UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21705
-------------------
Nuveen Tax-Advantaged Floating Rate Fund
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
---------------------
Date of fiscal year end: June 30
-------------------
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
Semi-AnnualReport
DECEMBER 31, 2007
Nuveen Investments
CLOSED-END FUNDS
NUVEEN
TAX-ADVANTAGED
FLOATING RATE
FUND
JFP
Opportunities for Tax-Advantaged Monthly Income
from a Portfolio Consisting Predominantly of
Adjustable Rate Preferred Securities
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Nuveen
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-----------------------------------
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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 six-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 SCHWERTEGER SIG)
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2008
Portfolio Managers' COMMENTS
NUVEEN INVESTMENTS CLOSED-END FUNDS JFP
The Nuveen Tax-Advantaged Floating Rate Fund (JFP) has been sub-advised since
its inception in 2005 by a team of specialists at Spectrum Asset Management, an
affiliate of Principal Capital(SM). Mark Lieb, Bernie Sussman and Phil Jacoby,
who have more than 50 years of combined experience in the preferred securities
markets, lead the team. Here Mark, Bernie and Phil talk about their management
strategy and the performance of the Fund for the six-month period ended December
31, 2007.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THE REPORTING PERIOD?
The volatility caused by the sub-prime mortgage crisis severely impacted the
preferred securities market during this period, with the fourth quarter of 2007
finishing as the worst quarter on record for $25 par preferred securities. These
$25 par securities, as well as $1000 par capital market preferreds, experienced
heavy selling (exacerbated by year-end tax loss selling) late in 2007. In
addition, there was a large amount of new issuance late in the calendar year.
All this caused large price declines among existing securities in the secondary
market as yields adjusted to reflect market conditions.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Despite this challenging environment, our basic strategy remained the same. We
continued to seek non-cumulative floating rate perpetual preferred stock issued
by middle market banking companies with financial strength comparable to those
who issue investment grade rated securities. We were able to find one such bank
during the period, Elmira Savings. While we had opportunities to purchase the
preferred stock of other middle market banks, we held off because we believed
too many issues were too deeply discounted, especially in late November and
December. In addition to middle market bank preferred issues, the portfolio
continued to invest in floating-rate preferred issues of large-cap financial
institutions.
4
HOW DID THE FUND PERFORM OVER THIS SIX-MONTH PERIOD?
The performance of the Fund, as well as the performance of a widely followed
market index, is presented in the accompanying table.
The Fund's overall return was negatively affected by the heavy selling of
financial services sector securities in the third and fourth quarters of 2007.
The middle market bank sector was particularly hard hit, which is one reason why
the Fund's return lagged the broader market index. Also, due to market
conditions, the effect of leverage was more pronounced during the period and
contributed to the underperformance of the Fund relative to its benchmark.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 The Merrill Lynch Adjustable Rate Preferred Index is an unmanaged index
composed of U.S. dollar-denominated investment-grade preferred securities,
predominantly from larger issuers. The Fund may invest a substantial portion of
its assets in below-investment-grade securities, often from smaller issuers.
- --------------------------------------------------------------------------------
Cumulative Total Returns on Net Asset Value
For the six-month period ended 12/31/07
<Table>
JFP -12.51%
Merrill Lynch Adjustable Rate Preferred Index(1) -18.68%
</Table>
For the six months ended December 31, 2007, the cumulative return on net asset
value for the Fund underperformed the Merrill Lynch Adjustable Rate Preferred
Index.
The Fund's concentration in the middle market bank sector was a detriment to
performance over the period as the financial service sector was overwhelmed by
the massive selling pressure affecting the entire market. The Fund's return also
was constrained by its investment requirement that mandates the Fund be at least
80% invested in tax-advantaged securities, which are typically associated with
the financial service sector.
The relatively attractive dividends of the middle market bank issues were a
primary contributor to the Fund's income. In addition, the attractive nominal
yields on the LIBOR floating rate preferred stock issued by the money center
banks sector supplemented income.
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
those 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.
5
Common Share
Distribution and Share Price
INFORMATION
The Fund employs financial leverage through the issuance of FundPreferred
shares. 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. This in one reason why the Fund declared only one monthly distribution
increase over the six-month period.
During certain periods, the Fund may pay dividends at a rate that may be more or
less than the amount of net investment income actually earned by the Fund during
the period. If a Fund has cumulatively earned more than it has paid in
dividends, it holds the excess in reserve as undistributed net investment income
(UNII) as part of the Fund's NAV. Conversely, if a Fund has cumulatively paid
dividends in excess of its earnings, the excess constitutes negative UNII that
is likewise reflected in the Fund's NAV. As of December 31, 2007, the Fund had a
negative UNII balance for financial statements and, a positive UNII balance,
based upon our best estimate, for tax purposes.
As of December 31, 2007, the Fund was trading at a -10.18% discount to its NAV,
compared with an average discount of -7.02% for the entire six-month period.
6
<Table>
JFP Nuveen Tax-Advantaged
PERFORMANCE Floating Rate Fund
OVERVIEW as of December 31, 2007
</Table>
PORTFOLIO ALLOCATION (AS A % OF TOTAL INVESTMENTS)(2)
(PORTFOLIO ALLOCATION PIE CHART)
<Table>
<Caption>
PREFERRED SECURITIES* CAPITAL PREFERRED SECURITIES**
- --------------------- ------------------------------
94.3 5.70
</Table>
* 53.2% of the Preferred Securities are invested in Middle Market Banks.
** 34.0% of the Capital Preferred Securities are invested in Middle Market
Banks.
2007 MONTHLY DISTRIBUTIONS PER SHARE(3)
(MONTHLY DISTRIBUTIONS BAR CHART)
<Table>
Jan 0.08
Feb 0.08
Mar 0.08
Apr 0.08
May 0.08
Jun 0.09
Jul 0.09
Aug 0.09
Sep 0.09
Oct 0.09
Nov 0.09
Dec 0.09
</Table>
SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE
(SHARE PRICE CHART)
<Table>
1/01/07 13.82
13.91
14.07
14.31
14.55
14.49
14.35
14.32
14.51
14.20
14.25
14.17
14.27
14.33
14.33
14.42
14.39
14.34
14.31
14.43
14.42
14.75
14.64
14.58
14.54
14.50
14.42
14.50
14.44
14.29
13.58
13.45
13.49
12.87
13.43
13.35
13.37
13.19
13.23
13.28
13.15
13.23
12.97
12.70
12.00
11.72
11.43
10.93
11.10
11.14
11.13
10.93
11.08
12/31/07 11.03
</Table>
FUND SNAPSHOT
<Table>
- -------------------------------------------------------------------------------------
Common Share Price $11.03
- -------------------------------------------------------------------------------------
Common Share
Net Asset Value $12.28
- -------------------------------------------------------------------------------------
Premium/(Discount) to NAV -10.18%
- -------------------------------------------------------------------------------------
Market Yield(1) 9.36%
- -------------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $170,141
- -------------------------------------------------------------------------------------
</Table>
AVERAGE ANNUAL TOTAL RETURN
(INCEPTION 3/28/05)
<Table>
<Caption>
- --------------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
- --------------------------------------------------------------------------------------
6-Month (Cumulative) -19.82% -12.51%
- --------------------------------------------------------------------------------------
1-Year -12.79% -9.25%
- --------------------------------------------------------------------------------------
Since Inception -4.18% 0.80%
- --------------------------------------------------------------------------------------
</Table>
INDUSTRIES
(AS A % OF TOTAL INVESTMENTS)(2)
<Table>
- -------------------------------------------------------------------------------------
Commercial Banks 67.6%
- -------------------------------------------------------------------------------------
Capital Markets 10.3%
- -------------------------------------------------------------------------------------
Insurance 9.7%
- -------------------------------------------------------------------------------------
Thrifts & Mortgage Finance 5.2%
- -------------------------------------------------------------------------------------
Diversified Financial Services 4.0%
- -------------------------------------------------------------------------------------
U.S. Agency 2.3%
- -------------------------------------------------------------------------------------
Consumer Finance 0.9%
- -------------------------------------------------------------------------------------
</Table>
1 Market Yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. The Fund's monthly distributions
to its shareholders may be comprised of ordinary income and net realized
short-term capital gains, if any.
2 Excluding derivative transactions.
3 The Fund paid shareholders a short-term capital gains distribution in December
2007 of $0.0626 per share.
7
SHAREHOLDER MEETING REPORT
The annual meeting of 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, November 12, 2007 and November 30, 2007.
<Table>
<Caption>
JFP
- ---------------------------------------------------------------------------
Common and
Preferred
shares voting
together
as a class
- ---------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT:
For 7,076,849
Against 176,514
Abstain 182,681
Broker Non-Votes 3,892,024
- ---------------------------------------------------------------------------
Total 11,328,068
- ---------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SPECTRUM ASSET MANAGEMENT, INC.:
For 7,068,075
Against 165,770
Abstain 202,199
Broker Non-Votes 3,892,024
- ---------------------------------------------------------------------------
Total 11,328,068
- ---------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Judith M. Stockdale
For 11,140,866
Withhold 187,202
- ---------------------------------------------------------------------------
Total 11,328,068
- ---------------------------------------------------------------------------
Carole E. Stone
For 11,141,076
Withhold 186,992
- ---------------------------------------------------------------------------
Total 11,328,068
- ---------------------------------------------------------------------------
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
CURRENT FISCAL YEAR:
For 11,173,948
Against 56,246
Abstain 97,874
- ---------------------------------------------------------------------------
Total 11,328,068
- ---------------------------------------------------------------------------
</Table>
8
JFP
Nuveen Tax-Advantaged Floating Rate Fund
Portfolio of INVESTMENTS
as of December 31, 2007 (Unaudited)
<Table>
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 137.4% (94.3% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 14.9%
302,800 Goldman Sachs Group Inc. 5.629%(3) A $ 7,024,960
195,400 Lehman Brothers Holdings Inc., Series G 5.350%(3) A- 3,642,256
73,600 Merrill Lynch & Company, Inc. 5.628%(3) A- 1,314,496
126,000 Merrill Lynch & Company, Inc. Series 5 5.466%(3) A- 2,205,000
118,700 Morgan Stanley, Series 2006A 5.914%(3) A 2,510,505
80 Richmond County Capital Corporation, 144A Series 8.250%(3) N/R 8,017,500
B
34,400 UBS Preferred Funding Trust IV 5.565%(3) Aa2 686,280
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capital Markets 25,400,997
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 93.9%
9,000 ABN AMRO North America Capital Funding, 144A 6.968% Aa3 8,724,375
31,165 Banco Santander Finance 6.800% Aa3 687,188
27,367 Banco Santander Finance 6.500% A 571,286
27,963 Banco Santander Finance 6.410% Aa3 616,584
100,000 Banco Santander Finance 0.000% Aa3 1,890,000
109,900 Bank of America Corporation, Series D 6.204% Aa3 2,384,830
135,000 Bank of America Corporation, Series E 5.248%(3) Aa3 2,693,250
7,000 City National Bancshares Corporation, Series F, 8.533% N/R 6,908,125
144A, (MMB)
20,000 Cobank ABC, 144A 7.000% A 1,010,740
10,000 Elmira Savings Bank 8.998% N/R 9,856,875
10,000 FBOP Corporation, Series 2005A, 144A, (MMB) 7.891%(3) N/R 10,290,623
6,000 First Tennessee Bank, 144A 5.708%(3) BBB+ 4,518,750
10,000 Heartland Bank, Series A, (MMB) 8.808%(3) N/R 9,843,750
206,100 HSBC USA Inc. 5.993%(3) A 4,122,000
5,000 MidCarolina Financial Corporation, Series 144A, 8.342% N/R 4,926,563
(MMB)
10,000 PedCor Bancorp., Series A, (MMB) 8.973%(3) N/R 9,846,875
5,000 Pedcor Financial Bancorp. (MMB) 8.704%(3) N/R 4,921,875
5,000 Regent Bancorp Inc., Series A, (MMB) 8.481% N/R 4,928,125
10,000 River Valley Bancorp, Series A, (MMB) 8.916%(3) N/R 9,900,000
10,000 Rogers Bancshares Inc., 144A Series A, (MMB) 8.916%(3) N/R 9,856,250
10,000 Shorebank Corporation, Series 144A, (MMB) 9.043%(3) N/R 9,865,625
5,000 Sleepy Hollow Bank, 144A Series A, (MMB) 9.030%(3) N/R 4,939,063
1,000 Southern Bancorp Inc., (MMB) 9.015%(3) N/R 9,971,875
197,800 SunTrust Bank Inc. 5.496%(3) A2 4,066,768
3,500 Truman Bancorp Inc., (MMB) 8.954%(3) N/R 3,506,563
230,000 U.S. Bancorp, Series 2006B 5.430%(3) A+ 4,997,900
10,000 Vineyard National Bancorp, 144A Series C, (MMB) 9.014%(3) N/R 9,875,000
198,300 Zions Bancorporation 5.486%(3) Baa1 4,045,320
- ----------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 159,766,178
---------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 1.4%
39,110 SLM Corporation 5.841%(3) BBB- 2,346,600
- ----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 5.8%
10,000 Blossman Bancshares, Inc., (MMB) 8.730% N/R 9,856,875
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 13.4%
386,500 Aegon N.V. 6.375% A- 7,633,375
145,000 MetLife Inc., Series B 6.500% Baa1 3,166,800
308,800 Prudential PLC 6.500% A- 6,231,584
6,000 Zurich RegCaPS Funding Trust VI, Series 144A 5.589%(3) Baa2 5,655,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Insurance 22,686,759
---------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 4.7%
5,000 RMG Capital Corporation, (MMB) 9.450%(3) N/R 4,935,938
200,000 Washington Mutual Inc. 5.626%(3) BBB 3,140,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 8,075,938
---------------------------------------------------------------------------------------------------------------------
</Table>
9
JFP
Nuveen Tax-Advantaged Floating Rate Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007 (Unaudited)
<Table>
<Caption>
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 3.3%
41,800 Federal Home Loan Mortgage Corporation, 5.570% AA- $ 804,650
Corporate Debt
118,200 Federal Home Loan Mortgage Corporation 5.660% AA- 2,323,812
71,000 Federal Home Loan Mortgage Corporation 5.100% AA- 2,471,688
- ----------------------------------------------------------------------------------------------------------------------------------
Total U.S. Agency 5,600,150
---------------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED SECURITIES (COST $258,719,251) 233,733,497
=====================================================================================================================
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT (000)/
SHARES DESCRIPTION (1) COUPON MATURITY RATINGS (2)
- ------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 8.2% (5.7% OF TOTAL INVESTMENTS)
COMMERCIAL BANKS - 4.7%
6,000 BBVA International Preferred SA, Unipersonal 5.919% 10/18/49 A
1,000 CBG Florida REIT Corporation 7.114% 11/15/49 BB+
1,000 Northgroup Preferred Capital Corporation, 144A 6.378% 12/10/49 A1
(4)
1,000 Standard Chartered PLC, 144A 6.409% 1/30/57 BBB+
- ------------------------------------------------------------------------------------------------------------------
Total Commercial Banks
--------------------------------------------------------------------------------------------------
INSURANCE - 0.7%
2,000 Twin Reefs Trust Pass Through to XL Financial 6.243% 12/10/49 Aa2
Assurance Ltd. Preferred Stock Series B (4)
- ------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.8%
5,000 MM Community Funding Trust XVIII Limited, Class 6.643% 12/26/39 N/R
D, (MMB)
- ------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL PREFERRED SECURITIES (COST
$15,964,210)
==================================================================================================
TOTAL INVESTMENTS (COST $274,683,461) - 145.6%
==================================================================================================
OTHER ASSETS LESS LIABILITIES - 0.2%
==================================================================================================
FUNDPREFERRED SHARES, AT LIQUIDATION
VALUE - (45.8)% (5)
==================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES - 100%
==================================================================================================
<Caption>
PRINCIPAL
AMOUNT (000)/
SHARES VALUE
- ------------- --------------
CAPITAL
PREFERRED
SECURITIES - 8.2%
(5.7% OF TOTAL
INVESTMENTS)
COMMERCIAL
BANKS - 4.7%
6,000 $ 5,260,974
1,000 930,723
1,000 886,508
1,000 907,207
- -------------
7,985,412
--------------
INSURANCE - 0.7%
2,000 1,304,140
- -------------
THRIFTS &
MORTGAGE
FINANCE - 2.8%
5,000 4,775,000
- -------------
14,064,552
==============
247,798,049
==============
343,187
==============
(78,000,000)
==============
$ 170,141,236
==============
</Table>
INTEREST RATE SWAPS OUTSTANDING AT DECEMBER 31, 2007:
<Table>
<Caption>
FUND
PAY/RECEIVE FIXED RATE UNREALIZED
NOTIONAL FLOATING FLOATING RATE FIXED RATE PAYMENT TERMINATION APPRECIATION
COUNTERPARTY AMOUNT RATE INDEX (ANNUALIZED) FREQUENCY DATE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------
Goldman
Sachs $ 7,000,000 Receive 3-Month USD-LIBOR 4.563% Semi-Annually 9/29/10 $ (111,872)
Goldman
Sachs 1,500,000 Receive 3-Month USD-LIBOR 5.278 Semi-Annually 12/09/35 (60,045)
Goldman
Sachs 8,700,000 Receive 3-Month USD-LIBOR 5.788 Semi-Annually 6/02/36 (1,030,741)
JPMorgan 10,000,000 Receive 3-Month USD-LIBOR 4.901 Semi-Annually 11/20/17 (195,411)
JPMorgan 1,300,000 Receive 3-Month USD-LIBOR 4.962 Semi-Annually 7/27/35 (6,585)
JPMorgan 1,500,000 Receive 3-Month USD-LIBOR 5.436 Semi-Annually 9/11/36 (117,587)
Morgan
Stanley 3,000,000 Receive 3-Month USD-LIBOR 4.590 Semi-Annually 7/15/15 (53,031)
Morgan
Stanley 2,000,000 Receive 3-Month USD-LIBOR 4.850 Semi-Annually 7/14/35 26,519
Morgan
Stanley 4,000,000 Receive 3-Month USD-LIBOR 4.880 Semi-Annually 7/15/35 34,434
Morgan
Stanley 1,750,000 Receive 3-Month USD-LIBOR 4.900 Semi-Annually 7/18/35 9,216
Morgan
Stanley 1,700,000 Receive 3-Month USD-LIBOR 4.930 Semi-Annually 7/21/35 1,129
----------------------------------------------------------------------------------------------------------------
$ (1,503,974)
================================================================================================================
USD-LIBOR (United States Dollar-London Inter-Bank Offered Rate)
</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: 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) Security has a floating rate coupon which is periodically reset based on a fixed
percentage rate above a predetermined index or benchmark. The coupon rate disclosed is
that in effect at the end of the reporting period.
(4) Portion of investment, with an aggregate market value of $1,252,922, has been pledged to
collateralize the net payment obligations under interest rate swap contracts.
(5) FundPreferred Shares, at Liquidation Value as a percentage of total investments is (31.5)%
N/R Not rated.
(MMB) Middle Market Bank.
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.
</Table>
See accompanying notes to financial statements.
10
Statement of
ASSETS AND LIABILITIES
December 31, 2007 (Unaudited)
<Table>
<Caption>
- ---------------------------------------------------------------------------
ASSETS
Investments, at value (cost $274,683,461) $247,798,049
Unrealized appreciation on interest rate swaps 18,267
Receivables:
Dividend 2,072,012
Interest 134,629
Other assets 11,121
- ---------------------------------------------------------------------------
Total assets 250,034,078
- ---------------------------------------------------------------------------
LIABILITIES
Cash overdraft 144,350
Unrealized depreciation on interest rate swaps 1,522,241
Accrued expenses:
Management fees 124,774
Other 47,796
FundPreferred share dividends payable 53,681
- ---------------------------------------------------------------------------
Total liabilities 1,892,842
- ---------------------------------------------------------------------------
FundPreferred shares, at liquidation value 78,000,000
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $170,141,236
===========================================================================
Common shares outstanding 13,857,647
===========================================================================
Net asset value per Common share outstanding (net assets
applicable to
Common shares, divided by Common shares outstanding) $ 12.28
===========================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ---------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,576
Paid-in surplus 196,516,056
Undistributed (Over-distribution of) net investment income 2,440,267
Accumulated net realized gain (loss) from investments and
derivative transactions (564,277)
Net unrealized appreciation (depreciation) of investments
and derivative transactions (28,389,386)
- ---------------------------------------------------------------------------
Net assets applicable to Common shares $170,141,236
===========================================================================
Authorized shares:
Common Unlimited
FundPreferred Unlimited
===========================================================================
</Table>
See accompanying notes to financial statements.
11
Statement of
OPERATIONS
Six Months Ended December 31, 2007
(Unaudited)
<Table>
<Caption>
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 9,699,395
Interest 642,116
- -------------------------------------------------------------------------------
Total investment income 10,341,511
- -------------------------------------------------------------------------------
EXPENSES
Management fees 1,187,168
FundPreferred shares - auction fees 98,302
FundPreferred shares - dividend disbursing agent fees 3,265
Shareholders' servicing agent fees and expenses 40
Custodian's fees and expenses 25,952
Trustees' fees and expenses 3,357
Professional fees 13,273
Shareholders' reports - printing and mailing expenses 27,154
Stock exchange listing fees 4,857
Investor relations expense 16,043
Other expenses 11,677
- -------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 1,391,088
Custodian fee credit (6,093)
Expense reimbursement (402,897)
- -------------------------------------------------------------------------------
Net expenses 982,098
- -------------------------------------------------------------------------------
Net investment income 9,359,413
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments (528,565)
Net realized gain (loss) from interest rate swaps (27,072)
Change in net unrealized appreciation (depreciation) of
investments (28,494,288)
Change in net unrealized appreciation (depreciation) of
interest rate swaps (3,226,693)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (32,276,618)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (2,047,375)
From accumulated net realized gains (187,752)
- -------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to FundPreferred shareholders (2,235,127)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations $ (25,152,332)
===============================================================================
</Table>
See accompanying notes to financial statements.
12
Statement of
CHANGES in NET ASSETS (Unaudited)
<Table>
<Caption>
SIX MONTHS ELEVEN MONTHS
ENDED ENDED YEAR ENDED
12/31/07 6/30/07 7/31/06
- --------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 9,359,413 $ 17,159,153 $ 15,231,129
Net realized gain (loss) from investments (528,565) 1,499,764 (710,382)
Net realized gain (loss) from interest rate swaps (27,072) 535,578 1,078,190
Change in net unrealized appreciation (depreciation) of
investments (28,494,288) 97,903 1,602,977
Change in net unrealized appreciation (depreciation) of
interest rate swaps (3,226,693) (327,337) 1,696,446
Distributions to FundPreferred shareholders:
From net investment income (2,047,375) (3,258,329) (3,128,299)
From accumulated net realized gains (187,752) (207,567) --
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations (25,152,332) 15,499,165 15,770,061
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (7,150,547) (12,079,037) (11,067,348)
From accumulated net realized gains (679,737) (735,515) --
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to Common shareholders (7,830,284) (12,814,552) (11,067,348)
- --------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Offering cost adjustments -- -- 25,050
Net proceeds from shares issued to shareholders due to
reinvestment of distributions -- 89,558 --
FundPreferred shares offering cost adjustments (4,626) -- (18,509)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from capital share transactions (4,626) 89,558 6,541
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares (32,987,242) 2,774,171 4,709,254
Net assets applicable to Common shares at the beginning of
period 203,128,478 200,354,307 195,645,053
- --------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $170,141,236 $203,128,478 $ 200,354,307
==============================================================================================================
Undistributed (Over-distribution of) net investment income
at the end of period $ 2,440,267 $ 2,278,776 $ (11,571)
==============================================================================================================
</Table>
See accompanying notes to financial statements.
13
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Floating Rate Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JFP". The Fund was organized
as a Massachusetts business trust on December 29, 2004.
The Fund's primary investment objective is to provide an attractive level of
after-tax current income. The Fund's secondary investment objective is capital
preservation. The Fund intends to pursue its investment objectives by investing
primarily in adjustable rate securities that are eligible to pay dividends
consisting primarily of tax-advantaged dividend income.
The Fund expects that substantially all of its portfolio of investments will be
comprised of securities issued by banking companies and other financial
institutions which may make the Fund more susceptible to adverse economic or
regulatory occurrences affecting these institutions. The Fund's concentration of
investments in these institutions includes the risk that banking companies and
other financial institutions may themselves have concentrated portfolios,
changes in interest rates or competition could affect their profitability, and
there could be increased costs or setbacks due to changes in the regulatory and
financial reporting requirements under which they operate.
In February 2007, the Board of Trustees of the Fund approved a change in the
Fund's fiscal year end from July 31 to June 30.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of preferred stocks issued by middle market and major banking
companies and other securities in the Fund's investment portfolio are generally
provided by one or more independent pricing services approved by the Fund's
Board of Trustees. The pricing services typically value exchange-listed
securities at the last sales price on that day; and value securities traded in
the over-the-counter market at the mean of the last bona fide bid and bona fide
ask prices when current quotations are readily available. The pricing services
may value preferred stocks issued by middle market and major banking companies
and other securities for which current quotations are not readily available at
fair value using a wide range of market data and other information and analysis,
including the obligor's credit characteristics considered relevant by such
pricing service to determine valuations. The Board of Trustees of the Fund has
approved procedures which permit the Nuveen Asset Management (the "Adviser"), a
wholly owned subsidiary of Nuveen Investments, Inc. ("Nuveen"), to determine the
fair value of investments for which the applicable pricing service or services
is not providing a price, using market data and other factors such as the
obligor's credit characteristics. The Fund may engage an independent appraiser
to periodically provide an independent determination of fair value of the
preferred stocks issued by middle market banks. The prices of fixed-income
securities and interest rate swap contracts 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 the pricing service is unable to supply a price for a
fixed-income security or interest rate swap contract the Fund may use market
quotes provided by major broker/ dealers in such investments. If it is
determined that the market price for an investment or derivative instrument 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 preferred stocks issued by middle market and major banking companies in
which the Fund invests are generally not listed on an organized exchange and the
secondary market for such investments may be less liquid relative to markets for
other securities. Consequently, the value of preferred stocks issued by middle
market and major banking companies, determined as described above, may differ
significantly from the value that would have been determined had there been an
active market for that preferred stock.
14
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and
losses from investment transactions are determined on the specific
identification method. Investments purchased on a when-issued/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.
Federal Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains, if any, to shareholders and to otherwise comply with the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies. Therefore, no federal income tax provision is
required.
Effective December 31, 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 statute of limitations, for all major jurisdictions,
which includes federal and certain states. Open tax years are those that are
open for exam by taxing authorities (i.e. the last four tax year ends and the
interim tax period since then). 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 six months 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
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Distributions to Common shareholders are declared monthly. Net realized capital
gains from investment transactions, if any, are distributed to shareholders not
less frequently than annually. Furthermore, capital gains are distributed only
to the extent they exceed available capital loss carryforwards.
FundPreferred Shares
The Fund has issued and outstanding 3,120 Series Th 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.
Interest Rate Swap Transactions
The Fund is authorized to invest in interest rate swap transactions. The Fund's
use of interest rate swap transactions is intended to synthetically convert
certain Fund positions in fixed-rate securities effectively into adjustable rate
instruments and thereby shorten the average interest rate reset time and
duration of the Fund's portfolio of investments. Interest rate swap transactions
involve the Fund's agreement with the counterparty to pay a semi-annual fixed
rate payment in exchange for the counterparty paying the Fund a quarterly
variable rate payment. The amount of payment obligation is based on the notional
amount of the interest rate swap contract. Interest rate swaps do not involve
the delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to the swap counterparty on such transactions is
limited to the net amount of interest payments that the Fund is to receive.
Interest rate swap positions are valued daily. The Fund accrues the fixed rate
payment expected to be paid and the variable
15
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
rate payment expected to be received on interest rate swap contracts on a daily
basis, and recognizes an unrealized gain (loss) for the daily changes in the
market value of the Fund's contractual rights and obligations under the
contracts. The net amount recorded for these transactions is recognized in the
Statement of Assets and Liabilities. Once periodic payments are settled in cash,
the net amount is recorded as net realized gain (loss) from interest rate swaps,
in addition to net realized gain (loss) recorded upon the termination of
interest rate swap contracts on the Statement of Operations. For tax purposes,
periodic payments are treated as ordinary income or expense. Although there are
economic advantages of entering into interest rate swap transactions, there are
also additional risks. The Fund helps manage the credit risks associated with
interest rate swap transactions by entering into agreements only with
counterparties the Adviser believes have the financial resources to honor their
obligations and by having the Adviser continually monitor the financial
stability of the swap counterparties. In addition, all counterparties are
required to pledge collateral daily (based on the daily valuation of each swap)
on behalf of the Fund with a value approximately equal to the amount of any
unrealized gain above a pre-determined threshold. Reciprocally, when the Fund
has an unrealized loss on a swap contract, the Fund has instructed the custodian
to pledge assets of the Fund as collateral with a value approximately equal to
the amount of the unrealized loss above a pre-determined threshold. Collateral
pledges are monitored and subsequently adjusted if and when the interest rate
swap valuations fluctuate, either up or down, by at least the pre-determined
threshold amount.
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.
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>
SIX
MONTHS ELEVEN MONTHS YEAR
ENDED ENDED ENDED
12/31/07 6/30/07 7/31/06
- ------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders due to reinvestment of
distributions -- 6,147 --
- ------------------------------------------------------------------------------------------------------------------
</Table>
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities, but excluding short-term investments
and derivative transactions) for the six months ended December 31, 2007,
aggregated $16,870,137 and $14,129,983, respectively.
16
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 recognition of premium amortization on debt securities 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 owned was $274,697,369.
Gross unrealized appreciation and gross unrealized depreciation of investments
at December 31, 2007, were as follows:
<Table>
- -----------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 748,125
Depreciation (27,647,445)
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $(26,899,320)
- -----------------------------------------------------------------------------------
</Table>
The tax components of undistributed net ordinary income and net long-term
capital gains at June 30, 2007, the Fund's last tax year end, were as follows:
<Table>
- -----------------------------------------------------------------------------------
Undistributed net ordinary income * $3,239,042
Undistributed net long-term capital gains 867,617
- -----------------------------------------------------------------------------------
</Table>
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any. Undistributed net ordinary
income (on a tax basis) has not been reduced for the dividend declared on June
1, 2007, paid on July 2, 2007.
The tax character of distributions paid during the Fund's last tax years ended
June 30, 2007 and June 30, 2006, was designated for purposes of the dividends
paid deduction as follows:
<Table>
<Caption>
2007
- -----------------------------------------------------------------------------------
Distributions from net ordinary income * $17,141,011
Distributions from net long-term capital gains 248,510
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
2006
- -----------------------------------------------------------------------------------
Distributions from net ordinary income * $13,943,288
Distributions from net long-term capital gains --
- -----------------------------------------------------------------------------------
</Table>
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
5. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser.
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>
17
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
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>
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 a Sub-Advisory Agreement with Spectrum Asset Management, Inc. ("Spectrum"),
under which Spectrum manages the investment portfolio of the Fund. Spectrum is
compensated for its services to the Fund from the management fee paid to the
Adviser. Spectrum also receives compensation on certain portfolio transactions
for providing brokerage services to the Fund.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its Officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised funds.
18
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
MARCH 31, MARCH 31,
- -----------------------------------------------------------------------------------------------------
2005 * .30% 2010 .30%
2006 .30 2011 .22
2007 .30 2012 .14
2008 .30 2013 .07
2009 .30
- -----------------------------------------------------------------------------------------------------
</Table>
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond March 31, 2013.
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
agreement between the Adviser and the sub-adviser 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-adviser on the same terms as the previous 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 199,600 shares of Merrill Lynch and
Company, Inc. preferred securities with a market value of $3,519,496. Total
income earned by the Fund from such securities amounted to $153,298 and is
included in dividend income on the Statement of Operations.
6. 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.
19
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
7. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Fund declared a $.0860 Common share dividend distribution from its net
investment income which was paid on February 1, 2008, to shareholders of record
on January 15, 2008.
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.
20
Financial
HIGHLIGHTS
21
Financial
HIGHLIGHTS (Unaudited)
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) holders+ holders+ Total
- -----------------------------------------------------------------------------------------------------------------
Year Ended 6/30:
2008(d) $14.66 $ .68 $ (2.33) $(.15) $ (.01) $(1.81)
2007(c) 14.46 1.24 .14 (.24) (.02) 1.12
Year Ended 7/31:
2006 14.12 1.10 .27 (.23) -- 1.14
2005(b) 14.33 .15 .02 (.03) -- .14
- -----------------------------------------------------------------------------------------------------------------
<Caption>
Less Distributions
----------------------------- Offering Costs,
Fund
Net Structuring
Investment Capital Fee 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 6/30:
2008(d) $(.52) $(.05) $(.57) $ --**** $12.28 $ 11.03
2007(c) (.87) (.05) (.92) -- 14.66 14.42
Year Ended 7/31:
2006 (.80) -- (.80) -- 14.46 13.18
2005(b) (.20) -- (.20) (.15) 14.12 13.42
- -----------------------------------------------------------------------------------------------------------------
</Table>
* Annualized.
** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. 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.
*** After custodian fee credit and expense reimbursement.
**** Per share Offering Costs, Fund Structuring Fee and FundPreferred Share
Underwriting Discounts rounds to less than $.01 per share.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares.
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period March 28, 2005 (commencement of operations) through July
31, 2005.
(c) For the eleven months ended June 30, 2007.
(d) For the six months ended December 31, 2007.
22
<Table>
<Caption>
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Applicable to Common Shares Applicable to Common Shares
Total Returns Before Credit/Reimbursement After Credit/Reimbursement***
---------------------- ----------------------------- -----------------------------
Based
on
Common Ending Net
Share Assets
Based on Net Applicable to Net Net Portfolio
Market Asset Common Investment Investment Turnover
Value** Value** Shares (000) Expenses++ Income++ Expenses++ Income++ Rate
- -----------------------------------------------------------------------------------------------------------------------
(19.82)% (12.51)% $170,141 1.46%* 9.40%* 1.03%* 9.83%* 5%
16.84 7.98 203,128 1.44* 8.84* 1.02* 9.26* 28
4.52 8.28 200,354 1.45 7.29 1.03 7.71 38
(9.24) (.08) 195,645 1.26* 2.88* .90* 3.25* 19
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
FundPreferred Shares at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Per Coverage
(000) Share Per Share
- ------------------------------------------------------------------------------------------------------------------------
$78,000 $25,000 $79,532
78,000 25,000 90,105
78,000 25,000 89,216
78,000 25,000 87,707
- ------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying notes to financial statements.
23
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.
24
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.
25
Glossary of
TERMS USED in this REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
Market Yield (also known as Dividend Yield or Current Yield): Market yield is
based on the Fund's current annualized monthly distribution divided by the
Fund's current market price. The Fund's monthly distributions to its
shareholders may be comprised of ordinary income, net realized capital gains
and, if at the end of the calendar year the 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.
26
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.
Board of Trustees
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
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.
27
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.
ESA-A-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.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of this report that
includes the disclosure required by this paragraph, based on their
evaluation of the controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or
15d-15(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Floating Rate 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.