UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21471
---------------------
Nuveen Tax-Advantaged Total Return Strategy Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2004
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT December 31, 2004
Nuveen Investments
Closed-End
Exchange-Traded
Funds
Nuveen
Tax-Advantaged
Total Return
Strategy Fund
JTA
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OPPORTUNITIES FOR CAPITAL APPRECIATION AND TAX-ADVANTAGED DIVIDENDS FROM A
PORTFOLIO OF VALUE EQUITIES AND SENIOR LOANS
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Timothy R. Schwertfeger
Chairman of the Board
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Chairman's
LETTER TO SHAREHOLDERS
I am very pleased to report that for the period from your Fund's inception in
January 2004 through December 31, 2004, your Fund was able to provide you with
attractive tax-advantaged income and capital appreciation potential. For details
on how the Fund has performed so far, I encourage you to read the Portfolio
Managers' Perspective that immediately follows this letter.
Portfolio diversification is a recognized way to try to reduce some of the risk
that comes with investing. Since one part of your portfolio may be going up when
another is going down, portfolio diversification may help smooth your investment
"IN ADDITION TO PROVIDING ATTRACTIVE MONTHLY DISTRIBUTIONS, AN EQUITY INVESTMENT
LIKE YOUR FUND MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO
DIVERSIFICATION."
returns over time. In addition to providing attractive monthly distributions, an
equity investment like your Fund may help you achieve and benefit from greater
portfolio diversification. Your financial advisor can explain these advantages
in more detail. urge you to contact him or her soon for more information on this
important investment strategy.
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mail and the Internet. Sign up is quick and easy -
see the inside front cover of this report for instructions.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
mission continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you secure your long-term
financial goals. We thank you for choosing us as a partner as you work toward
that objective.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2005
Nuveen Tax-Advantaged Total Return Strategy Fund
(JTA)
Portfolio Managers'
PERSPECTIVE
The Fund features management by two affiliates of Nuveen Investments. The Fund's
investments in dividend-paying common or preferred stocks are managed by NWQ
Investment Management Company, LLC (NWQ), while the Fund's investments in senior
corporate loans and other debt instruments are managed by Symphony Asset
Management, LLC (Symphony). Jon Bosse, Chief Investment Officer of NWQ, leads
the Fund's management team at that firm. He has more than 18 years of investment
management experience. The Symphony team is led by Gunther Stein and Lenny
Mason, who have more than 25 years of combined investment management experience,
much of it in evaluating and purchasing senior corporate loans and other
high-yield debt. Here Jon, Gunther and Lenny talk about general economic
conditions, their management strategies and the performance of the Fund for the
period ended December 31, 2004.
WHAT WERE THE GENERAL MARKET CONDITIONS WITHIN YOUR ASSET CLASS OVER THE COURSE
OF THE PERIOD FROM THE FUND'S INCEPTION IN JANUARY 2004 THROUGH THE END OF ITS
FISCAL YEAR ON DECEMBER 31, 2004?
Generally, the U.S. economy presented a slowly improving picture in 2004. The
Gross Domestic Product (GDP) grew at at preliminary estimate of 4.4% over the
course of the full year. Inflation remained largely in check, as the Consumer
Price Index rose 3.3% due primarily to increased energy costs. Corporate profits
grew by an average of about 20%, and there was an increase of approximately 2
million jobs with the unemployment rate dropping to 5.4% at the end of 2004 from
5.7% at the beginning of the year. The fourth quarter stock market rally seemed
to reflect a belief by some that the economic recovery had become more
self-sustaining.
Almost all equity indices posted strong, double-digit returns in 2004,
confounding many market observers. While many were expecting issues such as a
weak U.S. dollar, significant increases in almost all commodity prices, and
large trade and budget deficits to hurt equity returns, the market did not seem
to be significantly affected by these factors. During the spring and summer of
2004, the U.S. stock market was stuck in a very tight trading range as investors
worried about the likely outcome of U.S. elections, the risk of a terrorist
event disrupting the elections, and the rising price of oil. However, once the
election uncertainty was gone - and helped by some weakness in oil prices -
stocks surged higher, with many ending the year at or near their highs. Through
the first nine months of 2004 the S&P 500 was basically unchanged, but this
widely followed index ended the year up over 10% with nearly all of the gains
occurring in the fourth quarter.
4
This occurred despite the Federal Reserve raising interest rates twice in the
fourth quarter and five times between June and December 2004. (On February 2,
2005, after the close of this reporting period, the Federal Reserve raised the
fed funds rate by another 0.25% to 2.50%.)
The senior loan market maintained its upward momentum during the fourth quarter
of 2004, capping off a strong performance for the year. While volatile petroleum
prices and commodity costs remained a central concern, leveraged loan assets as
measured by the CSFB Leveraged Loan Index posted a 5.60% return for the year.
Investor sentiment remained upbeat, sustained by the steady flow of positive
macroeconomic data. M&A-related institutional transactions climbed to $65
billion for the year, more than double the 2003 level.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE PERIOD ENDED DECEMBER 31,
2004?
For the equity portion of the Fund's portfolio, we employed an opportunistic,
bottom-up strategy that focused on identifying attractively valued companies
that we thought possessed favorable risk/reward characteristics and emerging
catalysts that we believed could unlock value or improve profitability. These
catalysts included management changes, restructuring efforts, recognition of
hidden assets, or a positive change in the underlying fundamentals. We also
continued to focus on downside protection, and paid a great deal of attention to
a company's balance sheet and cash flow statement, not just the income
statement. We believed that cash flow analysis offered a more objective and
truer picture of a company's financial position than an evaluation based on
earnings alone.
We generally maintained a long-term horizon in our equity selection process.
However, we did reduce or eliminate several positions from the portfolio during
the year because we thought their risk/reward profiles had become less
attractive. This especially was true in the energy and utility sectors due to
share price appreciation. At the same time, we made several opportunistic
purchases in companies such as Altria Group, Citigroup and Fannie Mae when price
weakness had made these valuations more compelling in our
5
view. We also increased our exposure to cyclical stocks early in the year with
stakes in companies like Alumina Ltd and DSM NV.
For our preferred securities investments, given our view that interest rates
would rise over the period, we purchased securities with shorter effective
durations and we underweighted financial sector issues in favor of industrials
and utilities such as Devon Energy. We also limited our preferred sector
allocation to the lower end of our 5-20 percent policy range.
For the senior loan portion of the portfolio, our core strategies were to seek
opportunities to upgrade the portfolio by purchasing loans with what we thought
were strong asset protection and attractive coupons, reduce exposure to
companies with what we believed were inadequate asset protection, negative
earnings volatility or inadequate liquidity, and selectively add discount loans
that we thought offered value. With the continued robust level of new issues and
repricings, we focused on buying new loans with strong asset coverage,
attractive coupons and call protection, and selectively sold lower coupon loans.
Sectors that we found attractive included food and beverage/consumer products,
industrials and gaming. Sectors where we were cautious included automotive,
telecom and finance.
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a relevant benchmark,
are shown in the accompanying table.
TOTAL RETURN ON NET ASSET VALUE
Cumulative, for the period January 27, 2004 (commencement of operations) through
December 31, 2004
JTA 17.18%
--------------------------------------------------------------------------------
Comparative benchmark1 13.02%
--------------------------------------------------------------------------------
Past performance does not guarantee future results. Returns do not reflect the
deduction of taxes that a shareholder may have to pay on Fund distributions or
upon the sale of Fund shares.
1 The comparative benchmark designed to generally reflect the portfolio
composition of JTA is calculated by combining 1) 56% of the return of the
Russell 300 Value Index, which measures the performance of those Russell
3000 Index companies with lower price-to-book ratios and lower forecasted
growth values, 2) 16% of the return of the MSCI EAFE ex-Japan Value Index,
a capitalization-weighted index that selects the lower 50% of the
price-to-book ranked value stocks traded in the developed markets of
Europe, Asia and the Far East, excluding Japan, 3) 8% of the return of the
Merrill Lynch DRD Preferred Index, which consists of investment-grade,
DRD-eligible, exchange-traded preferred stocks with one year or more to
maturity, and 4) 20% of the return of the CSFB Leveraged Loan Index, which
consists of approximately $150 billion of tradable term loans with at least
one year to maturity and rated BBB or lower. Index returns are not
leveraged, and do not include the effects of any sales charges or
management fees. It is not possible to invest directly in an index.
6
For the period between the Fund's commencement of operations in late January and
the end of 2004, JTA produced a cumulative total return that was significantly
greater than the return of an unleveraged, unmanaged benchmark comprised of the
same asset classes in the same relative weightings as are represented in the
Fund's portfolio.
In particular, JTA's common stock portfolio benefited from the combination of a
bullish period for stocks and favorable stock selection that contributed to our
outperforming the comparative benchmark. As a group, our energy investments had
the greatest impact on performance with each of our five energy holdings
appreciating since their purchase. These stocks went up as high oil and gas
prices are contributing to an increase in drilling activity, higher refining
margins, and improved cash flows for energy companies. Our telecommunication
stocks also performed well, reflecting growth in cellular phone usage and
improving fundamentals for regional Bell companies. Most notable were our
investments in Telecom Italia SpA (Italy) and Sprint. Telecom Italia announced
plans to buy back its mobile subsidiary that was spun-off a decade ago, while
Sprint agreed to merge with Nextel Communications to form the nation's third
largest wireless provider. The merger will give Sprint access to Nextel's highly
lucrative business customers and help Nextel avoid the costly expense of
upgrading its wireless network. Our defense industry stocks, Lockheed Martin and
Raytheon, gained on the strength of their improving fundamentals and attractive
valuations, and our investment in Tate & Lyle plc (United Kingdom) surged on the
success of their new calorie-free sweetener called Sucralose. Sucralose sales
have benefited from the trend towards more low carbohydrate food and drink
products. Two utility stocks, Korea Electric Power (Korea), and United Utilities
plc (United Kingdom) also made strongly positive contributions to our results.
However, not all of the Fund's holdings performed as well as we expected. Our
investment in insurance-broker Aon Corp. underperformed due to an investigation
of the insurance industry by New York Attorney General Eliot Spitzer. Under
scrutiny is the practice of contingent commissions - compensating brokers for
steering business to certain insurance providers - and bid rigging. Although we
have not heard of any evidence that AON colluded with insurance providers to set
bid prices (i.e., bid rigging), the company did accept contingent commissions
which were disclosed to clients. As of
7
the end of the reporting period, the contingent commissions had been eliminated.
Our investment in Hartford Financial Services also declined significantly, but
this holding recovered to post a gain for the full year as it became apparent
the insurance industry investigation would have minimal impact on its operating
results. Fannie Mae declined over the course of the period following the release
of a report critical of the company's accounting practices. Shares of auto parts
supplier Delphi Corp. declined as rising commodity prices and lower production
volumes resulted in disappointing operating results, and our investment in
Newell Rubbermaid fell due to higher resin cost and disappointing revenue
growth.
In the senior loan portion of the portfolio, loans issued by Anthony Crane
Rental performed well. Anthony Crane is the largest crane rental company in the
country. Debt financed expansion followed by a severe industry downturn forced
the company into bankruptcy in June 2004. However, the securities rallied with
the approval of a restructuring plan in December 2004, and we expect the company
will emerge from bankruptcy in 2005.
WHAT ABOUT FUND DIVIDENDS AND SHARE PRICES?
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferredTM, and entered into a series of short-term
borrowing arrangements. This FundPreferred and borrowing provides a degree of
financial leverage that can increase share price volatility, but also can
enhance the Fund's returns and supplement the income available to pay common
shareholder distributions. This leveraging strategy provided incremental income
and helped enhance common share distributions over this reporting period.
In addition, on December 1, 2004, the Fund announced that it had adopted a
managed distribution policy. Under this policy, the Fund's monthly distributions
now are determined based not only on net investment income generated by its
underlying securities, but also on net realized capital gains and, to the extent
that distributions over the year exceed the amount of such income and net
realized gains, on returns of capital representing (in most circumstances)
unrealized capital gains. The Fund had built a balance of realized
8
and unrealized capital gains since its inception in late January 2004, and we
believed it was in the best interests of our shareholders to distribute a
portion of the capital appreciation generated by the Fund over the course of the
year.
As a result of this policy shift, the Fund raised its monthly distribution to
common shareholders in December 2004 to $0.10 per share from $0.0735 per share.
As of December 31, 2004, the Fund was trading at a -10.17% discount to its net
asset value. This discount was greater than the average -6.96% the Fund
exhibited over the course of the entire period.
9
Nuveen Tax-Advantaged Total Return Strategy Fund
JTA
Performance
OVERVIEW As of December 31, 2004
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
Common Stocks 69.3%
Variable Rate Senior
Loan Interests 14.9%
Preferred Securities 7.9%
Corporate Bonds 3.9%
Euro Time Deposits 4.0%
Bar Chart:
2004 MONTHLY DISTRIBUTIONS PER SHARE
Mar 0.0735
Apr 0.0735
May 0.0735
Jun 0.0735
Jul 0.0735
Aug 0.0735
Sep 0.0735
Oct 0.0735
Nov 0.0735
Dec 0.1
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
1/30/04 20.01
20.01
20.01
20
20.01
20.01
20.01
20.05
20.03
20.01
20.01
20.05
20
20.01
20.01
20
20.01
20.01
20
20.01
20
20
20
20
20
20
20
20
20
20
20
20
19.8
19.6
19.41
19.3
19.3
19.09
18.87
18.8
18.85
19
18.95
19.15
19.31
19.45
19.36
19.1
19
19.2
18.95
18.66
18.2
17.75
18.15
18.41
18.3
18.15
18.08
17.85
17.74
17.17
17.23
17.14
17.29
17.28
17.35
17.73
17.68
17.55
17
16
16.29
16.38
16.48
16.41
16.26
16.39
16.6
16.59
16.7
16.86
16.73
16.78
16.93
17.3
17.3
17.34
17.32
17.31
17.73
17.62
17.56
17.77
17.51
17.25
17.53
17.28
17.2
17.11
17.1
17.09
17.14
17.01
17
16.83
16.97
16.76
16.8
16.85
17.18
17.21
17.1
17.14
17.24
17.22
17.22
17.3
17.4
17.3
17.22
17.13
17.35
17.28
17.03
17.07
17.06
17.03
17.3
17.3
17.39
17.45
17.59
17.55
17.35
17.49
17.46
17.55
17.5
17.51
17.17
17.37
17.22
17.34
17.25
17.3
17.5
17.5
17.5
17.57
17.62
17.92
17.84
17.9
18
17.98
17.95
17.95
17.89
17.82
17.68
17.64
17.8
17.8
17.87
17.89
17.88
17.95
18.05
17.95
18.05
18.14
18.2
18.3
18.4
18.26
18.23
18.24
18.22
18.15
18.13
18.04
18.03
18
18
17.93
17.75
17.61
17.62
17.52
17.7
17.81
17.86
17.83
17.83
17.82
18
18.05
18.08
18.12
18.34
18.18
18.13
18.16
18.26
18.44
18.5
18.64
18.73
18.46
18.37
18.45
18.45
18.4
18.57
18.7
18.78
19.17
19.2
19.45
19.61
19.5
19.45
19.29
19.24
19.15
19.08
18.96
18.81
18.88
18.95
18.85
19.08
19.13
19.25
19.27
19.28
12/31/04 19.35
FUND SNAPSHOT
------------------------------------
Share Price $19.35
------------------------------------
Common Share
Net Asset Value $21.54
------------------------------------
Premium/(Discount) to NAV -10.17%
------------------------------------
Market Yield1 6.20%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $298,449
------------------------------------
CUMULATIVE TOTAL RETURN
(Inception 1/27/04)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
Since
Inception 0.91% 17.18%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Oil & Gas 9.2%
------------------------------------
Diversified Telecommunication
Services 8.8%
------------------------------------
Diversified Financial Services 6.9%
------------------------------------
Tobacco 5.7%
------------------------------------
Insurance 5.1%
------------------------------------
Aerospace & Defense 5.0%
------------------------------------
Metals & Mining 5.0%
------------------------------------
Commercial Banks 4.9%
------------------------------------
Thrifts & Mortagage Finance 4.8%
------------------------------------
Paper & Forest Products 4.2%
------------------------------------
Food & Staples Retailing 3.3%
------------------------------------
Electric Utilities 3.2%
------------------------------------
Auto Components 3.1%
------------------------------------
Household Durables 2.9%
------------------------------------
Media 2.9%
------------------------------------
Multi-Utilities &
Unregulated Power 2.8%
------------------------------------
Containers & Packaging 2.1%
------------------------------------
Road & Rail 2.1%
------------------------------------
Hotels, Restaurants & Leisure 2.0%
------------------------------------
Other 12.0%
------------------------------------
Euro Time Deposits 4.0%
------------------------------------
COUNTRIES
(as a % of total investments)
------------------------------------
United States 79.9%
------------------------------------
United Kingdom 6.7%
------------------------------------
South Korea 3.8%
------------------------------------
Italy 3.4%
------------------------------------
Netherlands 2.4%
------------------------------------
Other 3.8%
------------------------------------
1 Market yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Fund's
cumulative net ordinary income and net realized gains are less than the
amount of the Fund's distributions, a tax return of capital.
10
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND
We have audited the accompanying statement of assets and liabilities of Nuveen
Tax-Advantaged Total Return Strategy Fund (the "Fund"), including the portfolio
of investments, as of December 31, 2004, and the related statements of
operations, cash flows and changes in net assets and the financial highlights
for the period from January 27, 2004 (commencement of operations) to December
31, 2004. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and highlights are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of December 31,
2004, by correspondence with the custodian and selling or agent banks or by
other appropriate auditing procedures where replies from selling or agent banks
were not received. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Tax-Advantaged Total Return Strategy Fund at December 31, 2004, the results of
its operations, its cash flows, the changes in its net assets, and the financial
highlights for the period from January 27, 2004 (commencement of operations) to
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
February 17, 2005
11
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA)
Portfolio of
INVESTMENTS December 31, 2004
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 98.1% (69.3% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 5.7%
140,000 Lockheed Martin Corporation $ 7,777,000
235,000 Raytheon Company 9,125,050
------------------------------------------------------------------------------------------------------------------------------------
16,902,050
------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 1.7%
555,000 Delphi Corporation 5,006,100
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 2.7%
492,000 DSM NV Sponsored ADR 8,068,800
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 5.1%
150,000 Wachovia Corporation 7,890,000
120,000 Wells Fargo & Company 7,458,000
------------------------------------------------------------------------------------------------------------------------------------
15,348,000
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 2.4%
155,000 Pitney Bowes Inc. 7,173,400
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 2.0%
250,000 Packaging Corp of America 5,887,500
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 8.2%
150,000 Citigroup Inc. 7,227,000
265,000 IndyMac Bancorp, Inc. 9,129,250
205,000 JPMorgan Chase & Co. 7,997,050
------------------------------------------------------------------------------------------------------------------------------------
24,353,300
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 12.4%
343,000 KT Corporation 7,480,830
235,000 SBC Communications Inc. 6,055,950
330,000 Sprint Corporation 8,200,500
235,000 Telecom Italia S.p.A., Sponsored ADR 7,759,700
190,000 Verizon Communications Inc. 7,696,900
------------------------------------------------------------------------------------------------------------------------------------
37,193,880
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.9%
652,000 Korea Electric Power Corporation Sponsored ADR 8,632,480
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 4.7%
375,000 Albertson's, Inc. 8,955,000
240,625 J. Sainsbury plc Sponsored ADR 5,101,250
------------------------------------------------------------------------------------------------------------------------------------
14,056,250
------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 1.5%
120,000 Tate and Lyle plc 4,422,000
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.7%
207,000 Newell Rubbermaid Inc. 5,007,330
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.8%
80,000 Kimberly-Clark Corporation 5,264,800
12
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 5.0%
390,000 Aon Corporation $ 9,305,400
80,000 Hartford Financial Services Group, Inc. 5,544,800
------------------------------------------------------------------------------------------------------------------------------------
14,850,200
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 6.1%
404,000 Alumina Limited Sponsored ADR 7,490,160
90,000 Rio Tinto plc Sponsored ADR 10,728,900
------------------------------------------------------------------------------------------------------------------------------------
18,219,060
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 4.0%
110,000 Dominion Resources Inc. 7,451,400
180,000 United Utilities plc Sponsored ADR 4,420,800
------------------------------------------------------------------------------------------------------------------------------------
11,872,200
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 11.4%
80,000 ChevronTexaco Corporation 4,200,800
56,700 ConocoPhillips 4,923,261
53,000 Eni S.p.A. Sponsored ADR 6,669,520
215,000 Kerr-McGee Corporation 12,424,850
55,000 Total SA Sponsored ADR 6,041,200
------------------------------------------------------------------------------------------------------------------------------------
34,259,631
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 4.2%
125,000 International Paper Company 5,250,000
24 Neenah Paper Inc. 782
110,000 Weyerhaeuser Company 7,394,200
------------------------------------------------------------------------------------------------------------------------------------
12,644,982
------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 2.0%
90,000 Union Pacific Corporation 6,052,500
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 4.6%
192,000 Fannie Mae 13,672,320
------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 8.0%
235,000 Altria Group, Inc. 14,358,500
330,000 Loews Corporation - Carolina Group 9,553,500
------------------------------------------------------------------------------------------------------------------------------------
23,912,000
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $258,778,638) 292,798,783
--------------------------------------------------------------------------------------------------------------------
RATINGS*
------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 11.2% (7.9% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.2%
17,500 Bear Stearns Companies, Series E 6.150% A3 BBB $ 925,750
77,700 Lehman Brothers Holdings Inc., Series F 6.500% A3 BBB+ 2,108,778
25,000 Merrill Lynch and Company 2.572% A2 A- 636,250
------------------------------------------------------------------------------------------------------------------------------------
3,670,778
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 1.8%
40,600 Abbey National plc 7.375% A2 A- 1,098,230
23,500 Abbey National plc, Series B 7.375% A2 A 646,250
80,000 ABN AMRO Capital Trust Fund VII 6.080% A2 A 2,007,200
25,000 Banco Santander 6.410% A2 BBB+ 644,375
40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 A 1,049,200
------------------------------------------------------------------------------------------------------------------------------------
5,445,255
13
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS December 31, 2004
RATINGS*
------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 0.7%
36,100 SLM Corporation, Series A 6.970% Baa1 BBB+ $2,075,750
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.6%
20,000 Citigroup Inc., Series F 6.365% Aa3 A 1,067,600
28,100 Citigroup Inc., Series H 6.231% Aa3 NA 1,513,888
48,400 ING Group NV 7.200% A2 A- 1,315,028
25,600 ING Group NV 6.200% A2 A- 649,472
5,000 ING Group NV 7.050% NA A- 134,500
------------------------------------------------------------------------------------------------------------------------------------
4,680,488
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.7%
39,500 Alabama Power Company, Series A 5.300% Baa1 BBB+ 975,156
8,500 Consolidated Edison Company of New York, Inc. 5.000% A3 BBB+ 756,075
43,500 Interstate Power and Light Company 7.100% Baa3 BBB- 1,204,950
40,000 Mississippi Power Company 5.250% A3 BBB+ 980,000
40,000 Savannah Electric and Power Company 6.000% Baa1 BBB+ 1,063,752
------------------------------------------------------------------------------------------------------------------------------------
4,979,933
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.6%
72,000 Ace Ltd., Series C 7.800% Baa2 BBB- 1,920,960
40,000 Genworth Financial Inc., Series A 5.250% Baa1 BBB+ 2,065,000
30,000 Prudential plc 6.750% Baa1 A 777,900
------------------------------------------------------------------------------------------------------------------------------------
4,763,860
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 0.4%
11,000 Devon Energy Corporation, Series A 6.490% Ba1 BB+ 1,142,969
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.2%
26,900 Fannie Mae 5.810% Aa3 AA- 1,292,007
36,800 Fannie Mae 5.125% Aa3 AA- 1,573,936
20,000 Fannie Mae 5.500% Aa3 AA- 916,000
17,500 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 938,875
20,000 Federal Home Loan Mortgage Corporation 5.700% Aa3 AA- 998,000
21,900 Federal Home Loan Mortgage Corporation 5.000% Aa3 AA- 941,700
------------------------------------------------------------------------------------------------------------------------------------
6,660,518
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $33,296,270 ) 33,419,551
--------------------------------------------------------------------------------------------------------------------
RATINGS*
PRINCIPAL STATED -------------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 5.5% (3.9% OF TOTAL INVESTMENTS)
CONSTRUCTION MATERIALS - 1.1%
$ 2,800 Texas Industries Inc. 10.250% 6/15/11 B1 BB- $3,290,000
------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 0.8%
2,000 Park Place Entertainment 8.875% 9/15/08 Ba2 BB- 2,270,000
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.8%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Ba1 BB+ 2,177,500
2,000 Standard Pacific Corporation 6.500% 10/01/08 Ba2 BB 2,095,000
1,000 Standard Pacific Corporation 9.500% 9/15/10 Ba2 BB 1,080,000
------------------------------------------------------------------------------------------------------------------------------------
5,352,500
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 1.1%
3,000 Chesapeake Energy Corporation 8.375% 11/01/08 Ba3 BB- 3,266,250
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.7%
2,000 Georgia Pacific Corporation 9.375% 7/15/08 Ba2 BB+ 2,185,000
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $16,047,886) 16,363,750
--------------------------------------------------------------------------------------------------------------------
14
WEIGHTED RATINGS*
PRINCIPAL AVERAGE STATED -------------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY** MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 21.0% (14.9% OF TOTAL INVESTMENTS)
AEROSPACE AND DEFENSE - 1.4%
$ 1,979 K & F Industries, Inc., Term Loan B 4.931% 11/18/12 B2 B+ $2,013,596
2,000 Vought Aircraft Industries, Inc., Term Loan (b) TBD 12/22/11 Ba3 B+ 2,032,500
------------------------------------------------------------------------------------------------------------------------------------
4,046,096
------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 2.7%
2,000 Federal-Mogul Corporation, Term Loan (b) TBD TBD B1 NR 2,011,250
2,000 Federal-Mogul Corporation, Term Loan A (a) 4.650% 2/24/04 NR NR 1,895,750
1,990 Mark IV Industries, Inc., Term Loan B 5.372% 6/23/11 B1 BB- 2,022,338
2,260 Metaldyne Company LLC, Term Loan D 6.563% 12/31/09 B2 BB- 2,251,310
------------------------------------------------------------------------------------------------------------------------------------
8,180,648
------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.7%
1,990 PP Holding Corporation, Term Loan 4.670% 11/12/11 B1 B 2,019,850
------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING - 0.6%
2,000 Anthony Crane Rental, L.P., Term Loan (a) 8.500% 7/23/04 NR NR 1,786,667
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.0%
810 Owens-Illinois Group, Inc., Term Loan B 5.170% 4/01/08 NR NR 826,454
175 Smurfit-Stone Container Corporation,
Deposit-Funded Commitment 4.300% 11/01/11 Ba3 BB- 177,535
1,396 Smurfit-Stone Container Corporation,
Term Loan B 4.521% 11/01/11 Ba3 BB- 1,418,007
429 Smurfit-Stone Container Corporation,
Term Loan C 4.396% 11/01/11 Ba3 BB- 436,404
------------------------------------------------------------------------------------------------------------------------------------
2,858,400
------------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7%
1,713 Sensus Metering Systems Inc., Term Loan B-1 4.406% 12/17/10 B2 B+ 1,725,534
257 Sensus Metering Systems Inc., Term Loan B-2 4.406% 12/17/10 B2 B+ 258,830
------------------------------------------------------------------------------------------------------------------------------------
1,984,364
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.1%
1,341 Alderwoods Group, Inc., Term Loan B-2 4.320% 9/29/08 B1 BB- 1,355,699
1,990 IASIS Healthcare LLC, Term Loan B 4.253% 6/22/11 B1 B+ 2,021,094
------------------------------------------------------------------------------------------------------------------------------------
3,376,793
------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 2.0%
1,990 24 Hour Fitness Worldwide, Inc., Term Loan B 6.250% 7/01/09 B1 B 2,016,093
1,985 Jack in the Box Inc., Term Loan 4.478% 1/09/10 Ba2 BB 2,015,395
2,099 Wyndham International, Inc., Term Loan II 8.125% 4/01/06 NR NR 2,119,704
------------------------------------------------------------------------------------------------------------------------------------
6,151,192
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.6%
1,679 Sealy Mattress Company, Term Loan C 4.535% 8/06/12 B2 B+ 1,703,750
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.7%
1,920 Conseco, Inc., Term Loan 5.918% 6/22/10 B2 BB- 1,957,200
------------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.7%
1,995 Dresser-Rand Group Inc., Term Loan 4.560% 10/10/10 B1 B+ 2,027,668
15
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS December 31, 2004
WEIGHTED RATINGS*
PRINCIPAL AVERAGE STATED -------------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY** MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 4.0%
$ 1,990 Charter Communications Operating, LLC, Term Loan B 5.380% 4/07/11 B2 B $1,994,146
2,000 Freedom Communications, Inc., Term Loan B 4.147% 5/18/12 Ba3 BB 2,033,750
1,995 Metro-Goldwyn-Mayer Studios, Inc.,
Term Loan B 5.060% 4/26/11 NR NR 2,003,479
1,925 Regal Cinemas Corporation, Term Loan 4.560% 11/10/10 Ba3 BB- 1,945,629
920 Transwestern Publishing Company LLC,
First Lien Term Loan 4.191% 2/25/11 B1 B+ 932,075
993 Transwestern Publishing Company LLC,
Second Lien Term Loan 6.686% 2/25/12 B3 B- 1,007,854
2,231 WMG Acquisition Corp., Term Loan 5.209% 2/27/11 B1 B+ 2,263,799
------------------------------------------------------------------------------------------------------------------------------------
12,180,732
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.9%
2,764 Amsted Industries Incorporated, Term Loan B 4.972% 10/15/10 B1 BB- 2,807,814
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.0%
2,978 Solo Cup Company, Term Loan 4.876% 2/27/11 B1 B+ 3,036,120
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.3%
1,818 Crescent Real Estate Funding XII, L.P., Term Loan 4.530% 3/20/06 NR BB+ 1,835,747
2,000 General Growth Properties, Term Loan B 4.530% 11/12/08 Ba2 BB+ 2,008,011
------------------------------------------------------------------------------------------------------------------------------------
3,843,758
------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 0.9%
2,751 Laidlaw Inc., Term Loan B-1 6.170% 6/19/09 Ba3 BB+ 2,767,832
------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 0.7%
1,980 Nextel Finance Company, Term Loan E 4.688% 12/15/10 Ba1 BB+ 1,983,608
------------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $61,932,113) 62,712,492
--------------------------------------------------------------------------------------------------------------------
EURO TIME DEPOSITS - 5.7% (4.0% OF TOTAL INVESTMENTS)
16,909 State Street Bank, 1.000%, 1/03/05 16,909,248
------------------------------------------------------------------------------------------------------------------------------------
$ 16,909 Total Euro Time Deposits (cost $16,909,248) 16,909,248
=============-----------------------------------------------------------------------------------------------------------------------
Total Investments (cost $386,964,155) - 141.5% 422,203,824
--------------------------------------------------------------------------------------------------------------------
FundNotes - (26.1)% (78,000,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.3)% (754,596)
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (15.1)% (45,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 298,449,228
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(2) Senior Loans in which the Fund invests generally pay
interest at rates which are periodically adjusted by
reference to a base short-term, floating lending rate plus a
premium. These base lending rates are generally (i) the
lending rate referenced by the London Inter-Bank Offered
Rate ("LIBOR"), or (ii) the prime rate offered by one or
more major United States banks.
Senior loans may be considered restricted in that the Fund
ordinarily is contractually obligated to receive approval
from the Agent Bank and/or Borrower prior to the disposition
of a Senior Loan.
* Ratings (not covered by the report of independent registered
public accounting firm): Below Baa by Moody's Investor
Service, Inc. or BBB by Standard & Poor's Group are
considered to be below investment grade.
** Senior Loans in the Fund's portfolio generally are subject
to mandatory and/or optional prepayment. Because of these
mandatory prepayment conditions and because there may be
significant economic incentives for a Borrower to prepay,
prepayments of Senior Loans in the Fund's portfolio may
occur. As a result, the actual remaining maturity of Senior
Loans held in the Fund's portfolio may be substantially less
than the stated maturities shown. The Fund estimates that
the actual average maturity of the Senior Loans held in its
portfolio will be approximately 18-24 months.
TBD Senior Loan purchased on a when-issued basis in the primary
market. Certain details associated with this purchase are
not known prior to the settlement date of the transaction
period. At settlement, the borrower or counterparty will
provide the Fund with the final weighted average coupon rate
and maturity date.
NR Not rated.
(a) At or subsequent to December 31, 2004, this issue was under
the protection of the federal bankruptcy court.
(b) Purchased on a when-issued basis.
See accompanying notes to financial statements.
16
Statement of
ASSETS AND LIABILITIES December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $386,964,155) $422,203,824
Receivables:
Dividends 1,078,459
Interest 574,275
Investments sold 131,224
Reclaims 24,141
Deferred FundNotes offering costs 1,776,013
Other Assets 4,118
------------------------------------------------------------------------------------------------------------------------------------
Total assets 425,792,054
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 4,000,000
FundNotes 78,000,000
Accrued expenses:
Management fees 202,707
Other 128,513
FundNotes interest payable 5,023
FundPreferred share dividends payable 6,583
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 82,342,826
------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $298,449,228
====================================================================================================================================
Common shares outstanding 13,855,240
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 21.54
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,552
Paid-in surplus 262,862,532
Undistributed (Over-distribution of) net investment income (228,765)
Accumulated net realized gain from investments 437,240
Net unrealized appreciation of investments 35,239,669
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $298,449,228
====================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
17
Statement of
OPERATIONS For the Period January 27, 2004
(commencement of operations) through December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $259,194) $ 9,603,946
Interest 2,910,710
Fees 105,512
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 12,620,168
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 2,974,827
FundNotes interest expense and amortization of offering costs 917,709
FundNotes and FundPreferred shares - auction fees 207,535
FundNotes and FundPreferred shares - dividend disbursing agent fees 10,657
Shareholders' servicing agent fees and expenses 438
Custodian's fees and expenses 95,028
Trustees' fees and expenses 13,354
Professional fees 57,896
Shareholders' reports - printing and mailing expenses 60,499
Stock exchange listing fees 29,220
Investor relations expense 36,006
Other expenses 45,962
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,449,131
Custodian fee credit (8,088)
Expense reimbursement (1,061,197)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,379,846
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 9,240,322
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain from investments 2,023,579
Net unrealized appreciation of investments 35,239,669
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 37,263,248
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (449,287)
From accumulated net realized gains from investments (55,374)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shareholders
from distributions to FundPreferred shareholders (504,661)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $45,998,909
====================================================================================================================================
See accompanying notes to financial statements.
18
Statement of
CHANGES IN NET ASSETS For the Period
January 27, 2004 (commencement of operations) through December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 9,240,322
Net realized gain from investments 2,023,579
Net unrealized appreciation of investments 35,239,669
Distributions to FundPreferred shareholders:
From net investment income (449,287)
From accumulated net realized gains from investments (55,374)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations 45,998,909
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (9,240,701)
From accumulated net realized gains from investments (1,310,064)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (10,550,765)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of Common shares 263,981,000
FundPreferred shares offering costs (1,080,000)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from
capital share transactions 262,901,000
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 298,349,144
Net assets applicable to Common shares at the beginning of period 100,084
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $298,449,228
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (228,765)
====================================================================================================================================
See accompanying notes to financial statements.
19
Statement of
CASH FLOWS For the Period January 27, 2004
(commencement of operations) through December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 45,998,909
Adjustments to Reconcile the Net Increase in Net Assets Applicable to Common Shares from Operations
to Net Cash Used in Operating Activities:
Purchase of investment securities (424,051,114)
Purchase of short-term investment securities, net (16,909,248)
Proceeds from disposition of investment securities 55,655,934
Accretion/Amortization of discounts and premiums, net 170,606
Increase in dividends receivable (1,078,459)
Increase in interest receivable (574,275)
Increase in receivable from investments sold (131,224)
Increase in reclaims receivable (24,141)
Increase in other assets (4,118)
Increase in payable for investments purchased 4,000,000
Increase in management fees payable 202,707
Increase in FundPreferred share dividends payable 6,583
Increase in other liabilities 128,513
Net realized gain from investments (2,023,579)
Net unrealized appreciation of investments (35,239,669)
Net realized loss from paydowns 193,246
------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (373,679,329)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares:
Net proceeds from sale of shares 263,981,000
Cash distributions paid to shareholders (10,550,765)
FundNotes:
Liquidation value 78,000,000
Deferred offering costs (1,776,013)
Increase in FundNotes interest payable* 5,023
Net proceeds from sale of FundPreferred shares 43,920,000
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 373,579,245
------------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH (100,084)
Cash at the beginning of period 100,084
------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ --
====================================================================================================================================
*Cash paid for interest on FundNotes during the period April 23, 2004 through
December 31, 2004, was $870,200.
See accompanying notes to financial statements.
20
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Total Return Strategy Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JTA." The Fund was organized
as a Massachusetts business trust on October 1, 2003.
Prior to the commencement of operations, the Fund had no operations other than
those related to organizational matters, the initial capital contribution of
$100,084 by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Nuveen Investments, Inc. ("Nuveen"), and the recording of the
organization expenses ($11,500) and their reimbursement by Nuveen Investments,
LLC, also a wholly owned subsidiary of Nuveen.
The Fund seeks to provide a high level of after-tax total return consisting
primarily of tax-advantaged dividend income and capital appreciation by
investing primarily in a portfolio of dividend-paying common stocks that the
Fund believes at the time of investment are eligible to pay dividends that
qualify for favorable federal income taxation at rates applicable to long-term
capital gains ("tax-advantaged dividends"). The Fund will also invest to a more
limited extent in preferred securities that are eligible to pay tax-advantaged
dividends, as well as senior loans (both secured and unsecured), domestic
corporate bonds, notes and debentures, convertible debt securities, and other
similar types of corporate instruments, including high yield debt securities,
that are not eligible to pay tax-advantaged dividends.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities and senior
loans are generally provided by an independent pricing service approved by the
Fund's Board of Trustees and based on the mean between the bid and asked prices.
When price quotes are not readily available, the pricing service or, in the
absence of a pricing service for a particular security, the Board of Trustees of
the Fund, or its designee, may establish fair market value using a wide variety
of market data including yields or prices of investments of comparable quality,
type of issue, coupon, maturity and rating, indications of value from security
dealers, evaluations of anticipated cash flows or collateral, general market
conditions and other information and analysis, including the obligor's credit
characteristics considered relevant by the pricing service or the Board of
Trustees designee. Short-term securities are valued at amortized cost, which
approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from transactions are determined on the specific
identification method. Investments purchased on a when-issued or delayed
delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At December 31, 2004, the
Fund had outstanding when-issued purchase commitments of $4,000,000.
21
Notes to
FINANCIAL STATEMENTS (continued)
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis. Interest income also includes paydown gains and
losses on senior loans. Fee income consists primarily of amendment fees.
Amendment fees are earned as compensation for evaluating and accepting changes
to the original loan agreement and are recognized when received.
Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Prior to December 1, 2004, the Fund declared monthly income distributions to
Common shareholders. Commencing with the Fund's December 1, 2004 dividend
declaration, payable December 30, 2004, the Fund intends to make monthly cash
distributions to Common Shareholders of a stated dollar amount based primarily
on the Fund's net investment income but also secondarily on net realized capital
gains and/or on net unrealized capital gains in the Fund's portfolio (stated in
terms of a fixed cents per Common Share dividend rate) determined based upon not
only net investment income but also on net realized capital gains and, in
certain instances, on unrealized appreciation ("Managed Distribution Policy").
The Fund seeks to maintain a stable distribution level, subject to approval and
oversight by the Fund's Board of Trustees. Distributions will be made only after
paying any accrued dividends or making any redemption or liquidation payments to
FundPreferred shares, if any, and interest and required principal payments on
borrowings, if any. Under the Managed Distribution Policy, if, for any monthly
distribution, net investment income and net realized capital gain were less than
the amount of the distribution, the difference would be distributed from the
Fund's assets and would be treated by shareholders as a return of capital for
tax purposes. The final determination of the source of all distributions for the
year are made after the end of the year and reflected in the accompany financial
statements.
FundNotes
Effective April 23, 2004, the Fund issued 3,120 Series F FundNotes, $25,000
stated value per share, that mature on April 24, 2034. The interest rate is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable weekly at the end of each rate period. For the
period April 23, 2004 through December 31, 2004, the average daily balance of
FundNotes was $78 million with an average interest rate of 1.12%.
FundPreferred Shares
Effective May 6, 2004, the Fund issued 1,800 Series W FundPreferred shares,
$25,000 stated value per share, as a means of effecting financial leverage. The
dividend rate is determined every seven days, pursuant to a dutch auction
process overseen by the auction agent, and is payable weekly at the end of each
rate period.
22
Derivative Financial Instruments
The Fund may use derivatives or other transactions for the purpose of hedging
the portfolio's exposure to common stock risk, high yield credit risk, foreign
currency exchange risk and the risk of increases in interest rates. Although the
Fund is authorized to invest in such financial instruments, and may do so in the
future, it did not make any such investment during the period January 27, 2004
(commencement of operations) through December 31, 2004.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Organization and Offering Costs
Nuveen Investments, LLC has agreed to reimburse all organization expenses
(approximately $11,500) and pay all Common share offering costs (other than the
sales load) that exceed $.04 per Common share. The Fund's share of Common share
offering costs of $554,000 was recorded as a reduction of the proceeds from the
sale of Common shares.
Costs incurred by the Fund in connection with its offering of FundNotes
($1,840,000) were recorded as a deferred charge which will be amortized over the
30 year life of the FundNotes and included with FundNote Interest Expense on the
Statement of Operations.
Costs incurred by the Fund in connection with its offering of FundPreferred
shares ($1,080,000) were recorded as a reduction to paid-in surplus.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
During the period January 27, 2004 (commencement of operations) through December
31, 2004, the Fund sold 13,850,000 Common shares, 3,120 FundNotes and 1,800
FundPreferred shares.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) for the
period January 27, 2004 (commencement of operations) through December 31, 2004,
aggregated $424,051,114 and $55,655,934, respectively.
23
Notes to
FINANCIAL STATEMENTS (continued)
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization on debt securities and timing differences in recognizing
certain gains and losses on security transactions.
At December 31, 2004, the cost of investments was $387,196,026.
The net unrealized appreciation of investments at December 31, 2004, aggregated
$35,007,798 of which $37,540,103 related to appreciated securities and
$2,532,305 related to depreciated securities.
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2004, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $446,929
Undistributed net long-term capital gains --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The tax character of distributions paid during the period January 27, 2004
(commencement of operations) through December 31, 2004, was designated for
purposes of the dividends paid deduction as follows:
--------------------------------------------------------------------------------
Distributions from net ordinary income * $11,048,843
Distributions from net long-term capital gains --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
As approved by the Board of Trustees, effective August 1, 2004, a complex-wide
management fee structure was adopted for all funds sponsored by the Adviser and
its affiliates. This fee structure separates each fund's management fee into two
components - a complex-level component, based on the aggregate amount of all
funds assets managed by the Adviser and its affiliates, and a specific
fund-level component, based only on the amount of assets within each individual
fund. This pricing structure enables Nuveen fund shareholders to benefit from
growth in the assets within each individual fund as well as from growth in the
amount of complex-wide assets managed by the Adviser and its affiliates. Under
no circumstances will this pricing structure result in a fund paying management
fees at a rate higher than would otherwise have been applicable had the
complex-wide management fee structure not been implemented. As a consequence of
this new management fee structure, the funds' effective management fees were
reduced by approximately .009% as of January 31, 2005.
24
Effective August 1, 2004, the annual fund-level fee, payable monthly, for the
Fund is based upon the average daily Managed Assets of the Fund as follows:
FUND-LEVEL
AVERAGE DAILY MANAGED ASSETS FEE RATE
--------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
Effective August 1, 2004, the annual complex-level fee, payable monthly, which
is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S.,
is based on the aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
The Fund paid through July 31, 2004, an annual management fee, payable monthly,
at the rates set forth below, which were based upon the average daily Managed
Assets of the Fund as follows:
MANAGEMENT
AVERAGE DAILY MANAGED ASSETS FEE RATE
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with NWQ Investment Management Company, LLC ("NWQ")
and Symphony Asset Management, LLC ("Symphony"). Nuveen owns a controlling
interest in NWQ while key management of NWQ owns a non-controlling minority
interest. Symphony is an indirect wholly owned subsidiary of Nuveen. NWQ manages
the portion of the Fund's investment portfolio allocated to dividend-paying
common stocks including American Depository Receipts ("ADRs"). Symphony manages
the portion of the Fund's investment portfolio allocated to senior loans and
other debt instruments. NWQ and Symphony are compensated for their services to
the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
25
Notes to
FINANCIAL STATEMENTS (continued)
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2004* .32% 2009 .32%
2005 .32 2010 .24
2006 .32 2011 .16
2007 .32 2012 .08
2008 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond January 31, 2012.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At December 31, 2004, there were no such unfunded senior loan
commitments.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At December 31, 2004, there
were no such outstanding participation commitments.
8. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Fund declared a distribution of $.1000 per Common share which was paid on
February 1, 2005, to shareholders of record on January 15, 2005.
Adviser Merger
Effective January 1, 2005, the Adviser and its affiliate, Nuveen Advisory Corp.
("NAC"), were merged into Nuveen Asset Management ("NAM"), also a wholly owned
subsidiary of Nuveen. As a result of the merger, NAM is now the adviser to all
funds previously advised by either NAC or the Adviser.
Announcement Regarding Parent Company of Adviser
After the close of trading on the New York Stock Exchange on January 31, 2005,
The St. Paul Travelers Companies, Inc. announced that it intended to explore
strategic alternatives to divest its equity stake in Nuveen.
26
Financial
HIGHLIGHTS
27
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout the period:
Investment Operations Less Distributions
---------------------------------------------------------------- -------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ FundPreferred FundPreferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income(a) Gain holders+ holders+ Total holders holders Total
====================================================================================================================================
Year Ended 12/31:
2004(b) $19.10 $.67 $2.69 $(.03) $-- $3.33 $(.67) $(.10) $(.77)
====================================================================================================================================
Total Returns
-------------------
Based
Offering on
Costs and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=======================================================================================
Year Ended 12/31:
2004(b) $(.12) $21.54 $19.35 .91% 17.18%
=======================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
---------------------------- -------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
==============================================================================================================
Year Ended 12/31:
2004(b) $298,449 1.80%* 3.30%* 1.37%* 3.73%* 16%
==============================================================================================================
FundNotes at End of Period FundPreferred Shares at End of Period
---------------------------------------------------- ---------------------------------------
Aggregate Average Market Asset Aggregate Liquidation
Amount Value Per Coverage Per Amount and Market Asset
Outstanding $25,000 of $1,000 of Outstanding Value Coverage
(000) Principal Amount Principal Amount (000) Per Share Per Share
------------------------------------------------------------------------------------------------------------------
Year Ended 12/31:
2004(b) $78,000 $25,000 $5,403 $45,000 $25,000 $190,805
==================================================================================================================
* Annualized.
** Total Investment 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. Total Return on Common Share 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. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement.
+ The amounts shown are based on Common share equivalents.
++ o Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders.
o Income ratios reflect income earned on assets attributable to
FundPreferred shares.
o Each Ratio of Expenses to Average Net Assets Applicable to Common
Shares and each Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares includes the effect of the interest
expense paid on FundNotes as follows:
Ratio of FundNotes Interest
Expense to Average Net Assets
Applicable to Common Shares
-----------------------------
2004(b) 0.37%*
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period January 27, 2004 (commencement of operations) through
December 31, 2004.
See accompanying notes to financial statements.
28-29 SPREAD
Board Members
AND OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Funds is currently set
at nine. None of the board members who are not "interested" persons of the Funds
has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of 1994 Chairman and Director (since 1996) of Nuveen Investments, 153
3/28/49 the Board Inc. and Nuveen Investments, LLC; Director (since 1992) and
333 W. Wacker Drive and Trustee Chairman (since 1996) of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (3); Chairman and Director (since
1997) of Nuveen Asset Management; Director (since 1996)
of Institutional Capital Corporation; Chairman and Director
(since 1999) of Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers Inc. (since 2002).
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board member 1997 Private Investor and Management Consultant. 153
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Board member 1993 Retired (1989) as Senior Vice President of The Northern 153
7/29/34 Trust Company; Director, Community Advisory Board for
333 W. Wacker Drive Highland Park and Highwood, United Way of the North
Chicago, IL 60606 Shore (since 2002).
------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, a private philanthropic 153
10/22/48 corporation (since 1996); Director and Vice Chairman, United
333 W. Wacker Drive Fire Group, a publicly held company; Adjunct Faculty Member,
Chicago, IL 60606 University of Iowa; Director, Gazette Companies; Life Trustee
of Coe College; Director, Iowa College Foundation; formerly,
Director, Federal Reserve Bank of Chicago; formerly, President
and Chief Operating Officer, SCI Financial Group, Inc., a regional
financial services firm.
------------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Board member 2004 Dean and Distinguished Professor of Finance, School of 153
3/6/48 Business at the University of Connecticut (since 2003);
333 W. Wacker Drive previously Senior Vice President and Director of Research
Chicago, IL 60606 at the Federal Reserve Bank of Chicago (1995-2003);
Director, Credit Research Center at Georgetown University;
Director of Xerox Corporation (since 2004).
------------------------------------------------------------------------------------------------------------------------------------
David J. Kundert Board member 2005 Retired (2004) as Chairman, JPMorgan Fleming Asset 151
10/28/42 Management, President and CEO, Banc One Investment
333 W. Wacker Drive Advisors Corporation, and President, One Group Mutual
Chicago, IL 60606 Funds; prior thereto, Executive Vice President, Banc One
Corporation and Chairman and CEO, Banc One Investment
Management Group; Board of Regents, Luther College; currently
a member of the American and Wisconsin Bar Associations.
30
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Board member 1997 Chairman, formerly, Senior Partner and Chief Operating 153
9/24/44 Officer, Miller-Valentine Partners Ltd., a real estate
333 W. Wacker Drive investment company; formerly, Vice President, Miller-Valentine
Chicago, IL 60606 Realty, a construction company; Director, Chair of the Finance
Committee and Member of the Audit Committee of Premier
Health Partners, the not-for-profit parent company of Miami
Valley Hospital; President of the Dayton Philharmonic Orchestra
Association; Director and Immediate Past Chair, Dayton
Development Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton, Ohio and
Business Advisory Council, Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy Donnelley 153
12/29/47 Foundation (since 1994); prior thereto, Executive Director,
333 W. Wacker Drive Great Lakes Protection Fund (from 1990 to 1994)
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Eugene S. Sunshine Board member 2005 Senior Vice President for Business and Finance (since 1997), 153
1/22/50 Northwestern University; Director (since 2003), Chicago
333 W. Wacker Drive Board of Options Exchange; Director (since 2003), National
Chicago, IL 60606 Mentor Holdings, a privately-held, national provider of home
and community-based services; Chairman (since 1997), Board
of Directors, Rubicon, an insurance company owned by
Northwestern University; Director (since 1997), Evanston
of Commerce and Evanston Inventure, a business development
organization.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary and 153
9/9/56 Administrative Associate General Counsel, formerly, Vice President and
333 W. Wacker Drive Officer Assistant General Counsel of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp. (3);
Managing Director (since 2002), Assistant Secretary
and Associate General Counsel, formerly, Vice President
(since 2000), of Nuveen Asset Management; Managing
Director (since 2004) and Assistant Secretary (since
1994) of Nuveen Investments, Inc.; Assistant Secretary
of NWQ Investment Management Company, LLC (since 2002);
Vice President and Assistant Secretary of Nuveen
Investments Advisers Inc. (since 2002); Managing
Director, Associate General Counsel and Assistant
Secretary of Rittenhouse Asset Management, Inc.
(since 2003); Chartered Financial Analyst.
31
Board Members
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(3) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Julia L. Antonatos Vice President 2004 Managing Director (since 2005), previously, Vice President 153
9/22/63 (since 2002), formerly, Assistant Vice President (since 1999)
333 W. Wacker Drive of Nuveen Investments, LLC; Chartered Financial Analyst.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant Vice 153
2/3/66 and Assistant President (since 2000), previously, Associate of Nuveen
333 W. Wacker Drive Secretary Investments, LLC.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 1999), 153
11/28/67 and Treasurer prior thereto, Assistant Vice President (since 1997); Vice
333 W. Wacker Drive President and Treasurer of Nuveen Investments, Inc. (since
Chicago, IL 60606 1999); Vice President and Treasurer of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp (since 1999) (3); Vice
President and Treasurer of Nuveen Asset Management
(since 2002) and of Nuveen Investments Advisers Inc. (since
2002); Assistant Treasurer of NWQ Investment Management
Company, LLC (since 2002); Vice President and Treasurer of
Nuveen Rittenhouse Asset Management, Inc. (since 2003);
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 2000 Vice President (since 2002) and Assistant General Counsel 153
9/24/64 and Secretary (since 1998), formerly, Assistant Vice President (since 1998) of
333 W. Wacker Drive Nuveen Investments, LLC; Vice President (since 2002)
Chicago, IL 60606 and Assistant Secretary (since 1998), formerly, Assistant
Vice President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (3); Vice President and Assistant
Secretary (since 2002) of Nuveen Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004) formerly, Vice President of 153
10/24/45 Nuveen Investments, LLC; Managing Director (since 2004)
333 W. Wacker Drive formerly, Vice President (since 1998) of Nuveen Advisory Corp.
Chicago, IL 60606 and Nuveen Institutional Advisory Corp. (3); Managing Director
(since 2005) of Nuveen Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen Investments, 153
3/2/64 LLC; Managing Director (since 2001), formerly Vice President
333 W. Wacker Drive of Nuveen Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Corp. (since 1995) (3); Managing Director of Nuveen Asset
Management (3) (since 2001); Vice President of Nuveen
Investment Advisers Inc. (since 2002); Chartered Financial
Analyst.
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller (since 1998) 153
5/31/54 and Controller of Nuveen Investments, LLC and, formerly, Vice President and
333 W. Wacker Drive Funds Controller (since 1998) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
32
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(3) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 153
3/22/63 LLC, previously Assistant Vice President (since 1999);
333 W. Wacker Drive prior thereto, Associate of Nuveen Investments, LLC;
Chicago, IL 60606 Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, Assistant Vice 153
8/27/61 President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant General 153
7/27/51 and Assistant Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive Secretary Assistant Secretary of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (3); Assistant Secretary of Nuveen
Investments, Inc. and (since 1997) Nuveen Asset Management,
Vice President (since 2000), Assistant Secretary and Assistant
General Counsel (since 1998) of Rittenhouse Asset
Management, Inc.; Vice President and Assistant
Secretary of Nuveen Investments Advisers Inc.
(since 2002); Assistant Secretary of NWQ Investment
Management Company, LLC (since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and board member
of the Adviser.
(2) Board members serve an indefinite term until his/her successor is elected.
The year first elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
33
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
34
Other Useful
INFORMATION
Effective Jan. 1, 2005, the asset management services and operations of Nuveen
Advisory Corp. (NAC) and Nuveen Institutional Advisory Corp (NIAC) became part
of Nuveen Asset Management (NAM). This internal consolidation is intended to
simplify the delivery of services to the investment management clients of Nuveen
Investments. It does not affect the investment objectives or portfolio
management of any Fund.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2004 and (iii) a description of the
policies and procedures that the Fund used to determined how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
DIVIDEND INFORMATION
The Fund designates 63.55% of dividends declared from net investment income as
dividends qualifying for the 70% dividends received deduction for corporations
and 86.70% as qualified dividend income for individuals under the Jobs and
Growth Tax Relief Reconciliation Act of 2003.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD (ALSO KNOWN AS DISTRIBUTION YIELD OR CURRENT YIELD): Market yield
is based on the Fund's current annualized monthly distribution divided by the
Fund's current market price. The Fund's monthly distributions to its
shareholders may be comprised of ordinary income, net realized capital gains
and, if at the end of the calendar year the Funds' cumulative net ordinary
income and net realized gains are less than the amount of the Fund's
distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
35
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $115 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
Learn more o Fund details
about Nuveen Funds at o Daily financial news
WWW.NUVEEN.COM/ETF o Investor education
o Interactive planning tools
Logo: NUVEEN Investments
EAN-C-1204D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR. Mr. Evans has served as the
registrant's audit committee financial expert from July 26, 2004 to the end of
the reporting period on December 31, 2004.
Prior to July 26, 2004, William E. Bennett, who was "independent" for purposes
of Item 3 of Form N-CSR, served as the audit committee financial expert. Mr.
Bennett unexpectedly resigned from the Board effective April 30, 2004.
Accordingly for this reporting period, the registrant did not have a designated
"audit committee financial expert" from July 1, 2004 to July 26, 2004.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
Mr. Bennett was formerly Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidiary, The First National Bank
of Chicago. As part of his role as Chief Credit Officer, Mr. Bennett set policy
as to accrual of assets/loans; designated performing/non-performing assets; set
the level of reserves against the credit portfolio; and determined the carrying
value of credit related assets and exposure. Among other things, Mr. Bennett was
also responsible for the oversight of the internal analysis function including
setting ground rules for the review and preparation of financial analysis and
financial statements for use in making credit and risk decisions for clients.
Mr. Bennett has significant experience reviewing, analyzing and evaluating
financial statements of domestic and international companies in a variety of
industries with complex accounting issues.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Tax-Advantaged Total Return Strategy Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that Ernst & Young LLP provided to the Fund, except for those non-audit services
that were subject to the pre-approval exception under Rule 2-01 of Regulation
S-X (the "pre-approval exception"). The pre-approval exception for services
provided directly to the Fund waives the pre-approval requirement for services
other than audit, review or attest services if: (A) the aggregate amount of all
such services provided constitutes no more than 5% of the total amount of
revenues paid by the Fund to its accountant during the fiscal year in which the
services are provided; (B) the Fund did not recognize the services as non-audit
services at the time of the engagement; and (C) the services are promptly
brought to the Audit Committee's attention, and the Committee (or its delegate)
approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 39,500 $ 0 $ 15 $ -
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2003 N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
The above "All Other Fees" are fees paid to audit firms to perform agreed
upon procedures required by the rating agencies to rate fund preferred shares.
The above "Tax Fees" were billed for professional services for tax advice, tax
compliance and tax planning.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Institutional Advisory Corp. ("NIAC" or the "Adviser"), and any entity
controlling, controlled by or under common control with NIAC ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two full fiscal years.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2003 N/A N/A N/A
------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------------------------
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 15 $ 0 $ 0 $ 15
December 31, 2003 N/A N/A N/A N/A
Audit Committee Pre-Approval Policies and Procedures. Generally, the audit
committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the audit committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the audit committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the audit committee at
the next audit committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
audit committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (15 U.S.C.
78c(a)(58)(A)). The members of the audit committee are Robert P. Bremner,
Lawrence H. Brown, Jack B. Evans and William J. Schneider.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Schedule I in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
the Adviser would either engage an independent third party to determine how the
proxy should be voted or vote the proxy with the consent, or based on the
instructions, of the Fund's Board of Directors or Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Directors or Trustees and made available
to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In the event of a vacancy on the Board, the nominating and governance committee
receives suggestions from various sources, including shareholders, as to
suitable candidates. Suggestions should be sent in writing to Lorna Ferguson,
Vice President for Board Relations, Nuveen Investments, 333 West Wacker Drive,
Chicago, IL 60606. The nominating and governance committee sets appropriate
standards and requirements for nominations for new directors or trustees and
reserves the right to interview all candidates and to make the final selection
of any new directors or trustees.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf. and
there were no amendments during the period covered by this report (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.).
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Total Return Strategy Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 10, 2005
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: March 10, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: March 10, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.