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 --------------------- 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 ------------------- Date of fiscal year end: July 31 ------------------ Date of reporting period: July 31, 2005 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. ANNUAL REPORT July 31, 2005 Nuveen Investments Closed-End Exchange-Traded Funds NUVEEN TAX-ADVANTAGED FLOATING RATE FUND JFP Photo of: Man, woman and child at the beach. Photo of: A child. OPPORTUNITIES FOR TAX-ADVANTAGED MONTHLY INCOME FROM A PORTFOLIO CONSISTING PREDOMINANTLY OF ADJUSTABLE RATE PREFERRED SECURITIES Logo: NUVEEN Investments Photo of: Woman Photo of: Man and child Photo of: Woman NOW YOU CAN RECEIVE YOUR NUVEEN FUND REPORTS FASTER. NO MORE WAITING. SIGN UP TODAY TO RECEIVE NUVEEN FUND INFORMATION BY E-MAIL. It only takes a minute to sign up for E-Reports. Once enrolled, you'll receive an e-mail as soon as your Nuveen Investments Fund information is ready -- no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report, and save it on your computer if you wish. ------------------ DELIVERY DIRECT TO YOUR E-MAIL INBOX ------------------ IT'S FAST, EASY & FREE: WWW.INVESTORDELIVERY.COM if you get your Nuveen Fund dividends and statements from your financial advisor or brokerage account. OR WWW.NUVEEN.COM/ACCOUNTACCESS if you get your Nuveen Fund dividends and statements directly from Nuveen. (Be sure to have the address sheet that accompanied this report handy. You'll need it to complete the enrollment process.) Logo: NUVEEN Investments Photo of: Timothy R. Schwertfeger 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 ----------------------------------------------------------- By (Signature and Title)* /s/ Jessica R. Droeger ---------------------------------------------- Jessica R. Droeger Vice President and Secretary Date: October 7, 2005 ------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Gifford R. Zimmerman ---------------------------------------------- Gifford R. Zimmerman Chief Administrative Officer (principal executive officer) Date: October 7, 2005 ------------------------------------------------------------------- By (Signature and Title)* /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) Date: October 7, 2005 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.