UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21407
---------------------
Nuveen Diversified Dividend and Income Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2005
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT December 31, 2005
Nuveen Investments
Exchange-Traded
Closed-End
Funds
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
JDD
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HIGH CURRENT INCOME AND TOTAL RETURN FROM A PORTFOLIO OF DIVIDEND-PAYING COMMON
STOCKS, REIT STOCKS, EMERGING MARKETS SOVEREIGN DEBT, AND SENIOR LOANS
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Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am very pleased to report that for the year ended December 31, 2005, your Fund
continued to provide you with attractive monthly distributions and diversified
exposure to a variety of important market sectors and asset classes. For more
information on your Fund's performance, please read the Portfolio Managers'
Comments, the Distribution and Share Price Information, and the Performance
Overview sections of this report.
Portfolio diversification is a recognized way to try to reduce some of the risk
that comes with investing. Since one part of your portfolio may be going up when
another is going down, portfolio diversification may help smooth your investment
returns over time. In addition to providing regular monthly cash flow, an
investment like your Fund that combines several asset classes may help you
achieve and benefit from greater portfolio diversification. Your financial
advisor can explain these potential advantages
"IN ADDITION TO PROVIDING REGULAR MONTHLY CASH FLOW, AN INVESTMENT LIKE YOUR
FUND THAT COMBINES SEVERAL ASSET CLASSES MAY HELP YOU ACHIEVE AND BENEFIT FROM
GREATER PORTFOLIO DIVERSIFICATION."
in more detail. I urge you to contact him or her soon for more information on
this important investment strategy.
As you look through this report, be sure to review the inside front cover. This
contains information on how you can receive future Fund reports and other Fund
information faster by using e-mails and the Internet. Sign up is quick and easy
- - just follow the step-by-step instructions.
As we noted in our last shareholder report, The St. Paul Travelers Companies,
Inc., which had owned 79% of Nuveen Investments, Inc. (the parent of your Fund's
investment adviser), had sold a substantial portion of its stake in Nuveen.
Since then, St. Paul has sold the balance of its shares to Nuveen Investments or
to others. Please be assured that these transactions only affected Nuveen's
corporate structure, and they do not have any impact on the investment
objectives or management of your Fund.
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can help you
to secure your financial objectives. We are grateful that you have chosen us as
a partner as you pursue your financial goals, and we look forward to continuing
to earn your trust in the months and years ahead. Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2006
Nuveen Diversified Dividend and Income Fund
(JDD)
Portfolio Managers'
COMMENTS
The Nuveen Diversified Dividend and Income Fund features portfolio management by
teams at four subadvisers:
NWQ Investment Management Company, LLC, an affiliate of Nuveen Investments,
invests its portion of the Fund's assets in dividend-paying common stocks. Jon
Bosse, Chief Investment Officer of NWQ, leads the Fund's management team at that
firm. He has more than 22 years of corporate finance and investment management
experience.
The real estate portion of the Fund is managed by a team at Security Capital
Research & Management Incorporated, a wholly-owned subsidiary of J. P. Morgan
Chase & Co. Anthony R. Manno Jr. and Kenneth D. Statz, who each have more than
22 years experience in managing real estate investments, lead the team.
Wellington Management Company, LLP invests its portion of the Fund's assets in
emerging markets sovereign debt. James W. Valone, who has more than 18 years of
investment management experience, heads the team.
Symphony Asset Management, LLC, an affiliate of Nuveen Investments, invests its
portion of the Fund's assets in senior loans. The Symphony team is led by
Gunther Stein and Lenny Mason, who have more than 25 years of combined
investment management experience.
Here representatives from NWQ, Security Capital, Wellington Management and
Symphony talk about the markets, their management strategies and the performance
of the Fund for the 12-month period ended December 31, 2005.
WHAT WERE THE GENERAL ECONOMIC CONDITIONS AND MARKET TRENDS OVER THE COURSE OF
2005?
Looking back on 2005, performance for the major U.S. equity indices would make
one believe that it was a relatively quiet year. Returns for the various U.S.
indices generally ranged between 1% and 7% despite a year end rally that took
the Standard & Poor's 500 Index to levels last seen in 2001. Under the surface,
the performance was much more varied than was obvious. For instance, energy and
many resource stocks soared along with the prices of the commodities they
produce. A number of other industries, including electric utilities and real
estate investment trusts, also produced double-digit returns. In contrast,
performance for the very largest stocks was barely positive as measured by the
Standard & Poor's 100 Index at just 1.2%. Bond returns were also disappointing,
as the headwind of eight fed funds rate increases by the Federal Reserve
negatively impacted bond prices, particularly for intermediate maturities.
4
Real estate stocks in 2005 generated attractive returns driven by healthy job
growth, moderate levels of new construction, and broadly based investment demand
for real estate assets. Unlike the uneven operating environment in 2004, most
property markets experienced solid increases in occupancy and improved rental
rates in 2005.
There was a wave of privatization in 2005, with announced or completed merger
and acquisition activity involving public real estate companies totaling $35.0
billion. While elevated from historical levels, 2005 transaction totals only
moderately exceeded the $29.7 billion recorded in 2004. However, the 2005
activity was uniquely characterized by the large number of platform
privatization and M & A announcements, including five companies in the JDD
portfolio: Gables Residential, CRT Properties, AMLI Residential Properties,
Shurgard Storage Centers, and Arden Realty. These and other public companies
were targeted by institutional investors and other public companies in pursuit
of attractive asset portfolios, development pipelines and management
capabilities, exactly the type of companies in which the Fund seeks to invest.
Issuance of new real estate common equity totaled $9.1 billion in 2005, compared
to $13.3 billion in 2004. Last year's activity included seven initial public
offerings (IPOs) totaling $1.4 billion, including three IPOs during the fourth
quarter, two of which were added to the portfolio - Newkirk Realty Trust, an
owner and acquirer of net lease properties, and Republic Property Trust, an
owner and developer of office properties focused in the Washington D.C.
metropolitan area.
Emerging markets sovereign debt, as measured by the JP Morgan EMBI Global
Diversified Index, had a strong year in 2005, posting a total return of 10.2%.
The global economic and financial market environment continued to favor emerging
markets debt. Global economic growth remained strong, while the U.S. Federal
Reserve signaled that it might be nearing the end of its cycle of raising
short-term interest rates. This helped boost the performance of global equity
markets and emerging markets debt. Performance of the longer-term U.S. Treasury
bond market was mixed. The yield curve flattened, with short-term yields rising
more than longer-term yields. Additionally, high oil prices added to the
constructive market tone. Accordingly, the list of countries whose debt
performed well during the past year was generally comprised of countries with
high-yielding securities and oil exporters such as Venezuela, Russia, Ecuador,
Brazil and Colombia.
5
The fourth quarter capped another impressive year in the leveraged loan market.
Highlights in 2005 included record leveraged merger financing, near historic low
default rates, narrow credit spreads (the interest rate difference between
higher quality and lower quality loans) and record inflows into the leveraged
loan asset class. Throughout 2005, the loan market had to digest escalating
energy prices, rising short-term interest rates, record merger and acquisition
activity, and U.S. equity markets that were relatively stagnant. Despite these
many issues, conditions in the loan market remained robust. The CSFB Leveraged
Loan Index returned 5.69% for the year. As of the end of December, the Index had
registered 38 consecutive months of positive returns.
Total loan volume for the year stood at $294 billion, up 11% percent from 2004's
amount of $265 billion. Mergers and acquisitions were an important driver of
overall loan-volume growth during the year. The U.S. saw $173 billion of
leveraged merger financing, a 15-year record. Increasingly large deals are being
financed in the leveraged loan market, surpassing previous estimates of the
maximum deal size thought possible. Recent blockbuster deals include SunGard's
$5 billion LBO loan, Hertz's $2 billion LBO loan and the $7.5 billion financing
package backing Koch Industries' acquisition of Georgia-Pacific. At $79 billion,
U.S. LBO lending posted the highest volumes since the late 1980s - the years of
RJRNabisco.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE 12-MONTH PERIOD ENDED DECEMBER
31, 2005?
For the dividend-paying common stock portion of the Fund's portfolio, we
continued to employ an opportunistic, bottom-up strategy that focused on
identifying undervalued companies that possessed favorable risk/reward
characteristics as well as emerging catalysts that could unlock value or improve
profitability. These catalysts included management changes, restructuring
efforts, recognition of hidden assets, or a positive change in the underlying
fundamentals. We also focused on downside protection, and paid a great deal of
attention to a company's balance sheet and cash flow statement, not just the
income statement. We believe that analysis of both cash flow and earnings offers
a more objective and truer picture of a company's financial position than an
evaluation based on earnings alone.
During the course of the year, we took new common stock positions in American
Home Mortgage Investment Corp., Dominion Resources Inc., Dow Jones & Company,
POSCO, Merck & Co Inc., Wachovia Corporation, and Energias de Portugal S.A. Our
analysis
6
indicated that these companies possessed solid fundamentals, compelling
valuations, and an attractive risk/reward relationship. We maintained a large
position in energy stocks based on our analysis of global supply conditions for
crude oil and its impact on industry fundamentals, the outlook on company cash
flow growth, and valuations. The Fund's energy holdings include ChevronTexaco
Corporation, ConocoPhillips, ENI S.p.A., Kerr-McGee Corporation, and Total S.A.
We eliminated Tate & Lyle PLC, Weyerhauser Co., and DSM NV from the portfolio
based on valuation concerns, and Delphi Corp. in early April (prior to its
bankruptcy) because of deteriorating fundamentals and management credibility.
Fund holdings May Company, Toy's R Us and Unocal Corp. also were eliminated
after receiving take out offers.
In the real estate stock segment of the portfolio, we continued to focus on
finding what we believed would be the best opportunities to generate sustainable
income and potential price appreciation over the long run. In particular, we
sought to maintain significant diversification within this sector while taking
into account company credit quality, sector and geographic exposure and
security-type allocations. Every investment decision was based on a
multi-layered analysis of the company, the real estate it owns, its management
and the relative price of the security.
As of December 31, 2005, the real estate portfolio allocations were 97.1% common
stocks and 2.9% preferred stocks (excluding cash equivalents).
In the emerging markets sovereign debt portion of the portfolio, we sought to
add value by identifying countries and securities with attractive risk and
return profiles. In terms of positioning, we maintained relatively large
positions in countries with a combination of favorable fundamentals and
valuations. When valuation targets were hit, we cut positions. For instance,
toward the end of 2005 we reduced exposure to Indonesia following the strong
performance of that country's bonds. Security selection decisions continued to
be driven by our analysis of mispricings in the market. For instance, in the
second half of the year we believed short-dated Argentine securities offered
good value. Their yields provided more than ample compensation for some
unorthodox long-term policies, especially since the country currently benefits
from strong economic growth and enjoys current account and fiscal surpluses.
We viewed the leveraged loan market favorably but, given the current credit
environment, we continued to take a defensive credit stance in positioning our
loan
7
portfolio. In 2005 the loan market continued to demonstrate many positive
characteristics that we think make the asset class attractive. Market liquidity
was better than it had ever been, investor appetite remained strong and many
high quality deals came to market. Strong investor demand, however, also allowed
many deals to be structured with aggressive leverage levels. It is this
environment and market dynamic that led us to avoid credits we felt were too
aggressively leveraged or did not have a sound credit profile. We did not feel
that 2005 was the appropriate time to be reaching for yield or become involved
with what we considered to be marginal credits.
We continued to avoid most automotive related companies, even though many are
trading at distressed levels. We also avoided many small loans that were
supporting leveraged buyouts as we felt that market liquidity could be
challenged if the credit experienced any negative events. Instead, we focused on
adding higher quality new-issue loans at par.
We also continued to avoid the vast majority of second lien loans. At current
trading levels, we did not believe that most second lien loans compensated
investors for the risk these credits pose over a credit cycle.
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a comparative benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE
For the 12-months ended December 31, 2005
JDD 10.21%
- --------------------------------------------------------------------------------
Comparative Benchmark1 9.68%
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Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown.
Returns do not reflect the deduction of taxes that a shareholder may have to pay
on Fund distributions or upon the sale of Fund shares.
See the Performance Overview Page for additional information.
Our common equity investments in the energy sector performed very well in 2005
due to strong fundamentals, attractive valuations, and the rise in crude prices
during the year (and the expectation that these relatively high prices would be
sustainable). Corporate activity also contributed to this sector's returns as
our holding of Unocal Corp. was acquired by Chevron Corp., and Kerr-McGee
Corporation began a major restructuring
1 Comparative benchmark performance is a blended return consisting of: 1)
18.75% of the return of the Russell 3000 Value Index, which measures the
performance of those Russell 3000 Index companies with lower price-to-book
ratios and lower forecasted growth values, 2) 6.25% of the return of the
MSCI EAFE ex-Japan Value Index, a capitalization-weighted index that
selects the lower 50% of the price-to-book ranked value stocks traded in
the developed markets of Europe, Asia and the Far East, excluding Japan, 3)
25% of the return of the Dow Jones Wilshire Real Estate Securities Index,
an unmanaged, market-capitalization-weighted index comprised of publicly
traded REITs and real estate companies, 4) 25% of the return of the JP
Morgan EMBI Global Diversified Index, which tracks total returns for
U.S.-dollar-denominated debt instruments issued by emerging markets
sovereign and quasi-sovereign entities, and 5) 25% of the return of the
CSFB Leveraged Loan Index, which consists of approximately $150 billion of
tradable term loans with at least one year to maturity and rated BBB or
lower. Index returns do not include the effects of any sales charges or
management fees. It is not possible to invest directly in an index.
8
initiative to increase shareholder value through the monetization of assets,
paying down debt, and buying back stock.
Our common stock holdings in the tobacco industry, such as Altria Group Inc.
(parent of Philip Morris) and Loews Corp.- Carolina Group, also contributed
positive returns. Tobacco stocks continued to benefit from an improving
litigation environment.
Rio Tinto Plc, an Australian-based mining firm, outperformed due to strength in
copper prices and the positive outlook for iron ore prices in 2006. These two
segments account for roughly 70% of Rio Tinto's earnings. Strong global economic
growth, especially in China, has led to an increase in the demand for most
industrial commodities, including aluminum, copper, steel, and iron ore.
In the insurance industry, our common stock investment in Hartford Financial
Services appreciated on strong sales of the company's annuity products,
particularly in Japan, because of their favorable tax treatment and the lack of
attractive retirement savings alternatives in that country. Insurance broker Aon
Corporation also appreciated as new management and structural changes have
yielded improvements in top-line growth and operating margins. Lastly, Korea
Electric Power Corporation posted a strong gain due to its very attractive
valuation and the favorable performance of Korean stocks in 2005.
At the same time, several of our common stock investments in the financial
services sector underperformed as rising short-term interest rates and a
persistently flat yield curve for much of the year put pressure on net interest
margins and the outlook for company fundamentals. Shares of Fannie Mae were also
impacted as the company was forced to reduce its retained portfolio in order to
meet new surplus capital requirements mandated by its government regulator. Our
investments in International Paper Company and Packaging Corp. of America
declined as rising containerboard inventories put pressure on earnings and
margins, although industry fundamentals have improved more recently due to a
combination of stronger demand, higher operating rates, and shuttered capacity
in North America. Albertson's Inc. disappointed investors because management was
unable to complete a much-anticipated sale of the company, and telecommunication
stocks declined due to concerns of increased competition from cable operators
and VoiP, as well as pricing pressures in wireless services. Our position in
Telecom Italia Spa was also negatively impacted by weakness of the Italian lira
relative to the dollar.
9
In the real estate portion of the portfolio, we favored companies with high
quality management teams, strong balance sheets and potential for price
appreciation generally situated in urban markets characterized by high
barriers-to-entry. In each case, we sought real estate securities that were
priced at a discount to our long-term discounted cash flow valuation analysis.
As noted earlier, we owned five major M&A targets that experienced significant
price appreciation during the year, which benefited the portfolio's performance.
In its emerging markets sovereign debt sleeve, the Fund benefited from strong
country selection within Emerging Europe, Asia and Latin America. Decisions
during the year to overweight Brazil and the Philippines and to underweight
Hungary, China, Thailand and Pakistan all contributed to positive performance
from this asset class. The selection of specific securities within Colombia,
Ecuador and Panama also added to the overall return.
Conversely, specific securities from Russia, South Africa and Mexico proved
detrimental to overall performance, and our allocation to Malaysia
underperformed lower rated high yielding credits.
Given the relatively conservative nature of our senior loan portfolio, the
positions we held during the course of 2005 delivered returns generally
consistent with their coupons.
10
Distribution and Share Price
INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferredTM. FundPreferred provides a degree of financial
leverage that can enhance the Fund's returns and supplement the income available
to pay common shareholder distributions, but also can increase share price
volatility. This leveraging strategy provided incremental income and helped
enhance shareholder distributions over this reporting period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. The Fund raised its monthly distribution once to
$0.1075 per share over the course of 2005. (In January 2006, after the close of
this reporting period, the Fund announced another increase in its monthly
distribution to $0.11 per share.)
Under its managed distribution policy, the Fund pays monthly distributions that
are derived from a variety of sources for income tax reporting purposes. These
may include ordinary income, net realized capital gains, and, under certain
circumstances, a return of capital. Every month, the Fund prepares an estimate
of the sources for tax purposes of that month's distribution, and then posts
that estimate on the Nuveen Funds' website at www.nuveen.com/etf. The final
determination of the tax characteristics of all of a calendar year's
distributions are made after December 31 each year, and this information is then
reported on Form 1099-DIV early in the following year. The final tax
characterization of distributions may vary from the estimates provided monthly
throughout the course of the year. At the end of 2005, 54.96% of the Fund's
monthly distributions to Common shareholders represented ordinary income, and
45.04% represented net realized long-term capital gains. In addition, these
final tax characteristics of distributions likely will vary from the sources
identified in the Fund's financial statements, because the rules governing
determination of tax characteristics of distributions differ in many respects
from generally accepted accounting principles.
11
As of December 31, 2005, the Fund was trading at a -3.14% discount to its net
asset value. This discount was less than the average -7.82% discount the Fund
exhibited over the course of the entire reporting period.
12
Nuveen Diversified Dividend and Income Fund
JDD
Performance
OVERVIEW As of December 31, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
Real Estate Investment Trust Common Stocks
and $25 Par (or similar) Securities 28.2%
Common Stocks 25.5%
Emerging Markets Sovereign Debt and Foreign Corporate Bonds 23.1%
Variable Rate Senior Loan Interests 18.1%
Corporate Bonds 2.5%
Short-Term Investments 1.6%
Convertible Bonds 1.0%
Bar Chart:
2005 MONTHLY DISTRIBUTIONS PER SHARE
Jan 0.1025
Feb 0.1025
Mar 0.1025
Apr 0.1025
May 0.1025
Jun 0.1025
Jul 0.1025
Aug 0.1025
Sep 0.1075
Oct 0.1075
Nov 0.1075
Dec 0.1075
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
1/01/05 15.52
15.55
15.27
15.3
15.5
15.42
15.48
15.35
15.39
15.36
15.33
15.25
15.25
15.23
15.2
15.13
15.02
15.1
15.19
15.24
15.23
15.24
15.42
15.72
15.72
15.72
15.76
15.8
15.49
15.39
15.4
15.37
15.48
15.27
15.1
15.28
15.4
15.5
15.52
15.7
15.66
15.67
15.71
15.69
15.58
15.5
15.39
15.3
15.05
14.81
14.38
14.42
14.46
14.36
14.31
13.84
14.1
13.93
14.1
14.38
14.33
14.4
14.53
14.41
14.67
14.41
14.33
14.39
14.54
14.2
14.2
14.09
14.22
14.41
14.47
14.56
14.6
14.34
14.48
14.6
14.71
14.88
14.88
14.86
14.84
14.96
15.09
15.15
15.19
15.13
15.02
14.98
14.72
14.78
14.81
14.87
14.97
15.11
15.14
15.1
15.01
15.17
15.14
15.06
15.15
15.22
15.31
15.22
15.3
15.2
15.25
15.41
15.14
15.22
15.15
15.35
15.33
15.22
15.23
15.15
15.16
15.21
15.2
15.3
15.29
15.22
15.27
15.33
15.48
15.65
15.53
15.58
15.6
15.44
15.45
15.77
15.72
15.64
15.67
15.56
15.66
15.65
15.94
15.99
16
16
16
16.05
16.14
16.16
16.16
16.2
15.93
15.79
15.9
15.86
15.8
15.71
15.77
15.86
15.88
16
15.94
15.99
15.93
15.65
15.53
15.44
15.43
15.59
15.84
15.9
16.12
16.23
16.12
16.24
16.39
16.19
16.05
15.95
15.92
15.9
15.94
15.8
15.72
15.76
15.74
15.68
15.77
15.95
15.82
16.03
16.1
16
15.83
16.05
16.08
16.08
15.7
15.35
15.24
15.1
15
14.94
14.72
14.84
15.11
15.11
15
15.06
15.12
15.49
15.32
15.49
15.54
15.75
15.7
15.82
15.9
15.92
15.55
15.5
15.54
15.62
15.48
15.71
15.56
15.45
15.45
15.64
15.9
15.82
16.05
16.04
15.9
15.93
16.15
16.02
16.1
16.05
16.24
16.05
16
16.05
16.12
15.8
15.9
16.03
15.87
16.03
15.9
16.01
16.24
16.35
12/31/05 16.35
FUND SNAPSHOT
- ------------------------------------
Common Share Price $16.35
- ------------------------------------
Common Share Net Asset Value $16.88
- ------------------------------------
Premium/(Discount) to NAV -3.14%
- ------------------------------------
Market Yield1 7.89%
- ------------------------------------
Net Assets Applicable to
Common Shares ($000) $340,113
- ------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/03)
- ------------------------------------
ON SHARE PRICE ON NAV
- ------------------------------------
1-Year 16.36% 10.21%
- ------------------------------------
Since
Inception 13.39% 16.75%
- ------------------------------------
INDUSTRIES
(as a % of total investments)
- ------------------------------------
Real Estate 29.1%
- ------------------------------------
Sovereign Debt 23.1%
- ------------------------------------
Media 4.4%
- ------------------------------------
Metals & Mining 3.4%
- ------------------------------------
Diversified Telecommunication
Services 3.4%
- ------------------------------------
Oil, Gas & Consumable Fuels 3.2%
- ------------------------------------
Hotels, Restaurants & Leisure 2.9%
- ------------------------------------
Aerospace & Defense 2.8%
- ------------------------------------
Tobacco 2.5%
- ------------------------------------
Household Durables 2.1%
- ------------------------------------
Containers & Packaging 1.8%
- ------------------------------------
Diversified Financial Services 1.8%
- ------------------------------------
Thrifts & Mortgage Finance 1.7%
- ------------------------------------
Commercial Services & Supplies 1.5%
- ------------------------------------
Short-Term Investments 1.6%
- ------------------------------------
Other 14.7%
- ------------------------------------
REAL ESTATE INVESTMENT TRUST
TOP FIVE SUB-INDUSTRIES
(as a % of total investments)
- ------------------------------------
Office Property 10.6%
- ------------------------------------
Apartments 6.2%
- ------------------------------------
Shopping Center 3.0%
- ------------------------------------
Storage 1.9%
- ------------------------------------
Health Care 1.9%
- ------------------------------------
EMERGING MARKETS SOVEREIGN DEBT
AND FOREIGN CORPORATE BONDS
TOP FIVE COUNTRIES
(as a % of total investments)
- ------------------------------------
Mexico 1.7%
- ------------------------------------
Malaysia 1.6%
- ------------------------------------
Russian Federation 1.5%
- ------------------------------------
Argentina 1.4%
- ------------------------------------
Brazil 1.3%
- ------------------------------------
1 Market yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Fund's
cumulative net ordinary income and net realized gains are less than the
amount of the Fund's distributions, a tax return of capital.
13
Shareholder
MEETING REPORT
Approval of the new investment management agreement and sub-advisory agreements
were the proposals voted upon at the July 26, 2005, shareholder meeting held at
The Northern Trust Bank.
Approval of the Board Members was the proposal voted upon at the November 15,
2005, shareholder meeting held at the offices of Nuveen Investments.
JDD
- ------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT WAS
REACHED AS FOLLOWS:
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
For 19,523,599
Against 161,934
Abstain 180,589
- ------------------------------------------------------------------------------------------------------------------------------------
Total 19,866,122
====================================================================================================================================
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND NQW INVESTMENT MANAGEMENT COMPANY, LLC WAS
REACHED AS FOLLOWS:
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
For 19,530,651
Against 163,388
Abstain 172,083
- ------------------------------------------------------------------------------------------------------------------------------------
Total 19,866,122
====================================================================================================================================
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED
WAS REACHED AS FOLLOWS:
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
For 19,547,000
Against 158,986
Abstain 160,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total 19,866,122
====================================================================================================================================
14
JDD
- ------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SYMPHONY ASSET MANAGEMENT LLC WAS REACHED
AS FOLLOWS:
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
For 19,536,115
Against 165,415
Abstain 164,592
- ------------------------------------------------------------------------------------------------------------------------------------
Total 19,866,122
====================================================================================================================================
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND WELLINGTON MANAGEMENT COMPANY, LLP
WAS REACHED AS FOLLOWS:
Common and
Preferred shares
voting together
as a class
====================================================================================================================================
For 19,543,735
Against 165,202
Abstain 157,185
- ------------------------------------------------------------------------------------------------------------------------------------
Total 19,866,122
====================================================================================================================================
15
Report of
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Diversified Dividend and Income Fund as
of December 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, the statement of cash flows for the year then ended, and the
financial highlights for the each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian,
selling or agent banks and brokers or by other appropriate auditing procedures
where replies from selling or agent banks or brokers were not received. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Diversified Dividend and Income Fund at December 31, 2005, and the results of
its operations for the year then ended, changes in its net assets for each of
the two years in the period then ended, cash flows for the year then ended, and
its financial highlights for the each of the periods indicated therein in
conformity with U.S. generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
February 14, 2006
16
Nuveen Diversified Dividend and Income Fund (JDD)
Portfolio of
INVESTMENTS December 31, 2005
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 34.5% (25.5% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.9%
50,000 Lockheed Martin Corporation $ 3,181,500
85,000 Raytheon Company 3,412,750
- ------------------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 6,594,250
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 1.9%
69,200 Bank of America Corporation 3,193,580
65,000 Wachovia Corporation 3,435,900
- ------------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 6,629,480
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.3%
105,000 Pitney Bowes Inc. 4,436,250
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.0%
146,300 Packaging Corp. of America 3,357,585
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 2.4%
100,000 Citigroup Inc. 4,853,000
85,000 JPMorgan Chase & Co. 3,373,650
- ------------------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 8,226,650
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 4.1%
175,500 AT&T Inc. 4,297,995
90,000 KT Corporation, Sponsored ADR 1,939,500
135,000 Sprint Nextel Corporation 3,153,600
52,500 Telecom Italia S.p.A., Sponsored ADR 1,533,525
90,600 Verizon Communications Inc. 2,728,872
- ------------------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 13,653,492
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.5%
93,000 EDP - Energias de Portugal, S.A., Sponsored ADR 2,870,910
118,000 Korea Electric Power Corporation (KEPCO), Sponsored ADR 2,299,820
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 5,170,730
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 0.8%
66,700 Albertson's, Inc. 1,424,045
60,812 J. Sainsbury plc, Sponsored ADR 1,310,499
- ------------------------------------------------------------------------------------------------------------------------------------
Total Food & Staples Retailing 2,734,544
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.8%
112,000 Newell Rubbermaid Inc. 2,663,360
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.3%
73,000 Kimberly-Clark Corporation 4,354,450
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.5%
73,900 Aon Corporation 2,656,705
30,000 Hartford Financial Services Group, Inc. 2,576,700
- ------------------------------------------------------------------------------------------------------------------------------------
Total Insurance 5,233,405
- ------------------------------------------------------------------------------------------------------------------------------------
17
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2005
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.5%
48,900 Dow Jones & Company, Inc. $ 1,735,461
- ------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 2.8%
146,000 Alumina Limited, Sponsored ADR 3,187,180
33,000 POSCO, ADR 1,633,830
26,500 Rio Tinto plc, Sponsored ADR 4,843,935
- ------------------------------------------------------------------------------------------------------------------------------------
Total Metals & Mining 9,664,945
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 1.1%
25,000 Dominion Resources, Inc. 1,930,000
82,800 United Utilities plc, Sponsored ADR 1,930,896
- ------------------------------------------------------------------------------------------------------------------------------------
Total Multi-Utilities 3,860,896
- ------------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 3.8%
33,000 ChevronTexaco Corporation 1,873,410
41,800 ConocoPhillips 2,431,924
23,000 Eni S.p.A., Sponsored ADR 3,207,580
14,605 Kerr-McGee Corporation 1,327,010
30,000 Total SA, Sponsored ADR 3,792,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas, & Consumable Fuels 12,631,924
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.0%
105,500 International Paper Company 3,545,855
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 1.0%
110,000 Merck & Co. Inc. 3,499,100
- ------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 1.1%
94,100 IndyMac Bancorp, Inc. 3,671,782
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 3.5%
88,200 Altria Group, Inc. 6,590,304
113,000 Loews Corp. - Carolina Group 4,970,870
- ------------------------------------------------------------------------------------------------------------------------------------
Total Tobacco 11,561,174
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.AGENCY - 1.2%
81,600 Fannie Mae 3,982,896
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $93,310,695) 117,208,229
====================================================================================================================
REAL ESTATE INVESTMENT TRUST COMMON STOCKS - 36.9% (27.4% OF TOTAL INVESTMENTS)
APARTMENTS - 7.3%
87,900 AMLI Residential Properties Trust 3,344,595
114,900 Archstone-Smith Trust 4,813,161
57,500 AvalonBay Communities, Inc. 5,131,875
86,200 Camden Property Trust 4,992,704
164,400 Post Properties, Inc. 6,567,780
- ------------------------------------------------------------------------------------------------------------------------------------
Total Apartments 24,850,115
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED - 1.5%
325,000 Newkirk Realty Trust Inc. 5,037,500
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 2.5%
166,000 Nationwide Health Properties, Inc. 3,552,400
293,800 Senior Housing Properties Trust 4,968,158
- ------------------------------------------------------------------------------------------------------------------------------------
Total Health Care 8,520,558
- ------------------------------------------------------------------------------------------------------------------------------------
18
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS - 2.1%
350,000 DiamondRock Hospitality Company $ 4,186,000
338,736 Hersha Hospitality Trust 3,052,011
- ------------------------------------------------------------------------------------------------------------------------------------
Total Hotels 7,238,011
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE PROPERTY - 14.4%
180,300 Arden Realty, Inc. 8,082,847
200,300 Brandywine Realty Trust 5,590,373
219,100 Equity Office Properties Trust 6,645,303
192,000 Glenborough Realty Trust Incorporated 3,475,200
435,600 HRPT Properties Trust 4,508,460
158,900 Mack-Cali Realty Corporation 6,864,480
146,800 Maguire Properties, Inc. 4,536,120
115,400 Reckson Associates Realty Corporation 4,152,092
416,000 Republic Property Trust 4,992,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Office Property 48,846,875
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE - 0.8%
45,000 American Home Mortgage Investment Corp. 1,465,650
220,000 MFA Mortgage Investments, Inc. 1,254,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Mortgage 2,719,650
- ------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 1.7%
49,900 Macerich Company 3,350,286
32,400 Simon Property Group, Inc. 2,482,812
- ------------------------------------------------------------------------------------------------------------------------------------
Total Regional Malls 5,833,098
- ------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 2.5%
90,700 Shurgard Storage Centers, Inc., Class A 5,143,597
165,800 U-Store-It Trust 3,490,090
- ------------------------------------------------------------------------------------------------------------------------------------
Total Storage 8,633,687
- ------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTER - 4.1%
252,900 Cedar Shopping Centers Inc. 3,558,303
73,500 Federal Realty Investment Trust 4,457,775
221,000 Kite Realty Group Trust 3,418,870
107,100 New Plan Excel Realty Trust 2,482,578
- ------------------------------------------------------------------------------------------------------------------------------------
Total Shopping Center 13,917,526
- ------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust Common Stocks (cost $100,348,296) 125,597,020
====================================================================================================================
SHARES DESCRIPTION(1) COUPON RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST $25 PAR (OR SIMILAR) SECURITIES - 1.1% (0.8% OF TOTAL INVESTMENTS)
APARTMENTS - 1.1%
150,000 Apartment Investment & Management Company, Series U 7.750% Ba3 3,726,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust $25 Par (or similar) Securities (cost $3,750,000) 3,726,000
====================================================================================================================
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 24.4% (18.1% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.8%
$ 2,467 Hexcel Corporation, Term Loan B 5.926% 3/01/12 B2 2,491,333
1,879 K&F Industries, Inc., Term Loan B 6.570% 11/18/12 B2 1,901,776
1,621 Vought Aircraft Industries, Inc., Term Loan 6.890% 12/22/11 B+ 1,638,996
364 Vought Aircraft Industries, Inc., Tranche B, Letter of Credit 6.364% 12/22/10 B+ 368,125
- ------------------------------------------------------------------------------------------------------------------------------------
6,331 Total Aerospace & Defense 6,400,230
- ------------------------------------------------------------------------------------------------------------------------------------
19
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2005
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 1.8%
$ 2,500 Federal-Mogul Corporation, Term Loan A, (5) 6.640% 2/24/04 N/R $ 2,317,708
1,883 Gen Tek Inc., Term Loan B 7.070% 2/28/11 B2 1,896,439
1,217 Tenneco Automotive Inc., Term Loan B 6.630% 12/12/10 B+ 1,237,859
534 Tenneco Automotive Inc., Term Loan B-1 2.250% 12/12/10 B+ 543,769
- ------------------------------------------------------------------------------------------------------------------------------------
6,134 Total Auto Components 5,995,775
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 1.2%
1,975 Nortek, Inc., Term Loan B 6.948% 8/27/11 B 1,994,997
992 Stile Acquisition Corp. Canadien Term Loan 5.672% 4/08/13 B2 982,927
993 Stile Acquisition Corp. Term Loan B 6.211% 4/05/13 B2 984,601
- ------------------------------------------------------------------------------------------------------------------------------------
3,960 Total Building Products 3,962,525
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.9%
1,000 Brenntag Holdings, Term Loan, WI/DD TBD TBD B- 1,013,542
1,990 Rockwood Specialties Group, Inc., Term Loan E 6.466% 12/13/13 B+ 2,013,786
- ------------------------------------------------------------------------------------------------------------------------------------
2,990 Total Chemicals 3,027,328
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.7%
669 Allied Waste North America, Inc., Letter of Credit 3.340% 1/15/12 B1 673,286
1,723 Allied Waste North America, Inc., Term Loan B 6.180% 1/15/12 B1 1,734,286
- ------------------------------------------------------------------------------------------------------------------------------------
2,392 Total Commercial Services & Supplies 2,407,572
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.5%
2,970 Graham Packaging Company, L.P., Term Loan B 6.731% 10/07/11 B 3,008,286
175 Smurfit-Stone Container Corporation, 2.100% 11/01/11 B+ 176,488
Deposit-Funded Commitment
1,257 Smurfit-Stone Container Corporation, Term Loan B 6.444% 11/01/11 B+ 1,269,686
426 Smurfit-Stone Container Corporation, Term Loan C 6.438% 11/01/11 B+ 430,733
133 Smurfit-Stone Container Corporation, TBD TBD B+ 134,820
Tranche C-1, WI/DD
- ------------------------------------------------------------------------------------------------------------------------------------
4,961 Total Containers & Packaging 5,020,013
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.6%
1,985 Intelsat, Ltd., Term Loan B 5.813% 7/06/11 B 2,006,092
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
1,626 Sensus Metering Systems Inc., Term Loan B-1 6.448% 12/17/10 B2 1,645,397
254 Sensus Metering Systems Inc., Term Loan B-2 6.444% 12/17/10 B2 256,708
- ------------------------------------------------------------------------------------------------------------------------------------
1,880 Total Electrical Equipment 1,902,105
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.9%
2,926 Michael Foods, Inc., Term Loan B 6.659% 11/21/10 B+ 2,966,594
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.3%
877 Kinetic Concepts, Inc., Term Loan B-2 6.280% 8/11/10 Ba3 885,935
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.8%
1,955 Beverly Enterprises, Inc., Term Loan B 6.628% 10/22/08 Ba3 1,961,109
1,917 Davita Inc., Term Loan B 6.737% 10/05/12 B1 1,944,851
2,117 LifePoint Hospitals Holdings, Inc., Term Loan B 6.185% 4/15/12 Ba3 2,132,354
- ------------------------------------------------------------------------------------------------------------------------------------
5,989 Total Health Care Providers & Services 6,038,314
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 2.6%
2,000 24 Hour Fitness Worldwide, Inc., Term Loan B 6.780% 6/08/12 B 2,028,334
1,990 Burger King Corporation, Term Loan B 6.313% 6/30/12 B+ 2,016,275
513 Venetian Casino Resort, LLC, Delayed Draw, 6.280% 6/15/11 B1 516,747
Term Loan
2,487 Venetian Casino Resort, LLC, Term Loan 6.280% 6/16/11 B1 2,506,221
1,995 Penn National Gaming, Inc., Term Loan B 6.049% 10/03/12 BB- 2,021,341
- ------------------------------------------------------------------------------------------------------------------------------------
8,985 Total Hotels, Restaurants & Leisure 9,088,918
- ------------------------------------------------------------------------------------------------------------------------------------
20
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY(3) RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
$ 1,294 Conseco, Inc., Term Loan 6.370% 6/22/10 B2 $ 1,304,784
- ------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.1%
1,760 Fidelity National Information Services, 6.110% 3/09/13 Ba3 1,769,093
Term Loan B
1,990 SunGard Data Systems Inc., Term Loan B 6.810% 2/11/13 B+ 2,005,427
- ------------------------------------------------------------------------------------------------------------------------------------
3,750 Total IT Services 3,774,520
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 5.3%
1,968 Charter Communications Operating, LLC, 7.500% 4/07/11 B 1,975,009
Term Loan B
1,401 Dex Media West, LLC, Term Loan B 6.054% 3/09/10 BB 1,410,337
1,336 Emmis Operating Company, Term Loan 6.120% 11/10/11 B+ 1,343,862
1,970 Loews Cineplex Entertainment Corporation, 6.449% 6/30/11 B 1,982,221
Term Loan B
2,000 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 6.780% 4/08/12 N/R 2,015,682
1,730 R. H. Donnelley Inc., Tranche D 6.195% 6/30/11 Ba3 1,740,881
1,985 Rainbow Media Holdings LLC, Term Loan 7.188% 3/31/12 Ba3 2,003,113
1,905 Regal Cinemas Corporation, Term Loan 6.527% 11/10/10 BB- 1,928,858
2,000 UPC Financing Partnership, Term Loan H2 6.804% 9/30/12 B 2,020,535
1,963 WMG Acquisition Corp., Term Loan 6.263% 2/28/11 B+ 1,985,698
- ------------------------------------------------------------------------------------------------------------------------------------
18,258 Total Media 18,406,196
- ------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.5%
1,678 Amsted Industries Incorporated, Term Loan B 6.677% 10/15/10 B1 1,704,906
- ------------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL - 0.3%
1,000 Neiman Marcus Group Inc., Term Loan 6.947% 4/06/13 B+ 1,009,183
- ------------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 0.6%
387 Targa Resources Inc., Synthetic Letter of Credit 4.402% 10/31/12 B+ 390,605
1,609 Targa Resources Inc., Term Loan B 6.637% 10/31/12 B+ 1,623,451
- ------------------------------------------------------------------------------------------------------------------------------------
1,996 Total Oil, Gas & Consumable Fuels 2,014,056
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.2%
1,983 General Growth Properties, Inc., Term Loan B 6.390% 11/12/08 Ba2 1,999,062
1,960 LNR Property Corporation, Term Loan 7.268% 2/03/08 B2 1,970,352
- ------------------------------------------------------------------------------------------------------------------------------------
3,943 Total Real Estate 3,969,414
- ------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 0.3%
130 Hertz Corporation, Delayed Draw Term Loan, WI/DD TBD TBD Ba2 132,003
111 Hertz Corporation, Synthetic Term Loan, WI/DD TBD TBD Ba2 112,630
759 Hertz Corporation, Term Loan, WI/DD TBD TBD Ba2 769,039
- ------------------------------------------------------------------------------------------------------------------------------------
1,000 Total Road & Rail 1,013,672
- ------------------------------------------------------------------------------------------------------------------------------------
$ 82,329 Total Variable Rate Senior Loan Interests (cost $82,336,179) 82,898,132
====================================================================================================================================
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SOVEREIGN DEBT AND FOREIGN CORPORATE BONDS - 31.2% (23.1% OF TOTAL INVESTMENTS)
ARGENTINA - 1.8%
$ 885 Argentine Beverages Financial Trust, 144A 7.375% 3/22/12 N/R 893,850
570 Banco de Galicia y Buenos Aires SA, Reg S 8.190% 1/01/10 N/R 557,175
7,350 Republic of Argentina 1.330% 12/31/38 N/R 2,443,875
2,555 Republic of Argentina 4.005% 8/03/12 B- 2,013,340
345 Transportadora de Gas del Sur SA, Reg S 7.500% 12/15/13 CCC+ 338,100
- ------------------------------------------------------------------------------------------------------------------------------------
11,705 Total Argentina 6,246,340
- ------------------------------------------------------------------------------------------------------------------------------------
21
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2005
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 1.8%
$ 550 Banco Votorantim SA, 144A 6.875% 10/14/15 BB- $ 548,625
405 Centrais Eletricas Brasileiras S.A., 144A 7.750% 11/30/15 BB- 414,113
250 Federative Republic of Brazil 12.000% 4/15/10 BB- 304,625
575 Federative Republic of Brazil 8.250% 1/20/34 BB- 611,800
520 Federative Republic of Brazil 8.750% 2/04/25 BB- 575,900
2,140 Federative Republic of Brazil, DDI 7.875% 3/07/15 BB- 2,284,450
800 Federative Republic of Brazil 5.188% 4/15/24 BB- 783,040
390 Vale Overseas Limited 8.250% 1/17/34 BBB 450,938
- ------------------------------------------------------------------------------------------------------------------------------------
5,630 Total Brazil 5,973,491
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA - 0.4%
1,100 Republic of Bulgaria, Reg S 8.250% 1/15/15 BBB 1,331,110
- ------------------------------------------------------------------------------------------------------------------------------------
CHILE - 1.0%
1,100 Coldelco Inc., 144A 4.750% 10/15/14 Aa3 1,067,949
430 Coldelco Inc., 144A 5.500% 10/15/13 Aa3 440,449
600 Coldelco Inc., Reg S 6.375% 11/30/12 A2 647,460
550 Enersis SA 7.375% 1/15/14 BBB- 592,676
550 Republic of Chile 6.875% 4/28/09 A 582,175
- ------------------------------------------------------------------------------------------------------------------------------------
3,230 Total Chile 3,330,709
- ------------------------------------------------------------------------------------------------------------------------------------
CHINA - 0.2%
610 China Development Bank 5.000% 10/15/15 A2 602,715
- ------------------------------------------------------------------------------------------------------------------------------------
COLOMBIA - 0.6%
350 Republic of Colombia 11.750% 2/25/20 BB 485,625
700 Republic of Colombia 10.000% 1/23/12 BB 836,500
800 Republic of Colombia 8.125% 5/21/24 BB 868,000
- ------------------------------------------------------------------------------------------------------------------------------------
1,850 Total Colombia 2,190,125
- ------------------------------------------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC - 0.5%
1,489 Dominican Republic, Reg S 9.040% 1/23/18 B 1,573,189
- ------------------------------------------------------------------------------------------------------------------------------------
ECUADOR - 1.0%
1,125 Republic of Ecuador 144A 9.375% 12/15/15 CCC+ 1,054,688
2,525 Republic of Ecuador, Reg S 9.000% 8/15/30 CCC+ 2,323,000
- ------------------------------------------------------------------------------------------------------------------------------------
3,650 Total Ecuador 3,377,688
- ------------------------------------------------------------------------------------------------------------------------------------
EL SALVADOR - 0.9%
750 Republic of El Salvador, Reg S 8.500% 7/25/11 Baa3 843,750
1,080 Republic of El Salvador, Reg S 7.750% 1/24/23 Baa3 1,179,900
850 Republic of El Salvador, 144A 7.650% 6/15/35 Baa3 879,750
- ------------------------------------------------------------------------------------------------------------------------------------
2,680 Total El Salvador 2,903,400
- ------------------------------------------------------------------------------------------------------------------------------------
GUATEMALA - 0.3%
175 Republic of Guatemala, Reg S 10.250% 11/08/11 Ba2 209,125
880 Republic of Guatemala, 144A 8.125% 10/06/34 Ba2 963,600
- ------------------------------------------------------------------------------------------------------------------------------------
1,055 Total Guatemala 1,172,725
- ------------------------------------------------------------------------------------------------------------------------------------
HONG KONG - 0.3%
890 HKSARGovernment, 144A 5.125% 8/01/14 AA- 892,965
- ------------------------------------------------------------------------------------------------------------------------------------
INDIA - 0.3%
1,000 VTB Capital SA, 144A 7.500% 10/12/11 BBB 1,075,000
- ------------------------------------------------------------------------------------------------------------------------------------
22
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INDONESIA - 1.7%
$ 390 Adaro Finance B.V., 144A 8.500% 12/08/10 Ba3 $ 394,875
2,730 Republic of Indonesia, 144A 7.250% 4/20/15 B+ 2,815,313
1,200 Republic of Indonesia, 144A 7.500% 1/15/16 B+ 1,251,000
1,100 Republic of Indonesia, 144A 8.500% 10/12/35 B+ 1,201,750
- ------------------------------------------------------------------------------------------------------------------------------------
5,420 Total Indonesia 5,662,938
- ------------------------------------------------------------------------------------------------------------------------------------
KAZAKHSTAN - 0.5%
800 Development Bank of Kazakhstan 7.375% 11/12/13 Baa2 892,240
500 Kazkommerts International BV, 144A 8.000% 11/03/15 Baa2 531,550
300 Tengizchevroil Finance Company, 144A 6.124% 11/15/14 BBB- 306,600
- ------------------------------------------------------------------------------------------------------------------------------------
1,600 Total Kazakhstan 1,730,390
- ------------------------------------------------------------------------------------------------------------------------------------
LEBANON - 0.1%
450 Lebanese Republic, Reg S 8.500% 1/19/16 B- 472,500
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA - 2.1%
1,100 Malaysia 8.750% 6/01/09 A- 1,229,920
2,000 Malaysia 7.500% 7/15/11 A- 2,241,206
2,725 Petronas Capital Limited, Reg S 7.000% 5/22/12 A1 3,014,842
200 Petronas Capital Limited, Reg S 7.875% 5/22/22 A- 250,316
550 Sarawak International 5.500% 8/03/15 A- 538,512
- ------------------------------------------------------------------------------------------------------------------------------------
6,575 Total Malaysia 7,274,796
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO - 2.2%
550 America Movil S.A. de C.V. 5.500% 3/01/14 A3 544,555
895 Conproca SA, Reg S 12.000% 12/16/10 BBB- 1,069,525
240 Controladora Comercial Mexicana, 144A 6.625% 6/01/15 Baa2 245,292
1,100 Empresa Nacional del Petroleo, 144A 4.875% 3/15/14 A 1,057,432
1,200 Pemex Project Funding Master Trust 8.500% 2/15/08 Baa1 1,279,500
1,200 Pemex Project Funding Master Trust, 144A 5.750% 12/15/15 Baa1 1,195,500
750 Pemex Project Funding Master Trust, Reg S 6.625% 6/15/35 Baa1 752,812
275 Petroleos Mexicanos 8.850% 9/15/07 Baa1 292,188
590 Petroleos Mexicanos 9.375% 12/02/08 Baa1 654,900
530 United Mexican States 6.625% 3/03/15 Baa1 581,675
235 United Mexican States 6.375% 1/16/13 Baa1 250,275
- ------------------------------------------------------------------------------------------------------------------------------------
7,565 Total Mexico 7,923,654
- ------------------------------------------------------------------------------------------------------------------------------------
PANAMA - 1.3%
1,400 Republic of Panama 9.375% 4/01/29 Ba1 1,767,500
390 Republic of Panama 9.625% 2/08/11 Ba1 457,275
460 Republic of Panama 9.375% 1/16/23 Ba1 578,450
325 Republic of Panama 8.125% 4/28/34 Ba1 364,000
1,300 Republic of Panana 7.125% 1/29/26 Baa1 1,322,750
- ------------------------------------------------------------------------------------------------------------------------------------
3,875 Total Panama 4,489,975
- ------------------------------------------------------------------------------------------------------------------------------------
PERU - 0.7%
1,348 Republic of Peru 5.000% 3/07/17 BB 1,263,281
1,169 Republic of Peru 5.000% 3/07/17 BB 1,124,681
- ------------------------------------------------------------------------------------------------------------------------------------
2,517 Total Peru 2,387,962
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPINES - 1.7%
255 Bangko Sentral Pilipinas, Series A 8.600% 6/15/27 BB- 272,213
750 National Power Corporation, 144A 8.630% 8/23/11 BB- 806,945
1,500 Republic of the Philippines 9.375% 1/18/17 BB- 1,725,000
1,193 Republic of the Philippines 8.375% 2/15/11 BB- 1,294,405
1,445 Republic of the Philippines 8.000% 1/15/16 BB- 1,517,250
- ------------------------------------------------------------------------------------------------------------------------------------
5,143 Total Philipines 5,615,813
- ------------------------------------------------------------------------------------------------------------------------------------
23
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2005
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND - 0.1%
$ 500 Republic of Poland 5.250% 1/15/14 A2 $ 509,750
- ------------------------------------------------------------------------------------------------------------------------------------
QATAR - 0.6%
373 Ras Laffan Liquefied Natural Gas Company 144A 3.437% 9/15/09 A- 359,856
780 Ras Laffan Liquefied Natural Gas Company, Reg S 3.437% 9/15/09 A- 755,923
550 State of Qatar, Reg S 9.750% 6/15/30 A+ 841,665
- ------------------------------------------------------------------------------------------------------------------------------------
1,703 Total Qatar 1,957,444
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIAN FEDERATION - 2.5%
500 Aries Vermogensverwaltung GmbH, Russian Federation Sovereign 9.600% 10/25/14 BBB- 647,929
Collateralized Debt Obligation, Reg S
830 GazStream SA, 144A 5.625% 7/22/13 Baa1 825,518
1,500 Russia Federation, Reg S 5.000% 3/31/30 BBB- 1,697,070
2,050 Russia Ministry of Finance 3.000% 5/14/08 BBB 1,949,345
600 Russia Ministry of Finance 3.000% 5/14/11 Baa2 535,140
750 Russian Federation, Reg S 11.000% 7/24/18 BBB 1,114,450
400 Russian Federation, Reg S 12.750% 6/24/28 BB+ 734,860
550 UBS Luxembourg SA 6.230% 2/11/15 Baa2 555,841
550 Vedanta Resources PLC, Reg S 6.625% 2/22/10 BB+ 537,045
- ------------------------------------------------------------------------------------------------------------------------------------
7,730 Total Russian Federation 8,597,198
- ------------------------------------------------------------------------------------------------------------------------------------
SAINT LUCIA - 0.1%
300 First Citizens Saint Lucia, Reg S 5.125% 2/14/11 A2 295,683
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA - 1.3%
3,980 Republic of South Africa 9.125% 5/19/09 BBB+ 4,472,525
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 0.7%
410 Hanarotelecom Inc., 144A 7.000% 2/01/12 BB 404,492
2,020 Korea Development Bank 4.625% 9/16/10 A 1,982,125
- ------------------------------------------------------------------------------------------------------------------------------------
2,430 Total South Korea 2,386,617
- ------------------------------------------------------------------------------------------------------------------------------------
THAILAND - 0.1%
250 Bangkok Bank Public Company Limited, Reg S 9.025% 3/15/29 Baa2 318,406
- ------------------------------------------------------------------------------------------------------------------------------------
TRINIDAD AND TOBAGO - 1.2%
2,500 Republic of Serbia, 144A 3.750% 11/01/24 BB- 2,237,500
1,233 Republic of Trinidad and Tobago, Reg S 9.750% 7/01/20 A- 1,761,994
- ------------------------------------------------------------------------------------------------------------------------------------
3,733 Total Trinidad and Tobago 3,999,494
- ------------------------------------------------------------------------------------------------------------------------------------
TUNISIA - 0.6%
1,700 Banque Cent de Tunisie 7.375% 4/25/12 BBB 1,899,750
- ------------------------------------------------------------------------------------------------------------------------------------
TURKEY - 1.1%
825 Republic of Turkey 9.000% 6/30/11 BB- 944,625
425 Republic of Turkey 7.250% 3/15/15 BB- 449,438
1,875 Republic of Turkey 7.375% 2/05/25 BB- 1,945,313
350 Republic of Turkey 11.750% 6/15/10 BB- 430,500
- ------------------------------------------------------------------------------------------------------------------------------------
3,475 Total Turkey 3,769,876
- ------------------------------------------------------------------------------------------------------------------------------------
UKRAINE - 0.4%
646 Dresdner Bank AG, Ukreximbank Loan Participation Notes 7.750% 9/23/09 Ba2 673,197
644 Ukraine Government, Reg S 11.000% 3/15/07 B1 671,096
- ------------------------------------------------------------------------------------------------------------------------------------
1,290 Total Ukraine 1,344,293
- ------------------------------------------------------------------------------------------------------------------------------------
24
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY RATINGS(4) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
URUGUAY - 1.1%
$ 970 Republic of Uruguay 9.250% 5/17/17 B $ 1,108,225
2,150 Republic of Uruguay 7.250% 2/15/11 B 2,198,375
315 Republic of Uruguay 7.500% 3/15/15 B 325,238
- ------------------------------------------------------------------------------------------------------------------------------------
3,435 Total Uruguay 3,631,838
- ------------------------------------------------------------------------------------------------------------------------------------
VENEZUELA - 1.1%
475 Republic of Venezuela 9.375% 1/13/34 B+ 564,063
550 Republic of Venezuela 8.500% 10/08/14 B+ 606,375
10 Republic of Venezuela 9.250% 9/15/27 B+ 11,875
1,935 Republic of Venezuela, Reg S 5.375% 8/07/10 B+ 1,852,763
580 Republic of Venezuela, Reg S 7.000% 12/01/18 B+ 561,150
- ------------------------------------------------------------------------------------------------------------------------------------
3,550 Total Venezuela 3,596,226
- ------------------------------------------------------------------------------------------------------------------------------------
VIETNAM - 0.9%
2,593 Socialist Republic of Vietnam 4.813% 3/14/16 BB- 2,527,914
595 Socialist Republic of Vietnam, 144A 6.875% 1/15/16 BB- 621,775
- ------------------------------------------------------------------------------------------------------------------------------------
3,188 Total Vietnam 3,149,689
- ------------------------------------------------------------------------------------------------------------------------------------
$ 105,298 Total Emerging Markets Sovereign Debt and Foreign Corporate Bonds (cost $101,728,816) 106,156,274
====================================================================================================================================
CONVERTIBLE BONDS - 1.3% (1.0% OF TOTAL INVESTMENTS)
METALS & MINING - 1.3%
$ 5,000 Trizec Hahn Corporation 3.000% 1/29/21 N/R 4,450,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,000 Total Convertible Bonds (cost $3,653,723) 4,450,000
====================================================================================================================================
CORPORATE BONDS - 3.3% (2.5% OF TOTAL INVESTMENTS)
HOTELS, RESTAURANTS & LEISURE - 1.2%
$ 2,000 Aztar Corporation 9.000% 8/15/11 Ba3 2,127,500
2,000 MGM Mirage, Inc. 6.750% 8/01/07 BB 2,037,500
- ------------------------------------------------------------------------------------------------------------------------------------
4,000 Total Hotels, Restaurants & Leisure 4,165,000
====================================================================================================================================
HOUSEHOLD DURABLES - 2.1%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Baa3 2,086,410
2,000 KB Home 8.625% 12/15/08 Ba2 2,134,346
3,000 Standard Pacific Corporation 6.500% 10/01/08 BB 2,973,750
- ------------------------------------------------------------------------------------------------------------------------------------
7,000 Total Household Durables 7,194,506
- ------------------------------------------------------------------------------------------------------------------------------------
$ 11,000 Total Corporate Bonds (cost $11,511,606) 11,359,506
====================================================================================================================================
25
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS December 31, 2005
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.2% (1.6% OF TOTAL INVESTMENTS)
Repurchase Agreement with State Street Bank , dated 12/30/05,
repurchase price $7,431,255, collateralized by $7,620,000,
$ 7,429 U.S. Treasury Notes, 2.500%, due 5/31/06, value $7,581,900 3.250% 1/03/06 $ 7,428,572
=============-----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $7,428,572) 7,428,572
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $404,067,887) - 134.9% 458,823,733
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 1,289,737
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (35.3)% (120,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 340,113,470
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Senior Loans in which the Fund invests generally pay
interest at rates which are periodically adjusted by
reference to a base short-term, floating lending rate
plus an assigned fixed rate. These floating lending
rates are generally (i) the lending rate referenced by
the London Inter-Bank Offered Rate ("LIBOR"), or (ii)
the prime rate offered by one or more major United
States banks. Senior loans may be considered restricted
in that the Fund ordinarily is contractually obligated
to receive approval from the Agent Bank and/or Borrower
prior to the disposition of a Senior Loan.
(3) Senior Loans in the Fund's portfolio generally are
subject to mandatory and/or optional prepayment.
Because of these mandatory prepayment conditions and
because there may be significant economic incentives
for a Borrower to prepay, prepayments of Senior Loans
in the Fund's portfolio may occur. As a result, the
actual remaining maturity of Senior Loans held in the
Fund's portfolio may be substantially less than the
stated maturities shown.
(4) Ratings (not covered by the report of independent
registered public accounting firm): Using the higher of
Standard & Poor's or Moody's rating. Ratings below Baa
by Moody's Investor Service, Inc. or BBB by Standard &
Poor's Group are considered to be below investment
grade.
(5) At or subsequent to December 31, 2005, this issue was
under the protection of the Federal Bankruptcy Court.
WI/DD Investment purchased on a when-issued or delayed
delivery basis.
DDI Portion of investment purchased on a delayed delivery
basis.
N/R Investment is not rated.
ADR American Depositary Receipt.
144A Securities are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These
securities may only be resold in transactions exempt
from registration which are normally those transactions
with qualified institutional buyers.
Reg S Regulation S allows U.S. companies to sell securities
to persons or entities located outside of the U.S.
without registering those securities with the
Securities and Exchange Commission. Specifically, Reg S
provides a safe harbor from the registration
requirements of the Securities Act for the offers and
sales of securities by both foreign and domestic
issuers that are made outside the United States.
TBD Senior Loan purchased on a when-issued or delayed
delivery basis. Certain details associated with this
purchase are not known prior to the settlement date of
the transaction. In addition, Senior Loans typically
trade without accrued interest and therefore a weighted
average coupon rate is not available prior to
settlement. At settlement, if still unknown, the
borrower or counterparty will provide the Fund with the
final weighted average coupon rate and maturity date.
See accompanying notes to financial statements.
26
Statement of
ASSETS AND LIABILITIES December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $404,067,887) $458,823,733
Receivables:
Dividends 1,283,330
Interest 2,706,323
Investments sold 1,050,607
Reclaims 19,640
Other assets 11,607
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 463,895,240
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 452,066
Payable for investments purchased 2,930,378
Accrued expenses:
Management fees 225,501
Other 122,362
FundPreferred share dividends payable 51,463
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,781,770
- ------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 120,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $340,113,470
====================================================================================================================================
Common shares outstanding 20,145,123
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 16.88
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 201,451
Paid-in surplus 284,729,686
Undistributed (Over-distribution of) net investment income 478,675
Accumulated net realized gain (loss) from investments (52,188)
Net unrealized appreciation (depreciation) of investments 54,755,846
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $340,113,470
====================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
27
Statement of
OPERATIONS Year Ended December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $139,170) $ 7,426,916
Interest (net of foreign tax withheld of $15,018) 12,598,378
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 20,025,294
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 4,067,774
FundPreferred shares - auction fees 297,007
FundPreferred shares - dividend disbursing agent fees 13,360
Shareholders' servicing agent fees and expenses 972
Custodian's fees and expenses 174,847
Trustees' fees and expenses 11,386
Professional fees 35,681
Shareholders' reports - printing and mailing expenses 73,999
Stock exchange listing fees 10,475
Investor relations expense 68,917
Other expenses 25,138
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,779,556
Custodian fee credit (861)
Expense reimbursement (1,459,312)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,319,383
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 16,705,911
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 21,214,600
Change in net unrealized appreciation (depreciation) of investments (928,498)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 20,286,102
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (1,861,555)
From accumulated net realized gains (1,922,933)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to FundPreferred shareholders (3,784,488)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from operations $33,207,525
====================================================================================================================================
See accompanying notes to financial statements.
28
Statement of
CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
12/31/05 12/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 16,705,911 $ 16,226,149
Net realized gain (loss) from investments 21,214,600 9,195,966
Change in net unrealized appreciation (depreciation) of investments (928,498) 35,806,329
Distributions to FundPreferred shareholders:
From net investment income (1,861,555) (1,200,397)
From accumulated net realized gains (1,922,933) (601,610)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from operations 33,207,525 59,426,437
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (14,320,955) (16,301,063)
From accumulated net realized gains (18,211,404) (8,284,807)
Tax return of capital -- (187,892)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (32,532,359) (24,773,762)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Offering costs adjustments (4,043) --
Net proceeds from shares issued to shareholders due to reinvestment of distributions -- 411,807
FundPreferred shares offering costs adjustments (4,043) (4,868)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions (8,086) 406,939
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares 667,080 35,059,614
Net assets applicable to Common shares at the beginning of year 339,446,390 304,386,776
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of year $340,113,470 $339,446,390
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of year $ 478,675 $ (1,030,538)
====================================================================================================================================
See accompanying notes to financial statements.
29
Statement of
CASH FLOWS Year Ended December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 33,207,525
Adjustments to reconcile the net increase (decrease) in net assets applicable to Common shares from operations
to net cash provided by (used in) operating activities:
Purchases of investment securities (218,095,054)
Proceeds from the sales of investment securities 222,881,043
Proceeds from (Purchases of) short-term investment securities, net 12,120,271
Amortization/(Accretion) of premiums and discounts, net 484,613
(Increase)Decrease in receivable for dividends (75,114)
(Increase) Decrease in receivable for interest (58,504)
(Increase) Decrease in receivable for investments sold 804,506
(Increase) Decrease in receivable for reclaims (757)
(Increase) Decrease in other assets (4,582)
Increase (Decrease) in payable for investments purchased (3,069,622)
Increase (Decrease) in accrued management fees 3,964
Increase (Decrease) in accrued other liabilities (48,204)
Increase (Decrease) in FundPreferred share dividends payable 29,736
Net realized (gain) loss from investments (21,214,600)
Net realized (gain) loss from paydowns 142,508
Change in net unrealized (appreciation) depreciation of investments 928,498
Capital gain and return of capital distributions from investments 4,052,152
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 32,088,379
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (32,532,359)
Common shares offering costs adjustments (4,043)
FundPreferred shares offering costs adjustments (4,043)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (32,540,445)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (452,066)
Cash at the beginning of year --
- ------------------------------------------------------------------------------------------------------------------------------------
CASH OVERDRAFT AT THE END OF YEAR $ (452,066)
====================================================================================================================================
See accompanying notes to financial statements.
30
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Diversified Dividend and Income Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JDD." The Fund was organized
as a Massachusetts business trust on July 18, 2003.
The Fund seeks to provide high current income and total return by investing
primarily in a portfolio of dividend-paying common stocks, securities issued by
Real Estate Investment Trusts ("REITs"), debt securities and other non-equity
instruments that are issued by, or that are related to, government,
government-related and supernational issuers located, or conducting their
business, in emerging market countries ("emerging markets sovereign debt and
foreign corporate bonds") and senior loans.
Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the
Fund's previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NIAC or NAC.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities and senior
loans are generally provided by an pricing service approved by the Fund's Board
of Trustees and based on the mean between the bid and asked prices. When price
quotes are not readily available, the pricing service or, in the absence of a
pricing service for a particular security, the Board of Trustees of the Fund, or
its designee, may establish fair market value using a wide variety of market
data including yields or prices of investments of comparable quality, type of
issue, coupon, maturity and rating, market quotes or indications of value from
security dealers, evaluations of anticipated cash flows or collateral, general
market conditions and other information and analysis, including the obligor's
credit characteristics considered relevant by the pricing service or the Board
of Trustee's designee. Short-term investments are valued at amortized cost,
which approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from investment transactions are determined on the
specific identification method. Investments purchased on a when-issued or
delayed delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At December 31, 2005, the
Fund had outstanding when-issued and/or delayed delivery commitments of
$2,930,378.
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis. Interest income also includes paydown gains and
losses on senior loans. Fee income, if any, consists primarily of amendment
fees. Amendment fees are earned as compensation for evaluating and accepting
changes to the original loan agreement and are recognized when received.
Federal Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
31
Notes to
FINANCIAL STATEMENTS (continued)
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
The Fund makes monthly cash distributions to Common Shareholders of a stated
dollar amount based on the Fund's net investment income, net realized capital
gains and/or on net unrealized capital gains in the Fund's portfolio (stated in
terms of a fixed cents per Common Share dividend rate) ("Managed Distribution
Policy"). The Fund seeks to maintain a stable distribution level, subject to
approval and oversight by the Fund's Board of Trustees. Distributions will be
made only after paying any accrued dividends or making any redemption or
liquidation payments to FundPreferred shares, if any, and interest and required
principal payments on borrowings, if any. Under the Managed Distribution Policy,
if, for any monthly distribution, net investment income and net realized capital
gain were less than the amount of the distribution, the difference would be
distributed from the Fund's assets and would be treated by shareholders as a
return of capital for tax purposes. The final determination of the source of all
distributions for the year are made after the end of the year and are reflected
in the accompanying financial statements.
Real Estate Investment Trust ("REIT") distributions received by the Fund are
generally comprised of ordinary income, long-term and short-term capital gains,
and a return of REIT capital. The actual character of amounts received during
the period are not known until after the fiscal year-end. For the fiscal year
ended December 31, 2005, the character of distributions to the Fund from the
REITs was 46.22% ordinary income, 37.32% long-term and short-term capital gains,
and 16.46% return of REIT capital. For the fiscal year ended December 31, 2004,
the character of distributions to the Fund from the REITs was 51.30% ordinary
income, 28.25% long-term and short-term capital gains, and 20.45% return of REIT
capital.
For the fiscal years ended December 31, 2005 and December 31, 2004, the Fund
applied the actual character of distributions reported by the REITs in which the
Fund invests to its receipts from the REITS. If a REIT held in the portfolio of
investments did not report the actual character of its distributions during the
period, the Fund treated the distributions as ordinary income.
For the fiscal years ended December 31, 2005 and December 31, 2004, the Fund
applied the actual character of distributions reported by the REITs in which the
Fund invests to the distributions paid to the Fund shareholders.
FundPreferred Shares
The Fund has issued and outstanding 2,400 Series T and 2,400 Series W,
FundPreferred shares, $25,000 stated value per share, as a means of effecting
financial leverage. The dividend rate paid by the Fund on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable at the end of each rate period.
Derivative Financial Instruments
The Fund may use derivatives or other transactions for the purpose of hedging
the portfolio's exposure to common stock risk, high yield credit risk, foreign
currency exchange risk and the risk of increases in interest rates. Although the
Fund is authorized to invest in such financial instruments, and may do so in the
future, it did not engage any such investments during the fiscal year ended
December 31, 2005.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
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.
32
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the fiscal year
ended December 31, 2005.
During the fiscal year ended December 31, 2004, 26,242 Common shares were issued
to shareholders due to reinvestment of distributions.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
fiscal year ended December 31, 2005, aggregated $218,095,054 and $222,881,043,
respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization, recognition of income on REIT investments, and timing
differences in recognizing certain gains and losses on investment transactions.
At December 31, 2005, the cost of investments was $405,332,340.
The net unrealized appreciation of investments at December 31, 2005, aggregated
$53,491,393 of which $59,313,903 related to appreciated securities and
$5,822,510 related to depreciated securities.
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2005, were as follows:
- --------------------------------------------------------------------------------
Undistributed net ordinary income * $1,742,465
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 years ended December
31, 2005, and December 31, 2004, was designated for purposes of the dividends
paid deduction as follows:
2005
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $20,166,376
Distributions from net long-term capital gains ** 16,120,736
Tax return of capital --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
** The Fund designated as a long-term capital gain dividend, pursuant to
Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the
earnings and profits of the Fund related to net capital gain to zero for
the tax period ended December 31, 2005.
2004
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $22,551,616
Distributions from net long-term capital gains 3,819,302
Tax return of capital 187,892
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
33
Notes to
FINANCIAL STATEMENTS (continued)
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all funds assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, for the Fund is based upon the
average daily Managed Assets of the Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL FEE RATE
- --------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as stated in the table below. As
of December 31, 2005, the complex-level fee rate was .1895%.
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
- --------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in
the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level fee
rate for such complex-wide Managed Assets shall be .1400% until such time as
a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with NWQ Investment Management Company, LLC
("NWQ"), Security Capital Research & Management Incorporated ("Security
Capital"), Symphony Asset Management, LLC ("Symphony") and Wellington Management
Company, LLP ("Wellington"). Nuveen owns a controlling interest in NWQ while key
management of NWQ owns a non-controlling minority interest. Symphony is an
indirect wholly owned subsidiary of Nuveen. NWQ manages the portion of the
Fund's investment portfolio allocated to dividend-paying common stocks including
American Depositary Receipts ("ADRs"). Security Capital manages the portion of
the Fund's investment portfolio allocated to securities issued by real estate
companies including REITs. Symphony manages the portion of the Fund's investment
portfolio allocated to senior loans. Wellington manages the portion of the
Fund's investment portfolio allocated to emerging markets sovereign debt and
foreign corporate bonds. NWQ, Security Capital, Symphony and Wellington are
compensated for their services to the Fund from the management fee paid to the
Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. 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.
34
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------
2003* .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond September 30, 2011.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At December 31, 2005, there were no such unfunded senior loan
commitments.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At December 31, 2005, there
were no such outstanding participation commitments.
8. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreement between the Fund and the Adviser, which resulted in the
automatic termination of the agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved a new ongoing
investment management agreement for the Fund and the submission of the agreement
for approval by the Fund's shareholders, which shareholder approval was received
prior to the settlement of transactions (C) and (D). The new ongoing management
agreement took effect upon such settlement.
9. SUBSEQUENT EVENTS - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a distribution of $.1100 per Common share which was paid on
February 1, 2006, to shareholders of record on January 15, 2006.
35
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
---------------------------------------------------------------- ----------------------------------------
Distributions Distributions
from Net from Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to Tax
Share Net Unrealized FundPreferred FundPreferred Common Common Return
Net Asset Investment Investment Share- Share- Share- Share- of
Value Income(a) Gain (Loss) holders+ holders+ Total holders holders Capital Total
====================================================================================================================================
Period Ended 12/31:
2005 $16.85 $.83 $1.00 $(.09) $(.10) $1.64 $(.71) $(.90) $ -- $(1.61)
2004 15.13 .81 2.23 (.06) (.03) 2.95 (.81) (.41) (.01) (1.23)
2003(b) 14.33 .18 1.01 (.01) -- 1.18 (.18) (.02) (.01) (.21)
====================================================================================================================================
Total Returns
-------------------
Based
Offering on
Costs and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
====================================================================================
Period Ended 12/31:
2005 $ -- $16.88 $16.35 16.36% 10.21%
2004 -- 16.85 15.57 8.04 20.44
2003(b) (.17) 15.13 15.65 5.76 7.04
====================================================================================
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
----------------------------- ------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
===================================================================================================================
Period Ended 12/31:
2005 $340,113 1.42% 4.53% .99% 4.96% 49%
2004 339,446 1.50 4.74 1.06 5.19 46
2003(b) 304,387 1.26* 4.51* .87* 4.89* 28
===================================================================================================================
FundPreferred Shares at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
===============================================================
Period Ended 12/31:
2005 $120,000 $25,000 $95,857
2004 120,000 25,000 95,718
2003(b) 120,000 25,000 88,414
===============================================================
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares.
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period September 25, 2003 (commencement of operations) through
December 31, 2003.
See accompanying notes to financial statements.
36-37 SPREAD
Board Members
AND OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set
at nine. None of the board members who are not "interested" persons of the Funds
has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
- ------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger(1) Chairman of 1994 Chairman (since 1996) and Director of Nuveen Investments, 156
3/28/49 the Board Inc., Nuveen Investments, LLC, Nuveen Advisory Corp. and
333 W. Wacker Drive and Trustee Nuveen Institutional Advisory Corp.(3); Director (since 1996)
Chicago, IL 60606 of Institutional Capital Corporation; Chairman and Director
(since 1997) of Nuveen Asset Management; Chairman and
Director of Rittenhouse Asset Management, Inc. (since 1999);
Chairman of Nuveen Investments Advisers Inc. (since 2002).
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board member 1997 Private Investor and Management Consultant. 156
8/22/40
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence H. Brown Board member 1993 Retired (since 1989) as Senior Vice President of The 156
7/29/34 Northern Trust Company; Director (since 2002) Community
333 W. Wacker Drive Advisory Board for Highland Park and Highwood, United
Chicago, IL 60606 Way of the North Shore.
- ------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, a private philanthropic 156
10/22/48 corporation (since 1996); Director and Vice Chairman, United
333 W. Wacker Drive Fire Group, a publicly held company; Adjunct Faculty Member,
Chicago, IL 60606 University of Iowa; Director, Gazette Companies; Life Trustee
of Coe College and Iowa College Foundation; formerly,
Director, Alliant Energy; formerly, Director, Federal Reserve
Bank of Chicago; formerly, President and Chief Operating Officer,
SCI Financial Group, Inc., a regional financial services firm.
- ------------------------------------------------------------------------------------------------------------------------------------
William C. Hunter Board member 2004 Dean and Distinguished Professor of Finance, School of 156
3/6/48 Business at the University of Connecticut (since 2002);
333 W. Wacker Drive previously, Senior Vice President and Director of Research
Chicago, IL 60606 at the Federal Reserve Bank of Chicago (1995-2003); Director
(since 1997), Credit Research Center at Georgetown University;
Director (since 2004) of Xerox Corporation; Director
SS&C Technologies, Inc. (May 2005 - October 2005).
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Kundert Board member 2005 Retired (since 2004) as Chairman, JPMorgan Fleming Asset 154
10/28/42 Management, President and CEO, Banc One Investment
333 W. Wacker Drive Advisors Corporation, and President, One Group Mutual
Chicago, IL 60606 Funds; prior thereto, Executive Vice President, Banc One
Corporation and Chairman and CEO, Banc One Investment
Management Group; Board of Regents, Luther College;
member of the Wisconsin Bar Association; member of Board
of Directors, Friends of Boerner Botanical Gardens.
38
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR INCLUDING OTHER DIRECTORSHIPS OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(2) DURING PAST 5 YEARS BOARD MEMBER
- ------------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
William J. Schneider Board member 1997 Chairman of Miller-Valentine Partners Ltd., a real estate 156
9/24/44 investment company; formerly, Senior Partner and Chief
333 W. Wacker Drive Operating Officer (retired, December 2004), of Miller-Valentine
Chicago, IL 60606 Group; formerly, Vice President, Miller-Valentine Realty;
Board Member, Chair of the Finance Committee and member
of the Audit Committee of Premier Health Partners, the
not-for-profit company of Miami Valley Hospital; Vice
President, Dayton Philharmonic Orchestra Association; Board
Member, Regional Leaders Forum, which promotes cooperation on
economic development issues; Director, Dayton Development
Coalition; formerly, Member, Community Advisory Board,
National City Bank, Dayton, Ohio and Business Advisory
Council, Cleveland Federal Reserve Bank.
- ------------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy Donnelley 156
12/29/47 Foundation (since 1994); prior thereto, Executive Director,
333 W. Wacker Drive Great Lakes Protection Fund (from 1990 to 1994).
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Eugene S. Sunshine Board member 2005 Senior Vice President for Business and Finance, 156
1/22/50 Northwestern University (since 1997); Director (since 2003),
333 W. Wacker Drive Chicago Board Options Exchange; Director (since 2003),
Chicago, IL 60606 National Mentor Holdings, a privately-held, national provider
of home and community-based services; Chairman (since
1997), Board of Directors, Rubicon, a pure captive insurance
company owned by Northwestern University; Director (since
1997), Evanston Chamber of Commerce and Evanston
Inventure, a business development organization.
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUND:
- ------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary and 156
9/9/56 Administrative Associate General Counsel, formerly, Vice President and
333 W. Wacker Drive Officer Assistant General Counsel, of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (2002-2004), General Counsel (1998-2004)
and Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.(3);
Managing Director (since 2002) and Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
1997), of Nuveen Asset Management; Managing Director
(since 2004) and Assistant Secretary (since 1994) of Nuveen
Investments, Inc.; Assistant Secretary of NWQ Investment
Management Company, LLC. (since 2002); Vice President and
Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Managing Director, Associate General Counsel
and Assistant Secretary of Rittenhouse Asset Management,
Inc. (since 2003); Chartered Financial Analyst.
39
Board Members
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Julia L. Antonatos Vice President 2004 Managing Director (since 2005), formerly Vice President 156
9/22/63 (since 2002); formerly, Assistant Vice President (since 2000)
333 W. Wacker Drive of Nuveen Investments, LLC; Chartered Financial Analyst.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant Vice 156
2/3/66 and Assistant President (since 2000) of Nuveen Investments, LLC.
333 W. Wacker Drive Secretary
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 1999); Vice 156
11/28/67 and Treasurer President and Treasurer (since 1999) of Nuveen Investments,
333 W. Wacker Drive Inc.; Vice President and Treasurer (1999-2004) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory Corp.(3);
Vice President and Treasurer of Nuveen Asset Management
(since 2002) and of Nuveen Investments Advisers Inc. (since
2002); Assistant Treasurer of NWQ Investment Management
Company, LLC. (since 2002); Vice President and Treasurer of
Nuveen Rittenhouse Asset Management, Inc. (since 2003);
Chartered Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
John N. Desmond Vice President 2005 Vice President, Director of Investment Operations, Nuveen 156
8/24/61 Investments, LLC (since January 2005); formerly, Director,
333 W. Wacker Drive Business Manager, Deutsche Asset Management (2003-2004),
Chicago, IL 60606 Director, Business Development and Transformation, Deutsche
Trust Bank Japan (2002-2003); previously, Senior Vice
President, Head of Investment Operations and Systems,
Scudder Investments Japan, (2000-2002), Senior Vice
President, Head of Plan Administration and Participant
Services, Scudder Investments (1995-2002).
- ------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 1998 Vice President (since 2002), Assistant Secretary and 156
9/24/64 and Secretary Assistant General Counsel (since 1998) formerly, Assistant
333 W. Wacker Drive Vice President (since 1998) of Nuveen Investments, LLC;
Chicago, IL 60606 Vice President (2002-2004) and Assistant Secretary (1998-2004)
formerly, Assistant Vice President of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.(3); Vice President and
Assistant Secretary (since 2005) of Nuveen Asset Management.
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Managing Director (since 2004), formerly, Vice President of 156
10/24/45 Nuveen Investments, LLC, Managing Director (2004) formerly,
333 W. Wacker Drive Vice President (1998-2004) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.(3); Managing Director
(since 2005) of Nuveen Asset Management.
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002), formerly, Vice President of 156
3/2/64 Nuveen Investments; Managing Director (1997-2004) of
333 W. Wacker Drive Nuveen Advisory Corp. and Nuveen Institutional Advisory
Chicago, IL 60606 Corp.(3); Managing Director of Nuveen Asset Management
(since 2001); Vice President of Nuveen Investments Advisers
Inc. (since 2002); Chartered Financial Analyst.
40
NUMBER OF
PORTFOLIOS IN
POSITION(S) YEAR FIRST FUND COMPLEX
NAME, BIRTHDATE HELD WITH ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN BY
AND ADDRESS THE FUNDS APPOINTED(4) DURING PAST 5 YEARS OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller (since 1998) 156
5/31/54 and Controller of Nuveen Investments, LLC; formerly, Vice President and
333 W. Wacker Drive Funds Controller (1998-2004) of Nuveen Investments, Inc.;
Chicago, IL 60606 Certified Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
James D. Grassi Vice President 2004 Vice President and Deputy Director of Compliance (since 2004) 156
4/13/56 and Chief of Nuveen Investments, LLC, Nuveen Investments Advisers Inc.,
333 W. Wacker Drive Compliance Nuveen Asset Management and Rittenhouse Asset Management,
Chicago, IL 60606 Officer Inc.; previously, Vice President and Deputy Director of Compliance
(2004) of Nuveen Advisory Corp. and Nuveen Institutional Advisory
Corp.(3); formerly, Senior Attorney (1994-2004), The Northern
Trust Company.
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, 156
3/22/63 LLC; Certified Public Accountant.
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President of Nuveen Investments, LLC (since 1999). 156
8/27/61
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant General 156
7/27/51 and Assistant Counsel of Nuveen Investments, LLC; Vice President and
333 W. Wacker Drive Secretary Assistant Secretary of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp.(3); Vice President (since 2005)
and Assistant Secretary of Nuveen Investments, Inc.; Vice
President (since 2005) and Assistant Secretary (since 1997)
of Nuveen Asset Management; Vice President (since 2000),
Assistant Secretary and Assistant General Counsel (since
1998) of Rittenhouse Asset Management, Inc.; Vice President
and Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Assistant Secretary of NWQ Investment
Management Company, LLC (since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and board member of
the Adviser.
(2) Board members serve an indefinite term until his/her successor is elected.
The year first elected or appointed represents the year in which the board
member was first elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
41
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN EXCHANGE-TRADED CLOSED-END FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Exchange-Traded Closed-End Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
42
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between each
Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and
the Fund's sub-adviser. As required by law, the shareholders of each Fund were
asked to approve a new investment management agreement and, if applicable, a new
subadvisory agreement that reflected this change in ownership. The shareholders
of each Fund voted this approval at a Shareholders' Meeting on July 26, 2005.
There were no changes to the investment objectives or management of any Fund as
a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2005, and (iii) a description of the
policies and procedures that the Fund used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
DISTRIBUTION INFORMATION
The Fund designates 16.67% of dividends declared from net investment income as
dividends qualifying for the 70% dividends received deduction for corporations
and 22.74% as qualified dividend income for individuals under the Jobs and
Growth Tax Relief Reconciliation Act of 2003.
CEO CERTIFICATION DISCLOSURE
Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
Each Fund has filed with the Securities and Exchange Commission the
certification of its Chief Executive Officer and Chief Financial Officer
required by Section 302 of the Sarbanes-Oxley Act.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
43
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $135 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
o Fund details
Learn more o Daily financial news
about Nuveen Funds at o Investor education
WWW.NUVEEN.COM/ETF o Interactive planning tools
Logo: NUVEEN Investments
EAN-B-1205D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. There were no amendments to or waivers
from the Code during the period covered by this report. The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors or Trustees determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Diversified Dividend and Income Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 27,000 $ 0 $ 829 $ 900
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 25,000 $ 0 $ 785 $ 900
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0% 0%
pursuant to
pre-approval
exception
- ------------------------------------------------------------------------------------------------------------------------------------
The above "All Other Fees" are fees paid to audit firms to perform agreed upon
procedures required by the rating agencies to rate fund preferred shares. The
above "Tax Fees" were billed for professional services for tax advice, tax
compliance, and tax planning.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
- ---------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 0 $ 282,575 $ 0
- ---------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
- ---------------------------------------------------------------------------------------------------------------------
December 31, 2004 $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------------------------
Percentage approved 0% 0% 0%
pursuant to
pre-approval
exception
- ---------------------------------------------------------------------------------------------------------------------
The above "Tax Fees" are primarily fees billed to the Adviser for Fund tax
return preparation.
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2005 $ 1,729 $ 282,575 $ 0 $ 284,304
December 31, 2004 $ 1,685 $ 0 $ 0 $ 1,685
The above "Non-Audit Fees billed to Adviser" for 2005 include "Tax-Fees" billed
to Adviser in the amount of $282,575 from previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board of Directors or Trustees has a separately designated
Audit Committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The
members of the audit committee are Robert P. Bremner, Lawrence H. Brown, Jack B.
Evans, William J. Schneider and Eugene S. Sunshine.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged NWQ Investment Management Company, LLC ("NWQ"), Security
Capital Research & Management Incorporated ("Security Capital"), Wellington
Management Company, LLC ("Wellington") and Symphony Asset Management, LLC
("Symphony") (NWQ, Security Capital, Wellington and Symphony are also
collectively referred to as "Sub-Advisers") as Sub-Advisers to provide
discretionary investment advisory services. As part of these services, the
Adviser has also delegated to each Sub-Adviser the full responsibility for proxy
voting and related duties in accordance with the Sub-Adviser's policy and
procedures. The Adviser periodically will monitor each Sub-Adviser's voting to
ensure that they are carrying out their duties. The Sub-Advisers' proxy voting
policies and procedures are summarized as follows:
NWQ
The power to vote on proposals presented to shareholders through the proxy
solicitation process is considered to be an integral part of the investment
manager's investment responsibility, recognizing that certain proposals, if
implemented, may have a substantial impact on the market valuation of portfolio
securities and that in such situations the right to vote is considered an asset.
This Proxy Voting Policy was developed to ensure that proxies for which NWQ has
ultimate voting authority are voted consistently and solely in the best economic
interests of the beneficiaries of these equity investments. Note that clients
may otherwise reserve the right to vote their proxies. In addition, NWQ may
determine not to vote proxies related to certain securities if NWQ determines it
would be in its clients' overall best interest not to vote.
A senior member of the investment team is responsible for oversight of the proxy
voting process. NWQ has engaged the services of Institutional Shareholder
Services, Inc., ("ISS") to make recommendations to NWQ on the voting of proxies
relating to securities held in our clients' accounts. NWQ reviews ISS
recommendations and frequently follows the ISS recommendations. However, on
selected issues, NWQ may not vote in accordance with the ISS recommendations
when we believe that specific ISS recommendations are not in the best economic
interest of our clients and their beneficiaries. If NWQ manages the assets of a
company or its pension plan and any of NWQ's clients hold any securities of that
company, NWQ will vote proxies relating to such company's securities in
accordance with the ISS recommendations to avoid any conflict of interest. If a
client requests NWQ to follow specific voting guidelines or additional
guidelines, NWQ will review the request and inform the client only if NWQ is not
able to follow the client's request.
NWQ has adopted ISS Proxy Voting Guidelines. While these guidelines are not
intended to be all-inclusive, they do provide guidance on NWQ's general voting
policies. A copy of NWQ's Proxy Voting Policies and Procedures will be provided
upon written request to a requesting client. Also, clients may request from NWQ
information on how NWQ voted with respect to their portfolios' securities. NWQ
will provide such information through the most recently completed calendar
quarter. Please forward such requests to:
Compliance Director
NWQ Investment Management Company, LLC
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
SECURITY CAPITAL
Security Capital may be granted by its clients the authority to vote the proxies
of the securities held in client portfolios. To ensure that the proxies are
voted in the best interests of its clients, Security Capital has adopted
detailed proxy voting procedures ("Procedures") that incorporate detailed proxy
guidelines ("Guidelines") for voting proxies on specific types of issues.
Pursuant to the Procedures, most routine proxy matters will be voted in
accordance with the Guidelines, which have been developed with the objective of
encouraging corporate action that enhances shareholder value. For proxy matters
that are not covered by the Guidelines (including matters that require a
case-by-case determination) or where a vote contrary to the Guidelines is
considered appropriate, the Procedures require a certification and review
process to be completed before the vote is cast. That process is designed to
identify actual or potential material conflicts of interest and ensure that the
proxy is cast in the best interest of clients.
To oversee and monitor the proxy-voting process, Security Capital will establish
a proxy committee and appoint a proxy administrator. The proxy committee will
meet periodically to review general proxy-voting matters, review and approve the
Guidelines annually, and provide advice and recommendations on general
proxy-voting matters as well as on specific voting issues.
A copy of the Security Capital's proxy voting procedures and guidelines are
available upon request by contacting your client service representative.
WELLINGTON
The registrant has granted to Wellington Management the authority to vote
proxies on its behalf with respect to the assets managed by Wellington
Management. Wellington Management votes proxies in what it believes are the best
economic interests of its clients and in accordance with its Proxy Policies and
Procedures. Wellington Management's Proxy Committee is responsible for the
review and oversight of the firm's Proxy Policies and Procedures. The Proxy
Group within Wellington Management's Legal Services Department is responsible
for the day-to-day administration of the proxy voting process. Although
Wellington Management may utilize the services of various external resources in
analyzing proxy issues and has established its own Proxy Guidelines setting
forth general guidelines for voting proxies, Wellington Management personnel
analyze all proxies and vote proxies based on their assessment of the merits of
each proposal. The identified portfolio managers have the authority to determine
the final vote for securities held by the Fund, unless such party is determined
to have a material conflict of interest related to that proxy vote.
Wellington Management maintains procedures designed to identify and address
material conflicts of interest in voting proxies. The Proxy Committee sets
standards for identifying material conflicts based on client, vendor and lender
relationships. Proxy votes for which Wellington Management identifies a material
conflict are reviewed by designated members of the Proxy Committee or by the
entire Committee in some cases to resolve the conflict and direct the vote.
Wellington Management may be unable to vote or may determine not to vote a proxy
on behalf of the registrant due to securities lending, share blocking and
re-registration requirements, lack of adequate information, untimely receipt of
proxy materials, immaterial impact of the vote, and/or excessive costs.
SYMPHONY
Symphony uses the proxy voting services of Institutional Shareholder Services
("ISS"). The ISS Proxy Voting Services provide Symphony and its clients with an
independent source of proxy voting research and services. The use of ISS is
designed to offer client-centered proxy voting which minimizes conflicts of
interests between Symphony's interests and those of its clients.
In order to monitor how ISS votes client proxies, Symphony has established a
Proxy Voting Review Committee (the "Committee"). The Committee is composed of
Symphony's Chief Operating Officer and its Chief Investment Officer. Each year,
the Committee reviews ISS proxy voting policies and practices to determine
whether such policies and practices are consistent with Symphony's fiduciary
duty to the clients for whom Symphony is responsible for voting proxies. During
the year, the Committee review how ISS votes on specific issues. From time to
time, the Committee discusses the proxy voting process with representatives of
ISS in order to ensure that Symphony's client interests are being protected.
When Symphony disagrees with ISS' policies with respect to certain issues,
Symphony will direct the voting of its clients' proxies according to what
Symphony believes is the best interests of its clients.
Clients who have questions about how particular proxies are voted for their
account may request such information from Symphony by calling (800) 847-6369.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged Security Capital for a portion of the registrant's
equity investments, Wellington for a portion of the registrant's debt
investments, Symphony for an additional portion of the registrant's debt
investments and NWQ for an additional portion of the registrant's equity
investments, (NWQ, Security Capital, Wellington and Symphony are also
collectively referred to as "Sub-Advisers") as Sub-Advisers to provide
discretionary investment advisory services. The following section provides
information on the portfolio managers at each Sub-Adviser.
SECURITY CAPITAL
A. PORTFOLIO MANAGER BIOGRAPHIES:
ANTHONY R. MANNO JR. is CEO, President and Chief Investment Officer of Security
Capital Research & Management Incorporated. He is Chairman, President and
Managing Director of SC-Preferred Growth Incorporated. Prior to joining Security
Capital in 1994, Mr. Manno spent 14 years with LaSalle Partners Limited as a
Managing Director, responsible for real estate investment banking activities.
KENNETH D. STATZ is a Managing Director and Senior Market Strategist of Security
Capital Research & Management Incorporated where he is responsible for the
development and implementation of portfolio investment strategy. Prior to
joining Security Capital in 1995, Mr. Statz was a Vice President in the
Investment Research Department of Goldman, Sachs & Co., concentrating on
research and underwriting for the REIT industry.
KEVIN W. BEDELL is a Managing Director of Security Capital Research & Management
Incorporated where he directs the Investment Analysis Team, which provides
in-depth proprietary research on publicly listed companies. Prior to joining
Security Capital in 1996, Mr. Bedell spent nine years with LaSalle Partners
Limited where he was Equity Vice President and Portfolio Manager, with
responsibility for strategic, operational and financial management of a private
real estate investment trust with commercial real estate investments in excess
of $1 billion.
DAVID E. ROSENBAUM is a Managing Director of Security Capital Research &
Management Incorporated where he leads the Investment Structuring Team. He is
also Managing Director of SC-Preferred Growth Incorporated. Prior to joining
Security Capital in 1997, Mr. Rosenbaum was a Vice President at Lazard Freres &
Co., LLC, where he structured investments in real estate operating companies.
B. OTHER ACCOUNTS MANAGED:
- ------------------------------------------------------------------------------------------------------------------------------------
(a)(1) (a)(2) For each person identified in column (a)(1), provide (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the
Identify number of accounts other than the Funds managed by the categories in column (a)(2), provide number of
portfolio person within each category below and the total accounts and the total assets in the accounts
manager(s) assets in the accounts managed within each category below with respect to which the ADVISORY FEE IS BASED
of the ON THE PERFORMANCE OF THE ACCOUNT
Adviser to
be named in
the Fund
prospectus
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Registered Investment Other Pooled Other Accounts Registered Other Pooled Other Accounts
Companies Investment Investment Investment
Vehicles Companies Vehicles
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Number Total Number Total Number Total Number Total Number of Total Number Total
of Assets of Assets of Assets of Assets Accounts Assets of Assets
Accounts ($billions) Accounts ($billions) Accounts ($billions) Accounts Accounts ($billions)
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Anthony R.
Manno Jr. 4 $0.8 1 $1.9 526 $2.1 - - - - 5 $0.5
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Kenneth D.
Statz 4 $0.8 1 $1.9 518 $2.1 - - - - 5 $0.5
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Kevin W.
Bedell 4 $0.8 1 $1.9 524 $2.1 - - - - 5 $0.5
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
David E.
Rosenbaum 4 $0.8 1 $1.9 525 $2.1 - - - - 5 $0.5
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST:
As shown in the above tables, the portfolio managers may manage
accounts in addition to the Nuveen Funds (the "Funds"). The potential
for conflicts of interest exists when portfolio managers manage other
accounts with similar investment objectives and strategies as the Funds
("Similar Accounts"). Potential conflicts may include, for example,
conflicts between investment strategies and conflicts in the allocation
of investment opportunities.
Responsibility for managing Security Capital's clients' portfolios is
organized according to investment strategies within asset classes.
Generally, client portfolios with similar strategies are managed using
the same objectives, approach and philosophy. Therefore, portfolio
holdings, relative position sizes and sector exposures tend to be
similar across similar portfolios which minimizes the potential for
conflicts of interest.
Security Capital may receive more compensation with respect to certain
Similar Accounts than that received with respect to the Nuveen Funds or
may receive compensation based in part on the performance of certain
Similar Accounts. This may create a potential conflict of interest for
Security Capital or its portfolio managers by providing an incentive to
favor these Similar Accounts when, for example, placing securities
transactions. Potential conflicts of interest may arise with both the
aggregation and allocation of securities transactions and allocation of
limited investment opportunities. Allocations of aggregated trades,
particularly trade orders that were only partially completed due to
limited availability, and allocation of investment opportunities
generally, could raise a potential conflict of interest, as Security
Capital may have an incentive to allocate securities that are expected
to increase in value to favored accounts. Initial public offerings, in
particular, are frequently of very limited availability. Security
Capital may be perceived as causing accounts it manages to participate
in an offering to increase Security Capital's overall allocation of
securities in that offering. A potential conflict of interest also may
be perceived to arise if transactions in one account closely follow
related transactions in a different account, such as when a purchase
increases the value of securities previously purchased by another
account, or when a sale in one account lowers the sale price received
in a sale by a second account. If Security Capital manages accounts
that engage in short sales of securities of the type in which the Funds
invests, Security Capital could be seen as harming the performance of
the Funds for the benefit of the accounts engaging in short sales if
the short sales cause the market value of the securities to fall.
Security Capital has policies and procedures designed to manage these
conflicts described above such as allocation of investment
opportunities to achieve fair and equitable allocation of investment
opportunities among its clients over time. For example:
Orders for the same equity security are aggregated on a continual
basis throughout each trading day consistent with Security Capital's
duty of best execution for its clients. If aggregated trades are fully
executed, accounts participating in the trade will be allocated their
pro rata share on an average price basis. Partially completed orders
will be allocated among the participating accounts on a pro-rata
average price basis as well.
D. FUND MANAGER COMPENSATION
The Portfolio Managers participate in a highly competitive compensation
program that is designed to attract and retain outstanding people. The
total compensation program includes base salary and cash incentives.
These elements reflect individual performance and the performance of
the business as a whole. Base salaries are fixed for each Portfolio
Manager. Cash bonuses are variable and are focused extensively on the
profitability of the business as a whole as well as portfolio
investment performance. Base salaries are not based on the performance
of any account. Cash bonuses are based on the profitability of the
business as a whole as well as the investment performance of all
accounts managed by the Portfolio Manager. Portfolio Manager
compensation is not based on the value of assets held in the Funds
portfolio.
E. OWNERSHIP OF JDD SECURITIES AS DECEMBER 31, 2005.
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
Anthony R. Manno Jr. X
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
Kenneth D. Statz X
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
Kevin W. Bedell X
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
David E. Rosenbaum X
- ----------------------- -------- ------------- ----------------- ------------------ ------------------- ------------- --------------
WELLINGTON
A. PORTFOLIO MANAGER BIOGRAPHY:
JAMES W. VALONE, Senior Vice President and Fixed Income Portfolio Manager of
Wellington, has served as Portfolio Manager of the Fund since 2003. Mr. Valone
joined Wellington as an investment professional in 1999.
B. OTHER ACCOUNTS MANAGED:
- ------------------------------------------------------------------------------------------------------------------------------------
(a)(1) (a)(2) For each person identified in column (a)(1), provide (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the
Identify number of accounts other than the Funds managed by the categories in column (a)(2), provide number of
portfolio person within each category below and the total accounts and the total assets in the accounts
manager(s) assets in the accounts managed within each category below with respect to which the ADVISORY FEE IS BASED
of the ON THE PERFORMANCE OF THE ACCOUNT
Adviser to
be named in
the Fund
prospectus
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Registered Investment Other Pooled Other Accounts Registered Other Pooled Other Accounts
Companies Investment Investment Investment
Vehicles Companies Vehicles
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Number Total Number Total Number Total Number Total Number of Total Number Total
of Assets of Assets of Assets of Assets Accounts Assets of Assets
Accounts ($mil)* Accounts ($mil)* Accounts ($mil)* Accounts Accounts ($mil)*
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
James W.
Valone - - 16 $630.4 22 $1952.1 - - - - 3 $176.9
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST:
Individual investment professionals at Wellington manage multiple portfolios for
multiple clients. These accounts may include mutual funds, separate accounts
(assets managed on behalf of institutions such as pension funds, insurance
companies, foundations), bank common trust accounts, and hedge funds. The
investment professional primarily responsible for the day-to-day management of
the Fund ("Portfolio Manager") generally manages portfolios in several different
investment styles. These portfolios may have investment objectives, strategies,
time horizons, tax considerations and risk profiles that differ from those of
the Fund. The Portfolio Manager makes investment decisions for each portfolio,
including the Fund, based on the investment objectives, policies, practices,
benchmarks, cash flows, tax and other relevant investment considerations
applicable to that portfolio. Consequently, the Portfolio Manager may purchase
or sell securities, including IPOs, for one portfolio and not another portfolio,
and the performance of securities purchased for one portfolio may vary from the
performance of securities purchased for other portfolios. The Portfolio Manager
or other investment professionals at Wellington may place transactions on behalf
of other accounts that are directly or indirectly contrary to investment
decisions made on behalf of the Fund, or make investment decisions that are
similar to those made for the Fund, both of which have the potential to
adversely impact the Fund depending on market conditions. For example, an
investment professional may purchase a security in one portfolio while
appropriately selling that same security in another portfolio. In addition, some
of these portfolios have fee structures, including performance fees that are or
have the potential to be higher, in some cases significantly higher, than the
fees paid by the Fund to Wellington. The Portfolio Manager also manages hedge
funds, which pay performance allocations to Wellington or its affiliates.
Because incentive payments paid by Wellington to the Portfolio Manager are tied
to revenues earned by Wellington and, where noted, to the performance achieved
by the manager in each account, the incentives associated with any given
portfolio may be significantly higher or lower than those associated with other
accounts managed by a given investment professional. Finally, the Portfolio
Manager may hold shares or investments in the other pooled investment vehicles
and/or other accounts identified above.
Wellington's goal is to meet its fiduciary obligation to treat all clients
fairly and provide high quality investment services to all of its clients.
Wellington has adopted and implemented policies and procedures, including
brokerage and trade allocation policies and procedures that it believes address
the conflicts associated with managing multiple accounts for multiple clients.
In addition, Wellington monitors a variety of areas, including compliance with
primary Fund guidelines, the allocation of IPOs, and compliance with the firm's
Code of Ethics, and places additional investment restrictions on investment
professionals who manage hedge funds and certain other accounts. Furthermore,
senior investment and business personnel at Wellington periodically review the
performance of Wellington's Portfolio Managers. Although Wellington does not
track the time a Portfolio Manager spends on a single portfolio, Wellington does
periodically assess whether a Portfolio Manager has adequate time and resources
to effectively manage the Portfolio Manager's various client mandates.
D. FUND MANAGER COMPENSATION:
The Fund pays Wellington a fee based on the assets under management of the Fund
as set forth in an Investment Sub-Advisory Agreement between Wellington and
Nuveen Asset Management with respect to the Fund. Wellington pays its investment
professionals out of its total revenues and other resources, including the
advisory fees earned with respect to the Fund. The following information relates
to the fiscal year ended December 31, 2005.
Wellington's compensation structure is designed to attract and retain
high-caliber investment professionals necessary to deliver high quality
investment management services to its clients. Wellington's compensation of the
Portfolio Manager includes a base salary and incentive components. The base
salary for the Portfolio Manager, a partner of Wellington, is determined by the
Managing Partners of the firm. The Portfolio Manager's base salary is generally
a fixed amount that may change as a result of an annual review. The Portfolio
Manager is eligible to receive an incentive payment based on the revenues earned
by Wellington from the Fund and generally each other portfolio managed by such
Portfolio Manager. The Portfolio Manager's incentive payments are based solely
on the revenues earned by Wellington and are not directly linked to the
performance of the account. Wellington applies similar incentive structures to
other similar portfolios managed by the Portfolio Manager. Portfolio-based
incentives across all portfolios managed by a portfolio manager can, and
typically do, represent a significant portion of a portfolio manager's overall
compensation; incentive compensation varies significantly by individual and can
vary significantly from year to year. The Portfolio Manager may also be eligible
for bonus payments based on his overall contribution to Wellington's business
operations. Senior management at Wellington may reward individuals as it deems
appropriate based on factors other than portfolio performance. Each partner of
Wellington is eligible to participate in partner-funded tax qualified retirement
plan, the contributions to which are made pursuant to an actuarial formula, as a
partner of the firm.
E. OWNERSHIP OF JDD SECURITIES AS DECEMBER 31, 2005.
- --------------------- ------ ------------ ----------------- ------------------- -------------------- ------------- -----------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
- --------------------- ------ ------------ ----------------- ------------------- -------------------- ------------- -----------------
James W. Valone X
- --------------------- ------ ------------ ----------------- ------------------- -------------------- ------------- -----------------
SYMPHONY ASSET MANAGEMENT
A. PORTFOLIO MANAGER BIOGRAPHIES
Gunther Stein, Director of Fixed Income Strategies, Portfolio Manager
Gunther Stein is the lead portfolio manager for High Yield strategies at
Symphony Asset Management and is the lead portfolio manager of Nuveen's senior
loan asset management team. Prior to joining Symphony in 1999, Stein was a high
yield portfolio manager at Wells Fargo Bank, where he was responsible for
investing in public high yield bonds and bank loans and also managed a team of
credit analysts. Stein joined Wells Fargo in 1993 as an Associate in its Loan
Syndications/Leveraged Finance Group. Previously, Stein worked for four years as
a euro-currency deposit trader with First Interstate Bank. He has also worked
for Standard Chartered Bank, Mexico City and Citibank Investment Bank, London.
He completed Wells Fargo's Credit Management Training program and holds an
M.B.A. from the University of Texas, Austin. He graduated from the University of
California at Berkeley with a B.A. in Economics.
Lenny Mason, Portfolio Manager
Lenny Mason is a High Yield portfolio manager for Symphony Asset Management and
is also a portfolio manager on the Nuveen's senior loan asset management team.
Prior to joining Symphony in 2001, Mason was a Managing Director in
FleetBoston's Technology & Communications Group, where he headed its five member
Structuring and Advisory Team. He joined FleetBoston in 1995 as an Assistant
Vice President in its Media & Communications Group. Previously, Mason worked for
Wells Fargo Bank's Corporate Banking Group dealing primarily with leveraged
transactions and for Coopers & Lybrand as an auditor. He holds an M.B.A. in
Finance from the University of Chicago, a B.S. in Accounting from Babson College
and is also a C.P.A.
B. OTHER ACCOUNTS MANAGED BY SYMPHONY
GUNTHER STEIN LENNY MASON
(a) RICS
Number of accts 7 7
Assets ($000s) $ 2,790,982 $ 2,790,982
(b) Other pooled accts
Non-performance fee accts
Number of accts 2 2
Assets ($000s) $ 520,932 $ 520,932
Performance fee accts
Number of accts 9 6
Assets ($000s) $ 846,422 $ 407,989
(c) Other
Non-performance fee accts
Number of accts 5 5
Assets ($000s) $ 1,513 $ 1,366
Performance fee accts
Number of accts 3 0
Assets ($000s) $ 262,097
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST
As described above, the portfolio manager may manage other accounts with
investment strategies similar to the Fund, including other investment companies
and separately managed accounts. Fees earned by the sub-advisers may vary among
these accounts and the portfolio managers may personally invest in some but not
all of these accounts. These factors could create conflicts of interest because
a portfolio manager may have incentives to favor certain accounts over others,
resulting in other accounts outperforming the Fund. A conflict may also exist if
a portfolio manager identified a limited investment opportunity that may be
appropriate for more than one account, but the Fund is not able to take full
advantage of that opportunity due to the need to allocate that opportunity among
multiple accounts. In addition, the portfolio manager may execute transactions
for another account that may adversely impact the value of securities held by
the Fund. However, the sub-advisers believe that these risks are mitigated by
the fact that accounts with like investment strategies managed by a particular
portfolio manager are generally managed in a similar fashion, subject to
exceptions to account for particular investment restrictions or policies
applicable only to certain accounts, differences in cash flows and account
sizes, and other factors. In addition, each sub-adviser has adopted trade
allocation procedures that require equitable allocation of trade orders for a
particular security among participating accounts.
D. FUND MANAGER COMPENSATION
Symphony investment professionals receive competitive base salaries and
participate in a bonus pool which is tied directly to the firm's operating
income with a disproportionate amount paid to the managers responsible for
generating the alpha. The bonus paid to investment personnel is based on acumen,
overall contribution and strategy performance. However, there is no fixed
formula which guides bonus allocations. Bonuses are paid on an annual basis. In
addition, investment professionals may participate in an equity-based
compensation pool.
E. OWNERSHIP OF JQC SECURITIES AS DECEMBER 31, 2005.
- --------------------- ------ ------------ ----------------- ------------------- ------------------- ---------------- ---------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
- --------------------- ------ ------------ ----------------- ------------------- ------------------- ---------------- ---------------
Gunther Stein X
- --------------------- ------ ------------ ----------------- ------------------- ------------------- ---------------- ---------------
Lenny Mason X
- --------------------- ------ ------------ ----------------- ------------------- ------------------- ---------------- ---------------
NWQ INVESTMENT MANAGEMENT
A. PORTFOLIO MANAGER BIOGRAPHIES
Jon D. Bosse, CFA, is Chief Investment Officer and Portfolio Manager of NWQ and
has been a Managing Director of NWQ since 1996.
Mr. David Iben, CFA, is Managing Director and Portfolio Manager of NWQ since
joining the firm in November 2000, and is also Chief Investment Officer and
Managing Director of NWQ's affiliate, Tradewinds NWQ Global Investors, LLC. He
has co-managed the NWQ-subadvised segment of Nuveen Tax Advantaged Fund since
the fund's inception. From October 1998 through November 2000, Mr. Iben was
Founder, Chief Investment Officer and lead portfolio manager at Palladian
Capital Management. Prior to founding Palladian he spent 14 years with Farmer's
Group Inc. as Vice President and Portfolio Manager, and earned an MBA from
University of Southern California.
B. OTHER ACCOUNTS MANAGED BY NWQ
- ------------------------------------------------------------------------------------------------------------------------------------
(a)(1) (a)(2) For each person identified in column (a)(1), provide (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the
Identify number of accounts other than the Funds managed by the categories in column (a)(2), provide number of
portfolio person within each category below and the total accounts and the total assets in the accounts
manager(s) assets in the accounts managed within each category below with respect to which the ADVISORY FEE IS BASED
of the ON THE PERFORMANCE OF THE ACCOUNT
Adviser to
be named in
the Fund
prospectus
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Registered Investment Other Pooled Other Accounts Registered Other Pooled Other Accounts
Companies Investment Investment Investment
Vehicles Companies Vehicles
- -------------- --------------------- ------------------- -------------------- -------------- ----------------- --------------------
Number Total Number Total Number Total Number Total Number of Total Number Total
of Assets of Assets of Assets of Assets Accounts Assets of Assets
Accounts ($mil)* Accounts ($mil)* Accounts ($mil)* Accounts Accounts ($mil)*
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
David Iben 3 $172.9 0 - 6,405 $3,263 - - - - - -
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
Jon Bosse 5 $943.0 8 $758.1 54,127 $26,706 - - - - 9 $66.2
- -------------- -------- ------------ -------- ---------- -------- ----------- -------- ------ ---------- ------ -------- ----------
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one account.
More specifically, portfolio managers who manage multiple accounts are presented
with the following potential conflicts:
o The management of multiple accounts may result in a portfolio manager
devoting unequal time and attention to the management of each account.
NWQ seeks to manage such competing interests for the time and
attention of portfolio managers by having portfolio managers focus on
a particular investment discipline. Most accounts managed by a
portfolio manager in a particular investment strategy are managed
using the same investment models.
o If a portfolio manager identifies a limited investment opportunity
which may be suitable for more than one account, an account may not be
able to take full advantage of that opportunity due to an allocation
of filled purchase or sale orders across all eligible accounts. To
deal with these situations, NWQ has adopted procedures for allocating
portfolio transactions across multiple accounts.
o With respect to many of its clients' accounts, NWQ determines which
broker to use to execute transaction orders, consistent with its duty
to seek best execution of the transaction. However, with respect to
certain other accounts, NWQ may be limited by the client with respect
to the selection of brokers or may be instructed to direct trades
through a particular broker. In these cases, NWQ may place separate,
non-simultaneous, transactions for a Fund and other accounts which may
temporarily affect the market price of the security or the execution
of the transactions, or both, to the detriment of the Fund or the
other accounts.
o The Fund is subject to different regulation than other pooled
investment vehicles and other accounts managed by the portfolio
managers. As a consequence of this difference in regulatory
requirements, the Fund may not be permitted to engage in all the
investment techniques or transactions or to engage in these
transactions to the same extent as the other accounts managed by the
portfolio managers. Finally, the appearance of a conflict of interest
may arise where NWQ has an incentive, such as a performance-based
management fee, which relates to the management of some accounts, with
respect to which a portfolio manager has day-to-day management
responsibilities.
NWQ has adopted certain compliance procedures which are designed to address
these types of conflicts common among investment managers. However, there is no
guarantee that such procedures will detect each and every situation in which a
conflict arises.
D. FUND MANAGER COMPENSATION
NWQ's portfolio managers participate in a highly competitive compensation
structure with the purpose of attracting and retaining the most talented
investment professionals and rewarding them through a total compensation program
as determined by the firm's executive committee. The total compensation program
consists of both a base salary and an annual bonus that can be a multiple of the
base salary. The portfolio manager's performance is formally evaluated annually
and based on a variety of factors. Bonus compensation is primarily a function of
the firm's overall investment performance of client portfolios in the strategy
they manage relative to the strategy's general benchmark for one, three and five
year periods (as applicable), as well as an objective review of stock
recommendations and the quality of primary research, and subjective review of
the professional's contributions to portfolio strategy, teamwork, collaboration
and work ethic.
The total compensation package includes availability of equity-like incentive
for purchase (whose value is determined by the increase in profitability of NWQ
over time) made to most investment professionals. NWQ is a subsidiary of Nuveen
Investments, Inc., which has augmented this incentive compensation annually
through individual awards of a stock option pool, as determined through a
collaborative process between Nuveen Investments and the NWQ executive
committee.
E. OWNERSHIP OF JDD SECURITIES AS DECEMBER 31, 2005.
- ---------------------- ------ ----------- ----------------- ------------------- ------------------- ---------------- ---------------
Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over
$1,000,000 $1,000,000
- ---------------------- ------ ----------- ----------------- ------------------- ------------------- ---------------- ---------------
David Iben X
- ---------------------- ------ ----------- ----------------- ------------------- ------------------- ---------------- ---------------
Jon Bosse X
- ---------------------- ------ ----------- ----------------- ------------------- ------------------- ---------------- ---------------
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board during the reporting period and
implemented after the registrant last provided disclosure in response to this
Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Investor Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Diversified Dividend and Income Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: March 9, 2006
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: March 9, 2006
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: March 9, 2006
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.