UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21407
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Nuveen Diversified Dividend and Income Fund
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(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
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2007
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREHOLDERS
Annual Report
DECEMBER 31, 2007
Nuveen Investments
CLOSED-END FUNDS
NUVEEN DIVERSIFIED
DIVIDEND AND
INCOME FUND
JDD
High Current Income and Total Return from a
Portfolio of Dividend-Paying Common Stocks, REIT Stocks,
Emerging Markets Debt, 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 SCHWERFEGER SIG)
Timothy R. Schwertfeger
Chairman of the Board
February 15, 2008
Portfolio Managers' COMMENTS
NUVEEN INVESTMENTS CLOSED-END FUNDS JDD
JDD has been managed since its inception in 2003 by teams at four separate
sub-advisers.
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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.
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NWQ Investment Management Company, LLC (NWQ), an affiliate of Nuveen
Investments, invests its portion of the Fund's assets in dividend-paying common
stocks. Jon Bosse, Chief Investment Officer of NWQ, leads the Fund's management
team at that firm. He has more than 22 years of corporate finance and investment
management experience.
The real estate portion of the Fund's investment portfolio is managed by a team
at Security Capital Research & Management Incorporated (Security Capital), a
wholly-owned subsidiary of J.P. Morgan Chase & Co. Anthony R. Manno Jr. and
Kenneth D. Statz, who each have more than 22 years experience in managing real
estate investments, lead their team.
Symphony Asset Management, LLC (Symphony), an affiliate of Nuveen Investments,
invests its portion of the Fund's assets primarily in senior loans. The Symphony
team is led by Gunther Stein and Lenny Mason, who have more than 25 years of
combined investment management experience.
Wellington Management Company, LLP (Wellington) invests its portion of the
Fund's assets in emerging markets debt. James W. Valone, who has more than 18
years of investment management experience, heads the team.
Here representatives from NWQ, Security Capital, Symphony, and Wellington talk
about the markets, their management strategies and the performance of the Fund
for the twelve-month period ending December 31, 2007.
WHAT FACTORS AFFECTED THE U.S. ECONOMY AND MARKET 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
4
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
with 5.49% and the Russell 3000 Index with 5.14%.
Amidst otherwise healthy operating conditions for commercial real estate, Real
Estate Investment Trust (REIT) common and preferred stock prices declined
significantly, and especially in the fourth quarter, as investors sold to escape
turbulence in the real estate lending markets and questioned the potential for a
broader impact on market liquidity and asset pricing. For the year, the Dow
Jones Wilshire Real Estate Securities Index lost 17.66%. Looking at specific
sectors, health care, industrial and mall companies were performance leaders,
while the relative underperformers in 2007 were self-storage, multi-family and
lodging companies.
In the senior loan market, the first six months of the period were best
characterized by the record level of new loan issuance from merger and
acquisition and leveraged buyout activity, as well as a strong demand for new
loans fueled substantially by structured credit products, such as Collateralized
Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs). However, the
last six months were sharply different. As investors became concerned by
negative headlines in the asset-backed and mortgage-backed securities markets,
CLOs (which are believed to have been responsible for purchasing up to 60% of
loan issuance) were forced to the sidelines. This left a large overhang of new
loans in the Wall Street pipeline with few buyers. The CSFB Leveraged Loan Index
finished 2007 with a total return of 1.87% for the year. Putting continued
pressure on prices were institutional investors who were selling loans during
this volatile period. Adding to this pressure was 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.
Emerging markets debt, as measured by the J.P. Morgan Emerging Markets Bond
Index Global Diversified Equal Weighted Index, rose by 5.32% in 2007 despite
sub-prime mortgage concerns and the ensuing credit global credit crunch. The
positive absolute performance in emerging markets was due primarily to falling
U.S. Treasury yields. The yield spread between the J.P. Morgan Emerging Markets
Bond Index Global Diversified (EMBIGD) Index and U.S. Treasury securities
widened by 83 basis points during 2007, ending the year at 264 basis points.
Continued improvements in credit fundamentals of many emerging markets and a
favorable supply/demand outlook gave support to the sector and prevented
emerging markets from spread widening further.
IN THIS ENVIRONMENT, WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND?
For the equity portion of the Fund's portfolio, NWQ continued to employ an
opportunistic, bottom-up strategy that focused on identifying undervalued
companies that possess
5
favorable risk/reward characteristics as well as emerging catalysts that can
unlock value or improve profitability. These catalysts included management
changes, restructuring efforts, recognition of hidden assets, or a positive
change in the underlying fundamentals. NWQ 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, NWQ increased the portfolio's health care
exposure with new stakes in European pharmaceutical firms GlaxoSmithKline PLC
and Sanofi-Aventis because of our analysis of each company's growth potential
and valuation. Other new holdings included Gannet Company Inc, Genworth
Financial Inc., and The Travelers Companies, Inc. We lowered our commodity
exposure by selling Alumina Ltd, POSCO, and Rio Tinto PLC, and we eliminated
American Home Mortgage Investment Corp., AON Corp., and Vodafone Group PLC from
the portfolio. Additionally, we added to and trimmed several other positions,
particularly in the financial and telecommunication sectors.
For the REIT sleeve, Security Capital sought to maintain significant property
type and geographic diversification while taking into account company credit
quality, sector, and security-type allocations. Investment decisions were based
on a multi-layered analysis of the company, the real estate it owned, its
management, and the relative price of the security, with a focus on securities
that we believed would be best positioned to generate sustainable income and
potential price appreciation over the long run. Across all real estate sectors,
we favored companies with properties located in "high barrier to entry" markets,
where constraints limiting new construction present the potential for existing
properties to provide superior value enhancement and a real inflation hedge over
the long term.
In the senior loan sleeve of the Fund, Symphony continued to manage the
portfolio using fundamental analysis to select senior loans that we believed
offered strong asset coverage and attractive risk-adjusted return potential.
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 loans to smaller companies that were done to finance leveraged buyouts. We
didn't believe that there was sufficient incremental yields in many small
company 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 small company loans, we didn't believe that second
lien loans offered sufficient additional yield to compensate investors for
potentially increased volatility and lower recovery rates.
For the emerging markets debt portion of the Fund, Wellington continued to look
for opportunities to capture mispricings resulting from the recent market
turmoil and remained selective in our approach to emerging markets corporate
bonds and local debt markets.
6
In Latin America, we were relatively overweighted in Brazil, where the local
markets remained attractive, and in Peru, which was hurt by the global funding
squeeze but had strong fundamentals and an inclination to buy back debt. We also
remained relatively overweighted in Argentina through exposure to the short-end
of the yield curve. Counterbalancing this, we were relatively underweighted in
countries such as the Dominican Republic and El Salvador which are both heavily
dependent on a strong U.S. economy for their financial health.
In Europe and Asia, we were relatively underweighted when compared with our
comparative benchmark. We looked to avoid countries with weak bank sectors and
poor balance-of-payments positions, such as Poland and Bulgaria. Russia, our
biggest relative overweight in the region, continued to benefit from high and
rising oil prices and strong macroeconomic management. In Asia, we maintained
our exposure to Indonesia's local markets where inflation trends have been
positive and the central bank, we believe, is likely to lower interest rates.
7
HOW DID THE FUND PERFORM OVER THIS TWELVE-MONTH PERIOD?
The performance of JDD, as well as a comparative benchmark, is presented in the
accompanying table.
Total Returns on Net Asset Value(1)
For the twelve month period ended 12/31/07
<Table>
JDD -9.00%
Comparative Benchmark(2) -2.01%
</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 months ended December 31, 2007, the total return on net asset
value for the Fund underperformed an unleveraged, unmanaged comparative
benchmark. The benchmark return shows that 2007 presented a very challenging and
unforgiving market environment. The Fund's relative underperformance was due in
part to its use of financial leverage. 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 total return in
the past, and we believe it retains the potential to continue to do so in the
future.
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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 -7.60%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2 Comparative benchmark performance is a blended return consisting of: 1) 18.75%
of the return of the Russell 3000 Value Index, which measures the performance of
those Russell 3000 Index companies with lower price-to book ratios and lower
forecasted growth values, 2) 6.25% of the return of the MSCI EAFE ex-Japan Value
Index, a capitalization weighted index that selects the lower 50% of the
price-to-book ranked value stocks traded in the developed markets of Europe,
Asia and the Far East, excluding Japan, 3) 25% of the return of the Dow Jones
Wilshire Real Estate Securities Index, an unmanaged, market
capitalization-weighted index comprised of publicly traded REITs and real estate
companies, 4) 25% of the return of the J.P. Morgan EMBI Global Diversified
Index, which tracks total returns for U.S. dollar-denominated debt instruments
issued by emerging markets sovereign and quasi sovereign entities, and 5) 25% of
the return of the CSFB Leveraged Loan Index, which consists of approximately
$150 billion of tradable term loans with at least one year to maturity and rated
BBB or lower. Index returns do not include the effects of any sales charges or
management fees. It is not possible to invest directly in an index.
- --------------------------------------------------------------------------------
Looking at the Fund's holdings, the equity portion of the portfolio held several
positions that performed very well for the year, particularly in the energy,
defense, and telecommunications sectors. Our energy investments Chevron Corp.,
ConocoPhillips, Eni S.p.A, and Total S.A. rose as rising crude prices, along
with increasing worldwide demand, continued to support strong fundamentals and
higher valuations. Defense stocks Lockheed Martin Corp. and Raytheon Co.
performed well, since military contractors often are insulated from the more
economically sensitive factors affecting the equity and debt markets. In the
telecommunications sector, our positions in AT&T Inc. and Verizon Communications
did well as both companies saw strong momentum in their wireless and enterprise
businesses. In addition, tobacco manufacturer Carolina Group continued its
strong performance in 2007.
While we entered 2007 with no direct investments in homebuilders or sub-prime
mortgage lenders, 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.
These companies performed reasonably well for the first half of the year, even
as the sub-prime mortgage market began experiencing difficulties. However, when
the credit problems evolved into a liquidity crisis in late July, our mortgage
finance investments began to decline significantly as even industry leading
firms started trading below book value. The need to preserve or raise additional
capital has forced firms to reduce their dividend payouts, monetize assets,
and/or seek significant cash infusions from investors. Although we continued to
see attractive opportunities in the financial sector, our exposure to this
sector at the end of the reporting period was below the benchmark weighting due
to our concern that the mortgage/housing weakness may spread to other areas
within these financial institutions' businesses.
8
Looking 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. Meanwhile, poor ratings and
a soft local advertising environment contributed to weakness in the shares of
CBS Corp., while shares of postal meter manufacturer Pitney Bowes Inc. declined
on a lowered earnings outlook.
For the REIT sleeve, the portfolio's ownership of securities of companies that
were taken private in the first half of 2007 (Equity Office Properties,
Archstone Smith Trust and Republic Property Trust) was a positive contributor to
the Fund's performance due to the premiums paid versus trading values. Another
area of positive performance for the Fund was its significant overweight in
health care oriented companies, which performed well due to the defensive nature
of their long-term leases and continued demand.
However, 2007 proved to be a difficult year for REITs generally as many real
estate-related investments suffered as a result of sub-prime mortgage market
concerns. Additionally, the performance of the Fund's REIT investments were
hampered as we reinvested proceeds from high quality regional mall and office
holdings that were taken private during the year. The initial returns of these
new positions constrained returns in 2007, but we believe they have the
potential to significantly enhance the return potential of the Fund over a
complete investment cycle.
The senior loan portion of the Fund's portfolio saw certain names contributing
to the upside of the Fund's performance for the first half of the reporting
period. The second half, however, was characterized by broad declines across the
asset class, as bank loans sold off significantly during the final months. The
Fund benefited in the first half from the strong performance of its holdings in
Federal Mogul, 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 its 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.
The overall performance of the senior loan portion of the Fund cannot be
attributed to a few isolated positions, but rather to the broader portfolio in
general. As a result of the widespread sell-off in loans in the later half of
2007, the Fund experienced downside price 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.
The Fund's emerging markets debt holdings benefited from local market exposure
in Brazil and Turkey and some specific security selection in Venezuela. Yield
curve positioning in Argentina also benefited the portfolio. Ecuador was a
strong performer during the year as the new finance minister hinted that debt
repayment would take place as scheduled. The political situation in Turkey,
another strong performer, improved as the incumbent AK party prevailed in the
July parliamentary elections. However, country allocation in general detracted
from relative performance for the year. Among individual markets, Venezuela was
the weakest
9
performer. While some individual securities did well, the country's steps to
nationalize a number of important industries clouded the economy's long-term
outlook. Despite robust growth, Argentina also was also a weak performer as
inflationary concerns and deteriorating technical conditions put the country's
longer-dated debt under pressure.
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.
10
Common Share
Distribution and 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 Funds employ 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).
- - 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
11
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) JDD
- -----------------------------------------------------------------------------
Inception date 9/25/03
Calendar year:
Per share distribution:
From net investment income $0.90
From short-term capital gains --
From long-term capital gains 0.64
From return of capital --
--------
Total per share distribution $1.54
========
Distribution rate on NAV 9.57%
Annualized total returns:
Excluding retained gain tax credit/refund(3):
1-year on NAV -9.00%
Since inception on NAV 11.41%
Including retained gain tax credit/refund(3):
1-year on NAV -7.60%
Since inception on NAV 12.18%
- -----------------------------------------------------------------------------
</Table>
As of December 31, 2007, the Fund was trading at a -11.25% discount to its NAV,
compared with an average discount of -4.17% 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.
- --------------------------------------------------------------------------------
12
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 JDD
- ----------------------------------------------------------------------
Long-Term Capital Gain Retained $ 0.7213
Less Federal Income Taxes Paid by Fund (0.2524)
NET LONG-TERM CAPITAL GAIN RETAINED $ 0.4689
- ----------------------------------------------------------------------
</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.
13
<Table>
JDD Nuveen Diversified
PERFORMANCE Dividend and
OVERVIEW Income Fund
as of December 31, 2007
</Table>
PORTFOLIO ALLOCATION (AS A % OF TOTAL INVESTMENTS)(4)
(PORTFOLIO ALLOCATION PIE CHART)
<Table>
Common stocks 25.3
Emerging Markets Debt and Foreign Corporate Bonds 24.4
Real Estate Investment Trust Common Stocks 23.8
Variable Rate Senior Loan Interests 22.9
Short-Term Investments 3.6
</Table>
2007 DISTRIBUTIONS PER COMMON SHARE(5)
(MONTHLY DISTRIBUTIONS BAR CHART)
<Table>
Jan 0.125
Feb 0.125
Mar 0.125
Jun 0.388
Sep 0.388
Dec 0.388
</Table>
COMMON SHARE PRICE PERFORMANCE -- WEEKLY CLOSING PRICE
(SHARE PRICE CHART)
<Table>
1/01/07 20.36
20.13
20.22
20.30
20.16
20.65
20.29
20.19
19.94
18.94
18.88
19.14
20.00
20.12
19.84
19.49
19.21
19.23
18.85
19.24
18.89
18.76
19.25
19.13
18.80
18.30
18.49
19.23
18.52
17.11
15.71
15.79
15.80
15.09
16.49
16.39
16.39
16.32
16.32
16.76
17.44
17.37
16.48
16.70
16.23
15.16
14.75
14.40
14.90
15.15
13.97
13.93
14.32
12/31/07 14.28
</Table>
FUND SNAPSHOT
<Table>
- -------------------------------------------------------------------------------------
Common Share Price(1) $14.28
- -------------------------------------------------------------------------------------
Common Share Net Asset Value(1) $16.09
- -------------------------------------------------------------------------------------
Premium/(Discount) to NAV -11.25%
- -------------------------------------------------------------------------------------
Current Distribution Rate(2) 10.87%
- -------------------------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $325,097
- -------------------------------------------------------------------------------------
</Table>
AVERAGE ANNUAL TOTAL RETURN(3)
(INCEPTION 9/25/03)
<Table>
<Caption>
- --------------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
- --------------------------------------------------------------------------------------
1-Year -25.75% -9.00%
- --------------------------------------------------------------------------------------
Since Inception 7.65% 11.41%
- --------------------------------------------------------------------------------------
</Table>
INDUSTRIES
(AS A % OF TOTAL INVESTMENTS)(4)
<Table>
- -------------------------------------------------------------------------------------
Emerging Markets Debt 24.5%
- -------------------------------------------------------------------------------------
Real Estate Investment Trust 23.9%
- -------------------------------------------------------------------------------------
Media 6.2%
- -------------------------------------------------------------------------------------
Diversified Telecommunication Services 3.8%
- -------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 2.9%
- -------------------------------------------------------------------------------------
Aerospace & Defense 2.4%
- -------------------------------------------------------------------------------------
Pharmaceuticals 2.3%
- -------------------------------------------------------------------------------------
Insurance 2.2%
- -------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 1.9%
- -------------------------------------------------------------------------------------
Health Care Providers & Services 1.9%
- -------------------------------------------------------------------------------------
Electric Utilities 1.7%
- -------------------------------------------------------------------------------------
Tobacco 1.7%
- -------------------------------------------------------------------------------------
Commercial Services & Supplies 1.6%
- -------------------------------------------------------------------------------------
Chemicals 1.4%
- -------------------------------------------------------------------------------------
Paper & Forest Products 1.4%
- -------------------------------------------------------------------------------------
Commercial Banks 1.3%
- -------------------------------------------------------------------------------------
Other 18.9%
- -------------------------------------------------------------------------------------
</Table>
REAL ESTATE INVESTMENT TRUST
TOP FIVE SUB-INDUSTRIES
(AS A % OF TOTAL INVESTMENTS)(4)
<Table>
- ------------------------------------------------------------------------------------
Specialized 8.8%
- ------------------------------------------------------------------------------------
Retail 6.3%
- ------------------------------------------------------------------------------------
Office 3.9%
- ------------------------------------------------------------------------------------
Residential 3.6%
- ------------------------------------------------------------------------------------
Industrial 1.2%
- ------------------------------------------------------------------------------------
</Table>
EMERGING MARKETS DEBT
AND FOREIGN CORPORATE BONDS
TOP FIVE COUNTRIES
(AS A % OF TOTAL INVESTMENTS)(4)
<Table>
- ------------------------------------------------------------------------------------
Peru 2.0%
- ------------------------------------------------------------------------------------
Russian Federation 1.9%
- ------------------------------------------------------------------------------------
Brazil 1.8%
- ------------------------------------------------------------------------------------
Argentina 1.7%
- ------------------------------------------------------------------------------------
Indonesia 1.5%
- ------------------------------------------------------------------------------------
</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 tax return of capital.
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 -24.47% and 8.48%, 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 -7.60% and 12.18%, for the 1-year and since
inception periods, respectively.
4 Excluding derivative transactions
5 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.
14
SHAREHOLDER MEETING REPORT
The special meeting of shareholders was held in the offices of Nuveen
Investments on October 12, 2007.
<Table>
<Caption>
JDD
- -------------------------------------------------------------------------------
Common and
Preferred
shares voting
together
as a class
- -------------------------------------------------------------------------------
TO APPROVE A NEW INVESTMENT MANAGEMENT AGREEMENT:
For 9,218,876
Against 268,411
Abstain 334,441
Broker Non-Votes 2,920,098
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND NWQ INVESTMENT MANAGEMENT COMPANY, LLC:
For 9,152,279
Against 306,578
Abstain 362,871
Broker Non-Votes 2,920,098
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SECURITY CAPITAL RESEARCH & MANAGEMENT
INCORPORATED:
For 9,125,055
Against 317,669
Abstain 379,004
Broker Non-Votes 2,920,098
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND SYMPHONY ASSET MANAGEMENT LLC:
For 9,126,095
Against 315,648
Abstain 379,985
Broker Non-Votes 2,920,098
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
TO APPROVE A NEW SUB-ADVISORY AGREEMENT BETWEEN NUVEEN ASSET
MANAGEMENT AND WELLINGTON MANAGEMENT COMPANY, LLP:
For 9,136,459
Against 305,494
Abstain 379,775
Broker Non-Votes 2,920,098
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
CURRENT FISCAL YEAR:
For 12,338,609
Against 138,602
Abstain 264,615
- -------------------------------------------------------------------------------
Total 12,741,826
- -------------------------------------------------------------------------------
</Table>
15
Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Nuveen Diversified Dividend and Income Fund
(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
Diversified Dividend and Income 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
16
JDD
Nuveen Diversified Dividend and Income Fund
Portfolio of INVESTMENTS
as of December 31, 2007
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 38.2% (25.3% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 2.6%
32,600 Lockheed Martin Corporation $ 3,431,476
85,000 Raytheon Company 5,159,500
- ---------------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 8,590,976
-----------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 1.3%
100,000 JPMorgan Chase & Co. 4,365,000
- ---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.0%
100,000 Bank of America Corporation 4,126,000
65,000 Wachovia Corporation 2,471,950
- ---------------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 6,597,950
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.6%
135,100 Pitney Bowes Inc. 5,139,204
- ---------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.6%
131,000 Motorola, Inc. 2,101,240
- ---------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.8%
95,000 Packaging Corp. of America 2,679,000
- ---------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 0.7%
75,100 Citigroup Inc. 2,210,944
- ---------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.8%
109,500 AT&T Inc. 4,550,820
90,000 KT Corporation, Sponsored ADR 2,322,000
52,500 Telecom Italia S.p.A., Sponsored ADR 1,619,100
87,000 Verizon Communications Inc. 3,801,030
- ---------------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 12,292,950
-----------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.4%
32,200 EDP - Energias de Portugal, S.A., Sponsored ADR 2,104,389
118,000 Korea Electric Power Corporation, Sponsored ADR 2,460,300
- ---------------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 4,564,689
-----------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.4%
39,722 Kraft Foods Inc. 1,296,129
- ---------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.9%
112,000 Newell Rubbermaid Inc. 2,898,560
- ---------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.6%
73,000 Kimberly-Clark Corporation 5,061,820
- ---------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 1.2%
109,000 General Electric Company 4,040,630
- ---------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 3.0%
75,000 Genworth Financial Inc., Class A 1,908,750
65,400 Hartford Financial Services Group, Inc. 5,702,226
40,000 Travelers Companies, Inc. 2,152,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Insurance 9,762,976
-----------------------------------------------------------------------------------------------------------------
MACHINERY - 1.0%
45,000 Caterpillar Inc. 3,265,200
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIA - 1.7%
55,000 CBS Corporation, Class B 1,498,750
37,700 Clear Channel Communications, Inc. 1,301,404
</Table>
17
JDD
Nuveen Diversified Dividend and Income Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIA (continued)
66,400 Gannett Company Inc. $ 2,589,600
- ---------------------------------------------------------------------------------------------------------------------------------
Total Media 5,389,754
-----------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 0.8%
82,800 United Utilities PLC, Sponsored ADR 2,492,106
- ---------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 4.0%
33,000 Chevron Corporation 3,079,890
37,900 ConocoPhillips 3,346,570
57,500 Eni S.p.A., Sponsored ADR 4,164,725
30,000 Total SA, Sponsored ADR 2,478,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas & Consumable Fuels 13,069,185
-----------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.5%
105,500 International Paper Company 3,416,090
97,000 Stora Enso Oyj, Sponsored ADR 1,423,475
- ---------------------------------------------------------------------------------------------------------------------------------
Total Paper & Forest Products 4,839,565
-----------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.9%
60,000 GlaxoSmithKline PLC, ADR 3,023,400
140,000 Pfizer Inc. 3,182,200
68,000 Sanofi-Aventis, ADR 3,096,040
- ---------------------------------------------------------------------------------------------------------------------------------
Total Pharmaceuticals 9,301,640
-----------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 1.8%
129,200 Federal National Mortgage Association 5,165,416
141,000 IndyMac Bancorp, Inc. 838,950
- ---------------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 6,004,366
-----------------------------------------------------------------------------------------------------------------
TOBACCO - 2.6%
57,400 Altria Group, Inc. 4,338,292
47,000 Loews Corp - Carolina Group 4,009,100
- ---------------------------------------------------------------------------------------------------------------------------------
Total Tobacco 8,347,392
-----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $102,050,354) 124,311,276
=================================================================================================================
<Caption>
SHARES DESCRIPTION (1) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST COMMON STOCKS - 36.0% (23.8% OF TOTAL INVESTMENTS)
INDUSTRIAL - 1.8%
556,400 DCT Industrial Trust Inc. $ 5,180,084
19,700 First Industrial Realty Trust, Inc. 681,620
- ---------------------------------------------------------------------------------------------------------------------------------
Total Industrial 5,861,704
-----------------------------------------------------------------------------------------------------------------
OFFICE - 6.0%
42,700 Boston Properties, Inc. 3,920,287
200,300 Brandywine Realty Trust 3,591,379
158,900 Mack-Cali Realty Corporation 5,402,600
70,400 SL Green Realty Corporation 6,579,584
- ---------------------------------------------------------------------------------------------------------------------------------
Total Office 19,493,850
-----------------------------------------------------------------------------------------------------------------
RESIDENTIAL - 5.4%
43,600 Apartment Investment & Management Company, Class 1,514,228
A
57,500 AvalonBay Communities, Inc. 5,413,050
198,100 Equity Residential 7,224,706
99,100 Post Properties, Inc. 3,480,392
- ---------------------------------------------------------------------------------------------------------------------------------
Total Residential 17,632,376
-----------------------------------------------------------------------------------------------------------------
RETAIL - 9.5%
252,900 Cedar Shopping Centers Inc. 2,587,167
73,500 Federal Realty Investment Trust 6,038,025
221,000 Kite Realty Group Trust 3,374,670
64,900 Macerich Company 4,611,794
104,800 Simon Property Group, Inc. 9,102,927
77,200 Weingarten Realty Investors Trust 2,427,168
152,400 Westfield Group 2,786,263
- ---------------------------------------------------------------------------------------------------------------------------------
Total Retail 30,928,014
-----------------------------------------------------------------------------------------------------------------
</Table>
18
<Table>
<Caption>
SHARES DESCRIPTION (1) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
SPECIALIZED - 13.3%
566,700 Ashford Hospitality Trust Inc. $ 4,074,573
130,500 Cogdell Spencer Inc. 2,078,865
473,300 DiamondRock Hospitality Company 7,090,033
347,300 Extra Space Storage Inc. 4,962,919
169,500 Health Care Property Investors Inc. 5,895,210
37,174 Public Storage, Inc. 2,728,946
355,000 Senior Housing Properties Trust 8,051,399
185,600 Ventas Inc. 8,398,399
- ---------------------------------------------------------------------------------------------------------------------------------
Total Specialized 43,280,344
-----------------------------------------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST COMMON STOCKS 117,196,288
(COST $116,716,736)
=================================================================================================================
</Table>
<Table>
PRINCIPAL WEIGHTED
AMOUNT AVERAGE
(000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 34.6% (22.9% OF TOTAL INVESTMENTS) (4)
AEROSPACE & DEFENSE - 0.9%
$ 1,166 Hexcel Corporation, Term Loan B 6.413% 3/01/12 BB+ $ 1,148,510
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
- ---------------------------------------------------------------------------------------------------------------------------------
3,124 Total Aerospace & Defense 3,072,166
- ---------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 1.4%
2,500 Federal Mogul Corporation, Term Loan A 8.100% 2/24/04 N/R 2,481,771
460 Gen Tek Inc., Additional Term Loan B 6.997% 2/28/11 BB- 452,291
1,712 Gen Tek Inc., Term Loan B 7.159% 2/28/11 BB- 1,681,933
- ---------------------------------------------------------------------------------------------------------------------------------
4,672 Total Auto Components 4,615,995
- ---------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 1.3%
782 Armstrong World Industries, Inc., Tranche B, 6.715% 10/02/13 BBB- 774,709
Term Loan
1,935 Nortek, Inc., Term Loan B 7.100% 8/27/11 Ba2 1,804,388
974 Stile Acquisition Corporation, Canadien Term 7.084% 4/05/13 BB 889,336
Loan
976 Stile Acquisition Corporation, Term Loan B 7.084% 4/05/13 BB 890,851
- ---------------------------------------------------------------------------------------------------------------------------------
4,667 Total Building Products 4,359,284
- ---------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 2.1%
400 Celanese Holdings LLC, Credit Linked Deposit 5.225% 4/02/14 BB 386,694
1,592 Celanese Holdings LLC, Term Loan 6.979% 4/02/14 BB 1,539,044
1,061 Georgia Gulf Corporation, Term Loan 7.760% 10/03/13 Ba2 1,022,077
1,975 Hexion Specialty Chemicals, Inc., Term Loan C4 7.188% 5/05/13 Ba3 1,911,893
1,950 Rockwood Specialties Group, Inc., Term Loan E 6.460% 7/30/12 BB+ 1,885,542
- ---------------------------------------------------------------------------------------------------------------------------------
6,978 Total Chemicals 6,745,250
- ---------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
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
1,103 Berry Plastics Holding Corporation, Term Loan 7.160% 4/03/15 BB- 1,033,854
- ---------------------------------------------------------------------------------------------------------------------------------
2,880 Total Commercial Services & Supplies 2,726,861
- ---------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.1%
2,829 Graham Packaging Company, L.P., Term Loan 7.497% 10/07/11 B+ 2,725,431
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
- ---------------------------------------------------------------------------------------------------------------------------------
3,691 Total Containers & Packaging 3,570,382
- ---------------------------------------------------------------------------------------------------------------------------------
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 - 1.9%
1,995 Alltel Communications, Inc., Term Loan B3 7.778% 5/18/15 BB- 1,924,067
1,955 Intelsat, Tranche B, Term Loan 7.225% 7/01/13 BB 1,943,030
1,975 MetroPCS Wireless, Inc., Term Loan 7.165% 11/03/13 Ba3 1,900,800
473 Verifone, Inc., Term Loan B 6.710% 10/31/13 BB 460,688
- ---------------------------------------------------------------------------------------------------------------------------------
6,398 Total Diversified Telecommunication Services 6,228,585
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.2%
1,702 Dynegy Holdings Inc. Delayed Term Loan 6.355% 4/02/13 Ba1 1,603,900
</Table>
19
JDD
Nuveen Diversified Dividend and Income Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (continued)
$ 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
- -----------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.3%
988 Sensata Technologies B.V., Term Loan 6.761% 4/27/13 BB 940,946
- -----------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES - 0.6%
1,934 Kinder Morgan, Inc., Term Loan B 6.350% 5/30/14 Ba2 1,925,327
- -----------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.7%
2,315 Michael Foods, Inc., Term Loan B 6.849% 11/21/10 BB- 2,276,071
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.5%
400 Bausch & Lomb, Inc., Delayed Draw, Term Loan (5) 1.000% 12/31/09 BB- (1,125)
(6)
1,600 Bausch & Lomb, Inc., Term Loan 8.080% 10/01/14 BB- 1,595,500
- -----------------------------------------------------------------------------------------------------------------------------------
2,000 Total Health Care Equipment & Supplies 1,594,375
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 2.8%
1,265 DaVita, Inc., Term Loan B-1 6.555% 10/05/12 BB+ 1,222,137
1,980 HCA, Inc., Term Loan 7.080% 11/18/13 BB 1,910,618
1,985 Health Management Associates, Inc., Term Loan 6.580% 2/28/14 Ba2 1,857,354
1,038 LifePoint Hospitals, Inc.,Term Loan B 6.715% 4/18/12 BB 992,158
1,965 Quintiles Transnational Corporation, Term Loan B 6.830% 3/29/13 BB 1,898,681
242 United Surgical Partners International, Inc., 7.133% 4/30/13 Ba3 139,718
Delayed Term Loan (5)
1,252 United Surgical Partners International, Inc., 7.381% 4/30/13 Ba3 1,179,797
Term Loan
- -----------------------------------------------------------------------------------------------------------------------------------
9,727 Total Health Care Providers & Services 9,200,463
- -----------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 2.9%
1,965 24 Hour Fitness Worldwide, Inc., Term Loan B 7.507% 6/08/12 Ba3 1,896,225
2,127 Burger King Corporation, Term Loan B 6.375% 6/30/12 BB+ 2,098,374
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
1,955 Penn National Gaming, Inc., Term Loan B 6.710% 10/03/12 BBB- 1,934,500
89 Travelport LLC, Letter of Credit 7.080% 8/23/13 BB- 84,914
445 Travelport LLC, Term Loan 7.080% 8/23/13 BB- 423,194
600 Venetian Casino Resort LLC, Delayed Draw, Term 0.750% 5/23/13 BB (35,762)
Loan (5) (6)
2,388 Venetian Casino Resort LLC, Term Loan 6.580% 5/23/14 BB 2,245,669
- -----------------------------------------------------------------------------------------------------------------------------------
10,436 Total Hotels, Restaurants & Leisure 9,472,202
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 1.0%
750 Kgen LLC, Synthetic Letter of Credit 6.625% 2/05/14 BB 701,250
1,238 Kgen LLC, Term Loan B 6.625% 2/05/14 BB 1,157,063
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
- -----------------------------------------------------------------------------------------------------------------------------------
3,472 Total Independent Power Producers & Energy 3,276,246
Traders
- -----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
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 - 7.8%
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
995 Cequel Communications LLC, Term Loan B 7.212% 11/05/13 BB- 932,813
2,200 Charter Communications Operating Holdings LLC, 6.990% 3/06/14 B+ 2,059,857
Term Loan
1,990 Discovery Communications Holdings LLC, Term Loan 6.830% 5/14/14 N/R 1,932,041
1,933 Emmis Operating Company, New Term Loan 6.843% 11/01/13 B+ 1,792,195
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 B+ 908,244
</Table>
20
<Table>
<Caption>
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIA (continued)
$ 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 (5) (6)
1,933 Univision Communications, Inc., Term Loan 7.207% 9/29/14 Ba3 1,766,174
2,000 UPC Broadband Holding BV, Term Loan N 7.130% 12/31/14 Ba3 1,898,126
1,916 WMG Acquisition Corporation, Term Loan 7.071% 2/28/11 Ba2 1,834,647
2,000 Yell Group PLC, Term Loan 6.822% 10/27/12 Ba3 1,922,188
- -----------------------------------------------------------------------------------------------------------------------------------
26,850 Total Media 25,214,099
- -----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.5%
678 Amsted Industries, Inc., Delayed Draw Term Loan 7.014% 4/08/13 BB 667,365
933 Amsted Industries, Inc., Term Loan 7.210% 4/08/13 BB 917,277
- -----------------------------------------------------------------------------------------------------------------------------------
1,611 Total Metals & Mining 1,584,642
- -----------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 0.4%
387 Targa Resources, Inc., Synthetic Letter of 6.955% 10/31/12 Ba3 379,452
Credit
690 Targa Resources, Inc., Term Loan B 6.903% 10/31/12 Ba3 676,278
- -----------------------------------------------------------------------------------------------------------------------------------
1,077 Total Oil, Gas & Consumable Fuels 1,055,730
- -----------------------------------------------------------------------------------------------------------------------------------
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 - 0.7%
111 Hertz Corporation, Letter of Credit 4.910% 12/21/12 BB+ 108,996
616 Hertz Corporation, Term Loan 6.894% 12/21/12 BB+ 604,295
1,767 Swift Transportation Company, Inc., Term Loan 7.938% 5/10/14 BB- 1,458,692
- -----------------------------------------------------------------------------------------------------------------------------------
2,494 Total Road & Rail 2,171,983
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.4%
1,500 TRU 2005 RE Holding Co. I 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 - 0.6%
990 Ashtead Group Public Limited Company, Term Loan 6.688% 8/31/11 BB+ 947,925
196 Brenntag Holdings GmbH and Co. KG, Acquisition 7.387% 1/20/14 B+ 188,018
Facility
804 Brenntag Holdings GmbH and Co. KG, Facility B2 7.387% 1/20/14 B+ 769,484
- -----------------------------------------------------------------------------------------------------------------------------------
1,990 Total Trading Companies & Distributors 1,905,427
- -----------------------------------------------------------------------------------------------------------------------------------
$ 118,412 TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (COST 112,315,513
$116,935,210)
===================================================================================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT
(000)
(7) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT AND FOREIGN CORPORATE BONDS - 36.9% (24.4% OF TOTAL INVESTMENTS)
ARGENTINA - 2.6%
$ 420 Alto Parana S.A., 144A 6.375% 6/09/17 BBB+ $ 420,210
2,485 Argentina Republic 7.000% 4/17/17 B+ 1,972,469
885 Argentine Beverages Financial Trust, 144A 7.375% 3/22/12 N/R 887,213
1,395ARS Central Bank of Argentina 2.000% 2/04/18 N/R 532,778
655 Compania de Transporte Energia, 144A 8.875% 12/15/16 B+ 578,693
645 Province of Buenos Aires, 144A 9.625% 4/18/28 B+ 538,575
2,732 Republic of Argentina 5.374% 8/03/12 B+ 1,546,825
1,348 Republic of Argentina 8.280% 12/31/33 B+ 1,257,103
1,525ARS Republic of Argentina 5.830% 12/31/33 B+ 557,351
- ---------------------------------------------------------------------------------------------------------------------------------
Total Argentina 8,291,217
-----------------------------------------------------------------------------------------------------------------
BRAZIL - 2.7%
1,500BRL Banco ABN AMRO Real S.A., Reg S 16.200% 2/22/10 N/R 895,365
190 Centrais Eletricas Brasileiras S.A., 144A 7.750% 11/30/15 BB+ 200,925
</Table>
21
JDD
Nuveen Diversified Dividend and Income Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT (000)
(7) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BRAZIL (continued)
$ 400 Cia Brasileira de Bebidas 10.500% 12/15/11 Baa1 $ 467,520
1,370BRL Companhia Energetica de Sao Paulo, Corporate 9.750% 1/15/15 Ba3 842,204
Bond, 144A
590 Globo Comunicacao Participacoes, S.A., 144A 7.250% 4/26/22 BB+ 573,775
405 ISA Capital do Brasil S.A., 144A 8.800% 1/30/17 BB 418,163
100BRL National Treasury Note of Brazil (8) 6.000% 11/15/09 BB+ 931,395
200BRL National Treasury Note of Brazil 6.000% 5/15/15 Ba1 1,744,583
930 Petrobras International Finance Company 5.875% 3/01/18 Baa1 929,535
1,060 Petrobras International Finance Company 8.375% 12/10/18 Baa1 1,266,700
1,100BRL RBS Zero Hora Editora Jornalistica S.A., 144A 11.250% 6/15/17 BB- 524,508
- -----------------------------------------------------------------------------------------------------------------------------------
Total Brazil 8,794,673
-----------------------------------------------------------------------------------------------------------------
BULGARIA - 0.4%
1,100 Republic of Bulgaria, Reg S 8.250% 1/15/15 BBB+ 1,292,698
- -----------------------------------------------------------------------------------------------------------------------------------
CHILE - 2.1%
565 Celulosa Arauco Y Constitucion, 144A 5.625% 4/20/15 BBB+ 552,606
600 Coldelco Inc., Reg S 6.375% 11/30/12 Aa3 643,715
450 Corporacion Nacional del Cobre de Chile, Reg S 5.625% 9/21/35 Aa3 414,694
1,245 Corporacion Nacional del Cobre de Chile, Reg S 6.150% 10/24/36 Aa3 1,235,663
430 Corporacion Nacional del Cobre, 144A 5.500% 10/15/13 Aa3 437,104
1,765 Corporacion Nacional del Cobre, 144A 4.750% 10/15/14 Aa3 1,701,508
245 Empresa Nacional del Petroleo Reg S 6.750% 11/15/12 A 262,153
1,100 Empresa Nacional del Petroleo, 144A 4.875% 3/15/14 A 1,066,519
550 Enersis S.A. 7.375% 1/15/14 BBB 589,530
- -----------------------------------------------------------------------------------------------------------------------------------
Total Chile 6,903,492
-----------------------------------------------------------------------------------------------------------------
COLOMBIA - 1.6%
1,120 Bancolombia S.A. 6.875% 5/25/17 Ba1 1,044,400
650,000COP Bogota Distrito Capital, 144A 9.750% 7/26/28 BB+ 306,931
470 EEB International Limited, 144A 8.750% 10/31/14 BB 481,750
1,075 Republic of Colombia 10.000% 1/23/12 BBB- 1,255,063
350 Republic of Colombia 8.250% 12/22/14 BBB- 400,750
580 Republic of Colombia 7.375% 1/27/17 BBB- 638,000
597,000COP Republic of Colombia 9.850% 6/28/27 BB+ 308,191
635 TGI International Inc., 144A 9.500% 10/03/17 BB 666,750
- -----------------------------------------------------------------------------------------------------------------------------------
Total Colombia 5,101,835
-----------------------------------------------------------------------------------------------------------------
COSTA RICA - 0.2%
225 Republic of Costa Rica, Reg S 8.050% 1/31/13 BB+ 245,813
310 Republic of Costa Rica, Reg S 6.548% 3/20/14 BB+ 320,075
- -----------------------------------------------------------------------------------------------------------------------------------
Total Costa Rica 565,888
-----------------------------------------------------------------------------------------------------------------
EGYPT - 0.2%
2,775EGP Egypt Republic, Treasury Bill 0.000% 4/15/08 BBB- 493,244
875EGP Egypt Republic, Treasury Bill 0.000% 6/24/08 BBB- 153,329
- -----------------------------------------------------------------------------------------------------------------------------------
Total Egypt 646,573
-----------------------------------------------------------------------------------------------------------------
GABON - 0.3%
960 Republic of Gabon, 144A 8.200% 12/12/17 BB- 998,400
- -----------------------------------------------------------------------------------------------------------------------------------
GHANA - 0.2%
615 Republic of Ghana, 144A 8.500% 10/04/17 B+ 651,131
- -----------------------------------------------------------------------------------------------------------------------------------
HUNGARY - 0.8%
479,000HUF Republic of Hungary 6.750% 4/12/10 BBB+ 2,726,670
- -----------------------------------------------------------------------------------------------------------------------------------
INDIA - 0.1%
355 Icici Bank Limited Bahrain, 144A 6.625% 10/03/12 Baa2 352,127
- -----------------------------------------------------------------------------------------------------------------------------------
INDONESIA - 2.3%
315 Excelcomindo Finance Company B.V., 144A 7.125% 1/18/13 Ba2 311,063
410 PT Berlian Laju Tanker Finance B.V., 144A 7.500% 5/15/14 B+ 352,600
7,715,000IDR Indonesia Republic 11.000% 11/15/20 BB+ 854,684
1,195 Majapahit Holdings B.V., 144A 7.250% 10/17/11 BB- 1,200,975
885 Majapahit Holdings B.V. 7.750% 10/17/16 BB- 878,371
875 Majapahit Holdings B.V. 7.875% 6/29/37 BB- 842,188
2,575 Republic of Indonesia 6.625% 2/17/37 BB- 2,455,906
</Table>
22
<Table>
<Caption>
PRINCIPAL
AMOUNT (000)
(7) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
INDONESIA (continued)
$ 580 Republic of Indonesia, Reg S 8.500% 10/12/35 BB- $ 679,831
- -----------------------------------------------------------------------------------------------------------------------------------
Total Indonesia 7,575,618
-----------------------------------------------------------------------------------------------------------------
ISRAEL - 0.6%
4,525ILS State of Israel 10.000% 5/31/12 A2 1,429,449
585 State of Israel 5.500% 11/09/16 A 596,902
- -----------------------------------------------------------------------------------------------------------------------------------
Total Israel 2,026,351
-----------------------------------------------------------------------------------------------------------------
KAZAKHSTAN - 0.1%
300 Tengizchevroil LLP, 144A 6.124% 11/15/14 Baa3 284,250
- -----------------------------------------------------------------------------------------------------------------------------------
MALAYSIA - 1.4%
950 Penerbangan Malaysia Berhad, Reg S 5.625% 3/15/16 A- 979,830
525 Pertoliam Nasional Berhad, Reg S 7.625% 10/15/26 A1 635,934
1,125 Petronas Capital Limited, Reg S 7.000% 5/22/12 A1 1,225,254
1,100 Republic of Malaysia 8.750% 6/01/09 A- 1,159,178
550 Sarawak International Inc. 5.500% 8/03/15 A- 543,837
- -----------------------------------------------------------------------------------------------------------------------------------
Total Malaysia 4,544,033
-----------------------------------------------------------------------------------------------------------------
MEXICO - 1.9%
895 Conproca SA, Reg S 12.000% 12/16/10 BBB- 975,550
490 Pemex Project Funding Master Trust 8.500% 2/15/08 BBB+ 491,838
555 Pemex Project Funding Master Trust, 144A 6.625% 6/15/35 BBB+ 587,764
735 Pemex Project Funding Master Trust, 144A 5.750% 3/01/18 BBB+ 736,838
595 United Mexican States 11.375% 9/15/16 BBB+ 840,438
2,305 United Mexican States 6.750% 9/27/34 BBB+ 2,551,635
- -----------------------------------------------------------------------------------------------------------------------------------
Total Mexico 6,184,063
-----------------------------------------------------------------------------------------------------------------
PAKISTAN - 0.2%
330 Pakistan Mobile Communications Ltd., 144A 8.625% 11/13/13 B+ 297,000
320 Pakistan Mobile Communications Ltd., 144A, Reg S 8.625% 11/13/13 B+ 300,214
- -----------------------------------------------------------------------------------------------------------------------------------
Total Pakistan 597,214
-----------------------------------------------------------------------------------------------------------------
PANAMA - 0.9%
315 AES Panama SA, 144A 6.350% 12/21/16 BBB- 311,346
720 Republic of Panama 9.625% 2/08/11 Ba1 811,800
405 Republic of Panama 7.250% 3/15/15 Ba1 448,538
704 Republic of Panama 6.700% 1/26/36 Ba1 746,240
575 Republic of Panana 7.125% 1/29/26 Ba1 635,375
- -----------------------------------------------------------------------------------------------------------------------------------
Total Panama 2,953,299
-----------------------------------------------------------------------------------------------------------------
PERU - 3.0%
1,100 Republic of Peru 9.125% 2/21/12 BB+ 1,248,500
2,430 Republic of Peru 9.875% 2/06/15 BB+ 3,035,070
2,285 Republic of Peru 8.375% 5/03/16 BB+ 2,690,588
615 Republic of Peru 8.750% 11/21/33 BB+ 817,950
925 Republic of Peru 6.550% 3/14/37 BB+ 968,938
1,485 Republic of Peru, Enhanced Pass Thru Notes, 144A 0.000% 5/31/18 BB 1,028,363
- -----------------------------------------------------------------------------------------------------------------------------------
Total Peru 9,789,409
-----------------------------------------------------------------------------------------------------------------
PHILIPPINES - 0.9%
255 Bangko Sentral ng Pilipinas, Series A 8.600% 6/15/27 BB- 313,982
220 National Power Corporation, Reg S 9.265% 8/23/11 BB- 237,317
420 Republic of the Philippines 8.375% 2/15/11 BB- 453,600
945 Republic of the Philippines 8.250% 1/15/14 BB- 1,063,125
765 Republic of the Philippines 9.375% 1/18/17 BB- 950,513
- -----------------------------------------------------------------------------------------------------------------------------------
Total Philippines 3,018,537
-----------------------------------------------------------------------------------------------------------------
QATAR - 0.9%
885 Nakilat, Inc., Reg S 6.067% 12/31/33 Aa2 810,027
194 Ras Laffan Liquefied Natural Gas Co., Ltd., 144A 3.437% 9/15/09 Aa2 193,765
406 Ras Laffan Liquified Natural Gas Company 3.437% 9/15/09 Aa2 406,210
Limited, Reg S
575 Ras Laffan Liquified Natural Gas II, Reg S 5.298% 9/30/20 Aa2 556,773
550 State of Qatar, Reg S 9.750% 6/15/30 AA- 846,340
- -----------------------------------------------------------------------------------------------------------------------------------
Total Qatar 2,813,115
-----------------------------------------------------------------------------------------------------------------
RUSSIAN FEDERATION - 2.8%
640 Gaz Capital S.A., 144A 6.212% 11/22/16 A3 615,616
</Table>
23
JDD
Nuveen Diversified Dividend and Income Fund (continued)
Portfolio of INVESTMENTS as of December 31, 2007
<Table>
<Caption>
PRINCIPAL
AMOUNT (000)
(7) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
RUSSIAN FEDERATION (continued)
$ 695 Gaz Capital S.A., 144A 7.288% 8/16/37 A3 $ 704,939
170EUR Gaz Capital S.A., 144A 5.030% 2/25/14 A3 226,486
525 Gazprom 10.500% 10/21/09 A3 569,179
658 GazStream S.A., Series 144A 5.625% 7/22/13 A3 649,487
620 Irkut Corporation, Loan Participations, Moscow 8.250% 4/10/09 N/R 614,730
River B.V.
2,525 Russia Federation, Reg S 7.500% 3/31/30 BBB+ 2,896,313
990 Russian Ministry of Finance, Reg S 12.750% 6/24/28 BBB+ 1,799,612
550 Saving Bank of the Russian Federation, 6.230% 2/11/15 A2 545,050
Participations
490 VTB Capital SA, Corporate Bonds, 144A 5.511% 8/01/08 A2 485,713
- -----------------------------------------------------------------------------------------------------------------------------------
Total Russian Federation 9,107,125
-----------------------------------------------------------------------------------------------------------------
SERBIA - 0.7%
2,500 Republic of Serbia, 144A 3.750% 11/01/24 BB- 2,306,250
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA - 1.0%
1,140 Republic of South Africa 7.375% 4/25/12 BBB+ 1,236,900
2,100 Republic of South Africa 5.875% 5/30/22 BBB+ 2,059,449
- -----------------------------------------------------------------------------------------------------------------------------------
Total South Africa 3,296,349
-----------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 0.5%
1,660 Emport Import Bank of Korea 5.500% 10/17/12 Aa3 1,668,577
- -----------------------------------------------------------------------------------------------------------------------------------
THAILAND - 0.1%
250 Bangkok Bank Public Company Limited, Reg S 9.025% 3/15/29 BBB 289,784
- -----------------------------------------------------------------------------------------------------------------------------------
TRINIDAD AND TOBAGO - 1.6%
945 First Citizens Saint Lucia Limited, Reg S 5.125% 2/14/11 A1 984,952
180 National Gas Company of Trinidad and Tobago, 6.050% 1/15/36 A3 172,017
144A
1,325 Petroleum Company of Trinidad & Tobago Limited, 6.000% 5/08/22 BBB+ 1,323,013
144A
963 Republic of Trinidad and Tobago, Reg S 9.750% 7/01/20 A- 1,295,235
1,275 Republic of Trinidad and Tobago, Reg S 5.875% 5/17/27 A- 1,263,653
- -----------------------------------------------------------------------------------------------------------------------------------
Total Trinidad and Tobago 5,038,870
-----------------------------------------------------------------------------------------------------------------
TUNISIA - 0.7%
2,065 Banque de Tunisie 7.375% 4/25/12 BBB 2,254,567
- -----------------------------------------------------------------------------------------------------------------------------------
TURKEY - 0.5%
1,680 TRY Republic of Turkey, Government Bond 16.000% 3/07/12 Baa3 1,500,499
210 Republic of Turkey, Government Bond 6.875% 3/17/36 BB- 207,375
- -----------------------------------------------------------------------------------------------------------------------------------
Total Turkey 1,707,874
-----------------------------------------------------------------------------------------------------------------
UKRAINE - 1.8%
5,110 Republic of Ukraine, Reg S 6.875% 3/04/11 BB- 5,220,887
615 Ukraine Export-Import Bank Loan Participation 8.400% 2/09/16 Ba2 599,625
with Credit Suisse International
- -----------------------------------------------------------------------------------------------------------------------------------
Total Ukraine 5,820,512
-----------------------------------------------------------------------------------------------------------------
URUGUAY - 2.0%
4,985 Oriental Republic of Uruguay 7.625% 3/21/36 BB- 5,458,575
125 Republic of Uruguay 7.500% 3/15/15 BB- 135,625
385 Republic of Uruguay 9.250% 5/17/17 B1 465,850
315 Republic of Uruguay 8.000% 11/18/22 BB- 354,375
117 Republic of Uruguay 7.875% 1/15/33 BB- 131,978
- -----------------------------------------------------------------------------------------------------------------------------------
Total Uruguay 6,546,403
-----------------------------------------------------------------------------------------------------------------
UNITED ARAB EMIRATES - 0.2%
545 Abu Dhabi National Energy Company, 144A 6.500% 10/27/36 Aa2 526,588
- -----------------------------------------------------------------------------------------------------------------------------------
VENEZUELA - 0.8%
635 Republic of Venezuela, Reg S 7.000% 12/01/18 BB- 544,510
815 Republic of Venezuela, Reg S 6.180% 4/20/11 BB- 737,371
125 Republic of Venezuela 8.500% 10/08/14 BB- 120,938
1,400 Republic of Venezuela 6.000% 12/09/20 BB- 1,060,500
- -----------------------------------------------------------------------------------------------------------------------------------
Total Venezuela 2,463,319
-----------------------------------------------------------------------------------------------------------------
VIETNAM - 0.8%
600 Socialist Republic of Vietnam, Reg S 6.875% 1/15/16 BB 636,902
</Table>
24
<Table>
<Caption>
PRINCIPAL
AMOUNT (000)
(7) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
VIETNAM (continued)
$ 2,099 Socialist Republic of Vietnam 6.313% 3/12/16 BB $ 2,079,148
- -----------------------------------------------------------------------------------------------------------------------------------
Total Vietnam 2,716,050
-----------------------------------------------------------------------------------------------------------------
TOTAL EMERGING MARKETS DEBT AND FOREIGN CORPORATE BONDS (COST $117,731,792) 119,852,861
=================================================================================================================
</Table>
<Table>
PRINCIPAL
AMOUNT
(000) DESCRIPTION (1) COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.5% (3.6% OF TOTAL INVESTMENTS)
$ 17,729 Repurchase Agreement with Fixed Income Clearing 1.000% 1/02/08 $ 17,729,263
Corporation, dated 12/31/07, repurchase price
$17,730,248, collateralized by $16,555,000 U.S.
Treasury Notes,
6.500%, due 2/15/10, value $18,086,338
========== -----------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $17,729,263) 17,729,263
=================================================================================================================
TOTAL INVESTMENTS (COST $471,163,355) - 151.2% 491,405,201
=================================================================================================================
BORROWINGS - (13.8)% (9) (45,000,000)
=================================================================================================================
OTHER ASSETS LESS LIABILITIES - (0.3)% (1,308,204)
=================================================================================================================
FUNDPREFERRED SHARES, AT LIQUIDATION (120,000,000)
VALUE - (36.9)% (9)
=================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES - 100% $ 325,096,997
=================================================================================================================
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS OUTSTANDING AT DECEMBER 31, 2007:
<Table>
<Caption>
UNREALIZED
APPRECIATION
AMOUNT IN EXCHANGE FOR AMOUNT SETTLEMENT (DEPRECIATION)
CURRENCY CONTRACTS TO DELIVER (LOCAL CURRENCY) CURRENCY (LOCAL CURRENCY) DATE (U.S. DOLLARS)
---------------------------------------------------------------------------------------------------------------------
Brazil Real 4,460,000 U.S. Dollar 2,498,459 3/19/08 $ 20,371
Colombian Peso 1,295,187,000 U.S. Dollar 640,389 1/18/08 268
Euro 2,109,000 U.S. Dollar 3,138,930 3/19/08 53,206
New Turkish Lira 1,776,000 U.S. Dollar 1,437,058 3/19/08 (33,340)
U.S. Dollar 138,441 Indonesian Rupiah 1,287,500,000 1/18/08 (1,461)
U.S. Dollar 1,386,272 Peruvian Nouveau 4,120,000 3/19/08 (4,417)
---------------------------------------------------------------------------------------------------------------------
$ 34,627
=====================================================================================================================
</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) Senior Loans generally are subject to mandatory and/or optional prepayment. Because of
these mandatory prepayment conditions and because there may be significant economic
incentives for a Borrower to prepay, prepayments of Senior Loans may occur. As a result,
the actual remaining maturity of Senior Loans held may be substantially less than the
stated maturities shown.
(4) Senior Loans 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) Position or portion of position represents an unfunded Senior Loan commitment outstanding
at December 31, 2007.
(6) Negative value represents unrealized depreciation on unfunded Senior Loan commitment
outstanding at December 31, 2007.
(7) Principal amount denominated in U.S. Dollars, unless otherwise noted.
(8) Investment valued at fair value using methods determined in good faith by, or at the
discretion of, the Board of Trustees.
(9) Borrowings and FundPreferred Shares, at Liquidation Value as a percentage of total
investments are (9.2)% and (24.4)%, 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.
Reg S Regulation S allows U.S. companies to sell securities to persons or entities located
outside of the United States without registering those securities with the Securities and
Exchange Commission. Specifically, Regulation S provides a safe harbor from the
registration requirements of the Securities Act for the offers and sales of securities by
both foreign and domestic issuers that are made outside the United States.
ARS Argentine Peso
BRL Brazil Real
COP Colombian Peso
EGP Egyptian Pound
EUR Euro
HUF Hungarian Forint
IDR Indonesian Rupiah
ILS Israeli Shekel
TRY New Turkish Lira
</Table>
See accompanying notes to financial statements.
25
Statement of
ASSETS & LIABILITIES
December 31, 2007
<Table>
<Caption>
- -----------------------------------------------------------------------------
ASSETS
Investments, at value (cost $471,163,355) $$491,405,201
Cash denominated in foreign currencies (cost $260,776) 261,699
Cash 34,455
Unrealized appreciation on forward foreign currency exchange
contracts 73,845
Receivables:
Dividends 1,368,078
Interest 3,086,261
Investments sold 150,158
Reclaims 41,577
Other assets 31,915
- -----------------------------------------------------------------------------
Total assets 496,453,189
- -----------------------------------------------------------------------------
LIABILITIES
Borrowings 45,000,000
Unrealized depreciation on forward foreign currency exchange
contracts 39,218
Payables:
Investments purchased 489,035
Federal corporate income tax 5,100,000
Accrued expenses:
Management fees 240,480
Interest on borrowings 223,267
Other 168,340
FundPreferred shares dividends payable 95,852
- -----------------------------------------------------------------------------
Total liabilities 51,356,192
- -----------------------------------------------------------------------------
FundPreferred shares, at liquidation value 120,000,000
- -----------------------------------------------------------------------------
Net assets applicable to Common shares $325,096,997
=============================================================================
Common shares outstanding 20,202,819
=============================================================================
Net asset value per Common share outstanding (net assets
applicable to
Common shares, divided by Common shares outstanding) $ 16.09
=============================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- -----------------------------------------------------------------------------
Common shares, $.01 par value per share $ 202,028
Paid-in surplus(1) 304,726,261
Undistributed (Over-distribution of) net investment income (1,244,033)
Accumulated net realized gain (loss) from investments and
derivative transactions 1,120,951
Net unrealized appreciation (depreciation) of investments
and derivative transactions 20,291,790
- -----------------------------------------------------------------------------
Net assets applicable to Common shares $325,096,997
=============================================================================
Authorized shares:
Common Unlimited
FundPreferred Unlimited
=============================================================================
</Table>
(1) Includes retained realized long-term capital gains of $14,571,429, net of
federal corporate income taxes of $5,100,000.
See accompanying notes to financial statements.
26
Statement of
OPERATIONS
Year ended December 31, 2007
<Table>
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $100,071) $ 8,248,445
Interest (net of foreign tax withheld of $16,328) 18,783,564
- ------------------------------------------------------------------------------
Total investment income 27,032,009
- ------------------------------------------------------------------------------
EXPENSES
Management fees 4,736,947
FundPreferred shares - auction fees 300,001
FundPreferred shares - dividend disbursing agent fees 12,891
Shareholders' servicing agent fees and expenses 1,157
Interest expense on borrowings 2,458,159
Fees on borrowings 162,250
Custodian's fees and expenses 199,916
Trustees' fees and expenses 19,652
Professional fees 72,040
Shareholders' reports - printing and mailing expenses 102,742
Stock exchange listing fees 9,687
Investor relations expense 91,404
Other expenses 35,782
- ------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 8,202,628
Custodian fee credit (6,271)
Expense reimbursement (1,719,219)
- ------------------------------------------------------------------------------
Net expenses 6,477,138
- ------------------------------------------------------------------------------
Net investment income 20,554,871
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (net of federal corporate income taxes of
$5,100,000 on long-term capital gains retained) 28,858,921
Forwards (829,700)
Foreign currencies (158,020)
Change in net unrealized appreciation (depreciation) of:
Investments (74,388,652)
Forwards 17,375
Foreign currencies 14,140
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (46,485,936)
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (2,389,597)
From accumulated net realized gains (3,757,509)
- ------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to FundPreferred shareholders (6,147,106)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations $(32,078,171)
==============================================================================
</Table>
See accompanying notes to financial statements.
27
Statement of
CHANGES in NET ASSETS
<Table>
<Caption>
YEAR ENDED YEAR ENDED
12/31/07 12/31/06
- ----------------------------------------------------------------------------
OPERATIONS
Net investment income $ 20,554,871 $ 19,870,974
Net realized gain (loss) from:
Investments (net of federal corporate
income taxes of $5,100,000 and
$5,075,001, respectively,
on long-term capital gains retained) 28,858,921 20,381,938
Forwards (829,700) (108,994)
Foreign currencies (158,020) (14,318)
Change in net unrealized appreciation
(depreciation) of:
Investments (74,388,652) 39,874,652
Forwards 17,375 17,252
Foreign currencies 14,140 1,177
Distributions to FundPreferred
shareholders:
From net investment income (2,389,597) (2,676,452)
From accumulated net realized gains (3,757,509) (2,963,239)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
operations (32,078,171) 74,382,990
- ----------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (18,143,336) (19,796,094)
From accumulated net realized gains (12,928,107) (7,554,538)
- ----------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from
distributions to Common shareholders (31,071,443) (27,350,632)
- ----------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares issued
to shareholders due to reinvestment of
distributions 815,056 285,727
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions 815,056 285,727
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares (62,334,558) 47,318,085
Net assets applicable to Common shares
at the beginning of year 387,431,555 340,113,470
- ----------------------------------------------------------------------------
Net assets applicable to Common shares
at the end of year $325,096,997 $387,431,555
- ----------------------------------------------------------------------------
Undistributed (Over-distribution of) net
investment income at the end of year $ (1,244,033) $ (1,728,586)
============================================================================
</Table>
See accompanying notes to financial statements.
28
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 $(32,078,171)
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 (263,926,804)
Proceeds from the sales of investments 288,582,897
Proceeds from (Purchases of) short-term investments, net (7,118,917)
Amortization/(Accretion) of premiums and discounts, net (423,100)
(Increase) Decrease in receivable for dividends (300,876)
(Increase) Decrease in receivable for interest 574,493
(Increase) Decrease in receivable for investments sold 188,371
(Increase) Decrease in receivable for reclaims (9,863)
(Increase) Decrease in other assets 1,093
Increase (Decrease) in payable for investments purchased 489,035
Increase (Decrease) in payable for federal corporate
income tax 24,999
Increase (Decrease) in accrued management fees (25,068)
Increase (Decrease) in interest on borrowings 14,711
Increase (Decrease) in accrued other liabilities 12,233
Increase (Decrease) in FundPreferred share dividends
payable 17,770
Net realized (gain) loss from investments (28,858,921)
Net realized (gain) loss from forwards 829,700
Net realized (gain) loss from foreign currencies 158,020
Net realized (gain) loss from paydowns 26,275
Net realized (gain)/loss from sink payments on
fixed-income securities (321,399)
Change in net unrealized (appreciation) depreciation of
investments 74,388,652
Change in net unrealized (appreciation) depreciation of
forwards (17,375)
Change in net unrealized (appreciation) depreciation of
foreign currencies (14,140)
Federal corporate income taxes on retained capital gains (5,100,000)
Capital gain and return of capital distributions from
investments 3,177,227
- ----------------------------------------------------------------------------
Net cash provided by (used in) operating activities 30,290,842
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (30,256,387)
- ----------------------------------------------------------------------------
Net cash provided by (used in) financing activities (30,256,387)
- ----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 34,455
Cash at the beginning of year --
- ----------------------------------------------------------------------------
CASH AT THE END OF YEAR $ 34,455
- ----------------------------------------------------------------------------
</Table>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest on borrowings during the fiscal year ended December 31,
2007, was $2,443,448.
Cash paid for federal corporate income taxes was $5,075,011.
Non-cash financing activities not included herein consist of reinvestments of
Common share distributions of $815,056.
See accompanying notes to financial statements.
29
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Diversified Dividend and Income Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JDD." The Fund was organized
as a Massachusetts business trust on July 18, 2003.
The Fund seeks to provide high current income and total return by investing
primarily in a portfolio of dividend-paying common stocks, securities issued by
Real Estate Investment Trusts ("REITs"), debt securities and other non-equity
instruments that are issued by, or that are related to, government,
government-related and supernational issuers located, or conducting their
business, in emerging market countries ("emerging markets debt and foreign
corporate bonds") and senior loans.
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, senior
loans and derivative instruments 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, senior loan or derivative instrument 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 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
30
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 $14,571,429 of realized
long-term capital gains and accrued a provision for federal corporate income
taxes of $5,100,000, the net of which has been reclassified to Paid-in surplus.
During the tax year ended December 31, 2006, the Fund retained $14,500,002 of
realized long-term capital gains and accrued a provision for federal corporate
income taxes of $5,075,001.
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 statute 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 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 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.
REIT distributions received by the Fund are generally comprised of ordinary
income, long-term and short-term capital gains, and a return of REIT capital.
The actual character of amounts received during the period are not known until
after the fiscal year-end. For the fiscal year ended December 31, 2007, the
character of distributions to the Fund from the REITs was 52.86% ordinary
income, 27.53% long-term and short-term capital gains, and 19.61% return of REIT
capital. For the fiscal year ended December 31, 2006, the character of
distributions to the Fund from the REITs was 58.28% ordinary income, 22.05%
long-term and short-term capital gains, and 19.67% return of REIT capital.
For the fiscal years ended December 31, 2007 and December 31, 2006, the Fund
applied the actual character of distributions reported by the REITs in which the
Fund invests to its receipts from the REITs. If a REIT held in the portfolio of
investments did not report the actual character of its distributions during the
period, the Fund treated the distributions as ordinary income.
The actual character of distributions made by the Fund during the fiscal years
ended December 31, 2007 and December 31, 2006, are reflected in the accompanying
financial statements.
31
Notes to
FINANCIAL STATEMENTS (continued)
FundPreferred Shares
The Fund has issued and outstanding 2,400 Series T and 2,400 Series W
FundPreferred shares, $25,000 stated value per share, as a means of effecting
financial leverage. The dividend rate paid by the Fund on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable at the end of each rate period.
Foreign Currency Transactions
The Fund is authorized to engage in foreign currency exchange transactions,
including foreign currency forward, options and futures contracts. To the extent
that the Fund invests in securities and/or contracts that are denominated in a
currency other than U.S. dollars, the Fund will be subject to currency risk,
which is the risk that an increase in the U.S. dollar relative to the foreign
currency will reduce returns or portfolio value. Generally, when the U.S. dollar
rises in value against a foreign currency, the Fund's investments denominated in
that currency will lose value because its currency is worth fewer U.S. dollars;
the opposite effect occurs if the U.S. dollar falls in relative value.
Investments and other assets and liabilities denominated in foreign currencies
are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate
prevailing in the foreign currency exchange market at the time of valuation.
Purchases and sales of investments and income denominated in foreign currencies
are translated into U.S. dollars on the respective dates of such transactions.
The gains or losses resulting from changes in foreign exchange rates are
included in "Realized gain (loss) on foreign currencies" and "Change in net
unrealized appreciation (depreciation) of foreign currencies" on the Statement
of Operations.
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at 4:00 p.m. Eastern time. Investments and income and expenses are
translated on the respective dates of such transactions. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date of the
transactions, foreign currency transactions, and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amounts actually received.
Forward Foreign Currency Exchange Contracts
Generally, the Fund may enter into forward foreign currency exchange contracts
only under two circumstances: (i) when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency to "lock in"
the U.S. exchange rate of the transaction, with such period being a short-dated
contract covering the period between transaction date and settlement date; or
(ii) when Nuveen Asset Management (the "Adviser"), a wholly owned subsidiary of
Nuveen Investments, Inc. ("Nuveen"), believes that the currency of a particular
foreign country may experience a substantial movement against the U.S. dollar or
against another foreign currency. Forward foreign currency contracts are valued
daily at the forward rate. The change in market value is recorded as an
unrealized gain or loss by the Fund. When the contract is closed or offset with
the same counterparty, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed or offset.
Forward foreign currency exchange contracts will generally not be entered into
for terms greater than three months. The use of forward foreign currency
contracts does not eliminate fluctuations in the underlying prices of the Fund's
investment securities; however, it does establish a rate of exchange that can be
achieved in the future. The use of forward foreign currency contracts involves
the risk that anticipated currency movements will not be accurately predicted. A
forward foreign currency contract would limit the risk of loss due to a decline
in the value of a particular currency; however, it also would limit any
potential gain that might result should the value of the currency increase
instead of decrease. These contracts may involve market risk in excess of the
unrealized gain or loss reflected in the Statements of Assets and Liabilities.
In addition, the Fund could be exposed to risks if counterparties to the
contracts are unable to meet the terms of their contracts. The counterparty risk
exposure is, therefore, closely monitored and contracts are only executed with
high credit quality financial institutions.
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 changes for any days on
which the Fund overdraws its account at the custodian bank.
32
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 42,661 15,035
- ----------------------------------------------------------------------------
</Table>
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments
and derivative transactions) during the fiscal year ended December 31, 2007,
aggregated $263,926,804 and $288,582,897, respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization, recognition of income on REIT investments and timing
differences in recognizing certain gains and losses on investment transactions.
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 $472,199,182.
Gross unrealized appreciation and gross unrealized depreciation of investments
at December 31, 2007, were as follows:
<Table>
<Caption>
- --------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 50,132,783
Depreciation (30,926,764)
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments $ 19,206,019
- --------------------------------------------------------------------------------
</Table>
33
Notes to
FINANCIAL STATEMENTS (continued)
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>
<Caption>
- ---------------------------------------------------------------------------
Undistributed net ordinary income * $ --
Undistributed net long-term capital gains 1,243,596
- ---------------------------------------------------------------------------
</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 * $20,515,163
Distributions from net long-term capital gains ** 16,685,616
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
2006
- ---------------------------------------------------------------------------
Distributions from net ordinary income * $24,569,542
Distributions from net long-term capital gains 8,394,162
- ---------------------------------------------------------------------------
</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).
The Fund elected to defer net realized losses from investments incurred from
November 1, 2007 through December 31, 2007, the Fund's tax year and,
("post-October losses") in accordance with federal income tax regulations.
Post-October currency losses of $167,929 were treated as having arisen on the
first day of the following year.
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 funds assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, 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:
34
<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 Sub-Advisory Agreements with NWQ Investment Management Company, LLC
("NWQ"), Security Capital Research & Management Incorporated ("Security
Capital"), Symphony Asset Management, LLC ("Symphony") and Wellington Management
Company, LLP ("Wellington"). Nuveen owns a controlling interest in NWQ while key
management of NWQ owns a non-controlling minority interest. Symphony is an
indirect wholly owned subsidiary of Nuveen. NWQ manages the portion of the
Fund's investment portfolio allocated to dividend-paying common stocks including
American Depositary Receipts ("ADRs"). Security Capital manages the portion of
the Fund's investment portfolio allocated to securities issued by real estate
companies including REITs. Symphony manages the portion of the Fund's investment
portfolio allocated to senior loans. Wellington manages the portion of the
Fund's investment portfolio allocated to emerging markets debt and foreign
corporate bonds. NWQ, Security Capital, Symphony and Wellington are compensated
for their services to the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its Officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised funds.
35
Notes to
FINANCIAL STATEMENTS (continued)
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
SEPTEMBER 30, SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------
2003 * .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .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 September 30, 2011.
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, each sub-advisory
agreement between the Adviser and any 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 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 13, 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.
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 $1,155,420.
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 15, 2006, the Fund entered into a commercial paper program ($45
million maximum) with CITIBANK N.A.'s conduct financing agency, CHARTA, LLC
("CHARTA"). CHARTA issues high grade commercial paper and uses the proceeds to
make advances to the Fund. For the fiscal year ended December 31, 2007, the
average daily balance of borrowings under the commercial paper program agreement
was the full $45 million maximum 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 5.46%. In addition to the interest
expense, the Fund also pays a .21% per annum program fee, a .10% per annum
liquidity fee and a .05% per annum dealer commission fee all of which are
recognized as "Fees on borrowings" in the Statement of Operations.
36
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.
37
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 $19.22 $1.02 $ (2.30) $(.12) $ (.19) $(1.59)
2006 16.88 .99 2.98 (.13) (.15) 3.69
2005 16.85 .83 1.00 (.09) (.10) 1.64
2004 15.13 .81 2.23 (.06) (.03) 2.95
2003(c) 14.33 .18 1.01 (.01) -- 1.18
- ----------------------------------------------------------------------------------------------------
<Caption>
Less Distributions
------------------------------------------
Net Offering Costs
Investment Capital and Ending
Income to Gains to FundPreferred Common
Common Common Tax Share Share Ending
Share- Share- Return of Underwriting Net Asset Market
holders holders Capital Total Discounts Value Value
- ----------------------------------------------------------------------------------------------------
Year Ended 12/31:
2007 $(.90) $ (.64) $ -- $(1.54) $ -- $16.09 $14.28
2006 (.98) (.37) -- (1.35) -- 19.22 21.03
2005 (.71) (.90) -- (1.61) -- 16.88 16.35
2004 (.81) (.41) (.01) (1.23) -- 16.85 15.57
2003(c) (.18) (.02) (.01) (.21) (.17) 15.13 15.65
- ---------------------
</Table>
<Table>
<Caption>
FundPreferred Shares at End of Period Borrowings at End of Period
------------------------------------------------- ----------------------------
Aggregate Aggregate
Amount Liquidation Asset Amount Asset
Outstanding and Market Coverage Outstanding Coverage
(000) Value Per Share Per Share (000) Per $1,000
- --------------------------------------------------------------------------------------------------------
Year Ended 12/31:
2007 $120,000 $25,000 $ 92,729 45,000 $10,891
2006 120,000 25,000 105,715 45,000 12,276
2005 120,000 25,000 95,857 -- --
2004 120,000 25,000 95,718 -- --
2003(c) 120,000 25,000 88,414 -- --
- --------------------------------------------------------------------------------------------------------
</Table>
38
<Table>
<Caption>
Total Returns Ratios/Supplemental Data
------------------- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets Ratios to Average Net Assets
Based Ending Applicable to Common Shares Applicable to Common Shares
on Net Before Credit/ After Credit/
Common Assets Reimbursement Reimbursement***
Based Share Applicable ----------------------------- -----------------------------
on Net to Common Net Net Portfolio
Market Asset Shares Investment Investment Turnover
Value** Value** (000) Expenses++ Income++ Expenses++ Income++ Rate
- -----------------------------------------------------------------------------------------------------------------------
(25.75)% (9.00)% $ 325,097 2.20% 5.06% 1.74% 5.53% 48%
38.72 22.66 387,432 1.70 5.03 1.26 5.47 44
16.36 10.21 340,113 1.42 4.53 .99 4.96 49
8.04 20.44 339,446 1.50 4.74 1.06 5.19 46
5.76 7.04 304,387 1.26* 4.51* .87* 4.89* 28
- -----------------------------------------------------------------------------------------------------------------------
</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 Net Asset Value is the combination of changes in 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 (24.47)% (7.60)%
2006 December 29 40.37 24.26
2005 N/A N/A N/A
2004 N/A N/A N/A
2003(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 and borrowings, where applicable.
- Each ratio includes the effect of the interest expense paid on borrowings
as follows:
<Table>
<Caption>
Ratio of Borrowings Interest Expense
to Average Net Assets Applicable to Common Shares
------------------------------------------------------------------------
Year Ended 12/31:
2007 .66%
2006 .26*
2005 --
2004 --
2003(c) --
</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 $0.25 and $0.25 per share for the fiscal years ended
December 31, 2007 and December 31, 2006, respectively.
(c) For the period September 25, 2003 (commencement of operations) through
December 31, 2003.
See
accompanying notes to financial statements.
39
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>
40
<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>
41
<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
333 W. Wacker Drive Vice President 2004 (2002-2005), formerly
Chicago, IL 60606 Vice President (since
184 2002) 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>
42
<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>
43
<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.
44
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.
45
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.
46
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.
47
NOTES
48
NOTES
49
NOTES
50
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 Diversified Dividend and Income Fund (JDD) hereby designates 15.88% of
dividends paid from ordinary income during 2007 as dividends qualifying for the
70% dividends received deduction for corporations and 20.73% 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.
51
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-B-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 Diversified Dividend and Income Fund
The following tables show the amount of fees that Ernst & Young LLP, the Fund's
auditor, billed to the Fund during the Fund's last two full fiscal years. For
engagements with Ernst & Young LLP the Audit Committee approved in advance all
audit services and non-audit services that Ernst & Young LLP provided to the
Fund, except for those non-audit services that were subject to the pre-approval
exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The
pre-approval exception for services provided directly to the Fund waives the
pre-approval requirement for services other than audit, review or attest
services if: (A) the aggregate amount of all such services provided constitutes
no more than 5% of the total amount of revenues paid by the Fund to its
accountant during the fiscal year in which the services are provided; (B) the
Fund did not recognize the services as non-audit services at the time of the
engagement; and (C) the services are promptly brought to the Audit Committee's
attention, and the Committee (or its delegate) approves the services before the
audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES
FISCAL YEAR ENDED TO FUND (1) BILLED TO FUND (2) BILLED TO FUND (3) BILLED TO FUND (4)
- ----------------- ----------------- ------------------ ------------------ ------------------
December 31, 2007 $31,000 $0 $1,000 $7,000
------- --- ------ ------
Percentage approved
pursuant to
pre-approval
exception 0% 0% 0% 0%
------- --- ------ ------
December 31, 2006 $29,000 $0 $ 800 $ 950
------- --- ------ ------
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 and
Commercial Paper.
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 $8,000 $0 $0 $8,000
December 31, 2006 $1,750 $0 $0 $1,750
"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 of Directors 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, 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"), Security
Capital Research & Management Incorporated ("SC-R&M"), Wellington Management
Company, LLC ("Wellington") and Symphony Asset Management, LLC ("Symphony")
(NWQ, SC-R&M, Wellington and Symphony are also collectively referred to as
"Sub-Advisers") as Sub-Advisers to provide discretionary investment advisory
services. As part of these services, the Adviser has also delegated to each
Sub-Adviser the full responsibility for proxy voting and related duties in
accordance with the Sub-Adviser's policy and procedures. The Adviser
periodically will monitor each Sub-Adviser's voting to ensure that they are
carrying out their duties. The Sub-Advisers' proxy voting policies and
procedures are summarized as follows:
NWQ
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.
SC-R&M
SC-R&M may be granted by its clients the authority to vote the proxies of the
securities held in client portfolios. To ensure that the proxies are voted in
the best interests of its clients, SC-R&M has adopted detailed proxy voting
procedures ("Procedures") that incorporate detailed proxy guidelines
("Guidelines") for voting proxies on specific types of issues.
Pursuant to the Procedures, most routine proxy matters will be voted in
accordance with the Guidelines, which have been developed with the objective of
encouraging corporate action that enhances shareholder value. For proxy matters
that are not covered by the Guidelines (including matters that require a
case-by-case determination) or where a vote contrary to the Guidelines is
considered appropriate, the Procedures require a certification and review
process to be completed before the vote is cast. That process is designed to
identify actual or potential material conflicts of interest and ensure that the
proxy is cast in the best interest of clients.
To oversee and monitor the proxy-voting process, SC-R&M will establish a proxy
committee and appoint a proxy administrator. The proxy committee will meet
periodically to review general proxy-voting matters, review and approve the
Guidelines annually, and provide advice and recommendations on general
proxy-voting matters as well as on specific voting issues.
A copy of the SC-R&M's proxy voting procedures and guidelines are available upon
request by contacting your client service representative.
WELLINGTON MANAGEMENT
The registrant has granted to Wellington Management the authority to vote
proxies on its behalf with respect to the assets managed by Wellington
Management. Wellington Management votes proxies in what it believes are the best
economic interests of its clients and in accordance with its Global Proxy
Policies and Procedures. Wellington Management's Corporate Governance Committee
is responsible for the review and oversight of the firm's Global Proxy Policies
and Procedures. The Corporate Governance Group within Wellington Management's
Corporate Operations Department is responsible for the day-to-day administration
of the proxy voting process. Although Wellington Management may utilize the
services of various external resources in analyzing proxy issues and has
established its own Global Proxy Voting Guidelines setting forth general
guidelines for voting proxies, Wellington Management personnel analyze all
proxies and vote proxies based on their assessment of the merits of each
proposal. Each Fund's portfolio manager has the authority to determine the final
vote for securities held in the Fund, unless the portfolio manager is determined
to have a material conflict of interest related to that proxy vote.
Wellington Management maintains procedures designed to identify and address
material conflicts of interest in voting proxies. Its Corporate Governance
Committee sets standards for identifying materials conflicts based on client,
vendor and lender relationships. Proxy votes for which Wellington Management
identifies a material conflict are reviewed by designated members of its
Corporate Governance Committee or by the entire committee in some cases to
resolve the conflict and direct the vote.
Wellington Management may be unable to vote or may determine not to vote a proxy
on behalf of a Fund due to securities lending, share blocking and
re-registration requirements, lack of adequate information, untimely receipt of
proxy materials, immaterial impact of the vote, and/or excessive costs.
SYMPHONY
Symphony uses the proxy voting services of Institutional Shareholder Services
("ISS"). The ISS Proxy Voting Services provide Symphony and its clients with an
independent source of proxy voting research and services. The use of ISS is
designed to offer client-centered proxy voting which minimizes conflicts of
interests between Symphony's interests and those of its clients.
In order to monitor how ISS votes client proxies, Symphony has established a
Proxy Voting Review Committee (the "Committee"). The Committee is composed of
Symphony's Chief Operating Officer and its Chief Investment Officer. Each year,
the Committee reviews ISS proxy voting policies and practices to determine
whether such policies and practices are consistent with Symphony's fiduciary
duty to the clients for whom Symphony is responsible for voting proxies. During
the year, the Committee review how ISS votes on specific issues. From time to
time, the Committee discusses the proxy voting process with representatives of
ISS in order to ensure that Symphony's client interests are being protected.
When Symphony disagrees with ISS' policies with respect to certain issues,
Symphony will direct the voting of its clients' proxies according to what
Symphony believes is the best interests of its clients.
Clients who have questions about how particular proxies are voted for their
account may request such information from Symphony by calling (415) 676-4000.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser has engaged Security Capital Research & Management Incorporated
("SC-R&M") for a portion of the registrant's equity investments, Wellington
Management Company, LLP ("Wellington Management") for a portion of the
registrant's debt investments, Symphony Asset Management, LLC ("Symphony") for
an additional portion of the registrant's debt investments and NWQ Investment
Management Company, LLC ("NWQ") for an additional portion of the registrant's
equity investments, (SC-R&M, Wellington, Symphony and NWQ are also collectively
referred to as "Sub-Advisers") as Sub-Advisers to provide discretionary
investment advisory services. The following section provides information on the
portfolio managers at each Sub-Adviser:
SECURITY CAPITAL RESEARCH & MANAGEMENT INCORPORATED
ITEM 8(a)(1). PORTFOLIO MANAGER BIOGRAPHIES
ANTHONY R. MANNO JR. is CEO, President and Chief Investment
Officer of Security Capital Research & Management Incorporated. He
is Chairman, President and Managing Director of SC-Preferred
Growth Incorporated. Prior to joining Security Capital in 1994,
Mr. Manno spent 14 years with LaSalle Partners Limited as a
Managing Director, responsible for real estate investment banking
activities. Mr. Manno began his career in real estate finance at
The First National Bank of Chicago and has 34 years of experience
in the real estate investment business. He received an MBA in
Finance with honors (Beta Gamma Sigma) from the University of
Chicago and graduated Phi Beta Kappa from Northwestern University
with a BA and MA in Economics. Mr. Manno is also a Certified
Public Accountant and was awarded an Elijah Watt Sells award.
KENNETH D. STATZ is a Managing Director and Senior Market
Strategist of Security Capital Research & Management Incorporated
where he is responsible for the development and implementation of
portfolio investment strategy. Prior to joining Security Capital
in 1995, Mr. Statz was a Vice President in the Investment Research
Department of Goldman, Sachs & Co., concentrating on research and
underwriting for the REIT industry. Previously, he was a REIT
Portfolio Manager and a Managing Director of Chancellor Capital
Management. Mr. Statz has 26 years of experience in the real
estate securities industry and received an MBA and a BBA in
Finance from the University of Wisconsin.
KEVIN W. BEDELL is a Managing Director of Security Capital
Research & Management Incorporated where he directs the Investment
Analysis Team, which provides in-depth proprietary research on
publicly listed companies. Prior to joining Security Capital in
1996, Mr. Bedell spent nine years with LaSalle Partners Limited
where he was Equity Vice President and Portfolio Manager, with
responsibility for strategic, operational and financial management
of a private real estate investment trust with commercial real
estate investments in excess of $1 billion. Mr. Bedell has 20
years of experience in the real estate securities industry and
received an MBA in Finance from the University of Chicago and a BA
from Kenyon College.
ITEM 8(a)(2). OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
Nuveen Real Estate Income Fund and Nuveen Diversified Dividend and Income Fund ("Funds")
Security Capital Research & Management Incorporated ("Adviser")
- ----------------------------------------------------------------------------------------------------------------
(a)(1)Identify portfolio
manager(s) of the (a)(2) For each person identified in column (a)(1), provide number of accounts
Adviser to be named in other than the Funds managed by the person within each category below and the
the Fund prospectus total assets in the accounts managed within each category below
---------------------------------------------------------------------------------
Registered Investment Other Pooled
Companies Investment Vehicles Other Accounts
---------------------------------------------------------------------------------
Number Total Number Total Number Total
of Assets of Assets of Assets
Accounts ($billions) Accounts ($billions) Accounts ($billions)
- ----------------------------------------------------------------------------------------------------------------
Anthony R. Manno Jr. 4 $0.9 1 $1.0 491 $1.6
- ----------------------------------------------------------------------------------------------------------------
Kenneth D. Statz 4 $0.9 1 $1.0 483 $1.6
- ----------------------------------------------------------------------------------------------------------------
Kevin W. Bedell 4 $0.9 1 $1.0 490 $1.6
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Nuveen Real Estate Income Fund and Nuveen Diversified Dividend and Income Fund ("Funds")
Security Capital Research & Management Incorporated ("Adviser")
- ----------------------------------------------------------------------------------------------------------------
(a)(1)Identify portfolio
manager(s) of the (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the categories in column (a)(2),
Adviser to be named in provide number of accounts and the total assets in the accounts with respect to
the Fund prospectus which the ADVISORY FEE IS BASED ON THE PERFORMANCE OF THE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------
Registered Investment Other Pooled
Companies Investment Vehicles Other Accounts
---------------------------------------------------------------------------------
Number Number Number Total
of Total of Total of Assets
Accounts Assets Accounts Assets Accounts ($billions)
- ---------------------------------------------------------------------------------------------------------------
Anthony R. Manno Jr. - - - - 2 $0.2
- ----------------------------------------------------------------------------------------------------------------
Kenneth D. Statz - - - - 2 $0.2
- ----------------------------------------------------------------------------------------------------------------
Kevin W. Bedell - - - - 2 $0.2
- ----------------------------------------------------------------------------------------------------------------
</Table>
POTENTIAL MATERIAL CONFLICTS OF INTEREST
As shown in the above tables, the portfolio managers may manage
accounts in addition to the Nuveen Funds (the "Funds"). The potential
for conflicts of interest exists when portfolio managers manage other
accounts with similar investment objectives and strategies as the Funds
("Similar Accounts"). Potential conflicts may include, for example,
conflicts between investment strategies and conflicts in the allocation
of investment opportunities.
Responsibility for managing SC-R&M's clients' portfolios is organized
according to investment strategies within asset classes. Generally,
client portfolios with similar strategies are managed using the same
objectives, approach and philosophy. Therefore, portfolio holdings,
relative position sizes and sector exposures tend to be similar across
similar portfolios, which minimizes the potential for conflicts of
interest.
SC-R&M may receive more compensation with respect to certain Similar
Accounts than that received with respect to the Nuveen Funds or may
receive compensation based in part on the performance of certain
Similar Accounts. This may create a potential conflict of interest for
SC-R&M or its portfolio managers by providing an incentive to favor
these Similar Accounts when, for example, placing securities
transactions. Potential conflicts of interest may arise with both the
aggregation and allocation of securities transactions and allocation of
limited investment opportunities. Allocations of aggregated trades,
particularly trade orders that were only partially completed due to
limited availability, and allocation of investment opportunities
generally, could raise a potential conflict of interest, as SC-R&M may
have an incentive to allocate securities that are expected to increase
in value to favored accounts. Initial public offerings, in particular,
are frequently of very limited availability. SC-R&M may be perceived as
causing accounts it manages to participate in an offering to increase
SC-R&M's overall allocation of securities in that offering. A potential
conflict of interest also may be perceived to arise if transactions in
one account closely follow related transactions in a different account,
such as when a purchase increases the value of securities previously
purchased by another account, or when a sale in one account lowers the
sale price received in a sale by a second account. If SC-R&M manages
accounts that engage in short sales of securities of the type in which
the Funds invests, SC-R&M could be seen as harming the performance of
the Funds for the benefit of the accounts engaging in short sales if
the short sales cause the market value of the securities to fall.
SC-R&M has policies and procedures designed to manage these conflicts
described above such as allocation of investment opportunities to
achieve fair and equitable allocation of investment opportunities among
its clients over time. For example:
Orders for the same equity security are aggregated on a continual basis
throughout each trading day consistent with SC-R&M's duty of best
execution for its clients. If aggregated trades are fully executed,
accounts participating in the trade will be allocated their pro rata
share on an average price basis. Partially completed orders will be
allocated among the participating accounts on a pro-rata average price
basis as well.
ITEM 8(a)(3). FUND MANAGER COMPENSATION
The Portfolio Managers participate in a highly competitive compensation
program that is designed to attract and retain outstanding people. The
principal form of compensation for SC-R&M's professionals is a base
salary and target bonus. Base salaries are fixed for each portfolio
manager. Each professional is paid a cash salary and, in addition, a
year-end bonus based on achievement of specific objectives that the
professional's manager and the professional agree upon at the
commencement of the year. Actual bonus payments may range from below
100% of target to a multiple of target bonus depending upon actual
performance. Actual bonus is paid partially in cash and partially in
either (a) restricted stock of SC-R&M's parent company, JPMorgan Chase
& Co., which vests over a two-year period or (b) in self directed
parent company mutual funds which vests over a three-year period,
depending on the investment election of the professional. Actual bonus
paid is a function of SC-R&M achieving its financial, operating and
investment performance goals, as well as the individual achieving
measurable objectives specific to that professional's role within the
firm and the investment performance of all accounts managed by the
portfolio manager. None of the portfolio managers' compensation is
based on the performance of, or the value of assets held in, the Funds.
ITEM 8(a)(4). OWNERSHIP OF JDD SECURITIES AS OF DECEMBER 31, 2007
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- over
Portfolio Manager None $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ------------------------------------------------------------------------------------------------------------------------
Anthony R. Manno Jr. X
- ------------------------------------------------------------------------------------------------------------------------
Kenneth D. Statz X
- ------------------------------------------------------------------------------------------------------------------------
Kevin W. Bedell X
- ------------------------------------------------------------------------------------------------------------------------
</Table>
WELLINGTON
ITEM 8(a)(1). PORTFOLIO MANAGER BIOGRAPHY
JAMES W. VALONE, CFA, Senior Vice President and Fixed Income Portfolio Manager
of Wellington Management, has served as Portfolio Manager of the Fund since
2003. Mr. Valone joined Wellington Management as an investment professional in
1999.
ITEM 8(a)(2). OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------
Nuveen Real Estate Income Fund and Nuveen Diversified Dividend and Income Fund ("Funds")
Security Capital Research & Management Incorporated ("Adviser")
- ----------------------------------------------------------------------------------------------------------------
(a)(1)Identify portfolio
manager(s) of the (a)(2) For each person identified in column (a)(1), provide number of accounts
Adviser to be named in other than the Funds managed by the person within each category below and the
the Fund prospectus total assets in the accounts managed within each category below
---------------------------------------------------------------------------------
Registered Investment Other Pooled
Companies Investment Vehicles Other Accounts
---------------------------------------------------------------------------------
Number Total Number Total Number Total
of Assets of Assets of Assets
Accounts ($millions) Accounts ($millions) Accounts ($millions)
- ----------------------------------------------------------------------------------------------------------------
James W. Valone 1 $2.8 21 $3,778.8 11 $2,148.4
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Nuveen Real Estate Income Fund and Nuveen Diversified Dividend and Income Fund ("Funds")
Security Capital Research & Management Incorporated ("Adviser")
- ----------------------------------------------------------------------------------------------------------------
(a)(1)Identify portfolio
manager(s) of the (a)(3) PERFORMANCE FEE ACCOUNTS. For each of the categories in column (a)(2),
Adviser to be named in provide number of accounts and the total assets in the accounts with respect to
the Fund prospectus which the ADVISORY FEE IS BASED ON THE PERFORMANCE OF THE ACCOUNT
- ---------------------------------------------------------------------------------------------------------------
Registered Investment Other Pooled
Companies Investment Vehicles Other Accounts
---------------------------------------------------------------------------------
Number Number Number Total
of Total of Total of Assets
Accounts Assets Accounts Assets Accounts ($millions)
- ---------------------------------------------------------------------------------------------------------------
James W. Valone 0 $0 5 $241.2 2 $112.7
- ----------------------------------------------------------------------------------------------------------------
</Table>
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Individual investment professionals at Wellington Management manage
multiple accounts for multiple clients. These accounts may include
mutual funds, separate accounts (assets managed on behalf of
institutions, such as pension funds, insurance companies, foundations,
or separately managed account programs sponsored by financial
intermediaries), bank common trust accounts, and hedge funds. The
Fund's manager who is primarily responsible for the day-to-day
management of the Fund ("Portfolio Manager") generally manages accounts
in several different investment styles. These accounts may have
investment objectives, strategies, time horizons, tax considerations
and risk profiles that differ from those of the Fund. The Portfolio
Manager makes investment decisions for each account, including the
Fund, based on the investment objectives, policies, practices,
benchmarks, cash flows, tax and other relevant investment
considerations applicable to that account. Consequently, the Portfolio
Manager may purchase or sell securities, including IPOs, for one
account and not another account, and the performance of securities
purchased for one account may vary from the performance of securities
purchased for other accounts. Alternatively, these accounts may be
managed in a similar fashion to the Fund and thus the accounts may have
similar, and in some cases nearly identical, objectives, strategies
and/or holdings to that of the Fund.
The Portfolio Manager or other investment professionals at Wellington
Management may place transactions on behalf of other accounts that are
directly or indirectly contrary to investment decisions made on behalf
of the Fund, or make investment decisions that are similar to those
made for the Fund, both of which have the potential to adversely impact
the Fund depending on market conditions. For example, an investment
professional may purchase a security in one account while appropriately
selling that same security in another account. Similarly, the Portfolio
Manager may purchase the same security for the Fund and one or more
other accounts at or about the same time, and in those instances the
other accounts will have access to their respective holdings prior to
the public disclosure of the Fund's holdings. In addition, some of
these accounts have fee structures, including performance fees, which
are or have the potential to be higher, in some cases significantly
higher, than the fees paid by the Fund to Wellington Management. The
Portfolio Manager also manages hedge funds, which pay performance
allocations to Wellington Management or its affiliates. Because
incentive payments paid by Wellington Management to the Portfolio
Manager are tied to revenues earned by Wellington Management and, where
noted, to the performance achieved by the manager in each account, the
incentives associated with any given account may be significantly
higher or lower than those associated with other accounts managed by
the Portfolio Manager. Finally, the Portfolio Manager may hold shares
or investments in the other pooled investment vehicles and/or other
accounts identified above. Wellington Management's goal is to meet its
fiduciary obligation to treat all clients fairly and provide high
quality investment services to all of its clients. Wellington
Management has adopted and implemented policies and procedures,
including brokerage and trade allocation policies and procedures, which
it believes address the conflicts associated with managing multiple
accounts for multiple clients. In addition, Wellington Management
monitors a variety of areas, including compliance with primary account
guidelines, the allocation of IPOs, and compliance with the firm's Code
of Ethics, and places additional investment restrictions on investment
professionals who manage hedge funds and certain other accounts.
Furthermore, senior investment and business personnel at Wellington
Management periodically review the performance of Wellington
Management's investment professionals. Although Wellington Management
does not track the time an investment professional spends on a single
account, Wellington Management does periodically assess whether an
investment professional has adequate time and resources to effectively
manage the investment professional's various client mandates.
ITEM 8(a)(3). FUND MANAGER COMPENSATION
Wellington Management's compensation structure is designed to attract and retain
high-caliber investment professionals necessary to deliver high quality
investment management services to its clients. Wellington Management's
compensation of the Portfolio Manager includes a base salary and incentive
components. The base salary for the Portfolio Manager, who is a partner of
Wellington Management, is determined by the Managing Partners of the firm. The
Portfolio Manager's base salary is generally a fixed amount that may change as a
result of an annual review. The Portfolio Manager is eligible to receive an
incentive payment based on the revenues earned by Wellington Management from the
Fund and generally each other account managed by such Portfolio Manager. The
Portfolio Manager's incentive payment relating to the Fund is linked to the
gross pre-tax performance of the Fund compared to the JP Morgan Emerging Markets
Bond Index Global Diversified Index Equal Weight Performing over one and three
year periods, with an emphasis on three year results. Wellington Management
applies similar incentive compensation structures (although the benchmarks or
peer groups, time periods and rates may differ) to other accounts managed by the
Portfolio Manager, including accounts with performance fees. Prior to 2007, the
incentive paid to the Portfolio Manager was based on the revenues earned by
Wellington Management, which had no performance-related component.
Portfolio-based incentives across all accounts managed by an investment
professional can, and typically do, represent a significant portion of an
investment professional's overall compensation; incentive compensation varies
significantly by individual and can vary significantly from year to year. The
Portfolio Manager may also be eligible for bonus payments based on his overall
contribution to Wellington Management's business operations. Senior management
at Wellington Management may reward individuals as it deems appropriate based on
factors other than account performance. Each partner of Wellington Management is
eligible to participate in a partner-funded tax qualified retirement plan, the
contributions to which are made pursuant to an actuarial formula, as a partner
of the firm. Mr. Valone is a partner of the firm.
ITEM 8(a)(4). OWNERSHIP OF JDD SECURITIES AS OF DECEMBER 31, 2007
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- over
Portfolio Manager None $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ------------------------------------------------------------------------------------------------------------------------
James W. Valone X
- ------------------------------------------------------------------------------------------------------------------------
</Table>
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 BY PORTFOLIO MANAGERS
OTHER ACCOUNTS MANAGED BY SYMPHONY
PMS
AS OF 12/31/07
<Table>
<Caption>
GUNTHER STEIN LENNY MASON
(a) RICs
Number of accts 6 6
Assets ($000s) $3,072,655 $3,072,655
(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 -
</Table>
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 JDD SECURITIES AS OF DECEMBER 31, 2007
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- over
Portfolio Manager None $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ------------------------------------------------------------------------------------------------------------------------
Gunther Stein X
- ------------------------------------------------------------------------------------------------------------------------
Lenny Mason X
- ------------------------------------------------------------------------------------------------------------------------
</Table>
NWQ
ITEM 8(a)(1). PORTFOLIO MANAGER BIOGRAPHY
JON D. BOSSE, CFA, Chief Investment Officer and Portfolio Manager
Jon Bosse is Chief Investment Officer of NWQ, co-president of NWQ (since June
2006) and has been a Managing Director of NWQ since 1996.
ITEM 8(a)(2). OTHER ACCOUNTS MANAGED
<Table>
<Caption>
Jon Bosse
(a) RICs
Number of accts 6
Assets ($000s) $ 1,819,815,501
(b) Other pooled accts
Non-performance fee accts
Number of accts 9
Assets ($000s) $ 995,097,733
(c) Other
Non-performance fee accts
Number of accts 45,623
Assets ($000s) $27,741,956,314
Performance fee accts
Number of accts 9
Assets ($000s) $ 738,008,109
</Table>
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 the increase in profitability of NWQ
over time) made to most investment professionals. Additionally, the portfolio
managers have been provided compensation in conjunction with signing long-term
employment agreements.
ITEM 8(a)(4). OWNERSHIP OF JDD SECURITIES AS OF DECEMBER 31, 2007
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- over
Portfolio Manager None $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
- ------------------------------------------------------------------------------------------------------------------------
Jon Bosse X
- ------------------------------------------------------------------------------------------------------------------------
</Table>
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 Diversified Dividend and Income 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.