Nuveen Mortgage Opportunity Term Fund 2 (XJMTX) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.         )

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Nuveen Mortgage Opportunity Term Fund 2

(Name of Registrant As Specified in its Charter)

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Nuveen Funds Response to ISS Proxy Advisory

Services’

Recommendations

July 25, 2014

Nuveen Funds Response

2

•

ISS Proxy Advisory Services has recently recommended that shareholders of the

following Nuveen Funds withhold votes for members of the Funds’

Audit

Committee in connection with the election of Trustees:

•

Nuveen Energy MLP Total Return Fund (JMF)

•

Nuveen Mortgage Opportunity Term Fund (JLS)

•

Nuveen Mortgage Opportunity Term Fund 2 (JMT)

•

Nuveen

Investment

Funds,

Inc.

–

Nuveen

International

Select

Fund

•

ISS Proxy Advisory Services’

recommendation was based on a determination that

the Funds Audit Committee approved an excessive amount of non-audit fees paid to

each Fund’s auditor, which increases the potential for conflicts of interest.

•

Nuveen Fund Advisors, LLC (NFAL), each Fund’s investment adviser, respectfully

disagrees with that determination and requests that ISS Proxy Advisory Services

reconsider its determination.

.

For Internal Use Only.

Nuveen Funds Response, Cont.

3

•

NFAL believes the Audit committee acted appropriately in approving the non-audit

related services in question for the following reasons:

•

Each of the four Funds have unique circumstances within the Nuveen Fund complex that

require a higher than normal level of non-audit services be performed.

•

PwC is uniquely or more qualified than other firms to perform the non-audit services in

question on behalf of the Funds.

•

While

the

fees

paid

to

PricewaterhouseCoopers

(PwC)

by

each

Fund

for

non-audit

services

may appear out of proportion, the overall amount of non-audit fees paid to PwC by the Funds

is de minimis

compared to the overall audit fees paid by the complex to PwC.

•

The Audit Committee has taken into account PwC’s expertise in the areas requiring additional

services and, together with the overall amount of audit-related fees paid to PwC by the

Nuveen Funds complex, has determined that the use of PwC to perform these services was

and is in the best interests of each Fund and their shareholders.

•

This determination was made with full disclosure of all facts and in accordance with each

Fund’s Audit Committee Charter and applicable SEC and NYSE rules and regulations.

For Internal Use Only.

Nuveen Energy MLP Total Return Fund (JMF)

4

•

Nuveen Energy MLP Total Return Fund (JMF)

•

The Fund invests primarily in master limited partnerships (MLPs), which pass through active business

income to the Fund that is sourced to various states.

•

The Fund has elected to be taxed as a C-Corporation and therefore pays taxes to various states, the amounts

of which are determined using a combination of apportionment factors that are not provided by the MLPs or

otherwise generally available.

•

One other accounting firm provides tax return preparation services tailored for MLPs.

•

PwC, however, has the overwhelming market share in this area, which allows them direct access to

information needed for the apportionment services provided to the Fund, thereby making them uniquely and

solely qualified to perform those services.

•

In

addition,

JMF

was

the

acquiring

fund

in

a

fund

reorganization

and

the

Fund

incurred

additional

non-audit

tax-related expenses associated with the Fund calculating potential loss limitations that are typical in fund

reorganizations.

•

The $110,000 of non-audit related fees incurred in fiscal year 2013 as reported in the Fund’s proxy statement

were

comprised

of

the

following:

$40,000

apportionment

assistance

for

JMF

(recurring);

$37,500

apportionment

assistance

for

MTP,

which

merged

into

JMF

(non-recurring);

$25,850

tax

guidance

in

preparing JMF’s tax calculation of capital loss  carry forward and net operating loss limitations due to the

merger of MTP and JMF

(non-recurring); and $6,750 miscellaneous tax assistance associated with

understanding

state

sourcing

rules

for

several

state

tax

returns

(non-recurring).

•

Based on the foregoing, and a determination that such services would not impair PwC’s independence with

respect

to

the

Fund,

the

Audit

Committee

approved

the

use

of

PwC

for

such

non-audit

services.

5

•

Nuveen Mortgage Opportunity Term Fund (JLS)

•

Nuveen Mortgage Opportunity Term Fund 2 (JMT)

•

The Funds invest primarily in mortgage-backed securities (MBS)

•

The tax accretion of discount on MBS that have significant principal repayments differs from financial

statement reporting purposes.

•

The Funds engaged PwC’s Financial Modeling group to assist in the calculation of discount accruals on a tax

basis and the basis adjustments associated with sales of MBS, both of which are based on factors not readily

available.

•

When the Funds were launched in 2009/2010, only one other accounting firm provided the necessary services.

•

The other firm’s modeling contained significant assumptions and estimates when compared to modeling

performed by PwC’s Financial Modeling group, thereby making PwC uniquely qualified to perform those

services.

•

For

JLS,

the

$79,208

of

non-audit

related

fees

incurred

in

fiscal

year

2013

as

reported

in

the

Funds’

proxy

statements were comprised of the following: $74,838 related to the discount calculations (recurring); and

$4,370 related to annual excise tax review (recurring).

•

For

JMT,

the

$76,332

of

non-audit

related

fees

incurred

in

fiscal

year

2013

as

reported

in

the

Funds’

proxy

statements were comprised of the following: $71,962 related to the discount calculations (recurring); and

$4,370 related to annual excise tax review (recurring).

•

Based on the foregoing and a determination that such services would not impair PwC’s independence with

respect to the Funds, the Audit Committee approved the use of PwC for such non-audit services.

Nuveen Mortgage Opportunity Term Fund (JLS)

Nuveen Mortgage Opportunity Term Fund 2 (JMT)

Nuveen International Select Fund

6

•

Nuveen International Select Fund

•

The Fund invests a significant portion of its assets in companies domiciled in the European Union (EU) which

require taxes to be withheld on payments made to the Fund.  Court cases have called into question whether

these taxes should apply, necessitating the Fund to retain an outside administrator to assist in a reclaim process

for reimbursement of the withheld taxes.

•

NFAL and the Fund’s Audit Committee determined that PwC is a recognized provider of these services at

competitive rates.

•

The

reclaim

process

has

no

impact

on

the

financial

statements

of

the

Funds

and

NFAL

management

makes

the

annual determination of which reclaims to file separate and independent of PwC’s input.

•

The Fund is a series of Nuveen Investment Funds, Inc., a Maryland corporation (NIF) that has 28 separate

series, each of which constitutes a separate fund.

•

NIF elects directors at the corporate level as opposed to the Fund level. 

•

The $38,652 of non-audit related fees incurred by the Fund in fiscal year 2013 as reported in the Fund’s proxy

statement

were

comprised

of

the

following:

$23,937

EU

reclaim

assistance

(recurring);

$12,215

preparation

of

India

income

tax

returns

(recurring);

and

$2,500

excise

tax

review

(recurring).

•

Based on the foregoing and a determination that such services would not impair PwC’s independence with

respect to the Fund and NIF, the Audit Committee approved the use of PwC for such non-audit services.