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: December 31, 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.
ANNUAL REPORT December 31, 2005
Nuveen Investments
Exchange-Traded
Closed-End
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 year ended December 31, 2005, your Fund
continued to provide you with attractive tax-advantaged income and capital
appreciation potential. For more information on your Fund's performance, please
read the Portfolio Managers' Comments, the Distribution and Share Price
Information, and the Performance Overview sections of this report.
"IN ADDITION TO PROVIDING REGULAR MONTHLY CASH FLOW, AN INVESTMENT LIKE YOUR
FUND THAT FEATURES DIVIDEND-PAYING COMMON STOCKS ALONG WITH OTHER ASSET CLASSES
MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO DIVERSIFICATION."
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
returns over time. In addition to providing regular monthly cash flow, an
investment like your Fund that features dividend-paying common stocks along with
other asset classes may help you achieve and benefit from greater portfolio
diversification. Your financial advisor can explain these potential advantages
in more detail. I urge you to contact him or her soon for more information on
this important investment strategy.
As you look through this report, be sure to review the inside front cover. This
contains information on how you can receive future Fund reports and other Fund
information faster by using e-mails and the Internet. Sign up is quick and easy
- just follow the step-by-step instructions.
As we noted in our last shareholder report, The St. Paul Travelers Companies,
Inc., which had owned 79% of Nuveen Investments, Inc. (the parent of your Fund's
investment adviser), had sold a substantial portion of its stake in Nuveen.
Since then, St. Paul has sold the balance of its shares to Nuveen Investments or
to others. Please be assured that these transactions only affected Nuveen's
corporate structure, and they do not have any impact on the investment
objectives or management of your Fund.
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can help you
to secure your financial objectives. We are grateful that you have chosen us as
a partner as you pursue your financial goals, and we look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2006
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 or preferred stocks are managed by NWQ
Investment Management Company, LLC (NWQ), while the Fund's investments in senior
corporate loans and other debt instruments are managed by Symphony Asset
Management, LLC (Symphony). Jon Bosse, Chief Investment Officer of NWQ, leads
the Fund's management team at that firm. He has more than 22 years of corporate
finance and investment management experience. The Symphony team is led by
Gunther Stein and Lenny Mason, who have more than 25 years of combined
investment management experience, much of it in evaluating and purchasing senior
corporate loans and other high-yield debt. Here Jon, Gunther and Lenny talk
about general market conditions, their management strategies and the performance
of the Fund for the 12-month period ended December 31, 2005.
WHAT WERE THE GENERAL ECONOMIC CONDITIONS AND MARKET TRENDS OVER THE COURSE OF
2005?
Looking back on 2005, performance for the major U.S. equity indices would make
one believe that it was a relatively quiet year. Returns for the various U.S.
indices generally ranged between 1% and 7% despite a year-end rally that took
the Standard & Poor's 500 Index to levels last seen in 2001. Under the surface,
equity performance was much more varied than was obvious. For instance, energy
and many resource stocks soared along with the prices of the commodities they
produce. A number of other industries, including electric utilities and real
estate investment trusts, also produced double-digit returns. In contrast,
performance for the very largest stocks was barely positive as measured by the
Standard & Poor's 100 Index at just 1.2%. Bond returns were also disappointing,
as the headwind of eight fed funds rate increases negatively impacted bond
prices, particularly for intermediate maturities.
The fourth quarter capped another impressive year in the leveraged loan market.
Highlights in 2005 included record leveraged merger financing, near historic low
default rates, narrow credit spreads (the interest rate difference between
higher quality and lower quality loans), and record inflows into the leveraged
loan asset class. Throughout 2005, the loan market had to digest escalating
energy prices, rising interest rates, record merger and acquisition activity and
equity markets that were relatively stagnant. Despite these many issues,
conditions in the loan market remained robust. The CSFB Leveraged Loan Index
returned 5.69% for the year. As of the end of December, the Index had registered
38 consecutive months of positive returns.
4
Total loan volume for the year stood at $294 billion, up 11% percent from 2004's
amount of $265 billion. Mergers and acquisitions were an important driver of
overall loan-volume growth during the year. The U.S. saw a record $173 billion
of leveraged merger financing, a level that set a 15-year record. Increasingly
large deals are being financed in the leveraged loan market, surpassing previous
estimates of the maximum deal size thought possible. Recent blockbuster deals
include SunGard's $5 billion LBO loan, Hertz's $2 billion LBO loan and the $7.5
billion financing package backing Koch Industries' acquisition of
Georgia-Pacific. At $79 billion, U.S. LBO lending posted the highest volumes
since the late 1980s - the years of RJRNabisco.
WHAT STRATEGIES OR TACTICS DID YOU USE TO MANAGE YOUR PORTION OF THE FUND'S
ASSETS?
For the equity portion of the Fund's portfolio, we continued to employ an
opportunistic, bottom-up strategy that focused on identifying undervalued
companies that possessed favorable risk/reward characteristics as well as
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
focused 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 offers a more objective and truer picture of
a company's financial position than an evaluation based on earnings alone.
During the course of the year, we took new common stock positions in POSCO,
Merck & Co Inc., and Energias de Portugal S.A. Our analysis indicated that these
companies possessed solid fundamentals, compelling valuations, and an attractive
risk/reward relationship. We maintained a large position in energy stocks based
on our analysis of global supply conditions for crude oil and its impact on
industry fundamentals, the outlook on company cash flow growth, and valuations.
The Fund's energy holdings include ChevronTexaco Corporation, ConocoPhillips,
ENI S.p.A., Kerr-McGee Corporation, and Total S.A. We eliminated Tate & Lyle
PLC, Weyerhauser Company, and DSM NV from the portfolio based on valuation
concerns, and Delphi Corporation in early-April (prior to its bankruptcy)
because of deteriorating fundamentals and management credibility.
5
We viewed the leveraged loan market favorably but, given the current credit
environment, we continued to take a defensive stance in positioning our loan
portfolio by generally avoiding loans with the lowest credit quality. In 2005
the loan market continued to demonstrate many positive characteristics that we
think make the asset class attractive. Market liquidity was better than it had
ever been, investor appetite remained strong and many high quality deals came to
market. Strong investor demand, however, also allowed many deals to be
structured with aggressive leverage levels. It is this environment and market
dynamic that led us to avoid credits we felt were too aggressively leveraged or
did not have a sound credit profile. We did not feel that 2005 was the
appropriate time to be reaching for yield or become involved with what we
considered to be marginal credits.
We continued to avoid most automotive related companies, even though many are
trading at distressed (and some might say attractive) levels. We also avoided
many small loans that were supporting leveraged buyouts as we felt that market
liquidity could be challenged if the credit experienced any negative events.
Instead, we focused on adding higher quality new-issue loans at par.
We also continued to avoid the vast majority of second lien loans. At current
trading levels, we did not believe that most second lien loans compensated
investors for the risk these credits pose over a credit cycle. Should the
economy weaken, we believe that second lien loans could see significant downside
from year-end levels.
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a comparative benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE
For the 12-months ended December 31, 2005
JTA 11.93%
--------------------------------------------------------------------------------
Comparative Benchmark1 7.11%
--------------------------------------------------------------------------------
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.
See the Performance Overview Page for additional information.
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 (dividends received deduction) Preferred Index, which
consists of investment-grade, DRD-eligible, exchange-traded preferred
stocks with one year or more to maturity, and 4) 20% of the return of the
CSFB Leveraged Loan Index, which consists of approximately $150 billion of
tradable term loans with at least one year to maturity and rated BBB or
lower. Index returns are not leveraged, and do not include the effects of
any sales charges or management fees. It is not possible to invest directly
in an index.
6
A major contributor to the Fund's strong performance relative to its comparative
benchmark was the strong showing of our energy sector common stock investments,
which performed well in 2005 due to strong fundamentals, attractive valuations,
and the rise in crude prices during the year (and the expectation that the
higher-than-historical prices would be sustainable). Crude prices surged because
of ongoing uncertainties as to whether or not global supply will be able to meet
increased demand. Corporate activity also contributed to sector returns as
portfolio common stock holding Kerr-McGee Corp. began a major restructuring
initiative to increase shareholder value through the monetization of assets,
paying down debt, and buying back stock. We tendered approximately one-third of
our Kerr McGee shares back to the company during the year.
Our tobacco industry common stock holdings of Altria Group Inc. (parent of
Philip Morris) and Loews Corp.-Carolina Group also contributed to our positive
returns. Tobacco stocks continue to benefit from an improving litigation
environment, including the reversal of a $10.1 billion class-action judgment
against Altria Group by the Illinois Supreme Court related to the marketing of
"Lights" cigarettes.
Another strong common stock performer was our stake in Rio Tinto Plc, an
Australian-based mining firm. The stock outperformed due to strength in copper
prices and the positive outlook for iron-ore prices in 2006. These two segments
account for roughly 70% of Rio Tinto's earnings. Strong global economic growth,
especially in China, has led to an increase in the demand for most industrial
commodities, including aluminum, copper, steel, and iron ore.
In the insurance industry, our common stock investment in Hartford Financial
Services appreciated on strong sales of the company's annuity products,
particularly in Japan, because of their favorable tax treatment and the lack of
attractive retirement savings alternatives. Insurance broker, Aon Corporation,
also appreciated strongly as new management and structural changes have yielded
improvements in top-line growth and operating margins. The company is also
poised to benefit as one of its competitors struggles to repair its reputation
following a recent settlement with the government related to bid rigging and
overcharging its customers. Lastly, Korea Electric Power Corporation posted a
strong gain due to its very attractive valuation and the favorable performance
of Korean stocks in 2005.
7
At the same time, several of our common stock investments in financial services
underperformed as rising short-term interest rates and a persistently flat yield
curve for much of the year put pressure on net interest margins and the outlook
for company fundamentals. Shares of Fannie Mae were also impacted as the company
was forced to reduce its retained portfolio in order to meet new surplus capital
requirements mandated by their government regulator. Our investments in
International Paper Company and Packaging Corp. of America declined as rising
containerboard inventories put pressure on earnings and margins, although
industry fundamentals have improved more recently due to a combination of
stronger demand, higher operating rates, and shuttered capacity in North
America. Albertson's, Inc. disappointed investors because management was unable
to complete a much-anticipated sale of the company, and telecommunication stocks
declined due to concerns of increased competition from cable operators and VoIP
(Voice over Internet Protocol), as well as pricing pressures in wireless
services. Our position in Telecom Italia S.p.A. was also negatively impacted by
weakness of the Italian lira relative to the dollar.
The DRD (dividends received deduction) preferred market finished the year on a
strong note, and the Fund benefited from holding floating rate issues as
short-term interest rates continued to rise. In addition, the portfolio
benefited from having relatively small holdings of U.S. government agency
securities such as Fannie Mae and Freddie Mac, whose values declined as
questions were raised about their accounting practices.
Given the relatively conservative nature of our senior loan portfolio, the
positions we held during the course of 2005 delivered returns generally
consistent with their coupons.
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. The Fund raised its monthly distribution once to
$0.105 per share over the course of 2005. (In January 2006, after the close of
this reporting period, the Fund announced another increase in its monthly
distribution to $0.125 per share.)
Under its managed distribution policy, the Fund pays monthly distributions that
are derived from a variety of sources for income tax reporting purposes. These
include ordinary income, net realized capital gains, and, under certain
circumstances, a return of capital. Every month, the Fund prepares an estimate
of the sources for tax purposes of that month's distribution, and then posts
that estimate on the Nuveen Funds' website at www.nuveen.com/etf. The final
determination of the tax characteristics of all of a calendar year's
distributions are made after December 31 each year, and this information is then
reported on Form 1099-DIV early in the following year. The final tax
characterization of distributions may vary from the estimates provided monthly
throughout the course of the year. At the end of 2005, 50.71% of the Fund's
distributions to Common shareholders represented ordinary income and 49.29%
represented net realized long-term capital gains. In addition, these final tax
characteristics of distributions likely will vary from the sources identified in
the Fund's financial statements, because the rules governing determination of
tax characteristics of distributions differ in many respects from generally
accepted accounting principles.
As of December 31, 2005, the Fund was trading at a -4.30% discount to its net
asset value. This was less than the average -8.55% discount the Fund exhibited
over the course of the entire 12-month reporting period.
9
Nuveen Tax-Advantaged Total Return Strategy Fund
JTA
Performance
OVERVIEW As of December 31, 2005
Pie Chart:
PORTFOLIO ALLOCATION1
(as a % of total investments)
Common Stocks 71.3%
Variable Rate Senior Loan Interests 15.1%
$25 Par (or similar) Securities 8.0%
Short-Term Investments 3.0%
Corporate Bonds 1.9%
Capital Preferred Securities 0.7%
Bar Chart:
2005 MONTHLY DISTRIBUTIONS PER SHARE
Jan 0.1
Feb 0.1
Mar 0.1
Apr 0.1
May 0.1
Jun 0.1
Jul 0.1
Aug 0.1
Sep 0.105
Oct 0.105
Nov 0.105
Dec 0.105
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
1/01/05 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
19.9
19.93
19.94
19.93
20
19.97
19.99
20
20
19.95
19.98
20
20
19.95
19.95
19.99
19.89
20
19.99
20.04
20
20
20
20.15
20.24
20.65
20.39
20.35
20.25
20.29
20
20.18
20.1
20.05
19.97
19.84
20.03
19.87
19.87
19.9
19.9
19.94
19.94
19.92
19.85
20.1
20.18
20.2
20.21
20.18
20.4
20.54
20.4
20.45
20.3
20.25
20.35
20.2
20.06
19.98
20
19.93
19.89
19.86
19.99
20.19
20.12
20.1
19.91
19.99
19.96
20.03
20
19.52
19.54
19.75
19.8
19.65
19.45
19.24
19.25
19.45
19.24
19.27
19.33
19.6
19.8
19.97
19.96
20
20.09
20.13
19.94
20.08
19.61
19.93
19.99
19.67
19.97
19.86
19.99
20.02
20.03
20.03
20.2
20.15
20.09
19.94
20.03
20.05
20.02
20.19
20.24
20.28
20.45
20.4
20.15
20.7
20.86
21.09
21
20.79
20.9
20.86
21.17
20.95
21.21
21.21
21.37
12/31/05 21.37
{sidebar}
FUND SNAPSHOT
------------------------------------
Common Share Price 21.37
------------------------------------
Common Share Net Asset Value 22.33
------------------------------------
Premium/(Discount) to NAV -4.30%
------------------------------------
Market Yield1 5.90%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $309,452
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/27/04)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
1-Year 20.00% 11.93%
------------------------------------
Since
Inception 10.43% 15.10%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Diversified Telecommunication
Services 8.8%
------------------------------------
Tobacco 7.4%
------------------------------------
Oil, Gas & Consumable Fuels 6.7%
------------------------------------
Metals & Mining 6.7%
------------------------------------
Diversified Financial Services 5.9%
------------------------------------
Aerospace & Defense 5.5%
------------------------------------
Insurance 5.4%
------------------------------------
Commercial Banks 5.1%
------------------------------------
Electric Utilities 4.8%
------------------------------------
Thrifts & Mortgage Finance 4.8%
------------------------------------
Commercial Services & Supplies 3.4%
------------------------------------
Hotels, Restaurants & Leisure 3.1%
------------------------------------
Household Durables 2.9%
------------------------------------
Multi-Utilities 2.9%
------------------------------------
Household Products 2.9%
------------------------------------
Containers & Packaging 2.2%
------------------------------------
Media 2.2%
------------------------------------
Food & Staples Retailing 2.1%
------------------------------------
Short-Term Investments 3.0%
------------------------------------
Other 14.2%
------------------------------------
COUNTRIES
(as a % of total investments)
------------------------------------
United States 79.4%
------------------------------------
United Kingdom 6.2%
------------------------------------
South Korea 4.2%
------------------------------------
Italy 3.1%
------------------------------------
Australia 2.0%
------------------------------------
Other 5.1%
------------------------------------
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
Approval of the new investment management agreement and sub-advisory agreements
were the proposals voted upon at the July 26, 2005, shareholder meeting held at
The Northern Trust Bank.
Approval of the Board Members was the proposal voted upon at the November 15,
2005, shareholder meeting held at the offices of Nuveen Investments.
JTA
--------------------------------------------------------------------------------
APPROVAL OF THE NEW INVESTMENT
MANAGEMENT AGREEMENT WAS
REACHED AS FOLLOWS:
Common and
FundPreferred shares
voting together
as a class
================================================================================
For 13,339,452
Against 77,081
Abstain 116,501
--------------------------------------------------------------------------------
Total 13,533,034
================================================================================
APPROVAL OF THE NEW SUB-ADVISORY
AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND NWQ INVESTMENT
MANAGEMENT COMPANY, LLC WAS
REACHED AS FOLLOWS:
Common and
FundPreferred shares
voting together
as a class
================================================================================
For 13,343,785
Against 76,494
Abstain 112,755
--------------------------------------------------------------------------------
Total 13,533,034
================================================================================
APPROVAL OF THE NEW SUB-ADVISORY
AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SYMPHONY ASSET
MANAGEMENT, LLC WAS REACHED
AS FOLLOWS:
Common and
FundPreferred shares
voting together
as a class
================================================================================
For 13,337,300
Against 74,650
Abstain 121,084
--------------------------------------------------------------------------------
Total 13,533,034
================================================================================
11
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Tax-Advantaged Total Return Strategy
Fund as of December 31, 2005, and the related statement of operations for the
year then ended, the statements of changes in net assets for the periods
indicated therein, the statement of cash flows for the year then ended, and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian,
selling or agent banks and brokers or other appropriate auditing procedures
where replies from selling or agent banks or brokers were not received. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Tax-Advantaged Total Return Strategy Fund at December 31, 2005, and the results
of its operations for the year then ended, changes in its net assets for the
periods indicated therein, cash flows for the year then ended, and its financial
highlights for the periods indicated therein in conformity with U.S. generally
accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
February 14, 2006
12
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA)
Portfolio of
INVESTMENTS December 31, 2005
SHARES DESCRIPTION(1) VALUE
----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 99.3% (71.3% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 5.9%
140,000 Lockheed Martin Corporation $8,908,200
235,000 Raytheon Company 9,435,250
----------------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 18,343,450
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS -5.0%
150,000 Wachovia Corporation 7,929,000
120,000 Wells Fargo & Company 7,539,600
----------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 15,468,600
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 3.9%
285,000 Pitney Bowes Inc. 12,041,250
----------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 2.2%
300,000 Packaging Corp. of America 6,885,000
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 6.9%
275,000 Citigroup Inc. 13,345,750
205,000 JPMorgan Chase & Co. 8,136,450
----------------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 21,482,200
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 11.6%
385,000 AT&T Inc. 9,428,650
343,000 KT Corporation, Sponsored ADR 7,391,650
330,000 Sprint Nextel Corporation 7,708,800
235,000 Telecom Italia S.p.A., Sponsored ADR 5,773,950
190,000 Verizon Communications Inc. 5,722,800
----------------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 36,025,850
----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 4.6%
254,000 EDP - Energias de Portugal, S.A., Sponsored ADR 7,840,980
323,000 Korea Electric Power Corporation (KEPCO), Sponsored ADR 6,295,270
----------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 14,136,250
----------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 2.9%
181,500 Albertson's, Inc. 3,875,025
240,625 J. Sainsbury plc, Sponsored ADR 5,185,469
----------------------------------------------------------------------------------------------------------------------------------
Total Food & Staples Retailing 9,060,494
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 2.4%
307,000 Newell Rubbermaid Inc. 7,300,460
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 3.1%
160,000 Kimberly-Clark Corporation 9,544,000
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 4.6%
204,500 Aon Corporation 7,351,775
80,000 Hartford Financial Services Group, Inc. 6,871,200
----------------------------------------------------------------------------------------------------------------------------------
Total Insurance 14,222,975
----------------------------------------------------------------------------------------------------------------------------------
13
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS December 31, 2005
SHARES DESCRIPTION(1) VALUE
----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 8.5%
404,000 Alumina Limited, Sponsored ADR $8,819,320
90,000 POSCO, ADR 4,455,900
71,000 Rio Tinto plc, Sponsored ADR 12,978,090
----------------------------------------------------------------------------------------------------------------------------------
Total Metals & Mining 26,253,310
----------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 4.1%
110,000 Dominion Resources, Inc. 8,492,000
180,000 United Utilities plc, Sponsored ADR 4,197,600
----------------------------------------------------------------------------------------------------------------------------------
Total Multi-Utilities 12,689,600
----------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 9.4%
80,000 ChevronTexaco Corporation 4,541,600
113,400 ConocoPhillips 6,597,612
53,000 Eni S.p.A., Sponsored ADR 7,391,380
39,669 Kerr-McGee Corporation 3,604,325
55,000 Total SA, Sponsored ADR 6,952,000
----------------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas & Consumable Fuels 29,086,917
----------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 2.4%
220,000 International Paper Company 7,394,200
----------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.4%
230,000 Merck & Co. Inc. 7,316,300
----------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 2.3%
90,000 Union Pacific Corporation 7,245,900
----------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 6.7%
212,000 Fannie Mae 10,347,720
265,000 IndyMac Bancorp, Inc. 10,340,300
----------------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 20,688,020
----------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 10.4%
235,000 Altria Group, Inc. 17,559,199
330,000 Loews Corp - Carolina Group 14,516,700
----------------------------------------------------------------------------------------------------------------------------------
Total Tobacco 32,075,899
----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $260,523,694) 307,260,675
==================================================================================================================
SHARES DESCRIPTION(1) COUPON RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) SECURITIES - 11.2% (8.0% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.5%
15,500 Bear Stearns Companies Inc., Series E, (5) 6.150% A3 785,463
25,000 Goldman Sachs Group Inc., (5) 4.966% A2 642,500
20,000 Goldman Sachs Group Inc., (5) 6.200% A2 510,000
77,700 Lehman Brothers Holdings Inc., Series F, (5) 6.500% A- 2,039,625
25,000 Merrill Lynch & Company, (5) 5.011% A2 636,250
----------------------------------------------------------------------------------------------------------------------------------
Total Capital Markets 4,613,838
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.2%
23,500 Abbey National plc, Series B 7.375% A 620,165
41,100 Abbey National plc, Series C 7.375% A2 1,052,160
40,000 ABN AMRO Capital Trust Fund VII 6.080% A 976,000
25,000 Banco Santander 6.410% A2 627,500
50,000 HSBC USA Inc., Series G 4.931% A2 1,290,000
40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 1,016,800
40,000 Royal Bank of Scotland Group plc, Series N 6.350% A1 1,005,200
----------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 6,587,825
----------------------------------------------------------------------------------------------------------------------------------
14
SHARES DESCRIPTION(1) VALUE
----------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 1.0%
45,000 HSBC Finance Corporation 6.360% A3 $ 1,149,750
36,100 SLM Corporation, Series A, (5) 6.970% BBB+ 1,912,578
----------------------------------------------------------------------------------------------------------------------------------
Total Consumer Finance 3,062,328
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.3%
10,000 CIT Group Inc., Series A, (5) 6.350% BBB+ 258,500
19,500 Citigroup Inc., Series F, (5) 6.365% Aa3 1,004,250
28,900 Citigroup Inc., Series H, (5) 6.231% Aa3 1,514,360
5,000 ING Group N.V. 7.050% A 127,950
48,400 ING Group N.V. 7.200% A 1,242,428
----------------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 4,147,488
----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.8%
39,500 Alabama Power Company, Series A, (5) 5.300% BBB+ 934,175
12,400 Consolidated Edison Company of New York Inc. 5.000% A3 1,115,504
41,500 Interstate Power and Light Company, (5) 7.100% BBB- 1,121,745
40,000 Mississippi Power Company 5.250% A3 954,000
40,000 Savannah Electric and Power Company 6.000% BBB+ 1,055,600
5,000 Southern California Edison Company 6.125% BBB- 506,094
----------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 5,687,118
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.8%
50,300 Ace Ltd., Series C 7.800% Baa2 1,312,830
40,000 Aegon N.V. 6.375% A- 1,010,400
25,000 Aegon N.V., Series 1 5.265% A- 630,470
50,000 Endurance Specialty Holdings Limited 7.750% Baa3 1,185,000
30,000 Prudential plc 6.750% A 773,100
30,000 Prudential plc 6.500% A 760,500
----------------------------------------------------------------------------------------------------------------------------------
Total Insurance 5,672,300
----------------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 1.6%
20,000 Fannie Mae, (5) 5.500% AA- 951,000
24,300 Fannie Mae, (5) 5.125% AA- 1,073,574
18,400 Federal Home Loan Mortgage Corporation, (5) 6.000% AA- 892,400
20,000 Federal Home Loan Mortgage Corporation, (5) 5.700% AA- 974,500
21,900 Federal Home Loan Mortgage Corporation, (5) 5.000% AA- 950,460
----------------------------------------------------------------------------------------------------------------------------------
Total U.S. Agency 4,841,934
----------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost $35,022,239) 34,612,831
==================================================================================================================
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 21.0% (15.1% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.8%
$ 1,644 Hexcel Corporation, Term Loan B 5.926% 3/01/12 B2 1,660,889
1,879 K&F Industries, Inc., Term Loan B 6.570% 11/18/12 B2 1,901,776
1,621 Vought Aircraft Industries, Inc., Term Loan 6.890% 12/22/11 B+ 1,638,996
364 Vought Aircraft Industries, Inc., Tranche B, Letter of Credit 6.364% 12/22/10 B+ 368,125
----------------------------------------------------------------------------------------------------------------------------------
5,508 Total Aerospace & Defense 5,569,786
----------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 0.6%
2,000 Federal-Mogul Corporation, Term Loan A, (6) 6.640% 2/24/04 N/R 1,854,166
----------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.6%
1,774 PP Holding Corporation, Term Loan 7.530% 11/12/11 B 1,765,654
----------------------------------------------------------------------------------------------------------------------------------
15
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS December 31, 2005
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 1.0%
$ 1,000 Brenntag Holdings, Term Loan, WI/DD TBD TBD B- $ 1,013,542
1,990 Rockwood Specialties Group, Inc., Term Loan E 6.466% 12/13/13 B+ 2,013,786
----------------------------------------------------------------------------------------------------------------------------------
2,990 Total Chemicals 3,027,328
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
696 Allied Waste North America, Inc., Letter of Credit 3.340% 1/15/12 B1 700,217
1,792 Allied Waste North America, Inc., Term Loan B 6.180% 1/15/12 B1 1,803,657
----------------------------------------------------------------------------------------------------------------------------------
2,488 Total Commercial Services & Supplies 2,503,874
----------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.9%
788 Owens-Illinois Group, Inc., Term Loan B 6.150% 4/01/08 N/R 794,588
175 Smurfit-Stone Container Corporation, Deposit-Funded Commitment 2.100% 11/01/11 B+ 176,488
1,257 Smurfit-Stone Container Corporation, Term Loan B 6.444% 11/01/11 B+ 1,269,686
426 Smurfit-Stone Container Corporation, Term Loan C 6.438% 11/01/11 B+ 430,733
133 Smurfit-Stone Container Corporation, Tranche C-1, WI/DD TBD TBD B+ 134,820
----------------------------------------------------------------------------------------------------------------------------------
2,779 Total Containers & Packaging 2,806,315
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES - 0.3%
879 Alderwoods Group Inc., Term Loan B-2 6.245% 9/29/09 B1 888,871
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.7%
2,000 Madison River Term Loan 6.590% 7/29/12 B+ 2,030,625
----------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
1,626 Sensus Metering Systems Inc., Term Loan B-1 6.448% 12/17/10 B2 1,645,397
254 Sensus Metering Systems Inc., Term Loan B-2 6.444% 12/17/10 B2 256,708
----------------------------------------------------------------------------------------------------------------------------------
1,880 Total Electrical Equipment 1,902,105
----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.3%
1,995 Davita Inc., Term Loan B 6.737% 10/05/12 B1 2,024,233
1,970 IASIS Healthcare LLC, Term Loan B 6.307% 6/22/11 B+ 1,997,908
----------------------------------------------------------------------------------------------------------------------------------
3,965 Total Health Care Providers & Services 4,022,141
----------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 2.8%
2,000 24 Hour Fitness Worldwide, Inc., Term Loan B 6.780% 6/08/12 B 2,028,334
1,965 Jack in the Box Inc., Term Loan 5.689% 1/08/11 BB 1,985,878
1,995 Penn National Gaming, Inc., Term Loan B 6.049% 10/03/12 BB- 2,021,341
1,000 Pinnacle Entertainment Inc., Term Loan 6.370% 12/14/11 BB- 1,009,584
342 Venetian Casino Resort, LLC, Delayed Draw, Term Loan 6.280% 6/15/11 B1 344,498
1,658 Venetian Casino Resort, LLC, Term Loan 6.280% 6/15/11 B1 1,670,814
----------------------------------------------------------------------------------------------------------------------------------
8,960 Total Hotels, Restaurants & Leisure 9,060,449
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.4%
1,323 Sealy Mattress Company, Term Loan D 6.132% 4/06/12 B+ 1,338,607
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
2,948 Solo Cup Company, Term Loan 7.027% 2/27/11 B2 2,972,063
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
1,294 Conseco, Inc., Term Loan 6.370% 6/22/10 B2 1,304,784
----------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.2%
1,760 Fidelity National Information Services, Term Loan B 6.110% 3/09/13 Ba3 1,769,093
1,990 SunGard Data Systems Inc., Term Loan B 6.810% 2/11/13 B+ 2,005,427
----------------------------------------------------------------------------------------------------------------------------------
3,750 Total IT Services 3,774,520
----------------------------------------------------------------------------------------------------------------------------------
16
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.4%
$ 1,099 Dresser-Rand Group Inc., Term Loan 6.226% 10/29/07 B+ $ 1,118,453
----------------------------------------------------------------------------------------------------------------------------------
MEDIA - 3.1%
1,968 Charter Communications Operating, LLC, Term Loan B 7.500% 4/07/11 B 1,975,009
1,336 Emmis Operating Company, Term Loan 6.120% 11/10/11 B+ 1,343,862
2,000 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 6.780% 4/08/12 N/R 2,015,682
1,905 Regal Cinemas Corporation, Term Loan 6.527% 11/10/10 BB- 1,928,858
2,206 WMG Acquisition Corp., Term Loan 6.263% 2/28/11 B+ 2,232,044
----------------------------------------------------------------------------------------------------------------------------------
9,415 Total Media 9,495,455
----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.8%
2,532 Amsted Industries Incorporated, Term Loan B 6.677% 10/15/10 B1 2,573,460
----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.6%
1,000 Capital Automotive LP., Term Loan B, WI/DD TBD TBD BB+ 1,004,688
1,983 General Growth Properties, Inc., Term Loan B 6.390% 11/12/08 Ba2 1,999,062
1,960 LNR Property Corporation, Term Loan 7.268% 2/03/08 B2 1,970,352
----------------------------------------------------------------------------------------------------------------------------------
4,943 Total Real Estate 4,974,102
----------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.7%
337 United Rentals Inc., Credit Linked Deposit 5.590% 2/14/11 B2 340,884
1,659 United Rentals Inc., Term Loan B 6.630% 2/14/11 B2 1,678,855
----------------------------------------------------------------------------------------------------------------------------------
1,996 Total Trading Companies & Distributors 2,019,739
----------------------------------------------------------------------------------------------------------------------------------
$ 64,523 Total Variable Rate Senior Loan Interests (cost $64,515,027) 65,002,497
==================================================================================================================================
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 2.7% (1.9% OF TOTAL INVESTMENTS)
HOTELS, RESTAURANTS & LEISURE - 1.4%
$ 2,000 MGM Mirage, Inc. 6.750% 8/01/07 BB 2,037,500
2,000 Park Place Entertainment 8.875% 9/15/08 BB+ 2,167,500
----------------------------------------------------------------------------------------------------------------------------------
4,000 Total Hotels, Restaurants & Leisure 4,205,000
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.3%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Baa3 2,086,410
2,000 Standard Pacific Corporation 6.500% 10/01/08 BB 1,982,500
----------------------------------------------------------------------------------------------------------------------------------
4,000 Total Household Durables 4,068,910
----------------------------------------------------------------------------------------------------------------------------------
$ 8,000 Total Corporate Bonds (cost $8,393,251) 8,273,910
==================================================================================================================================
SHARES DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
----------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 1.0% (0.7% OF TOTAL INVESTMENTS)
ELECTRIC UTILITIES - 0.3%
9,000 Southern California Edison Company, Series A 5.349% 4/27/35 BBB- 904,219
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.7%
40,000 Genworth Financial Inc., Series A 5.250% 5/28/54 BBB+ 2,043,752
----------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $2,904,500) 2,947,971
------------------------------------------------------------------------------------------------------------------
17
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS December 31, 2005
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY VALUE
----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.2% (3.0% OF TOTAL INVESTMENTS)
Repurchase Agreement with State Street Bank, dated 12/30/05,
repurchase price $13,145,127, collateralized by $13,900,000
$ 13,140 U.S. Treasury Notes, 2.625%, due 5/15/08 valued at $13,404,562 3.250% 1/03/06 $ 13,140,382
============----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $13,140,382) 13,140,382
==================================================================================================================
Total Investments (cost $384,499,093) - 139.4% 431,238,266
==================================================================================================================
FundNotes - (25.2)% (78,000,000)
==================================================================================================================
Other Assets Less Liabilities - 0.3% 1,214,187
==================================================================================================================
FundPreferred Shares, at Liquidation Value - (14.5)% (45,000,000)
==================================================================================================================
Net Assets Applicable to Common Shares - 100% $309,452,453
==================================================================================================================
(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.
(3) 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.
(4) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below Baa
by Moody's Investor Service, Inc. or BBB by Standard &
Poor's Group are considered to be below investment
grade.
(5) Security is eligible for the Dividends Received
Deduction.
(6) At or subsequent to December 31, 2005, this issue was
under the protection of the Federal Bankruptcy Court.
WI/DD Investment purchased on a when-issued or delayed
delivery basis.
N/R Investment is not rated.
ADR American Depositary Receipt.
TBD Senior Loan purchased on a when-issued 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.
See accompanying notes to financial statements.
18
Statement of
ASSETS AND LIABILITIES December 31, 2005
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $384,499,093) $431,238,266
Receivables:
Dividends 1,210,985
Interest 700,780
Investments sold 32,421
Reclaims 30,662
Deferred FundNotes offering costs 1,720,420
Other assets 9,891
-----------------------------------------------------------------------------------------------------------------------------------
Total assets 434,943,425
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,133,424
FundNotes 78,000,000
Accrued expenses:
Management fees 210,573
Other 114,388
FundNotes interest payable 15,939
FundPreferred share dividends payable 16,648
-----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 80,490,972
-----------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $309,452,453
===================================================================================================================================
Common shares outstanding 13,855,240
===================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 22.33
===================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
-----------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,552
Paid-in surplus 262,780,022
Undistributed (Over-distribution of) net investment income (50,778)
Accumulated net realized gain (loss) from investments (154,516)
Net unrealized appreciation (depreciation) of investments 46,739,173
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $309,452,453
===================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
===================================================================================================================================
See accompanying notes to financial statements.
19
Statement of
OPERATIONS Year Ended December 31, 2005
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $422,383) $ 12,228,421
Interest 4,494,385
Fees 160,259
-----------------------------------------------------------------------------------------------------------------------------------
Total investment income 16,883,065
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 3,767,754
FundNotes interest expense and amortization of offering costs 2,414,175
FundNotes and FundPreferred shares - auction fees 308,070
FundNotes and FundPreferred shares - dividend disbursing agent fees 13,743
Shareholders' servicing agent fees and expenses 1,089
Custodian's fees and expenses 129,859
Trustees' fees and expenses 8,592
Professional fees 16,646
Shareholders' reports - printing and mailing expenses 51,247
Stock exchange listing fees 12,151
Investor relations expense 55,834
Other expenses 12,210
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 6,791,370
Custodian fee credit (1,337)
Expense reimbursement (1,349,823)
-----------------------------------------------------------------------------------------------------------------------------------
Net expenses 5,440,210
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 11,442,855
-----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 12,944,299
Change in net unrealized appreciation (depreciation) of investments 11,499,504
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 24,443,803
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (684,143)
From accumulated net realized gains (688,954)
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shareholders
from distributions to FundPreferred shareholders (1,373,097)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from operations $ 34,513,561
===================================================================================================================================
See accompanying notes to financial statements.
20
Statement of
CHANGES IN NET ASSETS
FOR THE PERIOD
1/27/04
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED THROUGH
12/31/05 12/31/04
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 11,442,855 $ 9,240,322
Net realized gain (loss) from investments 12,944,299 2,023,579
Change in net unrealized appreciation (depreciation) of investments 11,499,504 35,239,669
Distributions to FundPreferred shareholders:
From net investment income (684,143) (449,287)
From accumulated net realized gains (688,954) (55,374)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations 34,513,561 45,998,909
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (10,801,295) (9,240,701)
From accumulated net realized gains (12,626,529) (1,310,064)
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (23,427,824) (10,550,765)
-----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of Common shares -- 263,981,000
FundPreferred shares offering costs and adjustments (82,512) (1,080,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions (82,512) 262,901,000
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares 11,003,225 298,349,144
Net assets applicable to Common shares at the beginning of year 298,449,228 100,084
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of year $309,452,453 $298,449,228
===================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of year $ (50,778) $ (228,765)
===================================================================================================================================
See accompanying notes to financial statements.
21
Statement of
CASH FLOWS Year Ended December 31, 2005
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 34,513,561
Adjustments to reconcile the net increase (decrease) in
net assets applicable to Common shares from operations
to net cash provided by (used in) operating activities:
Purchases of investment securities (105,331,482)
Proceeds from sales of investment securities 116,697,476
Proceeds from (Purchases of) short-term investment securities, net 3,768,866
Amortization/ (Accretion) of premiums and discounts, net 227,890
(Increase) Decrease in receivable for dividends (132,526)
(Increase) Decrease in receivable for interest (126,505)
(Increase) Decrease in receivable for investments sold 98,803
(Increase) Decrease in receivable for reclaims (6,521)
(Increase) Decrease in other assets (5,773)
Increase (Decrease) in payable for investments purchased (1,866,576)
Increase (Decrease) in accrued management fees 7,866
Increase (Decrease) in accrued other liabilities (14,125)
Increase (Decrease) in FundPreferred share dividends payable 10,065
Net realized (gain) loss from investments (12,944,299)
Net realized (gain) loss from paydowns 46,611
Change in net unrealized (appreciation) depreciation of investments (11,499,504)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 23,443,827
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (23,427,824)
FundNotes:
(Increase) Decrease in deferred FundNotes offering costs 55,593
Increase (Decrease) in FundNotes interest payable* 10,916
FundPreferred shares offering costs and adjustments (82,512)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (23,443,827)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of year --
------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF YEAR $ --
====================================================================================================================================
* Cash paid for interest on FundNotes (excluding amortization of FundNotes
offering costs) during the fiscal year ended December 31, 2005, was
$2,341,965.
See accompanying notes to financial statements.
22
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Total Return Strategy Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JTA." The Fund was organized
as a Massachusetts business trust on October 1, 2003.
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.
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 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 investments 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.
23
Notes to
FINANCIAL STATEMENTS (continued)
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 December 31, 2005, the
Fund had outstanding when-issued and/or delayed delivery purchase commitments of
$2,133,424.
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.
Federal 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 began to make monthly cash
distributions to Common Shareholders of a stated dollar amount based on the
Fund's net investment income, 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. The final determination of the source of all distributions for the
year are made after the end of the year and are reflected in the accompanying
financial statements.
FundNotes
Effective April 23, 2004, the Fund issued 3,120 Series F FundNotes, $25,000
stated value per share, that mature on April 24, 2034. The interest rate paid by
the Fund is determined every seven days, pursuant to a dutch auction process
overseen by the auction agent, and is payable at the end of each rate period.
For the fiscal year ended December 31, 2005, the average daily balance of
FundNotes was $78 million with an average annualized interest rate (including
amortization of FundNotes offering costs) of 3.10%.
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 paid by the Fund is determined every seven days, pursuant to a
dutch auction process overseen by the auction agent, and is payable at the end
of each rate period.
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 engage in any such investments during the fiscal year ended
December 31, 2005.
24
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
($1,751,669) were recorded as a deferred charge and are being amortized over the
30 year life of the FundNotes and included with FundNotes Interest Expense on
the Statement of Operations.
Costs incurred by the Fund in connection with its offering of FundPreferred
shares ($1,162,512) 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 fiscal year
ended December 31, 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
fiscal year ended December 31, 2005, aggregated $105,331,482 and $116,697,476,
respectively.
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 and timing differences in recognizing certain gains and
losses on investment transactions.
At December 31, 2005, the cost of investments was $384,797,117.
The net unrealized appreciation of investments at December 31, 2005, aggregated
$46,441,149 of which $55,611,762 related to appreciated securities and
$9,170,613 related to depreciated securities.
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2005, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $255,108
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 fiscal year ended December
31, 2005, was designated for purposes of the dividends paid deduction as
follows:
2005
--------------------------------------------------------------------------------
Distributions from net ordinary income * $12,615,936
Distributions from net long-term capital gains ** 12,174,921
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
** The Fund designated as a long-term capital gain dividend, pursuant to
Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the
earnings and profits of the Fund related to net capital gain to zero for
the tax period ended December 31, 2005.
25
Notes to
FINANCIAL STATEMENTS (continued)
The tax character of distributions paid during the period January 27, 2004
(commencement of operations) through December 31, 2004, was designated for
purposes of the dividends paid deduction as follows:
2004
--------------------------------------------------------------------------------
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.
The Fund elected to defer net realized losses from investments incurred from
November 1, 2005 through December 31, 2005 ("post-October losses") in accordance
with Federal income tax regulations. Post-October losses of $145,729 were
treated as having arisen on the first day of the following fiscal year.
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.
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 stated in the table below. As
of December 31, 2005, the complex level fee rate was .1895%.
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.
26
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 Depositary 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.
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2004* .32% 2009 .32%
2005 .32 2010 .24
2006 .32 2011 .16
2007 .32 2012 .08
2008 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond January 31, 2012.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At December 31, 2005, there were no such unfunded senior loan
commitments.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At December 31, 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 $.1250 per Common share which was paid on
February 1, 2006, to shareholders of record on January 15, 2006.
27
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each 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 $21.54 $.83 $1.76 $(.05) $(.05) $2.49 $(.78) $(.91) $(1.69)
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 $(.01) $22.33 $21.37 20.00% 11.93%
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 $309,452 2.26% 3.36% 1.81% 3.81% 26%
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 $78,000 $25,000 $5,544 $45,000 $25,000 $196,918
2004(b) 78,000 25,000 5,403 45,000 25,000 190,805
===========================================================================================================
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. 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 .80%
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.
See accompanying notes to financial statements.
28-29 SPRREAD
Board Members
AND OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set
at nine. None of the board members who are not "interested" persons of the Funds
has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger(1) Chairman of 1994 Chairman (since 1996) and Director of Nuveen Investments, 156
3/28/49 the Board Inc., Nuveen Investments, LLC, Nuveen Advisory Corp. and
333 W. Wacker Drive and Trustee Nuveen Institutional Advisory Corp.(3); Director (since 1996)
Chicago, IL 60606 of Institutional Capital Corporation; Chairman and Director
(since 1997) of Nuveen Asset Management; Chairman and
Director of Rittenhouse Asset Management, Inc. (since 1999);
Chairman of Nuveen Investments Advisers Inc. (since 2002).
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board member 1997 Private Investor and Management Consultant. 156
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Board member 1993 Retired (since 1989) as Senior Vice President of The 156
7/29/34 Northern Trust Company; Director (since 2002) Community
333 W. Wacker Drive Advisory Board for Highland Park and Highwood, United
Chicago, IL 60606 Way of the North Shore.
------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, a private philanthropic 156
10/22/48 corporation (since 1996); Director and Vice Chairman, United
333 W. Wacker Drive Fire Group, a publicly held company; Adjunct Faculty Member,
Chicago, IL 60606 University of Iowa; Director, Gazette Companies; Life Trustee
of Coe College and Iowa College Foundation; formerly,
Director, Alliant Energy; formerly, Director, Federal Reserve
Bank of Chicago; formerly, President and Chief Operating Officer,
SCI Financial Group, Inc., a regional financial services firm.
------------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Board member 2004 Dean and Distinguished Professor of Finance, School of 156
3/6/48 Business at the University of Connecticut (since 2002);
333 W. Wacker Drive previously, Senior Vice President and Director of Research
Chicago, IL 60606 at the Federal Reserve Bank of Chicago (1995-2003); Director
(since 1997), Credit Research Center at Georgetown University;
Director (since 2004) of Xerox Corporation; Director
SS&C Technologies, Inc. (May 2005 - October 2005).
------------------------------------------------------------------------------------------------------------------------------------
David J. Kundert Board member 2005 Retired (since 2004) as Chairman, JPMorgan Fleming Asset 154
10/28/42 Management, President and CEO, Banc One Investment
333 W. Wacker Drive Advisors Corporation, and President, One Group Mutual
Chicago, IL 60606 Funds; prior thereto, Executive Vice President, Banc One
Corporation and Chairman and CEO, Banc One Investment
Management Group; Board of Regents, Luther College;
member of the Wisconsin Bar Association; member of Board
of Directors, Friends of Boerner Botanical Gardens.
30
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Board member 1997 Chairman of Miller-Valentine Partners Ltd., a real estate 156
9/24/44 investment company; formerly, Senior Partner and Chief
333 W. Wacker Drive Operating Officer (retired, December 2004), of Miller-Valentine
Chicago, IL 60606 Group; formerly, Vice President, Miller-Valentine Realty;
Board Member, Chair of the Finance Committee and member
of the Audit Committee of Premier Health Partners, the
not-for-profit company of Miami Valley Hospital; Vice
President, Dayton Philharmonic Orchestra Association; Board
Member, Regional Leaders Forum, which promotes cooperation on
economic development issues; Director, Dayton Development
Coalition; formerly, Member, Community Advisory Board,
National City Bank, Dayton, Ohio and Business Advisory
Council, Cleveland Federal Reserve Bank.
------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy Donnelley 156
12/29/47 Foundation (since 1994); prior thereto, Executive Director,
333 W. Wacker Drive Great Lakes Protection Fund (from 1990 to 1994).
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Eugene S. Sunshine Board member 2005 Senior Vice President for Business and Finance, 156
1/22/50 Northwestern University (since 1997); Director (since 2003),
333 W. Wacker Drive Chicago Board Options Exchange; Director (since 2003),
Chicago, IL 60606 National Mentor Holdings, a privately-held, national provider
of home and community-based services; Chairman (since
1997), Board of Directors, Rubicon, a pure captive insurance
company owned by Northwestern University; Director (since
1997), Evanston Chamber of Commerce and Evanston
Inventure, a business development organization.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND:
------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary and 156
9/9/56 Administrative Associate General Counsel, formerly, Vice President and
333 W. Wacker Drive Officer Assistant General Counsel, of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (2002-2004), General Counsel (1998-2004)
and Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.(3);
Managing Director (since 2002) and Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
1997), of Nuveen Asset Management; Managing Director
(since 2004) and Assistant Secretary (since 1994) of Nuveen
Investments, Inc.; Assistant Secretary of NWQ Investment
Management Company, LLC. (since 2002); Vice President and
Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Managing Director, Associate General Counsel
and Assistant Secretary of Rittenhouse Asset Management,
Inc. (since 2003); Chartered Financial Analyst.
31
Board Members
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Julia L. Antonatos Vice President 2004 Managing Director (since 2005), formerly Vice President 156
9/22/63 (since 2002); formerly, Assistant Vice President (since 2000)
333 W. Wacker Drive of Nuveen Investments, LLC; Chartered Financial Analyst.
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant Vice 156
2/3/66 and Assistant President (since 2000) of Nuveen Investments, LLC.
333 W. Wacker Drive Secretary
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 1999); Vice 156
11/28/67 and Treasurer President and Treasurer (since 1999) of Nuveen Investments,
333 W. Wacker Drive Inc.; Vice President and Treasurer (1999-2004) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory Corp.(3);
Vice President and Treasurer of Nuveen Asset Management
(since 2002) and of Nuveen Investments Advisers Inc. (since
2002); Assistant Treasurer of NWQ Investment Management
Company, LLC. (since 2002); Vice President and Treasurer of
Nuveen Rittenhouse Asset Management, Inc. (since 2003);
Chartered Financial Analyst.
------------------------------------------------------------------------------------------------------------------------------------
John N. Desmond Vice President 2005 Vice President, Director of Investment Operations, Nuveen 156
8/24/61 Investments, LLC (since January 2005); formerly, Director,
333 W. Wacker Drive Business Manager, Deutsche Asset Management (2003-2004),
Chicago, IL 60606 Director, Business Development and Transformation, Deutsche
Trust Bank Japan (2002-2003); previously, Senior Vice
President, Head of Investment Operations and Systems,
Scudder Investments Japan, (2000-2002), Senior Vice
President, Head of Plan Administration and Participant
Services, Scudder Investments (1995-2002).
------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 1998 Vice President (since 2002), Assistant Secretary and 156
9/24/64 and Secretary Assistant General Counsel (since 1998) formerly, Assistant
333 W. Wacker Drive Vice President (since 1998) of Nuveen Investments, LLC;
Chicago, IL 60606 Vice President (2002-2004) and Assistant Secretary (1998-2004)
formerly, Assistant Vice President of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.(3); Vice President and
Assistant Secretary (since 2005) of Nuveen Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004), formerly, Vice President of 156
10/24/45 Nuveen Investments, LLC, Managing Director (2004) formerly,
333 W. Wacker Drive Vice President (1998-2004) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.(3); Managing Director
(since 2005) of Nuveen Asset Management.
------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002), formerly, Vice President of 156
3/2/64 Nuveen Investments; Managing Director (1997-2004) of
333 W. Wacker Drive Nuveen Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Corp.(3); Managing Director of Nuveen Asset Management
(since 2001); Vice President of Nuveen Investments Advisers
Inc. (since 2002); Chartered Financial Analyst.
32
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller (since 1998) 156
5/31/54 and Controller of Nuveen Investments, LLC; formerly, Vice President and
333 W. Wacker Drive Funds Controller (1998-2004) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
------------------------------------------------------------------------------------------------------------------------------------
James D. Grassi Vice President 2004 Vice President and Deputy Director of Compliance (since 2004) 156
4/13/56 and Chief of Nuveen Investments, LLC, Nuveen Investments Advisers Inc.,
333 W. Wacker Drive Compliance Nuveen Asset Management and Rittenhouse Asset Management,
Chicago, IL 60606 Officer Inc.; previously, Vice President and Deputy Director of Compliance
(2004) of Nuveen Advisory Corp. and Nuveen Institutional Advisory
Corp.(3); formerly, Senior Attorney (1994-2004), The Northern
Trust Company.
------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 156
3/22/63 LLC; Certified Public Accountant.
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President of Nuveen Investments, LLC (since 1999). 156
8/27/61
333 W. Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant General 156
7/27/51 and Assistant Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive Secretary Assistant Secretary of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.(3); Vice President (since 2005)
and Assistant Secretary of Nuveen Investments, Inc.; Vice
President (since 2005) and Assistant Secretary (since 1997)
of Nuveen Asset Management; Vice President (since 2000),
Assistant Secretary and Assistant General Counsel (since
1998) of Rittenhouse Asset Management, Inc.; Vice President
and Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Assistant Secretary of NWQ Investment
Management Company, LLC (since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and board member of
the Adviser.
(2) Board members serve an indefinite term until his/her successor is elected.
The year first elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
33
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN EXCHANGE-TRADED CLOSED-END FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Exchange-Traded Closed-End 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.
DISTRIBUTION INFORMATION
The Fund designates 68.67% of dividends declared from net investment income as
dividends qualifying for the 70% dividends received deduction for corporations
and 99.24% as qualified dividend income for individuals under the Jobs and
Growth Tax Relief Reconciliation Act of 2003.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
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 Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
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 $135 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
EAN-C-1205D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Tax-Advantaged Total Return Strategy Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND
----------------------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 21,600 $ 0 $ 822 $ 900
----------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
----------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 (1) $ 39,500 $ 0 $ 0 $ 15
----------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
----------------------------------------------------------------------------------------------------------------------------------
The above "All Other Fees" are fees paid to audit firms to perform agreed upon
procedures required by the rating agencies to rate fund preferred shares. The
above "Tax Fees" were billed for professional services for tax advice, tax
compliance, and tax planning.
(1) "Audit Fees" for 2004 have been revised to include fees paid for the audit
of registration statements for common, preferred, note offerings.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 0 $ 282,575 $ 0
------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 0 $ 0 $ 0
------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
------------------------------------------------------------------------------------------------------------------
The above "Tax Fees" are primarily fees billed to the Adviser for Fund tax
return preparation.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
----------------------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 1,722 $ 282,575 $ 0 $ 284,297
December 31, 2004 $ 15 $ 0 $ 0 $ 15
The above "Non-Audit Fees billed to Adviser" for 2005 include "Tax-Fees" billed
to Adviser in the amount of $282,575 from previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The
members of the audit committee are Robert P. Bremner, Lawrence H. Brown, Jack B.
Evans, William J. Schneider and Eugene S. Sunshine.
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.
The Adviser has engaged NWQ Investment Management Company, LLC ("NWQ") and
Symphony Asset Management, LLC ("Symphony") (NWQ and Symphony are also
collectively referred to as "Sub-Advisers") as Sub-Advisers to provide
discretionary investment advisory services. As part of these services, the
Adviser has also delegated to each Sub-Adviser the full responsibility for proxy
voting and related duties in accordance with the Sub-Adviser's policy and
procedures. The Adviser periodically will monitor each Sub-Adviser's voting to
ensure that they are carrying out their duties. The Sub-Advisers' proxy voting
policies and procedures are summarized as follows:
NWQ
The power to vote on proposals presented to shareholders through the proxy
solicitation process is considered to be an integral part of the investment
manager's investment responsibility, recognizing that certain proposals, if
implemented, may have a substantial impact on the market valuation of portfolio
securities and that in such situations the right to vote is considered an asset.
This Proxy Voting Policy was developed to ensure that proxies for which NWQ has
ultimate voting authority are voted consistently and solely in the best economic
interests of the beneficiaries of these equity investments. Note that clients
may otherwise reserve the right to vote their proxies. In addition, NWQ may
determine not to vote proxies related to certain securities if NWQ determines it
would be in its clients' overall best interest not to vote.
A senior member of the investment team is responsible for oversight of the proxy
voting process. NWQ has engaged the services of Institutional Shareholder
Services, Inc., ("ISS") to make recommendations to NWQ on the voting of proxies
relating to securities held in our clients' accounts. NWQ reviews ISS
recommendations and frequently follows the ISS recommendations. However, on
selected issues, NWQ may not vote in accordance with the ISS recommendations
when we believe that specific ISS recommendations are not in the best economic
interest of our clients and their beneficiaries. If NWQ manages the assets of a
company or its pension plan and any of NWQ's clients hold any securities of that
company, NWQ will vote proxies relating to such company's securities in
accordance with the ISS recommendations to avoid any conflict of interest. If a
client requests NWQ to follow specific voting guidelines or additional
guidelines, NWQ will review the request and inform the client only if NWQ is not
able to follow the client's request.
NWQ has adopted ISS Proxy Voting Guidelines. While these guidelines are not
intended to be all-inclusive, they do provide guidance on NWQ's general voting
policies. A copy of NWQ's Proxy Voting Policies and Procedures will be provided
upon written request to a requesting client. Also, clients may request from NWQ
information on how NWQ voted with respect to their portfolios' securities. NWQ
will provide such information through the most recently completed calendar
quarter. Please forward such requests to:
Compliance Director
NWQ Investment Management Company, LLC
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
SYMPHONY
Symphony uses the proxy voting services of Institutional Shareholder Services
("ISS"). The ISS Proxy Voting Services provide Symphony and its clients with an
independent source of proxy voting research and services. The use of ISS is
designed to offer client-centered proxy voting which minimizes conflicts of
interests between Symphony's interests and those of its clients.
In order to monitor how ISS votes client proxies, Symphony has established a
Proxy Voting Review Committee (the "Committee"). The Committee is composed of
Symphony's Chief Operating Officer and its Chief Investment Officer. Each year,
the Committee reviews ISS proxy voting policies and practices to determine
whether such policies and practices are consistent with Symphony's fiduciary
duty to the clients for whom Symphony is responsible for voting proxies. During
the year, the Committee review how ISS votes on specific issues. From time to
time, the Committee discusses the proxy voting process with representatives of
ISS in order to ensure that Symphony's client interests are being protected.
When Symphony disagrees with ISS' policies with respect to certain issues,
Symphony will direct the voting of its clients' proxies according to what
Symphony believes is the best interests of its clients.
Clients who have questions about how particular proxies are voted for their
account may request such information from Symphony by calling (800) 847-6369.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged Symphony and NWQ (Symphony and NWQ are also collectively
referred to as "Sub-Advisers") as Sub-Advisers to provide discretionary
investment advisory services with respect to the registrant's investments in
senior loans and other debt instruments and equity investments, respectively.
The following section provides information on the portfolio managers at each
Sub-Adviser.
SYMPHONY
A. PORTFOLIO MANAGER BIOGRAPHIES
Gunther Stein, Director of Fixed Income Strategies, Portfolio Manager
Gunther Stein is the lead portfolio manager for High Yield strategies at
Symphony Asset Management and is the lead portfolio manager of Nuveen's senior
loan asset management team. Prior to joining Symphony in 1999, Stein was a high
yield portfolio manager at Wells Fargo Bank, where he was responsible for
investing in public high yield bonds and bank loans and also managed a team of
credit analysts. Stein joined Wells Fargo in 1993 as an Associate in its Loan
Syndications/Leveraged Finance Group. Previously, Stein worked for four years as
a euro-currency deposit trader with First Interstate Bank. He has also worked
for Standard Chartered Bank, Mexico City and Citibank Investment Bank, London.
He completed Wells Fargo's Credit Management Training program and holds an
M.B.A. from the University of Texas, Austin. He graduated from the University of
California at Berkeley with a B.A. in Economics.
Lenny Mason, Portfolio Manager
Lenny Mason is a High Yield portfolio manager for Symphony Asset Management and
is also a portfolio manager on the Nuveen's senior loan asset management team.
Prior to joining Symphony in 2001, Mason was a Managing Director in
FleetBoston's Technology & Communications Group, where he headed its five member
Structuring and Advisory Team. He joined FleetBoston in 1995 as an Assistant
Vice President in its Media & Communications Group. Previously, Mason worked for
Wells Fargo Bank's Corporate Banking Group dealing primarily with leveraged
transactions and for Coopers & Lybrand as an auditor. He holds an M.B.A. in
Finance from the University of Chicago, a B.S. in Accounting from Babson College
and is also a C.P.A.
B. OTHER ACCOUNTS MANAGED BY SYMPHONY
GUNTHER STEIN LENNY MASON
(a) RICS
Number of accts 7 7
Assets ($000s) $ 2,790,982 $ 2,790,982
(b) Other pooled accts
Non-performance fee accts
Number of accts 2 2
Assets ($000s) $ 520,932 $ 520,932
Performance fee accts
Number of accts 9 6
Assets ($000s) $ 846,422 $ 407,989
(c) Other
Non-performance fee accts
Number of accts 5 5
Assets ($000s) $ 1,513 $ 1,366
Performance fee accts
Number of accts 3 0
Assets ($000s) $ 262,097
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST
As described above, the portfolio manager may manage other accounts with
investment strategies similar to the Fund, including other investment companies
and separately managed accounts. Fees earned by the sub-advisers may vary among
these accounts and the portfolio managers may personally invest in some but not
all of these accounts. These factors could create conflicts of interest because
a portfolio manager may have incentives to favor certain accounts over others,
resulting in other accounts outperforming the Fund. A conflict may also exist if
a portfolio manager identified a limited investment opportunity that may be
appropriate for more than one account, but the Fund is not able to take full
advantage of that opportunity due to the need to allocate that opportunity among
multiple accounts. In addition, the portfolio manager may execute transactions
for another account that may adversely impact the value of securities held by
the Fund. However, the sub-advisers believe that these risks are mitigated by
the fact that accounts with like investment strategies managed by a particular
portfolio manager are generally managed in a similar fashion, subject to
exceptions to account for particular investment restrictions or policies
applicable only to certain accounts, differences in cash flows and account
sizes, and other factors. In addition, each sub-adviser has adopted trade
allocation procedures that require equitable allocation of trade orders for a
particular security among participating accounts.
D. FUND MANAGER COMPENSATION
Symphony investment professionals receive competitive base salaries and
participate in a bonus pool which is tied directly to the firm's operating
income with a disproportionate amount paid to the managers responsible for
generating the alpha. The bonus paid to investment personnel is based on acumen,
overall contribution and strategy performance. However, there is no fixed
formula which guides bonus allocations. Bonuses are paid on an annual basis. In
addition, investment professionals may participate in an equity-based
compensation pool.
E. OWNERSHIP OF JTA SECURITIES AS DECEMBER 31, 2005.
---------------------- ------- ------------ ----------------- ------------------- ------------------- ---------------- -------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
---------------------- ------- ------------ ----------------- ------------------- ------------------- ---------------- -------------
Gunther Stein X
---------------------- ------- ------------ ----------------- ------------------- ------------------- ---------------- -------------
Lenny Mason X
---------------------- ------- ------------ ----------------- ------------------- ------------------- ---------------- -------------
NWQ
A. PORTFOLIO MANAGER BIOGRAPHIES
Mr. David Iben, CFA, is Managing Director and Portfolio Manager of NWQ since
joining the firm in November 2000, and is also Chief Investment Officer and
Managing Director of NWQ's affiliate, Tradewinds NWQ Global Investors, LLC. He
has co-managed the NWQ-subadvised segment of Nuveen Tax Advantaged Fund since
the fund's inception. From October 1998 through November 2000, Mr. Iben was
Founder, Chief Investment Officer and lead portfolio manager at Palladian
Capital Management. Prior to founding Palladian he spent 14 years with Farmer's
Group Inc. as Vice President and Portfolio Manager, and earned an MBA from
University of Southern California.
Jon D. Bosse, CFA, co-managers the NWQ-subadvised segment of Nuveen Tax
Advantaged Fund and has held such position since the fund's inception. Mr. Bosse
is Chief Investment Officer and Portfolio Manager of NWQ and has been a Managing
Director of NWQ since 1996. Mr. Bosse received his M.B.A. from the Wharton
Business School, University of Pennsylvania.
Michael J. Carne, CFA, Managing Director since January 2006 and Fixed Income
Portfolio Manager since joining NWQ in 2002. Mr. Carne co-manages the
NWQ-subadvised segment of Nuveen Tax Advantaged Fund and has held such position
since the fund's inception. Mr. Carne was Director of Global Fixed Income at ING
Aeltus and Chief Investment Officer of a Phoenix Home Life affiliate. Mr. Carne
received his M.B.A from Harvard University.
B. OTHER ACCOUNTS MANAGED BY NWQ
------------------------------------------------------------------------------------------------------------------------------------
(a)(1) (a)(2) For each person identified in column (a)(1), provide (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the
Identify number of accounts other than the Funds managed by the categories in column (a)(2), provide number of
portfolio person within each category below and the total accounts and the total assets in the accounts
manager(s) assets in the accounts managed within each category below with respect to which the ADVISORY FEE IS BASED
of the ON THE PERFORMANCE OF THE ACCOUNT
Adviser to
be named in
the Fund
prospectus
-------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Registered Investment Other Pooled Other Accounts Registered Other Pooled Other Accounts
Companies Investment Investment Investment
Vehicles Companies Vehicles
-------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Number Total Number Total Number Total Number Total Number of Total Number Total
of Assets of Assets of Assets of Assets Accounts Assets of Assets
Accounts ($mil)* Accounts ($mil)* Accounts ($mil)* Accounts Accounts ($mil)*
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
David Iben 3 $172.9 0 - 6,405 $3,263 - - - - - -
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Jon Bosse 5 $943.0 8 $758.1 54,127 $26,706 - - - - 9 $66.2
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Mike Carne 0 - 0 - 13,803 $1,613 - - - - - -
-------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one account.
More specifically, portfolio managers who manage multiple accounts are presented
with the following potential conflicts:
o The management of multiple accounts may result in a portfolio manager
devoting unequal time and attention to the management of each account.
NWQ seeks to manage such competing interests for the time and
attention of portfolio managers by having portfolio managers focus on
a particular investment discipline. Most accounts managed by a
portfolio manager in a particular investment strategy are managed
using the same investment models.
o If a portfolio manager identifies a limited investment opportunity
which may be suitable for more than one account, an account may not be
able to take full advantage of that opportunity due to an allocation
of filled purchase or sale orders across all eligible accounts. To
deal with these situations, NWQ has adopted procedures for allocating
portfolio transactions across multiple accounts.
o With respect to many of its clients' accounts, NWQ determines which
broker to use to execute transaction orders, consistent with its duty
to seek best execution of the transaction. However, with respect to
certain other accounts, NWQ may be limited by the client with respect
to the selection of brokers or may be instructed to direct trades
through a particular broker. In these cases, NWQ may place separate,
non-simultaneous, transactions for a Fund and other accounts which may
temporarily affect the market price of the security or the execution
of the transactions, or both, to the detriment of the Fund or the
other accounts.
o The Fund is subject to different regulation than other pooled
investment vehicles and other accounts managed by the portfolio
managers. As a consequence of this difference in regulatory
requirements, the Fund may not be permitted to engage in all the
investment techniques or transactions or to engage in these
transactions to the same extent as the other accounts managed by the
portfolio managers. Finally, the appearance of a conflict of interest
may arise where NWQ has an incentive, such as a performance-based
management fee, which relates to the management of some accounts, with
respect to which a portfolio manager has day-to-day management
responsibilities.
NWQ has adopted certain compliance procedures which are designed to address
these types of conflicts common among investment managers. However, there is no
guarantee that such procedures will detect each and every situation in which a
conflict arises.
D. FUND MANAGER COMPENSATION
NWQ's portfolio managers participate in a highly competitive compensation
structure with the purpose of attracting and retaining the most talented
investment professionals and rewarding them through a total compensation program
as determined by the firm's executive committee. The total compensation program
consists of both a base salary and an annual bonus that can be a multiple of the
base salary. The portfolio manager's performance is formally evaluated annually
and based on a variety of factors. Bonus compensation is primarily a function of
the firm's overall investment performance of client portfolios in the strategy
they manage relative to the strategy's general benchmark for one, three and five
year periods (as applicable), as well as an objective review of stock
recommendations and the quality of primary research, and subjective review of
the professional's contributions to portfolio strategy, teamwork, collaboration
and work ethic.
The total compensation package includes availability of equity-like incentive
for purchase (whose value is determined by the increase in profitability of NWQ
over time) made to most investment professionals. NWQ is a subsidiary of Nuveen
Investments, Inc., which has augmented this incentive compensation annually
through individual awards of a stock option pool, as determined through a
collaborative process between Nuveen Investments and the NWQ executive
committee.
E. OWNERSHIP OF JDD SECURITIES AS DECEMBER 31, 2005.
---------------------- ------- ------------- ----------------- ------------------ -------------------- -------------- --------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
---------------------- ------- ------------- ----------------- ------------------ -------------------- -------------- --------------
Dave Iben X
---------------------- ------- ------------- ----------------- ------------------ -------------------- -------------- --------------
Jon Bosse X
---------------------- ------- ------------- ----------------- ------------------ -------------------- -------------- --------------
Mike Carne X
---------------------- ------- ------------- ----------------- ------------------ -------------------- -------------- --------------
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 were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board during the reporting period and
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. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Total Return Strategy Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 9, 2006
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: March 9, 2006
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: March 9, 2006
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.