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 811-21407
---------
Nuveen Diversified Dividend and Income 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, 2003
------------------
Date of reporting period: December 31, 2003
------------------
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.
Nuveen Investments
Closed-End
Exchange-Traded
Funds
ANNUAL REPORT December 31, 2003
NUVEEN
DIVERSIFIED
DIVIDEND AND
INCOME FUND
JDD
Photo of: Man holding up small boy.
Photo of: 2 women with 2 girls looking at seashells.
HIGH CURRENT INCOME AND TOTAL RETURN
FROM A PORTFOLIO OF DIVIDEND-PAYING
COMMON STOCKS, REIT COMMON STOCKS,
EMERGING MARKETS SOVEREIGN DEBT, AND
SENIOR SECURED LOANS
Logo: NUVEEN Investments
FASTER INFORMATION
RECEIVE YOUR
NUVEEN FUND REPORT
ELECTRONICALLY
By registering for electronic delivery, you will receive an e-mail as soon as
your Nuveen Fund information is available. Click on the link and you will be
taken directly to the report. Your Fund report can be viewed and saved on your
computer. Your report will arrive faster via e-mail than by traditional mail.
Registering is easy and only takes a few minutes (see instructions at right).
- --------------------------------------------------------------------------------
SOME COMMON CONCERNS:
WILL MY E-MAIL ADDRESS BE DISTRIBUTED TO OTHER COMPANIES?
No, your e-mail address is strictly confidential and will not be used for
anything other than notification of shareholder information.
WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR
MAIL DELIVERY AGAIN?
If you decide you do not like receiving your reports electronically, it's a
simple process to go back to regular mail delivery.
- --------------------------------------------------------------------------------
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.INVESTORDELIVERY.COM and follow the simple instructions, using
the address sheet that accompanied this report as a guide.
2 You'll be taken to a page with several options. Select the NEW
ENROLLMENT-CREATE screen and follow the simple instructions.
3 Click Submit. Confirm the information you just entered is correct, then
click Submit again.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME DIRECTLY TO YOU FROM NUVEEN,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.NUVEEN.COM
2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click
on Enrollment Today.
3 You'll be taken to a screen that asks for your Social Security number and
e-mail address. Fill in this information, then click Enroll.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
Logo: NUVEEN Investments
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: I URGE YOU TO CONSIDER RECEIVING FUTURE FUND REPORTS AND OTHER
FUND INFORMATION BY E-MAIL AND THE INTERNET .....SEE THE INSIDE FRONT COVER OF
THIS REPORT FOR STEP-BY-STEP INSTRUCTIONS.
Dear
SHAREHOLDER
On behalf of all of us at Nuveen Investments, I'd like to use this
first report of the Nuveen Diversified Dividend and Income Fund to welcome you
to the growing family of Nuveen investors. For more than 100 years, Nuveen has
specialized in offering quality investments to those seeking to accumulate and
preserve wealth. Our mission continues to be to assist you and your financial
advisor by offering the investment services and products that can help you meet
your financial objectives. We thank you for choosing Nuveen Investments as a
partner as you work toward that goal.
Because your Fund's fiscal year ends on December 31, this "annual" report really
covers only about three months of operations. However, we believe the Fund is
off to a good start, and is already well positioned to meet its objectives of
high current income and total return potential. For more details, I encourage
you to read the portfolio managers' summaries that immediately follow this
letter.
I also urge you to consider receiving future Fund reports and other information
electronically via the Internet and e-mail rather than in hard copy. Not only
will you be able to receive the information faster, but this also may help lower
Fund expenses. Sign up is quick and easy - see the inside front cover of this
report for detailed instructions.
Again, thank you for the confidence you have shown in Nuveen Investments. We
look forward to reporting on the performance of your Fund in the months and
years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 18, 2004
1
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD)
Portfolio Managers' PERSPECTIVE
The Fund features management by four subadvisors: 1) NWQ Investment Management
Company, LLC, investing in dividend-paying common stocks, 2) Security Capital
Research & Management Incorporated, investing in REIT common stocks, 3)
Wellington Management Company, LLP, investing in emerging markets sovereign
debt, and 4) Symphony Asset Management, LLC, investing in senior secured loans.
This report covers the period from the Fund's inception in late September 2003
through December 31, 2003. Over that time, the Fund produced a cumulative total
return on net asset value of 7.04%. In order to create a benchmark comparison,
it is necessary to use monthly return data. Looking at the three month period
from September 30, 2003, to December 31, 2003, the Fund provided a total return
on net asset value of 7.27%. This compared with a benchmark1 return of 7.84%.
While we are pleased with the Fund's initial performance, we believe it is
important to remember that it is designed to serve as a long-term investment. We
believe it is inappropriate to place too great a focus on its return over any
relatively short-term period, and especially during its initial investing phase.
We look forward to reporting in more detail on the Fund's performance in future
reports.
In the sections that follow, each of the Fund's subadvisors discusses the market
environment and their investing activities for the period since the Fund's
inception through December 31, 2003.
NWQ INVESTMENT MANAGEMENT COMPANY, LLC (DIVIDEND-PAYING COMMON STOCKS)
Investor sentiment for stocks, both domestically and abroad, was bullish in the
fourth quarter of 2003. All of the major domestic stock indices recorded
double-digit gains with particular strength witnessed in small capitalization
stocks due to the broadening economic expansion. Stock valuations also improved
due to lessened geopolitical uncertainty and a broadening global economic
recovery. U.S.corporate earnings recovered from their recessionary-lows as
increased revenue growth coincided with tight cost controls, high productivity
in the labor markets, and decreased capital costs. Greater confidence in the
sustainability of the economic recovery seemed to be the catalyst for businesses
to begin restocking depleted inventory levels, and spending on capital equipment
rose. Weakness in the dollar has also aided U.S. manufacturers as it made
exports more competitive overseas. The dollar traded lower (especially versus
the euro) due to the Fed's commitment to low interest rates and the rising trade
and budget deficits.
The start-up phase of the equity sleeve of the JDD portfolio progressed smoothly
as the assets were invested in a well-diversified portfolio of stocks and
convertible securities. We were increasingly cautious in our investment choices
as the level of investor enthusiasm heightened during the quarter and, broadly
speaking, made valuations less attractive. However, we were able to identify
companies that we believed met our investment criteria of attractive valuation,
downside protection, sustainable dividends, and a catalyst in place that will
unlock value or improve profitability.
1 Benchmark performance is a blended return consisting 1) 25% of the return
of the Wilshire Real Estate Securities Index, an unmanaged,
market-capitalization-weighted index comprised of publicly traded REITs and
real estate companies, 2) 25% of the return of the JP Morgan EMBI Global
Diversified Index, which tracks total returns for U.S.-dollar-denominated
debt instruments issued by emerging markets sovereign and quasi-sovereign
entities, 3) 25% 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, 4) 18.75% 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, and 6.25% of the return of the EAFE ex-Japan Value Index, a
capitalization-weighted index of European, Asian and the Far Eastern stocks
(excluding Japan) that rank in the lower 50% of price-to-book values within
their respective countries. It is not possible to invest directly in any of
these indexes.
2
SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED (REIT COMMON STOCKS)
The combination of low interest rates and clearer signs of economic recovery
continued to highlight both income and growth attributes within the real estate
stock group, driving another strong performance quarter and capping off a
near-record performance year. The benchmark Wilshire Real Estate Securities
Index ("WARESI") generated a total rate of return for the fourth quarter of
+9.3%, bringing the total return for 2003 to +37.1%.
The standout performers by property type in 2003 were the retail companies, with
mall companies in particular generating a total return of +52.5% for the year
and +12.5% in the fourth quarter. Also part of the retail group, local shopping
center companies generated returns of +40.8% in 2003, including a +8.1% return
in the fourth quarter. We believe investors were drawn to the perceived
stability inherent in local, needs-based retail properties, and we also think
investors were impressed in 2003 with the ease and efficiency of the retail
group performed despite its Kmart exposures. Importantly, investors are closely
monitoring the competitive situation between the traditional grocers that anchor
many of these properties, and the rapid expansion of Wal-Mart and Costco into
the grocery segment.
The level of new equity issuance stepped up significantly during the second half
of 2003 bringing the full year total for new common equity to $7.8 billion.
While far short of 1997's $26.0 billion record, this is the highest annual level
of new common issuance since 1998, and the abundant supply helped us invest our
portion of the Fund's IPO proceeds in a timely manner. As of December 31, 2003,
the REIT common stock allocation of JDD's portfolio was fully invested and we
were beginning to look for swap opportunities that had the potential to add
income, diversification or total return to the portfolio.
WELLINGTON MANAGEMENT COMPANY, LLP (EMERGING MARKETS SOVEREIGN DEBT)
Through much of the fourth quarter of 2003, many emerging markets securities
were propelled higher by a favorable external environment and positive country
developments. Global economic conditions were supportive for the market, as
signs of growth were evident from around the world, including the U.S., Europe,
and Japan. Global liquidity remained abundant and the U.S. dollar weakened in an
orderly manner, making it easier for many developing countries to repay their
external debt with cheaper dollars. The combination of these factors also
contributed to an increase in commodity prices, which boosted prospects for
several emerging market countries.
In addition to constructive external factors, there were encouraging fundamental
developments in several key countries in the market. Russia was upgraded to
investment grade by Moody's following several years of strong economic
performance and steady debt reduction. In Brazil, Congress passed social
security and tax reforms, and the central bank continued to cut interest rates,
setting the stage for stronger economic performance in 2004. In Venezuela, a
peaceful
3
signature drive was successfully mounted to call for a referendum to end
President Chavez's term, which suggests that political risks may diminish in the
future. In Turkey, despite tragic terrorist bombings, the country continued to
benefit from strong economic growth, support from the IMF, and progress towards
EU accession.
In this generally positive environment, the broad indexes showed solid returns.
As one example, the JP Morgan EMBI Global Diversified Index which tracks total
returns for U.S.-dollar-denominated debt instruments issued by emerging markets
sovereign and quasi-sovereign entities, was up 4.12% during the fourth quarter
and more than 22% for the year.
While generally favorable fundamental prospects across the emerging markets
spectrum provided a positive atmosphere during our investment of JDD assets, we
found that spread levels were clearly on the tight side of their historic range.
A number of new investors were seemingly recognizing the attractive merits of
the asset class, while many sovereign nations restricted their issuance in
international capital markets as a result of prudent policies to limit fiscal
deficits and to tap local markets. While this made the invest-up process more
challenging, we believed that values generally stayed in line with those
prevalent in the U.S. corporate bond market. Nevertheless, the emerging markets
sovereign debt portion of JDD's portfolio was fully invested in a diversified
selection of securities as of the end of 2003.
SYMPHONY ASSET MANAGEMENT, LLC
(SENIOR SECURED LOANS)
The 2003 leveraged loan market was one of the strongest in ten years as
companies benefited from signs of an economic recovery, improved access to
capital and increased M&A lending activity. The CSFB Leveraged Loan Index
returned 2.26% in 4th quarter 2003 and 11.01% for the year 2003, the highest
level since 1993. All industries of the Index had positive returns for the 4th
quarter and year 2003 with financial, telecommunications and wireless
communications the top three. The syndicated leveraged loan market in 2003 had
$166 billion of new issuance, up from $139 billion in 2002, and secondary loan
trading volume for 2003 of $138 billion, above the record $117 billion trading
volume in 2001.
In this generally positive environment, we were able to invest most of the
senior secured loan portion of the Fund by year end in a diversified portfolio
of loans which we believed provided strong asset coverage and attractive
coupons. We will continue to look for opportunities to invest the remaining
portfolio proceeds and to grow its quality and return over time.
4
Nuveen Diversified Dividend and Income Fund
Performance
OVERVIEW As of December 31, 2003
JDD
PORTFOLIO STATISTICS
- --------------------------------------------------
Share Price $15.65
- --------------------------------------------------
Common Share Net Asset Value $15.13
- --------------------------------------------------
Premium/(Discount) to NAV 3.44%
- --------------------------------------------------
Net Assets Attributable to
Common Shares ($000) $304,387
- --------------------------------------------------
CUMULATIVE TOTAL RETURN
(INCEPTION DATE 9/25/03)
- --------------------------------------------------
MARKET NAV
- --------------------------------------------------
Since Inception 5.76% 7.04%
- --------------------------------------------------
Pie Chart:
PORTFOLIO ALLOCATION1
Real Estate Investment Trust
Common Stocks 24.3%
Emerging Markets Sovereign Debt 24.0%
Common Stocks 23.6%
Variable Rate Senior
Loan Interests 18.9%
U.S. Corporate Bonds 3.8%
Short-Term Investments 3.3%
Other 2.1%
Bar Chart:
2003 MONTHLY DIVIDENDS PER SHARE
Nov 0.1025
Dec 0.1025
Line Chart:
SHARE PRICE PERFORMANCE
9/25/03 15.01
15.09
15
15.01
14.96
15.06
15.05
15.2
15.25
15.33
15.18
15.3
12/31/03 15.42
Weekly Closing Price
Past performance is not predictive of future results.
1 As a percentage of total holdings as of December 31, 2003. Holdings are
subject to change.
5
Report of
INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Diversified Dividend and Income Fund as
of December 31, 2003, and the related statements of operations, changes in net
assets and the financial highlights for the period from September 25, 2003
(commencement of operations) through December 31, 2003. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 2003, by correspondence
with the custodian, selling or agent banks, and brokers or by other appropriate
auditing procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Diversified Dividend and Income Fund at December 31, 2003, and the results of
its operations, changes in its net assets and financial highlights for the
period from September 25, 2003 (commencement of operations) through December 31,
2003, in conformity with accounting principles generally accepted in the United
States.
/s/Ernst & Young LLP
Chicago, Illinois
February 17, 2004
6
Nuveen Diversified Dividend and Income Fund (JDD)
Portfolio of
INVESTMENTS December 31, 2003
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 32.8% (23.6% OF TOTAL INVESTMENTS)
CONSUMER DISCRETIONARY - 1.3%
245,600 Delphi Corporation $ 2,507,576
53,400 May Department Stores Company 1,552,338
- ------------------------------------------------------------------------------------------------------------------------------------
4,059,914
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 5.1%
135,000 Albertson's, Inc. 3,057,750
61,200 Altria Group, Inc. 3,330,504
70,200 ConAgra Foods, Inc. 1,852,578
69,500 J. Sainsbury plc, Sponsored ADR 1,595,025
48,000 Kimberly-Clark Corporation 2,836,320
113,000 Loews Corp - Carolina Group 2,852,120
- ------------------------------------------------------------------------------------------------------------------------------------
15,524,297
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 5.5%
32,300 ChevronTexaco Corporation 2,790,397
63,200 ConocoPhillips 4,144,024
23,000 Eni S.p.A., Sponsored ADR 2,184,540
63,500 Kerr-McGee Corporation 2,952,115
30,000 Total S.A., Sponsored ADR 2,775,300
49,500 Unocal Corporation 1,823,085
- ------------------------------------------------------------------------------------------------------------------------------------
16,669,461
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS - 8.0%
165,000 Aon Corporation 3,950,100
34,600 Bank of America Corporation 2,782,878
61,600 Fannie Mae 4,623,696
217,400 Hang Lung Group Limited, Sponsored ADR 1,358,120
20,000 Hartford Financial Services Group, Inc. 1,180,600
94,100 IndyMac Bancorp, Inc. 2,803,239
85,000 J.P. Morgan Chase & Co. 3,122,050
200,000 MFA Mortgage Investments, Inc. 1,950,000
80,000 PMA Capital Corporation, Class A # 409,600
140,000 Travelers Property Casualty Corp., Class A 2,349,200
- ------------------------------------------------------------------------------------------------------------------------------------
24,529,483
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 0.8%
41,000 CIGNA Corporation 2,357,500
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.9%
90,000 Pitney Bowes Inc. 3,655,800
135,000 Raytheon Company 4,055,400
52,600 Tsakos Energy Navigation Ltd. 970,470
- ------------------------------------------------------------------------------------------------------------------------------------
8,681,670
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 2.5%
55,500 International Paper Company 2,392,605
106,300 Packaging Corp of America 2,323,718
26,500 Rio Tinto plc, Sponsored ADR 2,949,715
- ------------------------------------------------------------------------------------------------------------------------------------
7,666,038
- ------------------------------------------------------------------------------------------------------------------------------------
7
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2003
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 4.6%
153,000 Chunghwa Telecom Co., Ltd., Sponsored ADR $ 2,218,500
155,500 SBC Communications Inc. 4,053,885
135,000 Sprint Corporation 2,216,700
52,500 Telecom Italia S.p.A., Sponsored ADR 1,558,725
110,600 Verizon Communications Inc. 3,879,848
- ------------------------------------------------------------------------------------------------------------------------------------
13,927,658
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.1%
85,300 DTE Energy Company 3,360,820
150,000 Korea Electric Power Corporation Sponsored ADR 1,558,500
82,800 United Utilities plc, Sponsored ADR 1,497,024
- ------------------------------------------------------------------------------------------------------------------------------------
6,416,344
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $89,927,279) 99,832,365
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 0.7% (0.5% OF TOTAL INVESTMENTS)
CONSUMER DISCRETIONARY - 0.7%
57,000 Toys "R" Us, Inc., 6.25% 2,277,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock (cost $2,002,026) 2,277,150
--------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST COMMON STOCKS - 33.8% (24.3% OF TOTAL INVESTMENTS)
HEALTHCARE - 4.1%
100,200 Healthcare Realty Trust, Inc. 3,582,150
195,900 Nationwide Health Properties, Inc. 3,829,845
293,800 Senior Housing Properties Trust 5,062,174
- ------------------------------------------------------------------------------------------------------------------------------------
12,474,169
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS - 1.1%
338,736 Hersha Hospitality Trust 3,421,234
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 0.6%
50,000 First Industrial Realty Trust, Inc. 1,687,500
- ------------------------------------------------------------------------------------------------------------------------------------
MALLS - 1.2%
49,900 The Macerich Company 2,220,550
32,400 Simon Property Group, Inc. 1,501,416
- ------------------------------------------------------------------------------------------------------------------------------------
3,721,966
- ------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY - 9.6%
242,800 Amli Residential Properties Trust 6,507,040
125,200 Apartment Investment & Management Company 4,319,400
114,900 Archstone-Smith Trust 3,214,902
57,500 AvalonBay Communities, Inc. 2,748,500
74,500 Camden Property Trust 3,300,350
129,600 Gables Residential Trust 4,502,304
164,400 Post Properties, Inc. 4,590,048
- ------------------------------------------------------------------------------------------------------------------------------------
29,182,544
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE - 13.3%
180,300 Arden Realty, Inc. 5,470,302
159,000 Brandywine Realty Trust 4,256,430
81,400 Highwoods Properties, Inc. 2,067,560
594,600 HRPT Properties Trust 5,999,514
140,700 Koger Equity, Inc. 2,944,851
118,900 Mack-Cali Realty Corporation 4,948,618
372,100 Maguire Properties, Inc. 9,042,030
54,300 Reckson Associates Realty Corporation 1,319,490
8
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE (continued)
149,200 Trizec Properties, Inc. $ 2,297,680
36,300 Vornado Realty Trust 1,987,425
- ------------------------------------------------------------------------------------------------------------------------------------
40,333,900
- ------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTERS - 2.9%
183,900 Cedar Shopping Centers Inc. 2,284,038
73,500 Federal Realty Investment Trust 2,821,665
149,600 New Plan Excel Realty Trust 3,690,632
- ------------------------------------------------------------------------------------------------------------------------------------
8,796,335
- ------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 1.0%
77,700 Shurgard Storage Centers, Inc., Class A 2,925,405
- ------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust Common Stocks (cost $96,484,900) 102,543,053
--------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST PREFERRED SECURITIES - 1.3% (1.0% OF TOTAL INVESTMENTS)
MULTIFAMILY - 1.3%
48,000 Apartment Investment & Management Company, Series Q, 10.100% 1,298,400
103,000 Apartment Investment & Management Company, Series R, 10.000% 2,798,510
- ------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust Preferred Securities (cost $4,031,190) 4,096,910
--------------------------------------------------------------------------------------------------------------------
RATINGS*
PRINCIPAL --------------------- STATED
AMOUNT (000) DESCRIPTION(1) MOODY'S S&P MATURITY** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 26.3% (18.9% OF TOTAL INVESTMENTS)
AEROSPACE/DEFENSE - 1.3%
$ 351 Vought Aircraft Industries, Inc., Term Loan B Ba3 B+ 6/30/07 352,058
1,113 Vought Aircraft Industries, Inc., Term Loan C Ba3 B+ 6/30/08 1,115,899
2,373 Vought Aircraft Industries, Inc., Term Loan X Ba3 B+ 12/31/06 2,377,834
- ------------------------------------------------------------------------------------------------------------------------------------
3,845,791
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - 2.8%
2,993 Hayes Lemmerz International, Inc., Term Loan B Ba3 NR 6/3/09 3,039,259
1,914 Meridian Automotive Systems, Term Loan A NR NR 6/30/06 1,840,160
1,764 Metaldyne Company/Metalync Company, LLC, Term Loan D B2 BB- 12/31/09 1,757,043
1,379 Tenneco Auto, Inc., Term Loan B (DD, settling 1/06/04) B1 B 12/12/10 1,397,700
621 Tenneco Auto, Inc., Term Loan B-1 (DD, settling 1/06/04) B1 B 12/12/10 628,963
- ------------------------------------------------------------------------------------------------------------------------------------
8,663,125
- ------------------------------------------------------------------------------------------------------------------------------------
BEVERAGE, FOOD & TOBACCO - 1.0%
3,000 Michael Foods, Inc., Term Loan B B1 B+ 11/20/10 3,045,626
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING/CABLE - 0.6%
1,995 Charter Communications Operating, LLC, Term Loan B B2 B 3/18/08 1,933,705
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING/RADIO - 0.7%
1,995 Emmis Communications Corporation, Term Loan B Ba2 B+ 8/31/09 2,021,323
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS, PACKAGING & GLASS - 2.6%
1,900 Crown Cork & Seal, Term Loan B-1 Ba3 NR 2/26/08 1,923,513
1,996 Graham Packaging Company, Term Loan B (Tranche 1) B2 B 2/14/10 2,014,204
1,702 Smurfit Stone Container Corporation, Term Loan B B2 NR 6/30/09 1,714,824
288 Smurfit Stone Container Corporation, Term Loan C B2 NR 6/30/09 290,548
1,997 United States Can Company, Term Loan B B2 B 1/4/06 1,997,532
- ------------------------------------------------------------------------------------------------------------------------------------
7,940,621
- ------------------------------------------------------------------------------------------------------------------------------------
9
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2003
RATINGS*
PRINCIPAL --------------------- STATED
AMOUNT (000) DESCRIPTION(1) MOODY'S S&P MATURITY** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING - 2.0%
$ 1,992 Amsted Industries Incorporated, Term Loan B B1 BB- 10/15/10 $ 2,005,259
1,995 Eaglepicher Incorporated, Term Loan B B2 B+ 8/7/09 2,017,431
2,000 GenTek Inc, Term Loan NR NR 11/10/08 2,000,625
- ------------------------------------------------------------------------------------------------------------------------------------
6,023,315
- ------------------------------------------------------------------------------------------------------------------------------------
ECOLOGICAL - 1.0%
2,963 Allied Waste North America, Inc., Term Loan B Ba3 BB 1/15/10 3,001,876
- ------------------------------------------------------------------------------------------------------------------------------------
FARMING & AGRICULTURAL - 1.3%
3,990 Seminis Vegetable Seeds, Inc., Term Loan B B1 BB- 9/29/09 4,042,369
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 2.9%
1,714 Alaris Medical Systems, Inc., Term Loan B1 BB 6/30/09 1,734,608
1,995 Beverly Enterprises, Term Loan B Ba3 BB 10/22/08 2,017,444
1,995 Kinetic Concepts, Inc., Term Loan B B1 BB- 8/11/10 2,019,925
3,059 Triad Hospitals, Inc., Term Loan B Ba3 BB 9/30/08 3,089,821
- ------------------------------------------------------------------------------------------------------------------------------------
8,861,798
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING - 2.5%
2,900 Alliance Gaming Corporation, LLC, Term Loan B B1 BB- 9/5/09 2,931,417
2,955 Las Vegas Sands, Inc., Term Loan B NR B+ 6/4/08 2,994,400
1,886 Wyndham International, Inc., Term Loan 2 NR NR 4/1/06 1,815,093
- ------------------------------------------------------------------------------------------------------------------------------------
7,740,910
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.7%
1,538 Conseco, Inc., Tranche A-1 Caa1 B- 9/10/09 1,540,865
462 Conseco, Inc., Tranche B-1 Caa1 B- 9/10/10 465,192
- ------------------------------------------------------------------------------------------------------------------------------------
2,006,057
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT - 1.3%
4,000 Fitness Holdings Worldwide, Inc., Term Loan B B1 B 7/1/09 4,050,000
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.8%
2,494 Rainbow Media Holdings, LLC, Term Loan C (DD, settling 1/14/04) Ba2 BB+ 3/31/09 2,509,955
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.3%
1,000 Georgia Pacific, Term Loan NR NR 11/3/05 1,001,459
- ------------------------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING - 1.3%
1,881 Dex Media West, LLC., Term Loan B Ba3 BB- 3/9/10 1,904,579
1,995 R.H. Donnelley , Term Loan B-2 Ba3 NR 6/30/10 2,017,582
- ------------------------------------------------------------------------------------------------------------------------------------
3,922,161
- ------------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS & FOOD SERVICE - 0.7%
1,974 Domino's, Inc., Term Loan B1 B+ 6/25/10 1,996,802
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL/STORES - 0.7%
2,000 Alimentation Couche-Tard Inc., Term Loan Ba2 BB 12/17/10 2,013,125
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS/HYBRID - 0.8%
2,500 Nextel Finance Company, Term Loan E Ba2 BB 12/15/10 2,515,040
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION/RAIL MANUFACTURING - 1.0%
2,969 Laidlaw Inc., Term Loan B-1 Ba3 BB+ 6/19/09 2,996,763
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $80,117,113) 80,131,821
--------------------------------------------------------------------------------------------------------------------
10
RATINGS*
PRINCIPAL --------------------- STATED
AMOUNT (000) DESCRIPTION(1) MOODY'S S&P MATURITY** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SOVEREIGN DEBT - 33.3% (24.0% OF TOTAL INVESTMENTS)
ARGENTINA - 0.7%
$ 3,355 Argentina Republic, 1.165% Caa1 CCC 8/3/12 $ 2,106,282
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 2.6%
850 Brazil Republic, 14.500% B2 B+ 10/15/09 1,115,625
800 Brazil Republic, 12.750% B2 B+ 1/15/20 1,020,000
600 Brazil Republic, 12.250% B2 B+ 3/6/30 750,000
600 Brazil Republic, 12.000% B2 B+ 4/15/10 723,000
500 Brazil Republic, 11.000% B2 B+ 8/17/40 552,500
490 Brazil Republic, 10.000% B2 B+ 8/7/11 543,900
395 Brazil Republic, 9.250% B2 B+ 10/22/10 426,600
800 Brazil Republic, 8.875% B2 B+ 4/15/24 784,000
2,093 Brazil Republic, 8.000% B2 B+ 4/15/14 2,065,706
- ------------------------------------------------------------------------------------------------------------------------------------
7,981,331
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA - 1.4%
3,000 Bulgaria National Republic, Reg S, 8.250% Ba2 BB+ 1/15/15 3,553,365
686 Bulgaria National Republic, Series A, 2.000% Ba2 BB+ 7/28/12 679,799
- ------------------------------------------------------------------------------------------------------------------------------------
4,233,164
- ------------------------------------------------------------------------------------------------------------------------------------
CAYMAN ISLANDS - 0.1%
350 CSN Islands VII Corp., 144A, 10.750% B1 B+ 9/12/08 387,625
- ------------------------------------------------------------------------------------------------------------------------------------
CHILE - 1.0%
550 Chile Republic, 6.875% Baa1 A- 4/28/09 623,408
1,030 Codelco Inc., 144A, 5.500% A2 A- 10/15/13 1,047,590
600 Codelco Inc., Reg S, 6.375% A2 A- 11/30/12 653,266
300 Empresa Nacional de Electric, 8.350% Ba2 BBB- 8/1/13 337,925
375 Enersis SA, 144A, 7.3750% Ba2 BB+ 1/15/14 386,906
- ------------------------------------------------------------------------------------------------------------------------------------
3,049,095
- ------------------------------------------------------------------------------------------------------------------------------------
COLOMBIA - 1.9%
600 Colombia Republic, 11.750% Ba2 BB 2/25/20 726,000
550 Colombia Republic, 10.750% Ba2 BB 1/15/13 628,375
1,200 Colombia Republic, 10.375% Ba2 BB 1/28/33 1,293,000
416 Colombia Republic, 9.750% Ba2 BB+ 4/9/11 473,723
1,830 Colombia Republic, 9.750% Ba2 BB 4/23/09 2,027,640
470 Colombia Republic, 9.750% Ba2 BB 4/23/09 518,175
- ------------------------------------------------------------------------------------------------------------------------------------
5,666,913
- ------------------------------------------------------------------------------------------------------------------------------------
ECUADOR - 1.6%
1,700 Ecuador Republic, Reg S, 12.000% Caa2 CCC+ 11/15/12 1,657,787
4,200 Ecuador Republic, Reg S, 7.000% Caa2 CCC+ 8/15/30 3,260,884
- ------------------------------------------------------------------------------------------------------------------------------------
4,918,671
- ------------------------------------------------------------------------------------------------------------------------------------
EL SALVADOR - 1.9%
2,270 El Salvador Republic, Reg S, 8.500% Baa3 BB+ 7/25/11 2,533,976
700 El Salvador Republic, Reg S, 8.250% Baa3 BB+ 4/10/32 700,567
2,475 El Salvador Republic, Reg S, 7.750% Baa3 BB+ 1/24/23 2,631,472
- ------------------------------------------------------------------------------------------------------------------------------------
5,866,015
- ------------------------------------------------------------------------------------------------------------------------------------
GUATEMALA - 0.3%
885 Guatemala Government, Reg S, 9.250% Ba2 BB- 8/1/13 984,276
- ------------------------------------------------------------------------------------------------------------------------------------
11
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2003
RATINGS*
PRINCIPAL --------------------- STATED
AMOUNT (000) DESCRIPTION(1) MOODY'S S&P MATURITY** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA - 0.4%
$ 500 Malaysia Republic, 7.500% Baa1 A- 7/15/11 $ 592,730
600 Petronas Capital Ltd., Reg S, 7.000% Baa1 A- 5/22/12 687,929
- ------------------------------------------------------------------------------------------------------------------------------------
1,280,659
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO - 2.7%
500 Conproca SA, Reg S, 12.000% Baa3 BBB- 6/16/10 645,558
1,000 Pemex Project Funding, Reg S, 7.375% Baa1 BBB- 12/15/14 1,072,500
2,600 Petroleos Mexicanos, 9.500% Baa1 BBB- 9/15/27 3,107,000
1,500 United Mexican States, 11.375% Baa2 BBB- 9/15/16 2,130,000
1,100 United Mexican States, 5.875% Baa2 BBB- 1/15/14 1,089,000
- ------------------------------------------------------------------------------------------------------------------------------------
8,044,058
- ------------------------------------------------------------------------------------------------------------------------------------
PANAMA - 1.9%
900 Panama Republic, 9.625% Ba1 BB 2/8/11 1,044,000
2,900 Panama Republic, 9.375% Ba1 BB 4/1/29 3,277,000
1,718 Panama Republic, 2.000% Ba1 BB 7/17/16 1,502,461
- ------------------------------------------------------------------------------------------------------------------------------------
5,823,461
- ------------------------------------------------------------------------------------------------------------------------------------
PERU - 2.2%
1,800 Peru Republic, 9.875% Ba3 BB- 2/6/15 2,097,000
1,300 Peru Republic, 9.125% Ba3 BB- 2/21/12 1,456,000
900 Peru Republic, 8.750% Ba3 BB- 11/21/33 904,500
564 Peru Republic, 5.000% Ba3 BB- 3/7/17 526,448
1,950 Peru Republic, 4.500% Ba3 BB- 3/7/17 1,751,823
- ------------------------------------------------------------------------------------------------------------------------------------
6,735,771
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES - 1.5%
900 Philippines Republic, 9.875% Ba1 BB 1/15/19 956,250
2,600 Philippines Republic, 9.500% Ba1 BB 10/21/24 2,873,000
700 Philippines Republic, 8.375% Ba1 BB 3/12/09 741,125
- ------------------------------------------------------------------------------------------------------------------------------------
4,570,375
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND - 0.2%
500 Poland Republic, 5.250% A2 BBB+ 1/15/14 501,250
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIA - 2.8%
300 Rao Gazprom, Reg S, 9.625% N/A BB- 3/1/13 332,529
1,800 Russia Federation, Reg S, 8.250% Baa3 BB 3/31/10 2,016,466
3,400 Russia Federation, Reg S, 5.000% Baa3 BB 3/31/30 3,268,250
2,100 Russia Ministry of Finance, 3.000% Ba2 BB 5/14/08 1,883,183
800 Russia Ministry of Finance, 3.000% Ba1 BB 5/14/11 629,949
- ------------------------------------------------------------------------------------------------------------------------------------
8,130,377
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA - 1.2%
3,100 South Africa Republic, 9.125% Baa2 BBB 5/19/09 3,743,250
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 0.7%
1,000 Export-Import Bank of Korea, 4.250% A3 A- 11/27/07 1,019,018
500 Korea Development Bank, 5.750% A3 A- 9/10/13 526,103
600 Korea Republic, 8.875% A3 A- 4/15/08 724,122
- ------------------------------------------------------------------------------------------------------------------------------------
2,269,243
- ------------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL - 0.3%
1,000 Corp Andina Fomento, 5.200% A2 A 5/21/13 997,516
- ------------------------------------------------------------------------------------------------------------------------------------
12
RATINGS*
PRINCIPAL --------------------- STATED
AMOUNT (000) DESCRIPTION(1) MOODY'S S&P MATURITY** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
TUNISIA - 1.1%
$ 1,200 Banque de Tunisie, 8.250% Baa2 BBB 9/19/27 $ 1,326,000
1,700 Banque de Tunisie, 7.375% Baa2 BBB 4/25/12 1,916,750
- ------------------------------------------------------------------------------------------------------------------------------------
3,242,750
- ------------------------------------------------------------------------------------------------------------------------------------
TURKEY - 1.7%
2,100 Turkey Republic, 12.375% B1 B+ 6/15/09 2,698,500
1,350 Turkey Republic, 11.875% B1 B+ 1/15/30 1,836,000
400 Turkey Republic, 11.000% B1 B+ 1/14/13 503,000
- ------------------------------------------------------------------------------------------------------------------------------------
5,037,500
- ------------------------------------------------------------------------------------------------------------------------------------
UKRAINE - 1.4%
2,600 Ukraine Government, 144A, 7.650% B1 B 6/11/13 2,717,000
1,503 Ukraine Government, Reg S, 11.000% B1 B 3/15/07 1,674,724
- ------------------------------------------------------------------------------------------------------------------------------------
4,391,724
- ------------------------------------------------------------------------------------------------------------------------------------
URUGUAY - 1.6%
1,900 Uruguay Republic, 7.875% B3 B- 1/15/33 1,306,250
1,850 Uruguay Republic, 7.500% B3 B- 3/15/15 1,489,250
2,500 Uruguay Republic, 7.250% B3 B- 2/15/11 2,168,750
- ------------------------------------------------------------------------------------------------------------------------------------
4,964,250
- ------------------------------------------------------------------------------------------------------------------------------------
VENEZUELA - 2.1%
1,300 PDVSA Finance, 9.375% Caa1 B+ 11/15/07 1,361,750
800 PDVSA Finance, 8.500% Caa1 B+ 11/16/12 780,000
2,600 Venezuela Government, Reg S, 5.375% Caa1 B- 8/7/10 2,143,284
1,700 Venezuela Republic, 9.250% Caa1 B- 9/15/27 1,555,500
571 Venezuela Republic, 2.125% Caa1 B- 12/18/07 543,439
- ------------------------------------------------------------------------------------------------------------------------------------
6,383,973
- ------------------------------------------------------------------------------------------------------------------------------------
Total Emerging Markets Sovereign Debt (cost $98,172,071) 101,309,529
--------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE BONDS - 0.9% (0.6% OF TOTAL INVESTMENTS)
FINANCIALS - 0.9%
3,400 Trizec Hahn Corporation Ba1 NR 1/29/21 2,664,750
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Convertible Bonds (cost $2,401,665) 2,664,750
--------------------------------------------------------------------------------------------------------------------
U.S. CORPORATE BONDS - 5.3% (3.8% OF TOTAL INVESTMENTS)
BUILDINGS & REAL ESTATE - 1.7%
2,000 D.R. Horton, Inc., 7.500% Ba1 BB 12/1/07 2,200,000
3,000 Standard Pacific Corporation, 6.500% Ba2 BB 10/1/08 3,105,000
- ------------------------------------------------------------------------------------------------------------------------------------
5,305,000
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 0.7%
2,000 HCA Inc., 6.910% Ba1 BBB- 6/15/05 2,107,466
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & GAMING - 2.9%
2,000 Aztar Corporation, 9.000% Ba3 B+ 8/15/11 2,205,000
2,150 Harrahs Entertainment Bond, 7.785% Ba1 BB+ 12/15/05 2,343,500
2,000 MGM Mirage, Inc., 6.750% Ba1 BB+ 8/1/07 2,140,000
2,000 Park Place Entertainment, 7.875% Ba2 BB- 12/15/05 2,147,500
- ------------------------------------------------------------------------------------------------------------------------------------
8,836,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Corporate Bonds (cost $16,089,785) 16,248,466
--------------------------------------------------------------------------------------------------------------------
13
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2003
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.6% (3.3% OF TOTAL INVESTMENTS)
$ 13,851 State Street Bank Repurchase Agreement, 0.720%, dated 12/31/03, due 1/02/04, $ 13,851,000
============ repurchase price $13,851,554, collateralized by U.S. Treasury Bonds
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $13,851,000) 13,851,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $403,077,029) - 139.0% 422,955,044
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 1,431,732
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (39.4)% (120,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 304,386,776
====================================================================================================================
(1) All percentages shown in the Portfolio of
Investments are based on net assets applicable to
Common shares unless otherwise noted.
* Bank loans rated below Baa by Moody's Investor
Service, Inc. or BBB by Standard & Poor's Group are
considered to be below investment grade. Ratings are
not covered by the Report of Independent Auditors.
** Senior Loans in the Fund's portfolio generally are
subject to mandatory and/or optional prepayment.
Because of these mandatory prepayment conditions and
because there may be significant economic incentives
for a Borrower to prepay, prepayments of Senior
Loans in the Fund's portfolio may occur. As a
result, the actual remaining maturity of Senior
Loans held in the Fund's portfolio may be
substantially less than the stated maturities shown.
The Fund estimates that the actual average maturity
of the Senior Loans held in its portfolio will be
approximately 18-24 months.
(2) Senior Loans in which the Fund invests generally pay
interest at rates which are periodically adjusted by
reference to a base short-term, floating lending
rate plus a premium. These base lending rates are
generally (i) the lending rate offered by one or
more major European banks, such as the London
Inter-Bank Offered Rate ("LIBOR"), (ii) the prime
rate offered by one or more major United States
banks, or (iii) the certificate of deposit rate.
Senior loans are generally considered to be
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.
144A 144A securities are those which are exempt from
registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may only be
resold in transactions exempt from registration
which are normally those transactions with qualified
institutional buyers.
Reg S Regulation S allows U.S. companies to sell
securities to persons or entities located outside of
the U.S. without registering those securities with
the SEC. Specifically, Reg S provides a safe harbor
from the registration requirements of the Securities
Act for offers and sales of securities by both
foreign and domestic issuers that are made outside
the United States.
(DD) Security purchased on a delayed delivery basis.
NR Not rated.
# Non-income producing.
See accompanying notes to financial statements.
14
Statement of
ASSETS AND LIABILITIES December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $403,077,029) $422,955,044
Cash 2,144,998
Receivables:
Dividends 1,125,526
Interest 2,619,111
Investments sold 2,571,191
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 431,415,870
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 6,557,411
Accrued expenses:
Management fees 206,364
Organization and offering costs 162,875
Other 97,676
FundPreferred share dividends payable 4,768
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,029,094
- ------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 120,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $304,386,776
====================================================================================================================================
Common shares outstanding 20,118,881
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 15.13
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 201,189
Paid-in surplus 284,518,987
Undistributed (Over-distribution of) net investment income (197,395)
Accumulated net realized gain (loss) from investments (14,020)
Net unrealized appreciation of investments 19,878,015
====================================================================================================================================
Net assets applicable to Common shares $304,386,776
====================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
15
Statement of
OPERATIONS For the Period September 25, 2003
(commencement of operations) through December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 1,753,946
Interest 2,381,549
Fees 70,818
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 4,206,313
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 771,222
FundPreferred shares - auction fees 33,699
FundPreferred shares - dividend disbursing agent fees 2,240
Shareholders' servicing agent fees and expenses 3,112
Custodian's fees and expenses 25,070
Trustees' fees and expenses 2,371
Professional fees 16,536
Shareholders' reports - printing and mailing expenses 38,570
Stock exchange listing fees 1,736
Investor relations expense 8,046
Other expenses 13,612
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 916,214
Custodian fee credit (5,812)
Expense reimbursement (274,212)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 636,190
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,570,123
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investments 253,308
Change in net unrealized appreciation of investments 19,878,015
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 20,131,323
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (148,176)
From accumulated net realized gains from investments (14,008)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shareholders
from distributions to FundPreferred shareholders (162,184)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $23,539,262
====================================================================================================================================
See accompanying notes to financial statements.
16
Statement of
CHANGES IN NET ASSETS For the Period
September 25, 2003 (commencement of operations) through December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 3,570,123
Net realized gain from investments 253,308
Change in net unrealized appreciation of investments 19,878,015
Distributions to FundPreferred shareholders:
From net investment income (148,176)
From accumulated net realized gains from investments (14,008)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations 23,539,262
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (3,529,495)
From accumulated net realized gains from investments (345,168)
Tax return of capital (249,105)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (4,123,768)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares 287,415,270
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 85,737
FundPreferred shares offering costs (2,630,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from
capital share transactions 284,871,007
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 304,286,501
Net assets applicable to Common shares at the beginning of period 100,275
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $304,386,776
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (197,395)
====================================================================================================================================
See accompanying notes to financial statements.
17
Statement of
CASH FLOWS For the Period September 25, 2003
(commencement of operations) through December 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 23,539,262
Adjustments to Reconcile the Net Increase in Net Assets Applicable to Common Shares from Operations
to Net Cash Used in Operating Activities:
Purchase of investment securities (466,961,210)
Short-term investment securities, net (13,851,000)
Proceeds from disposition of investment securities 77,592,476
Accretion/Amortization of bond discounts and premiums, net 65,043
Increase in dividends receivable (1,125,526)
Increase in interest receivable (2,619,111)
Increase in receivable from investments sold (2,571,191)
Increase in payable for investments purchased 6,557,411
Increase in management fees payable 206,364
Increase in FundPreferred share dividends payable 4,768
Increase in other liabilities 97,676
Net unrealized appreciation of investments (19,878,015)
Net realized gain from investments (253,308)
Net realized gain from paydowns (111,880)
Capital gain and return of capital distributions from investments 442,850
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (398,865,391)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common shares:
Net proceeds from sale of shares 287,415,270
Net proceeds from shares issued to shareholders due to reinvestment of distributions 85,737
Cash distributions paid to shareholders (4,123,768)
Organization and offering costs payable 162,875
Net proceeds from sale of FundPreferred shares 117,370,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 400,910,114
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 2,044,723
Cash at the beginning of period 100,275
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ 2,144,998
====================================================================================================================================
See accompanying notes to financial statements.
18
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Diversified Dividend and Income 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 "JDD." The Fund was organized
as a Massachusetts business trust on July 18, 2003.
Prior to the commencement of operations, the Fund had no operations other than
those related to organizational matters, the initial capital contribution of
$100,275 by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of Nuveen Investments, Inc. ("Nuveen"), and the recording of the
organization expenses ($11,500) and their reimbursement by Nuveen Investments,
LLC, also a wholly owned subsidiary of Nuveen.
The Fund seeks to provide high current income and total return by investing
primarily in a portfolio of dividend-paying common stocks, securities issued by
Real Estate Investment Trusts ("REITs"), debt securities and other non-equity
instruments that are issued by, or that are related to, government,
government-related and supernational issuers located, or conducting their
business, in emerging market countries ("emerging markets sovereign debt") and
senior loans.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Securities 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. When price quotes are not readily available for
fixed-income securities and senior loans, the pricing service establishes fair
market value using a wide range of market data including yields or prices of
securities of comparable quality, type of issue, coupon, maturity and rating,
indications of value from security dealers, evaluations of anticipated cash
flows or collateral, general market conditions and other information and
analysis, including the obligor's credit characteristics considered relevant by
the pricing service. If it is determined that market prices for a security are
unavailable or inappropriate, the Board of Trustees of the Fund, or its
designee, may establish a fair value for the security. Short-term securities are
valued at amortized cost, which approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments is less liquid relative
to markets for other fixed income securities. Consequently, the value of a
senior loan, 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.
Securities Transactions
Securities 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. Realized gains and losses from securities
transactions are determined on the specific identification method. Securities
purchased on a when-issued or delayed delivery basis may have extended
settlement periods. Any securities 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, 2003, the Fund had outstanding delayed
delivery purchase commitments of $4,527,480.
19
Notes to
FINANCIAL STATEMENTS (continued)
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis. Interest income also includes paydown gains and
losses on senior loans. Fees consist primarily of senior loan amendment fees.
Amendment fees are earned as compensation for evaluating and accepting changes
to the original senior loan agreement.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its net investment income to its shareholders. Therefore, no federal income
tax provision is required.
Dividends and Distributions to Common Shareholders
Commencing with the Fund's first dividend, the Fund has made monthly cash
distributions to Common Shareholders of a stated dollar amount (stated in terms
of a fixed cents per Common Share dividend rate) ("Managed Distribution
Policy"). The Fund seeks to maintain a stable dividend 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 a 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.
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 accounting principles generally
accepted in the United States.
FundPreferred Shares
Effective November 21, 2003, the Fund issued 2,400 Series T and 2,400 Series W,
$25,000 stated value FundPreferred shares. The dividend rate on each Series may
change every seven days, as set pursuant to a dutch auction process by the
auction agent, and is payable at or near the end of each rate period.
20
Derivative Financial Instruments
The Fund may use derivatives or other transactions solely for the purpose of
hedging the portfolio's exposure to common stock risk, high yield credit risk,
foreign currency exchange risk and the risk of increases in interest rates.
Although the Fund is authorized to invest in such financial instruments, and may
do so in the future, it did not make any such investment during the period
September 25, 2003 (commencement of operations) through December 31, 2003.
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 $.03 per Common share. The Fund's share of Common share
offering costs of $603,180 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 FundPreferred
shares ($2,630,000) were recorded as a reduction to paid-in surplus.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
During the period September 25, 2003 (commencement of operations) through
December 31, 2003, 20,106,000 Common shares and 4,800 FundPreferred shares were
sold. In addition, 5,881 Common shares were issued to shareholders due to
reinvestment of distributions during the period September 25, 2003 (commencement
of operations) through December 31, 2003.
3. SECURITIES TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) and U.S.
Government and agency obligations (excluding short-term investments) for the
period September 25, 2003 (commencement of operations) through December 31,
2003, were as follows:
- --------------------------------------------------------------------------------
Purchases:
Investment securities $411,643,631
U.S. Government and agency obligations 55,317,579
Sales and maturities:
Investment securities 22,570,210
U.S. Government and agency obligations 55,022,266
================================================================================
21
Notes to
FINANCIAL STATEMENTS (continued)
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to treatment of paydown gains and losses on senior loans,
recognition of premium amortization on debt securities, recognition of income on
REIT securities, and timing differences in recognizing certain gains and losses
on security transactions.
At December 31, 2003, the cost of investments were as follows:
- --------------------------------------------------------------------------------
Cost of investments $403,283,676
================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at December 31, 2003, were as follows:
- --------------------------------------------------------------------------------
Gross unrealized:
Appreciation $21,049,749
Depreciation (1,378,381)
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments $19,671,368
================================================================================
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2003, were as follows:
- --------------------------------------------------------------------------------
Undistributed net ordinary income * $--
Undistributed net long-term capital gains --
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The tax character of distributions paid during the period September 25, 2003
(commencement of operations) through December 31, 2003, was designated for
purposes of the dividends paid deduction as follows:
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $3,899,231
Distributions from net long-term capital gains 132,847
Tax return of capital 249,105
================================================================================
*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, 2003.
22
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, at the rates set forth below, which
are based upon the average daily managed assets of the Fund. "Managed Assets"
means the average daily net assets of the Fund including assets attributable to
FundPreferred shares and the principal amount of borrowings, if any.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
- --------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with NWQ Investment Management Company, LLC
("NWQ"), Security Capital Research & Management Incorporated ("Security
Capital"), Symphony Asset Management, LLC ("Symphony") and Wellington Management
Company, LLP ("Wellington"). Nuveen owns a controlling interest in NWQ while key
management of NWQ owns a non-controlling minority interest. Symphony is a wholly
owned subsidiary of Nuveen. NWQ manages the portion of the Fund's investment
portfolio allocated to dividend-paying common stocks including American
Depository Receipts ("ADRs"). Security Capital manages the portion of the
investment portfolio allocated to securities issued by real estate companies
including REITs. Symphony manages the portion of the Fund's investment portfolio
allocated to senior loans. Wellington manages the portion of the Fund's
investment portfolio allocated to emerging markets sovereign debt. NWQ, Security
Capital, Symphony and Wellington 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.
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
SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------
2003* .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond September 30, 2011.
Sub-Adviser Acquisition
On November 24, 2003, Banc One Investment Advisors Corporation, an indirect,
wholly-owned subsidiary of Bank One Corporation acquired Security Capital.
Pursuant to the Investment Company Act of 1940, the change in ownership of
Security Capital caused the existing sub-advisory agreement to terminate, and
shareholders of the Fund were required to approve a new sub-advisory agreement
with Security Capital. At the Fund's annual shareholder meeting on January 20,
2004, shareholders approved the new sub-advisory agreement.
On January 14, 2004 Bank One Corporation and J.P. Morgan Chase & Co. ("J.P.
Morgan") announced that they have agreed to merge in a strategic business
combination. The proposed merger is subject to approval of shareholders of Bank
One Corp. and J.P. Morgan and approval of U.S. federal and state and foreign
regulatory authorities. The transaction is expected to occur in mid-2004. In the
event that the merger between Bank One Corp. and J.P. Morgan is deemed a change
in control of the Sub-Adviser, shareholder approval of a new sub-advisory
agreement will be necessary.
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, 2003, there were no such unfunded senior loan
commitments.
23
Notes to
FINANCIAL STATEMENTS (continued)
7. SENIOR LOAN PARTICIPATION COMMITMENTS
The Fund invests in assignments, participations, or acts as a party to the
primary lending syndicate of a variable rate senior loan interest to
corporations, partnerships, and other entities. 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, but not with the borrower directly. As such, the Fund assumes the
credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower. At December 31, 2003, there
were no such outstanding senior loan participation commitments.
8. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a dividend distribution of $.1025 per Common share which was
paid on February 2, 2004, to shareholders of record on January 15, 2004.
24
Financial
HIGHLIGHTS
25
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout the period:
Investment Operations
-------------------------------------------------------------------
Distributions Distributions
from Net from
Beginning Net Investment Capital
Common Realized/ Income to Gains to
Share Net Unrealized FundPreferred FundPreferred
Net Asset Investment Investment Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
- -------------------------------------------------------------------------------------------------------
Period Ended 12/31:
2003(b) $14.33 $.18 $1.01 $(.01) $-- $1.18
=======================================================================================================
Less Distributions Total Returns
--------------------------------------- --------------------
Based
Net Offering on
Investment Capital Costs and Ending Common
Income to Gains to Tax Preferred Common Based Share
Common Common Return Share Share Ending on Net
Share- Share- of Underwriting Net Asset Market Market Asset
holders holders Capital Total Discounts Value Value Value** Value**
- --------------------------------------------------------------------------------------------------------------------------------
Period Ended 12/31:
2003(b) $(.18) $(.02) $(.01) $(.21) $(0.17) $15.13 $15.65 5.76% 7.04%
================================================================================================================================
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
- --------------------------------------------------------------------------------------------------------------------
Period Ended 12/31:
2003(b) $304,387 1.26%* 4.51%* .87%* 4.89%* 28%
====================================================================================================================
FundPreferred Shares at End of Period
----------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
- -------------------------------------------------------------------
Period Ended 12/31:
2003(b) $120,000 $25,000 $88,414
===================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares.
(a) Per share Net Investment Income is calculated using the average shares
method.
(b) For the period September 25, 2003 (commencement of operations) through
December 31, 2003.
See accompanying notes to financial statements.
26-27 SPREAD
Trustees
AND OFFICERS
The management of the Fund, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board of
Trustees of the Fund. The number of trustees of the Fund is currently set at
twelve. None of the trustees who are not "interested" persons of the Fund has
ever been a trustee or employee of, or consultant to, Nuveen or its affiliates.
The names and business addresses of the trustees and officers of the Fund, 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
POSITION(S) IN FUND
HELD YEAR FIRST PRINCIPAL OCCUPATION(S) COMPLEX
NAME, BIRTHDATE WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN
AND ADDRESS THE FUND APPOINTED(2) DURING PAST 5 YEARS BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of 1994 Chairman and Director (since 1996) of Nuveen 143
3/28/49 the Board Investments, Inc. and Nuveen Investments, LLC;
333 W. Wacker Drive and Trustee Director (since 1992) and Chairman (since 1996) of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chairman and Director (since 1997)
of Nuveen Asset Management, Inc.; Director (since 1996)
of Institutional Capital Corporation; Chairman and Director
(since 1999) of Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers Inc. (since 2002).
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
William E. Bennett Trustee 2001 Private Investor; previously, President and Chief Executive 143
10/16/46 Officer, Draper & Kramer, Inc., a private company that
333 W. Wacker Drive handles mortgage banking, real estate development, pension
Chicago, IL 60606 advisory and real estate management (1995-1998). Prior
thereto, Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidiary, The
First National Bank of Chicago.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Trustee 1997 Private Investor and Management Consultant. 143
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Trustee 1993 Retired (since 1989) as Senior Vice President of The Northern 143
7/29/34 Trust Company; Director, Community Advisory Board for
333 W. Wacker Drive Highland Park and Highwood, United Way of the North Shore
Chicago, IL 60606 (since 2002).
- ------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Trustee 1999 President, The Hall-Perrine Foundation, a private philanthropic 143
10/22/48 corporation (since 1996); Director, Alliant Energy; Director and
333 W. Wacker Drive Vice Chairman, United Fire & Casualty Company; Director,
Chicago, IL 60606 Federal Reserve Bank of Chicago; formerly, President and Chief
Operating Officer, SCI Financial Group, Inc., a regional financial
services firm.
- ------------------------------------------------------------------------------------------------------------------------------------
Anne E. Impellizzeri Trustee 1994 Retired, formerly, Executive Director (since 1998) of Manitoga/ 143
1/26/33 The Russel Wright Design Center; prior thereto, President and
333 W. Wacker Drive Chief Executive Officer of Blanton-Peale Institute (since 1990);
Chicago, IL 60606 prior thereto, Vice President, Metropolitan Life Insurance Co.
- ------------------------------------------------------------------------------------------------------------------------------------
William L. Kissick Trustee 1992 Professor Emeritus, School of Medicine and the Wharton 143
7/29/32 School of Management and former Chairman, Leonard Davis
333 W. Wacker Drive Institute of Health Economics, University of Pennsylvania;
Chicago, IL 60606 Adjunct Professor, Health Policy and Management, Yale University.
28
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST PRINCIPAL OCCUPATION(S) COMPLEX
NAME, BIRTHDATE WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN
AND ADDRESS THE FUND APPOINTED(2) DURING PAST 5 YEARS BY TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Leafstrand Trustee 1992 Retired; previously, Vice President in charge of Municipal 143
11/11/31 Underwriting and Dealer Sales at The Northern Trust
333 W. Wacker Drive Company.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Peter R. Sawers Trustee 1991 Adjunct Professor of Business and Economics, University of 143
4/3/33 Dubuque, Iowa; formerly (1991-2000) Adjunct Professor, Lake
333 W. Wacker Drive Forest Graduate School of Management, Lake Forest, Illinois;
Chicago, IL 60606 prior thereto, Executive Director, Towers Perrin Australia, a
management consulting firm; Chartered Financial Analyst;
Certified Management Consultant; Director, Executive
Service Corps of Chicago, a not-for-profit organization.
- ------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Trustee 1997 Senior Partner and Chief Operating Officer, Miller-Valentine 143
9/24/44 Group, Vice President, Miller-Valentine Realty, a construction
333 W. Wacker Drive company; Chair, MiamiValley Hospital; Chair, Dayton
Chicago, IL 60606 Development Coalition; formerly, Member, Community
Advisory Board, National City Bank, Dayton, Ohio and
Business Advisory Council, Cleveland Federal Reserve Bank.
- ------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Trustee 1997 Executive Director, Gaylord and Dorothy Donnelley Foundation 143
12/29/47 (since 1994); prior thereto, Executive Director, Great Lakes
333 W. Wacker Drive Protection Fund (1990-1994).
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Sheila W. Wellington Trustee 1994 Clinical Professor of Management, Stern/NYU Business School 143
2/24/32 (since 2003); formerly, President (1993-2003) of Catalyst (a
333 W. Wacker Drive not-for-profit organization focusing on women's leadership
Chicago, IL 60606 development in business and the professions).
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary 143
9/9/56 Administrative and Associate General Counsel, formerly, Vice President
333 W. Wacker Drive Officer and Assistant General Counsel of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.;
Managing Director (since 2002), Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
2000), of Nuveen Asset Management, Inc.; Assistant
Secretary of Nuveen Investments, Inc. (since 1994);
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.
29
Trustees
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice 2000 Vice President (since 2002), formerly, Assistant 143
2/3/66 President and Vice President (since 2000), previously, Associate of
333 W. Wacker Drive Assistant Nuveen Investments, LLC.
Chicago, IL 60606 Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice 1999 Vice President of Nuveen Investments, LLC (since 1999), 143
11/28/67 President and prior thereto, Assistant Vice President (since 1997); Vice
333 W. Wacker Drive Treasurer President and Treasurer of Nuveen Investments, Inc. (since
Chicago, IL 60606 1999); Vice President and Treasurer of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp. (since 1999); Vice
President and Treasurer of Nuveen Asset Management,
Inc. (since 2002) and of Nuveen Investments Advisers
Inc. (since 2002); Assistant Treasurer of NWQ Investment
Management Company, LLC (since 2002); Chartered
Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Susan M. DeSanto Vice 2001 Vice President of Nuveen Advisory Corp. (since 2001); 143
9/8/54 President previously, Vice President of Van Kampen Investment
333 W. Wacker Drive Advisory Corp. (since 1998); Vice President of Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 2002); prior thereto,
Assistant Vice President of Van Kampen Investment
Advisory Corp. (since 1994).
- ------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice 2000 Vice President (since 2002) and Assistant General Counsel 143
9/24/64 President and (since 1998); formerly, Assistant Vice President (since 1998)
333 W. Wacker Drive Secretary of Nuveen Investments, LLC; Vice President (since 2002)
Chicago, IL 60606 and Assistant Secretary (since 1998), formerly Assistant
Vice President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice 1998 Managing Director (since 2003), formerly, Vice President (since 143
10/24/45 President 1998) of Nuveen Investments, LLC; Vice President (since 1998)
333 W. Wacker Drive of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice 1995 Managing Director (since 2002) of Nuveen Investments, 143
3/2/64 President LLC; Managing Director (since 2001), formerly Vice
333 W. Wacker Drive President of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 1995); Managing
Director of Nuveen Asset Management, Inc. (since 2001);
Vice President of Nuveen Investment Advisers Inc.
(since 2002); Chartered Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice 1998 Vice President (since 1993) and Funds Controller (since 143
5/31/54 President and 1998) of Nuveen Investments, LLC and Vice President and
333 W. Wacker Drive Controller Funds Controller (since 1998) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
30
NUMBER OF
PORTFOLIOS
POSITION(S) IN FUND
HELD YEAR FIRST COMPLEX
NAME, BIRTHDATE WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS THE FUND APPOINTED(3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice 2000 Vice President (since 2000) of Nuveen Investments, LLC, 143
3/22/63 President previously Assistant Vice President (since 1999); prior
333 W. Wacker Drive thereto, Associate of Nuveen Investments, LLC; Certified
Chicago, IL 60606 Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice 2002 Vice President (since 1999), previously, Assistant Vice 143
8/27/61 President President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice 1988 Vice President, Assistant Secretary and Assistant General 143
7/27/51 President and Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive Assistant Assistant Secretary of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Secretary Institutional Advisory Corp.; Assistant Secretary of Nuveen
Investments, Inc. and (since 1997) Nuveen Asset Management,
Inc.; 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).
- ------------------------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV Vice 1996 Managing Director (since 2002) of Nuveen Investments, 143
7/7/65 President LLC; Managing Director (since 1997), formerly Vice
333 W. Wacker Drive President (since 1996) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; Managing Director
of Nuveen Asset Management, Inc. (since 1999).
Chartered Financial Analyst.
(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 trustee of the
Adviser.
(2) Trustees serve a one-year term until his/her successor is elected. The year
first elected or appointed represents the year in which the Trustee was
first elected or appointed to any fund in the Nuveen Complex.
(3) Officers serve a one-year term 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.
31
Build Your Wealth
AUTOMATICALLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power 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 95% of
the then-current market price or at net asset value, whichever is higher. 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 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.
FLEXIBILITY
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.
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.
32
Fund
INFORMATION
BOARD OF TRUSTEES
William E. Bennett
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
Anne E. Impellizzeri
William L. Kissick
Thomas E. Leafstrand
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Sheila W. Wellington
FUND MANAGER
Nuveen Institutional
Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
SUB-ADVISERS
NWQ Investment Management
Company, LLC
2049 Century Park East
Los Angeles, CA 90067
Security Capital Research &
Management Incorporated
11 South LaSalle Street
Chicago, IL 60603
Wellington Management
Company, LLP
75 State Street
Boston, MA 02109
Symphony Asset
Management, LLC
555 California Street
San Francisco, CA 94104
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling Nuveen Investments at (800) 257-8787; and (ii)
on the Commission's website at http://www.sec.gov.
QUALIFIED DIVIDEND TAX DISCLOSURE
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Fund during the calendar year ended
December 31, 2003. For corporate shareholders, 11.66% of the ordinary income
distributions qualify for the dividend received deduction. Certain dividends
paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by
the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to
designate up to a maximum of 10.5% of the ordinary income as taxed at a maximum
of 15%.
GLOSSARY OF TERMS USED IN THIS REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
Net Asset Value (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
- ---------
Each 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 ended December 31, 2003. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
33
Serving Investors
FOR GENERATIONS
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.
Managing $80 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 tax-free 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.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
EAN-B-1203D
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. The registrant has posted such code of
ethics on its website at www.nuveen.com/etf.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has 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 William E. Bennett, who is "independent" for purposes of
Item 3 of Form N-CSR.
Mr. Bennett was formerly Executive Vice President and Chief Credit Officer of
First Chicago Corporation and its principal subsidary, The First National Bank
of Chicago. As part of his role as Chief Credit Officer, Mr. Bennett set policy
as to accrual of assets/loans; designated performing/non-performing assets; set
the level of reserves against the credit portfolio; and determined the carrying
value of credit related assets and exposure. Among other things, Mr. Bennett was
also responsible for the oversight of the internal analysis function including
setting ground rules for the review and preparation of financial analysis and
financial statements for use in making credit and risk decisions for clients.
Mr. Bennett has significant experience reviewing, analyzing and evaluating
financial statements of domestic and international companies in a variety of
industries with complex accounting issues.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund since its inception on September 25, 2003. For
engagements with Ernst & Young, LLP entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that Ernst & Young LLP provided to the Fund, except for those non-audit services
that were subject to the pre-approval exception under Rule 2-01 of Regulation
S-X (the "pre-approval exception"). The pre-approval exception for services
provided directly to the Fund waives the pre-approval requirement for services
other than audit, review or attest services if: (A) the aggregate amount of all
such services provided constitutes no more than 5% of the total amount of
revenues paid by the fund 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
- ----------------------- --------------------- -------------------- --------------------- --------------------
Fiscal Year Ended Audit Fees Billed Audit-Related Fees Tax Fees Billed to All Other Fees
December 31 to Fund Billed to Fund Fund Billed to Fund
- ----------------------- --------------------- -------------------- --------------------- --------------------
2003* $17,800 $0 $0 $1500
- ----------------------- --------------------- -------------------- --------------------- --------------------
Percentage approved N/A 0% 0% 0%
pursuant to
pre-approval
exception
- ----------------------- --------------------- -------------------- --------------------- --------------------
* Represent's Fund's first fiscal year end.
The "Other Fees" were billed for initial agreed upon procedures for the offering
of FundPreferred Shares.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following table shows the amount of fees billed by Ernst & Young LLP to
Nuveen Institutional Advisor Corp. ("NIAC" or the "Adviser"), and any entity
controlling, controlled by or under common control with NIAC ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two fiscal years.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to 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 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 audit is completed.
- ----------------------- --------------------- -------------------- ---------------------
Fiscal Year Ended Audit-Related Fees Tax Fees Billed to All Other Fees
December 31 Billed to Adviser Adviser and Billed to Adviser
and Affiliated Fund Affiliated Fund and Affiliated Fund
Service Providers Service Providers Service Providers
- ----------------------- --------------------- -------------------- ---------------------
2003 $0 $0 $0
- ----------------------- --------------------- -------------------- ---------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
- ----------------------- --------------------- -------------------- ---------------------
2002 $0 $0 $0
- ----------------------- --------------------- -------------------- ---------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval exception
- ----------------------- --------------------- -------------------- ---------------------
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two 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 Service Provider, if the engagement relates 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 Total Non-Audit Total Non-Audit Total of (A), (B)
December 31 Fees Billed to Fund Fees billed to Fees billed to and (C)
(A) Adviser and Adviser and
Affiliated Fund Affiliated Fund
Service Providers Service Providers
(engagements (all other
related directly engagements)
to the operations (C)
and financial
reporting of the
Fund)
(B)
- ----------------------- --------------------- -------------------- --------------------- --------------------
2003 $1500 $0 $0 $1500
- ----------------------- --------------------- -------------------- --------------------- --------------------
2002 $0 $0 $0 $0
- ----------------------- --------------------- -------------------- --------------------- --------------------
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.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
Nuveen Advisory Corp. (the "Adviser") would either engage an independent third
party to determine how the proxy should be voted or vote the proxy with the
consent, or based on the instructions, of the Fund's Board of Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Trustees and made available to
shareholders as required by applicable rules.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable at this time.
ITEM 10. 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 registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. 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 posted on registrant's website at www.nuveen.com/etf.
(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 (17CFR 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
at this time.
(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 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 Diversified Dividend and Income Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 9, 2004
-------------------------------------------------------------------
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, 2004
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: March 9, 2004
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.