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 811-21471
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Nuveen Tax-Advantaged Total Return Strategy Fund
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(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
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: September 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.
QUARTERLY REPORT September 30, 2005
Nuveen Investments
Exchange-Traded
Closed-End Funds
NUVEEN
TAX-ADVANTAGED
TOTAL RETURN
STRATEGY FUND
JTA
OPPORTUNITIES FOR CAPITAL APPRECIATION AND TAX-ADVANTAGED DISTRIBUTIONS FROM A
PORTFOLIO OF VALUE EQUITIES AND SENIOR LOANS
Chairman's Letter
Dear Shareholder
I am very pleased to report that for the nine-month period ended September 30,
2005, your Fund was able to provide you with the opportunity for attractive
tax-advantaged income and capital appreciation potential.
Portfolio diversification is a recognized way to try to reduce some of the risk
that comes with investing. Since one part of your portfolio may be going up when
another is going down, portfolio diversification may help smooth your investment
returns over time. In addition to providing attractive monthly distributions, an
equity investment like your Fund may help you achieve and benefit from greater
portfolio diversification. Your financial advisor can explain these potential
advantages in more detail. I urge you to contact him or her soon for more
information on this important investment strategy.
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,
Timothy R. Schwertfeger
Chairman of the Board
November 15, 2005
Nuveen Tax-Advantaged Total Return Strategy Fund
(JTA)
Portfolio Managers'
Comments
The Fund features management by two affiliates of Nuveen Investments. The Fund's
investments in dividend-paying common and preferred stocks are managed by NWQ
Investment Management Company, LLC, while the Fund's investments in senior
corporate loans and other debt instruments are managed by Symphony Asset
Management, LLC. Jon Bosse, Chief Investment Officer of NWQ, leads the Fund's
management team at that firm. He has more than 23 years of investment management
experience. The Symphony team is led by Gunther Stein and Lenny Mason, who have
more than 25 years of combined investment management experience, much of it in
evaluating and purchasing senior corporate loans and other high-yield debt. Here
Jon, Gunther and Lenny talk about their management strategies and the
performance of the Fund for the nine-month period ended September 30, 2005.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 2005?
For the equity portion of the Fund's portfolio, 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 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.
During the course of this nine-month reporting period, we took new common stock
positions in POSCO, Merck & Co Inc., and Energias de Portugal SA. Our analysis
indicated that these companies possessed solid fundamentals, compelling
valuations, and an attractive risk/reward relationship. We eliminated Tate &
Lyle PLC, Weyerhauser Co., and DSM NV from the portfolio based on valuation
concerns. We also sold Delphi Corp. in early-April (prior to its bankruptcy)
because of deteriorating fundamentals and management credibility. We maintained
a large position in energy stocks during the period based on our analysis of
global supply conditions for crude oil and its impact on industry fundamentals,
the outlook on company cash flow growth, and valuations. The Fund's energy
holdings include Chevron Corp. Conocophillips, ENI Spa, Kerr-McGee Corp., and
Total S.A.
For the senior loan portion of the portfolio, we continued to focus on executing
a conservative portfolio management strategy that emphasized carefully selecting
both industry sectors and individual companies. We analyzed opportunities to
upgrade the portfolio by selling loans in sectors that we believed could have
problems over the coming months and rotating into what we believed were safer,
less cyclical sectors that would provide stronger asset protection. This
strategy led us to sell almost all of our automotive exposure before the sector
experienced significant volatility in May due to fears surrounding General
Motors and Ford. The loan market showed signs of strength during the third
quarter, although skyrocketing energy prices and rising short-term interest
rates caused uneasiness in the financial markets. Energy prices continued their
upward climb, causing speculation that corporate earnings growth could come
under pressure in the coming quarters.
Given the robust volume of new offerings, we were able to rotate into senior
loans that we felt provided more asset protection and less likelihood of
earnings volatility. When evaluating loans, we continued to look at the
fundamentals of the issuer. 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 bond market.
HOW DID THE FUND PERFORM?
Fund performance results, as well as the performance of a relevant benchmark,
are shown in the accompanying table.
Total returns on net asset value*
For the period September 30, 2005
9-MONTH 1-YEAR
--------------------------------------------------------------------------------
JTA 7.70% 17.95%
--------------------------------------------------------------------------------
Comparative benchmark(1) 5.54% 14.97%
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*Nine-month returns are cumulative and one-year returns are 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.
For the nine-month period ended September 30, 2005, JTA produced a cumulative
total return that exceeded an unleveraged, unmanaged benchmark comprised of the
same asset classes in approximately the same weightings as are represented in
the Fund's portfolio.
Overall, market conditions were difficult in the first six-months of 2005, but
began to improve in the third quarter of the year. In particular, the portfolio
generated solid third quarter gains based on the strength of its energy stocks,
stepped-up corporate restructuring activities, and news that portfolio holding
Albertson's Inc. has put itself up for sale. None of the Fund's equity
investments suffered material losses as a consequence of Hurricanes Katrina and
Rita that devastated the Gulf Coast region in August and September.
Also contributing to performance were tobacco holdings Altria Group Inc. (parent
of Philip Morris) and Carolina Group. The stocks rallied after the Illinois
Supreme Court reversed a $1.05 billion class-action judgment against State Farm
Insurance related to consumer fraud. The decision had positive implications for
the tobacco industry as a similar class-action judgment for $10.1 billion
against Altria Group is now expected to be reversed.
1 The comparative benchmark is designed to reflect the portfolio composition
of JTA, and is calculated by combining 1) 56% 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) 16% of the return of the MSCI EAFE ex-Japan Value Index, a
capitalization-weighted index that selects the lower 50% of the
price-to-book ranked value stocks traded in the developed markets of
Europe, Asia and the Far East, excluding Japan, 3) 8% of the return of the
Merrill Lynch DRD Preferred Index, which consists of investment-grade,
dividends received deduction-eligible, exchange-traded preferred stocks
with one year or more to maturity, and 4) 20% 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 are not leveraged, and do not include the effects of
any sales charges or management fees. It is not possible to invest directly
in an index.
Fund holdings POSCO and Rio Tinto PLC also outperformed during the reporting
period as global economic growth, especially in China, has led to an increase in
the demand for most industrial commodities, including steel and iron ore. Both
companies have a meaningful exposure to that country. Meanwhile, new management
and structural changes continued to yield improvements in top-line growth and
operating margins at insurance broker, Aon Corp. The company is also poised to
benefit as one of its competitors struggles to repair its reputation following a
recent settlement with the government related to bid rigging and overcharging
its customers.
The Fund did see a fall off in the performance of several of its financial
services holdings during the reporting period, particularly in the third quarter
as a persistently flat yield curve put pressure on net interest margins and the
outlook for company fundamentals. Shares of Fannie Mae were also pressured as
the company has been actively reducing its retained portfolio in order to meet
new surplus capital requirements mandated by its government regulator.
Pharmaceutical manufacturer Merck & Co. declined as well following a wrongful
death verdict against the company related to its anti-inflammatory drug, Vioxx.
In the senior loan portion of the Fund's portfolio, our holdings continued to
perform in line with the relatively positive overall performance of the loan
market in general over the nine-month period. In particular, Anthony Crane, a
large renter of industrial cranes and equipment, had a positive impact on the
Fund's performance, even though we sold this position before the end of the
period.
Given some relative weakness in the high yield market over this period, several
high yield positions had a negative impact on Fund performance during these nine
months. In addition, Federal Mogul remained in Chapter 11 bankruptcy proceedings
as of September 30, 3005, and the term loan we held had a negative impact on
performance over the course of the period.
DISTRIBUTION AND SHARE PRICE INFORMATION
In addition to owning preferred stocks, the Fund has issued its own preferred
shares, called FundPreferred(TM), and entered into short-term borrowing
arrangements. This FundPreferred and borrowing 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. In September
2005, the Fund announced an increase in its monthly distribution to $0.105 per
share from $0.100 per share.
As of September 30, 2005, the Fund was trading at a -9.14% discount to its net
asset value. This was greater than the average -8.56% discount the Fund
exhibited over the course of the entire nine-month reporting period.
Nuveen Tax-Advantaged Total Return Strategy Fund
JTA
Performance
OVERVIEW As of September 30, 2005
PORTFOLIO ALLOCATION
(as a % of total investments)
------------------------------------
Common Stocks 69.1%
------------------------------------
Variable Rate Senior
Loan Interests 15.0%
------------------------------------
Preferred Securities 8.6%
------------------------------------
Corporate Bonds 2.4%
------------------------------------
Repurchase Agreements 4.9%
------------------------------------
Bar Chart:
2004-2005 MONTHLY DISTRIBUTIONS PER SHARE
Oct .0735
Nov .0735
Dec .1000
Jan .1000
Feb .1000
Mar .1000
Apr .1000
May .1000
Jun .1000
Jul .1000
Aug .1000
Sep .1050
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
10/1/2004 18.30
10/4/2004 18.40
10/5/2004 18.26
10/6/2004 18.23
10/7/2004 18.24
10/8/2004 18.22
10/11/2004 18.15
10/12/2004 18.13
10/13/2004 18.04
10/14/2004 18.03
10/15/2004 18.00
10/18/2004 18.00
10/19/2004 17.93
10/20/2004 17.75
10/21/2004 17.61
10/22/2004 17.62
10/25/2004 17.52
10/26/2004 17.70
10/27/2004 17.81
10/28/2004 17.86
10/29/2004 17.83
11/1/2004 17.82
11/2/2004 18.00
11/3/2004 18.05
11/4/2004 18.08
11/5/2004 18.12
11/8/2004 18.34
11/9/2004 18.18
11/10/2004 18.13
11/11/2004 18.16
11/12/2004 18.26
11/15/2004 18.44
11/16/2004 18.50
11/17/2004 18.64
11/18/2004 18.73
11/19/2004 18.46
11/22/2004 18.37
11/23/2004 18.45
11/24/2004 18.45
11/26/2004 18.40
11/29/2004 18.57
11/30/2004 18.70
12/1/2004 18.78
12/2/2004 19.17
12/3/2004 19.20
12/6/2004 19.45
12/7/2004 19.61
12/8/2004 19.50
12/9/2004 19.45
12/10/2004 19.29
12/13/2004 19.24
12/14/2004 19.15
12/15/2004 19.08
12/16/2004 18.96
12/17/2004 18.81
12/20/2004 18.88
12/21/2004 18.95
12/22/2004 18.85
12/23/2004 19.08
12/27/2004 19.13
12/28/2004 19.25
12/29/2004 19.27
12/30/2004 19.28
12/31/2004 19.35
1/3/2005 19.54
1/4/2005 19.41
1/5/2005 19.53
1/6/2005 19.43
1/7/2005 19.52
1/10/2005 19.46
1/11/2005 19.43
1/12/2005 19.37
1/13/2005 19.38
1/14/2005 19.49
1/18/2005 19.47
1/19/2005 19.35
1/20/2005 19.45
1/21/2005 19.49
1/24/2005 19.40
1/25/2005 19.29
1/26/2005 19.30
1/27/2005 19.26
1/28/2005 19.30
1/31/2005 19.42
2/1/2005 19.51
2/2/2005 19.63
2/3/2005 19.69
2/4/2005 19.83
2/7/2005 19.83
2/8/2005 19.85
2/9/2005 19.68
2/10/2005 19.64
2/11/2005 19.62
2/14/2005 19.60
2/15/2005 19.83
2/16/2005 19.72
2/17/2005 19.64
2/18/2005 19.58
2/22/2005 19.38
2/23/2005 19.33
2/24/2005 19.39
2/25/2005 19.62
2/28/2005 19.60
3/1/2005 19.70
3/2/2005 19.70
3/3/2005 19.73
3/4/2005 19.85
3/7/2005 19.82
3/8/2005 19.79
3/9/2005 19.67
3/10/2005 19.70
3/11/2005 19.41
3/14/2005 19.43
3/15/2005 19.25
3/16/2005 19.16
3/17/2005 19.42
3/18/2005 19.37
3/21/2005 19.36
3/22/2005 19.19
3/23/2005 19.05
3/24/2005 19.02
3/28/2005 18.84
3/29/2005 18.66
3/30/2005 19.04
3/31/2005 19.20
4/1/2005 19.20
4/4/2005 19.14
4/5/2005 19.28
4/6/2005 19.25
4/7/2005 19.36
4/8/2005 19.52
4/11/2005 19.50
4/12/2005 19.35
4/13/2005 19.30
4/14/2005 19.01
4/15/2005 18.85
4/18/2005 18.72
4/19/2005 18.99
4/20/2005 18.80
4/21/2005 19.15
4/22/2005 19.19
4/25/2005 19.15
4/26/2005 19.15
4/27/2005 19.16
4/28/2005 19.17
4/29/2005 19.39
4/30/2005 19.39
5/2/2005 19.31
5/3/2005 19.40
5/4/2005 19.66
5/5/2005 19.57
5/6/2005 19.72
5/9/2005 19.55
5/10/2005 19.63
5/11/2005 19.57
5/12/2005 19.60
5/13/2005 19.53
5/16/2005 19.58
5/17/2005 19.69
5/18/2005 19.55
5/19/2005 19.70
5/20/2005 19.75
5/23/2005 19.88
5/24/2005 19.78
5/25/2005 19.63
5/26/2005 19.79
5/27/2005 19.89
5/31/2005 19.74
6/1/2005 19.68
6/2/2005 19.70
6/3/2005 19.75
6/6/2005 19.92
6/7/2005 19.97
6/8/2005 19.76
6/9/2005 19.85
6/10/2005 19.80
6/13/2005 19.88
6/14/2005 19.82
6/15/2005 19.89
6/16/2005 19.89
6/17/2005 19.92
6/20/2005 19.80
6/21/2005 19.70
6/22/2005 19.87
6/23/2005 19.70
6/24/2005 19.75
6/27/2005 19.68
6/28/2005 19.90
6/29/2005 19.95
6/30/2005 19.90
7/1/2005 19.93
7/5/2005 19.94
7/6/2005 19.93
7/7/2005 20.00
7/8/2005 19.97
7/11/2005 19.99
7/12/2005 20.00
7/13/2005 20.00
7/14/2005 19.95
7/15/2005 19.98
7/18/2005 20.00
7/19/2005 20.00
7/20/2005 19.95
7/21/2005 19.95
7/22/2005 19.99
7/25/2005 19.89
7/26/2005 20.00
7/27/2005 19.99
7/28/2005 20.04
7/29/2005 20.00
7/31/2005 20.00
8/1/2005 20.00
8/2/2005 20.15
8/3/2005 20.24
8/4/2005 20.65
8/5/2005 20.39
8/8/2005 20.35
8/9/2005 20.25
8/10/2005 20.29
8/11/2005 20.00
8/12/2005 20.18
8/15/2005 20.10
8/16/2005 20.05
8/17/2005 19.97
8/18/2005 19.84
8/19/2005 20.03
8/22/2005 19.87
8/23/2005 19.87
8/24/2005 19.90
8/25/2005 19.90
8/26/2005 19.94
8/29/2005 19.94
8/30/2005 19.92
8/31/2005 19.85
9/1/2005 20.10
9/2/2005 20.18
9/6/2005 20.20
9/7/2005 20.21
9/8/2005 20.18
9/9/2005 20.40
9/12/2005 20.54
9/13/2005 20.40
9/14/2005 20.45
9/15/2005 20.30
9/16/2005 20.25
9/19/2005 20.35
9/20/2005 20.20
9/21/2005 20.06
9/22/2005 19.98
9/23/2005 20.00
9/26/2005 19.93
9/27/2005 19.89
9/28/2005 19.86
9/29/2005 19.99
9/30/2005 20.19
FUND SNAPSHOT
------------------------------------
Common Share Price $20.19
------------------------------------
Common Share Net Asset Value $22.22
------------------------------------
Premium / (Discount) to NAV -9.14%
------------------------------------
Market Yield(1) 6.24%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $307,886
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/27/04)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
9-Month
(Cumulative) 9.40% 7.70%
------------------------------------
1-Year 17.85% 17.95%
------------------------------------
Since Inception 6.07% 14.89%
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Diversified Telecommunication
Services 9.1%
------------------------------------
Oil, Gas, & Consumable Fuels 7.4%
------------------------------------
Tobacco 7.0%
------------------------------------
Metals & Mining 6.2%
------------------------------------
Thrifts & Mortgage Finance 6.1%
------------------------------------
Diversified Financial Services 5.6%
------------------------------------
Insurance 5.4%
------------------------------------
Aerospace & Defense 5.3%
------------------------------------
Commercial Banks 4.7%
------------------------------------
Electric Utilities 4.4%
------------------------------------
Commercial Services & Supplies 3.3%
------------------------------------
Hotels, Restaurants & Leisure 3.2%
------------------------------------
Multi-Utilities & Unregulated
Power 3.1%
------------------------------------
Household Products 2.9%
------------------------------------
Household Durables 2.8%
------------------------------------
Media 2.3%
------------------------------------
Food & Staples Retailing 2.2%
------------------------------------
Paper & Forest Products 2.0%
------------------------------------
Other 12.1%
------------------------------------
Repurchase Agreements 4.9%
------------------------------------
COUNTRIES
(as a % of total investments)
------------------------------------
United States 80.8%
------------------------------------
United Kingdom 5.7%
------------------------------------
South Korea 4.2%
------------------------------------
Italy 3.3%
------------------------------------
Other 6.0%
------------------------------------
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.
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)
PORTFOLIO OF INVESTMENTS (UNAUDITED)
September 30, 2005
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 98.0% (69.1% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 5.7%
140,000 Lockheed Martin Corporation $ 8,545,600
235,000 Raytheon Company 8,934,700
------------------------------------------------------------------------------------------------------------------
17,480,300
------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 4.6%
150,000 Wachovia Corporation 7,138,500
120,000 Wells Fargo & Company 7,028,400
------------------------------------------------------------------------------------------------------------------
14,166,900
------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 3.9%
285,000 Pitney Bowes Inc. 11,895,900
------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 1.9%
300,000 Packaging Corp of America 5,823,000
------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 6.3%
275,000 Citigroup Inc. 12,518,000
205,000 JPMorgan Chase & Co. 6,955,650
------------------------------------------------------------------------------------------------------------------
19,473,650
------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 12.1%
343,000 KT Corporation, Sponsored ADR 7,717,500
385,000 SBC Communications Inc. 9,228,450
330,000 Sprint Corporation 7,847,400
235,000 Telecom Italia S.p.A., Sponsored ADR 6,490,700
190,000 Verizon Communications Inc. 6,211,100
------------------------------------------------------------------------------------------------------------------
37,495,150
------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 4.2%
254,000 EDP - Energias de Portugal, S.A. Sponsored ADR 7,086,600
323,000 Korea Electric Power Corporation (KEPCO), Sponsored ADR 5,720,330
------------------------------------------------------------------------------------------------------------------
12,806,930
------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 3.1%
181,500 Albertson's, Inc. 4,655,475
240,625 J. Sainsbury plc, Sponsored ADR 4,752,344
------------------------------------------------------------------------------------------------------------------
9,407,819
------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 2.3%
307,000 Newell Rubbermaid Inc. 6,953,550
------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 3.1%
160,000 Kimberly-Clark Corporation 9,524,800
------------------------------------------------------------------------------------------------------------------
INSURANCE - 5.4%
330,000 Aon Corporation 10,586,400
80,000 Hartford Financial Services Group, Inc. 6,173,600
------------------------------------------------------------------------------------------------------------------
16,760,000
------------------------------------------------------------------------------------------------------------------
METALS & MINING - 7.9%
404,000 Alumina Limited, Sponsored ADR 7,631,560
90,000 POSCO, ADR 5,090,400
71,000 Rio Tinto plc, Sponsored ADR 11,665,300
------------------------------------------------------------------------------------------------------------------
24,387,260
------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 4.4%
110,000 Dominion Resources Inc. 9,475,400
180,000 United Utilities plc, Sponsored ADR 4,217,400
------------------------------------------------------------------------------------------------------------------
13,692,800
------------------------------------------------------------------------------------------------------------------
OIL, GAS, & CONSUMABLE FUELS - 10.5%
80,000 ChevronTexaco Corporation 5,178,400
113,400 ConocoPhillips 7,927,794
53,000 Eni S.p.A., Sponsored ADR 7,849,300
39,669 Kerr-McGee Corporation 3,852,257
55,000 Total SA, Sponsored ADR 7,470,100
------------------------------------------------------------------------------------------------------------------
32,277,851
------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 2.1%
220,000 International Paper Company 6,556,000
------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.0%
230,000 Merck & Co. Inc. 6,258,300
------------------------------------------------------------------------------------------------------------------
ROAD & RAIL - 2.1%
90,000 Union Pacific Corporation 6,453,000
------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 6.5%
212,000 Fannie Mae 9,501,840
265,000 IndyMac Bancorp, Inc. 10,488,700
------------------------------------------------------------------------------------------------------------------
19,990,540
------------------------------------------------------------------------------------------------------------------
TOBACCO - 9.9%
235,000 Altria Group, Inc. 17,321,850
330,000 Loews Corp - Carolina Group 13,077,900
------------------------------------------------------------------------------------------------------------------
30,399,750
------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $263,728,132) 301,803,500
----------------------------------------------------------------------------------------------------
RATINGS**
------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 12.2% (8.6% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 1.3%
15,500 Bear Stearns Companies, Series E 6.150% A3 BBB 794,375
25,000 Goldman Sachs Group Inc. 4.510% A2 A- 633,750
77,700 Lehman Brothers Holdings Inc., Series F 6.500% A3 A- 2,042,733
25,000 Merrill Lynch & Company 4.610% A2 A- 628,750
----------------------------------------------------------------------------------------------------------------------------------
4,099,608
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 2.2%
41,100 Abbey National plc, Series C 7.375% A2 A- 1,071,066
23,500 Abbey National plc, Series B 7.375% A2 A 627,450
40,000 ABN AMRO Capital Trust Fund VII 6.080% A2 A 997,200
25,000 Banco Santander 6.410% A2 BBB+ 645,000
40,000 HSBC USA Inc. 4.804% A2 A- 1,015,200
40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 A 1,019,200
40,000 Royal Bank of Scotland Group plc, Series N 6.350% A1 A 1,016,400
----------------------------------------------------------------------------------------------------------------------------------
6,391,516
----------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 1.0%
45,000 HSBC Finance Corporation 6.360% A3 BBB+ 1,138,050
36,100 SLM Corporation, Series A 6.970% Baa1 BBB+ 1,956,620
----------------------------------------------------------------------------------------------------------------------------------
3,094,670
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 1.5%
10,000 CIT Group Inc., Series A 6.350% Baa1 BBB+ 253,700
19,500 Citigroup Inc., Series F 6.365% Aa3 A 1,004,250
28,900 Citigroup Inc., Series H 6.231% Aa3 A 1,510,025
5,000 ING Group NV 7.050% N/R A 129,500
48,400 ING Group NV 7.200% A2 A 1,263,724
23,800 ING Group NV 6.200% A2 A 599,046
----------------------------------------------------------------------------------------------------------------------------------
4,760,245
----------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.2%
39,500 Alabama Power Company, Series A 5.300% Baa1 BBB+ 958,665
12,400 Consolidated Edison Company of New York, Inc. 5.000% A3 BBB+ 1,122,200
41,500 Interstate Power and Light Company 7.100% Baa3 BBB- 1,130,875
40,000 Mississippi Power Company 5.250% A3 BBB+ 963,000
40,000 Savannah Electric & Power Company 6.000% Baa1 BBB+ 1,056,000
5,000 Southern California Edison Company 6.125% Baa3 BBB- 502,813
9,000 Southern California Edison Company, Series A 5.349% Baa3 BBB- 919,688
----------------------------------------------------------------------------------------------------------------------------------
6,653,241
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 1.9%
50,300 Ace Ltd., Series C 7.800% Baa2 BBB- 1,325,405
40,000 Aegon NV 6.375% A3 A- 1,019,600
40,000 Genworth Financial Inc., Series A 5.250% Baa1 BBB+ 2,081,252
30,000 Prudential plc 6.750% Baa1 A 772,200
30,000 Prudential plc 6.500% Baa1 A 754,500
----------------------------------------------------------------------------------------------------------------------------------
5,952,957
----------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.1%
20,000 Fannie Mae 5.500% Aa3 AA- 930,000
24,300 Fannie Mae 5.125% Aa3 AA- 1,029,105
35,000 Fannie Mae 5.810% Aa3 AA- 1,697,500
20,000 Federal Home Loan Mortgage Corporation 5.700% Aa3 AA- 963,000
18,400 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 927,360
21,900 Federal Home Loan Mortgage Corporation 5.000% Aa3 AA- 930,750
----------------------------------------------------------------------------------------------------------------------------------
6,477,715
----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $37,743,769) 37,429,952
--------------------------------------------------------------------------------------------------------------------
RATINGS**
PRINCIPAL STATED -------------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 3.4% (2.4% OF TOTAL INVESTMENTS)
HOTELS, RESTAURANTS & LEISURE - 1.4%
$ 2,000 MGM Mirage 6.750% 8/01/07 Ba1 BB+ 2,045,000
2,000 Park Place Entertainment 8.875% 9/15/08 Ba2 BB- 2,192,500
----------------------------------------------------------------------------------------------------------------------------------
4,237,500
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 1.3%
2,000 D.R. Horton, Inc. 7.500% 12/01/07 Ba1 BB+ 2,103,084
2,000 Standard Pacific Corporation 6.500% 10/01/08 Ba2 BB 1,992,500
----------------------------------------------------------------------------------------------------------------------------------
4,095,584
----------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.7%
2,000 Georgia-Pacific Corp 7.375% 7/15/08 Ba2 BB+ 2,105,000
----------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $10,531,607) 10,438,084
--------------------------------------------------------------------------------------------------------------------
WEIGHTED RATINGS**
PRINCIPAL AVERAGE STATED -------------------
AMOUNT (000) DESCRIPTION(1) COUPON MATURITY* MOODY'S S&P VALUE
----------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE SENIOR LOAN INTERESTS(2) - 21.2%
(15.0% OF TOTAL INVESTMENTS)
AEROSPACE & DEFENSE - 1.8%
1,644 Hexcel, Term Loan B 5.313% 3/01/12 B2 B+ 1,663,629
1,900 K & F Industries, Inc., Term Loan B 6.284% 11/18/12 B2 B+ 1,914,250
1,625 Vought Aircraft Industries, Inc., Term Loan 6.350% 12/22/11 Ba3 B+ 1,643,701
364 Vought Aircraft Industries, Inc., Tranche B, 5.840% 12/22/10 Ba3 B+ 368,239
Letter of Credit
----------------------------------------------------------------------------------------------------------------------------------
5,589,819
----------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS - 0.6%
2,000 Federal-Mogul Corporation, Term Loan A (a) 6.090% 2/24/04 N/R N/R 1,880,000
----------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS - 0.6%
1,774 PP Holding Corporation, Term Loan 6.100% 11/12/11 B1 B 1,779,992
----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.7%
1,990 Rockwood Specialties Group, Inc., Tranche D 5.930% 7/30/12 B1 B+ 2,024,203
----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES - 0.8%
703 Allied Waste North America, Inc., Letter of Credit 3.100% 3/21/12 B1 BB 708,851
1,841 Allied Waste North America, Inc., Term Loan B 5.851% 3/12/21 B1 BB 1,856,936
----------------------------------------------------------------------------------------------------------------------------------
2,565,787
----------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING - 0.9%
788 Owens-Illinois Group, Inc., Term Loan B 5.570% 4/01/08 B1 N/R 797,791
175 Smurfit-Stone Container Corporation, Deposit-Funded
Commitment 2.100% 11/01/11 Ba3 BB- 176,607
1,389 Smurfit-Stone Container Corporation, Term Loan B 5.697% 11/01/11 Ba3 BB- 1,404,349
427 Smurfit-Stone Container Corporation, Term Loan C 5.834% 11/01/11 Ba3 BB- 432,107
----------------------------------------------------------------------------------------------------------------------------------
2,810,854
----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.7%
2,000 Madison River Term Loan 6.220% 9/29/08 B1 B+ 2,033,750
----------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.6%
1,630 Sensus Metering Systems Inc., Term Loan B-1 5.954% 7/29/12 B2 B+ 1,649,796
254 Sensus Metering Systems Inc., Term Loan B-2 5.969% 12/17/10 B2 B+ 257,368
----------------------------------------------------------------------------------------------------------------------------------
1,907,164
----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES - 1.6%
972 Alderwoods Group, Inc., Term Loan B-2 5.748% 12/17/10 B1 BB- 986,658
2,000 Davita Inc., Term Loan B (b) TBD TBD B1 BB- 2,032,084
1,975 IASIS Healthcare LLC, Term Loan B 5.770% 6/22/11 B1 B+ 2,006,036
----------------------------------------------------------------------------------------------------------------------------------
5,024,778
----------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE - 3.0%
2,000 24 Hour Fitness Worldwide, Inc., Term Loan B 6.780% 6/06/05 B2 B 2,033,750
1,970 Jack in the Box, Inc., Term Loan 5.446% 1/09/10 Ba2 BB 1,990,931
2,000 Penn National Gaming, Inc., Term Loan B (b) TBD TBD Ba3 BB- 2,027,656
1,400 Pinnacle Entertainment, Term Loan B (b) TBD TBD B1 BB- 1,412,688
342 Venetian Casino Resort, LLC, Delayed Draw, Term Loan (c) 5.770% 6/15/11 B1 BB- 345,272
1,658 Venetian Casino Resort, LLC, Term Loan 5.770% 6/15/11 B1 BB- 1,674,572
----------------------------------------------------------------------------------------------------------------------------------
9,484,869
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES - 0.5%
1,470 Sealy Mattress Company, Term Loan D 5.572% 4/06/12 B1 B+ 1,487,800
----------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - 1.0%
2,955 Solo Cup Company, Term Loan 5.938% 2/27/11 B1 B+ 2,967,189
----------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.4%
1,100 Conseco, Inc., Term Loan 5.768% 6/22/10 B2 BB- 1,114,094
----------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 1.2%
1,765 Fidelity National Information Services, Term Loan B 5.478% 3/09/13 Ba3 BB 1,773,510
2,000 SunGard Data System, Term Loan B 6.280% 1/25/13 B1 B+ 2,025,228
----------------------------------------------------------------------------------------------------------------------------------
3,798,738
----------------------------------------------------------------------------------------------------------------------------------
MACHINERY - 0.4%
1,099 Dresser-Rand Group Inc., Term Loan 6.047% 10/10/10 B1 B+ 1,118,453
----------------------------------------------------------------------------------------------------------------------------------
MEDIA - 3.2%
1,973 Charter Communications Operating, LLC, Term Loan B 6.930% 4/07/11 B2 B 1,984,218
1,985 Emmis Operating Company, Term Loan 5.518% 11/10/11 Ba2 B+ 2,001,624
2,000 Metro-Goldwyn Mayer Studios, Inc., Term Loan B 6.270% 4/12/12 N/R N/R 2,026,250
1,910 Regal Cinemas Corporation, Term Loan 6.020% 11/10/10 Ba3 BB- 1,932,240
2,213 WMG Acquisition Corp., Term Loan 5.700% 2/27/11 B1 B+ 2,240,693
----------------------------------------------------------------------------------------------------------------------------------
10,185,025
----------------------------------------------------------------------------------------------------------------------------------
METALS & MINING - 0.9%
2,723 Amsted Industries Incorporated, Term Loan B 6.198% 10/15/10 B1 BB- 2,773,060
----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.6%
784 Crescent Real Estate Funding XII, L.P., Term Loan 5.943% 3/20/06 N/R N/R 788,320
1,987 General Growth Properties, Inc., Term Loan B 5.850% 11/12/08 Ba2 BB+ 2,014,339
1,960 LNR Property Corporation, Term Loan 6.711% 2/03/08 B2 B+ 1,985,664
---------------------------------------------------------------------------------------------------------------------------------
4,788,323
---------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.7%
2,000 United Rentals, Term Loan B (b) TBD TBD BB B2 2,019,750
---------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $64,757,630) 65,353,648
-------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 7.0% (4.9% OF TOTAL INVESTMENTS)
$ 21,537 State Street Bank, 3.150%, dated 9/30/05, due 10/03/05, 21,536,783
repurchase price $21,542,436, collateralized by
$21,970,000, U.S. Treasury Bonds, 3.875%, due 5/15/10,
value $21,970,000
==============-------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $21,536,783) 21,536,783
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $398,297,921) - 141.8% 436,561,967
-------------------------------------------------------------------------------------------------------------------
FundNotes - (25.3)% (78,000,000)
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.9)% (5,676,151)
-------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (14.6)% (45,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 307,885,816
===================================================================================================================
(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.
** 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 September 30, 2005, this issue was under the protection
of Federal Bankruptcy Court.
(b) Purchased on a when-issued or delayed delivery basis.
ADR American Depositary Receipt.
TBD Senior Loan purchased on a when-issued basis in the primary market. 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.
Statement of
ASSETS AND LIABILITIES September 30, 2005 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $398,297,921) $ 436,561,967
Receivables:
Dividends 680,182
Interest 568,186
Investments sold 20,742
Reclaims 13,422
Deferred FundNotes offering costs 1,735,869
Other assets 16,740
-----------------------------------------------------------------------------------------------------------------------------------
Total assets 439,597,108
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 8,338,465
FundNotes 78,000,000
Accrued expenses:
Management fees 201,404
Other 153,407
FundNotes interest payable 8,522
FundPreferred share dividends payable 9,494
-----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 86,711,292
-----------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 45,000,000
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 307,885,816
===================================================================================================================================
Common shares outstanding 13,855,240
===================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 22.22
===================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
-----------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 138,552
Paid-in surplus 262,780,020
Undistributed (Over-distribution of) net investment income (5,290,939)
Accumulated net realized gain from investments 11,994,137
Net unrealized appreciation of investments 38,264,046
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 307,885,816
===================================================================================================================================
Authorized shares:
Common Unlimited
FundPreferred shares Unlimited
===================================================================================================================================
See accompanying notes to financial statements.
Statement of
OPERATIONS Nine Months Ended September 30, 2005 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $320,026) $ 9,019,809
Interest 3,224,917
Fees 107,046
-----------------------------------------------------------------------------------------------------------------------------------
Total investment income 12,351,772
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 2,808,251
FundNotes interest expense and amortization of offering costs 1,650,653
FundNotes and FundPreferred shares - auction fees 229,994
FundNotes and FundPreferred shares - dividend disbursing agent fees 9,349
Shareholders' servicing agent fees and expenses 1,163
Custodian's fees and expenses 107,056
Trustees' fees and expenses 8,018
Professional fees 21,690
Shareholders' reports - printing and mailing expenses 34,323
Stock exchange listing fees 9,088
Investor relations expense 43,746
Other expenses 6,343
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 4,929,674
Custodian fee credit (1,333)
Expense reimbursement (1,004,881)
-----------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,923,460
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income 8,428,312
-----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain from investments 11,983,638
Change in net unrealized appreciation (depreciation) of investments 3,024,377
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 15,008,015
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (951,493)
From accumulated net realized gains from investments -
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shareholders
from distributions to FundPreferred shareholders (951,493)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $ 22,484,834
===================================================================================================================================
See accompanying notes to financial statements.
Statement of
CHANGES IN NET ASSETS (Unaudited)
FOR THE PERIOD
1/27/04
(COMMENCEMENT
OF OPERATIONS)
NINE MONTHS ENDED THROUGH
9/30/05 12/31/04
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 8,428,312 $ 9,240,322
Net realized gain from investments 11,983,638 2,023,579
Change in net unrealized appreciation (depreciation) of investments 3,024,377 35,239,669
Distributions to FundPreferred shareholders:
From net investment income (951,493) (449,287)
From accumulated net realized gains from investments -- (55,374)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares
from operations 22,484,834 45,998,909
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (12,538,993) (9,240,701)
From accumulated net realized gains from investments (426,741) (1,310,064)
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to Common shareholders (12,965,734) (10,550,765)
----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of Common shares -- 263,981,000
FundPreferred shares offering costs (82,512) (1,080,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions (82,512) 262,901,000
----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 9,436,588 298,349,144
Net assets applicable to Common shares at the beginning of period 298,449,228 100,084
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $307,885,816 $298,449,228
===================================================================================================================================
Undistributed (Over-distribution of) net investment income at the end of period $ (5,290,939) $ (228,765)
===================================================================================================================================
See accompanying notes to financial statements.
Statement of
CASH FLOWS Nine Months Ended September 30, 2005 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS $ 22,484,834
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 (98,483,475)
Proceeds from (Purchases of) short-term investment securities, net (4,627,535)
Proceeds from sales of investment securities 103,554,379
Amortization/(Accretion) of premiums and discounts, net 178,891
Decrease in receivable for dividends 398,277
Decrease in receivable for interest 6,089
Decrease in receivable for investments sold 110,482
Decrease in receivable for reclaims 10,719
Increase in other assets (12,622)
Increase in payable for investments purchased 4,338,465
Decrease in management fees payable (1,303)
Increase in other liabilities 24,894
Increase in FundPreferred share dividends payable 2,911
Net realized (gain) from investments (11,983,638)
Change in net unrealized (appreciation)/depreciation of investments (3,024,377)
Net realized (gain)/loss from paydowns 27,612
-----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,004,603
-----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to Common shareholders (12,965,734)
FundNotes:
Decrease in deferred offering costs 40,144
Increase in FundNotes interest payable* 3,499
FundPreferred shares offering costs (82,512)
-----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (13,004,603)
-----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH --
Cash at the beginning of period --
-----------------------------------------------------------------------------------------------------------------------------------
CASH AT THE END OF PERIOD --
====================================================================================================================================
* Cash paid for interest on FundNotes (excluding amortization of FundNotes
offering costs) during the nine months ended September 30, 2005
was $1,601,309.
See accompanying notes to financial statements.
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
Nuveen Tax-Advantaged Total Return Strategy 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 "JTA." The Fund was organized
as a Massachusetts business trust on October 1, 2003.
Prior to the commencement of operations, the Fund had no operations other than
those related to organizational matters, the initial capital contribution of
$100,084 by the Adviser, and the recording of the organization expenses
($11,500) and their reimbursement by Nuveen Investments, LLC, also a wholly
owned subsidiary of Nuveen.
The Fund seeks to provide a high level of after-tax total return consisting
primarily of tax-advantaged dividend income and capital appreciation by
investing primarily in a portfolio of dividend-paying common stocks that the
Fund believes at the time of investment are eligible to pay dividends that
qualify for favorable federal income taxation at rates applicable to long-term
capital gains ("tax-advantaged dividends"). The Fund will also invest to a more
limited extent in preferred securities that are eligible to pay tax-advantaged
dividends, as well as senior loans (both secured and unsecured), domestic
corporate bonds, notes and debentures, convertible debt securities, and other
similar types of corporate instruments, including high yield debt securities,
that are not eligible to pay tax-advantaged dividends.
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 independent pricing service approved by the
Fund's Board of Trustees and based on the mean between the bid and asked prices.
When price quotes are not readily available, the pricing service or, in the
absence of a pricing service for a particular 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 Trustees 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 September 30, 2005,
the Fund had outstanding when-issued and delayed delivery purchase commitments
of $7,431,250.
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
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.
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.
Prior to December 1, 2004, the Fund declared monthly income distributions to
Common shareholders. Commencing with the Fund's December 1, 2004 dividend
declaration, payable December 30, 2004, the Fund began 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 nine 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 interim 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.
FundNotes
Effective April 23, 2004, the Fund issued 3,120 Series F FundNotes, $25,000
stated value per share, that mature on April 24, 2034. The interest rate paid by
the Fund is determined every seven days, pursuant to a dutch auction process
overseen by the auction agent, and is payable at the end of each rate period.
For the nine months ended September 30, 2005, the average daily balance of
FundNotes was $78 million with an average annualized interest rate (including
amortization of FundNotes offering costs) of 2.83%.
FundPreferred Shares
Effective May 6, 2004, the Fund issued 1,800 Series W FundPreferred shares,
$25,000 stated value per share, as a means of effecting financial leverage. The
dividend rate paid by the Fund is determined every seven days, pursuant to a
dutch auction process overseen by the auction agent, and is payable at the end
of each rate period.
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 nine months ended
September 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.
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.
Organization and Offering Costs
Nuveen Investments, LLC has agreed to reimburse all organization expenses
(approximately $11,500) and pay all Common share offering costs (other than the
sales load) that exceed $.04 per Common share. The Fund's share of Common share
offering costs of $554,000 was recorded as a reduction of the proceeds from the
sale of Common shares.
Costs incurred by the Fund in connection with its offering of FundNotes
($1,751,669) were recorded as a deferred charge and are being amortized over the
30 year life of the FundNotes and included with FundNote Interest Expense on the
Statement of Operations.
Costs incurred by the Fund in connection with its offering of FundPreferred
shares ($1,162,512) were recorded as a reduction to paid-in surplus.
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 nine months
ended September 30, 2005.
During the period January 27, 2004 (commencement of operations) through December
31, 2004, the Fund sold 13,850,000 Common shares, 3,120 FundNotes and 1,800
FundPreferred shares.
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments) during the
nine months ended September 30, 2005, aggregated $98,483,475 and $103,554,379,
respectively.
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
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 and timing differences in recognizing
certain gains and losses on investment transactions.
At September 30, 2005, the cost of investments was $398,605,414.
The net unrealized appreciation of investments at September 30, 2005, aggregated
$37,956,553 of which $51,453,411 related to appreciated securities and
$13,496,858 related to depreciated securities.
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 * $446,929
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 period January 27, 2004
(commencement of operations) through 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 * $11,048,843
Distributions from 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.
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 fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within the Fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, 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 stated in the table below. As
of September 30, 2005, the complex level fee rate was .1898%.
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")
and Symphony Asset Management, LLC ("Symphony"). 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"). Symphony manages
the portion of the Fund's investment portfolio allocated to senior loans and
other debt instruments. NWQ and Symphony 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.
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
For the first eight years of the Fund's operations, the Adviser has agreed to
reimburse the Fund, as a percentage of average daily Managed Assets, for fees
and expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2004* .32% 2009 .32%
2005 .32 2010 .24
2006 .32 2011 .16
2007 .32 2012 .08
2008 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond January 31, 2012.
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 September 30, 2005, there were no such unfunded senior loan
commitments.
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 September 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 EVENT -- DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Fund declared a distribution of $.1050 per Common share which was paid on
November 1, 2005, to shareholders of record on October 15, 2005.
Financial
HIGHLIGHTS (Unaudited)
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------ -------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ FundPreferred FundPreferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
Year Ended 12/31:
2005(c) $21.54 $ .61 $ 1.09 $ (.07) $ -- $ 1.63 $ (.91) $(.03) $ (.94)
2004(b) 19.10 .67 2.69 (.03) -- 3.33 (.67) (.10) (.77)
====================================================================================================================================
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**
==================================================================================
Year Ended 12/31:
2005(c) $(.01) $22.22 $20.19 9.40% 7.70%
2004(b) (.12) 21.54 19.35 .91 17.18
==================================================================================
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
=================================================================================================================
Year Ended 12/31:
2005(c) $307,886 2.21%* 3.32%* 1.76%* 3.77%* 24%
2004(b) 298,449 1.80* 3.30* 1.37* 3.73* 16
=================================================================================================================
FundNotes at End of Period FundPreferred Shares at End of Period
---------------------------------------------------- -----------------------------------------
Aggregate Average Market Asset Aggregate Liquidation
Amount Value Per Coverage Per Amount and Market Asset
Outstanding $25,000 of $1,000 of Outstanding Value Coverage
(000) Principal Amount Principal Amount (000) Per Share Per Share
=====================================================================================================================
Year Ended 12/31:
2005(c) $78,000 $25,000 $5,524 $45,000 $25,000 $196,048
2004(b) 78,000 25,000 5,403 45,000 25,000 190,805
=====================================================================================================================
* 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.
++ o Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders.
o Income ratios reflect income earned on assets attributable to
FundPreferred shares and Fundnotes.
o Each Ratio of Expenses to Average Net Assets Applicable to Common
Shares and each Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares includes the effect of the interest
expense paid on FundNotes as follows:
Ratio of FundNotes Interest
Expense and Amortization of
FundNotes Offering Costs to Average
Net Assets Applicable to
Common Shares
------------------------
2005(c) .74%*
2004(b) .37*
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) For the period January 27, 2004 (commencement of operations) through
December 31, 2004.
(c) For the nine months ended September 30, 2005.
See accompanying notes to financial statements.
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
David J. Kundert
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.
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 Tax-Advantaged Total Return Strategy Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: December 8, 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: December 8, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: December 8, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.