UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21471
-----------------------
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
---------------------
Date of fiscal year end: December 31
-------------------
Date of reporting period: June 30, 2006
---------------------
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.
SEMIANNUAL REPORT JUNE 30, 2006
NUVEEN INVESTMENTS
EXCHANGE-TRADED
CLOSED-END
FUNDS
NUVEEN
TAX-ADVANTAGED
TOTAL RETURN
STRATEGY FUND
JTA
OPPORTUNITIES FOR CAPITAL
APPRECIATION AND
TAX-ADVANTAGED DISTRIBUTIONS
FROM A PORTFOLIO OF VALUE
EQUITIES AND SENIOR LOANS
NUVEEN LOGO
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<Table>
WWW.INVESTORDELIVERY.COM OR WWW.NUVEEN.COM/ACCOUNTACCESS
if you get your Nuveen Fund if you get your Nuveen Fund
dividends and statements from dividends and statements directly
your financial advisor or from Nuveen.
brokerage account.
(Be sure to have the address
sheet that accompanied this
report handy. You'll need it to
complete the enrollment process.)
</Table>
NUVEEN LOGO
(TIMOTHY R. SCHWERTFEGER PHOTO)
Timothy R. Schwertfeger
Chairman of the Board
CHAIRMAN'S
LETTER TO SHAREHOLDERS
Dear Shareholder:
I am very pleased to report that over the six-month period covered by this
report, your Fund continued to provide you with attractive tax-advantaged
income and capital appreciation potential. For more information on your
Fund's performance, please read the Portfolio Managers' Comments,
Performance Overview, and Distribution and Share Price Information
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 income, an investment like your Fund may help you achieve and
benefit from greater portfolio diversification. Your financial advisor can
explain these potential advantages in more detail. I urge you to contact
him or her soon for more information on this important investment
strategy.
"IN ADDITION TO PROVIDING REGULAR MONTHLY INCOME, AN INVESTMENT LIKE YOUR FUND
MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO DIVERSIFICATION."
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,
(TIMOTHY R. SCHWERTFEGER SIG)
Timothy R. Schwertfeger
Chairman of the Board
August 11, 2006
Nuveen Investments Exchange-Traded Closed-End Funds (JTA)
PORTFOLIO MANAGERS'
COMMENTS
The Fund features management by two affiliates of Nuveen Investments. The Fund's
investments in dividend-paying common or preferred stocks are managed by NWQ
Investment Management Company, LLC (NWQ), while the Fund's investments in senior
corporate loans and other debt instruments are managed by Symphony Asset
Management, LLC (Symphony).
Jon Bosse, Chief Investment Officer of NWQ, leads the Fund's management team at
that firm. He has more than 22 years of corporate finance and investment
management experience.
The Symphony team is led by Gunther Stein and Lenny Mason, who have more than 25
years of combined investment management experience, much of it in evaluating and
purchasing senior corporate loans and other high-yield debt.
Here Jon, Gunther and Lenny talk about general market conditions, their
management strategies and the performance of the Fund for the six-month period
ended June 30, 2006.
WHAT WAS YOUR STRATEGY IN MANAGING THE FUND DURING THE SIX-MONTH PERIOD ENDED
JUNE 30, 2006?
In the dividend paying stock portion of the Fund's portfolio, there were no
changes to our management strategy during the period as the portfolio's assets
continued to be well-diversified, and invested in dividend producing common or
preferred stocks. We employ an opportunistic approach to investing, utilizing a
bottom-up strategy that is focused on identifying attractively valued companies
which possess favorable risk/reward characteristics and emerging catalysts that
we believe could unlock value or improve profitability. These catalysts include
management changes, restructuring efforts, recognition of hidden assets/free
options, or a turn in the underlying fundamentals. We also continue to focus on
downside protection, and pay a great deal of attention to a company's Balance
Sheet and Cash Flow Statement, not just the Income Statement. We focus on cash
flow analysis believing it offers a more objective and truer picture of a
company's financial position than an evaluation based on earnings alone.
During the period, we took new positions in five common stock securities, and
added to our stakes in several existing holdings. The new investments include
CBS Corporation, Clear Channel Communications, Inc., Pfizer Inc., Stora Enso
Oyj, and Vodafone Group PLC. Our analyses indicated these companies possessed
solid fundamentals, compelling valuations, and an attractive risk/reward
relationship. Conversely, we eliminated our positions in Albertson's, Inc.,
Arkema, Embarq Corp., Kerr-McGee Corporation, Sprint-Nextel Corporation, and
Tronox Inc.
4
We continue to view the leveraged loan market favorably with near historic low
default rates over the past 24 months, improved market liquidity and new
companies coming to market. In addition, the volatility experienced in the
second quarter has presented new opportunities in the new-issue market. Strong
investor demand, however, has allowed many deals to be structured with
aggressive leverage levels and with weaker credit fundamentals. Concerned about
credits we feel are too aggressively leveraged or do not have a strong enough
credit profile, we have continued to position the portfolio in a defensive
manner, investing only in those senior loans that we believe have sold
collateral, appropriate covenants and attractive pricing.
HOW DID THE FUND PERFORM OVER THE PERIOD?
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 six-months ended June 30, 2006
<Table>
<Caption>
- -------------------------------------------------------------------------------------------
JTA 7.98%
- -------------------------------------------------------------------------------------------
Comparative Benchmark(1) 7.02%
- -------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
1 The comparative benchmark designed to reflect the portfolio composition of JTA
is calculated by combining: 1) 56% of the return of the Russell 3000 Value
Index, which measures the performance of those Russell 3000 Index companies
with lower price-to-book ratios and lower forecasted growth values, 2) 16% of
the return of the MSCI EAFE ex-Japan Value Index, a capitalization weighted
index that selects the lower 50% of the price-to-book ranked value stocks
traded in the developed markets of Europe, Asia and the Far East, excluding
Japan, 3) 8% of the return of the Merrill Lynch DRD (dividends received
deduction) Preferred Index, which consists of investment-grade, DRD-eligible,
exchange-traded preferred stocks with one year or more to maturity, and 4) 20%
of the return of the CSFB Leveraged Loan Index, which consists of
approximately $150 billion of tradable term loans with at least one year to
maturity and rated BBB or lower. Index returns are not leveraged, and do not
include the effects of any sales charges or management fees. It is not
possible to invest directly in an index.
- --------------------------------------------------------------------------------
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.
As indicated in the accompanying table, the Nuveen Tax-Advantaged Total Return
Strategy Fund posted positive results for the six months ending June 30, 2006.
Results exceeded our benchmark by over 90 basis points. Several stocks across
the equity portfolio contributed to our out-performance; however, we would note
the large gains in Energias de Portugal SA, Kerr-McGee Corp., and POSCO for the
period. With a gain of over 50% for the period, our best performing holding was
Kerr-McGee, as the company received an all-cash takeover offer from Anadarko
Petroleum Corp. Our remaining energy investments posted returns of 5-13% as high
oil prices and increased production volumes drove record earnings and cash
flows. Increased industry consolidation and positive fundamentals also
contributed to the 35% rise in our shares of Korean-based steel manufacturer,
POSCO. The portfolio's investment in iron-ore manufacturer Rio Tinto PLC also
posted a double-digit gain.
5
The qualified dividend income (QDI) eligible preferred stock portion of the
portfolio outperformed the Merrill Lynch DRD Preferred Index for the first
six-months of the year posting a -0.4% return vs. -1.7% for the index. DRD
Preferreds continue to outperform longer maturity issues as the Merrill Lynch
15+ year Corporate & Treasury indices returned -4.9% and -5.5%, respectively,
for the first half of the year. The JTA portfolio benefited from holding an
allocation in floating-rate preferreds as their low effective durations and
investor demand allowed their prices to hold steady even as fixed rate preferred
prices fell.
One security that positively impacted the performance of the senior loan
component of the fund's performance over the first quarter was the Federal Mogul
term loan. The Federal Mogul term loan traded up during the period due to the
expectation that the company will emerge out of bankruptcy soon. Successful
restructuring efforts and financial results show progress on the company's
chapter 11 emergence.
The Fund had several positions that constrained performance over this reporting
period. Our common stock investments in International Paper Company and
Packaging Corp. of America posted modest declines of 4% due to rising cost
pressures and weak demand characteristics in the paper industry. Alumina Limited
declined 8% on rising cost pressures and concerns of increased Chinese
production, and our investments in insurance broker, Aon Corporation, struggled
modestly after reporting core operating earnings that were slightly below
expectations. The stock had appreciated strongly in the past year, moving its
valuation a bit ahead of itself. Notwithstanding the recent softness in the
stock price, we believe the Aon story remains very compelling as the company is
well-positioned to generate strong revenue growth and margin expansion through
ongoing restructuring initiatives and the possible monetization of its
underwriting businesses.
One additional position that had a negative impact on the portfolio was D.R.
Horton, Inc. The D.R. Horton 7.5% corporate bonds have traded down during the
period due to the decrease in new home orders, investor concern about a severe
slowdown in homebuilding activity, and increasing mortgage rates.
6
DISTRIBUTION AND SHARE PRICE
INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferred(TM), and entered into a series of short-term
borrowing arrangements. This FundPreferred and borrowing provides a degree of
financial leverage that can enhance the Fund's returns and supplement the income
available to pay common shareholder distributions, but also can increase share
price volatility. This leveraging strategy provided incremental income and
helped enhance shareholder distributions over this reporting period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. Under this policy, the Fund's monthly
distributions will be paid from net investment income generated by its
underlying investments as well as from net realized capital gains and/or returns
of capital, generally representing net unrealized capital gains. The Fund
declared a monthly distribution increase in June to $0.1300 per share.
As of June 30, 2006, the Fund was trading at a -2.83% discount to its net asset
value. This was less than the average -5.08% discount the Fund exhibited over
the course of the entire six-month reporting period.
We are providing shareholders with an estimate of the source of the Fund's
monthly distribution as of June 30, 2006. These estimates may, and likely will,
vary over time based on the investment activities of the Fund and changes in the
value of portfolio investments. The final determination of the source and tax
characteristics of all distributions will be made after December 31, 2006 and
reported to you on Form 1099-DIV early in 2007. More details about the Fund's
distributions are available monthly on www.nuveen.com/cef.
The Fund estimates that its monthly distribution is comprised of 45% net
investment income and, pursuant to the Fund's managed distribution policy, 55%
capital appreciation consisting of either net realized capital gains and/or a
return of capital, generally representing net unrealized capital gains.
The foregoing presents information about the expected tax characteristics of the
Fund's distributions, to conform to a federal securities law requirement that
any fund paying distributions from any sources other than net income disclose to
shareholders the distribution portions attributable to such other sources. The
Fund provides this type of
7
information on a tax basis, instead of on a generally accepted accounting
principles (GAAP) basis, because experience has shown that fund shareholders are
most concerned about the tax character of their distributions (and might well be
confused by information about distribution characteristics that differed from
the tax-based characteristics), and because the Fund also believes that the
distributions' tax characteristics fairly represent the economic basis of the
Fund's distributions and returns. The breakdown of distribution characteristics
according to GAAP likely would differ from the expected tax characteristics
shown above.
8
Nuveen Tax-Advantaged Total Return Strategy Fund
JTA
PERFORMANCE
OVERVIEW As of June 30, 2006
<Table>
PORTFOLIO APPLICATION
(as a % of total investments)
- -------------------------------------------------------------------------------------
Common Stocks 72.6%
- -------------------------------------------------------------------------------------
Variable Rate Senior Loan Interests 16%
- -------------------------------------------------------------------------------------
$25 Par (or similar) Securities 8.1%
- -------------------------------------------------------------------------------------
Corporate Bonds 1.4%
- -------------------------------------------------------------------------------------
Short-Term Investments 1.2%
- -------------------------------------------------------------------------------------
Capital Preferred Securities 0.7%
- -------------------------------------------------------------------------------------
</Table>
Bar Chart:
2005-2006 MONTHLY DISTRIBUTIONS PER SHARE
<Table>
Jul 0.100
Aug 0.100
Sep 0.105
Oct 0.105
Nov 0.105
Dec 0.105
Jan 0.125
Feb 0.125
Mar 0.125
Apr 0.125
May 0.125
Jun 0.130
</Table>
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
<Table>
7/01/05 19.93
19.94
19.93
20.00
19.97
19.99
20.00
20.00
19.95
19.98
20.00
20.00
19.95
19.95
19.99
19.89
20.00
19.99
20.04
20.00
20.00
20.00
20.15
20.24
20.65
20.39
20.35
20.25
20.29
20.00
20.18
20.10
20.05
19.97
19.84
20.03
19.87
19.87
19.90
19.90
19.94
19.94
19.92
19.85
20.10
20.18
20.20
20.21
20.18
20.40
20.54
20.40
20.45
20.30
20.25
20.35
20.20
20.06
19.98
20.00
19.93
19.89
19.86
19.99
20.19
20.12
20.10
19.91
19.99
19.96
20.03
20.00
19.52
19.54
19.75
19.80
19.65
19.45
19.24
19.25
19.45
19.24
19.27
19.33
19.60
19.80
19.97
19.96
20.00
20.09
20.13
19.94
20.08
19.61
19.93
19.99
19.67
19.97
19.86
19.99
20.02
20.03
20.03
20.20
20.15
20.09
19.94
20.03
20.05
20.02
20.19
20.24
20.28
20.45
20.40
20.15
20.70
20.86
21.09
21.00
20.79
20.90
20.86
21.17
20.95
21.21
21.21
21.37
21.37
21.30
21.00
20.80
20.93
21.50
21.73
21.60
21.82
21.76
21.67
21.60
21.49
21.48
21.31
21.48
21.98
21.98
22.50
21.99
21.80
22.11
22.11
22.25
21.79
21.80
21.90
22.00
22.03
21.60
21.67
21.84
22.10
22.15
22.29
22.60
22.59
22.75
22.77
22.77
22.67
22.67
22.74
22.80
22.42
22.15
21.87
21.78
21.88
21.96
22.15
22.19
22.45
22.72
22.56
22.40
22.65
22.99
22.65
22.85
22.97
22.60
22.39
22.28
22.30
22.24
22.28
22.18
22.15
21.97
22.11
21.95
21.50
21.61
21.70
21.86
21.98
22.08
21.97
21.95
21.95
22.00
22.00
21.90
22.40
22.44
22.30
22.37
22.47
22.27
22.10
21.92
21.74
21.60
22.00
21.35
21.64
21.51
20.84
21.15
21.27
21.72
21.77
21.44
21.67
21.99
22.45
22.34
22.20
22.03
22.09
22.23
22.40
22.20
22.16
22.00
22.09
22.05
22.25
22.34
22.31
22.20
22.46
22.50
22.35
22.49
6/30/06 22.69
</Table>
FUND SNAPSHOT
<Table>
- ----------------------------------------------------------------------
Common Share Price $22.69
- ----------------------------------------------------------------------
Common Share Net Asset Value $23.35
- ----------------------------------------------------------------------
Premium/(Discount) to NAV -2.83%
- ----------------------------------------------------------------------
Current Distribution Rate(1) 6.88%
- ----------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $323,517
- ----------------------------------------------------------------------
</Table>
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/27/04)
<Table>
<Caption>
- -------------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
- -------------------------------------------------------------------------------------
6-Month
(Cumulative) 9.82% 7.98%
- -------------------------------------------------------------------------------------
1-Year 24.28% 18.91%
- -------------------------------------------------------------------------------------
Since
Inception 12.48% 15.43%
- -------------------------------------------------------------------------------------
</Table>
INDUSTRIES
(as a % of total investments)
<Table>
- -------------------------------------------------------------------
Diversified Telecommunication Services 8.6%
- -------------------------------------------------------------------
Tobacco 6.8%
- -------------------------------------------------------------------
Oil, Gas & Consumable Fuels 6.1%
- -------------------------------------------------------------------
Aerospace & Defense 5.8%
- -------------------------------------------------------------------
Diversified Financial Services 5.8%
- -------------------------------------------------------------------
Commercial Banks 5.6%
- -------------------------------------------------------------------
Insurance 5.4%
- -------------------------------------------------------------------
Electric Utilities 5.1%
- -------------------------------------------------------------------
Thrifts & Mortgage Finance 5.0%
- -------------------------------------------------------------------
Media 4.9%
- -------------------------------------------------------------------
Metals & Mining 4.3%
- -------------------------------------------------------------------
Multi-Utilities 3.3%
- -------------------------------------------------------------------
Commercial Services & Supplies 3.2%
- -------------------------------------------------------------------
Hotels, Restaurants & Leisure 3.1%
- -------------------------------------------------------------------
Pharmaceuticals 2.9%
- -------------------------------------------------------------------
Household Products 2.9%
- -------------------------------------------------------------------
Paper & Forest Products 2.9%
- -------------------------------------------------------------------
Household Durables 2.5%
- -------------------------------------------------------------------
Containers & Packaging 1.9%
- -------------------------------------------------------------------
Other 13.9%
- -------------------------------------------------------------------
</Table>
COUNTRIES
(as a % of total investments)
<Table>
- -------------------------------------------------------------------
United States 79.1%
- -------------------------------------------------------------------
United Kingdom 6.5%
- -------------------------------------------------------------------
South Korea 4.4%
- -------------------------------------------------------------------
Italy 3.1%
- -------------------------------------------------------------------
Portugal 1.7%
- -------------------------------------------------------------------
Other 5.2%
- -------------------------------------------------------------------
</Table>
1 Current Distribution Rate 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.
9
Shareholder
MEETING REPORT
The shareholder meeting was held in the offices of Nuveen Investments on March
29, 2006.
<Table>
<Caption>
- -------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Common and
Preferred Preferred
shares voting shares voting
together together
as a class as a class
- -------------------------------------------------------------------------------------------
Robert P. Bremner
For 13,020,521 --
Withhold 94,654 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
Lawrence H. Brown
For 12,999,869 --
Withhold 115,306 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
Jack B. Evans
For 13,018,544 --
Withhold 96,631 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
William C. Hunter
For 13,022,184 --
Withhold 92,991 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
David J. Kundert
For 13,020,116 --
Withhold 95,059 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
William J. Schneider
For -- 1,707
Withhold -- 1
- -------------------------------------------------------------------------------------------
Total -- 1,708
- -------------------------------------------------------------------------------------------
Timothy R. Schwertfeger
For -- 1,707
Withhold -- 1
- -------------------------------------------------------------------------------------------
Total -- 1,708
- -------------------------------------------------------------------------------------------
Judith M. Stockdale
For 13,035,124 --
Withhold 80,051 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
Eugene S. Sunshine
For 13,021,234 --
Withhold 93,941 --
- -------------------------------------------------------------------------------------------
Total 13,115,175 --
- -------------------------------------------------------------------------------------------
</Table>
10
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA)
Portfolio of
INVESTMENTS June 30, 2006 (Unaudited)
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 100.0% (72.6% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 6.3%
140,000 Lockheed Martin Corporation $ 10,043,600
235,000 Raytheon Company 10,473,950
- -------------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 20,517,550
------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 5.0%
150,000 Wachovia Corporation 8,112,000
120,000 Wells Fargo & Company 8,049,600
- -------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 16,161,600
------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 3.6%
285,000 Pitney Bowes Inc. 11,770,499
- -------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 2.0%
300,000 Packaging Corp. of America 6,606,000
- -------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 6.8%
275,000 Citigroup Inc. 13,265,999
205,000 JPMorgan Chase & Co. 8,610,000
- -------------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 21,875,999
------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 10.6%
385,000 AT&T Inc. 10,737,650
343,000 KT Corporation, Sponsored ADR 7,357,350
235,000 Telecom Italia S.p.A., Sponsored ADR 6,041,850
301,500 Verizon Communications Inc. 10,097,235
- -------------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 34,234,085
------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 4.2%
187,100 EDP - Energias de Portugal, S.A., Sponsored ADR 7,356,772
Korea Electric Power Corporation (KEPCO),
323,000 Sponsored ADR 6,124,080
- -------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 13,480,852
------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 1.7%
240,625 J. Sainsbury PLC, Sponsored ADR 5,895,313
- -------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 2.5%
307,000 Newell Rubbermaid Inc. 7,929,810
- -------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 3.1%
160,000 Kimberly-Clark Corporation 9,872,000
- -------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 4.4%
214,300 Aon Corporation 7,461,926
80,000 Hartford Financial Services Group, Inc. 6,768,000
- -------------------------------------------------------------------------------------------------------------------------------
Total Insurance 14,229,926
------------------------------------------------------------------------------------------------------------------
MEDIA - 3.4%
200,000 CBS Corporation, Class B 5,410,000
176,600 Clear Channel Communications, Inc. 5,465,770
- -------------------------------------------------------------------------------------------------------------------------------
Total Media 10,875,770
------------------------------------------------------------------------------------------------------------------
METALS & MINING - 5.5%
236,900 Alumina Limited, Sponsored ADR 4,761,690
90,000 POSCO, ADR 6,021,000
33,500 Rio Tinto PLC, Sponsored ADR 7,025,285
- -------------------------------------------------------------------------------------------------------------------------------
Total Metals & Mining 17,807,975
------------------------------------------------------------------------------------------------------------------
</Table>
11
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- -------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 3.9%
110,000 Dominion Resources, Inc. $ 8,226,900
180,000 United Utilities PLC, Sponsored ADR 4,267,800
- -------------------------------------------------------------------------------------------------------------------------------
Total Multi-Utilities 12,494,700
------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 8.5%
80,000 Chevron Corporation 4,964,800
113,400 ConocoPhillips 7,431,102
132,500 Eni S.p.A., Sponsored ADR 7,784,375
110,000 Total SA, Sponsored ADR 7,207,200
- -------------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas & Consumable Fuels 27,387,477
------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 3.4%
220,000 International Paper Company 7,106,000
270,200 Stora Enso Oyj, Sponsored ADR 3,777,396
- -------------------------------------------------------------------------------------------------------------------------------
Total Paper & Forest Products 10,883,396
------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 4.0%
230,000 Merck & Co. Inc. 8,378,900
198,000 Pfizer Inc. 4,647,060
- -------------------------------------------------------------------------------------------------------------------------------
Total Pharmaceuticals 13,025,960
------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 2.6%
90,000 Union Pacific Corporation 8,366,400
- -------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 6.9%
212,000 Fannie Mae 10,197,200
265,000 IndyMac Bancorp, Inc. 12,150,249
- -------------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 22,347,449
------------------------------------------------------------------------------------------------------------------
TOBACCO - 9.3%
235,000 Altria Group, Inc. 17,256,046
250,000 Loews Corp - Carolina Group 12,842,499
- -------------------------------------------------------------------------------------------------------------------------------
Total Tobacco 30,098,545
------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 2.3%
352,000 Vodafone Group PLC 7,497,600
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $267,902,886) 323,358,906
------------------------------------------------------------------------------------------------------------------
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- -------------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) SECURITIES - 11.1% (8.1% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.1%
25,000 Goldman Sachs Group Inc., (6) 5.843% A2 $ 639,063
20,000 Goldman Sachs Group Inc., (6) 6.200% A2 494,000
77,700 Lehman Brothers Holdings Inc., Series F, (6) 6.500% A- 1,949,493
25,000 Merrill Lynch & Co., Inc., (6) 5.880% A2 634,250
- -------------------------------------------------------------------------------------------------------------------------------
Total Capital Markets 3,716,806
------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.7%
23,500 Abbey National PLC, Series B 7.375% A 614,760
41,100 Abbey National PLC, Series C 7.375% A2 1,052,160
40,000 ABN AMRO Capital Trust Fund VII 6.080% A 905,600
25,000 Banco Santander 6.410% A2 600,000
50,000 HSBC USA Inc., Series G 5.825% A2 1,286,000
50,000 HSBC USA Inc., (6) 6.500% A 1,264,065
40,000 Royal Bank of Scotland Group PLC, Series M 6.400% A1 961,600
40,000 Royal Bank of Scotland Group PLC, Series N 6.350% A1 946,000
40,000 U.S. Bancorp, Series B 6.100% A1 1,017,500
- -------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 8,647,685
------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 0.6%
35,600 SLM Corporation, Series A, (6) 6.970% BBB+ 1,897,480
- -------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.3%
10,000 CIT Group Inc., Series A, (6) 6.350% BBB+ 245,100
19,500 Citigroup Inc., Series F, (6) 6.365% Aa3 980,850
28,900 Citigroup Inc., Series H, (6) 6.231% Aa3 1,469,565
</Table>
12
<Table>
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- -------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (continued)
48,400 ING Group N.V. 7.200% A $ 1,234,684
5,000 ING Group N.V. 7.050% A 126,150
- -------------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 4,056,349
------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.4%
39,500 Alabama Power Company, Series A, (6) 5.300% BBB+ 895,465
34,700 Interstate Power and Light Company, (6) 7.100% Baa2 900,292
40,000 Mississippi Power Company 5.250% A3 919,800
40,000 PPL Electric Utilities Corporation 6.250% BBB 972,500
40,000 Savannah Electric and Power Company 6.000% BBB+ 969,000
- -------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 4,657,057
------------------------------------------------------------------------------------------------------------------
INSURANCE - 2.6%
50,300 Ace Ltd., Series C 7.800% Baa2 1,300,255
25,000 Aegon N.V., Series 1 6.085% A- 634,375
60,000 Aegon N.V. 6.375% A- 1,406,400
20,000 Arch Capital Group Limited 8.000% Baa3 508,800
50,000 Endurance Specialty Holdings Limited 7.750% Baa3 1,205,500
40,000 Genworth Financial Inc., Series A 5.250% BBB+ 1,968,752
30,000 Prudential PLC 6.750% A 734,100
30,000 Prudential PLC 6.500% A- 725,700
- -------------------------------------------------------------------------------------------------------------------------------
Total Insurance 8,483,882
------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 1.4%
20,000 Fannie Mae, (6) 5.500% AA- 856,000
19,800 Fannie Mae, (6) 5.125% AA- 825,660
18,400 Federal Home Loan Mortgage Corporation, (6) 6.000% AA- 886,880
20,000 Federal Home Loan Mortgage Corporation, (6) 5.700% AA- 886,400
26,900 Federal Home Loan Mortgage Corporation, (6) 5.000% AA- 1,065,240
- -------------------------------------------------------------------------------------------------------------------------------
Total U.S. Agency 4,520,180
------------------------------------------------------------------------------------------------------------------
TOTAL $25 PAR (OR SIMILAR) SECURITIES (COST
$37,544,282) 35,979,439
------------------------------------------------------------------------------------------------------------------
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 22.0% (16.0% OF TOTAL INVESTMENTS) (4)
AEROSPACE & DEFENSE - 1.7%
$ 1,640 Hexcel Corporation, Term Loan B 6.813% 3/01/12 BB- $ 1,645,077
1,817 K&F Industries, Inc., Term Loan C 7.110% 11/18/12 B2 1,820,452
1,613 Vought Aircraft Industries, Inc., Term Loan 8.000% 12/22/11 B+ 1,627,378
Vought Aircraft Industries, Inc., Tranche B,
364 Letter of Credit 7.329% 12/22/10 B+ 365,682
- ----------------------------------------------------------------------------------------------------------------------------------
5,434 Total Aerospace & Defense 5,458,589
- ----------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 0.6%
2,000 Federal-Mogul Corporation, Term Loan A, (5) 7.600% 2/24/04 N/R 1,940,417
- ----------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.6%
1,774 PP Holding Corporation, Term Loan 8.350% 11/12/11 B 1,791,522
- ----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.6%
1,980 Rockwood Specialties Group, Inc., Term Loan E 7.126% 7/30/12 B+ 1,986,325
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
696 Allied Waste North America, Inc., Letter of Credit 5.750% 3/21/12 B1 693,778
1,792 Allied Waste North America, Inc., Term Loan B 6.759% 1/15/12 B1 1,786,677
- ----------------------------------------------------------------------------------------------------------------------------------
2,488 Total Commercial Services & Supplies 2,480,455
- ----------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.6%
Smurfit-Stone Container Corporation,
175 Deposit-Funded Commitment 7.584% 11/01/11 B+ 175,570
1,250 Smurfit-Stone Container Corporation, Term Loan B 7.984% 11/01/11 B+ 1,256,713
424 Smurfit-Stone Container Corporation, Term Loan C 7.459% 11/01/11 B+ 426,332
133 Smurfit-Stone Container Corporation, Tranche C-1 7.375% 11/01/11 B+ 133,782
- ----------------------------------------------------------------------------------------------------------------------------------
1,982 Total Containers & Packaging 1,992,397
- ----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES - 0.3%
824 Alderwoods Group, Inc., Term Loan B-2 7.082% 9/29/09 B1 826,167
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
13
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.2%
$ 2,000 Cebridge III LLC., Term Loan B 7.379% 11/05/13 B+ $ 1,991,071
2,000 Madison River Capital LLC, Term Loan 7.260% 7/29/12 B+ 2,006,875
- ----------------------------------------------------------------------------------------------------------------------------------
4,000 Total Diversified Telecommunication Services 3,997,946
- ----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.3%
995 Mirant Corporation, Term Loan 7.100% 1/03/13 BB- 994,378
- ----------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
1,583 Sensus Metering Systems Inc., Term Loan B-1 6.929% 12/17/10 B2 1,585,576
210 Sensus Metering Systems Inc., Term Loan B-2 7.351% 12/17/10 B2 210,612
- ----------------------------------------------------------------------------------------------------------------------------------
1,793 Total Electrical Equipment 1,796,188
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.5%
1,878 Davita Inc., Term Loan B 7.153% 10/05/12 B1 1,884,527
1,940 IASIS Healthcare LLC, Term Loan B 7.264% 6/22/11 B+ 1,954,146
998 Quintiles Transnational Corporation, Term Loan B 7.500% 3/31/13 B1 998,280
- ----------------------------------------------------------------------------------------------------------------------------------
4,816 Total Health Care Providers & Services 4,836,953
- ----------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 3.0%
1,995 24 Hour Fitness Worldwide, Inc., Term Loan B 7.809% 6/08/12 B 2,010,586
122 Cracker Barrel Delayed Draw Term Loan B-2, (7) (8) 0.750% 4/28/13 BB (229)
878 Cracker Barrel Term Loan B-1 6.630% 4/28/18 BB 876,724
1,955 Jack in the Box Inc., Term Loan B 6.613% 1/08/11 BB 1,965,182
1,985 Penn National Gaming, Inc., Term Loan B 6.911% 10/03/12 BB 1,993,271
1,000 Pinnacle Entertainment Inc., Term Loan 7.300% 12/14/11 B1 1,004,063
2,000 Venetian Casino Resort, LLC, Term Loan 7.250% 6/15/11 BB- 2,004,688
- ----------------------------------------------------------------------------------------------------------------------------------
9,935 Total Hotels, Restaurants & Leisure 9,854,285
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.4%
1,308 Sealy Mattress Company, Term Loan D 7.041% 4/06/12 BB- 1,311,471
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.9%
2,933 Solo Cup Company, Term Loan 7.842% 2/27/11 B2 2,946,246
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
1,180 Conseco, Inc., Term Loan 6.958% 6/22/10 BB- 1,182,451
- ----------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.1%
Fidelity National Information Services, Term Loan
1,730 B 6.920% 3/09/13 BB+ 1,731,149
1,980 SunGard Data Systems Inc., Term Loan B 7.660% 2/11/13 B+ 1,989,075
- ----------------------------------------------------------------------------------------------------------------------------------
3,710 Total IT Services 3,720,224
- ----------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.3%
760 Dresser-Rand Group, Inc., Term Loan 7.092% 10/10/10 B+ 767,151
- ----------------------------------------------------------------------------------------------------------------------------------
MEDIA - 3.4%
Cablevision Systems Corporation, Incremental Term
1,995 Loan 6.886% 3/24/13 Ba3 1,987,311
2,000 Charter Communications Inc., Term Loan B 7.755% 4/28/13 B 2,006,324
798 Emmis Operating Company, Term Loan 7.047% 11/10/11 B+ 800,910
1,995 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 7.749% 4/08/12 B+ 2,007,016
1,896 Regal Cinemas Corporation, Term Loan 7.238% 11/10/10 BB- 1,896,330
2,193 WMG Acquisition Corp., Term Loan 7.222% 2/28/11 B+ 2,200,899
- ----------------------------------------------------------------------------------------------------------------------------------
10,877 Total Media 10,898,790
- ----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.4%
1,032 Amsted Industries Incorporated, Delayed Draw Term 2.000% 4/05/11 B1 (7,738)
Loan B, (7) (8)
1,435 Amsted Industries Incorporated, Term Loan B 7.069% 4/05/13 B1 1,445,995
- ----------------------------------------------------------------------------------------------------------------------------------
2,467 Total Metals & Mining 1,438,257
- ----------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 0.6%
371 NRG Energy Inc., Credit Linked Deposit 7.499% 2/01/13 BB- 372,081
1,625 NRG Energy Inc., Term Loan 7.231% 2/01/13 BB- 1,628,202
- ----------------------------------------------------------------------------------------------------------------------------------
1,996 Total Multi-Utilities 2,000,283
- ----------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.6%
1,990 Georgia-Pacific Corporation, Term Loan B 7.340% 12/20/12 BB- 1,988,446
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
14
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 1.2%
$ 1,000 Capital Automotive LP., Term Loan 6.860% 12/16/10 BB+ $ 999,170
1,500 LNR Property Corporation, Term Loan B, WI/DD TBD TBD B2 1,506,563
1,438 LNR Property Corporation, Term Loan 8.132% 2/03/08 B2 1,440,208
- ----------------------------------------------------------------------------------------------------------------------------------
3,938 Total Real Estate Management & Development 3,945,941
- ----------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.9%
196 Brenntag Holdings, Acquisition Facility Term Loan 7.440% 1/20/14 B2 198,327
804 Brenntag Holdings, Term Loan 7.440% 1/20/14 B- 810,467
337 United Rentals Inc., Credit Linked Deposit 5.340% 2/13/11 B2 337,825
1,646 United Rentals Inc., Term Loan B 7.360% 2/14/11 B2 1,651,117
- ----------------------------------------------------------------------------------------------------------------------------------
2,983 Total Trading Companies & Distributors 2,997,736
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (COST
$ 72,163 $70,945,999) 71,152,618
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 1.9% (1.4% OF TOTAL INVESTMENTS)
HOTELS, RESTAURANTS & LEISURE - 1.3%
$ 2,000 MGM Mirage, Inc. 6.750% 8/01/07 BB $ 2,017,500
2,000 Park Place Entertainment 8.875% 9/15/08 BB+ 2,105,000
- ----------------------------------------------------------------------------------------------------------------------------------
4,000 Total Hotels, Restaurants & Leisure 4,122,500
- ----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.6%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 BBB- 2,034,036
- ----------------------------------------------------------------------------------------------------------------------------------
$ 6,000 TOTAL CORPORATE BONDS (COST $6,251,605) 6,156,536
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
SHARES DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 1.0% (0.7% OF TOTAL INVESTMENTS)
ELECTRIC UTILITIES - 1.0%
12,400 Consolidated Edison Company of New York Inc. 5.000% 8/01/53 A3 $ 1,078,800
5,000 Southern California Edison Company 6.125% 12/31/55 BBB- 470,313
9,000 Southern California Edison Company, Series A 5.349% 4/27/35 BBB- 892,407
10,000 Southern California Edison Company, Series C 6.000% 4/30/56 BBB- 936,250
- ----------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 3,377,770
-------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL PREFERRED SECURITIES (COST
$3,461,270) 3,377,770
-------------------------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.7% (1.2% OF TOTAL INVESTMENTS)
Repurchase Agreement with State Street Bank, dated
$ 5,384 6/30/06, repurchase price $5,385,367, collateralized by
$4,630,000 U.S. Treasury Bonds, 7.500%,
due 11/15/16 value 5,495,954 4.130% 7/03/06 $ 5,383,514
- -----------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $5,383,514) 5,383,514
-------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $391,489,556) - 137.7% 445,408,783
-------------------------------------------------------------------------------------------------------------------
FUNDNOTES - (24.1)% (78,000,000)
-------------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.3% 1,108,470
-------------------------------------------------------------------------------------------------------------------
FUNDPREFERRED SHARES, AT LIQUIDATION VALUE - (13.9)% (45,000,000)
-------------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100% $ 323,517,253
-------------------------------------------------------------------------------------------------------------------
</Table>
15
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
<Table>
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable
to Common shares unless otherwise noted.
(2) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by
Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be
below investment grade.
(3) Senior Loans 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 may occur. As a result,
the actual remaining maturity of Senior Loans held may be substantially less than the
stated maturities shown.
(4) 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.
(5) At or subsequent to June 30, 2006, this issue was under the protection of the Federal
Bankruptcy Court.
(6) Investment is eligible for the Dividends Received Deduction.
(7) Position represents an unfunded Senior Loan commitment outstanding at June 30, 2006.
(8) Negative value represents unrealized depreciation on Senior Loan commitment at June 30,
2006.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
ADR American Depositary Receipt.
TBD Senior Loan purchased on a when-issued or delayed-delivery basis. Certain details
associated with this purchase are not known prior to the settlement date of the
transaction. In addition, Senior Loans typically trade without accrued interest and
therefore a weighted average coupon rate is not available prior to settlement. At
settlement, if still unknown, the borrower or counterparty will provide the Fund with the
final weighted average coupon rate and maturity date.
</Table>
See accompanying notes to financial statements.
16
Statement of
ASSETS AND LIABILITIES June 30, 2006 (Unaudited)
<Table>
<Caption>
- ---------------------------------------------------------------------------
ASSETS
Investments, at value (cost $391,489,556) $ 445,408,783
Receivables:
Dividends 965,240
Interest 775,729
Investments sold 144,078
Reclaims 46,742
Deferred FundNotes offering costs 1,690,024
Other assets 27,203
- ---------------------------------------------------------------------------
Total assets 449,057,799
- ---------------------------------------------------------------------------
LIABILITIES
Cash overdraft 372,290
Payable for investments purchased 1,858,406
FundNotes 78,000,000
Accrued expenses:
Management fees 205,395
Other 83,801
FundNotes interest payable 10,790
FundPreferred share dividends payable 9,864
- ---------------------------------------------------------------------------
Total liabilities 80,540,546
- ---------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $ 323,517,253
- ---------------------------------------------------------------------------
Common shares outstanding 13,855,240
- ---------------------------------------------------------------------------
Net asset value per Common share outstanding (net assets
applicable to
Common shares, divided by Common shares outstanding) $ 23.35
- ---------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ---------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,552
Paid-in surplus 262,780,022
Undistributed (Over-distribution of) net investment income (5,304,166)
Accumulated net realized gain (loss) from investments 11,983,618
Net unrealized appreciation (depreciation) of investments 53,919,227
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $ 323,517,253
- ---------------------------------------------------------------------------
Authorized shares:
Common Unlimited
FundPreferred Unlimited
- ---------------------------------------------------------------------------
</Table>
See accompanying notes to financial statements.
17
Statement of
OPERATIONS Six Months Ended June 30, 2006 (Unaudited)
<Table>
<Caption>
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $172,180) $ 6,702,163
Interest 2,700,744
Fees 3,920
- -----------------------------------------------------------------------------
Total investment income 9,406,827
- -----------------------------------------------------------------------------
EXPENSES
Management fees 1,960,974
FundNotes interest expense and amortization of offering
costs 1,721,872
FundNotes and FundPreferred shares - auction fees 152,487
FundNotes and FundPreferred shares - dividend disbursing
agent fees 8,678
Shareholders' servicing agent fees and expenses 623
Custodian's fees and expenses 64,014
Trustees' fees and expenses 8,519
Professional fees 11,636
Shareholders' reports - printing and mailing expenses 33,710
Stock exchange listing fees 4,871
Investor relations expense 23,061
Other expenses 11,373
- -----------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 4,001,818
Custodian fee credit (1,782)
Expense reimbursement (706,002)
- -----------------------------------------------------------------------------
Net expenses 3,294,034
- -----------------------------------------------------------------------------
Net investment income 6,112,793
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 12,138,134
Change in net unrealized appreciation (depreciation) of
investments 7,180,054
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) 19,318,188
- -----------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From and in excess of net investment income (905,475)
From accumulated net realized gains --
- -----------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to FundPreferred shareholders (905,475)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations $24,525,506
- -----------------------------------------------------------------------------
</Table>
See accompanying notes to financial statements.
18
Statement of
CHANGES IN NET ASSETS (Unaudited)
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED
6/30/06 12/31/05
- ---------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 6,112,793 $ 11,442,855
Net realized gain (loss) from investments 12,138,134 12,944,299
Change in net unrealized appreciation (depreciation) of
investments 7,180,054 11,499,504
Distributions to FundPreferred shareholders:
From and in excess of net investment income (905,475) --
From net investment income -- (684,143)
From accumulated net realized gains -- (688,954)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares
from operations 24,525,506 34,513,561
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (10,460,706) --
From net investment income -- (10,801,295)
From accumulated net realized gains -- (12,626,529)
- ---------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (10,460,706) (23,427,824)
- ---------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
FundPreferred shares offering costs adjustments -- (82,512)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from
capital share transactions -- (82,512)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares 14,064,800 11,003,225
Net assets applicable to Common shares at the beginning of
period 309,452,453 298,449,228
- ---------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $323,517,253 $309,452,453
- ---------------------------------------------------------------------------------------------
Undistributed (Over-distribution of) net investment income
at the end of period $ (5,304,166) $ (50,778)
- ---------------------------------------------------------------------------------------------
</Table>
See accompanying notes to financial statements.
19
Statement of
CASH FLOWS Six Months Ended June 30, 2006 (Unaudited)
<Table>
<Caption>
- ----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHARES FROM OPERATIONS $ 24,525,506
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 investments (52,550,318)
Proceeds from sales of investments 49,785,483
Proceeds from (Purchases of) short-term investments, net 7,756,868
Amortization/(Accretion) of premiums and discounts, net 92,626
(Increase) Decrease in receivable for dividends 245,745
(Increase) Decrease in receivable for interest (74,949)
(Increase) Decrease in receivable for investments sold (111,657)
(Increase) Decrease in receivable for reclaims (16,080)
(Increase) Decrease in other assets (17,312)
Increase (Decrease) in payable for investments purchased (275,018)
Increase (Decrease) in accrued management fees (5,178)
Increase (Decrease) in accrued other liabilities (30,587)
Increase (Decrease) in FundPreferred share dividends
payable (6,784)
Net realized (gain) loss from investments (12,138,134)
Net realized (gain) loss from paydowns 63,012
Change in net unrealized (appreciation) depreciation of
investments (7,180,054)
- ----------------------------------------------------------------------------
Net cash provided by (used in) operating activities 10,063,169
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (10,460,706)
FundNotes:
(Increase) Decrease in deferred FundNotes offering costs 30,396
Increase (Decrease) in FundNotes interest payable* (5,149)
- ----------------------------------------------------------------------------
Net cash provided by (used in) financing activities (10,435,459)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (372,290)
Cash at the beginning of period --
- ----------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ (372,290)
- ----------------------------------------------------------------------------
</Table>
* Cash paid for interest on FundNotes (excluding amortization of FundNotes
offering costs) during the six months ended June 30, 2006, was $1,696,625.
See accompanying notes to financial statements.
20
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Total Return Strategy Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JTA." The Fund was organized
as a Massachusetts business trust on October 1, 2003.
The Fund seeks to provide a high level of after-tax total return consisting
primarily of tax-advantaged dividend income and capital appreciation by
investing primarily in a portfolio of dividend-paying common stocks that the
Fund believes at the time of investment are eligible to pay dividends that
qualify for favorable federal income taxation at rates applicable to long-term
capital gains ("tax-advantaged dividends"). The Fund will also invest to a more
limited extent in preferred securities that are eligible to pay tax-advantaged
dividends, as well as senior loans (both secured and unsecured), domestic
corporate bonds, notes and debentures, convertible debt securities, and other
similar types of corporate instruments, including high yield debt securities,
that are not eligible to pay tax-advantaged dividends.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities and senior
loans are generally provided by an independent pricing service approved by the
Fund's Board of Trustees and based on the mean between the bid and asked prices.
When price quotes are not readily available, the pricing service or, in the
absence of a pricing service for a particular investment, the Board of Trustees
of the Fund, or its designee, may establish fair value using a wide variety of
market data including yields or prices of investments of comparable quality,
type of issue, coupon, maturity and rating, market quotes or indications of
value from security dealers, evaluations of anticipated cash flows or
collateral, general market conditions and other information and analysis,
including the obligor's credit characteristics considered relevant by the
pricing service or the Board of Trustees' designee. Short-term investments are
valued at amortized cost, which approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that senior loan.
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/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 June 30, 2006, the
Fund had outstanding when-issued/delayed delivery purchase commitments of
$1,500,000.
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.
21
Notes to
FINANCIAL STATEMENTS (Unaudited) (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 per share. Subject to approval and oversight by the Fund's Board
of Trustees, the Fund seeks to maintain a stable distribution level designed to
deliver the long-term return potential of the Fund's investment strategy through
regular monthly distributions (a "Managed Distribution Policy"). Total
distributions during a calendar year generally will be made from the Fund's net
investment income, net realized capital gains and net unrealized capital gains
in the Fund's portfolio, if any. The portion of distributions paid from net
unrealized gains, if any, would be distributed from the Fund's assets and would
be treated by shareholders as a non-taxable distribution for tax purposes. If
the Fund's total return on net asset value exceeds total distributions during a
calendar year, the excess will be reflected as an increase in net asset value
per share. In the event that total distributions during a calendar year exceed
the Fund's total return on net asset value, the difference will be treated as a
return of capital for tax purposes and will reduce net asset value per share.
The final determination of the source and character of all distributions for the
fiscal year are made after the end of the fiscal year and reflected in the
financial statements contained in the annual report as of December 31 each year.
The actual character of distributions made by the Fund during the fiscal year
ended December 31, 2005, are reflected in the accompanying financial statements.
The distributions made by the Fund during the six months ended June 30, 2006,
are provisionally classified as being "From and in excess of net investment
income", and those distributions will be classified as being from net investment
income, net realized capital gains and/or a return of capital for tax purposes
after the fiscal year end. For purposes of calculating "Undistributed (Over-
distribution of) net investment income as of June 30, 2006, the distribution
amounts provisionally classified as "From and in excess of net investment
income" were treated as being entirely from net investment income. Consequently,
the financial statements at June 30, 2006, reflect an over-distribution of net
investment income.
FundNotes
The Fund has issued and outstanding 3,120 Series F FundNotes, $25,000 stated
value per share, that mature on April 24, 2034. The interest rate paid by the
Fund is determined every seven days, pursuant to a dutch auction process
overseen by the auction agent, and is payable at the end of each rate period.
For the six months ended June 30, 2006, the average daily balance of FundNotes
was $78 million with an average annualized interest rate (including amortization
of the FundNotes offering costs) of 4.45%.
FundPreferred Shares
The Fund has issued and outstanding 1,800 Series W FundPreferred shares, $25,000
stated value per share, as a means of effecting financial leverage. The dividend
rate paid by the Fund is determined every seven days, pursuant to a dutch
auction process overseen by the auction agent, and is payable at the end of each
rate period.
Derivative Financial Instruments
The Fund is authorized to invest in 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 invest in any such
instruments during the six months ended June 30, 2006.
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.
22
Organization and Offering Costs
Costs incurred by the Fund in connection with its offering of FundNotes are
recorded as a deferred charge which are being amortized over the 30 year life of
the FundNotes and included with "FundNotes interest expense and amortization of
offering costs" on the Statement of Operations.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the six months
ended June 30, 2006, nor during the fiscal year ended December 31, 2005.
3. INVESTMENT TRANSACTIONS
Purchases and sales (excluding short-term investments) during the six months
ended June 30, 2006, aggregated $52,550,318 and $49,785,483, respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization, and timing differences in recognizing certain gains and
losses on investment transactions.
At June 30, 2006, the cost of investments was $391,807,120.
Gross unrealized appreciation and gross unrealized depreciation of investments
at June 30, 2006, were as follows:
<Table>
- -----------------------------------------------------------------------------------
Gross unrealized:
Appreciation $63,223,722
Depreciation (9,622,059)
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $53,601,663
- -----------------------------------------------------------------------------------
</Table>
The tax components of undistributed net ordinary income and net long-term
capital gains at December 31, 2005, the Fund's last tax year end, were as
follows:
<Table>
- -----------------------------------------------------------------------------------
Undistributed net ordinary income * $255,108
Undistributed net long-term capital gains --
- -----------------------------------------------------------------------------------
</Table>
* 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 Fund's last tax year ended
December 31, 2005, was designated for purposes of the dividends paid deduction
as follows:
<Table>
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $12,615,936
Distributions from net long-term capital gains 12,174,921
- --------------------------------------------------------------------------------
</Table>
*Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The Fund elected to defer net realized losses from investments incurred from
November 1, 2005 through December 31, 2005 ("post-October losses") in accordance
with Federal income tax regulations. Post-October losses of $145,729 were
treated as having arisen on the first day of the current tax year.
23
Notes to
FINANCIAL STATEMENTS (Unaudited) (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 fund assets managed by Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), 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, is based upon the average daily
Managed Assets of the Fund as follows:
<Table>
<Caption>
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
- ---------------------------------------------------------------------------------------------
</Table>
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 June 30, 2006, the complex level fee rate was .1887%.
<Table>
<Caption>
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
- ---------------------------------------------------------------------------------------------
</Table>
(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")
and Symphony Asset Management, LLC ("Symphony"). Nuveen owns a controlling
interest in NWQ while key management of NWQ owns a non-controlling minority
interest. Symphony is an indirect wholly owned subsidiary of Nuveen. NWQ manages
the portion of the Fund's investment portfolio allocated to dividend-paying
common stocks including American Depositary Receipts ("ADRs"). Symphony manages
the portion of the Fund's investment portfolio allocated to senior loans and
other debt instruments. NWQ and Symphony are compensated for their services to
the Fund from the management fee paid to the Adviser.
24
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its Officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
<Table>
<Caption>
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
- -----------------------------------------------------------------------------------
2004 * .32% 2009 .32%
2005 .32 2010 .24
2006 .32 2011 .16
2007 .32 2012 .08
2008 .32
- -----------------------------------------------------------------------------------
</Table>
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond January 31, 2012.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At June 30, 2006, the Fund had unfunded senior loan commitments of
$1,153,821.
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 June 30, 2006, there were
no such outstanding participation commitments.
8. NEW ACCOUNTING PRONOUNCEMENT
Financial Accounting Standards Board Interpretation No. 48
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and does not expect the adoption of FIN 48
will have a significant impact on the net assets or results of operations of the
Fund.
9. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Fund declared a distribution of $.1300 per Common share which was paid on
August 1, 2006, to shareholders of record on July 15, 2006.
Additional Borrowings
On August 2, 2006, the Fund entered into a $33 million revolving credit
agreement with Citibank, N.A. As of August 3, 2006, the Fund had borrowed the
full $33 million allowed under the revolving credit agreement.
25
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
<Table>
<Caption>
Investment Operations
-----------------------------------------------------------------
Distributions
from Net Distributions
Beginning Investment from Capital
Common Net Income to Gains to
Share Net Realized/ FundPreferred FundPreferred
Net Asset Investment Unrealized Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
- -----------------------------------------------------------------------------------------------------
Year Ended 12/31:
2006(b) $ 22.33 $ .44 $ 1.40 $ (.07)* $ -- $ 1.77
2005 21.54 .83 1.76 (.05) (.05) 2.49
2004(c) 19.10 .67 2.69 (.03) -- 3.33
- -----------------------------------------------------------------------------------------------------
<Caption>
Less Distributions
------------------------------
Net Offering
Investment Capital Costs and Ending
Income to Gains to FundPreferred Common
Common Common Share Share Ending
Share- Share- Underwriting Net Asset Market
holders holders Total Discounts Value Value
- --------------------- --------------------------------------------------------------------
Year Ended 12/31:
2006(b) $ (.75)* $ -- $ (.75) $ -- $ 23.35 $ 22.69
2005 (.78) (.91) (1.69) (.01) 22.33 21.37
2004(c) (.67) (.10) (.77) (.12) 21.54 19.35
- ---------------------
</Table>
<Table>
<Caption>
FundNotes at End of Period FundPreferred Shares at End of Period
------------------------------------------------- ---------------------------------------
Aggregate Average Market Asset Aggregate Liquidation
Amount Value Per Coverage Per Amount and Market Asset
Outstanding $25,000 of $1,000 of Outstanding Value Coverage
(000) Principal Amount Principal Amount (000) Per Share Per Share
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31:
2006(b) $ 78,000 $ 25,000 $ 5,725 $ 45,000 $ 25,000 $ 204,732
2005 78,000 25,000 5,544 45,000 25,000 196,918
2004(c) 78,000 25,000 5,403 45,000 25,000 190,805
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
* Represents distributions paid "From and in excess of net investment income"
for the six months ended June 30, 2006.
** 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 and FundNotes.
- Each Ratio of Expenses to Average Net Assets Applicable to Common Shares
and each Ratio of Net Investment Income to Average Net Assets Applicable
to Common Shares includes the effect of the interest expense paid on
FundNotes as follows:
<Table>
<Caption>
Ratio of FundNotes Interest Expense and
Amortization of FundNotes Offering Costs
to Average Net Assets Applicable to
Common Shares
----------------------------------------
2006(b) 1.08%**
2005 .80%
2004(c) .37**
</Table>
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the six months ended June 30, 2006.
(c) For the period January 27, 2004 (commencement of operations) through
December 31, 2004.
26
<Table>
<Caption>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Total Returns Before Credit/Reimbursement After Credit/Reimbursement****
------------------- ---------------------------- ------------------------------
Ratio of Net Ratio of Net
Based Ratio of Investment Ratio of Investment
on Expenses Income to Expenses Income to
Common Ending Net to Average Average to Average Average
Based Share Assets Net Assets Net Assets Net Assets Net Assets
on Net Applicable Applicable Applicable Applicable Applicable Portfolio
Market Asset to Common to Common to Common to Common to Common Turnover
Value*** Value*** Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
- -------------------------------------------------------------------------------------------------------------------
9.82% 7.98% $ 323,517 2.51%** 3.38%** 2.06%** 3.83%** 12%
20.00 11.93 309,452 2.26 3.36 1.81 3.81 26
.91 17.18 298,449 1.80** 3.30** 1.37** 3.73** 16
- -------------------------------------------------------------------------------------------------------------------
<Caption>
- ---
- ---
</Table>
27
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
The Board of Trustees is responsible for overseeing the performance of the
investment adviser to the Fund and determining whether to continue the advisory
arrangements. At a meeting held on May 23-25, 2006 (the "May Meeting"), the
Board of Trustees of the Fund, including the independent Trustees, unanimously
approved the continuance of the Investment Management Agreement between the Fund
and NAM and the Sub-Advisory Agreements between NAM and Symphony and NWQ,
respectively (each, a "Sub-Adviser"). NAM and the Sub-Advisers are each a "Fund
Adviser."
THE APPROVAL PROCESS
During the course of the year, the Board received a wide variety of materials
relating to the services provided by the Fund Advisers and the performance of
the Fund. To assist the Board in its evaluation of the advisory contract with a
Fund Adviser at the May Meeting, the independent Trustees received extensive
materials in advance of their meeting which outlined, among other things:
- the nature, extent and quality of services provided by the Fund Adviser;
- the organization and business operations of the Fund Adviser, including
the responsibilities of various departments and key personnel;
- the Fund's past performance, the Fund's performance compared to funds of
similar investment objectives compiled by an independent third party and
with recognized and/or customized benchmarks (as appropriate);
- the profitability of the Fund Adviser and certain industry profitability
analyses for unaffiliated advisers;
- the expenses of the Fund Adviser in providing the various services;
- the advisory fees (gross and net management fees) and total expense ratios
of the Fund, including comparisons of such fees and expenses with those of
comparable, unaffiliated funds based on information and data provided by
Lipper (the "Peer Universe") as well as compared to a subset of funds
within the Peer Universe (the "Peer Group") to the Fund (as applicable);
- the advisory fees the Fund Adviser assesses to other types of investment
products or clients;
- the soft dollar practices of the Fund Adviser, if any; and
- from independent legal counsel, a legal memorandum describing, among other
things, the duties of the Trustees under the Investment Company Act of
1940 (the "1940 Act") as well as the general principles of relevant state
law in reviewing and approving advisory contracts; the requirements of the
1940 Act in such matters; an adviser's fiduciary duty with respect to
advisory agreements and compensation; the standards used by courts in
determining whether investment company boards of directors have fulfilled
their duties and factors to be considered by the board in voting on
advisory agreements.
At the May Meeting, NAM made a presentation to and responded to questions from
the Board. After the presentations and after reviewing the written materials,
the independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contracts. It is with this background that the Trustees considered each
advisory contract (which includes the Sub-Advisory Agreements) with the
respective Fund Adviser. The independent Trustees, in consultation with
independent counsel, reviewed the factors set out in judicial decisions and SEC
directives relating to the renewal of advisory contracts. As outlined in more
detail below, the Trustees considered all factors they believed relevant with
respect to the Fund, including the following: (a) the nature, extent and quality
of the services to be provided by the Fund Adviser; (b) the investment
performance of the Fund and the Fund Adviser; (c) the costs of the services to
be provided and profitability of the Fund Adviser and its affiliates; (d) the
extent to which economies of scale would be realized as the Fund grows; and (e)
whether fee levels reflect these economies of scale for the benefit of Fund
investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In reviewing the Fund Advisers, the Trustees considered the nature, extent and
quality of the respective Fund Adviser's services. The Trustees reviewed
materials outlining, among other things, the Fund Adviser's organization and
business; the types of services that the Fund Adviser or its affiliates provide
and are expected to provide to the Fund; the performance record of the Fund (as
described in further detail below); and any initiatives Nuveen has taken for its
fund product line. In connection with their continued service as Trustees, the
Trustees also have a good understanding of each Fund Adviser's organization,
operations and personnel. In this regard, the Trustees are familiar with and
have evaluated the professional experience, qualifications and credentials of
the Fund Adviser's personnel. With respect to each Sub-Adviser, the Trustees
also received and reviewed an evaluation of the Sub-Adviser from NAM. Such
evaluation outlined, among other things, the Sub-Adviser's organizational
history, client base, product mix, investment team and any changes thereto,
investment process and any changes to its investment strategy, the Fund's
investment objectives and performance (as applicable). The Trustees noted that
NAM recommended the renewal of the Sub-Advisory Agreements and considered the
28
basis for such recommendation and any qualifications in connection therewith.
Given the Trustees' experience with the Fund (including any other Nuveen funds
advised by a Fund Adviser) and each Fund Adviser, the Trustees recognized and
considered the quality of their investment processes in making portfolio
management decisions as well as any refinements or improvements thereto. In this
regard, the Trustees considered the continued quality of the Fund Adviser's
investment process in making portfolio management decisions as well as any
additional refinements and improvements adopted to the portfolio management
processes.
In addition to advisory services, the independent Trustees considered the
quality of any administrative or non-advisory services provided. With respect to
each Sub-Adviser, the independent Trustees noted that the respective
Sub-Advisory Agreement was essentially an agreement for portfolio management
services only and the Sub-Adviser was not expected to supply other significant
administrative services to the Fund.
With respect to NAM, NAM provides the Fund with such administrative and other
services (exclusive of, and in addition to, any such services provided by others
for the Fund) and officers and other personnel as are necessary for the
operations of the Fund. In connection with the review of the Investment
Management Agreement, the Trustees considered the extent and quality of these
other services which include, among other things, providing: product management
(e.g., product positioning, performance benchmarking, risk management); fund
administration (e.g., daily net asset value pricing and reconciliation, tax
reporting, fulfilling regulatory filing requirements); oversight of third party
service providers; administration of board relations (e.g., organizing board
meetings and preparing related materials); compliance (e.g., monitoring
compliance with investment policies and guidelines and regulatory requirements);
and legal support (e.g., helping prepare and file registration statements,
amendments thereto, proxy statements and responding to regulatory requests
and/or inquiries). As the Fund operates in a highly regulated industry and given
the importance of compliance, the Trustees considered, in particular, the
additions of experienced personnel to the compliance teams and the enhancements
to technology and related systems to support the compliance activities for the
Fund (including a new reporting system for quarterly portfolio holdings). In
addition to the above, because the Fund utilizes Sub-Advisers, the Trustees also
considered NAM's ability and procedures to monitor each Sub-Adviser's
performance, business practices and compliance policies and procedures. In this
regard, the Trustees noted the enhancements in the investment oversight process,
including increased site visits and departments participating in investment
oversight.
In addition to the foregoing, the Trustees also noted the additional services
that the Fund Adviser or its affiliates provide to closed-end funds, including,
in particular, secondary market support activities. The Trustees recognized
Nuveen's continued commitment to supporting the secondary market for the common
shares of its closed-end funds through a variety of initiatives designed to
raise investor and analyst awareness and understanding of closed-end funds.
These efforts include providing advertising and other media relations programs,
continued contact with analysts, maintaining and enhancing its website for
closed-end funds, and targeted advisor communication programs. With respect to
Funds that utilize leverage through the issuance of preferred shares, the
Trustees noted Nuveen's continued support for the preferred shares by
maintaining, among other things, an in-house preferred trading desk; designating
a product manager whose responsibilities include creating and disseminating
product information and managing relations in connection with the preferred
share auction; and maintaining systems necessary to test compliance with rating
agency requirements.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
The Board considered the investment performance for the Fund, including the
Fund's historic performance as well as its performance compared to funds with
similar investment objectives identified by an independent third party (the
"Performance Peer Group") and recognized and/or customized benchmarks (as
applicable). In evaluating the performance information, in certain instances,
the Trustees noted that the closest Performance Peer Group for the Fund still
may not adequately reflect the Fund's investment objectives, strategies and
portfolio duration, thereby limiting the usefulness of the comparisons of the
Fund's performance with that of the Performance Peer Group (such as, the Nuveen
Diversified Dividend and Income Fund, Nuveen Preferred and Convertible Income
Fund, Nuveen Preferred and Convertible Income Fund 2, Nuveen Tax-Advantaged
Floating Rate Fund, and the Nuveen Real Estate Income Fund).
In reviewing performance, the Trustees reviewed performance information
including, among other things, total return information compared with the Fund's
Performance Peer Group as well as recognized and/or customized benchmarks (as
appropriate) for the one-, three- and five-year periods (as applicable) ending
December 31, 2005. This information supplements the Fund performance information
provided to the Board at each of their quarterly meetings. Based on their
review, the Trustees determined that the Fund's absolute and relative investment
performance over time had been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses of the Fund, the Board
reviewed, among other things, the Fund's advisory fees (net and gross
management fees) and total expense ratios (before and after expense
reimbursements and/or waivers) in absolute terms as well as comparisons to
the gross management fees (before waivers), net management fees (after
waivers) and total expense ratios (before and after waivers) of comparable
funds in the Peer Universe and the Peer Group. The Trustees reviewed data
regarding the construction of Peer Groups as well as the methods of
measurement for the fee and expense analysis and the performance analysis. In
certain cases, due to the small number of peers in the Peer Universe, the
Peer Universe and the Peer Group may be the same. Further, the Trustees
recognized that in certain cases the closest Peer Universe and/or Peer Group
may not adequately reflect the Fund's investment objectives and strategies
limiting the usefulness of
29
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT APPROVAL PROCESS (continued)
comparisons. In reviewing comparisons, the Trustees also considered the size
of the Peer Universe and/or Peer Group, the composition of the Peer Group
(including differences in the use of leverage) as well as differing levels of
fee waivers and/or expense reimbursements. In this regard, the Trustees
considered the fund-level and complex-wide breakpoint schedules (described in
further detail below) and any fee waivers and reimbursements provided by
Nuveen (applicable, in particular, for certain funds launched since 1999).
Based on their review of the fee and expense information provided, the
Trustees determined that the Fund's net total expense ratio was within an
acceptable range compared to peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further reviewed data comparing the advisory fees of NAM with
fees NAM charges to other clients (such as separate managed accounts and
funds that are not offered by Nuveen Investments but are sub-advised by one
of Nuveen's investment management teams). In general, the advisory fees
charged for separate accounts are somewhat lower than the advisory fees
assessed to the Fund. The Trustees recognized that the differences in fees
are attributable to a variety of factors, including the differences in
services provided, product distribution, portfolio investment policies,
investor profiles, account sizes and regulatory requirements. The Trustees
noted, in particular, that the range of services provided to the Fund is more
extensive than that provided to managed separate accounts. As described in
further detail above, such additional services include, but are not limited
to, providing: product management, fund administration, oversight of third
party service providers, administration of board relations, and legal
support. Funds further operate in a highly regulated industry requiring
extensive compliance functions compared to the other investment products. In
addition to the costs of the additional services, administrative costs may
also be greater for funds as the average account size for separate accounts
is notably larger than the retail accounts of funds. Given the differences in
the product structures, particularly the extensive services provided to
closed-end funds, the Trustees believe such facts justify the different
levels of fees.
In considering the advisory fees of a Sub-Adviser, the Trustees also
considered the pricing schedule that the Sub-Adviser charges for similar
investment management services for other sponsors or clients. With respect to
Symphony, the Trustees reviewed the generally higher fees for hedge funds and
accounts it manages, which include performance fees.
3. PROFITABILITY OF FUND ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of Nuveen Investments for advisory activities (which
incorporated Nuveen's wholly-owned affiliated sub-advisers). The Trustees
reviewed data comparing Nuveen's profitability with other fund sponsors
prepared by three independent third party service providers as well as
comparisons of the revenues, expenses and profits margins of various
unaffiliated management firms with similar amounts of assets under management
prepared by Nuveen. The Trustees further reviewed the 2005 Annual Report for
Nuveen Investments. In considering profitability, the Trustees recognized the
inherent limitations in determining profitability as well as the difficulties
in comparing the profitability of other unaffiliated advisers. Profitability
may be affected by numerous factors, including the methodology for allocating
expenses, the adviser's business mix, the types of funds managed, the
adviser's capital structure and cost of capital. Further, individual fund or
product line profitability of other sponsors is generally not publicly
available. Accordingly, the profitability information that is publicly
available from various investment advisory or management firms may not be
representative of the industry.
Notwithstanding the foregoing, in reviewing profitability, the Trustees reviewed
Nuveen's methodology and assumptions for allocating expenses across product
lines to determine profitability. In this regard, the methods of allocation used
appeared reasonable. The Trustees also, to the extent available, compared
Nuveen's profitability margins (including pre- and post-marketing profit
margins) with the profitability of various unaffiliated management firms. The
Trustees noted that Nuveen's profitability is enhanced due to its efficient
internal business model. The Trustees also recognized that while a number of
factors affect profitability, Nuveen's profitability may change as fee waivers
and/or expense reimbursement commitments of Nuveen to various funds in the
Nuveen complex expire. To keep apprised of profitability and developments that
may affect profitability, the Trustees have requested profitability analysis be
provided periodically during the year. Based on their review, the Trustees were
satisfied that the respective Fund Adviser's level of profitability was
reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Fund, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the Fund, the Trustees
determined that the advisory fees and expenses of the Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Trustees recognized the potential
benefits resulting from the costs of a fund being spread over a larger asset
base as a fund grows. To help ensure the shareholders share in these benefits,
the Trustees have reviewed and considered the breakpoints in the advisory fee
schedules that reduce advisory fees as the Fund's assets grow. In addition to
advisory fee breakpoints as assets in the Fund rise, after lengthy discussions
with management, the Board also approved a complex-
30
wide fee arrangement that was introduced on August 1, 2004. Pursuant to the
complex-wide fee arrangement, the fees of the funds in the Nuveen complex,
including the Fund, are reduced as the assets in the fund complex reach certain
levels. In evaluating the complex-wide fee arrangement, the Trustees considered,
among other things, the historic and expected fee savings to shareholders as
assets grow, the amount of fee reductions at various asset levels, and that the
arrangement would extend to all funds in the Nuveen complex. The Trustees noted
that 2005 was the first full year to reflect the fee reductions from the complex
wide fee arrangement. The Trustees also considered the impact, if any, the
complex-wide fee arrangement may have on the level of services provided. Based
on their review, the Trustees concluded that the breakpoint schedule and
complex-wide fee arrangement currently was acceptable and desirable in providing
benefits from economies of scale to shareholders.
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the Fund Adviser or its affiliates may receive as a result of its
relationship with the Fund. In this regard, the Trustees considered revenues
received by affiliates of the Fund Adviser for serving as agent at Nuveen's
preferred trading desk and for serving as a co-manager in the initial public
offering of new closed-end exchange traded funds.
In addition to the above, the Trustees considered whether the Fund Adviser
received any benefits from soft dollar arrangements. With respect to NAM, the
Trustees noted that NAM does not currently have any soft dollar arrangements and
does not pay excess brokerage commissions (or spreads on principal transactions)
in order to receive research services; however, NAM may from time to time
receive and have access to research generally provided to institutional clients.
The Trustees also considered the soft dollar arrangements, if any, of the
Sub-Advisers. With respect to NWQ, the Trustees noted that such Sub-Adviser has
engaged in soft dollar arrangements. The Trustees recognize NWQ benefits from
its soft dollar arrangements pursuant to which it receives research from brokers
that execute the Fund's portfolio transactions. At the May Meeting and in prior
meetings, the Trustees have received and reviewed materials concerning NWQ's
soft dollar arrangements, including the type of research received. NWQ has
agreed to limit the type of research received with the use of soft dollars to
that with intellectual content. The Trustees note that this Sub-Adviser's
profitability may be lower if it was required to pay for this research with hard
dollars. With respect to Symphony, such Sub-Adviser currently does not enter
into soft dollar arrangements; however, it has adopted a soft dollar policy in
the event it does so in the future.
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management Agreement and
Sub-Advisory Agreements were fair and reasonable, that the respective Fund
Adviser's fees are reasonable in light of the services provided to the Fund, and
that the renewal of the respective Investment Management Agreement and
Sub-Advisory Agreements should be approved.
31
Reinvest Automatically
EASILY AND CONVENIENTLY
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
NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO
SET UP YOUR REINVESTMENT ACCOUNT.
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, however, if shares begin trading at or above net
asset value during the purchase period, the Fund will issue new shares at the
greater of the net asset value of 95% of the then current market price.
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.
32
Notes
33
Notes
34
OTHER USEFUL
INFORMATION
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, 2006, 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.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD: Market yield is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Funds'
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
35
(back cover photo)
NUVEEN INVESTMENTS:
SERVING INVESTORS
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past
century, Nuveen Investments has adhered to the belief that the best
approach to investing is to apply conservative risk-management principles
to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity
and fixed-income solutions that are integral to a well-diversified core
portfolio. Our clients have come to appreciate this diversity, as well as
our continued adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT
NEEDS.
Managing more than $149 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 six distinct brands: Nuveen, a leader in fixed-income
investments; NWQ, a leader in value-style equities; Rittenhouse, a leader
in growth-style equities; Symphony, a leading institutional manager of
market-neutral alternative investment portfolios; Santa Barbara, a leader
in growth equities; and Tradewinds NWQ, a leader in global equities.
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.
- Share prices
- Fund details
- Daily financial news
- Investor education
- Interactive planning tools
LEARN MORE
ABOUT NUVEEN FUNDS AT
WWW.NUVEEN.COM/CEF
ESA-C-0606D
NUVEEN LOGO
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
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.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
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.
During this reporting period, the registrant's Board of Trustees implemented a
change to the procedures by which shareholders may recommend nominees to the
registrant's board of trustees by amending the registrant's by-laws to include a
provision specifying the date by which shareholder nominations for election as
trustee at a subsequent meeting must be submitted to the registrant.
Shareholders must deliver or mail notice to the registrant not less than
forty-five days nor more than sixty days prior to the first anniversary date of
the date on which the registrant first mailed its proxy materials for the prior
year's annual meeting; provided, however, if and only if the annual meeting is
not scheduled to be held within a period that commences thirty days before the
first anniversary date of the annual meeting for the preceding year and ends
thirty days after such anniversary date (an annual meeting date outside such
period being referred to as an "Other Annual Meeting Date" hereafter), the
shareholder notice must be given no later than the close of business on the date
forty-five days prior to such Other Annual Meeting Date or the tenth business
day following the date such Other Annual Meeting Date is first publicly
announced or disclosed. The shareholder's notice must be in writing and set
forth the name, age, date of birth, business address, residence address and
nationality of the person(s) being nominated and the class or series, number of
all shares of the registrant owned of record or beneficially be each such
person(s), any other information regarding such person required by Item 401 of
Regulation S-K or Item 22 of Rule 14a-101 (Schedule 14A) under the Securities
Exchange Act of 1934, as amended, any other information regarding the person(s)
to be nominated that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitation of proxies for
election of trustees, and whether such shareholder believes any nominee is or
will be an "interested person" (as that term is defined in the Investment
Company Act of 1940, as amended) of the registrant or sufficient information to
enable the registrant to make that determination and the written and signed
consent of the person(s) to be nominated.
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.
(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 to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Total Return Strategy Fund
By (Signature and Title)* /s/ Jessica R. Droeger
---------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: September 8, 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: September 8, 2006
By (Signature and Title)* /s/ Stephen D. Foy
---------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 8, 2006
* Print the name and title of each signing officer under his or her signature.