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
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Nuveen Tax-Advantaged Total Return Strategy Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(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: December 31, 2007
-----------------------
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 SHAREHOLDERS
Annual Report
DECEMBER 31, 2007
Nuveen Investments
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
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<Table>
www.investordelivery.com OR www.nuveen.com/accountaccess
If you received your Nuveen Fund If you received your Nuveen Fund
dividends and statements from your dividends and statements directly from
financial advisor or brokerage Nuveen.
account.
</Table>
NUVEEN INVESTMENTS LOGO
Chairman's
LETTER TO SHAREHOLDERS
<Table>
(TIMOTHY
SCHWERTFEGER
PHOTO) Timothy R. Schwertfeger Chairman of the Board
</Table>
Dear Shareholder:
Once again, I am pleased to report that over the twelve-month period covered by
this report your Fund continued to provide you with attractive income. For more
details about the management strategy and performance of your Fund, please read
the Portfolio Managers' Comments, the Distribution and Share Price Information,
and the Performance Overview sections of this report.
With the recent volatility in the stock market, many have begun to wonder which
way the market is headed, and whether they need to adjust their holdings of
investments. No one knows what the future will bring, which is why we think a
well-balanced portfolio that is structured and carefully monitored with the help
of an investment professional is an important component in achieving your
long-term financial goals. A well-diversified portfolio may actually help to
reduce your overall investment risk, and we believe that investments like your
Nuveen Investments Fund can be important building blocks in a portfolio crafted
to perform well through a variety of market conditions.
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. 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.
Sincerely,
(TIMOTHY SCHWERTFEGER SIG)
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2008
Portfolio Managers' COMMENTS
NUVEEN INVESTMENTS CLOSED-END FUNDS JTA
The Fund has been managed since its inception in 2004 by two affiliates of
Nuveen Investments. The Fund's investments in dividend-paying common and
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 twelve-month
period ended December 31, 2007.
WHAT WERE THE GENERAL ECONOMIC CONDITIONS AND MARKET TRENDS DURING THE ANNUAL
REPORTING PERIOD ENDED DECEMBER 31, 2007?
During the first part of the period, equities generally performed well as
favorable corporate earnings and export-driven economic growth were sufficient
to offset some growing anxiety over the deteriorating housing and mortgage
markets. The second half of the period was dominated by concerns about the
impact of possible sub-prime mortgage defaults and fears of a recession,
especially as the impact began to spread beyond mortgage lenders to
international and domestic money center banks and other financial institutions.
When data began to show the potential for a severely weakening economy, the
Federal Reserve cut the widely followed short-term fed funds rate by a half a
percentage point in September, by another quarter of a percentage point in
October and yet another quarter point in December. (On January 22 and 29, 2008,
after the close of this reporting period, the Federal Reserve cut the fed funds
rate by a combined 1.25%, bringing the rate to 3.00%.)
The U.S. equity markets suffered through significant turbulence during the year,
as concerns about the credit markets, a slowing economy and rising commodity
prices (particularly oil) weighed on investor sentiment. Additionally, recent
inflation reports have not been favorable, further raising investor concerns
about the equity market's prospects. Nevertheless, several leading market
indicators did finish 2007 with positive returns including the S&P 500 Index up
5.49% and the Russell 3000 Index up 5.14%.
- --------------------------------------------------------------------------------
Discussions of specific investments are for illustrative purposes only and are
not intended as recommendations of individual investments. The views expressed
in this commentary represent those of the portfolio managers as of the date of
this report and are subject to change at any time, based on market conditions
and other factors. The Fund disclaims any obligation to advise shareholders of
such changes.
- --------------------------------------------------------------------------------
4
For our preferred securities holdings, December 31(st) closed out as the worst
month, in the worst quarter, of the worst year on record for the preferred
securities market. The Merrill Lynch Preferred Stock Hybrid Securities Index
fell by more than 9% in the fourth quarter, and posted a loss of 11.30% for the
year. The problems stemmed from the fallout from the sub-prime mortgage markets
and consequent credit tightening. Financial firms account for approximately 75%
of the preferred market, and many of them suffered losses from sub-prime
mortgages in collateralized debt obligations (CDOs).
In the senior loan sleeve of the Fund, we saw a reversal of trend as strength
through the first two quarters of the year was followed by a decline in the loan
prices toward the end of the year. For the first six months the loan market was
robust, with record levels of new loan issuance, tightening spreads, and record
inflows into the leveraged loan asset class. Sentiment began to shift, however,
during the second quarter of 2007 as liquidity issues driven by a spillover of
fear from the mortgage market and a large pipeline of new institutional loan
issuance created a supply/demand imbalance in the market that resulted in
downward pressure on loan prices. In July, the CSFB Leveraged Loan Index, which
had returned 56 consecutive months of positive returns, posted a return of
- -3.32% for the month, its the largest monthly loss since inception. This was an
unprecedented level of volatility for the loan market. To put it in perspective,
in the 186 months that the CSFB Leveraged Loan Index had existed previous to
July (January 1992 through June 2007), it had moved by more than one point
(either positively or negatively) a total of only nine times. What made this
event more unusual, however, was that unlike previous market dislocations, the
volatility was unrelated to defaults or credit fundamentals and was primarily
supply/demand related.
While the first six months of the year saw a record level of new loan issuance,
the last six months were sharply different as investors became concerned by
negative headlines and many retreated to the sidelines. This left an overhang of
new loans in the Wall Street pipeline with few buyers. Institutional investors
who were selling loans during this volatile period also put pressure on prices,
as did the growing perception that sustained weakness in the housing space and
instability in the financial markets might negatively impact the U.S. economy,
particularly in consumer-sensitive sectors such as homebuilders and retailers.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THIS PERIOD?
For the equity portion of the Fund's portfolio, we continued to employ an
opportunistic, bottom-up strategy that focused on identifying undervalued
companies that possessed favorable risk/reward characteristics as well as
emerging catalysts that we believed could unlock value or improve profitability.
These catalysts included management changes, restructuring efforts, recognition
of hidden assets, or a positive change in the underlying fundamentals. We also
focused on downside protection, and paid a great deal of attention to a
company's balance sheet and cash flow statement, not just the income statement.
We believed that cash flow analysis offered a more objective and truer picture
of a company's financial position than an evaluation based on earnings alone.
During the course of the year, we increased our health care exposure with new
stakes in European pharmaceutical makers GlaxoSmithKline PLC and Sanofi-Aventis,
based on our
5
analysis of each company's growth potential and valuation. Other new holdings
included Federal Home Loan Mortgage Corporation and Gannet Company Inc. We
lowered our commodity exposure by selling Alumina Ltd, POSCO, and Rio Tinto PLC.
Also eliminated from the portfolio were AON Corp. and Vodafone Group PLC.
Additionally, we added to and trimmed several positions, particularly in the
financial and telecommunications sectors.
For the senior loan portion of the Fund, we continued to manage the portfolios
using fundamental analysis to select senior loans that we believed offered
strong asset coverage and attractive risk-adjusted returns. During this period,
we avoided the senior loans of most automotive part suppliers as well as smaller
homebuilders and land developers, even though many loans in these sectors traded
at discounts throughout the year. We also avoided many smaller loans that were
done to finance leveraged buyouts. We didn't believe that there was sufficient
value in many small loans to compensate for potential illiquidity and volatility
if earnings of the companies issuing them should become challenged.
Throughout the year, we focused on adding quality new-issue senior loans to the
portfolios, which were often priced at a discount to par and were structured
with strong covenant protection. We also continued to avoid the vast majority of
second lien loans. Similar to smaller loans, we didn't believe that second lien
loans offered sufficient additional yield to compensate investors for
potentially increased volatility and lower recovery rates.
Although the loan portfolios suffered as a result of the broad-based sell-off in
loans, the market dislocation also provided an opportunity to buy loans in good
companies with strong covenants at attractive prices.
6
HOW DID THE FUND PERFORM OVER THIS TWELVE-MONTH PERIOD?
The performance of JTA, as well as a benchmark, is presented in the accompanying
table.
Total Returns on Net Asset Value
For the twelve month period ended 12/31/07
<Table>
JTA(1) -2.38%
Comparative Benchmark(2) 0.38%
</Table>
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Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown.
Returns do not reflect the deduction of taxes that shareholders may have to pay
on Fund distributions or upon the sale of Fund shares. For additional
information, see the Performance Overview for the Fund in this report.
- --------------------------------------------------------------------------------
For the twelve-month period ended December 31, 2007, the net asset value of the
Fund underperformed its comparative benchmark.
The benchmark return shows that 2007 presented a very challenging and
unforgiving market environment. The Fund's relative underperformance was due in
large part to its use of financial leverage, and the cost of leverage exceeded
the returns generated by the Fund's investment portfolio. Over the past year,
leverage tended to exacerbate the price declines suffered by the Fund's
holdings. However, leverage is a strategy that has contributed to enhanced
distributions and returns in the past, and we believe it retains the potential
to continue to do so in the future.
Looking at the Fund's holdings, the equity portion of the Fund's portfolio held
several positions that performed very well for the year, particularly in the
energy, defense, and telecommunications sectors. Our energy investments rose as
rising crude prices and increasing worldwide demand continued to support strong
industry fundamentals and higher valuations. Our energy investments included
Chevron Corporation, ConocoPhillips, Eni S.p.A., and Total S.A.
Lockheed Martin Corporation and Raytheon Company outperformed the overall
market, as military contractors were generally insulated from the more
economically sensitive factors such as the consumer and debt markets. The
fundamentals of our defense holdings continued to be healthy with both companies
generating superior operating returns, buying back shares to increase
shareholder value, and enjoying a strong growth outlook. In addition, their
valuations remained compelling in our view.
In the telecommunications sector, our stakes in AT&T Inc. and Verizon
Communications Inc. performed well. Verizon saw strong momentum in its wireless
and enterprise businesses, while their wireline operations were not as bad as
some had predicted. Improving cost trends, particularly at AT&T, also provided
better-than-expected earnings.
- --------------------------------------------------------------------------------
1 The Fund elected to retain a portion of its realized long-term capital gains
for the tax years ended December 31, 2007 and December 31, 2006, and pay
required federal corporate income taxes on these amounts. Common shareholders on
record date are entitled to take an offsetting tax credit for their pro-rata
share of the taxes paid by the Fund. The total return shown does not include the
economic benefit to Common shareholders of record of this tax credit/refund. The
Fund's corresponding total return on NAV for the twelve-month period ended
December 31, 2007 when this benefit is included is -1.54%.
2 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.
- --------------------------------------------------------------------------------
Tobacco manufacturer Carolina Group continued its strong performance in 2007.
The stock, which was spun out as a tracking stock from parent company Loews
Corp. in 2002, rose over 32% in 2007 following a 47% rise in 2006 and 52%
increase in 2005. Carolina Group's Newport brand, the number one selling menthol
cigarette in the US, continued to outperform its peers as management
successfully balanced promotion spending and pricing to drive market share gains
and cash flows. Further, in December, Loews announced its plan to
7
spin-off Lorillard, the tobacco business that makes up Carolina Group, to
Carolina Group shareholders, thereby removing the tracking stock nature of the
equity and allowing Lorillard the flexibility to direct its own cash flows.
We entered 2007 with a cautious view of the housing and sub-prime lending
sectors. As a result we did not have any investments in homebuilders or
sub-prime mortgage lenders. However, we did maintain investments in a select
number of mortgage-related companies which we believed could navigate the
housing down cycle and improve their franchise value as the market inevitably
consolidated. The companies we were invested in operated reasonably well for the
first 5-6 months of the year even as sub-prime companies were experiencing
severe difficulties. When the credit problems evolved into a liquidity crisis in
late July, however, our mortgage finance investments began to decline
significantly as fear took over the markets and industry leading firms traded
below book value. The need to preserve or raise additional capital forced firms
to reduce their dividend payouts, monetize assets, and/or seek significant cash
infusions from investors - often from foreign sovereign investment funds. While
these investment transactions have diluted existing shareholders, they may
provide a basis for recovery in the sector as the current credit crisis becomes
more fully digested by the equity markets. Although we continued to see
attractive opportunities in the financial sector, our current exposure was below
the benchmark due to our concern that the mortgage/housing weakness might begin
to affect other areas within these financial institutions' businesses.
Beyond the financial sector, our investment in Motorola, Inc. declined as the
company continued to encounter weakness in its high-end 3G phones, as well as
aggressive price competition in emerging markets. We expected the profitability
of the handset unit to gradually improve as the company continued to transition
its business mix to focus on higher priced phones. Meanwhile, poor ratings and a
soft local advertising environment contributed to weakness in the shares of CBS
Corporation.
Another factor weighing on the overall performance of the Fund was our
allocation to preferred securities. Mortgage-related losses forced firms - most
notably Fannie Mae and Freddie Mac - to tap the preferred market in order to
raise capital. Net preferred issuance totaled $17.7 billion in December alone.
That was greater than the net issuance for any of the past four entire years,
and expanded the size of the total preferred market. This new supply forced a
re-pricing of the entire market, pulling down the prices of all existing issues.
The senior loan sleeve saw certain names contributing to the upside of the
Fund's performance for the first half of the reporting period. The second half
of the period was better characterized by broad declines across the asset class,
as bank loans sold off significantly during the final months of the period. The
Fund benefited in the first half of the period from the strong performance of
its holdings in Federal Mogul Corporation, a global supplier of automotive
parts. The Federal Mogul term loan traded up due to continued expectation that
the company would emerge out of bankruptcy soon due to their steady operations
and improving financial results. The Fund also benefited from positions in
Aladdin Gaming, a resort and gaming company, which were paid off during the
period.
8
In the second half of the year, the weak performance of the senior loan portion
of the Funds portfolio cannot be attributed to a few isolated positions but the
broader market in general. As a result of the sell-off in loans in the later
half of 2007, the Fund experienced downside pressure across its loan portfolio.
There were no individual company-specific events that negatively impacted
performance. This was characteristic of the loan market in general, which has
been influenced heavily by technical trends in recent months. Default rates and
fundamental factors remained relatively strong throughout 2007 when compared to
historical levels.
RECENT DEVELOPMENTS IN THE AUCTION RATE PREFERRED MARKETS
During February 2008, after the close of this reporting period, regularly
scheduled auctions for the FundPreferred(R) shares issued by the Fund began
attracting more shares for sale than offers to buy. This meant that these
auctions "failed to clear," and that many FundPreferred shareholders who wanted
to sell their shares in these auctions were unable to do so. It is important to
note this decline in liquidity did not lower the credit quality of these shares,
and that FundPreferred shareholders unable to sell their shares received
distributions at the "maximum rate" calculated in accordance with the
pre-established terms of the FundPreferred stock. At the time this report was
prepared, the Fund's managers could not predict when future auctions might
succeed in attracting sufficient buyers for the shares offered. The Fund's
managers are working diligently to develop mechanisms designed to improve the
liquidity of the FundPreferred shares, but at present there is no assurance that
these efforts will succeed.
These developments do not affect the management or investment policies of the
Fund. However, one implication of these auction failures for common shareholders
is that the Fund's cost of leverage will be higher than it otherwise would have
been had the auctions been successful. As a result, the Fund's future common
share earnings may be marginally lower than they otherwise might have been.
9
Common Share
Distribution and Share Price
INFORMATION
On March 1, 2007, Nuveen Investments announced that the Fund would move from a
monthly to a quarterly common share distribution schedule. The last monthly
distribution was paid on April 2, 2007, and first quarterly distribution was
paid on July 2, 2007.
The Fund employs financial leverage through the issuance of FundPreferred
shares, as well as through bank borrowings. Financial leverage provides the
potential for higher earnings (net investment income), total returns and
distributions over time, but -- as noted earlier -- also increases the
variability of common shareholders' net asset value per share in response to
changing market conditions. Financial leverage contributed positively to the
Fund's common share net earnings over the reporting period, but detracted from
the Fund's overall common share total return.
The Fund has a managed distribution program. The goal of a managed distribution
program is to provide common shareholders with relatively consistent and
predictable cash flow by systematically converting its expected long-term return
potential into regular distributions. As a result, regular common share
distributions throughout the year are likely to include a portion of expected
long-term gains (both realized and unrealized), along with net investment
income.
Important points to understand about the managed distribution program are:
- - The Fund seeks to establish a relatively stable common share distribution rate
that roughly corresponds to the projected total return from its investment
strategy over an extended period of time. However, you should not draw any
conclusions about the Fund's past or future investment performance from its
current distribution rate.
- - Actual common share returns will differ from projected long-term returns (and
therefore the Fund's distribution rate), at least over shorter time periods.
Over a specific timeframe, the difference between actual returns and total
distributions will be reflected in an increasing (returns exceed
distributions) or a decreasing (distributions exceed returns) Fund net asset
value.
- - Each distribution is expected to be paid from some or all of the following
sources:
- net investment income (regular interest and dividends),
- realized capital gains, and
- unrealized gains, or, in certain cases, a return of principal (non-taxable
distributions).
10
- - A non-taxable distribution is a payment of a portion of the Fund's capital.
When the Fund's returns exceed distributions, it may represent portfolio gains
generated, but not realized as a taxable capital gain. In periods when the
Fund's returns fall short of distributions, it will represent a portion of
your original principal unless the shortfall is offset during other time
periods over the life of your investment (previous or subsequent) when the
Fund's total return exceeds distributions.
- - Because distribution source estimates are updated during the year based on the
Fund's performance and forecast for its current fiscal year (which is the
calendar year for the Fund), estimates on the nature of your distributions
provided at the time the distributions are paid may differ from both the tax
information reported to you in your Fund's IRS Form 1099 statement provided at
year end, as well as the ultimate economic sources of distributions over the
life of your investment.
The following table provides information regarding the Fund's common share
distributions and total return performance for the fiscal year ended December
31, 2007. The distribution information is presented on a tax basis rather than
on a generally accepted accounting principles (GAAP) basis. This information is
intended to help you better understand whether the Fund's returns for the
specified time period was sufficient to meet the Fund's distributions.
<Table>
<Caption>
- ----------------------------------------------------------------------------
As of 12/31/07 (Common Shares) JTA
- ----------------------------------------------------------------------------
Inception date 1/27/04
Calendar year:
Per share distribution:
From net investment income $0.82
From short-term capital gains --
From long-term capital gains 1.14
From return of capital --
-------
Total per share distribution $1.96
=======
Distribution rate on NAV 7.90%
Annualized total returns:
Excluding retained gain tax credit/refund(3):
1-year on NAV -2.38%
Since inception on NAV 12.53%
Including retained gain tax credit/refund(3):
1-year on NAV -1.54%
Since inception on NAV 13.14%
- ----------------------------------------------------------------------------
</Table>
As of December 31, 2007, the Fund was trading at a -7.35% discount to its NAV,
compared with the average discount of -2.59% for the entire twelve-month period.
- --------------------------------------------------------------------------------
3 The Fund elected to retain a portion of its realized long-term capital gains
for the tax years ended December 31, 2007 and December 31, 2006, and pay
required federal corporate income taxes on these amounts. As reported on Form
2439, Common shareholders on record date must include their pro-rata share of
these gains on their applicable federal tax returns, and are entitled to take
offsetting tax credits, for their pro-rata share of the taxes paid by the Fund.
The total returns "Including retained gain tax credit/refund" include the
economic benefit to Common shareholders on record date of these tax
credits/refunds.
- --------------------------------------------------------------------------------
11
Retention of Realized Long-Term
CAPITAL GAINS
On December 14, 2007, the Fund announced it would retain a portion of its
realized long-term capital gains for the tax year ended December 31, 2007, and
would pay any required federal corporate income taxes on these gains.
We believe retaining realized long-term capital gains enables the Fund to better
preserve and grow its capital base for long-term investors. This increases
earnings potential over time, providing the opportunity for more stable growth
of distributions and high share prices.
Common shareholders of record on December 31, 2007, holding the Fund in a
taxable account must include their pro-rata share of the Fund's retained gains
as reported on IRS Form 2439 on their 2007 federal income tax returns. They will
be entitled to take an offsetting federal income tax credit equal to their
pro-rata share of taxes the Fund paid on its retained gains. Common shareholders
also will be entitled to increase their Fund investments' cost basis by the net
amount of gains retained by the Fund. The Fund's net asset value on December 27,
2007, was reduced to reflect the accrual of the Fund's estimated tax liability.
The Fund's final per share retained long-term capital gains and corresponding
federal corporate income taxes paid are as follows:
<Table>
<Caption>
PER SHARE JTA
Long-Term Capital Gain Retained $ 0.5936
Less Federal Income Taxes Paid by Fund (0.2078)
NET LONG-TERM CAPITAL GAIN RETAINED $ 0.3858
</Table>
Final amounts for retained gains and taxes paid will be reported to shareholders
of record on IRS Form 2439. Investors who hold shares in "street name" should
receive Form 2439 from their brokerage firm by March 31, 2008. Investors who own
shares directly through the Funds' transfer agent will receive Form 2439 in
mid-February 2008. These gains will not be reported on Form 1099-DIV, which only
reflects realized capital gains actually distributed to shareholders and taxable
in 2007. Shareholders who held Funds in a taxable account should wait to file
their tax returns until both Form 2439 and 1099-DIV are received. More details
about these Funds, as well as additional information on retained capital gains
and related tax information are available on www.nuveen.com/taxinfo.
12
<Table>
JTA Nuveen Tax-Advantaged
PERFORMANCE Total Return
OVERVIEW Strategy Fund
as of December 31, 2007
</Table>
PORTFOLIO ALLOCATION (AS A % OF TOTAL INVESTMENTS)
(PIE CHART)
<Table>
Corporate Bonds 0.40
Short-Term Investments 3.70
$25 Par (or similar) Securities 9.60
Variable Rate Senior Loan Interests 17.50
Common Stocks 68.80
</Table>
2007 DISTRIBUTIONS PER SHARE(4)
(GRAPH)
<Table>
Jan 0.1500
Feb 0.1500
Mar 0.1550
Jun 0.4840
Sep 0.5075
Dec 0.5075
</Table>
SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE
(GRAPH)
<Table>
1/01/07 26.77
26.35
26.36
26.22
26.53
26.78
26.46
25.75
25.57
25.14
25.85
25.80
26.94
26.92
26.69
26.15
26.25
26.03
26.60
26.94
27.07
27.26
27.52
27.08
26.50
26.17
26.51
26.98
27.70
27.35
24.30
23.85
24.35
22.47
24.54
24.97
25.12
24.87
25.70
25.91
26.35
25.75
24.40
25.42
24.58
22.11
21.70
21.27
22.44
23.48
21.63
21.45
21.90
12/31/07 21.81
</Table>
4 Effective March 1, 2007, the Fund changed from a monthly distribution to a
quarterly distribution schedule. The Fund's last monthly distribution was
declared March 1, 2007, and paid on April 2, 2007. The Fund's first quarterly
distribution was declared June 1, 2007, and paid on July 2, 2007.
FUND SNAPSHOT
<Table>
- -------------------------------------------------------------------------------------
Common Share Price(1) $21.81
- -------------------------------------------------------------------------------------
Common Share Net Asset Value(1) $23.54
- -------------------------------------------------------------------------------------
Premium/(Discount) to NAV -7.35%
- -------------------------------------------------------------------------------------
Current Distribution Rate(2) 9.31%
- -------------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $328,557
- -------------------------------------------------------------------------------------
</Table>
AVERAGE ANNUAL TOTAL RETURN(3)
(INCEPTION 1/27/04)
<Table>
<Caption>
- -------------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
- -------------------------------------------------------------------------------------
1-Year -12.99% -2.38%
- -------------------------------------------------------------------------------------
Since Inception 9.50% 12.53%
- -------------------------------------------------------------------------------------
</Table>
INDUSTRIES
(AS A % OF TOTAL INVESTMENTS)
<Table>
- -------------------------------------------------------------------------------------
Diversified Telecommunication Services 8.8%
- -------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 7.1%
- -------------------------------------------------------------------------------------
Media 6.4%
- -------------------------------------------------------------------------------------
Pharmaceuticals 5.8%
- -------------------------------------------------------------------------------------
Aerospace & Defense 5.5%
- -------------------------------------------------------------------------------------
Electric Utilities 5.5%
- -------------------------------------------------------------------------------------
Tobacco 5.0%
- -------------------------------------------------------------------------------------
Commercial Banks 4.9%
- -------------------------------------------------------------------------------------
Insurance 4.8%
- -------------------------------------------------------------------------------------
Commercial Services & Supplies 4.1%
- -------------------------------------------------------------------------------------
Other 42.1%
- -------------------------------------------------------------------------------------
</Table>
COUNTRIES
(AS A % OF TOTAL INVESTMENTS)
<Table>
- -------------------------------------------------------------------
United States 82.2%
- -------------------------------------------------------------------
United Kingdom 3.9%
- -------------------------------------------------------------------
France 3.5%
- -------------------------------------------------------------------
South Korea 3.2%
- -------------------------------------------------------------------
Italy 3.1%
- -------------------------------------------------------------------
Other 4.1%
- -------------------------------------------------------------------
</Table>
1 Common Share Net Asset Value (NAV) reflects an adjustment, made subsequent to
December 31, 2007, for the amount of the tax liability associated with the
Fund's retention of a portion of its long-term capital gains and the Fund's
payment of federal corporate income tax thereon, and therefore differs from
the NAV published shortly after that date. The Common Share Price is actual as
of December 31, 2007, and did not reflect the knowledge of the subsequent
adjustment to NAV.
2 Current Distribution Rate is based on the Fund's current annualized quarterly
distribution divided by the Fund's current market price. The Fund's quarterly
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 return of capital for tax purposes.
3 The Fund elected to retain a portion of its realized long-term capital gains
for the tax years ended December 31, 2007 and December 31, 2006, and pay
required federal corporate income taxes on these amounts. As reported on Form
2439, Common shareholders on record date must include their pro-rata share of
these gains on their applicable federal tax returns, and are entitled to take
an offsetting tax credit, for their pro-rata share of the taxes paid by the
Fund. The standardized total returns shown above do not include the economic
benefit to Common shareholders of record of this tax credit/refund. The Fund's
corresponding average annual total returns on share price when this benefit is
included are -12.18% and 10.14%, for the 1-year and since inception periods,
respectively. The Fund's corresponding average annual total returns on NAV
when this benefit is included are -1.54% and 13.14%, for the 1-year and since
inception periods, respectively.
13
SHAREHOLDER MEETING REPORT
The special meeting of the shareholders was held in the offices of
Nuveen Investments on October 12, 2007; the meeting was subsequently
adjourned to October 22, 2007, and additionally adjourned to November
8, 2007, and November 30, 2007.
<Table>
<Caption>
JTA
- -----------------------------------------------------------------------------------------
Common and
Preferred
shares
voting together
as a class
- -----------------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT:
For 7,205,947
Against 259,280
Abstain 227,146
Broker Non-Votes 1,790,424
- -----------------------------------------------------------------------------------------
Total 9,482,797
- -----------------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND NWQ INVESTMENT MANAGEMENT COMPANY, LLC:
For 7,167,569
Against 283,128
Abstain 241,676
Broker Non-Votes 1,790,424
- -----------------------------------------------------------------------------------------
Total 9,482,797
- -----------------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SYMPHONY ASSET MANAGEMENT LLC:
For 7,161,412
Against 289,003
Abstain 241,958
Broker Non-Votes 1,790,424
- -----------------------------------------------------------------------------------------
Total 9,482,797
- -----------------------------------------------------------------------------------------
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE CURRENT FISCAL YEAR:
For 9,217,987
Against 111,815
Abstain 152,995
- -----------------------------------------------------------------------------------------
Total 9,482,797
- -----------------------------------------------------------------------------------------
</Table>
14
Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Tax- Advantaged Total Return Strategy
Fund (the "Fund") as of December 31, 2007, and the related statements of
operations and cash flows for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian,
selling or agent banks and brokers or by other appropriate auditing procedures
where replies from selling or agent banks or brokers were not received. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Tax-Advantaged Total Return Strategy Fund at December 31, 2007, the results of
its operations and cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for the periods indicated therein in conformity with U.S. generally
accepted accounting principles.
(ERNST & YOUNG LLP LOGO)
Chicago, Illinois
February 26, 2008
15
JTA
Nuveen Tax-Advantaged Total Return Strategy Fund
Portfolio of INVESTMENTS
as of December 31, 2007
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 101.4% (68.8% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 7.4%
94,000 Lockheed Martin Corporation $ 9,894,440
235,000 Raytheon Company 14,264,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 24,158,940
----------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 3.7%
276,500 JPMorgan Chase & Co. 12,069,225
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 4.0%
155,500 Wachovia Corporation 5,913,665
240,000 Wells Fargo & Company 7,245,600
- -----------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 13,159,265
----------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 4.8%
410,500 Pitney Bowes Inc. 15,615,420
- -----------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.8%
377,600 Motorola, Inc. 6,056,704
- -----------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.7%
201,800 Packaging Corp. of America 5,690,760
- -----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 4.3%
229,000 Citigroup Inc. 6,741,760
220,000 Federal Home Loan Mortgage Corporation 7,495,400
- -----------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 14,237,160
----------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 11.9%
323,600 AT&T Inc. 13,448,816
343,000 KT Corporation, Sponsored ADR 8,849,400
235,000 Telecom Italia S.p.A., Sponsored ADR 5,522,500
256,500 Verizon Communications Inc. 11,206,485
- -----------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 39,027,201
----------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 3.9%
95,300 EDP - Energias de Portugal, S.A., Sponsored ADR 6,228,208
323,000 Korea Electric Power Corporation, Sponsored ADR 6,734,550
- -----------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 12,962,758
----------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 1.1%
114,806 Kraft Foods Inc. 3,746,120
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 2.4%
307,000 Newell Rubbermaid Inc. 7,945,160
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 3.4%
160,000 Kimberly-Clark Corporation 11,094,400
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 3.4%
298,000 General Electric Company 11,046,860
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE - 5.0%
187,200 Hartford Financial Services Group, Inc. 16,321,968
- -----------------------------------------------------------------------------------------------------------------------------
MACHINERY - 1.7%
75,000 Caterpillar Inc. 5,442,000
- -----------------------------------------------------------------------------------------------------------------------------
MEDIA - 3.7%
200,000 CBS Corporation, Class B 5,450,000
168,100 Gannett Company Inc. 6,555,900
- -----------------------------------------------------------------------------------------------------------------------------
Total Media 12,005,900
----------------------------------------------------------------------------------------------------------------
</Table>
16
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 1.6%
180,000 United Utilities PLC, Sponsored ADR, $ 5,417,622
- -----------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 10.5%
80,000 Chevron Corporation 7,466,400
113,400 ConocoPhillips 10,013,220
132,500 Eni S.p.A., Sponsored ADR 9,596,975
90,000 Total S.A., Sponsored ADR 7,434,000
- -----------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas & Consumable Fuels 34,510,595
----------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 3.4%
220,000 International Paper Company 7,123,600
270,200 Stora Enso Oyj, Sponsored ADR 3,965,185
- -----------------------------------------------------------------------------------------------------------------------------
Total Paper & Forest Products 11,088,785
----------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 7.9%
175,000 GlaxoSmithKline PLC, ADR 8,818,250
341,200 Pfizer Inc. 7,755,476
206,000 Sanofi-Aventis, ADR 9,379,180
- -----------------------------------------------------------------------------------------------------------------------------
Total Pharmaceuticals 25,952,906
----------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 3.4%
90,000 Union Pacific Corporation 11,305,800
- -----------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 3.1%
191,700 Federal National Mortgage Association 7,664,166
411,000 IndyMac Bancorp, Inc. 2,445,450
- -----------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 10,109,616
----------------------------------------------------------------------------------------------------------------
TOBACCO - 7.3%
165,900 Altria Group, Inc. 12,538,723
134,900 Loews Corp - Carolina Group 11,506,969
- -----------------------------------------------------------------------------------------------------------------------------
Total Tobacco 24,045,692
----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $271,756,625) 333,010,857
================================================================================================================
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) PREFERRED SECURITIES - 14.2% (9.6% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.1%
50,000 Goldman Sachs Group Inc., (3) 6.200% A $ 1,144,500
77,700 Lehman Brothers Holdings Inc., Series F, (3) 6.500% A- 1,680,651
40,000 Merrill Lynch and Company, Inc., (3) 6.375% A- 801,600
- -----------------------------------------------------------------------------------------------------------------------------
Total Capital Markets 3,626,751
----------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 3.3%
40,000 ABN AMRO Capital Trust Fund VII 6.080% A1 743,200
75,000 Banco Santander Finance, 144A 6.500% Aa3 1,565,625
25,000 Banco Santander Finance 6.800% Aa3 551,250
41,200 Bank of America Corporation, Series D, (3) 6.204% Aa3 894,040
10,000 Bank of America Corporation 7.250% Aa3 256,250
50,000 Barclays Bank PLC 6.625% Aa3 1,086,000
20,000 HSBC Holdings PLC, Series A 6.200% A1 407,400
63,200 HSBC USA Inc., (3) 6.500% A 1,391,032
40,000 Royal Bank of Scotland Group PLC, Series M 6.400% A1 790,800
40,000 Royal Bank of Scotland Group PLC, Series N 6.350% A1 780,000
20,000 Royal Bank of Scotland Group PLC 6.600% Aa3 405,200
75,000 Wachovia Corporation, (3) 8.000% A 1,897,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 10,768,297
----------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.0%
50,000 Deutsche Bank Capital Funding Trust VIII 6.375% Aa3 1,060,500
71,900 ING Group N.V. 7.200% A1 1,611,998
15,300 ING Group N.V. 7.050% A 335,070
15,000 ING Group N.V. 6.125% A1 286,500
- -----------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 3,294,068
----------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 3.0%
38,900 Alabama Power Company, Series A, (3) 5.300% BBB+ 820,790
</Table>
17
JTA
Nuveen Tax-Advantaged Total Return Strategy Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (continued)
50,000 Alabama Power Company, (3) 5.625% BBB+ $ 1,179,690
8,600 Consolidated Edison Company of New York Inc., 5.000% A3 766,690
(3)
40,000 Georgia Power Company 6.125% Baa1 1,008,000
5,000 Gulf Power Company, (3) 6.450% BBB+ 521,163
34,700 Interstate Power and Light Company 7.100% Baa2 917,815
36,400 Mississippi Power Company, (3) 5.250% A3 851,760
65,000 PPL Electric Utilities Corporation, (3) 6.250% BBB 1,604,688
9,000 Southern California Edison Company, Series A, 5.349% Baa2 863,719
(3)
10,000 Southern California Edison Company, Series C, 6.000% Baa2 963,750
(3)
5,000 Southern California Edison Company, (3) 6.125% Baa2 477,657
- -----------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 9,975,722
----------------------------------------------------------------------------------------------------------------
INSURANCE - 1.8%
60,300 Ace Ltd., Series C 7.800% BBB 1,441,170
68,400 Aegon N.V. 6.375% A- 1,350,900
22,800 Arch Capital Group Limited 8.000% BBB- 569,772
50,000 Endurance Specialty Holdings Limited 7.750% BBB- 1,041,500
20,000 MetLife Inc., Series A, (3) 5.991% Baa1 422,000
30,000 Prudential PLC 6.750% A 610,200
30,000 Prudential PLC 6.500% A- 605,400
- -----------------------------------------------------------------------------------------------------------------------------
Total Insurance 6,040,942
----------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 4.0%
25,000 Federal Home Loan Mortgage Corporation, (3) 5.570% AA- 481,250
40,000 Federal Home Loan Mortgage Corporation, (3) 6.550% AA- 930,000
25,000 Federal Home Loan Mortgage Corporation, (3) 6.420% AA- 1,086,000
25,000 Federal Home Loan Mortgage Corporation, (3) 6.020% AA- 575,000
18,400 Federal Home Loan Mortgage Corporation, (3) 6.000% AA- 736,000
20,000 Federal Home Loan Mortgage Corporation, (3) 5.700% AA- 771,876
52,300 Federal Home Loan Mortgage Corporation, (3) 5.660% AA- 1,028,217
30,000 Federal Home Loan Mortgage Corporation, (3) 5.000% AA- 1,032,000
74,600 Federal Home Loan Mortgage Corporation, (3) 8.375% AA- 1,950,790
24,000 Federal National Mortgage Association 7.625% AA- 609,000
20,000 Federal National Mortgage Association 6.750% AA- 475,000
20,000 Federal National Mortgage Association, (3) 5.500% AA- 758,200
19,800 Federal National Mortgage Association, (3) 5.125% AA- 712,800
75,000 Federal National Mortgage Association, (3) 8.250% AA- 1,931,250
- -----------------------------------------------------------------------------------------------------------------------------
Total U.S. Agency 13,077,383
----------------------------------------------------------------------------------------------------------------
TOTAL $25 PAR (OR SIMILAR) PREFERRED SECURITIES 46,783,163
(COST $52,862,328)
================================================================================================================
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (5) RATINGS (2) VALUE
- --------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 25.8% (17.5% OF TOTAL INVESTMENTS) (4)
AEROSPACE & DEFENSE - 0.8%
$ 777 Hexcel Corporation, Term Loan B 6.413% 3/01/12 BB+ $ 765,674
1,594 Vought Aircraft Industries, Inc., Term Loan 7.340% 12/22/11 Ba3 1,567,444
364 Vought Aircraft Industries, Inc., Tranche B, 7.624% 12/22/10 Ba3 356,212
Letter of Credit
- --------------------------------------------------------------------------------------------------------------------------------
2,735 Total Aerospace & Defense 2,689,330
- --------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 0.6%
2,000 Federal Mogul Corporation, Term Loan A 8.100% 2/24/04 N/R 1,985,417
- --------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.2%
782 Armstrong World Industries, Inc., Tranche B, 6.715% 10/02/13 BBB- 774,709
Term Loan
- --------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.9%
1,061 Georgia Gulf Corporation, Term Loan B 7.760% 10/03/13 Ba2 1,022,077
1,950 Rockwood Specialties Group, Inc., Term Loan E 6.460% 7/30/12 BB+ 1,885,542
- --------------------------------------------------------------------------------------------------------------------------------
3,011 Total Chemicals 2,907,619
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.4%
682 Allied Waste North America, Inc., Letter of 6.871% 3/28/14 BBB- 653,660
Credit
1,134 Allied Waste North America, Inc., Term Loan B 6.592% 3/28/14 BBB- 1,087,151
119 Aramark Corporation, Letter of Credit 6.705% 1/24/14 BB- 112,930
1,658 Aramark Corporation, Term Loan 6.830% 1/24/14 BB- 1,580,077
</Table>
18
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (5) RATINGS (2) VALUE
- --------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (continued)
$ 1,103 Berry Plastics Holding Corporation, Term Loan 7.160% 4/03/15 BB- $ 1,033,854
- --------------------------------------------------------------------------------------------------------------------------------
4,696 Total Commercial Services & Supplies 4,467,672
- --------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.8%
1,920 Graham Packaging Company, L.P., Term Loan 7.497% 10/07/11 B+ 1,849,477
175 Smurfit-Stone Container Corporation, 7.124% 11/01/10 BB 171,215
Deposit-Funded Commitment
196 Smurfit-Stone Container Corporation, Term Loan B 7.058% 11/01/11 BB 191,953
374 Smurfit-Stone Container Corporation, Term Loan C 7.154% 11/01/11 BB 366,700
117 Smurfit-Stone Container Corporation, Tranche C-1 7.250% 11/01/11 BB 115,083
- --------------------------------------------------------------------------------------------------------------------------------
2,782 Total Containers & Packaging 2,694,428
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES - 0.6%
1,980 Weight Watchers International, Inc., Term Loan B 6.375% 1/26/14 BB+ 1,929,263
- --------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.2%
1,995 Alltel Communications, Inc., Term Loan B3 7.778% 5/18/15 BB- 1,924,067
1,975 MetroPCS Wireless, Inc., Term Loan 7.165% 11/03/13 Ba3 1,900,800
- --------------------------------------------------------------------------------------------------------------------------------
3,970 Total Diversified Telecommunication Services 3,824,867
- --------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.2%
1,702 Dynegy Holdings, Inc., Delayed Term Loan, Letter 6.355% 4/02/13 Ba1 1,603,900
of Credit
298 Dynegy Holdings, Inc., Term Loan 6.752% 4/02/13 Ba1 280,683
2,000 TXU Corporation, Term Loan B-2 8.396% 10/10/14 Ba3 1,965,752
- --------------------------------------------------------------------------------------------------------------------------------
4,000 Total Electric Utilities 3,850,335
- --------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.5%
1,496 Sensus Metering Systems, Inc., Term Loan B-1 7.036% 12/17/10 BB 1,469,478
97 Sensus Metering Systems, Inc., Term Loan B-2 6.878% 12/17/10 BB 95,473
- --------------------------------------------------------------------------------------------------------------------------------
1,593 Total Electrical Equipment 1,564,951
- --------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.3%
200 Bausch & Lomb, Inc., Delayed Draw Term Loan, (6) 1.000% 12/31/09 BB- (563)
(7)
800 Bausch & Lomb, Inc., Term Loan 8.080% 10/01/14 BB- 797,750
- --------------------------------------------------------------------------------------------------------------------------------
1,000 Total Health Care Equipment & Supplies 797,187
- --------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 2.1%
1,317 DaVita, Inc., Term Loan B-1 6.555% 10/05/12 BB+ 1,272,020
1,980 HCA, Inc., Term Loan 7.080% 11/18/13 BB 1,910,618
124 IASIS Healthcare LLC, Letter of Credit 4.531% 3/14/14 Ba2 117,556
464 IASIS Healthcare LLC, Delayed Draw Term Loan, 7.151% 3/14/14 Ba2 320,237
(6)
1,347 IASIS Healthcare LLC, Term Loan 7.064% 3/14/14 Ba2 1,280,496
996 LifePoint Hospitals, Inc., Term Loan B 6.715% 4/18/12 BB 951,906
983 Quintiles Transnational Corporation, Term Loan B 6.830% 3/29/13 BB 949,341
- --------------------------------------------------------------------------------------------------------------------------------
7,211 Total Health Care Providers & Services 6,802,174
- --------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 2.8%
1,965 24 Hour Fitness Worldwide, Inc., Term Loan B 7.507% 6/08/12 Ba3 1,896,225
774 CBRL Group, Inc., Term Loan B-1 6.400% 4/28/13 BB 736,519
93 CBRL Group, Inc., Term Loan B-2 6.393% 4/28/13 BB 88,569
142 OSI Restaurant Partners LLC, Revolver Term Loan 4.878% 6/14/13 BB- 131,128
1,787 OSI Restaurant Partners LLC, Term Loan 7.125% 6/14/14 BB- 1,646,052
1,955 Penn National Gaming, Inc., Term Loan B 6.710% 10/03/12 BBB- 1,934,500
445 Travelport LLC, Term Loan 7.080% 8/23/13 BB- 423,194
89 Travelport LLC, Letter of Credit 7.080% 8/23/13 BB- 84,914
800 Venetian Casino Resort LLC, Delayed Draw, Term 0.750% 5/23/13 BB (35,762)
Loan, (6) (7)
2,388 Venetian Casino Resort LLC, Term Loan 6.580% 5/23/14 BB 2,245,669
- --------------------------------------------------------------------------------------------------------------------------------
10,438 Total Hotels, Restaurants & Leisure 9,151,008
- --------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.4%
1,212 Solo Cup Company, Term Loan 8.484% 2/27/11 B1 1,203,405
- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.4%
469 NRG Energy, Inc., Credit Linked Deposit 6.480% 2/01/13 Ba1 447,873
1,015 NRG Energy, Inc., Term Loan 6.580% 2/01/13 Ba1 970,060
- --------------------------------------------------------------------------------------------------------------------------------
1,484 Total Independent Power Producers & Energy 1,417,933
Traders
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
19
JTA
Nuveen Tax-Advantaged Total Return Strategy Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (5) RATINGS (2) VALUE
- --------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.3%
$ 1,168 Conseco, Inc., Term Loan 6.845% 10/10/13 Ba3 $ 1,076,134
- --------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.2%
1,995 First Data Corporation, Term Loan B-1 7.630% 9/24/14 BB- 1,896,373
2,042 SunGard Data Systems, Inc., Term Loan B 6.898% 2/28/14 BB 1,976,858
- --------------------------------------------------------------------------------------------------------------------------------
4,037 Total IT Services 3,873,231
- --------------------------------------------------------------------------------------------------------------------------------
MEDIA - 5.7%
1,965 CSC Holdings, Inc., Term Loan 6.896% 3/29/13 BB 1,860,434
1,990 CanWest Mediaworks LP, Term Loan 7.081% 7/10/15 Ba1 1,940,250
1,990 Cequel Communications LLC, Term Loan B 7.212% 11/05/13 BB- 1,865,625
2,200 Charter Communications Operating Holdings LLC, 6.990% 3/06/14 B+ 2,059,857
Term Loan
1,980 Idearc, Inc., Term Loan 6.830% 11/17/14 BBB- 1,888,988
978 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 8.108% 4/08/12 N/R 908,244
1,980 Neilsen Finance LLC, Term Loan 7.276% 8/09/13 Ba3 1,881,553
1,990 Tribune Company, Term Loan B 7.910% 6/04/14 BB 1,699,211
933 Tribune Company, Term Loan X 7.994% 6/04/09 BB 903,167
67 Univision Communications, Inc., Delayed Draw, 1.000% 9/29/13 Ba3 (5,789)
Term Loan, (6) (7)
1,933 Univision Communications, Inc., Term Loan 7.207% 9/29/14 Ba3 1,766,174
2,154 WMG Acquisition Corporation, Term Loan 7.071% 2/28/11 Ba2 2,062,254
- --------------------------------------------------------------------------------------------------------------------------------
20,160 Total Media 18,829,968
- --------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.7%
1,024 Amsted Industries, Inc., Delayed Draw Term Loan 7.014% 4/08/13 BB 1,007,350
1,408 Amsted Industries, Inc., Term Loan 7.210% 4/08/13 BB 1,384,578
- --------------------------------------------------------------------------------------------------------------------------------
2,432 Total Metals & Mining 2,391,928
- --------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.6%
1,950 Georgia-Pacific Corporation, Term Loan B 6.866% 12/21/12 BB+ 1,861,207
- --------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.6%
1,985 Royalty Pharma Finance Trust, Term Loan 7.095% 4/16/13 Baa2 1,977,143
- --------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.4%
1,500 LNR Property Corporation, Term Loan B 7.630% 7/12/11 BB 1,435,313
- --------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 0.4%
1,767 Swift Transportation Company, Inc., Term Loan 7.938% 5/10/14 BB- 1,458,692
- --------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.4%
1,500 TRU 2005 RE Holding Co., LLC, Term Loan 8.225% 12/08/08 B3 1,449,219
- --------------------------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS - 0.4%
1,395 HBI Branded Apparel Limited, Inc., Term Loan 6.779% 9/05/13 BB 1,362,683
- --------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.9%
990 Ashtead Group Public Limited Company, Term Loan 6.688% 8/31/11 BB+ 947,925
196 Brenntag Holdings GmbH & Co. KG, Acquisition 7.387% 1/20/14 B+ 188,018
Facility
804 Brenntag Holdings GmbH & Co. KG, Facility B2 7.387% 1/20/14 B+ 769,482
310 United Rentals, Inc. Tranche B, Credit Linked 5.322% 2/13/11 Ba1 302,724
Deposit
736 United Rentals, Inc., Term Loan B 7.110% 2/14/11 Ba1 719,668
- --------------------------------------------------------------------------------------------------------------------------------
3,036 Total Trading Companies & Distributors 2,927,817
- --------------------------------------------------------------------------------------------------------------------------------
$ 89,824 TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (COST 84,703,633
$88,310,425)
================================================================================================================================
<Caption>
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
- --------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 0.6% (0.4% OF TOTAL INVESTMENTS)
HOTEL, RESTAURANTS & LEISURE - 0.6%
$ 2,000 Park Place Entertainment 8.875% 9/15/08 Ba1 $ 2,078,162
- --------------------------------------------------------------------------------------------------------------------------------
$ 2,000 TOTAL CORPORATE BONDS (COST $2,045,788) 2,078,162
================================================================================================================================
</Table>
20
<Table>
<Caption>
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.4% (3.7% OF TOTAL INVESTMENTS)
$ 17,716 Repurchase Agreement with Fixed Income Clearing 1.000% 1/02/08 $ 17,716,125
Corporation,
dated 12/31/07, repurchase price $17,717,109,
collateralized by
$16,545,000 U.S. Treasury Notes, 6.500%, due
2/15/10, value $18,075,413
========== -----------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $17,716,125) 17,716,125
=================================================================================================================
TOTAL INVESTMENTS (COST $432,691,292) - 147.4% 484,291,940
=================================================================================================================
BORROWINGS - (10.1)% (8) (33,000,000)
=================================================================================================================
FUNDNOTES - (23.7)% (8) (78,000,000)
=================================================================================================================
OTHER ASSETS LESS LIABILITIES - 0.1% 264,716
=================================================================================================================
FUNDPREFERRED SHARES, AT LIQUIDATION VALUE - (13.7)% (8) (45,000,000)
=================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES - 100% $ 328,556,656
=================================================================================================================
</Table>
<Table>
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable
to Common shares unless otherwise noted.
(2) Ratings (not covered by the report of independent registered public accounting firm):
Using the higher of Standard & Poor's Group ("Standard & Poor's") or Moody's Investor
Service, Inc. ("Moody's") rating. Ratings below BBB by Standard & Poor's or Baa by Moody's
are considered to be below investment grade.
(3) Investment is eligible for the Dividends Received Deduction.
(4) Senior Loans 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) 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.
(6) Position or portion of position represents an unfunded Senior Loan commitment outstanding
at December 31, 2007.
(7) Negative value represents unrealized depreciation on Senior Loan commitment at December
31, 2007.
(8) Borrowings, FundNotes and FundPreferred Shares, at Liquidation Value as a percentage of
total investments are (6.8)%, (16.1)% and (9.3)%, respectively.
N/R Not rated.
144A Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as
amended. These investments may only be resold in transactions exempt from registration
which are normally those transactions with qualified institutional buyers.
ADR American Depositary Receipt.
</Table>
See accompanying notes to financial statements.
21
Statement of
ASSETS & LIABILITIES
December 31, 2007
<Table>
<Caption>
- ---------------------------------------------------------------------------
ASSETS
Investments, at value (cost $432,691,292) $ 484,291,940
Receivables:
Dividends 1,051,468
Interest 889,926
Investments sold 1,249,291
Reclaims 134,736
Deferred FundNotes offering costs 1,617,895
Other assets 26,602
- ---------------------------------------------------------------------------
Total assets 489,261,858
- ---------------------------------------------------------------------------
LIABILITIES
Borrowings 33,000,000
Payables:
Investments purchased 641,334
Federal corporate income tax 2,900,000
FundNotes 78,000,000
Accrued expenses:
Management fees 237,022
Interest on borrowings 735,521
Other 112,016
FundNotes interest payable 46,947
FundPreferred shares dividends payable 32,362
- ---------------------------------------------------------------------------
Total liabilities 115,705,202
- ---------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $ 328,556,656
===========================================================================
Common shares outstanding 13,958,267
===========================================================================
Net asset value per Common share outstanding (net assets
applicable to Common shares, divided by Common shares
outstanding) $ 23.54
===========================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ---------------------------------------------------------------------------
Common shares, $.01 par value per share $ 139,583
Paid-in surplus (1) 279,959,701
Undistributed (Over-distribution of) net investment income (296,740)
Accumulated net realized gain (loss) from investments (2,846,536)
Net unrealized appreciation (depreciation) of investments 51,600,648
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $ 328,556,656
===========================================================================
Authorized shares:
Common Unlimited
FundPreferred Unlimited
===========================================================================
</Table>
(1) Includes retained realized long-term capital gains of $8,285,714, net of
federal corporate income taxes of $2,900,000.
See accompanying notes to financial statements.
22
Statement of
OPERATIONS
Year ended December 31, 2007
<Table>
<Caption>
- -----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $244,095) $14,350,884
Interest 7,710,699
- -----------------------------------------------------------------------------
Total investment income 22,061,583
- -----------------------------------------------------------------------------
EXPENSES
Management fees 4,576,291
FundNotes interest expense and amortization of offering
costs 4,033,705
FundNotes and FundPreferred shares - auction fees 307,502
FundNotes and FundPreferred shares - dividend disbursing
agent fees 17,087
Shareholders' servicing agent fees and expenses 630
Interest expense on borrowings 1,856,324
Custodian's fees and expenses 124,154
Trustees' fees and expenses 15,540
Professional fees 67,083
Shareholders' reports - printing and mailing expenses 89,271
Stock exchange listing fees 9,748
Investor relations expense 93,916
Other expenses 30,048
- -----------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 11,221,299
Custodian fee credit (2,723)
Expense reimbursement (1,659,405)
- -----------------------------------------------------------------------------
Net expenses 9,559,171
- -----------------------------------------------------------------------------
Net investment income 12,502,412
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments (net of federal
corporate income taxes of $2,900,000 on long-term capital
gains retained) 20,234,467
Change in net unrealized appreciation (depreciation) of
investments (37,324,738)
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) (17,090,271)
- -----------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (643,144)
From accumulated net realized gains (1,511,526)
- -----------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to FundPreferred shareholders (2,154,670)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations $(6,742,529)
=============================================================================
</Table>
See accompanying notes to financial statements.
23
Statement of
CHANGES in NET ASSETS
<Table>
<Caption>
YEAR ENDED YEAR ENDED
12/31/07 12/31/06
- -------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 12,502,412 $ 12,395,442
Net realized gain (loss) from investments (net of federal
corporate income taxes of $2,900,000 and $4,560,679,
respectively, on long-term capital gains retained) 20,234,467 19,797,397
Change in net unrealized appreciation (depreciation) of
investments (37,324,738) 42,186,210
Distributions to FundPreferred shareholders:
From net investment income (643,144) (684,168)
From accumulated net realized gains (1,511,526) (1,265,973)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations (6,742,529) 72,428,908
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (11,443,362) (12,216,747)
From accumulated net realized gains (15,815,168) (9,753,316)
- -------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (27,258,530) (21,970,063)
- -------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Offering costs adjustments -- (4,264)
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 1,817,508 817,373
FundPreferred shares offering costs adjustments -- 15,800
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from
capital share transactions 1,817,508 828,909
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares (32,183,551) 51,287,754
Net assets applicable to Common shares at the beginning of
year 360,740,207 309,452,453
- -------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of year $328,556,656 $360,740,207
===========================================================================================
Undistributed (Over-distribution of) net investment income
at the end of year $ (296,740) $ (402,491)
===========================================================================================
</Table>
See accompanying notes to financial statements.
24
Statement of
CASH FLOWS
Year ended December 31, 2007
<Table>
<Caption>
- ----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHARES FROM OPERATIONS $ (6,742,529)
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 (132,274,698)
Proceeds from sales of investments 162,015,448
Proceeds from (Purchases of) short-term investments, net (9,381,896)
Amortization/(Accretion) of premiums and discounts, net 203,434
(Increase) Decrease in receivable for dividends (30,346)
(Increase) Decrease in receivable for interest 113,335
(Increase) Decrease in receivable for investments sold (725,654)
(Increase) Decrease in receivable for reclaims (85,815)
(Increase) Decrease in other assets (8,282)
Increase (Decrease) in payable for investments purchased (854,916)
Increase (Decrease) in payable for federal corporate
income tax (1,660,679)
Increase (Decrease) in accrued management fees (11,042)
Increase (Decrease) in accrued interest on borrowings 443,095
Increase (Decrease) in accrued other liabilities 14,338
Increase (Decrease) in FundNotes interest payable 18,373
Increase (Decrease) in FundPreferred shares dividends
payable 10,906
Net realized (gain) loss from investments (20,234,467)
Net realized (gain) loss from paydowns 37,167
Proceeds from litigation settlement 109,218
Change in net unrealized (appreciation) depreciation of
investments 37,324,738
Federal corporate income taxes on retained capital gains (2,900,000)
- ----------------------------------------------------------------------------
Net cash provided by (used in) operating activities 25,379,728
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (25,441,022)
(Increase) Decrease in deferred FundNotes offering costs 61,294
- ----------------------------------------------------------------------------
Net cash provided by (used in) financing activities (25,379,728)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of period --
- ----------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ --
============================================================================
</Table>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest on borrowings during the fiscal year ended December 31,
2007, was $1,413,229.
Cash paid for federal corporate income taxes was $4,560,679.
Cash paid for interest on FundNotes (excluding amortization of FundNotes
offering costs) during the fiscal year ended December 31, 2007, was $3,954,038.
Non-cash financing activities not included herein consist of reinvestments of
Common share distributions of $1,817,508.
See accompanying notes to financial statements.
25
Notes to
FINANCIAL STATEMENTS
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. 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.
If it is determined that the market price for an investment is unavailable or
inappropriate, the Board of Trustees of the Fund, or its designee, may establish
fair value in accordance with procedures established in good faith by the Board
of Trustees. 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 has
instructed the custodian to segregate assets with a current value at least equal
to the amount of the when-issued/delayed delivery purchase commitments. At
December 31, 2007, the Fund had no such outstanding purchase commitments.
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, if any. Interest income also includes fee income and amendment fees, if
any. Fee income 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 comply with the requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies. The Fund intends to
distribute substantially all of its investment company taxable income to
shareholders. In any year when the Fund realizes net capital gains, the Fund may
choose to distribute all or a portion of its net capital gains to shareholders,
or alternatively, to retain all or a portion of its net capital gains and pay
federal corporate income taxes on such retained gains. During the tax year ended
December 31, 2007, the Fund retained $8,285,714 of realized long-term capital
gains and
26
accrued a provision for federal corporate income taxes of $2,900,000, the net of
which has been reclassified to Paid-in surplus. During the tax year ended
December 31, 2006, the Fund retained $13,030,512 of realized long-term capital
gains and accrued a provision for federal corporate income taxes of $4,560,679.
Effective June 29, 2007, the Fund adopted Financial Accounting Standards Board
(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 affirmative evaluation of tax positions taken or expected to be
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not," (i.e. greater than 50-percent) of being sustained by
the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold may result in a tax benefit or expense in the
current year.
Implementation of FIN 48 required management of the Fund to analyze all open tax
years, as defined by the status of limitations, for all major jurisdictions,
which includes federal and certain states. Open tax years are those that are
open for examination by taxing authorities (i.e. the last four tax year ends and
the interim tax period since than). The Fund has no examinations in progress.
For all open tax years and all major taxing jurisdictions through the end of the
reporting period, management of the Fund has reviewed all tax positions taken or
expected to be taken in the preparation of the Fund's tax returns and concluded
the adoption of FIN 48 resulted in no impact to the Fund's net assets or results
of operations as of and during the fiscal year ended December 31, 2007.
The Fund is also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
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
corporate income tax regulations, which may differ from U.S. generally accepted
accounting principles.
The Fund makes quarterly 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 quarterly distributions (a "Managed Distribution Program"). 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. 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. 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. 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
are reflected in the accompanying financial statements.
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 fiscal year ended December 31, 2007, the average daily balance of
FundNotes was $78 million with an average annualized interest rate (including
amortization of the FundNotes offering costs) of 5.17%.
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 derivative financial instruments 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 fiscal year ended December 31, 2007.
27
Notes to
FINANCIAL STATEMENTS (continued)
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 net credits earned on the Fund's cash on
deposit with the bank. Such deposit arrangements are an alternative to overnight
investments. Credits for cash balances may be offset by charges for any days on
which the Fund overdraws its account at the custodian bank.
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
Transactions in Common shares were as follows:
<Table>
<Caption>
YEAR YEAR
ENDED ENDED
12/31/07 12/31/06
- ----------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of
distributions 70,333 32,694
- ----------------------------------------------------------------------------
</Table>
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments)
during the fiscal year ended December 31, 2007, aggregated $132,274,698 and
$162,015,448, 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. To the extent that differences arise that are
permanent in nature, such amounts are reclassified within the capital accounts
on the Statement of Assets and Liabilities presented in the annual report, based
on their federal tax basis treatment; temporary differences do not require
reclassification. Temporary and permanent differences do not impact the net
asset value of the Fund.
At December 31, 2007, the cost of investments was $438,027,491.
Gross unrealized appreciation and gross unrealized depreciation of investments
at December 31, 2007, were as follows:
<Table>
- -----------------------------------------------------------------------------------
Gross unrealized:
Appreciation $84,685,277
Depreciation (38,420,828)
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $46,264,449
- -----------------------------------------------------------------------------------
</Table>
28
The tax components of undistributed net ordinary income and net long-term
capital gains at December 31, 2007, the Fund's tax year end, were as follows:
<Table>
- --------------------------------------------------------------------------------
Undistributed net ordinary income * $ --
Undistributed net long-term capital gains 2,902,935
- --------------------------------------------------------------------------------
</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 tax years ended December 31,
2007 and December 31, 2006, was designated for purposes of the dividends paid
deduction as follows:
<Table>
<Caption>
2007
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $12,075,600
Distributions from net long-term capital gains ** 17,326,694
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
2006
- --------------------------------------------------------------------------------
Distributions from net ordinary income * $13,681,235
Distributions from net long-term capital gains 10,235,261
- --------------------------------------------------------------------------------
</Table>
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
** The Fund hereby designates this amount paid during the fiscal year ended
December 31, 2007, as long-term capital gain dividends, pursuant to the
Internal Revenue Code Section 852(b)(3).
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by 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 tables below. As
of December 31, 2007, the complex level fee rate was .1846%.
Effective August 20, 2007, the complex-level fee schedule is as follows:
<Table>
<Caption>
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
- ------------------------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1691
$125 billion .1599
$200 billion .1505
$250 billion .1469
$300 billion .1445
- ------------------------------------------------------------------------------------------------
</Table>
29
Notes to
FINANCIAL STATEMENTS (continued)
Prior to August 20, 2007, the complex-level fee schedule was as follows:
<Table>
<Caption>
COMPLEX-LEVEL ASSET BREAKPOINT LEVEL (1) EFFECTIVE RATE AT BREAKPOINT LEVEL
- ------------------------------------------------------------------------------------------------
$55 billion .2000%
$56 billion .1996
$57 billion .1989
$60 billion .1961
$63 billion .1931
$66 billion .1900
$71 billion .1851
$76 billion .1806
$80 billion .1773
$91 billion .1698
$125 billion .1617
$200 billion .1536
$250 billion .1509
$300 billion .1490
- ------------------------------------------------------------------------------------------------
</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
preferred stock issued by or borrowings by the Nuveen funds) of
Nuveen-sponsored funds in the U.S.
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.
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.
Agreement and Plan of Merger
On June 20, 2007, Nuveen Investments announced that it had entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with Windy City
Investments, Inc. ("Windy City"), a corporation formed by investors led by
Madison Dearborn Partners, LLC ("Madison Dearborn"), pursuant to which Windy
City would acquire Nuveen Investments. Madison Dearborn is a private equity
investment firm based in Chicago, Illinois. The merger was consummated on
November 13, 2007.
The consummation of the merger was deemed to be an "assignment" (as that term is
defined in the Investment Company Act of 1940) of the investment management
agreement between the Fund and the Adviser and, if applicable, the sub-advisory
agreements between the Adviser and the sub-advisers of the Fund, and resulted in
the automatic termination of each such agreement. The Board of Trustees of the
Fund considered and approved a new investment management agreement with the
Adviser, and, if applicable, a new sub-advisory agreement between the Adviser
and the sub-advisers on the same terms as the previous
30
agreements. Each new ongoing investment management agreement and sub-advisory
agreement, if applicable, was approved by the shareholders of the Fund and took
effect on November 30, 2007.
The investors led by Madison Dearborn includes an affiliate of Merrill Lynch. As
a result, Merrill Lynch is an indirect "affiliated person" (as that term is
defined in the Investment Company Act of 1940) of the Fund. Certain conflicts of
interest may arise as a result of such indirect affiliation. For example, the
Fund is generally prohibited from entering into principal transactions with
Merrill Lynch and its affiliates. The Adviser does not believe that any such
prohibitions or limitations as a result of Merrill Lynch's affiliation will
significantly impact the ability of the Fund to pursue its investment objectives
and policies.
Related Party Holdings
At December 31, 2007, the Fund owned 40,000 shares of Merrill Lynch and Company,
Inc. preferred securities with a market value of $801,600. Total income earned
by the Fund from such securities amounted to $39,842 and is included in dividend
income on the Statement of Operations.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At December 31, 2007, the Fund had unfunded senior loan commitments
of $987,620.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At December 31, 2007, there
were no such outstanding participation commitments.
8. BORROWINGS
On August 2, 2006, the Fund entered into a $33 million revolving credit
agreement ($33 million maximum) with CITIBANK, N.A. On August 3, 2006, the Fund
had borrowed the full $33 million allowed under the revolving credit agreement.
For the fiscal year ended December 31, 2007, the average daily balance of
borrowings under the revolving credit agreement was the full $33 million
allowed. The interest expense incurred on borrowings is recognized as "Interest
expense on borrowings" in the Statement of Operations. The average annualized
interest rate on such borrowings for the fiscal year ended December 31, 2007,
was 5.63%.
9. NEW ACCOUNTING PRONOUNCEMENT
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 157
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The changes to current generally accepted accounting principles from the
application of this standard relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. As of December 31, 2007, management does not believe the adoption
of SFAS No. 157 will impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements included within the Statement of
Operations for the period.
10. SUBSEQUENT EVENTS
During February 2008, regularly scheduled auctions for the FundPreferred shares
issued by the Fund began attracting more shares for sale than offers to buy.
This meant that these auctions "failed to clear," and that many FundPreferred
shareholders who wanted to sell their shares in these auctions were unable to do
so. FundPreferred shareholders unable to sell their shares received
distributions at the "maximum rate" calculated in accordance with the
pre-established terms of the FundPreferred stock.
These developments do not affect the management or investment policies of the
Fund. However, one implication of these auction failures for Common shareholders
is that the Fund's cost of leverage will be higher than it otherwise would have
been had the auctions been successful. As a result, the Fund's future Common
share earnings may be lower than they otherwise might have been.
31
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
<Table>
<Caption>
Investment Operations
----------------------------------------------------------------
Distributions
from Net Distributions
Beginning Net Investment from Capital
Common Realized/ Income to Gains to
Share Net Unrealized FundPreferred FundPreferred
Net Asset Investment Gain Share- Share-
Value Income(a) (Loss)(b) holders+ holders+ Total
- -------------------------------------------------------------------------------------------------------------
Year Ended 12/31:
2007 $25.98 $.90 $(1.22) $(.05) $(.11) $(.48)
2006 22.33 .89 4.48 (.05) (.09) 5.23
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 Costs
Investment Capital 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:
2007 $(.82) $(1.14) $(1.96) $ -- $23.54 $21.81
2006 (.88) (.70) (1.58) --** 25.98 27.09
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:
2007 $ 78,000 $ 25,000 $ 5,789 $ 45,000 $ 25,000 $ 207,531
2006 78,000 25,000 6,202 45,000 25,000 225,411
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
- ---------------------------------------------------------------------------------------------------------------------------------
<Caption>
Borrowings at End of Period
---------------------------
Aggregate
Amount Asset
Outstanding Coverage
(000) Per $1,000
- ----------------------------------- ---------------------------
Year Ended 12/31:
2007 $ 33,000 $ 14,684
2006 33,000 15,659
2005 -- --
2004(c) -- --
- -----------------------------------
</Table>
32
<Table>
<Caption>
Ratios/Supplemental Data
---------------------------------------------------------------------
Ratios to Average Ratios to Average
Net Assets Applicable to Net Assets Applicable to
Common Shares Before Common Shares After
Total Returns Credit/Reimbursement Credit/Reimbursement****
------------------- ------------------------- -------------------------
Based
on
Common Ending Net
Based Share Assets
on Net Applicable to Net Net
Market Asset Common Investment Investment
Value*** Value*** Shares (000) Expenses++ Income++ Expenses++ Income++
- ------------------------------------------------------------------------------------------------
(12.99)% (2.38)% $328,557 3.10% 2.99% 2.64% 3.45%
35.52 24.19 360,740 2.79 3.28 2.34 3.73
20.00 11.93 309,452 2.26 3.36 1.81 3.81
.91 17.18 298,449 1.80* 3.30* 1.37* 3.73*
- ------------------------------------------------------------------------------------------------
<Caption>
Ratios/Supplemental Data
---------
Portfolio
Turnover
Rate
- ---------------------------------------------------------------
25%
25
26
16
- ---
</Table>
* Annualized.
** Per share offering costs and FundPreferred Share Underwriting Discounts
rounds to less than $.01 per share.
*** - 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. The last dividend declared in the
period, which is typically paid on the first business day of the
following month, is assumed to be reinvested at the ending market price.
The actual reinvestment for the last dividend declared in the period
takes place over several days, and in some instances may not be based on
the market price, so the actual reinvestment price may be different from
the price used in the calculation. Total returns are not annualized.
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. The last dividend declared in the period, which is
typically paid on the first business day of the following month, is
assumed to be reinvested at the ending net asset value. The actual
reinvest price for the last dividend declared in the period may often be
based on the Fund's market price (and not its net asset value), and
therefore may be different from the price used in the calculation. Total
returns are not annualized.
- The Fund elected to retain a portion of its realized long-term capital
gains for the tax years ended December 31, and pay required federal
corporate income taxes on these amounts. As reported on Form 2439, Common
shareholders on record date must include their pro-rata share of these
gains on their applicable federal tax returns, and are entitled to take
offsetting tax credits, for their pro-rata share of the taxes paid by the
Fund. The standardized total returns shown above do not include the
economic benefit to Common shareholders on record date of these tax
credits/refunds. The Fund's corresponding Total Return on Market Value
and Common Share Net Asset Value when these benefits are included are as
follows:
<Table>
<Caption>
Total Returns
--------------------------------
Common Based on
Shareholders Based on Common Share
of Record on Market Value Net Asset Value
-------------------------------------------------------
Tax Year Ended 12/31:
2007 December 31 (12.18)% (1.54)%
2006 December 29 37.15 25.75
2005 N/A N/A N/A
2004(c) N/A N/A N/A
</Table>
N/A The Fund did not elect to retain a portion of its realized long-term
capital gains prior to tax year ended December 31, 2006.
**** After custodian fee credit and expense reimbursement, where applicable.
+ 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, FundNotes and borrowings, where applicable.
- 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 and borrowings as follows:
<Table>
<Caption>
Ratios of FundNotes Interest Expense Ratios of Borrowings Interest
and Amortization of FundNotes Offering Expense to
Costs to Average Net Assets Applicable Average Net Assets Applicable to
to Common Shares Common Shares
-------------------------------------- ----------------------------------
Year Ended:
2007 1.11% .51%
2006 1.11 .23*
2005 .80 --
2004(c) .37* --
</Table>
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) Net of federal corporate income taxes on long-term capital gains retained
by the Fund of $0.21 and $0.33 per share for the fiscal years ended
December 31, 2007 and December 31, 2006, respectively.
(c) For the period January 27, 2004 (commencement of operations) through
December 31, 2004.
See accompanying notes to financial statements.
33
BOARD MEMBERS & OFFICERS
The management of the Funds, including general supervision of the duties
performed for the Funds by the Adviser, is the responsibility of the Board
Members of the Funds. The number of board members of the Fund is currently set
at eight. None of the board members who are not interested persons of the Funds
has ever been a director or employee of, or consultant to, Nuveen or its
affiliates. The names and business addresses of the board members and officers
of the Funds, their principal occupations and other affiliations during the past
five years, the number of portfolios each oversees and other directorships they
hold are set forth below.
<Table>
<Caption>
NAME, BIRTHDATE POSITION(S) HELD WITH YEAR FIRST NUMBER OF PORTFOLIOS
& ADDRESS THE FUNDS ELECTED OR IN FUND COMPLEX PRINCIPAL OCCUPATION(S)
APPOINTED OVERSEEN BY INCLUDING OTHER DIRECTORSHIPS
AND TERM(2) BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBER WHO IS AN INTERESTED PERSON OF THE FUNDS:
- - TIMOTHY R.
SCHWERTFEGER(1)
3/28/49 Chairman of 1994 Former director
333 W. Wacker Drive the Board ANNUAL (1994-November 12, 2007),
Chicago, IL 60606 and Board Member Chairman (1996-June 30,
2007), Non-Executive Chairman
(July 1, 2007-November 12,
2007) and Chief Executive
Officer (1996-June 30, 2007)
184 of Nuveen Investments, Inc.
and Nuveen Asset Management
and certain other
subsidiaries of Nuveen
Investments, Inc.; formerly,
Director (1992-2006) of
Institutional Capital
Corporation.
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
- - ROBERT P. BREMNER
8/22/40 Lead Independent 1997 184 Private Investor and
333 W. Wacker Drive Board member CLASS III Management Consultant.
Chicago, IL 60606
- - JACK B. EVANS
10/22/48 1999 President, The Hall-Perrine
333 W. Wacker Drive Board member CLASS III Foundation, a private phil-
Chicago, IL 60606 anthropic corporation (since
1996); Director and Vice
Chairman, United Fire Group,
a publicly held company;
Member of the Board of
Regents Companies; for the
State of Iowa University
System; Director, Gazette
Life Trustee of Coe College
184 and Iowa College Foundation;
Member of the Advisory
Council of the Department of
Finance in the Tippie College
of Business, University of
Iowa; formerly, Director,
Alliant Energy; formerly,
Director, Federal Reserve
Bank of Chicago; formerly,
President and Chief Operating
Officer, SCI Financial Group,
Inc., a regional financial
services firm.
</Table>
34
<Table>
<Caption>
NAME, BIRTHDATE POSITION(S) HELD WITH YEAR FIRST NUMBER OF PORTFOLIOS
& ADDRESS THE FUNDS ELECTED OR IN FUND COMPLEX PRINCIPAL OCCUPATION(S)
APPOINTED OVERSEEN BY INCLUDING OTHER DIRECTORSHIPS
AND TERM(2) BOARD MEMBER DURING PAST 5 YEARS
BOARD MEMBERS WHO ARE NOT INTERESTED PERSONS OF THE FUNDS (CONTINUED):
- - WILLIAM C. HUNTER
3/6/48 2004 Dean, Tippie College of
333 W. Wacker Drive Board member CLASS II Business, University of Iowa
Chicago, IL 60606 (since July 2006); formerly,
Dean and Distinguished
Professor of Finance, School
of Business at the University
of Connecticut (2003-2006);
previously, Senior Vice
President and Director of
Research at the Federal
184 Reserve Bank of Chicago
(1995-2003); Director (since
1997), Credit Research Center
at George Washington
University; Director (since
2004) of Xerox Corporation;
Director (since 2005) Beta
Gamma Sigma International
Honor Society; Director, SS&C
Technologies, Inc. (May
2005-October 2005).
- - WILLIAM J. SCHNEIDER
9/24/44 1997 Chairman of Miller-Valentine
333 W. Wacker Drive Board member ANNUAL Partners Ltd., a real estate
Chicago, IL 60606 investment company, formerly,
Senior Partner and Chief
184 Operating Officer (retired,
2004); Director, Dayton
Development Coalition;
formerly, Member, Business
Advisory Council, Cleveland
Federal Reserve Bank.
- - JUDITH M. STOCKDALE
12/29/47 1997 Executive Director, Gaylord
333 W. Wacker Drive Board member CLASS I and Dorothy Donnelley
Chicago, IL 60606 Foundation (since 1994);
184 prior thereto, Executive
Director, Great Lakes
Protection Fund (from 1990 to
1994).
- - CAROLE E. STONE
6/28/47 2007 Director, Chicago Board
333 W. Wacker Drive Board member CLASS I Options Exchange (since
Chicago, IL 60606 2006); Chair New York Racing
Association Oversight Board
(2005-12/2007); Commissioner,
New York State Commission on
Public Authority Reform
184 (since 2005); formerly
Director, New York State
Division of the Budget
(2000-2004), Chair, Public
Authorities Control Board
(2000-2004) and Director,
Local Government Assistance
Corporation (2000-2004).
</Table>
35
<Table>
<Caption>
NAME, BIRTHDATE POSITION(S) HELD WITH NUMBER OF PORTFOLIOS
& ADDRESS THE FUNDS YEAR FIRST IN FUND COMPLEX PRINCIPAL
ELECTED OR OVERSEEN OCCUPATION(S)
APPOINTED(4) BY OFFICER DURING PAST 5 YEARS
OFFICERS OF THE FUND:
- - GIFFORD R. ZIMMERMAN
9/9/56 Chief Administrative Managing Director (since
333 W. Wacker Drive Officer 1988 2002), Assistant
Chicago, IL 60606 Secretary and Associate
General Counsel,
formerly, Vice Presi-
dent and Assistant
General Counsel, of
Nuveen Investments, LLC;
Managing Director (since
2002), Associate General
Counsel and Assistant
Secretary, of Nuveen
Asset Management; Vice
President and Assistant
Secretary of NWQ
Investment Management
Company, LLC. (since
2002), Nuveen Investments
Advisers Inc. (since
2002), Symphony Asset
Management LLC, and NWQ
184 Investment Management
Company, LLC (since
2003), Tradewinds Global
Investors, LLC, and Santa
Barbara Asset Management,
LLC (since 2006); Nuveen
HydePark Group LLC and
Richards & Tierney, Inc.
(since 2007); Managing
Director, Associate
General Counsel and
Assistant Secretary of
Rittenhouse Asset
Management, Inc. (since
2003); Managing Director
(since 2004) and
Assistant Secretary
(since 1994) of Nuveen
Investments, Inc.,
Assistant Secretary
(since 2003) of Symphony
Asset Management LLC.
- - WILLIAM ADAMS IV
6/9/55 Executive Vice President,
333 W. Wacker Drive Vice President 2007 U.S. Structured Products
Chicago, IL 60606 of Nuveen Investments,
120 LLC, (since 1999), prior
thereto, Managing
Director of Structured
Investments.
- - JULIA L. ANTONATOS
9/22/63 Managing Director (since
333 W. Wacker Drive Vice President 2004 2005), formerly Vice
Chicago, IL 60606 184 President (2002-2005) of
Nuveen Investments, LLC;
Chartered Financial
Analyst.
- - CEDRIC H. ANTOSIEWICZ
1/11/62 Managing Director, (since
333 W. Wacker Drive Vice President 2007 120 2004) previously, Vice
Chicago, IL 60606 President (1993-2004) of
Nuveen Investments, LLC.
- - MICHAEL T. ATKINSON
2/3/66 Vice President Vice President (since
333 W. Wacker Drive and Assistant 2000 184 2002) of Nuveen
Chicago, IL 60606 Secretary Investments, LLC.
- - PETER H. D(#)ARRIGO
11/28/67 Vice President and
333 W. Wacker Drive Vice President 1999 Treasurer of Nuveen
Chicago, IL 60606 Investments, LLC and
Nuveen Investments, Inc.;
Vice President and
Treasurer of Nuveen Asset
Management (since 2002),
Nuveen Investments
Advisers Inc. (since
2002); NWQ Investment
Management Company, LLC.
(since 2002); Rittenhouse
Asset Management, Inc.
(since 2003), Tradewinds
NWQ Global Investors, LLC
184 (since 2006), Santa
Barbara Asset Management,
LLC (since 2006) and
Nuveen HydePark Group,
LLC and Richards &
Tierney, Inc. (since
2007); Treasurer of
Symphony Asset Management
LLC (since 2003);
formerly, Vice President
and Treasurer (1999-2004)
of Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.(3),
Chartered Financial
Analyst.
</Table>
36
<Table>
<Caption>
NAME, BIRTHDATE POSITION(S) HELD WITH NUMBER OF PORTFOLIOS
& ADDRESS THE FUNDS YEAR FIRST IN FUND COMPLEX PRINCIPAL
ELECTED OR OVERSEEN OCCUPATION(S)
APPOINTED(4) BY OFFICER DURING PAST 5 YEARS
OFFICERS OF THE FUND (CONTINUED):
- - LORNA C. FERGUSON
10/24/45 Managing Director (since
333 W. Wacker Drive Vice President 1998 2004), formerly, Vice
Chicago, IL 60606 President of Nuveen
Investments, LLC,
Managing Director (2004)
184 formerly, Vice President
(1998-2004) of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp.(3); Managing
Director (since 2005) of
Nuveen Asset Management.
- - STEPHEN D. FOY
5/31/54 Vice President Vice President (since
333 W. Wacker Drive and Controller 1998 1993) and Funds
Chicago, IL 60606 Controller (since 1998)
of Nuveen Investments,
LLC; Vice President
(since 2005) of Nuveen
184 Asset Management;
formerly, Vice President
and Funds Controller
(1998-2004) of Nuveen
Investments, Inc.;
Certified Public
Accountant.
- - WALTER M. KELLY
2/24/70 Chief Compliance Vice President (since
333 W. Wacker Drive Officer and 2003 2006) formerly, Assistant
Chicago, IL 60606 Vice President Vice President and
Assistant General Counsel
(2003-2006) of Nuveen
Investments, LLC;
184 Assistant Vice President
and Assistant Secretary
of the Nuveen Funds
(2003-2006); previously,
Associate (2001-2003) at
the law firm of
VedderPrice P.C.
- - DAVID J. LAMB
3/22/63 Vice President (since
333 W. Wacker Drive Vice President 2000 2000) of Nuveen
Chicago, IL 60606 184 Investments, LLC;
Certified Public
Accountant.
- - TINA M. LAZAR
8/27/61 Vice President of Nuveen
333 W. Wacker Drive Vice President 2002 184 Investments, LLC (since
Chicago, IL 60606 1999).
- - LARRY W. MARTIN
7/27/51 Vice President Vice President, Assistant
333 W. Wacker Drive and Assistant 1988 Secretary and Assistant
Chicago, IL 60606 Secretary General Counsel of Nuveen
Investments, LLC;
formerly, Vice President
and Assistant Secretary
of Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.(3); Vice
President (since 2005)
and Assistant Secretary
of Nuveen Investments,
Inc.; Vice President
(since 2005) and
Assistant Secretary
(since 1997) of Nuveen
Asset Management; Vice
President (since 2000),
Assistant Secretary and
184 Assistant General Counsel
(since 1998) of
Rittenhouse Asset Manage-
ment, Inc.; Vice
President and Assistant
Secretary of Nuveen
Investments Advisers Inc.
(since 2002); NWQ
Investment Management
Company, LLC (since
2002), Symphony Asset
Management LLC (since
2003), Tradewinds Global
Investors, LLC, Santa
Barbara Asset Management
LLC (since 2006) and of
Nuveen HydePark Group,
LLC and Richards &
Tierney, Inc. (since
2007).
</Table>
37
<Table>
<Caption>
NAME, BIRTHDATE POSITION(S) HELD WITH NUMBER OF PORTFOLIOS
& ADDRESS THE FUNDS YEAR FIRST IN FUND COMPLEX PRINCIPAL
ELECTED OR OVERSEEN OCCUPATION(S)
APPOINTED(4) BY OFFICER DURING PAST 5 YEARS
OFFICERS OF THE FUND (CONTINUED):
- - KEVIN J. MCCARTHY
3/26/66 Vice President Vice President, Nuveen
333 W. Wacker Drive and Secretary 2007 Investments, LLC (since
Chicago, IL 60606 2007); Vice President,
and Assistant Secretary,
Nuveen Asset Management,
Rittenhouse Asset
Management, Inc., Nuveen
Investment Advisers Inc.,
Nuveen Investment
Institutional Services
Group LLC, NWQ Investment
Management Company, LLC,
Tradewinds Global
184 Investors LLC, NWQ
Holdings, LLC, Symphony
Asset Management LLC,
Santa Barbara Asset
Management LLC, Nuveen
HydePark Group, LLC and
Richards & Tierney, Inc.
(since 2007); Vice
President and Assistant
General Counsel, Nuveen
Investments, Inc. (since
2007). Prior thereto,
Partner, Bell, Boyd &
Lloyd LLP (1997-2007).
- - JOHN V. MILLER
4/10/67 Managing Director (since
333 W. Wacker Drive Vice President 2007 2007), formerly, Vice
Chicago, IL 60606 184 President (2002-2007) of
Nuveen Investments, LLC;
Chartered Financial
Analyst.
- - JAMES F. RUANE
7/3/62 Vice President Vice President, Nuveen
333 W. Wacker Drive and Assistant 2007 Investments (since 2007);
Chicago, IL 60606 Secretary prior thereto, Partner,
184 Deloitte & Touche USA LLP
(since 2005), formerly,
senior tax manager (since
2002); Certified Public
Accountant.
- - MARK L. WINGET
12/21/68 Vice President Vice President, Nuveen
333 W. Wacker Drive and Assistant 2008 Investments, LLC (since
Chicago, IL 60606 Secretary 2008); Vice President and
Assistant Secretary,
Nuveen Asset Management,
Rittenhouse Asset
Management, Inc., Nuveen
Investment Advisers Inc.,
Nuveen Investment
Institutional Services
Group LLC, NWQ Investment
Management Company, LLC,
Tradewinds Global
184 Investors, LLC, NWQ
Holdings, LLC, Symphony
Asset Management LLC,
Santa Barbara Asset
Management, LLC, Nuveen
HydePark Group, LLC and
Richards & Tierney, Inc.
(since 2008); Vice
President and Assistant
General Counsel, Nuveen
Investments Inc. (since
2008); prior thereto,
Counsel, VedderPrice P.C.
(1997-2007).
</Table>
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, by reason of being the former Chairman and
Chief Executive Officer of Nuveen Investments, Inc. and having previously
served in various other capacities with Nuveen Investments, Inc. and its
subsidiaries. It is expected that Mr. Schwertfeger will resign from the
Board of Trustees by the end of the second quarter of 2008.
(2) Board Members serve three year terms, except for two board members who are
elected by the holders of Preferred Shares. The Board of Trustees is divided
into three classes, Class I, Class II, and Class III, with each being
elected to serve until the third succeeding annual shareholders' meeting
subsequent to its election or thereafter in each case when its respective
successors are duly elected or appointed, except two board members are
elected by the holders of Preferred Shares to serve until the next annual
shareholders' meeting subsequent to its election or thereafter in each case
when its respective successors are duly elected or appointed. The first year
elected or appointed represents the year in which the board member was first
elected or appointed to any fund in the Nuveen Complex.
(3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were
reorganized into Nuveen Asset Management, effective January 1, 2005.
(4) Officers serve one year terms through July of each year. The year first
elected or appointed represents the year in which the Officer was first
elected or appointed to any fund in the Nuveen Complex.
38
Reinvest Automatically
EASILY and CONVENIENTLY
NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET UP YOUR
REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen 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 tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. If the Plan Agent begins purchasing Fund shares on
the open market while shares are trading below net asset value, but the Fund's
shares subsequently trade at or above their net asset value before the Plan
Agent is able to complete its purchases, the Plan Agent may cease open-market
purchases and may invest the uninvested portion of the distribution in
newly-issued Fund shares at a price equal to the greater of the shares' net
asset value or 95% of the shares' market value on the last business day
immediately prior to the purchase date. 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.
39
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.
40
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.
Collateralized Debt Obligations (CDOs): Collateralized debt obligations are a
type of asset-backed security constructed from a portfolio of fixed-income
assets. CDOs usually are divided into different tranches having different
ratings and paying different interest rates. Losses, if any, are applied in
reverse order of seniority and so junior tranches generally offer higher coupons
to compensate for added default risk.
Market Yield (also known as Dividend Yield or Current Yield): Market yield is
based on the Fund's current annualized quarterly distribution divided by the
Fund's current market price. The Fund's quarterly 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.
Net Asset Value (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any Preferred 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.
41
NOTES
42
OTHER USEFUL INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Fund voted proxies relating to portfolio securities held during the most
recent twelve-month period ended June 30, 2007, 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.
CEO Certification Disclosure
The Fund's Chief Executive Officer has submitted to the New York Stock Exchange
the annual CEO certification as required by Section 303A.12(a) of the NYSE
Listed Company Manual.
The Fund has filed with the Securities and Exchange Commission the certification
of its Chief Executive Officer and Chief Financial Officer required by Section
302 of the Sarbanes-Oxley Act.
Distribution Information
Nuveen Tax-Advantaged Total Return Strategy Fund (JTA) hereby designates 73.40%
of dividends paid from ordinary income as dividends qualifying for the 70%
dividends received deduction for corporations and 100% as qualified dividend
income for individuals under Section 1(h)(11) of the Internal Revenue Code.
Board of Trustees
Robert P. Bremner
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Carol E. Stone
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 semi-annual report.
43
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 $170 billion in assets, as of September 30, 2007, 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, 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.
EAN-C-1207D
Learn more about Nuveen Funds at: WWW.NUVEEN.COM/CEF
Share prices
Fund details
Daily financial news
Investor education
Interactive planning tools
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. [There were no amendments to or waivers
from the Code during the period covered by this report.] The registrant has
posted the code of ethics on its website at www.nuveen.com/etf. (To view the
code, click on the Shareholder Resources drop down menu box, click on Fund
Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors (the "Board") determined that the registrant
has at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its Audit Committee. The registrant's audit committee
financial expert is Jack B. Evans, Chairman of the Audit Committee, who is
"independent" for purposes of Item 3 of Form N-CSR.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial
Group, Inc., a full service registered broker-dealer and registered investment
adviser ("SCI"). As part of his role as President and Chief Operating Officer,
Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and
actively supervised the CFO's preparation of financial statements and other
filings with various regulatory authorities. In such capacity, Mr. Evans was
actively involved in the preparation of SCI's financial statements and the
resolution of issues raised in connection therewith. Mr. Evans has also served
on the audit committee of various reporting companies. At such companies, Mr.
Evans was involved in the oversight of audits, audit plans, and the preparation
of financial statements. Mr. Evans also formerly chaired the audit committee of
the Federal Reserve Bank of Chicago.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Nuveen Tax-Advantaged Total Return Strategy Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND (1) BILLED TO FUND (2) BILLED TO FUND (3) BILLED TO FUND (4)
- ----------------- ----------------- ------------------ ------------------ ------------------
December 31, 2007 $24,600 $0 $1,000 $1,650
------- --- ------ ------
Percentage approved
pursuant to
pre-approval
exception 0% 0% 0% 0%
------- --- ------ ------
December 31, 2006 $23,000 $0 $ 800 $1,550
------- --- ------ ------
Percentage approved
pursuant to
pre-approval
exception 0% 0% 0% 0%
(1) "Audit Fees" are the aggregate fees billed for professional services for
the audit of the Fund's annual financial statements and services provided
in connection with statutory and regulatory filings or engagements.
(2) "Audit Related Fees" are the aggregate fees billed for assurance and
related services reasonably related to the performance of the audit or
review of financial statements and are not reported under "Audit Fees".
(3) "Tax Fees" are the aggregate fees billed for professional services for tax
advice, tax compliance, and tax planning.
(4) "All Other Fees" are the aggregate fees billed for products and services
for agreed upon procedures engagements performed for leveraged funds.
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to
Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling,
controlled by or under common control with NAM ("Control Affiliate") that
provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for
engagements directly related to the Fund's operations and financial reporting,
during the Fund's last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to the Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount of
all such services provided constitutes no more than 5% of the total amount of
revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund
Service Providers during the fiscal year in which the services are provided that
would have to be pre-approved by the Audit Committee; (B) the Fund did not
recognize the services as non-audit services at the time of the engagement; and
(C) the services are promptly brought to the Audit Committee's attention, and
the Committee (or its delegate) approves the services before the Fund's audit is
completed.
AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES
BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER
AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND
FISCAL YEAR ENDED SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS
- ----------------- --------------------- ------------------ -------------------
December 31, 2007 $0 $0 $0
--- --- ---
Percentage approved
pursuant to
pre-approval
exception 0% 0% 0%
--- --- ---
December 31, 2006 $0 $0 $0
--- --- ---
Percentage approved
pursuant to
pre-approval
exception 0% 0% 0%
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed
during the Fund's last two full fiscal years for non-audit services. For
engagements entered into on or after May 6, 2003, the Audit Committee is
required to pre-approve non-audit services that Ernst & Young LLP provides to
the Adviser and any Affiliated Fund Services Provider, if the engagement related
directly to the Fund's operations and financial reporting (except for those
subject to the de minimis exception described above). The Audit Committee
requested and received information from Ernst & Young LLP about any non-audit
services that Ernst & Young LLP rendered during the Fund's last fiscal year to
the Adviser and any Affiliated Fund Service Provider. The Committee considered
this information in evaluating Ernst & Young LLP's independence.
TOTAL NON-AUDIT FEES
BILLED TO ADVISER AND
AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES
PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND
RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE
TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER
FISCAL YEAR ENDED BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL
- ----------------- -------------------- ------------------------ ----------------------- ------
December 31, 2007 $2,650 $0 $0 $2,650
December 31, 2006 $2,350 $0 $0 $2,350
"Non-Audit Fees billed to Adviser" for both fiscal year ends represent "Tax
Fees" billed to Adviser in their respective amounts from the previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must approve (i) all non-audit services to be performed for the Fund
by the Fund's independent accountants and (ii) all audit and non-audit services
to be performed by the Fund's independent accountants for the Affiliated Fund
Service Providers with respect to operations and financial reporting of the
Fund. Regarding tax and research projects conducted by the independent
accountants for the Fund and Affiliated Fund Service Providers (with respect to
operations and financial reports of the Fund) such engagements will be (i)
pre-approved by the Audit Committee if they are expected to be for amounts
greater than $10,000; (ii) reported to the Audit Committee chairman for his
verbal approval prior to engagement if they are expected to be for amounts under
$10,000 but greater than $5,000; and (iii) reported to the Audit Committee at
the next Audit Committee meeting if they are expected to be for an amount under
$5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant's Board has a separately designated Audit Committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended (15 U.S.C. 78c(a)(58)(A)). The members of the audit committee are
Robert P. Bremner, Jack B. Evans, David J. Kundert and William J. Schneider. Mr.
Eugene S. Sunshine, who also served as a member of the Committee during this
reporting period, has resigned from the Board. His resignation became effective
on July 31, 2007.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged NWQ Investment Management Company, LLC ("NWQ") and
Symphony Asset Management, LLC ("Symphony"), as Sub-Advisers to provide
discretionary investment advisory services (NWQ and Symphony are also
collectively referred to as "Sub-Advisers"). As part of these services, the
Adviser has also delegated to each Sub-Adviser the full responsibility for proxy
voting and related duties in accordance with the Sub-Adviser's policy and
procedures. The Adviser periodically will monitor each Sub-Adviser's voting to
ensure that they are carrying out their duties. The Sub-Advisers' proxy voting
policies and procedures are summarized as follows:
NWQ
With respect to NWQ, NWQ's Proxy Voting Committee (the "Committee") is
responsible for supervision of the proxy voting process, including
identification of material conflicts of interest involving NWQ and the proxy
voting process in respect of securities owned on behalf of clients, and
circumstances when NWQ may deviate from its policies and procedures. Unless
otherwise determined by the Committee, NWQ will cause proxies to be voted
consistent with the recommendations or guidelines of an independent third party
proxy service or other third party, and in most cases, votes generally in
accordance with the recommendations of ISS on the voting of proxies relating to
securities held on behalf of clients' accounts. Unless otherwise restricted,
NWQ's Committee reserves the right to override the specific recommendations in
any situation where it believes such recommendation is not in its clients best
interests. NWQ's Committee oversees the identification of material conflicts of
interest, and where such matter is covered by the recommendations or guidelines
of a third party proxy service, it shall cause proxies to be voted in accordance
with the applicable recommendation or guidelines, to avoid such conflict. If a
material conflict of interest matter is not covered by the third party service
provider recommendations, NWQ may (i) vote in accordance with the
recommendations of an alternative independent third party or (ii) disclose the
conflict to the client, and with their consent, make the proxy voting
determination and document the basis for such determination.
NWQ generally does not intend to vote proxies associated with the securities of
any issuer if as a result of voting, the issuer restricts such securities from
being transacted for a period (this occurs for issuers in a few foreign
countries), or where the voting would in NWQ's judgment result in some other
financial, legal, regulatory disability or burden to NWQ or the client (such as
imputing control with respect to the issuer). Likewise, the Committee may
determine not to recall securities on loan if negative consequences of such
recall outweigh benefits of voting in the particular instance, or expenses and
inconvenience of such recall outweigh benefits, in NWQ's judgment.
SYMPHONY
Symphony uses the proxy voting services of Institutional Shareholder Services
("ISS"). The ISS Proxy Voting Services provide Symphony and its clients with an
independent source of proxy voting research and services. The use of ISS is
designed to offer client-centered proxy voting which minimizes conflicts of
interests between Symphony's interests and those of its clients.
In order to monitor how ISS votes client proxies, Symphony has established a
Proxy Voting Review Committee (the "Committee"). The Committee is composed of
Symphony's Chief Operating Officer and its Chief Investment Officer. Each year,
the Committee reviews ISS proxy voting policies and practices to determine
whether such policies and practices are consistent with Symphony's fiduciary
duty to the clients for whom Symphony is responsible for voting proxies. During
the year, the Committee review how ISS votes on specific issues. From time to
time, the Committee discusses the proxy voting process with representatives of
ISS in order to ensure that Symphony's client interests are being protected.
When Symphony disagrees with ISS' policies with respect to certain issues,
Symphony will direct the voting of its clients' proxies according to what
Symphony believes is the best interests of its clients.
Clients who have questions about how particular proxies are voted for their
account may request such information from Symphony by calling (415) 676-4000.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged Symphony Asset Management, LLC ("Symphony") and NWQ
Investment Management Company, LLC ("NWQ"), as Sub-Advisers to provide
discretionary investment advisory services with respect to the registrant's
investments in senior loans and other debt instruments and equity investments,
respectively (Symphony and NWQ are also collectively referred to as
"Sub-Advisers"). The following section provides information on the portfolio
managers at each Sub-Adviser:
SYMPHONY
ITEM 8(a)(1). PORTFOLIO MANAGER BIOGRAPHIES
LENNY MASON, CPA, Fixed-Income Portfolio Manager
Lenny is a Fixed-Income Portfolio Manager for Symphony Asset Management LLC. His
responsibilities include portfolio management for Symphony's high yield and bank
loan strategies and credit research for its fixed income strategies. Prior to
joining Symphony in 2001, Lenny was a Managing Director in FleetBoston's
Technology & Communications Group where he headed its Structuring and Advisory
Team. Before joining Fleet, Lenny worked for Wells Fargo Bank's Corporate
Banking Group dealing primarily with leveraged transactions and for Coopers &
Lybrand as an auditor. Lenny has an MBA in Finance from the University of
Chicago, a BS in Accounting from Babson College. Lenny is a Certified Public
Accountant.
GUNTHER STEIN, Director of Fixed-Income Strategies
Gunther is a Principal and the Director of Fixed-Income Strategies at Symphony
Asset Management. He has close to 20 years of investment and research
experience. Gunther is responsible for all of Symphony's fixed-income
strategies, in addition to portfolio management, trading, and research for the
fixed-income funds. Prior to joining Symphony in 1999, Gunther was a high-yield
portfolio manager at Wells Fargo. Gunther joined Wells Fargo in 1993 as an
associate in its Loan Syndications & Leveraged Finance Group after completing
its credit-management training program. Previously, Gunther worked for First
Interstate Bank as a euro-currency deposit trader. He also worked for Standard
Chartered Bank in Mexico City and Citibank Investment Bank in London. Gunther
received an MBA from the University of Texas at Austin and a BA in Economics
from the University of California at Berkeley.
ITEM 8(a)(2). OTHER ACCOUNTS MANAGED
OTHER ACCOUNTS MANAGED BY SYMPHONY
PMS
AS OF 12/31/07
GUNTHER LENNY
STEIN MASON
(a) RICs
Number of accts 6 6
Assets ($000s) $3,099,782 $3,099,782
(b) Other pooled accts
Non-performance fee accts
Number of accts 7 7
Assets ($000s) $2,074,448 $2,074,448
Performance fee accts
Number of accts 8 8
Assets ($000s) $1,573,741 $1,573,741
(c) Other
Non-performance fee accts
Number of accts 2 -
Assets ($000s) $ 1,370 -
Performance fee accts
Number of accts 2 -
Assets ($000s) $ 318,650 -
POTENTIAL MATERIAL CONFLICTS OF INTEREST
As described above, the portfolio manager may manage other accounts with
investment strategies similar to the Fund, including other investment companies
and separately managed accounts. Fees earned by the sub-advisers may vary among
these accounts and the portfolio managers may personally invest in some but not
all of these accounts. In addition, certain accounts may be subject to
performance-based fees. These factors could create conflicts of interest because
a portfolio manager may have incentives to favor certain accounts over others,
resulting in other accounts outperforming the Fund. A conflict may also exist if
a portfolio manager identified a limited investment opportunity that may be
appropriate for more than one account, but the Fund is not able to take full
advantage of that opportunity due to the need to allocate that opportunity among
multiple accounts. In addition, the portfolio manger may execute transactions
for another account that may adversely impact the value of securities held by
the Fund. However, the sub-advisers believe that these risks are mitigated by
the fact that accounts with like investment strategies managed by a particular
portfolio manager are generally managed in a similar fashion, subject to
exceptions to account for particular investment restrictions or policies
applicable only to certain accounts, differences in cash flows and account
sizes, and other factors. In addition, each sub-adviser has adopted trade
allocation procedures that require equitable allocation of trade orders for a
particular security among participating accounts.
ITEM 8(a)(3). FUND MANAGER COMPENSATION
Symphony investment professionals receive competitive base salaries and
participate in a bonus pool which is tied directly to the firm's operating
income with a disproportionate amount paid to the managers responsible for
generating the alpha. The bonus paid to investment personnel is based on acumen,
overall contribution and strategy performance. However, there is no fixed
formula which guides bonus allocations. Bonuses are paid on an annual basis. In
addition, investment professionals may participate in an equity-based
compensation pool.
ITEM 8(a)(4). OWNERSHIP OF JTA SECURITIES AS OF DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------
NAME OF PORTFOLIO $1 - $10,001 - $50,001 - $100,001 - $500,001 - OVER
MANAGER NONE $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ----------------------------------------------------------------------------------------------------------
Gunther Stein X
- ----------------------------------------------------------------------------------------------------------
Lenny Mason X
- ----------------------------------------------------------------------------------------------------------
NWQ
ITEM 8(a)(1). PORTFOLIO MANAGER BIOGRAPHIES
JON D. BOSSE, CFA, Chief Investment Officer and Portfolio Manager
Mr. Bosse is Chief Investment Officer of NWQ, co-president of NWQ (since June
2006) and has been a Managing Director of NWQ since 1996.
MICHAEL CARNE, CFA, Managing Director and Fixed Income Portfolio Manager
Mr. Carne has been with NWQ since 2002 and has been a Managing Director since
2006.
ITEM 8(a)(2). OTHER ACCOUNTS MANAGED
Jon Bosse Michael Carne
(a) RICs
Number of accts 6 1
Assets ($000s) $ 1,556,610,726 $ 62,551,973
(b) Other pooled accts
Non-performance fee accts
Number of accts 9 0
Assets ($000s) $ 995,097,733 0
(c) Other
Non-performance fee accts
Number of accts 45,623 10,743
Assets ($000s) $27,741,956,314 $ 2,297,028,827
Performance fee accts
Number of accts 9 0
Assets ($000s) $ 738,008,109 0
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has
day-to-day management responsibilities with respect to more than one account.
More specifically, portfolio managers who manage multiple accounts are presented
with the following potential conflicts:
- The management of multiple accounts may result in a portfolio
manager devoting unequal time and attention to the management of
each account. NWQ seeks to manage such competing interests for
the time and attention of portfolio managers by having portfolio
managers focus on a particular investment discipline. Most
accounts managed by a portfolio manager in a particular
investment strategy are managed using the same investment models.
- If a portfolio manager identifies a limited investment
opportunity which may be suitable for more than one account, an
account may not be able to take full advantage of that
opportunity due to an allocation of filled purchase or sale
orders across all eligible accounts. To deal with these
situations, NWQ has adopted procedures for allocating portfolio
transactions across multiple accounts.
- With respect to many of its clients' accounts, NWQ determines
which broker to use to execute transaction orders, consistent
with its duty to seek best execution of the transaction. However,
with respect to certain other accounts, NWQ may be limited by the
client with respect to the selection of brokers or may be
instructed to direct trades through a particular broker. In these
cases, NWQ may place separate, non-simultaneous, transactions for
a Fund and other accounts which may temporarily affect the market
price of the security or the execution of the transactions, or
both, to the detriment of the Fund or the other accounts.
- The Fund is subject to different regulation than other pooled
investment vehicles and other accounts managed by the portfolio
managers. As a consequence of this difference in regulatory
requirements, the Fund may not be permitted to engage in all the
investment techniques or transactions or to engage in these
transactions to the same extent as the other accounts managed by
the portfolio managers. Finally, the appearance of a conflict of
interest may arise where NWQ has an incentive, such as a
performance-based management fee, which relates to the management
of some accounts, with respect to which a portfolio manager has
day-to-day management responsibilities.
NWQ has adopted certain compliance procedures which are designed to address
these types of conflicts common among investment managers. However, there is no
guarantee that such procedures will detect each and every situation in which a
conflict arises.
In addition, Merrill Lynch & Co. (and its affiliates) is an indirect investor in
Nuveen and therefore is considered an affiliate of NWQ under certain federal
securities laws. NWQ may have a conflict of interest due to its relationship
with Merrill Lynch & Co. (and its affiliates).
ITEM 8(a)(3). FUND MANAGER COMPENSATION
NWQ's portfolio managers participate in a highly competitive compensation
structure with the purpose of attracting and retaining the most talented
investment professionals and rewarding them through a total compensation program
as determined by the firm's executive committee. The total compensation program
consists of both a base salary and an annual bonus that can be a multiple of the
base salary. The portfolio manager's performance is formally evaluated annually
and based on a variety of factors. Bonus compensation is primarily a function of
the firm's overall annual profitability and the individual portfolio manager's
contribution as measured by the overall investment performance of client
portfolios in the strategy they manage relative to the strategy's general
benchmark for one, three and five year periods (as applicable), as well as an
objective review of stock recommendations and the quality of primary research,
and subjective review of the professional's contributions to portfolio strategy,
teamwork, collaboration and work ethic.
The total compensation package includes availability of equity-like incentive
for purchase (whose value is determined by various factors including the
increase in profitability of NWQ over time). Additionally, the portfolio
managers have been provided compensation in conjunction with signing long-term
employment agreements.
ITEM 8(a)(4). OWNERSHIP OF JTA SECURITIES AS OF DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------------
NAME OF PORTFOLIO $1 - $10,001 - $50,001 - $100,001 - $500,001 - OVER
MANAGER NONE $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ----------------------------------------------------------------------------------------------------------
Jon Bosse 0
- ----------------------------------------------------------------------------------------------------------
Mike Carne 0
- ----------------------------------------------------------------------------------------------------------
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of this report that
includes the disclosure required by this paragraph, based on their
evaluation of the controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or
15d-15(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because the code is posted on registrant's website at www.nuveen.com/etf and
there were no amendments during the period covered by this report. (To view the
code, click on the Shareholder Resources drop down menu box, click on Fund
Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: See
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: See 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/ Kevin J. McCarthy
------------------------------------------
Kevin J. McCarthy
Vice President and Secretary
Date: March 7, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: March 7, 2008
By (Signature and Title)* /s/ Stephen D. Foy
------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: March 7, 2008
* Print the name and title of each signing officer under his or her signature.