UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21407
-------------------
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
--------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
---------------------
Date of fiscal year end: December 31
-------------------
Date of reporting period: June 30, 2006
---------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. SS. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT JUNE 30, 2006
NUVEEN INVESTMENTS
EXCHANGE-TRADED
CLOSED-END
FUNDS
NUVEEN
DIVERSIFIED
DIVIDEND AND
INCOME FUND
JDD
HIGH CURRENT INCOME AND
TOTAL RETURN FROM A
PORTFOLIO OF DIVIDEND-PAYING
COMMON STOCKS, REIT STOCKS,
EMERGING MARKETS SOVEREIGN
DEBT, AND SENIOR LOANS
NUVEEN LOGO
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NUVEEN LOGO
(TIMOTHY SCHWERTFEGER PHOTO)
Timothy R. Schwertfeger
Chairman of the Board
CHAIRMAN'S
LETTER TO SHAREHOLDERS
Dear Shareholder:
I am very pleased to report that over the six-month period covered by this
report, your Fund continued to provide you with attractive monthly
distributions and diversified exposure to a variety of important market
sectors and asset classes. For more information on your Fund's
performance, please read the Portfolio Managers' Comments, the
Distribution and Share Price Information, and the Performance Overview
sections of this report.
Portfolio diversification is a recognized way to try to reduce some of the
risk that comes with investing. Since one part of your portfolio may be
going up when another is going down, portfolio diversification may help
smooth your investment returns over time. In addition to providing regular
monthly income, an investment like your Fund may help you achieve and
benefit from greater portfolio diversification. Your financial advisor can
explain these potential advantages in more detail. I urge you to contact
him or her soon for more information on this important investment
strategy.
"IN ADDITION TO PROVIDING REGULAR MONTHLY INCOME, AN INVESTMENT LIKE YOUR FUND
MAY HELP YOU ACHIEVE AND BENEFIT FROM GREATER PORTFOLIO DIVERSIFICATION."
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can
help you to secure your financial objectives. We are grateful that you
have chosen us as a partner as you pursue your financial goals, and we
look forward to continuing to earn your trust in the months and years
ahead.
Sincerely,
(TIMOTHY SCHWERTFEGER SIG)
Timothy R. Schwertfeger
Chairman of the Board
August 11, 2006
Nuveen Investments Exchange-Traded Closed-End Funds (JDD)
PORTFOLIO MANAGERS'
COMMENTS
THE NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND FEATURES PORTFOLIO MANAGEMENT BY
TEAMS AT FOUR SUBADVISERS:
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 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 the team.
Wellington Management Company, LLP ("Wellington") invests its portion of the
Fund's assets in emerging markets sovereign debt. James W. Valone, who has more
than 18 years of investment management experience, heads the team.
Symphony Asset Management, LLC, ("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.
Here representatives from NWQ, Security Capital, Wellington and Symphony talk
about the markets, their management strategies and the performance of the Fund
for the six-month period ended June 30, 2006.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 2006?
We continue to view the leveraged loan market favorably with near historic low
default rates over the past 24 months, improved market liquidity and new
companies coming to market. Strong investor demand, however has allowed many
deals to be structured with aggressive leverage levels. We continue to position
the portfolio in a defensive manner, avoiding credits we feel are too
aggressively leveraged or do not have a strong credit profile. The volatility
experienced during the second quarter has presented new opportunities in the
new-issue market. Recently, we have found an increase in new deals with
attractive pricing, solid collateral and appropriate covenants. A combination of
these characteristics has been less prevalent recently in a strong market
environment.
For the dividend-paying common stock portion of the Fund's portfolio, there were
no changes to our management strategy as the portfolio's assets continue to be
well-diversified, and invested in dividend producing securities. We employ an
opportunistic approach to investing, utilizing a bottom-up strategy that is
focused on identifying
4
attractively valued companies which possess favorable risk/reward
characteristics and emerging catalysts that we believe could unlock value or
improve profitability. These catalysts include management changes, restructuring
efforts, recognition of hidden assets/free options, or a turn in the underlying
fundamentals. We also continue to focus on downside protection, and pay a great
deal of attention to a company's balance sheet and cash flow statement, not just
the income statement. We focus on cash flow analysis believing it offers a more
objective and truer picture of a company's financial position than an evaluation
based on earnings alone.
During the period, we took new positions in five common stock securities, and
added to our stakes in several existing holdings. The new investments include
CBS Corporation, Clear Channel Communications, Inc., Pfizer Inc., Stora Enso
Oyj, and Vodafone Group PLC. Our analysis indicated these companies possessed
solid fundamentals, compelling valuations, and an attractive risk/reward
relationship. Conversely, we eliminated our positions in Albertson's, Inc.,
Arkema, Embarq Corp., Kerr-McGee Corporation, Sprint-Nextel Corporation, and
Tronox Inc.
In the emerging markets debt sleeve of the Fund, we sought to add value by
identifying countries and securities with attractive risk and return profiles.
In Central and Eastern Europe, we maintained an overweight to Russia as the
country continued to use fiscal and current account surpluses to reduce debt,
thereby boosting its credit profile. We were underweight countries with
relatively weak fundamentals and valuations, such as Hungary and Turkey.
In Latin America, our overweight to Argentina was based on the country's strong
macroeconomic performance and continued improvement in the country's debt
servicing capacity. We were overweight Brazil as the country was well positioned
from a credit perspective, since its government is actively reducing its
external debt.
In Asia, we found attractive valuations in the debt of the Philippines and
Indonesia. Economic policy frameworks have improved in both countries and debt
markets are only slowly reflecting the associated reductions in credit risk.
Other Asian countries remain fundamentally strong, but valuations limit upside
potential.
5
Finally, in anticipation of higher market volatility brought on by a combination
of rising inflation and slower economic growth, we moved the portfolio into a
moderately defensive position in the second quarter. We favored higher quality
countries and increased our allocation to cash during this period. We remain
constructive on the fundamental outlook of emerging markets, and look for
opportunities to add risk following the recent market sell-off.
As of June 30, 2006, the real estate portion of the portfolio was predominately
invested in common stocks. We continued to focus on finding what we believed
would be the best opportunities to generate sustainable income and potential
price appreciation over the long-run. In particular, we sought to maintain
significant diversification within the real estate sector while taking into
account company credit quality, sector and geographic exposure and security-type
allocations. Every investment decision was based on a multi-layered analysis of
the company, the real estate it owns, its management and the relative price of
the security.
HOW DID THE FUND PERFORM DURING THE PERIOD?
TOTAL RETURNS ON NET ASSET VALUE
For the six-months ended June 30, 2006
JDD 7.38%
--------------------------------------------------------------------------------------------
Comparative Benchmark(1) 6.36%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 Comparative benchmark performance is a blended return consisting of: 1) 18.75%
of the return of the Russell 3000 Value Index, which measures the performance
of those Russell 3000 Index companies with lower price-to book ratios and
lower forecasted growth values, 2) 6.25% of the return of the MSCI EAFE
ex-Japan Value Index, a capitalization weighted index that selects the lower
50% of the price-to-book ranked value stocks traded in the developed markets
of Europe, Asia and the Far East, excluding Japan, 3) 25% of the return of the
Dow Jones Wilshire Real Estate Securities Index, an unmanaged,
market-capitalization-weighted index comprised of publicly traded REITs and
real estate companies, 4) 25% of the return of the JP Morgan EMBI Global
Diversified Index, which tracks total returns for U.S.-dollar-denominated debt
instruments issued by emerging markets sovereign and quasi sovereign entities,
and 5) 25% of the return of the CSFB Leveraged Loan Index, which consists of
approximately $150 billion of tradable term loans with at least one year to
maturity and rated BBB or lower. Index returns do not include the effects of
any sales charges or management fees. It is not possible to invest directly in
an index.
--------------------------------------------------------------------------------
Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that a shareholder may have to pay on Fund distributions or upon the sale
of Fund shares. See the Performance Overview Page for additional information.
One security that positively impacted the performance of the senior loan
component of the Fund over the period was the Federal-Mogul Corporation term
loan. The Federal-Mogul Corporation term loan traded up during the period due to
the expectation that the company will emerge out of bankruptcy soon. Successful
restructuring efforts and financial results show they are making progress on
their emergence from chapter 11.
The Fund had several common equity investments that produced double-digit gains
for the period. With a gain of over 50% for the period, our best performing
holding was Kerr-McGee as the company received an all-cash takeover offer from
Anadarko Petroleum Corp. Our remaining energy investments posted returns of
5-13% as high oil prices and increased production volumes are driving record
earnings and cash flows. Increased
6
industry consolidation and positive fundamentals also contributed to the 35%
rise in our shares of Korean-based steel manufacturer, POSCO. The portfolio's
investment in iron-ore manufacturer, Rio Tinto PLC, also posted a double-digit
gain.
Other notable investments during the period include IndyMac Bancorp Inc. as the
company continues to show strong fundamental trends despite the current
headwinds of rising interest rates and a slowing mortgage origination market;
Carolina Group appreciated due to an improving litigation environment and higher
operating results; and our stakes in AT&T Inc. and Verizon Communications
appreciated given their attractive valuations and improving trends in the
telecommunications sector.
In the emerging markets sovereign debt portion of the portfolio, the Fund
benefited from decisions to overweight Argentina and the Philippines and to
underweight Turkey and Hungary. A move to increase cash positions and exposure
to high-quality credits in the second quarter was additive to performance
results.
For the six-month period ended June 30, 2006, the real estate portion of the
Fund modestly outperformed a commonly followed industry benchmark. Over this
period, we favored real estate companies with high quality management teams,
strong balance sheets and potential for price appreciation, with property
portfolios generally situated in urban markets characterized by high
barriers-to-entry. Performance benefited from the increased representation of
investments in apartment and lodging companies, sectors characterized by
short-duration lease terms, and thus the ability to rapidly raise rents in an
improving economy.
The Fund had several holdings that constrained the Fund's performance over this
reporting period. One corporate bond position that had a negative impact on the
portfolio was KB Homes. The KB Home 8.625% bond traded down during the period
due to the decrease in new home orders and investor concern about a severe
slowdown in homebuilding activity. This concern has been caused by increasing
mortgage rates and a slowdown in new home orders.
In the equity portfolio, our investments in International Paper Co. and
Packaging Corp. of America posted modest declines of 4% due to rising cost
pressures and weak demand characteristics in the paper industry. Alumina Ltd
declined 8% on rising cost
7
pressures and concerns of increased Chinese production, and our investments in
insurance broker, Aon Corp., struggled modestly after reporting core operating
earnings that were slightly below expectations. The stock had appreciated
strongly in the past year, moving its valuation a bit ahead of itself.
Notwithstanding the recent softness in the stock price, we believe the Aon story
remains very compelling as the company is well-positioned to generate strong
revenue growth and margin expansion through ongoing restructuring initiatives
and the possible monetization of its underwriting businesses.
In its emerging markets sovereign debt sleeve, relative detractors from
performance were primarily due to overweightings to Russia, Mexico and Malaysia
and security selection in Argentina.
In the real estate portion of the Fund, in seeking to maintain the income and
sector diversification objectives of the Fund, our investments in the higher
yielding, but historically defensive healthcare sector underperformed the
Benchmark as a whole.
8
DISTRIBUTION AND SHARE PRICE
INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferred(TM). FundPreferred provides a degree of financial
leverage that can enhance the Fund's returns and supplement the income available
to pay common shareholder distributions, but also can increase share price
volatility. This leveraging strategy provided incremental income and helped
enhance shareholder distributions over this reporting period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. Under this policy, the Fund's monthly
distributions will be paid from net investment income generated by its
underlying investments as well as from net realized capital gains and/or returns
of capital, generally representing net unrealized capital gains. During the
six-month period, the Fund maintained its monthly distribution of $0.110 per
share.
As of June 30, 2006, the Fund was trading at a -3.26% discount to its net asset
value. This discount was less than the average -3.69% discount the Fund
exhibited over the course of the six-month reporting period.
We are providing shareholders with an estimate of the source of the Fund's
monthly distribution as of June 30, 2006. These estimates may, and likely will,
vary over time based on the investment activities of the Fund and changes in the
value of portfolio investments. The final determination of the source and tax
characteristics of all distributions will be made after December 31, 2006 and
reported to you on Form 1099-DIV early in 2007. More details about the Fund's
distributions are available monthly on www.nuveen.com/cef.
The Fund estimates that its monthly distribution is comprised of 65% net
investment income and, pursuant to the Fund's managed distribution policy, 35%
capital appreciation consisting of either net realized capital gains and/or a
return of capital (generally representing net unrealized capital gains). The
components of the Fund's net investment income are estimated to be 86% ordinary
income, 8% capital gains, and 6% return of capital. A portion of the Fund's net
investment income represents distribution payments received from securities of
real estate investment trusts (REITs) which may be re-characterized by the REITs
for tax purposes after calendar year-end.
9
The foregoing presents information about the expected tax characteristics of the
Fund's distributions, to conform to a federal securities law requirement that
any fund paying distributions from any sources other than net income disclose to
shareholders the distribution portions attributable to such other sources. The
Fund provides this type of information on a tax basis, instead of on a generally
accepted accounting principles (GAAP) basis, because experience has shown that
Fund shareholders are most concerned about the tax character of their
distributions (and might well be confused by information about distribution
characteristics that differed from the tax-based characteristics), and because
the Fund also believes that the distributions' tax characteristics fairly
represent the economic basis of the Fund's distributions and returns. The
breakdown of distribution characteristics according to GAAP likely would differ
from the expected tax characteristics shown above.
10
Nuveen Diversified Dividend and Income Fund
JDD
PERFORMANCE
OVERVIEW As of June 30, 2006
PORTFOLIO APPLICATION
(as a % of total investments)
-------------------------------------------------------------------------------------
Real Estate Investment Trust Common Stocks, $25 Par (or
similar) Securities and Convertible Bonds 30.2%
-------------------------------------------------------------------------------------
Common Stocks 26.0%
-------------------------------------------------------------------------------------
Emerging Markets Sovereign Debt and Foreign Corporate Bonds 20.8%
-------------------------------------------------------------------------------------
Variable Rate Senior Loan Interests 18.9%
-------------------------------------------------------------------------------------
Short-Term Investments 2.3%
-------------------------------------------------------------------------------------
Corporate Bonds 1.8%
-------------------------------------------------------------------------------------
BAR CHART:
2005-2006 MONTHLY DISTRIBUTIONS PER SHARE
Jul 0.1025
Aug 0.1025
Sep 0.1075
Oct 0.1075
Nov 0.1075
Dec 0.1075
Jan 0.1100
Feb 0.1100
Mar 0.1100
Apr 0.1100
May 0.1100
Jun 0.1100
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/01/05 15.27
15.33
15.48
15.65
15.53
15.58
15.60
15.44
15.45
15.77
15.72
15.64
15.67
15.56
15.66
15.65
15.94
15.99
16.00
16.00
16.00
16.05
16.14
16.16
16.16
16.20
15.93
15.79
15.90
15.86
15.80
15.71
15.77
15.86
15.88
16.00
15.94
15.99
15.93
15.65
15.53
15.44
15.43
15.59
15.84
15.90
16.12
16.23
16.12
16.24
16.39
16.19
16.05
15.95
15.92
15.90
15.94
15.80
15.72
15.76
15.74
15.68
15.77
15.95
15.82
16.03
16.10
16.00
15.83
16.05
16.08
16.08
15.70
15.35
15.24
15.10
15.00
14.94
14.72
14.84
15.11
15.11
15.00
15.06
15.12
15.49
15.32
15.49
15.54
15.75
15.70
15.82
15.90
15.92
15.55
15.50
15.54
15.62
15.48
15.71
15.56
15.45
15.45
15.64
15.90
15.82
16.05
16.04
15.90
15.93
16.15
16.02
16.10
16.05
16.24
16.05
16.00
16.05
16.12
15.80
15.90
16.03
15.87
16.03
15.90
16.01
16.24
16.35
16.35
16.44
16.21
16.16
16.34
16.75
16.70
16.85
16.92
16.81
16.69
16.45
16.65
16.65
16.83
16.84
16.62
16.61
16.71
16.70
16.62
16.80
16.80
16.75
16.86
16.84
16.99
16.80
17.00
16.65
16.55
16.58
16.67
16.72
16.82
16.84
16.70
16.84
16.98
17.00
16.95
16.95
17.08
17.05
17.15
17.13
17.04
17.17
16.98
17.04
16.99
16.95
16.90
16.92
16.91
17.00
16.95
17.05
16.90
17.06
16.97
16.95
16.93
16.90
17.11
17.19
17.14
17.13
16.98
16.67
16.63
16.67
16.25
16.30
16.79
16.84
16.84
16.94
16.97
16.98
16.97
16.95
16.95
17.09
17.01
17.00
16.95
17.13
17.18
17.22
17.17
17.24
17.05
16.94
16.91
16.49
16.74
16.66
16.48
16.65
16.45
16.87
16.84
16.62
16.60
16.74
16.98
17.00
16.94
16.79
16.88
16.99
17.01
16.81
16.83
17.00
16.78
16.62
16.58
16.41
16.25
16.34
16.47
16.35
16.40
16.60
6/30/06 16.89
FUND SNAPSHOT
----------------------------------------------------------------------
Common Share Price $16.89
----------------------------------------------------------------------
Common Share Net Asset Value $17.46
----------------------------------------------------------------------
Premium/(Discount) to NAV -3.26%
----------------------------------------------------------------------
Current Distribution Rate(1) 7.82%
----------------------------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $351,808
----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/03)
-------------------------------------------------------------------------------------
ON SHARE PRICE ON NAV
-------------------------------------------------------------------------------------
6-Month (Cumulative) 7.40% 7.38%
-------------------------------------------------------------------------------------
1-Year 22.72% 14.22%
-------------------------------------------------------------------------------------
Since
Inception 13.75% 16.51%
-------------------------------------------------------------------------------------
INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------
Real Estate Investment Trust 30.2%
-------------------------------------------------------------------
Sovereign Debt 20.8%
-------------------------------------------------------------------
Media 4.7%
-------------------------------------------------------------------
Diversified Telecommunication Services 3.3%
-------------------------------------------------------------------
Hotels, Restaurants & Leisure 3.1%
-------------------------------------------------------------------
Oil, Gas & Consumable Fuels 3.0%
-------------------------------------------------------------------
Aerospace & Defense 2.9%
-------------------------------------------------------------------
Tobacco 2.4%
-------------------------------------------------------------------
Diversified Financial Services 1.8%
-------------------------------------------------------------------
Thrifts & Mortgage Finance 1.8%
-------------------------------------------------------------------
Containers & Packaging 1.7%
-------------------------------------------------------------------
Metals & Mining 1.7%
-------------------------------------------------------------------
Electric Utilities 1.5%
-------------------------------------------------------------------
Commercial Banks 1.5%
-------------------------------------------------------------------
Household Durables 1.5%
-------------------------------------------------------------------
Commercial Services & Supplies 1.4%
-------------------------------------------------------------------
Short-Term Investments 2.3%
-------------------------------------------------------------------
Other 14.4%
-------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST
TOP FIVE SUB-INDUSTRIES
(as a % of total investments)
-------------------------------------------------------------------
Office 10.3%
-------------------------------------------------------------------
Residential 6.3%
-------------------------------------------------------------------
Specialized 6.0%
-------------------------------------------------------------------
Retail 4.5%
-------------------------------------------------------------------
Diversified 1.7%
-------------------------------------------------------------------
EMERGING MARKETS SOVEREIGN DEBT
AND FOREIGN CORPORATE BONDS
TOP FIVE COUNTRIES
(as a % of total investments)
------------------------------------------------------------------
Russian Federation 1.9%
------------------------------------------------------------------
Argentina 1.6%
------------------------------------------------------------------
Peru 1.3%
------------------------------------------------------------------
Mexico 1.1%
------------------------------------------------------------------
Malaysia 1.1%
------------------------------------------------------------------
1 Current Distribution Rate is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Fund's
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
11
Shareholder
MEETING REPORT
The shareholder meeting was held in the offices of Nuveen Investments on March
29, 2006.
------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Common and
Preferred Preferred
shares voting shares voting
together together
as a class as a class
------------------------------------------------------------------------------------------
Robert P. Bremner
For 18,933,136 --
Withhold 160,013 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
Lawrence H. Brown
For 18,924,556 --
Withhold 168,593 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
Jack B. Evans
For 18,951,934 --
Withhold 141,215 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
William C. Hunter
For 18,951,849 --
Withhold 141,300 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
William J. Schneider
For -- 4,174
Withhold -- 38
------------------------------------------------------------------------------------------
Total -- 4,212
------------------------------------------------------------------------------------------
Timothy R. Schwertfeger
For -- 4,174
Withhold -- 38
------------------------------------------------------------------------------------------
Total -- 4,212
------------------------------------------------------------------------------------------
Judith M. Stockdale
For 18,942,510 --
Withhold 150,639 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
Eugene S. Sunshine
For 18,951,474 --
Withhold 141,675 --
------------------------------------------------------------------------------------------
Total 19,093,149 --
------------------------------------------------------------------------------------------
12
Nuveen Diversified Dividend and Income Fund (JDD)
Portfolio of
INVESTMENTS June 30, 2006 (Unaudited)
SHARES DESCRIPTION (1) VALUE
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 34.7% (26.0% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 2.1%
50,000 Lockheed Martin Corporation $ 3,587,000
85,000 Raytheon Company 3,788,450
---------------------------------------------------------------------------------------------------------------------------
Total Aerospace & Defense 7,375,450
--------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 1.9%
69,200 Bank of America Corporation 3,328,520
65,000 Wachovia Corporation 3,515,200
---------------------------------------------------------------------------------------------------------------------------
Total Commercial Banks 6,843,720
--------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.2%
105,000 Pitney Bowes Inc. 4,336,500
---------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.9%
146,300 Packaging Corp. of America 3,221,526
---------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 2.4%
100,000 Citigroup Inc. 4,824,000
85,000 JPMorgan Chase & Co. 3,570,000
---------------------------------------------------------------------------------------------------------------------------
Total Diversified Financial Services 8,394,000
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.6%
175,500 AT&T Inc. 4,894,695
90,000 KT Corporation, Sponsored ADR 1,930,500
52,500 Telecom Italia S.p.A., Sponsored ADR 1,465,800
131,100 Verizon Communications Inc. 4,390,539
---------------------------------------------------------------------------------------------------------------------------
Total Diversified Telecommunication Services 12,681,534
--------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.4%
67,100 EDP -- Energias de Portugal, S.A., Sponsored ADR 2,638,372
118,000 Korea Electric Power Corporation (KEPCO), 2,237,280
Sponsored ADR
---------------------------------------------------------------------------------------------------------------------------
Total Electric Utilities 4,875,652
--------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 0.4%
60,812 J. Sainsbury PLC, Sponsored ADR 1,489,894
---------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.8%
112,000 Newell Rubbermaid Inc. 2,892,960
---------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.3%
73,000 Kimberly-Clark Corporation 4,504,100
---------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.5%
76,300 Aon Corporation 2,656,766
30,000 Hartford Financial Services Group, Inc. 2,538,000
---------------------------------------------------------------------------------------------------------------------------
Total Insurance 5,194,766
--------------------------------------------------------------------------------------------------------------
MEDIA - 1.3%
55,000 CBS Corporation, Class B 1,487,750
57,300 Clear Channel Communications, Inc. 1,773,435
33,900 Dow Jones & Company, Inc. 1,186,839
---------------------------------------------------------------------------------------------------------------------------
Total Media 4,448,024
--------------------------------------------------------------------------------------------------------------
METALS & MINING - 1.8%
84,900 Alumina Limited, Sponsored ADR 1,706,490
33,000 POSCO, ADR 2,207,700
12,100 Rio Tinto PLC, Sponsored ADR 2,537,491
---------------------------------------------------------------------------------------------------------------------------
Total Metals & Mining 6,451,681
--------------------------------------------------------------------------------------------------------------
13
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
SHARES DESCRIPTION (1) VALUE
---------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 1.4%
37,800 Dominion Resources, Inc. $ 2,827,062
82,800 United Utilities PLC, Sponsored ADR 1,963,188
---------------------------------------------------------------------------------------------------------------------------
Total Multi-Utilities 4,790,250
--------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 3.4%
33,000 Chevron Corporation 2,047,980
41,800 ConocoPhillips 2,739,154
57,500 Eni S.p.A., Sponsored ADR 3,378,125
60,000 Total SA, Sponsored ADR 3,931,200
---------------------------------------------------------------------------------------------------------------------------
Total Oil, Gas & Consumable Fuels 12,096,459
--------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.4%
105,500 International Paper Company 3,407,650
97,000 Stora Enso Oyj, Sponsored ADR 1,356,060
---------------------------------------------------------------------------------------------------------------------------
Total Paper & Forest Products 4,763,710
--------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 1.6%
110,000 Merck & Co. Inc. 4,007,300
71,000 Pfizer Inc. 1,666,370
---------------------------------------------------------------------------------------------------------------------------
Total Pharmaceuticals 5,673,670
--------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.3%
81,600 Fannie Mae 3,924,960
94,100 IndyMac Bancorp, Inc. 4,314,485
---------------------------------------------------------------------------------------------------------------------------
Total Thrifts & Mortgage Finance 8,239,445
--------------------------------------------------------------------------------------------------------------
TOBACCO - 3.2%
88,200 Altria Group, Inc. 6,476,525
91,000 Loews Corp -- Carolina Group 4,674,670
---------------------------------------------------------------------------------------------------------------------------
Total Tobacco 11,151,195
--------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 0.8%
126,000 Vodafone Group PLC 2,683,800
---------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $96,433,547) 122,108,336
--------------------------------------------------------------------------------------------------------------
SHARES DESCRIPTION (1) VALUE
---------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST COMMON STOCKS - 38.5% (28.8% OF TOTAL INVESTMENTS)
DIVERSIFIED - 2.2%
455,000 Newkirk Realty Trust Inc. $ 7,898,799
---------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 1.1%
106,000 First Industrial Realty Trust, Inc. 4,021,640
---------------------------------------------------------------------------------------------------------------------------
MORTGAGE - 0.9%
45,000 American Home Mortgage Investment Corp. 1,658,700
220,000 MFA Mortgage Investments, Inc. 1,513,600
---------------------------------------------------------------------------------------------------------------------------
Total Mortgage 3,172,300
--------------------------------------------------------------------------------------------------------------
OFFICE - 12.9%
200,300 Brandywine Realty Trust 6,443,651
219,100 Equity Office Properties Trust 7,999,336
192,000 Glenborough Realty Trust Incorporated 4,135,680
435,600 HRPT Properties Trust 5,035,536
158,900 Mack-Cali Realty Corporation 7,296,687
146,800 Maguire Properties, Inc. 5,162,956
115,400 Reckson Associates Realty Corporation 4,775,252
416,000 Republic Property Trust 4,110,080
---------------------------------------------------------------------------------------------------------------------------
Total Office 44,959,178
--------------------------------------------------------------------------------------------------------------
RESIDENTIAL - 7.4%
114,900 Archstone-Smith Trust 5,844,963
57,500 AvalonBay Communities, Inc. 6,360,650
86,200 Camden Property Trust 6,340,010
164,400 Post Properties, Inc. 7,453,895
---------------------------------------------------------------------------------------------------------------------------
Total Residential 25,999,518
--------------------------------------------------------------------------------------------------------------
14
SHARES DESCRIPTION (1) VALUE
---------------------------------------------------------------------------------------------------------------------------
RETAIL - 6.0%
252,900 Cedar Shopping Centers Inc. $ 3,722,688
73,500 Federal Realty Investment Trust 5,145,000
221,000 Kite Realty Group Trust 3,445,390
49,900 Macerich Company 3,502,980
107,100 New Plan Excel Realty Trust 2,644,299
32,400 Simon Property Group, Inc. 2,687,256
---------------------------------------------------------------------------------------------------------------------------
Total Retail 21,147,613
--------------------------------------------------------------------------------------------------------------
SPECIALIZED - 8.0%
78,500 Cogdell Spencer Inc. 1,531,535
350,000 DiamondRock Hospitality Company 5,183,500
338,736 Hersha Hospitality Trust 3,146,857
166,000 Nationwide Health Properties, Inc. 3,736,660
293,800 Senior Housing Properties Trust 5,261,958
90,700 Shurgard Storage Centers, Inc., Class A 5,668,750
190,400 U-Store-It Trust 3,590,944
---------------------------------------------------------------------------------------------------------------------------
Total Specialized 28,120,204
--------------------------------------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST COMMON STOCKS 135,319,252
(COST $101,800,369)
--------------------------------------------------------------------------------------------------------------
SHARES DESCRIPTION (1) COUPON RATINGS (2) VALUE
-----------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST $25 PAR (OR SIMILAR) SECURITIES - 1.0% (0.8% OF TOTAL INVESTMENTS)
RESIDENTIAL - 1.0%
150,000 Apartment Investment & Management Company, Series 7.750% Ba3 $ 3,690,000
U
-----------------------------------------------------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUST $25 PAR (OR SIMILAR) SECURITIES (COST 3,690,000
$3,750,000)
----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT RATINGS
(000) DESCRIPTION (1) COUPON MATURITY (2) VALUE
----------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST CONVERTIBLE BONDS - 1.0% (0.6% OF TOTAL INVESTMENTS)
OFFICE - 1.0%
$ 3,715 Trizec Hahn Corporation 3.000% 1/29/21 N/R $ 3,394,581
----------------------------------------------------------------------------------------------------------------------
$ 3,715 TOTAL REAL ESTATE INVESTMENT TRUST CONVERTIBLE 3,394,581
BONDS (COST $2,711,748)
----------------------------------------------------------------------------------------------------------------------
PRINCIPAL WEIGHTED
AMOUNT AVERAGE MATURITY RATINGS
(000) DESCRIPTION (1) COUPON (3) (2) VALUE
----------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS - 25.2% (18.9% OF TOTAL INVESTMENTS) (4)
AEROSPACE & DEFENSE - 1.8%
$ 2,460 Hexcel Corporation, Term Loan B 6.813% 3/01/12 BB- $ 2,467,615
1,817 K&F Industries, Inc., Term Loan C 7.110% 11/18/12 B2 1,820,452
1,613 Vought Aircraft Industries, Inc., Term Loan 8.000% 12/22/11 B+ 1,627,378
364 Vought Aircraft Industries, Inc., Tranche B, 7.329% 12/22/10 B+ 365,682
Letter of Credit
----------------------------------------------------------------------------------------------------------------------
6,254 Total Aerospace & Defense 6,281,127
----------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 1.7%
2,500 Federal-Mogul Corporation, Term Loan A, (5) 7.600% 2/24/04 N/R 2,425,521
1,874 Gen Tek Inc., Term Loan B 7.524% 12/31/10 B2 1,888,409
1,217 Tenneco Automotive Inc., Term Loan B 7.190% 12/12/10 BB- 1,228,429
534 Tenneco Automotive Inc., Term Loan B-1 7.346% 12/12/10 BB- 539,627
----------------------------------------------------------------------------------------------------------------------
6,125 Total Auto Components 6,081,986
----------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 1.1%
1,965 Nortek, Inc., Term Loan B 7.350% 8/27/11 B 1,965,308
987 Stile Acquisition Corp. , Canadien Term Loan 7.111% 4/08/13 B2 978,880
988 Stile Acquisition Corp., Term Loan B 7.111% 4/08/13 B2 980,548
----------------------------------------------------------------------------------------------------------------------
3,940 Total Building Products 3,924,736
----------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.6%
1,980 Rockwood Specialties Group, Inc., Term Loan E 7.126% 7/30/12 B+ 1,986,325
----------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.7%
670 Allied Waste North America, Inc., Letter of Credit 5.750% 3/21/12 B1 668,307
1,723 Allied Waste North America, Inc., Term Loan B 6.759% 1/15/12 B1 1,717,958
----------------------------------------------------------------------------------------------------------------------
2,393 Total Commercial Services & Supplies 2,386,265
----------------------------------------------------------------------------------------------------------------------
15
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.4%
$ 2,955 Graham Packaging Company, L.P., Term Loan B 7.215% 10/07/11 B $ 2,963,126
175 Smurfit-Stone Container Corporation, 7.584% 11/01/11 B+ 175,570
Deposit-Funded Commitment
1,250 Smurfit-Stone Container Corporation, Term Loan B 7.984% 11/01/11 B+ 1,256,713
424 Smurfit-Stone Container Corporation, Term Loan C 7.459% 11/01/11 B+ 426,332
133 Smurfit-Stone Container Corporation, Tranche C-1 7.375% 11/01/11 B+ 133,782
-------------------------------------------------------------------------------------------------------------------------------
4,937 Total Containers & Packaging 4,955,523
-------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.8%
1,000 Cebridge III LLC., Term Loan B 7.379% 11/05/13 B+ 995,536
1,970 Intelsat, Ltd., Term Loan B 8.750% 7/06/11 B 1,974,104
-------------------------------------------------------------------------------------------------------------------------------
2,970 Total Diversified Telecommunication Services 2,969,640
-------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.6%
1,990 Mirant Corporation, Term Loan 7.100% 1/03/13 BB- 1,988,756
-------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.5%
1,583 Sensus Metering Systems Inc., Term Loan B-1 6.929% 12/17/10 B2 1,585,576
210 Sensus Metering Systems Inc., Term Loan B-2 7.351% 12/17/10 B2 210,612
-------------------------------------------------------------------------------------------------------------------------------
1,793 Total Electrical Equipment 1,796,188
-------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.3%
1,000 Sensata Technologies B.V., Term Loan 6.860% 4/27/13 B1 995,179
-------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS -- 0.8%
2,926 Michael Foods, Inc., Term Loan B 7.514% 11/20/10 B+ 2,939,775
-------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2%
668 Kinteic Concepts, Inc., Term Loan B-2 7.250% 8/11/10 Ba3 673,095
-------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES -- 1.7%
1,805 Davita Inc., Term Loan B 7.153% 10/05/12 B1 1,810,624
2,085 LifePoint Hospitals Holdings, Inc., Term Loan B 7.125% 4/15/12 Ba3 2,084,577
1,995 Quintiles Transnational Corporation, Term Loan B 7.500% 3/31/13 B1 1,996,559
-------------------------------------------------------------------------------------------------------------------------------
5,885 Total Health Care Providers & Services 5,891,760
-------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 3.0%
1,995 24 Hour Fitness Worldwide, Inc., Term Loan B 7.809% 6/08/12 B 2,010,586
2,582 Burger King Corporation, Term Loan B 7.000% 6/30/12 B+ 2,580,903
122 Cracker Barrel Delayed Draw Term Loan B-2, (6) (7) 0.750% 4/28/13 BB (229)
878 Cracker Barrel Term Loan B-1 6.630% 4/28/18 BB 876,724
1,985 Penn National Gaming, Inc., Term Loan B 6.911% 10/03/12 BB 1,993,271
3,000 Venetian Casino Resort, LLC, Term Loan 7.250% 6/15/11 BB- 3,007,032
-------------------------------------------------------------------------------------------------------------------------------
10,562 Total Hotels, Restaurants & Leisure 10,468,287
-------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.3%
1,180 Conseco, Inc., Term Loan 6.958% 6/22/10 BB- 1,182,451
-------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.1%
1,730 Fidelity National Information Services, Term Loan 6.920% 3/09/13 BB+ 1,731,149
B
1,980 SunGard Data Systems Inc., Term Loan B 7.660% 2/11/13 B+ 1,989,075
-------------------------------------------------------------------------------------------------------------------------------
3,710 Total IT Services 3,720,224
-------------------------------------------------------------------------------------------------------------------------------
MEDIA - 4.8%
1,995 Cablevision Systems Corporation, Incremental Term 6.886% 3/24/13 Ba3 1,987,311
Loan
2,000 Charter Communications Operating, LLC, Term Loan B 7.755% 4/28/13 B 2,006,324
1,371 Dex Media West, LLC, Term Loan B 6.771% 3/09/10 BB 1,366,899
798 Emmis Operating Company, Term Loan 7.047% 11/10/11 B+ 800,910
1,995 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 7.749% 4/08/12 B+ 2,007,016
1,722 R. H. Donnelley Inc., Tranche D 6.840% 6/30/11 Ba3 1,715,899
1,980 Rainbow Media Holdings LLC, Term Loan 10.000% 3/31/12 Ba3 1,997,820
1,896 Regal Cinemas Corporation, Term Loan 7.238% 11/10/10 BB- 1,896,330
1,000 UPC Broadband Holding BV, Term Loan J2 7.108% 3/29/13 B 999,822
1,000 UPC Broadband Holding BV, Term Loan K2 7.108% 12/31/13 B 999,822
1,951 WMG Acquisition Corp., Term Loan 7.222% 2/28/11 B+ 1,957,991
-------------------------------------------------------------------------------------------------------------------------------
17,708 Total Media 17,736,144
-------------------------------------------------------------------------------------------------------------------------------
16
WEIGHTED
PRINCIPAL AVERAGE
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY (3) RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.3%
$ 683 Amsted Industries Incorporated, Delayed Draw Term 2.000% 4/05/11 B1 $ (5,126)
Loan, (6) (7)
951 Amsted Industries Incorporated, Term Loan B 7.069% 4/05/13 B1 957,965
-------------------------------------------------------------------------------------------------------------------------------
1,634 Total Metals & Mining 952,839
-------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL - 0.3%
949 Neiman Marcus Group Inc., Term Loan 7.770% 3/28/13 B+ 956,953
-------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES - 0.6%
371 NRG Energy Inc., Credit-Linked Deposit 7.499% 2/01/13 BB- 372,081
1,625 NRG Energy Inc., Term Loan 7.231% 2/01/13 BB- 1,628,202
-------------------------------------------------------------------------------------------------------------------------------
1,996 Total Multi-Utilities 2,000,283
-------------------------------------------------------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS - 0.6%
387 Targa Resources Inc., Synthetic Letter of Credit 7.624% 10/31/12 B+ 388,185
1,601 Targa Resources Inc., Term Loan B 7.330% 10/31/12 B+ 1,605,309
-------------------------------------------------------------------------------------------------------------------------------
1,988 Total Oil, Gas & Consumable Fuels 1,993,494
-------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.6%
1,990 Georgia-Pacific Corporation, Term Loan B 7.340% 12/20/12 BB- 1,988,446
-------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.8%
1,500 LNR Property Corporation, Term Loan B, WI/DD TBD TBD B2 1,506,563
1,438 LNR Property Corporation, Term Loan 8.132% 2/03/08 B2 1,440,208
-------------------------------------------------------------------------------------------------------------------------------
2,938 Total Real Estate Management & Development 2,946,771
-------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 0.3%
111 Hertz Corporation, Synthetic Term Loan 5.424% 12/21/12 BB+ 111,554
92 Hertz Corporation, Delayed Draw Term Loan (6) 2.250% 12/21/12 BB+ 347
793 Hertz Corporation, Term Loan 7.338% 12/21/12 BB+ 795,788
-------------------------------------------------------------------------------------------------------------------------------
996 Total Road & Rail 907,689
-------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.3%
196 Brenntag Holdings, Acquisition Facility Term Loan 7.440% 1/20/14 B2 198,327
804 Brenntag Holdings, Term Loan 7.440% 1/20/14 B- 810,467
-------------------------------------------------------------------------------------------------------------------------------
1,000 Total Trading Companies & Distributors 1,008,794
-------------------------------------------------------------------------------------------------------------------------------
$ 89,512 TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (COST 88,732,730
$88,569,034)
-------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SOVEREIGN DEBT AND FOREIGN CORPORATE BONDS - 27.7% (20.8% OF TOTAL INVESTMENTS)
ARGENTINA - 2.2%
$ 885 Argentine Beverages Financial Trust, 144A 7.375% 3/22/12 N/R $ 854,025
71 Banco de Galicia y Buenos Aires SA, Reg S 8.190% 1/01/10 N/R 70,181
4,305 Republic of Argentina 4.889% 8/03/12 B 3,581,760
7,350 Republic of Argentina 1.330% 12/31/38 B 2,682,750
545 Transportadora de Gas del Sur SA, Series B-A, Reg 7.500% 12/15/13 CCC+ 520,475
S
-------------------------------------------------------------------------------------------------------------------------------
13,156 Total Argentina 7,709,191
-------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 1.3%
550 Banco Votorantim SA, 144A 6.875% 10/14/15 BB 543,125
405 Centrais Eletricas Brasileiras S.A., 144A 7.750% 11/30/15 BB 397,913
400 Cia Brasileira de Bebidas 10.500% 12/15/11 BBB 467,000
1,075 Federative Republic of Brazil 8.000% 1/15/18 BB 1,136,813
1,110 Federative Republic of Brazil 8.250% 1/20/34 BB 1,168,275
425 Vale Overseas Limited 6.250% 1/11/16 BBB+ 406,938
390 Vale Overseas Limited 8.250% 1/17/34 BBB+ 422,663
-------------------------------------------------------------------------------------------------------------------------------
4,355 Total Brazil 4,542,727
-------------------------------------------------------------------------------------------------------------------------------
BULGARIA - 0.4%
1,100 Republic of Bulgaria, Reg S 8.250% 1/15/15 BBB 1,247,290
-------------------------------------------------------------------------------------------------------------------------------
CHILE - 1.3%
600 Coldelco Inc., Reg S 6.375% 11/30/12 A2 612,300
450 Corporacion Nacional del Cobre de Chile, Reg S 5.625% 9/21/35 Aa3 404,225
1,100 Corporacion Nacional del Cobre 4.750% 10/15/14 Aa3 1,007,273
430 Corporacion Nacional del Cobre, 144A 5.500% 10/15/13 Aa3 416,228
1,100 Empresa Nacional del Petroleo, 144A 4.875% 3/15/14 A 1,007,447
17
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
--------------------------------------------------------------------------------------------------------------------------
CHILE (continued)
$ 550 Enersis SA 7.375% 1/15/14 BBB- $ 557,759
550 Republic of Chile 6.875% 4/28/09 A 565,895
--------------------------------------------------------------------------------------------------------------------------
4,780 Total Chile 4,571,127
--------------------------------------------------------------------------------------------------------------------------
CHINA - 0.2%
610 China Development Bank 5.000% 10/15/15 A2 570,371
--------------------------------------------------------------------------------------------------------------------------
COLOMBIA - 0.8%
950 Republic of Colombia 10.500% 7/09/10 BB 1,073,500
1,255 Republic of Colombia 10.000% 1/23/12 BB 1,424,425
350 Republic of Colombia 11.750% 2/25/20 BB 462,000
--------------------------------------------------------------------------------------------------------------------------
2,555 Total Colombia 2,959,925
--------------------------------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC - 0.7%
2,485 Dominican Republic, Reg S 4.520% 1/23/18 B 2,609,259
--------------------------------------------------------------------------------------------------------------------------
ECUADOR - 1.0%
1,125 Republic of Ecuador, 144A 9.375% 12/15/15 CCC+ 1,119,375
2,375 Republic of Ecuador, Reg S 9.000% 8/15/30 CCC+ 2,291,875
--------------------------------------------------------------------------------------------------------------------------
3,500 Total Ecuador 3,411,250
--------------------------------------------------------------------------------------------------------------------------
EL SALVADOR - 1.0%
1,275 Republic of El Salvador, 144A 7.650% 6/15/35 Baa3 1,230,375
285 Republic of El Salvador, Reg S 7.650% 6/15/35 Baa3 276,450
750 Republic of El Salvador, Reg S 8.500% 7/25/11 Baa3 810,000
1,080 Republic of El Salvador, Reg S 7.750% 1/24/23 Baa3 1,139,400
--------------------------------------------------------------------------------------------------------------------------
3,390 Total El Salvador 3,456,225
--------------------------------------------------------------------------------------------------------------------------
HONG KONG - 0.2%
890 HKSAR Government, 144A 5.125% 8/01/14 AA- 852,289
--------------------------------------------------------------------------------------------------------------------------
INDONESIA - 0.4%
390 Adaro Finance B.V., 144A 8.500% 12/08/10 Ba3 388,050
315 Excelcomindo Finance Company B.V., 144A 7.125% 1/18/13 BB- 301,219
705 Republic of Indonesia, 144A 7.250% 4/20/15 B+ 710,288
--------------------------------------------------------------------------------------------------------------------------
1,410 Total Indonesia 1,399,557
--------------------------------------------------------------------------------------------------------------------------
KAZAKHSTAN - 0.4%
1,040 Intergas Finance B.V. 6.875% 11/04/11 Baa2 1,021,477
212 Kazkommerts International BV, 144A 8.000% 11/03/15 Baa2 206,700
300 Tengizchevroil Finance Company, 144A 6.124% 11/15/14 BBB- 291,375
--------------------------------------------------------------------------------------------------------------------------
1,552 Total Kazakhstan 1,519,552
--------------------------------------------------------------------------------------------------------------------------
MALAYSIA - 1.5%
1,100 Malaysia 8.750% 6/01/09 A- 1,183,538
1,000 Malaysia 7.500% 7/15/11 A- 1,066,898
1,025 Penerbangan Malaysia Berhad 5.625% 3/15/16 A- 979,718
1,125 Petronas Capital Limited, Reg S 7.000% 5/22/12 A1 1,179,791
200 Petronas Capital Limited, Reg S 7.875% 5/22/22 A- 229,641
550 Sarawak International Inc. 5.500% 8/03/15 A- 509,162
--------------------------------------------------------------------------------------------------------------------------
5,000 Total Malaysia 5,148,748
--------------------------------------------------------------------------------------------------------------------------
MEXICO - 1.5%
895 Conproca SA, Reg S 12.000% 12/16/10 BBB- 1,035,963
1,200 Pemex Project Funding Master Trust 8.500% 2/15/08 Baa1 1,249,500
590 Pemex Project Funding Master Trust 9.375% 12/02/08 Baa1 634,250
1,395 Pemex Project Funding Master Trust, 5.750% 12/15/15 Baa1 1,286,539
405 Pemex Project Funding Master Trust, 144A 5.750% 12/15/15 Baa1 373,511
275 Petroleos Mexicanos 8.850% 9/15/07 Baa1 284,350
446 United Mexican States 7.500% 1/14/12 Baa1 473,875
--------------------------------------------------------------------------------------------------------------------------
5,206 Total Mexico 5,337,988
--------------------------------------------------------------------------------------------------------------------------
PANAMA - 1.2%
990 Republic of Panama 9.625% 2/08/11 Ba1 1,103,850
585 Republic of Panama 9.375% 4/01/29 Ba1 693,225
2,114 Republic of Panama 6.700% 1/26/36 Ba1 1,944,880
575 Republic of Panama 7.125% 1/29/26 Ba1 557,750
--------------------------------------------------------------------------------------------------------------------------
4,264 Total Panama 4,299,705
--------------------------------------------------------------------------------------------------------------------------
18
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
PERU - 1.7%
$ 1,825 Republic of Peru 9.125% 2/21/12 BB $ 2,025,750
600 Republic of Peru 9.875% 2/06/15 BB 705,000
582 Republic of Peru 5.000% 3/07/17 BB 557,265
1,126 Republic of Peru 5.000% 3/07/17 BB 1,083,534
575 Republic of Peru 7.350% 7/21/25 BB 554,875
1,100 Republic of Peru 8.750% 11/21/33 BB 1,229,250
-------------------------------------------------------------------------------------------------------------------------------
5,808 Total Peru 6,155,674
-------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES - 0.7%
255 Bangko Sentral Pilipinas, Series A 8.600% 6/15/27 BB- 269,981
750 National Power Corporation, 144A 9.444% 8/23/11 BB- 812,903
1,275 Republic of the Philippines 9.375% 1/18/17 BB- 1,421,625
-------------------------------------------------------------------------------------------------------------------------------
2,280 Total Philippines 2,504,509
-------------------------------------------------------------------------------------------------------------------------------
QATAR - 0.6%
329 Ras Laffan Liquefied Natural Gas Company, 144A 3.437% 9/15/09 A- 316,065
689 Ras Laffan Liquified Natural Gas Company, Reg S 3.437% 9/15/09 A- 662,375
575 Ras Laffan Liquified Natural Gas Company II, Reg S 5.298% 9/30/20 A1 535,605
550 State of Qatar, Reg S 9.750% 6/15/30 A+ 770,550
-------------------------------------------------------------------------------------------------------------------------------
2,143 Total Qatar 2,284,595
-------------------------------------------------------------------------------------------------------------------------------
RUSSIAN FEDERATION - 2.9%
500 Aries Vermogensverwaltung GmbH, Russian Federation 9.600% 10/25/14 BBB- 622,020
Sovereign Collateralized Debt Obligation, Reg S
805 GazStream SA, 144A 5.625% 7/22/13 Baa1 786,824
2,675 Russia Federation, Reg S 5.000% 3/31/30 BBB 2,853,051
2,050 Russia Ministry of Finance 3.000% 5/14/08 BBB 1,939,505
505 Russian Agricultural Bank 7.175% 5/16/13 A3 501,844
750 Russian Federation, Reg S 11.000% 7/24/18 BBB 1,037,756
400 Russian Ministry of Finance 12.750% 6/24/28 BB+ 676,512
550 Saving Bank of the Russian Federation, 6.230% 2/11/15 Baa2 539,990
Participations
1,000 VTB Capital SA, Series 144A 7.500% 10/12/11 A2 1,028,750
-------------------------------------------------------------------------------------------------------------------------------
9,235 Total Russian Federation 9,986,252
-------------------------------------------------------------------------------------------------------------------------------
SERBIA - 0.6%
2,500 Republic of Serbia, 144A 3.750% 11/01/24 BB- 2,087,500
-------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA - 1.0%
3,255 Republic of South Africa 9.125% 5/19/09 BBB+ 3,499,125
-------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 0.5%
2,020 Korea Development Bank 4.625% 9/16/10 A 1,928,969
-------------------------------------------------------------------------------------------------------------------------------
THAILAND - 0.1%
250 Bangkok Bank Public Company Limited, Reg S 9.025% 3/15/29 Baa2 287,583
-------------------------------------------------------------------------------------------------------------------------------
TRINIDAD AND TOBAGO - 0.6%
300 First Citizens Saint Lucia, Reg S 5.125% 2/14/11 A2 288,651
180 National Gas Company of Trinidad and Tobago 6.050% 1/15/36 A3 166,239
480 Republic of Trinidad and Tobago, Reg S 9.750% 7/01/20 A- 1,589,843
-------------------------------------------------------------------------------------------------------------------------------
960 Total Trinidad and Tobago 2,044,733
-------------------------------------------------------------------------------------------------------------------------------
TUNISIA - 0.6%
2,065 Banque Cent de Tunisie 7.375% 4/25/12 BBB 2,157,925
-------------------------------------------------------------------------------------------------------------------------------
TURKEY - 0.1%
350 Republic of Turkey 11.750% 6/15/10 BB- 395,500
-------------------------------------------------------------------------------------------------------------------------------
UKRAINE - 0.8%
775 Republic of Ukraine, Reg S 6.875% 3/04/11 BB- 759,500
1,775 Republic of Ukraine 7.650% 6/11/13 BB- 1,788,313
429 Ukraine Government, Reg S 7.650% 3/15/07 B1 438,404
-------------------------------------------------------------------------------------------------------------------------------
2,979 Total Ukraine 2,986,217
-------------------------------------------------------------------------------------------------------------------------------
URUGUAY - 1.2%
2,150 Republic of Uruguay 7.250% 2/15/11 B 2,155,375
790 Republic of Uruguay 7.500% 3/15/15 B 764,325
1,300 Republic of Uruguay 8.000% 11/18/22 B 1,251,250
-------------------------------------------------------------------------------------------------------------------------------
4,240 Total Uruguay 4,170,950
-------------------------------------------------------------------------------------------------------------------------------
19
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS June 30, 2006 (Unaudited)
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
VENEZUELA - 1.5%
$ 505 Petrozuata Finance Inc., Reg S 8.220% 4/01/17 Ba3 $ 475,963
1,935 Republic of Venezuela 5.375% 8/07/10 B+ 1,833,413
500 Republic of Venezuela 6.090% 4/20/11 BB- 495,875
125 Republic of Venezuela 8.500% 10/08/14 BB- 132,500
2,415 Republic of Venezuela 5.750% 2/26/16 BB- 2,143,313
-------------------------------------------------------------------------------------------------------------------------------
5,480 Total Venezuela 5,081,064
-------------------------------------------------------------------------------------------------------------------------------
VIETNAM - 0.7%
2,470 Socialist Republic of Vietnam 5.875% 3/14/16 BB- 2,411,704
-------------------------------------------------------------------------------------------------------------------------------
$ 100,288 TOTAL EMERGING MARKETS SOVEREIGN DEBT AND FOREIGN CORPORATE 97,617,504
BONDS (COST $97,917,478)
-------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY RATINGS (2) VALUE
-------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 2.5% (1.8% OF TOTAL INVESTMENTS)
HOTELS, RESTAURANTS & LEISURE - 1.2%
$ 2,000 Aztar Corporation 9.000% 8/15/11 Ba3 $ 2,105,000
2,000 MGM Mirage, Inc. 6.750% 8/01/07 BB 2,017,500
-------------------------------------------------------------------------------------------------------------------------------
4,000 Total Hotels, Restaurants & Leisure 4,122,500
-------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.2%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 BBB- 2,034,036
2,000 KB Home 8.625% 12/15/08 Ba2 2,082,504
-------------------------------------------------------------------------------------------------------------------------------
4,000 Total Household Durables 4,116,540
-------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.1%
395 Cospipa Commercial Limited, 144A 8.250% 6/14/16 Baa2 397,963
-------------------------------------------------------------------------------------------------------------------------------
$ 8,395 TOTAL CORPORATE BONDS (COST $8,763,553) 8,637,003
-------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (000) DESCRIPTION (1) COUPON MATURITY VALUE
-------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 3.0% (2.3% OF TOTAL INVESTMENTS)
$ 10,603 Repurchase Agreement with State Street Bank, dated
6/30/06, repurchase price $10,606,321,
collateralized by $10,870,000 U.S. Treasury
Notes, 4.125%, due
8/15/08, value $10,815,650 4.130% 7/03/06 $ 10,602,672
-----------
-------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,602,672) 10,602,672
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $410,548,401) - 133.6% 470,102,078
----------------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.5% 1,706,226
----------------------------------------------------------------------------------------------------------------
FUNDPREFERRED SHARES, AT LIQUIDATION (120,000,000)
VALUE - (34.1)%
----------------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100% $ 351,808,304
----------------------------------------------------------------------------------------------------------------
20
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable
to Common shares unless otherwise noted.
(2) Ratings: Using the higher of Standard & Poor's or Moody's rating. Ratings below BBB by
Standard & Poor's Group or Baa by Moody's Investor Service, Inc. are considered to be
below investment grade.
(3) Senior Loans generally are subject to mandatory and/or optional prepayment. Because of
these mandatory prepayment conditions and because there may be significant economic
incentives for a Borrower to prepay, prepayments of Senior Loans may occur. As a result,
the actual remaining maturity of Senior Loans held may be substantially less than the
stated maturities shown.
(4) Senior Loans in which the Fund invests generally pay interest at rates which are
periodically adjusted by reference to a base short-term, floating lending rate plus an
assigned fixed rate. These floating lending rates are generally (i) the lending rate
referenced by the London Inter-Bank Offered Rate ("LIBOR"), or (ii) the prime rate offered
by one or more major United States banks.
Senior Loans may be considered restricted in that the Fund ordinarily is contractually
obligated to receive approval from the Agent Bank and/or Borrower prior to the disposition
of a Senior Loan.
(5) At or subsequent to June 30, 2006, this issue was under the protection of the Federal
Bankruptcy Court.
(6) Position represents an unfunded Senior Loan commitment outstanding at June 30, 2006.
(7) Negative value represents unrealized depreciation on Senior Loan commitment at June 30,
2006.
N/R Not rated.
WI/DD Purchased on a when-issued or delayed delivery basis.
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 United States 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.
TBD Senior Loan purchased on a when-issued or delayed-delivery basis. Certain details
associated with this purchase are not known prior to the settlement date of the
transaction. In addition, Senior Loans typically trade without accrued interest and
therefore a weighted average coupon rate is not available prior to settlement. At
settlement, if still unknown, the borrower or counterparty will provide the Fund with the
final weighted average coupon rate and maturity date.
See accompanying notes to financial statements.
21
Statement of
ASSETS AND LIABILITIES June 30, 2006 (Unaudited)
---------------------------------------------------------------------------
ASSETS
Investments, at value (cost $410,548,401) $470,102,078
Receivables:
Dividends 1,186,350
Interest 2,720,500
Investments sold 818,005
Reclaims 39,346
Other assets 22,650
---------------------------------------------------------------------------
Total assets 474,888,929
---------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,718,482
Accrued expenses:
Management fees 217,695
Other 102,037
FundPreferred share dividends payable 42,411
---------------------------------------------------------------------------
Total liabilities 3,080,625
---------------------------------------------------------------------------
FundPreferred shares, at liquidation value 120,000,000
---------------------------------------------------------------------------
Net assets applicable to Common shares $351,808,304
---------------------------------------------------------------------------
Common shares outstanding 20,145,123
---------------------------------------------------------------------------
Net asset value per Common share outstanding (net assets
applicable to
Common shares, divided by Common shares outstanding) $ 17.46
---------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
---------------------------------------------------------------------------
Common shares, $.01 par value per share $ 201,451
Paid-in surplus 284,729,686
Undistributed (Over-distribution of) net investment income (6,399,108)
Accumulated net realized gain (loss) from investments 13,722,598
Net unrealized appreciation (depreciation) of investments 59,553,677
---------------------------------------------------------------------------
Net assets applicable to Common shares $351,808,304
---------------------------------------------------------------------------
Authorized shares:
Common Unlimited
FundPreferred Unlimited
---------------------------------------------------------------------------
See accompanying notes to financial statements.
22
Statement of
OPERATIONS Six Months Ended June 30, 2006 (Unaudited)
-----------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $58,637) $ 3,742,734
Interest (net of foreign tax withheld of $17,678) 6,974,708
-----------------------------------------------------------------------------
Total investment income $10,717,442
-----------------------------------------------------------------------------
EXPENSES
Management fees 2,078,727
FundPreferred shares - auction fees 148,768
FundPreferred shares - dividend disbursing agent fees 7,397
Shareholders' servicing agent fees and expenses 1,240
Custodian's fees and expenses 85,486
Trustees' fees and expenses 7,311
Professional fees 13,962
Shareholders' reports - printing and mailing expenses 46,679
Stock exchange listing fees 4,871
Investor relations expense 33,093
Other expenses 13,157
-----------------------------------------------------------------------------
Total expenses before custodian fee credit and expense
reimbursement 2,440,691
Custodian fee credit (1,240)
Expense reimbursement (748,396)
-----------------------------------------------------------------------------
Net expenses 1,691,055
-----------------------------------------------------------------------------
Net investment income 9,026,387
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from investments 13,774,786
Change in net unrealized appreciation (depreciation) of
investments 4,797,831
-----------------------------------------------------------------------------
Net realized and unrealized gain (loss) 18,572,617
-----------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From and in excess of net investment income (2,608,389)
From accumulated net realized gains --
-----------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to FundPreferred shareholders (2,608,389)
-----------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from operations $24,990,615
-----------------------------------------------------------------------------
See accompanying notes to financial statements.
23
Statement of
CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS
ENDED YEAR ENDED
6/30/06 12/31/05
-----------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 9,026,387 $ 16,705,911
Net realized gain (loss) from investments 13,774,786 21,214,600
Change in net unrealized appreciation (depreciation) of
investments 4,797,831 (928,498)
Distributions to Fundpreferred shareholders:
From and in excess of net investment income (2,608,389) --
From net investment income -- (1,861,555)
From accumulated net realized gains -- (1,922,933)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares
from operations 24,990,615 33,207,525
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From and in excess of net investment income (13,295,781) --
From net investment income -- (14,320,955)
From accumulated net realized gains -- (18,211,404)
-----------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (13,295,781) (32,532,359)
-----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares offering cost adjustments -- (4,043)
FundPreferred shares offering costs adjustments -- (4,043)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares from
capital share transactions -- (8,086)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common
shares 11,694,834 667,080
Net assets applicable to Common shares at the beginning of
period 340,113,470 339,446,390
-----------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $351,808,304 $340,113,470
-----------------------------------------------------------------------------------------------
Undistributed (Over-distribution of) net investment income
at the end of period $ (6,399,108) $ 478,675
-----------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
24
Statement of
CASH FLOWS Six Months Ended June 30, 2006 (Unaudited)
-----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHARES FROM OPERATIONS $ 24,990,615
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 (93,542,010)
Proceeds from the sales of investments 101,954,846
Proceeds from (Purchases of) short-term investments, net (3,174,100)
Amortization/(Accretion) of premiums and discounts, net 87,467
(Increase) Decrease in receivable for dividends 96,980
(Increase) Decrease in receivable for interest (14,177)
(Increase) Decrease in receivable for investments sold 232,602
(Increase) Decrease in receivable for reclaims (19,706)
(Increase) Decrease in other assets (11,043)
Increase (Decrease) in payable for investments purchased (211,896)
Increase (Decrease) in accrued management fees (7,806)
Increase (Decrease) in accrued other liabilities (20,325)
Increase (Decrease) in FundPreferred share dividends
payable (9,052)
Net realized (gain) loss from investments (13,774,786)
Net realized (gain) loss from paydowns 72,668
Change in net unrealized (appreciation) depreciation of
investments (4,797,831)
Capital gain and return of capital distributions from
investments 1,895,401
-----------------------------------------------------------------------------
Net cash provided by (used in) operating activities 13,747,847
-----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (13,295,781)
-----------------------------------------------------------------------------
Net cash provided by (used in) financing activities (13,295,781)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 452,066
Cash at the beginning of period (452,066)
-----------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ --
-----------------------------------------------------------------------------
25
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Diversified Dividend and Income Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JDD." The Fund was organized
as a Massachusetts business trust on July 18, 2003.
The Fund seeks to provide high current income and total return by investing
primarily in a portfolio of dividend-paying common stocks, securities issued by
Real Estate Investment Trusts ("REITs"), debt securities and other non-equity
instruments that are issued by, or that are related to, government,
government-related and supernational issuers located, or conducting their
business, in emerging market countries ("emerging markets sovereign debt and
foreign corporate bonds") and senior loans.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities and senior
loans are generally provided by an independent pricing service approved by the
Fund's Board of Trustees and based on the mean between the bid and asked prices.
When price quotes are not readily available, the pricing service or, in the
absence of a pricing service for a particular investment, the Board of Trustees
of the Fund, or its designee, may establish fair market value using a wide
variety of market data including yields or prices of investments of comparable
quality, type of issue, coupon, maturity and rating, market quotes or
indications of value from security dealers, evaluations of anticipated cash
flows or collateral, general market conditions and other information and
analysis, including the obligor's credit characteristics considered relevant by
the pricing service or the Board of Trustee's designee. Short-term investments
are valued at amortized cost, which approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from investment transactions are determined on the
specific identification method. Investments purchased on a when-issued or
delayed delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued/delayed delivery purchase commitments. At June 30, 2006, the Fund
had outstanding when-issued/delayed delivery commitments of $1,500,000.
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis. Interest income also includes paydown gains and
losses on senior loans. Fee income, if any, consists primarily of amendment
fees. Amendment fees are earned as compensation for evaluating and accepting
changes to the original loan agreement and are recognized when received.
Federal Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
26
The Fund makes monthly cash distributions to Common shareholders of a stated
dollar amount per share. Subject to approval and oversight by the Fund's Board
of Trustees, the Fund seeks to maintain a stable distribution level designed to
deliver the long-term return potential of the Fund's investment strategy through
regular monthly distributions (a "Managed Distribution Policy"). Total
distributions during a calendar year generally will be made from the Fund's net
investment income, net realized capital gains and net unrealized capital gains
in the Fund's portfolio, if any. The portion of distributions paid from net
unrealized gains, if any, would be distributed from the Fund's assets and would
be treated by shareholders as a non-taxable distribution for tax purposes. If
the Fund's total return on net asset value exceeds total distributions during a
calendar year, the excess will be reflected as an increase in net asset value
per share. In the event that total distributions during a calendar year exceed
the Fund's total return on net asset value, the difference will be treated as a
return of capital for tax purposes and will reduce net asset value per share.
The final determination of the source and character of all distributions for the
fiscal year are made after the end of the fiscal year and reflected in the
financial statements contained in the annual report as of December 31 each year.
Real estate investment trust ("REIT") distributions received by the Fund are
generally comprised of ordinary income, long-term and short-term capital gains,
and a return of REIT capital. The actual character of amounts received during
the period are not known until after the fiscal year-end. For the fiscal year
ended December 31, 2005, the character of distributions to the Fund from the
REITs was 46.22% ordinary income, 37.32% long-term and short-term capital gains,
and 16.46% return of REIT capital.
For the fiscal year ended December 31, 2005, the Fund applied the actual
character of distributions reported by the REITs in which the Fund invests to
its receipts from the REITS. If a REIT held in the portfolio of investments did
not report the actual character of its distributions during the period, the Fund
treated the distributions as ordinary income.
For the six months ended June 30, 2006, the Fund applied the actual percentages
for the twelve months ended December 31, 2005, described above, to its receipts
from the REITs and treated as income in the Statement of Operations only the
amount of ordinary income so calculated. The Fund adjusts that estimated
breakdown of income type (and consequently its net investment income) as
necessary early in the following calendar year when the REITs inform their
shareholders of the actual breakdown of income type.
The actual character of distributions made by the Fund during the fiscal year
ended December 31, 2005, are reflected in the accompanying financial statements.
The distributions made by the Fund to its shareholders during the six months
ended June 30, 2006, are provisionally classified as being "From and in excess
of net investment income", and those distributions will be classified as being
from net investment income, net realized capital gains and/or a return of
capital for tax purposes after the fiscal year end, based upon the income type
breakdown information conveyed at the time by the REITs whose securities are
held in the Fund's portfolio. For purposes of calculating "Undistributed
(Over-distribution of) net investment income as of June 30, 2006, the
distribution amounts provisionally classified as "From and in excess of net
investment income" were treated as being entirely from net investment income.
Consequently, the financial statements at June 30, 2006, reflect an
over-distribution of net investment income.
FundPreferred Shares
The Fund has issued and outstanding 2,400 Series T and 2,400 Series W
FundPreferred shares, $25,000 stated value per share, as a means of effecting
financial leverage. The dividend rate paid by the Fund on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable at the end of each rate period.
Derivative Financial Instruments
The Fund is authorized to invest in derivatives or other transactions for the
purpose of hedging the portfolio's exposure to common stock risk, high yield
credit risk, foreign currency exchange risk and the risk of increases in
interest rates. Although the Fund is authorized to invest in such financial
instruments, and may do so in the future, it did not invest in any such
instruments during the six months ended June 30, 2006.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
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.
27
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the six months
ended June 30, 2006, nor during the fiscal year ended December 31, 2005.
3. INVESTMENT TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments)
during the six months ended June 30, 2006, aggregated $93,542,010 and
$101,954,846, respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization, recognition of income on REIT investments, and timing
differences in recognizing certain gains and losses on investment transactions.
At June 30, 2006, the cost of investments was $411,945,288.
Gross unrealized appreciation and gross unrealized depreciation of investments
at June 30, 2006, were as follows:
----------------------------------------------------------------------------
Gross unrealized:
Appreciation $66,275,578
Depreciation (8,118,788)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments $58,156,790
----------------------------------------------------------------------------
The tax components of undistributed net ordinary income and net long-term
capital gains at December 31, 2005, the Fund's last tax year end, were as
follows:
----------------------------------------------------------------------------
Undistributed net ordinary income * $1,742,465
Undistributed net long-term capital gains --
----------------------------------------------------------------------------
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The tax character of distributions paid during the Fund's last tax year ended,
December 31, 2005, was designated for purposes of the dividends paid deduction
as follows:
----------------------------------------------------------------------------
Distributions from net ordinary income * $20,166,376
Distributions from net long-term capital gains * 16,120,736
----------------------------------------------------------------------------
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all funds assets managed by Nuveen
Asset Management (the "Adviser"), a wholly owned subsidiary of Nuveen
Investments, Inc. ("Nuveen"), and a specific fund-level component, based only on
the amount of assets within the Fund. This pricing structure enables Nuveen fund
shareholders to benefit from growth in the assets within each individual fund as
well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is based upon the average daily
Managed Assets of the Fund as follows:
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
------------------------------------------------------------------------
28
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as stated in the table below. As
of June 30, 2006, the complex-level fee rate was .1887%.
COMPLEX-LEVEL ASSETS (1) COMPLEX-LEVEL FEE RATE
---------------------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
---------------------------------------------------------------------------------------------
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in
the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level fee
rate for such complex-wide Managed Assets shall be .1400% until such time as
a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with NWQ Investment Management Company, LLC
("NWQ"), Security Capital Research & Management Incorporated ("Security
Capital"), Symphony Asset Management, LLC ("Symphony") and Wellington Management
Company, LLP ("Wellington"). Nuveen owns a controlling interest in NWQ while key
management of NWQ owns a non-controlling minority interest. Symphony is an
indirect wholly owned subsidiary of Nuveen. NWQ manages the portion of the
Fund's investment portfolio allocated to dividend-paying common stocks including
American Depositary Receipts ("ADRs"). Security Capital manages the portion of
the Fund's investment portfolio allocated to securities issued by real estate
companies including REITs. Symphony manages the portion of the Fund's investment
portfolio allocated to senior loans. Wellington manages the portion of the
Fund's investment portfolio allocated to emerging markets sovereign debt and
foreign corporate bonds. NWQ, Security Capital, Symphony and Wellington are
compensated for their services to the Fund from the management fee paid to the
Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its Officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------------------------------------
2003 * .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
-------------------------------------------------------------------------------------
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond September 30, 2011.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At June 30, 2006, the Fund had unfunded senior loan commitments of
$898,075.
29
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At June 30, 2006, there were
no such outstanding participation commitments.
8. NEW ACCOUNTING PRONOUNCEMENT
Financial Accounting Standards Board Interpretation No. 48
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact in the financial statements
has not yet been determined. At this time, management is evaluating the
implications of FIN 48 and does not expect the adoption of FIN 48 will have a
significant impact on the net assets or results of operations of the Funds.
9. SUBSEQUENT EVENTS
Distributions to Common Shareholders.
The Fund declared a distribution of $.1100 per Common share which was paid on
August 1, 2006, to shareholders of record on July 15, 2006.
Borrowings
On August 15, 2006, the Fund entered into a commercial paper program ($45
million maximum) with Citibank's N.A.'s conduit financing agency, CHARTA, LLC
("CHARTA"), whose sole purpose is the issuance of high grade commercial paper.
CHARTA uses the proceeds to make advances to the Fund and to many other
borrowers who comprise CHARTA's total borrowing base. As of August 15, 2006, the
Fund had borrowed the full $45 million maximum allowed under the commercial
paper program.
30
Financial
HIGHLIGHTS
31
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations
----------------------------------------------------------------
Distributions
from Net Distributions
Beginning Investment from Capital
Common Net Income to Gains to
Share Net Realized/ FundPreferred FundPreferred
Net Asset Investment Unrealized Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total
----------------------------------------------------------------------------------------------------
Period Ended 12/31:
2006(c) $ 16.88 $ .45 $ .92 $ (.13)* $ -- $1.24
2005 16.85 .83 1.00 (.09) (.10) 1.64
2004 15.13 .81 2.23 (.06) (.03) 2.95
2003(b) 14.33 .18 1.01 (.01) -- 1.18
----------------------------------------------------------------------------------------------------
Less Distributions
----------------------------------------
Net Offering
Investment Capital Costs and Ending
Income to Gains to Tax FundPreferred Common
Common Common Return Share Share
Share- Share- of Underwriting Net Asset
holders holders Capital Total Discounts Value
--------------------- --------------------------------------------------------------------
Period Ended 12/31:
2006(c) $ (.66)* $ -- $ -- $ (.66) $ -- $ 17.46
2005 (.71) (.90) -- (1.61) -- 16.88
2004 (.81) (.41) (.01) (1.23) -- 16.85
2003(b) (.18) (.02) (.01) (.21) (.17) 15.13
---------------------
* Represents distributions paid "From and in excess of net investment income"
for the six months ended June 30, 2006.
** Annualized.
*** Total Return on Market Value is the combination of changes in the market
price per share and the effect of reinvested dividend income and reinvested
capital gains distributions, if any, at the average price paid per share at
the time of reinvestment. Total Return on Common Share Net Asset Value is
the combination of changes in Common share net asset value, reinvested
dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
**** After custodian fee credit and expense reimbursement.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares.
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period September 25, 2003 (commencement of operations) through
December 31, 2003.
(c) For the six months ended June 30, 2006.
32
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Total Returns Before Credit/Reimbursement After Credit/Reimbursement****
------------------- ---------------------------- ------------------------------
Ratio of Net Ratio of Net
Based Ratio of Investment Ratio of Investment
on Expenses Income to Expenses Income to
Common Ending Net to Average Average to Average Average
Based Share Assets Net Assets Net Assets Net Assets Net Assets
Ending on Net Applicable Applicable Applicable Applicable Applicable Portfolio
Market Market Asset to Common to Common to Common to Common to Common Turnover
Value Value*** Value*** Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
----------------------------------------------------------------------------------------------------------------------------
$16.89 7.40% 7.38% $ 351,808 1.40%** 4.74%** .97%** 5.17%** 20%
16.35 16.36 10.21 340,113 1.42 4.53 .99 4.96 49
15.57 8.04 20.44 339,446 1.50 4.74 1.06 5.19 46
15.65 5.76 7.04 304,387 1.26** 4.51** .87** 4.89** 28
----------------------------------------------------------------------------------------------------------------------------
FundPreferred Shares at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Per Coverage
(000) Share Per Share
--- ---------------------------------------
$ 120,000 $ 25,000 $ 98,293
120,000 25,000 95,857
120,000 25,000 95,718
120,000 25,000 88,414
---
See accompanying notes to financial statements.
33
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
The Board of Trustees is responsible for overseeing the performance of the
investment adviser to the Fund and determining whether to continue the advisory
arrangements. At a meeting held on May 23-25, 2006 (the "May Meeting"), the
Board of Trustees of the Fund, including the independent Trustees, unanimously
approved the continuance of the Investment Management Agreement between the Fund
and NAM and the Sub-Advisory Agreements between NAM and NWQ, Security Capital,
Symphony and Wellington, respectively (each, a "Sub-Adviser"). NAM and the
Sub-Advisers are each a "Fund Adviser."
THE APPROVAL PROCESS
During the course of the year, the Board received a wide variety of materials
relating to the services provided by the Fund Advisers and the performance of
the Fund. To assist the Board in its evaluation of the advisory contract with a
Fund Adviser at the May Meeting, the independent Trustees received extensive
materials in advance of their meeting which outlined, among other things:
- the nature, extent and quality of services provided by the Fund Adviser;
- the organization and business operations of the Fund Adviser, including
the responsibilities of various departments and key personnel;
- the Fund's past performance, the Fund's performance compared to funds of
similar investment objectives compiled by an independent third party and
with recognized and/or customized benchmarks (as appropriate);
- the profitability of the Fund Adviser and certain industry profitability
analyses for unaffiliated advisers;
- the expenses of the Fund Adviser in providing the various services;
- the advisory fees (gross and net management fees) and total expense ratios
of the Fund, including comparisons of such fees and expenses with those of
comparable, unaffiliated funds based on information and data provided by
Lipper (the "Peer Universe") as well as compared to a subset of funds
within the Peer Universe (the "Peer Group") to the Fund (as applicable);
- the advisory fees the Fund Adviser assesses to other types of investment
products or clients;
- the soft dollar practices of the Fund Adviser, if any; and
- from independent legal counsel, a legal memorandum describing, among other
things, the duties of the Trustees under the Investment Company Act of
1940 (the "1940 Act") as well as the general principles of relevant state
law in reviewing and approving advisory contracts; the requirements of the
1940 Act in such matters; an adviser's fiduciary duty with respect to
advisory agreements and compensation; the standards used by courts in
determining whether investment company boards of directors have fulfilled
their duties and factors to be considered by the board in voting on
advisory agreements.
At the May Meeting, NAM made a presentation to and responded to questions from
the Board. After the presentations and after reviewing the written materials,
the independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contracts. It is with this background that the Trustees considered each
advisory contract (which includes the Sub-Advisory Agreements) with the
respective Fund Adviser. The independent Trustees, in consultation with
independent counsel, reviewed the factors set out in judicial decisions and SEC
directives relating to the renewal of advisory contracts. As outlined in more
detail below, the Trustees considered all factors they believed relevant with
respect to the Fund, including the following: (a) the nature, extent and quality
of the services to be provided by the Fund Adviser; (b) the investment
performance of the Fund and the Fund Adviser; (c) the costs of the services to
be provided and profitability of the Fund Adviser and its affiliates; (d) the
extent to which economies of scale would be realized as the Fund grows; and (e)
whether fee levels reflect these economies of scale for the benefit of Fund
investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In reviewing the Fund Advisers, the Trustees considered the nature, extent and
quality of the respective Fund Adviser's services. The Trustees reviewed
materials outlining, among other things, the Fund Adviser's organization and
business; the types of services that the Fund Adviser or its affiliates provide
and are expected to provide to the Fund; the performance record of the Fund (as
described in further detail below); and any initiatives Nuveen has taken for its
fund product line. In connection with their continued service as Trustees, the
Trustees also have a good understanding of each Fund Adviser's organization,
operations and personnel. In this regard, the Trustees are familiar with and
have evaluated the professional experience, qualifications and credentials of
the Fund Adviser's personnel. With respect to each Sub-Adviser, the Trustees
also received and reviewed an evaluation of the Sub-Adviser from NAM. Such
evaluation outlined, among other things, the Sub-Adviser's organizational
history, client base, product mix, investment team and any changes thereto,
investment process and any changes to its investment strategy, the Fund's
investment objectives and performance (as applicable). The Trustees noted that
NAM recommended the renewal of the Sub-Advisory Agreements and considered the
34
basis for such recommendation and any qualifications in connection therewith.
Given the Trustees' experience with the Fund (including any other Nuveen funds
advised by a Fund Adviser) and each Fund Adviser, the Trustees recognized and
considered the quality of their investment processes in making portfolio
management decisions as well as any refinements or improvements thereto. In this
regard, the Trustees considered the continued quality of the Fund Adviser's
investment process in making portfolio management decisions as well as any
additional refinements and improvements adopted to the portfolio management
processes.
In addition to advisory services, the independent Trustees considered the
quality of any administrative or non-advisory services provided. With respect to
each Sub-Adviser, the independent Trustees noted that the respective
Sub-Advisory Agreement was essentially an agreement for portfolio management
services only and the Sub-Adviser was not expected to supply other significant
administrative services to the Fund.
With respect to NAM, NAM provides the Fund with such administrative and other
services (exclusive of, and in addition to, any such services provided by others
for the Fund) and officers and other personnel as are necessary for the
operations of the Fund. In connection with the review of the Investment
Management Agreement, the Trustees considered the extent and quality of these
other services which include, among other things, providing: product management
(e.g., product positioning, performance benchmarking, risk management); fund
administration (e.g., daily net asset value pricing and reconciliation, tax
reporting, fulfilling regulatory filing requirements); oversight of third party
service providers; administration of board relations (e.g., organizing board
meetings and preparing related materials); compliance (e.g., monitoring
compliance with investment policies and guidelines and regulatory requirements);
and legal support (e.g., helping prepare and file registration statements,
amendments thereto, proxy statements and responding to regulatory requests
and/or inquiries). As the Fund operates in a highly regulated industry and given
the importance of compliance, the Trustees considered, in particular, the
additions of experienced personnel to the compliance teams and the enhancements
to technology and related systems to support the compliance activities for the
Fund (including a new reporting system for quarterly portfolio holdings). In
addition to the above, because the Fund utilizes Sub-Advisers, the Trustees also
considered NAM's ability and procedures to monitor each Sub-Adviser's
performance, business practices and compliance policies and procedures. In this
regard, the Trustees noted the enhancements in the investment oversight process,
including increased site visits and departments participating in investment
oversight.
In addition to the foregoing, the Trustees also noted the additional services
that the Fund Adviser or its affiliates provide to closed-end funds, including,
in particular, secondary market support activities. The Trustees recognized
Nuveen's continued commitment to supporting the secondary market for the common
shares of its closed-end funds through a variety of initiatives designed to
raise investor and analyst awareness and understanding of closed-end funds.
These efforts include providing advertising and other media relations programs,
continued contact with analysts, maintaining and enhancing its website for
closed-end funds, and targeted advisor communication programs. With respect to
Funds that utilize leverage through the issuance of preferred shares, the
Trustees noted Nuveen's continued support for the preferred shares by
maintaining, among other things, an in-house preferred trading desk; designating
a product manager whose responsibilities include creating and disseminating
product information and managing relations in connection with the preferred
share auction; and maintaining systems necessary to test compliance with rating
agency requirements.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
The Board considered the investment performance for the Fund, including the
Fund's historic performance as well as its performance compared to funds with
similar investment objectives identified by an independent third party (the
"Performance Peer Group") and recognized and/or customized benchmarks (as
applicable). In evaluating the performance information, in certain instances,
the Trustees noted that the closest Performance Peer Group for the Fund still
may not adequately reflect the Fund's investment objectives, strategies and
portfolio duration, thereby limiting the usefulness of the comparisons of the
Fund's performance with that of the Performance Peer Group (such as, the Nuveen
Diversified Dividend and Income Fund, Nuveen Preferred and Convertible Income
Fund, Nuveen Preferred and Convertible Income Fund 2, Nuveen Tax-Advantaged
Floating Rate Fund, and the Nuveen Real Estate Income Fund).
In reviewing performance, the Trustees reviewed performance information
including, among other things, total return information compared with the Fund's
Performance Peer Group as well as recognized and/or customized benchmarks (as
appropriate) for the one-, three- and five-year periods (as applicable) ending
December 31, 2005. This information supplements the Fund performance information
provided to the Board at each of their quarterly meetings. Based on their
review, the Trustees determined that the Fund's absolute and relative investment
performance over time had been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses of the Fund, the Board
reviewed, among other things, the Fund's advisory fees (net and gross
management fees) and total expense ratios (before and after expense
reimbursements and/or waivers) in absolute terms as well as comparisons to
the gross management fees (before waivers), net management fees (after
waivers) and total expense ratios (before and after waivers) of comparable
funds in the Peer Universe and the Peer Group. The Trustees reviewed data
regarding the construction of Peer Groups as well as the methods of
measurement for the fee and expense analysis and the performance analysis. In
certain cases, due to the small number of peers in the Peer Universe, the
Peer Universe and the Peer Group may be the same. Further, the Trustees
recognized that in certain cases the closest Peer Universe and/or Peer Group
may not adequately reflect the Fund's investment objectives and strategies
limiting the usefulness of
35
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT APPROVAL PROCESS (continued)
comparisons. In reviewing comparisons, the Trustees also considered the size
of the Peer Universe and/or Peer Group, the composition of the Peer Group
(including differences in the use of leverage) as well as differing levels of
fee waivers and/or expense reimbursements. In this regard, the Trustees
considered the fund-level and complex-wide breakpoint schedules (described in
further detail below) and any fee waivers and reimbursements provided by
Nuveen (applicable, in particular, for certain funds launched since 1999).
Based on their review of the fee and expense information provided, the
Trustees determined that the Fund's net total expense ratio was within an
acceptable range compared to peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further reviewed data comparing the advisory fees of NAM with
fees NAM charges to other clients (such as separate managed accounts and
funds that are not offered by Nuveen Investments but are sub-advised by one
of Nuveen's investment management teams). In general, the advisory fees
charged for separate accounts are somewhat lower than the advisory fees
assessed to the Fund. The Trustees recognized that the differences in fees
are attributable to a variety of factors, including the differences in
services provided, product distribution, portfolio investment policies,
investor profiles, account sizes and regulatory requirements. The Trustees
noted, in particular, that the range of services provided to the Fund is more
extensive than that provided to managed separate accounts. As described in
further detail above, such additional services include, but are not limited
to, providing: product management, fund administration, oversight of third
party service providers, administration of board relations, and legal
support. Funds further operate in a highly regulated industry requiring
extensive compliance functions compared to the other investment products. In
addition to the costs of the additional services, administrative costs may
also be greater for funds as the average account size for separate accounts
is notably larger than the retail accounts of funds. Given the differences in
the product structures, particularly the extensive services provided to
closed-end funds, the Trustees believe such facts justify the different
levels of fees.
In considering the advisory fees of a Sub-Adviser, the Trustees also
considered the pricing schedule that the Sub-Adviser charges for similar
investment management services for other sponsors or clients. With respect to
Symphony, the Trustees reviewed the generally higher fees for hedge funds and
accounts it manages, which include performance fees.
3. PROFITABILITY OF FUND ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of Nuveen Investments for advisory activities (which
incorporated Nuveen's wholly-owned affiliated sub-advisers). The Trustees
reviewed data comparing Nuveen's profitability with other fund sponsors
prepared by three independent third party service providers as well as
comparisons of the revenues, expenses and profits margins of various
unaffiliated management firms with similar amounts of assets under management
prepared by Nuveen. The Trustees further reviewed the 2005 Annual Report for
Nuveen Investments. In considering profitability, the Trustees recognized the
inherent limitations in determining profitability as well as the difficulties
in comparing the profitability of other unaffiliated advisers. Profitability
may be affected by numerous factors, including the methodology for allocating
expenses, the adviser's business mix, the types of funds managed, the
adviser's capital structure and cost of capital. Further, individual fund or
product line profitability of other sponsors is generally not publicly
available. Accordingly, the profitability information that is publicly
available from various investment advisory or management firms may not be
representative of the industry.
Notwithstanding the foregoing, in reviewing profitability, the Trustees reviewed
Nuveen's methodology and assumptions for allocating expenses across product
lines to determine profitability. In this regard, the methods of allocation used
appeared reasonable. The Trustees also, to the extent available, compared
Nuveen's profitability margins (including pre- and post-marketing profit
margins) with the profitability of various unaffiliated management firms. The
Trustees noted that Nuveen's profitability is enhanced due to its efficient
internal business model. The Trustees also recognized that while a number of
factors affect profitability, Nuveen's profitability may change as fee waivers
and/or expense reimbursement commitments of Nuveen to various funds in the
Nuveen complex expire. To keep apprised of profitability and developments that
may affect profitability, the Trustees have requested profitability analysis be
provided periodically during the year. With respect to unaffiliated Sub-Advisers
(i.e., Security Capital and Wellington), the Trustees also considered the
Sub-Adviser's revenues from serving as a Sub-Adviser to the Fund, expenses
(including the basis for allocating expenses) and profitability margins (pre-
and post-tax). Based on their review, the Trustees were satisfied that the
respective Fund Adviser's level of profitability was reasonable in light of the
services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Fund, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the Fund, the Trustees
determined that the advisory fees and expenses of the Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
With respect to economies of scale, the Trustees recognized the potential
benefits resulting from the costs of a fund being spread over a larger asset
base as a fund grows. To help ensure the shareholders share in these benefits,
the Trustees have reviewed and
36
considered the breakpoints in the advisory fee schedules that reduce advisory
fees as the Fund's assets grow. In addition to advisory fee breakpoints as
assets in the Fund rise, after lengthy discussions with management, the Board
also approved a complex-wide fee arrangement that was introduced on August 1,
2004. Pursuant to the complex-wide fee arrangement, the fees of the funds in the
Nuveen complex, including the Fund, are reduced as the assets in the fund
complex reach certain levels. In evaluating the complex-wide fee arrangement,
the Trustees considered, among other things, the historic and expected fee
savings to shareholders as assets grow, the amount of fee reductions at various
asset levels, and that the arrangement would extend to all funds in the Nuveen
complex. The Trustees noted that 2005 was the first full year to reflect the fee
reductions from the complex wide fee arrangement. The Trustees also considered
the impact, if any, the complex-wide fee arrangement may have on the level of
services provided. Based on their review, the Trustees concluded that the
breakpoint schedule and complex-wide fee arrangement currently was acceptable
and desirable in providing benefits from economies of scale to shareholders.
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the Fund Adviser or its affiliates may receive as a result of its
relationship with the Fund. In this regard, the Trustees considered revenues
received by affiliates of the Fund Adviser for serving as agent at Nuveen's
preferred trading desk and for serving as a co-manager in the initial public
offering of new closed-end exchange traded funds.
In addition to the above, the Trustees considered whether the Fund Adviser
received any benefits from soft dollar arrangements. With respect to NAM, the
Trustees noted that NAM does not currently have any soft dollar arrangements and
does not pay excess brokerage commissions (or spreads on principal transactions)
in order to receive research services; however, NAM may from time to time
receive and have access to research generally provided to institutional clients.
The Trustees also considered the soft dollar arrangements, if any, of the
Sub-Advisers. With respect to NWQ, the Trustees noted that such Sub-Adviser has
engaged in soft dollar arrangements. The Trustees recognize NWQ benefits from
its soft dollar arrangements pursuant to which it receives research from brokers
that execute the Fund's portfolio transactions. At the May Meeting and in prior
meetings, the Trustees have received and reviewed materials concerning NWQ's
soft dollar arrangements, including the type of research received. NWQ has
agreed to limit the type of research received with the use of soft dollars to
that with intellectual content. The Trustees note that this Sub-Adviser's
profitability may be lower if it was required to pay for this research with hard
dollars. With respect to Security Capital, such Sub-Adviser does not enter into
soft dollar arrangements; however, such Sub-Advisor may receive or have access
to research generally provided to institutional clients. With respect to
Symphony, such Sub-Adviser currently does not enter into soft dollar
arrangements; however, it has adopted a soft dollar policy in the event it does
so in the future. Finally, with respect to Wellington, the Trustees noted that
while such Sub-Adviser does have some soft dollar arrangements with respect to
some of its agency trades, the trades in fixed income securities held by the
Nuveen Diversified Dividend and Income Fund are done on a principal basis and,
therefore, do not generate soft dollar credits.
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management Agreement and
Sub-Advisory Agreements were fair and reasonable, that the respective Fund
Adviser's fees are reasonable in light of the services provided to the Fund, and
that the renewal of the respective Investment Management Agreement and
Sub-Advisory Agreements should be approved.
37
Reinvest Automatically
EASILY AND CONVENIENTLY
NUVEEN EXCHANGE-TRADED CLOSED-END FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Exchange-Traded Closed-End Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO
SET UP YOUR REINVESTMENT ACCOUNT.
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
38
AUTOMATIC DIVIDEND
REINVESTMENT PLAN
NOTICE OF AMENDMENT TO THE TERMS AND CONDITIONS
The Fund is amending the terms and conditions of its Automatic Dividend
Reinvestment Plan (the "Plan") as further described below effective with the
close of business on December 1, 2006. THESE CHANGES ARE INTENDED TO ENABLE PLAN
PARTICIPANTS UNDER CERTAIN CIRCUMSTANCES TO REINVEST FUND DISTRIBUTIONS AT A
LOWER AGGREGATE COST THAN IS POSSIBLE UNDER THE EXISTING PLAN. Shareholders who
do not wish to continue as participants under the amended Plan may withdraw from
the Plan by notifying the Plan Agent prior to the effective date of the
amendments. Participants should refer to their Plan document for notification
instructions, or may simply call Nuveen at (800) 257-8787.
Fund shareholders who elect to participate in the Plan are able to have Fund
distributions consisting of income dividends, realized capital gains and returns
of capital automatically reinvested in additional Fund shares. Under the Plan's
existing terms, the Plan Agent purchases Fund shares in the open market if the
Fund's shares are trading at a discount to their net asset value on the payable
date for the distribution. If the Fund's shares are trading at or above their
net asset value on the payable date for the distribution, the Plan Agent
purchases newly-issued Fund shares directly from the Fund at a price equal to
the greater of the shares' net asset value or 95% of the shares' market value.
Under the Plan's amended terms, 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. This change will permit Plan
participants under these circumstances to reinvest Fund distributions at a lower
aggregate cost than is possible under the existing Plan.
39
Notes
40
Notes
41
Notes
42
OTHER USEFUL
INFORMATION
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2006, and (iii) a description of the
policies and procedures that the Fund used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD: Market yield is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Funds'
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
43
(back cover photo)
NUVEEN INVESTMENTS:
SERVING INVESTORS
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past
century, Nuveen Investments has adhered to the belief that the best
approach to investing is to apply conservative risk-management principles
to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity
and fixed-income solutions that are integral to a well-diversified core
portfolio. Our clients have come to appreciate this diversity, as well as
our continued adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT
NEEDS.
Managing more than $149 billion in assets, Nuveen Investments offers
access to a number of different asset classes and investing solutions
through a variety of products. Nuveen Investments markets its
capabilities under six distinct brands: Nuveen, a leader in fixed-income
investments; NWQ, a leader in value-style equities; Rittenhouse, a leader
in growth-style equities; Symphony, a leading institutional manager of
market-neutral alternative investment portfolios; Santa Barbara, a leader
in growth equities; and Tradewinds NWQ, a leader in global equities.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers,
talk to your financial advisor, or call us at (800) 257-8787. Please read
the information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should
consider the investment objective and policies, risk considerations,
charges and expenses of the Fund carefully before investing. The
prospectus contains this and other information relevant to an investment
in the Fund. For a prospectus, please contact your securities
representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL
60606. Please read the prospectus carefully before you invest or send
money.
- Share prices
- Fund details
- Daily financial news
- Investor education
- Interactive planning tools
LEARN MORE
ABOUT NUVEEN FUNDS AT
WWW.NUVEEN.COM/CEF
ESA-B-0606D
NUVEEN LOGO
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During this reporting period, the registrant's Board of Trustees implemented a
change to the procedures by which shareholders may recommend nominees to the
registrant's board of trustees by amending the registrant's by-laws to include a
provision specifying the date by which shareholder nominations for election as
trustee at a subsequent meeting must be submitted to the registrant.
Shareholders must deliver or mail notice to the registrant not less than
forty-five days nor more than sixty days prior to the first anniversary date of
the date on which the registrant first mailed its proxy materials for the prior
year's annual meeting; provided, however, if and only if the annual meeting is
not scheduled to be held within a period that commences thirty days before the
first anniversary date of the annual meeting for the preceding year and ends
thirty days after such anniversary date (an annual meeting date outside such
period being referred to as an "Other Annual Meeting Date" hereafter), the
shareholder notice must be given no later than the close of business on the date
forty-five days prior to such Other Annual Meeting Date or the tenth business
day following the date such Other Annual Meeting Date is first publicly
announced or disclosed. The shareholder's notice must be in writing and set
forth the name, age, date of birth, business address, residence address and
nationality of the person(s) being nominated and the class or series, number of
all shares of the registrant owned of record or beneficially be each such
person(s), any other information regarding such person required by Item 401 of
Regulation S-K or Item 22 of Rule 14a-101 (Schedule 14A) under the Securities
Exchange Act of 1934, as amended, any other information regarding the person(s)
to be nominated that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitation of proxies for
election of trustees, and whether such shareholder believes any nominee is or
will be an "interested person" (as that term is defined in the Investment
Company Act of 1940, as amended) of the registrant or sufficient information to
enable the registrant to make that determination and the written and signed
consent of the person(s) to be nominated.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of
a date within 90 days of the filing date of this report that
includes the disclosure required by this paragraph, based on their
evaluation of the controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or
15d-15(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Diversified Dividend and Income Fund
By (Signature and Title)* /s/ Jessica R. Droeger
---------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: September 8, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
---------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: September 8, 2006
By (Signature and Title)* /s/ Stephen D. Foy
---------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 8, 2006
* Print the name and title of each signing officer under his or her signature.