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Nuveen Floating Rate Income Fund Rights Offering

The Nuveen Floating Rate Income Fund’s (NYSE: JFR) Board of Trustees has approved the terms of the issuance of transferable rights to the holders of shares of the Fund’s common shares as of January 21, 2025 (the record date). Holders of rights will be entitled to subscribe for additional common shares at a discount to the market price of the common shares. 

Why should I exercise my rights?

The Advisor believes exposure to senior loans continues to deliver value to investors through high current income and low-interest rate sensitivity, resulting in attractive risk-adjusted returns compared to other fixed income asset classes.

Higher yields available in Senior Loans

The Advisor has identified opportunities to buy senior loans that it believes are attractively valued and are outliers versus the broader market, providing attractive income and potential for capital appreciation.

Significant number of loans trading at discounts to par

The Advisor has experience investing over multiple credit cycles.

The Fund has generated attractive returns over the broader loan market.

JFR has returned 195% on NAV since inception

What is a transferable rights offering?
  • A transferable rights offering provides investors of a fund the opportunity, but not the obligation to acquire new shares of the fund at a discounted price during a specific offering period.
  • Shareholders receive a set number of rights based on how many shares they already own.
  • A specific number of rights are required to purchase each additional share.
  • Additional shares are purchased at a subscription price which is calculated using a specific formula. This formula usually provides a discount to the market price and/or net asset value.
  • In a transferable rights offering, shareholders that do not wish to participate have the option to sell their rights in the open market. The rights have their own ticker symbol and trade on the New York Stock Exchange.
  • Rights offerings provide a way for closed-end funds to raise additional capital quickly, in order to capitalize on attractive market opportunities, with the ultimate goal of enhancing returns to shareholders.
Has the fund conducted a rights offering in the past?
No, this is the first such offering in the fund’s operating history since it came to market in 2004.
Why is the fund conducting the offering at this time?
  • Fund management believes the result of the investment of this additional capital will benefit all shareholders.
  • The Fund’s investment advisor, Nuveen Fund Advisors, LLC (the “Advisor”), believes this is an attractive time to raise additional capital for the Fund based on several factors, including the following potential benefits:
    • Attractive yields: the Advisor believes that new proceeds can be invested in securities with significantly higher yields than the current portfolio’s average yield. This would have a meaningful positive effect on the fund’s earnings and income generation.
    • Fortifying the Distribution: the fund’s distribution currently consists of net investment income and return of capital. Enhancing the yield of the portfolio should reduce the amount of return of capital needed to pay the monthly distribution.
    • Total return: reducing the reliance on return of capital to support the distribution is expected to positively impact NAV returns.
    • Lower Fund expenses: anticipated positive impact to the Fund’s total expense ratio by spreading fixed costs over a larger asset base.
    • Tax-efficiency: potential reduction in the need to sell existing portfolio positions, which may reduce taxable events for shareholders.
    • Enhanced liquidity: an increase in the fund’s outstanding shares may improve secondary market liquidity for the fund’s shares, potentially leading to a reduction in the share price’s bid ask-spread.
What are the important dates?
  • Subscription period: January 21, 2025 – February 19, 2025 (at 5 PM EST)*
  • Record Date: January 21, 2025
  • JFR trades Ex-Rights on January 21, 2025
  • Date Rights begin trading: January 17, 2025 on a when-issued basis
  • Date Rights Cease Trading: February 18, 2025 at the close of the NYSE* 

*Unless the offering is extended

Can I subscribe for additional shares?
  • If there are unexercised rights, shareholders of record on January 21, 2025, who fully exercise all rights initially issued to them are permitted to subscribe for additional common shares that were not subscribed for by other record date common shareholders at the subscription price (over-subscription privilege).
  • Over-subscription shares may only be acquired if there are unexercised rights.
  • If over-subscription requests exceed the number of available shares (from unexercised rights), then the available shares will be allocated pro-rata based on the number of rights originally awarded.
  • Rights acquired in the secondary market are not eligible for the over-subscription privilege.
Secondary Oversubscription:
  • If the fund’s offering is over-subscribed (requests for more than the total shares offered), then the Board of Trustees may authorize the issuance of up to an additional 25% of the offering’s shares.
  • Only shareholders of record on January 21, 2025, who fully exercise all rights initially issued to them, and have requested additional shares, may participate in any secondary oversubscription.
  • Rights acquired in the secondary market are not eligible for a potential secondary over-subscription.
Do I have to participate in the offering?
  • No. Participation in the offering is at shareholder discretion.
    • Shareholders have three options:
      • Subscribe for the offering (partially or fully).
      • Do nothing, in which the rights will expire worthless.
      • Sell rights on the secondary market under the ticker JFR RT
Are my newly acquired shares entitled to the January and February distributions?

Shares acquired in the offering will not be eligible for either of the distributions declared in January or February that are payable in February and March, respectively.  However, newly acquired shares will be eligible for the March distribution that is payable in April.

How do I participate in the offering?
  • To exercise your rights, contact your broker or financial advisor who can forward your instructions on your behalf.
  • If you do not have a broker or financial advisor, you should complete the subscription certificate and deliver it to the subscription agent, together with your payment, at one of the locations indicated on the subscription certificate. If you need assistance you can call the Information Agent, Georgeson LLC, toll-free at (833) 880-3673.
What are the tax consequences of this offering?
  • The awarded rights will have no cost basis.  Therefore, investors that do not exercise their rights, and allow them to expire will not incur a loss.
  • Rights purchased in the secondary market will assume a cost basis equal to the purchase price. Therefore, any rights purchased in the secondary market that go unexercised will result in in a capital loss equal to the purchase price.
  • Any rights sold in the secondary market will be considered a capital gain or loss.
  • The cost basis for shares acquired through the exercise of rights will equal the cost of the right (if any) plus the subscription price.
  • Investors can find further information in the offering prospectus.
  • Investors are urged to consult their own tax advisors to determine the tax consequences of the Rights offering and investing in the Fund.
Can non-US accounts participate in the offering?

No. However, their rights can be sold.  They should contact their financial advisor or intermediary, or if they do not have one, contact the Information Agent toll-free at (833) 880-3673.

PLEASE READ THE PROSPECTUS SUPPLEMENT AND PROSPECTUS FOR MORE INFORMATION.

These "FAQs" are qualified in their entirety by reference to the information included in the accompanying prospectus supplement and prospectus. Investors should consider the Fund's investment objective, risks, and charges and expenses before investing. The prospectus supplement and prospectus contains this and other information about the Fund, including risk factors that should be carefully considered before participating in the offer.

For more information, and to request a prospectus supplement and prospectus, shareholders can contact the Fund’s Information Agent, Georgeson LLC, toll-free at (833) 880-3673.

Performance data shown represents past performance and does not predict or guarantee future results. 

1  As of 30 Sept 2024. Nuveen Leveraged Finance assets under management (AUM).
2  The loans referenced in this presentation are those that have been managed by Symphony Asset Management LLC since inception. As of December 31, 2020, Symphony Asset Management LLC has merged with and into Nuveen Asset Management, LLC. Along with other registered investment advisers, Nuveen Asset Management, LLC comprises part of the Nuveen Leveraged Finance platform. As such, the Nuveen name is being used contemporaneously with Symphony.
3  JP Morgan’s market default and recovery rate data was sourced from the JPMorgan North America Credit Research Default Monitor as of 31 Dec 2023. Nuveen calculates its default and recovery rate independently and includes in its universe loans for issuers outside North America. As a result Nuveen’s calculation methodologies may differ materially from JPMorgan’s. Default rates are calculated as the total loan par value that defaulted, divided by the ending par value of all loans at year-end, including all invested assets and cash equivalents. Nuveen includes in its default calculation loans that have stopped paying interest and does not include the loans of companies in bankruptcy which continue to make payments. Recovery rates are based on the first lien recovery and are calculated as the sum of all cash flows after the default date plus the residual market value of the asset (as of 31 Dec 2023), divided by the weighted-average cost of the asset. Nuveen began managing Senior Loans in November 2001. This analysis illustrates default rate information beginning in 2002. There were no defaults in loan portfolios during the last two months of 2001. There is no guarantee that Nuveen will be able to maintain such default and recovery rates relative to the loan market as measured by the JPMorgan data.
4  JFR NAV performance shown from 31 Mar 2004 to 31 Dec 2024

The common shares may decline in value or even lose all of their value. The accompanying prospectus supplement and prospectus should be read carefully before investing.

CERTAIN RISKS. Investing in the Fund involves risks, including the risk that investors may receive little or no return on their investment or may lose part or all of their investment. Below is a summary of certain principal risks of investing in the Fund. For a more complete discussion of the risks of investing in the Fund, see “Special Characteristics and Risks of the Rights Offering“ in the prospectus supplement and “Risk Factors” in the prospectus. Investors should consider carefully the following principal risks before investing in the Fund. An investment in the Fund is subject to investment and market risk, including the possible loss of an investor’s entire investment. Before making an investment decision, a prospective investor should (i) consider the suitability of this investment with respect to his or her investment objectives and personal situation and (ii) consider factors such as his or her personal net worth, income, age, risk tolerance and liquidity needs.

TAXATION. The Fund has elected to be treated and has qualified, and intends to continue to qualify annually to be treated for U.S. federal income tax purposes, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, the Fund generally will not pay corporate level federal income taxes on any net ordinary income or capital gains that it currently distributes to its common shareholders. To qualify and maintain its qualification as a RIC for U.S. federal income tax purposes, the Fund must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of its net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Taxation” and “Tax Matters” in the accompanying prospectus supplement and prospectus, respectively.

DILUTION Record date shareholders who do not fully exercise their Rights will, at the completion of the offer, own a smaller proportional interest in the Fund than owned prior to the offer. The completion of the offer will result in immediate voting dilution for such common shareholders. Further, the expenses associated with the offer will immediately reduce the net asset value of each outstanding common share. In addition, if the subscription price is less than the net asset value per common share as of the expiration date, the completion of this offer will result in an immediate dilution of the net asset value per common share for all existing common shareholders (i.e., will cause the net asset value per common share of the Fund to decrease). It is anticipated that existing common shareholders will experience immediate dilution even if they fully exercise their rights. Such dilution is not currently determinable because it is not known how many common shares will be subscribed for, what the net asset value per common share or market price of the Fund’s common shares will be on the expiration date or what the subscription price per common share will be. The Fund will pay expenses associated with the offer, estimated at approximately $1,260,000. All of the costs of the offer will be borne by the Fund’s common shareholders. See “Summary of Fund Expenses” in the accompanying prospectus supplement and prospectus for more information.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the Fund’s actual results or level of performance to be materially different from any future results or level of performance expressed or implied by such forward looking statements. Such factors include, among others, those listed under “Special Characteristics and Risks of the Rights Offering” in the prospectus supplement and “Risk Factors” in the prospectus. As a result of these and other factors, the Fund cannot give you any assurances as to its future results or level of performance, and neither the Fund nor any other person assumes responsibility for the accuracy and completeness of such statements. The Fund undertakes no obligation to publicly update or revise any forward-looking statements made herein.

 

 

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