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
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: December 31
------------------
Date of reporting period: June 30, 2005
------------------
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.
SEMIANNUAL REPORT June 30, 2005
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 DISTRIBUTIONS FROM A
PORTFOLIO OF VALUE EQUITIES AND SENIOR LOANS
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Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am very pleased to report that for the six-month period ended June 30, 2005,
your Fund was able to provide you with the opportunity for attractive
tax-advantaged income and capital appreciation potential.
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-mails and the Internet. Sign up is quick and easy
- see the inside front cover of this report for step-by-step instructions.
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its shares in Nuveen to us or to others. Please be assured that these
transactions only affect Nuveen's corporate structure, and they do not have any
impact on the investment objectives or management of your Fund.
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
August 15, 2005
Nuveen Tax-Advantaged Total Return Strategy Fund
(JTA)
Portfolio Managers'
COMMENTS
The Fund features management by two affiliates of Nuveen Investments. The Fund's
investments in dividend-paying common and preferred stocks are managed by NWQ
Investment Management Company, LLC, while the Fund's investments in senior
corporate loans and other debt instruments are managed by Symphony Asset
Management, LLC. Jon Bosse, Chief Investment Officer of NWQ, leads the Fund's
management team at that firm. He has more than 22 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 their management strategies and the
performance of the Fund for the six-month period ended June 30, 2005.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE PERIOD ENDED JUNE 30, 2005?
For the equity portion of the Fund's portfolio, we continued to employ an
opportunistic, bottom-up strategy that focused on identifying attractively
valued companies that we thought possessed favorable risk/reward characteristics
and emerging catalysts that 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 believe that cash flow analysis often has offered a more objective
and truer picture of a company's financial position than an evaluation based on
earnings alone.
During this reporting period, we took two new common stock positions and added
to our stakes in several existing holdings. The new investments include Merck &
Co. and POSCO. Our analysis indicated these companies possessed solid
fundamentals, compelling valuations and an attractive risk/reward relationship.
Conversely, we eliminated our positions in Tate & Lyle, and Weyerhauser Co.
where valuations had become less attractive, and in Delphi, where fundamentals
had deteriorated.
4
In general, we maintained a cautious outlook for long-term interest rates. As a
result, we favored preferred stocks with lower interest rate sensitivity. In
addition, we purchased several floating rate positions to hedge against further
increases in short-term interest rates.
For the senior loan portion of the portfolio, we focused on executing a
conservative portfolio management strategy that emphasized carefully selecting
both industry sectors and individual companies. We analyzed opportunities to
upgrade the portfolio by selling loans in sectors that we believed could have
problems over the coming months and rotating into what we believed were safer,
less cyclical sectors that would provide stronger asset protection. This
strategy led us to sell almost all of our automotive exposure before the sector
experienced significant volatility in May due to fears surrounding General
Motors and Ford. Given the robust volume of new offerings, we were able to
rotate into loans that we felt provided more asset protection and less
likelihood of earnings volatility. Industry sectors to which we continued to be
favorably disposed included food and beverage/consumer products, industrials,
and gaming. Industry sectors about which we were cautious included automotive,
telecom, and finance. When evaluating loans, we continued to look at the
fundamentals of the issuer. At the same time, we also closely monitored the
relative value of the loans we held or were considering as compared with other
closely related loans or securities in the high yield bond market.
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a relevant benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE*
For the period June 30, 2005
6-MONTH 1-YEAR
--------------------------------------------------------------------------------
JTA 1.64% 15.65%
--------------------------------------------------------------------------------
Comparative benchmark1 1.69% 12.83%
--------------------------------------------------------------------------------
*Six-month returns are cumulative and one-year returns are annualized.
Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown. 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 reflect the portfolio composition of
JTA is calculated by combining 1) 56% of the return of the Russell 3000 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, dividends received deduction- 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.
5
For the six-month period ended June 30, 2005, JTA produced a cumulative total
return that was comparable with an unleveraged, unmanaged benchmark comprised of
the same asset classes in the same relative weightings as are represented in the
Fund's portfolio.
Overall, market conditions proved to be more difficult in the first six months
of 2005 than in the last six months of 2004. This is seen in the differences
between the six-month and one-year returns shown here for both the Fund and its
comparative benchmark. Nevertheless, the Fund's portfolio did have several
holdings that produced solid gains during this six-month period. For example,
our investments in the energy sector provided the most significant impact to
performance during the period. Energy stocks tended to outperform other sectors
as crude oil prices reached record highs and the prospect of even higher energy
prices continued to create demand for these securities. Along with strong
operating results, oil and gas companies were generating significant free cash
flows which they were using for debt reduction and share repurchases - actions
that strengthened their balance sheets and accreted value to their equity
shareholders. As of June 30, 2005, our energy investments included exploration
companies ENI Spa and Kerr McGee, as well as integrated firms ChevronTexaco
Corp., ConocoPhillips, and Total S.A.
In the finance sector, our investment in IndyMac Bancorp appreciated 18% during
this reporting period as the company exceeded earnings expectations due to
increased mortgage volumes brought on by declining long-term interest rates.
Shares of Hartford Financial Services gained 8% as the rising stock market
contributed to strong sales of the company's annuity products, and Aon Corp.
posted a 5% gain as ongoing cost cutting initiatives enabled the company to
exceed earnings expectations during an otherwise environment for
property-casualty insurance companies.
6
Our tobacco positions of Altria Group Inc. and Loews-Carolina Group rose 6% and
15%, respectively, because of improving industry fundamentals and a favorable
litigation outlook, and Lockheed Martin Corp. posted a 17% gain as the company
was part of a consortium that was the surprising winner of a contract to build a
new fleet of presidential helicopters. In addition, our investment in Korea
Electric Power Corp. appreciated 18% as hotter-than- normal weather is
contributing to increased electricity demand, while a strong South Korean won
versus the U.S. dollar is helping to offset rising fuel costs.
In our preferred portfolio, our underweight of Agency-issued preferred
securities relative to the comparative benchmark benefited the portfolio as FNMA
and FHLMC continue to work through their regulatory issues.
Conversely, auto parts supplier Delphi Corp. declined 52% during the period,
after the company announced the need to restate earnings due to improper
accounting practices related to its rebates from suppliers. We determined that
the company faced an environment that could make a recovery very difficult, and
we elected to sell our holding. Fortunately, this investment was a relatively
small position in the Fund's portfolio.
Our investments in International Paper Co. and Packaging Corporation of America
declined 28% and 11%, respectively, during the period due to pricing pressures
and softening demand. The paper industry is facing some upcoming capacity issues
as new pulp mills in China and Latin America are projected to come on line much
sooner than expected, which could have a negative impact on future pricing
power. Our investment in Albertson's declined 13% on lowered earnings
expectations due to increased price and promotional pressures among the
traditional supermarket retailers, and Fannie Mae fell 18% as an accounting
restatement and proposed legislation granting broader authority to a new
regulator put downward pressure on its stock.
7
In addition, our telecommunication stocks underperformed during the period
following strong gains last year. Their decline was related to valuations and to
concerns about cellular subscriber growth as wireless penetration approaches 60%
of the U.S. population. Fears of growth in VoIP (Voice over Internet Protocol)
remained the dominant threat to the industry.
In the senior loan portion of the Fund's portfolio, our holdings were in line
with the positive performance of the loan market in general over the six month
period. In particular, Anthony Crane, a large renter of industrial cranes and
equipment, had a positive impact on the Fund's performance during the period. We
sold this position for a substantial gain before the end of the period.
Given some relative weakness in the high yield market over this period, several
high yield positions had a negative impact on Fund performance during these six
months. In addition, Federal Mogul was in Chapter 11 bankruptcy proceedings as
of June 30, 3005, and the term loan we held had a negative impact on performance
during this reporting period.
8
Distribution and Share Price
INFORMATION
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 enhance the Fund's returns and supplement the income
available to pay common shareholder distributions, but also can increase share
price volatility. This leveraging strategy provided incremental income and
helped enhance shareholder distributions over this reporting period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. Under this policy, the Fund's monthly
distributions will be paid from net investment income generated by its
underlying securities as well as from net realized capital gains and/or returns
of capital, generally representing net unrealized capital gains. Over this
six-month reporting period, the Fund has maintained a stable monthly
distribution of $0.10 per share.
As of June 30, 2005, the Fund was trading at a -6.53% discount to its net asset
value. This was less than the average -8.53% discount the Fund exhibited over
the course of the entire six-month reporting period.
9
Nuveen Tax-Advantaged Total Return Strategy Fund
JTA
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
Common Stocks 70.7%
Variable Rate Senior
Loan Interests 14.9%
Preferred Securities 8.8%
Corporate Bonds 3.1%
High-Grade Short-Term
Investments 2.5%
Bar Chart:
2004-2005 MONTHLY DISTRIBUTIONS PER SHARE
Jul 0.0735
Aug 0.0735
Sep 0.0735
Oct 0.0735
Nov 0.0735
Dec 0.1
Jan 0.1
Feb 0.1
Mar 0.1
Apr 0.1
May 0.1
Jun 0.1
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1//04 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
17.82
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
19.35
19.54
19.41
19.53
19.43
19.52
19.46
19.43
19.37
19.38
19.49
19.47
19.35
19.45
19.49
19.4
19.29
19.3
19.26
19.3
19.42
19.51
19.63
19.69
19.83
19.83
19.85
19.68
19.64
19.62
19.6
19.83
19.72
19.64
19.58
19.38
19.33
19.39
19.62
19.6
19.7
19.7
19.73
19.85
19.82
19.79
19.67
19.7
19.41
19.43
19.25
19.16
19.42
19.37
19.36
19.19
19.05
19.02
18.84
18.66
19.04
19.2
19.2
19.14
19.28
19.25
19.36
19.52
19.5
19.35
19.3
19.01
18.85
18.72
18.99
18.8
19.15
19.19
19.15
19.15
19.16
19.17
19.39
19.39
19.31
19.4
19.66
19.57
19.72
19.55
19.63
19.57
19.6
19.53
19.58
19.69
19.55
19.7
19.75
19.88
19.78
19.63
19.79
19.89
19.74
19.68
19.7
19.75
19.92
19.97
19.76
19.85
19.8
19.88
19.82
19.89
19.89
19.92
19.8
19.7
19.87
19.7
19.75
19.68
19.9
19.95
6/30/05 19.9
FUND SNAPSHOT
------------------------------------
Common Share Price $19.90
------------------------------------
Common Share
Net Asset Value $21.29
------------------------------------
Premium/(Discount) to NAV -6.53%
------------------------------------
Market Yield1 6.03%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $294,971
------------------------------------
CUMULATIVE TOTAL RETURN
(Inception 1/27/04)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 6.04% 1.64%
------------------------------------
1-Year 25.58% 15.65%
------------------------------------
Since
Inception 4.87% 13.06%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Diversified Telecommunication
Services 8.7%
------------------------------------
Oil & Gas 8.3%
------------------------------------
Thrifts & Mortgage Finance 7.1%
------------------------------------
Tobacco 6.2%
------------------------------------
Metals & Mining 5.8%
------------------------------------
Aerospace and Defense 5.7%
------------------------------------
Insurance 5.6%
------------------------------------
Diversified Financial Services 5.1%
------------------------------------
Commercial Banks 5.0%
------------------------------------
Electric Utilities 3.9%
------------------------------------
Commercial Services & Supplies 3.0%
------------------------------------
Food & Staples Retailing 3.0%
------------------------------------
Media 2.9%
------------------------------------
Multi-Utilities &
Unregulated Power 2.9%
------------------------------------
Household Durables 2.8%
------------------------------------
Hotels, Restaurants & Leisure 2.6%
------------------------------------
Chemicals 2.5%
------------------------------------
Containers & Packaging 2.2%
------------------------------------
Paper & Forest Products 2.1%
------------------------------------
Other 12.1%
------------------------------------
High-Grade Short-Term
Investments 2.5%
------------------------------------
COUNTRIES
(as a % of total investments)
------------------------------------
United States 79.9%
------------------------------------
United Kingdom 5.7%
------------------------------------
South Korea 5.1%
------------------------------------
Italy 3.1%
------------------------------------
Netherlands 2.5%
------------------------------------
Other 3.7%
------------------------------------
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
Shareholder
MEETING REPORT
The annual shareholder meeting was held on March 22, 2005, in Chicago at
Nuveen's headquarters.
JTA
------------------------------------------------------------------------------------------------------------------------------------
Common and
Preferred shares Preferred shares
voting together voting together
as a class as a class
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Robert P. Bremner
For 13,565,019 --
Withhold 88,564 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
Lawrence H. Brown
For 13,560,931 --
Withhold 92,652 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
Jack B. Evans
For 13,566,306 --
Withhold 87,277 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
William C. Hunter
For 13,562,298 --
Withhold 91,285 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
David J. Kundert
For 13,565,276 --
Withhold 88,307 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
William J. Schneider
For -- 1,749
Withhold -- 19
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,768
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,749
Withhold -- 19
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,768
====================================================================================================================================
Judith M. Stockdale
For 13,564,403 --
Withhold 89,180 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
Eugene S. Sunshine
For 13,560,488 --
Withhold 93,095 --
------------------------------------------------------------------------------------------------------------------------------------
Total 13,653,583 --
====================================================================================================================================
11
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA)
Portfolio of
INVESTMENTS June 30, 2005 (Unaudited)
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 100.9% (70.7% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 6.2%
140,000 Lockheed Martin Corporation $ 9,081,800
235,000 Raytheon Company 9,193,200
------------------------------------------------------------------------------------------------------------------------------------
18,275,000
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 2.8%
492,000 DSM NV, Sponsored ADR 8,364,000
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 5.0%
150,000 Wachovia Corporation 7,440,000
120,000 Wells Fargo & Company 7,389,600
------------------------------------------------------------------------------------------------------------------------------------
14,829,600
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 3.4%
230,000 Pitney Bowes Inc. 10,016,500
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 2.1%
300,000 Packaging Corp of America 6,315,000
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 5.7%
205,000 Citigroup Inc. 9,477,150
205,000 JPMorgan Chase & Co. 7,240,600
------------------------------------------------------------------------------------------------------------------------------------
16,717,750
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 12.2%
343,000 KT Corporation, Sponsored ADR 7,374,500
346,500 SBC Communications Inc. 8,229,375
330,000 Sprint Corporation 8,279,700
235,000 Telecom Italia S.p.A., Sponsored ADR 6,053,600
190,000 Verizon Communications Inc. 6,564,500
------------------------------------------------------------------------------------------------------------------------------------
36,501,675
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 3.5%
652,000 Korea Electric Power Corporation (KEPCO), Sponsored ADR 10,216,840
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 4.3%
375,000 Albertson's, Inc. 7,755,000
240,625 J. Sainsbury plc, Sponsored ADR 5,017,031
------------------------------------------------------------------------------------------------------------------------------------
12,772,031
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.7%
207,000 Newell Rubbermaid Inc. 4,934,880
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.7%
80,000 Kimberly-Clark Corporation 5,007,200
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 5.3%
390,000 Aon Corporation 9,765,600
80,000 Hartford Financial Services Group, Inc. 5,982,400
------------------------------------------------------------------------------------------------------------------------------------
15,748,000
------------------------------------------------------------------------------------------------------------------------------------
12
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 7.4%
404,000 Alumina Limited, Sponsored ADR $ 6,872,040
90,000 POSCO, ADR 3,957,300
90,000 Rio Tinto plc, Sponsored ADR 10,972,800
------------------------------------------------------------------------------------------------------------------------------------
21,802,140
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 4.2%
110,000 Dominion Resources Inc. 8,072,900
180,000 United Utilities plc, Sponsored ADR 4,307,400
------------------------------------------------------------------------------------------------------------------------------------
12,380,300
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 11.9%
80,000 ChevronTexaco Corporation 4,473,600
113,400 ConocoPhillips 6,519,366
53,000 Eni S.p.A., Sponsored ADR 6,794,600
142,669 Kerr-McGee Corporation 10,887,071
55,000 Total SA, Sponsored ADR 6,426,750
------------------------------------------------------------------------------------------------------------------------------------
35,101,387
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 2.3%
220,000 International Paper Company 6,646,200
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.4%
230,000 Merck & Co. Inc. 7,084,000
------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 2.0%
90,000 Union Pacific Corporation 5,832,000
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 7.9%
212,000 Fannie Mae 12,380,800
265,000 IndyMac Bancorp, Inc. 10,793,450
------------------------------------------------------------------------------------------------------------------------------------
23,174,250
------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 8.9%
235,000 Altria Group, Inc. 15,195,100
330,000 Loews Corp - Carolina Group 10,995,600
------------------------------------------------------------------------------------------------------------------------------------
26,190,700
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stock (cost $265,516,156) 297,909,453
--------------------------------------------------------------------------------------------------------------------
RATINGS**
-------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 12.5% (8.8% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.4%
17,500 Bear Stearns Companies, Series E 6.150% A3 BBB $ 901,250
25,000 Goldman Sachs Group Inc. 3.090% A2 A- 623,000
77,700 Lehman Brothers Holdings Inc., Series F 6.500% A3 BBB+ 2,016,315
25,000 Merrill Lynch and Company 4.266% A2 A- 613,750
------------------------------------------------------------------------------------------------------------------------------------
4,154,315
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.2%
41,100 Abbey National plc 7.375% A2 A- 1,081,752
23,500 Abbey National plc, Series B 7.375% A2 A 629,800
40,000 ABN AMRO Capital Trust Fund VII 6.080% A2 A 994,000
25,000 Banco Santander 6.410% A2 BBB+ 631,250
40,000 HSBC USA Inc. 3.870% A2 A- 992,800
40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 A 1,030,800
40,000 Royal Bank of Scotland Group plc, Series N 6.350% A1 A 1,014,800
------------------------------------------------------------------------------------------------------------------------------------
6,375,202
------------------------------------------------------------------------------------------------------------------------------------
13
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
-------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 1.0%
45,000 HSBC Finance Corporation 6.360% A3 BBB+ $ 1,147,500
36,100 SLM Corporation, Series A 6.970% Baa1 BBB+ 2,062,213
------------------------------------------------------------------------------------------------------------------------------------
3,209,713
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.6%
19,500 Citigroup Inc., Series F 6.365% Aa3 A 1,026,675
30,000 Citigroup Inc., Series H 6.231% Aa3 NA 1,601,100
5,000 ING Group NV 7.050% NA A- 130,750
48,400 ING Group NV 7.200% A2 A- 1,275,340
25,600 ING Group NV 6.200% A2 A- 648,448
------------------------------------------------------------------------------------------------------------------------------------
4,682,313
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.0%
39,500 Alabama Power Company, Series A 5.300% Baa1 BBB+ 984,538
9,800 Consolidated Edison Company of New York, Inc. 5.000% A3 BBB+ 916,300
41,500 Interstate Power and Light Company 7.100% Baa3 BBB- 1,136,063
40,000 Mississippi Power Company 5.250% A3 BBB+ 995,200
40,000 Savannah Electric & Power Company 6.000% Baa1 BBB+ 1,063,200
9,000 Southern California Edison Company, Series A 5.349% Baa3 BBB- 903,657
------------------------------------------------------------------------------------------------------------------------------------
5,998,958
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 2.0%
72,700 Ace Ltd., Series C 7.800% Baa2 BBB- 1,948,360
40,000 Aegon NV 6.375% A3 A- 1,010,800
40,000 Genworth Financial Inc., Series A 5.250% Baa1 BBB+ 2,116,252
30,000 Prudential plc 6.750% Baa1 A 787,500
------------------------------------------------------------------------------------------------------------------------------------
5,862,912
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.3%
20,000 Fannie Mae 5.500% Aa3 AA- 937,000
24,300 Fannie Mae 5.125% Aa3 AA- 1,069,200
35,000 Fannie Mae 5.810% Aa3 AA- 1,715,000
20,000 Federal Home Loan Mortgage Corporation 5.700% Aa3 AA- 975,000
18,400 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 950,360
21,900 Federal Home Loan Mortgage Corporation 5.000% Aa3 AA- 952,650
------------------------------------------------------------------------------------------------------------------------------------
6,599,210
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $36,846,298) 36,882,623
--------------------------------------------------------------------------------------------------------------------
RATINGS**
PRINCIPAL STATED -------------------
AMOUNT (000)/ DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.4% (3.1% OF TOTAL INVESTMENTS)
CONSTRUCTION MATERIALS - 1.1%
$ 2,800 Texas Industries Inc. 10.250% 6/15/11 B1 BB- $ 3,258,500
------------------------------------------------------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE - 0.8%
2,000 Park Place Entertainment 8.875% 9/15/08 Ba2 BB- 2,237,500
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.8%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Ba1 BB+ 2,126,666
2,000 Standard Pacific Corporation 6.500% 10/01/08 Ba2 BB 2,030,000
1,000 Standard Pacific Corporation 9.500% 9/15/10 Ba2 BB 1,060,000
------------------------------------------------------------------------------------------------------------------------------------
5,216,666
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.7%
2,000 Georgia-Pacific Corp 7.375% 7/15/08 Ba2 BB+ 2,137,500
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $12,686,440) 12,850,166
--------------------------------------------------------------------------------------------------------------------
14
WEIGHTED RATINGS**
PRINCIPAL AVERAGE STATED -------------------
AMOUNT (000)/ DESCRIPTION(1) COUPON MATURITY* MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 21.2% (14.9% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.9%
$ 1,644 Hexcel, Term Loan B 6.130% 3/01/12 B2 B+ $ 1,659,605
1,900 K & F Industries, Inc., Term Loan B 5.770% 11/18/12 B2 B+ 1,925,955
1,629 Vought Aircraft Industries, Inc., 5.830% 12/22/11 Ba3 B+ 1,653,907
Term Loan
364 Vought Aircraft Industries, Inc., TBD TBD Ba3 B+ 368,909
Tranche B, Letter of Credit
------------------------------------------------------------------------------------------------------------------------------------
5,608,376
------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 0.6%
2,000 Federal-Mogul Corporation, 5.580% 2/24/04 N/R N/R 1,787,917
Term Loan A (a)
------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.6%
1,870 PP Holding Corporation, Term Loan 5.580% 11/12/11 B1 B 1,881,688
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.7%
2,000 Rockwood Specialties Group, 5.430% 7/30/12 B1 B+ 2,030,625
Inc., Tranche D
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.9%
703 Allied Waste North America, Inc., TBD TBD B1 BB 705,241
Letter of Credit
1,841 Allied Waste North America, Inc., 5.373% 3/12/21 B1 BB 1,847,313
Term Loan B
------------------------------------------------------------------------------------------------------------------------------------
2,552,554
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.0%
788 Owens-Illinois Group, Inc., Term Loan B 5.020% 4/01/08 B1 N/R 795,327
175 Smurfit-Stone Container Corporation, TBD TBD Ba3 BB- 177,244
Deposit-Funded Commitment
1,392 Smurfit-Stone Container Corporation, 5.410% 11/01/11 Ba3 BB- 1,412,548
Term Loan B
428 Smurfit-Stone Container Corporation, 5.290% 11/01/11 Ba3 BB- 434,630
Term Loan C
------------------------------------------------------------------------------------------------------------------------------------
2,819,749
------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.7%
1,700 Sensus Metering Systems Inc., 5.540% 12/17/10 B2 B+ 1,720,542
Term Loan B-1
255 Sensus Metering Systems Inc., 5.530% 12/17/10 B2 B+ 258,081
Term Loan B-2
------------------------------------------------------------------------------------------------------------------------------------
1,978,623
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.7%
1,091 Alderwoods Group, Inc., Term Loan B-2 5.280% 9/29/08 B1 BB- 1,105,457
2,000 Davita Inc., Term Loan B (b) TBD TBD B1 BB- 2,027,657
1,980 IASIS Healthcare LLC, Term Loan B 5.370% 6/22/11 B1 B+ 2,006,341
------------------------------------------------------------------------------------------------------------------------------------
5,139,455
------------------------------------------------------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE - 3.0%
2,000 24 Hour Fitness Worldwide, Inc., 6.190% 6/06/05 B1 B- 2,032,500
Term Loan B
1,975 Jack in the Box, Inc., Term Loan 4.950% 1/09/10 Ba2 BB 1,994,750
2,000 Penn National Gaming, Inc., TBD TBD Ba3 BB- 2,030,179
Term Loan B (b)
342 Venetian Casino Resort, LLC, Delayed 0.750% 6/15/11 B1 B+ 2,991
Draw, Term Loan (c)
1,658 Venetian Casino Resort, LLC, Term Loan 5.240% 6/15/11 B1 B+ 1,676,625
86 Wyndham International, Inc., TBD TBD B2 B 86,638
Letter of Credit
914 Wyndham International, Inc., Term Loan B 6.500% 4/15/11 B3 B 920,075
------------------------------------------------------------------------------------------------------------------------------------
8,743,758
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.5%
1,573 Sealy Mattress Company, Term Loan D 4.990% 4/06/12 B1 B+ 1,583,346
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
2,963 Solo Cup Company, Term Loan 5.400% 2/27/11 B1 B+ 2,992,866
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.7%
1,918 Conseco, Inc., Term Loan 6.830% 6/22/10 B2 BB- 1,939,377
------------------------------------------------------------------------------------------------------------------------------------
15
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
WEIGHTED RATINGS**
PRINCIPAL AVERAGE STATED -------------------
AMOUNT (000)/ DESCRIPTION(1) COUPON MATURITY* MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 0.6%
$ 1,850 Fidelity National Information Services, 4.960% 3/09/13 Ba3 BB $ 1,844,701
Term Loan B
------------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.5%
1,371 Dresser-Rand Group Inc., Term Loan 5.438% 10/10/10 B1 B+ 1,392,416
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 4.0%
1,980 Charter Communications Operating, LLC, 6.440% 4/07/11 B2 B 1,970,188
Term Loan B
1,990 Emmis Operating Company, Term Loan 4.960% 11/10/11 Ba2 B+ 2,009,070
2,000 Metro-Goldwyn Mayer Studios, Inc., 5.740% 4/12/12 N/R N/R 2,009,375
Term Loan B
1,915 Regal Cinemas Corporation, Term Loan 5.240% 11/10/10 Ba3 BB- 1,934,551
859 Transwestern Publishing Company LLC,
First Lien Term Loan 5.560% 2/25/11 B1 B+ 862,927
990 Transwestern Publishing Company LLC,
Second Lien Term Loan 6.800% 2/25/12 B3 B- 1,001,140
2,219 WMG Acquisition Corp., Term Loan 5.330% 2/27/11 B1 B+ 2,235,751
------------------------------------------------------------------------------------------------------------------------------------
12,023,002
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.9%
2,730 Amsted Industries Incorporated, 5.930% 10/15/10 B1 BB- 2,764,261
Term Loan B
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.9%
1,522 Crescent Real Estate Funding XII, L.P., 5.361% 3/20/06 N/R N/R 1,536,586
Term Loan
1,991 General Growth Properties, Inc., 5.580% 11/12/08 Ba2 BB+ 2,007,368
Term Loan B
1,960 LNR Property Corporation, Term Loan 6.210% 2/03/08 B2 B+ 1,967,815
------------------------------------------------------------------------------------------------------------------------------------
5,511,769
------------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $62,219,221) 62,594,483
--------------------------------------------------------------------------------------------------------------------
HIGH-GRADE SHORT-TERM INVESTMENTS - 3.6% (2.5% OF TOTAL INVESTMENTS)
$ 10,509 State Street Bank Euro Dollar Time Deposit, 2.600%, 7/01/05 10,508,080
=============-----------------------------------------------------------------------------------------------------------------------
Total High Grade Short-Term Investments (cost $10,508,080) 10,508,080
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $387,776,195) - 142.6% 420,744,805
--------------------------------------------------------------------------------------------------------------------
FundNotes - (26.4)% (78,000,000)
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.9)% (2,773,520)
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (15.3)% (45,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 294,971,285
====================================================================================================================
(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 an assigned fixed rate. These floating 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.
* 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.
** Ratings below Baa by Moody's Investor Service, Inc. or
BBB by Standard & Poor's Group are considered to be
below investment grade.
(a) At or subsequent to June 30, 2005, this issue was under
the protection of Federal Bankruptcy Court.
(b) Purchased on a when-issued or delayed delivery basis.
(c) Position represents an unfunded loan commitment
outstanding at June 30, 2005.
ADR American Depository Receipt.
TBD Senior Loan purchased on a when-issued basis or delayed
delivery basis. Certain details associated with this
purchase are not known prior to the settlement date of
the transaction. In addition, Senior Loans typically
trade without accrued interest and therefore a weighted
average coupon rate is not available prior to
settlement. At settlement, if still unknown, the
borrower or counterparty will provide the Fund with the
final weighted average coupon rate and maturity date.
N/R Investment is not rated.
See accompanying notes to financial statements.
16
Statement of
ASSETS AND LIABILITIES June 30, 2005 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $387,776,195) $420,744,805
Receivables:
Dividends 1,101,923
Interest 581,203
Investments sold 770,242
Reclaims 57,639
Deferred FundNotes offering costs 1,751,319
Other assets 22,007
-----------------------------------------------------------------------------------------------------------------------------------
Total assets 425,029,138
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 6,656,967
FundNotes 78,000,000
Accrued expenses:
Management fees 200,665
Other 149,946
FundNotes interest payable 46,145
FundPreferred share dividends payable 4,130
-----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 85,057,853
-----------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $294,971,285
====================================================================================================================================
Common shares outstanding 13,855,240
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 21.29
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
-----------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,552
Paid-in surplus 262,784,819
Undistributed (Over-distribution of) net investment income (3,139,596)
Accumulated net realized gain from investments 2,218,900
Net unrealized appreciation of investments 32,968,610
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $294,971,285
====================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
17
Statement of
OPERATIONS Six Months Ended June 30, 2005 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $277,619) $ 6,404,681
Interest 2,097,422
Fees 4,359
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 8,506,462
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 1,850,388
FundNotes interest expense and amortization of offering costs 1,019,810
FundNotes and FundPreferred shares - auction fees 152,487
FundNotes and FundPreferred shares - dividend disbursing agent fees 4,938
Shareholders' servicing agent fees and expenses 876
Custodian's fees and expenses 60,135
Trustees' fees and expenses 4,237
Professional fees 13,019
Shareholders' reports - printing and mailing expenses 18,155
Stock exchange listing fees 6,026
Investor relations expense 31,028
Other expenses 642
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 3,161,741
Custodian fee credit (709)
Expense reimbursement (660,436)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,500,596
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,005,866
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from investments 1,781,660
Change in net unrealized appreciation (depreciation) of investments (2,271,059)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (489,399)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (603,553)
From accumulated net realized gains from investments --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shareholders
from distributions to FundPreferred shareholders (603,553)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $ 4,912,914
====================================================================================================================================
See accompanying notes to financial statements.
18
Statement of
CHANGES IN NET ASSETS (Unaudited)
FOR THE PERIOD
1/27/04
(COMMENCEMENT
OF OPERATIONS)
SIX MONTHS ENDED THROUGH
6/30/05 12/31/04
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,005,866 $ 9,240,322
Net realized gain from investments 1,781,660 2,023,579
Change in net unrealized appreciation (depreciation) of investments (2,271,059) 35,239,669
Distributions to FundPreferred shareholders:
From net investment income (603,553) (449,287)
From accumulated net realized gains from investments -- (55,374)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations 4,912,914 45,998,909
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (8,313,144) (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 (8,313,144) (10,550,765)
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of Common shares -- 263,981,000
FundPreferred shares offering costs (77,713) (1,080,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions (77,713) 262,901,000
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares (3,477,943) 298,349,144
Net assets applicable to Common shares at the beginning of period 298,449,228 100,084
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $294,971,285 $298,449,228
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (3,139,596) $ (228,765)
====================================================================================================================================
See accompanying notes to financial statements.
19
Statement of
CASH FLOWS Six Months Ended June 30, 2005 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 4,912,914
Adjustments to Reconcile the Net Increase in Net Assets Applicable to Common Shares from Operations
to Net Cash Provided by Operating Activities:
Purchases of investment securities (65,148,321)
Proceeds from disposition of short-term investment securities, net 6,401,168
Proceeds from disposition of investment securities 59,576,980
Amortization/(Accretion) of discounts and premiums, net 113,613
Increase in dividends receivable (23,464)
Increase in interest receivable (6,928)
Increase in receivable from investments sold (639,018)
Increase in reclaims receivable (33,498)
Increase in other assets (17,889)
Increase in payable for investments purchased 2,656,967
Decrease in management fees payable (2,042)
Increase in other liabilities 21,433
Decrease in FundPreferred share dividends payable (2,453)
Net realized gain from investments (1,781,660)
Change in net unrealized (appreciation)/depreciation of investments 2,271,059
Net realized (gain)/loss from paydowns 26,180
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 8,325,041
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (8,313,144)
FundNotes:
Deferred offering costs 24,694
Increase in FundNotes interest payable* 41,122
FundPreferred shares offering costs (77,713)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (8,325,041)
-----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of period --
-----------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ --
====================================================================================================================================
* Cash paid for interest on FundNotes during the six months end June 30, 2004
was $948,293.
See accompanying notes to financial statements.
20
Notes to
FINANCIAL STATEMENTS (Unaudited)
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.
Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the
Fund's previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NIAC or NAC.
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 the Adviser, 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, market quotes or 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 investment 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 June 30, 2005, the
Fund had outstanding delayed delivery purchase commitments of $4,000,000.
21
Notes to
FINANCIAL STATEMENTS (Unaudited) (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) ("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. Distributions during the first six months of
the fiscal year are classified as having been paid from net investment income;
consequently, this will negatively impact the amount of undistributed net
investment income shown in the financial statements in this semiannual report.
The final determination of the source of all distributions for the year are made
after the end of the year and reflected in the financial statements contained in
the annual report.
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 six
months ended June 30, 2005, the average daily balance of FundNotes was $78
million with an average annualized interest rate of 2.64%.
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 six months ended June 30,
2005.
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 ($1,157,713) 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
The Fund did not engage in transactions in its own shares during the six months
ended June 30, 2005.
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) during the
six months ended June 30, 2005, aggregated $65,148,321 and $59,576,980,
respectively.
23
Notes to
FINANCIAL STATEMENTS (Unaudited) (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 investment transactions.
At June 30, 2005, the cost of investments was $388,080,380.
The net unrealized appreciation of investments at June 30, 2005, aggregated
$32,664,425 of which $42,246,782 related to appreciated securities and
$9,582,357 related to depreciated securities.
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2004, the Fund's last fiscal year end, 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, the Fund's last fiscal
year end, 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
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the 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. As of July
31, 2005, the complex-level fee rate was .1899%.
24
The annual fund-level fee, payable monthly, for the Fund is based upon the
average daily Managed Assets of the Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL 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
================================================================================
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 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 (Unaudited) (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 June 30, 2005, there were unfunded senior loan commitments of
$2,991.
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 June 30, 2005, there were
no such outstanding participation commitments.
8. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreement between the Fund and the Adviser, which resulted in the
automatic termination of the agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved a new ongoing
investment management agreement for the Fund and the submission of the agreement
for approval by the Fund's shareholders, which shareholder approval was received
prior to the settlement of transactions (C) and (D). The new ongoing management
agreement took effect upon such settlement.
9. SUBSEQUENT EVENT -- DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a distribution of $.1000 per Common share which was paid on
August 1, 2005, to shareholders of record on July 15, 2005. The fund also
declared a capital gains distribution of $.0308 per share, which was also paid
on August 1, 2005, to shareholders of record on July 15, 2005.
26
Financial
HIGHLIGHTS (Unaudited)
27
Financial
HIGHLIGHTS (Unaudited)
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 (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
Year Ended 12/31:
2005(c) $21.54 $.43 $ (.03) $(.04) $ -- $ .36 $(.60) $ -- $(.60)
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:
2005(c) $(.01) $21.29 $19.90 6.04% 1.64%
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:
2005(c) $294,971 2.16%* 3.65%* 1.71%* 4.10%* 15%
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:
2005(c) $78,000 $25,000 $5,359 $45,000 $25,000 $188,873
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 and Fundnotes.
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 and Amortization of
FundNotes Offering Costs to Average
Net Assets Applicable to
Common Shares
------------------------
2005(c) .70%*
2004(b) .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.
(c) For the six months ended June 30, 2005.
28-29 SPREAD
See accompanying notes to financial statements.
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
At a meeting held on May 10-12, 2005, the Board of Trustees of the Fund,
including the independent Trustees, unanimously approved the Investment
Management Agreement between the Fund and NAM and the Sub-Advisory Agreements
between NAM and Symphony and NWQ (each a "Sub-Adviser") (NAM and the
Sub-Advisers are each a "Fund Adviser").
THE APPROVAL PROCESS
To assist the Board in its evaluation of an advisory contract with a Fund
Adviser, the independent Trustees received a report in adequate time in advance
of their meeting which outlined, among other things, the services provided by
the Fund Adviser; the organization of the Fund Adviser, including the
responsibilities of various departments and key personnel; the Fund's past
performance as well as the Fund's performance compared to funds of similar
investment objectives compiled by an independent third party (a "Peer Group") as
described below and with recognized and/or customized benchmarks (as
appropriate); the profitability of the Fund Adviser and certain industry
profitability analyses for advisers to unaffiliated investment companies; the
expenses of the Fund Adviser in providing the various services; the advisory
fees of the Fund Adviser, including comparisons of such fees with the management
fees of comparable funds in its Peer Group as well as comparisons of the Fund
Adviser's management fees with the fees the Fund Adviser assesses to other types
of investment products or accounts, if any; the soft dollar practices of the
Fund Adviser; and the expenses of the Fund, including comparisons of the Fund's
expense ratios (after any fee waivers) with the expense ratios of its Peer
Group. This information supplements that received by the Board throughout the
year regarding Fund performance, expense ratios, portfolio composition, trade
execution and sales activity.
In addition to the foregoing materials, independent legal counsel to the
independent Trustees provided, in advance of the meeting, a legal memorandum
outlining, among other things, the duties of the Trustees under the 1940 Act as
well as the general principles of relevant state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; an
adviser's fiduciary duty with respect to advisory agreements and compensation;
the standards used by courts in determining whether investment company boards of
directors have fulfilled their duties and factors to be considered by the board
in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. In addition, the independent Trustees noted that each Sub-Adviser
also previously made written or oral presentations to the Board providing the
respective Sub-Adviser with the opportunity to explain its investment
strategies, discuss market conditions, and highlight any material issues. Many
of these presentations were part of site visits by the Board throughout the
year. After the presentations and after reviewing the written materials, the
independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contract. It is with this background that the Trustees considered each
advisory contract (which includes sub-advisory contracts) with a Fund Adviser.
The independent Trustees, in consultation with independent counsel, reviewed the
factors set out in judicial decisions and SEC directives relating to the renewal
of advisory contracts. As outlined in more detail below, the Trustees considered
all factors they believed relevant with respect to the Fund, including the
following: (a) the nature, extent and quality of the services to be provided by
the Fund Adviser; (b) the investment performance of the Fund and the Fund
Adviser; (c) the costs of the services to be provided and profits to be realized
by the Fund Adviser and its affiliates from the relationship with the Fund; (d)
the extent to which economies of scale would be realized as the Fund grows; and
(e) whether fee levels reflect these economies of scale for the benefit of Fund
investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of the respective Fund Adviser's
services, the Trustees reviewed information concerning the types of services
that a Fund Adviser or its affiliates provide and are expected to provide to the
Nuveen Funds; narrative and statistical information concerning the Fund's
performance record and how such performance compares to the Fund's Peer Group
and recognized benchmarks and/or customized benchmarks (as described in further
detail in Section B below); information describing the Fund Adviser's
organization and its various departments, the experience and responsibilities of
key personnel, and available resources. In the discussion of key personnel, the
Trustees received materials regarding the changes or additions in personnel of
the applicable Fund Adviser. The Trustees further noted the willingness of the
personnel of NAM to engage in open, candid discussions with the Board. The
Trustees further considered the quality of the Fund Adviser's investment process
in making portfolio management decisions, including any refinements or
improvements to the portfolio management processes, enhancements to technology
and systems that are available to portfolio managers, and any additions of new
personnel which may strengthen or expand the research and investment
capabilities of the Fund Adviser. In their review of the advisory contracts for
the fixed income funds, the Trustees also noted that Nuveen won the Lipper Award
for Best Fund Family: Fixed Income-Large Asset Class, for 2004. Given the
Trustees' experience with the Fund, other Nuveen funds and the Fund Advisers,
the Trustees noted that they were familiar with and continue to have a good
understanding of the organization, operations and personnel of the Fund
Advisers.
30
In addition to advisory services, the independent Trustees considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Fund with such administrative and other services (exclusive of,
and in addition to, any such services provided by others for the Fund) and
officers and other personnel as are necessary for the operations of the Fund. In
addition to investment management services, NAM and its affiliates provide the
Fund with a wide range of services, including: preparing shareholder reports;
providing daily accounting; providing quarterly financial statements; overseeing
and coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such meetings;
providing legal support (such as helping to prepare registration statements,
amendments thereto and proxy statements and responding to regulatory inquiries);
and performing other Fund administrative tasks necessary for the operation of
the Fund (such as tax reporting and fulfilling regulatory filing requirements).
In addition, in evaluating the administrative services, the Trustees considered,
in particular, a Fund Adviser's policies and procedures for assuring compliance
with applicable laws and regulations in light of the new SEC regulations
governing compliance. The Trustees noted NAM's focus on compliance and its
compliance systems. In their review, the Trustees considered, among other
things, the additions of experienced personnel to NAM's compliance group and
modifications and other enhancements to NAM's computer systems. In addition to
the foregoing, the Trustees also noted that NAM outsources certain services that
cannot be replicated without significant costs or at the same level of
expertise. Such outsourcing has been a beneficial and efficient use of resources
by keeping expenses low while obtaining quality services. Further, as the Fund
utilizes Sub-Advisers, the Trustees considered NAM's ability and procedures to
monitor the respective Sub-Adviser's performance, business practices and
compliance policies and procedures. In this regard, the Trustees noted the role
of NAM's investment oversight committee, including its increased personnel, the
responsibilities and experience of the staff, and procedures to monitor
Sub-Advisers, including the use of site visits.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Fund, the
independent Trustees determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Trustees noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
In evaluating the services of the Sub-Advisers, the independent Trustees noted
that the Sub-Advisory Agreements were essentially agreements for portfolio
management services only and the respective Sub-Adviser was not expected to
supply other significant administrative services to the Fund.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were quite satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
As previously noted, the Board received a myriad of performance information
regarding the Fund and its Peer Group, if available. Among other things, the
Board received materials reflecting the Fund's historic performance, the Fund's
performance compared to its Peer Group (as available), and its performance
compared to recognized and/or customized benchmarks (as applicable). The
Trustees reviewed performance information including, among other things, total
return information compared with a Fund's Peer Group as well as recognized
and/or customized benchmarks (as appropriate) for the one-, three- and five-year
periods (as applicable) ending December 31, 2004. This information supplements
the Fund performance information provided to the Board at each of their
quarterly meetings. Based on their review, the Trustees determined that the
Fund's absolute and relative investment performance over time had been
satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses that the Fund is expected to
bear, the Trustees considered the Fund's current management fee structure,
the sub-advisory fee arrangements and the Fund's expected expense ratios in
absolute terms as well as compared with the fees and expense ratios of the
unaffiliated funds in its Peer Group. The Trustees reviewed the financial
information of the respective Fund Adviser, including its respective
revenues, expenses and profitability. In reviewing fees, the Trustees, among
other things, reviewed comparisons of the Fund's gross management fees (fees
after fund-level and complex-wide level breakpoints but before reimbursement
and fee waivers), net management fees (after breakpoints and reimbursements
and fee waivers) and total expense ratios (before and after waivers) with
those of the unaffiliated funds in its Peer Group and peer averages. In this
regard, the Trustees noted that the relative ranking of the Nuveen Funds on
fees and expenses was aided by the significant level of fee reductions
provided by the fund-level and complex-wide breakpoint schedules, and the fee
waivers and reimbursements provided by Nuveen for certain funds launched
since 1999. The complex-wide breakpoint schedule was instituted in 2004 and
is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect These Economies of Scale." In its
review, the Trustees noted that all taxable closed-end exchange-traded Nuveen
funds had net expense ratios below or within an acceptable range compared to
peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further compared the fees of NAM to the fees NAM or an affiliate
thereof assessed for other types of clients (such as separate managed
accounts as well as fees charged on funds that are not offered by Nuveen but
are sub-advised by one of Nuveen's investment management teams). With respect
to separately managed accounts, the advisory fees to such separate managed
accounts are generally lower than those charged to the Fund. The Trustees
noted, however, the additional services that are provided and the costs
incurred by Nuveen in managing and operating registered investment companies,
such as the Fund, com-
31
ANNUAL INVESTMENT MANAGEMENT
AGREEMENT APPROVAL PROCESS (continued)
pared to individually managed separate accounts. For instance, as described
above, NAM and its affiliates provide numerous services to the Fund
including, but not limited to, preparing shareholder reports; providing daily
accounting; preparing quarterly financial statements; overseeing and
coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such
meetings; providing legal support; and administering all other aspects of the
Fund's operations. Further, the Trustees noted the increased compliance
requirements for funds in light of new SEC regulations and other legislation.
These services are generally not required to the same extent, if at all, for
separate accounts. In addition to the differences in services, the Trustees
also considered, among other things, the differences in product distribution,
investor profiles and account sizes. Accordingly, the Trustees believe that
the nature and number of services provided to operate the Fund merit the
higher fees than those to separate managed accounts.
In considering the fees of the Sub-Advisers, the Trustees also considered the
pricing schedule the respective Sub-Adviser charges for similar investment
management services for other fund sponsors or clients. With respect to
Symphony, the Trustees also compared the sub-advisory fees to the
significantly higher fees assessed to hedge funds advised by Symphony.
Generally, the sub-advisory fees were at the lower end of the Sub-Adviser's
fee schedule.
3. PROFITABILITY OF ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of NAM (which incorporated Nuveen's wholly-owned subsidiaries -
NWQ and Symphony). The Trustees reviewed NAM's revenues, expenses and
profitability margins (on both a pre-tax and after-tax basis). In reviewing
profitability, the Trustees recognized that one of the most difficult issues in
determining profitability is establishing a method of allocating expenses.
Accordingly, the Trustees reviewed the Fund Adviser's assumptions and
methodology of allocating expenses. In this regard, the methods of allocation
used appeared reasonable but the Board noted the inherent limitations in
allocating costs among various advisory products. The Trustees also recognized
that individual fund or product line profitability of other advisers is
generally not publicly available. Further, profitability may be affected by
numerous factors including the types of funds managed, expense allocations,
business mix, etc. and therefore comparability of profitability is somewhat
limited. Nevertheless, to the extent available, the Trustees considered NAM's
profit margin compared to the profitability of various publicly-traded
investment management companies and/or investment management companies that
publicly disclose some or all of their financial results compiled by three
independent third-party service providers. The Trustees also reviewed the
revenues, expenses and profit margins of various unaffiliated advisory firms
with similar amounts of assets under management for the last year prepared by
NAM. Based on their review, the Trustees were satisfied that NAM's level of
profitability from its relationship with the Fund was reasonable in light of the
services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Fund, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the Fund, the Trustees
determined that the advisory fees and expenses of the Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
In reviewing the compensation, the Trustees have long understood the benefits of
economies of scale as the assets of a fund grows and have sought to ensure that
shareholders share in these benefits. One method for shareholders to share in
economies of scale is to include breakpoints in the advisory fee schedules that
reduce fees as fund assets grow. Accordingly, the Trustees received and reviewed
the schedules of advisory fees for the Fund, including fund-level breakpoints
thereto. In addition, after lengthy negotiations with management, the Board in
May, 2004 approved a complex-wide fee arrangement pursuant to which fees of the
funds in the Nuveen complex, including the Fund, are reduced as the assets in
the fund complex reach certain levels. The complex-wide fee arrangement was
introduced on August 1, 2004 and the Trustees reviewed data regarding the
reductions of fees for the Fund for the period of August 1, 2004 to December 31,
2004. In evaluating the complex-wide fee arrangement, the Trustees considered,
among other things, the historic and expected fee savings to shareholders as
assets grow, the amount of fee reductions at various asset levels, and that the
arrangement would extend to all funds in the Nuveen complex. The Trustees also
considered the impact, if any, the complex-wide fee arrangement may have on the
level of services provided. Based on their review, the Trustees concluded that
the breakpoint schedule and complex-wide fee arrangement currently was
acceptable and desirable in providing benefits from economies of scale to
shareholders.
32
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the respective Fund Adviser or its affiliates may receive as a result of
its relationship with the Fund. In this regard, the Trustees considered any
benefits from soft dollar arrangements. The Trustees noted that although NAM
manages a large amount of assets, it has very little, if any, brokerage to
allocate. This is due to the fact that NAM typically manages the portfolios of
the municipal funds in the Nuveen complex and municipal bonds generally trade on
a principal basis. Accordingly, NAM does not currently have any soft dollar
arrangements and does not pay excess brokerage commissions (or spreads on
principal transactions) in order to receive research services. The Trustees also
considered the soft dollar arrangements of the Sub-Advisers. The Trustees noted
that NWQ has engaged in soft dollar arrangements. With respect to such
Sub-Adviser, the Trustees considered that the respective Sub-Adviser benefits
from its soft dollar arrangements pursuant to which such Sub-Adviser receives
research from brokers that execute the Fund's portfolio transactions. The
Trustees received and reviewed materials concerning such Sub-Adviser's brokerage
practices, including its broker allocation policies and procedures, the types of
research and brokerage services received, the brokers providing such services,
and the dollar amount of commissions allocated to brokers for soft dollar
arrangements for the last calendar year. In considering the types of research
received, the Trustees noted that such Sub-Adviser either has already limited
(or has agreed to modify its practices to limit) the use of soft dollars to
research with intellectual content. The Trustees recognized that such
Sub-Adviser's profitability may be lower if the Sub-Adviser was required to pay
for this research with hard dollars. With respect to Symphony, the Trustees
noted that such Sub-Adviser does not use soft dollar arrangements.
In addition to soft dollar arrangements, the Trustees also considered any other
revenues, if any, received by NAM or its affiliates. In this regard, for Nuveen
funds with outstanding preferred shares and new closed-end funds, the Trustees
also considered revenues received by Nuveen for serving as agent for
broker-dealers at its preferred trading desk and for acting as co-manager in the
initial public offering of new closed-end exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority owned subsidiary of St. Paul Travelers
Companies, Inc. ("St. Paul"). As noted, St. Paul earlier this year announced its
intention to divest its equity stake in Nuveen. Nuveen is the parent of NAM.
Pursuant to a series of transactions, St. Paul had begun to reduce its interest
in Nuveen which would ultimately result in a change of control of Nuveen and
therefore NAM. As mandated by the 1940 Act, such a change in control would
result in an assignment of the Investment Management Agreement with NAM and the
automatic termination of such agreement. Accordingly, the Board also considered
the approval of a New Investment Management Agreement with the Fund in light of,
and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for the Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul's
interest will have an impact on the various factors they considered in approving
NAM, such as the scope and quality of services to be provided following the
change of control. In reviewing the St. Paul transactions, the Board considered,
among other things, the impact, if any, on the operations and organizational
structure of NAM; the possible benefits and costs of the transactions to the
Fund; the potential implications of any arrangements used by Nuveen to finance
certain of the transactions; the ability of NAM to perform its duties after the
transactions; whether the Fund's fee structure or expense ratio would change;
any changes to the current practices of the Fund; any changes to the terms of
the advisory agreement; and any anticipated changes to the operations of NAM.
Based on its review, the Board determined that St. Paul's divestiture would not
affect the nature and quality of services provided by NAM, the terms of the
Investment Management Agreement, including the fees thereunder, and would not
materially affect the organization or operations of NAM. Accordingly, the Board
determined that their analysis of the various factors regarding their approval
of NAM would continue to apply after the change of control.
In addition to the foregoing, a change in control of NAM may be deemed an
assignment of the Sub-Advisory Agreement between NAM and the respective
Sub-Adviser. Further, NWQ and Symphony are wholly-owned subsidiaries of Nuveen.
Accordingly, the change of control of Nuveen would also result in a change of
control of such Sub-Advisers resulting in the automatic termination of their
existing Sub-Advisory Agreements. The Board therefore considered approval of a
New Sub-Advisory Agreement with each Sub-Adviser in light of the anticipated
change of control. More specially, the Board considered approval of each New
Sub-Advisory Agreement on substantially identical terms as the respective
Original Sub-Advisory Agreement, to take effect after the change of control has
occurred and the agreement has been approved by Fund shareholders. In reviewing
the impact of the St. Paul divestiture on the respective Sub-Adviser, the Board
considered the same factors as outlined previously with respect to their review
of NAM. As with NAM, the Board concluded that the St. Paul divestiture would not
affect the nature and quality of services provided by the respective
Sub-Adviser, the terms of the Sub-Advisory Agreement, including the fees paid
thereunder, and would not materially affect the organization or operations of
the Sub-Adviser. Accordingly, the Board determined that their analysis of the
various factors regarding their review and approval of the respective
Sub-Adviser would continue to apply following the change in control.
G. APPROVAL
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management and Sub-Advisory
Agreements were fair and reasonable, that the respective Fund Adviser's fees are
reasonable in light of the services provided to the Fund, that the renewal of
the NAM Investment Management Agreement and each Sub-Advisory Agreement should
be approved, and that the new, post-change of control NAM Investment Management
Agreement and the Sub-Advisory Agreements be approved and recommended to
shareholders.
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
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between each
Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and
the Fund's sub-adviser. As required by law, the shareholders of each Fund were
asked to approve a new investment management agreement and, if applicable, a new
subadvisory agreement that reflected this change in ownership. The shareholders
of each Fund voted this approval at a Shareholders' Meeting on July 26. 2005.
There were no changes to the investment objectives or management of any Fund as
a result of these actions.
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, 2005, and (iii) a description of the
policies and procedures that the Fund used to determine 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.
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: 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 $120 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
o Fund details
Learn more o Daily financial news
about Nuveen Funds at o Investor education
WWW.NUVEEN.COM/ETF o Interactive planning tools
Logo: NUVEEN Investments
ESA-C-0605D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
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.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
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.
(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 to
this filing.
(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: September 7, 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: September 7, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 7, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.