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 811-21705
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Nuveen Tax-Advantaged Floating Rate 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
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Date of fiscal year end: July 31
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Date of reporting period: July 31, 2005
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT July 31, 2005
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN
TAX-ADVANTAGED
FLOATING RATE
FUND
JFP
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OPPORTUNITIES FOR TAX-ADVANTAGED MONTHLY INCOME FROM A PORTFOLIO CONSISTING
PREDOMINANTLY OF ADJUSTABLE RATE PREFERRED SECURITIES
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Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
On behalf of all of us at Nuveen Investments, I'd like to use this first
shareholder report of the Nuveen Tax-Advantaged Floating Rate Fund (JFP) to
welcome each of you to the growing family of Nuveen investors. We're pleased and
proud that you have chosen Nuveen Investments as a part of your investment
program, and I am grateful for this opportunity to thank you directly.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
mission continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you secure your long-term
financial goals. We thank you for choosing us as a partner as you work toward
that objective.
CALLOUT:
"OUR MISSION CONTINUES TO BE TO ASSIST YOU AND YOUR FINANCIAL ADVISOR BY
OFFERING THE INVESTMENT SOLUTIONS AND SERVICES THAT CAN HELP YOU SECURE YOUR
LONG-TERM FINANCIAL GOALS."
Because JFP came to market in March 2005, this "annual" report really covers
only the first few months of the Fund's operations. While it's too early to make
any long-term observations about JFP, we do believe the Fund is off to a
favorable start and we are working to position it to meet its objectives. For
details on the steps we've been taking to bring this about, I encourage you to
read the Portfolio Managers' Comments and review the Performance Overview pages
that immediately follow this letter.
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mails and the internet. Sign up is quick and easy
- - see the inside front cover of this report for step-by-step instructions.
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its Nuveen shares to Nuveen Investments or to others. Please be
assured that these transactions only affect Nuveen's corporate structure, and
they do not have any impact on the investment objectives or management of your
Fund.
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
September 15, 2005
Nuveen Tax-Advantaged Floating Rate Fund (JFP)
Portfolio Managers'
COMMENTS
The Nuveen Tax-Advantaged Floating Rate Fund features portfolio management by a
team of specialists at Spectrum Asset Management, Inc., an affiliate of
Principal Capital(SM). Mark Lieb, Bernie Sussman and Phil Jacoby, who have more
than 70 years of combined experience in the securities markets, lead the team.
Here Mark, Bernie and Phil talk about their management strategy and the
performance of the Fund from its inception in March 2005 through July 31, 2005.
WHAT WERE THE GENERAL MARKET CONDITIONS OVER THE PERIOD FROM THE FUND'S
INCEPTION THROUGH JULY 31, 2005?
General economic conditions over this four-month period perhaps can be best
characterized by paraphrasing the minutes of the June 2005 meeting of the
Federal Reserve's Open Market Committee. At that meeting, the Fed stated that
although energy prices had continued to rise, the U.S. economic expansion
remained firm and U.S. labor market conditions continued to improve gradually.
The Fed also noted that pressures for increased inflation were present, but
longer term inflation expectations remained, in their view, well contained.
In his July 2005 testimony to Congress, Fed Chairman Alan Greenspan reemphasized
that with the U.S. economy on a strong and sustainable growth path, there was a
need to remain vigilant against shorter-term inflationary pressures. In August
2005 (shortly after the end of this reporting period), the Fed's Open Market
Committee raised the Federal Funds Rate to 3.5%, the third 0.25% raise in this
widely-followed benchmark since the Fund's March 2005 inception.
We expect that, over time, preferred stocks issued by so-called "middle market"
banks will be a major source of investment opportunities for the Fund. (Small-
to mid-sized banking companies often have limited access to the capital markets
for the issuance of preferred stock or similar securities, and therefore
generally pay attractive rates when they do issue such securities.) Although we
saw signs during this period that such banks would be increasing their issuance
of floating rate preferred stocks, the pace of this new issuance was tempered by
several factors, including:
4
o The Federal Reserve's extension to 2009 from 2007 of the effective date for
new capital rules that will likely make traditional forms of financing less
attractive to banks and bank holding companies, and make the issuance of
non-cumulative preferred stock a more efficient financing option.
o The longer-than-expected learning curve for many potential issuers
concerning the features and benefits of this relatively new type of core
capital security.
o Concerns among some potential issuers that rising shorter-term rates could
unacceptably increase their financing expenses if they were to issue
adjustable-rate preferred stock.
Despite these factors, we believe that the overall tone of the broad preferred
market during this period was very constructive for both issuers and investors.
In our opinion, one reason for this productive environment was the refinement of
a Moody's guide that gives users a well defined set of guidelines to compare the
equity characteristics of common stock with those of preferred stock and hybrid
preferred securities - ultimately leading to more equity credit available via
preferred securities than there has been in the past.
The prospect of more equity credit at an affordable and non-dilutive premium
fostered an active environment among larger financial institutions for the
issuance of Dividend Received Deduction (DRD) and Qualified Dividend Income
(QDI) securities, which helped us offset the slower-than-expected pace of middle
market bank preferred stock issuance. Indeed, the second quarter brought $4.2
billion in preferred stock issuance from the larger financial institutions - the
strongest issuance pace in over a decade. Notably, about $1.8 billion of this
issuance was in LIBOR floating rate perpetual preferred stock, which was an
additional source of supply during the Fund's initial investment period.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE INITIAL INVESTING PERIOD
BETWEEN THE FUND'S INCEPTION IN MARCH AND JULY 31, 2005?
Our main goal during this initial reporting period was to achieve a
fully-invested position, which we were essentially able to accomplish by July
31, 2005. As of the end of the reporting period, 95% of the Fund's portfolio was
invested in either floating rate instruments or their functional equivalents,
along with a small allocation to higher income fixed rate preferred issues. The
overall effective portfolio duration was 0.90 years.
5
Given the slower pace of middle market bank preferred stock issuance during this
initial four-month period, we achieved a fully-invested position by purchasing
more issues from larger, higher-quality financial services firms than we
originally anticipated. Generally, these securities carry lower yields than
equivalent middle market bank preferred stock due to their higher credit
quality. It is our intention to switch these larger institution securities for
the preferred stock of middle market banks as more issuance from these banks
becomes available. Ultimately, we would like to have 60% - 65% of the Fund's
portfolio invested in preferred securities issued by middle market banks.
In seeking appropriate investments, we worked closely with a number of firms,
including Sandler O'Neill; Keefe, Bruyette and Woods; First Tennessee and Bear
Stearns, to encourage middle market banks to issue preferred stock. As of July
31, 2005, all of these firms had been successful in engaging issuers and bidding
transactions that have led to investments by the Fund.
Given the dividend and interest expense concerns of many potential issuers in a
rising short-term rate environment, we invested some of the Fund's assets in
fixed-rate DRD or QDI securities. We then used interest rate swaps to
effectively convert fixed-rate issues into floating-rate investments suitable
for the Fund.
WHAT CAN YOU SAY ABOUT THE PERFORMANCE OF THE FUND OVER THIS INITIAL PERIOD?
While technically this is an "annual" report, JFP was introduced in March 2005.
For the period between the Fund's inception and the July 31, 2005 end of its
initial fiscal year the Fund provided a total return on net asset value of
- -0.08%. While we do not believe this initial period was long enough to produce
any meaningful performance results or trends, the Fund's total return over this
time shows the effects of a general softening of bond prices toward the end of
the period. It also reflects the offering costs of the Fund's FundPreferredTM
shares.
We look forward to discussing the performance of this Fund in the next
shareholder report.
6
Distribution and Share Price
INFORMATION
The Fund uses leverage to provide opportunities for additional income for common
shareholders. The extent of this benefit is tied in part to the short-term rates
the Fund pays its FundPreferred shareholders. During periods of low short-term
rates, a leveraged Fund generally pays lower dividends to its FundPreferred
shareholders, which can leave more earnings to support common share dividends.
However, when short-term interest rates rise, the Funds' borrowing costs also
rise. While leveraging can still provide benefits for common shareholders when
short-term rates rise, the extent of the benefit will be tied to the rates the
Fund is receiving from the adjustable rate securities in its portfolio.
Helped in part by this leveraging, the Fund declared its first monthly
distribution of $0.0655 per common share in May 2005. The Fund maintained a
stable monthly common share distribution through July 31, 2005.
It is the Fund's policy to seek to pay dividends that are relatively stable from
month to month, and that reflect the Fund's past results and projected future
performance. During certain periods, the Fund may pay dividends at a rate that
may be more or less than the amount of net investment income actually earned by
the Fund during the period. If a Fund has cumulatively earned more than it has
paid in dividends, it holds the excess in reserve as undistributed net
investment income (UNII) as part of the Fund's NAV. Conversely, if a Fund has
cumulatively paid dividends in excess of its earnings, the excess constitutes
negative UNII that is likewise reflected in the Fund's NAV. The Fund will, over
time, pay all of its net investment income as dividends to shareholders.
As noted earlier, during the Fund's initial investment period we purchased more
securities issued by larger, higher-quality financial institutions than we
originally anticipated. These securities generally had lower yields than the
issues from middle market banks we were looking to purchase. The Fund did not
adjust its monthly distribution rate as short-term rates increased over the
course of the four-month period due in part to the modest shortfall in
anticipated income when compared with the initial monthly distribution level
established by the Fund. As of July 31, 2005, the Fund had a negative UNII
balance for financial statement purposes and a positive UNII balance for tax
purposes.
As of July 31, 2005, the Fund was trading at a share price discount of -4.96% to
its net asset value per share. This compares with an average share price premium
of +0.34% for the period from the Fund's inception through the end of this
initial reporting period.
7
Nuveen Tax-Advantaged Floating Rate Fund
JFP
Performance
OVERVIEW As of July 31, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
$25 Par (or similar) Preferred Securities 70.9%
Capital Preferred Securities 24.1%
Repurchase Agreements 5.0%
Bar Chart:
2005 MONTHLY DISTRIBUTIONS PER SHARE
May 0.0655
Jun 0.0655
Jul 0.0655
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
3/28/05 15
15
15
14.95
15
14.96
14.95
14.97
14.98
15.01
15.01
15.01
15.01
15
15.05
15
15.02
14.99
15
14.99
14.97
14.93
14.9
14.85
14.78
14.78
14.53
14.55
14.6
14.58
14.54
14.51
14.48
14.48
14.5
14.43
14.6
14.62
14.57
14.52
14.55
14.5
14.51
14.46
14.45
14.42
14.51
14.4
14.45
14.35
14.15
14.3
14.4
14.38
14.4
14.25
14.1
14.05
14.15
14
13.86
13.75
13.8
13.5
13.25
13.31
13.21
13.17
13.39
13.43
13.49
13.41
13.32
13.4
13.46
13.59
13.65
13.5
13.58
13.5
13.52
13.6
13.54
13.41
13.35
13.49
13.55
13.49
13.42
7/31/05 13.42
FUND SNAPSHOT
- ------------------------------------
Common Share Price $13.42
- ------------------------------------
Common Share
Net Asset Value $14.12
- ------------------------------------
Premium/(Discount) to NAV -4.96%
- ------------------------------------
Market Yield1 5.86%
- ------------------------------------
Net Assets Applicable to
Common Shares ($000) $195,645
- ------------------------------------
CUMULATIVE TOTAL RETURN
(Inception 3/28/05)
- ------------------------------------
ON SHARE PRICE ON NAV
- ------------------------------------
Since
Inception -9.24% -0.08%
- ------------------------------------
INDUSTRIES
(as a % of total investments)
- ------------------------------------
Commercial Banks 38.6%
- ------------------------------------
Insurance 16.1%
- ------------------------------------
Capital Markets 14.9%
- ------------------------------------
Diversified Financial
Services 14.3%
- ------------------------------------
U.S. Agency 8.2%
- ------------------------------------
Consumer Finance 2.9%
- ------------------------------------
Repurchase Agreements 5.0%
- ------------------------------------
1 Market yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income and
net realized short-term capital gains.
8
Special Shareholder
MEETING REPORT
The Special Shareholder Meeting was held at The Northern Trust Bank, 50 S.
LaSalle St., Chicago, IL on July 26, 2005.
JFP
- ------------------------------------------------------------------------------------------------------------------------------------
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT WITH NUVEEN ASSET MANAGEMENT
WAS REACHED AS FOLLOWS:
For 13,418,171
Against 64,417
Abstain 100,302
- ------------------------------------------------------------------------------------------------------------------------------------
Total 13,582,890
====================================================================================================================================
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET MANAGEMENT
AND SPECTRUM ASSET MANAGEMENT, INC. WAS REACHED AS FOLLOWS:
For 13,402,883
Against 67,200
Abstain 112,807
- ------------------------------------------------------------------------------------------------------------------------------------
Total 13,582,890
====================================================================================================================================
9
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARDS OF TRUSTEES AND SHAREHOLDERS
NUVEEN TAX-ADVANTAGED FLOATING RATE FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Tax-Advantaged Floating Rate Fund as of
July 31, 2005, and the related statement of operations, statement of changes in
net assets, and the financial highlights for the period from March 28, 2005
(commencement of operations) to July 31, 2005. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of July 31, 2005, by correspondence with the custodian and
brokers. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Tax-Advantaged Floating Rate Fund at July 31, 2005 and the results of its
operations, the changes in its net assets, and its financial highlights for the
period from March 28, 2005 (commencement of operations) to July 31, 2005, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
September 14, 2005
10
Nuveen Tax-Advantaged Floating Rate Fund (JFP)
Portfolio of
INVESTMENTS July 31, 2005
RATINGS*
---------------
MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
- -----------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) PREFERRED SECURITIES - 99.8%
(70.9% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 20.9%
407,300 Goldman Sachs Group Inc. (a) 3.911% A2 A- $ 10,141,770
339,000 Lehman Brothers Holdings Inc., Series G (a) 4.138% A3 BBB+ 8,441,100
288,300 Merrill Lynch & Company Inc. (a) 4.070% A2 A- 7,170,021
165,000 Merrill Lynch & Company Inc., Series H (a) 3.970% A2 A- 3,930,300
10,000 River Valley Bancorp, Series A 7.380% NR NR 10,371,875
35,600 UBS Preferred Funding Trust IV 3.920% A1 AA- 893,560
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 30.7%
120,000 Banco Santander 6.410% A2 BBB+ 3,150,000
10,000 FBOP Corporation, 144A 6.129% NR NR 10,005,625
443,900 HSBC USA Inc. (a) 4.254% A2 A- 11,106,378
10,000 Pedcor Bancorp, Series A 7.280% NR NR 10,268,125
10,000 Shorebank Corporation, 144A 7.329% NR NR 10,206,250
5,000 Sleepy Hollow Bank, Series A, 144A 7.328% NR NR 5,103,125
10,000 Vineyard National Bancorp, Series C, 144A 7.328% NR NR 10,206,250
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 4.1%
79,500 SLM Corporation (a) 4.070% Baa1 BBB+ 7,992,238
- -----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 11.7%
320,000 CIT Group Inc., Series A (a) 6.350% Baa1 BBB+ 8,065,600
7,000 First Tennessee Bank, 144A (a) 4.400% A3 BBB+ 6,898,938
7,400 SG Preferred Capital II LLC (a) 6.302% A1 A 7,875,913
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE - 20.9%
10,000 ABN AMRO North America Capital Funding, 144A (a) 6.968% A2 A- 10,815,625
386,500 Aegon NV 6.375% A3 A- 9,925,320
323,000 MetLife Inc., Series A (a) 4.390% Baa1 BBB 8,091,150
320,000 Prudential Public Limited Company 6.500% Baa1 A 8,030,016
4,000 Zurich RegCaPS Funding Trust VI, 144A (a) 3.978% Baa2 NR 3,937,500
- -----------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 11.5%
125,000 Fannie Mae (a) 5.396% Aa3 AA- 6,337,500
100,100 Fannie Mae (a) 4.716% Aa3 AA- 5,015,010
19,600 Federal Home Loan Mortgage Corporation (a) 6.140% Aa3 AA- 980,980
71,000 Federal Home Loan Mortgage Corporation (a) 5.100% Aa3 AA- 3,099,597
40,000 Federal Home Loan Mortgage Corporation (a) 5.100% Aa3 AA- 1,756,000
51,300 Federal Home Loan Mortgage Corporation (a) 5.000% Aa3 AA- 2,167,425
58,200 Federal Home Loan Mortgage Corporation (a) 3.930% Aa3 AA- 2,473,500
17,600 Federal Home Loan Mortgage Corporation (a) 3.850% Aa3 AA- 715,000
- -----------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Preferred
Securities (cost $195,111,871) 195,171,691
-------------------------------------------------------------------------------------------------------------
11
Nuveen Tax-Advantaged Floating Rate Fund (JFP) (continued)
Portfolio of INVESTMENTS July 31, 2005
RATINGS*
---------------
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 33.8% (24.1% OF TOTAL INVESTMENTS)
COMMERCIAL BANKS - 23.6%
$ 7,000 Abbey National Capital Trust I 8.963% 12/29/49 A2 A- $ 9,899,008
1,000 ANZ Capital Trust I, 144A 4.484% 12/31/49 A2 A- 981,920
7,750 Barclays Bank plc 6.278% 12/15/49 Aa3 A+ 7,877,875
2,000 Barclays Bank plc, 144A 8.550% 9/29/49 Aa3 A+ 2,369,560
3,985 Barnett Capital III 4.318% 2/01/27 Aa3 A 3,889,189
755 BCI U.S. Funding Trust 1, Intesabci SPA 144A 8.010% 12/29/49 A3 BBB+ 819,798
4,260 Corestates Capital Trust II, 144A 4.249% 1/15/27 A1 A 4,171,575
1,000 Den Norske Bank, 144A 7.729% 6/29/49 A2 A- 1,145,746
2,000 KBC Bank Fund Trust III, 144A 9.860% 11/29/49 A2 A- 2,371,798
1,950 St. George Funding Company LLC, 144A 8.485% 12/31/49 Baa1 NR 2,149,719
6,000 SunTrust Capital Trust I, Series A 3.938% 5/15/27 A1 A- 5,874,720
2,000 Swedbank ForeningsSparbanken AB, 144A 9.000% 12/29/49 A2 BBB+ 2,323,818
2,000 Unicredito Italiano Capital Trust, 144A 9.200% 10/05/49 A1 A 2,373,336
- ---------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 8.4%
1,000 Bank One Capital IV 4.830% 9/01/30 A1 NR 1,000,521
2,000 ING Capital Funding Trust III 8.439% 12/29/49 A2 A- 2,323,206
2,000 J.P. Morgan Chase Capital XIII, Floating Rate Capital 4.440% 9/30/34 A1 A- 1,983,536
Securities, Series M
11,000 RBS Capital Trust IV 4.290% 9/29/49 A1 A 11,190,212
- ---------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.8%
3,500 Twin Reefs Trust Pass Through to XL Financial Assurance 4.350% 12/10/49 Aa2 AA- 3,488,901
Ltd. Preferred Stock Series B
- ---------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $66,386,262) 66,234,438
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 7.0% (5.0% OF TOTAL INVESTMENTS)
$ 13,648 State Street Bank, 3.000%, dated 7/29/05, repurchase price
============= $13,651,712, collateralized by $9,810,000 U.S. Treasury
Bonds, 8.125%, due 8/15/19, value $13,926,492 13,648,300
-----------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $13,648,300) 13,648,300
-----------------------------------------------------------------------------------------------------------------
Total Investments (cost $275,146,433) - 140.6% 275,054,429
-----------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.7)% (1,409,376)
-----------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (39.9)% (78,000,000)
-----------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $195,645,053
=================================================================================================================
12
INTEREST RATE SWAP CONTRACTS OUTSTANDING AT JULY 31, 2005:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT DATE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------------------------
Agreement with Morgan Stanley dated July 12, 2005, to pay semi-annually the
notional amount multiplied by 4.850% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). $9,000,000 7/14/35 $148,723
Agreement with Morgan Stanley dated July 13, 2005, to pay semi-annually
the notional amount multiplied by 4.880% (annualized) and receive quarterly
the notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 5,600,000 7/15/35 66,444
Agreement with Morgan Stanley dated July 13, 2005, to pay semi-annually the
notional amount multiplied by 4.590% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 3,000,000 7/15/15 30,352
Agreement with Morgan Stanley dated July 14, 2005, to pay semi-annually the
notional amount multiplied by 4.900% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 1,750,000 7/18/35 15,421
Agreement with Morgan Stanley dated July 18, 2005, to pay semi-annually the
notional amount multiplied by 4.890% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 8,000,000 7/20/35 83,676
Agreement with Morgan Stanley dated July 19, 2005, to pay semi-annually the
notional amount multiplied by 4.930% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 1,700,000 7/21/35 7,244
Agreement with Program dated July 25, 2005, to pay semi-annually the
notional amount multiplied by 4.962% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 1,300,000 7/27/35 (683)
Agreement with JPMorgan dated July 26, 2005, to pay semi-annually the
notional amount multiplied by 4.955% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar-London Inter-Bank Offered Rates). 4,000,000 7/28/35 2,433
- -----------------------------------------------------------------------------------------------------------------------------------
$353,610
===================================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on
net assets applicable to Common shares unless otherwise noted.
(2) Effective date represents the date on which both the Fund and
counterparty commence interest payment accruals on each interest rate
swap contract.
* Ratings not covered by the report of independent registered public
accounting firm.
(a) Security is eligible for the Dividends Received Deduction.
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.
NR Security is not rated.
See accompanying notes to financial statements.
13
Statement of
ASSETS AND LIABILITIES July 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $275,146,433) $275,054,429
Interest rate swaps, at value 353,610
Receivables:
Dividends 148,316
Interest 536,394
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 276,092,749
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,040,265
Accrued expenses:
Management fees 136,748
Organization and offering costs 186,942
Other 65,796
FundPreferred share dividends payable 17,945
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,447,696
- ---------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 78,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $195,645,053
=================================================================================================================================
Common shares outstanding 13,851,500
=================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 14.12
=================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ---------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,515
Paid-in surplus 196,267,421
Undistributed (Over-distribution of) net investment income (1,047,053)
Accumulated net realized gain from investments and interest rate swaps 24,564
Net unrealized appreciation of investments and interest rate swaps 261,606
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $195,645,053
=================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred Unlimited
=================================================================================================================================
See accompanying notes to financial statements.
14
Statement of
OPERATIONS For the Period March 28, 2005
(commencement of operations) through July 31, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $1,114,981
Interest 1,566,913
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 2,681,894
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 701,397
FundPreferred shares - auction fees 35,261
FundPreferred shares - dividend disbursing agent fees 1,221
Shareholders' servicing agent fees and expenses 798
Custodian's fees and expenses 18,980
Trustees' fees and expenses 2,784
Professional fees 31,621
Shareholders' reports - printing and mailing expenses 13,083
Investor relations expense 8,617
Other expenses 4,357
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 818,119
Expense reimbursement (236,241)
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 581,878
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,100,016
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from investments 16,702
Net realized gain from interest rate swaps 8,000
Change in net unrealized appreciation (depreciation) of investments (92,004)
Change in net unrealized appreciation of interest rate swaps 353,610
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 286,308
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (426,009)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $1,960,315
==================================================================================================================================
See accompanying notes to financial statements.
15
Statement of
CHANGES IN NET ASSETS For the Period
March 28, 2005 (commencement of operations) through
July 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 2,100,016
Net realized gain from investments 16,702
Net realized gain from interest rate swaps 8,000
Change in net unrealized appreciation (depreciation) of investments (92,004)
Change in net unrealized appreciation (depreciation) of interest rate swaps 353,610
Distributions to FundPreferred shareholders from net investment income (426,009)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations 1,960,315
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (2,721,198)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to Common shareholders (2,721,198)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares 197,181,325
Net proceeds from shares issued to shareholders due to reinvestment of distributions 134,336
FundPreferred shares offering costs (1,010,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from capital share transactions 196,305,661
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 195,544,778
Net assets applicable to Common shares at the beginning of period 100,275
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $195,645,053
===================================================================================================================================
Undistributed (Over=distribution of) net investment income at the end of period $ (1,047,053)
===================================================================================================================================
See accompanying notes to financial statements.
16
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Floating Rate 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 "JFP". The Fund was organized
as a Massachusetts business trust on December 29, 2004.
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 Asset Management (the "Adviser"), a wholly owned subsidiary
of Nuveen Investments, Inc. ("Nuveen"), the recording of the organization
expenses ($13,500) and their reimbursement by Nuveen Investments, LLC, also a
wholly owned subsidiary of Nuveen.
The Fund's primary investment objective is to provide an attractive level of
after-tax current income. The Fund's secondary investment objective is capital
preservation. The Fund intends to pursue its investment objectives by investing
primarily in adjustable rate securities that are eligible to pay dividends
consisting primarily of tax-advantaged dividend income.
The Fund expects that substantially all of its portfolio of investments will be
comprised of securities issued by banking companies and other financial
institutions which may make the Fund more susceptible to adverse economic or
regulatory occurrences affecting these institutions. The Fund's concentration of
investments in these institutions includes the risk that banking companies and
other financial institutions may themselves have concentrated portfolios,
changes in interest rates or competition could affect their profitability, and
there could be increased costs or setbacks due to changes in the regulatory and
financial reporting requirements under which they operate.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of preferred stocks issued by middle market and major banking
companies and other securities in the Fund's investment portfolio are generally
provided by one or more independent pricing services approved by the Fund's
Board of Trustees. The pricing services typically value exchange-listed
securities at the last sales price on that day; and value securities traded in
the over-the-counter market at the mean of the last bona fide bid and bona fide
ask prices when current quotations are readily available. The pricing services
may value preferred stocks issued by middle market and major banking companies
and other securities for which current quotations are not readily available at
fair value using a wide range of market data and other information and analysis,
including the obligor's credit characteristics considered relevant by such
pricing service to determine valuations. The Board of Trustees of the Fund has
approved procedures which permit the Adviser to determine the fair value of
investments for which the applicable pricing service or services is not
providing a price, using market data and other factors such as the obligor's
credit characteristics. The Fund may engage an independent appraiser to
periodically provide an independent determination of fair value of the preferred
stocks issued by middle market banks. Short-term investments which mature within
60 days are valued at amortized cost, which approximates market value.
The preferred stocks issued by middle market and major banking companies in
which the Fund invests are generally not listed on an organized exchange and the
secondary market for such investments may be less liquid relative to markets for
other securities. Consequently, the value of preferred stocks issued by middle
market and major banking companies, determined as described above, may differ
significantly from the value that would have been determined had there been an
active market for that preferred stock.
17
Notes to
FINANCIAL STATEMENTS (continued)
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and
losses from investment transactions are determined on the specific
identification method. Investments purchased on a when-issued or delayed
delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At July 31, 2005, the
Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income, which
includes the amortization of premiums and accretion of discounts for financial
reporting purposes, is recorded on an accrual basis.
Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
Dividends and Distributions to Common Shareholders
The Fund intends to declare monthly distributions to Common shareholders from
its net investment income and net short-term capital gains. Net realized
long-term capital gains from investment transactions, if any, are distributed to
shareholders not less frequently than annually. Furthermore, long-term capital
gains are distributed only to the extent they exceed available capital loss
carryforwards.
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
FundPreferred Shares
Effective May 27, 2005, the Fund issued 3,120 Series Th FundPreferred shares,
$25,000 stated value per share, as a means of effecting financial leverage. The
dividend rate is determined every seven days, pursuant to a dutch auction
process overseen by the auction agent, and is payable weekly at the end of each
rate period.
Interest Rate Swap Transactions
The Fund may invest in certain derivative financial instruments. The Fund's use
of interest rate swap transactions is intended to synthetically convert certain
Fund positions in fixed-rate securities effectively into adjustable rate
instruments and thereby shorten the average interest rate reset time and
duration of the Fund's portfolio of investments. Interest rate swap transactions
involve the Fund's agreement with the counterparty to pay a semiannual fixed
rate payment in exchange for the counterparty paying the Fund a quarterly
variable rate payment. The payment obligations are based on the notional amount
of the interest rate swap contract. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to the swap counterparty on such transactions is
limited to the net amount of interest payments that the Fund is to receive.
Interest rate swap positions are valued daily. The Fund accrues for the interim
incoming and outgoing payments on interest rate swap contracts on a daily basis,
and for the interim changes in the market value of the Fund's contractual rights
and obligations under the contracts, with the net amount recorded within net
unrealized appreciation (depreciation) of investments of interest rate swaps on
the Statement of Assets and Liabilities. Once the interim payments are settled
in cash, the net amount is recorded as net realized gain (loss) from interest
rate swaps, in addition to net realized gain (loss) recorded upon the
termination of interest rate swap contracts on the Statement of Operations.
Although there are economic advantages of entering into interest rate swap
transactions, there are also additional risks. The Fund helps manage the credit
risks associated with interest rate swap transactions by entering into
agreements only with counterparties the Adviser believes have the financial
resources to honor their obligations. In addition, all counterparties are
required to pledge collateral daily (based on the daily valuation of each swap)
on behalf of the Fund with a value approximately equal to the amount of any
unrealized gain above a pre-determined threshold. Reciprocally, when the Fund
has an unrealized loss on a swap contract, the Fund has instructed the custodian
to pledge assets of the Fund as collateral with a value approximately equal to
the amount of the unrealized loss above a pre-determined threshold. Collateral
pledges are monitored and subsequently adjusted if and when the interest rate
swap valuations fluctuate, either up or down, by at least the pre-determined
threshold amount.
18
Organization, Offering Costs and Fund Structuring Fee
Nuveen Investments, LLC has agreed to reimburse all organization expenses
(approximately $13,500) and pay all Common share offering costs (other than the
sales load and fund structuring fee) that exceed $.03 per Common share. The
Fund's share of Common share offering costs ($415,050) and fund structuring fee
($590,000) were recorded as reductions of the proceeds from the sale of Common
shares.
Costs incurred by the Fund in connection with its offering of FundPreferred
shares ($1,010,000) were recorded as a reduction to paid-in surplus.
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.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common and FundPreferred shares during the period March 28, 2005
(commencement of operations) though July 31, 2005, were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Common shares
Shares sold 13,835,000
Shares issued to shareholders due to reinvestment of distributions 9,500
- ----------------------------------------------------------------------------------------------------------------------------------
13,844,500
==================================================================================================================================
FundPreferred shares sold 3,120
==================================================================================================================================
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
period March 28, 2005 (commencement of operations) through July 31, 2005,
aggregated $290,924,522 and $29,441,643, respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to recognition of premium amortization on debt securities, and
timing differences in recognizing certain gains and losses on investment
transactions.
At July 31, 2005, the cost of investments was as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of investments $275,150,259
==================================================================================================================================
19
Notes to
FINANCIAL STATEMENTS (continued)
Gross unrealized appreciation and gross unrealized depreciation of investments
at July 31, 2005, were as follows:
- ---------------------------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 1,024,937
Depreciation (1,120,767)
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments $ (95,830)
=================================================================================================================================
The tax components of undistributed net ordinary income and net realized gains
at June 30, 2005, the Fund's last fiscal year end, were as follows:
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net ordinary income * $228,414
Undistributed net long-term capital gains --
=================================================================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended June 30,
2005, the Fund's last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions from net ordinary income * $1,078,688
Distributions from net long-term capital gains --
=================================================================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
Calculation of certain of the amounts presented above (namely, undistributed net
ordinary income for tax purposes) involves the application of complex aspects of
the Internal Revenue Code to certain securities held by the Fund. In calculating
the amount of taxable income derived from these securities, management made
assumptions as to the correct tax treatment of certain of those securities and
made estimates about the tax characteristics of income received from those
securities, based on information currently available to the Fund. The use of
these assumptions and estimates will not affect the qualification of the Fund as
a regulated investment company under Subchapter M of the Internal Revenue Code,
nor is it expected that these assumptions and estimates will be used in
computing taxable income for purposes of preparing the federal and state income
and excise tax returns.
20
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser. As of August
31, 2005, the complex-level fee rate was .1896%
The annual fund-level fee, payable monthly, is based upon the average daily
Managed Assets of the Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL FEE RATE
- ----------------------------------------------------------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
==================================================================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
- ----------------------------------------------------------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
==================================================================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in
the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level fee
rate for such complex-wide Managed Assets shall be .1400% until such time as
a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Spectrum Asset Management, Inc. ("Spectrum"),
under which Spectrum manages the investment portfolio of the Fund. Spectrum is
compensated for its services to the Fund from the management fee paid to the
Adviser. Spectrum also receives compensation on certain portfolio transactions
for providing brokerage services to the Fund.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
- -----------------------------------------------------------------------------------------------------------------------------------
2005* .30% 2010 .30%
2006 .30 2011 .22
2007 .30 2012 .14
2008 .30 2013 .07
2009 .30
===================================================================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond March 31, 2013.
21
Notes to
FINANCIAL STATEMENTS (continued)
6. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreement between the Fund and the Adviser, which resulted in the
automatic termination of the agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved a new ongoing
investment management agreement for the Fund and the submission of the agreement
for approval by the Fund's shareholders, which shareholder approval was received
prior to the settlement of transactions (C) and (D). The new ongoing management
agreement took effect upon such settlement.
7. SUBSEQUENT EVENT - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a $.0655 Common share dividend distribution from its net
investment income and net short-term capital gains which was paid on September
1, 2005, to shareholders of record on August 15, 2005.
22
Financial
HIGHLIGHTS
23
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout the period:
Investment Operations Less Distributions
---------------------------------------------------------------- -------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ FundPreferred FundPreferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain holders+ holders+ Total holders holders Total
============================================================================================================================
Year Ended 7/31:
2005(a) $14.33 $.15 $.02 $(.03) $ -- $.14 $(.20) $ -- $(.20)
============================================================================================================================
Total Returns
---------------------
Offering
Costs, Fund Based
Structuring on
Fee and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
==================================================================================
Year Ended 7/31:
2005(a) $(.15) $14.12 $13.42 (9.24)% (.08)%
==================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------
Before Reimbursement After Reimbursement***
-------------------------------- ---------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
===========================================================================================================================
Year Ended 7/31:
2005(a) $195,645 1.26%* 2.88%* .90%* 3.25%* 19%
===========================================================================================================================
FundPreferred Shares at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
=============================================================
Year Ended 7/31:
2005(a) $78,000 $25,000 $87,707
=============================================================
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Common Share Net
Asset Value is the combination of changes in Common share net asset value,
reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After 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) For the period March 28, 2005 (commencement of operations) through July 31,
2005.
See accompanying notes to financial statements.
24-25 SPREAD
Board Members
AND OFFICERS
The management of the Fund, including general supervision of the duties
performed for the Fund by the Adviser, is the responsibility of the Board
Members of the Fund. The number of board members of the Fund is currently set at
nine. None of the board members who are not "interested" persons of the Fund has
ever been a director or employee of, or consultant to, Nuveen or its affiliates.
The names and business addresses of the board members and officers of the 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) PRINCIPAL OCCUPATION(S) IN FUND COMPLEX
NAME, BIRTHDATE HELD WITH YEAR FIRST ELECTED INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUND OR APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
- -----------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUND:
- -----------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger(1) Chairman of 1994 Chairman and Director (since 1996) of 155
3/28/49 the Board Nuveen Investments,Inc. and Nuveen
333 W. Wacker Drive and Trustee Investments, LLC; Director (since 1992) and
Chicago, IL 60606 Chairman (since 1996) of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.(3);
Chairman and Director (since 1997) of Nuveen
Asset Management; Director (since 1996) of
Institutional Capital Corporation; Chairman and
Director (since 1999) of Rittenhouse Asset
Management, Inc.; Chairman of Nuveen
Investments Advisers Inc. (since 2002).
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUND:
- -----------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board member 1997 Private Investor and Management Consultant. 155
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Board member 1993 Retired (1989) as Senior Vice President of The 155
7/29/34 Northern Trust Company; Director, Community
333 W. Wacker Drive Advisory Board for Highland Park and Highwood,
Chicago, IL 60606 United Way of the North Shore (since 2002).
- -----------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, a 155
10/22/48 private philanthropic corporation (since 1996);
333 W. Wacker Drive Director and Vice Chairman, United Fire Group,
Chicago, IL 60606 a publicly held company; Adjunct Faculty Member,
University of Iowa; Director, Gazette Companies;
Life Trustee of Coe College; Director, Iowa
College Foundation; formerly, Director, Alliant
Energy; formerly, Director, Federal Reserve
Bank of Chicago; formerly, President and Chief
Operating Officer, SCI Financial Group, Inc., a
regional financial services firm.
- -----------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Board member 2004 Dean and Distinguished Professor of Finance, 155
3/6/48 School of Business at the University
333 W. Wacker Drive of Connecticut (since 2003); previously, Senior
Chicago, IL 60606 Vice President and Director of Research at the
Federal Reserve Bank of Chicago (1995-2003);
Director (since 1997), Credit Research Center at
Georgetown University; Director of
Xerox Corporation (since 2004).
- -----------------------------------------------------------------------------------------------------------------------------------
David J. Kundert Board member 2005 Retired (2004) as Chairman, JPMorgan Asset 153
10/28/42 Management, President and CEO, Banc One
333 W. Wacker Drive Investment Advisors Corporation, and President,
Chicago, IL 60606 One Group Mutual Funds; prior thereto,
Executive Vice President, Banc One Corporation
and Chairman and CEO, Bank One Investment
Management Group; Board of Regents, Luther
College; currently a member of the American and
Wisconsin Bar Associations.
26
NUMBER OF
PORTFOLIOS
IN FUND
POSITION(S) PRINCIPAL OCCUPATION(S) COMPLEX
NAME, BIRTHDATE HELD WITH YEAR FIRST ELECTED INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUND OR APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
- -----------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUND (CONTINUED):
- -----------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Board member 1997 Chairman, formerly, Senior Partner and Chief 155
9/24/44 Operating Officer, Miller-Valentine Partners
333 W. Wacker Drive Ltd., a real estate investment company;
Chicago, IL 60606 formerly, Vice President, Miller-Valentine
Realty, a construction company; Board Member
and Chair of the Finance Committee, member of
the Audit Committee of Premier Health Partners,
the not-for-profit company of Miami Valley
Hospital; Board Member, formerly Chair, Dayton
Development Coalition; President, Dayton
Philharmonic Orchestra Association; formerly,
Member, Community Advisory Board, National City
Bank, Dayton, Ohio and Business Advisory
Council, Cleveland Federal Reserve Bank.
- -----------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy Donnelley 155
12/29/47 Foundation (since 1994); prior thereto, Executive
333 W. Wacker Drive Director, Great Lakes Protection Fund (from 1990
Chicago, IL 60606 to 1994).
- -----------------------------------------------------------------------------------------------------------------------------------
Eugene S. Sunshine Board member 2005 Senior Vice President for Business and Finance 155
1/22/50 (since 1997), Northwestern University; Director
333 W. Wacker Drive (since 2003), Chicago Board of Options Exchange;
Chicago, IL 60606 Director (since 2003), National Mentor Holdings,
a privately-held, national provider of home and
community-based services; Chairman (since 1997),
Board of Directors, Rubicon, an insurance
company owned by Northwestern University;
Director (since 1997), Evanston of Commerce
and Evanston Inventure, a business
development organization.
NUMBER OF
PORTFOLIOS IN
POSITION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUND OR APPOINTED(4) DURING PAST 5 YEARS OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND:
- -----------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant 155
9/9/56 Administrative Secretary and Associate General Counsel,
333 W. Wacker Drive Officer formerly, Vice President and Assistant General
Chicago, IL 60606 Counsel of Nuveen Investments, LLC; Managing
Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President
of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.(3); Managing
Director (since 2002), Assistant Secretary
and Associate General Counsel, formerly, Vice
President (since 2000), of Nuveen Asset
Management; Managing Director (since 2004) and
Assistant Secretary (since 1994) of Nuveen
Investments, Inc.; Assistant Secretary of NWQ
Investment Management Company, LLC (since 2002);
Vice President and Assistant Secretary of Nuveen
Investments Advisers Inc. (since 2002); Managing
Director, Associate General Counsel and
Assistant Secretary of Rittenhouse Asset
Management, Inc. (since 2003);
Chartered Financial Analyst.
27
Board Members
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS IN
POSITION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUND OR APPOINTED(4) DURING PAST 5 YEARS OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND (CONTINUED):
- -----------------------------------------------------------------------------------------------------------------------------------
Julia L. Antonatos Vice President 2004 Managing Director (since 2005), previously, Vice 155
9/22/63 President (since 2002), formerly, Assistant Vice
333 W. Wacker Drive President (since 1999) of Nuveen Investments,
Chicago, IL 60606 LLC; Chartered Financial Analyst.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant 155
2/3/66 and Assistant Vice President (since 2000) of Nuveen
333 W. Wacker Drive Secretary Investments, LLC.
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 155
11/28/67 and Treasurer 1999); Vice President and Treasurer of Nuveen
333 W. Wacker Drive Investments, Inc. (since 1999); Vice President
Chicago, IL 60606 and Treasurer of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp (since
1999)(3); Vice President and Treasurer of
Nuveen Asset Management (since 2002) and of
Nuveen Investments Advisers Inc.; Assistant
Treasurer of NWQ Investment Management Company,
LLC (since 2002); Vice President and Treasurer
of Nuveen Rittenhouse Asset Management, Inc.
(since 2003); Chartered Financial Analyst.
- -----------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 1998 Vice President (since 2002) and Assistant 155
9/24/64 and Secretary General Counsel (since 1998), formerly,
333 W. Wacker Drive Assistant Vice President (since 1998) of
Chicago, IL 60606 Nuveen Investments, LLC; Vice President (since
2002) and Assistant Secretary (since 1998),
formerly Assistant Vice President of Nuveen
Advisory Corp. and Nuveen Institutional
Advisory Corp.(3); and (since 2005) Nuveen
Asset Management.
- -----------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004) formerly, Vice 155
10/24/45 President of Nuveen Investments, LLC; Managing
333 W. Wacker Drive Director (since 2004) formerly, Vice President
Chicago, IL 60606 (since 1998) of Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.(3);
Managing Director (since 2005) of Nuveen Asset
Management.
- -----------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen 155
3/2/64 Investments, LLC; Managing Director (since
333 W. Wacker Drive 2001), formerly, Vice President (since 1995)
Chicago, IL 60606 of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.(3); Managing
Director (since 2001) of Nuveen Asset
Management; Vice President (since 2002) of
Nuveen Investment Advisers Inc.; Chartered
Financial Analyst.
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds 155
5/31/54 and Controller Controller (since 1998) of Nuveen Investments,
333 W. Wacker Drive LLC; formerly, Vice President and Funds
Chicago, IL 60606 Controller (1998-2004) of Nuveen Investments,
Inc.; Certified Public Accountant.
- -----------------------------------------------------------------------------------------------------------------------------------
James D. Grassi Vice President 2004 Vice President and Deputy Director of 155
4/13/56 and Chief Compliance (since 2004) of Nuveen Investments,
333 W. Wacker Drive Compliance LLC, Nuveen Investments Advisers Inc., Nuveen
Chicago, IL 60606 Officer Asset Management and Rittenhouse Asset
Management, Inc.; previously, Vice President
and Deputy Director of Compliance (2004) of
Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.(3); formerly, Senior Attorney
(1994 to 2004), The Northern Trust Company.
28
Board Members
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS IN
POSITION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH YEAR FIRST ELECTED PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUND OR APPOINTED(4) DURING PAST 5 YEARS OFFICER
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND (CONTINUED):
- -----------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen 155
3/22/63 Investments, LLC; Certified Public
333 W. Wacker Drive Accountant.
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999) of Nuveen 155
8/27/61 Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
- -----------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and 155
7/27/51 and Assistant Assistant General Counsel of Nuveen
333 W. Wacker Drive Secretary Investments, LLC; Vice President and
Chicago, IL 60606 Assistant Secretary of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.(3);
Vice President (since 2005) and Assistant
Secretary of Nuveen Investments, Inc. and
of Nuveen Asset Management; Vice President
(since 2000), Assistant Secretary and
Assistant General Counsel (since 1998) of
Rittenhouse Asset Management; Vice President
and Assistant Secretary of Nuveen Investments
Advisers Inc. (since 2002); Assistant
Secretary of NWQ Investment Management
Company, LLC (since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Fund, as defined in the
Investment Company Act of 1940, because he is an officer and board member of
the Adviser.
(2) Board members serve an indefinite term until his/her successor is elected.
The year first elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
29
Reinvest Automatically
EASILY AND CONVENIENTLY
SIDE BAR TEXT:
NUVEEN MAKES
REINVESTING EASY.
A PHONE CALL IS
ALL IT TAKES TO
SET UP YOUR
REINVESTMENT
ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time. .
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
30
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between
each Fund and NAM and, if applicable, of the sub-advisory agreement between NAM
and the Fund's sub-adviser. As required by law, the shareholders of each Fund
were asked to approve a new investment management agreement and, if applicable,
a new subadvisory agreement that reflected this change in ownership. The
shareholders of each Fund voted this approval at a Shareholders' Meeting on July
26, 2005. There were no changes to the investment objectives or management of
any Fund as a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
12-month period ended June 30, 2005, and (iii) a description of the policies and
procedures that the Funds used to determine how to vote proxies relating to
portfolio securities are available without charge, upon request, by calling
Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
References Section at 450 Fifth Street NW, Washington, D.C. 20549.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
GLOSSARY OF TERMS USED IN THIS REPORT
MARKET YIELD: Market yield is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Funds'
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
31
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS'
DIFFERENT NEEDS.
Managing more than $120 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
Learn more
about Nuveen Funds at
WWW.NUVEEN.COM/ETF
o Share prices
o Fund details
o Daily financial news
o Investor education
o Interactive planning tools
Logo: NUVEEN Investments
EAN-D-0705D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Tax-Advantaged Floating Rate Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that Ernst & Young LLP provided to the Fund, except for those non-audit services
that were subject to the pre-approval exception under Rule 2-01 of Regulation
S-X (the "pre-approval exception"). The pre-approval exception for services
provided directly to the Fund waives the pre-approval requirement for services
other than audit, review or attest services if: (A) the aggregate amount of all
such services provided constitutes no more than 5% of the total amount of
revenues paid by the Fund to its accountant during the fiscal year in which the
services are provided; (B) the Fund did not recognize the services as non-audit
services at the time of the engagement; and (C) the services are promptly
brought to the Audit Committee's attention, and the Committee (or its delegate)
approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
Audit Fees Billed Audit-Related Fees Tax Fees All Other Fees
Fiscal Year Ended to Fund Billed to Fund Billed to Fund Billed to Fund
- ------------------------------------------------------------------------------------------------------------------------------------
July 31, 2005 $ 37,000 $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
- ------------------------------------------------------------------------------------------------------------------------------------
July 31, 2004 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage approved N/A N/A N/A N/A
pursuant to
pre-approval
exception
- ------------------------------------------------------------------------------------------------------------------------------------
The above "All Other Fees" are fees paid to audit firms to perform agreed upon
procedures required by the rating agencies to rate fund preferred shares. The
above "Tax Fees" were billed for professional services for tax advice, tax
compliance, and tax planning.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
Fiscal Year Ended Audit-Related Fees Tax Fees Billed to All Other Fees
Billed to Adviser and Adviser and Billed to Adviser
Affiliated Fund Affiliated Fund and Affiliated Fund
Service Providers Service Providers Service Providers
- ---------------------------------------------------------------------------------------------------------------------
July 31, 2005 $ 0 $ 282,575 $ 0
- ---------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
- ---------------------------------------------------------------------------------------------------------------------
July 31, 2004 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Percentage approved N/A N/A N/A
pursuant to
pre-approval
exception
- ---------------------------------------------------------------------------------------------------------------------
The above "Tax Fees" are primarily fees billed to the Adviser for Fund tax
return preparation.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
Fiscal Year Ended Total Non-Audit Fees
billed to Adviser and
Affiliated Fund Service Total Non-Audit Fees
Providers (engagements billed to Adviser and
related directly to the Affiliated Fund Service
Total Non-Audit Fees operations and financial Providers (all other
Billed to Fund reporting of the Fund) engagements) Total
- ------------------------------------------------------------------------------------------------------------------------------------
July 31, 2005 $ 0 $ 282,575 $ 0 $ 282,575
July 31, 2004 N/A N/A N/A N/A
The above "Non-Audit Fees billed to Adviser" for 2005 include "Tax-Fees" billed
to Adviser in the amount of $282,575 from previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the audit
committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the audit committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the audit committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the audit committee at
the next audit committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
audit committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The
members of the audit committee are Robert P. Bremner, Lawrence H. Brown, Jack B.
Evans, William J. Schneider and Eugene S. Sunshine.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
In the rare event that a municipal issuer held by the Fund were to issue a proxy
or that the Fund were to receive a proxy issued by a cash management security,
the Adviser would either engage an independent third party to determine how the
proxy should be voted or vote the proxy with the consent, or based on the
instructions, of the Fund's Board of Directors or Trustees or its
representative. In the case of a conflict of interest, the proxy would be
submitted to the applicable Fund's Board to determine how the proxy should be
voted. A member of the Adviser's legal department would oversee the
administration of the voting, and ensure that records were maintained in
accordance with Rule 204-2(c)(2) under the Investment Advisers Act of 1940 (17
CFR 275.204-2(c)(2)), reports were filed with the SEC on Form N-PX, and the
results were provided to the Board of Directors or Trustees and made available
to shareholders as required by applicable rules.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Floating Rate Fund
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By (Signature and Title)* /s/ Jessica R. Droeger
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Jessica R. Droeger
Vice President and Secretary
Date: October 7, 2005
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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
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Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: October 7, 2005
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By (Signature and Title)* /s/ Stephen D. Foy
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Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: October 7, 2005
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* Print the name and title of each signing officer under his or her signature.