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 |
811-22058 | |||||
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Nuveen Tax-Advantaged Dividend Growth Fund | ||||||
(Exact name of registrant as specified in charter) | ||||||
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Nuveen Investments | ||||||
(Address of principal executive offices) (Zip code) | ||||||
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Kevin J. McCarthy | ||||||
(Name and address of agent for service) | ||||||
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Registrants telephone number, including area code: |
(312) 917-7700 |
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Date of fiscal year end: |
December 31 |
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Date of reporting period: |
December 31, 2011 |
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Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (OMB) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREHOLDERS
Closed-End Funds
Nuveen Investments
Closed-End Funds
Tax-Advantaged Distributions with the Potential for
Dividend Growth and Capital Appreciation
Annual Report
December 31, 2011
Nuveen Tax-Advantaged
Dividend Growth Fund
JTD
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Table of Contents
Chairman's Letter to Shareholders | 4 | ||||||
Portfolio Managers' Comments | 5 | ||||||
Fund Leverage and Other Information | 9 | ||||||
Common Share Distribution and Price Information | 12 | ||||||
Performance Overview | 14 | ||||||
Report of Registered Independent Public Accounting Firm | 15 | ||||||
Portfolio of Investments | 16 | ||||||
Statement of Assets & Liabilities | 23 | ||||||
Statement of Operations | 24 | ||||||
Statement of Changes in Net Assets | 25 | ||||||
Statement of Cash Flows | 26 | ||||||
Financial Highlights | 28 | ||||||
Notes to Financial Statements | 30 | ||||||
Board Members & Officers | 40 | ||||||
Reinvest Automatically Easily and Conveniently | 45 | ||||||
Glossary of Terms Used in this Report | 47 | ||||||
Additional Fund Information | 51 | ||||||
Chairman's
Letter to Shareholders
Dear Shareholders,
These are perplexing times for investors. The global economy continues to struggle. The solutions being implemented in the eurozone to deal with the debt crises of many of its member countries are not yet seen as sufficient by the financial markets. The political paralysis in the U.S. has prevented the compromises necessary to deal with the fiscal imbalance and government spending priorities. The efforts by individual consumers, governments and financial institutions to reduce their debts are increasing savings but reducing demand for the goods and services that drive employment. These developments are undermining the rebuilding of confidence by consumers, corporations and investors that is so essential to a resumption of economic growth.
Although it is painfully slow, progress is being made. In Europe, the turnover of a number of national governments reflects the realization by politicians and voters alike that leaders who practiced business as usual had to be replaced by leaders willing to face problems and accept the hard choices needed to resolve them. The recent coordinated efforts by central banks in the U.S. and Europe to provide liquidity to the largest European banks indicates that these monetary authorities are committed to facilitating a recovery in the European banking sector.
In the U.S., the failure of the congressionally appointed Debt Reduction Committee was a blow to those who hoped for a bipartisan effort to finally begin addressing the looming fiscal crisis. Nevertheless, Congress and the administration cannot ignore the issue for long. The Bush era tax cuts are scheduled to expire on December 31, 2012, and six months later the $1.2 trillion of mandatory across-the-board spending cuts under the Budget Control Act of 2011 begin to go into effect. Any legislative modification would require bipartisan support and the prospects for a bipartisan solution are unclear. The impact of these two developments would be a mixed blessing: a meaningful reduction in the annual budget deficit at the cost of slowing the economic recovery.
It is in these particularly volatile markets that professional investment management is most important. Skillful investment teams who have experienced challenging markets and remain committed to their investment disciplines are critical to the success of an investor's long-term objectives. In fact, many long-term investment track records are built during challenging markets when managers are able to protect investors against these economic crosscurrents. Experienced investment teams know that volatile markets put a premium on companies and investment ideas that will weather the short-term volatility and that compelling values and opportunities are opened up when markets overreact to negative developments. By maintaining appropriate time horizons, diversification and relying on practiced investment teams, we believe that investors can achieve their long-term investment objectives.
As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
February 22, 2012
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Portfolio Managers' Comments
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor's Group, Moody's Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.
Nuveen Tax-Advantaged Dividend Growth Fund (JTD)
The Fund's investment portfolio is managed by three affiliates of Nuveen Investments: Santa Barbara Asset Management (Santa Barbara) oversees the Fund's dividend-growth equity strategy, while the Fund's income-oriented strategy is managed by NWQ Investment Management Company, LLC (NWQ). The Fund also employs an index call option strategy managed by Nuveen Asset Management, LLC.
James Boothe, CFA, serves as portfolio manager for the dividend-growth equity strategy. He has 30 years of corporate finance and investment management experience and joined Santa Barbara in 2002. The income-oriented investment team at NWQ is led by Michael Carne, CFA. Michael has more than 20 years of investment experience and joined NWQ in 2002. Keith Hembre, CFA, David Friar and James Colon, CFA, oversee the call option program.
Here the managers talk about general economic and market conditions, their management strategies and the performance of the Fund for the twelve-month period ended December 31, 2011.
What were the general market conditions for the reporting period?
During this period, the U.S. economy continued to recover from the recent recession, but progress remained slow. The country's gross domestic product (GDP) grew in 2011, but at a slower rate than in 2010 (1.7% vs. 3.0%). The unemployment picture showed some improvement, with the national unemployment rate standing at 8.5% as of December 2011, compared with 9.4% one year earlier. However, the housing market continued to be a weak spot. For the twelve months ended November 2011 (the most recent data available at the time this report was prepared), the average home price in the Standard & Poor's (S&P)/Case-Shiller Index lost 1.3%, with 18 of the 20 major metropolitan areas reporting lower values. In addition, the U.S. economic picture continued to be clouded by concerns about the European debt crisis and efforts to reduce the federal deficit.
In an attempt to improve the overall economic environment, the Federal Reserve (Fed) continued to hold the benchmark fed funds rate at the record low level of zero to 0.25% that it had established in December 2008. In January 2012 (following the end of this reporting period), the central bank stated that economic conditions would likely warrant maintaining this low rate through 2014. The Fed also implemented a program to extend the average maturity of its U.S. Treasury holdings by purchasing $400 billion of these securities with maturities of six to thirty years and selling an equal amount of U.S. Treasury securities with maturities of three years or less. The goals of this program, which
Nuveen Investments
5
the Fed expects to complete by the end of June 2012, are to lower longer-term interest rates, support a stronger economic recovery and help ensure that inflation remains at levels consistent with the Fed's mandates of maximum employment and price stability.
The U.S. equity markets experienced periods of extreme volatility over the twelve-month reporting period, and posted mixed results for the full year. The Dow Jones Industrial Average gained 8.38% in 2011, and the broader S&P 500 Index ended the year up 2.11%. The NASDAQ Composite Index finished in the red, returning -0.83% during 2011.
What key strategies were used to manage the Fund during this twelve-month period?
Under normal circumstances, the Fund invests primarily in dividend-paying common stocks of mid- to large-cap companies. To a lesser extent, the Fund also invests in the preferred stocks of mid- to large-cap companies, and will write (sell) call options on various equity market indices. Under normal market circumstances, the Fund will invest at least 80% of its managed assets in securities that are eligible to pay tax-advantaged dividends.
Despite considerable market uncertainty during the period, our overall investment strategy did not change. We sought to produce a portfolio that had a greater yield and less price volatility than the S&P 500 Index by focusing on companies that are growing their dividends.
In the fixed-income portion of the Fund's portfolio, we focused primarily on purchasing tax-advantaged preferred stocks using a disciplined, bottom-up, research-driven approach using both fundamental valuation and qualitative measures. In particular, we looked for undervalued companies where a catalyst, such as a management change, industry consolidation or a company restructuring, might lead to better value recognition or improved profitability.
From time to time over the year, the Fund also wrote S&P 500 Index call options with average expirations between 30 and 90 days. This was done in an effort to enhance returns, although it meant the Fund did relinquish some of the upside potential of its equity portfolio and exposed the Fund to the risks of using an options strategy.
How did the Fund perform over this period?
The performance of the Fund, as well as for a comparative benchmark and index, is presented in the accompanying table.
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Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares.
For additional information, see the Performance Overview page in this report.
* Since inception returns are from 6/26/07.
** Refer to Glossary of Terms Used in this Report for definitions.
Average Annual Total Returns on Common Share Net Asset Value
For periods ended 12/31/11
1-Year | Since Inception* | ||||||||||
JTD | 3.28 | % | 0.91 | % | |||||||
Comparative Benchmark** | 4.81 | % | -2.80 | % | |||||||
S&P 500 Index** | 2.11 | % | -1.59 | % |
For the twelve-month period ended December 31, 2011, the Fund's common shares at net asset value (NAV) outperformed the general stock market index, but underperformed its comparative benchmark.
In the equity portion of the Fund during the reporting period, stock selection was the primary positive contributor to results, with sector allocation a smaller contributor. Most of the sector performance was driven by the consumer discretionary, consumer staples and energy sectors.
Three stocks in the aforementioned sectors, VF Corporation, Philip Morris International and Lorillard, were major contributors to positive investment performance. VF Corporation is a $9 billion apparel and footwear company, with a diverse, international portfolio of brands and product. The company reported solid third quarter results, boosted its dividend and raised guidance. Philip Morris is a leading international tobacco company. During the third quarter of 2011, the company increased its regularly quarterly dividend by over 20%. Lorillard performed well as the FDA eased its stance regarding banning menthol tobacco.
One of the Fund's worst performing sectors on a relative basis was the financial sector. AFLAC, HSBC Holdings and New York Community Bancorp were the main detractors. Southern Copper was a major drag on performance within the materials sector due to increasing risks affecting many companies with operations in Mexico.
The fixed-income portion of the Fund positively contributed to performance. This was partially due to the Fund's underweighting in the banking sector, which posted the lowest return of all other benchmark sectors during the second half of the reporting period. Banks have continued to be pressured by concerns such as the European debt crisis, ongoing implementation of new regulations, and an overall weak capital markets and trading environment.
While we were underweight the worst performing sector, our issue selection detracted from performance. Three holdings in our banking sector allocation performed exceptionally poorly. The ALLY Financial 8-1/2% perpetual preferred stock fell sharply largely due to technical factors surrounding hedge-fund selling and, in our opinion, this decline was not a result of a significant change in company fundamentals or performance. Also negatively impacting performance were the holdings of Citigroup, Inc. 7-1/2 Series H convertible preferred stock and Bank of America 7-1/4% Series L perpetual convertible preferred stock. These securities, due to their convertibility feature, were driven down in price along with their issuers' common stock.
We had several fixed-income positions that outperformed. For the reporting period, the Equity Residential Property 8.29% preferred stock was one of the top performers, reflecting
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the strong fundamental performance of the companies in the Apartment real estate investment trust (REIT) space. Also, the DTE Energy Company 6-1/2% Junior Subordinated Debentures due 12/01/2061 and Southern California Edison Company 6% Series perpetual preferred stock were both positive contributors. Both performed well due to market demand for yield from relatively safe and reliable dividend-paying companies such as utility issuers.
We began a program to sell our holding of SLM Corporation 6.49% Series P perpetual preferred stock, despite an attractive valuation of 8.25% or so. Credit improvement in the company's student loan portfolio appears to have peaked and we have become concerned that the student loan sector may become the target of election-year posturing due to the well-documented failings of several for-profit schools to police underwriting standards.
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Fund Leverage
and Other Information
IMPACT OF THE FUND'S LEVERAGE STRATEGY ON PERFORMANCE
One important factor impacting the return of the Fund relative to its benchmarks was the Fund's use of financial leverage through the use of bank borrowings. The Fund uses leverage because its managers believe that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by the Fund decline, the negative impact of these valuation changes on common share net asset value and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by the Fund generally are rising. Leverage had a positive impact on the performance of the Fund over this reporting period. During the period, the Fund entered into interest rate swap contracts to partially fix the interest cost of the Fund's leverage. This activity detracted modestly from the overall positive impact of leverage, as rates declined slightly while the position was in place, meaning it would have been better had the interest rates of the leverage floated rather than being partially fixed in the period.
RECENT DEVELOPMENTS REGARDING THE FUND'S REDEMPTION OF AUCTION RATE PREFERRED SHARES
Shortly after its inception, the Fund issued auction rate preferred shares (ARPS) to create leverage. As noted in past shareholder reports, the weekly auctions for those ARPS shares began in February 2008 to consistently fail, causing the Fund to pay the so called "maximum rate" to ARPS shareholders under the terms of the ARPS in the Fund's charter documents. The Fund redeemed its ARPS at par in 2008 and since then has relied upon bank borrowings to create effective leverage.
During 2010 and 2011, certain Nuveen leveraged closed-end funds (including this Fund) received a demand letter from a law firm on behalf of purported holders of common shares of each such fund, alleging that Nuveen and the funds' officers and Board of Directors/Trustees breached their fiduciary duties related to the redemption at par of the funds' ARPS. In response, the Board established an ad hoc Demand Committee consisting of certain of its disinterested and independent Board members to investigate the claims. The Demand Committee retained independent counsel to assist it in conducting an extensive investigation. Based upon its investigation, the Demand Committee found that it was not in the best interests of each fund or its shareholders to take the actions suggested in the demand letters, and recommended that the full Board reject the demands made in the demand letters. After reviewing the findings and recommendation
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of the Demand Committee, the full Board of each fund unanimously adopted the Demand Committee's recommendation.
Subsequently, the funds that received demand letters (including this Fund) were named in a consolidated complaint as nominal defendants in a putative shareholder derivative action captioned Martin Safier, et al. v. Nuveen Asset Management, et al. that was filed in the Circuit Court of Cook County, Illinois, Chancery Division (the "Cook County Chancery Court") on February 18, 2011 (the "Complaint"). The Complaint, filed on behalf of purported holders of each fund's common shares, also named Nuveen Fund Advisors, Inc. as a defendant, together with current and former Officers and interested Directors/Trustees of each of the funds (together with the nominal defendants, collectively, the "Defendants"). The Complaint contained the same basic allegations contained in the demand letters. The Defendants filed a motion to dismiss the suit and on December 16, 2011, the court granted that motion dismissing the Complaint. The plaintiffs failed to file an appeal of the court's decision within the required time period, resulting in the final disposition of the suit.
RISK CONSIDERATIONS
Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Past performance is no guarantee of future results. Fund common shares are subject to a variety of risks, including:
Investment Risk. The possible loss of the entire principal amount that you invest.
Price Risk. Shares of closed-end investment companies like the Fund frequently trade at a discount to their net asset value (NAV). Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvest- ment of Fund dividends and distributions.
Leverage Risk. The Fund's use of leverage creates the possibility of higher volatility for the Fund's per share NAV, market price, distributions and returns. There is no assurance that a Fund's leveraging strategy will be successful.
Tax Risk. The tax treatment of Fund distributions may be affected by new IRS interpretations of the Internal Revenue Code and future changes in tax laws and regulations. This is particularly true for funds employing a managed distribution program.
Common Stock Risk. Common stocks returns often have experienced significant volatility.
Issuer Credit Risk. This is the risk that a security in the Fund's portfolio will fail to make dividend or interest payments when due.
Dividend Income Risk. There is no guarantee that the issuers of common stocks in which the Fund invests will declare dividends in the future or that, if declared, they will remain at current levels or increase over time.
Preferred Stock Risk. Preferred stocks are subordinated to bonds and other debt instruments in a company's capital structure, and therefore are subject to greater credit risk.
Mid-Cap Company Risk. Mid-cap companies often carry additional risks because earn- ings of these companies tend to be less predictable than larger, more established companies.
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Call Option Risk. The value of call options sold (written) by the Fund will fluctuate. The Fund may not participate in any appreciation of its equity portfolio as fully as it would if the Fund did not sell call options. In addition, the Fund will continue to bear the risk of declines in the value of the equity portfolio.
Call Risk or Prepayment Risk. Issuers may exercise their option to prepay principal earlier than scheduled, forcing the Fund to reinvest in lower-yielding securities.
Derivatives Strategy Risk. Derivative securities, such as calls, puts, warrants, swaps and forwards, carry risks different from, and possibly greater than, the risks associated with the underlying investments.
Interest Rate Risk. Fixed-income securities such as bonds, preferred, convertible and other debt securities will decline in value if market interest rates rise.
Reinvestment Risk. If market interest rates decline, income earned from the Fund's portfolio may be reinvested at rates below that of the original bond that generated the income.
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Common Share Distribution
and Price Information
Distribution Information
The following information regarding the Fund's distributions is current as of December 31, 2011, and likely will vary over time based on the Fund's investment activities and portfolio investment value changes.
During the twelve-month reporting period, the Fund did not make any changes to its quarterly distributions to shareholders. Some of the important factors affecting the amount and composition of these distributions are summarized below.
The Fund employs financial leverage through the use of bank borrowings. Financial leverage provides the potential for higher earnings (net investment income), total returns and distributions over time, but also increases the variability of common shareholders' net asset value per share in response to changing market conditions.
The Fund has a managed distribution program. The goal of this program is to provide common shareholders with relatively consistent and predictable cash flow by systematically converting the Fund's expected long-term return potential into regular distributions. As a result, regular common share distributions throughout the year are likely to include a portion of expected long-term gains (both realized and unrealized), along with net investment income.
Important points to understand about the managed distribution program are:
• The Fund seeks to establish a relatively stable common share distribution rate that roughly corresponds to the projected total return from its investment strategy over an extended period of time. However, you should not draw any conclusions about the Fund's past or future investment performance from its current distribution rate.
• Actual common share returns will differ from projected long-term returns (and therefore the Fund's distribution rate), at least over shorter time periods. Over a specific timeframe, the difference between actual returns and total distributions will be reflected in an increasing (returns exceed distributions) or a decreasing (distributions exceed returns) Fund net asset value.
• Each distribution is expected to be paid from some or all of the following sources:
• net investment income (regular interest and dividends),
• realized capital gains, and
• unrealized gains, or, in certain cases, a return of principal (non-taxable distributions).
• A non-taxable distribution is a payment of a portion of the Fund's capital. When the Fund's returns exceed distributions, it may represent portfolio gains generated, but
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12
not realized as a taxable capital gain. In periods when the Fund's returns fall short of distributions, the shortfall will represent a portion of your original principal, unless the shortfall is offset during other time periods over the life of your investment (previous or subsequent) when the Fund's total return exceeds distributions.
• Because distribution source estimates are updated during the year based on the Fund's performance and forecast for its current fiscal year (which is the calendar year for the Fund), estimates on the nature of your distributions provided at the time the distributions are paid may differ from both the tax information reported to you in your Fund's IRS Form 1099 statement provided at year end, as well as the ultimate economic sources of distributions over the life of your investment.
The following table provides information regarding the Fund's common share distributions and total return performance for the fiscal year ended December 31, 2011. This information is intended to help you better understand whether the Fund's returns for the specified time period were sufficient to meet the Fund's distributions.
As of 12/31/11 (Common Shares) | JTD | ||||||
Inception date | 6/26/07 | ||||||
Fiscal year (calendar year) ended December 31, 2011: | |||||||
Per share distribution: | |||||||
From net investment income | $ | 1.04 | |||||
From long-term capital gains | 0.00 | ||||||
From short-term capital gains | 0.00 | ||||||
Return of capital | 0.00 | ||||||
Total per share distribution | $ | 1.04 | |||||
Distribution rate on NAV | 7.67 | % | |||||
Average annual total returns: | |||||||
1-Year on NAV | 3.28 | % | |||||
Since inception on NAV | 0.91 | % |
The qualified dividend income provisions of the federal tax code are set to expire on December 31, 2012. In the event that Congress does not further extend (or make permanent) these provisions, beginning in calendar 2013, dividends previously referred to as "qualified dividends" would be taxed at normal marginal tax rates.
Common Share Repurchases and Price Information
As of December 31, 2011, and since the inception of the Fund's repurchase program, the Fund has cumulatively repurchased and retired 370,900 of its common shares, representing approximately 2.6% of the Fund's total common shares outstanding.
During the twelve-month reporting period, the Fund repurchased and retired 19,900 of its common shares at a weighted average price and weighted average discount per common share of $11.16 and 14.88%, respectively.
As of December 31, 2011, the Fund was trading at a -9.37% discount to its common share NAV, compared with an average -10.21% discount for the entire twelve-month period.
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Fund Snapshot
Common Share Price | $ | 12.29 | |||||
Common Share Net Asset Value (NAV) | $ | 13.56 | |||||
Premium/(Discount) to NAV | -9.37 | % | |||||
Current Distribution Rate1 | 8.46 | % | |||||
Net Assets Applicable to Common Shares ($000) |
$ | 196,401 |
Average Annual Total Returns
(Inception 6/26/07)
On Share Price | On NAV | ||||||||||
1-Year | 2.55 | % | 3.28 | % | |||||||
Since Inception | -1.07 | % | 0.91 | % |
Leverage
Regulatory Leverage | 30.70 | % | |||||
Effective Leverage | 30.70 | % |
Portfolio Composition
(as a % of total investments)2,3
Commercial Banks | 7.2 | % | |||||
Oil, Gas & Consumable Fuels | 6.8 | % | |||||
Pharmaceuticals | 6.5 | % | |||||
Insurance | 6.2 | % | |||||
Electric Utilities | 4.5 | % | |||||
Real Estate Investment Trust | 4.3 | % | |||||
Diversified Financial Services | 4.0 | % | |||||
Machinery | 4.0 | % | |||||
Tobacco | 3.9 | % | |||||
IT Services | 3.3 | % | |||||
Hotels, Restaurants & Leisure | 2.9 | % | |||||
Food Products | 2.8 | % | |||||
Health Care Providers & Services | 2.5 | % | |||||
Beverages | 2.5 | % | |||||
Semiconductors & Equipment | 2.4 | % | |||||
Software | 2.2 | % | |||||
Household Durables | 1.9 | % | |||||
Communications Equipment | 1.7 | % | |||||
Diversified Telecommunication Services | 1.7 | % | |||||
Electrical Equipment | 1.6 | % | |||||
Multi-Utilities | 1.5 | % | |||||
Chemicals | 1.5 | % | |||||
Thrifts & Mortgage Finance | 1.5 | % | |||||
Household Products | 1.4 | % | |||||
Consumer Finance | 1.4 | % | |||||
Short-Term Investments | 5.3 | % | |||||
Other | 14.5 | % |
JTD
Performance
OVERVIEW
(Unaudited)
Nuveen Tax-Advantaged Dividend Growth Fund
December 31, 2011
Portfolio Allocation (as a % of total investments)2,3
2010-2011 Distributions Per Common Share
Common Share Price Performance Weekly Closing Price
Refer to Glossary of Terms used in this Report for further definition of the terms used within this Fund's Performance Overview Page.
1 Current Distribution Rate is based on the Fund's current annualized quarterly distribution divided by the Fund's current market price. The Fund's quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the calendar year the Fund's cumulative net ordinary income and net realized gains are less than the amount of the Fund's distributions, a return of capital for tax purposes.
2 Excluding investments in derivatives.
3 Holdings subject to change.
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Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders
Nuveen Tax-Advantaged Dividend Growth Fund
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Nuveen Tax-Advantaged Dividend Growth Fund (the "Fund") as of December 31, 2011, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian, counterparty and brokers. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Nuveen Tax-Advantaged Dividend Growth Fund at December 31, 2011, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated therein in conformity with U.S. generally accepted accounting principles.
Chicago, Illinois
February 27, 2012
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JTD
Nuveen Tax-Advantaged Dividend Growth Fund
Portfolio of Investments
December 31, 2011
Shares | Description (1) | Value | |||||||||
Common Stocks 102.5% (70.7% of Total Investments) | |||||||||||
Aerospace & Defense 1.6% | |||||||||||
66,823 | Raytheon Company | $ | 3,232,897 | ||||||||
Beverages 3.6% | |||||||||||
80,945 | Coca-Cola Company | 5,663,722 | |||||||||
59,300 | Heineken NV, (2) | 1,365,679 | |||||||||
Total Beverages | 7,029,401 | ||||||||||
Capital Markets 1.7% | |||||||||||
18,805 | BlackRock Inc. | 3,351,803 | |||||||||
Chemicals 2.2% | |||||||||||
121,000 | Linde AG, (2) | 1,804,110 | |||||||||
41,800 | Syngenta AG, ADR, (3) | 2,463,692 | |||||||||
Total Chemicals | 4,267,802 | ||||||||||
Commercial Banks 3.8% | |||||||||||
78,053 | Cullen/Frost Bankers, Inc. | 4,129,784 | |||||||||
42,700 | HSBC Holdings PLC, (4) | 1,626,870 | |||||||||
16,700 | Westpac Banking Corporation | 1,710,080 | |||||||||
Total Commercial Banks | 7,466,734 | ||||||||||
Communications Equipment 2.5% | |||||||||||
90,365 | QUALCOMM, Inc. | 4,942,966 | |||||||||
Diversified Financial Services 2.3% | |||||||||||
136,955 | JP Morgan Chase & Co. | 4,553,754 | |||||||||
Diversified Telecommunication Services 2.4% | |||||||||||
156,453 | AT&T Inc. | 4,731,139 | |||||||||
Electric Utilities 2.7% | |||||||||||
88,139 | NextEra Energy Inc. | 5,365,902 | |||||||||
Electrical Equipment 2.4% | |||||||||||
94,200 | ABB Limited, (3) | 1,773,786 | |||||||||
62,461 | Emerson Electric Company | 2,910,058 | |||||||||
Total Electrical Equipment | 4,683,844 | ||||||||||
Energy Equipment & Services 1.7% | |||||||||||
36,200 | ENSCO International Incorporated | 1,698,504 | |||||||||
46,200 | Tenaris SA | 1,717,716 | |||||||||
Total Energy Equipment & Services | 3,416,220 | ||||||||||
Food Products 2.9% | |||||||||||
134,400 | Danone, (2) | 1,698,816 | |||||||||
81,100 | McCormick & Company, Incorporated | 4,089,062 | |||||||||
Total Food Products | 5,787,878 |
Nuveen Investments
16
Shares | Description (1) | Value | |||||||||
Gas Utilities 2.1% | |||||||||||
46,600 | ONEOK, Inc. | $ | 4,039,754 | ||||||||
Health Care Providers & Services 3.6% | |||||||||||
121,650 | AmerisourceBergen Corporation | 4,524,164 | |||||||||
38,600 | Fresenius SE, ADR | 2,624,028 | |||||||||
Total Health Care Providers & Services | 7,148,192 | ||||||||||
Hotels, Restaurants & Leisure 4.2% | |||||||||||
225,700 | Compass Group PLC, (2) | 2,139,636 | |||||||||
102,584 | YUM! Brands, Inc. | 6,053,482 | |||||||||
Total Hotels, Restaurants & Leisure | 8,193,118 | ||||||||||
Household Durables 2.8% | |||||||||||
166,200 | Leggett and Platt Inc. | 3,829,248 | |||||||||
89,600 | Sony Corporation | 1,616,384 | |||||||||
Total Household Durables | 5,445,632 | ||||||||||
Household Products 2.1% | |||||||||||
61,215 | Procter & Gamble Company | 4,083,653 | |||||||||
Independent Power Producers & Energy Traders 1.0% | |||||||||||
39,000 | International Power PLC, (2) | 2,043,764 | |||||||||
Industrial Conglomerates 1.9% | |||||||||||
39,100 | Jardine Matheson Holdings Limited, (2) | 1,839,655 | |||||||||
19,700 | Siemens AG, Sponsored ADR | 1,883,517 | |||||||||
Total Industrial Conglomerates | 3,723,172 | ||||||||||
Insurance 1.7% | |||||||||||
75,125 | AFLAC Incorporated, (4) | 3,249,908 | |||||||||
IT Services 4.8% | |||||||||||
87,850 | Accenture Limited | 4,676,256 | |||||||||
25,610 | International Business Machines Corporation (IBM) | 4,709,167 | |||||||||
Total IT Services | 9,385,423 | ||||||||||
Machinery 5.8% | |||||||||||
34,700 | Caterpillar Inc. | 3,143,820 | |||||||||
70,000 | Eaton Corporation | 3,047,100 | |||||||||
47,200 | Kubota Corporation | 1,961,632 | |||||||||
84,313 | PACCAR Inc. | 3,159,208 | |||||||||
Total Machinery | 11,311,760 | ||||||||||
Media 1.7% | |||||||||||
95,300 | Pearson Public Limited Company | 1,798,311 | |||||||||
29,600 | WPP Group PLC | 1,546,008 | |||||||||
Total Media | 3,344,319 | ||||||||||
Metals & Mining 1.3% | |||||||||||
37,100 | BHP Billiton PLC, ADR | 2,620,373 | |||||||||
Office Electronics 0.8% | |||||||||||
36,600 | Canon Inc. | 1,611,864 |
Nuveen Investments
17
JTD
Nuveen Tax-Advantaged Dividend Growth Fund (continued)
Portfolio of Investments December 31, 2011
Shares | Description (1) | Value | |||||||||
Oil, Gas & Consumable Fuels 9.1% | |||||||||||
17,300 | BG PLC., Sponsored ADR, (2) | $ | 1,851,100 | ||||||||
49,850 | Chevron Corporation, (4) | 5,304,040 | |||||||||
65,042 | EQT Corporation | 3,563,651 | |||||||||
120,000 | Kinder Morgan, Inc. | 3,860,400 | |||||||||
37,500 | Sasol Ltd | 1,777,500 | |||||||||
29,100 | Total SA, Sponsored ADR | 1,487,301 | |||||||||
Total Oil, Gas & Consumable Fuels | 17,843,992 | ||||||||||
Personal Products 1.3% | |||||||||||
62,900 | L'Oreal, (2) | 1,310,207 | |||||||||
66,400 | Shiseido Company, Limited, (2) | 1,203,832 | |||||||||
Total Personal Products | 2,514,039 | ||||||||||
Pharmaceuticals 9.4% | |||||||||||
100,230 | Abbott Laboratories, (4) | 5,635,933 | |||||||||
48,900 | Merck KGaA, (2) | 1,629,935 | |||||||||
35,100 | Novartis AG, Sponsored ADR | 2,006,667 | |||||||||
28,400 | Novo-Nordisk A/S | 3,273,384 | |||||||||
275,050 | Pfizer Inc., (4) | 5,952,082 | |||||||||
Total Pharmaceuticals | 18,498,001 | ||||||||||
Professional Services 0.8% | |||||||||||
116,400 | Experian PLC, (2) | 1,579,548 | |||||||||
Road & Rail 1.8% | |||||||||||
34,000 | Union Pacific Corporation | 3,601,960 | |||||||||
Semiconductors & Equipment 3.5% | |||||||||||
31,000 | ASM Lithography Holding NV | 1,295,490 | |||||||||
150,054 | Microchip Technology Incorporated | 5,496,478 | |||||||||
Total Semiconductors & Equipment | 6,791,968 | ||||||||||
Software 3.2% | |||||||||||
170,150 | Microsoft Corporation | 4,417,094 | |||||||||
34,200 | SAP AG, Sponsored ADR | 1,810,890 | |||||||||
Total Software | 6,227,984 | ||||||||||
Textiles, Apparel & Luxury Goods 2.0% | |||||||||||
30,405 | VF Corporation | 3,861,131 | |||||||||
Thrifts & Mortgage Finance 2.1% | |||||||||||
337,778 | New York Community Bancorp Inc. | 4,178,314 | |||||||||
Tobacco 5.7% | |||||||||||
42,044 | Lorillard Inc. | 4,793,016 | |||||||||
80,789 | Philip Morris International, (4) | 6,340,317 | |||||||||
Total Tobacco | 11,133,333 | ||||||||||
Total Common Stocks (cost $182,589,682) | 201,261,542 |
Nuveen Investments
18
Shares | Description (1) | Coupon | Ratings (5) | Value | |||||||||||||||||||
$25 Par (or similar) Preferred Securities 28.3% (19.5% of Total Investments) | |||||||||||||||||||||||
Commercial Banks 5.2% | |||||||||||||||||||||||
48,500 | Associated Banc-Corp. | 8.000 | % | BB+ | $ | 1,219,775 | |||||||||||||||||
27,439 | BB&T Capital Trust VI | 9.600 | % | A- | 735,365 | ||||||||||||||||||
14,861 | BB&T Capital Trust VII | 8.100 | % | A- | 395,303 | ||||||||||||||||||
48,400 | First Niagara Finance Group | 8.625 | % | BB+ | 1,241,765 | ||||||||||||||||||
10,300 | HSBC Holdings PLC | 8.000 | % | A+ | 268,418 | ||||||||||||||||||
19,810 | National City Capital Trust IV | 8.000 | % | A- | 505,749 | ||||||||||||||||||
16,307 | PNC Capital Trust | 7.750 | % | A- | 426,102 | ||||||||||||||||||
11,500 | Popular Inc. | 8.250 | % | B2 | 201,250 | ||||||||||||||||||
3,500 | Wells Fargo & Company, Convertible Bond | 7.500 | % | A | 3,689,000 | ||||||||||||||||||
62,300 | Zions Bancorporation | 9.500 | % | BB | 1,573,075 | ||||||||||||||||||
Total Commercial Banks | 10,255,802 | ||||||||||||||||||||||
Consumer Finance 1.3% | |||||||||||||||||||||||
38,940 | Ally Financial Inc. | 8.500 | % | B | 716,107 | ||||||||||||||||||
14,626 | GMAC LLC | 7.250 | % | BB | 297,932 | ||||||||||||||||||
62,800 | HSBC Finance Corporation | 6.360 | % | A | 1,334,500 | ||||||||||||||||||
3,868 | SLM Corporation, Series A | 6.970 | % | BB | 155,107 | ||||||||||||||||||
Total Consumer Finance | 2,503,646 | ||||||||||||||||||||||
Diversified Financial Services 1.9% | |||||||||||||||||||||||
56,000 | Bank of America Corporation | 8.200 | % | BBB- | 1,237,600 | ||||||||||||||||||
1,360 | Bank of America Corporation | 7.250 | % | BBB- | 1,071,707 | ||||||||||||||||||
31,700 | Citigroup Inc. | 8.500 | % | BBB | 824,200 | ||||||||||||||||||
4,615 | Citigroup Inc. | 8.125 | % | BBB | 120,359 | ||||||||||||||||||
9,012 | Citigroup Inc. | 6.500 | % | BBB | 365,166 | ||||||||||||||||||
Total Diversified Financial Services | 3,619,032 | ||||||||||||||||||||||
Electric Utilities 3.8% | |||||||||||||||||||||||
75,000 | Entergy Arkansas Inc. | 6.450 | % | BB+ | 1,872,660 | ||||||||||||||||||
20,000 | Gulf Power Company | 6.000 | % | BBB+ | 1,999,282 | ||||||||||||||||||
25,000 | PPL Electric Utilities Corporation | 6.250 | % | BBB- | 633,595 | ||||||||||||||||||
25,000 | Southern California Edison Company, Series C | 6.000 | % | BBB+ | 2,475,783 | ||||||||||||||||||
5,000 | Southern California Edison Company | 6.500 | % | Baa2 | 521,250 | ||||||||||||||||||
Total Electric Utilities | 7,502,570 | ||||||||||||||||||||||
Food Products 1.1% | |||||||||||||||||||||||
20 | HJ Heinz Finance Company, 144A | 8.000 | % | BBB- | 2,083,750 | ||||||||||||||||||
Insurance 5.2% | |||||||||||||||||||||||
62,400 | American Financial Group | 7.000 | % | BBB+ | 1,635,504 | ||||||||||||||||||
50,000 | Aspen Insurance Holdings Limited | 7.401 | % | BBB- | 1,235,000 | ||||||||||||||||||
25,000 | Endurance Specialty Holdings Limited | 7.750 | % | BBB- | 638,250 | ||||||||||||||||||
95,300 | Endurance Specialty Holdings Limited | 7.500 | % | BBB- | 2,429,197 | ||||||||||||||||||
30,500 | Montpelier Re Holdings Limited | 8.875 | % | BB+ | 831,125 | ||||||||||||||||||
58,100 | Principal Financial Group | 6.518 | % | BBB | 1,462,377 | ||||||||||||||||||
75,000 | Prudential Financial Inc. | 9.000 | % | BBB+ | 2,040,750 | ||||||||||||||||||
Total Insurance | 10,272,203 | ||||||||||||||||||||||
Multi-Utilities 2.2% | |||||||||||||||||||||||
25,000 | Dominion Resources Inc. | 8.375 | % | BBB | 734,250 | ||||||||||||||||||
97,000 | DTE Energy Company | 6.500 | % | BBB- | 2,605,420 | ||||||||||||||||||
32,500 | Scana Corporation | 7.700 | % | BBB- | 951,600 | ||||||||||||||||||
Total Multi-Utilities | 4,291,270 |
Nuveen Investments
19
JTD
Nuveen Tax-Advantaged Dividend Growth Fund (continued)
Portfolio of Investments December 31, 2011
Shares | Description (1) | Coupon | Ratings (5) | Value | |||||||||||||||||||
Oil, Gas & Consumable Fuels 0.7% | |||||||||||||||||||||||
25,000 | Magnum Hunter Resources Corporation | 10.250 | % | BB- | $ | 631,250 | |||||||||||||||||
18,500 | Magnum Hunter Resources Corporation | 8.000 | % | N/A | 823,620 | ||||||||||||||||||
Total Oil, Gas & Consumable Fuels | 1,454,870 | ||||||||||||||||||||||
Real Estate Investment Trust 6.2% | |||||||||||||||||||||||
29,023 | Apartment Investment & Management Company | 7.750 | % | Ba3 | 727,316 | ||||||||||||||||||
100,000 | Ashford Hospitality Trust Inc. | 9.000 | % | N/A | 2,435,000 | ||||||||||||||||||
22,800 | Ashford Hospitality Trust Inc. | 8.450 | % | N/A | 531,696 | ||||||||||||||||||
67,800 | CommomWealth REIT | 7.250 | % | Baa3 | 1,660,422 | ||||||||||||||||||
72,500 | Dupont Fabros Technology | 7.875 | % | Ba2 | 1,820,475 | ||||||||||||||||||
25,000 | Equity Residential Properties Trust | 8.290 | % | Baa2 | 1,662,500 | ||||||||||||||||||
50,000 | Kimco Realty Corporation, Series G | 7.750 | % | Baa2 | 1,287,500 | ||||||||||||||||||
72,500 | Vornado Realty LP | 7.875 | % | BBB | 1,992,300 | ||||||||||||||||||
Total Real Estate Investment Trust | 12,117,209 | ||||||||||||||||||||||
Wireless Telecommunication Services 0.7% | |||||||||||||||||||||||
16,523 | Telephone and Data Systems Inc. | 7.000 | % | Baa2 | 445,790 | ||||||||||||||||||
37,607 | United States Cellular Corporation | 6.950 | % | Baa2 | 1,001,098 | ||||||||||||||||||
Total Wireless Telecommunication Services | 1,446,888 | ||||||||||||||||||||||
Total $25 Par (or similar) Preferred Securities (cost $53,332,140) | 55,547,240 | ||||||||||||||||||||||
Shares | Description (1) | Coupon | Ratings (5) | Value | |||||||||||||||||||
Convertible Preferred Securities 0.7% (0.5% of Total Investments) | |||||||||||||||||||||||
Diversified Financial Services 0.7% | |||||||||||||||||||||||
16,651 | Citigroup Inc., Convertible | 7.500 | % | N/A | $ | 1,352,894 | |||||||||||||||||
Total Convertible Preferred Securities (cost $1,593,792) | 1,352,894 | ||||||||||||||||||||||
Principal Amount (000) |
Description (1) | Coupon | Maturity | Ratings (5) | Value | ||||||||||||||||||
Corporate Bonds 1.5% (1.0% of Total Investments) | |||||||||||||||||||||||
Commercial Banks 0.5% | |||||||||||||||||||||||
$ | 1,000 | Western Alliance Bancorporation | 10.000 | % | 9/01/15 | Ba3 | $ | 1,040,000 | |||||||||||||||
Independent Power Producers & Energy Traders 0.5% | |||||||||||||||||||||||
968 | NRG Energy Inc., 144A | 7.875 | % | 5/15/21 | BB | 943,800 | |||||||||||||||||
Insurance 0.5% | |||||||||||||||||||||||
969 | Genworth Financial Inc. | 7.200 | % | 2/15/21 | BBB | 884,276 | |||||||||||||||||
$ | 2,937 | Total Corporate Bonds (cost $2,795,052) | 2,868,076 | ||||||||||||||||||||
Principal Amount (000)/ Shares |
Description (1) | Coupon | Maturity | Ratings (5) | Value | ||||||||||||||||||
Capital Preferred Securities 4.3% (3.0% of Total Investments) | |||||||||||||||||||||||
Commercial Banks 0.9% | |||||||||||||||||||||||
1,000 | PNC Financial Services Inc. | 6.750 | % | 8/01/21 | A- | $ | 977,930 | ||||||||||||||||
1 | U.S. Bancorp. | 3.500 | % | N/A (6) | A | 795,544 | |||||||||||||||||
Total Commercial Banks | 1,773,474 | ||||||||||||||||||||||
Consumer Finance 0.8% | |||||||||||||||||||||||
1,000 | Capital One Capital V Corporation | 10.250 | % | 8/15/39 | BBB | 1,037,500 | |||||||||||||||||
500 | Capital One Capital VI | 8.875 | % | 5/15/40 | BBB | 518,946 | |||||||||||||||||
Total Consumer Finance | 1,556,446 |
Nuveen Investments
20
Principal Amount (000)/ Shares |
Description (1) | Coupon | Maturity | Ratings (5) | Value | ||||||||||||||||||
Diversified Financial Services 1.0% | |||||||||||||||||||||||
1,000 | JP Morgan Chase & Company | 7.900 | % | N/A (6) | A | $ | 1,064,690 | ||||||||||||||||
1,000 | MBNA Capital Trust | 8.278 | % | 12/01/26 | BBB- | 927,500 | |||||||||||||||||
Total Diversified Financial Services | 1,992,190 | ||||||||||||||||||||||
Insurance 1.6% | |||||||||||||||||||||||
20 | Axis Capital Holdings Limited | 7.500 | % | N/A (6) | BBB | 1,920,000 | |||||||||||||||||
1,000 | MetLife Inc. | 10.750 | % | 8/01/69 | BBB | 1,320,000 | |||||||||||||||||
Total Insurance | 3,240,000 | ||||||||||||||||||||||
Total Capital Preferred Securities (cost $8,130,471) | 8,562,110 | ||||||||||||||||||||||
Principal Amount (000) |
Description (1) | Coupon | Maturity | Value | |||||||||||||||||||
Short-Term Investments 7.6% (5.3% of Total Investments) | |||||||||||||||||||||||
$ | 14,908 |
Repurchase Agreement with State Street Bank, dated 12/30/11, repurchase price $14,908,274, collateralized by: $365,000 U.S. Treasury Notes, 1.000%, due 8/31/16, value $369,563, $12,220,000 U.S. Treasury Notes, 2.375%, due 7/31/17, value $13,228,150, $1,355,000 U.S. Treasury Notes, 2.250%, due 7/31/18, value $1,451,544, $160,000 U.S.Treasury Notes, 2.000%, due 11/15/21, value $161,800 |
0.010 |
% |
1/03/12 |
$ |
14,908,257 |
||||||||||||||||
Total Short-Term Investments (cost $14,908,257) | 14,908,257 | ||||||||||||||||||||||
Total Investments (cost $263,349,394) 144.9% | 284,500,119 | ||||||||||||||||||||||
Borrowings (44.3)% (7), (8) | (87,000,000 | ) | |||||||||||||||||||||
Other Assets Less Liabilities (0.6)% (9) | (1,099,471 | ) | |||||||||||||||||||||
Net Assets Applicable to Common Shares 100% | $ | 196,400,648 |
Investments in Derivatives at December 31, 2011
Call Options Written outstanding:
Number of Contracts |
Type |
Notional Amount (10) |
Expiration Date |
Strike Price |
Value | ||||||||||||||||||
Call Options Written | |||||||||||||||||||||||
(100 | ) | S&P 500 INDEX | $ | (13,000,000 | ) | 1/21/12 | $ | 1,300 | $ | (61,000 | ) | ||||||||||||
(100 | ) | S&P 500 INDEX | (13,250,000 | ) | 1/21/12 | 1,325 | (20,000 | ) | |||||||||||||||
(100 | ) | S&P 500 INDEX | (12,750,000 | ) | 2/18/12 | 1,275 | (292,500 | ) | |||||||||||||||
(300 | ) | Total Call Options Written (premiums received $593,893) | $ | (39,000,000 | ) | $ | (373,500 | ) |
Interest Rate Swaps outstanding:
Counterparty |
Notional Amount |
Fund Pay/Receive Floating Rate |
Floating Rate Index |
Fixed Rate* |
Fixed Rate Payment Frequency |
Termination Date |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
JPMorgan | $ | 16,750,000 | Receive | 1-Month USD-LIBOR | 1.412 | % | Monthly | 3/29/14 | $ | (325,338 | ) | ||||||||||||||||||||
Morgan Stanley | 16,750,000 | Receive | 1-Month USD-LIBOR | 0.409 | Monthly | 3/29/12 | 2,747 | ||||||||||||||||||||||||
Morgan Stanley | 16,750,000 | Receive | 1-Month USD-LIBOR | 2.323 | Monthly | 3/29/16 | (988,008 | ) | |||||||||||||||||||||||
$ | (1,310,599 | ) |
* Annualized
Nuveen Investments
21
JTD
Nuveen Tax-Advantaged Dividend Growth Fund (continued)
Portfolio of Investments December 31, 2011
For Fund portfolio compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted.
(2) For fair value measurement disclosure purposes, Common Stock categorized as Level 2. See Notes to Financial Statements, Footnote 1General Information and Significant Accounting Policies, Investment Valuation for more information.
(3) Non-income producing; issuer has not declared a dividend within the past twelve months.
(4) Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.
(5) Ratings (not covered by the report of independent registered public accounting firm): Using the highest of Standard & Poor's Group ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch") rating. Ratings below BBB by Standard & Poor's, Baa by Moody's or BBB by Fitch are considered to be below investment grade.
(6) Perpetual security. Maturity date is not applicable.
(7) Borrowings Payable as a percentage of Total investments is 30.6%.
(8) The Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of December 31, 2011, investments with a value of $232,426,356 have been pledged as collateral for Borrowings.
(9) Other Assets Less Liabilities includes the Value and the Net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives at December 31, 2011.
(10) For disclosure purposes, Notional Amount is calculated by multiplying the Number of Contracts by the Strike Price by 100.
N/A Not applicable.
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.
USD-LIBOR United States DollarLondon Inter-Bank Offered Rate.
See accompanying notes to financial statements.
Nuveen Investments
22
Statement of
ASSETS & LIABILITIES
December 31, 2011
Assets | |||||||
Investments, at value (cost $263,349,394) | $ | 284,500,119 | |||||
Cash | 1,789 | ||||||
Receivables: | |||||||
Dividends | 650,748 | ||||||
Interest | 207,782 | ||||||
Reclaims | 21,441 | ||||||
Other assets | 16,916 | ||||||
Total assets | 285,398,795 | ||||||
Liabilities | |||||||
Borrowings | 87,000,000 | ||||||
Call options written, at value (premiums received $593,893) | 373,500 | ||||||
Unrealized depreciation on interest rate swaps, net | 1,310,599 | ||||||
Accrued expenses: | |||||||
Interest on borrowings | 7,419 | ||||||
Management fees | 225,143 | ||||||
Other | 81,486 | ||||||
Total liabilities | 88,998,147 | ||||||
Net assets applicable to Common shares | $ | 196,400,648 | |||||
Common shares outstanding | 14,484,340 | ||||||
Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) | $ | 13.56 | |||||
Net assets applicable to Common shares consist of: | |||||||
Common shares, $.01 par value per share | $ | 144,843 | |||||
Paid-in surplus | 231,662,455 | ||||||
Undistributed (Over-distribution of) net investment income | (65,420 | ) | |||||
Accumulated net realized gain (loss) | (55,401,749 | ) | |||||
Net unrealized appreciation (depreciation) | 20,060,519 | ||||||
Net assets applicable to Common shares | $ | 196,400,648 | |||||
Authorized shares: | |||||||
Common | Unlimited | ||||||
FundPreferred | Unlimited |
See accompanying notes to financial statements.
Nuveen Investments
23
Statement of
OPERATIONS
Year Ended December 31, 2011
Investment Income | |||||||
Dividends (net of foreign tax withheld of $78,812) | $ | 10,374,072 | |||||
Interest | 649,745 | ||||||
Total investment income | 11,023,817 | ||||||
Expenses | |||||||
Management fees | 2,627,436 | ||||||
Interest expense on borrowings | 939,334 | ||||||
Shareholders' servicing agent fees and expenses | 498 | ||||||
Custodian's fees and expenses | 68,682 | ||||||
Trustees' fees and expenses | 7,961 | ||||||
Professional fees | 23,461 | ||||||
Shareholders' reports printing and mailing expenses | 40,624 | ||||||
Stock exchange listing fees | 8,918 | ||||||
Investor relations expense | 41,062 | ||||||
Other expenses | 24,046 | ||||||
Total expenses before custodian fee credit | 3,782,022 | ||||||
Custodian fee credit | (105 | ) | |||||
Net expenses | 3,781,917 | ||||||
Net investment income (loss) | 7,241,900 | ||||||
Realized and Unrealized Gain (Loss) | |||||||
Net realized gain (loss) from: | |||||||
Investments and foreign currency | 6,474,013 | ||||||
Call options written | 164,785 | ||||||
Interest rate swaps | (439,626 | ) | |||||
Change in net unrealized appreciation (depreciation) of: | |||||||
Investments and foreign currency | (7,067,627 | ) | |||||
Call options written | 1,196,900 | ||||||
Interest rate swaps | (1,310,599 | ) | |||||
Net realized and unrealized gain (loss) | (982,154 | ) | |||||
Net increase (decrease) in net assets applicable to Common shares from operations | $ | 6,259,746 |
See accompanying notes to financial statements.
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Statement of
CHANGES in NET ASSETS
Year Ended 12/31/11 |
Year Ended 12/31/10 |
||||||||||
Operations | |||||||||||
Net investment income (loss) | $ | 7,241,900 | $ | 7,222,932 | |||||||
Net realized gain (loss) from: | |||||||||||
Investments and foreign currency | 6,474,013 | 4,713,671 | |||||||||
Call options written | 164,785 | (183,926 | ) | ||||||||
Interest rate swaps | (439,626 | ) | | ||||||||
Change in net unrealized appreciation (depreciation) of: | |||||||||||
Investments and foreign currency | (7,067,627 | ) | 21,616,568 | ||||||||
Call options written | 1,196,900 | (1,297,257 | ) | ||||||||
Interest rate swaps | (1,310,599 | ) | | ||||||||
Net increase (decrease) in net assets applicable to Common shares from operations | 6,259,746 | 32,071,988 | |||||||||
Distributions to Common Shareholders | |||||||||||
From net investment income | (15,076,454 | ) | (9,957,582 | ) | |||||||
Return of capital | | (5,127,608 | ) | ||||||||
Decrease in net assets applicable to Common shares from distributions to Common shareholders | (15,076,454 | ) | (15,085,190 | ) | |||||||
Capital Share Transactions | |||||||||||
Common shares repurchased and retired | (222,413 | ) | (559,095 | ) | |||||||
Net increase (decrease) in net assets applicable to Common shares from capital share transactions | (222,413 | ) | (559,095 | ) | |||||||
Net increase (decrease) in net assets applicable to Common shares | (9,039,121 | ) | 16,427,703 | ||||||||
Net assets applicable to Common shares at the beginning of period | 205,439,769 | 189,012,066 | |||||||||
Net assets applicable to Common shares at the end of period | $ | 196,400,648 | $ | 205,439,769 | |||||||
Undistributed (Over-distribution of) net investment income at the end of period | $ | (65,420 | ) | $ | (129,270 | ) |
See accompanying notes to financial statements.
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Statement of
CASH FLOWS
Year Ended December 31, 2011
Cash Flows from Operating Activities: | |||||||
Net Increase (Decrease) in Net Assets Applicable to Common Shares from Operations | $ | 6,259,746 | |||||
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 | (155,819,603 | ) | |||||
Proceeds from sales and maturities of investments | 134,891,551 | ||||||
Proceeds from (Purchases of) short-term investments, net | (13,455,872 | ) | |||||
Proceeds from (Payments for) closed foreign currency spot contracts | 198 | ||||||
Proceeds from (Payments for) interest rate swap contracts, net | (439,626 | ) | |||||
Premiums received for call options written | 4,938,045 | ||||||
Cash paid for terminated call options written | (5,138,360 | ) | |||||
Amortization (Accretion) of premiums and discounts, net | (5,731 | ) | |||||
(Increase) Decrease in: | |||||||
Receivable for dividends | (283,208 | ) | |||||
Receivable for interest | (39,815 | ) | |||||
Receivable for reclaims | (5,941 | ) | |||||
Other assets | 5,445 | ||||||
Increase (Decrease) in: | |||||||
Payable for investments purchased | (130,103 | ) | |||||
Accrued interest on borrowings | 3,850 | ||||||
Accrued management fees | 19,268 | ||||||
Accrued other expenses | (11,366 | ) | |||||
Net realized gain (loss) from: | |||||||
Investments and foreign currency | (6,474,013 | ) | |||||
Call options written | (164,785 | ) | |||||
Interest rate swaps | 439,626 | ||||||
Change in net unrealized (appreciation) depreciation of: | |||||||
Investments and foreign currency | 7,067,627 | ||||||
Call options written | (1,196,900 | ) | |||||
Interest rate swaps | 1,310,599 | ||||||
Net cash provided by (used in) operating activities | (28,229,368 | ) | |||||
Cash Flows from Financing Activities: | |||||||
Increase (Decrease) in borrowings | 43,500,000 | ||||||
Cash distributions paid to Common shareholders | (15,076,454 | ) | |||||
Cost of Common shares repurchased and retired | (222,413 | ) | |||||
Net cash provided by (used in) financing activities | 28,201,133 | ||||||
Net Increase (Decrease) in Cash | (28,235 | ) | |||||
Cash at the beginning of period | 30,024 | ||||||
Cash at the End of Period | $ | 1,789 |
Supplemental Disclosure of Cash Flow Information
Cash paid for interest on borrowings (excluding borrowing costs) during the fiscal year ended December 31, 2011, was $885,484.
See accompanying notes to financial statements.
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Intentionally Left Blank
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Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations | Less Distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning Common Share Net Asset Value |
Net Investment Income (Loss)(a) |
Net Realized/ Unrealized Gain (Loss) |
Distributions from Net Investment Income to Fund- Preferred Share- holders(b) |
Total |
Net Investment Income to Common Share- holders |
Return of Capital to Common Share- holders |
Total |
Discount from Common Shares Repurchased and Retired |
Offering Costs and Fund- Preferred Share Underwriting Discounts |
Ending Common Share Net Asset Value |
Ending Market Value |
||||||||||||||||||||||||||||||||||||||||
Year Ended 12/31: | |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.16 | $ | 0.50 | $ | (0.06 | ) | $ | | $ | 0.44 | $ | (1.04 | ) | $ | | $ | (1.04 | ) | $ | | * | $ | | $ | 13.56 | $ | 12.29 | |||||||||||||||||||||||
2010 | 12.99 | .50 | 1.71 | | 2.21 | (.69 | ) | (.35 | ) | (1.04 | ) | | * | | 14.16 | 13.01 | |||||||||||||||||||||||||||||||||||
2009 | 11.21 | .48 | 2.29 | | 2.77 | (.49 | ) | (.52 | ) | (1.01 | ) | .02 | | 12.99 | 11.56 | ||||||||||||||||||||||||||||||||||||
2008 | 18.17 | .49 | (5.97 | ) | (.03 | ) | (5.51 | ) | (.47 | ) | (.97 | ) | (1.44 | ) | | (.01 | ) | 11.21 | 8.68 | ||||||||||||||||||||||||||||||||
2007 | (d) | 19.10 | .31 | (.30 | ) | (.04 | ) | (.03 | ) | (.28 | ) | (.54 | ) | (.82 | ) | | * | (.08 | ) | 18.17 | 16.33 |
FundPreferred Shares at End of Period | Borrowings at End of Period | ||||||||||||||||||||||
Aggregate Amount Outstanding (000) |
Liquidation Value Per Share |
Asset Coverage Per Share |
Aggregate Amount Outstanding (000) |
Asset Coverage Per $1,000 |
|||||||||||||||||||
Year Ended 12/31: | |||||||||||||||||||||||
2011 | $ | | $ | | $ | | $ | 87,000 | $ | 3,257 | |||||||||||||
2010 | | | | 43,500 | 5,723 | ||||||||||||||||||
2009 | | | | 43,500 | 5,345 | ||||||||||||||||||
2008 | | | | 58,000 | 3,853 | ||||||||||||||||||
2007 | (d) | 36,000 | 25,000 | 211,243 | | |
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Ratios/Supplemental Data | |||||||||||||||||||||||||||
Total Returns |
Ratios to Average Net Assets Applicable to Common Shares(e) |
||||||||||||||||||||||||||
Based on Market Value(c) |
Based on Common Share Net Asset Value(c) |
Ending Net Assets Applicable to Common Shares (000) |
Expenses |
Net Investment Income (Loss) |
Portfolio Turnover Rate |
||||||||||||||||||||||
Year Ended 12/31: | |||||||||||||||||||||||||||
2011 | 2.55 | % | 3.28 | % | $ | 196,401 | 1.87 | % | 3.59 | % | 50 | % | |||||||||||||||
2010 | 22.50 | 17.94 | 205,440 | 1.71 | 3.81 | 36 | |||||||||||||||||||||
2009 | 47.97 | 26.65 | 189,012 | 1.94 | 4.32 | 52 | |||||||||||||||||||||
2008 | (40.24 | ) | (31.99 | ) | 165,471 | 2.31 | 3.16 | 52 | |||||||||||||||||||
2007 | (d) | (14.37 | ) | (.70 | ) | 268,190 | 1.19 | ** | 3.21 | ** | 58 |
(a) Per share Net Investment Income (Loss) is calculated using the average daily shares method.
(b) The amounts shown are based on Common share equivalents.
(c) Total Return Based on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
Total Return Based on Common Share Net Asset Value is the combination of changes in Common share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvest price for the last dividend declared in the period may often be based on the Fund's market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total returns are not annualized.
(d) For the period June 26, 2007 (commencement of operations) through December 31, 2007.
(e) • Ratios do not reflect the effect of dividend payments to FundPreferred shareholders, where applicable.
• Net Investment Income ratios reflect income earned and expenses incurred on assets attributable to FundPreferred shares and/or borrowings, where applicable.
• Each ratio includes the effect of all interest expense and other costs related to borrowings as follows:
Ratios of Borrowings Interest Expense to Average Net Assets Applicable to Common Shares |
|||||||
Year Ended 12/31: | |||||||
2011 | .47 | % | |||||
2010 | .35 | ||||||
2009 | .52 | ||||||
2008 | .93 | ||||||
2007 | (d) | |
* Round to less than $.01 per share.
** Annualized.
See accompanying notes to financial statements.
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Notes to
FINANCIAL STATEMENTS
1. General Information and Significant Accounting Policies
General Information
Nuveen Tax-Advantaged Dividend Growth Fund (the "Fund") is a closed-end management investment company registered under the Investment Company Act of 1940, as amended. The Fund's shares are listed on the NYSE Amex and trade under the ticker symbol "JTD." The Fund was organized as a Massachusetts business trust on February 22, 2007.
Effective January 1, 2011, the Fund's adviser, Nuveen Asset Management, a wholly-owned subsidiary of Nuveen Investments, Inc. ("Nuveen"), changed its name to Nuveen Fund Advisors, Inc. (the "Adviser"). Concurrently, the Adviser formed a wholly-owned subsidiary, Nuveen Asset Management, LLC, to house its portfolio management capabilities and to serve as one of the Fund's sub-advisers.
The Fund's investment objective is to provide an attractive level of tax-advantaged distributions and capital appreciation by investing in dividend-paying equity securities consisting primarily of common stocks of mid- to large-cap companies that have attractive dividend income and the potential for future dividend growth and capital appreciation. The Fund will also invest in preferred stocks of mid- to large-cap companies and other fixed-income securities, and to a limited extent, write (sell) call options on various equity market indices. The qualified dividend income provisions of the federal tax code are set to expire on December 31, 2012. In the event that Congress does not extend these provisions, beginning in calendar 2013, dividends previously referred to as "qualified dividends" would be taxed at normal marginal tax rates.
Significant Accounting Policies
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 ("U.S. GAAP").
Investment Valuation
Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market ("NASDAQ") are valued, except as indicated below, at the NASDAQ Official Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price and are generally classified as Level 2. Prices of certain American Depositary Receipts ("ADR") held by the Fund that trade in only limited volume in the United States are valued based on the last traded price, official closing price, or the most recent bid price of the underlying non-U.S.-traded stock, adjusted as appropriate for the underlying-to-ADR conversion ratio and foreign exchange rate, and from time-to-time foreign currencies may also be adjusted further to take into account material events that may take place after the close of the local non-U.S. market but before the close of the New York Stock Exchange ("NYSE"), which generally represents a transfer from a Level 1 to a Level 2 security.
Prices of fixed-income securities and interest rate swap contracts are provided by a pricing service approved by the Fund's Board of Trustees. These securities are generally classified as Level 2. When price quotes are not readily available, the pricing service establishes a security's fair value using methods that may include consideration of the following: 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. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
The value of exchange-traded options are based on the mean of the closing bid and ask prices. Exchange-traded options are generally classified as Level 1. Options traded in the over-the-counter market are valued using an evaluated mean price and are generally classified as Level 2.
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30
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Fund's Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security's fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: 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. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Fund's Board of Trustees or its designee.
Refer to Footnote 2Fair Value Measurements for further details on the leveling of securities held by the Fund as of the end of the reporting period.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal Income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Fund has instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At December 31, 2011, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Interest income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Interest income also reflects paydown gains and losses, if any.
Income Taxes
The Fund intends to distribute substantially all of its investment company taxable income to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies ("RICs"). In any year when the Fund realizes net capital gains, the Fund may choose to distribute all or a portion of its net capital gains to shareholders, or alternatively, to retain all or a portion of its net capital gains and pay federal corporate income taxes on such retain gains.
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
The Fund makes quarterly cash distributions to Common shareholders of a stated dollar amount per share. Subject to approval and oversight by the Fund's Board of Trustees, the Fund seeks to maintain a stable distribution level designed to deliver the long-term return potential of the Fund's investment strategy through regular quarterly distributions (a "Managed Distribution Program"). Total distributions during a calendar year generally will be made from the Fund's net investment income, net realized capital gains and net unrealized capital gains in the Fund's portfolio, if any. The portion of distributions paid attributed to net unrealized gains, if any, is distributed from the Fund's assets and is treated by shareholders as a non-taxable distribution ("Return of Capital") for tax purposes. In the event that total distributions during a calendar year exceed the Fund's total return on net asset value, the difference will reduce net asset value per share. If the Fund's total return on net asset value exceeds total distributions during a calendar year, the excess will be reflected as an increase in net asset value per share. The final determination of the source and character of all distributions for
Nuveen Investments
31
Notes to
FINANCIAL STATEMENTS (continued)
the fiscal year are made after the end of the fiscal year and are reflected in the financial statements contained in the annual report as of December 31 each year.
The actual character of distributions made by the Fund during the fiscal years ended December 31, 2011 and December 31, 2010, are reflected in the accompanying financial statements.
FundPreferred Shares
The Fund is authorized to issue auction rate preferred ("FundPreferred") shares. During the fiscal year ended December 31, 2008, the Fund redeemed all $36,000,000 of its outstanding FundPreferred shares.
During the fiscal year ended December 31, 2010, lawsuits pursuing claims made in a demand letter alleging that the Fund's Board of Trustees breached their fiduciary duties related to the redemption at par of the Fund's FundPreferred shares had been filed on behalf of shareholders of the Fund, against the Adviser, the Nuveen holding company, the majority owner of the holding company, the lone interested trustee, and current and former officers of the Fund. Nuveen and the other defendants have filed a motion to dismiss the lawsuits and on December 16, 2011, the court granted that motion dismissing the lawsuits. The plaintiffs failed to file an appeal on the court's decision within the required time period, resulting in the final disposition of the lawsuits.
Foreign Currency Transactions
The Fund is authorized to engage in foreign currency exchange transactions, including foreign currency forwards, futures, options and swap contracts. To the extent that the Fund invests in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Fund will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Fund's investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern time. Investments, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received.
The realized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of "Net realized gain (loss) from investments and foreign currency" on the Statement of Operations, when applicable.
The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of "Change in net unrealized appreciation (depreciation) of investments and foreign currency" on the Statement of Operations, when applicable.
Options Transactions
The Fund is subject to equity price risk in the normal course of pursuing its investment objectives and is authorized to write (sell) call options on securities, futures, swaps ("swaptions") or currencies in an attempt to manage such risk. When the Fund writes an option, an amount equal to the net premium received (the premium less commission) is recognized as a component of "Call options written, at value" on the Statement of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option until the option is exercised or expires or the Fund enters into a closing purchase transaction. The changes in the value of options written during the fiscal period are recognized as a component of "Change in net unrealized appreciation (depreciation) of call options written" on the Statement of Operations. When an option is exercised or expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase
Nuveen Investments
32
transaction, including commission, is recognized as a component of "Net realized gain (loss) from call options written" on the Statement of Operations. The Fund, as a writer of an option, has no control over whether the underlying instrument may be sold (called) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
During fiscal year ended December 31, 2011, the Fund wrote call options on a broad equity index, while investing in a portfolio of equities, to enhance returns while foregoing some upside potential of its equity portfolio.
The Fund did not purchase put or call options or write put options during the fiscal year ended December 31, 2011. The average notional amount of call options written during the fiscal year ended December 31, 2011, was as follows:
Average notional amount of call options written* | $ | (53,325,000 | ) |
* The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year.
Refer to Footnote 3Derivative Instruments and Hedging Activities and Footnote 5Investment Transactions for further details on options activity.
Interest Rate Swap Contracts
The Fund is authorized to enter into interest rate swap contracts consistent with its investment objectives and policies to reduce, increase or otherwise alter its risk profile or to alter its portfolio characteristics (i.e. duration, yield curve positioning and credit quality).
The Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and is authorized to invest in interest rate swap transactions in an attempt to manage such risk. The Fund's use of interest rate swap contracts is intended to mitigate the negative impact that an increase in short-term interest rates could have on Common share net earnings as a result of leverage. Interest rate swap contracts involve the Fund's agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment that is intended to approximate the Fund's variable rate payment obligation on FundPreferred shares or any variable rate borrowing. The payment obligation is based on the notional amount of the interest rate swap contract. Interest rate swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that the Fund is to receive. Interest rate swap positions are valued daily. The Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Fund's contractual rights and obligations under the contracts. The net amount recorded for these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of "Unrealized appreciation or depreciation on interest rate swaps, net" with the change during the fiscal period recognized on the Statement of Operations as a component of "Change in net unrealized appreciation (depreciation) of interest rate swaps." Income received or paid by the Fund is recognized as a component of "Net realized gain (loss) from interest rate swaps" on the Statement of Operations, in addition to the net realized gains or losses recognized upon the termination of an interest rate swap contract and are equal to the difference between the Fund's basis in the interest rate swap and the proceeds from (or cost of) the closing transaction. Payments received or made at the beginning of the measurement period are recognized as a component of "Interest rate swap premiums paid and/or received" on the Statement of Assets and Liabilities. For tax purposes, periodic payments are treated as ordinary income or expense.
During the fiscal year ended December 31, 2011, the Fund entered into interest rate swap contracts to partially fix the interest cost of leverage, which the Fund uses through the use of bank borrowings.
The average notional amount of interest rate swaps contracts outstanding during the fiscal year ended December 31, 2011, was as follows:
Average notional amount of interest rate swap contracts outstanding* | $ | 40,200,000 |
* The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year.
Refer to Footnote 3Derivative Instruments and Hedging Activities for further details on interest rate swap activity.
Market and Counterparty Credit Risk
In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Fund's exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts,
Nuveen Investments
33
Notes to
FINANCIAL STATEMENTS (continued)
when applicable, expose the Fund to minimal counterparty credit risk as they are exchange traded and the exchange's clearing house, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.
The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on the Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which the Fund overdraws its account at the custodian bank.
Indemnifications
Under the Fund's organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates.
2. Fair Value Measurements
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:
Level 1 Quoted prices in active markets for identical securities.
Level 2 Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3 Significant unobservable inputs (including management's assumptions in determining the fair value of investments).
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The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the Fund's fair value measurements as of December 31, 2011:
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Investments: | |||||||||||||||||||
Common Stocks* | $ | 182,795,260 | $ | 18,466,282 | $ | | $ | 201,261,542 | |||||||||||
$25 Par (or similar) Preferred Securities | 42,855,406 | 12,691,834 | | 55,547,240 | |||||||||||||||
Convertible Preferred Securities | 1,352,894 | | | 1,352,894 | |||||||||||||||
Corporate Bonds | | 2,868,076 | | 2,868,076 | |||||||||||||||
Capital Preferred Securities | 795,544 | 7,766,566 | | 8,562,110 | |||||||||||||||
Short-Term Investments | | 14,908,257 | | 14,908,257 | |||||||||||||||
Derivatives: | |||||||||||||||||||
Call Options Written | (373,500 | ) | | | (373,500 | ) | |||||||||||||
Interest Rate Swaps** | | (1,310,599 | ) | | (1,310,599 | ) | |||||||||||||
Total | $ | 227,425,604 | $ | 55,390,416 | $ | | $ | 282,816,020 |
* Refer to the Fund's Portfolio of Investments for industry breakdown of Common Stocks classified as Level 2.
** Represents net unrealized appreciation (depreciation) as reported in the Fund's Portfolio of Investments.
During the fiscal year ended December 31, 2011, the Fund recognized no significant transfers to or from Level 1, Level 2 or Level 3.
3. Derivative Instruments and Hedging Activities
The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund's investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which the Fund was invested during and at the end of the reporting period, refer to the Portfolio of Investments, Financial Statements and Footnote 1General Information and Significant Accounting Policies.
The following table presents the fair value of all derivative instruments held by the Fund as of December 31, 2011, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure.
Location on the Statements of Assets Liabilities | |||||||||||||||||||||||
Underlying | Derivative | Asset Derivatives | Liability Derivatives | ||||||||||||||||||||
Risk Exposure | Instrument | Location | Value | Location | Value | ||||||||||||||||||
Equity Price | Options | | $ | | Call options written, at value | $ | 373,500 | ||||||||||||||||
Interest Rate | Swaps |
Unrealized depreciation on interest rate swaps, net* |
2,747 |
Unrealized depreciation on interest rate swaps, net* |
1,313,346 | ||||||||||||||||||
Total | $ | 2,747 | $ | 1,686,846 |
* Value represents cumulative gross appreciation (depreciation) of swap contracts as reported in the Fund's Portfolio of Investments. The Statement of Assets and Liabilities presents the net unrealized appreciation (depreciation) of all interest rate swap contracts as "Unrealized depreciation on interest rate swaps, net."
The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended December 31, 2011, on derivative instruments, as well as the primary risk exposure associated with each.
Net Realized Gain (Loss) from Call Options Written | |||||||
Risk Exposure | |||||||
Equity Price | $ | 164,785 | |||||
Net Realized Gain (Loss) from Interest Rate Swaps | |||||||
Risk Exposure | |||||||
Interest Rate | $ | (439,626 | ) | ||||
Change in Net Unrealized Appreciation (Depreciation) of Call Options Written | |||||||
Risk Exposure | |||||||
Equity Price | $ | 1,196,900 | |||||
Change in Net Unrealized Appreciation (Depreciation) of Interest Rate Swaps | |||||||
Risk Exposure | |||||||
Interest Rate | $ | (1,310,599 | ) |
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35
Notes to
FINANCIAL STATEMENTS (continued)
4. Fund Shares
Common shares
Transactions in Common shares were as follows:
Year Ended 12/31/11 |
Year Ended 12/31/10 |
||||||||||
Common shares repurchased and retired | (19,900 | ) | (50,200 | ) | |||||||
Weighted average: | |||||||||||
Price per Common share repurchased and retired | $ | 11.16 | $ | 11.12 | |||||||
Discount per Common share repurchased and retired | 14.88 | % | 14.16 | % |
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the fiscal year ended December 31, 2011, aggregated $155,819,603 and $134,891,551, respectively.
Transactions in call options written during the fiscal year ended December 31, 2011, were as follows:
Number of Contracts |
Premiums Received |
||||||||||
Options outstanding, beginning of year | 500 | $ | 958,993 | ||||||||
Options written | 2,950 | 4,938,045 | |||||||||
Options terminated in closing purchase transactions | (3,150 | ) | (5,303,145 | ) | |||||||
Options expired | | | |||||||||
Options outstanding, end of year | 300 | $ | 593,893 |
6. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to the recognition of unrealized gain or loss for tax (mark-to-market) on option contracts, timing differences in the recognition of income and timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset value of the Fund.
At December 31, 2011, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:
Cost of investments | $ | 266,093,790 | |||||
Gross unrealized: | |||||||
Appreciation | $ | 30,600,188 | |||||
Depreciation | (12,193,859 | ) | |||||
Net unrealized appreciation (depreciation) of investments | $ | 18,406,329 |
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Permanent differences, primarily due to tax basis earnings and profits adjustments, foreign currency reclasses, adjustments for investments in real estate investment trusts and complex securities character adjustments, resulted in reclassifications among the Fund's components of common share net assets at December 31, 2011, the Fund's tax year-end, as follows:
Paid-in surplus | $ | (8,365,590 | ) | ||||
Undistributed (Over-distribution) of net investment income | 7,898,404 | ||||||
Accumulated net realized gain (loss) | 467,186 |
The tax components of undistributed net ordinary income and net long-term capital gains at December 31, 2011, the Fund's tax year end, were as follows:
Undistributed net ordinary income | $ | | |||||
Undistributed net long-term capital gains | |
The tax character of distributions paid during the Fund's tax years ended December 31, 2011 and December 31, 2010, was designated for purposes of the dividends paid deduction as follows:
2011 | |||||||
Distributions from net ordinary income * | $ | 15,076,454 | |||||
Distributions from long-term capital gains | | ||||||
Return of capital | | ||||||
2010 | |||||||
Distributions from net ordinary income * | $ | 9,957,582 | |||||
Distributions from long-term capital gains | | ||||||
Return of capital | 5,127,608 |
* Net ordinary income consists of net taxable income derived from dividends and interest, and current year earnings and profits attributable to realized gains.
At December 31, 2011, the Fund's tax year end, the Fund had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:
Expiration: | |||||||
December 31, 2017 | $ | 9,338,461 | |||||
December 31, 2018 | 42,037,884 | ||||||
Total | $ | 51,376,345 |
During the tax year ended December 31, 2011, the Fund utilized $10,245,853 of its capital loss carryforwards.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the "Act") was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the Act, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
The Act also contains several provisions aimed at preserving the character of distributions made by fiscal year RICs during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which RICs might be required to file amended Forms 1099 to restate previously reported distributions.
During the Fund's tax year ended December 31, 2011, there were no post-enactment capital losses generated.
The Fund has elected to defer losses incurred from November 1, 2011 through December 31, 2011, the Fund's tax year end, in accordance with federal income tax rules. These losses are treated as having arisen on the first day of the following fiscal year. The Fund has elected to defer losses as follows:
Post-October capital losses | $ | 1,052,793 | |||||
Late-year ordinary losses | |
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37
Notes to
FINANCIAL STATEMENTS (continued)
7. Management Fees and Other Transactions with Affiliates
The Fund's management fee consists of two componentsa fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the 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 calculated according to the following schedule:
Average Daily Managed Assets* | Fund-Level Fee Rate | ||||||
For the first $500 million | .8000 | % | |||||
For the next $500 million | .7750 | ||||||
For the next $500 million | .7500 | ||||||
For the next $500 million | .7250 | ||||||
For managed assets over $2 billion | .7000 |
The annual complex-level fee, payable monthly, is calculated according to the following schedule:
Complex-Level Managed Asset Breakpoint Level* | Effective Rate at Breakpoint Level | ||||||
$55 billion | .2000 | % | |||||
$56 billion | .1996 | ||||||
$57 billion | .1989 | ||||||
$60 billion | .1961 | ||||||
$63 billion | .1931 | ||||||
$66 billion | .1900 | ||||||
$71 billion | .1851 | ||||||
$76 billion | .1806 | ||||||
$80 billion | .1773 | ||||||
$91 billion | .1691 | ||||||
$125 billion | .1599 | ||||||
$200 billion | .1505 | ||||||
$250 billion | .1469 | ||||||
$300 billion | .1445 |
* For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the funds' use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust's issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen Funds that constitute "eligible assets." Eligible assets do not include assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser's assumption of the management of the former First American Funds effective January 1, 2011. As of December 31, 2011, the complex-level fee rate for the Fund was .1767%.
The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Adviser is responsible for the Fund's overall strategy and asset allocation decisions. The Adviser has entered into sub-advisory agreements with Santa Barbara Asset Management ("Santa Barbara"), NWQ Investment Management Company, LLC ("NWQ"), and Nuveen Asset Management, LLC, each a subsidiary of Nuveen. Santa Barbara manages the portion of the Fund's investment portfolio allocated to dividend-paying equity securities. NWQ manages the portion of the Fund's investment portfolio allocated to preferred securities and other fixed-income securities. Nuveen Asset Management, LLC is responsible for the writing of index call options on various equity market indices. The Adviser is responsible for overseeing the Fund's investments in interest rate
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38
swap contracts. Santa Barbara, NWQ, and Nuveen Asset Management, LLC are compensated for their services to the Fund from the management fees 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.
8. Borrowing Arrangements
The Fund has entered into a $88 million (maximum commitment amount) prime brokerage facility with BNP Paribas Prime Brokerage, Inc. ("BNP") as a means of financial leverage. On January 19, 2011, the Fund amended its prime brokerage facility with BNP and increased its maximum commitment amount from $63 million to $68 million and on November 9, 2011, increased its maximum commitment amount from $68 million to $88 million. As of December 31, 2011, the outstanding balance on these borrowings was $87 million. During the fiscal year ended December 31, 2011, the average daily balance outstanding and annual interest rate on these borrowings were $66.7 million and 1.29%, respectively.
In order to maintain this borrowing facility, the Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities held in the Fund's portfolio of investments. Interest is charged on these borrowings at 3-Month LIBOR (London Inter-bank Offered Rate) plus .95% on the amount borrowed and .50% on the undrawn balance. The Fund also incurred a one-time .25% amendment fee on each increase to the maximum commitment amount, which was fully expensed during the current reporting period.
Effective January 9, 2012, interest charged on the amount borrowed changed from 3-Month LIBOR plus .95% to 3-Month LIBOR plus .85%. All other terms remained unchanged.
Borrowings outstanding are recognized as "Borrowings" on the Statement of Assets and Liabilities. Interest expense incurred on the borrowed amount and undrawn balance and the one-time amendment fee are recognized as a component of "Interest expense on borrowings" on the Statement of Operations.
9. New Accounting Pronouncements
Financial Accounting Standards Board ("FASB") Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.
On April 15, 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-03 ("ASU No. 2011-03"). The guidance in the ASU No. 2011-03 is intended to improve the accounting for repurchase and other similar agreements. Specifically, ASU No. 2011-03 modifies the criteria for determining when these transactions would be accounted for as financings transactions (secured borrowings/lending agreements) as opposed to sale (purchase) transactions with commitments to repurchase (resell). The effective date of ASU No. 2011-03 is for interim and annual periods beginning on or after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statement amounts and footnote disclosures, if any.
Fair Value Measurements and Disclosures
On May 12, 2011, the FASB issued an ASU No. 2011-04 modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board ("IASB") issued International Financial Reporting Standard ("IFRS") 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2 and the reasons for the transfers and ii) for Level 3 fair value measurements, a) quantitative information about significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statement amounts and footnote disclosures, if any.
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Board Members & Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board Members of the Funds. The number of board members of the Fund is currently set at ten. None of the board members who are not "interested" persons of the Funds (referred to herein as "independent board members") has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the board members and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed and Term(1) |
Principal Occupation(s) Including other Directorships During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Board Member |
|||||||||||||||
Independent Board Members: | |||||||||||||||||||
g ROBERT P. BREMNER(2) | |||||||||||||||||||
8/22/40 333 W. Wacker Drive Chicago, IL 60606 |
Chairman of the Board and Board Member |
1996 Class III |
Private Investor and Management Consultant; Treasurer and Director, Humanities Council of Washington, D.C.; Board Member, Independent Directors Council (affiliated with the Investment Company Institute.) | 238 | |||||||||||||||
g JACK B. EVANS | |||||||||||||||||||
10/22/48 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
1999 Class III |
President, The Hall-Perrine Foundation, a private philanthropic corporation (since 1996); Director and Chairman, United Fire Group, a publicly held company; member of the Board of Regents for the State of Iowa University System; Director, Source Media Group; Life Trustee of Coe College and the Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 238 | |||||||||||||||
g WILLIAM C. HUNTER | |||||||||||||||||||
3/6/48 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
2004 Class I |
Dean, Tippie College of Business, University of Iowa (since 2006); Director (since 2004) of Xerox Corporation; Director (since 2005), Beta Gamma Sigma International Honor Society; Director of Wellmark, Inc. (since 2009); formerly, Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University. | 238 | |||||||||||||||
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Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed and Term(1) |
Principal Occupation(s) Including other Directorships During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Board Member |
|||||||||||||||
Independent Board Members (continued): | |||||||||||||||||||
g DAVID J. KUNDERT(2) | |||||||||||||||||||
10/28/42 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
2005 Class II |
Director, Northwestern Mutual Wealth Management Company; retired (since 2004) as Chairman, JPMorgan Fleming Asset Management, President and CEO, Banc One Investment Advisors Corporation, and President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Member, Board of Regents, Luther College; member of the Wisconsin Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens; member of Board of Directors and Chair of Investment Committee, Greater Milwaukee Foundation. | 238 | |||||||||||||||
g WILLIAM J. SCHNEIDER(2) | |||||||||||||||||||
9/24/44 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
1997 Class III |
Chairman of Miller-Valentine Partners Ltd., a real estate investment company; formerly, Senior Partner and Chief Operating Officer (retired 2004) of Miller- Valentine Group; member, University of Dayton Business School Advisory Council; member, Mid-America Health System Board; formerly, member and chair, Dayton Philharmonic Orchestra Association; formerly, member, Business Advisory Council, Cleveland Federal Reserve Bank. | 238 | |||||||||||||||
g JUDITH M. STOCKDALE | |||||||||||||||||||
12/29/47 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
1997 Class I |
Executive Director, Gaylord and Dorothy Donnelley Foundation (since 1994); prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 238 | |||||||||||||||
g CAROLE E. STONE(2) | |||||||||||||||||||
6/28/47 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
2007 Class I |
Director, Chicago Board Options Exchange (since 2006); Director, C2 Options Exchange, Incorporated (since 2009); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010); formerly, Chair, New York Racing Association Oversight Board (2005-2007). | 238 | |||||||||||||||
g VIRGINIA L. STRINGER | |||||||||||||||||||
8/16/44 333 W. Wacker Drive Chicago, IL 60606 |
Board Member | 2011 | Board Member, Mutual Fund Directors Forum; Member, Governing Board, Investment Company Institute's Independent Directors Council; governance consultant and non-profit board member; former Owner and President, Strategic Management Resources, Inc. a management consulting firm; previously, held several executive positions in general management, marketing and human resources at IBM and The Pillsbury Company; Independent Director, First American Fund Complex (1987-2010) and Chair (1997-2010). | 238 | |||||||||||||||
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Board Members & Officers (Unaudited) (continued)
Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed and Term(1) |
Principal Occupation(s) Including other Directorships During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Board Member |
|||||||||||||||
Independent Board Members (continued): | |||||||||||||||||||
g TERENCE J. TOTH(2) | |||||||||||||||||||
9/29/59 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
2008 Class II |
Director, Legal & General Investment Management America, Inc. (since 2008); Managing Partner, Promus Capital (since 2008); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); member: Goodman Theatre Board (since 2004), Chicago Fellowship Board (since 2005) and Catalyst Schools of Chicago Board (since 2008); formerly, member: Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003-2007) and Northern Trust Hong Kong Board (1997-2004). | 238 | |||||||||||||||
Interested Board Member: | |||||||||||||||||||
g JOHN P. AMBOIAN(3) | |||||||||||||||||||
6/14/61 333 W. Wacker Drive Chicago, IL 60606 |
Board Member |
2008 Class II |
Chief Executive Officer and Chairman (since 2007) and Director (since 1999) of Nuveen Investments, Inc., formerly, President (1999-2007); Chief Executive Officer (since 2007) of Nuveen Investments Advisers, Inc.; Director (since 1998) formerly, Chief Executive Officer (2007-2010) of Nuveen Fund Advisors, Inc. | 238 | |||||||||||||||
Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed(4) |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Officer |
|||||||||||||||
Officers of the Funds: | |||||||||||||||||||
g GIFFORD R. ZIMMERMAN | |||||||||||||||||||
9/9/56 333 W. Wacker Drive Chicago, IL 60606 |
Chief Administrative Officer |
1988 | Managing Director (since 2002), Assistant Secretary and Associate General Counsel of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Managing Director, Associate General Counsel and Assistant Secretary, of Symphony Asset Management LLC (since 2003); Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Nuveen Investments Advisers Inc. (since 2002), Tradewinds Global Investors LLC, and Santa Barbara Asset Management, LLC (since 2006), Nuveen HydePark Group LLC and Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management Inc. (since 2010); Chief Administrative Officer and Chief Compliance Officer (since 2006) of Nuveen Commodities Asset Management, LLC; Chartered Financial Analyst. | 238 | |||||||||||||||
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42
Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed(4) |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Officer |
|||||||||||||||
Officers of the Funds (continued): | |||||||||||||||||||
g WILLIAM ADAMS IV | |||||||||||||||||||
6/9/55 333 W. Wacker Drive Chicago, IL 60606 |
Vice President | 2007 | Senior Executive Vice President, Global Structured Products (since 2010), formerly, Executive Vice President (1999-2010) of Nuveen Securities, LLC; Co-President of Nuveen Fund Advisors, Inc. (since 2011); President (since August 2011), formerly, Managing Director (2010-2011) of Nuveen Commodities Asset Management, LLC. | 133 | |||||||||||||||
g CEDRIC H. ANTOSIEWICZ | |||||||||||||||||||
1/11/62 333 W. Wacker Drive Chicago, IL 60606 |
Vice President | 2007 | Managing Director of Nuveen Securities, LLC. | 133 | |||||||||||||||
g MARGO L. COOK | |||||||||||||||||||
4/11/64 333 W. Wacker Drive Chicago, IL 60606 |
Vice President | 2009 | Executive Vice President (since 2008) of Nuveen Investments, Inc. and of Nuveen Fund Advisors, Inc. (since 2011); Managing Director-Investment Services of Nuveen Commodities Asset Management, LLC (since August 2011), previously, Head of Institutional Asset Management (2007-2008) of Bear Stearns Asset Management; Head of Institutional Asset Management (1986-2007) of Bank of NY Mellon; Chartered Financial Analyst. | 238 | |||||||||||||||
g LORNA C. FERGUSON | |||||||||||||||||||
10/24/45 333 W. Wacker Drive Chicago, IL 60606 |
Vice President | 1998 | Managing Director (since 2005) of Nuveen Fund Advisors, Inc. and Nuveen Securities, LLC (since 2004). | 238 | |||||||||||||||
g STEPHEN D. FOY | |||||||||||||||||||
5/31/54 333 W. Wacker Drive Chicago, IL 60606 |
Vice President and Controller |
1998 | Senior Vice President (since 2010), formerly, Vice President (2005-2010) and Funds Controller of Nuveen Securities, LLC; Vice President of Nuveen Fund Advisors, Inc.; Chief Financial Officer of Nuveen Commodities Asset Management, LLC; (since 2010) Certified Public Accountant. | 238 | |||||||||||||||
g SCOTT S. GRACE | |||||||||||||||||||
8/20/70 333 W. Wacker Drive Chicago, IL 60606 |
Vice President and Treasurer |
2009 | Managing Director, Corporate Finance & Development, Treasurer (since 2009) of Nuveen Securities, LLC; Managing Director and Treasurer (since 2009) of Nuveen Fund Advisors, Inc., Nuveen Investment Solutions, Inc., Nuveen Investments Advisers, Inc., Nuveen Investments Holdings Inc. and (since 2011) Nuveen Asset Management, LLC; Vice President and Treasurer of NWQ Investment Management Company, LLC, Tradewinds Global Investors, LLC, Symphony Asset Management LLC and Winslow Capital Management, Inc.; Vice President of Santa Barbara Asset Management, LLC; formerly, Treasurer (2006-2009), Senior Vice President (2008-2009), previously, Vice President (2006-2008) of Janus Capital Group, Inc.; formerly, Senior Associate in Morgan Stanley's Global Financial Services Group (2000-2003); Chartered Accountant Designation. | 238 | |||||||||||||||
Nuveen Investments
43
Board Members & Officers (Unaudited) (continued)
Name, Birthdate and Address |
Position(s) Held with the Funds |
Year First Elected or Appointed(4) |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Officer |
|||||||||||||||
Officers of the Funds (continued): | |||||||||||||||||||
g WALTER M. KELLY | |||||||||||||||||||
2/24/70 333 W. Wacker Drive Chicago, IL 60606 |
Chief Compliance Officer and Vice President |
2003 | Senior Vice President (since 2008) and Assistant Secretary (since 2003) of Nuveen Fund Advisors, Inc. | 238 | |||||||||||||||
g TINA M. LAZAR | |||||||||||||||||||
8/27/61 333 W. Wacker Drive Chicago, IL 60606 |
Vice President | 2002 | Senior Vice President (since 2010), formerly, Vice President (2005-2010) of Nuveen Fund Advisors, Inc. | 238 | |||||||||||||||
g KEVIN J. MCCARTHY | |||||||||||||||||||
3/26/66 333 W. Wacker Drive Chicago, IL 60606 |
Vice President and Secretary |
2007 | Managing Director (since 2008), formerly, Vice President (2007-2008), Nuveen Securities, LLC; Managing Director (since 2008), Assistant Secretary (since 2007) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director (since 2008), and Assistant Secretary, Nuveen Investment Holdings, Inc.; Vice President (since 2007) and Assistant Secretary of Nuveen Investments Advisers Inc., NWQ Investment Management Company, LLC, Tradewinds Global Investors LLC, NWQ Holdings, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC, Nuveen HydePark Group, LLC, Nuveen Investment Solutions, Inc. (since 2007) and of Winslow Capital Management, Inc. (since 2010); Vice President and Secretary (since 2010) of Nuveen Commodities Asset Management, LLC; prior thereto, Partner, Bell, Boyd & Lloyd LLP (1997-2007). | 238 | |||||||||||||||
g KATHLEEN L. PRUDHOMME | |||||||||||||||||||
3/30/53 901 Marquette Avenue Minneapolis, MN 55402 |
Vice President and Assistant Secretary | 2011 | Managing Director, Assistant Secretary and Co-General Counsel (since 2011) of Nuveen Fund Advisors, Inc.; Managing Director, Assistant Secretary and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC; Managing Director and Assistant Secretary (since 2011) of Nuveen Securities, LLC; formerly, Deputy General Counsel, FAF Advisors, Inc. (2004-2010). | 238 | |||||||||||||||
(1) The Board Members serve three year terms. The Board of Trustees is divided into three classes. Class I, Class II, and Class III, with each being elected to serve until the third succeeding annual shareholders' meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed. The first year elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen Complex.
(2) Also serves as a trustee of the Nuveen Diversified Commodity Fund, an exchange-traded commodity pool managed by Nuveen Commodities Asset Management, LLC, an affiliate of the Adviser.
(3) Mr. Amboian is an interested Trustee because of his position with Nuveen Investments, Inc. and certain of its subsidiaries, which are affiliates of the Nuveen Funds.
(4) Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed to any fund in the Nuveen Complex.
Nuveen Investments
44
Reinvest Automatically
Easily and Conveniently
Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account.
Nuveen Closed-End Funds Automatic Reinvestment Plan
Your Nuveen Closed-End Fund allows you to conveniently reinvest 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. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each quarter you'll receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund's shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares' net asset value or 95% of the shares' market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on 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 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
Nuveen Investments
45
Reinvest Automatically
Easily and Conveniently (continued)
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.
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 financial 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 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.
Nuveen Investments
46
Glossary of Terms
Used in this Report
• Average Annual Total Return: This is a commonly used method to express an investment's performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment's actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
• Comparative Benchmark: The comparative benchmark performance is a blended return consisting of: 1) 50% of the return of the S&P 500 Index, an unmanaged Index generally considered representative of the U.S. stock market, 2) 25% of the return the CBOE S&P 500 BuyWrite Index (BXM), which is designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index, and 3) 25% of the return of the Merrill Lynch DRD (dividends received deduction) Preferred Index, which consists of investment-grade, DRD-eligible, exchange-traded preferred stocks with one year or more to maturity. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. It is not possible to invest directly in an index.
• Current Distribution Rate: Current distribution rate is based on the Fund's current annualized quarterly distribution divided by the Fund's current market price. The Fund's quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the calendar year the Fund's cumulative net ordinary income and net realized gains are less than the amount of the Fund's distributions, a tax return of capital.
• Effective Leverage: Effective leverage is a Fund's effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative investments in the Fund's portfolio.
• Leverage: Using borrowed money to invest in securities or other assets.
• Net Asset Value (NAV): The net market value of all securities held in a portfolio.
• Net Asset Value (NAV) Per Share: The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by taking the Fund's total assets (securities, cash, and accrued earnings), subtracting the Fund's liabilities, and dividing by the number of shares outstanding.
• Regulatory Leverage: Regulatory Leverage consists of preferred shares or debt issued by the Fund. Both of these are part of the Fund's capital structure. Regulatory leverage is sometimes referred to as "'40 Act Leverage" and is subject to asset coverage limits set in the Investment Company Act of 1940.
• S&P 500 Index: An unmanaged index generally considered representative of the U.S. stock market. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. It is not possible to invest directly in an index.
Nuveen Investments
47
Notes
Nuveen Investments
48
Notes
Nuveen Investments
49
Notes
Nuveen Investments
50
Additional Fund Information
Board of Trustees
John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M. Stockdale
Carole E. Stone
Virginia L. Stringer
Terence J. Toth
Fund Manager
Nuveen Fund Advisors, Inc.
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
Quarterly Portfolio of Investments and Proxy Voting Information
You may obtain (i) the Fund's quarterly portfolio of investments, (ii) information regarding how the Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Fund used to determine how to vote proxies relating to portfolio securities 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 (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 100 F Street NE, Washington, D.C. 20549.
CEO Certification Disclosure
The Fund's Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.
The Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
Distribution Information
The Fund hereby designates its percentages of dividends paid from net ordinary income as dividends qualifying for the 70% dividends received deduction (DRD) for corporations and its percentages as qualified dividend income (QDI) for individuals under Section 1(h)(11) of the Internal Revenue Code as shown in the accompanying table. The actual qualified dividend income distributions will be reported to shareholders on Form 1099-DIV which will be sent to shareholders shortly after calendar year end.
% of DRD | % of QDI | ||||||||||
JTD | 48.76 | % | 60.52 | % |
Common Share Information
The Fund intends to repurchase shares of its own common stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Fund repurchased shares of its common stock as shown in the accompanying table.
Common Shares Repurchased |
|||||||
JTD | 19,900 |
Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
Nuveen Investments
51
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments provides high-quality investment services designed to help secure the long-term goals of institutional and individual investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets a wide range of specialized investment solutions which provide investors access to capabilities of its high-quality boutique investment affiliatesNuveen Asset Management, Symphony Asset Management, NWQ Investment Management Company, Santa Barbara Asset Management, Tradewinds Global Investors, Winslow Capital Management and Gresham Investment Management. In total, Nuveen Investments managed $220 billion as of December 31, 2011.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain 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.
Learn more about Nuveen Funds at: www.nuveen.com/cef
Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, IL 60606
www.nuveen.com/cef
EAN-J-1211D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There were no amendments to or waivers from the Code during the period covered by this report. The registrant has posted the code of ethics on its website at www.nuveen.com/CEF/Info/Shareholder/. (To view the code, click on Fund Governance and then click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrants Board of Directors or Trustees (Board) determined that the registrant has at least one audit committee financial expert (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. The registrants audit committee financial expert is Carole E. Stone, who is independent for purposes of Item 3 of Form N-CSR.
Ms. Stone served for five years as Director of the New York State Division of the Budget. As part of her role as Director, Ms. Stone was actively involved in overseeing the development of the States operating, local assistance and capital budgets, its financial plan and related documents; overseeing the development of the States bond-related disclosure documents and certifying that they fairly presented the States financial position; reviewing audits of various State and local agencies and programs; and coordinating the States system of internal audit and control. Prior to serving as Director, Ms Stone worked as a budget analyst/examiner with increasing levels of responsibility over a 30 year period, including approximately five years as Deputy Budget Director. Ms. Stone has also served as Chair of the New York State Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. These positions have involved overseeing operations and finances of certain entities and assessing the adequacy of project/entity financing and financial reporting. Currently, Ms. Stone is on the Board of Directors of CBOE Holdings, Inc., of the Chicago Board Options Exchange, and of C2 Options Exchange. Ms. Stones position on the boards of these entities and as a member of both CBOE Holdings Audit Committee and its Finance Committee has involved, among other things, the oversight of audits, audit plans and preparation of financial statements.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND
The following tables show the amount of fees that Ernst & Young LLP, the Funds auditor, billed to the Fund during the Funds last two full fiscal years. For engagements with Ernst & Young LLP the Audit Committee approved in advance all audit services and non-audit services that Ernst & Young LLP provided to the Fund, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the pre-approval exception). The pre-approval exception for services provided directly to the Fund waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by the Fund to its accountant during the fiscal year in which the services are provided; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committees attention, and the Committee (or its delegate) approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).
SERVICES THAT THE FUNDS AUDITOR BILLED TO THE FUND
|
|
Audit Fees Billed |
|
Audit-Related Fees |
|
Tax Fees |
|
All Other Fees |
| ||||
Fiscal Year Ended |
|
to Fund (1) |
|
Billed to Fund (2) |
|
Billed to Fund (3) |
|
Billed to Fund (4) |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2011 |
|
$ |
22,100 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
| ||||
Percentage approved pursuant to pre-approval exception |
|
0 |
% |
0 |
% |
0 |
% |
0 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2010 |
|
$ |
22,100 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
| ||||
Percentage approved pursuant to pre-approval exception |
|
0 |
% |
0 |
% |
0 |
% |
0 |
% |
(1) |
|
Audit Fees are the aggregate fees billed for professional services for the audit of the Funds annual financial statements and services provided in connection with statutory and regulatory filings or engagements. |
|
|
|
(2) |
|
Audit Related Fees are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or review of financial statements and are not reported under Audit Fees. |
|
|
|
(3) |
|
Tax Fees are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. |
|
|
|
(4) |
|
All Other Fees are the aggregate fees billed for products and services for agreed upon procedures engagements performed for leveraged funds. |
SERVICES THAT THE FUNDS AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by Ernst & Young LLP to Nuveen Fund Advisors, Inc. (formerly Nuveen Asset Management) (the Adviser), and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund (Affiliated Fund Service Provider), for engagements directly related to the Funds operations and financial reporting, during the Funds last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval exception. The pre-approval exception for services provided to the Adviser and any Affiliated Fund Service Provider (other than audit, review or attest services) waives the pre-approval requirement if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund Service Providers during the fiscal year in which the services are provided that would have to be pre-approved by the Audit Committee; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committees attention, and the Committee (or its delegate) approves the services before the Funds audit is completed.
|
|
Audit-Related Fees |
|
Tax Fees Billed to |
|
All Other Fees |
| |||
|
|
Billed to Adviser and |
|
Adviser and |
|
Billed to Adviser |
| |||
|
|
Affiliated Fund |
|
Affiliated Fund |
|
and Affiliated Fund |
| |||
Fiscal Year Ended |
|
Service Providers |
|
Service Providers |
|
Service Providers |
| |||
|
|
|
|
|
|
|
| |||
December 31, 2011 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
|
|
|
|
|
|
| |||
Percentage approved pursuant to pre-approval exception |
|
0 |
% |
0 |
% |
0 |
% | |||
|
|
|
|
|
|
|
| |||
December 31, 2010 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
|
|
|
|
|
|
| |||
Percentage approved pursuant to pre-approval exception |
|
0 |
% |
0 |
% |
0 |
% |
NON-AUDIT SERVICES
The following table shows the amount of fees that Ernst & Young LLP billed during the Funds last two full fiscal years for non-audit services. The Audit Committee is required to pre-approve non-audit services that Ernst & Young LLP provides to the Adviser and any Affiliated Fund Services Provider, if the engagement related directly to the Funds operations and financial reporting (except for those subject to the pre-approval exception described above). The Audit Committee requested and received information from Ernst & Young LLP about any non-audit services that Ernst & Young LLP rendered during the Funds last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating Ernst & Young LLPs independence.
|
|
|
|
Total Non-Audit Fees |
|
|
|
|
| ||||
|
|
|
|
billed to Adviser and |
|
|
|
|
| ||||
|
|
|
|
Affiliated Fund Service |
|
Total Non-Audit Fees |
|
|
| ||||
|
|
|
|
Providers (engagements |
|
billed to Adviser and |
|
|
| ||||
|
|
|
|
related directly to the |
|
Affiliated Fund Service |
|
|
| ||||
|
|
Total Non-Audit Fees |
|
operations and financial |
|
Providers (all other |
|
|
| ||||
Fiscal Year Ended |
|
Billed to Fund |
|
reporting of the Fund) |
|
engagements) |
|
Total |
| ||||
December 31, 2011 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
December 31, 2010 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
Non-Audit Fees billed to Fund for both fiscal year ends represent Tax Fees and All Other Fees billed to Fund in their respective amounts from the previous table.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit Committee must approve (i) all non-audit services to be performed for the Fund by the Funds independent accountants and (ii) all audit and non-audit services to be performed by the Funds independent accountants for the Affiliated Fund Service Providers with respect to operations and financial reporting of the Fund. Regarding tax and research projects conducted by the independent accountants for the Fund and Affiliated Fund Service Providers (with respect to operations and financial reports of the Fund) such engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee chairman for his verbal approval prior to engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrants Board has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The members of the audit committee are Robert P. Bremner, David J. Kundert, William J. Schneider, Carole E. Stone and Terence J. Toth.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) |
|
See Portfolio of Investments in Item 1. |
|
|
|
(b) |
|
Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
The Adviser, Nuveen Fund Advisors, Inc., has engaged NWQ Investment Management Company, LLC (NWQ), Santa Barbara Asset Management, LLC (SBAM) and Nuveen Asset Management, LLC (Nuveen Asset Management) (NWQ, SBAM and Nuveen Asset Management are collectively referred to herein as Sub-Advisers) to provide discretionary investment advisory services to the Fund. As part of these services, the Adviser has also delegated to Nuveen Asset Management, NWQ and SBAM the full responsibility for proxy voting and related duties in accordance with the Sub-Advisers policy and procedures. The Adviser periodically will monitor each Sub-Advisers voting to ensure that they are carrying out their duties. The Sub-Advisers proxy voting policies and procedures are summarized as follows:
NUVEEN ASSET MANAGEMENT
Nuveen Asset Managements proxy voting policies and procedures are attached to this filing as an exhibit and incorporated herein by reference.
NWQ
With respect to NWQ, NWQs Proxy Voting Committee (the Committee) is responsible for supervision of the proxy voting process, including identification of material conflicts of interest involving NWQ and the proxy voting process in respect of securities owned on behalf of clients, and circumstances when NWQ may deviate from its policies and procedures. Unless otherwise determined by the Committee, NWQ will cause proxies to be voted consistent with the recommendations or guidelines of an independent third party proxy service or other third party, and in most cases, votes generally in accordance with the recommendations of MSCI Institutional Shareholder Services (ISS) on the voting of proxies relating to securities held on behalf of clients accounts. Unless otherwise restricted, the Committee reserves the right to override the specific recommendations in any situation where it believes such recommendation is not in its clients best interests. The Committee oversees the identification of material conflicts of interest, and where such matter is covered by the recommendations or guidelines of a third party proxy service, it shall cause proxies to be voted in accordance with the applicable recommendation or guidelines, to avoid such conflict. If a material conflict of interest matter is not covered by the third party service provider recommendations, NWQ may (i) vote in accordance with the recommendations of an alternative independent third party or (ii) disclose the conflict to the client, and with their consent, make the proxy voting determination and document the basis for such determination.
NWQ generally does not intend to vote proxies associated with the securities of any issuer if as a result of voting, the issuer restricts such securities from being transacted for a period (this occurs for issuers in a few foreign countries), or where the voting would in NWQs judgment result in some other financial, legal, regulatory disability or burden to NWQ or the client (such as imputing control with respect to the issuer).
SBAM
Generally, except to the extent a client instructs the firm otherwise, Santa Barbara will vote on all matters for which a shareholder vote is solicited by issuers of securities beneficially held in client accounts in such manner as deemed appropriate in accordance with the firms written policies and procedures. Santa Barbaras proxy voting policies and procedures set forth guidelines for voting many typical proxy proposals. In certain instances, the firm may determine that it is in clients best interest to deviate from the guidelines or the proxy issue may require individual case-by-case consideration under the guidelines. Santa Barbara has designated a Nuveen affiliate as primarily responsible for monitoring proxy voting for our clients.
If a proposal raises a material conflict of interest between Santa Barbara and its client(s), the firm is committed to resolving the conflict in the best interest of clients before the firm votes the proxy in question. If any such instances should arise, the firm will vote for or against the given proposals as stated in its standard voting guidelines. Alternatively (and with respect to issues not mentioned in the voting guidelines and those to be determined on a case-by case basis), the firm will obtain voting direction from an independent third party or disclose the conflict of interest to clients and obtain clients consent prior to voting the securities.
Clients may obtain, free of charge, information on how their securities were voted or a copy of these Proxy Voting Policies and Procedures by written request addressed to the Santa Barbara office or by calling (805) 965-4600.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Nuveen Fund Advisors, Inc. (NFA) is the registrants investment adviser (NFA is also referred to as the Adviser). NFA is responsible for the selection and on-going monitoring of the Funds investment portfolio, managing the Funds business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged NWQ Investment Management Company, LLC (NWQ), Nuveen Asset Management, LLC (Nuveen Asset Management) and Santa Barbara Asset Management (Santa Barbara) as Sub-Advisers to provide discretionary investment advisory services; (NWQ, Nuveen Asset Management and Santa Barbara are also collectively referred to as Sub-Advisers). The following section provides information on the portfolio managers at each Sub-Adviser:
NUVEEN ASSET MANAGEMENT
Item 8(a)(1). PORTFOLIO MANAGER BIOGRAPHIES
Messrs. Keith B. Hembre, CFA, David A. Friar and James Colon, CFA are primarily responsible for the day-to-day management of the portion of the registrants portfolio managed by Nuveen Asset Management.
Mr. Hembre, Managing Director of Nuveen Asset Management, entered the financial services industry in 1992. He joined Nuveen Asset Management, LLC in January 2011 following the firms acquisition of a portion of the asset management business of FAF Advisors, Inc. (FAF Advisors) and currently serves as Nuveen Asset Managements Chief Economist & Chief Investment Strategist. Mr. Hembre previously served in various positions with FAF Advisors since 1997 where he headed the team that managed the firms asset allocation, international equity, quantitative equity, and index products and most recently also served as Chief Economist and Chief Investment Strategist.
Mr. Friar, Senior Vice President and Portfolio Manager of Nuveen Asset Management since January 2011, entered the financial services industry in 1998. He joined Nuveen Asset Management in January 2011 following the firms acquisition of a portion of the asset management business of FAF Advisors. Mr. Friar previously served in various positions with FAF Advisors since 1999 where he served as a member of FAFs Performance Measurement group.
Mr. Colon is a portfolio manager and senior quantitative analyst for Nuveen Asset Management. His responsibilities include portfolio management, risk management and research, with a specific focus on asset allocation strategies. Prior to Nuveen Asset Management, he was a Vice President and Portfolio Manager at HydePark and at an affiliate, Nuveen Investment Solutions (NIS), where he managed the quantitative analysis underlying NISs asset allocation, alternative investment research, and risk management methods. He is a member of the CFA Institute, the CFA Society of Chicago, and the International Association of Financial Engineers.
Item 8(a)(2). OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS
In addition to the Fund, as of December 31, 2011, the portfolio managers are also primarily responsible for the day-to-day portfolio management of the following accounts:
|
|
(ii) Number of Other Accounts Managed |
|
(iii) Number of Other Accounts and |
| |||||||||||||||||
(i) Name of |
|
Other |
|
Other Pooled |
|
Other |
|
Other |
|
Other Pooled |
|
Other |
| |||||||||
Keith Hembre |
|
8 |
|
$ |
2.066 billion |
|
0 |
|
$ |
0 |
|
4 |
|
$ |
19,032,156 |
|
NA |
|
NA |
|
NA |
|
David Friar |
|
11 |
|
$ |
2.850 billion |
|
0 |
|
$ |
0 |
|
26 |
|
$ |
621,846,629 |
|
NA |
|
NA |
|
NA |
|
James Colon |
|
9 |
|
$ |
1.901 billion |
|
1 |
|
$ |
0 |
|
5 |
|
$ |
5,544,710 |
|
NA |
|
NA |
|
NA |
|
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented a number of potential conflicts, including, among others, those discussed below.
The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Nuveen Asset Management seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Nuveen Asset Management has adopted procedures for allocating limited opportunities across multiple accounts.
With respect to many of its clients accounts, Nuveen Asset Management determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Nuveen Asset Management may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Nuveen Asset Management may place separate, non-simultaneous, transactions for a Fund and
other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Nuveen Asset Management has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
Nuveen Asset Management has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). FUND MANAGER COMPENSATION
Portfolio manager compensation consists primarily of base pay, an annual cash bonus and long term incentive payments.
Base pay. Base pay is determined based upon an analysis of the portfolio managers general performance, experience, and market levels of base pay for such position.
Annual cash bonus. The Funds portfolio managers are eligible for an annual cash bonus based on investment performance, qualitative evaluation and financial performance of Nuveen Asset Management.
A portion of each portfolio managers annual cash bonus is based on the Funds investment performance, generally measured over the past one- and three or five-year periods unless the portfolio managers tenure is shorter. Investment performance for the Fund generally is determined by evaluating the Funds performance relative to its benchmark(s) and/or Lipper industry peer group.
A portion of the cash bonus is based on a qualitative evaluation made by each portfolio managers supervisor taking into consideration a number of factors, including the portfolio managers team collaboration, expense management, support of personnel responsible for asset growth, and his or her compliance with Nuveen Asset Managements policies and procedures.
The final factor influencing a portfolio managers cash bonus is the financial performance of Nuveen Asset Management based on its operating earnings.
Long-term incentive compensation. Certain key employees of Nuveen Investments and its affiliates, including certain portfolio managers, have received equity interests in the
parent company of Nuveen Investments. In addition, certain key employees of Nuveen Asset Management, including certain portfolio managers, have received profits interests in Nuveen Asset Management which entitle their holders to participate in the firms growth over time.
There are generally no differences between the methods used to determine compensation with respect to the Fund and the Other Accounts shown in the table above.
Item 8(a)(4). OWNERSHIP OF JTD SECURITIES AS OF FEBRUARY 29, 2012
Name of Portfolio |
|
None |
|
$1 - |
|
$10,001- |
|
$50,001- |
|
$100,001- |
|
$500,001- |
|
Over |
|
Keith Hembre |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
David Friar |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
James Colon |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
NWQ
Item 8(a)(1). PORTFOLIO MANAGER BIOGRAPHIES
Michael Carne, CFA, Managing Director and Fixed Income Portfolio Manager
Prior to joining NWQ in 2002, Mr. Carne managed institutional, private client fixed income and balanced portfolios for over twenty years. During this time, he held assignments as Director of Global Fixed Income at Aetna Capital Management, as Chief Investment Officer of a Phoenix Home Life affiliate and was a principal in Standard Asset Group. Mr. Carne graduated from the University of Massachusetts with a B.B.A. degree in Finance and received his M.B.A. from Harvard University. He earned the designation of Chartered Financial Analyst in 1989.
Item 8(a)(2). OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS
In addition to managing the Income Oriented Strategy, Mr. Carne is also primarily responsible for the day-to-day portfolio management of the following accounts. Information is provided as of December 31, 2011 unless otherwise indicated:
Type of Account Managed |
|
Number of Accounts |
|
Assets* |
| |
Registered Investment Company |
|
3 |
|
$ |
650,770,720 |
|
Other Pooled Investment |
|
0 |
|
$ |
0 |
|
Other Accounts |
|
6,729 |
|
$ |
1,217,237,095 |
|
* None of the assets in these accounts are subject to an advisory fee based on performance.
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented with the following potential conflicts, which are not intended to be an exhaustive list:
· The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. NWQ seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
· If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these
situations, NWQ has adopted procedures for allocating limited opportunities across multiple accounts.
· With respect to many of its clients accounts, NWQ determines which broker to use to execute transaction orders, consistent with its duty to seek to obtain best execution of the transaction. However, with respect to certain other accounts, NWQ may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, NWQ may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the execution of the transactions, or both, to the detriment of the Fund or the other accounts.
· The Fund is subject to different regulation than other pooled investment vehicles and other accounts managed by the portfolio managers. As a consequence of this difference in regulatory requirements, the Fund may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio managers. Finally, the appearance of a conflict of interest may arise where NWQ has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
NWQ has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). FUND MANAGER COMPENSATION
NWQ offers a highly competitive compensation structure with the purpose of attracting and retaining the most talented investment professionals. These professionals are rewarded through a combination of cash and long-term incentive compensation as determined by the firms executive committee. Total cash compensation (TCC) consists of both a base salary and an annual bonus that can be a multiple of the base salary. The firm annually benchmarks TCC to prevailing industry norms with the objective of achieving competitive levels for all contributing professionals.
Available bonus pool compensation is primarily a function of the firms overall annual profitability, and in the interest of employee and client interest alliance, NWQs bonus pool will be augmented should the firm outperform its benchmarks on a 1, 2 and 3 year basis. Individual bonuses are based primarily on the following:
· Overall performance of client portfolios
· Objective review of stock recommendations and the quality of primary research
· Subjective review of the professionals contributions to portfolio strategy, teamwork, collaboration and work ethic
To further strengthen our incentive compensation package and to create an even stronger alignment to the long-term success of the firm, NWQ provides a number of other incentive opportunities through long-term employment contracts with senior executives, retention agreements, and an equity incentive plan with non-solicitation and non-compete provisions for participating employees. The equity incentive plan provides meaningful equity to employees which is similar to restricted stock and options and which vests over the next 5 to 7 years. Equity incentive plans allowing key employees of NWQ to participate in the firms growth over time have been in place since Nuveens acquisition of NWQ.
At NWQ, we believe that we are an employer of choice. Our analysts have a meaningful impact on the portfolio and, therefore, are compensated in a manner similar to portfolio managers at many other firms. Benefits besides compensation include a college tuition program for the children of all full-time employees whereby they are eligible for reimbursement of tuition and other mandatory fees, among others.
Item 8(a)(4). OWNERSHIP OF JTD SECURITIES AS OF DECEMBER 31, 2011
Name of Portfolio |
|
None |
|
$1 - |
|
$10,001- |
|
$50,001- |
|
$100,001- |
|
$500,001- |
|
Over |
|
Michael Carne |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Barbara
Item 8(a)(1). PORTFOLIO MANAGER BIOGRAPHY
Mr. James Boothe, CFA, joined Santa Barbara in 2002 with over 20 years of investment management experience. He was a Portfolio Manager with USAA Investment Management. Prior to that Mr. Boothe was a portfolio manager / analyst at San Juan Asset Management. He earned a B.B.A. from Kent State University and received his M.B.A. in Finance from Loyola Marymount University. Mr. Boothe has earned the CFA Institutes Chartered Financial Analyst designation.
Item 8(a)(2). OTHER ACCOUNTS MANAGED
In addition to managing the Dividend Growth Equity Strategy, Mr. Boothe is also primarily responsible for the day-to-day portfolio management of the following accounts. Information is provided as of December 31, 2011 unless otherwise indicated:
Type of Account Managed |
|
Number of Accounts |
|
Assets* |
| |
Registered Investment Company |
|
4 |
|
$ |
706,275,613.93 |
|
Other Pooled Investment |
|
|
|
$ |
0 |
|
Other Accounts |
|
2,683 |
|
$ |
2,658,257,367 |
|
* None of the assets in these accounts are subject to an advisory fee based on performance.
Material Conflicts of Interest. Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, a portfolio manager who manages multiple accounts is presented with the following potential conflicts:
· The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Santa Barbara seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
· If a portfolio manager identifies a limited investment opportunity that may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Santa Barbara has adopted procedures for allocating portfolio transactions across multiple accounts.
· With respect to many of its clients accounts, Santa Barbara determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Santa
Barbara may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Santa Barbara may place separate, non-simultaneous, transactions for a Fund and other accounts, which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
· The Fund is subject to different regulation than the other pooled investment vehicles and other accounts managed by the portfolio manager. As a consequence of this difference in regulatory requirements, the Fund may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Santa Barbara has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
In addition, Merrill Lynch & Co., Inc. (Merrill Lynch), which was acquired by Bank of America Corporation (Bank of America, and together with their affiliates, ML/BofA), are indirect investors in Nuveen. While we do not believe that ML/BofA are affiliates of Santa Barbara for purposes of the Investment Company Act of 1940, Santa Barbara may determine to impose certain trading limitations in connection with ML/BofA broker-dealers.
Santa Barbara has adopted certain compliance procedures that are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). FUND MANAGER COMPENSATION
Salary and Cash Bonus. With respect to Santa Barbara, Mr. Boothe participates in a highly competitive compensation structure with the purpose of attracting and retaining the most talented investment professionals and rewarding them through a total compensation program as determined by Santa Barbaras executive committee. The total compensation consists of both a base salary and any annual bonus that can be a multiple of the base salary. Mr. Boothes performance is formally evaluated annually and based on a variety of factors. Bonus compensation is primarily a function of Santa Barbaras overall annual profitability and Mr. Boothes contribution as measured by the overall investment performance of client portfolios in the strategies he manages relative the strategys general benchmark for one-, three- and five-year periods as well as an objective review of stock recommendations and the quality of primary research and subjective review of Mr. Boothes contributions to portfolio strategy, team work, collaboration and work ethic.
Item 8(a)(4). OWNERSHIP OF JTD SECURITIES AS OF DECEMBER 31, 2011
Name of Portfolio |
|
None |
|
$1 - |
|
$10,001- |
|
$50,001- |
|
$100,001- |
|
$500,001- |
|
Over |
|
James Boothe |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
|
|
|
|
(b) |
|
(c) |
|
(d)* |
| |
|
|
(a) |
|
AVERAGE |
|
TOTAL NUMBER OF SHARES |
|
MAXIMUM NUMBER (OR |
| |
|
|
TOTAL NUMBER OF |
|
PRICE |
|
(OR UNITS) PURCHASED AS |
|
APPROXIMATE DOLLAR VALUE) OF |
| |
|
|
SHARES (OR |
|
PAID PER |
|
PART OF PUBLICLY |
|
SHARES (OR UNITS) THAT MAY YET |
| |
|
|
UNITS) |
|
SHARE (OR |
|
ANNOUNCED PLANS OR |
|
BE PURCHASED UNDER THE PLANS OR |
| |
Period* |
|
PURCHASED |
|
UNIT) |
|
PROGRAMS |
|
PROGRAMS |
| |
|
|
|
|
|
|
|
|
|
| |
JANUARY 1-31, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
FEBRUARY 1-28, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
MARCH 1-31, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
APRIL 1-30, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
MAY 1-31, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
JUNE 1-30, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
JULY 1-31, 2011 |
|
0 |
|
|
|
0 |
|
1,450,000 |
| |
|
|
|
|
|
|
|
|
|
| |
AUGUST 1-31, 2011 |
|
10,800 |
|
$ |
10.91 |
|
10,800 |
|
1,439,200 |
|
|
|
|
|
|
|
|
|
|
| |
SEPTEMBER 1-30, 2011 |
|
0 |
|
|
|
0 |
|
1,439,200 |
| |
|
|
|
|
|
|
|
|
|
| |
OCTOBER 1-31, 2011 |
|
2,500 |
|
$ |
11.57 |
|
2,500 |
|
1,436,700 |
|
|
|
|
|
|
|
|
|
|
| |
NOVEMBER 1-30, 2011 |
|
6,500 |
|
$ |
11.40 |
|
6,500 |
|
1,433,500 |
|
|
|
|
|
|
|
|
|
|
| |
DECEMBER 1-31, 2011 |
|
100 |
|
$ |
11.46 |
|
100 |
|
1,433,400 |
|
|
|
|
|
|
|
|
|
|
| |
TOTAL |
|
19,900 |
|
|
|
|
|
|
|
* The registrants repurchase program, for the repurchase of 1,450,000 shares, was authorized November 16, 2010. The program was reauthorized for a maximum repurchase amount of 1,440,000 shares on November 16, 2011. Any repurchases made by the registrant pursuant to the program were made through open-market transactions.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrants Board implemented after the registrant last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrants principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants 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 registrants 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 registrants internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable because the code is posted on registrants website at www.nuveen.com/CEF/Info/Shareholder/ and there were no amendments during the period covered by this report. (To view the code, click on Fund Governance and then Code of Conduct.)
(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT Attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR 270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed filed for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Dividend Growth Fund
By (Signature and Title) |
/s/ Kevin J. McCarthy |
|
|
Kevin J. McCarthy |
|
|
Vice President and Secretary |
|
Date: March 9, 2012
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 |
|
Date: March 9, 2012
By (Signature and Title) |
/s/ Stephen D. Foy |
|
|
Stephen D. Foy |
|
|
Vice President and Controller |
|
Date: March 9, 2012