UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21407
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Nuveen Diversified Dividend and Income Fund
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2005
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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 STOCKHOLDERS.
SEMIANNUAL REPORT June 30, 2005
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN
DIVERSIFIED
DIVIDEND AND
INCOME FUND
JDD
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HIGH CURRENT INCOME AND TOTAL RETURN FROM A PORTFOLIO OF DIVIDEND-PAYING COMMON
STOCKS, REIT STOCKS, EMERGING MARKETS SOVEREIGN DEBT, AND SENIOR LOANS
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Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am very pleased to report that for the period ended June 30, 2005, your Fund
continued to provide you with attractive monthly distributions and diversified
exposure to a variety of important market sectors and asset classes.
Portfolio diversification is a recognized way to reduce some of the risk that
comes with investing. Since one part of your portfolio may be going up when
another is going down, portfolio diversification may help smooth your investment
returns over time. Your Fund, with its holdings of dividend-paying common
stocks, REIT stocks, emerging markets sovereign debt and senior corporate loans,
is specifically designed to help you achieve greater portfolio diversification.
Your financial advisor can explain the potential advantages of portfolio
diversification in more detail. I urge you to contact him or her soon for more
information on this important investment strategy.
"YOUR FUND, WITH ITS HOLDINGS OF DIVIDEND-PAYING COMMON STOCKS, REIT STOCKS,
EMERGING MARKETS SOVEREIGN DEBT AND SENIOR CORPORATE LOANS, IS SPECIFICALLY
DESIGNED TO HELP YOU ACHIEVE GREATER PORTFOLIO DIVERSIFICATION."
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mails and the Internet. Sign up is quick and easy
- see the inside front cover of this report for step-by-step instructions.
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its shares in Nuveen to us or to others. Please be assured that these
transactions only affect Nuveen's corporate structure, and they do not have any
impact on the investment objectives or management of your Fund.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
mission continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you secure your long-term
financial goals. We thank you for choosing us as a partner as you work toward
that objective. Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 15, 2005
Nuveen Diversified Dividend and Income Fund
(JDD)
Portfolio Managers'
COMMENTS
The Nuveen Diversified Dividend and Income Fund features portfolio management by
teams at four subadvisers:
NWQ Investment Management Company, LLC, an affiliate of Nuveen Investments,
invests its portion of the Fund's assets in dividend-paying common stocks. Jon
Bosse, Chief Investment Officer of NWQ, leads the Fund's management team at that
firm. He has more than 22 years of investment management experience.
Security Capital Research & Management Incorporated, a wholly-owned subsidiary
of J. P. Morgan Chase & Co., invests its portion of the Fund's assets primarily
in REIT common stocks. Tony Manno and Ken Statz, who each have more than 22
years' experience in managing real estate investments, lead the team.
Wellington Management Company, LLP invests its portion of the Fund's assets in
emerging markets sovereign debt. James W. Valone, who has more than 10 years of
investment management experience, heads the team.
Symphony Asset Management, LLC, an affiliate of Nuveen Investments, invests its
portion of the Fund's assets in senior loans. The Symphony team is led by
Gunther Stein and Lenny Mason, who have more than 25 years of combined
investment management experience.
Here representatives from NWQ, Security Capital, Wellington and Symphony talk
about their management strategies and the performance of the Fund for the
six-month period ended June 30, 2005
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 2005?
For the portion of the Fund's assets earmarked for dividend-paying common
stocks, there were no changes to our management strategy during the period. We
continued to employ an opportunistic, bottom-up strategy that focused on
identifying attractively valued companies that we thought possessed favorable
risk/reward characteristics and emerging catalysts that we believed could unlock
value or improve profitability. These catalysts included management changes,
restructuring efforts, recognition of hidden assets, or a positive change in the
underlying fundamentals. We also continued to focus on downside protection, and
paid a great deal of attention to a company's balance sheet and cash flow
statement, not just the income statement. We believed that cash flow analysis
offered a more objective and truer picture of a company's financial position
than an evaluation based on earnings alone.
4
During this six-month period, we took new positions in five securities and added
to our stakes in several existing holdings. The new investments include Dominion
Resources, Dow Jones & Company, Merck & Co., POSCO, and Wachovia Corp. Our
analysis indicated these companies possessed solid fundamentals, compelling
valuations and an attractive risk/reward relationship. Conversely, we eliminated
our positions in May Department Stores, Tate & Lyle, Unocal Corp., and
Weyerhauser Co., where we believed the valuations had become less attractive,
and in Delphi, where we believed the fundamentals had deteriorated.
For the portion of the Fund's portfolio that was invested in real estate
securities, we continued to focus on finding what we believed would be the best
opportunities to generate sustainable income and potential price appreciation
over the long-run. In particular, we sought to maintain significant
diversification within this sector while taking into account company credit
quality, sector and geographic exposure and security-type allocations. Every
investment decision was based on a multi-layered analysis of the company, the
real estate it owns, its management and the relative price of the security.
In general over this period, we favored real estate companies with high quality
management teams, strong balance sheets and potential for price appreciation
generally situated in urban markets characterized by high barriers-to-entry. In
each case, we sought real estate securities that were priced at a discount
according to our long-term discounted cash flow valuation analysis. This
analysis benefited the portfolio's performance as we owned both Gables
Residential Trust and CRT Properties, Inc., each a major privatization target
that experienced significant price appreciation during the six month reporting
period.
At the beginning of this six-month period, the real estate portfolio consisted
of 89.2% common stocks and 10.8% preferred stocks (excluding cash equivalents).
As of June 30, 2005, the portfolio allocations were 92.6% common stocks and 7.4%
preferred stocks (excluding cash equivalents).
For the portion of the portfolio invested in emerging markets sovereign debt, we
sought to add value by identifying countries and securities with attractive
risk/return profiles. In Central and Eastern Europe, we maintained an overweight
to Russia on the belief that Russian sovereign and quasi-sovereign debt was
attractively valued and would benefit from continued de-leveraging trends in the
country. In Turkey, we moved to an under-
5
weight position, as several European Union leaders signaled their reluctance to
allow Turkey to join as a full member.
In Latin America, our investments in Argentina reflected our belief that, after
exiting out of default, the country was well positioned for solid growth and
credit improvement over the next few years. On the other end of the credit
spectrum, we believed that Mexican debt offered attractive value relative to
other investment-grade rated countries in the market. In Asia, Indonesia was a
favorite as we saw stable credit fundamentals and attractive valuations.
For the senior loan portion of the Fund, we focused on executing a conservative
portfolio management strategy which emphasized carefully selecting both industry
sectors and individual companies. We analyzed opportunities to upgrade the
portfolio by selling loans in sectors that we believed would have problems over
the coming months and rotating into what we believed were safer, less cyclical
sectors that would provide stronger asset protection. At the same time, we also
closely monitored the relative value of the loans we held or were considering as
compared with other closely related loans or securities in the high yield
market. Given the robust volume of new deals, we generally were able to find
loans that we felt provided more asset protection and less earnings volatility.
Early in this reporting period, we completed the sale of some of our automotive
exposure. We substantially reduced our exposure before the sector experienced
significant volatility in May due to fears surrounding General Motors and Ford.
6
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a comparative benchmark,
are shown in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE*
For periods ended June 30, 2005
6 - MONTH 1-YEAR
--------------------------------------------------------------------------------
JDD 3.61% 20.13%
--------------------------------------------------------------------------------
Comparative Benchmark1 3.86% 17.53%
--------------------------------------------------------------------------------
*Six-month returns are cumulative; return for one year is annualized.
Past performance does not guarantee future results. Current performance may be
higher or lower than the data shown. Returns do not reflect the deduction of
taxes that a shareholder may have to pay on Fund distributions or upon the sale
of Fund shares.
See the Performance Overview Page for additional information.
For the six months ended June 30, 2005, the Fund underperformed an unleveraged,
unmanaged comparative benchmark. Each of the four asset classes in which the
Fund invests provided generally positive performance during this period.
The dividend-paying common stock portion of the Fund's portfolio benefited from
several holdings that recorded sizable gains. Our investments in the energy
sector provided the most significant impact to performance during the period.
Energy stocks tended to outperform as crude oil prices reached record highs and
the prospect of even higher energy prices continued to create demand for these
securities. Along with strong operating results, oil and gas companies are
generating significant free cash flows which they are using for debt reduction
and share repurchases - actions that strengthen the balance sheet and accrete
value to equity shareholders. As of June 30, 2005, our energy investments
included exploration companies ENI Spa and Kerr McGee, and integrated firms
ChevronTexaco, ConocoPhilips, and Total S.A. We eliminated our position in
Unocal Corp. during the period after the company received a takeover offer from
Chevron.
In the finance sector, our investment in IndyMac Bancorp appreciated 18% as the
company exceeded earnings expectations due to increased mortgage volumes brought
on by declining long-term interest rates. Shares of Hartford Financial Services
gained 8% as the rising stock market contributed to strong sales of the
company's annuity products, and Aon Corp. posted a 5% gain as ongoing cost
cutting initiatives enabled the company to exceed earnings expectations during
an otherwise difficult environment for property-casualty insurance companies.
1 Comparative benchmark performance is a blended return consisting of 1)
18.75% of the return of the Russell 3000 Value Index, which measures the
performance of those Russell 3000 Index companies with lower price-to-book
ratios and lower forecasted growth values, 2) 6.25% of the return of the
MSCI EAFE ex-Japan Value Index, a capitalization-weighted index that
selects the lower 50% of the price-to-book ranked value stocks ranks traded
in the developed markets of Europe, Asia and the Far East, excluding Japan,
3) 25% of the return of the Dow Jones Wilshire Real Estate Securities
Index, an unmanaged, market-capitalization-weighted index comprised of
publicly traded REITs and real estate companies, 4) 25% of the return of
the JP Morgan EMBI Global Diversified Index, which tracks total returns for
U.S.-dollar-denominated debt instruments issued by emerging markets
sovereign and quasi-sovereign entities, and 5) 25% of the return of the
CSFB Leveraged Loan Index, which consists of approximately $150 billion of
tradable term loans with at least one year to maturity and rated BBB or
lower. Index returns do not include the effects of any sales charges or
management fees. It is not possible to invest directly in an index.
7
It was a relatively bullish period for retail stocks, and our investment in May
Department Stores rose sharply as investors speculated that management at
Federated Department Stores will be able to institute significant operational
improvements once the company completes its planned merger later this year.
However, we did eliminate our position in May Department Stores during the
period when the stock's price reached levels that we did not believe were
sustainable. Our tobacco positions of Altria Group Inc. and Loews-Carolina Group
rose 6% and 15%, respectively, because of improving industry fundamentals and a
favorable litigation outlook, and Lockheed Martin Corp. posted a 17% gain as the
company was part of a consortium that was the surprising winner of a contract to
build a new fleet of presidential helicopters. In addition, our investment in
Korea Electric Power Corp. appreciated 18% as hotter-than-normal weather is
contributing to increased electricity demand, while a strong South Korean won
versus the U.S. dollar is helping to offset rising fuel costs.
Conversely, auto parts supplier, Delphi Corp., declined 52% during the period,
after the company announced the need to restate earnings due to improper
accounting practices related to its rebates from suppliers. We determined that
the company faced an environment that could make a recovery very difficult, and
we elected to sell our holding. Fortunately, this investment was a relatively
small position in the Fund's portfolio.
Our investments in International Paper Co. and Packaging Corporation of America
declined 28% and 11%, respectively, due to pricing pressures and softening
demand. The paper industry is facing some upcoming capacity issues as new pulp
mills in China and Latin America are projected to come on line much sooner than
expected, which could have a negative impact on future pricing power. Our
investment in Albertson's declined 13% on lowered earnings expectations due to
increased price and promotional pressures among the traditional supermarket
retailers, and Fannie Mae fell 18% as an accounting restatement and proposed
legislation granting broader authority to a new regulator put downward pressure
on its stock. Our telecommunication stocks also underperformed during this
period, following strong gains last year. We believe their decline was related
to valuations and to concerns about cellular subscriber growth as wireless
penetration approaches 60% of the U.S. population. In addition, fears of growth
in VoIP (Voice over Internet Protocol) remain the dominant threat to the
industry.
For the six months ended June 30, 2005, the real estate portion of the JDD
portfolio modestly underperformed a commonly followed industry benchmark.
However, the common stocks within this sector of the Fund's holdings performed
well, especially in the
8
second quarter, due to the increased representation of more cyclically sensitive
real estate common stocks such as those of apartment companies. Holding
preferred real estate stocks hurt the Fund's comparative performance during this
period because broad real estate indices are composed of only common equity
securities. However, the inclusion of preferred stock in the portfolio reflected
our belief that many of the higher dividend-paying real estate securities are
overvalued and are unattractive total rate of return candidates for the future.
In the emerging markets sovereign debt portion of the portfolio, the Fund
benefited from strong country selection within emerging Europe, Latin America
and Asia. We decided to overweight many of our holdings of Russian securities
relative to the indexes within our benchmark, and to underweight our positions
in Pakistan, Lebanon, Thailand and Uruguay. Each of these actions contributed
positively to the Fund's results during this period. In addition, several
specific securities from Ecuador, Uruguay and Colombia performed well and helped
the Fund's return. On the other hand, some of our South African and Russian
securities did not perform well during these six months. Relative detractors
from performance in this area were primarily due to security selection within
South Africa and Russia. In particular, some of our Russian holdings that had
relatively short effective maturities hurt us in a market that tended to favor
longer-term holdings.
In the senior loan sector, the market continued its strong performance during
the six month period, although at a more subdued pace than in previous quarters.
Universal Compression and Vought Aircraft had a positive impact on the fund's
performance.
Given some relative weakness in the high yield market over this period, several
high yield bonds had a negative impact on Fund performance during these six
months. In addition, Federal Mogul was in Chapter 11 bankruptcy proceedings as
of June 30, 3005, and the term loan we held had a negative impact on performance
during this reporting period.
9
Distribution and Share Price
INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferredTM. FundPreferred provides a degree of financial
leverage that can enhance the Fund's returns and supplement the income available
to pay common shareholder distributions, but also can increase share price
volatility. This leveraging strategy provided incremental income and helped
enhance shareholder distributions over this reporting period.
The Fund has a managed distribution policy designed to provide relatively stable
monthly cash flow to investors. Under this policy, the Fund's monthly
distributions will be paid from net investment income generated by its
underlying securities as well as from net realized capital gains and/or returns
of capital, generally representing net unrealized capital gains. Over this
six-month reporting period, the Fund has maintained a stable monthly
distribution of $0.1025 per share.
As of June 30, 2005, the Fund was trading at a -9.51% discount to its net asset
value. This discount was greater than the average -8.29% discount the Fund
exhibited over the course of the entire reporting period.
10
Nuveen Diversified Dividend and Income Fund
JDD
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
Real Estate Investment Trust Common
Stocks and Preferred Stocks 27.5%
Common Stocks 24.0%
Emerging Markets Sovereign Debt 23.4%
Variable Rate Senior
Loan Interests 17.0%
U.S. Corporate Bonds 3.4%
High-Grade Short-Term Investments 3.0%
Other 1.7%
Bar Chart:
2004-2005 MONTHLY DISTRIBUTIONS PER SHARE
Jul 0.1025
Aug 0.1025
Sep 0.1025
Oct 0.1025
Nov 0.1025
Dec 0.1025
Jan 0.1025
Feb 0.1025
Mar 0.1025
Apr 0.1025
May 0.1025
Jun 0.1025
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1/04 13.42
13.39
13.59
13.52
13.42
13.42
13.36
13.39
13.42
13.44
13.41
13.45
13.45
13.56
13.67
13.79
13.91
14.09
14.23
14.29
14.22
14.19
14.28
14.29
14.17
14.27
14.3
14.41
14.48
14.51
14.57
14.66
14.6
14.75
14.84
14.92
14.85
14.95
14.9
14.93
15
15
14.95
14.8
14.61
14.64
14.75
14.73
14.72
14.75
14.84
14.9
14.83
14.85
14.99
14.81
14.92
14.94
14.94
14.99
15
15.06
15.06
15.06
15.04
15.03
15.07
15
14.92
14.93
14.9
14.99
14.91
14.72
14.78
14.95
15.07
15.04
15.09
15.12
15.29
14.99
14.9
14.83
15.06
15.06
15.12
15.23
15.45
15.49
15.5
15.57
15.44
15.39
15.28
15.37
15.35
15.3
15.38
15.43
15.47
15.56
15.62
15.48
15.5
15.62
15.53
15.37
15.35
15.33
15.2
15.31
15.3
15.29
15.3
15.3
15.28
15.37
15.5
15.57
15.52
15.55
15.27
15.3
15.5
15.42
15.48
15.35
15.39
15.36
15.33
15.25
15.25
15.23
15.2
15.13
15.02
15.1
15.19
15.24
15.23
15.24
15.42
15.72
15.72
15.72
15.76
15.8
15.49
15.39
15.4
15.37
15.48
15.27
15.1
15.28
15.4
15.5
15.52
15.7
15.66
15.67
15.71
15.69
15.58
15.5
15.39
15.3
15.05
14.81
14.38
14.42
14.46
14.36
14.31
13.84
14.1
13.93
14.1
14.38
14.33
14.4
14.53
14.41
14.67
14.41
14.33
14.39
14.54
14.2
14.2
14.09
14.22
14.41
14.47
14.56
14.6
14.34
14.48
14.6
14.71
14.88
14.88
14.86
14.84
14.96
15.09
15.15
15.19
15.13
15.02
14.98
14.72
14.78
14.81
14.87
14.97
15.11
15.14
15.1
15.01
15.17
15.14
15.06
15.15
15.22
15.31
15.22
15.3
15.2
15.25
15.41
15.14
15.22
15.15
15.35
15.33
15.22
15.23
15.15
15.16
15.21
15.2
15.3
15.29
6/30/05 15.22
FUND SNAPSHOT
------------------------------------
Common Share Price $15.22
------------------------------------
Common Share Net Asset Value $16.82
------------------------------------
Premium/(Discount) to NAV -9.51%
------------------------------------
Market Yield1 8.08%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $338,856
------------------------------------
ANNUALIZED TOTAL RETURN
(Inception 9/25/03)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 1.81% 3.61%
------------------------------------
1-Year 24.21% 20.13%
------------------------------------
Since
Inception 8.97% 17.83%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Real Estate 28.4%
------------------------------------
Sovereign Debt 23.4%
------------------------------------
Media 4.6%
------------------------------------
Diversified Telecommunication
Services 3.5%
------------------------------------
Hotels, Restaurants & Leisure 3.5%
------------------------------------
Oil & Gas 3.1%
------------------------------------
Aerospace and Defense 2.8%
------------------------------------
Metals & Mining 2.8%
------------------------------------
Tobacco 2.1%
------------------------------------
Household Durables 2.0%
------------------------------------
Thrifts & Mortgage Finance 1.9%
------------------------------------
Containers & Packaging 1.7%
------------------------------------
Insurance 1.7%
------------------------------------
Chemicals 1.4%
------------------------------------
Commercial Services & Supplies 1.4%
------------------------------------
Diversified Financial Services 1.4%
------------------------------------
High-Grade Short-Term
Investments 3.0%
------------------------------------
Other 11.3%
------------------------------------
REAL ESTATE INVESTMENT TRUST
TOP FIVE SUB-INDUSTRIES
(as a % of total investments)
------------------------------------
Office Property 8.4%
------------------------------------
Apartments 7.6%
------------------------------------
Shopping Center 3.3%
------------------------------------
Healthcare 2.1%
------------------------------------
Storage 1.6%
------------------------------------
EMERGING MARKETS SOVEREIGN DEBT
TOP FIVE COUNTRIES
(as a % of total investments)
------------------------------------
Mexico 1.9%
------------------------------------
Malaysia 1.9%
------------------------------------
Russia 1.7%
------------------------------------
South Africa 1.4%
------------------------------------
Indonesia 1.4%
------------------------------------
1 Market yield is based on the Fund's current annualized monthly distribution
divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Fund's
cumulative net ordinary income and net realized gains are less than the
amount of the Fund's distributions, a tax return of capital.
11
Shareholder
MEETING REPORT
The annual shareholder meeting was held on March 22, 2005, in Chicago at
Nuveen's headquarters.
JDD
------------------------------------------------------------------------------------------------------------------------------------
Common and
Preferred shares Preferred shares
voting together voting together
as a class as a class
====================================================================================================================================
APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS:
Robert P. Bremner
For 19,841,943 --
Withhold 93,281 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
Lawrence H. Brown
For 19,839,494 --
Withhold 95,730 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
Jack B. Evans
For 19,843,634 --
Withhold 91,590 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
William C. Hunter
For 19,841,703 --
Withhold 93,521 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
William J. Schneider
For -- 4,728
Withhold -- 9
------------------------------------------------------------------------------------------------------------------------------------
Total -- 4,737
====================================================================================================================================
Timothy R. Schwertfeger
For -- 4,728
Withhold -- 9
------------------------------------------------------------------------------------------------------------------------------------
Total -- 4,737
====================================================================================================================================
Judith M. Stockdale
For 19,841,905 --
Withhold 93,319 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
Eugene S. Sunshine
For 19,843,003 --
Withhold 92,221 --
------------------------------------------------------------------------------------------------------------------------------------
Total 19,935,224 --
====================================================================================================================================
12
Nuveen Diversified Dividend and Income Fund (JDD)
Portfolio of
INVESTMENTS (Unaudited) June 30, 2005
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 32.6% (24.0% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.9%
50,000 Lockheed Martin Corporation $ 3,243,500
85,000 Raytheon Company 3,325,200
------------------------------------------------------------------------------------------------------------------------------------
6,568,700
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.7%
143,000 DSM NV, Sponsored ADR 2,431,000
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 1.7%
69,200 Bank of America Corporation 3,156,212
50,000 Wachovia Corporation 2,480,000
------------------------------------------------------------------------------------------------------------------------------------
5,636,212
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 1.2%
90,000 Pitney Bowes Inc. 3,919,500
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.8%
121,300 Packaging Corp of America 2,553,365
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.9%
75,000 Citigroup Inc. 3,467,250
85,000 JPMorgan Chase & Co. 3,002,200
------------------------------------------------------------------------------------------------------------------------------------
6,469,450
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 4.2%
90,000 KT Corporation, Sponsored ADR 1,935,000
144,000 SBC Communications Inc. 3,420,000
135,000 Sprint Corporation 3,387,150
52,500 Telecom Italia S.p.A., Sponsored ADR 1,643,775
110,600 Verizon Communications Inc. 3,821,230
------------------------------------------------------------------------------------------------------------------------------------
14,207,155
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.0%
220,000 Korea Electric Power Corporation (KEPCO), Sponsored ADR 3,447,400
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 1.1%
126,700 Albertson's Inc. 2,620,156
60,812 J Sainsbury plc, Sponsored ADR 1,267,930
------------------------------------------------------------------------------------------------------------------------------------
3,888,086
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.5%
77,000 Newell Rubbermaid Inc. 1,835,680
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 0.9%
48,000 Kimberly-Clark Corporation 3,004,320
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.7%
145,000 Aon Corporation 3,630,800
30,000 Hartford Financial Services Group, Inc. 2,243,400
------------------------------------------------------------------------------------------------------------------------------------
5,874,200
------------------------------------------------------------------------------------------------------------------------------------
13
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS (Unaudited) June 30, 2005
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.6%
60,000 Dow Jones & Company, Inc. $ 2,127,000
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 2.1%
146,000 Alumina Limited, Sponsored ADR 2,483,460
33,000 POSCO, ADR 1,451,010
26,500 Rio Tinto plc, Sponsored ADR 3,230,880
------------------------------------------------------------------------------------------------------------------------------------
7,165,350
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 1.1%
25,000 Dominion Resources, Inc. 1,834,750
82,800 United Utilities plc, Sponsored ADR 1,981,404
------------------------------------------------------------------------------------------------------------------------------------
3,816,154
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 4.4%
33,000 ChevronTexaco Corporation 1,845,360
41,800 ConocoPhillips 2,403,082
23,000 Eni S.p.A., Sponsored ADR 2,948,600
49,105 Kerr-McGee Corporation 3,747,203
30,000 Total SA, Sponsored ADR 3,505,500
------------------------------------------------------------------------------------------------------------------------------------
14,449,745
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.7%
80,500 International Paper Company 2,431,905
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.8%
85,000 Merck & Co. Inc. 2,618,000
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.5%
94,100 IndyMac Bancorp, Inc. 3,832,693
81,600 Fannie Mae 4,765,440
------------------------------------------------------------------------------------------------------------------------------------
8,598,133
------------------------------------------------------------------------------------------------------------------------------------
TOBACCO - 2.8%
88,200 Altria Group, Inc. 5,703,012
113,000 Loews Corp - Carolina Group 3,765,160
------------------------------------------------------------------------------------------------------------------------------------
9,468,172
------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $91,346,855) 110,509,527
--------------------------------------------------------------------------------------------------------------------
RATINGS**
------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 1.0% (0.8% OF TOTAL INVESTMENTS)
SPECIALTY RETAIL - 1.0%
57,000 Toys "R" Us, Inc. 6.250% Ba2 BB 3,502,017
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stock (cost $2,002,026) 3,502,017
--------------------------------------------------------------------------------------------------------------------
14
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST COMMON STOCKS - 34.6%
(25.5% OF TOTAL INVESTMENTS)
APARTMENTS - 8.0%
242,800 AMLI Residential Properties Trust $ 7,589,928
114,900 Archstone-Smith Trust 4,437,438
57,500 AvalonBay Communities, Inc. 4,646,000
86,200 Camden Property Trust 4,633,250
164,400 Post Properties, Inc. 5,936,484
------------------------------------------------------------------------------------------------------------------------------------
27,243,100
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED - 1.3%
380,400 Sprint Finance Corporation 4,469,700
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 2.8%
166,000 Nationwide Health Properties, Inc. 3,919,260
293,800 Senior Housing Properties Trust 5,555,758
------------------------------------------------------------------------------------------------------------------------------------
9,475,018
------------------------------------------------------------------------------------------------------------------------------------
HOTELS - 2.1%
350,000 DiamondRock Hospitality Company 3,955,000
338,736 Hersha Hospitality Trust 3,231,541
------------------------------------------------------------------------------------------------------------------------------------
7,186,541
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 0.6%
50,000 First Industrial Realty Trust, Inc. 1,995,000
------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE - 0.5%
220,000 MFA Mortgage Investments, Inc. 1,639,000
------------------------------------------------------------------------------------------------------------------------------------
OFFICE PROPERTY - 11.0%
180,300 Arden Realty, Inc. 6,487,194
200,300 Brandywine Realty Trust 6,139,195
130,000 Highwoods Properties, Inc. 3,868,800
435,600 HRPT Properties Trust 5,414,508
158,900 Mack-Cali Realty Corporation 7,198,170
146,800 Maguire Properties, Inc. 4,160,312
115,400 Reckson Associates Realty Corporation 3,871,670
------------------------------------------------------------------------------------------------------------------------------------
37,139,849
------------------------------------------------------------------------------------------------------------------------------------
REGIONAL MALLS - 1.7%
32,400 Simon Property Group, Inc. 2,348,676
49,900 The Macerich Company 3,345,795
------------------------------------------------------------------------------------------------------------------------------------
5,694,471
------------------------------------------------------------------------------------------------------------------------------------
SHOPPING CENTER - 4.4%
305,500 Cedar Shopping Centers Inc. 4,506,125
73,500 Federal Realty Investment Trust 4,336,500
221,000 Kite Realty Group Trust 3,315,000
107,100 New Plan Excel Realty Trust 2,909,907
------------------------------------------------------------------------------------------------------------------------------------
15,067,532
------------------------------------------------------------------------------------------------------------------------------------
STORAGE - 2.2%
90,700 Shurgard Storage Centers, Inc. 4,168,572
165,800 U-Store It Trust 3,158,490
------------------------------------------------------------------------------------------------------------------------------------
7,327,062
------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust Common Stocks (cost $92,589,625) 117,237,273
--------------------------------------------------------------------------------------------------------------------
15
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS (Unaudited) June 30, 2005
SHARES DESCRIPTION(1) COUPON VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST PREFERRED STOCKS - 2.8%
(2.0% OF TOTAL INVESTMENTS)
APARTMENTS - 2.3%
48,000 Apartment Investment & Management Company, Series Q 10.100% $ 1,247,040
103,000 Apartment Investment & Management Company, Series R 10.000% 2,693,450
150,000 Apartment Investment & Management Company, Series U 7.750% 3,765,000
------------------------------------------------------------------------------------------------------------------------------------
7,705,490
------------------------------------------------------------------------------------------------------------------------------------
OFFICE PROPERTY - 0.5%
64,000 Maguire Properties, Inc., Series A 7.625% 1,617,920
------------------------------------------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust Preferred Stocks (cost $9,300,276) 9,323,410
--------------------------------------------------------------------------------------------------------------------
WEIGHTED RATINGS**
PRINCIPAL AVERAGE STATED ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY* MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 23.1%
(17.0% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.9%
$ 2,467 Hexcel, Term Loan B 6.130% 3/01/12 B2 B+ $ 2,489,407
1,900 K & F Industries, Inc., Term Loan B 5.770% 11/18/12 B2 B+ 1,925,955
1,629 Vought Aircraft Industries, Inc., Term Loan 5.830% 12/22/11 Ba3 B+ 1,653,907
364 Vought Aircraft Industries, Inc., Tranche B,
Letter of Credit TBD TBD Ba3 B+ 368,909
------------------------------------------------------------------------------------------------------------------------------------
6,438,178
------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 1.2%
2,500 Federal-Mogul Corporation, Term Loan A (a) 5.580% 2/24/04 N/R N/R 2,234,896
1,217 Tenneco Automotive Inc., Term Loan B TBD TBD B1 B+ 1,233,448
534 Tenneco Automotive Inc., Term Loan B-1 5.361% 12/12/10 B1 B+ 541,832
------------------------------------------------------------------------------------------------------------------------------------
4,010,176
------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 1.2%
997 Masonite Corporation, Canadian Term Loan 5.220% 3/21/13 B2 BB+ 996,375
998 Masonite Corporation, Term Loan B 5.220% 5/13/11 B2 BB+ 998,072
1,985 Nortek, Inc., Term Loan B 5.910% 8/27/11 B2 B 1,997,820
------------------------------------------------------------------------------------------------------------------------------------
3,992,267
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 1.2%
1,995 GenTek, Inc., Term Loan B 6.090% 12/31/10 B2 B+ 1,998,745
2,000 Rockwood Specialties Group, Inc., Tranche D 5.430% 7/30/12 B1 B+ 2,030,625
------------------------------------------------------------------------------------------------------------------------------------
4,029,370
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.7%
676 Allied Waste North America, Inc., Letter of Credit TBD TBD B1 BB 678,116
1,770 Allied Waste North America, Inc., Term Loan B 5.373% 3/12/21 B1 BB 1,776,263
------------------------------------------------------------------------------------------------------------------------------------
2,454,379
------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.5%
2,985 Graham Packaging Company, L.P., Term Loan B 5.758% 10/07/11 B2 B 3,031,330
175 Smurfit-Stone Container Corporation,
Deposit-Funded Commitment TBD TBD Ba3 BB- 177,244
1,392 Smurfit-Stone Container Corporation, Term Loan B 5.410% 11/01/11 Ba3 BB- 1,412,548
428 Smurfit-Stone Container Corporation, Term Loan C 5.290% 11/01/11 Ba3 BB- 434,630
------------------------------------------------------------------------------------------------------------------------------------
5,055,752
------------------------------------------------------------------------------------------------------------------------------------
16
WEIGHTED RATINGS**
PRINCIPAL AVERAGE STATED ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY* MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.6%
$ 1,990 Intelsat, Ltd., Term Loan B 5.250% 7/06/11 B1 B $ 2,008,905
------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
1,700 Sensus Metering Systems Inc., Term Loan B-1 5.540% 12/17/10 B2 B+ 1,720,542
255 Sensus Metering Systems Inc., Term Loan B-2 5.530% 12/17/10 B2 B+ 258,081
------------------------------------------------------------------------------------------------------------------------------------
1,978,623
------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES - 0.6%
1,995 Universal Compression, Term Loan 5.240% 2/15/12 Ba2 BB 2,022,743
------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.8%
2,738 Michael Foods, Inc., Term Loan B 5.130% 11/20/10 B1 B+ 2,784,463
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES - 0.3%
1,136 Kinetic Concepts, Inc., Term Loan B-2 5.240% 8/11/10 Ba3 BB 1,148,323
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES - 1.8%
1,965 Beverly Enterprises, Inc., Term Loan B 5.590% 10/22/08 Ba3 BB 1,976,667
2,000 Davita, Inc., Term Loan B (b) TBD TBD B1 BB- 2,027,657
1,980 LifePoint Hospitals, Inc., Term Loan B 4.845% 9/30/11 Ba3 BB+ 1,984,208
------------------------------------------------------------------------------------------------------------------------------------
5,988,532
------------------------------------------------------------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE - 2.2%
2,000 24 Hour Fitness Worldwide, Inc., Term Loan B 6.190% 6/06/05 B1 B- 2,032,500
2,000 Penn National Gaming, Inc., Term Loan B (b) TBD TBD Ba3 BB- 2,030,179
513 Venetian Casino Resort, LLC, Delayed Draw,
Term Loan (c) 0.750% 6/15/11 B1 B+ 4,487
2,487 Venetian Casino Resort, LLC, Term Loan 5.240% 6/15/11 B1 B+ 2,514,938
86 Wyndham International, Inc., Letter of Credit TBD TBD B2 B 86,638
914 Wyndham International, Inc., Term Loan B 6.500% 4/15/11 B3 B 920,075
------------------------------------------------------------------------------------------------------------------------------------
7,588,817
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.6%
1,918 Conseco, Inc., Term Loan 6.830% 6/22/10 B2 BB- 1,939,377
------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 0.5%
1,850 Fidelity National Information Services, Term Loan B 4.960% 3/09/13 Ba3 BB 1,844,701
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 5.7%
1,980 Charter Communications Operating, LLC, Term Loan B 6.440% 4/07/11 B2 B 1,970,187
1,523 Dex Media West, LLC, Term Loan B 4.930% 3/09/10 Ba2 BB- 1,538,620
1,990 Emmis Operating Company, Term Loan 4.960% 11/10/11 Ba2 B+ 2,009,070
1,970 Loews Cineplex Entertainment Corporation,
Term Loan B 5.410% 6/30/11 B1 B 1,979,656
2,000 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 5.740% 4/12/12 N/R N/R 2,009,375
1,739 R.H. Donnelley Inc., Tranche D 5.190% 6/30/11 Ba3 N/R 1,758,629
1,995 Rainbow Media Holdings LLC, Term Loan 6.130% 3/31/12 B1 BB+ 2,015,947
1,915 Regal Cinemas Corporation, Term Loan 5.240% 11/10/10 Ba3 BB- 1,934,550
2,000 UPC, Term Loan H2 5.752% 9/30/12 B1 B 2,001,805
1,974 WMG Acquisition Corp., Term Loan 5.330% 2/27/11 B1 B+ 1,988,995
------------------------------------------------------------------------------------------------------------------------------------
19,206,834
------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.5%
1,809 Amsted Industries Incorporated, Term Loan B 5.930% 10/15/10 B1 BB- 1,831,310
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.2%
1,991 General Growth Properties, Inc., Term Loan B 5.580% 11/12/08 Ba2 BB+ 2,007,368
1,960 LNR Property Corporation, Term Loan 6.210% 2/03/08 B2 B+ 1,967,815
------------------------------------------------------------------------------------------------------------------------------------
3,975,183
------------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $77,903,432) 78,297,933
--------------------------------------------------------------------------------------------------------------------
17
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS (Unaudited) June 30, 2005
RATINGS**
PRINCIPAL ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKET SOVEREIGN DEBT - 31.7% (23.4% OF TOTAL INVESTMENTS)
ARGENTINA - 1.0%
$ 1,855 Argentina Republic 3.010% 8/03/12 B3 B- $ 1,688,362
885 Argentine Beverages Financial Trust, 144A 7.375% 3/22/12 N/R N/R 904,913
570 Banco de Galicia y Buenos Aires, South America,
Reg S 7.190% 1/01/10 N/R N/R 553,598
345 Transportadora de Gas del Sur S.A., Series B-A,
Reg S 7.000% 12/15/13 N/R CCC+ 333,271
------------------------------------------------------------------------------------------------------------------------------------
3,480,144
------------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 1.4%
425 Braskem International Limited,144A 9.375% 6/01/15 N/R BB- 460,063
250 Brazil Republic 12.000% 4/15/10 B1 BB- 305,000
1,319 Brazil Republic 8.000% 4/15/14 B2 BB- 1,359,926
800 Brazil Republic 4.250% 4/15/24 B1 BB- 764,659
1,620 Brazil Republic 11.000% 8/17/40 B1 BB- 1,950,885
------------------------------------------------------------------------------------------------------------------------------------
4,840,533
------------------------------------------------------------------------------------------------------------------------------------
BULGARIA - 0.8%
1,286 Bulgaria Republic 3.750% 7/28/12 Ba1 BBB- 1,286,911
1,100 Bulgaria Republic, Reg S 8.250% 1/15/15 Ba2 BBB- 1,387,760
------------------------------------------------------------------------------------------------------------------------------------
2,674,671
------------------------------------------------------------------------------------------------------------------------------------
CHILE - 0.8%
550 Chile Republic 6.875% 4/28/09 Baa1 A 600,875
430 Coldelco Inc., 144A 5.500% 10/15/13 A2 A 449,904
600 Coldelco Inc., Reg S 6.375% 11/30/12 A2 A- 660,678
1,100 Corporation Nacional del Cobre, 144A 4.750% 10/15/14 A2 A 1,089,842
------------------------------------------------------------------------------------------------------------------------------------
2,801,299
------------------------------------------------------------------------------------------------------------------------------------
COLUMBIA - 1.2%
354 Columbia Republic 9.750% 4/09/11 Ba2 BB+ 406,427
700 Columbia Republic 10.000% 1/23/12 Ba2 BB 819,000
600 Columbia Republic 11.750% 2/25/20 Ba2 BB 792,000
1,710 Columbia Republic 10.375% 1/28/33 Ba2 BB 2,047,725
------------------------------------------------------------------------------------------------------------------------------------
4,065,152
------------------------------------------------------------------------------------------------------------------------------------
ECUADOR - 0.7%
400 Ecuador Republic, 144A 8.000% 8/15/30 Caa1 CCC+ 338,000
265 Ecuador Republic, Reg S 12.000% 11/15/12 Caa1 CCC+ 250,542
2,300 Ecuador Republic, Reg S 8.000% 8/15/30 Caa1 CCC+ 1,926,250
------------------------------------------------------------------------------------------------------------------------------------
2,514,792
------------------------------------------------------------------------------------------------------------------------------------
EL SALVADOR - 0.6%
750 El Salvador Republic, Reg S 8.500% 7/25/11 Baa3 BB+ 872,326
1,080 El Salvador Republic, Reg S 7.750% 1/24/23 Baa3 BB+ 1,209,839
------------------------------------------------------------------------------------------------------------------------------------
2,082,165
------------------------------------------------------------------------------------------------------------------------------------
GERMANY - 0.5%
500 Aries Vermogensverwaltung Federation Sovereign
Collateralized Debt, Reg S 9.600% 10/25/14 Ba2 BBB- 648,978
1,100 Dresdener Bank AG, Ukreximbank Loan Participation
Notes, Reg S 7.750% 9/23/09 Ba2 N/R 1,153,680
------------------------------------------------------------------------------------------------------------------------------------
1,802,658
------------------------------------------------------------------------------------------------------------------------------------
GUATEMALA - 0.3%
125 Republic of Guatemala, Reg S 10.250% 11/08/11 Ba2 BB- 151,725
880 Republic of Guatemala, 144A 8.125% 10/06/34 Ba2 BB- 946,000
------------------------------------------------------------------------------------------------------------------------------------
1,097,725
------------------------------------------------------------------------------------------------------------------------------------
18
RATINGS**
PRINCIPAL ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
HONG KONG - 0.3%
$ 890 Hong Kong, 144A 5.125% 8/01/14 A1 A+ $ 932,100
------------------------------------------------------------------------------------------------------------------------------------
INDONESIA - 1.8%
300 Indosat International Financial Company, 144A 6.750% 4/20/15 B1 BB- 303,000
800 Republic of Indonesia, Reg S 7.250% 4/20/15 B2 B+ 810,208
5,030 Republic of Indonesia, 144A 7.250% 4/20/15 B2 B+ 5,118,025
------------------------------------------------------------------------------------------------------------------------------------
6,231,233
------------------------------------------------------------------------------------------------------------------------------------
KAZAKHSTAN - 0.3%
800 Development Bank of Kazakhstan 7.375% 11/12/13 Baa3 BBB- 905,280
------------------------------------------------------------------------------------------------------------------------------------
LUXEMBOURG - 0.9%
300 Tengizchevroil LLP, 144A 6.124% 11/15/14 Baa3 BBB- 308,250
550 UBS Luxembourg S.A 6.230% 2/11/15 Baa2 N/R 556,655
1,000 VTB Capital SA, 144A 7.500% 10/12/11 Baa2 BB+ 1,095,000
1,100 VTB Capital SA, 144A 6.250% 7/02/35 Baa2 BB+ 1,111,000
------------------------------------------------------------------------------------------------------------------------------------
3,070,905
------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA - 2.5%
1,100 Malaysia Republic 8.750% 6/01/09 A3 A- 1,276,564
2,000 Malaysia Republic 7.500% 7/15/11 A3 A- 2,333,962
3,300 Petronas Capital Limited, Reg S 7.000% 5/22/12 A2 A- 3,761,095
900 Petronas Capital Limited, Reg S 7.875% 5/22/22 Baa1 A- 1,143,578
------------------------------------------------------------------------------------------------------------------------------------
8,515,199
------------------------------------------------------------------------------------------------------------------------------------
MEXICO - 2.6%
700 Conproca SA, Reg S 12.000% 6/16/10 Baa3 BBB- 867,853
240 Controladora Comercial Mexicana, 144A 6.625% 6/01/15 Baa2 BBB- 244,080
1,100 Empresa Nacional del Petroleo, 144A 4.875% 3/15/14 Baa1 A 1,081,655
1,200 Pemex Project Funding Master Trust 8.500% 2/15/08 Baa1 BBB 1,317,000
1,000 Pemex Project Funding Master Trust, 144A 9.500% 9/15/27 Baa1 BBB 1,310,000
275 Petroleos Mexicanos 8.850% 9/15/07 Baa1 BBB 300,850
590 Petroleos Mexicanos 9.375% 12/02/08 Baa1 BBB 672,600
1,000 United Mexican States 6.375% 1/16/13 Baa1 BBB 1,076,000
930 United Mexican States 6.625% 3/03/15 Baa1 BBB 1,025,790
220 United Mexican States 8.125% 12/30/19 Baa1 BBB 270,600
400 United Mexican States 8.300% 8/15/31 Baa1 BBB 499,000
------------------------------------------------------------------------------------------------------------------------------------
8,665,428
------------------------------------------------------------------------------------------------------------------------------------
PANAMA - 1.3%
650 Panama Republic 9.625% 2/08/11 Ba1 BB 780,000
1,350 Panama Republic 7.250% 3/15/15 Ba1 BB 1,474,200
460 Panama Republic 9.375% 1/16/23 Ba1 BB 570,400
1,400 Panama Republic 9.375% 4/01/29 Ba1 BB 1,739,500
------------------------------------------------------------------------------------------------------------------------------------
4,564,100
------------------------------------------------------------------------------------------------------------------------------------
PERU - 1.4%
1,300 Peru Republic 9.125% 2/21/12 Ba3 BB 1,527,500
1,931 Peru Republic 5.000% 3/07/17 Ba3 BB 1,840,185
510 Peru Republic 4.000% 3/07/17 Ba3 BB 489,956
915 Peru Republic 8.750% 11/21/33 Ba3 BB 1,036,238
------------------------------------------------------------------------------------------------------------------------------------
4,893,879
------------------------------------------------------------------------------------------------------------------------------------
19
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS (Unaudited) June 30, 2005
RATINGS**
PRINCIPAL ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES - 1.2%
$ 1,193 Philippines Republic 8.375% 2/15/11 B1 BB- $ 1,240,720
2,000 Philippines Republic 9.375% 1/18/17 B1 BB- 2,150,000
545 Philippines Republic 9.500% 2/02/30 B1 BB- 557,535
------------------------------------------------------------------------------------------------------------------------------------
3,948,255
------------------------------------------------------------------------------------------------------------------------------------
POLAND - 0.2%
500 Poland Republic 5.250% 1/15/14 A2 BBB+ 528,500
------------------------------------------------------------------------------------------------------------------------------------
QATAR - 0.3%
416 Ras Laffan Liquified Natural Gas Company Limited,
144A 3.437% 9/15/09 Baa1 A- 408,194
623 Ras Laffan Liquified Natural Gas Company Limited,
Reg S 3.437% 9/15/09 Baa1 A- 613,650
------------------------------------------------------------------------------------------------------------------------------------
1,021,844
------------------------------------------------------------------------------------------------------------------------------------
RUSSIA - 2.3%
500 Alrosa Finance SA, 144A 8.875% 11/17/14 Ba3 B 567,500
1,300 Russia Federation, Reg S 8.250% 3/31/10 Baa3 BBB- 1,421,420
750 Russian Federation, Reg S 11.000% 7/24/18 Baa3 BBB- 1,123,297
500 Russian Federation, Reg S 5.000% 3/31/30 Baa3 BBB- 559,435
3,200 Russia Ministry of Finance 3.000% 5/14/08 Ba2 BBB- 3,027,200
600 Russia Ministry of Finance 3.000% 5/14/11 Ba1 BBB- 527,340
400 Russian Ministry of Finance, Reg S 12.750% 6/24/28 Ba2 BB+ 724,606
------------------------------------------------------------------------------------------------------------------------------------
7,950,798
------------------------------------------------------------------------------------------------------------------------------------
SERBIA - 0.6%
2,500 Serbia Republic, 144A 3.750% 11/01/24 N/R B+ 2,156,250
------------------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA - 1.9%
5,450 South Africa Republic 9.125% 5/19/09 Baa1 BBB 6,335,625
------------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA - 0.1%
410 Hanarotelecom Inc., 144A 7.000% 2/01/12 Ba2 BB 407,550
------------------------------------------------------------------------------------------------------------------------------------
THAILAND - 0.1%
250 Bangkok Bank Public Company Limited, Reg S 9.025% 3/15/29 Baa2 BB- 325,724
------------------------------------------------------------------------------------------------------------------------------------
TUNISIA - 0.6%
1,700 Banque de Tunisie 7.375% 4/25/12 Baa2 BBB 1,963,500
------------------------------------------------------------------------------------------------------------------------------------
TURKEY - 1.0%
1,170 Turkey Republic 12.375% 6/15/09 B1 BB- 1,447,875
350 Turkey Republic 11.750% 6/15/10 B1 BB- 436,625
450 Turkey Republic 9.000% 6/30/11 B1 BB- 513,000
675 Turkey Republic 7.000% 6/05/20 B1 BB- 663,188
350 Turkey Republic 7.375% 2/05/25 B1 BB- 348,460
------------------------------------------------------------------------------------------------------------------------------------
3,409,148
------------------------------------------------------------------------------------------------------------------------------------
UKRAINE - 1.4%
2,600 Republic of Ukraine, Series 2004, Reg S 6.365% 8/05/09 B1 B+ 2,821,000
800 Ukraine Cabinet Ministers, 144A 6.365% 8/05/09 B1 BB- 865,000
859 Ukraine Government, Reg S 11.000% 3/15/07 B1 B 908,166
------------------------------------------------------------------------------------------------------------------------------------
4,594,166
------------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM - 0.2%
550 Vedanta Resources PLC, Reg S 6.625% 2/22/10 Ba2 BB+ 541,094
------------------------------------------------------------------------------------------------------------------------------------
20
RATINGS**
PRINCIPAL ----------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
URUGUAY - 1.4%
S 2,150 Uruguay Republic 7.250% 2/15/11 B3 B $ 2,160,750
860 Uruguay Republic 7.500% 3/15/15 B3 B 847,100
1,670 Uruguay Republic 9.250% 5/17/17 B3 B 1,795,250
------------------------------------------------------------------------------------------------------------------------------------
4,803,100
------------------------------------------------------------------------------------------------------------------------------------
VENEZUELA - 1.2%
1,200 Venezuela Republic 7.650% 4/21/25 B2 B 1,081,310
985 Venezuela Republic 9.250% 9/15/27 B2 B 1,035,235
1,935 Venezuela Republic, Reg S 5.375% 8/07/10 Caa1 B- 1,807,385
------------------------------------------------------------------------------------------------------------------------------------
3,923,930
------------------------------------------------------------------------------------------------------------------------------------
VIETNAM - 0.8%
2,716 Socialist Republic of Vietnam 4.063% 3/14/16 B1 BB- 2,586,585
------------------------------------------------------------------------------------------------------------------------------------
Total Emerging Market Sovereign Debt (cost $101,904,277) 107,633,332
--------------------------------------------------------------------------------------------------------------------
U.S. CONVERTIBLE BONDS - 1.2% (0.9 OF TOTAL INVESTMENTS) METALS
& MINING - 1.2%
5,000 Trizec Hahn Corporation 3.000% 1/29/21 N/R N/R 3,918,750
------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Convertible Bonds (cost $3,625,663) 3,918,750
--------------------------------------------------------------------------------------------------------------------
U.S. CORPORATE BONDS - 4.7% (3.4 OF TOTAL INVESTMENTS) HOTELS
RESTAURANTS & LEISURE - 2.5%
2,000 Aztar Corporation 9.000% 8/15/11 Ba3 B+ 2,182,500
2,150 Harrahs Entertainment 7.875% 12/15/05 Ba1 BB+ 2,187,625
2,000 MGM Mirage, Inc. 6.750% 8/01/07 Ba1 BB+ 2,072,500
2,000 Park Place Entertainment 7.875% 12/15/05 Ba2 BB- 2,035,000
------------------------------------------------------------------------------------------------------------------------------------
8,477,625
------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 2.2%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Ba1 BB+ 2,126,666
2,000 KB Home 8.625% 12/15/08 Ba2 BB- 2,178,246
3,000 Standard Pacific Corporation 6.500% 10/01/08 Ba2 BB 3,045,000
------------------------------------------------------------------------------------------------------------------------------------
7,349,912
------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Corporate Bonds (cost $15,812,127) 15,827,537
--------------------------------------------------------------------------------------------------------------------
21
Nuveen Diversified Dividend and Income Fund (JDD) (continued)
Portfolio of INVESTMENTS (Unaudited) June 30, 2005
PRINCIPAL
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
HIGH-GRADE SHORT-TERM INVESTMENTS - 4.0% (3.0% OF TOTAL INVESTMENTS)
$ 13,720 State Street Bank Euro Dollar Time Deposit, 2.600%, 7/01/05 $ 13,719,646
============ --------------------------------------------------------------------------------------------------------------------
Total High-Grade Short-Term Investments (cost $13,719,646) 13,719,646
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $408,203,927) - 135.7% 459,969,425
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.3)% (1,113,835)
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (35.4)% (120,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 338,855,590
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Senior Loans in which the Fund invests generally pay
interest at rates which are periodically adjusted by
reference to a base short-term, floating lending rate
plus an assigned fixed rate. These floating lending
rates are generally (i) the lending rate referenced by
the London Inter-Bank Offered Rate ("LIBOR"), or (ii)
the prime rate offered by one or more major United
States banks. Senior loans may be considered restricted
in that the Fund ordinarily is contractually obligated
to receive approval from the Agent Bank and/or Borrower
prior to the disposition of a Senior Loan.
* Senior Loans in the Fund's portfolio generally are
subject to mandatory and/or optional prepayment.
Because of these mandatory prepayment conditions and
because there may be significant economic incentives
for a Borrower to prepay, prepayments of Senior Loans
in the Fund's portfolio may occur. As a result, the
actual remaining maturity of Senior Loans held in the
Fund's portfolio may be substantially less than the
stated maturities shown. The Fund estimates that the
actual average maturity of the Senior Loans held in its
portfolio will be approximately 18-24 months.
** Ratings below Baa by Moody's Investor Service, Inc. or
BBB by Standard & Poor's Group are considered to be
below investment grade.
(a) At or subsequent to June 30, 2005, this issue was under
the protection of the Federal Bankruptcy Court.
(b) Purchased on a when-issued or delayed delivery basis.
(c) Position represents an unfunded loan commitment
outstanding at June 30, 2005. ADR American Depositary
Receipt.
144A 144A securities are those which are exempt from
registration under Rule 144A of the Securities Act of
1933, as amended. These securities may only be resold
in transactions exempt from registration which are
normally those transactions with qualified
institutional buyers.
Reg S Regulation S allows U.S. companies to sell securities
to persons or entities located outside of the U.S.
without registering those securities with the SEC.
Specifically, Reg S provides a safe harbor from the
registration requirements of the Securities Act for the
offers and sales of securities by both foreign and
domestic issuers that are made outside the United
States.
TBD Senior Loan purchased on a when-issued or delayed
delivery basis. Certain details associated with this
purchase are not known prior to the settlement date of
the transaction. In addition, Senior Loans typically
trade without accrued interest and therefore a weighted
average coupon rate is not available prior to
settlement. At settlement, if still unknown, the
borrower or counterparty will provide the Fund with the
final weighted average coupon rate and maturity date.
N/R Investment is not rated.
See accompanying notes to financial statements.
22
Statement of
ASSETS AND LIABILITIES June 30, 2005 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $408,203,927) $459,969,425
Receivables:
Dividends 1,010,257
Interest 2,639,943
Investments sold 2,739,972
Reclaims 29,946
Other assets 18,471
------------------------------------------------------------------------------------------------------------------------------------
Total assets 466,408,014
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 7,186,251
Accrued expenses:
Management fees 216,180
Other 133,536
FundPreferred share dividends payable 16,457
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,552,424
------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 120,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $338,855,590
====================================================================================================================================
Common shares outstanding 20,145,123
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 16.82
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 201,451
Paid-in surplus 284,729,686
Undistributed (Over-distribution of) net investment income (6,960,283)
Accumulated net realized gain from investments 9,119,238
Net unrealized appreciation of investments 51,765,498
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $338,855,590
====================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
23
Statement of
OPERATIONS Six Months Ended June 30, 2005 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $89,487) $ 3,824,848
Interest (net of foreign tax withheld of $7,407) 5,932,806
------------------------------------------------------------------------------------------------------------------------------------
Total investment income $ 9,757,654
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 1,991,157
FundPreferred shares - auction fees 148,767
FundPreferred shares - dividend disbursing agent fees 6,517
Shareholders' servicing agent fees and expenses 881
Custodian's fees and expenses 93,447
Trustees' fees and expenses 6,671
Professional fees 21,502
Shareholders' reports - printing and mailing expenses 32,269
Stock exchange listing fees 5,194
Investor relations expense 34,299
Other expenses 12,633
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 2,353,337
Custodian fee credit (285)
Expense reimbursement (712,666)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,640,386
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 8,117,268
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain from investments 9,265,877
Change in net unrealized appreciation (depreciation) of investments (3,918,846)
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 5,347,031
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (1,657,762)
From accumulated net realized gains from investments --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares
from distributions to FundPreferred shareholders (1,657,762)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $11,806,537
====================================================================================================================================
See accompanying notes to financial statements.
24
Statement of
CHANGES IN NET ASSETS (Unaudited)
SIX MONTHS
ENDED YEAR ENDED
6/30/05 12/31/04
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 8,117,268 $ 16,226,149
Net realized gain from investments 9,265,877 9,195,966
Change in net unrealized appreciation (depreciation) of investments (3,918,846) 35,806,329
Distributions to FundPreferred shareholders:
From net investment income (1,657,762) (1,200,397)
From accumulated net realized gains from investments -- (601,610)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations 11,806,537 59,426,437
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (12,389,251) (16,301,063)
From accumulated net realized gains from investments -- (8,284,807)
Tax return of capital -- (187,892)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (12,389,251) (24,773,762)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares (4,043) --
Net proceeds from shares issued to shareholders due to
reinvestment of distributions -- 411,807
FundPreferred shares offering costs (4,043) (4,868)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions (8,086) 406,939
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares (590,800) 35,059,614
Net assets applicable to Common shares at the beginning of period 339,446,390 304,386,776
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $338,855,590 $339,446,390
====================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (6,960,283) $ (1,030,538)
====================================================================================================================================
See accompanying notes to financial statements.
25
Statement of
CASH FLOWS Six Months Ended June 30, 2005 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 11,806,537
Adjustments to Reconcile the Net Increase in Net Assets Applicable to Common Shares from Operations
to Net Cash Provided by Operating Activities:
Purchases of investment securities (119,525,641)
Proceeds from disposition of short-term investment securities, net 5,829,197
Proceeds from disposition of investment securities 117,058,258
Amortization/(Accretion) of discounts and premiums, net 287,068
Decrease in dividends receivable 197,959
Decrease in interest receivable 7,876
Increase in receivable from investments sold (884,859)
Increase in reclaims receivable (11,063)
Increase in other assets (11,446)
Increase in payable for investments purchased 1,186,251
Decrease in management fees payable (5,357)
Decrease in other liabilities (37,030)
Decrease in FundPreferred share dividends payable (5,270)
Net realized gain from investments (9,265,877)
Change in net unrealized (appreciation)/depreciation of investments 3,918,846
Net realized (gain)/loss from paydowns 178,657
Capital gain and return of capital distributions from investments 1,673,231
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,397,337
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (12,389,251)
Net proceeds from sale of Common shares (4,043)
FundPreferred shares offering costs (4,043)
------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (12,397,337)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of period --
------------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD $ --
====================================================================================================================================
See accompanying notes to financial statements.
26
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Diversified Dividend and Income Fund (the "Fund") is a diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended. The Fund's Common shares are listed on the New York
Stock Exchange and trade under the ticker symbol "JDD." The Fund was organized
as a Massachusetts business trust on July 18, 2003.
The Fund seeks to provide high current income and total return by investing
primarily in a portfolio of dividend-paying common stocks, securities issued by
Real Estate Investment Trusts ("REITs"), debt securities and other non-equity
instruments that are issued by, or that are related to, government,
government-related and supernational issuers located, or conducting their
business, in emerging market countries ("emerging markets sovereign debt") and
senior loans.
Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the
Fund's previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NIAC or NAC.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities and senior
loans are generally provided by an pricing service approved by the Fund's Board
of Trustees and based on the mean between the bid and asked prices. When price
quotes are not readily available, the pricing service or, in the absence of a
pricing service for a particular security, the Board of Trustees of the Fund, or
its designee, may establish fair market value using a wide variety of market
data including yields or prices of investments of comparable quality, type of
issue, coupon, maturity and rating, market quotes or indications of value from
security dealers, evaluations of anticipated cash flows or collateral, general
market conditions and other information and analysis, including the obligor's
credit characteristics considered relevant by the pricing service or the Board
of Trustee's designee. Short-term securities are valued at amortized cost, which
approximates market value.
The senior loans in which the Fund invests are not listed on an organized
exchange and the secondary market for such investments may be less liquid
relative to markets for other fixed income securities. Consequently, the value
of senior loans, determined as described above, may differ significantly from
the value that would have been determined had there been an active market for
that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis. Trade date for
senior loans purchased in the "primary market" is considered the date on which
the loan allocations are determined. Trade date for senior loans purchased in
the "secondary market" is the date on which the transaction is entered into.
Realized gains and losses from investment transactions are determined on the
specific identification method. Investments purchased on a when-issued or
delayed delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At June 30, 2005, the
Fund had outstanding delayed delivery commitments of $4,030,000.
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis. Interest income also includes paydown gains and
losses on senior loans. Fee income consists primarily of amendment fees.
Amendment fees are earned as compensation for evaluating and accepting changes
to the original loan agreement and are recognized when received.
Income Taxes
The Fund intends to distribute substantially all net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
27
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
The Fund intends to make monthly cash distributions to Common Shareholders of a
stated dollar amount based primarily on the Fund's net investment income but
also secondarily on net realized capital gains and/or on net unrealized capital
gains in the Fund's portfolio (stated in terms of a fixed cents per Common Share
dividend rate) ("Managed Distribution Policy"). The Fund seeks to maintain a
stable distribution level, subject to approval and oversight by the Fund's Board
of Trustees. Distributions will be made only after paying any accrued dividends
or making any redemption or liquidation payments to FundPreferred shares, if
any, and interest and required principal payments on borrowings, if any. Under
the Managed Distribution Policy, if, for any monthly distribution, net
investment income and net realized capital gain were less than the amount of the
distribution, the difference would be distributed from the Fund's assets and
would be treated by shareholders as a return of capital for tax purposes.
Distributions during the first six months of the fiscal year are classified as
having been paid from net investment income; consequently, this will negatively
impact the amount of undistributed net investment income shown in the financial
statements in this semiannual report. The final determination of the source of
all distributions for the year are made after the end of the year and reflected
in the financial statements contained in the annual report.
REIT distributions received by the Fund are generally comprised of investment
income, long-term and short-term capital gains, and a return of REIT capital.
The actual character of amounts received during the period are not known until
after the fiscal year-end of the Fund. For the twelve months ended December 31,
2004, the character of distributions to the Fund from the REITs was 51.30%
ordinary income, 28.25% long-term and short-term capital gains, and 20.45%
return of REIT capital.
For the six months ended June 30, 2005, the Fund applied the actual percentages
for the twelve months ended December 31, 2004, described above, to its receipts
from the REITs and treated as income in the Statement of Operations only the
amount of ordinary income so calculated. The Fund adjusts that estimated
breakdown of income type (and consequently its net investment income) as
necessary early in the following calendar year when the REITs inform their
shareholders of the actual breakdown of income type. For the fiscal period ended
December 31, 2004, the Fund applied the actual character of distributions
reported by the REITs in which the Fund invests to its receipts from the REITS.
If a REIT held in the portfolio of investments did not report the actual
character of its distributions during the period, the Fund treated the
distributions as ordinary income.
During the six months ended June 30, 2005, the Fund treated each distribution to
its shareholders from the portfolio REITs as being entirely from net investment
income. The Fund will recharacterize those distributions as being from ordinary
income, long-term and short-term capital gains, and return of capital, if
necessary, at the beginning of the subsequent year, based upon the income type
breakdown information conveyed at the time by the REITs whose securities are
held in the Fund's portfolio. Consequently, the financial statements at June 30,
2005, reflect an over-distribution of net investment income that is at least
partly attributable to the fact that some of the amounts received by the Fund
from the portfolio REITS, but none of the dividends paid by the Fund to
shareholders, were treated as something other than ordinary income. For the
fiscal year ended December 31, 2004, the Fund applied the actual character of
distributions reported by the REITs in which the Fund invests to the
distributions paid to the Fund shareholders.
FundPreferred Shares
The Fund has issued and outstandings 2,400 Series T and 2,400 Series W,
FundPreferred shares, $25,000 stated value per share, as a means of effecting
financial leverage. The dividend rate on each Series is determined every seven
days, pursuant to a dutch auction process overseen by the auction agent, and is
payable weekly at the end of each rate period.
Derivative Financial Instruments
The Fund may use derivatives or other transactions for the purpose of hedging
the portfolio's exposure to common stock risk, high yield credit risk, foreign
currency exchange risk and the risk of increases in interest rates. Although the
Fund is authorized to invest in such financial instruments, and may do so in the
future, it did not make any such investment during the six months ended June 30,
2005.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
28
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Fund's organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, in the normal course of business, the Fund
enters into contracts that provide general indemnifications to other parties.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
The Fund did not engage in transactions in its own shares during the six months
ended June 30, 2005.
During the fiscal year ended December 31, 2004, 26,242 Common shares were issued
to shareholders due to reinvestment of distributions.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
six months ended June 30, 2005, aggregated $119,525,641 and $117,058,258,
respectively.
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses, recognition of
premium amortization on debt securities, recognition of income on REIT
securities, and timing differences in recognizing certain gains and losses on
investment transactions.
At June 30, 2005, the cost of investments was as follows:
--------------------------------------------------------------------------------
Cost of investments $409,713,402
================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at June 30, 2005, were as follows:
--------------------------------------------------------------------------------
Gross unrealized:
Appreciation $53,809,667
Depreciation (3,553,644)
--------------------------------------------------------------------------------
Net unrealized appreciation of investments $50,256,023
================================================================================
The tax components of undistributed net ordinary income and net realized gains
at December 31, 2004, the Fund's last fiscal year end, were as follows:
--------------------------------------------------------------------------------
Undistributed net ordinary income * $ --
Undistributed net long-term capital gains --
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended December
31, 2004, the Fund's last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
--------------------------------------------------------------------------------
Distributions from net ordinary income * $22,551,616
Distributions from net long-term capital gains 3,819,302
Tax return of capital 187,892
================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest, and net short-term capital gains, if any.
The Fund designated as a long-term capital gain dividend, pursuant to Internal
Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and
profits of the Fund related to net capital gain to zero for the tax period ended
December 31, 2004.
29
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all funds assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser. As of July
31, 2005, the complex-level fee rate was .1899%.
The annual fund-level fee, payable monthly, for the Fund is based upon the
average daily Managed Assets of the Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with NWQ Investment Management Company, LLC
("NWQ"), Security Capital Research & Management Incorporated ("Security
Capital"), Symphony Asset Management, LLC ("Symphony") and Wellington Management
Company, LLP ("Wellington"). Nuveen owns a controlling interest in NWQ while key
management of NWQ owns a non-controlling minority interest. Symphony is an
indirect wholly owned subsidiary of Nuveen. NWQ manages the portion of the
Fund's investment portfolio allocated to dividend-paying common stocks including
American Depositary Receipts ("ADRs"). Security Capital manages the portion of
the Fund's investment portfolio allocated to securities issued by real estate
companies including REITs. Symphony manages the portion of the Fund's investment
portfolio allocated to senior loans. Wellington manages the portion of the
Fund's investment portfolio allocated to emerging markets sovereign debt. NWQ,
Security Capital, Symphony and Wellington are compensated for their services to
the Fund from the management fee paid to the Adviser.
The Fund pays no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Fund from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
30
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2003* .32% 2008 .32%
2004 .32 2009 .24
2005 .32 2010 .16
2006 .32 2011 .08
2007 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond September 30, 2011.
6. COMMITMENTS
Pursuant to the terms of certain of the variable rate senior loan agreements,
the Fund may have unfunded senior loan commitments. The Fund will maintain with
its custodian, cash, liquid securities and/or liquid senior loans having an
aggregate value at least equal to the amount of unfunded senior loan
commitments. At June 30, 2005, the Fund had unfunded loan commitments of $4,487.
7. SENIOR LOAN PARTICIPATION COMMITMENTS
With respect to the senior loans held in the Fund's portfolio, the Fund may: 1)
invest in assignments; 2) act as a participant in primary lending syndicates; or
3) invest in participations. If the Fund purchases a participation of a senior
loan interest, the Fund would typically enter into a contractual agreement with
the lender or other third party selling the participation, rather than directly
with the Borrower. As such, the Fund not only assumes the credit risk of the
Borrower, but also that of the Selling Participant or other persons
interpositioned between the Fund and the Borrower. At June 30, 2005, there were
no such outstanding participation commitments.
8. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreement between the Fund and the Adviser, which resulted in the
automatic termination of the agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved a new ongoing
investment management agreement for the Fund and the submission of the agreement
for approval by the Fund's shareholders, which shareholder approval was received
prior to the settlement of transactions (C) and (D). The new ongoing management
agreement took effect upon such settlement.
9. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Fund declared a distribution of $.1025 per Common share which was paid on
August 1, 2005, to shareholders of record on July 15, 2005.
31
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
-------------------------------------------------------------- ---------------------------------------
Distributions Distributions
from Net from Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to Tax
Share Net Unrealized FundPreferred FundPreferred Common Common Return
Net Asset Investment Investment Share- Share- Share- Share- of
Value Income(a) Gain holders+ holders+ Total holders holders Capital Total
====================================================================================================================================
Period Ended 12/31:
2005(c) $16.85 $.40 $ .27 $(.08) $ -- $ .59 $(.62) $ -- $ -- $ (.62)
2004 15.13 .81 2.23 (.06) (.03) 2.95 (.81) (.41) (.01) (1.23)
2003(b) 14.33 .18 1.01 (.01) -- 1.18 (.18) (.02) (.01) (.21)
====================================================================================================================================
Total Returns
-------------------
Based
Offering on
Costs and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
==========================================================================================
Period Ended 12/31:
2005(c) $ -- $16.82 $15.22 1.81% 3.61%
2004 -- 16.85 15.57 8.04 20.44
2003(b) (.17) 15.13 15.65 5.76 7.04
==========================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------- -------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
=============================================================================================================================
Period Ended 12/31:
2005(c) $338,856 1.46%* 4.60%* 1.02%* 5.05%* 27%
2004 339,446 1.50 4.74 1.06 5.19 46
2003(b) 304,387 1.26* 4.51* .87* 4.89* 28
=============================================================================================================================
FundPreferred Shares at End of Period
--------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
===========================================================================
Period Ended 12/31:
2005(c) $120,000 $25,000 $95,595
2004 120,000 25,000 95,718
2003(b) 120,000 25,000 88,414
===========================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Common Share Net
Asset Value is the combination of changes in Common Share net asset value,
reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares.
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period September 25, 2003 (commencement of operations) through
December 31, 2003.
(c) For the six months ended June 30, 2005.
See accompanying notes to financial statements.
32-33 SPREAD
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
At a meeting held on May 10-12, 2005, the Board of Trustees of the Fund,
including the independent Trustees, unanimously approved the Investment
Management Agreement between the Fund and NAM and the Sub-Advisory Agreement
between NAM and NWQ, Security Capital, Symphony and Wellington, respectively
(each, a "Sub-Adviser") (NAM and the Sub-Advisers are each a "Fund Adviser").
THE APPROVAL PROCESS
To assist the Board in its evaluation of an advisory contract with a Fund
Adviser, the independent Trustees received a report in adequate time in advance
of their meeting which outlined, among other things, the services provided by
the Fund Adviser; the organization of the Fund Adviser, including the
responsibilities of various departments and key personnel; the Fund's past
performance as well as the Fund's performance compared to funds of similar
investment objectives compiled by an independent third party (a "Peer Group") as
described below and if available, with recognized or, in certain cases,
customized benchmarks; the profitability of the Fund Adviser and certain
industry profitability analyses for advisers to unaffiliated investment
companies; the expenses of the Fund Adviser in providing the various services;
the advisory fees of the Fund Adviser, including comparisons of such fees with
the management fees of comparable funds in its Peer Group as well as comparisons
of the Fund Adviser's management fees with the fees the Fund Adviser assesses to
other types of investment products or accounts, if any; the soft dollar
practices of the Fund Adviser; and the expenses of the Fund, including
comparisons of the Fund's expense ratios (after any fee waivers) with the
expense ratios of its Peer Group. This information supplements that received by
the Board throughout the year regarding Fund performance, expense ratios,
portfolio composition, trade execution and sales activity.
In addition to the foregoing materials, independent legal counsel to the
independent Trustees provided, in advance of the meeting, a legal memorandum
outlining, among other things, the duties of the Trustees under the 1940 Act as
well as the general principles of relevant state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; an
adviser's fiduciary duty with respect to advisory agreements and compensation;
the standards used by courts in determining whether investment company boards of
directors have fulfilled their duties and factors to be considered by the board
in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. In addition, the independent Trustees noted that each Sub-Adviser
also previously made written or oral presentations to the Board providing the
respective Sub-Adviser with the opportunity to explain its investment
strategies, discuss market conditions, and highlight any material issues. Many
of these presentations were part of site visits by the Board throughout the
year. After the presentations and after reviewing the written materials, the
independent Trustees met privately with their legal counsel to review the
Board's duties in reviewing advisory contracts and consider the renewal of the
advisory contract. It is with this background that the Trustees considered each
advisory contract (which includes sub-advisory contracts) with a Fund Adviser.
The independent Trustees, in consultation with independent counsel, reviewed the
factors set out in judicial decisions and SEC directives relating to the renewal
of advisory contracts. As outlined in more detail below, the Trustees considered
all factors they believed relevant with respect to the Fund, including the
following: (a) the nature, extent and quality of the services to be provided by
the Fund Adviser; (b) the investment performance of the Fund and the Fund
Adviser; (c) the costs of the services to be provided and profits to be realized
by the Fund Adviser and its affiliates from the relationship with the Fund; (d)
the extent to which economies of scale would be realized as the Fund grows; and
(e) whether fee levels reflect these economies of scale for the benefit of Fund
investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of the respective Fund Adviser's
services, the Trustees reviewed information concerning the types of services
that a Fund Adviser or its affiliates provide and are expected to provide to the
Nuveen Funds; narrative and statistical information concerning the Fund's
performance record and how such performance compares to the Fund's Peer Group
and recognized benchmarks and/or customized benchmarks (as described in further
detail in Section B below); information describing the Fund Adviser's
organization and its various departments, the experience and responsibilities of
key personnel, and available resources. In the discussion of key personnel, the
Trustees received materials regarding the changes or additions in personnel of
the applicable Fund Adviser. The Trustees further noted the willingness of the
personnel of NAM to engage in open, candid discussions with the Board. The
Trustees further considered the quality of the Fund Adviser's investment process
in making portfolio management decisions, including any refinements or
improvements to the portfolio management processes, enhancements to technology
and systems that are available to portfolio managers, and any additions of new
personnel which may strengthen or expand the research and investment
capabilities of the Fund Adviser. In their review of the advisory contracts for
the fixed income funds, the Trustees also noted that Nuveen won the Lipper Award
for Best Fund Family: Fixed Income-Large Asset Class, for 2004. Given the
Trustees' experience with the Fund, other Nuveen funds and the Fund Advisers,
the Trustees noted that they were familiar with and continue to have a good
understanding of the organization, operations and personnel of the Fund
Advisers.
34
In addition to advisory services, the independent Trustees considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Fund with such administrative and other services (exclusive of,
and in addition to, any such services provided by others for the Fund) and
officers and other personnel as are necessary for the operations of the Fund. In
addition to investment management services, NAM and its affiliates provide the
Fund with a wide range of services, including: preparing shareholder reports;
providing daily accounting; providing quarterly financial statements; overseeing
and coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such meetings;
providing legal support (such as helping to prepare registration statements,
amendments thereto and proxy statements and responding to regulatory inquiries);
and performing other Fund administrative tasks necessary for the operation of
the Fund (such as tax reporting and fulfilling regulatory filing requirements).
In addition, in evaluating the administrative services, the Trustees considered,
in particular, a Fund Adviser's policies and procedures for assuring compliance
with applicable laws and regulations in light of the new SEC regulations
governing compliance. The Trustees noted NAM's focus on compliance and its
compliance systems. In their review, the Trustees considered, among other
things, the additions of experienced personnel to NAM's compliance group and
modifications and other enhancements to NAM's computer systems. In addition to
the foregoing, the Trustees also noted that NAM outsources certain services that
cannot be replicated without significant costs or at the same level of
expertise. Such outsourcing has been a beneficial and efficient use of resources
by keeping expenses low while obtaining quality services. Further, as the Fund
utilizes Sub-Advisers, the Trustees considered NAM's ability and procedures to
monitor the respective Sub-Adviser's performance, business practices and
compliance policies and procedures. In this regard, the Trustees noted the role
of NAM's investment oversight committee, including its increased personnel, the
responsibilities and experience of the staff, and procedures to monitor
Sub-Advisers, including the use of site visits.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Fund, the
independent Trustees determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Trustees noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
In evaluating the services of the various Sub-Advisers, the independent Trustees
noted that the Sub-Advisory Agreements were essentially agreements for portfolio
management services only and the respective Sub-Adviser was not expected to
supply other significant administrative services to the Fund.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were quite satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
As previously noted, the Board received a myriad of performance information
regarding the Fund and its Peer Group, if available. Among other things, the
Board received materials reflecting the Fund's historic performance, the Fund's
performance compared to its Peer Group (as available) and its performance
compared to customized benchmarks. The Trustees reviewed performance information
including, among other things, total return information compared with the Fund's
Peer Group as well as customized benchmarks for the one-, three- and five-year
periods (as applicable) ending December 31, 2004. The Fund does not have
comparable peers in which case its performance was measured against custom
benchmarks for applicable periods during the life of the Fund. This information
supplements the Fund performance information provided to the Board at each of
their quarterly meetings. Based on their review, the Trustees determined that
the Fund's absolute and relative investment performance over time had been
satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses that the Fund is expected to
bear, the Trustees considered the Fund's current management fee structure,
the sub-advisory fee arrangements and the Fund's expected expense ratios in
absolute terms as well as compared with the fees and expense ratios of the
unaffiliated funds in its Peer Group. The Trustees reviewed the financial
information of the respective Fund Adviser, including its respective
revenues, expenses and profitability. In reviewing fees, the Trustees, among
other things, reviewed comparisons of the Fund's gross management fees (fees
after fund-level and complex-wide level breakpoints but before reimbursement
and fee waivers), net management fees (after breakpoints and reimbursements
and fee waivers) and total expense ratios (before and after waivers) with
those of the unaffiliated funds in its Peer Group and peer averages. In this
regard, the Trustees noted that the relative ranking of the Nuveen Funds on
fees and expenses was aided by the significant level of fee reductions
provided by the fund-level and complex-wide breakpoint schedules, and the fee
waivers and reimbursements provided by Nuveen for certain funds launched
since 1999. The complex-wide breakpoint schedule was instituted in 2004 and
is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect These Economies of Scale." In its
review, the Trustees noted that all taxable closed-end exchange-traded Nuveen
funds had net expense ratios below or within an acceptable range compared to
peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further compared the fees of NAM to the fees NAM or an affiliate
thereof assessed for other types of clients (such as separate managed
accounts as well as fees charged on funds that are not offered by Nuveen but
are sub-advised by one of Nuveen's investment management teams). With respect
to separately managed accounts, the advisory fees to such separate managed
accounts are generally lower than those charged to the Fund. The Trustees
noted, however, the additional services that are provided and the costs
incurred by Nuveen in managing and operating registered investment companies,
such as the Fund, compared to individually managed separate accounts. For
instance, as described above, NAM and its affiliates provide numerous
services to the Fund including, but not limited to, preparing shareholder
reports; providing daily accounting; preparing quarterly financial
statements; overseeing and coordinating the activities of other service
providers; administering and organizing Board
35
ANNUAL INVESTMENT MANAGEMENT
AGREEMENT APPROVAL PROCESS (continued)
meetings and preparing the Board materials for such meetings; providing legal
support; and administering all other aspects of the Fund's operations.
Further, the Trustees noted the increased compliance requirements for funds
in light of new SEC regulations and other legislation. These services are
generally not required to the same extent, if at all, for separate accounts.
In addition to the differences in services, the Trustees also considered,
among other things, the differences in product distribution, investor
profiles and account sizes. Accordingly, the Trustees believe that the nature
and number of services provided to operate the Fund merit the higher fees
than those to separate managed accounts.
In considering the fees of the Sub-Adviser, the Trustees also considered the
pricing schedule the Sub-Adviser charges for similar investment management
services for other fund sponsors or clients (except for Wellington for which
information was not made available). With respect to Symphony, the Trustees
also compared the sub-advisory fees to the significantly higher fees assessed
to hedge funds advised by Symphony. Generally, the sub-advisory fees were at
the lower end of the Sub-Adviser's fee schedule. In addition, the Trustees
noted that such sub-advisory fees and arrangements with the unaffiliated
Sub-Advisers were established through arms-length negotiations between the
respective Sub-Adviser and NAM.
3. PROFITABILITY OF ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of NAM (which incorporated Nuveen's wholly-owned subsidiaries -
NWQ and Symphony) as well as the profitability of the other Sub-Advisers. The
Trustees reviewed the respective Fund Adviser's revenues, expenses and
profitability margins (on both a pre-tax and after-tax basis). In reviewing
profitability, the Trustees recognized that one of the most difficult issues in
determining profitability is establishing a method of allocating expenses.
Accordingly, the Trustees reviewed a Fund Adviser's assumptions and methodology
of allocating expenses. In this regard, the methods of allocation used appeared
reasonable but the Board noted the inherent limitations in allocating costs
among various advisory products. The Trustees also recognized that individual
fund or product line profitability of other advisers is generally not publicly
available. Further, profitability may be affected by numerous factors including
the types of funds managed, expense allocations, business mix, etc. and
therefore comparability of profitability is somewhat limited. Nevertheless, to
the extent available, the Trustees considered the respective Fund Adviser's
profit margin compared to the profitability of various publicly-traded
investment management companies and/or investment management companies that
publicly disclose some or all of their financial results compiled by three
independent third-party service providers. The Trustees also reviewed the
revenues, expenses and profit margins of various unaffiliated advisory firms
with similar amounts of assets under management for the last year prepared by
NAM. Based on their review, the Trustees were satisfied that each Fund Adviser's
level of profitability from its relationship with the Fund was reasonable in
light of the services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Fund, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the Fund, the Trustees
determined that the advisory fees and expenses of the Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
In reviewing the compensation, the Trustees have long understood the benefits of
economies of scale as the assets of a fund grows and have sought to ensure that
shareholders share in these benefits. One method for shareholders to share in
economies of scale is to include breakpoints in the advisory fee schedules that
reduce fees as fund assets grow. Accordingly, the Trustees received and reviewed
the schedules of advisory fees for the Fund, including fund-level breakpoints
thereto. In addition, after lengthy negotiations with management, the Board in
May, 2004 approved a complex-wide fee arrangement pursuant to which fees of the
funds in the Nuveen complex, including the Fund, are reduced as the assets in
the fund complex reach certain levels. The complex-wide fee arrangement was
introduced on August 1, 2004 and the Trustees reviewed data regarding the
reductions of fees for the Fund for the period of August 1, 2004 to December 31,
2004. In evaluating the complex-wide fee arrangement, the Trustees considered,
among other things, the historic and expected fee savings to shareholders as
assets grow, the amount of fee reductions at various asset levels, and that the
arrangement would extend to all funds in the Nuveen complex. The Trustees also
considered the impact, if any, the complex-wide fee arrangement may have on the
level of services provided. Based on their review, the Trustees concluded that
the breakpoint schedule and complex-wide fee arrangement currently was
acceptable and desirable in providing benefits from economies of scale to
shareholders.
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the respective Fund Adviser or its affiliates may receive as a result of
its relationship with the Fund. In this regard, the Trustees considered any
benefits from soft dollar arrangements. The Trustees noted that although NAM
manages a large amount of assets, it has very little, if any, brokerage to
allocate. This is due to the fact that NAM typically manages the portfolios of
the municipal funds in the Nuveen complex and municipal bonds generally
36
trade on a principal basis. Accordingly, NAM does not currently have any soft
dollar arrangements and does not pay excess brokerage commissions (or spreads on
principal transactions) in order to receive research services. The Trustees also
considered the soft dollar arrangements of the Sub-Advisers. The Trustees noted
that NWQ has engaged in soft dollar arrangements. With respect to such
Sub-Advisers, the Trustees considered that the respective Sub-Adviser benefits
from its soft dollar arrangements pursuant to which such Sub-Adviser receives
research from brokers that execute the Fund's portfolio transactions. The
Trustees received and reviewed materials concerning such Sub-Adviser's brokerage
practices, including its broker allocation policies and procedures, the types of
research and brokerage services received, the brokers providing such services,
and the dollar amount of commissions allocated to brokers for soft dollar
arrangements for the last calendar year. In considering the types of research
received, the Trustees noted that such Sub-Adviser either has already limited
(or has agreed to modify its practices to limit) the use of soft dollars to
research with intellectual content. The Trustees recognized that such
Sub-Adviser's profitability may be lower if the Sub-Adviser was required to pay
for this research with hard dollars. With respect to Security Capital and
Symphony, the Trustees noted that these Sub-Advisers do not use soft dollar
arrangements. Finally, with respect to Wellington, the Trustees noted that while
Wellington does have soft dollar arrangements with respect to some of its agency
trades, the trades in fixed income securities held in the Fund are done on a
principal basis and, therefore, do not generate soft dollar credits.
In addition to soft dollar arrangements, the Trustees also considered any other
revenues, if any, received by NAM or its affiliates. In this regard, for Nuveen
funds with outstanding preferred shares and new closed-end funds, the Trustees
also considered revenues received by Nuveen for serving as agent for
broker-dealers at its preferred trading desk and for acting as co-manager in the
initial public offering of new closed-end exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority owned subsidiary of St. Paul Travelers
Companies, Inc. ("St. Paul"). As noted, St. Paul earlier this year announced its
intention to divest its equity stake in Nuveen. Nuveen is the parent of NAM.
Pursuant to a series of transactions, St. Paul had begun to reduce its interest
in Nuveen which would ultimately result in a change of control of Nuveen and
therefore NAM. As mandated by the 1940 Act, such a change in control would
result in an assignment of the Investment Management Agreement with NAM and the
automatic termination of such agreement. Accordingly, the Board also considered
the approval of a New Investment Management Agreement with the Fund in light of,
and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for the Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul's
interest will have an impact on the various factors they considered in approving
NAM, such as the scope and quality of services to be provided following the
change of control. In reviewing the St. Paul transactions, the Board considered,
among other things, the impact, if any, on the operations and organizational
structure of NAM; the possible benefits and costs of the transactions to the
Fund; the potential implications of any arrangements used by Nuveen to finance
certain of the transactions; the ability of NAM to perform its duties after the
transactions; whether the Fund's fee structure or expense ratio would change;
any changes to the current practices of the Fund; any changes to the terms of
the advisory agreement; and any anticipated changes to the operations of NAM.
Based on its review, the Board determined that St. Paul's divestiture would not
affect the nature and quality of services provided by NAM, the terms of the
Investment Management Agreement, including the fees thereunder, and would not
materially affect the organization or operations of NAM. Accordingly, the Board
determined that their analysis of the various factors regarding their approval
of NAM would continue to apply after the change of control.
In addition to the foregoing, a change in control of NAM may be deemed an
assignment of the Sub-Advisory Agreement between NAM and the respective
Sub-Adviser. Further, NWQ and Symphony are wholly-owned subsidiaries of Nuveen.
Accordingly, the change of control of Nuveen would also result in a change of
control of such Sub-Advisers resulting in the automatic termination of their
existing Sub-Advisory Agreements. The Board therefore considered approval of a
New Sub-Advisory Agreement with each Sub-Adviser in light of the anticipated
change of control. More specially, the Board considered approval of each New
Sub-Advisory Agreement on substantially identical terms as the respective
Original Sub-Advisory Agreement, to take effect after the change of control has
occurred and the agreement has been approved by Fund shareholders. In reviewing
the impact of the St. Paul divesture on the respective Sub-Adviser, the Board
considered the same factors as outlined previously with respect to their review
of NAM. As with NAM, the Board concluded that the St. Paul divestiture would not
affect the nature and quality of services provided by the respective
Sub-Adviser, the terms of the Sub-Advisory Agreement, including the fees paid
thereunder, and would not materially affect the organization or operations of
the Sub-Adviser. Accordingly, the Board determined that their analysis of the
various factors regarding their review and approval of the respective
Sub-Adviser would continue to apply following the change in control.
G. APPROVAL
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management and Sub-Advisory
Agreements were fair and reasonable, that the respective Fund Adviser's fees are
reasonable in light of the services provided to the Fund, that the renewal of
the NAM Investment Management Agreement and each Sub-Advisory Agreement should
be approved, and that the new, post-change of control NAM Investment Management
Agreement and the Sub-Advisory Agreements be approved and recommended to
shareholders.
37
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
38
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an "assignment" of the investment management agreement between each
Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and
the Fund's sub-adviser. As required by law, the shareholders of each Fund were
asked to approve a new investment management agreement and, if applicable, a new
subadvisory agreement that reflected this change in ownership. The shareholders
of each Fund voted this approval at a Shareholders' Meeting on July 26. 2005.
There were no changes to the investment objectives or management of any Fund as
a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2005, and (iii) a description of the
policies and procedures that the Fund used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD: Market yield is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Funds'
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
39
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $120 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
o Fund details
Learn more o Daily financial news
about Nuveen Funds at o Investor education
WWW.NUVEEN.COM/ETF o Interactive planning tools
Logo: NUVEEN Investments
ESA-B-0605D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Diversified Dividend and Income Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: September 7, 2005
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: September 7, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 7, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.