N-14 8C/A 1 d55127dn148ca.htm NUVEEN MULTI-ASSET INCOME FUND Nuveen Multi-Asset Income Fund

As filed with the Securities and Exchange Commission on June 29, 2021

File No. 333-256163

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-14

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. 1

Post-Effective Amendment No.                 

 

 

NUVEEN MULTI-ASSET INCOME FUND

(Exact Name of Registrant as Specified in Charter)

 

 

333 West Wacker Drive

Chicago, Illinois 60606

(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)

(800) 257-8787

(Area Code and Telephone Number)

 

 

Mark L. Winget

Vice President and Secretary

Nuveen Investments

333 West Wacker Drive

Chicago, Illinois 60606

(Name and Address of Agent for Service)

 

 

Copies to:

 

Deborah Bielicke Eades
Vedder Price P.C.
222 North LaSalle Street
Chicago, Illinois 60601
  Eric F. Fess
Chapman and Cutler LLP
111 West Monroe Street
Chicago, Illinois 60603

 

 

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

 

 

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

 

 

Title of Securities
Being Registered
  Amount
Being
Registered(1)
  Proposed
Maximum
Offering Price
Per Unit(1)
  Proposed
Maximum
Aggregate
Offering Price(1)
  Amount of
Registration
Fee(2)

Common Shares of Beneficial Interest,
$0.01 Par Value Per Share

  38,794,228 Shares   $20.00   $775,884,560.00   $84,649.01

 

 

(1)

Estimated solely for the purpose of calculating the registration fee.

(2)

Transmitted prior to filing. A registration fee of $2.18 was paid in connection with the initial filing.

 

 

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

 

 

 


LOGO

IMPORTANT NOTICE TO SHAREHOLDERS OF

NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD),

NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)

AND

NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND (JTD)

[•], 2021

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

 

Q.

Why am I receiving the enclosed Joint Proxy Statement/Prospectus?

 

A.

You are receiving the Joint Proxy Statement/Prospectus in connection with the special shareholder meetings of Nuveen Diversified Dividend and Income Fund (“Dividend and Income Fund”), Nuveen Tax-Advantaged Total Return Strategy Fund (“Total Return Strategy Fund”), and Nuveen Tax-Advantaged Dividend Growth Fund (“Dividend Growth Fund” and together with Dividend and Income Fund and Total Return Strategy Fund, the “Target Funds” and each, a “Target Fund”). The shareholders of each Target Fund will consider the reorganization of such Target Fund into Nuveen Multi-Asset Income Fund (the “Acquiring Fund”), a newly formed closed-end fund (each, a “Reorganization” and together, the “Reorganizations”). The Acquiring Fund and Target Funds are collectively referred to as the “Funds” and each, a “Fund.”

Proposal Regarding the Reorganizations

 

Q.

Why has each Target Fund’s Board recommended this proposal?

 

A.

At a meeting held on April 22, 2021, the Board of Trustees (each a “Board”) of each Target Fund approved a proposal to reorganize the Target Funds into the Acquiring Fund, a newly formed closed-end fund that will be managed in accordance with Nuveen’s dynamic multi-asset income strategy. Based on information provided by Nuveen Fund Advisors, LLC (“Nuveen Fund Advisors”), the Funds’ investment adviser, each Target Fund’s Board believes that the Reorganizations may benefit the Target Fund’s shareholders in a number of ways, including, among other things:

 

   

The potential to deliver superior risk-adjusted returns as a result of adopting a dynamic risk-based asset allocation framework in contrast to the Target Funds’ current static asset allocation strategies with fixed target asset allocations;

 

   

The potential for a more consistent return profile, resulting in more stable managed distributions through an asset allocation framework that considers backward and forward-looking inputs, in contrast to the Target Funds’ current static asset allocation strategies;


   

The potential for improved secondary market liquidity for trading common shares as a result of the combined fund’s larger share float, which may lead to increased trading volume, narrower bid-ask spreads and greater market depth; and

 

   

Lower net operating expenses as a result of certain fixed costs being spread over a larger asset base, and a potentially lower effective fund-level management fee rate due to the ability of the combined fund’s assets to achieve breakpoints in the Acquiring Fund’s fee schedule. In addition, shareholders of Dividend Growth Fund will benefit as a result of the Acquiring Fund’s fund-level management fee schedule, which provides for a lower fund-level management fee rate at all asset levels compared to the current fund-level management fee schedule of Dividend Growth Fund.

 

Q.

How does the Acquiring Fund’s dynamic multi-asset income strategy differ from the Target Funds’ static asset allocation strategies?

 

A.

The goal of the Acquiring Fund’s dynamic multi-asset income strategy is to deliver attractive total return through risk-managed portfolio construction. The Acquiring Fund’s strategy employs a dynamic asset allocation framework that is designed to improve diversification and take into account changing market conditions. Nuveen Fund Advisors believes that a key benefit of the dynamic multi-asset income strategy is the ability to adapt asset allocations to changing market environments from both a risk and return standpoint. The Acquiring Fund may invest in a broader range of security types, use a broader range of investment techniques and have exposure to a broader range of geographic regions than the Target Funds.

 

  

In contrast, each Target Fund utilizes a static asset allocation strategy that generally takes a long-term view that does not change based on prevailing market conditions. At times, a Target Fund’s static asset allocation strategy may result in greater volatility of returns and distributions, particularly when the market outlook is not favorable to the Target Fund’s permitted asset mix.

 

  

The Funds have similar investment objectives but there are certain differences. All of the Funds have investment objectives that focus on the pursuit of total return, comprised of income or distributions and capital appreciation. However, the investment objective of Total Return Strategy Fund additionally emphasizes the pursuit of tax-advantaged dividend income. The Acquiring Fund’s investment objective is to provide total return through high current income and capital appreciation. Dividend and Income Fund’s investment objectives are high current income and total return. Total Return Strategy Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation. Dividend Growth Fund’s investment objective is to provide an attractive level of distributions and capital appreciation.

 

  

The Target Funds currently engage in leverage through borrowings and the Acquiring Fund initially is expected to engage in leverage through borrowings.

 

  

In addition, although all of the Funds have the same investment adviser and use some of the same sub-advisers, the Acquiring Fund will utilize certain Nuveen-affiliated sub-advisers that are not currently sub-advisers to the Target Funds, and the Acquiring Fund may allocate its assets to any investment strategy offered by its sub-advisers. Accordingly, the individual

 

2


  portfolio managers managing the various investment strategies available to the Acquiring Fund include individuals who do not serve as portfolio managers to the Target Funds and may change over time. The individuals who will be responsible for the asset allocation strategy of the Acquiring Fund are not currently named portfolio managers of any Target Fund.

 

  

For additional information regarding differences among the Funds’ investment objectives, policies, strategies and risks, see “Proposal No. 1—A. Synopsis—Comparison of the Target Funds and the Acquiring Fund” and “Proposal No. 1—A. Synopsis—Comparative Risk Information” beginning on pages 3 and 22, respectively, of the enclosed Joint Proxy Statement/Prospectus.

 

Q.

Do the Reorganizations constitute taxable events for federal income tax purposes for the Target Funds’ shareholders?

 

A.

No. Each Reorganization is intended to qualify as a tax-free “reorganization” for federal income tax purposes. It is expected that shareholders of a Target Fund who receive Acquiring Fund shares pursuant to a Reorganization will recognize no gain or loss for federal income tax purposes as a direct result of the Reorganization, except to the extent common shareholders of a Target Fund receive cash in lieu of fractional Acquiring Fund common shares. Prior to the closing of the Reorganizations, each Target Fund expects to declare a distribution of at least all of its net investment income and net capital gains, if any. All or a portion of such a distribution may be taxable to a Target Fund’s shareholders for federal income tax purposes.

 

  

If all three Reorganizations had occurred as of December 31, 2020, Dividend and Income Fund, Total Return Strategy Fund and Dividend Growth Fund would have sold 60%, 81% and 53%, respectively, of their portfolio assets (based on managed assets) prior to their Reorganizations. After the Reorganizations are completed, the Acquiring Fund may sell additional portfolio assets received from the Target Funds depending on numerous factors, including market conditions, the availability of capital loss carryforwards and the impact on distributions to Acquiring Fund shareholders. The actual tax effect of such sales will depend on the difference between the price at which such portfolio assets are sold and the tax basis in such assets and the holding period of such assets. Any capital gains recognized in any such sales on a net basis, after reduction for available capital losses, will be a taxable distribution to shareholders of the applicable Fund who are subject to federal income tax. It is currently expected that any such capital gains realized by a Target Fund in connection with the sale of portfolio assets prior to its Reorganization will be offset by capital losses and/or capital loss carryforwards. However, to the extent that portfolio investments of the Acquiring Fund are sold after the Reorganizations, the Acquiring Fund may recognize gains or losses, which may result in taxable distributions to shareholders of the Acquiring Fund (which will include former shareholders of the Target Funds who hold Acquiring Fund shares after the Reorganizations). The Acquiring Fund may seek to sell portfolio securities of the Target Funds over one or more tax years to minimize the tax impact of such sales in any given year. In addition, any such portfolio repositioning will result in transaction costs, such as brokerage commissions and bid/ask spreads, payable by the applicable Fund. See “Proposal No. 1—A. Synopsis—Material Federal Income Tax Consequences of the Reorganizations” in the enclosed Joint Proxy Statement/Prospectus.

 

3


Q.

What will happen if the required shareholder approvals in connection with the Reorganizations are not obtained?

 

A.

In addition to customary closing conditions that include approval by Target Fund shareholders, the closing of each Target Fund’s Reorganization is contingent upon at least one other Target Fund obtaining the requisite shareholder approval and satisfying (or obtaining the waiver of) other closing conditions. If only one Target Fund’s shareholders approve the Reorganization of their Fund, none of the Reorganizations will take place. If the Reorganization with respect to a Target Fund is not consummated, the Target Fund’s Board may take such actions as it deems in the best interests of such Target Fund, including continuing to operate the Target Fund as a stand-alone fund.

 

Q.

Will shareholders of the Target Funds have to pay any fees or expenses in connection with the Reorganizations?

 

A.

Yes. Common shareholders of each Target Fund will indirectly bear the costs of the Reorganizations whether or not any Reorganization is consummated. The total costs of the Reorganizations are estimated to be $1,185,000 and will be reflected in each Target Fund’s net asset value prior to the closing of the Reorganizations. These estimated expenses will be borne by Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund in the amounts of $405,000, $280,000, and $500,000, respectively (0.21%, 0.21%, and 0.23%, respectively, of each Target Fund’s average net assets applicable to common shares for the twelve months ended December 31, 2020). The allocation of the costs of the Reorganizations among the Target Funds is based on the projected relative benefits of the Reorganizations to the Target Funds, which are comprised of forecasted improvements in the secondary trading market for common shares and operating expense savings to Target Fund shareholders following the Reorganizations.

 

Q.

How will the Reorganizations affect fees and expenses?

 

A.

The fund-level management fee schedule applicable to the Acquiring Fund will be the same as the current fund-level management fee schedule applicable to Dividend and Income Fund and Total Return Strategy Fund but will provide for a lower fund-level management fee rate at all asset levels than the current fund-level management fee schedule applicable to Dividend Growth Fund. Due to the larger size of the Acquiring Fund upon completion of the Reorganizations, the shareholders of each Target Fund participating in a Reorganization are expected to benefit from economies of scale with respect to the management fee rate (as a percentage of managed assets) and operating expenses, exclusive of leverage. Based on information for the 12-month period ended December 31, 2020, the total operating expenses of the Acquiring Fund are expected to be lower than the total operating expenses for each Target Fund, before taking leverage costs into account, and assuming all three Reorganizations are completed after taking leverage costs into account. See “Proposal No. 1—A. Synopsis—Comparative Expense Information” beginning on page 23 of the enclosed Joint Proxy Statement/Prospectus.

 

Q.

What is the timetable for the Reorganizations?

 

A.

If the shareholder voting and other conditions to closing are satisfied (or waived), the Reorganizations are expected to take effect on or about September 20, 2021 or as soon as practicable thereafter.

 

4


Q.

How does each Target Fund’s Board recommend that I vote on the Reorganizations?

 

A.

After careful consideration, each Target Fund’s Board has determined that the Reorganization proposed for its Target Fund is in the best interests of its Target Fund and its shareholders and recommends that you vote FOR your Target Fund’s proposal.

General

 

Q.

Who do I call if I have questions?

 

A.

If you need any assistance, or have any questions regarding the proposal or how to vote your shares, please call Computershare Fund Services, the proxy solicitor hired by your Target Fund, at 866-436-5968 weekdays during its business hours of 9:00 a.m. to 11:00 p.m. and Saturdays 12:00 p.m. to 6:00 p.m., Eastern time. Please have your proxy materials available when you call.

 

Q.

How do I vote my shares?

 

A.

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

 

   

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

 

   

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

 

   

To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide.

 

   

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

 

Q.

How can I attend my Target Fund’s special meeting?

 

A.

The special meetings will be completely virtual meetings of shareholders, which will be conducted exclusively by webcast. You are entitled to participate in your Target Fund’s special meeting only if you were a shareholder of record as of the close of business on May 21, 2021. No physical meetings will be held.

 

  

You will be able to attend your Target Fund’s special meeting online and submit your questions during the meetings by visiting Meetings.computershare.com/MDA67UP. You also will be able to vote your shares online by attending the special meeting by webcast. To participate in your Target Fund’s special meeting, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box.

 

  

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

 

  

The online meetings will begin promptly at 2:00 p.m., Central time on August 19, 2021. We encourage you to access the meetings prior to the start time leaving ample time for the check in. Please follow the access instructions as outlined herein.

 

5


Q.

How do I register to attend my Target Fund’s special meeting virtually on the Internet?

 

A.

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

 

  

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

 

  

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

 

  

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

 

Q.

Why hold virtual meetings?

 

A.

In light of the public health concerns regarding the coronavirus outbreak (COVID-19), we believe that hosting virtual meetings is in the best interests of the Target Funds and their shareholders.

 

Q.

Will anyone contact me?

 

A.

You may receive a call from Computershare Fund Services, the proxy solicitor hired by your Target Fund, to verify that you received your proxy materials, to answer any questions you may have about the proposal and to encourage you to vote your proxy.

 

  

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

 

  

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

 

6


[•], 2021

NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD),

NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)

AND

NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND (JTD)

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

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 19, 2021

To the Shareholders:

Notice is hereby given that a Special Meeting of Shareholders (each, a “Special Meeting” and together, the “Special Meetings”) of Nuveen Diversified Dividend and Income Fund, Nuveen Tax-Advantaged Total Return Strategy Fund and Nuveen Tax-Advantaged Dividend Growth Fund (each, a “Target Fund” and together, the “Target Funds”) will be held on August 19, 2021, at 2:00 p.m., Central time, for the following purposes:

 

  1.

Agreement and Plan of Reorganization. The shareholders of each Target Fund will vote on a proposal to approve an Agreement and Plan of Reorganization pursuant to which the Target Fund would: (i) transfer substantially all of its assets to Nuveen Multi-Asset Income Fund, a newly formed Massachusetts business trust (the “Acquiring Fund”), in exchange solely for newly issued common shares of the Acquiring Fund and the Acquiring Fund’s assumption of substantially all of the liabilities of the Target Fund; (ii) distribute such newly issued shares of the Acquiring Fund to the common shareholders of the Target Fund; and (iii) liquidate, dissolve and terminate in accordance with applicable law (each, a “Reorganization” and together, the “Reorganizations”).

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

In light of the public health concerns regarding the coronavirus outbreak (COVID-19), the Special Meetings will be held in a virtual meeting format only, which will be conducted online via live webcast. Shareholders may attend and vote at the virtual Special Meetings by following the instructions included in the Q&A and Joint Proxy Statement/Prospectus.

Only Target Fund shareholders of record as of the close of business on May 21, 2021 (“Record Date”) are entitled to notice of and to vote at their Target Fund’s Special Meeting and any adjournments or postponements thereof.

For each Target Fund, shareholders entitled to vote at the Special Meeting are cordially invited to attend the virtual Special Meeting for their Target Fund. In order to avoid delay and additional expense for the Target Funds and to assure that your shares are represented, please vote as promptly as possible, whether or not you plan to attend your Special Meeting. You may vote by attending your Target Fund’s Special Meeting or by mail, by telephone or over the Internet.

 

   

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

 

   

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

 

   

To vote by telephone, please call the toll-free number located on your proxy card and follow the recorded instructions, using your proxy card as a guide.

 

   

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


You will be able to attend and participate in the Special Meetings online, vote your shares electronically and submit your questions during the meetings by visiting: Meetings.computershare.com/MDA67UP at the meeting date and time described in the enclosed Joint Proxy Statement/Prospectus. To participate in the Special Meetings, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box. There is no physical location for the Special Meetings.

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

Mark L. Winget

Vice President and Secretary

The Nuveen Closed-End Funds

 

2


The information contained in this Joint Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Joint Proxy Statement/Prospectus is not an offer to sell these securities, and it is not a solicitation of an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION,

DATED JUNE 29, 2021

NUVEEN FUNDS

333 WEST WACKER DRIVE

CHICAGO, ILLINOIS 60606

(800) 257-8787

JOINT PROXY STATEMENT/PROSPECTUS

NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD),

NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)

NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND (JTD)

AND

NUVEEN MULTI-ASSET INCOME FUND (NMAI)

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

[•], 2021

This Joint Proxy Statement/Prospectus is being furnished to the shareholders of Nuveen Diversified Dividend and Income Fund (“Dividend and Income Fund”), Nuveen Tax-Advantaged Total Return Strategy Fund (“Total Return Strategy Fund”), and Nuveen Tax-Advantaged Dividend Growth Fund (“Dividend Growth Fund”) (and together with Dividend and Income Fund and Total Return Strategy Fund, the “Target Funds” and each, a “Target Fund”), each a closed-end management investment company, in connection with the solicitation of proxies by each Fund’s Board of Trustees, for use at the Special Meeting of Shareholders of each Target Fund to be held on August 19, 2021, at 2:00 p.m., Central time, and at any and all adjournments or postponements thereof (each, a “Special Meeting” and collectively, the “Special Meetings”), to consider the proposal listed below and discussed in greater detail elsewhere in this Joint Proxy Statement/Prospectus. Each Fund is organized as a Massachusetts business trust. The enclosed proxy card and this Joint Proxy Statement/Prospectus are first being sent to shareholders of the Target Funds on or about [•], 2021. Shareholders of record of the Target Funds as of the close of business on May 21, 2021 are entitled to notice of and to vote at the Special Meetings and any and all adjournments or postponements thereof. Each Fund’s Board of Trustees is referred to herein as a “Board” and each Trustee, a “Board Member.”

The Special Meetings will be held in a virtual meeting format only, which will be conducted online via live webcast. There is no physical location for the Special Meetings. If your shares are registered in your name, you will be able to attend and participate in your Target Fund’s Special Meeting online, vote your shares electronically and submit your questions during the meeting by visiting: Meetings.computershare.com/MDA67UP at the meeting date and time. To participate in your Target Fund’s Special Meeting, you will need to log on using the control number from your proxy card or meeting notice. The control number can be found in the shaded box.

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


This Joint Proxy Statement/Prospectus explains concisely what you should know before voting on the proposal described in this Joint Proxy Statement/Prospectus or investing in Nuveen Multi-Asset Income Fund, a newly formed Massachusetts business trust (the “Multi-Asset Income Fund” or the “Acquiring Fund”) that will operate as a registered closed-end management investment company. Please read it carefully and keep it for future reference.

 

 

The securities offered by this Joint Proxy Statement/Prospectus have not been approved or disapproved by the Securities and Exchange Commission (“SEC”), nor has the SEC passed upon the accuracy or adequacy of this Joint Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense.

 

 

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

To be approved with respect to a Target Fund, the following proposal must be approved by a majority (more than 50%) of the Target Fund’s’ outstanding common shares entitled to vote on the matter:

 

  Proposal No. 1.

(Each Target Fund) To approve an Agreement and Plan of Reorganization (the “Agreement”) pursuant to which the Target Fund would: (i) transfer substantially all of its assets to the Acquiring Fund in exchange solely for newly issued common shares of the Acquiring Fund and the Acquiring Fund’s assumption of substantially all of the liabilities of the Target Fund; (ii) distribute such newly issued shares of the Acquiring Fund to the common shareholders of the Target Fund; and (iii) liquidate, dissolve and terminate in accordance with applicable law (each, a “Reorganization” and together, the “Reorganizations”).

The Board of each Target Fund has determined that the use of this Joint Proxy Statement/ Prospectus for the Special Meetings is in the best interests of each Target Fund and its shareholders in light of the similar matters being considered and voted on by shareholders.

A quorum of shareholders is required to take action at the Special Meeting for each Target Fund. A majority (more than 50%) of the shares entitled to vote at each Special Meeting, represented in person (including participation by means of remote or “virtual” communication) or by proxy, will constitute a quorum of shareholders at that Special Meeting. Votes cast in person (including participation by means of remote or “virtual” communication) or by proxy at each Special Meeting will be tabulated by the inspectors of election appointed for that Special Meeting. The inspectors of election

 

ii


will determine whether or not a quorum is present at the Special Meeting. For purposes of holding a meeting, all properly submitted proxies, including abstentions, will be counted as present for purposes of determining whether a quorum is present. In addition, because the approval of Proposal No. 1 requires that a minimum percentage of a Target Fund’s outstanding common shares be voted in favor of the proposal, abstentions will have the same effect as a vote against the proposal.

Broker-dealer firms holding shares of a Target Fund in “street name” for the benefit of their customers and clients are generally required to request the instructions of such customers and clients on how to vote their shares before the Target Fund’s Special Meeting. The Target Funds understand that, under the rules of the New York Stock Exchange (the “NYSE”), such broker-dealer firms may, for certain “routine” matters, grant discretionary authority to the proxies designated by each Board to vote without instructions from their customers and clients if no instructions have been received prior to the date specified in the broker-dealer firm’s request for voting instructions. “Broker non-votes” are shares held by brokers or nominees, typically in “street name,” for which the broker or nominee returns a completed proxy but are not voted because instructions have not been received from beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary authority to vote such shares on a particular matter. Broker non-votes typically occur when both routine and non-routine proposals are being considered at a meeting. Proposal No. 1 described in this Joint Proxy Statement/Prospectus is considered a “non-routine” matter for which, under the rules of the NYSE, uninstructed shares may not be voted by broker-dealers. As a result, it is expected that there will be no broker non-votes at any Target Fund’s Special Meeting.

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

Those persons who were shareholders of record at the close of business on May 21, 2021 will be entitled to one vote for each share held and a proportionate fractional vote for each fractional share held.

As of May 21, 2021, the shares of the Target Funds issued and outstanding are as follows:

 

Target Fund (Ticker Symbol)

   Common
Shares(1)
 

Dividend and Income Fund (JDD)

     19,668,517  

Total Return Strategy Fund (JTA)

     13,850,897  

Dividend Growth Fund (JTD)

     14,484,340  

 

(1)

The common shares of the Target Funds are listed on the NYSE. Upon the closing of the Reorganizations, it is expected that the common shares of the Acquiring Fund will be listed on the NYSE with the ticker symbol NMAI.

If at least two of the Reorganizations are approved by Target Fund shareholders, the assets of those Target Funds will be combined, and the shareholders of those participating Target Funds will become shareholders of the Acquiring Fund, which will operate after the consummation of the Reorganizations as a registered closed-end management investment company with the investment objective and policies described in this Joint Proxy Statement/Prospectus.

 

iii


The following documents have been filed with the SEC and are incorporated into this Joint Proxy Statement/Prospectus by reference:

 

  (i)

the Statement of Additional Information relating to the proposed Reorganizations, dated [•], 2021 (the “Reorganization SAI”);

 

  (ii)

the audited financial statements and financial highlights and related independent registered public accounting firm’s report for Dividend and Income Fund contained in the Fund’s Annual Report for the fiscal year ended December 31, 2020 (File No. 811-21407);

 

  (iii)

the audited financial statements and financial highlights and related independent registered public accounting firm’s report for Total Return Strategy Fund contained in the Fund’s Annual Report for the fiscal year ended December 31, 2020 (File No. 811-21471); and

 

  (iv)

the audited financial statements and financial highlights and related independent registered public accounting firm’s report for Dividend Growth Fund contained in the Fund’s Annual Report for the fiscal year ended December 31, 2020 (File No. 811-22058).

No other parts of any Target Fund’s Annual or Semi-Annual Reports are incorporated by reference herein.

Copies of the foregoing may be obtained without charge by calling (800) 257-8787 or writing the Funds at 333 West Wacker Drive, Chicago, Illinois 60606. If you wish to request a copy of the Reorganization SAI, please ask for the “Nuveen Multi-Asset Income Fund Reorganization SAI.” In addition, each Fund will furnish, without charge, a copy of its most recent Annual Report or Semi-Annual Report to a shareholder upon request. Any such request should be directed to the Funds by calling (800) 257-8787 or by writing the Funds at 333 West Wacker Drive, Chicago, Illinois 60606.

The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the Investment Company Act of 1940, as amended (the “1940 Act”), and in accordance therewith file reports and other information with the SEC. Reports, proxy statements, registration statements and other information filed by the Funds, including the Registration Statement on Form N-14 relating to the common shares of the Acquiring Fund of which this Joint Proxy Statement/Prospectus is a part, may be obtained, with payment of a duplication fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may also access reports and other information about the Funds on the EDGAR database on the SEC’s Internet site at http://www.sec.gov. Reports, proxy statements and other information concerning the Funds can also be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005.

This Joint Proxy Statement/Prospectus serves as a prospectus of the Acquiring Fund in connection with the issuance of the Acquiring Fund common shares in the Reorganizations. In this connection, no person has been authorized to give any information or make any representation not contained in this Joint Proxy Statement/Prospectus and, if so given or made, such information or representation must not be relied upon as having been authorized. This Joint Proxy Statement/Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to any person to whom, it is unlawful to make such offer or solicitation.

 

iv


JOINT PROXY STATEMENT/PROSPECTUS

[•], 2021

NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD),

NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA),

NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND (JTD)

AND

NUVEEN MULTI-ASSET INCOME FUND (NMAI)

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

TABLE OF CONTENTS

 

PROPOSAL NO.  1—REORGANIZATION OF EACH TARGET FUND INTO THE ACQUIRING FUND (SHAREHOLDERS OF EACH TARGET FUND)

     1  

A.        SYNOPSIS

     1  
  

Background and Reasons for the Reorganizations

     1  
  

Material Federal Income Tax Consequences of the Reorganizations

     2  
  

Comparison of the Target Funds and the Acquiring Fund

     3  
  

Comparative Risk Information

     22  
  

Comparative Expense Information

     23  
  

Comparative Performance Information

     27  

B.        RISK FACTORS

     27  
  

Portfolio Level Risks

     30  
  

Fund Level and Other Risks

     40  
  

Additional Risks Applicable to an Investment in the Acquiring Fund

     44  

C.        INFORMATION ABOUT THE REORGANIZATIONS

     52  
  

General

     52  
  

Terms of the Reorganizations

     52  
  

Reasons for the Reorganizations

     55  
  

Capitalization

     59  
  

Expenses Associated with the Reorganizations

     63  
  

Dissenting Shareholders’ Rights of Appraisal

     64  
  

Material Federal Income Tax Consequences of the Reorganizations

     64  
  

Shareholder Approval

     67  
  

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

     67  
  

Affiliated Brokerage and Other Fees

     71  
  

Summary Description of Massachusetts Business Trusts

     71  

D.         ADDITIONAL INFORMATION ABOUT THE INVESTMENT POLICIES

     75  
  

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

     75  

E.         ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND

     87  
  

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

     87  
  

Repurchase of Common Shares; Conversion to Open-End Fund

     90  
  

Custodian, Transfer Agent and Dividend Disbursing Agent

     91  
  

Federal Income Tax Matters Associated with Investment in the Acquiring Fund

     91  
  

Net Asset Value

     96  
  

Legal Opinions

     97  
  

Experts

     98  

 

v


F.        GENERAL INFORMATION

     98  
  

Outstanding Shares of the Target Funds

     98  
  

Shareholders of Target Funds and the Acquiring Fund

     98  
  

Expenses of Proxy Solicitation

     99  
  

Shareholder Proposals

     99  
  

Shareholder Communications

     100  
  

Fiscal Year

     100  
  

Shareholder Report Delivery

     100  
  

Other Information

     101  

 

APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION

   A-1

APPENDIX B FINANCIAL HIGHLIGHTS

   B-1

 

vi


PROPOSAL NO. 1—REORGANIZATION OF EACH TARGET FUND INTO

THE ACQUIRING FUND

(SHAREHOLDERS OF EACH TARGET FUND)

 

A.

SYNOPSIS

The following is a summary of certain information contained elsewhere in this Joint Proxy Statement/Prospectus with respect to the proposed Reorganizations. More complete information is contained elsewhere in this Joint Proxy Statement/Prospectus and in the Reorganization SAI and the appendices hereto and thereto. Shareholders should read the entire Joint Proxy Statement/Prospectus carefully.

Background and Reasons for the Reorganizations

At a meeting held on April 22, 2021, the Board of each Target Fund, each Board comprised solely of independent Board Members, approved a proposal to reorganize the Target Funds into the Acquiring Fund, a newly formed Massachusetts business trust that will operate after the consummation of the Reorganizations as a registered closed-end management investment company. The Acquiring Fund will be managed in accordance with a new dynamic multi-asset income strategy.

Based on information provided by Nuveen Fund Advisors, LLC (“Nuveen Fund Advisors” or the “Adviser”), a subsidiary of Nuveen, LLC (“Nuveen”) and the Funds’ investment adviser, each Target Fund’s Board believes that the Reorganizations may benefit such Fund’s shareholders in a number of ways, including, among other things:

 

   

The potential to deliver superior risk-adjusted returns as a result of adopting a dynamic risk-based asset allocation framework in contrast to the Target Funds’ current static asset allocation strategies with fixed target asset allocations;

 

   

The potential for a more consistent return profile, resulting in more stable managed distributions through an asset allocation framework that considers backward and forward-looking inputs, in contrast to the Target Funds’ current static asset allocation strategies;

 

   

The potential for improved secondary market liquidity for trading common shares as a result of the combined fund’s larger share float, which may lead to increased trading volume, narrower bid-ask spreads and greater market depth; and

 

   

Lower net operating expenses as a result of certain fixed costs being spread over a larger asset base, and a potentially lower effective fund-level management fee rate due to the ability of the combined fund’s assets to achieve breakpoints in the Acquiring Fund’s fee schedule. In addition, shareholders of Dividend Growth Fund will benefit as a result of the Acquiring Fund’s fund-level management fee schedule, which provides for a lower fund-level management fee rate at all asset levels compared to the current fund-level management fee schedule of Dividend Growth Fund.

In addition to customary closing conditions that include approval by Target Fund shareholders, the closing of each Target Fund’s Reorganization is contingent upon at least one other Target Fund obtaining the requisite shareholder approval and satisfying (or obtaining the waiver of) other closing conditions. If only one Target Fund’s shareholders approve the Reorganization of their Fund, none of the Reorganizations will take place. If the Reorganization with respect to a Target Fund is not

 

1


consummated, the Target Fund’s Board may take such actions as it deems in the best interests of such Target Fund, including continuing to operate the Target Fund as a stand-alone fund. For a discussion of the Boards’ considerations regarding the approval of the Reorganizations, see “C. Information About the Reorganizations—Reasons for the Reorganizations.”

Material Federal Income Tax Consequences of the Reorganizations

As a non-waivable condition to closing, each Target Fund will receive, with respect to its Reorganization, an opinion of Vedder Price P.C., subject to certain representations, assumptions and conditions, substantially to the effect that the proposed Reorganization will qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, it is expected that the Target Funds will generally not recognize gain or loss for federal income tax purposes as a direct result of the Reorganizations. It is also expected that shareholders of a Target Fund who receive Acquiring Fund shares pursuant to a Reorganization will recognize no gain or loss for federal income tax purposes as a result of such exchange, except to the extent a common shareholder of a Target Fund receives cash in lieu of a fractional Acquiring Fund common share. Prior to the closing of the Reorganizations, each Target Fund expects to declare a distribution of at least all of its net investment income and net capital gains, if any. All or a portion of such a distribution made by a Target Fund may be taxable to that Target Fund’s shareholders who are subject to federal income tax.

If all three Reorganizations had occurred as of December 31, 2020, Dividend and Income Fund, Total Return Strategy Fund and Dividend Growth Fund would have sold 60%, 81% and 53%, respectively, of their portfolio assets (based on managed assets) prior to their Reorganizations. After the Reorganizations are completed, the Acquiring Fund may sell additional portfolio assets received from the Target Funds depending on numerous factors, including market conditions, the availability of capital loss carryforwards and the impact on distributions to Acquiring Fund shareholders. The actual tax effect of such sales will depend on the difference between the price at which such portfolio assets are sold and the tax basis in such assets and the holding period of such assets. Any capital gains recognized in any such sales on a net basis, after reduction for available capital losses, will be a taxable distribution to shareholders of the applicable Fund who are subject to federal income tax. It is currently expected that any such capital gains realized by a Target Fund in connection with the sale of portfolio assets prior to its Reorganization will be offset by capital losses and/or capital loss carryforwards. However, to the extent that portfolio investments of the Acquiring Fund are sold after the Reorganizations, the Acquiring Fund may recognize gains or losses, which may result in taxable distributions to shareholders of the Acquiring Fund (which will include former shareholders of the Target Funds who hold Acquiring Fund shares after the Reorganizations). The Acquiring Fund may seek to sell portfolio securities of the Target Funds over one or more tax years to minimize the tax impact of such sales in any given year. In addition, any such portfolio repositioning will result in transaction costs, such as brokerage commissions and bid/ask spreads, payable by the applicable Fund.

If all three Reorganizations had occurred as of December 31, 2020, it is estimated that each Target Fund would have borne the repositioning costs as set forth below in connection with the sale of portfolio assets prior to the Reorganizations, based upon average transaction costs normally paid on the types of assets the Target Funds expect to sell. Actual market prices and transaction costs may vary significantly at the time of sale and will depend on market conditions at that time. The attractiveness of various asset

 

2


classes may change, sometimes substantially, between the date of this Joint Proxy Statement/Prospectus and the closing of the Reorganizations, resulting in more or less turnover than shown.

 

Target Fund Repositioning Costs

 

Fund

  Market Value
of Securities
Repositioned
    Percent of
Managed
Assets of
Securities
Repositioned
    Total
Transaction
Costs
    Per  Share
Transaction
Costs
    Net Realized
Capital  Gain
(Loss)
    Per Share Net
Realized  Capital
Gain (Loss)
 

Dividend and Income Fund

  $ 167,255,970       60   $ 70,361     $     $ 28,298,414     $ 1.44  

Total Return Strategy Fund

  $ 171,013,224       81   $ 87,933     $ 0.01     $ 35,647,951     $ 2.57  

Dividend Growth Fund

  $ 176,031,137       53   $ 33,579     $     $ 46,721,745     $ 3.23  

Comparison of the Target Funds and the Acquiring Fund

General. Each Target Fund is, and after the consummation of the Reorganizations the Acquiring Fund will be, a diversified closed-end management investment company. Set forth below is certain comparative information about the organization, capitalization and operation of each Fund.

 

Organization

 

Fund

   Organization
Date
   State of
Organization
     Entity Type  

Dividend and Income Fund

   July 18, 2003      Massachusetts        business trust  

Total Return Strategy Fund

   October 1, 2003      Massachusetts        business trust  

Dividend Growth Fund

   February 22, 2007      Massachusetts        business trust  

Acquiring Fund

   April 22, 2021      Massachusetts        business trust  

 

Capitalization—Common Shares

Fund

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

Listed
  Ticker
Symbol

Dividend and Income Fund

   Unlimited      19,668,517      $0.01    None    None    NYSE   JDD

Total Return Strategy Fund

   Unlimited      13,850,897      $0.01    None    None    NYSE   JTA

Dividend Growth Fund

   Unlimited      14,484,340      $0.01    None    None    NYSE   JTD

Acquiring Fund

   Unlimited           $0.01    None    None    NYSE(2)   NMAI

 

(1)

As of May 21, 2021.

(2)

Upon the closing of the Reorganizations, it is expected that the common shares of the Acquiring Fund will be listed on the NYSE.

Investment Objectives and Policies. Each Fund’s investment objective(s) and a summary of the Fund’s principal investment strategies are set forth in the table below. The Funds’ investment objectives, policies and strategies are similar but there are certain differences.

All of the Funds have investment objectives that focus on the pursuit of total return, comprised of income or distributions and capital appreciation. However, the investment objective of Total Return Strategy Fund additionally emphasizes the pursuit of tax-advantaged dividend income. Dividend and Income Fund’s investment objectives are high current income and total return. Total Return Strategy Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation. Dividend Growth Fund’s investment objective is to provide an attractive level of distributions and capital appreciation.

 

3


In addition, although there are certain similarities between the Funds’ principal investment strategies, there are also certain differences. Each of the Funds pursues its investment objective(s) by allocating its assets across multiple strategies and asset classes. The Acquiring Fund will employ a dynamic multi-asset income strategy that may invest in a portfolio of equity and debt securities of issuers located around the world. The Acquiring Fund may invest in equity and debt securities of any type. Accordingly, the allocation of the Acquiring Fund’s assets across strategies and asset classes may change over time. This strategy is designed to improve diversification and take into account changing market conditions.

In contrast, each Target Fund utilizes a static asset allocation strategy that generally takes a long-term view that does not change based on prevailing market conditions. Dividend and Income Fund utilizes equity and debt strategies focused on providing current income, total return and reducing U.S. interest rate sensitivity, and Total Return Strategy Fund and Dividend Growth Fund each primarily invest in common stocks whose dividends may be eligible for favorable income tax treatment.

The Acquiring Fund has a broader investment mandate than the Target Funds and may invest in a broader range of security types, use a broader range of investment techniques and have exposure to a broader range of geographic regions than the Target Funds, and the Acquiring Fund has the ability to adapt its asset allocations to changing market environments from both a risk and return standpoint. In addition, although all of the Funds have the same investment adviser and use some of the same sub-advisers, the Acquiring Fund will utilize certain Nuveen-affiliated sub-advisers that are not currently sub-advisers to the Target Funds, and the Target Fund sub-advisers that are not Nuveen-affiliated will not serve as sub-advisers of the Acquiring Fund. The Acquiring Fund may allocate its assets to any investment strategy offered by its sub-advisers. Accordingly, the individual portfolio managers managing the various investment strategies available to the Acquiring Fund include individuals who do not serve as portfolio managers to the Target Funds and may change over time. The individuals who will be responsible for the asset allocation strategy of the Acquiring Fund are not currently named portfolio managers of any Target Fund.

An investment in the Acquiring Fund is not intended as, and you should not construe it to be, a complete investment program. There can be no assurance that the Acquiring Fund’s investment objective will be achieved or that the Acquiring Fund’s investment program will be successful.

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

 

Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

Investment Objectives:

 

The Fund’s investment objectives are high current income and total return.

  

Investment Objective:

 

The Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation.

  

Investment Objective:

 

The Fund’s investment objective is to provide an attractive level of distributions and capital appreciation.

  

Investment Objective:

 

The Fund’s investment objective is to provide total return through high current income and capital appreciation.

 

4


Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

Principal Investment Strategy:

 

In its efforts to achieve its investment objectives, the Fund utilizes equity and debt strategies focused on providing current income, total return and reducing U.S. interest rate sensitivity. The Fund invests approximately equal proportions in (1) U.S. and foreign dividend-paying common stocks, (2) dividend paying common stocks issued by real estate companies and Real Estate Investment Trusts (“REITs”), (3) emerging markets sovereign debt, and (4) adjustable rate senior loans.

  

Principal Investment Strategy:

 

Under normal conditions, the Fund invests at least 60% of its Managed Assets in common stocks whose dividends may be eligible for favorable income tax treatment.

 

The Fund’s assets are allocated between investments in dividend-paying common and preferred stocks and covered call and put options (the “Global Equity Income Strategy”) and investments in senior loans and other debt instruments.

  

Principal Investment Strategy:

 

In pursuing its investment objective, the Fund seeks to reduce and defer potential federal income tax liabilities incurred by the holders of its common shares in connection with their investment in the Fund.

 

The Fund seeks to achieve its investment objective by investing in dividend-paying equity securities consisting primarily of common stocks of mid- to large-cap companies that have attractive dividend income and the potential for future dividend growth and capital appreciation and, to a lesser extent, preferred stocks of mid- to large-cap companies.

 

Under normal market circumstances, the Fund will invest at least 80% of its Managed Assets in securities that are eligible to pay tax-advantaged dividends.

  

Principal Investment Strategy:

 

Under normal circumstances, the Acquiring Fund will dynamically invest in a portfolio of equity and debt securities of issuers located around the world. This dynamic investment strategy uses a risk-based framework in which any amount can be allocated to an asset-class at any time. The Fund may invest in equity and debt securities of any type.

Asset Allocation:

 

The Fund’s target weighting is approximately 50% equity and 50% debt. However, subject to the limitations noted below, the relative allocations of the Fund’s Managed Assets for

  

Asset Allocation:

 

Under normal conditions, the Fund invests at least 60% of its Managed Assets in common stocks whose dividends may be eligible for favorable income tax treatment.

  

Asset Allocation:

 

The Fund will invest primarily in the dividend growth equity strategy consisting of dividend-paying equity securities (primarily common stocks). The

  

Asset Allocation:

 

The Acquiring Fund will employ a dynamic asset allocation strategy in seeking to achieve the Fund’s investment objective. Nuveen Asset

 

5


Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

investment in equity securities and debt securities, and allocations to the different types of securities within each such asset class, will vary from time to time consistent with the Fund’s investment objectives.

 

Under normal conditions, the Fund expects to invest at least 40%, but no more than 70%, of its Managed Assets in equity security holdings and at least 30%, but no more than 60%, of its Managed Assets in debt security holdings.

   Under normal conditions, the Fund may invest up to 40% of its assets in other securities, including preferred securities, convertible securities, convertible preferred securities, senior loans and other debt instruments.    Fund also may invest in the income-oriented strategy consisting of preferred securities and other fixed income securities, including both fixed and floating rate securities.   

Management will implement the Acquiring Fund’s dynamic multi-asset income strategy by allocating the Fund’s assets among equity and debt investments.

 

The relative allocations of the Fund’s Managed Assets for investment between equity and debt securities, and relative allocations to the different types of equity and income strategies, will vary from time to time consistent with the Fund’s investment objective.

Equity Securities:

 

The Fund invests in U.S. and foreign dividend-paying common stocks and dividend paying common stock issued by real estate companies and REITs.

 

Under normal market conditions, the Fund will invest at least 15%, but no more than 40%, of its Managed Assets in dividend-paying common stocks issued by real estate companies, including companies that derive at least 50% of their revenues from the ownership, construction, financing, management or sale of commercial, industrial, or residential real estate (or that have at least 50% of their assets invested in such real estate), commonly referred to as “REOCs”, and REITs.

  

Equity Securities:

 

The Fund invests in common stocks whose dividends may be eligible for favorable income tax treatment.

  

Equity Securities:

 

The Fund invests in dividend-paying equity securities consisting primarily of common stocks of mid- to large-cap companies that have attractive dividend income and the potential for future dividend growth and capital appreciation and, to a lesser extent, preferred stocks of mid- to large-cap companies.

 

Under normal market conditions, the Fund expects to invest more than 25% of its Managed Assets in equity securities of companies principally engaged in the financial services sector and to a lesser extent in other

  

Equity Securities:

 

The Acquiring Fund may invest in equity securities of any type and across various investment styles (e.g., growth- or value-oriented styles), sectors, market capitalizations (e.g., large-, mid-, and small-cap) and geographic regions throughout the world (including the U.S., non-U.S. developed markets, and emerging markets) without limit.

 

6


Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

      economic sectors, such as the utilities and energy sectors, that historically have provided higher dividend yields than companies in other sectors or industries.   

Debt Securities:

 

Under normal market conditions, the Fund will invest at least 15%, but no more than 30%, of its Managed Assets in senior secured loans.

 

Under normal market conditions, the Fund will invest at least 15%, but no more than 30%, of its Managed Assets in emerging market sovereign debt securities.

 

Under normal circumstances, the Fund may invest up to 10% of its Managed Assets in securities that, at the time of investment, are rated below B by at least one nationally recognized statistical rating organization (“NRSRO”) (commonly known as “high yield” or “junk” bonds) or are unrated but judged to be of comparable quality, except no more than 5% of the its Managed Assets may be invested in such securities rated below CCC by at least one NRSRO or that are unrated but judged to be of comparable quality.

  

Debt Securities:

 

Under normal market conditions, the Fund may purchase senior loans and other debt instruments that, at the time of investment, are rated below the four highest grades (Ba or BB or lower) by at least one NRSRO or are unrated but judged to be of comparable quality; however, no more than 5% of its Managed Assets may be invested in securities rated below CCC- or Caa3 by Standard & Poor’s Group (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch Ratings, Inc. (“Fitch”) (commonly known as “high yield” or “junk” bonds) or that are unrated but judged to be of comparable quality.

  

Debt Securities:

 

The Fund may invest in fixed income securities, including both fixed and floating rate securities.

 

Under normal market conditions, the Fund may invest up to 25% of its Managed Assets in securities that, at the time of investment, are rated below the four highest grades (Ba or BB or lower) by all NRSROs (commonly known as “high yield” or “junk” bonds) or are unrated but judged to be of comparable quality.

  

Debt Securities:

 

The Acquiring Fund may invest in debt securities of any type without limit. The Acquiring Fund may invest in debt securities paying a fixed or fluctuating rate of interest, and with any maturity or duration. The Fund may invest in debt securities across various geographic regions throughout the world (including the U.S., non-U.S. developed markets, and emerging markets) without limit.

 

The Acquiring Fund may invest in debt securities of any rating (including below-investment-grade debt securities, commonly known as “high yield” or “junk” bonds), distressed securities, and in debt securities that are unrated.

Illiquid Securities:

 

The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities

  

Illiquid Securities:

 

The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities

  

Illiquid Securities:

 

The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to,

  

Illiquid Securities:

 

The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to,

 

7


Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

(securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and repurchase agreements with maturities in excess of seven days.    (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.    restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.    restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the 1933 Act, and repurchase agreements with maturities in excess of seven days.

Leverage:

 

The Fund uses leverage to pursue its investment objectives. The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including borrowings, entering into reverse repurchase agreements (effectively a secured borrowing) and the issuance of preferred shares of beneficial interest. In addition, the Fund may also use certain derivatives that have the economic effect of leverage by creating additional investment exposure. The amount and sources of leverage will vary depending on market conditions.

  

Leverage:

 

The Fund uses leverage to pursue its investment objective. The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including borrowings, entering into reverse repurchase agreements (effectively a secured borrowing) and the issuance of preferred shares of beneficial interest. In addition, the Fund may also use certain derivatives that have the economic effect of leverage by creating additional investment exposure. The amount and sources of leverage will vary depending on market conditions.

  

Leverage:

 

The Fund uses leverage to pursue its investment objective. The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including borrowings, entering into reverse repurchase agreements (effectively a secured borrowing) and the issuance of preferred shares of beneficial interest. In addition, the Fund may also use certain derivatives that have the economic effect of leverage by creating additional investment exposure. The amount and sources of leverage will vary depending on market conditions.

  

Leverage:

 

The Acquiring Fund will use leverage to seek to achieve its investment objective. The Fund may use leverage to the extent permitted under the 1940 Act. The Fund may source leverage through a number of methods including borrowings, the issuance of preferred shares, commercial paper or notes, by entering into reverse repurchase agreements, and by investing in inverse floating rate securities. In addition, the Fund may also use certain derivatives that have the economic effect of leverage by creating additional investment exposure. The amount and sources of leverage will vary depending on market conditions.

Non-U.S. Issuers:

 

Under normal market conditions, the Fund may

  

Non-U.S. Issuers:

 

Under normal market conditions, the Fund may

  

Non-U.S. Issuers:

 

The Fund may invest up to 50% of its

  

Non-U.S. Issuers:

 

The Acquiring Fund has no geographic

 

8


Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

invest up to 60% of its Managed Assets in non-U.S. issuers of any currency.

 

Under normal market conditions, the Fund will invest at least 15%, but no more than 30%, of its Managed Assets in emerging market sovereign debt securities.

  

invest up to 70% of its Managed Assets in non-U.S. issues of any currency.

 

Under normal market conditions, the Fund may invest up to 20% of its Managed Assets in emerging market countries.

   Managed Assets in securities of non-U.S. issuers that are U.S. dollar denominated or that are converted into American Depository Receipts (“ADRs”) or other types of dollar-denominated depository receipts immediately after purchase.    limits on where it may invest.

Derivatives:

 

The Fund may enter into certain derivative instruments for hedging purposes, including to hedge the Fund’s exposure to foreign currency exchange rate risk in the event the Fund invests in non-U.S. denominated securities of non-U.S. issuers. Such instruments include options, including option on common stock, stock indexes, bonds and bond indexes, futures contracts, including stock index futures, bond index futures and related instruments, structured notes, forward foreign currency contracts and similar instruments, credit derivative instruments and currency exchange transactions. The Fund may also write (sell) covered puts and call options for enhancing risk-adjusted returns.

  

Derivatives:

 

The Fund may enter into certain derivative instruments for hedging purposes, including to hedge the Fund’s exposure to foreign currency exchange rate risk in the event the Fund invests in non-U.S. denominated securities of non-U.S. issuers, and to enhance risk-adjusted returns. Such instruments include options, including option on common stock, stock indexes, bonds and bond indexes, futures contracts, including stock index futures, bond index futures and related instruments, structured notes, forward foreign currency contracts and similar instruments, credit derivative instruments and currency exchange transactions. The Fund may also write (sell) covered puts and call options.

  

Derivatives:

 

The Fund may invest in interest rate and total return swaps. The Fund will enter into swap agreements only with counterparties that meet certain standards of creditworthiness.

 

The Fund may enter into certain derivative instruments for purposes of hedging with respect to the dividend growth equity Strategy against declining equity markets. Such instruments include financial futures contracts, swap contracts (including interest rate and credit default swaps), options on financial futures, options on swap contracts or other derivative instruments. In addition, to seek to enhance the Fund’s risk-adjusted returns, the Fund, to a limited extent, will write (sell) index call options on various equity market indices.

  

Derivatives:

 

The Acquiring Fund may use derivatives of any type for a variety of reasons, including but not limited to, adjusting its exposures to markets, sectors, asset classes and securities. The Acquiring Fund may employ an options strategy whereby the Fund sells (writes) call options on a percentage of the market value of the Fund’s equity portfolio. The Fund may also buy calls, sell puts, or buy puts as a secondary emphasis of the options strategy. This may also include certain uncovered options positions. The options may be on indexes, custom baskets of securities, and individual securities. The Fund’s options strategy may include OTC options and exchange-traded options.

 

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Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

     

 

Under normal market conditions, the Fund will not write call options on more than 35% of its Managed Assets.

 

Under normal market conditions, the Fund may buy and sell combinations of call options, put options and futures contracts in both the listed and over-the-counter (“OTC”) markets on up to 5% of its Managed Assets.

  

Inverse Floating Rate Securities:

 

Under normal market conditions, the Fund will not invest in inverse floating rate securities.

  

Inverse Floating Rate Securities:

 

Under normal market conditions, the Fund will not invest in inverse floating rate securities.

  

Inverse Floating Rate Securities:

 

No stated policy.

  

Inverse Floating Rate Securities:

 

The Acquiring Fund may invest in inverse floating rate securities.

Other Investment Companies:

 

The Fund may invest in securities of other open- or closed-end investment companies (including exchange-traded funds (“ETFs”)) that invest primarily in securities of the types in which the Fund may invest directly, to the extent permitted by the 1940 Act, the rules and regulations issued thereunder and applicable exemptive orders issued by the SEC.

  

Other Investment Companies:

 

Under normal market conditions, the Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in 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.

  

Other Investment Companies:

 

Under normal market conditions, the Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in 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.

  

Other Investment Companies:

 

The Acquiring Fund may invest in other open- or closed-end investment companies, including exchange-traded funds (“ETFs”), that invest primarily in securities of the types in which the Fund may invest directly. The Acquiring Fund may invest in investment companies that are advised by the Adviser or its affiliates.

 

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Dividend and Income Fund

  

Total Return Strategy Fund

  

Dividend Growth Fund

  

Acquiring Fund

Temporary Defensive Periods:

 

During temporary defensive periods the Fund may deviate from its investment objective and policies, and in order to keep the Fund’s cash fully invested, the Fund may invest any percentage of its total assets in short-term high quality fixed-income securities. The Fund may not achieve its investment objectives during such periods.

  

Temporary Defensive Periods:

 

During temporary defensive periods the Fund may deviate from its investment objective and policies, and in order to keep the Fund’s cash fully invested, the Fund may invest any percentage of its total assets in short-term high quality fixed-income securities. The Fund may not achieve its investment objective during such periods.

  

Temporary Defensive Periods:

 

During temporary defensive periods the Fund may deviate from its investment objective and policies, and in order to keep the Fund’s cash fully invested, the Fund may invest any percentage of its total assets in short-term high quality fixed-income securities. The Fund may not achieve its investment objective during such periods.

  

Temporary Defensive Periods:

 

During temporary defensive periods the Fund may invest any percentage of its total assets in short-term high quality debt securities. The Fund may not achieve its investment objective during such periods.

The Acquiring Fund will employ a dynamic asset allocation strategy in seeking to achieve the Fund’s investment objective. Nuveen Asset Management will implement the Acquiring Fund’s asset allocation strategy by considering factors such as risk and return outlook when allocating the Fund’s assets among equity and debt investment strategies. The relative allocations of the Acquiring Fund’s Managed Assets for investment between equity and debt securities, and relative allocations to the different types of equity and income strategies, will vary from time to time consistent with the Acquiring Fund’s investment objective.

Portfolio Turnover. The portfolio turnover of the Acquiring Fund is expected to be higher than the historical portfolio turnover rates of each Target Fund due to the dynamic asset allocation strategy of the Acquiring Fund.

Leverage. As of December 31, 2020, 2019 and 2018, each Target Fund employed leverage through the use of bank borrowings. Certain important ratios related to each Target Fund’s use of leverage for the last three fiscal years ended December 31 are set forth in the tables below. The Acquiring Fund currently expects to employ leverage through bank borrowings. Initially, the Acquiring Fund’s use of leverage is expected to be generally consistent with the range of leverage historically used by the Target Funds.

 

Dividend and Income Fund

   2020     2019     2018  

Asset Coverage Ratio(1)

     356.86     339.31     308.10

Regulatory Leverage Ratio(2)

     28.02     29.47     32.46

Effective Leverage Ratio(3)

     28.02     29.47     32.46

 

Total Return Strategy Fund

   2020     2019     2018  

Asset Coverage Ratio(1)

     347.17     330.44     305.71

Regulatory Leverage Ratio(2)

     28.81     30.26     32.71

Effective Leverage Ratio(3)

     28.81     30.26     32.71

 

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Dividend Growth Fund

   2020     2019     2018  

Asset Coverage Ratio(1)

     339.05     335.94     302.24

Regulatory Leverage Ratio(2)

     29.49     29.77     33.09

Effective Leverage Ratio(3)

     29.49     29.77     33.09

 

(1)

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

(2)

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

(3)

Effective leverage is a Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in a Fund’s portfolio that increase the Fund’s investment exposure. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in addition to any regulatory leverage.

Board Members and Officers. The Target Funds have the same Board Members and officers, and these same individuals will serve as Board Members and officers of the Acquiring Fund. The management of each Fund, including general supervision of the duties performed by the Adviser under an investment management agreement between the Adviser and such Fund (each, an “Investment Management Agreement”), is the responsibility of its Board. Each Fund currently has twelve (12) Board Members, each of whom is not considered an “interested person,” as defined in the 1940 Act (referred to herein as “Independent Board Members”). The names and business addresses of the Board Members and officers of the Funds and their principal occupations and other affiliations during the past five years are set forth under “Management of the Acquiring Fund—Board Members and Officers” in the SAI.

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

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

Nuveen Fund Advisors, a registered investment adviser, is a subsidiary of Nuveen, LLC (“Nuveen”), the investment management arm of Teachers Insurance and Annuity Association of America (“TIAA”). TIAA is a life insurance company founded in 1918 by the Carnegie Foundation for the Advancement of Teaching and is the companion organization of College Retirement Equities Fund. As of March 31, 2021, Nuveen managed approximately $1.2 trillion in assets, of which approximately $169.5 billion was managed by Nuveen Fund Advisors.

Pursuant to each Investment Management Agreement, each Fund has agreed to pay an annual management fee for the overall advisory and administrative services and general office facilities

 

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provided by Nuveen Fund Advisors. Each Fund’s management fee consists of two components—a fund-level fee, based only on the amount of assets within a Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets of Nuveen-branded closed- and open-end registered investment companies organized in the U.S., and a specific fund-level fee, based only on the amount of assets of such Fund. This pricing structure enables Fund shareholders to benefit from growth in the assets within each individual Fund as well as from growth of complex-wide assets managed by Nuveen Fund Advisors.

The tables below set forth the annual fund-level management fee rates for the Target Funds and the Acquiring Fund. Each Fund’s fund-level management fee rate schedule provides for reduced management fee rates applicable to the Fund’s Managed Assets that are above specified breakpoints set forth in the schedule below. Each Fund’s fund-level management fee is calculated and payable monthly.

Fund-Level Management Fee Schedules

 

Target Funds

 

Average Total Daily Managed Assets*

   Dividend and
Income Fund
    Total Return
Strategy Fund
    Dividend Growth
Fund
 

For the first $500 million

     0.7000     0.7000     0.8000

For the next $500 million

     0.6750     0.6750     0.7750

For the next $500 million

     0.6500     0.6500     0.7500

For the next $500 million

     0.6250     0.6250     0.7250

For the next $2 billion

     0.6000     0.6000     0.7000

 

Acquiring Fund

 

Average Total Daily Managed Assets*

   Multi-Asset Income Fund  

For the first $500 million

     0.7000

For the next $500 million

     0.6750

For the next $500 million

     0.6500

For the next $500 million

     0.6250

For the next $2 billion

     0.6000

 

*

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

The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. Each Fund pays all of its other costs and expenses of its operations, including compensation of its Board Members (other than those affiliated with the Adviser), custodian, transfer agency and dividend disbursing expenses, legal fees, expenses of independent auditors, expenses of repurchasing shares, expenses of issuing any preferred shares, expenses of preparing, printing and distributing shareholder reports, notices, proxy statements and reports to governmental agencies, listing fees and taxes, if any.

The fund-level management fee schedule applicable to the Acquiring Fund will be the same as the current fund-level management fee schedule applicable to Dividend and Income Fund and Total Return Strategy Fund but will provide for a lower fund-level management fee rate at all asset levels than the current fund-level management fee schedule applicable to Dividend Growth Fund. The effective fund-level management fee rate as a percentage of average daily Managed Assets for the

 

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Acquiring Fund will potentially be lower than the current effective fund-level management fee rate for each Target Fund due to the combination of the assets of the Target Funds and the Acquiring Fund’s ability to benefit from available breakpoints in the fund-level management fee schedule that reduce the effective fund-level management fee rate as Managed Assets increase in size. In addition, the effective fund-level management fee rate as a percentage of average daily Managed Assets for the Acquiring Fund will be lower than the current effective fund-level management fee rate for Dividend Growth Fund due to the Acquiring Fund’s lower fund-level management fee rate at all asset levels.

Each Fund also pays a complex-level fee to Nuveen Fund Advisors, which is payable monthly and is in addition to the fund-level fee. The complex-level fee is based on the aggregate daily amount of eligible assets for all Nuveen branded closed and open-end registered investment companies organized in the United States, as stated in the table below. As of December 31, 2020, the complex-level fee rate for each Target Fund was 0.1557%.

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

Complex-Level Fee Rates

 

Complex-Level Asset Breakpoint Level*

   Effective Rate at
Breakpoint Level
 

$55 billion

     0.2000

$56 billion

     0.1996

$57 billion

     0.1989

$60 billion

     0.1961

$63 billion

     0.1931

$66 billion

     0.1900

$71 billion

     0.1851

$76 billion

     0.1806

$80 billion

     0.1773

$91 billion

     0.1691

$125 billion

     0.1599

$200 billion

     0.1505

$250 billion

     0.1469

$300 billion

     0.1445

 

*

For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, leverage includes the funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen open-end and closed-end funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011, but do include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year.

 

14


Sub-Advisers. Nuveen Fund Advisors has selected the following registered investment advisers to serve as sub-advisers to the Target Funds and the Acquiring Fund (following the Reorganizations) as set forth below (each, a “Sub-Adviser” and collectively, the “Sub-Advisers”):

 

Target Fund Sub-Advisers

Target Fund

  

Sub-Advisers

Dividend and Income Fund

   Nuveen Asset Management, LLC (“Nuveen Asset Management”)
   NWQ Investment Management Company, LLC (“NWQ”)
   Security Capital Research & Management Incorporated (“Security Capital”)
   Wellington Management Company LLP (“Wellington”)

Total Return Strategy Fund

   Nuveen Asset Management
   NWQ

Dividend Growth Fund

   Nuveen Asset Management
   NWQ
   Santa Barbara Asset Management LLC (“Santa Barbara”)

 

Acquiring Fund Sub-Advisers

Acquiring Fund

  

Sub-Advisers

Multi-Asset Income Fund

   Nuveen Asset Management
   NWQ
   Santa Barbara
   Teachers Advisors, LLC (“Teachers Advisors”)
   Winslow Capital Management, LLC, (“Winslow”)

Nuveen Asset Management. Nuveen Asset Management serves as a sub-adviser to each Target Fund pursuant to separate sub-advisory agreements between Nuveen Fund Advisors and Nuveen Asset Management (each, a “Target Fund Sub-Advisory Agreement”). Nuveen Fund Advisors has also selected Nuveen Asset Management to serve as a sub-adviser to the Acquiring Fund following the Reorganizations pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Nuveen Asset Management (an “Acquiring Fund Sub-Advisory Agreement”).

Nuveen Asset Management, a registered investment adviser, will be responsible for implementing the Acquiring Fund’s dynamic asset allocation strategy and allocating the Acquiring Fund’s assets among the Fund’s Sub-Advisers, which include Nuveen Asset Management. Nuveen Asset Management also manages the investment of the Funds’ assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors and the asset allocation team of Nuveen Asset Management.

Nuveen Asset Management is a wholly owned subsidiary of Nuveen Fund Advisors. The business address of Nuveen Asset Management is 333 West Wacker Drive, Chicago, Illinois 60606.

NWQ. NWQ serves as a sub-adviser to each Target Fund pursuant to separate sub-advisory agreements between Nuveen Fund Advisors and NWQ (each, a “Target Fund Sub-Advisory Agreement”). Nuveen Fund Advisors has also selected NWQ to serve as a sub-adviser to the Acquiring Fund following the Reorganizations pursuant to a sub-advisory agreement between Nuveen Fund Advisors and NWQ (an “Acquiring Fund Sub-Advisory Agreement”). NWQ, a registered investment

 

15


adviser, manages the investment of the Funds’ assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. NWQ is an affiliate of Nuveen. The business address of NWQ is 2029 Century Park East, Suite 1600, Los Angeles, California 90067.

Security Capital. Security Capital serves as a sub-adviser to Dividend and Income Fund pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Security Capital (a “Target Fund Sub-Advisory Agreement”). Security Capital, a registered investment adviser, manages the investment of Dividend and Income Fund’s assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Security Capital is organized as a Delaware corporation and is a wholly-owned subsidiary of JP Morgan Asset Management Holdings, Inc., a wholly-owned subsidiary of JP Morgan Chase & Co. The business address of Security Capital is 10 South Dearborn Street, Suite 1400, Chicago, Illinois 60603.

Wellington. Wellington serves as a sub-adviser to Dividend and Income Fund pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Wellington (a “Target Fund Sub-Advisory Agreement”). Wellington, a registered investment adviser, manages the investment of Dividend and Income Fund’s assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Wellington is organized as a Massachusetts limited liability partnership. Wellington is a professional investment counseling firm which provides services to investment companies, employee benefit plans, endowments, foundations and other institutions. The business address of Wellington is 280 Congress Street, Boston, Massachusetts 02210.

Santa Barbara. Santa Barbara serves as a sub-adviser to Dividend Growth Fund pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Santa Barbara (a “Target Fund Sub-Advisory Agreement”). Nuveen Fund Advisors has also selected Santa Barbara to serve as a sub-adviser to the Acquiring Fund following the Reorganizations pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Santa Barbara (an “Acquiring Fund Sub-Advisory Agreement”). Santa Barbara, a registered investment adviser, manages the investment of the applicable Funds’ assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Santa Barbara is an affiliate of Nuveen. The business address of Santa Barbara is 2029 Century Park East, Suite 1600, Los Angeles, California 90067.

Teachers Advisors. Nuveen Fund Advisors has selected Teachers Advisors to serve as a sub-adviser to the Acquiring Fund following the Reorganizations pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Teachers Advisors (an “Acquiring Fund Sub-Advisory Agreement”). Teachers Advisors will manage the investment of the Acquiring Fund’s assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Teachers Advisors is an indirect wholly owned subsidiary of TIAA and an affiliate under common control with Nuveen. Teachers Advisors is organized as a Delaware limited liability company. Teachers Advisors provides its services to a wide range of client types including registered investment companies (including open-end and closed-end funds), institutional asset management businesses (including unregistered investment funds, separately managed accounts, insurance company separate accounts, insurance company general accounts, and pension plans) and other clients. The business address of Teachers Advisors is 730 Third Avenue, New York, New York 10017.

Winslow. Nuveen Fund Advisors has selected Winslow to serve as a sub-adviser to the Acquiring Fund following the Reorganizations pursuant to a sub-advisory agreement between Nuveen Fund Advisors and Winslow (an “Acquiring Fund Sub-Advisory Agreement”). Winslow will manage

 

16


the investment of the Acquiring Fund’s assets allocated to it on a discretionary basis, subject to the supervision of Nuveen Fund Advisors. Winslow specializes in growth investing through its domestic equity investments, international equity investments, and alternative investments strategies. Winslow is an affiliate of Nuveen. The business address of Winslow is 4400 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402.

The Target Fund Sub-Advisory Agreements and the Acquiring Fund Sub-Advisory Agreements may individually be referred to as a “Sub-Advisory Agreement” and collectively referred to as “Sub-Advisory Agreements.”

Sub-Advisory Fees. For the services provided to each Target Fund pursuant to its Sub-Advisory Agreements, Nuveen Fund Advisors pays each Sub-Adviser a fee, payable monthly, calculated as set forth below. For the services to be provided to the Acquiring Fund pursuant to its Sub-Advisory Agreements, Nuveen Fund Advisors will pay each Sub-Adviser a fee, payable monthly, equal to 35% of the management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Acquiring Fund to Nuveen Fund Advisors with respect to the Acquiring Fund assets managed by the Sub-Adviser.

In addition, pursuant to the Acquiring Fund Sub-Advisory Agreement between the Adviser and Nuveen Asset Management, Nuveen Asset Management is also compensated for employing the Acquiring Fund’s dynamic asset allocation strategy and allocating the Fund’s assets among the various Sub-Advisers. For its role in implementing the Acquiring Fund’s dynamic asset allocation strategy, Nuveen Asset Management receives a fee, payable monthly, equal to 15% of the management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Acquiring Fund to Nuveen Fund Advisors with respect to all Acquiring Fund assets.

Dividend and Income Fund

For each Sub-Adviser to Dividend and Income Fund, the sub-advisory fee is calculated as a percentage of the net management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Fund to Nuveen Fund Advisors with respect to the Fund’s net assets (including net assets attributable to preferred shares and the principal amount of any borrowings, if any) allocated to the Sub-Adviser in accordance with the following schedules:

 

Nuveen Asset Management

 

Average Daily Net Assets

      

First $125 million

     50.0000

Next $25 million

     47.5000

Next $25 million

     45.0000

Next $25 million

     42.5000

Over $200 million

     40.0000

 

NWQ

 

Average Daily Net Assets

      

First $200 million

     55.0000

Next $100 million

     52.5000

Over $300 million

     50.0000

 

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Security Capital

 

Average Daily Net Assets

      

First $200 million

     55.0000

Next $100 million

     52.5000

Over $300 million

     50.0000

 

Wellington

 

Average Daily Net Assets

      

First $125 million

     50.0000

Next $25 million

     47.5000

Next $25 million

     45.0000

Next $25 million

     42.5000

Over $200 million

     40.0000

Total Return Strategy Fund

For each Sub-Adviser to Total Return Strategy Fund, the sub-advisory fee is calculated as a percentage of the net management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Fund to Nuveen Fund Advisors with respect to the Fund’s net assets (including net assets attributable to preferred shares and the principal amount of any borrowings, if any) allocated to the Sub-Adviser in accordance with the following schedules:

 

Nuveen Asset Management

 

Average Daily Net Assets

      

First $125 million

     50.0000

Next $25 million

     47.5000

Next $25 million

     45.0000

Next $25 million

     42.5000

Over $200 million

     40.0000

 

NWQ

 

Average Daily Net Assets

      

First $200 million

     55.0000

Next $100 million

     52.5000

Over $300 million

     50.0000

Dividend Growth Fund

For Dividend Growth Fund, the sub-advisory fee payable to Nuveen Asset Management is equal to 10.0000% of the net management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Fund to Nuveen Fund Advisors, and the sub-advisory fee payable to NWQ is calculated as 0.3250% of the Fund’s net assets (including net assets attributable to preferred shares and the principal amount of any borrowings, if any) allocated to the Sub-Adviser.

In addition, pursuant to the Acquiring Fund Sub-Advisory Agreement between the Adviser and Nuveen Asset Management, Nuveen Asset Management is also compensated for employing the Acquiring Fund’s dynamic asset allocation strategy and allocating the Fund’s assets among the various Sub-Advisers. For its role in implementing the Acquiring Fund’s dynamic asset allocation strategy,

 

18


Nuveen Asset Management receives a fee, payable monthly, equal to 15% of the management fee (net of applicable breakpoints, waivers and reimbursements) paid by the Acquiring Fund to Nuveen Fund Advisors with respect to all Acquiring Fund assets.

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

Term and Termination of the Investment Advisory Agreements and the Sub-Advisory Agreements. Unless earlier terminated as described below, each Target Fund’s Investment Management Agreement with Nuveen Fund Advisors and Sub-Advisory Agreements with its respective Sub-Advisers will remain in effect until August 1, 2022. If the Reorganizations are completed, the Acquiring Fund will enter into an Investment Management Agreement with Nuveen Fund Advisors and Sub-Advisory Agreements with Nuveen Asset Management, NWQ, Santa Barbara, Teachers Advisors, and Winslow, each of which will have an initial term of no longer than two years. After these dates, each Fund’s Investment Management Agreement and Sub-Advisory Agreements will continue in effect from year to year so long as such continuation is approved at least annually by: (1) the Board or the vote of a majority of the outstanding voting securities of the Acquiring Fund; and (2) a majority of the Independent Board Members who are not interested persons of any party to the applicable Investment Management Agreement and Sub-Advisory Agreement, cast in person at a meeting called for the purpose of voting on such approval. Each Investment Management Agreement and Sub-Advisory Agreement may be terminated at any time, without penalty, by either the Acquiring Fund, or the applicable investment adviser or sub-adviser upon 60 days’ written notice, and is automatically terminated in the event of its assignment, as defined in the 1940 Act.

A discussion of the basis for the Board’s most recent approval of the Investment Management Agreement and Sub-Advisory Agreements for each Target Fund will be available in that Target Fund’s Semi-Annual Report for the period ended June 30, 2021. If the Reorganizations are completed, a discussion of the basis for the Board’s approval of the Acquiring Fund’s Investment Management Agreement and Sub-Advisory Agreements will be included in the Acquiring Fund’s first Annual Report or Semi-Annual Report.

Portfolio Management. Each Fund’s Sub-Advisers manage the assets of the Fund that are allocated to it using a team of analysts and portfolio managers. Each Target Fund’s portfolio managers that are primarily responsible for the day-to-day management of one or more of the Fund’s investment strategies are set forth below, accompanied by a description of each portfolio manager’s experience and education. For the Acquiring Fund, the portfolio managers responsible for the dynamic asset allocation strategy are set forth below, accompanied by a description of each portfolio manager’s experience and education.

Target Funds

Nuveen Asset Management

Dividend and Income Fund; Total Return Strategy Fund. Scott Caraher is head of senior loans and responsible for retail and institutional bank loan-focused portfolio management and co-portfolio manager on the firm’s Long-Short Credit Strategy. When Scott joined Nuveen affiliate Symphony Asset Management in 2002, he was a gaming and industrials analyst providing long and short credit ideas to the investment team up and down the capital structure. Scott began trading loans for the platform in

 

19


2003 and in 2005 was named an associate portfolio manager on the firm’s loan strategies. He became the lead portfolio manager on the firm’s loan strategies in 2008. Prior to joining the firm, Scott was an investment banking analyst in the industrial group at Deutsche Banc Alex Brown in New York.

Dividend Growth Fund. David Friar, Portfolio Manager (since 2000) of Nuveen Asset Management. He is a portfolio manager for Nuveen’s multi-asset portfolio management team. Additionally, he is a member of the investment team responsible for several other quantitative products, including the equity option overwrite strategies. David joined the firm in 1999 as a member of the performance measurement group. Before his role in portfolio management, he provided quantitative analysis for equity portfolios and constructed quantitatively driven portfolios for institutional and taxable clients. David graduated with a B.S. in Finance from Metropolitan State University.

NWQ

Total Return Strategy Fund; Dividend Growth Fund. Susi Budiman, CFA, FRM, Managing Director and Co-Head of Fixed Income, Portfolio Manager/Analyst. Prior to joining NWQ in 2006, Susi was Portfolio Manager for China Life Insurance Company, Ltd. in Taiwan where she managed multi-sector and multi-currency fixed income portfolios with responsibility for over $1.8 billion in assets under management. Prior to that, she was a currency exchange sales associate at Fleet National Bank in Singapore covering Asian, Euro and other major currencies.

Dividend and Income Fund; Total Return Strategy Fund; Dividend Growth Fund. Thomas J. Ray, CFA, Managing Director, Co-Head of Fixed Income, Portfolio Manager/Analyst. Prior to joining NWQ in 2015, Tom was a Private Investor. Prior to that, he served as Chief Investment Officer, President and founding member of Inflective Asset Management, a boutique investment firm specializing in convertible securities. Prior to founding Inflective, Tom also served as portfolio manager at Transamerica Investment Management. Tom graduated from University of Wisconsin with a B.B.A. in Finance, Investment & Banking and an M.S. in Finance. He holds the Chartered Financial Analyst designation and is a member of the CFA Institute.

Dividend and Income Fund; Total Return Strategy Fund. James T. Stephenson, CFA, Managing Director, Portfolio Manager and Equity Analyst. Prior to joining NWQ in 2006, Jim spent seven years at Bel Air Investment Advisors, LLC, formerly a State Street Global Advisors Company, where he was a Managing Director and Partner. Most recently, Jim was Chairman of the firm’s Equity Policy Committee and the Portfolio Manager for Bel Air’s Large Cap Core and Select strategies. Previous to this, he spent five years as an Analyst and Portfolio Manager at ARCO Investment Management Company. Prior to that, he was an Equity Analyst at Trust Company of the West. Jim received his B.B.A. and M.S. in Business from the University of Wisconsin-Madison, where he participated in the Applied Security Analysis Program. In addition, he earned the designation of Chartered Financial Analyst in 1993 and is a member of the CFA Institute and the Los Angeles Society of Financial Analysts.

 

20


Santa Barbara

Dividend Growth Fund. David A. Chalupnik, CFA, Co-Head of Santa Barbara and Portfolio Manager, Head of Nuveen U.S. Active Equities Portfolio Management. David oversees all portfolio management activities for Nuveen’s actively managed U.S. equities strategies. He is the lead portfolio manager for several core and value-focused equities strategies and related institutional portfolios. David also manages several Santa Barbara Dividend Growth strategies. Prior to joining the firm in 2002, David served as chief investment officer for Duff & Phelps Investment Management Company. David was also head of the equity investment division of Allstate Insurance Company. He began working in the investment industry in 1984. David graduated with a B.S. in Commerce and an M.B.A. from DePaul University. He holds the CFA designation and is a member of the CFA Institute.

Dividend Growth Fund. David S. Park, CFA, CPA—Co-Head of Santa Barbara, Portfolio Manager and Director of Research. Prior to joining the firm in 2011, David was an equity analyst at HighMark Capital Management, focusing on consumer, technology, telecom and industrials. Preceding this, he held several positions in finance and transactions as a manager for M&A Transaction Support at Ernst & Young, senior analyst at Move, Inc. and as a senior associate at PricewaterhouseCoopers. David graduated with a B.A. from the University of California, Los Angeles and an M.B.A. from New York University, Leonard N. Stern School of Business. David holds the CFA designation and is a Certified Public Accountant.

Security Capital

Dividend and Income Fund. Anthony R. Manno Jr. is CEO, President and Chief Investment Officer of Security Capital Research & Management Incorporated. He is Chairman, President and Managing Director of SC-Preferred Growth LLC. Prior to joining Security Capital in 1994, Mr. Manno spent 14 years with LaSalle Partners Limited as a Managing Director, responsible for real estate investment banking activities. Mr. Manno began his career in real estate finance at The First National Bank of Chicago and has 47 years of experience in the real estate investment business. He received an MBA in Finance with honors (Beta Gamma Sigma) from the University of Chicago and graduated Phi Beta Kappa from Northwestern University with a BA and MA in Economics. Mr. Manno is a Certified Public Accountant and was awarded an Elijah Watt Sells Award and is a recipient of the President’s Call to Service Award, December 2008.

Dividend and Income Fund. Kenneth D. Statz is a Managing Director and Senior Market Strategist of Security Capital Research & Management Incorporated where he is responsible for the development and implementation of portfolio investment strategy. Prior to joining Security Capital in 1995, Mr. Statz was a Vice President in the Investment Research Department of Goldman, Sachs & Co., concentrating on research and underwriting for the REIT industry. Previously, he was a REIT Portfolio Manager and a Managing Director of Chancellor Capital Management. Mr. Statz has 39 years of experience in the real estate securities industry and received an MBA and a BBA in Finance from the University of Wisconsin.

Dividend and Income Fund. Kevin W. Bedell is a Managing Director of Security Capital Research & Management Incorporated where he directs the Investment Analysis Team, which provides in-depth proprietary research on publicly listed companies. Prior to joining Security Capital in 1996, Mr. Bedell spent nine years with LaSalle Partners Limited where he was Equity Vice President and Portfolio Manager, with responsibility for strategic, operational and financial management of a private

 

21


real estate investment trust with commercial real estate investments in excess of $1 billion. Mr. Bedell has 33 years of experience in the real estate securities industry and received an MBA in Finance from the University of Chicago and a BA from Kenyon College.

Dividend and Income Fund. Nathan J. Gear, CFA, is an Executive Director of Security Capital Research & Management Incorporated where, as a senior member of the Investment Analysis Team, he leads the fundamental analysis and pricing of REIT fixed income senior securities. Prior to joining Security Capital in 2006, Mr. Gear was involved in the underwriting and analysis of real estate loans for JPMorgan. Mr. Gear received his BS with honors from Pensacola Christian College and is a member of the Chartered Financial Analyst Institute.

Wellington

Dividend and Income Fund. James W. Valone, CFA, Senior Managing Director and Fixed Income Portfolio Manager, joined Wellington as an investment professional in 1999. He will retire effective December 31, 2021.

Dividend and Income Fund. Kevin Murphy, Senior Managing Director and Fixed Income Portfolio Manager, joined Wellington as an investment professional in 2016.

Acquiring Fund

Nuveen Asset Management

Nathan Shetty, CFA, oversees Nuveen’s Multi-Asset team. Nathan joined the firm from UBS, where he was global co-head of portfolio management for Investment Solutions. Prior to that, he launched the Investment Solutions group at Mesirow Financial after having been a senior portfolio manager in the currency group. Prior to that, he was at Pareto Partners. He started in the industry in 2001. Nathan graduated with a Master of Science in Communication from Northwestern University, an M.B.A. from the University of Chicago and a Master of Science in Statistics from Texas A&M. He holds the CFA designation and FRM certification from the Global Association of Risk Professionals.

Anurag Dugar is a portfolio manager on Nuveen’s Multi-Asset portfolio management team. Prior to joining Nuveen in July 2017, Anurag worked at BlackRock where his primary responsibilities were portfolio management, multi-asset investment research and construction of model portfolios and investment solutions. Prior to BlackRock, Anurag worked at Mellon Capital Management as a senior research analyst in the Multi-Asset research group where he researched and developed fixed income models and strategies that were used in Mellon’s Global Fixed Income Hedge Fund and Global Opportunities Hedge Fund. Anurag graduated with a Masters in Computer Engineering from Texas A&M University and a Masters in Financial Engineering from University of California, Berkeley.

Additional information regarding the compensation, other accounts managed and ownership of securities of the portfolio managers of the Acquiring Fund is contained in the Reorganization SAI.

Comparative Risk Information

Risk is inherent in all investing. Investing in the Funds involves risk, including the risk that you may receive little or no return on your investment or that you may even lose part or all of your

 

22


investment. An investment in the Funds is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before you invest in a Fund, you should consider its principal risks.

The Acquiring Fund has a broader investment mandate than the Target Funds and will dynamically invest in a portfolio of equity and debt securities of issuers located around the world. This dynamic investment strategy uses a risk-based framework in which any amount can be allocated to an asset-class at any time. The Acquiring Fund may invest in equity and debt securities of any type. The Acquiring Fund may invest in a broader range of security types, use a broader range of investment techniques and have exposure to a broader range of geographic regions than the Target Funds. The Acquiring Fund may also use a broader range of derivatives relative to the Target Funds. Therefore, the Acquiring Fund is generally subject to the same types of principal investment risks as those of the Target Funds, and is also subject to principal investment risks that do not apply to an investment in the Target Funds. Without limitation, the Acquiring Fund is expected to have greater exposure to non-dividend paying common stocks and may have greater exposure to foreign securities. Because of its dynamic allocation strategy, the Acquiring Fund is subject to a higher degree of allocation risk and multi-manager risk.

The principal risks of investing in the Funds are described in more detail below. See “B. Risk Factors.”

Comparative Expense Information

The purpose of the comparative fee tables below is to assist you in understanding the various fees and expenses of investing in common shares of the Funds. The information in the tables reflect the fees and expenses for each Target Fund’s fiscal year ended December 31, 2020 and the pro-forma expenses for the twelve months ended December 31, 2020 for the Acquiring Fund under the following scenarios in which, pursuant to the requirements of the Agreement, at least two of the three proposed Reorganizations are completed:

 

  1.

all three Target Fund Reorganizations are completed;

 

  2.

the Reorganizations of Dividend and Income Fund and Total Return Strategy Fund are completed;

 

  3.

the Reorganizations of Dividend and Income Fund and Dividend Growth Fund are completed; and

 

  4.

the Reorganizations of Total Return Strategy Fund and Dividend Growth Fund are completed.

The assets of the Funds will vary based on market conditions and other factors and may vary significantly during volatile market conditions. The figures in the Example are not necessarily indicative of past or future expenses, and actual expenses may be greater or less than those shown. The Funds’ actual rates of return may be greater or less than the hypothetical 5% annual return shown in the Example.

 

23


1. Comparative Fee Table(1)—Reorganizations of Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund

 

      Dividend  and
Income
Fund(2)
    Total  Return
Strategy
Fund(2)
    Dividend
Growth
Fund(2)
    Multi-Asset
Income Fund
(Pro Forma)(3)
 

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

        

Management Fees

     1.20     1.21     1.36     1.20

Other Expenses(4)

     0.21     0.19     0.12     0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     1.41     1.40     1.48     1.32

Borrowing Expense(5)

     0.62     0.52     0.51     0.55
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Annual Operating Expenses

     2.03     1.92     1.99     1.87
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

“Annual Expenses (as a percentage of net assets applicable to common shares)” are based on the expenses of the Target Funds for the twelve (12) months ended December 31, 2020.

(3)

The Multi-Asset Income Fund Pro Forma figures reflect the impact of applying the Multi-Asset Income Fund’s fund-level management fee rates to the Multi-Asset Income Fund Pro Forma assets and the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganizations. All percentages are based on average net assets applicable to common shares for the twelve (12) months ended December 31, 2020.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal year. Expenses do not include the expenses to be borne by the Target Funds in connection with the Reorganizations, which are estimated to be $405,000 (0.21%) for Dividend and Income Fund, $280,000 (0.21%) for Total Return Strategy Fund, and $500,000 (0.23%) for Dividend Growth Fund.

(5)

Borrowing Expense for each Target Fund is estimated based on actual expenses from the prior fiscal year. For the Multi-Asset Income Fund Pro Forma, Borrowing Expense is estimated by applying actual expenses for the Target Funds from the prior fiscal year to the Multi-Asset Income Fund Pro Forma average net assets. The actual Borrowing Expense incurred may be higher or lower.

Example: The following examples illustrate the expenses that a common shareholder would pay on a $1,000 investment that is held for the time periods provided in the table. The examples assume that all dividends and other distributions are reinvested and that Total Annual Operating Expenses remain the same. The examples also assume a 5% annual return. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Dividend and Income Fund

   $ 21      $ 64      $ 109      $ 236  

Total Return Strategy Fund

   $ 19      $ 60      $ 104      $ 224  

Dividend Growth Fund

   $ 20      $ 62      $ 107      $ 231  

Multi-Asset Income Fund (Pro Forma)

   $ 19      $ 59      $ 101      $ 219  

2. Comparative Fee Table(1)—Reorganizations of Dividend and Income Fund and Total Return Strategy Fund

 

      Dividend and
Income  Fund(2)
    Total Return
Strategy  Fund(2)
    Multi-Asset
Income Fund
(Pro Forma)(3)
 

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

      

Management Fees

     1.20     1.21     1.20

Other Expenses(4)

     0.21     0.19     0.16
  

 

 

   

 

 

   

 

 

 

Subtotal

     1.41     1.40     1.36

Borrowing Expense (5)

     0.62     0.52     0.58
  

 

 

   

 

 

   

 

 

 

Total Annual Operating Expenses

     2.03     1.92     1.94
  

 

 

   

 

 

   

 

 

 

 

24


 

(1)

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

(2)

“Annual Expenses (as a percentage of net assets applicable to common shares)” are based on the expenses of the Target Funds for the twelve (12) months ended December 31, 2020.

(3)

The Multi-Asset Income Fund Pro Forma figures reflect the impact of applying the Multi-Asset Income Fund’s fund-level management fee rates to the Multi-Asset Income Fund Pro Forma assets and the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganizations. All percentages are based on average net assets applicable to common shares for the twelve (12) months ended December 31, 2020.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal year. Expenses do not include the expenses to be borne by the Target Funds in connection with the Reorganizations, which are estimated to be $405,000 (0.21%) for Dividend and Income Fund and $280,000 (0.21%) for Total Return Strategy Fund.

(5)

Borrowing Expense for each Target Fund is estimated based on actual expenses from the prior fiscal year. For the Multi-Asset Income Fund Pro Forma, Borrowing Expense is estimated by applying actual expenses for the Target Funds from the prior fiscal year to the Multi-Asset Income Fund Pro Forma average net assets. The actual Borrowing Expense incurred may be higher or lower.

Example: The following examples illustrate the expenses that a common shareholder would pay on a $1,000 investment that is held for the time periods provided in the table. The examples assume that all dividends and other distributions are reinvested and that Total Annual Operating Expenses remain the same. The examples also assume a 5% annual return. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Dividend and Income Fund

   $ 21      $ 64      $ 109      $ 236  

Total Return Strategy Fund

   $ 19      $ 60      $ 104      $ 224  

Multi-Asset Income Fund (Pro Forma)

   $ 20      $ 61      $ 105      $ 227  

3. Comparative Fee Table(1)—Reorganizations of Dividend and Income Fund and Dividend Growth Fund

 

      Dividend and
Income  Fund(2)
    Dividend  Growth
Fund(2)
    Multi-Asset
Income Fund
(Pro Forma)(3)
 

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

      

Management Fees

     1.20     1.36     1.20

Other Expenses(4)

     0.21     0.12     0.13
  

 

 

   

 

 

   

 

 

 

Subtotal

     1.41     1.48     1.33

Borrowing Expense(5)

     0.62     0.51     0.56
  

 

 

   

 

 

   

 

 

 

Total Annual Operating Expenses

     2.03     1.99     1.89
  

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

“Annual Expenses (as a percentage of net assets applicable to common shares)” are based on the expenses of the Target Funds for the twelve (12) months ended December 31, 2020.

(3)

The Multi-Asset Income Fund Pro Forma figures reflect the impact of applying the Multi-Asset Income Fund’s fund-level management fee rates to the Multi-Asset Income Fund Pro Forma assets and the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganizations. All percentages are based on average net assets applicable to common shares for the twelve (12) months ended December 31, 2020.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal year. Expenses do not include the expenses to be borne by the Target Funds in connection with the Reorganizations, which are estimated to be $405,000 (0.21%) for Dividend and Income Fund and $500,000 (0.23%) for Dividend Growth Fund.

(5)

Borrowing Expense for each Target Fund is estimated based on actual expenses from the prior fiscal year. For the Multi-Asset Income Fund Pro Forma, Borrowing Expense is estimated by applying actual expenses for the Target Funds from the prior fiscal year to the Multi-Asset Income Fund Pro Forma average net assets. The actual Borrowing Expense incurred may be higher or lower.

 

25


Example: The following examples illustrate the expenses that a common shareholder would pay on a $1,000 investment that is held for the time periods provided in the table. The examples assume that all dividends and other distributions are reinvested and that Total Annual Operating Expenses remain the same. The examples also assume a 5% annual return. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Dividend and Income Fund

   $ 21      $ 64      $ 109      $ 236  

Dividend Growth Fund

   $ 20      $ 62      $ 107      $ 231  

Multi-Asset Income Fund (Pro Forma)

   $ 19      $ 59      $ 102      $ 221  

4. Comparative Fee Table(1)—Reorganizations of Total Return Strategy Fund and Dividend Growth Fund

 

      Total Return
Strategy  Fund(2)
    Dividend  Growth
Fund(2)
    Multi-Asset
Income Fund
(Pro Forma)(3)
 

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

      

Management Fees

     1.21     1.36     1.21

Other Expenses(4)

     0.19     0.12     0.11
  

 

 

   

 

 

   

 

 

 

Subtotal

     1.40     1.48     1.32

Borrowing Expense(5)

     0.52     0.51     0.51
  

 

 

   

 

 

   

 

 

 

Total Annual Operating Expenses

     1.92     1.99     1.84
  

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

“Annual Expenses (as a percentage of net assets applicable to common shares)” are based on the expenses of the Target Funds for the twelve (12) months ended December 31, 2020.

(3)

The Multi-Asset Income Fund Pro Forma figures reflect the impact of applying the Multi-Asset Income Fund’s fund-level management fee rates to the Multi-Asset Income Fund Pro Forma assets and the anticipated reduction of certain duplicative expenses eliminated as a result of the Reorganizations. All percentages are based on average net assets applicable to common shares for the twelve (12) months ended December 31, 20120.

(4)

Other Expenses are estimated based on actual expenses from the prior fiscal year. Expenses do not include the expenses to be borne by the Target Funds in connection with the Reorganizations, which are estimated to be $280,000 (0.21%) for Total Return Strategy Fund and $500,000 (0.23%) for Dividend Growth Fund.

(5)

Borrowing Expense for each Target Fund is estimated based on actual expenses from the prior fiscal year. For the Multi-Asset Income Fund Pro Forma, Borrowing Expense is estimated by applying actual expenses for the Target Funds from the prior fiscal year to the Multi-Asset Income Fund Pro Forma average net assets. The actual Borrowing Expense incurred may be higher or lower.

Example: The following examples illustrate the expenses that a common shareholder would pay on a $1,000 investment that is held for the time periods provided in the table. The examples assume that all dividends and other distributions are reinvested and that Total Annual Operating Expenses remain the same. The examples also assume a 5% annual return. The examples should not be considered a representation of future expenses. Actual expenses may be greater or lesser than those shown.

 

     1 Year      3 Years      5 Years      10 Years  

Total Return Strategy Fund

   $ 19      $ 60      $ 104      $ 224  

Dividend Growth Fund

   $ 20      $ 62      $ 107      $ 231  

Multi-Asset Income Fund (Pro Forma)

   $ 19      $ 58      $ 99      $ 216  

 

26


Comparative Performance Information

Comparative total return performance for the Target Funds for the periods ended December 31, 2020:

 

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

Dividend and Income Fund

     (6.37 )%      4.66     6.74     (10.89 )%      5.39     7.22

Total Return Strategy Fund

     (6.39 )%      4.32     6.61     (13.70 )%      4.48     6.77

Dividend Growth Fund

     (3.42 )%      8.57     9.11     (9.95 )%      9.09     9.36

Average Annual Total Return on Net Asset Value is the combination of changes in common share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvestment price for the last dividend declared in the period may often be based on the Fund’s market price (and not its net asset value), and therefore may be different from the price used in the calculation. Average Annual Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances it may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Past performance information is not necessarily indicative of future results.

 

B.

RISK FACTORS

An investment in the Acquiring Fund may not be appropriate for all investors. An investment in the Acquiring Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Acquiring Fund will achieve its investment objective. Investors should consider their long-term investment goals and financial needs when making an investment decision with respect to shares of the Acquiring Fund. An investment in the Acquiring Fund is intended to be a long-term investment, and you should not view the Fund as a trading vehicle. Your shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions, if applicable.

The principal risks of investing in the Acquiring Fund are described below following the table that compares the principal risks of an investment in each of the Target Funds and the Acquiring Fund. The Acquiring Fund is a newly formed fund with risk disclosure practices that differ from those of the Target Funds. Accordingly, certain differences between the Target Funds and the Acquiring Fund are attributable primarily to those differing risk disclosure practices. For example, a risk that is indicated as being applicable to the Acquiring Fund may generally be applicable to a Target Fund, even if the risk is not so designated for the Target Fund in the table below, because the Target Fund discloses the risk under a risk type of a different name.

The table below is not intended to provide shareholders with any indication of the Funds’ relative risk/return profiles. Shareholders should instead refer to the narrative descriptions of the

 

27


Funds’ principal risks that follow the table below. The risks and special considerations of an investment in the Acquiring Fund described below should be considered by shareholders of each Target Fund in their evaluation of the Reorganizations.

 

      Dividend
and
Income
Fund
     Total
Return
Strategy
Fund
     Dividend
Growth
Fund
     Multi-
Asset
Income
Fund
 

Portfolio Level Risks

 

Equity Securities Risks:

           

Common Stock Risk

                           

Concentration Risk

               

Contingent Capital Security Risk

               

Convertible Securities Risk

                           

ETF Risk

               

Dividend Paying Securities Risk

                           

Growth Stock Risk

               

Large-Cap Company Risk

                       

Mid-Cap Company Risk

                       

Other Investment Companies Risk

                           

Preferred Securities Risk

                           

Rights and Warrants Risk

                   

Smaller-Cap Company Risk

               

Value Stock Risk

               

Debt Securities Risks:

           

Debt Securities Risk

                           

Basis Risk

                   

Below Investment Grade Risk

                           

Bond Market Liquidity Risk

                       

Collateralized Loan Obligations Risk

               

Credit Risk

                           

Credit Spread Risk

                           

Deflation Risk

                           

Downgrade Risk

               

Duration Risk

                           

Extension Risk

               

Floating and Variable Rate Securities Risk

               

Income Risk

                           

Income Volatility Risk

               

Inflation Risk

                           

Interest Rate Risk

                           

Loan Risk

               

Mortgage- and Asset-Backed Securities Risk

               

Mortgage Roll Risk

               

Municipal Securities Risk

               

New Types of Tax-Advantaged Securities Risk

                   

Prepayment Risk

               

Reinvestment Risk

                           

Rule 144A Securities Risk

               

Senior Loan Agent Risk

                       

Senior Loan Risk

                       

Special Risks for Inflation-Indexed Bonds

               

 

28


      Dividend
and
Income
Fund
     Total
Return
Strategy
Fund
     Dividend
Growth
Fund
     Multi-
Asset
Income
Fund
 

Portfolio Level Risks

 

Unrated Securities Risk

                           

Valuation Risk

                           

When-Issued and Delayed-Delivery Transactions Risk

                   

Derivatives Risks:

           

Derivatives Risk

                           

Call Option Risk

                           

Financial Futures and Options Transactions Risk

                           

Hedging Risk

                           

Inverse Floating Rate Securities Risk

               

Put Options Risk

                   

Swap Transactions Risk

                           

Non-U.S. Securities Risks:

           

Non-U.S. Securities Risk

                           

Emerging Markets Risk

                   

Foreign Currency Risk

                       

Foreign Currency Contracts Risk

                   

Foreign Debt Investment Risk

               

Sovereign Government and Supranational Debt Risk

                   

Sector and Other Risks:

           

Illiquid Investments Risk

                           

Infrastructure Sector Risk

               

Master Limited Partnerships (“MLPs”) Risk

                   

Real Estate Related Securities Risk

                   

Sector Concentration Risk

               

Tax Treatment of Dividends and Distributions Risk

                   

U.S. Government Securities Risk

               

Fund Level and Other Risks

 

Allocation Risk

               

Anti-Takeover Provisions

                           

Borrowing Risk

                           

Counterparty Risk

                           

Cybersecurity Risk

                           

Global Economic Risk

                           

Investment and Market Risk

                           

Legislation and Regulatory Risk

                           

Leverage Risk

                           

Market Discount from Net Asset Value

                           

Multi-Manager Risk

               

Portfolio Turnover Risk

               

Recent Market Conditions

                           

Reverse Repurchase Agreement Risk

                           

Tax Risk

                           

 

29


The following risks apply to an investment in the Acquiring Fund, and also apply to an investment in the Target Funds as indicated in the table above.

Portfolio Level Risks

Equity Securities Risks

Common Stock Risk. Common stocks have experienced significantly more volatility in returns and may significantly underperform relative to debt securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by the Fund. Also, the price of common stocks is sensitive to general movements in the stock market, and a drop in the stock market may depress the price of common stocks to which the Fund has exposure. Common stock prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer, the general condition of the relevant stock market or the current and expected future conditions of the broader economy, or when political or economic events affecting the issuer in particular or the stock market in general occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.

Concentration Risk. The Fund’s investments may be concentrated in issuers of one or a few specific economic sectors, so the Fund may be subject to more risks than if it were broadly diversified across the economy.

Convertible Securities Risk. Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks that are typically associated with debt, including but not limited to Interest Rate Risk, Credit Risk, Below Investment Grade Risk and Unrated Securities Risk. The value of a convertible security is influenced by both the yield of non-convertible securities of comparable issuers and by the value of the underlying common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar credit quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, the convertible security’s market value tends to reflect the market price of the common stock of the issuing company when that stock price is greater than the convertible security’s “conversion price.” The conversion price is defined as the predetermined price at which the convertible security could be exchanged for the associated common stock. As the market price of the underlying common stock declines, the price of the convertible security tends to be influenced more by the yield of the convertible security. Thus, the convertible security may not decline in price to the same extent as the underlying common stock. 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.

Dividend-Paying Securities Risk. The Fund’s investment in dividend-paying stocks could cause the Fund to underperform similar funds that invest without consideration of a company’s track record of paying dividends. Stocks of companies with a history of paying dividends may not participate in a broad market advance to the same degree as most other stocks, and a sharp rise in interest rates or economic downturn could cause a company to unexpectedly reduce or eliminate its dividend. There is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that, if declared, they will remain at their current levels or increase over time. The Fund may also be harmed by changes to the favorable federal income tax treatment generally afforded to dividends.

 

30


Large-Cap Company Risk. While securities of large-cap companies may be less volatile than those of mid-and small-cap companies, they still involve risk. To the extent the Fund invests in large-capitalization securities, the Fund may underperform funds that invest primarily in securities of smaller capitalization companies during periods when the securities of such companies are in favor. Large-capitalization companies may be unable to respond as quickly as smaller capitalization companies to competitive challenges or to changes in business, product, financial or other market conditions.

Mid-Cap Company Risk. While securities of mid-cap companies may be slightly less volatile than those of small-cap companies, they still involve substantial risk. Mid-cap companies may have limited product lines, markets or financial resources, and they may be dependent on a limited management group. Securities of mid-cap companies may be subject to more abrupt or erratic market movements than those of larger, more established companies or broader market averages in general.

Other Investment Companies Risk. The Fund may invest in the securities of other investment companies, including ETFs. Investing in an investment company exposes the Fund to all of the risks of that investment company’s investments. The Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies’ expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund’s own operations. As a result, the cost of investing in investment company shares may exceed the costs of investing directly in its underlying investments. In addition, securities of other investment companies may be leveraged. As a result, the Fund may be indirectly exposed to leverage through an investment in such securities and therefore magnify the Fund’s leverage risk.

With respect to ETFs, an ETF that is based on a specific index may not be able to replicate and maintain exactly the composition and relative weighting of securities in the index. The value of an ETF based on a specific index is subject to change as the values of its respective component assets fluctuate according to market volatility. ETFs typically rely on a limited pool of authorized participants to create and redeem shares, and an active trading market for ETF shares may not develop or be maintained. The market value of shares of ETFs and closed-end funds may differ from their NAV.

Preferred Securities Risk. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure, and therefore are subject to greater credit risk. In addition, preferred stockholders (such as the Fund, to the extent it invests in preferred stocks of other issuers) generally have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred stockholders may elect a number of directors to the issuer’s board. Generally, once all the arrearages have been paid, the preferred stockholders no longer have voting rights. In the case of certain taxable preferred stocks, holders generally have no voting rights, except (i) if the issuer fails to pay dividends for a specified period of time or (ii) if a declaration of default occurs and is continuing. In such an event, rights of preferred stockholders generally would include the right to appoint and authorize a trustee to enforce the trust or special purpose entity’s rights as a creditor under the agreement with its operating company. In certain varying circumstances, an issuer of preferred stock may redeem the securities prior to a specified date. For instance, for certain types of preferred stock, a redemption may be triggered by a change in U.S. federal income tax or securities laws. As with call provisions, a redemption by the issuer may negatively impact the return of the security held by the Fund.

Rights and Warrants Risk. Rights and warrants are subject to the same market risks as common stocks, but are more volatile in price. Rights and warrants do not carry the right to dividends or voting

 

31


rights with respect to their underlying securities, and they do not represent any rights in the assets of the issuer. An investment in rights or warrants may be considered speculative. In addition, the value of a right or warrant does not necessarily change with the value of the underlying security and a right or warrant ceases to have value if it is not exercised prior to its expiration date. The purchase of warrants or rights involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe for additional shares is not exercised prior to the rights’ or warrants’ expiration. Also, the purchase of rights and warrants involves the risk that the effective price paid for the right or warrant added to the subscription price of the related security may exceed the value of the subscribed security’s market price such as when there is no movement in the price of the underlying security.

Debt Securities Risks

Debt Securities Risk. Issuers of debt instruments in which the Fund may invest 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 debt instrument experiencing non-payment and, potentially, a decrease in the NAV of the Fund. There can be no assurance that liquidation of collateral would satisfy the issuer’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 an issuer, the Fund could experience delays or limitations with respect to its ability to realize the benefits of any collateral securing a security. To the extent that the credit rating assigned to a security in the Fund’s portfolio is downgraded, the market price and liquidity of such security may be adversely affected.

Basis Risk. As short-term rates change, interest income from floating rate loans may not increase in concert with increases in the costs of floating rate leverage or other borrowings, introducing basis or imperfect hedging risk.

Below Investment Grade Risk. Securities of below investment grade quality (commonly known as “high yield” or “junk” bonds) are regarded as having speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal, and may be subject to higher price volatility and default risk than investment grade securities of comparable terms and duration. 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. The secondary market for lower rated 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. If a below investment grade security goes into default, or its issuer enters bankruptcy, it might be difficult to sell that security in a timely manner at a reasonable price.

Bond Market Liquidity Risk. Dealer inventories of bonds, which provide an indication of the ability of financial intermediaries to “make markets” in those bonds, are at or near historic lows in relation to market size. This reduction in market making capacity has the potential to decrease liquidity and increase price volatility in the debt markets in which the Fund invests, particularly during periods of economic or market stress. In addition, recent federal banking regulations may cause certain dealers to reduce their inventories of bonds, which may further decrease the Fund’s ability to buy or sell bonds. As a result of this decreased liquidity, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on performance. If the Fund needed to sell large blocks of bonds to raise cash, those sales could further reduce the bonds’ prices and hurt performance.

 

32


Credit Risk. Issuers of securities in which the Fund may invest 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 security experiencing non-payment and potentially a decrease in the net asset value (“NAV”) of the Fund. To the extent that the credit rating assigned to a security in the Fund’s portfolio is downgraded, the market price and liquidity of such security may be adversely affected.

Credit Spread Risk. Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market believes that securities generally have a greater risk of default. Increasing credit spreads may reduce the market values of the Fund’s securities. Credit spreads often increase more for lower rated and unrated securities than for investment grade securities. In addition, when credit spreads increase, reductions in market value will generally be greater for longer-maturity securities.

Deflation Risk. Deflation risk is the risk that prices throughout the economy decline over time. 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.

Duration Risk. Duration is the sensitivity, expressed in years, of the price of a debt security to changes in the general level of interest rates (or yields). Securities with longer durations tend to be more sensitive to interest rate (or yield) changes, which typically corresponds to increased volatility and risk, than securities with shorter durations. For example, if a security or portfolio has a duration of three years and interest rates increase by 1%, then the security or portfolio would decline in value by approximately 3%. Duration differs from maturity in that it considers potential changes to interest rates, and a security’s coupon payments, yield, price and par value and call features, in addition to the amount of time until the security matures. The duration of a security will be expected to change over time with changes in market factors and time to maturity.

Income Risk. The Fund’s income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the Fund generally will have to invest the proceeds from maturing portfolio securities in lower-yielding securities.

Inflation Risk. Inflation risk is the risk that the value of assets or income from investments 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.

Interest Rate Risk. Interest rate risk is the risk that securities in the Fund’s portfolio will decline in value because of changes in market interest rates. Generally, when market interest rates rise, the market value of such securities will fall, and vice versa. As interest rates decline, issuers of securities may prepay principal earlier than scheduled, forcing the Fund to reinvest in lower-yielding securities and potentially reducing the Fund’s income. As interest rates increase, slower than expected principal payments may extend the average life of securities, potentially locking in a below-market interest rate and reducing the Fund’s value. In typical market interest rate environments, the prices of longer-term securities generally fluctuate more than prices of shorter-term securities as interest rates change.

New Types of Tax-Advantaged Securities Risk. New types of securities that pay tax-advantaged dividends, including preferred securities having features other than those described herein, may in the future be offered. The Fund reserves the right to invest in these securities if the Sub-Adviser

 

33


responsible for the investment believes that doing so would be consistent with the Fund’s investment objective and policies. Because the market for these instruments would be new, the Fund may have difficulty disposing of them at a suitable price and time. In addition to limited liquidity, these instruments may present other risks, such as high price volatility.

Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if and when the Fund invests the proceeds from matured, traded or called securities at market interest rates that are below the portfolio’s current earnings rate. A decline in income could affect the common shares’ market price, NAV and/or a common shareholder’s overall returns.

Senior Loan 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.

Senior Loan Risk. Senior loans typically hold the most senior position in the capital structure of a business entity, are typically secured with specific collateral and have a claim on the assets and/or stock of the issuer that is senior to that held by subordinated debt holders and stockholders of the issuer. Senior loans are usually rated below investment grade, and share the same risks of other below investment grade debt instruments.

Although the Fund may invest in senior loans that are secured by specific collateral, there can be no assurance that the liquidation of such collateral would satisfy an issuer’s obligation to the Fund in the event of issuer default or that such collateral could be readily liquidated under such circumstances. If the terms of a senior loan do not require the issuer to pledge additional collateral in the event of a decline in the value of the already pledged 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 issuer’s obligations under the senior loan.

In the event of bankruptcy of an issuer, the Fund could also experience delays or limitations with respect to its ability to realize the benefits of any collateral securing a senior loan. Some senior loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the senior loans to presently existing or future indebtedness of the issuer or take other action detrimental to lenders, including the Fund. Such court action could under certain circumstances include invalidation of senior loans.

Unrated Securities Risk. The Fund may purchase securities that are not rated by any rating organization. The Adviser and/or the Sub-Advisers may, after assessing such securities’ credit quality, internally assign ratings to certain of those securities in categories similar to those of rating organizations. Some unrated securities may not have an active trading market or may be difficult to value, which means the Fund might have difficulty selling them promptly at an acceptable price. To the extent that the Fund invests in unrated securities, the Fund’s ability to achieve its investment objective will be more dependent on the Adviser’s and/or the Sub-Advisers’ credit analysis than would be the case when the Fund invests in rated securities.

 

34


Valuation Risk. The securities in which the Fund invests typically are valued by a pricing service utilizing a range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers making markets in such instruments, cash flows and transactions for comparable instruments. There is no assurance that the Fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the Fund. Pricing services generally price securities assuming orderly transactions of an institutional “round lot” size, but some trades may occur in smaller, “odd lot” sizes, often at lower prices than institutional round lot trades. Different pricing services may incorporate different assumptions and inputs into their valuation methodologies, potentially resulting in different values for the same securities. As a result, if the Fund were to change pricing services, or if the Fund’s pricing service were to change its valuation methodology, there could be a material impact, either positive or negative, on the Fund’s NAV.

When-Issued and Delayed-Delivery Transactions Risk. The Fund may invest in securities on a “when-issued” or “delayed-delivery” basis. When-issued and delayed-delivery transactions 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.

Derivatives Risks

Derivatives Risk. The use of derivatives involves additional risks and transaction costs which could leave the Fund in a worse position than if it had not used these instruments. Derivative instruments can be used to acquire or to transfer the risk and returns of a security or other asset without buying or selling the security or asset. These instruments may entail investment exposures that are greater than their cost would suggest. As a result, a small investment in derivatives can result in losses that greatly exceed the original investment. Derivatives can be highly volatile, illiquid and difficult to value. An over-the-counter derivative transaction between the Fund and a counterparty that is not cleared through a central counterparty also involves the risk that a loss may be sustained as a result of the failure of the counterparty to the contract to make required payments. The payment obligation for a cleared derivative transaction is guaranteed by a central counterparty, which exposes the Fund to the creditworthiness of the central counterparty.

The derivatives market is subject to a changing regulatory environment. It is possible that regulatory or other developments in the derivatives market, including the SEC’s recently adopted new Rule 18f-4 under the 1940 Act, which imposes limits on the amount of derivatives a fund can enter into, could adversely affect the Fund’s ability to successfully use derivative instruments.

Call Option Risk. As the writer of a call option, the Fund foregoes, during the option’s life, the opportunity to profit from increases in the market value of the instrument underlying the call option above the sum of the premium and the strike price of the option, but will retain the risk of loss should the market value of the instrument underlying the call option decline. The purchaser of the call option has the right to any appreciation in the value of the underlying instrument over the exercise price upon the exercise of the call option or the expiration date.

As the Fund increases the option overlay percentage, its ability to benefit from capital appreciation becomes more limited and the risk of NAV erosion increases. If the Fund experiences

 

35


NAV erosion, which itself may have a negative effect on the market price of the Fund’s shares, the Fund will have a reduced asset base over which to write call options, which may eventually lead to reduced distributions to shareholders.

In addition, because the exercise of index options is settled in cash, sellers of index call options, such as the Fund, cannot provide in advance for their potential settlement obligations by acquiring and holding the underlying securities. The Fund bears a risk that the value of the securities held by the Fund will vary from the value of the underlying index and relative to the written index call option positions. Accordingly, the Fund may incur losses on the index call options that it has sold that exceed gains on the Fund’s equity portfolio. The value of index options written by the Fund, which will be priced daily, will be affected by changes in the value of and dividend rates of the underlying common stocks in the index, changes in the actual or perceived volatility of the stock market and the remaining time to the options’ expiration. The value of the index options also may be adversely affected if the market for the index options becomes less liquid or smaller.

Financial Futures and Options Transactions Risk. The Fund may use certain transactions for hedging the portfolio’s exposure to credit risk and the risk of increases in interest rates, which could result in poorer overall performance for the Fund. There may be an imperfect correlation between price movements of the futures and options and price movements of the portfolio securities being hedged.

If the Fund engages in futures transactions or in the writing of options on futures, it will be required to maintain initial margin and maintenance margin and may be required to make daily variation margin payments in accordance with applicable rules of the exchanges and the Commodity Futures Trading Commission (“CFTC”). If the Fund purchases a financial futures contract or a call option or writes a put option in order to hedge the anticipated purchase of securities, and if the Fund fails to complete the anticipated purchase transaction, the Fund may have a loss or a gain on the futures or options transaction that will not be offset by price movements in the securities that were the subject of the anticipatory hedge. There can be no assurance that a liquid market will exist at a time when the Fund seeks to close out a derivatives or futures or a futures option position, and the Fund would remain obligated to meet margin requirements until the position is closed.

Hedging Risk. The Fund’s use of derivatives or other transactions to reduce risk involves costs and will be subject to the Adviser’s and/or the Sub-Advisers’ ability to predict correctly changes in the relationships of such hedge instruments to the Fund’s portfolio holdings or other factors. No assurance can be given that the Adviser’s and/or the Sub-Advisers’ judgment in this respect will be correct, and no assurance can be given that the Fund will enter into hedging or other transactions at times or under circumstances in which it may be advisable to do so. Hedging activities may reduce the Fund’s opportunities for gain by offsetting the positive effects of favorable price movements and may result in net losses.

Put Options Risk. If the Fund writes put options, it takes on the risk of declines in the value of the underlying instrument, including the possibility of a loss up to the entire strike price of each option it sells but without the corresponding opportunity to benefit from potential increases in the value of the underlying instrument. If the Fund writes a put option, it assumes the risk that it must purchase the underlying instrument at a strike price that may be higher than the market price of the instrument. If there is a broad market decline and the Fund is not able to close out its written put options, it may result in substantial losses to the Fund. The Fund will receive a premium from writing options, but the premium received may not be sufficient to offset any losses sustained from exercised put options.

 

36


Swap Transactions Risk. The Fund may enter into derivative instruments such as credit default swap contracts and interest rate swaps. Like most derivative instruments, the use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. In addition, the use of swaps requires an understanding by the Adviser and/or the Sub-Advisers of not only the referenced asset, rate or index, but also of the swap itself. If the Adviser and/or the Sub-Advisers are incorrect in their forecasts of default risks, market spreads or other applicable factors or events, the investment performance of the Fund would diminish compared with what it would have been if these techniques were not used.

Non-U.S. Securities Risks

Non-U.S. Securities Risk. Investments in securities of non-U.S. issuers involve special risks, including: 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; 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; 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 amount of its assets in issuers located in one region.

Emerging Markets Risk. Risks of investing in securities of emerging markets issuers include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible restrictions on repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; and future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. Certain emerging markets also may face other significant internal or external risks, including a heightened risk of war, and ethnic, religious and racial conflicts. In addition, governments in many emerging market countries participate to a significant degree in their economies and securities markets, which may impair investment and economic growth, and which may in turn diminish the value of the securities in those markets. The considerations noted below in “Non-U.S. Securities Risk” are generally intensified for investments in emerging market countries.

Foreign Currency Risk. Because the Fund may invest in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates may affect the value of securities held by the Fund and the unrealized appreciation or depreciation of investments. Currencies of certain countries may be volatile and therefore may affect the value of securities denominated in such currencies, which means that the Fund’s NAV could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, certain countries, particularly emerging market countries, may impose foreign currency exchange controls or other restrictions on the transferability, repatriation or convertibility of currency.

Forward Currency Contracts Risk. Forward currency contracts are not standardized; rather, banks and dealers act as principals in these markets, negotiating each transaction on an individual basis. Forward and “cash” trading is substantially unregulated; there is no limitation on daily price movements and speculative position limits are not applicable. The principals who deal in the forward currency markets are not required to continue to make markets in the securities they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been

 

37


periods during which certain participants in these markets have refused to quote prices for certain securities or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. Market illiquidity or disruption could result in major losses to the Fund. In addition, trading forward currency contracts can have the effect of leverage by creating additional investment exposure.

Sovereign Government and Supranational Debt Risk. Investments in sovereign debt, including supranational debt, involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuer’s balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates 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. 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. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, as many external debt obligations bear interest at rates which are adjusted based upon international interest rates. Foreign investment in certain sovereign debt is restricted or controlled to varying degrees, including requiring governmental approval for the repatriation of income, capital or proceeds of sales by foreign investors. There are no bankruptcy proceedings similar to those in the U.S. by which defaulted sovereign debt may be collected.

Sector and Other Risks

Illiquid Investments Risk. Illiquid investments are investments that are not readily marketable and may include restricted securities, which are securities that may not be resold unless they have been registered under the 1933 Act or that can be sold in a private transaction pursuant to an available exemption from such registration. Illiquid investments involve the risk that the investments 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 investments on its books from time to time.

Master Limited Partnerships (“MLPs”) Risk. An MLP is an investment that combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. Entities commonly referred to as MLPs are generally organized under state law as limited partnerships or limited liability companies. An investment in MLP units involves risks that differ from a similar investment in equity securities, such as common stock, of a corporation. Holders of MLP units have the rights typically afforded to limited partners in a limited partnership. As compared to common stockholders of a corporation, holders of MLP units have significantly more limited rights to exercise control over the partnership and to vote on matters affecting the partnership. In addition, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded investors in an MLP than investors in a corporation. Investments held by MLPs may be relatively illiquid, limiting the MLPs’ ability to vary their portfolios promptly in response to changes in economic or other conditions. MLPs may have limited financial resources and

 

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their securities may trade infrequently and in limited volumes and be subject to more abrupt or erratic price movements than securities of larger or more broadly-based companies. The Fund’s investment in MLPs also subjects the Fund to the risks associated with the specific industry or industries in which the MLPs invest. Currently, most MLPs operate in the energy, natural resources or real estate sectors. Additionally, since MLPs generally conduct business in multiple states, the Fund may be subject to income or franchise tax in each of the states in which the partnership does business. The additional cost of preparing and filing the tax returns and paying the related taxes may adversely impact the Fund’s return on its investment in MLPs. The value of any investment by the Fund in MLP units will depend on the MLP’s ability to qualify as a partnership for federal income tax purposes. If an MLP fails to meet the requirements for partnership status under the Code, or if the MLP is unable to do so because of changes in tax law or regulation, the MLP could be taxed as a corporation. In that case, the MLP would be obligated to pay federal income tax at the entity level, and distributions received by the Fund would be taxed as dividend income. The Fund may also invest in debt securities issued by MLPs.

Real Estate Related Securities Risk. Real estate companies have been subject to substantial fluctuations and declines on a local, regional and national basis in the past and may continue to be in the future. Real property values and incomes from real property may decline due to general and local economic conditions, overbuilding and increased competition for tenants, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, regulatory limitations on rents, changes in neighborhoods and in demographics, increases in market interest rates, or other factors. Factors such as these may adversely affect companies that own and operate real estate directly, companies that lend to them, and companies that service the real estate industry. Equity REITs may be affected by changes in the values of and incomes from the properties they own, while mortgage REITs may be affected by the credit quality of the mortgage loans they hold. REITs are subject to other risks as well, including the fact that REITs are dependent on specialized management skills, which may affect their ability to generate cash flow for operating purposes and to make distributions to shareholders or unitholders. REITs may have limited diversification and are subject to the risks associated with obtaining financing for real property. A U.S. domestic REIT can pass its income through to shareholders or unitholders without any federal income tax at the entity level if it complies with various requirements under the Code. There is the risk that a REIT held by the Fund will fail to qualify for this tax-free pass-through treatment of its income, in which case the REIT would become subject to federal income tax. Similarly, REITs formed under the laws of non-U.S. countries may fail to qualify for corporate tax benefits made available by the governments of such countries. The Fund, as a holder of a REIT, will bear its pro rata portion of the REIT’s expenses.

Sector Concentration Risk. Sector concentration risk is the risk that focusing on investment in specific industries or sectors makes the Fund more vulnerable to developments particularly affecting those industries or sectors than a more broadly diversified fund would be. Financial instruments of companies in the same sector may decline in price at the same time due to market conditions, interest rates or economic, regulatory, financial or sector specific developments since these companies may share common characteristics and are more likely to react similarly to sector specific market or economic developments. In addition, at times, a small number of companies may represent a large portion of a single sector, and these companies can be sensitive to adverse economic, regulatory or financial developments.

Tax Treatment of Dividends and Distributions Risk. The Fund’s investment program and the tax treatment of Fund distributions may be affected by Internal Revenue Service (the “IRS”) interpretations of the Code and future changes in tax laws and regulations. The current favorable tax

 

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treatment of tax-advantaged dividends may be changed or discontinued and the higher tax rates applicable to ordinary income may apply to such dividends at such time. In addition, in order for otherwise tax-advantaged dividends from the Fund received by individual shareholders to be taxable at long-term capital gain rates, a shareholder must currently hold his, her or its shares for a certain amount of time and meet certain other holding period requirements. Failure by a shareholder to satisfy the holding period requirements will cause Fund income distributions that otherwise would qualify as tax-advantaged dividends to be taxable to the shareholder at ordinary income rates.

Fund Level and Other Risks

Anti-Takeover Provisions. The Fund’s organizational documents include 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.

Borrowing Risk. In addition to borrowing for leverage, the Fund may borrow for temporary or emergency purposes, to pay dividends, repurchase its shares, or clear portfolio transactions. Borrowing may exaggerate changes in the NAV of the Fund’s shares and may affect the Fund’s net income. When the Fund borrows money, it must pay interest and other fees, which will reduce the Fund’s returns if such costs exceed the returns on the portfolio securities purchased or retained with such borrowings. Any such borrowings are intended to be temporary. However, under certain market circumstances, such borrowings might be outstanding for longer periods of time.

Counterparty Risk. The Fund will be subject to credit risk with respect to the counterparties to the derivative transactions entered into by the Fund. Changes in the credit quality of the companies that serve as the Fund’s counterparties with respect to derivatives transactions may affect the value of those instruments. Because certain derivative transactions in which the Fund may engage may be traded between counterparties based on contractual relationships, the Fund is subject to the risk that a counterparty will not perform its obligations under the related contracts. If a counterparty becomes bankrupt or otherwise becomes unable to perform its obligations due to financial difficulties the Fund may sustain losses (including the full amount of its investment), may be unable to liquidate a derivatives position or may experience significant delays in obtaining any recovery in bankruptcy or other reorganization proceedings. By entering into derivatives transactions, the Fund assumes the risk that its counterparties could experience such financial hardships. Although the Fund intends to enter into transactions only with counterparties that the sub-adviser believes to be creditworthy, there can be no assurance that a counterparty will not default and that the Fund will not sustain a loss on a transaction. In the event of a counterparty’s bankruptcy or insolvency, any collateral posted by the Fund in connection with a derivatives transaction may be subject to the conflicting claims of that counterparty’s creditors, and the Fund may be exposed to the risk of a court treating the Fund as a general unsecured creditor of the counterparty, rather than as the owner of the collateral.

Cybersecurity Risk. The Fund and its service providers are susceptible to operational and information security risk resulting from cyber incidents. Cyber incidents refer to both intentional attacks and unintentional events including: processing errors, human errors, technical errors including computer glitches and system malfunctions, inadequate or failed internal or external processes, market-wide technical-related disruptions, unauthorized access to digital systems (through “hacking” or malicious software coding), computer viruses, and cyber-attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website access or functionality (including denial of

 

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service attacks). Cyber incidents could adversely impact the Fund and cause the Fund to incur financial loss and expense, as well as face exposure to regulatory penalties, reputational damage, and additional compliance costs associated with corrective measures. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. Furthermore, the Fund cannot control the cybersecurity plans and systems put in place by its service providers or any other third parties whose operations may affect the Fund.

Global Economic Risk. National and regional economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country, region or market might adversely impact issuers in a different country, region or market. Changes in legal, political, regulatory, tax and economic conditions may cause fluctuations in markets and securities prices around the world, which could negatively impact the value of the Fund’s investments. Major economic or political disruptions, particularly in large economies like China’s, may have global negative economic and market repercussions. Additionally, events such as war, terrorism, natural and environmental disasters and the spread of infectious illnesses or other public health emergencies may adversely affect the global economy and the markets and issuers in which the Fund invests. Recent examples of such events include the outbreak of a novel coronavirus known as COVID-19 that was first detected in China in December 2019 and heightened concerns regarding North Korea’s nuclear weapons and long-range ballistic missile programs. These events could reduce consumer demand or economic output, result in market closure, travel restrictions or quarantines, and generally have a significant impact on the economy. These events could also impair the information technology and other operational systems upon which the Fund’s service providers, including the Adviser and Sub-Advisers, rely, and could otherwise disrupt the ability of employees of the Fund’s service providers to perform essential tasks on behalf of the Fund. Governmental and quasi-governmental authorities and regulators throughout the world have in the past responded to major economic disruptions with a variety of significant fiscal and monetary policy changes, including but not limited to, direct capital infusions into companies, new monetary programs and dramatically lower interest rates. An unexpected or quick reversal of these policies, or the ineffectiveness of these policies, could increase volatility in securities markets, which could adversely affect the Fund’s investments.

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. Common shares frequently trade at a discount to their NAV. An investment in common shares represents an indirect investment in the securities owned by the Fund. 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.

Legislation and Regulatory Risk. At any time after the date of this Joint Proxy Statement/Prospectus, legislation or additional regulations may be enacted that could negatively affect the assets of the Fund, securities held by the Fund or the issuers of such securities. Fund shareholders may incur increased costs resulting from such legislation or additional regulation. There can be no assurance that future legislation, regulation or deregulation will not have a material adverse effect on the Fund or will not impair the ability of the Fund to achieve its investment objective.

The SEC recently adopted rules governing the use of derivatives by registered investment companies, which could affect the nature and extent of derivatives used by the Fund. The full impact of such rules is uncertain at this time. It is possible that such rules, as interpreted, applied and enforced by the SEC, could limit the implementation of the Fund’s use of derivatives, which could have an adverse impact on the Fund.

 

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Leverage Risk. The use of leverage creates special risks for common shareholders, including potential interest rate risks and the likelihood of greater volatility of NAV and market price of, and distributions on, the common shares. The use of leverage in a declining market will likely cause a greater decline in the Fund’s NAV, which may result at a greater decline of the common share price, than if the Fund were not to have used leverage.

The Fund will pay (and common shareholders will bear) any costs and expenses relating to the Fund’s use of leverage, which will result in a reduction in the Fund’s NAV. The Adviser and/or the Sub-Advisers may, based on their assessment of market conditions and composition of the Fund’s holdings, increase or decrease the amount of leverage. Such changes may impact the Fund’s distributions and the price of the common shares in the secondary market.

The Fund may seek to refinance its leverage over time, in the ordinary course, as current forms of leverage mature or it is otherwise desirable to refinance; however, the form that such leverage will take cannot be predicted at this time. If the Fund is unable to replace existing leverage on comparable terms, its costs of leverage will increase. Accordingly, there is no assurance that the use of leverage may result in a higher yield or return to common shareholders.

The amount of fees paid to the Adviser and the Sub-Advisers for investment advisory services will be higher if the Fund uses leverage because the fees will be calculated based on the Fund’s Managed Assets – this may create an incentive for the Adviser and the Sub-Advisers to leverage the Fund or increase the Fund’s leverage.

Market Discount from Net Asset Value. Shares of closed-end investment companies like the Fund frequently trade at prices lower than their NAV. This characteristic is a risk separate and distinct from the risk that the Fund’s NAV could decrease as a result of investment activities. Whether investors will realize gains or losses upon the sale of the common shares will depend not upon the Fund’s NAV 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. Furthermore, management may have difficulty meeting the Fund’s investment objective and managing its portfolio when the underlying securities are redeemed or sold during periods of market turmoil and as investors’ perceptions regarding closed-end funds or their underlying investments change. Because the market price of the common shares will be determined by factors such as relative supply of and demand for the common shares in the market, general market and economic circumstances, and other factors beyond the control of the Fund, the Fund cannot predict whether the common shares will trade at, below or above NAV. The common shares are designed primarily for long-term investors, and you should not view the Fund as a vehicle for short-term trading purposes.

Recent Market Conditions. In response to the financial crisis and recent market events, policy and legislative changes by the United States government and the Federal Reserve to assist in the ongoing support of financial markets, both domestically and in other countries, are changing many aspects of financial regulation. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Withdrawal of government support, failure of efforts in response to the crisis, or investor perception that such efforts are not succeeding, could adversely impact the value and liquidity of certain securities. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations, including changes in tax laws and the imposition of trade barriers. The impact of new financial regulation legislation on the markets and the practical

 

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implications for market participants may not be fully known for some time. Changes to the Federal Reserve policy may affect the value, volatility and liquidity of dividend and interest paying securities. In addition, the contentious domestic political environment, as well as political and diplomatic events within the United States and abroad, such as the U.S. government’s inability at times to agree on a long-term budget and deficit reduction plan, the threat of a federal government shutdown and threats not to increase the federal government’s debt limit, may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree.

Interest rates have been unusually low in recent years in the United States and abroad but there is consensus that interest rates will increase during the life of the Fund, which could negatively impact the price of debt securities. Because there is little precedent for this situation, it is difficult to predict the impact of a significant rate increase on various markets.

The current political climate has intensified concerns about a potential trade war between China and the United States, as each country has recently imposed tariffs on the other country’s products. These actions may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China’s export industry, which could have a negative impact on the Fund’s performance.

The impact of these developments in the near- and long-term is unknown and could have additional adverse effects on economies, financial markets and asset valuations around the world.

Reverse Repurchase Agreement Risk. A reverse repurchase agreement, in economic essence, constitutes a securitized borrowing by the Fund from the security purchaser. The Fund may enter into reverse repurchase agreements for the purpose of creating a leveraged investment exposure and, as such, their usage involves essentially the same risks associated with a leveraging strategy generally since the proceeds from these agreements may be invested in additional portfolio securities. Reverse repurchase agreements tend to be short-term in tenor, and there can be no assurances that the purchaser (lender) will commit to extend or “roll” a given agreement upon its agreed-upon repurchase date or an alternative purchaser can be identified on similar terms. Reverse repurchase agreements also involve the risk that the purchaser fails to return the securities as agreed upon, files for bankruptcy or becomes insolvent. The Fund may be restricted from taking normal portfolio actions during such time, could be subject to loss to the extent that the proceeds of the agreement are less than the value of securities subject to the agreement and may experience adverse tax consequences.

Tax Risk. The Fund intends to elect and qualify each year as a regulated investment company (“RIC”) under the Code. As a RIC, the Fund is not expected to be subject to federal income tax to the extent that it distributes its investment company taxable income and net capital gains. To qualify for the special tax treatment available to a RIC, the Fund must comply with certain investment, distribution, and diversification requirements. Under certain circumstances, the Fund may be forced to sell certain assets when it is not advantageous in order to meet these requirements, which may reduce the Fund’s overall return. If the Fund fails to meet any of these requirements, subject to the opportunity to cure such failures under applicable provisions of the Code, the Fund’s income would be subject to a double level of federal income tax. The Fund’s income, including its net capital gain, would first be subject to federal income tax at regular corporate rates, even if such income were distributed to shareholders and, second, all distributions by the Fund from earnings and profits, including distributions of net capital gain (if any), would be taxable to shareholders who are subject to federal income tax as dividends.

 

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Additional Risks Applicable to an Investment in the Acquiring Fund

Allocation Risk. The Fund’s ability to achieve its investment objective depends upon Nuveen Asset Management’s skill in determining the Fund’s allocation to different Sub-Advisers and strategies. There is the risk that Nuveen Asset Management’s evaluations and assumptions used in making such allocations may be incorrect.

Collateralized Loan Obligations Risk. A collateralized loan obligation (“CLO”) is an asset-backed security whose underlying collateral is a pool of loans, which may include, among others, domestic and foreign floating rate and fixed rate senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. In addition to the risks associated with loans, illiquid investments and high-yield securities described below, investments in CLOs carry additional risks including, but not limited to, the risk that: (1) distributions from the collateral may not be adequate to make interest or other payments; (2) the quality of the collateral may decline in value or default; (3) the Fund may invest in tranches of CLOs that are subordinate to other tranches; (4) the complex structure of the CLO may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results; and (5) the CLO’s manager may perform poorly. CLOs may charge management and other administrative fees, which are in addition to those of the Fund.

Contingent Capital Security Risk. Contingent capital securities (sometimes referred to as “CoCos”) have loss absorption mechanisms benefitting the issuer built into their terms. A loss absorption mechanism trigger event for CoCos would likely be the result of, or related to, the deterioration of the issuer’s financial condition (e.g., a decrease in the issuer’s capital ratio) and status as a going concern. In such a case, with respect to CoCos that provide for conversion into common stock upon the occurrence of the trigger event, the market price of the issuer’s common stock received by the Fund will have likely declined, perhaps substantially, and may continue to decline, which may adversely affect the Fund’s net asset value. Further, the issuer’s common stock would be subordinate to the issuer’s other classes of securities and therefore would worsen the Fund’s standing in a bankruptcy proceeding. In addition, because the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero. In view of the foregoing, CoCos are often rated below investment grade and are subject to the risks of high yield securities.

CoCos may be subject to an automatic write-down (i.e., the automatic write-down of the principal amount or value of the securities, potentially to zero, and the cancellation of the securities) under certain circumstances, which could result in the Fund losing a portion or all of its investment in such securities. In addition, the Fund may not have any rights with respect to repayment of the principal amount of the securities that has not become due or the payment of interest or dividends on such securities for any period from (and including) the interest or dividend payment date falling immediately prior to the occurrence of such automatic write-down. An automatic write-down could also result in a reduced income rate if the dividend or interest payment is based on the security’s par value. Coupon payments on CoCos may be discretionary and may be cancelled by the issuer for any reason or may be subject to approval by the issuer’s regulator and may be suspended in the event there are insufficient distributable reserves.

In certain scenarios, investors in CoCos may suffer a loss of capital ahead of equity holders or when equity holders do not. There is no guarantee that the Fund will receive a return of principal on CoCos. Any indication that an automatic write-down or conversion event may occur can be expected to have a material adverse effect on the market price of CoCos.

 

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The prices of CoCos may be volatile. Additionally, the trading behavior of a given issuer’s CoCo may be strongly impacted by the trading behavior of other issuers’ CoCos, such that negative information from an unrelated CoCo may cause a decline in value of one or more CoCos held by the Fund. Accordingly, the trading behavior of CoCos may not follow the trading behavior of other similarly structured securities.

CoCos are issued primarily by financial institutions. Therefore, CoCos present substantially increased risks at times of financial turmoil, which could affect financial institutions more than companies in other sectors and industries.

Downgrade Risk. The risk that securities are subsequently downgraded should the Sub-Adviser and/or rating agencies believe the issuer’s business outlook or creditworthiness has deteriorated. If this occurs, the values of these investments may decline, or it may affect the issuer’s ability to raise additional capital for operational or financial purposes and increase the chance of default, as a downgrade may be seen in the financial markets as a signal of an issuer’s deteriorating financial position.

ETF Risk. Like any fund, an ETF is subject to the risks of the underlying securities that it holds. In addition, investments in ETFs present certain risks that do not apply to investments in traditional mutual funds. For index-based ETFs, while such ETFs seek to achieve the same returns as a particular market index, the performance of an ETF may diverge from the performance of such index (commonly known as tracking error). ETFs are subject to fees and expenses (like management fees and operating expenses) and the Fund will indirectly bear its proportionate share of any such fees and expenses paid by the ETFs in which it invests. Moreover, ETF shares may trade at a premium or discount to their net asset value. As ETFs trade on an exchange, they are subject to the risks of any exchange-traded instrument, including: (i) an active trading market for its shares may not develop or be maintained, (ii) market makers or authorized participants may decide to reduce their role or step away from these activities in times of market stress, (iii) trading of its shares may be halted by the exchange, and (iv) its shares may be delisted from the exchange.

Extension Risk. The risk that, during periods of rising interest rates, borrowers may pay off their mortgage loans later than expected, preventing the Fund from reinvesting principal proceeds at higher interest rates, resulting in less income than potentially available. These risks are normally present in mortgage-backed securities and other asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can lengthen depending on homeowner prepayment activity. A decline in the prepayment rate and the resulting increase in duration of debt securities held by the Fund can result in losses to investors in the Fund.

Floating and Variable Rate Securities Risk. Floating and variable rate securities provide for adjustment in the interest rate paid on the obligations. The terms of such obligations typically provide that interest rates are adjusted based upon an interest or market rate adjustment as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event-based, such as based on a change in the prime rate. Because of the interest rate adjustment feature, floating and variable rate securities provide an investor with a certain degree of protection against rises in interest rates, although the investor will participate in any declines in interest rates as well. Generally, changes in interest rates will have a smaller effect on the market value of floating and variable rate securities than on the market value of comparable fixed-income obligations.

 

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Thus, investing in floating and variable rate securities generally allows less opportunity for capital appreciation and depreciation than investing in comparable fixed-income securities. Floating and variable rate securities may be subject to greater liquidity risk than other debt securities, meaning that there may be limitations on the Fund’s ability to sell the securities at any given time. Such securities also may lose value.

Foreign Debt Investment Risk. Foreign investments, which may include debt securities of foreign issuers, or securities or contracts payable or denominated in non-U.S. currencies, can involve special risks that arise from one or more of the following events or circumstances: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation or nationalization of assets; (5) more limited financial information about the foreign debt issuer or difficulties interpreting it because of foreign regulations and accounting standards; (6) lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social or diplomatic events; (8) economic sanctions or other measures by the United States or other governments; (9) the difficulty of evaluating some foreign economic trends; and (10) the possibility that a foreign government could restrict an issuer from paying principal and interest on its debt obligations to investors outside the country. It may also be difficult to use foreign laws and courts to force a foreign issuer to make principal and interest payments on its debt obligations. In addition, the cost of servicing external debt will also generally be adversely affected by rising international interest rates because many external debt obligations bear interest at rates which are adjusted based upon international interest rates. To the extent the Fund invests a significant portion of its assets in the securities of companies in a single country or region, it is more likely to be impacted by events or conditions affecting that country or region. Investment in the Fund may be more exposed to a single country or a region’s economic cycles, stock market valuations and currency, which could increase its risk compared with a more geographically diversified fund. In addition, political, social, regulatory, economic or environmental events that occur in a single country or region may adversely affect the values of that country or region’s securities and thus the holdings of the Fund.

Growth Stock Risk. The growth stocks in which the Fund may invest tend to be more volatile than certain other types of stocks and their prices usually fluctuate more dramatically than the overall stock market. Growth stocks may be more expensive relative to their earnings or assets compared to other types of equity securities. Accordingly, a stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market. In addition, growth stocks, at times, may not perform as well as value stocks or the stock market in general, and may be out of favor with investors for varying periods of time. Growth companies may be newer or smaller companies and may retain a large part of their earnings for research, development or investments in capital assets.

Income Volatility Risk. Income volatility refers to the degree and speed with which changes in prevailing market interest rates diminish the level of current income from a portfolio of debt securities. The risk of income volatility is that the level of current income from a portfolio of debt securities may decline in certain interest rate environments.

Infrastructure Sector Risk. A Fund that invests significantly in infrastructure-related securities has greater exposure to adverse economic, regulatory, political, legal, and other changes affecting the issuers of such securities. Infrastructure-related businesses are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital

 

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construction programs, costs associated with environmental and other regulations, the effects of economic slowdown and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel and natural resources at reasonable prices, the effects of energy conservation policies, increased susceptibility to terrorist acts and other factors. Additionally, infrastructure-related entities may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to consumers, service interruption and/or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards. There is also the risk that corruption may negatively affect publicly-funded infrastructure projects, especially in emerging markets, resulting in delays and cost overruns as well as cause negative publicity, which may adversely affect the value of an entity’s securities.

Inverse Floating Rate Securities Risk. The Fund may invest in inverse floating rate securities. Typically, inverse floating rate securities represent beneficial interests in a special purpose trust (sometimes called a “tender option bond trust”) formed for the purpose of holding municipal bonds. In general, income on inverse floating rate securities will decrease when short-term interest rates increase and increase when short-term interest rates decrease. Inverse floating rate securities generally will underperform the market for fixed rate municipal bonds in a rising interest rate environment. Investments in inverse floating rate securities may subject the Fund to the risks of reduced or eliminated interest payments and losses of principal. In addition, inverse floating rate securities may increase or decrease in value at a greater rate than the underlying fixed rate municipal bonds held by the tender option bond, which effectively leverages the Fund’s investment. As a result, the market value of such securities generally will be more volatile than that of fixed rate securities.

The Fund may invest in inverse floating rate securities issued by special purpose trusts that have recourse to the Fund. In the Adviser’s or a Sub-Adviser’s discretion, the Fund may enter into a separate shortfall and forbearance agreement with the third party granting liquidity to the floating rate security holders of the special purpose trust. The Fund may enter into such recourse agreements (i) when the liquidity provider to the special purpose trust requires such an agreement because the level of leverage in the special purpose trust exceeds the level that the liquidity provider is willing to support absent such an agreement; and/or (ii) to seek to prevent the liquidity provider from collapsing the special purpose trust in the event that the municipal obligation held in the trust has declined in value. Such an agreement would require the Fund to reimburse the third party granting liquidity to the floating rate security holders of the special purpose trust, upon termination of the trust issuing the inverse floater, the difference between the liquidation value of the bonds held in the trust and the principal amount due to the holders of floating rate interests. In such instances, the Fund may be at risk of loss that exceeds its investment in the inverse floating rate securities.

The Fund’s investments in inverse floating rate securities issued by special purpose trusts that have recourse to the Fund may be highly leveraged. The structure and degree to which the Fund’s inverse floating rate securities are leveraged will vary based upon a number of factors, including the size of the trust and the terms of the underlying municipal security. In the event of a significant decline in the value of an underlying security, the Fund may suffer losses in excess of the amount of its investment (up to an amount equal to the value of the municipal securities underlying the inverse floating rate securities) as a result of liquidating special purpose trusts or other collateral required to maintain the Fund’s anticipated leverage ratio.

 

 

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The Fund’s investment in inverse floating rate securities has the economic effect of leverage, which will create an opportunity for increased common share net income and returns, but will also create the possibility that common share long-term returns will be diminished if the cost of leverage exceeds the return on the inverse floating rate securities purchased by the Fund. Inverse floating rate securities have varying degrees of liquidity based upon the liquidity of the underlying securities deposited in a special purpose trust. The market price of inverse floating rate securities is more volatile than the underlying securities due to leverage. The leverage attributable to such inverse floating rate securities may be “called away” on relatively short notice and therefore may be less permanent than more traditional forms of leverage. In certain circumstances, the likelihood of an increase in the volatility of NAV and market price of common shares may be greater for a fund (like the Fund) that relies primarily on inverse floating rate securities to achieve a desired leverage ratio. The Fund may be required to sell its inverse floating rate securities at less than favorable prices, or liquidate other Fund portfolio holdings in certain circumstances, including, but not limited to, the following:

 

   

If the Fund has a need for cash and the securities in a special purpose trust are not actively trading due to adverse market conditions; and

 

   

If the value of an underlying security declines significantly and if additional collateral has not been posted by the Fund.

Loan Risk. In addition to risks generally associated with debt securities, loans in which the Fund may invest, including secured loans, unsecured and/or subordinated loans and loan participations, are subject to other risks. Loans generally are subject to legal or contractual restrictions on resale and may trade infrequently on the secondary market. It is sometimes necessary to obtain the consent of the borrower and/or agent before selling or assigning a floating rate loan. The lack of an active trading market for certain loans may impair the ability of the Fund to realize full value in the event of the need to sell a loan and may make it difficult to value such loans. Portfolio transactions in loans may settle in as short as seven days but typically can take up to two or three weeks, and in some cases much longer. As a result of these extended settlement periods, the Fund may incur losses if it is required to sell other investments or temporarily borrow to meet its cash needs, including satisfying redemption requests. The amount of public information available with respect to loans may be less extensive than that available for registered or exchange listed securities. Furthermore, because the Fund’s Sub-Advisers may wish to invest in the publicly-traded securities of an obligor, the Fund may not have access to material non-public information regarding the obligor to which other investors have access. Loans may not be considered “securities” under the federal securities laws and, as a result, the Fund may not be entitled to rely on the anti-fraud protections afforded by such laws. Interests in secured loans have the benefit of collateral and, typically, of restrictive covenants limiting the ability of the borrower to further encumber its assets. However, in periods of high demand by lenders for loan investments, borrowers may limit these restrictive covenants and weaken the ability of lenders like the Fund from accessing the collateral securing the loan. Additionally, loans with fewer restrictive covenants may provide the borrower with more flexibility to take actions that may be detrimental to the lender or limit the lender’s ability to declare a default, which may hinder the Fund’s ability to reprice credit risk associated with the borrower and mitigate potential loss. The Fund may experience relatively greater realized or unrealized losses or delays and expenses in enforcing its rights with respect to loans with fewer restrictive covenants. There is also a risk that the value of any collateral securing a loan in which the Fund has an interest may decline and that the collateral may not be sufficient to cover the amount owed on the loan. In the event the borrower defaults, the Fund’s access to the collateral may be limited or delayed because of difficulty liquidating the collateral or by bankruptcy or other insolvency laws.

 

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The risks associated with unsecured loans, which are not backed by a security interest in any specific collateral, are higher than those for comparable loans that are secured by specific collateral. Interests in loans made to finance highly leveraged companies or transactions such as corporate acquisitions may be especially vulnerable to adverse changes in economic or market conditions. Additionally, because junior loans have a lower place in an issuer’s capital structure and may be unsecured, junior loans involve a higher degree of overall risk than senior loans of the issuer. With respect to loan participations, the Fund may not always have direct recourse against a borrower if the borrower fails to pay scheduled principal and/or interest; may be subject to greater delays, expenses and risks than if the Fund had purchased a direct obligation of the borrower; and may be regarded as the creditor of the agent lender (rather than the borrower), subjecting the Fund to the creditworthiness of that lender as well and the ability of the lender to enforce appropriate credit remedies against the borrower.

The Fund’s investments in floating rate loans that pay interest based on the London Inter-Bank Offered Rate (LIBOR) may experience increased volatility and/or illiquidity during the transition away from LIBOR, which is scheduled to be phased out. The Fund’s investments in instruments that pay a floating interest rate based on LIBOR, including any instrument that does not include a provision specifying the replacement reference rate if LIBOR is no longer available (a “fallback provision”), may be adversely affected during the transition away from LIBOR by, among other things, increased volatility or illiquidity. There remains uncertainty regarding the future use of LIBOR and the nature of any replacement reference rate and, accordingly, it is difficult to predict the full impact of the transition away from LIBOR.

Mortgage- and Asset-Backed Securities Risk. These securities generally can be prepaid at any time, and prepayments that occur either more quickly or more slowly than expected can adversely impact the value of such securities. They are also subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, thereby lengthening the duration of such securities, increasing their sensitivity to interest rate changes and causing their prices to decline. A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such security, the credit quality of its issuer or guarantor, and the nature and structure of its credit support.

Mortgage Roll Risk. The risk that the Adviser or a Sub-Adviser will not correctly predict mortgage prepayments and interest rates, which will diminish the investment performance of the Fund compared with what such performance would have been without the use of the strategy.

Multi-Manager Risk. The interplay of the various strategies employed by portfolio managers of Nuveen and its affiliates may result in the Fund holding a significant amount of certain types of securities. This may be beneficial or detrimental to the Fund’s performance depending upon the performance of those securities and the overall economic environment. The portfolio managers may make investment decisions which conflict with each other; for example, at any particular time, portfolio manager of one strategy may be purchasing shares of an issuer whose shares are being sold by portfolio managers of another strategy. Consequently, the Fund could indirectly incur transaction costs without accomplishing any net investment result. In addition, the multi-manager approach could increase the Fund’s portfolio turnover rate which may result in higher transaction costs and a greater amount of tax on the Fund’s shareholders.

Municipal Securities Risk. The values of municipal securities may be adversely affected by local political and economic conditions and developments. Adverse conditions in an industry

 

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significant to a local economy could have a correspondingly adverse effect on the financial condition of local issuers. Other factors that could affect municipal securities include a change in the local, state, or national economy, a downgrade of a state’s credit rating or the rating of authorities or political subdivisions of the state, demographic factors, ecological or environmental concerns, inability or perceived inability of a government authority to collect sufficient tax or other revenues, statutory limitations on the issuer’s ability to increase taxes, and other developments generally affecting the revenue of issuers (for example, legislation or court decisions reducing state aid to local governments or mandating additional services). This risk would be heightened to the extent that the Fund invests a substantial portion of the below-investment grade quality portion of its portfolio in the bonds of similar projects (such as those relating to the education, health care, housing, transportation, or utilities industries), in industrial development bonds, or in particular types of municipal securities (such as general obligation bonds, municipal lease obligations, private activity bonds or moral obligation bonds) that are particularly exposed to specific types of adverse economic, business or political events. The value of municipal securities may also be adversely affected by rising health care costs, increasing unfunded pension liabilities, and by the phasing out of federal programs providing financial support. In recent periods, a number of municipal issuers have defaulted on obligations, been downgraded or commenced insolvency proceedings. Financial difficulties of municipal issuers may continue or get worse. In addition, the amount of public information available about municipal bonds is generally less than for certain corporate equities or bonds, meaning that the investment performance of the Fund may be more dependent on the analytical abilities of the Fund’s Sub-Advisers than funds that invest in stock or other corporate investments.

To the extent that a fund invests a significant portion of its assets in the securities of issuers located in a given state or U.S. territory, it will be disproportionally affected by political and economic conditions and developments in that state or territory and may involve greater risk than funds that invest in a larger universe of securities. In addition, economic, political or regulatory changes in that state or territory could adversely affect municipal securities issuers in that state or territory and therefore the value of a fund’s investment portfolio.

Portfolio Turnover Risk. In pursuing its investment objective, the Fund may engage in trading that results in a high portfolio turnover rate, which may vary greatly from year to year, as well as within a given year. A higher portfolio turnover rate may result in correspondingly greater transactional expenses that are borne by the Fund. Such expenses may include bid-ask spreads, dealer mark-ups, and other transactional costs on the sale of securities and reinvestment in other securities, and may result in the realization of taxable capital gains (including short-term gains, which are generally taxed for federal income tax purposes to shareholders as ordinary income when distributed). These costs, which are not reflected in annual fund operating expenses or in the example thereunder, may affect the Fund’s performance.

Prepayment Risk. The risk that, during periods of falling interest rates, borrowers may pay off their mortgage loans sooner than expected, forcing a Fund to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in income. These risks are normally present in mortgage-backed securities and other asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can shorten depending on homeowner prepayment activity. A rise in the prepayment rate and the resulting decline in duration of debt securities held by the Fund can result in losses to investors in the Fund.

 

 

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Rule 144A Securities Risk. The market for Rule 144A securities typically is less active than the market for publicly-traded securities. Rule 144A securities carry the risk that their liquidity may become impaired and the Fund may be unable to dispose of the securities promptly or at reasonable prices.

Smaller-Cap Company Risk. Small-cap stocks involve substantial risk. Prices of small-cap stocks may be subject to more abrupt or erratic movements, and to wider fluctuations, than stock prices of larger, more established companies or the market averages in general. It may be difficult to sell small-cap stocks at the desired time and price. While mid-cap stocks may be slightly less volatile than small-cap stocks, they still involve similar risks.

Special Risks for Inflation-Indexed Bonds. The risk that market values of inflation-indexed investments held by the Fund may be adversely affected by a number of factors, including changes in the market’s inflation expectations, changes in real rates of interest or declines in inflation (or deflation). There is a risk that interest payments in inflation-indexed investments may fall because of a decline in inflation (or deflation). In addition, the Consumer Price Index for All Urban Consumers (“CPI-U”) may not accurately reflect the true rate of inflation. If the market perceives that any of these events have occurred, then the market value of those investments could be adversely affected.

U.S. Government Securities Risk. U.S. Treasury obligations and some obligations of U.S. government agencies and instrumentalities are supported by the full faith and credit of the U.S. government. Other U.S. government agencies or instrumentalities are backed by the right of the issuer to borrow from the U.S. Treasury. Still others are supported only by the credit of the issuer. No assurance can be given that the U.S. government would provide financial support to its agencies or instrumentalities if not required to do so by law, and such agencies or instrumentalities may not have the funds to meet their payment obligations in the future. Therefore, securities issued by U.S. government agencies or instrumentalities that are not backed by the full faith and credit of the U.S. government may involve increased risk of loss of principal and interest. In addition, the value of U.S. government securities may be affected by changes in the credit rating of the U.S. government. To the extent the Fund invests significantly in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, any market movements, regulatory changes or changes in political or economic conditions that affect the securities of the U.S. government or its agencies or instrumentalities in which the Fund invests may have a significant impact on the Fund’s performance. Events that would adversely affect the market prices of securities issued or guaranteed by one U.S. government agency or instrumentality may adversely affect the market prices of securities issued or guaranteed by other agencies or instrumentalities.

Value Stock Risk. Value stocks are securities of companies that typically trade at a perceived discount to their intrinsic value and at valuation discounts relative to companies in the same industry. Value stocks often times are also in sectors that trade at a discount to the broader market. The reasons for their discount may vary greatly, but some examples may include adverse business, industry or other developments that may cause the company to be subject to special risks. The intrinsic value of a stock with value characteristics may be difficult to identify and may not be fully recognized by the market for a long time or a stock identified to be undervalued may actually be appropriately priced at a low level.

 

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C.

INFORMATION ABOUT THE REORGANIZATIONS

General

The Board of each Target Fund, each Board comprised solely of Independent Board Members, has determined that the Reorganization of its Target Fund would be in the best interests of the Target Fund and its shareholders and has approved the Reorganization of the Target Fund into the Acquiring Fund. If at least two of the Reorganizations are approved by Target Fund shareholders and the other closing conditions are satisfied or waived, the assets of those Target Funds will be combined, and the shareholders of those participating Target Funds will become shareholders of the Acquiring Fund, which will operate after the Reorganizations as a registered closed-end management investment company with the investment objective and policies described in this Joint Proxy Statement/Prospectus. The proposed Reorganizations are intended to benefit common shareholders of the Target Funds in a number of ways, including, among other things:

 

   

The potential to deliver superior risk-adjusted returns as a result of adopting a dynamic risk-based asset allocation framework in contrast to the Target Funds’ current static asset allocation strategies with fixed target asset allocations;

 

   

The potential for a more consistent return profile, resulting in more stable managed distributions through an asset allocation framework that considers backward and forward-looking inputs, in contrast to the Target Funds’ current static asset allocation strategies;

 

   

The potential for improved secondary market liquidity for trading common shares as a result of the combined fund’s larger share float, which may lead to increased trading volume, narrower bid-ask spreads and greater market depth; and

 

   

Lower net operating expenses as a result of certain fixed costs being spread over a larger asset base and a potentially lower effective fund-level management fee rate due to the ability of the combined fund’s assets to achieve breakpoints in the Acquiring Fund’s fee schedule. In addition, shareholders of Dividend Growth Fund will benefit as a result of the Acquiring Fund’s fund-level management fee schedule, which provides for a lower fund-level management fee rate at all asset levels compared to the current fund-level management fee schedule of Dividend Growth Fund.

In addition to customary closing conditions that include approval by Target Fund shareholders, the closing of each Target Fund’s Reorganization is contingent upon at least one other Target Fund obtaining the requisite shareholder approval and satisfying (or obtaining the waiver of) other closing conditions. If only one Target Fund’s shareholders approve the Reorganization of their Fund, none of the Reorganizations will take place. If the Reorganization with respect to a Target Fund is not consummated, the Target Fund’s Board may take such actions as it deems in the best interests of such Target Fund, including continuing to operate the Target Fund as a stand-alone fund.

Terms of the Reorganizations

General. The Agreement and Plan of Reorganization, in the form attached as Appendix A to this Joint Proxy Statement/Prospectus (the “Agreement”), provides for: (1) the Acquiring Fund’s acquisition of substantially all of the assets of each Target Fund in exchange for newly issued common

 

52


shares of the Acquiring Fund, par value $0.01 per share, and the Acquiring Fund’s assumption of substantially all of the liabilities of each Target Fund; and (2) the distribution of the newly issued Acquiring Fund common shares received by each Target Fund to its common shareholders as part of the liquidation, dissolution and termination of the Target Fund in accordance with applicable law. No fractional Acquiring Fund common shares will be distributed to the Target Funds’ common shareholders in connection with the Reorganizations and, in lieu of such fractional shares, the Target Funds’ common shareholders entitled to receive a fractional share will receive cash in an amount equal to a pro rata share of the proceeds from the sale by the Acquiring Fund’s transfer agent of the aggregated fractional shares in the open market (as described further below), which may be higher or lower than net asset value.

If at least two of the Reorganizations are approved by Target Fund shareholders and the other closing conditions are satisfied or waived, the assets of those Target Funds will be combined, and the shareholders of those participating Target Funds will become shareholders of the Acquiring Fund, which will operate after the Reorganizations as a registered closed-end management investment company with the investment objective and policies described in this Joint Proxy Statement/Prospectus. If the conditions to closing the Reorganizations are satisfied or waived, the Reorganizations are expected to occur on or about September 20, 2021, or such other date as the parties may agree (the “Closing Date”). Each Target Fund that completes its proposed Reorganization will subsequently terminate its registration as an investment company under the 1940 Act.

The aggregate net asset value of the Acquiring Fund common shares received by each Target Fund in connection with the Reorganizations will equal the aggregate net asset value of the Target Fund common shares held by shareholders of the Target Fund, in each case determined as of the Valuation Time (as defined below). See “—Description of Common Shares to Be Issued by the Acquiring Fund; Comparison to Target Funds” for a description of the rights of Acquiring Fund common shareholders. However, no fractional Acquiring Fund common shares will be distributed to the Target Funds’ common shareholders in connection with the Reorganizations. The Acquiring Fund’s transfer agent will aggregate all fractional Acquiring Fund common shares that may be due to the Target Fund’s shareholders as of the Closing Date and will sell the resulting whole shares for the account of holders of all such fractional interests at a value that may be higher or lower than net asset value, and each such holder will be entitled to a pro rata share of the proceeds from such sale. With respect to the aggregation and sale of fractional common shares, the Acquiring Fund’s transfer agent will act directly on behalf of the shareholders entitled to receive fractional shares and will accumulate fractional shares, sell the shares and distribute the cash proceeds net of brokerage commissions, if any, directly to the Target Fund shareholders entitled to receive the fractional shares (without interest and subject to withholding taxes). For federal income tax purposes, Target Fund shareholders will be treated as if they received fractional share interests and then sold such interests for cash. The holding period and the aggregate tax basis of the Acquiring Fund shares received by a shareholder, including fractional share interests deemed received by a shareholder, will be the same as the holding period and aggregate tax basis of the Target Fund common shares previously held by the shareholder and exchanged therefor, provided the Target Fund shares exchanged therefor were held as capital assets at the effective time of the Reorganization. As a result of the Reorganizations, common shareholders of the Funds will hold a smaller percentage of the outstanding common shares of the combined fund as compared to their percentage holdings of their respective Fund prior to the Reorganizations and thus, common shareholders will hold reduced percentages of ownership in the larger combined entity than they held in their Target Fund individually.

 

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The Acquiring Fund will be the corporate, tax and accounting survivor of the Reorganizations, and will not continue the financial history or performance of the Target Funds.

Valuation of Assets and Liabilities. The value of the net assets of each Target Fund will be the value of its assets, less its liabilities, computed as of the close of regular trading on the NYSE on the business day immediately prior to the Closing Date (such time and date being hereinafter called the “Valuation Time”). The value of each Target Fund’s assets will be determined by using the valuation procedures of the Nuveen closed-end funds adopted by the Board or such other valuation procedures as will be mutually agreed upon by the parties.

Distributions. Undistributed net investment income represents net earnings from a Fund’s investment portfolio that over time have not been distributed to shareholders. Under the terms of the Agreement, if a Target Fund has undistributed net investment income or undistributed net capital gains, the Target Fund is required to declare a distribution prior to the Valuation Time, which, together with all previous dividends, has the effect of distributing to its shareholders all undistributed net investment income and undistributed realized net capital gains (after reduction by any available capital loss carryforwards and excluding any net capital gain on which the Target Fund paid federal income tax) for all taxable periods ending on or before the Closing Date.

Amendments. Under the terms of the Agreement, the Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by each Fund as specifically authorized by each Fund’s Board; provided, however, that following the receipt of shareholder approval of the Agreement, no such amendment, modification or supplement may have the effect of changing the provisions for determining the number of Acquiring Fund shares to be issued to a Target Fund’s shareholders under the Agreement to the detriment of such shareholders without their further approval.

Conditions. Under the terms of the Agreement, the closing of each Reorganization is subject to the satisfaction or waiver of the following closing conditions: (1) the requisite approval by the shareholders of the Target Fund of the Agreement and by shareholders of at least one other Target Fund; (2) the receipt by the Target Fund and the Acquiring Fund of an opinion substantially to the effect that the Reorganization will qualify as a reorganization under the Code (see “—Material Federal Income Tax Consequences of the Reorganizations”), (3) the absence of legal proceedings challenging the Reorganization, (4) the receipt by the Target Fund and the Acquiring Fund of certain customary certificates and legal opinions.

As noted above, the closing of each Target Fund’s Reorganization is contingent upon at least one other Target Fund obtaining the requisite shareholder approval and satisfying (or obtaining the waiver of) other closing conditions. If only one Target Fund’s shareholders approve the Reorganization of their Fund, none of the Reorganizations will take place.

Termination. The Agreement may be terminated by the mutual agreement of the parties and such termination may be effected by each Fund’s Chief Administrative Officer or a Vice President without further action by the Board of such Fund. In addition, any Fund may at its option terminate the Agreement with respect to that Fund and the corresponding Target Fund or Acquiring Fund, as the case may be, at or before the closing due to: (1) a breach by any other party of any representation, warranty or agreement contained therein to be performed at or before the closing, if not cured within 30 days of the breach and prior to the closing; (2) a condition precedent to the obligations of the terminating party

 

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that has not been met and it reasonably appears it will not or cannot be met; or (3) a determination by its Board that the consummation of the transactions contemplated by the Agreement is not in the best interests of the Fund.

Reasons for the Reorganizations

Based on the considerations below, the Board of Trustees of each Target Fund (each, a “Target Board”), all of whom are not “interested persons” as defined in the 1940 Act, has determined that its respective Target Fund’s Reorganization would be in the best interests of its Target Fund and that the interests of the existing shareholders of such Target Fund would not be diluted with respect to net asset value as a result of such Reorganization. The Board of Trustees of the Acquiring Fund (the “Acquiring Board”; the Target Boards and the Acquiring Board are each a “Board” for purposes of this section), all of whom are not “interested persons” as defined in the 1940 Act, has also determined that each Reorganization would be in the best interests of the Acquiring Fund. At a meeting held on April 22, 2021 (the “Meeting”), the Boards approved the Reorganizations, and each Target Board recommended that shareholders of the respective Target Fund approve the applicable Reorganization.

Since last year, the Adviser has been evaluating its multi-asset closed-end fund product line in seeking, among other things, to enhance the strategies to address changes in the capital market conditions that have occurred over time since the launch of the Target Funds and a shift in investor preferences toward more flexible, dynamic asset allocation strategies. As part of this initiative, the Adviser has proposed the Reorganizations of the Target Funds into the Acquiring Fund. During 2020 and 2021, the Adviser has made presentations, and the Boards have received a variety of materials relating to the proposed Reorganizations, including the rationale therefor. Prior to approving the Reorganizations, the Boards reviewed the foregoing information with their independent legal counsel and with management, reviewed with independent legal counsel applicable law and their duties in considering such matters, and met with independent legal counsel in private sessions without management present. The Boards considered a number of principal factors presented at the time of the Meeting or prior meetings in reaching their determinations, including, among others, the following:

 

   

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

 

   

consistency of portfolio management;

 

   

the potential for enhanced risk-adjusted returns and the potential for a more consistent return profile;

 

   

the potential for improved economies of scale over time and the effect on fees and total expenses;

 

   

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

 

   

the anticipated federal income tax-free nature of the Reorganizations and the potential costs from any portfolio transitions related to the Reorganizations;

 

   

the expected costs of the Reorganizations and the extent to which a Fund would bear any such costs;

 

55


   

the terms of the Reorganizations and whether the Reorganizations would dilute the interests of the existing shareholders of the Funds;

 

   

the effect of the Reorganizations on shareholder rights;

 

   

any potential economic and other benefits of the Reorganizations to the Adviser and its affiliates as a result of the Reorganizations; and

 

   

alternatives to the Reorganizations.

Compatibility of Investment Objectives, Policies and Related Risks. Based on the information presented, the Boards noted that although the Funds’ investment objectives are similar in that they focus on the pursuit of total return comprised of income or distributions and capital appreciation, there are differences among the investment objectives, policies, strategies and related risks of the Funds. More specifically, the Dividend and Income Fund’s investment objectives are high current income and total return; the Total Return Strategy Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation; and the Dividend Growth Fund’s investment objective is to provide an attractive level of distributions and capital appreciation. The Boards recognized, however, that the Acquiring Fund, which was newly formed to facilitate the consolidation of the Target Funds and the restructuring of their combined portfolios, would operate as a registered closed-end management investment company managed in accordance with Nuveen’s dynamic multi-asset income strategy. The investment objective of the Acquiring Fund is to provide total return through high current income and capital appreciation. In addition, the Acquiring Fund will not explicitly pursue a tax-advantaged strategy such as reflected in the investment objective and principal investment strategies of the Total Return Strategy Fund or in the principal investment strategies of the Dividend Growth Fund. Each Target Fund also follows a static asset allocation strategy that generally takes a long-term view that does not change based on prevailing market conditions. In contrast, the Acquiring Fund will follow a dynamic multi-asset income strategy providing the ability to adapt asset allocations to changing market environments from both a risk and return standpoint. The Acquiring Fund has a broader investment mandate and may invest in a broader range of security types, use a broader range of investment techniques and have exposure to a broader range of geographic regions than the Target Funds. The Acquiring Fund also may use a broader range of derivatives relative to the Target Funds. The Target Funds and the Acquiring Fund may engage in leverage through borrowings. Given the differences in investment mandates, the Acquiring Fund may generally be subject to the same types of principal investment risks as the Target Funds, but also may be subject to principal investment risks not applicable to the Target Funds. For example, the Acquiring Fund is expected to have greater exposure to non-dividend paying common stock and may have greater exposure to foreign securities. In addition, because of the Acquiring Fund’s dynamic allocation strategy, the Acquiring Fund is subject to a higher degree of allocation risk and multi-manager risk.

Consistency of Portfolio Management. The Boards noted that each Fund has the same investment adviser; however, there are some differences among the Sub-Advisers utilized by the Funds. More specifically, Nuveen Asset Management will serve as one of the Sub-Advisers to the Acquiring Fund and will be responsible for implementing the Acquiring Fund’s dynamic asset allocation strategy and allocating the Acquiring Fund’s assets among the Acquiring Fund’s Sub-Advisers which include Nuveen Asset Management. In addition to Nuveen Asset Management, the other Sub-Advisers to the Acquiring Fund include NWQ, Santa Barbara, Teachers Advisors and Winslow. While there is some overlap in the Sub-Advisers used by the Acquiring Fund and the Target

 

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Funds, there are differences. Nuveen Asset Management and NWQ are each a Sub-Adviser to the Acquiring Fund and each Target Fund. Santa Barbara serves as a Sub-Adviser to the Acquiring Fund and the Dividend Growth Fund but not the other Target Funds. Teachers Advisors and Winslow will each serve as a Sub-Adviser to the Acquiring Fund but are not Sub-Advisers to the Target Funds. Further, Security Capital and Wellington, which are unaffiliated with the Adviser, each serve as a Sub-Adviser to the Dividend and Income Fund but are not Sub-Advisers to the Acquiring Fund or other Target Funds. The Boards also recognized that the Acquiring Fund may allocate its assets to any investment strategy offered by its Sub-Advisers. The Boards considered that with the dynamic asset allocation strategy of the Acquiring Fund, the two portfolio managers who will be responsible for the Acquiring Fund’s asset allocation strategy are not currently named portfolio managers of any Target Fund. Further, given the Acquiring Fund’s broader range of investment mandate, eligible investments and investment techniques, the portfolio managers managing the investment strategies available to the Acquiring Fund include individuals who do not serve as portfolio managers to the Target Funds and may change over time.

Potential for Enhanced Risk-Adjusted Returns. The Boards considered that the dynamic risk-based asset allocation framework of the Acquiring Fund may provide the potential to deliver superior risk-adjusted returns in contrast to the static asset allocation strategies with fixed target asset allocations of the Target Funds. The Boards noted that the dynamic asset allocation strategies can be adaptable to changing market environments from a risk and return standpoint.

Potential for More Consistent Return Profile. The Boards considered the Adviser’s belief that the Acquiring Fund’s dynamic approach to asset allocation which allows the consideration of backward and forward-looking inputs may potentially allow for lower variability of returns and a more consistent return profile, which may result in more stable managed distributions in contrast to the static asset allocation strategies of the Target Funds.

Potential for Improved Economies of Scale Over Time and Effect on Fees and Total Expenses. The Boards considered the fees and expense ratios of each of the Target Funds and the estimated expenses of the Acquiring Fund following the Reorganizations. The Boards noted that the fund-level management fee schedule of the Acquiring Fund will be the same as that applicable to the Dividend and Income Fund and Total Return Strategy Fund but will provide for a lower fund-level management fee rate at all levels than the fund-level management fee schedule applicable to the Dividend Growth Fund. The Boards further noted that the Reorganizations were intended to result in reduced net operating expenses as a result of certain fixed costs being spread over the larger asset base of the Acquiring Fund and a potentially lower effective fund-level management fee rate due to the ability of the Acquiring Fund’s assets to achieve breakpoints in its fee schedule (assuming all three Reorganizations are completed).

Potential for Improved Secondary Market Trading with Respect to the Common Shares. While it is not possible to predict trading levels following the Reorganizations, the Boards noted that the Reorganizations are being proposed, in part, to seek to enhance the secondary trading market for the common shares of the combined fund as a result of its larger share float, which may lead to increased trading volume, narrower bid-ask spreads and greater market depth.

Anticipated Tax-Free Reorganizations; Portfolio Transition; and Capital Loss Carryforwards. The Boards considered the tax implications of the Reorganizations. The Reorganizations will be structured with the intention that they qualify as tax-free reorganizations for federal income tax

 

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purposes, and the Funds will obtain an opinion of counsel substantially to this effect (based on certain factual representations and certain customary assumptions). Further, the Boards recognized that there could be some gains realized as a result of a portfolio realignment of the Target Funds related to the Reorganizations. If the portfolio realignment occurs prior to the respective Reorganization and if the respective Target Fund is in a net realized gain position, any such gains would be distributed to such Target Fund’s shareholders prior to the Reorganization. However, the Boards also recognized that part of the realignment may occur after the Reorganizations which may result in the Acquiring Fund realizing some gains and a taxable distribution to shareholders. In evaluating the tax implications of the Reorganizations, the Boards also considered the impact of the Reorganizations on any estimated capital loss carryforwards of the Target Funds and applicable limitations of federal income tax rules.

Expected Costs of the Reorganizations. The Boards considered the terms and conditions of the Agreement and Plan of Reorganization, including the estimated costs associated with the Reorganizations and the allocation of such costs among each Target Fund. The Boards recognized that the common shareholders of each Target Fund will indirectly bear the costs of the respective Reorganization whether or not any Reorganization is consummated. The Boards noted, however, that, assuming the Reorganizations are consummated, the Adviser anticipated that the projected costs of each Reorganization may be recovered over time for the common shareholders.

Terms of the Reorganizations and Impact on Shareholders. The terms of the Reorganizations are intended to avoid dilution of the interests with respect to net asset value of the existing shareholders of the Target Funds. In this regard, the Boards considered that each holder of common shares of a Target Fund will receive common shares of the Acquiring Fund (taking into account any fractional shares to which the shareholder would be entitled) having an aggregate net asset value equal to the aggregate per share net asset value of that shareholder’s Target Fund common shares held as of the Valuation Time. No fractional common shares of the Acquiring Fund, however, will be distributed to a Target Fund’s common shareholders in connection with the Reorganizations and, in lieu of such fractional shares, each Target Fund’s common shareholders will receive cash.

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

Potential Benefits to Nuveen Fund Advisors and Affiliates. The Boards recognized that the Reorganizations may result in some benefits and economies for the Adviser and its affiliates. The Boards recognized that all the Sub-Advisers of the Acquiring Fund are affiliated with the Adviser, whereas two Sub-Advisers of the Dividend and Income Fund, Wellington and Security Capital, are not. Accordingly, the Boards recognized that with the Acquiring Fund, the Adviser and its affiliates will be retaining all of the advisory fees applicable to the Acquiring Fund. In addition, the Boards further recognized that the indirect benefits to the Adviser and its affiliates may also include, among other things, a reduction in the level of operational expenses incurred for administrative, compliance and portfolio management services as a result of the elimination of the Target Funds as separate funds in the Nuveen complex.

Alternatives to the Reorganizations. The Boards also considered alternatives to the Reorganizations, including maintaining the status quo of the Target Funds and liquidation. The Boards considered, among other things, the original rationale for the Target Funds, the changes in the capital

 

58


markets since the Target Funds have launched, the shift in preference to more flexible mandates compared to the static asset allocation strategies followed by the Target Funds, and the potential benefits of the Acquiring Fund with a dynamic asset allocation strategy as described above. The Boards recognized that to help ensure sufficient scale for the Acquiring Fund, each Reorganization is contingent upon at least two Target Funds obtaining the requisite shareholder approvals and satisfying (or obtaining the waivers of) the other closing conditions. The Boards recognized that some of the benefits may diminish if the Reorganizations of all three of the Target Funds are not completed. In addition, the Target Boards could have decided to liquidate the Target Funds; however, the Target Boards did not believe this alternative was in the best interests of the applicable Target Fund as liquidation would result in a taxable event for shareholders.

Conclusion. Each Target Board approved the applicable Reorganization on behalf of its Target Fund, concluding that such Reorganization is in the best interests of its Target Fund and that the interests of existing shareholders of such Target Fund will not be diluted with respect to net asset value as a result of the respective Reorganization. The Acquiring Board also approved each Reorganization, concluding that each Reorganization is in the best interests of the Acquiring Fund. The Boards did not identify any single factor discussed above as all-important or controlling, but considered all such factors together in approving a Reorganization.

Capitalization

The following tables set forth the unaudited capitalization of the Funds as of December 31, 2020, and the pro-forma combined capitalization of the Acquiring Fund as if the Reorganization(s) had occurred on that date and under the following scenarios in which, pursuant to the requirements of the Agreement, at least two of the three proposed Reorganizations are completed:

 

  1.

all three Target Fund Reorganizations are completed;

 

  2.

the Reorganizations of Dividend and Income Fund and Total Return Strategy Fund are completed;

 

  3.

the Reorganizations of Dividend and Income Fund and Dividend Growth Fund are completed; and

 

  4.

the Reorganizations of Total Return Strategy Fund and Dividend Growth Fund are completed.

 

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1. Capitalization Table—Reorganizations of Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund

The table reflects a pro forma exchange ratio of approximately 0.50764500, 0.53924000, and 0.80202500 common shares of the Acquiring Fund issued for each common share of Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund, respectively. If the Reorganizations are consummated, the actual exchange ratios may vary.

 

     Dividend and
Income Fund
     Total Return
Strategy Fund
     Dividend
Growth Fund
     Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Common Shareholders’ Equity:

             

Common shares, $0.01 par value per share, 19,668,517 shares outstanding for Dividend and Income Fund; common shares, $0.01 par value per share, 13,850,897 shares outstanding for Total Return Strategy Fund; common shares, $0.01 par value per share, 14,484,340 shares outstanding for Dividend Growth Fund; common shares, $0.01 par value per share, 29,070,361 shares outstanding for Multi-Asset Income Fund (Pro Forma)

     196,685        138,509        144,843        (189,333 )(2)      290,704  

Paid-in surplus

     191,014,532        140,103,809        161,451,356        (995,667 )(3)      491,574,030  

Total distributable earnings

     8,885,301        9,417,367        71,239,822              89,542,490  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Net assets applicable to common shares

   $ 200,096,518      $ 149,659,685      $ 232,836,021      $ (1,185,000   $ 581,407,224  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 10.17      $ 10.81      $ 16.08        $ 20.00  

Authorized common shares:

     Unlimited        Unlimited        Unlimited          Unlimited  

 

(1)

The pro forma balances are presented as if the Reorganizations were effective as of December 31, 2020, and are presented for informational purposes only. The actual Closing Date of the Reorganization is expected to be on or about September 20, 2021, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Reorganization.

(2)

Assumes the issuance of 9,984,576, 7,468,984, and 11,616,801 Acquiring Fund common shares to the common shareholders of Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund, respectively. These numbers are based on the net asset values of the Target Funds as of December 31, 2020, adjusted for the effect of estimated total Reorganization costs and distributions.

(3)

Includes the impact of estimated total Reorganization costs of $1,185,000, which will be borne by the common shareholders of Dividend and Income Fund, Total Return Strategy Fund and Dividend Growth Fund in the amounts of $405,000, $280,000 and $500,000, respectively.

 

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2. Capitalization Table—Reorganizations of Dividend and Income Fund and Total Return Strategy Fund

The table reflects a pro forma exchange ratio of approximately 0.50764500 and 0.53924000 common shares of the Acquiring Fund issued for each common share of Dividend and Income Fund and Total Return Strategy Fund, respectively. If the Reorganizations are consummated, the actual exchange ratios may vary.

 

     Dividend and
Income Fund
     Total Return
Strategy Fund
     Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Common Shareholders’ Equity:

          

Common shares, $0.01 par value per share, 19,668,517 shares outstanding for Dividend and Income Fund; common shares, $0.01 par value per share, 13,850,897 shares outstanding for Total Return Strategy Fund; common shares, $0.01 par value per share, 17,453,560 shares outstanding for Multi-Asset Income Fund (Pro Forma)

     196,685        138,509        (160,658 )(2)      174,536  

Paid-in surplus

     191,014,532        140,103,809        (524,342 )(3)      330,593,999  

Total distributable earnings

     8,885,301        9,417,367              18,302,668  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net assets applicable to common shares

   $ 200,096,518      $ 149,659,685      $ (685,000   $ 349,071,203  
  

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 10.17      $ 10.81        $ 20.00  

Authorized common shares:

     Unlimited        Unlimited          Unlimited  

 

(1)

The pro forma balances are presented as if the Reorganizations were effective as of December 31, 2020, and are presented for informational purposes only. The actual Closing Date of the Reorganization is expected to be on or about September 20, 2021, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Reorganization.

(2)

Assumes the issuance of 9,984,576 and 7,468,984 Acquiring Fund common shares to the common shareholders of Dividend and Income Fund and Total Return Strategy Fund, respectively. These numbers are based on the net asset values of the Target Funds as of December 31, 2020, adjusted for the effect of estimated total Reorganization costs and distributions.

(3)

Includes the impact of estimated total Reorganization costs of $685,000, which will be borne by the common shareholders of Dividend and Income Fund and Total Return Strategy Fund in the amounts of $405,000 and $280,000, respectively.

 

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3. Capitalization Table—Reorganizations of Dividend and Income Fund and Dividend Growth Fund

The table reflects a pro forma exchange ratio of approximately 0.50764500 and 0.80202500 common shares of the Acquiring Fund issued for each common share of Dividend and Income Fund and Dividend Growth Fund, respectively. If the Reorganizations are consummated, the actual exchange ratios may vary.

 

     Dividend and
Income Fund
     Dividend
Growth Fund
     Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Common Shareholders’ Equity:

          

Common shares, $0.01 par value per share, 19,668,517 shares outstanding for Dividend and Income Fund; common shares, $0.01 par value per share, 14,484,340 shares outstanding for Dividend Growth Fund; common shares, $0.01 par value per share, 21,601,377 shares outstanding for Multi-Asset Income Fund (Pro Forma)

     196,685        144,843        (125,514 )(2)      216,014  

Paid-in surplus

     191,014,532        161,451,356        (779,486 )(3)      351,686,402  

Total distributable earnings

     8,885,301        71,239,822              80,125,123  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net assets applicable to common shares

   $ 200,096,518      $ 232,836,021      $ (905,000   $ 432,027,539  
  

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 10.17      $ 16.08        $ 20.00  

Authorized common shares:

     Unlimited        Unlimited          Unlimited  

 

(1)

The pro forma balances are presented as if the Reorganizations were effective as of December 31, 2020, and are presented for informational purposes only. The actual Closing Date of the Reorganization is expected to be on or about September 20, 2021, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Reorganization.

(2)

Assumes the issuance of 9,984,576 and 11,616,801 Acquiring Fund common shares to the common shareholders of Dividend and Income Fund and Dividend Growth Fund, respectively. These numbers are based on the net asset values of the Target Funds as of December 31, 2020, adjusted for the effect of estimated total Reorganization costs and distributions.

(3)

Includes the impact of estimated total Reorganization costs of $905,000, which will be borne by the common shareholders of Dividend and Income Fund and Dividend Growth Fund in the amounts of $405,000 and $500,000, respectively.

 

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4. Capitalization Table—Reorganizations of Total Return Strategy Fund and Dividend Growth Fund

The table reflects a pro forma exchange ratio of approximately 0.53924000 and 0.80202500 common shares of the Acquiring Fund issued for each common share of Total Return Strategy Fund and Dividend Growth Fund, respectively. If the Reorganizations are consummated, the actual exchange ratios may vary.

 

     Total Return
Strategy Fund
     Dividend
Growth Fund
     Pro Forma
Adjustments
    Acquiring Fund
Pro Forma(1)
 

Common Shareholders’ Equity:

          

Common shares, $0.01 par value per share, 13,850,897 shares outstanding for Total Return Strategy Fund; common shares, $0.01 par value per share, 14,484,340 shares outstanding for Dividend Growth Fund; common shares, $0.01 par value per share, 19,085,785 shares outstanding for Multi-Asset Income Fund (Pro Forma)

     138,509        144,843        (92,494 )(2)      190,858  

Paid-in surplus

     140,103,809        161,451,356        (687,506 )(3)      300,867,659  

Total distributable earnings

     9,417,367        71,239,822              80,657,189  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net assets applicable to common shares

   $ 149,659,685      $ 232,836,021      $ (780,000   $ 381,715,706  
  

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 10.81      $ 16.08        $ 20.00  

Authorized common shares:

     Unlimited        Unlimited          Unlimited  

 

(1)

The pro forma balances are presented as if the Reorganizations were effective as of December 31, 2020, and are presented for informational purposes only. The actual Closing Date of the Reorganization is expected to be on or about September 20, 2021, or such later time agreed to by the parties at which time the results would be reflective of the actual composition of shareholders’ equity as of that date. All pro forma adjustments are directly attributable to the Reorganization.

(2)

Assumes the issuance of 7,468,984 and 11,616,801 Acquiring Fund common shares to the common shareholders of Total Return Strategy Fund and Dividend Growth Fund, respectively. These numbers are based on the net asset values of the Target Funds as of December 31, 2020, adjusted for the effect of estimated total Reorganization costs and distributions.

(3)

Includes the impact of estimated total Reorganization costs of $780,000, which will be borne by the common shareholders of Total Return Strategy Fund and Dividend Growth Fund in the amounts of $280,000 and $500,000, respectively.

Expenses Associated with the Reorganizations

The allocation of the costs of the Reorganizations among the Target Funds is based on the projected relative benefits of the Reorganizations to the Target Funds, which are comprised of forecasted improvements in the secondary trading market for common shares and operating expense savings, if any, to Target Fund shareholders. The costs of the Reorganizations are estimated to be $1,185,000. These costs represent the estimated nonrecurring expenses of the Funds in carrying out their obligations under the Agreement and consist of management’s estimate of additional stock exchange listing fees, SEC registration fees, legal and accounting fees, proxy solicitation and distribution costs and other related administrative or operational costs related to the proposed Reorganizations. These estimated expenses will be borne by Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund in the amounts of $405,000, $280,000 and $500,000, respectively (0.21%, 0.21%, and 0.23%, respectively, of each Target Fund’s average net assets applicable to common shares for the twelve months ended December 31, 2020). Reorganization

 

63


expenses have been or will be accrued as expenses of each Target Fund prior to the Valuation Time. If one or all of the Reorganizations are not consummated for any reason, including because the requisite shareholder approvals are not obtained, each of the Target Funds and indirectly their common shareholders, will still bear the costs of the Reorganizations.

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

Dissenting Shareholders’ Rights of Appraisal

Under the charter documents of the Target Funds, shareholders do not have dissenters’ rights of appraisal with respect to the Reorganizations.

Material Federal Income Tax Consequences of the Reorganizations

As a non-waivable condition to each Fund’s obligation to consummate the Reorganizations, each Fund will receive a tax opinion from Vedder Price P.C. (which opinion will be based on certain factual representations and certain customary assumptions and exclusions) with respect to its Reorganization(s) substantially to the effect that, on the basis of the existing provisions of the Code, current administrative rules and court decisions, for federal income tax purposes:

 

  1.

The transfer by the Target Fund of substantially all its assets to the Acquiring Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of substantially all the liabilities of the Target Fund, immediately followed by the pro rata distribution of all the Acquiring Fund shares so received by the Target Fund to the Target Fund’s shareholders of record in complete liquidation of the Target Fund and the dissolution of the Target Fund as soon as practicable thereafter, will constitute a “reorganization” within the meaning of Section 368(a) of the Code and the Acquiring Fund and the Target Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the reorganization.

 

  2.

No gain or loss will be recognized by the Acquiring Fund upon the receipt of substantially all the Target Fund’s assets solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of substantially all the liabilities of the Target Fund.

 

  3.

No gain or loss will be recognized by the Target Fund upon the transfer of substantially all its assets to the Acquiring Fund solely in exchange for Acquiring Fund shares and the assumption by the Acquiring Fund of substantially all the liabilities of the Target Fund or upon the distribution (whether actual or constructive) of such Acquiring Fund shares to the Target Fund’s shareholders solely in exchange for such shareholders’ shares of the Target Fund in complete liquidation of the Target Fund.

 

  4.

No gain or loss will be recognized by the Target Fund’s shareholders upon the exchange of all their Target Fund shares solely for Acquiring Fund shares in the reorganization, except to the extent the Target Fund shareholders receive cash in lieu of a fractional Acquiring Fund share.

 

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  5.

The aggregate basis of the Acquiring Fund shares received by each Target Fund shareholder pursuant to the reorganization (including any fractional Acquiring Fund share to which a Target Fund shareholder would be entitled) will be the same as the aggregate basis of the Target Fund shares exchanged therefor by such shareholder.

 

  6.

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

 

  7.

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

 

  8.

The holding period of the assets of the Target Fund received by the Acquiring Fund will include the period during which those assets were held by the Target Fund.

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

Each opinion will be based on certain factual representations and customary assumptions. The opinion will rely on such representations and will assume the accuracy of such representations. If such representations and assumptions are incorrect, the Reorganization that is the subject of such opinion may not qualify as a tax-free reorganization for federal income tax purposes, and the Target Fund involved in the Reorganization and the shareholders of such Target Fund may recognize taxable gain or loss as a result of that Reorganization.

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

If a Target Fund shareholder receives cash in lieu of a fractional Acquiring Fund common share, the shareholder will be treated as having received the fractional Acquiring Fund share pursuant to the Reorganization and then as having sold that fractional Acquiring Fund common share for cash. As a result, each such Target Fund shareholder generally will recognize gain or loss equal to the difference between the amount of cash received and the basis in the fractional Acquiring Fund

 

65


common share. This gain or loss generally will be a capital gain or loss and generally will be long-term capital gain or loss if, as of the effective time of the Reorganizations, the holding period for the shares (including the holding period of Target Fund shares surrendered therefor if such Target Fund shares were held as capital assets at the time of the Reorganization) is more than one year. The deductibility of capital losses is subject to limitations. Any cash received in lieu of a fractional share may be subject to backup withholding taxes.

Prior to the Valuation Time, each Target Fund will declare a distribution to its common shareholders, which together with all other distributions to its shareholders made with respect to the taxable year in which its Reorganization occurs and all prior taxable years, will have the effect of distributing to shareholders all its net investment income and realized net capital gains (after reduction by any available capital loss carryforwards and excluding any net capital gain on which the Target Fund paid federal income tax), if any, through the Closing Date of the Reorganizations. To the extent distributions are attributable to ordinary taxable income or capital gains, the distribution will be taxable to shareholders who are subject to federal income tax. Additional distributions may be made if necessary. All dividends and distributions will be paid in cash unless a shareholder has made an election to reinvest dividends and distributions in additional shares under the Target Fund’s dividend reinvestment plan. The tax character of dividends and distributions (as consisting of ordinary income and capital gain) will be the same for federal income tax purposes whether received in cash or additional shares.

After the Reorganizations, the Acquiring Fund’s ability to use the pre-Reorganization capital losses, if any, of the Target Funds that participated in such Reorganizations may be limited under certain federal income tax rules applicable to reorganizations of this type. Therefore, in certain circumstances, shareholders may pay federal income taxes sooner, or pay more federal income taxes, than they would have had the Reorganizations not occurred. The effect of these potential limitations, however, will depend on a number of factors including the amount of the losses, the amount of gains to be offset, the exact timing of the Reorganizations and the amount of unrealized capital gains in the Target Funds at the time of the Reorganizations.

The table below sets forth, as of December 31, 2020 (the Target Funds’ tax year ends), each Target Fund’s unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. The Acquiring Fund will commence operations upon completion of the Reorganizations and therefore does not have any capital loss carryforwards.

 

     Dividend and
Income Fund
     Total Return
Strategy Fund
     Dividend
Growth Fund
 

Not subject to expiration:

        

Short-Term

   $ 10,201,679      $ 7,524,461      $ —    

Long-Term

     3,077,246        11,811,069        —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 13,278,925      $ 19,335,530      $ —    
  

 

 

    

 

 

    

 

 

 

To the extent the Acquiring Fund sells portfolio investments after the Reorganizations, the Acquiring Fund may recognize gains or losses, which may result in taxable distributions to shareholders holding shares of the Acquiring Fund, including former shareholders of the Target Funds who hold Acquiring Fund shares after the Reorganizations. As a result, shareholders of the Target Funds may receive a greater amount of taxable distributions than they would have had the Reorganizations not occurred.

 

66


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

Shareholder Approval

Each Reorganization is required to be approved by the affirmative vote of the holders of a majority (more than 50%) of the Target Fund’s outstanding common shares entitled to vote on the matter.

Abstentions will not be voted but will have the same effect as a vote against the approval of the Reorganizations. Broker non-votes are shares held by brokers or nominees, typically in “street name,” as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have discretionary voting power on a particular matter. Because the matter being presented at the Special Meetings is a “non-routine” matter for which a broker or nominee does not have discretionary voting power under NYSE rules, it is expected that there will be no broker non-votes at the Special Meetings.

In addition to customary closing conditions that include approval by Target Fund shareholders, the closing of each Target Fund’s Reorganization is contingent upon at least one other Target Fund obtaining the requisite shareholder approval and satisfying (or obtaining the waiver of) other closing conditions. If only one Target Fund’s shareholders approve the Reorganization of their Fund, none of the Reorganizations will take place. If the Reorganization with respect to a Target Fund is not consummated, the Target Fund’s Board may take such actions as it deems in the best interests of such Target Fund, including continuing to operate the Target Fund as a stand-alone fund.

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

General

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

 

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The Acquiring Fund’s declaration of trust authorizes an unlimited number of common shares, par value $0.01 per share. If the Reorganization with respect to a Target Fund is consummated, the Acquiring Fund will issue additional common shares on the Closing Date to that Target Fund based on the relative per share net asset value of the Acquiring Fund and the aggregate net assets of such Target Fund that are transferred in connection with the Reorganization, in each case as of the Valuation Time.

Acquiring Fund common shares have equal rights with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Acquiring Fund. The Acquiring Fund common shares, when issued, will be fully paid and non-assessable and have no preemptive, conversion or exchange rights or rights to cumulative voting. See also “Summary Description of Massachusetts Business Trusts.”

Distributions

As a general matter, each Fund has a quarterly distribution policy and each Fund seeks to maintain a stable level of distributions. Each Fund’s current policy, which may be changed by its Board, is to make regular quarterly cash distributions to holders of its common shares at a level rate (stated in terms of a fixed cents per common share dividend rate) that reflects the past and projected performance of the Fund.

The Acquiring Fund’s ability to maintain a level dividend rate will depend on a number of factors. The net income of the Acquiring Fund generally consists of all investment income accrued on portfolio assets less all expenses of the Fund. Expenses of the Acquiring Fund are accrued each day. Over time, all the net investment income of the Acquiring Fund will be distributed. At least annually, the Acquiring Fund also intends to effectively distribute net capital gains and ordinary taxable income, if any. Although it does not now intend to do so, the Board may change the Acquiring 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 historical and projected investment income.

As explained more fully below, at least annually, the Acquiring Fund may elect to retain rather than distribute all or a portion of any net capital gains (which are the excess of net long-term capital gains over net short-term capital losses) otherwise allocable to shareholders and pay federal income tax on the retained gain. As provided under federal income tax law, shareholders will include their share of the retained net capital gains in their income for the year as a long-term capital gain (regardless of their holding period in the shares) and will be entitled to a federal income tax credit or refund for the federal income tax deemed paid on their behalf by the Acquiring Fund. See “E. Additional Information About the Acquiring Fund—Federal Income Tax Matters Associated with Investment in the Acquiring Fund” below and “Federal Income Tax Matters” in the Reorganization SAI.

Dividend Reinvestment Plan

Generally, the terms of the dividend reinvestment plan (each, a “Plan”) for the Acquiring Fund and the Target Funds are identical. Under the Acquiring Fund’s 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 Plan, your distributions, including any capital gain distributions, will automatically be reinvested in additional common shares under the Plan unless you request otherwise. If you elect not to participate in the Plan, or are not eligible to participate because your brokerage firm does not

 

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participate in the Plan, you will receive all distributions in cash paid by check mailed directly to you or your brokerage firm by Computershare Inc. and Computershare, as dividend paying agent. Computershare serves as the plan agent (the “Plan Agent”) under the Plan. Taxable dividends and distributions are subject to federal income tax whether received in cash or additional shares.

Under the Plan, the number of common shares you will receive will be determined as follows:

 

  (1)

If the net asset value per common share is equal to or less than the market price per common share plus estimated per share fees (which include any applicable brokerage commissions the Plan Agent is required to pay), the Acquiring Fund will issue new shares including fractions 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 the net asset value per common share exceeds the market price per common share plus estimated per share fees, the Plan Agent will receive the dividend or distribution in cash and will purchase common shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the common shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in common shares issued by the Acquiring Fund. The Plan Agent will use all dividends and distributions received in cash to purchase common shares in the open market within 30 days of the valuation date. Interest will not be paid on any uninvested cash payments. The Plan provides that if common shares start trading at or above net asset value before the Plan Agent has completed its purchases, the Plan Agent may cease purchasing common shares in the open market, and may invest the uninvested portion in new shares at a price equal to the greater of (i) net asset value per common share determined on the last business day immediately prior to the purchase date or (ii) 95% of the market price on that date.

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

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

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

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

 

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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 Acquiring Fund reserves the right to amend or terminate the Plan if in the judgment of the Board 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 Computershare, P.O. Box 505000, Louisville, Kentucky, 40233-5000, (800) 257-8787.

Common Share Price Data

The following tables show for each Target Fund for the periods indicated: (1) the high and low sales prices for common shares reported as of the end of the day on the NYSE, (2) the high and low net asset values of the common shares, and (3) the high and low of the premium/(discount) to net asset value (expressed as a percentage) of the common shares.

 

     Dividend and Income Fund  
     Market Price      Net Asset Value      Premium/(Discount)  

Fiscal Quarter Ended

     High          Low          High          Low          High         Low    

March 2021

   $ 9.48      $ 8.60      $ 10.71      $ 10.02        (10.48 )%      (15.38 )% 

December 2020

   $ 9.14      $ 7.33      $ 10.27      $ 8.93        (11.00 )%      (18.17 )% 

September 2020

   $ 8.15      $ 7.59      $ 9.80      $ 8.94        (14.29 )%      (18.90 )% 

June 2020

   $ 8.55      $ 6.08      $ 9.89      $ 7.78        (10.25 )%      (21.85 )% 

March 2020

   $ 11.21      $ 5.33      $ 12.10      $ 6.77        (6.08 )%      (25.98 )% 

December 2019

   $ 11.10      $ 10.67      $ 11.87      $ 11.31        (5.17 )%      (8.37 )% 

September 2019

   $ 11.26      $ 10.68      $ 11.73      $ 11.15        (1.59 )%      (7.29 )% 

June 2019

   $ 10.92      $ 10.16      $ 11.75      $ 11.28        (5.46 )%      (10.25 )% 

March 2019

   $ 10.71      $ 9.05      $ 11.61      $ 10.20        (7.11 )%      (11.84 )% 

 

     Total Return Strategy Fund  
     Market Price      Net Asset Value      Premium/(Discount)  

Fiscal Quarter Ended

     High          Low          High          Low          High         Low    

March 2021

   $ 10.81      $ 9.26      $ 11.95      $ 10.71        (9.16 )%      (13.97 )% 

December 2020

   $ 9.42      $ 7.53      $ 10.80      $ 9.00        (11.55 )%      (19.38 )% 

September 2020

   $ 8.80      $ 7.85      $ 10.03      $ 9.04        (9.64 )%      (14.62 )% 

June 2020

   $ 8.89      $ 6.60      $ 10.00      $ 7.50        (5.71 )%      (12.58 )% 

March 2020

   $ 12.23      $ 5.26      $ 12.73      $ 6.32        2.88     (19.79 )% 

December 2019

   $ 12.07      $ 10.89      $ 12.65      $ 11.34        (3.07 )%      (6.58 )% 

September 2019

   $ 11.82      $ 10.74      $ 12.32      $ 11.20        (1.33 )%      (6.87 )% 

June 2019

   $ 12.22      $ 11.09      $ 12.48      $ 11.55        (0.73 )%      (5.88 )% 

March 2019

   $ 11.91      $ 10.08      $ 12.20      $ 10.65        (0.92 )%      (7.03 )% 

 

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     Dividend Growth Fund  
     Market Price      Net Asset Value      Premium/(Discount)  

Fiscal Quarter Ended

     High          Low          High          Low          High         Low    

March 2021

   $ 15.11      $ 13.90      $ 16.92      $ 15.75        (9.79 )%      (12.94 )% 

December 2020

   $ 14.22      $ 11.88      $ 16.07      $ 14.03        (11.51 )%      (17.05 )% 

September 2020

   $ 13.73      $ 12.64      $ 15.78      $ 14.15        (8.59 )%      (13.96 )% 

June 2020

   $ 14.16      $ 10.69      $ 15.13      $ 11.89        (5.10 )%      (10.20 )% 

March 2020

   $ 18.22      $ 8.54      $ 18.59      $ 10.12        0.41     (20.88 )% 

December 2019

   $ 17.69      $ 16.25      $ 18.14      $ 16.48        (0.58 )%      (4.70 )% 

September 2019

   $ 16.99      $ 16.02      $ 17.48      $ 16.41        (0.49 )%      (4.45 )% 

June 2019

   $ 16.62      $ 15.55      $ 17.20      $ 16.22        (1.33 )%      (4.28 )% 

March 2019

   $ 16.12      $ 13.32      $ 16.57      $ 14.31        (1.95 )%      (8.16 )% 

On May 21, 2021, the closing sale prices of Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund common shares were $10.29, $11.53, and $16.04, respectively. These prices represent discounts to net asset value for Dividend and Income Fund, Total Return Strategy Fund, and Dividend Growth Fund of (8.61)%, (8.49)%, and (8.97)%, respectively.

Common shares of each Target Fund have historically traded at a discount to net asset value. It is not possible to state whether Acquiring Fund common shares will trade at a discount or premium to net asset value following the Reorganizations, or what the extent of any such discount or premium might be.

Affiliated Brokerage and Other Fees

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

Summary Description of Massachusetts Business Trusts

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

General. Each Fund is a Massachusetts business trust. A fund organized as a Massachusetts business trust is governed by the trust’s declaration of trust or similar instrument. Massachusetts law allows the trustees of a business trust to set the terms of a fund’s governance in its declaration of trust. All power and authority to manage the fund and its affairs generally reside with the trustees, and shareholder voting and other rights are limited to those provided to the shareholders in the declaration of trust and related governing documents.

Because Massachusetts law governing business trusts provides more flexibility compared to typical state corporate statutes, the Massachusetts business trust is a common form of organization for closed-end funds. However, some consider it less desirable than other entities because it relies on the terms of the applicable declaration of trust, by-laws and judicial interpretations rather than statutory provisions for substantive issues, such as the personal liability of shareholders and trustees, and does not provide the level of certitude that corporate laws, or newer statutory trust laws, such as those of Delaware, provide.

 

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Shareholders of a Massachusetts business trust are not afforded the statutory limitation of personal liability generally afforded to shareholders of a corporation from the trust’s liabilities. Instead, the declaration of trust of a fund organized as a Massachusetts business trust typically provides that a shareholder will not be personally liable, and further provides for indemnification to the extent that a shareholder is found personally liable, for the fund’s acts or obligations. The declaration of trust of each Fund contains such provisions.

Similarly, the trustees of a Massachusetts business trust are not afforded statutory protection from personal liability for the obligations of the trust. However, courts in Massachusetts have recognized limitations of a trustee’s personal liability in contract actions for the obligations of a trust contained in the trust’s declaration of trust, and declarations of trust may also provide that trustees may be indemnified out of the assets of the trust to the extent held personally liable. The declaration of trust of each Fund contains such provisions.

The Funds

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

Shareholder Voting. The declaration of trust of each Fund requires a shareholder vote on a number of matters, including certain amendments to the declaration of trust, the election of trustees when required by the 1940 Act, the merger or reorganization of the Fund (under certain circumstances) or sales of assets in certain circumstances and matters required to be voted on by the 1940 Act. The declaration of trust of each Fund provides that each whole share of the Fund is entitled to one vote on any matter on which it is entitled to vote and each fractional share is entitled to a proportional fractional vote.

The by-laws of each Fund provide that the holders of a majority (more than 50%) of the shares of the Fund entitled to vote at a meeting will constitute a quorum for the transaction of business. The declaration of trust of each Fund provides that the affirmative vote of the holders of a majority (more than 50%) of the shares present in person or by proxy and entitled to vote at a meeting of shareholders at which a quorum is present is required to approve a matter, except for the election of trustees and as otherwise required by the 1940 Act, the declaration of trust or the by-laws. With respect to the election of trustees, each Fund’s by-laws provide that the affirmative vote of a majority (more than 50%) of the shares outstanding and entitled to vote is required to elect trustees in a “contested election” (i.e., an election in which the number of trustees nominated exceeds the number of trustees to be elected), but that a plurality vote applies in an uncontested election.

 

 

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

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

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

The by-laws of each Fund establish qualification criteria applicable to prospective trustees and generally require that advance notice be given to the Fund in the event a shareholder desires to nominate a person for election to the Board or to transact any other business at a meeting of shareholders. Any notice by a shareholder must be accompanied by certain information as required by the by-laws. No shareholder proposal will be considered at any meeting of shareholders of a Fund if such proposal is submitted by a shareholder who does not satisfy all applicable requirements set forth in the by-laws.

 

 

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

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

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

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

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

Shareholder, Trustee and Officer Liability. The declaration of trust of each Fund provides that shareholders have no personal liability for the acts or obligations of the Fund and requires the Fund to indemnify a shareholder from any loss or expense arising solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason. In addition, each declaration of trust provides that the Fund will assume the defense of any claim against a shareholder for personal liability at the request of the shareholder. Similarly, each declaration of trust provides that any person who is a trustee, officer or employee of the Fund is not personally liable to any person in connection with the affairs of the Fund, other than to the Fund and its shareholders arising from such trustee’s, officer’s or employee’s bad faith, willful misfeasance, gross negligence or reckless disregard for his or her duties involved in the conduct of his or her office. Each declaration of

 

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

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

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

 

D.

ADDITIONAL INFORMATION ABOUT THE INVESTMENT POLICIES

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

General

The Funds have similar investment objectives but there are certain differences. All of the Funds have investment objectives that focus on the pursuit of total return, comprised of income or distributions and capital appreciation. However, the investment objective of Total Return Strategy Fund additionally emphasizes the pursuit of tax-advantaged dividend income. The Acquiring Fund’s investment objective is to provide total return through high current income and capital appreciation. Dividend and Income Fund’s investment objectives are high current income and total return. Total Return Strategy Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation. Dividend Growth Fund’s investment objective is to provide an attractive level of distributions and capital appreciation.

 

 

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In addition, although there are similarities between the Funds’ principal investment strategies, there are also certain differences. Each of the Funds pursues its investment objective(s) by allocating its assets across multiple strategies and asset classes. The Acquiring Fund will pursue a multi-asset income strategy that may invest in a portfolio of equity and debt securities of issuers located around the world. The Acquiring Fund may invest in equity and debt securities of any type. Accordingly, the allocation of the Acquiring Fund’s assets across strategies and asset classes may change over time. This strategy is designed to improve diversification and take into account changing market conditions.

In contrast, each Target Fund utilizes a static asset allocation strategy that generally takes a long-term view that does not change based on prevailing market conditions. Dividend and Income Fund’s investment objectives are high current income and total return. Total Return Strategy Fund’s investment objective is to achieve a high level of after-tax total return, consisting primarily of tax-advantaged dividend income and capital appreciation. Dividend Growth Fund’s investment objective is to provide an attractive level of distributions and capital appreciation.

The Acquiring Fund also has a broader investment mandate than the Target Funds and may invest in a broader range of security types, use a broader range of investment techniques and have exposure to a broader range of geographic regions than the Target Funds, and the Acquiring Fund has the ability to adapt its asset allocations to changing market environments from both a risk and return standpoint. In addition, although all of the Funds have the same investment adviser and use some of the same sub-advisers, the Acquiring Fund will utilize certain Nuveen-affiliated sub-advisers that are not currently sub-advisers to the Target Funds, and the Acquiring Fund may allocate its assets to any investment strategy offered by its Sub-Advisers. Accordingly, the individual portfolio managers managing the various investment strategies available to the Acquiring Fund include individuals who do not serve as portfolio managers to the Target Funds and may change over time. The individuals who will be responsible for the asset allocation strategy of the Acquiring Fund are not currently named portfolio managers of any Target Fund.

The Acquiring Fund’s investment objective is a non-fundamental policy and may be changed by the Board without prior shareholder approval. The Target Funds’ investment objectives are fundamental policies that may not be changed without the approval of the holders of a majority of the outstanding common shares of the applicable Target Fund. For this purpose, “a majority of the outstanding shares” means the vote of (1) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or (2) more than 50% of the outstanding voting securities, whichever is less

An investment in the Acquiring Fund is not intended as, and you should not construe it to be, a complete investment program. There can be no assurance that the Acquiring Fund’s investment objective will be achieved or that the Acquiring Fund’s investment program will be successful.

Investment Policies of the Acquiring Fund

General. Under normal circumstances, the Acquiring Fund will dynamically invest in a portfolio of equity and debt securities of issuers located around the world. This dynamic investment strategy uses a risk-based framework in which any amount can be allocated to an asset-class at any time. The Acquiring Fund may invest in equity and debt securities of any type. The Acquiring Fund may invest its assets in any markets, including emerging markets, or asset classes believed to be appropriate for meeting the Fund’s investment objective. The Acquiring Fund may use derivatives for

 

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a variety of reasons, including but not limited to, adjusting its exposures to markets, sectors, asset classes and securities, and may utilize derivatives of any type. As part of its investment strategy, the Acquiring Fund may employ an options strategy whereby the Fund sells (writes) call options on a percentage of the market value of the Fund’s equity portfolio. The Acquiring Fund is not required to allocate its investments among asset classes, issuer jurisdiction, or any other investment parameter in any fixed proportion except as specifically described herein.

Dynamic Asset Allocation. The Acquiring Fund will employ a dynamic asset allocation strategy in seeking to achieve the Fund’s investment objective. Nuveen Fund Advisors, the Acquiring Fund’s investment adviser, has selected Nuveen Asset Management to implement the Acquiring Fund’s dynamic asset allocation strategy by considering factors such as risk and return outlook and allocating the Fund’s assets among equity and income investment strategies that are managed by the Fund’s various Sub-Advisers including Nuveen Asset Management. All Sub-Advisers are affiliated with Nuveen. The relative allocations of the Acquiring Fund’s Managed Assets for investment between equity and debt securities, and relative allocations to the different types of equity and income strategies, will vary from time to time consistent with the Acquiring Fund’s investment objective.

To implement the dynamic allocation strategy, Nuveen Asset Management uses a top-down investment approach that focuses on macro-economic conditions, long term trends and changes that could benefit particular markets and/or industries relative to other markets and industries, and a variety of other factors in allocating the Fund’s assets among investment strategies. Nuveen Asset Management begins by deconstructing a broad universe of asset classes into risk factors, including interest rate, credit, equity and idiosyncratic risks. Nuveen Asset Management then constructs a portfolio optimized to deliver the Fund’s investment objective while minimizing risk and maintaining diversification among the aforementioned risk factors. Nuveen Asset Management then selects investment strategies to implement the portfolio designed to meet the Fund’s investment objective. As appropriate, Nuveen Asset Management may use tactical allocations to adjust the Fund’s exposures to mitigate risk and/or capitalize on shorter term opportunities.

The Acquiring Fund’s investment strategy provides wide investment flexibility to create a portfolio of assets that, over time, may vary between equity and debt securities allocations and that is broadly diversified among many individual investments. The Acquiring Fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. There is no limit on the percentage of assets the Acquiring Fund can invest in a particular asset class or security type, and Nuveen Asset Management may change its emphasis on an asset class, investment strategy or security type at any time based on its evaluation of those factors and market opportunities and may determine not to allocate any assets to a particular asset class, investment strategy, or security type. As a result, there may not be any Acquiring Fund assets allocated to a particular asset class, investment strategy, or security type at any point in time.

Investment Strategies. Nuveen Asset Management currently expects that the Acquiring Fund’s dynamic asset allocation strategy will be implemented by allocating the Fund’s assets among equity and income investment strategies. The allocation strategy considers factors such as risk and return outlook when allocating the Fund’s assets. The relative allocations of the Acquiring Fund’s Managed Assets for investment between equity and debt securities, and relative allocations to the different types of equity and income strategies, will vary from time to time consistent with the Acquiring Fund’s investment objective.

 

 

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Each investment strategy will be managed by Nuveen or its affiliates. The dynamic asset allocation may also utilize certain index-based exposures that may be sourced through derivatives or exchange-traded funds. Each of the investment strategies may employ the use of derivatives. In addition, Nuveen Asset Management may retain a portion of the Acquiring Fund’s assets for investment in derivatives, including total return swaps, for risk management purposes and to obtain exposure to particular asset classes. See below for additional information regarding the Acquiring Fund’s use of derivatives.

The information below describes the types and characteristics of the securities, derivatives, and other assets in which the Acquiring Fund may invest through its use of the investment strategies described above. Information regarding additional investment strategies and techniques is also provided below. Unless otherwise stated herein or in the Reorganization SAI, the Acquiring Fund’s investment policies are non-fundamental policies and may be changed by the Board without prior shareholder approval.

Equity Securities. The Acquiring Fund may invest in equity securities of any type and across various investment styles (e.g., growth- or value-oriented styles), sectors, market capitalizations (e.g., large-, mid-, and small-cap) and geographic regions throughout the world (including the U.S. and emerging markets) without limit. These securities may include, but are not limited to, common stock, preferred stock, securities convertible into common, depositary receipts, stock, MLPs and other partnership interests, real estate investment trusts (“REITs”), rights and warrants, or securities or other instruments whose price is linked to (or derived from) the value of common stock.

Debt Securities. The Acquiring Fund may invest in debt securities of any type without limit, including but not limited to debt securities of the U.S. government and other governments throughout the world (including emerging markets) as well as their agencies and instrumentalities and government-sponsored enterprises, municipal securities, domestic and foreign corporate debt obligations, convertible bonds, municipal bonds, structured notes, credit-linked notes, loan assignments and participations, repurchase agreements, residential and commercial mortgage-backed securities, asset-backed securities, debt obligations of MLPs, and securities issued or guaranteed by certain international organizations such as the World Bank. The Acquiring Fund may invest in debt securities paying a fixed or fluctuating rate of interest, including senior loans and secured and unsecured junior loans, and with any maturity or duration. The Acquiring Fund may invest in debt securities across various geographic regions throughout the world (including the U.S., non-U.S. developed markets, and emerging markets) without limit. The Acquiring Fund may invest in debt securities of any rating (including below-investment-grade debt securities, commonly known as “high yield” or “junk” bonds), distressed securities, and in debt securities that are unrated. The Acquiring Fund may invest in junk bonds and distressed securities when a Sub-Adviser believes that they will provide an attractive total return, relative to their risk, as compared to higher quality debt securities. The Acquiring Fund may invest in distressed securities when a Sub-Adviser believes they offer significant potential for higher returns or can be exchanged for other securities that offer this potential.

Scope of Investments. The Acquiring Fund may invest in the securities of companies of any market capitalization. The Acquiring Fund will generally seek diversification across markets and industries. The Acquiring Fund has no geographic limits on where it may invest, and therefore may invest in the securities of corporate and governmental issuers in both developed and emerging markets around the world. The Acquiring Fund may emphasize foreign securities when Nuveen Asset Management expects these investments to outperform U.S. securities. In addition to investing in

 

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foreign securities, the Acquiring Fund may actively manage its exposure to foreign currencies through the use of forward currency contracts and other currency derivatives. The Acquiring Fund may hold a portion of its assets in cash or cash equivalents, including foreign cash equivalents or foreign bank deposits.

Other Investment Companies. The Acquiring Fund may invest in other open- or closed-end investment companies, including exchange-traded funds (“ETFs”), that invest primarily in securities of the types in which the Fund may invest directly. The Acquiring Fund may invest in investment companies that are advised by the Adviser, affiliates of the Adviser, and unaffiliated investment advisers to the extent permitted by applicable law and/or pursuant to exemptive relief from the SEC. The Acquiring Fund may invest in investment companies that sell securities short, and that may use the proceeds of the short sales to purchase additional portfolio securities.

Derivatives. In addition to the Acquiring Fund’s options writing strategy described below, the Acquiring Fund may purchase and sell futures contracts, enter into various interest rate transactions such as swaps, caps, floors or collars, currency transactions such as currency forward contracts, currency futures contracts, currency swaps or options on currency or currency futures and swap contracts (including, but not limited to, credit default swaps and total return swaps) and may purchase and sell exchange-listed and OTC put and call options on securities and swap contracts, financial indices and futures contracts and use other derivative instruments or management techniques. The Acquiring Fund may use derivatives for a variety of reasons, including for hedging purposes, to manage risk or to enhance the Acquiring Fund’s return.

Options Strategy. As part of its investment strategy, the Acquiring Fund may employ an options strategy whereby the Fund sells (writes) call options on a varying percentage of the market value of the Fund’s equity portfolio. The Fund may also buy calls, buy puts, and sell puts as a secondary emphasis of the options strategy. This may also include certain uncovered options positions. The options may be on indexes, custom baskets of securities and individual securities. The Fund’s options strategy may include OTC options and exchange-traded options.

Leverage. The Acquiring Fund will use leverage to seek to achieve its investment objective. The Acquiring Fund’s use of leverage may increase or decrease from time to time in its discretion and the Fund may, in the future, determine not to use leverage. The Acquiring Fund currently anticipates utilizing leverage for investment purposes in an amount equal to approximately 30% of its Managed Assets through a number of methods, including borrowings, the issuance of preferred shares, commercial paper or notes, by entering into reverse repurchase agreements, and by investing in residual interest certificates of tender option bond trusts, also called inverse floating rate securities, that have the economic effect of leverage because the Acquiring Fund’s investment exposure to the underlying bonds held by the trust have been effectively financed by the trust’s issuance of floating rate certificates. The Acquiring Fund may also invest in inverse floaters and derivative instruments with leverage embedded in them. The Acquiring Fund is permitted to borrow money or issue debt securities in an amount up to 33 1/3% of its Managed Assets (50% of its net assets), issue preferred shares in an amount up to 50% of its Managed Assets (100% of its net assets) and enter into reverse repurchase agreements or derivative instruments with leverage embedded in them to the maximum extent permitted by the Investment Company Act of 1940 and/or the rules, guidance or positions thereunder. “Managed Assets” means the total assets of the Acquiring Fund (including any assets attributable to money borrowed for investment purposes) minus the sum of the Acquiring Fund’s accrued liabilities (other than liabilities for money borrowed for investment purposes).

 

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Temporary Defensive Periods. During temporary defensive periods the Acquiring Fund may invest any percentage of its total assets in short-term high quality debt securities. The Acquiring Fund may not achieve its investment objective during such periods.

Investment Policies of the Target Funds

Dividend and Income Fund

In its efforts to achieve its investment objectives, Dividend and Income Fund utilizes equity and debt strategies focused on providing current income, total return and reducing U.S. interest rate sensitivity. Dividend and Income Fund invests approximately equal proportions in (1) U.S. and foreign dividend-paying common stocks, (2) dividend paying common stocks issued by real estate companies and REITs, (3) emerging markets sovereign debt, and (4) adjustable rate senior loans.

Dividend and Income Fund generally invests in:

 

   

(i)(a) dividend-paying common stocks and (b) dividend-paying common stocks issued by companies that derive at least 50% of their revenues from the ownership, construction, financing, management or sale of commercial, industrial, or residential real estate (or that have at least 50% of their assets invested in such real estate), commonly referred to as “REOCs”, including REITs; and

 

   

(ii)(a) debt securities and other instruments that are issued by, or that are related to, government, government-related and supranational issuers located, or conducting their business, in emerging market countries and (b) senior secured loans.

Dividend and Income Fund’s target weighting is approximately 50% equity and 50% debt. However, subject to the limitations noted below, the relative allocations of the Dividend and Income Fund’s Managed Assets for investment in equity securities and debt securities, and allocations to the different types of securities within each such asset class, will vary from time to time consistent with the Fund’s investment objectives.

Under normal conditions, Dividend and Income Fund expects to invest at least 40%, but no more than 70%, of its Managed Assets in equity security holdings and at least 30%, but no more than 60%, of its Managed Assets in debt security holdings.

Dividend and Income Fund’s investment adviser has entered into sub-advisory agreements with NWQ, Security Capital, Nuveen Asset Management and Wellington.

NWQ manages the global equity income strategy portion of Dividend and Income Fund consisting of a portfolio focused on income producing and dividend paying equity securities. Security Capital manages the REIT strategy portion of Dividend and Income Fund consisting of a portfolio focused on dividend-paying common stock REITs. Nuveen Asset Management manages the adjustable rate senior loan strategy portion of Dividend and Income Fund consisting of a portfolio focused on senior loans. Wellington manages the emerging market debt strategy portion of Dividend and Income Fund consisting of a portfolio focused on emerging market sovereign debt. Wellington also manages Dividend and Income Fund’s forward foreign currency strategy. The Adviser is responsible for managing Dividend and Income Fund’s investments in swap contracts.

 

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Dividend and Income Fund has the following principal investment policies that apply at the Fund level and various principal investment policies that apply specifically to each portion of the portfolio managed by each sub-adviser. The following policies apply only at the time of any new investment.

Under normal market conditions:

 

   

Dividend and Income Fund will invest at least 80% of its Managed Assets in income producing or dividend paying securities.

 

   

Dividend and Income Fund may invest up to 60% of its Managed Assets in non-U.S. issuers of any currency.

 

   

Dividend and Income Fund intends to invest at least 15%, but no more than 40%, of its Managed Assets in common stocks of issuers (other than REITs) that have historically paid periodic dividends or otherwise made distributions to common stockholders.

 

   

Dividend and Income Fund will invest at least 15%, but no more than 40%, of its Managed Assets in dividend-paying common stocks issued by real estate companies, including REOC’s and REITs.

 

   

Dividend and Income Fund will invest at least 15%, but no more than 30%, of its Managed Assets in senior secured loans.

 

   

Dividend and Income Fund will invest at least 15%, but no more than 30%, of its Managed Assets in emerging market sovereign debt securities.

 

   

Dividend and Income Fund may invest up to 10% of its Managed Assets in securities that, at the time of investment, are rated below B by at least one NRSRO or are unrated but judged to be of comparable quality, except no more than 5% of the its Managed Assets may be invested in such securities rated below CCC by at least one NRSRO or that are unrated but judged to be of comparable quality. This policy applies only at the Fund level and does not apply individually to any portion managed by any of the Sub-Advisers.

 

   

Dividend and Income Fund will not invest in inverse floating rate securities.

Global Equity Income Strategy. Under normal market conditions, NWQ will invest its portion of Dividend and Income Fund’s Managed Assets in the global equity income strategy as follows:

 

   

At least 80% of the global equity income strategy is invested in equity security holdings that may include common stock, preferred securities, convertible securities, and common and preferred securities issued by MLPs and REITs of U.S. and non-U.S. issuers.

 

   

At least 65% of the global equity income strategy is invested in income-producing or dividend-paying securities.

 

   

No more than 20% of the global equity income strategy may be invested in emerging markets issuers.

 

 

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No more than 20% of the global equity income strategy may be invested in convertible securities.

 

   

No more than 20% of the global equity income strategy may be invested in preferred securities.

 

   

No more than 20% of the global equity income strategy may be invested in debt.

REIT Strategy. Under normal market conditions, Security Capital will invest its portion of Dividend and Income Fund’s Managed Assets in the REIT strategy as follows:

 

   

At least 80% of the REIT strategy is invested in common stocks issued by REITs.

 

   

No more than 20% of the REIT may be invested in any one of the following investment categories: preferred securities, convertible securities and rights and warrants to acquire any of the foregoing, each issued by REITs.

Adjustable Rate Senior Loan Strategy. Under normal market conditions, Nuveen Asset Management will invest its portion of Dividend and Income Fund’s Managed Assets in the adjustable rate senior loan strategy as follows:

 

   

At least 80% of the adjustable rate senior loan strategy will be invested in senior secured loans, except that up to 5% may be invested in senior unsecured loans.

 

   

No more than 20% of the adjustable rate senior loan strategy may be invested in other senior unsecured loans, domestic corporate bonds, notes and debentures, convertible debt securities, and other similar types of corporate instruments, including high yield securities.

Emerging Market Debt Strategy. Under normal market conditions, Wellington will invest its portion of Dividend and Income Fund’s Managed Assets in the emerging market debt strategy as follows:

 

   

At least 80% of the emerging market debt strategy will be invested in sovereign debt securities issued by issuers located, or conducting their business, in emerging markets countries.

 

   

No more than 20% of the emerging market debt strategy may be invested may be invested in other non-U.S. sovereign debt securities and non-U.S. (including emerging market) corporate bonds, notes and debentures and other similar types of corporate instruments.

Total Return Strategy Fund

Under normal conditions, Total Return Strategy Fund invests at least 60% of its Managed Assets in common stocks whose dividends may be eligible for favorable income tax treatment.

Total Return Strategy Fund’s investment adviser has entered into sub-advisory agreements with NWQ to manage the Fund’s investments in dividend-paying common and preferred stocks and covered call and put options (the “Global Equity Income Strategy”) and Nuveen Asset Management to manage the Fund’s investments in senior loans and other debt instruments.

 

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Under normal market conditions:

 

   

Total Return Strategy Fund may purchase senior loans and other debt instruments that, at the time of investment, are rated below the four highest grades (Ba or BB or lower) by at least one NRSRO or are unrated but judged to be of comparable quality; however, no more than 5% of its Managed Assets may be invested in securities rated below CCC- or Caa3 by S&P, Moody’s or Fitch or that are unrated but judged to be of comparable quality.

 

   

Total Return Strategy Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in securities of the types in which the Fund may invest directly. In addition, Total Return Strategy 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.

 

   

Total Return Strategy Fund may invest up to 70% of its Managed Assets in non-U.S. issues of any currency.

 

   

Total Return Strategy Fund may invest up to 20% of its Managed Assets in emerging market countries.

 

   

Total Return Strategy Fund will not invest in inverse floating rate securities.

Global Equity Income Strategy. With respect specifically to Total Return Strategy Fund’s Global Equity Income Strategy only, under normal market conditions:

 

   

NWQ may invest in common stocks, preferred securities, convertible securities, convertible preferred securities, REITs, MLPs and debt.

 

   

Any credit rating policies described above that apply generally to Total Return Strategy Fund’s investments will not apply to the securities invested pursuant to the Global Equity Income Strategy.

The foregoing policies apply only at the time of any new investment.

Dividend Growth Fund

In pursuing its investment objective, Dividend Growth Fund seeks to reduce and defer potential federal income tax liabilities incurred by the holders of its common shares in connection with their investment in the Fund.

Dividend Growth Fund seeks to achieve its investment objective by investing in dividend-paying equity securities consisting primarily of common stocks of mid- to large-cap companies that have attractive dividend income and the potential for future dividend growth and capital appreciation and, to a lesser extent, preferred stocks of mid- to large-cap companies. Mid-cap companies are those with market capitalizations in the range of $1 billion to $4.5 billion. Large-cap companies are considered to be those with market capitalizations in excess of $4 billion. Dividend Growth Fund also sells call options in seeking to enhance risk-adjusted performance relative to an all equity portfolio.

 

 

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Dividend Growth Fund will invest primarily in the dividend growth equity strategy consisting of dividend-paying equity securities (primarily common stocks). Dividend Growth Fund also may invest in the income-oriented strategy consisting of preferred securities and other fixed income securities, including both fixed and floating rate securities. Dividend Growth Fund’s investment adviser has entered into sub-advisory agreements with Santa Barbara to manage the dividend-growth equity strategy and NWQ to manage the Fund’s income-orientated strategy.

Under normal market circumstances, Dividend Growth Fund will invest at least 80% of its Managed Assets in securities that are eligible to pay tax-advantaged dividends.

Under normal market conditions:

 

   

Dividend Growth Fund expects to invest more than 25% of its Managed Assets in equity securities of companies principally engaged in the financial services sector and to a lesser extent in other economic sectors, such as the utilities and energy sectors, that historically have provided higher dividend yields than companies in other sectors or industries.

 

   

Dividend Growth Fund may invest up to 50% of its Managed Assets in securities of non-U.S. issuers that are U.S. dollar denominated or that are converted into ADRs or other types of dollar-denominated depositary receipts immediately after purchase.

 

   

Dividend Growth Fund may invest up to 25% of its Managed Assets in securities that, at the time of investment, are rated below the four highest grades (Ba or BB or lower) by all NRSROs or are unrated but judged to be of comparable quality.

 

   

Dividend Growth Fund may invest up to 10% of its Managed Assets in securities of other open- or closed-end investment companies (including ETFs) that invest primarily in securities of the types in which the Fund may invest directly. In addition, Dividend Growth 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.

 

   

Dividend Growth Fund will not write call options on more than 35% of its Managed Assets.

 

   

Dividend Growth Fund may buy and sell combinations of call options, put options and futures contracts in both the listed and OTC markets on up to 5% of its Managed Assets.

The foregoing policies apply only at the time of any new investment.

Approving Changes in Investment Policies

The Board of each Target Fund may change the policies above without a shareholder vote. However, with respect to Dividend and Income Fund’s policy of investing at least 80% of its Managed Assets in income producing or dividend paying securities, such policy may not be changed without 60 days’ prior written notice to shareholders.

 

 

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Target Fund Portfolio Contents

The securities and other instruments in which the Target Funds may invest and certain investment techniques that the Target Funds may use are listed below.

 

   

Common Stock. Each Target Fund may invest in common stocks, including in the case of Dividend and Income Fund and Total Return Strategy Fund those issued by REITs and MLPs.

 

   

Preferred Securities. Each Target Fund may invest in preferred securities, including in the case of Dividend and Income Fund and Total Return Strategy Fund preferred securities issued by REITs and MLPs and in the case of Dividend Growth Fund fixed preferred securities and preferred securities issued by REITs. The term “preferred securities” also includes certain hybrid securities and other types of preferred securities that do not have the traditional features of preferred securities.

 

   

Convertible Securities. Dividend and Income Fund may invest in convertible securities, which may include convertible debt, convertible preferred stock, synthetic convertible securities and may also include secured and unsecured debt, based upon the judgment of the Fund’s Sub-Advisers. The convertible securities in which Dividend and Income Fund may invest also includes convertible securities issued by REITs and MLPs. Total Return Strategy Fund and Dividend Growth Fund also may invest in convertible securities, which may include convertible preferred stock.

 

   

Rights and Warrants. Dividend and Income Fund may invest in rights and warrants in any of the foregoing investments in which it is permitted to invest. Dividend Growth Fund may invest in warrants on common stock.

 

   

Depository Receipts. Total Return Strategy Fund and Dividend Growth Fund may purchase depositary receipts such as ADRs, European Depositary Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”).

 

   

Government Debt Securities. Dividend and Income Fund may invest in debt securities of governmental issuers in all countries, including emerging market countries. Dividend and Income Fund may invest in sovereign debt securities issued by issuers located, or conducting their business, in emerging markets countries, and a wide variety of bonds and other debt instruments of varying maturities issued by domestic and non-U.S. corporations, including high yield debt securities. Total Return Strategy Fund and Dividend Growth Fund may invest in U.S. government debt securities, U.S. local government debt securities and U.S. government agency securities of any maturity, including U.S. government mortgage-backed securities.

 

   

International Debt Securities. The Fund may invest in international debt securities, including those of emerging market issuers. These securities may be U.S. dollar denominated or non-U.S. dollar denominated and include: (a) debt obligations issued or guaranteed by foreign national, provincial, state, municipal or other governments with taxing authority or by their agencies or instrumentalities; (b) debt obligations of supranational entities; (c) debt obligations (including U.S. dollar and non-U.S. dollar denominated) and other fixed-income securities of foreign corporate issuers; and

 

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(d) non-U.S. dollar denominated debt obligations of U.S. corporate issuers. The Fund may also invest in securities denominated in currencies of emerging market countries.

 

   

Corporate Debt Securities. Dividend and Income Fund and Total Return Strategy Fund may invest in corporate debt securities, including corporate bonds.

 

   

Senior Loans. Dividend and Income Fund may invest in fixed and floating rate loans. Loans may include senior loans and secured and unsecured junior loans, including subordinated loans, second lien or more junior loans and bridge loans. Total Return Strategy Fund also may invest in senior loans.

 

   

High-Yield Securities. Each Target Fund’s investments may include investment grade and below investment grade securities. Below investment grade securities (such securities are