability to make distributions on
its Common Shares could under certain circumstances impair the ability of the
Fund to maintain its qualification for taxation as a regulated investment
company. See "Tax Matters."

DESCRIPTION OF SHARES

COMMON SHARES

The Fund's Declaration of Trust (the "Declaration") authorizes the issuance of
an unlimited number of Common Shares. The Common Shares being offered have a par
value of $0.01 per share and, subject to the rights of holders of FundPreferred
shares if issued, have equal rights as to the payment of dividends and the
distribution of assets upon liquidation of the Fund. The Common Shares being
offered will, when issued, be fully paid and, subject to matters discussed in
"Certain Provisions in the Declaration of Trust," non-assessable, and will have
no pre-emptive or conversion rights or rights to cumulative voting. Whenever the
Fund issues FundPreferred shares and/or incurs Borrowings, the Common
Shareholders will not be entitled to receive any cash distributions from the
Fund unless accrued dividends on FundPreferred shares and interest on Borrowings
have been paid, and (i) unless asset coverage (as defined in the 1940 Act) with
respect to FundPreferred shares would be at least 200% after giving effect to
the distributions and (ii) unless asset coverage (again, as defined in the 1940
Act) with respect to FundPreferred shares would be at least 300% after giving
effect to the distributions. See "FundPreferred Shares" below.

Shares of closed-end investment companies may frequently trade at
prices lower than net asset value. Shares of closed-end investment companies
like the Fund have, during some periods, traded at prices higher than net asset
value and, during other periods, have traded at prices lower than net asset
value. Because the market value of the Common Shares may be influenced by such
factors as dividend levels (which are in turn affected by expenses), call
protection, dividend stability, portfolio credit quality, net asset value,
relative demand for and supply of such shares in the market, general market and
economic conditions, and other factors beyond the control of the Fund, the Fund
cannot assure you that Common Shares will trade at a price equal to or higher
than net asset value in the future. The Fund's net asset value per share
generally increases when interest rates decline, and decreases when interest
rates rise, and these changes are likely to be greater because the Fund, if
market conditions are deemed favorable, likely will have a leveraged capital
structure. Net asset value of the Fund and the net asset value per Common Share
will be reduced immediately following this offering by the amount of sales load
and the amount of organization and offering expenses paid by the Fund. Nuveen
has agreed to pay (i) all organizational expenses and (ii) offering costs (other
than sales load) that exceed $0.03 per Common Share. See "Use of Proceeds." The
net asset value per Common Share also will be reduced by any costs associated
with the issuance of FundPreferred shares or any Borrowings. Whether investors
will realize gains or losses upon the sale of Common Shares will not depend upon
a Fund's net asset value but will depend entirely upon whether the market price
of the Common Shares at the time of sale is above or below the original purchase
price for the shares. Since the market price of the Fund's Common Shares will be
determined by factors beyond the control of the Fund, the Fund cannot predict
whether the Common Shares will trade at, below, or above net asset value or at,
below or above the initial public offering price. Accordingly, the Common Shares
are designed primarily for long-term investors, and investors in the Common
Shares should not view the Fund as a vehicle for trading purposes. See
"Repurchase of Fund Shares; Conversion to Open-End Fund" and the Fund's
Prospectus under "Use of Leverage" and "The Fund's Investments."

LEVERAGE

Following the completion of this offering, the Fund intends to seek to
increase the Fund's common share net income by issuing FundPreferred shares
and/or Borrowings and investing the proceeds in the manner described herein. The
Fund's Board of Trustees has authorized an offering of FundPreferred shares
representing approximately 38% of the Fund's Managed Assets that the Fund
expects will likely be issued within approximately one and one-half to two
months after completion of the offering of Common Shares. The amount of
outstanding FundPreferred shares may vary with prevailing market or economic
conditions. The timing and terms of any leverage transactions will be determined
by the Fund's Board of Trustees.

Because both Senior Loans and the Fund's FundPreferred shares and
Borrowings generally pay interest or dividends based on short-term market
interest rates, the Fund's investments in Senior Loans may potentially offset
the leverage risks borne by the Fund relating to the fluctuations on Common
Share income due to variations in the FundPreferred share dividend rate and/or
the interest rate on Borrowings.

The Fund may issue FundPreferred shares or Borrowings or that would entitle
a holder to convert the FundPreferred shares or Borrowings into Common Shares of
the Fund ("Convertible Leverage"), although it has no present intention to do
so. If the Fund were to issue Convertible Leverage, the holders would have the
right to convert the Convertible Leverage into Common Shares at a predetermined
price that could be less than the Fund's net asset value or market price per
share at the time of conversion. Such conversion, if it were to occur, might
operate to dilute the net asset value of the Fund (to the extent that the
dilution to Common Shareholders due to an assumed conversion had not already
been reflected in the net asset value), otherwise dilute the existing Common
Shareholders' interest in the Fund's undistributed and future net Common Share
returns, or change the economic impact that leverage would have going forward on
the existing Common Shareholders. Because such a conversion of Convertible
Leverage would operate to both increase the number of Common Shares outstanding
and decrease the Fund's leverage, to the extent that the Fund determined to
subsequently re-leverage itself, the Fund would incur costs associated with such
additional leveraging, which costs would be borne by the Common Shareholders.

FUNDPREFERRED SHARES

The Declaration authorizes the issuance of an unlimited number of
FundPreferred shares in one or more classes or series, with rights as determined
by the Board of Trustees of the Fund, by action of the Board of Trustees without
the approval of the Common Shareholders.

The Fund's Board of Trustees has authorized an offering of
FundPreferred shares (representing approximately 38% of the Fund's Managed
Assets) that the Fund expects will likely be issued within approximately one and
one-half to two months after this offering of Common Shares. Any final decision
to issue FundPreferred shares is subject to market conditions and to the Board's
continuing belief that leveraging the Fund's capital structure through the
issuance of FundPreferred shares is likely to achieve the benefits to the Common
Shareholders described in this Statement of Additional Information. The Board
has stated that the initial series of FundPreferred shares would likely pay
cumulative dividends at relatively shorter-term periods (such as 7 days); by
providing for the periodic redetermination of the dividend rate through an
auction or remarketing procedure. The Board of Trustees of the Fund has
indicated that the liquidation preference, preference on distribution, voting
rights and redemption provisions of the FundPreferred shares will be as stated
below.

Limited Issuance of FundPreferred Shares. Under the 1940 Act, the Fund
could issue FundPreferred shares with an aggregate liquidation value of up to
one-half of the value of the Fund's total net assets, measured immediately after
issuance of the FundPreferred shares. "Liquidation value" means the original
purchase price of the shares being liquidated plus any accrued and unpaid
dividends. In addition, the Fund is not permitted to declare any cash dividend
or other distribution on its Common Shares unless the liquidation value of the
FundPreferred shares is less than one-half of the value of the Fund's total net
assets (determined after deducting the amount of such dividend or distribution)
immediately after the distribution. If the Fund sells all the Common Shares and
FundPreferred shares discussed in the prospectus, the liquidation value of the
FundPreferred shares is expected to be approximately 38% of the value of the
Fund's total net assets.

Distribution Preference. The FundPreferred shares have complete
priority over the Common Shares as to distribution of assets.

Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, holders of
FundPreferred shares will be entitled to receive a preferential liquidating
distribution (expected to equal the original purchase price per share plus
accumulated and unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common Shares. After
payment of the full amount of the liquidating distribution to which they are
entitled, holders of FundPreferred shares will not be entitled to any further
participation in any distribution of assets by the Fund. A consolidation or
merger of the Fund with or into any Massachusetts business trust or corporation
or a sale of all or substantially all of the assets of the Fund shall not be
deemed to be a liquidation, dissolution or winding up of the Fund.

Voting Rights. In connection with any issuance of FundPreferred
shares, the Fund must comply with Section 18(i) of the 1940 Act, which requires,
among other things, that FundPreferred shares be voting shares and have equal
voting rights with Common Shares. Except as otherwise indicated in this
Statement of Additional Information and except as otherwise required by
applicable law, holders of FundPreferred shares will vote together with Common
Shareholders as a single class.

In connection with the election of the Fund's trustees, holders of
FundPreferred shares, voting as a separate class, will be entitled to elect two
of the Fund's trustees, and the remaining trustees shall be elected by Common
Shareholders and holders of FundPreferred shares, voting together as a single
class. In addition, if at any time dividends on the Fund's outstanding
FundPreferred shares shall be unpaid in an amount equal to two full years'
dividends thereon, the holders of all outstanding FundPreferred shares, voting
as a separate class, will be entitled to elect a majority of the Fund's trustees
until all dividends in arrears have been paid or declared and set apart for
payment.

The affirmative vote of the holders of a majority of the Fund's
outstanding FundPreferred shares of any class or series, as the case may be,
voting as a separate class, will be required to, among other things, (1) take
certain actions which would affect the preferences, rights, or powers of such
class or series or (2) authorize or issue any class or series ranking prior to
the FundPreferred shares. Except as may otherwise be required by law, (1) the
affirmative vote of the holders of at least two-thirds of the Fund's
FundPreferred shares outstanding at the time, voting as a separate class, will
be required to approve any conversion of the Fund from a closed-end to an
open-end investment company and (2) the affirmative vote of the holders of at
least two-thirds of the outstanding FundPreferred shares, voting as a separate
class, shall be required to approve any plan of reorganization (as such term is
used in the 1940 Act) adversely affecting such shares, provided however, that
such separate class vote shall be a majority vote if the action in question has
previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of trustees fixed in accordance with the
Declaration or the By-laws. The affirmative vote of the holders of a majority of
the outstanding FundPreferred shares, voting as a separate class, shall be
required to approve any action not described in the preceding sentence requiring
a vote of security holders under Section 13(a) of the 1940 Act including, among
other things, changes in a Fund's investment objective or changes in the
investment restrictions described as fundamental policies under "Investment
Objective and Policies--Investment Restrictions." The class or series vote of
holders of FundPreferred shares described above shall in each case be in
addition to any separate vote of the requisite percentage of Common Shares and
FundPreferred shares necessary to authorize the action in question.

The foregoing voting provisions will not apply with respect to the
Fund's FundPreferred shares if, at or prior to the time when a vote is
required, such shares shall have been (1) redeemed or (2) called for redemption
and sufficient funds shall have been deposited in trust to effect such
redemption.

Redemption, Purchase and Sale of FundPreferred Shares. The terms of the
FundPreferred shares may provide that they are redeemable by the Fund at certain
times, in whole or in part, at the original purchase price per share plus
accumulated dividends, that the Fund may tender for or purchase FundPreferred
shares and that the Fund may subsequently resell any shares so tendered for or
purchased. Any redemption or purchase of FundPreferred shares by the Fund will
reduce the leverage applicable to Common Shares, while any resale of shares by
the Fund will increase such leverage.

The discussion above describes the Board of Trustees' present intention
with respect to a possible offering of the FundPreferred shares. The terms of
the FundPreferred shares may be the same as, or different from, the terms
described above, subject to applicable law and the Fund's Declaration.

BORROWINGS

The Declaration authorizes the Fund, without prior approval of the
Common Shareholders, to borrow money. In this connection, the Fund may issue
notes or other evidence of indebtedness (including bank borrowings or commercial
paper) ("Borrowings") and may secure any such borrowings by mortgaging, pledging
or otherwise subjecting as security the Fund's assets. In connection with such
borrowing, the Fund may be required to maintain average balances with the lender
or to pay a commitment or other fee to maintain a line of credit. Any such
requirements will increase the cost of borrowing over the stated interest rate.
Under the requirements of the 1940 Act, the Fund, immediately after any
Borrowings, must have an asset coverage of at least 300%. With respect to any
Borrowings, asset coverage means the ratio which the value of the total assets
of the Fund, less all liabilities and indebtedness not represented by senior
securities (as defined in the 1940 Act), bears to the aggregate amount of such
Borrowings represented by senior securities issued by the Fund. Certain types of
Borrowings may result in the Fund being subject to covenants in credit
agreements relating to asset coverages or portfolio composition or otherwise. In
addition, the Fund may be subject to certain restrictions imposed by guidelines
of one or more ratings agencies which may issue ratings on commercial paper or
notes issued by the Fund. Such restrictions may be more stringent than those
imposed by the 1940 Act.

The rights of lenders to the Fund to receive interest on and repayment
of principal of any such Borrowings will be senior to those of the Common
Shareholders, and the terms of any such Borrowings may contain provisions which
limit certain activities of the Fund, including the payment of dividends to
Common Shareholders in certain circumstances. Further, the 1940 Act does (in
certain circumstances) grant to the lenders to the Fund certain voting rights in
the event of default in the payment of interest on or repayment of principal. In
the event that such provisions would impair the Fund's status as a regulated
investment company under the Code, the Fund, subject to its ability to liquidate
its relatively illiquid portfolio, intends to repay the borrowings. Any
borrowings will likely be ranked senior or equal to all other existing and
future borrowings of the Fund. The Fund also may borrow up to an additional 5%
of its total assets for temporary purposes.

The discussion above describes the Fund's Board of Trustees' present
intention with respect to an offering of FundPreferred shares or Borrowings.
The terms of the FundPreferred shares and, if authorized by the Board of
Trustees, the terms of any borrowings may be the same as, or different from,
the terms described above, subject to applicable law and the Fund's Declaration.

CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration contains an express disclaimer of shareholder
liability for debts or obligations of the Fund and requires that notice of such
limited liability be given in each agreement, obligation or instrument entered
into or executed by the Fund or the trustees. The Declaration further provides
for indemnification out of the assets and property of the Fund for all loss and
expense of any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations. The Fund believes that the likelihood of such
circumstances is remote.

The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund or to convert the Fund to
open-end status. Specifically, the Declaration requires a vote by holders of at
least two-thirds of the Common Shares and FundPreferred shares, voting together
as a single class, except as described below, to authorize (1) a conversion of
the Fund from a closed-end to an open-end investment company, (2) a merger or
consolidation of the Fund, or a series or class of the Fund, with any
corporation, association, trust or other organization or a reorganization of the
Fund, or a series or class of the Fund, (3) a sale, lease or transfer of all or
substantially all of the Fund's assets (other than in the regular course of the
Fund's investment activities), (4) in certain circumstances, a termination of
the Fund, or a series or class of the Fund or (5) a removal of trustees by
shareholders, and then only for cause, unless, with respect to (1) through (4),
such transaction has already been authorized by the affirmative vote of
two-thirds of the total number of trustees fixed in accordance with the
Declaration or the By-laws, in which case the affirmative vote of the holders of
at least a majority of the Fund's Common Shares and FundPreferred shares
outstanding at the time, voting together as a single class, is required,
provided, however, that where only a particular class or series is affected (or,
in the case of removing a trustee, when the trustee has been elected by only one
class), the required vote by only the applicable class or series will be
required. Approval of shareholders is not required, however, for any
transaction, whether deemed a merger, consolidation, reorganization or otherwise
whereby the Fund issues shares in connection with the acquisition of assets
(including those subject to liabilities) from any other investment company or
similar entity. None of the foregoing provisions may be amended except by the
vote of at least two-thirds of the Common Shares and FundPreferred shares,
voting together as a single class. In the case of the conversion of the Fund to
an open-end investment company, or in the case of any of the foregoing
transactions constituting a plan of reorganization which adversely affects the
holders of FundPreferred shares, the action in question will also require the
affirmative vote of the holders of at least two-thirds of the Fund's
FundPreferred shares outstanding at the time, voting as a separate class, or, if
such action has been authorized by the affirmative vote of two-thirds of the
total number of trustees fixed in accordance with the Declaration or the Bylaws,
the affirmative vote of the holders of at least a majority of the Fund's
FundPreferred shares outstanding at the time, voting as a separate class. The
votes required to approve the conversion of the Fund from a closed-end to an
open-end investment company or to approve transactions constituting a plan of
reorganization which adversely affects the holders of FundPreferred shares are
higher than those required by the 1940 Act. The Board of Trustees believes that
the provisions of the Declaration relating to such higher votes are in the best
interest of the Fund and its shareholders.

The provisions of the Declaration described above could have the
effect of depriving the Common Shareholders of opportunities to sell their
Common Shares at a premium over market value by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or similar transaction.
The overall effect of these provisions is to render more difficult the
accomplishment of a merger or the assumption of control by a third party. They
provide, however, the advantage of potentially requiring persons seeking
control of the Fund to negotiate with its management regarding the price to be
paid and facilitating the continuity of the Fund's investment objective and
policies. The Board of Trustees of the Fund has considered the foregoing
anti-takeover provisions and concluded that they are in the best interests of
the Fund and its Common Shareholders.

Reference should be made to the Declaration on file with the
Commission for the full text of these provisions.

The Declaration provides that the obligations of the Fund are not
binding upon the trustees of the Fund individually, but only upon the assets and
property of the Fund, and that the trustees shall not be liable for errors of
judgment or mistakes of fact or law. Nothing in the Declaration, however,
protects a trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

The Fund is a closed-end investment company and as such its
shareholders will not have the right to cause the Fund to redeem their shares.
Instead, the Fund's Common Shares will trade in the open market at a price that
will be a function of several factors, including dividend levels (which are in
turn affected by expenses), net asset value, call protection, price, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Because shares of a
closed-end investment company may frequently trade at prices lower than net
asset value, the Fund's Board of Trustees has currently determined that, at
least annually, it will consider action that might be taken to reduce or
eliminate any material discount from net asset value in respect of Common
Shares, which may include the repurchase of such shares in the open market or
in private transactions, the making of a tender offer for such shares at net
asset value, or the conversion of the Fund to an open-end investment company.
There can be no assurance, however, that the Board of Trustees will decide to
take any of these actions, or that share repurchases or tender offers, if
undertaken, will reduce market discount.

Notwithstanding the foregoing, at any time when the Fund's
FundPreferred shares are outstanding, the Fund may not purchase, redeem or
otherwise acquire any of its Common Shares unless (1) all accrued
FundPreferred shares dividends have been paid and (2) at the time of such
purchase, redemption or acquisition, the net asset value of the Fund's portfolio
(determined after deducting the acquisition price of the Common Shares) is at
least 200% of the liquidation value of the outstanding FundPreferred shares
(expected to equal the original purchase price per share plus any accrued and
unpaid dividends thereon). The staff of the Commission currently requires that
any tender offer made by a closed-end investment company for its shares must be
at a price equal to the net asset value of such shares on the close of business
on the last day of the tender offer. Any service fees incurred in connection
with any tender offer made by the Fund will be borne by the Fund and will not
reduce the stated consideration to be paid to tendering shareholders.

Subject to its investment limitations, the Fund may borrow to finance
the repurchase of shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by the
Fund in anticipation of share repurchases or tenders will reduce the Fund's net
income. Any share repurchase, tender offer or borrowing that might be approved
by the Board of Trustees would have to comply with the Securities Exchange Act
of 1934, as amended, and the 1940 Act and the rules and regulations thereunder.

Although the decision to take action in response to a discount from net
asset value will be made by the Board of Trustees at the time it considers such
issue, it is the Board's present policy, which may be changed by the Board, not
to authorize repurchases of Common Shares or a tender offer for such shares if
(1) such transactions, if consummated, would (a) result in the delisting of the
Common Shares from the New York Stock Exchange, or (b) impair the Fund's status
as a regulated investment company under the Code (which would make the Fund a
taxable entity, causing the Fund's income to be taxed at the corporate level in
addition to the taxation of shareholders who receive dividends from the Fund) or
as a registered closed-end investment company under the 1940 Act; (2) the Fund
would not be able to liquidate portfolio securities in an orderly manner and
consistent with the Fund's investment objective and policies in order to
repurchase shares; or (3) there is, in the Board's judgment, any (a) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b) general
suspension of or limitation on prices for trading securities on the New York
Stock Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States or state banks in
which the Fund invests, (d) material limitation affecting the Fund or the
issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of non-U.S.
currency, (e) commencement of war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, or (f)
other event or condition which would have a material adverse effect (including
any adverse tax effect) on the Fund or its shareholders if shares were
repurchased. The Board of Trustees of the Fund may in the future modify these
conditions in light of experience.

Conversion to an open-end company would require the approval of the
holders of at least two-thirds of the Fund's Common Shares and FundPreferred
shares outstanding at the time, voting together as a single class, and of the
holders of at least two-thirds of the Fund's FundPreferred shares outstanding
at the time, voting as a separate class, provided however, that such separate
class vote shall be a majority vote if the action in question has previously
been approved, adopted or authorized by the affirmative vote of two-thirds of
the total number of trustees fixed in accordance with the Declaration or
By-laws. See the Prospectus under "Certain Provisions in the Declaration of
Trust" for a discussion of voting requirements applicable to conversion of the
Fund to an open-end company. If the Fund converted to an open-end company, it
would be required to redeem all FundPreferred shares then outstanding, and the
Fund's Common Shares would no longer be listed on the New York Stock Exchange.
Shareholders of an open-end investment company may require the company to
redeem their shares on any business day (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of redemption. In
order to avoid maintaining large cash positions or liquidating favorable
investments to meet redemptions, open-end companies typically engage in a
continuous offering of their shares. Open-end companies are thus subject to
periodic asset in-flows and out-flows that can complicate portfolio management.
The Board of Trustees of the Fund may at any time propose conversion of the
Fund to an open-end company depending upon their judgment as to the
advisability of such action in light of circumstances then prevailing.

The repurchase by the Fund of its shares at prices below net asset
value will result in an increase in the net asset value of those shares that
remain outstanding. However, there can be no assurance that share repurchases
or tenders at or below net asset value will result in the Fund's shares trading
at a price equal to their net asset value. Nevertheless, the fact that the
Fund's shares may be the subject of repurchase or tender offers at net asset
value from time to time, or that the Fund may be converted to an open-end
company, may reduce any spread between market price and net asset value that
might otherwise exist.

In addition, a purchase by the Fund of its Common Shares will decrease
the Fund's total assets which would likely have the effect of increasing the
Fund's expense ratio. Any purchase by the Fund of its Common Shares at a time
when FundPreferred shares are outstanding will increase the leverage applicable
to the outstanding Common Shares then remaining. See the Fund's Prospectus under
"Risks--Concentration Risk" and "Risks--Leverage Risk."

Before deciding whether to take any action if the Fund's Common Shares
trade below net asset value, the Board of Trustees would consider all relevant
factors, including the extent and duration of the discount, the liquidity of
the Fund's portfolio, the impact of any action that might be taken on the Fund
or its shareholders and market considerations. Based on these considerations,
even if the Fund's shares should trade at a discount, the Board of Trustees may
determine that, in the interest of the Fund and its shareholders, no action
should be taken.

TAX MATTERS

FEDERAL INCOME TAX MATTERS

The following discussion of federal income tax matters is based upon
the advice of Bell, Boyd & Lloyd LLC, special counsel to the Fund.

Set forth below is a discussion of certain U.S. federal income tax
issues concerning the Fund and the purchase, ownership and disposition of Fund
shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in
light of their particular circumstances. Unless otherwise noted, this
discussion assumes you are a U.S. shareholder and that you hold your shares as
a capital asset. This discussion is based upon present provisions of the Code,
the regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, non-U.S. country, or other taxing jurisdiction.

The Fund intends to elect to be treated and to qualify annually as a
regulated investment company under the Code.

To qualify for the favorable U.S. federal income tax treatment
generally accorded to regulated investment companies, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including receivables), U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities (other than U.S. Government securities or
the securities of other regulated investment companies) of a single issuer, or
two or more issuers which the Fund controls and are engaged in the same, similar
or related trades or businesses; and (c) distribute at least 90% of its
investment company taxable income (as that term is defined in the Code, but
without regard to the deduction for dividends paid).

As a regulated investment company, the Fund generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, that it distributes to shareholders. The Fund may retain
for investment its net capital gain. However, if the Fund retains any net
capital gain or any investment company taxable income, it will be subject to tax
at regular corporate rates on the amount retained. If the Fund retains any net
capital gain, it may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their share of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by the Fund on such undistributed amount against their
federal income tax liabilities, if any, and to claim refunds to the extent the
credit exceeds such liabilities. For federal income tax purposes, the tax basis
of shares owned by a shareholder of the Fund will be increased by an amount
equal under current law to the difference between the amount of undistributed
capital gains included in the shareholder's gross income and the tax deemed paid
by the shareholder under clause (ii) of the preceding sentence. The Fund intends
to distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gain.

Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, the Fund must distribute during each
calendar year an amount at least equal to the sum of (1) 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for the one-year period ending October 31 of the
calendar year, and (3) any ordinary income and capital gains for previous years
that were not distributed during those years and on which the Fund paid no
federal income tax. To prevent application of the excise tax, the Fund intends
to make its distributions in accordance with the calendar year distribution
requirement. A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Fund in October, November or
December with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.

If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary dividend income. Such
distributions generally would be eligible (i) to be treated as "qualified
dividend income," as discussed below (See "The Jobs and Growth Tax
Reconciliation Act of 2003") in the case of noncorporate shareholders and (ii)
for the dividends received deduction under Section 243 of the Code (the
"Dividends Received Deduction") in the case of corporate shareholders.

DISTRIBUTIONS

Dividends paid out of the Fund's investment company taxable income
will generally be taxable to a shareholder as ordinary income to the extent of
the Fund's earnings and profits, whether paid in cash or reinvested in
additional shares.

Distributions of net capital gain, if any, designated as capital gain
dividends are taxable to a shareholder as long-term capital gains, regardless of
how long the shareholder has held Fund shares. Shareholders receiving
distributions in the form of additional shares, rather than cash, generally will
have a cost basis in each such share equal to the fair market value of a share
of the Fund on the reinvestment date. A distribution of an amount in excess of
the Fund's current and accumulated earnings and profits will be treated by a
shareholder as a return of capital which is applied against and reduces the
shareholder's basis in his or her shares. To the extent that the amount of any
such distribution exceeds the shareholder's basis in his or her shares, the
excess will be treated by the shareholder as gain from a sale or exchange of the
shares. Distributions from the Fund generally are not expected to qualify for
the Dividends Received Deduction.

The Internal Revenue Service's position in a published revenue ruling
indicates that the Fund is required to designate distributions paid with respect
to its Common Shares and its FundPreferred Shares as consisting of a portion of
each type of income distributed by the Fund. The portion of each type of income
deemed received by the holders of each class of shares will be equal to the
portion of total Fund dividends received by such class. Thus, the Fund will
designate dividends paid as capital gain dividends in a manner that allocates
such dividends between the holders of the Common Shares and the holders of
FundPreferred Shares, in proportion to the total dividends paid to each such
class during or with respect to the taxable year, or otherwise as required by
applicable law.

Shareholders will be notified annually as to the U.S. federal tax
status of distributions, and shareholders receiving distributions in the form
of additional shares will receive a report as to the net asset value of those
shares.

SALE OR EXCHANGE OF FUND SHARES

Upon the sale or other disposition of shares of the Fund, which a
shareholder holds as a capital asset, such a shareholder may realize a capital
gain or loss which will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Generally, a shareholder's gain or
loss will be a long-term gain or loss if the shares have been held for more
than one year. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced
the maximum tax rate on long-term capital gains of noncorporate investors from
20% to 15% for taxable years beginning on or before December 31, 2008.

Any loss realized on a sale or exchange will be disallowed to the extent
that shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after disposition of the original shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gain received or deemed
received by the shareholder with respect to such shares.

NATURE OF FUND'S INVESTMENTS

Certain of the Fund's investment practices are subject to special and
complex federal income tax provisions that may, among other things, (i)
disallow, suspend or otherwise limit the allowance of certain losses or
deductions, (ii) convert lower taxed long-term capital gain into higher taxed
short-term capital gain or ordinary income, (iii) convert an ordinary loss or a
deduction into a capital loss (the deductibility of which is more limited), (iv)
cause the Fund to recognize income or gain without a corresponding receipt of
cash, (v) adversely affect the time as to when a purchase or sale of stock or
securities is deemed to occur and (vi) adversely alter the characterization of
certain complex financial transactions. The Fund may make certain tax elections
in order to mitigate the effect of these provisions.

The Fund's investment program and the tax treatment of Fund distributions
may be affected by Internal Revenue Service interpretations of the Code and
future changes in tax laws and regulations.

FUTURES CONTRACTS AND OPTIONS

The Fund's transactions in futures contracts and options will be
subject to special provisions of the Code that, among other things, may affect
the character of gains and losses realized by the Fund (i.e., may affect whether
gains or losses are ordinary or capital), may accelerate recognition of income
to the Fund and may defer Fund losses. These rules could, therefore, affect the
character, amount and timing of distributions to shareholders. These provisions
also (a) will require the Fund to mark-to-market certain types of the positions
in its portfolio (i.e., treat them as if they were closed out), and (b) may
cause the Fund to recognize income without receiving cash with which to make
distributions in amounts necessary to satisfy the 90% distribution requirement
for qualifying to be taxed as a regulated investment company and the 98%
distribution requirement for avoiding excise taxes. The Fund will monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any futures
contract, option or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Fund from being taxed as a regulated
investment company.

FOREIGN TAXES

Since the Fund may invest in foreign securities, its income from such
securities may be subject to non-U.S. taxes. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Shareholders
of the Fund generally will not be entitled to a credit or deduction with respect
to such taxes paid by the Fund.

CURRENCY FLUCTUATIONS

Under Section 988 of the Code, gains or losses attributable to fluctuations
in exchange rates between the time the Fund accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such income or receivables or pays such liabilities are
generally treated as ordinary income or loss. Similarly, gains or losses on
foreign currency forward contracts and the disposition of debt securities
denominated in foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition dates, are also treated
as ordinary income or loss.

RECOGNITION OF INCOME IN THE ABSENCE OF CASH

Investments by the Fund in zero coupon or other discount securities
will result in income to the Fund equal to a portion of the excess of the face
value of the securities over their issue price (the "original issue discount")
each year that the securities are held, even though the Fund receives no cash
interest payments. In other circumstances, whether pursuant to the terms of a
security or as a result of other factors outside the control of the Fund, the
Fund may recognize income without receiving a commensurate amount of cash. Such
income is included in determining the amount of income which the Fund must
distribute to maintain its status as a regulated investment company and to avoid
the payment of federal income tax and the nondeductible 4% excise tax. Because
such income may not be matched by a corresponding cash distribution to the Fund,
the Fund may be required to borrow money or dispose of other securities to be
able to make distributions to its shareholders.

The Code imposes constructive sale treatment for federal income tax
purposes on certain hedging strategies with respect to appreciated financial
positions. Under these rules, taxpayers will recognize gain, but not loss, with
respect to securities if they enter into short sales or "offsetting notional
principal contracts" (as defined by the Code) with respect to, or futures or
forward contracts to deliver, the same or substantially identical property, or
if they enter into such transactions and then acquire the same or substantially
identical property. The Secretary of the Treasury is authorized to promulgate
regulations that will treat as constructive sales certain transactions that have
substantially the same effect as these transactions.

INVESTMENTS IN SECURITIES OF UNCERTAIN TAX CHARACTER

The Fund may invest in preferred securities, convertible securities or
other securities the federal income tax treatment of which is uncertain or
subject to recharacterization by the Internal Revenue Service. To the extent
the tax treatment of such securities or income differs from the tax treatment
expected by the Fund, it could affect the timing or character of income
recognized by the Fund, requiring the Fund to purchase or sell securities, or
otherwise change its portfolio, in order to comply with the tax rules applicable
to regulated investment companies under the Code.

BACKUP WITHHOLDING

The Fund may be required to withhold federal income tax from all
taxable distributions and redemption proceeds payable to shareholders who fail
to provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. As modified by the Jobs and
Growth Tax Relief Reconciliation Act of 2003, the backup withholding percentage
is 28% for amounts paid through 2010, after which time the rate will increase to
31% absent legislative change. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. This withholding is not an additional tax. Any amounts withheld may
be credited against the shareholder's federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.

NON-U.S. SHAREHOLDERS

U.S. taxation of a shareholder who, as to the United States, is a
nonresident alien individual, a foreign trust or estate, a foreign corporation
or foreign partnership (a "non-U.S. shareholder") depends on whether the income
of the Fund is "effectively connected" with a U.S. trade or business carried on
by the shareholder.

Income Not Effectively Connected. If the income from the Fund is not
"effectively connected" with a U.S. trade or business carried on by the non-U.S.
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate), which tax is generally withheld
from such distributions.

Capital gain dividends and any amounts retained by the Fund which are
designated as undistributed capital gains will not be subject to U.S. federal
withholding tax at the rate of 30% (or lower treaty rate) unless the non-U.S.
shareholder is a nonresident alien individual and is physically present in the
United States for more than 182 days during the taxable year and meets certain
other requirements. However, this 30% tax on capital gains of nonresident alien
individuals who are physically present in the United States for more than the
182 day period only applies in exceptional cases because any individual present
in the United States for more than 182 days during the taxable year is generally
treated as a resident for U.S. income tax purposes; in that case, he or she
would be subject to U.S. income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. federal
withholding tax. In the case of a non-U.S. shareholder who is a nonresident
alien individual, the Fund may be required to withhold U.S. income tax from
distributions of net capital gain unless the non-U.S. shareholder certifies his
or her non-U.S. status under penalties of perjury or otherwise establishes an
exemption. See "Tax Matters--Backup Withholding" above. Any gain a non-U.S.
shareholder realizes upon the sale or exchange of such shareholder's shares of
the Fund will ordinarily be exempt from U.S. tax unless, in the case of a
non-U.S. shareholder that is a nonresident alien individual, the gain is U.S.
source income and such shareholder is physically present in the United States
for more than 182 days during the taxable year and meets certain other
requirements, or is otherwise considered to be a resident alien of the United
States.

Income Effectively Connected. If the income from the Fund is
"effectively connected" with a U.S. trade or business carried on by a non-U.S.
shareholder, then distributions of investment company taxable income and
capital gain dividends, any amounts retained by the Fund which are designated
as undistributed capital gains and any gains realized upon the sale or exchange
of shares of the Fund will be subject to U.S. income tax at the graduated rates
applicable to U.S. citizens, residents and domestic corporations. Non-U.S.
corporate shareholders may also be subject to the branch profits tax imposed by
the Code.

The tax consequences to a non-U.S. shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described herein.
Non-U.S. shareholders are advised to consult their own tax advisors with respect
to the particular tax consequences to them of an investment in the Fund.

THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act")
reduced the maximum tax rate on long-term capital gains of noncorporate
investors from 20% to 15%. The Act also reduced to 15% the maximum tax rate on
"qualified dividend income" of a noncorporate investor. To the extent the Fund
distributes amounts of dividends, including capital gain dividends, eligible for
the reduced rates, it will identify the relevant amounts in its annual tax
information reports to its shareholders. However, it is not expected that a
significant amount, if any, of the distributions paid with respect to the Common
Shares will constitute "qualified dividend income" eligible for taxation at the
reduced rates. Without further legislative change, the rate reductions enacted
by the Act will lapse, and the previous rates will be reinstated, for taxable
years beginning on or after January 1, 2009.

REGULATIONS ON "REPORTABLE TRANSACTIONS"

Under recently promulgated Treasury regulations, if a shareholder
recognizes a loss with respect to Common Shares of $2 million or more for an
individual shareholder or $10 million or more for a corporate shareholder in any
single taxable year (or a greater loss over a combination of years), the
shareholder must file with the Internal Revenue Service a disclosure statement
on Form 8886. Direct shareholders of portfolio securities are in many cases
excepted from this reporting requirement, but under current guidance,
shareholders of a regulated investment company are not excepted. Future guidance
may extend the current exception from this reporting requirement to shareholders
of most or all regulated investment companies. The fact that a loss is
reportable under these regulations does not affect the legal determination of
whether the taxpayer's treatment of the loss is proper. Shareholders should
consult their tax advisors to determine the applicability of these regulations
in light of their individual circumstances.

OTHER TAXES

Fund shareholders may be subject to state, local and foreign taxes on
their Fund distributions. Shareholders are advised to consult their own tax
advisors with respect to the particular tax consequences to them of an
investment in the Fund.

EXPERTS

The Financial Statements of the Fund as of March 4, 2004, appearing in
this Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing. Ernst & Young LLP provides
accounting and auditing services to the Fund. The principal business address of
Ernst & Young LLP is 233 S. Wacker Drive, Chicago, IL 60606.

CUSTODIAN AND TRANSFER AGENT

The custodian of the assets of the Fund is State Street Bank and Trust
Company, One Federal Street, Boston, Massachusetts 02110. The custodian performs
custodial, fund accounting and portfolio accounting services. The Fund's
transfer, shareholder services and dividend paying agent is also State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.

ADDITIONAL INFORMATION

A Registration Statement on Form N-2, including amendments thereto,
relating to the shares of the Fund offered hereby, has been filed by the Fund
with the Commission, Washington, D.C. The Fund's Prospectus and this Statement
of Additional Information do not contain all of the information set forth in the
Registration Statement, including any exhibits and schedules thereto. For
further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's Registration Statement. Statements contained in
the Fund's Prospectus and this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement may be inspected without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the Commission upon the payment of certain fees prescribed by
the Commission.

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder of
Nuveen Floating Rate Income Fund

We have audited the accompanying statement of assets and liabilities of Nuveen
Floating Rate Income Fund (the "Fund") as of March 4, 2004 and the related
statement of operations for the period from January 15, 2004 (date of
organization) through March 4, 2004. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of the Fund at March 4, 2004, and
the results of its operations for the period from January 15, 2004 (date of
organization) through March 4, 2004, in conformity with accounting principles
generally accepted in the United States.

/s/ ERNST & YOUNG LLP

Chicago, Illinois
March 5, 2004

NUVEEN FLOATING RATE INCOME FUND
FINANCIAL STATEMENTS

Nuveen Floating Rate Income Fund
Statement of Assets and Liabilities

March 4, 2004

Assets:
Cash................................................................. $ 100,275
Offering costs....................................................... 1,000,000
Receivable from Adviser.............................................. 11,500
----------
Total assets...................................................... 1,111,775
----------

Liabilities:
Accrued offering costs............................................... 1,000,000
Payable for organization costs....................................... 11,500
----------
Total liabilities................................................. 1,011,500
----------
FundPreferred Shares, $25,000 liquidation value; unlimited
number of shares authorized, no shares outstanding................ -
----------
Net assets applicable to Common Shares................................... $ 100,275
==========

Net asset value per Common Share outstanding ($100,275 divided
by 7,000 Common Shares outstanding).................................. $ 14.325
==========
Net Assets Applicable to Common Shares Represent:
Common Shares, $.01 par value; unlimited number of shares
authorized, 7,000 shares outstanding.............................. $ 70
Paid-in surplus...................................................... 100,205
----------
$ 100,275
==========

NUVEEN FLOATING RATE INCOME FUND

Statement of Operations

Period from January 15, 2004 (date of organization) through March 4, 2004

Investment income.................................................... $ -
--------

Expenses:
Organization costs................................................ 11,500
Expense reimbursement............................................. (11,500)
--------
Total expenses................................................. -
--------
Net investment income................................................ $ -
========

Note 1: Organization

The Fund was organized as a Massachusetts business trust on January 15, 2004,
and has been inactive since that date except for matters relating to its
organization and registration as a diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended, and the Securities
Act of 1933, as amended, and the sale of 7,000 Common Shares to Nuveen
Institutional Advisory Corp., the Fund's investment adviser (the "Adviser"), a
wholly owned subsidiary of Nuveen Investments, Inc.

Nuveen Investments, LLC, also a wholly owned subsidiary of Nuveen Investments,
Inc., has agreed to reimburse all organization expenses (approximately $11,500)
and pay all Common Share offering costs (other than the sales load) that exceed
$.03 per Common Share.

The Fund seeks to provide a high level of current income by investing primarily
in adjustable rate senior loans.

The Fund is authorized by its Declaration of Trust to utilize financial leverage
through borrowing, issuing commercial paper or notes and/or offering Preferred
Shares ("FundPreferred Shares"). FundPreferred Shares may have a liquidation
value of $25,000 per share and may be issued in one or more classes or series,
with dividend, liquidation preference and other rights as determined by the
Fund's Board of Trustees without approval of the Common Shareholders.

Note 2: Significant Accounting Policies

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

The Fund's share of Common Share offering costs will be recorded as a reduction
of the proceeds from the sale of Common Shares upon the commencement of Fund
operations.

If the Fund offers FundPreferred Shares, the offering costs will be borne by
Common Shareholders as a direct reduction to paid-in surplus.

Note 3: Investment Management Agreement

Pursuant to an investment management agreement between the Adviser and the Fund,
the Fund, upon commencement of Fund operations, has agreed to pay a management
fee, payable on a monthly basis, at an annual rate ranging from .8500% of the
first $500 million of the average daily net assets (including net assets
attributable to FundPreferred Shares and/or the principal amount of any
borrowings, commercial paper and/or notes issued ("Managed Assets")) to .7500%
of the average daily Managed Assets in excess of $2 billion.

In addition to the reimbursement and waiver of organization and Common Share
offering costs discussed in Note 1, the Adviser has contractually agreed to
reimburse the Fund for fees and expenses in the amount of .32% of average daily
Managed Assets for the first five full years of the Fund's operations, .24% in
year 6, .16% in year 7 and .08% in year 8. The Adviser has not agreed to
reimburse the Fund for any portion of its fees and expenses beyond March 31,
2012.

Note 4: Income Taxes

The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its net
investment income, in addition to any significant amounts of net realized
capital gains from investment transactions, if any.

APPENDIX A

Ratings of Investments

Standard & Poor's Corporation --A brief description of the applicable
Standard & Poor's Corporation, a division of The McGraw-Hill Companies
("Standard & Poor's" or "S&P"), rating symbols and their meanings (as published
by S&P) follows:

A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations, or a specific financial program
(including ratings on medium term note programs and commercial paper programs).
It takes into consideration the creditworthiness of guarantors, insurers, or
other forms of credit enhancement on the obligation. The issue credit rating is
not a recommendation to purchase, sell, or hold a financial obligation, inasmuch
as it does not comment as to market price or suitability for a particular
investor.

Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
credit rating and may, on occasion, rely on unaudited financial information.
Credit ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or based on other circumstances.

Issue credit ratings can be either long-term or short-term. Short-term
ratings are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days - including commercial paper.

Short-term ratings are also used to indicate the creditworthiness of an
obligor with respect to put features on long-term obligations. The result is a
dual rating, in which the short-term ratings address the put feature, in
addition to the usual long-term rating. Medium-term notes are assigned long-term
ratings.

LONG-TERM ISSUE CREDIT RATINGS

Issue credit ratings are based in varying degrees, on the following
considerations:

1. Likelihood of payment - capacity and willingness of the
obligor to meet its financial commitment on an obligation
in accordance with the terms of the obligation;

2. Nature of and provisions of the obligation; and

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights. The issue ratings
definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity.
Junior obligations are typically rated lower than senior
obligations, to reflect the lower priority in bankruptcy,
as noted above.

A-1

AAA

An obligation rated 'AAA' has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.

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

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

BBB

An obligation rated 'BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, And C

Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded
as having significant speculative characteristics. 'BB' indicates the
least degree of speculation and 'C' the highest. While such obligations
will likely have some quality and protective characteristics, these may
be outweighed by large uncertainties or major exposures to adverse
conditions.

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

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

CCC

A-2

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

An obligation rated 'CC' is currently highly vulnerable to
nonpayment.

The 'C' rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken,
but payments on this obligation are being continued.

An obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. The 'D' rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.

Plus (+) or minus (-). The ratings from 'AA' to 'CCC' may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.

The 'c' subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase
tendered bonds if the long-term credit rating of the issuer is below an
investment-grade level and/or the issuer's bonds are deemed taxable.

The letter 'p' indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project
financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the
successful, timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of or the risk of default
upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

A-3

Continuance of the ratings is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or closing
documentation confirming investments and cash flows.

The 'r' highlights derivative, hybrid, and certain other
obligations that Standard & Poor's believes may experience high
volatility or high variability in expected returns as a result of
noncredit risks. Examples of such obligations are securities with
principal or interest return indexed to equities, commodities, or
currencies; certain swaps and options; and interest-only and
principal-only mortgage securities. The absence of an 'r' symbol should
not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.

N.R.

Not rated.

Debt obligations of issuers outside the United States and its
territories are rated on the same basis as domestic corporate and
municipal issues. The ratings measure the creditworthiness of the
obligor but do not take into account currency exchange and related
uncertainties.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the
Comptroller of the Currency, bonds rated in the top four categories
('AAA', 'AA', 'A', 'BBB', commonly known as investment-grade ratings)
generally are regarded as eligible for bank investment. Also, the laws
of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings
banks, trust companies, insurance companies, and fiduciaries in
general.

Short-Term Issue Credit Ratings

Notes

A Standard & Poor's note ratings reflects the liquidity
factors and market access risks unique to notes. Notes due in three
years or less will likely receive a note rating. Notes maturing beyond
three years will most likely receive a long-term debt rating. The
following criteria will be used in making that assessment:

. Amortization schedule -- the larger the final
maturity relative to other maturities, the more
likely it will be treated as a note; and

. Source of payment -- the more dependent the issue is
on the market for its refinancing, the more likely
it will be treated as a note.

Note rating symbols are as follows:

A-4

SP-1

Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.

SP-2

Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3

Speculative capacity to pay principal and interest.

A note rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

Commercial Paper

An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:

A-1

A short-term obligation rated 'A-1' is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2

A short-term obligation rated 'A-2' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

A-3

A short-term obligation rated 'A-3' exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

A-5

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

A short-term obligation rated 'C' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.

A short-term obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.

A commercial rating is not a recommendation to purchase, sell, or hold
a security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

A-6

Moody's Investors Service, Inc.-- A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:

Municipal Bonds

Aaa

Bonds which are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

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

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

Baa

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

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

A-7

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

Caa

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

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

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

#(hatchmark): Represents issues that are secured by escrowed funds held
in cash, held in trust, invested and reinvested in direct, non-callable,
non-prepayable United States government obligations or non-callable,
non-prepayable obligations unconditionally guaranteed by the U.S. Government,
Resolution Funding Corporation debt obligations.

Con. (...): Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. The parenthetical rating denotes probable credit stature upon
completion of construction or elimination of the basis of the condition.

(P): When applied to forward delivery bonds, indicates the rating is
provisional pending delivery of the bonds. The rating may be revised prior to
delivery if changes occur in the legal documents or the underlying credit
quality of the bonds.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
issue ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.

Short-Term Loans

MIG 1/VMIG 1

This designation denotes superior credit quality. Excellent protection
is afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2

This designation denotes strong credit quality. Margins of protection
are ample, although not as large as in the preceding group.

A-8

MIG 3/VMIG 3

This designation denotes acceptable credit quality. Liquidity and
cash-flow protection may be narrow, and market access for refinancing is likely
to be less well-established.

This designation denotes speculative-grade credit quality. Debt
instruments in this category may lack sufficient margins of protection.

Commercial Paper

Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will normally be evidenced by the following characteristics:

-- Leading market positions in well-established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.

-- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.

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

Issuers (or supporting institutions) rated Prime-2 have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation than is the case for Prime-2 securities. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating
categories.

A-9

Fitch Ratings --A brief description of the applicable Fitch Ratings
("Fitch") ratings symbols and meanings (as published by Fitch) follows:

Long-Term Credit Ratings

Investment Grade

AAA

Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB

Good credit quality. 'BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

Speculative Grade

Speculative. 'BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic change
over time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.

Highly speculative. 'B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

A-10

CCC, CC, C

High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon sustained, favorable business or
economic developments. A 'CC' rating indicates that default of some kind appears
probable. 'C' ratings signal imminent default.

DDD, DD, and D Default

The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. 'DDD' obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest. `DD' indicates
potential recoveries in the range of 50%-90%, and 'D' the lowest recovery
potential, i.e., below 50%. Entities rated in this category have defaulted on
some or all of their obligations. Entities rated 'DDD' have the highest prospect
for resumption of performance or continued operation with or without a formal
reorganization process. Entities rated 'DD' and 'D' are generally undergoing a
formal reorganization or liquidation process; those rated 'DD' are likely to
satisfy a higher portion of their outstanding obligations, while entities rated
'D' have a poor prospect for repaying all obligations.

Short-Term Credit Ratings

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.

Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.

Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.

Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade. B Speculative. Minimal capacity for timely
payment of financial commitments, plus vulnerability to near-term adverse
changes in financial and economic conditions.

Speculative Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.

A-11

High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

Default. Denotes actual or imminent payment default.

Notes to Long-term and Short-term ratings:

"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the 'AAA' Long-term rating
category, to categories below 'CCC', or to Short-term ratings other than 'F1'.

'NR' indicates that Fitch Ratings does not rate the issuer or issue in
question.

'Withdrawn': A rating is withdrawn when Fitch Ratings deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.

Rating Watch: Ratings are placed on Rating Watch to notify investors that
there is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.

A Rating Outlook indicates the direction a rating is likely to move over a
one to two year period. Outlooks may be positive, stable, or negative. A
positive or negative Rating Outlook does not imply a rating change is
inevitable. Similarly, ratings for which outlooks are `stable' could be
downgraded before an outlook moves to positive or negative if circumstances
warrant such an action. Occasionally, Fitch Ratings may be unable to identify
the fundamental trend. In these cases, the Rating Outlook may be described as
evolving.

A-12

Nuveen Floating Rate Income Fund

__________ Common Shares

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

STATEMENT OF ADDITIONAL INFORMATION

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

____________, 2004

PART C - OTHER INFORMATION

Item 24: Financial Statements and Exhibits

1. Financial Statements:

Registrant has not conducted any business as of the date of this filing,
other than in connection with its organization. Financial Statements indicating
that the Registrant has met the net worth requirements of Section 14(a) of the
1940 Act are filed with this Pre-effective Amendment to the Registration
Statement.

2. Exhibits:

a.1 Declaration of Trust dated January 15, 2004. Filed on January 23, 2004 as
Exhibit a to Registrant's registration statement on Form N-2 (File
No. 333-112179) and incorporated herein by reference.*

a.2 Amendment to Declaration of Trust dated February 23, 2004. Filed on
February 24, 2004 as Exhibit a.2 to Pre-effective amendment No. 3 to the
Registrant's registration statement on Form N-2 (File No. 333-112179) and
incorporated herein by reference.*

b. By-laws of Registrant. Filed on January 23, 2004 as Exhibit b to
Registrant's registration statement on Form N-2 (File No. 333-112179) and
incorporated herein by reference.*

c. None.

d. Not Applicable.

e. Terms and Conditions of the Dividend Reinvestment Plan.

f. None.

g.1 Investment Management Agreement between Registrant and Nuveen Institutional
Advisory Corp. dated February 24, 2004.

g.2 Investment Sub-Advisory Agreement between Nuveen Institutional Advisory
Corp. and Symphony Asset Management, LLC dated February 24, 2004.

h.1 Form of Underwriting Agreement.

h.2 Form of Salomon Smith Barney Inc. Master Selected Dealer Agreement.

h.3 Form of Nuveen Master Selected Dealer Agreement.

h.4 Form of Salomon Smith Barney Inc. Master Agreement Among Underwriters.

h.5 Form of Dealer Letter Agreement.

i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.

j. Master Custodian Agreement between Registrant and State Street Bank and
Trust Company dated August 19, 2002.

k.1 Shareholder Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated October 7, 2002.

k.2 Expense Reimbursement Agreement between Registrant and Nuveen Institutional
Advisory Corp. dated February 24, 2004.

C-1

l.1 Opinion and consent of Bell, Boyd & Lloyd LLC. Filed on February 24, 2004
as Exhibit l.1 to Pre-effective amendment No. 3 to the Registrant's
registration statement on Form N-2 (File No. 333-112179) and incorporated
herein by reference.*

l.2 Opinion and consent of Bingham McCutchen LLP. Filed on February 24, 2004 as
Exhibit l.2 to Pre-effective amendment No. 3 to the Registrant's
registration statement on Form N-2 (File No. 333-112179) and incorporated
herein by reference.*

l.3 Consent of Bell, Boyd & Lloyd LLC.

l.4 Consent of Bingham McCutchen LLP.

m. None.

n. Consent of Ernst & Young LLP.

o. None.

p. Subscription Agreement of Nuveen Institutional Advisory Corp. dated March
4, 2004.

q. None.

r.1 Code of Ethics of Nuveen Exchange-Traded Funds and Nuveen Institutional
Advisory Corp.

r.2 Code of Ethics of Symphony Asset Management, LLC. Filed on February 24,
2004 as Exhibit r.2 to Pre-effective amendment No. 3 to the Registrant's
registration statement on Form N-2 (File No. 333-112179) and incorporated
herein by reference.*

s. Powers of Attorney.

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

* Previously filed.

Item 25: Marketing Arrangements

Sections 3, 5 and 6(n) of the Form of Underwriting Agreement filed as Exhibit
h.1 to this Registration Statement.

See the Introductory Paragraph and Sections 2 and 3(d) of the Form of Salomon
Smith Barney Inc. Master Selected Dealer Agreement filed as Exhibit h.2 to this
Registration Statement and the Introductory Paragraph and Sections 2 and 3 of
the Form of Nuveen Master Selected Dealer Agreement filed as Exhibit h.3 to this
Registration Statement.

See the Introductory Paragraph and Sections 1.2, 3.1, 3.2, 3.4-3.8, 4.1, 4.2,
5.1-5.4, 6.1, 10.9 and 10.10 of the Form of Salomon Smith Barney Inc. Master
Agreement Among Underwriters filed as Exhibit h.4 to this Registration
Statement.

See Paragraph e of the Form of Dealer Letter Agreement between Nuveen and the
Underwriters filed as Exhibit h.5 to this Registration Statement.

Item 26: Other Expenses of Issuance and Distribution

Securities and Exchange Commission fees 91,224
National Association of Securities Dealers, Inc. fees 30,500
Printing and engraving expenses 700,000
Legal Fees 220,000
Exchange listing fees 40,000
Blue Sky filing fees and expenses 5,000
Underwriters reimbursement 135,000
Miscellaneous expenses 13,276
----------
Total $1,235,000
==========

C-2

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

* Nuveen Institutional Advisory Corp. and Symphony Asset Management, LLC have
contractually agreed to reimburse the Fund for fees and expenses in the amount
of .32% of average daily Managed Assets of the Fund for the first five full
years of the Fund's operations, .24% of average daily Managed Assets in year
six, .16% in year seven and .08% in year eight. Without the reimbursement,
"Total Annual Expenses" would be estimated to be 1.69% of average daily net
assets attributable to Common Shares. Nuveen has agreed to pay (i) all
organizational expenses and (ii) offering costs (other than sales load) that
exceed $0.03 per Common Share (0.20% of offering price).

Item 27: Persons Controlled by or under Common Control with Registrant

Not applicable.

Item 28: Number of Holders of Securities

At March 24, 2004

Number of
Title of Class Record Holders
-------------- --------------

Common Shares, $0.01 par value 1

Item 29: Indemnification

Section 4 of Article XII of the Registrant's Declaration of Trust provides
as follows:

Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director, officer, employee or agent and
against amounts paid or incurred by him in settlement thereof.

No indemnification shall be provided hereunder to a Covered Person:

(a) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;

(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or

C-3

(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:

(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or

(ii) by written opinion of independent legal counsel.

The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.

Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:

(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or

(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.

As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.

C-4

As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

The trustees and officers of the Registrant are covered by Investment Trust
Directors and Officers and Errors and Omission policies in the aggregate amount
of $50,000,000 against liability and expenses of claims of wrongful acts arising
out of their position with the Registrant and other Nuveen funds, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of the
Registrant or where he or she had reasonable cause to believe this conduct was
unlawful). The policy has a $500,000 deductible, which does not apply to
individual trustees or officers.

Section 9 of the Form of Underwriting Agreement filed as Exhibit h.1 to
this Registration Statement provides for each of the parties thereto, including
the Registrant and the Underwriters, to indemnify the others, their trustees,
directors, certain of their officers, trustees, directors and persons who
control them against certain liabilities in connection with the offering
described herein, including liabilities under the federal securities laws.

Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

Item 30: Business and Other Connections of Investment Adviser

Nuveen Institutional Advisory Corp. ("NIAC") serves as investment adviser
to the following open-end and closed-end management type investment companies:
Nuveen Investment Trust, Nuveen Investment Trust II, Nuveen Investment Trust
III, Nuveen Senior Income Fund, Nuveen Select Tax-Free Income Portfolio, Nuveen
Select Tax-Free Income Portfolio 2, Nuveen California Select Tax-Free Income
Portfolio, Nuveen New York Select Tax-Free Income Portfolio, Nuveen Real Estate
Income Fund, Nuveen Select Tax-Free Income Portfolio 3, Nuveen Quality Preferred
Income Fund, Nuveen Quality Preferred Income Fund 2, Nuveen Quality Preferred
Income Fund 3, Nuveen Preferred and Convertible Income Fund, Nuveen Preferred
and Convertible Income Fund 2, Nuveen Diversified Dividend and Income Fund and
Nuveen Tax-Advantaged Total Return Strategy Fund.

C-5

NIAC has no other clients or business at the present time. For a
description of other business, profession, vocation or employment of a
substantial nature in which any director or officer of the investment adviser
who serve as officers or Trustees of the Registrant has engaged during the last
two years for his or her account or in the capacity of director, officer,
employee, partner or trustee, see the descriptions under "Management of the
Fund" in Part B of this Registration Statement. Such information for the
remaining senior officers of NIAC appears below:

Other Business Profession, Vocation or
Name and Position with NIAC Employment During Past Two Years
--------------------------- --------------------------------------

John P. Amboian, President and Director....... President and Director of Nuveen Investments, Inc.,
Nuveen Investments, LLC, Nuveen Advisory Corp., Nuveen Asset
Management, Inc., Rittenhouse Asset Management, Inc., Nuveen
Investments Advisors Inc., and Nuveen Investments Holdings, Inc.

Alan G. Berkshire, Senior Vice President and
Secretary..................................... Senior Vice President, Secretary and General Counsel of Nuveen
Investments, Inc., Nuveen Investments, LLC, Nuveen Asset Management,
Inc., Rittenhouse Asset Management, Inc. and Nuveen Investments Holdings,
Inc.; Senior Vice President and Secretary of Nuveen Advisory Corp. and
Nuveen Investments Advisors Inc.; Assistant Secretary of NWQ Investment
Management Company, LLC and Secretary of Symphony Asset Management, LLC.

Margaret E. Wilson, Senior Vice President,
Finance....................................... Senior Vice President, Finance of Nuveen Investments, Inc.,
Nuveen Investments, LLC, Nuveen Asset Management, Inc., Nuveen
Advisory Corp., Rittenhouse Asset Management, Inc., Nuveen
Investments Advisors Inc. and Nuveen Investments Holdings, Inc.

Symphony Asset Management, LLC currently serves as an investment adviser or
subadviser to three other funds. The address for Symphony Asset Management, LLC
is 555 California Street, Suite 2975, San Francisco, CA 94104. See "Investment
Advisers" in Part B of the Registration Statement.

Set forth below is a list of each director and officer of Symphony, indicating
each business, profession, vocation or employment of a substantial nature in
which such person has been, at any time during the past two fiscal years,
engaged for his or her own account or in the capacity of director, officer,
partner or trustee.

Other Business, Profession, Vocation or Employment
Name and Position with Symphony During Past Two Years
------------------------------- ---------------------------------------------------

Jeffrey L. Skelton Manager/Member, NetNet Ventures, LLC
President, Chief Executive
Officer

Neil L. Rudolph Manager/Member, NetNet Ventures, LLC
Chief Operating Officer; Chief
Financial Officer; Chief Compliance
Officer

Michael J. Henman Manager/Member, NetNet Ventures, LLC
Director of Business
Development; Vice President

Praveen K. Gottipalli Portfolio Manager and Manager/Member, NetNet Ventures,
Director of Investments; LLC
Vice President

Gunther M. Stein Portfolio Manager, Symphony Asset Management LLC;
Director of Fixed Income Strategies Portfolio Manager, Nuveen Senior Loan Asset Management
LLC; Vice President, Nuveen Institutional Advisory
Corp.

Item 31: Location of Accounts and Records

Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago,
Illinois 60606, maintains the Declaration of Trust, By-Laws, minutes of trustees
and shareholders meetings and contracts of the Registrant and all advisory
material of the investment adviser.

Symphony Asset Management, LLC, 555 California Street, Suite 2975, San
Francisco, CA 94104, maintenance certain of its advisory material.

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, maintains all general and subsidiary ledgers, journals,
trial balances, records of all portfolio purchases and sales, and all other
required records not maintained by Nuveen Institutional Advisory Corp.

Item 32: Management Services

Not applicable.

C-6

Item 33: Undertakings

1. Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if: (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement; or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.

2. Not applicable.

3. Not applicable.

4. Not applicable.

5. The Registrant undertakes that:

a. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant under Rule 497(h) under the
Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

b. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.

6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, any Statement of Additional Information.

C-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago, and State of Illinois, on the 24th day of
March, 2004.

NUVEEN FLOATING RATE INCOME FUND

/s/ Jessica R. Droeger
________________________________________
Jessica R. Droeger, Vice President and
Secretary

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

Signature Title Date
--------- ----- ----

/s/ Stephen D. Foy Vice President and Controller March 24, 2004
---------------------- (Principal Financial and
Stephen D. Foy Accounting Officer)

/s/ Gifford R. Zimmerman Chief Administrative Officer March 24, 2004
------------------------ (Principal Executive Officer)
Gifford R. Zimmerman

Timothy R. Schwertfeger* Chairman of the Board and By: /s/ Jessica R. Droeger
Trustee ------------------------
Jessica R. Droeger
Attorney-In-Fact
March 24, 2004

William E. Bennett* Trustee

Robert P. Bremner* Trustee

Lawrence H. Brown* Trustee

Jack B. Evans* Trustee

William C. Hunter* Trustee

Anne E. Impellizzeri* Trustee

William L. Kissick* Trustee

Thomas E. Leafstrand* Trustee

Peter R. Sawers* Trustee

William J. Schneider* Trustee

Judith M. Stockdale* Trustee

Shelia W. Wellington* Trustee

*Original powers of attorney authorizing Jessica R. Droeger and Gifford R.
Zimmerman, among others, to execute this Registration Statement, and Amendments
thereto, for each of the trustees of the Registrant on whose behalf this
Registration Statement is filed, have been executed and filed as exhibits.

INDEX TO EXHIBITS

a.1 Declaration of Trust dated January 15, 2004.*
a.2 Amendment to Declaration of Trust dated February 23, 2004.*

b. By-laws of Registrant.*

c. None.
d. Not Applicable.

e. Terms and Conditions of the Dividend Reinvestment Plan.

f. None.

g.1 Investment Management Agreement between Registrant and Nuveen Institutional
Advisory Corp. dated February 24, 2004.
g.2 Investment Sub-Advisory Agreement between Nuveen Institutional Advisory
Corp. and Symphony Asset Management, LLC dated February 24, 2004.
h.1 Form of Underwriting Agreement.
h.2 Form of Salomon Smith Barney Inc. Master Selected Dealer Agreement.
h.3 Form of Nuveen Master Selected Dealer Agreement.
h.4 Form of Salomon Smith Barney Inc. Master Agreement Among Underwriters.
h.5 Form of Dealer Letter Agreement.
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.
j. Master Custodian Agreement between Registrant and State Street Bank and
Trust Company dated August 19, 2002.
k.1 Shareholder Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company dated October 7, 2002.
k.2 Expense Reimbursement Agreement between Registrant and Nuveen Institutional
Advisory Corp. dated February 24, 2004.
l.1 Opinion and consent of Bell, Boyd & Lloyd LLC.*
l.2 Opinion and consent of Bingham McCutchen LLP.*
l.3 Consent of Bell, Boyd & Lloyd LLC.
l.4 Consent of Bingham McCutchen LLP.

m. None.

n. Consent of Ernst & Young LLP.

o. None.

p. Subscription Agreement of Nuveen Institutional Advisory Corp. dated March
4, 2004.

q. None.

r.1 Code of Ethics of Nuveen Exchange-Traded Funds and Nuveen Institutional
Advisory Corp.
r.2 Code of Ethics of Symphony Asset Management, LLC.*
s. Powers of Attorney.

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

* Previously filed.