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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Nuveen Tax Advantaged Dividend Growth Fund | NYSE:JTD | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 16.72 | 0 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number |
811-22058 |
Nuveen Tax-Advantaged Dividend Growth Fund
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Address of principal executive offices) (Zip code)
Mark L. Winget
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)
Registrants telephone number, including area code: (312) 917-7700
Date of fiscal year end: December 31
Date of reporting period: December 31, 2020
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.
Closed-End Funds
31 December
2020
Nuveen
Closed-End Funds
JTD | Nuveen Tax-Advantaged Dividend Growth Fund |
As permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds annual and semi-annual shareholder reports will not be sent to you by mail unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds website (www.nuveen.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting the financial intermediary (such as a broker-dealer or bank) through which you hold your Fund shares or, if you are a direct investor, by enrolling at www.nuveen.com/e-reports.
You may elect to receive all future shareholder reports in paper free of charge at any time by contacting your financial intermediary or, if you are a direct investor, by calling 800-257-8787 and selecting option #2 or (ii) by logging into your Investor Center account at www.computershare.com/investor and clicking on Communication Preferences. Your election to receive reports in paper will apply to all funds held in your account with your financial intermediary or, if you are a direct investor, to all your directly held Nuveen Funds and any other directly held funds within the same group of related investment companies.
Annual Report
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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3
Chairs Letter to Shareholders
Dear Shareholders,
The rollout of COVID-19 vaccines has kindled the promise of a more normal economy in 2021. Until then, the economic shortfall is expected to be bridged by a combination of fiscal relief measures and easier financial conditions aimed at supporting individuals, businesses and state and local governments. The measures taken to date have already helped the U.S. economy make a significant, although incomplete, turnaround from the depths of a historic recession. In late December 2020, the U.S. government enacted another $900 billion in aid to individuals and businesses, extending some of the programs enacted earlier in the COVID-19 crisis, and more stimulus is anticipated. The U.S. Federal Reserve, along with other central banks around the world, have pledged to keep monetary conditions accommodative for as long as necessary.
While the markets longer-term outlook has brightened, we expect intermittent bouts of volatility to continue. COVID-19 cases are still alarmingly high in some regions, and recent economic indicators have shown the dampening effect of renewed restrictions on social and business activity in the latter months of 2020. The pandemics course can still be unpredictable, and achieving sufficient inoculation of the population depends on many variables, including logistics, public confidence, real-world efficacy and the emergence of variant virus strains. Additionally, the Biden administrations full policy agenda and the potential for Congressional gridlock remain to be seen, which could cause investment outlooks to shift. Nevertheless, short-term market fluctuations can provide opportunities to invest in new ideas as well as upgrade existing positioning, within our goal of providing long-term value for our shareholders. For more than 120 years, the careful consideration of risk and reward has guided Nuveens focus on delivering long-term results to our shareholders.
The beginning of the year can be an opportune time to assess your portfolios resilience and readiness for what may come next. We encourage you to review your time horizon, risk tolerance and investment goals with your financial professional. On behalf of the other members of the Nuveen Fund Board, we look forward to continuing to earn your trust in the months and years ahead.
Sincerely,
Terence J. Toth
Chair of the Board
February 22, 2021
4
Nuveen Tax-Advantaged Dividend Growth Fund (JTD)
The Funds investment portfolio is managed by three affiliates of Nuveen Fund Advisors, LLC, the Funds investment adviser. The Funds dividend-growth strategy is managed by Santa Barbara Asset Management LLC (Santa Barbara) and the portfolio managers are David S. Park, CFA, and David A, Chalupnik, CFA. The Funds income-oriented strategy is managed by NWQ Investment Management Company, LLC (NWQ) and the portfolio managers are Thomas J. Ray, CFA and Susi Budiman, CFA. The Funds index call option strategy is managed by Nuveen Asset Management (NAM), which is overseen by David A. Friar.
Portfolio Manager Change
Effective March 24, 2020, Jody Hrazanek is no longer a portfolio manager of the Fund.
Here the Funds portfolio management teams reviews U.S. economic and market conditions, key investment strategies and the performance of the Fund for the twelve-month reporting period ended December 31, 2020.
What factors affected the U.S. economy and financial markets during the twelve-month reporting period ended December 31, 2020?
The U.S. economy rebounded more quickly than expected from the deep downturn caused by the COVID-19 crisis and containment measures, but it was not fully recovered by the years end. U.S. gross domestic product (GDP) grew 4.0% on an annualized basis in the fourth quarter of 2020 and 33.1% (annualized) in the third quarter, but remained down 3.5% in 2020 overall (from the 2019 annual level to the 2020 annual level) as measured by the Bureau of Economic Analysis advance estimate. GDP measures the value of goods and services produced by the nations economy less the value of the goods and services used up in production, adjusted for price changes. The economy fell into a deep recession in February 2020 due to the restrictions on business and social activity to mitigate the COVID-19 spread. In the first and second quarters of 2020, annualized GDP shrank 5% and 31.4%, respectively. Government relief programs provided significant aid to individuals and businesses as the economy began reopening in May 2020, which helped the economy bounce back strongly over the second half of the year.
Consumer spending, the largest driver of the economy, remained resilient despite the disruption caused by the health and economic crisis. Consumer spending declined significantly and unemployment rose sharply starting in March 2020. These measures rebounded markedly in the second half of the year, although the momentum slowed toward year end amid a resurgence of coronavirus infections. The Bureau of Labor Statistics said the unemployment rate rose to 6.7% in December 2020 from 3.6% in December 2019. As of December 2020, slightly more than half of the 22 million jobs lost
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investors objectives and circumstances and in consultation with his or her advisors.
Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.
For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poors (S&P), Moodys Investors (Moodys) Service, Inc. or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.
5
Portfolio Managers Comments (continued)
in March and April 2020 have been recovered. The average hourly earnings rate appeared to increase, growing at an annualized rate of 5.1% in December 2020, despite the spike in unemployment. Earnings data was skewed by the concentration of job losses in lower-wage work, which effectively eliminated most of the low-wage data, resulting in an average of mostly higher numbers. The overall trend of inflation remained muted, as decreases in gasoline, apparel and transportation prices offset an increase in food prices. The Bureau of Labor Statistics said the Consumer Price Index (CPI) increased 1.4% over the twelve-month reporting period ended December 31, 2020 before seasonal adjustment.
Prior to the COVID-19 crisis recession, the U.S. Federal Reserve (the Fed) had reduced its benchmark interest rate to support the economys slowing growth. The Fed also stopped shrinking its bond portfolio sooner than scheduled and began buying short-term Treasury bills to help money markets operate smoothly and maintain short-term borrowing rates at low levels. As the health and economic crisis deepened, the Fed enacted an array of emergency measures in March 2020 to stabilize the financial system and support the markets, including cutting its main interest rate to near zero, offering lending programs to aid small and large companies and allowing unlimited bond purchases, known as quantitative easing. In August 2020, the Fed announced a change in inflation policy to average inflation targeting. Under this regime, the Fed will tolerate the inflation rate temporarily overshooting the target rate to offset periods of below-target inflation, so that inflation averages a 2% rate over time. Fed officials remained cautious, acknowledging the economys improvement but concerned about near-term weakness, and left policy unchanged over the remainder of their meetings in 2020.
In March and April 2020, the U.S. government approved three aid packages. These included $2 trillion allocated across direct payments to Americans, an expansion of unemployment insurance, loans to large and small businesses, funding to hospitals and health agencies and support to state and local governments, and more than $100 billion in funding to health agencies and employers offering paid leave. In December 2020, the government enacted a $900 billion relief package extending some of these programs. With Joe Biden winning the U.S. presidential election in November 2020, more fiscal stimulus is anticipated in 2021.
The COVID-19 crisis rapidly dwarfed all other market concerns starting in late February 2020. Equity and commodity markets sold off and safe-haven assets rallied in March 2020 as China, other countries and then the United States initiated quarantines, restricted travel and shuttered factories and businesses. The potential economic shock was particularly difficult to assess, which amplified market volatility. An ill-timed oil price war between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC member Russia, which caused oil prices to plunge in March 2020, exacerbated the market sell-off. At year end, the announcement of high efficacy rates in several COVID-19 vaccine trials, followed by regulatory authorizations and public vaccination drives across Western countries, improved the outlook for 2021 and led to risk-on sentiment in the markets.
Geopolitical uncertainty remained elevated during 2020 in anticipation of the U.S. presidential election in November 2020 and the Brexit transition period set to expire in December 2020. Political risks eased somewhat toward the end of the reporting period, as markets ultimately viewed a Biden administration positively and the European Union (EU) and United Kingdom (U.K.) finalized a trade deal in the final days of the transition period. Although China and the U.S. signed a phase one trade deal in January 2020, tensions continued to flare over other trade and technology/security issues, Hong Kongs sovereignty and the management of the COVID-19 crisis.
The S&P 500® Index experienced some of the sharpest declines and swiftest recoveries in 2020. In March 2020, the equity market experienced record-setting volatility and fell into a bear market faster than any other market decline in history. Nearly as shocking was how swiftly the equity market recovered to new highs, which also happened in record time. After the recovery reached a temporary peak in early September 2020, the market experienced an additional sharp decline as investors processed faced a resurging in COVID-19 cases and election uncertainty. In November 2020, as election uncertainty faded and COVID-19 vaccines were announced, earlier losses were recovered and the Index delivered its second highest total return of any November 2020 on record. The S&P 500® Index continued to trend upward in December 2020 and ended the reporting period at a new all-time high.
6
During the reporting period, the ICE BofA Fixed Rate Preferred Securities Index (P0P1), which is part of the Funds Blended Benchmark, returned 6.95%. The yield-to-worst for the index ended the reporting period at 1.25%, a 129 basis points decrease from third quarter 2020. Preferred securities trailed investment grade bonds, but outperformed high yield bonds for the reporting period.
What key strategies were used to manage the Fund during the twelve-month reporting period ended December 31, 2020?
The Funds investment objective is to provide an attractive level of distributions and capital appreciation by investing primarily in dividend paying common stocks of mid to large cap companies. To a lesser extent, the Fund also invests in the preferred stocks of mid to large cap companies and will write (sell) call options on various equity market indexes. Under normal market circumstances, the Fund will invest at least 80% of its managed assets in securities that are eligible to pay tax-advantaged dividends.
In the equity portion of the Funds portfolio actively managed by Santa Barbara, the Fund maintained a consistent strategy seeking to provide a higher dividend yield and lower price volatility than the S&P 500® Index. The Fund achieved this by focusing on high quality companies that are growing their dividends.
The fixed-income portion of the Funds portfolio is actively managed by NWQ and has the flexibility to invest across the capital structure in any type of debt or preferred securities offered by a particular company. NWQs investment process identifies undervalued securities within a companys capital structure that offer the most attractive risk/reward potential. The portfolio management team then evaluates all available investment choices within a selected companys capital structure to determine the portfolio investment that may offer the most favorable risk-adjusted return potential. The Funds portfolio is constructed with an emphasis on maintaining a sustainable level of income and an overall analysis for downside risk management.
The Fund also wrote call options on various indexes, which is managed by NAM, with average expirations between 30 and 90 days. This is done in an effort to enhance returns, although it means the Fund may relinquish some of the upside potential of its equity portfolio.
How did the Fund perform during the twelve-month reporting period ended December 31, 2020?
The table in the Performance Overview and Holding Summaries section of this report provides total returns at net asset value (NAV) for the period ended December 31, 2020. The Funds total returns on NAV are compared with the performance of a corresponding market index.
For the twelve-month reporting period ending December 31, 2020, the Funds common shares at NAV underperformed the S&P 500® Index and its Blended Benchmark. Effective June 30, 2020, the Funds Blended Benchmark changed to 1) 16% S&P 500® Index, 34% MSCI EAFE Index (Net), 2) 12.5% ICE BofA (dividends received deduction) Preferred Index, 3) 12.5% ICE BofA Fixed Rate Preferred Index, 4) 25% Cboe S&P 500 BuyWrite Index (BXM), which better reflects how the Santa Barbara sleeve is managed, linked retroactively as of July 1, 2011. The Funds previous Blended Benchmark was 1) 50% of the return of the S&P 500® Index, 2) 25% of the return the Cboe S&P 500 BuyWrite Index (BXM), 3) 12.5% of the return of the ICE BofA DRD (dividends received deduction), 4) 12.5% of the return of the ICE BofA Fixed Rate Preferred Index. Each Blended Benchmark is further described in the Glossary of Terms Used in this Report.
Santa Barbara
The equity portion of the Funds portfolio managed by Santa Barbara contributed to the Funds performance on an absolute basis but underperformed the broader equity market as measured by the S&P 500® Index.
The risk-on market environment during the year created a challenging period for the Funds portfolio given the Funds broadly diversified approach and the high-quality defensive composition. Both stock selection and sector allocation had
7
Portfolio Managers Comments (continued)
a negative impact on performance. The information technology sector was the largest detractor to performance due to the portfolios underweight exposure within the sector. Given the risk-on environment, the Funds overweight positions in defensive oriented sectors detracted from relative performance. However, these losses were partially offset by holdings in the utilities, real estate and materials sectors.
Individual holdings that contributed to performance included information technology holdings, Apple Inc. and Microsoft Corp. Apple benefited from high expectations for the upcoming 5G iPhone launch and upgrade cycle, continued strength within its services business, and support from the economic stimulus. The company reported revenue and earnings per share above consensus estimates as demand improved significantly in May and June 2020. Another top contributor was information technology sector holding Microsoft Corp. The company announced better than expected quarterly revenue, earnings per share, cash flow per share, and margins. The increase in work-from-home drove demand for the companys cloud-computing products, Windows devices, and productivity tools. Consumer discretionary holding and home improvement retailer Lowes Companies, Inc. continued to report strong quarterly earnings as consumers are spending more money on home improvements and less on other discretionary categories. Quarterly sales and earnings results were well ahead of expectations driven by strong same-store sales and execution improvements. Additionally, Lowes management announced a 9% dividend increase.
Individual holdings that detracted from performance included financial services holding Lloyds Banking Group PLC, which missed analysts expectations and announced disappointing earnings for the first quarter of 2020 as the COVID-19 crisis impacted financial institutions around the world. Compass Group PLC also detracted from performance, as the worlds largest contract management food service firm was impacted by the COVID-19 crisis. Compass Group missed first-half earnings expectations and cut its dividend as a result of stagnant revenue and a steep decline in margins in Europe. Lastly energy holding and oil and gas refiner Phillips 66 detracted despite reporting better-than-expected quarterly earnings due to favorable tax items, while the COVID-19 crisis related shutdowns continued to be a major headwind. The firms refining business reported results below expectations due to weaker margins, while recent hurricanes resulted in several refinery shutdowns. As of the end of the reporting period, the Fund no longer holds a position in Compass Group.
NWQ
The preferred portion of the Fund managed by NWQ underperformed its blended benchmark during the reporting period. The Funds banking holdings contributed the most to performance, while the Funds holdings in the financials sector slightly detracted from performance for the reporting period on an absolute basis.
Several holdings detracted from absolute performance, including CenterPoint Energy Inc. Shares fell sharply after the Public Utilities Commission of Texas (PUCT) discussed Centerpoint Energys outstanding Houston electric rate case, which indicated a lower than expected return on equity. Investors expected that there would be potential for significant equity needs if the final decision is in line with what the PUCT discussed. In addition, the preferred stock of General Electric Company was another detractor during the reporting period. The company along with many cyclical peers was negatively impacted by the COVID-19 crisis as results declined during the reporting period. Lastly, MFA Financial senior notes detracted from absolute performance. The financials sector struggled as one of the worst performers during the throes of the COVID-19 crisis on lower business activity and declining interest rates. As of the end of the reporting period, the NWQ sleeve no longer holds positions in CenterPoint Energy, General Electric Company and MFA Financial.
Several individual positions contributed to absolute performance, including the structured note of Merrill Lynch International & Co. The Merrill Lynch structured notes underlying common stock, Broadcom Inc., rose on the announcement of a potential sale of its radio-frequency unit. The Companys management no longer views its wireless (and industrial) businesses as core and chose to focus on its more stable, higher margin networking, broadband and storage solutions business on the components side. NWQ continues to the hold the position. In addition, the preferred stocks of JPMor-
8
gan Chase & Co. and Bank of America Corp contributed to performance. Banks rose sharply as positive news on COVID-19 vaccines in early November 2020 refocused investors on the potential for economic normalization and the powerful impact that has when combined with compelling valuation.
NAM
As mentioned previously, the Fund also wrote call options with average expirations between 30 and 90 days. This was done in an effort to enhance returns, although it meant the Fund did relinquish some of the upside potential of its equity portfolio. During the reporting period, the Fund wrote call options on the Russell 2000® Index. Unlike other indexes, the Russell 2000® Index had periods of flat performance in January and the beginning of February 2020. As a result, the Fund retained more option premium. However, the Russell 2000® Index rallied sharply during the second half of the reporting period. The Fund collected less premium income as it was an unfavorable environment for writing options on the Russell 2000® Index. The Funds call options strategy detracted from performance during the reporting period.
9
IMPACT OF THE FUNDS LEVERAGE STRATEGY ON PERFORMANCE
One important factor impacting the returns of the Funds common shares relative to their comparative benchmarks was the Funds use of leverage through the use of bank borrowings. The Fund uses leverage because our research has shown that, over time, leveraging provides opportunities for additional income. The opportunity arises when short-term rates that the Fund pays on its leveraging instruments are lower than the interest the Fund earns on its portfolio securities that it has bought with the proceeds of that leverage. This has been particularly true in the recent market environment where short-term rates have been low by historical standards.
However, use of leverage can expose Fund common shares to additional price volatility. When a Fund uses leverage, the Funds common shares will experience a greater increase in their net asset value if the securities acquired through the use of leverage increase in value, but will also experience a correspondingly larger decline in their net asset value if the bonds acquired through leverage decline in value. All this will make the shares total return performance more variable, over time.
In addition, common share income in levered funds will typically decrease in comparison to unlevered funds when short-term interest rates increase and increase when short-term interest rates decrease. In recent quarters, fund leverage expenses have generally tracked the overall movement of short-term tax-exempt interest rates. While fund leverage expenses are somewhat higher than their recent lows, leverage nevertheless continues to provide the opportunity for incremental common share income, particularly over longer-term periods.
The Funds use of leverage had a negative impact on total return performance during this reporting period. The negative impact of leverage during the brief but severe COVID-19 induced market downturn in March was greater than the positive impact of leverage during the remainder of the reporting period. More specifically, this net negative contribution of leverage was amplified during the market downturn in part because the Fund used proceeds from portfolio sales to pay down borrowings and reduce its elevated leverage ratio, which rose as prices of portfolio securities, including those sold for de-levering purposes, declined. Conversely, as financial markets recovered and asset prices steadied, the Fund gradually increased leverage levels, using proceeds to purchase new portfolio securities at generally higher prices. Management believes, however, that the potential benefits from leverage continue to outweigh the associated increase in risk and total return variability previously described.
The Fund continued to use interest rate swap contracts to partially hedge its future interest cost of leverage. The impact of the swap contracts on total return performance was negative during this reporting period.
As of December 31, 2020, the Funds percentages of leverage are as shown in the accompanying table.
JTD | ||||
Effective Leverage* |
29.49 | % | ||
Regulatory Leverage* |
29.49 | % |
* |
Effective leverage is the Funds effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in the Funds portfolio that increase the Funds investment exposure. Regulatory leverage consists of preferred shares issued or borrowings of the Fund. Both of these are part of the Funds capital structure. The Fund, however, may from time to time, borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings are excluded from the calculation of the Funds effective leverage ratio. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940. |
THE FUNDS REGULATORY LEVERAGE
Bank Borrowings
As noted above, the Fund employs leverage through the use of bank borrowings. The Funds bank borrowing activities are as shown in the accompanying table.
Current Reporting Period |
Subsequent to the Close
of the Reporting Period |
|||||||||||||||||||||||||||||||||
January 1, 2020 | Draws | Paydowns | December 31, 2020 |
Average Balance
Outstanding |
Draws | Paydowns | February 25, 2021 | |||||||||||||||||||||||||||
$111,100,000 | $32,150,000 | $(45,850,000) | $97,400,000 | $91,320,765 | $ | $ | $97,400,000 |
Refer to Notes to Financial Statements, Note 8 Borrowing Arrangements for further details.
10
DISTRIBUTION INFORMATION
The following information regarding the Funds distributions is current as of December 31, 2020, the Funds fiscal and tax year end, and may differ from previously issued distribution notifications. The Funds distribution levels may vary over time based on the Funds investment activities and portfolio investment value changes.
The Fund has adopted a managed distribution program. The goal of the Funds managed distribution program is to provide shareholders relatively consistent and predictable cash flow by systematically converting its expected long-term return potential into regular distributions. As a result, regular distributions throughout the year will likely include a portion of expected long-term and/or short-term gains (both realized and unrealized), along with net investment income.
Important points to understand about Nuveen fund managed distributions are:
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The Fund seeks to establish a relatively stable common share distribution rate that roughly corresponds to the projected total return from its investment strategy over an extended period of time. However, you should not draw any conclusions about the Funds past or future investment performance from its current distribution rate. |
|
Actual common share returns will differ from projected long-term returns (and therefore the Funds distribution rate), at least over shorter time periods. Over a specific timeframe, the difference between actual returns and total distributions will be reflected in an increasing (returns exceed distributions) or a decreasing (distributions exceed returns) Fund net asset value. |
|
Each periods distributions are expected to be paid from some or all of the following sources: |
|
net investment income consisting of regular interest and dividends, |
|
net realized gains from portfolio investments, and |
|
unrealized gains, or, in certain cases, a return of principal (non-taxable distributions). |
|
A non-taxable distribution is a payment of a portion of the Funds capital. When the Funds returns exceed distributions, it may represent portfolio gains generated, but not realized as a taxable capital gain. In periods when the Funds returns fall short of distributions, it will represent a portion of your original principal unless the shortfall is offset during other time periods over the life of your investment (previous or subsequent) when the Funds total return exceeds distributions. |
|
Because distribution source estimates are updated throughout the current fiscal year based on the Funds performance, these estimates may differ from both the tax information reported to you in the Funds 1099 statement, as well as the ultimate economic sources of distributions over the life of your investment. |
The following table provides information regarding the Funds distributions and total return performance over various time periods. This information is intended to help you better understand whether the Funds returns for the specified time periods were sufficient to meet its distributions.
11
Common Share Information (continued)
Data as of December 31, 2020
Per Share
Regular Distributions |
Annualized Total
Return on NAV |
|||||||||||||||||||||||||||||||||||||
Inception Date |
Latest
Quarter |
Total
Current Year |
Total
Current Year Net Investment Income |
Total
Current Year Net Realized Gain/Loss |
Current
Unrealized Gain/Loss |
Current
Distribution Rate on NAV1,3 |
Actual
Full Year
|
1-Year | 5-Year | |||||||||||||||||||||||||||||
6/2007 | $0.2945 | $1.1935 | $0.4838 | $0.1163 | $4.9778 | 7.33% | 7.42% | (3.42)% | 8.57% |
1 |
Current distribution per share, annualized, divided by the NAV per share on the stated date. |
2 |
Actual total per share distributions made during the full fiscal year, divided by the NAV per share on the stated date. |
3 |
Each distribution rate represents a managed distribution rate. For this Fund, at least in the just completed fiscal year, distributions were predominately comprised of sources other than net investment income, as shown in the table immediately below. |
The following table provides the Funds distribution sources as of December 31, 2020.
The amounts and sources of distributions reported in this notice are for financial reporting purposes and are not being provided for tax reporting purposes. The actual amounts and character of the distributions for tax reporting purposes will be reported to shareholders on Form 1099-DIV which will be sent to shareholders shortly after calendar year-end. More details about the Funds distributions and the basis for these estimates are available on www.nuveen.com/cef.
Data as of December 31, 2020
Fiscal Year Source of Distribution | Fiscal Year Per Share Amounts | |||||||||||||||||||||||||||||
Net
Investment Income |
Realized
Gains |
Return of
Capital1 |
Distributions |
Net
Investment Income |
Realized
Gains |
Return of
Capital1 |
||||||||||||||||||||||||
33.73% | 60.34% | 5.93% | $1.1935 | $0.4026 | $0.7202 | $0.0707 |
1 |
Return of capital may represent unrealized gains, return of shareholders principal, or both. In certain circumstances, all or a portion of the return of capital may be characterized as ordinary income under federal tax law. The actual tax characterization will be provided to shareholders on Form 1099-DIV shortly after calendar year-end. |
NUVEEN CLOSED-END FUND DISTRIBUTION AMOUNTS
The Nuveen Closed-End Funds monthly and quarterly periodic distributions to shareholders are posted on www.nuveen.com and can be found on Nuveens enhanced closed-end fund resource page, which is at https://www.nuveen.com/resource-center-closed-endfunds, along with other Nuveen closed-end fund product updates. To ensure timely access to the latest information, shareholders may use a subscribe function, which can be activated at this web page (https://www.nuveen.com/subscriptions).
COMMON SHARE REPURCHASES
During August 2020, the Funds Board of Trustees reauthorized an open-market share repurchase program, allowing the Fund to repurchase an aggregate of up to approximately 10% of its outstanding shares.
As of December 31, 2020, and since the inception of the Funds repurchase program, the Fund has cumulatively repurchased and retired its outstanding common shares as shown in the accompanying table.
JTD | ||||
Common shares cumulatively repurchased and retired |
0 | |||
Common shares authorized for repurchase |
1,445,000 |
12
During the current reporting period, the Fund did not repurchase any of its outstanding common shares.
OTHER COMMON SHARE INFORMATION
As of December 31, 2020, and during the current reporting period, the Funds common share price was trading at a premium/(discount) to its common share NAV as shown in the accompanying table.
JTD | ||||
Common share NAV |
$ | 16.08 | ||
Common share price |
$ | 14.22 | ||
Premium/(Discount) to NAV |
(11.57 | )% | ||
12-month average premium/(discount) to NAV |
(9.72 | )% |
13
JTD |
Nuveen Tax-Advantaged Dividend Growth Fund Performance Overview and Holding Summaries as of December 31, 2020 |
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.
Average Annual Total Returns as of December 31, 2020
Average Annual | ||||||||||||
1-Year | 5-Year | 10-Year | ||||||||||
JTD at Common Share NAV |
(3.42)% | 8.57% | 9.11% | |||||||||
JTD at Common Share Price |
(9.95)% | 9.09% | 9.36% | |||||||||
Blended Benchmark Old1 |
10.77% | 10.73% | 10.39% | |||||||||
Blended Benchmark New2 |
7.48% | 8.25% | 7.71% | |||||||||
S&P 500® Index |
18.40% | 15.22% | 13.88% |
Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is provided for the Funds shares at NAV only. Indexes are not available for direct investment.
Common Share Price Performance Weekly Closing Price
1 |
The Blended Benchmark Old Consists of: 1) 50% of the return of the S&P 500® Index, 2) 25% of the return the Cboe S&P 500 BuyWrite Index (BXM) 3) 12.5% of the return of the ICE BofA DRD (dividends received deduction) 4) 12.5% of the return of the ICE BofA Fixed Rate Preferred Index. |
2 |
The Blended Benchmark New consists of: 1) 16% of the return of the S&P 500® Index, 2) 34% of the return the MSCI EAFE (NET) Index, 3) 25% of the return of the CBOE S&P 500 BuyWrite Index (BXM), 4) 12.5% of the return of the ICE BofA DRD (dividends received deduction) Preferred Index and 5) 12.5% of the return of the ICE BofA Fixed Rate Preferred Index. |
14
This data relates to the securities held in the Funds portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.
For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poors Group, Moodys Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.
Fund Allocation
(% of net assets)
Common Stocks |
106.6% | |||
$1,000 Par (or similar) Institutional Preferred |
16.5% | |||
$25 Par (or similar) Retail Preferred |
12.6% | |||
Corporate Bonds |
4.6% | |||
Convertible Preferred Securities |
2.4% | |||
Repurchase Agreements |
1.0% | |||
Other Assets Less Liabilities |
(1.9)% | |||
Net Assets Plus Borrowings |
141.8% | |||
Borrowings |
(41.8)% | |||
Net Assets |
100% |
Portfolio Credit Quality
(% of total fixed-income investments)
A |
1.8% | |||
BBB |
55.6% | |||
BB or Lower |
34.0% | |||
N/R (not rated) |
8.6% | |||
Total |
100% |
Portfolio Composition
(% of total investments)
Banks |
12.5% | |||
Pharmaceuticals |
6.5% | |||
Insurance |
6.1% | |||
Capital Markets |
4.8% | |||
Chemicals |
4.3% | |||
Food Products |
4.0% | |||
Electric Utilities |
3.5% | |||
Oil, Gas & Consumable Fuels |
3.7% | |||
Software |
3.2% | |||
IT Services |
2.9% | |||
Wireless Telecommunication Services |
2.9% | |||
Health Care Providers & Services |
2.6% | |||
Communications Equipment |
2.2% | |||
Containers & Packaging |
2.1% | |||
Diversified Telecommunication Services |
2.1% | |||
Consumer Finance |
2.1% | |||
Technology Hardware, Storage & Peripherals |
2.0% | |||
Media |
2.0% | |||
Household Products |
1.9% | |||
Hotels, Restaurants & Leisure |
1.9% | |||
Aerospace & Defense |
1.9% | |||
Semiconductors & Semiconductor Equipment |
1.8% | |||
Trading Companies & Distributors |
1.8% | |||
Biotechnology |
1.8% | |||
Specialty Retail | 1.8% | |||
Diversified Financial Services | 1.5% | |||
Other2 | 15.4% | |||
Repurchase Agreements | 0.7% | |||
Total |
100% |
Top Five Issuers
(% of
total long-term
investments)
JPMorgan Chase & Co | 2.3% | |||
Apple Inc |
2.0% | |||
Microsoft Corp |
1.9% | |||
Koninklijke DSM NV, ADR |
1.9% | |||
ITOCHU Corp, ADR |
1.8% |
Country Allocation1
(% of total investments)
United States |
62.6% | |||
United Kingdom |
8.8% | |||
Japan |
6.0% | |||
France |
4.5% | |||
Canada |
4.1% | |||
Netherlands |
2.1% | |||
Hong Kong |
2.1% | |||
Australia |
1.6% | |||
Denmark |
1.4% | |||
Germany |
1.3% | |||
Italy |
1.2% | |||
Singapore |
1.1% | |||
Switzerland |
1.0% | |||
Spain |
0.8% | |||
China |
0.7% | |||
Other |
0.7% | |||
Total |
100% |
1 |
Includes 1.39% (as percentage of total investments) in emerging market countries. |
2 |
See Portfolio of Investments for details on other Portfolio Composition. |
15
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
Nuveen Tax-Advantaged Dividend Growth Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Nuveen Tax-Advantaged Dividend Growth Fund (the Fund), including the portfolio of investments, as of December 31, 2020, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes (collectively, the financial statements) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, the results of its operations and cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of December 31, 2020, by correspondence with custodians and brokers or other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the auditor of one or more Nuveen investment companies since 2014.
Chicago, Illinois
February 25, 2021
16
JTD |
Nuveen Tax-Advantaged Dividend
|
17
JTD | Nuveen Tax-Advantaged Dividend Growth Fund (continued) | |
Portfolio of Investments December 31, 2020 |
Shares | Description (1) | Value | ||||||||||||||||||
Electric Utilities 3.3% | ||||||||||||||||||||
46,204 |
NextEra Energy Inc, (3), (4) |
$ | 3,564,638 | |||||||||||||||||
203,027 |
SSE PLC, ADR, (2) |
4,125,509 | ||||||||||||||||||
Total Electric Utilities |
7,690,147 | |||||||||||||||||||
Electronic Equipment, Instruments & Components 0.7% | ||||||||||||||||||||
65,649 |
Alps Alpine Co Ltd, ADR, (2) |
1,726,989 | ||||||||||||||||||
Food Products 3.9% | ||||||||||||||||||||
272,072 |
Danone SA, ADR, (2) |
3,564,143 | ||||||||||||||||||
35,640 |
Mondelez International Inc |
2,083,871 | ||||||||||||||||||
28,733 |
Nestle SA, ADR, (2), (3) |
3,384,747 | ||||||||||||||||||
Total Food Products |
9,032,761 | |||||||||||||||||||
Gas Utilities 1.7% | ||||||||||||||||||||
341,866 |
Snam SpA, ADR, (2) |
3,849,138 | ||||||||||||||||||
Health Care Equipment & Supplies 1.2% | ||||||||||||||||||||
24,781 |
Medtronic PLC |
2,902,846 | ||||||||||||||||||
Health Care Providers & Services 3.7% | ||||||||||||||||||||
9,458 |
Anthem Inc, (4) |
3,036,869 | ||||||||||||||||||
15,796 |
UnitedHealth Group Inc, (3), (4) |
5,539,341 | ||||||||||||||||||
Total Health Care Providers & Services |
8,576,210 | |||||||||||||||||||
Hotels, Restaurants & Leisure 2.7% | ||||||||||||||||||||
15,125 |
McDonalds Corp, (3) |
3,245,523 | ||||||||||||||||||
51,301 |
Restaurant Brands International Inc, (4) |
3,135,004 | ||||||||||||||||||
Total Hotels, Restaurants & Leisure |
6,380,527 | |||||||||||||||||||
Household Products 2.8% | ||||||||||||||||||||
34,828 |
Colgate-Palmolive Co, (4) |
2,978,142 | ||||||||||||||||||
191,864 |
Reckitt Benckiser Group PLC, ADR, (2), (3) |
3,476,576 | ||||||||||||||||||
Total Household Products |
6,454,718 | |||||||||||||||||||
Industrial Conglomerates 1.6% | ||||||||||||||||||||
17,159 |
Honeywell International Inc, (3) |
3,649,719 | ||||||||||||||||||
Insurance 3.5% | ||||||||||||||||||||
69,039 |
AIA Group Ltd, ADR, (2) |
3,391,886 | ||||||||||||||||||
14,526 |
Chubb Ltd |
2,235,842 | ||||||||||||||||||
21,655 |
Marsh & McLennan Cos Inc, (3) |
2,533,635 | ||||||||||||||||||
Total Insurance |
8,161,363 | |||||||||||||||||||
IT Services 4.2% | ||||||||||||||||||||
19,680 |
Accenture PLC, (3), (4) |
5,140,613 | ||||||||||||||||||
32,057 |
Fidelity National Information Services Inc |
4,534,783 | ||||||||||||||||||
Total IT Services |
9,675,396 | |||||||||||||||||||
Media 2.1% | ||||||||||||||||||||
94,475 |
Comcast Corp, (4) |
4,950,490 | ||||||||||||||||||
Multi-Utilities 1.1% | ||||||||||||||||||||
26,753 |
WEC Energy Group Inc, (3), (4) |
2,462,079 | ||||||||||||||||||
Oil, Gas & Consumable Fuels 4.6% | ||||||||||||||||||||
24,355 |
Chevron Corp, (3) |
2,056,780 | ||||||||||||||||||
102,301 |
Enbridge Inc, (3) |
3,272,609 | ||||||||||||||||||
35,340 |
Phillips 66, (3) |
2,471,680 | ||||||||||||||||||
71,485 |
TOTAL SE, ADR |
2,995,936 | ||||||||||||||||||
Total Oil, Gas & Consumable Fuels |
10,797,005 |
18
19
JTD | Nuveen Tax-Advantaged Dividend Growth Fund (continued) | |
Portfolio of Investments December 31, 2020 |
Principal
Amount (000) |
Description (1) | Coupon | Maturity | Ratings (5) | Value | |||||||||||||||
Banks (continued) | ||||||||||||||||||||
$ | 1,975 |
Citigroup Inc |
6.250% | N/A (6) | BBB- | $ | 2,265,242 | |||||||||||||
925 |
Citizens Financial Group Inc |
4.194% | N/A (6) | BB+ | 907,148 | |||||||||||||||
275 |
CoBank ACB, 144A |
6.250% | N/A (6) | BBB+ | 300,438 | |||||||||||||||
125 |
JPMorgan Chase & Co |
6.100% | N/A (6) | BBB+ | 137,095 | |||||||||||||||
2,775 |
JPMorgan Chase & Co |
6.750% | N/A (6) | BBB+ | 3,115,497 | |||||||||||||||
625 |
Lloyds Bank PLC, 144A |
12.000% | N/A (6) | Baa3 | 721,081 | |||||||||||||||
975 |
M&T Bank Corp |
6.450% | N/A (6) | Baa2 | 1,079,812 | |||||||||||||||
2,000 |
PNC Financial Services Group Inc/The |
6.750% | N/A (6) | Baa2 | 2,049,500 | |||||||||||||||
380 |
Regions Financial Corp |
5.750% | N/A (6) | BB+ | 423,320 | |||||||||||||||
1,125 |
Truist Financial Corp |
4.950% | N/A (6) | Baa2 | 1,237,511 | |||||||||||||||
1,500 |
Wells Fargo & Co |
5.875% | N/A (6) | Baa2 | 1,700,625 | |||||||||||||||
1,150 |
Zions Bancorp NA |
7.200% | 3/15/69 | BB+ | 1,224,750 | |||||||||||||||
17,810 |
Total Banks |
19,505,169 | ||||||||||||||||||
Capital Markets 0.8% | ||||||||||||||||||||
550 |
Charles Schwab Corp/The |
7.000% | N/A (6) | BBB | 580,937 | |||||||||||||||
550 |
Goldman Sachs Group Inc/The |
5.300% | N/A (6) | BBB- | 600,721 | |||||||||||||||
665 |
Morgan Stanley |
4.047% | N/A (6) | Baa3 | 658,350 | |||||||||||||||
1,765 |
Total Capital Markets |
1,840,008 | ||||||||||||||||||
Consumer Finance 0.8% | ||||||||||||||||||||
845 |
Capital One Financial Corp |
4.025% | N/A (6) | Baa3 | 837,648 | |||||||||||||||
850 |
Discover Financial Services |
5.500% | N/A (6) | Ba2 | 909,500 | |||||||||||||||
1,695 |
Total Consumer Finance |
1,747,148 | ||||||||||||||||||
Diversified Financial Services 0.4% | ||||||||||||||||||||
990 |
Voya Financial Inc |
6.125% | N/A (6) | BBB- | 1,046,925 | |||||||||||||||
Electric Utilities 1.2% | ||||||||||||||||||||
1,610 |
Emera Inc |
6.750% | 6/15/76 | BB+ | 1,881,688 | |||||||||||||||
850 |
NextEra Energy Capital Holdings Inc |
5.650% | 5/01/79 | BBB | 1,001,017 | |||||||||||||||
2,460 |
Total Electric Utilities |
2,882,705 | ||||||||||||||||||
Food Products 0.9% | ||||||||||||||||||||
1,950 |
Land O Lakes Inc, 144A |
8.000% | N/A (6) | BB | 1,993,875 | |||||||||||||||
Insurance 2.5% | ||||||||||||||||||||
325 |
Enstar Finance LLC |
5.750% | 9/01/40 | BB+ | 342,140 | |||||||||||||||
895 |
Liberty Mutual Group Inc, 144A |
7.800% | 3/15/37 | Baa3 | 1,147,228 | |||||||||||||||
300 |
MetLife Capital Trust IV, 144A |
7.875% | 12/15/37 | BBB | 423,000 | |||||||||||||||
325 |
MetLife Inc, 144A |
9.250% | 4/08/38 | BBB | 495,232 | |||||||||||||||
1,000 |
MetLife Inc |
10.750% | 8/01/39 | BBB | 1,712,244 | |||||||||||||||
1,000 |
Nationwide Financial Services Inc |
6.750% | 5/15/37 | Baa2 | 1,195,011 | |||||||||||||||
500 |
Progressive Corp/The |
5.375% | N/A (6) | BBB+ | 521,250 | |||||||||||||||
4,345 |
Total Insurance |
5,836,105 | ||||||||||||||||||
Multi-Utilities 0.3% | ||||||||||||||||||||
600 |
Sempra Energy |
4.875% | N/A (6) | BBB- | 641,250 | |||||||||||||||
Oil, Gas & Consumable Fuels 0.4% | ||||||||||||||||||||
800 |
Transcanada Trust |
5.875% | 8/15/76 | BBB | 892,000 | |||||||||||||||
U.S. Agency 0.2% | ||||||||||||||||||||
525 |
Farm Credit Bank of Texas, 144A |
6.200% | N/A (6) | BBB+ | 564,375 | |||||||||||||||
34,310 |
Total $1,000 Par (or similar) Institutional Preferred (cost $35,294,542) |
38,445,848 | ||||||||||||||||||
Shares | Description (1) | Coupon | Ratings (5) | Value | ||||||||||||||||
$25 PAR (OR SIMILAR) RETAIL PREFERRED 12.6% (8.7% of Total Investments) |
|
|||||||||||||||||||
Banks 3.9% | ||||||||||||||||||||
30,400 |
Citigroup Inc |
7.125% | BBB- | $ | 864,576 | |||||||||||||||
8,700 |
CoBank ACB, 144A, (2) |
6.250% | BBB+ | 917,850 |
20
Shares | Description (1) | Coupon | Ratings (5) | Value | ||||||||||||||||
Banks (continued) | ||||||||||||||||||||
2,209 |
CoBank ACB, (2) |
6.125% | BBB+ | $ | 227,969 | |||||||||||||||
4,750 |
Farm Credit Bank of Texas, 144A, (2) |
6.750% | Baa1 | 508,250 | ||||||||||||||||
29,100 |
Fifth Third Bancorp |
6.625% | Baa3 | 847,392 | ||||||||||||||||
31,541 |
FNB Corp/PA |
7.250% | Ba1 | 895,764 | ||||||||||||||||
32,000 |
Huntington Bancshares Inc/OH |
6.250% | Baa3 | 813,440 | ||||||||||||||||
32,975 |
KeyCorp |
6.125% | Baa3 | 965,178 | ||||||||||||||||
14,188 |
Peoples United Financial Inc |
5.625% | BB+ | 397,264 | ||||||||||||||||
15,687 |
Regions Financial Corp |
6.375% | BB+ | 441,119 | ||||||||||||||||
56,493 |
US Bancorp |
6.500% | A3 | 1,506,103 | ||||||||||||||||
30,108 |
Western Alliance Bancorp |
6.250% | N/R | 768,356 | ||||||||||||||||
Total Banks |
9,153,261 | |||||||||||||||||||
Capital Markets 2.2% | ||||||||||||||||||||
11,100 |
B Riley Financial Inc |
7.500% | N/R | 282,717 | ||||||||||||||||
5,712 |
B Riley Financial Inc |
7.250% | N/R | 145,485 | ||||||||||||||||
48,779 |
Charles Schwab Corp/The |
6.000% | BBB | 1,240,450 | ||||||||||||||||
15,175 |
Cowen Inc |
7.350% | N/R | 382,562 | ||||||||||||||||
58,535 |
Morgan Stanley |
7.125% | Baa3 | 1,721,514 | ||||||||||||||||
31,470 |
Stifel Financial Corp |
6.250% | BB- | 817,591 | ||||||||||||||||
20,626 |
Stifel Financial Corp |
6.250% | BB- | 573,815 | ||||||||||||||||
Total Capital Markets |
5,164,134 | |||||||||||||||||||
Consumer Finance 1.0% | ||||||||||||||||||||
21,300 |
Capital One Financial Corp |
5.000% | Baa3 | 566,367 | ||||||||||||||||
49,015 |
GMAC Capital Trust I |
6.007% | BB- | 1,325,856 | ||||||||||||||||
17,000 |
Synchrony Financial |
5.625% | BB- | 453,900 | ||||||||||||||||
Total Consumer Finance |
2,346,123 | |||||||||||||||||||
Diversified Telecommunication Services 0.4% | ||||||||||||||||||||
11,563 |
Qwest Corp |
7.000% | BBB- | 293,353 | ||||||||||||||||
19,700 |
Qwest Corp |
6.750% | BBB- | 507,472 | ||||||||||||||||
Total Diversified Telecommunication Services |
800,825 | |||||||||||||||||||
Food Products 1.1% | ||||||||||||||||||||
550 |
CHS Inc |
7.875% | N/R | 15,829 | ||||||||||||||||
39,675 |
CHS Inc |
7.100% | N/R | 1,102,965 | ||||||||||||||||
48,065 |
CHS Inc |
6.750% | N/R | 1,342,455 | ||||||||||||||||
Total Food Products |
2,461,249 | |||||||||||||||||||
Insurance 2.7% | ||||||||||||||||||||
32,616 |
Argo Group US Inc |
6.500% | BBB- | 832,360 | ||||||||||||||||
31,236 |
Athene Holding Ltd |
6.350% | BBB- | 911,466 | ||||||||||||||||
15,300 |
Athene Holding Ltd |
6.375% | BBB- | 427,482 | ||||||||||||||||
32,400 |
Enstar Group Ltd |
7.000% | BB+ | 914,976 | ||||||||||||||||
30,450 |
Globe Life Inc |
6.125% | BBB+ | 826,718 | ||||||||||||||||
27,150 |
Hartford Financial Services Group Inc/The |
7.875% | Baa2 | 749,612 | ||||||||||||||||
24,434 |
National General Holdings Corp |
7.500% | N/R | 615,737 | ||||||||||||||||
9,191 |
National General Holdings Corp |
7.500% | N/R | 231,246 | ||||||||||||||||
30,574 |
PartnerRe Ltd |
7.250% | BBB | 783,917 | ||||||||||||||||
Total Insurance |
6,293,514 | |||||||||||||||||||
Multi-Utilities 0.4% | ||||||||||||||||||||
32,500 |
Algonquin Power & Utilities Corp |
6.200% | BB+ | 914,550 | ||||||||||||||||
Thrifts & Mortgage Finance 0.4% | ||||||||||||||||||||
33,214 |
New York Community Bancorp Inc |
6.375% | Ba2 | 951,913 | ||||||||||||||||
Wireless Telecommunication Services 0.5% | ||||||||||||||||||||
44,625 |
United States Cellular Corp |
7.250% | Ba1 | 1,129,013 | ||||||||||||||||
Total $25 Par (or similar) Retail Preferred (cost $27,339,964) |
29,214,582 |
21
JTD | Nuveen Tax-Advantaged Dividend Growth Fund (continued) | |
Portfolio of Investments December 31, 2020 |
Principal
Amount (000) |
Description (1) | Coupon | Maturity | Ratings (5) | Value | |||||||||||||||
CORPORATE BONDS 4.6% (3.2% of Total Investments) |
||||||||||||||||||||
Automobiles 0.4% (0.3% of Total Investments) | ||||||||||||||||||||
$ | 350 |
Ford Motor Co |
8.500% | 4/21/23 | BB+ | $ | 394,653 | |||||||||||||
385 |
Ford Motor Co |
9.000% | 4/22/25 | BB+ | 473,107 | |||||||||||||||
735 |
Total Automobiles |
867,760 | ||||||||||||||||||
Chemicals 0.0% (0.0% of Total Investments) | ||||||||||||||||||||
67 |
Blue Cube Spinco LLC |
9.750% | 10/15/23 | BB- | 68,843 | |||||||||||||||
Containers & Packaging 0.2% (0.1% of Total Investments) | ||||||||||||||||||||
325 |
Sealed Air Corp, 144A |
6.875% | 7/15/33 | BB+ | 429,000 | |||||||||||||||
Entertainment 0.6% (0.4% of Total Investments) | ||||||||||||||||||||
1,157 |
Liberty Interactive LLC |
8.500% | 7/15/29 | BB | 1,290,055 | |||||||||||||||
Food & Staples Retailing 0.4% (0.3% of Total Investments) | ||||||||||||||||||||
875 |
Albertsons Cos Inc / Safeway Inc / New Albertsons LP / Albertsons LLC, 144A |
7.500% | 3/15/26 | BB- | 979,169 | |||||||||||||||
Interactive Media & Services 0.2% (0.2% of Total Investments) | ||||||||||||||||||||
475 |
TripAdvisor Inc, 144A |
7.000% | 7/15/25 | BB- | 513,000 | |||||||||||||||
Machinery 0.2% (0.1% of Total Investments) | ||||||||||||||||||||
400 |
Dana Financing Luxembourg Sarl, 144A |
6.500% | 6/01/26 | BB+ | 418,500 | |||||||||||||||
Media 0.7% (0.5% of Total Investments) | ||||||||||||||||||||
800 |
Altice Financing SA, 144A |
7.500% | 5/15/26 | B | 844,240 | |||||||||||||||
575 |
ViacomCBS Inc |
6.875% | 4/30/36 | BBB | 830,980 | |||||||||||||||
1,375 |
Total Media |
1,675,220 | ||||||||||||||||||
Metals & Mining 0.1% (0.1% of Total Investments) | ||||||||||||||||||||
225 |
ArcelorMittal SA |
7.250% | 10/15/39 | BBB- | 315,702 | |||||||||||||||
Multiline Retail 0.3% (0.2% of Total Investments) | ||||||||||||||||||||
700 |
Nordstrom Inc, 144A |
8.750% | 5/15/25 | Baa2 | 783,987 | |||||||||||||||
Oil, Gas & Consumable Fuels 0.3% (0.2% of Total Investments) | ||||||||||||||||||||
715 |
Enviva Partners LP / Enviva Partners Finance Corp, 144A |
6.500% | 1/15/26 | BB- | 759,687 | |||||||||||||||
Semiconductors & Semiconductor Equipment 0.4% (0.3% of Total
Investments) |
||||||||||||||||||||
810 |
Amkor Technology Inc, 144A |
6.625% | 9/15/27 | BB | 878,850 | |||||||||||||||
Specialty Retail 0.4% (0.3% of Total Investments) | ||||||||||||||||||||
825 |
L Brands Inc |
6.875% | 11/01/35 | B+ | 926,062 | |||||||||||||||
Wireless Telecommunication Services 0.4% (0.2% of Total Investments) | ||||||||||||||||||||
775 |
T-Mobile USA Inc |
6.500% | 1/15/26 | BB+ | 802,125 | |||||||||||||||
9,459 |
Total Corporate Bonds (cost $9,998,118) |
10,707,960 | ||||||||||||||||||
Shares | Description (1) | Coupon | Ratings (5) | Value | ||||||||||||||||
CONVERTIBLE PREFERRED SECURITIES 2.4% (1.7% of Total Investments) |
|
|||||||||||||||||||
Banks 0.9% | ||||||||||||||||||||
575 |
Bank of America Corp |
7.250% | BBB | $ | 873,184 | |||||||||||||||
825 |
Wells Fargo & Co |
7.500% | Baa2 | 1,252,267 | ||||||||||||||||
Total Banks |
2,125,451 |
22
Shares | Description (1) | Coupon | Ratings (5) | Value | ||||||||||||||||
Electric Utilities 0.5% | ||||||||||||||||||||
8,300 |
NextEra Energy Inc |
6.219% | BBB | $ | 426,371 | |||||||||||||||
13,100 |
Southern Co/The |
6.750% | BBB | 679,890 | ||||||||||||||||
Total Electric Utilities |
1,106,261 | |||||||||||||||||||
Multi-Utilities 0.4% | ||||||||||||||||||||
8,000 |
Sempra Energy |
6.750% | N/R | 829,840 | ||||||||||||||||
Semiconductors & Semiconductor Equipment 0.6% | ||||||||||||||||||||
1,050 |
Broadcom Inc |
8.000% | N/R | 1,493,594 | ||||||||||||||||
Total Convertible Preferred Securities (cost $4,828,460) |
5,555,146 | |||||||||||||||||||
Total Long-Term Investments (cost $254,876,916) |
332,164,676 | |||||||||||||||||||
Principal
Amount (000) |
Description (1) | Coupon | Maturity | Value | ||||||||||||||||
SHORT-TERM INVESTMENTS 1.0% (0.7% of Total Investments) |
||||||||||||||||||||
REPURCHASE AGREEMENTS 1.0% (0.7% of Total Investments) | ||||||||||||||||||||
$ | 2,305 |
Repurchase Agreement with Fixed Income Clearing Corporation,
dated 12/31/20, repurchase price $2,305,374,
|
0.000% | 1/04/21 | $ | 2,305,374 | ||||||||||||||
Total Short-Term Investments (cost $2,305,374) |
2,305,374 | |||||||||||||||||||
Total Investments (cost $257,182,290) 143.7% |
334,470,050 | |||||||||||||||||||
Borrowings (41.8)% (7), (8) |
(97,400,000 | ) | ||||||||||||||||||
Other Assets Less Liabilities (1.9)% (9) |
(4,234,029 | ) | ||||||||||||||||||
Net Assets Applicable to Common Shares 100% |
$ | 232,836,021 |
Investments in Derivatives
Options Written
Description (10) | Type |
Number of
Contracts |
Notional
Amount (11) |
Exercise
Price |
Expiration
Date |
Value | ||||||||||||||||
S&P 500® Index |
Call |
(26 | ) | $ | (10,010,000 | ) | $ | 3,850 | 1/15/2021 | $ | (28,210 | ) | ||||||||||
S&P 500® Index |
Call |
(100 | ) | $ | (38,000,000 | ) | $ | 3,800 | 1/15/2021 | $ | (263,500 | ) | ||||||||||
S&P 500® Index |
Call |
(105 | ) | $ | (39,375,000 | ) | $ | 3,750 | 1/15/2021 | $ | (554,400 | ) | ||||||||||
Total Options Written (premiums received $858,589) |
(231 | ) | $ | (87,385,000 | ) | $ | (846,110 | ) |
Interest Rate Swaps OTC Uncleared
Counterparty |
Notional
Amount |
Fund
Pay/Receive Floating Rate |
Floating Rate Index |
Fixed Rate
(Annualized) |
Fixed Rate
Payment Frequency |
Effective
Date (12) |
Optional
Termination Date |
Maturity
Date |
Value |
Unrealized
Appreciation (Depreciation) |
||||||||||||||||||||||||||||||
JPMorgan Chase Bank, N.A. |
52,500,000 | Receive | 1-Month LIBOR | 1.969 | % | Monthly | 6/1/18 | 7/1/25 | 7/1/27 | $ | (5,200,359 | ) | $ | (5,200,359 | ) |
23
JTD | Nuveen Tax-Advantaged Dividend Growth Fund (continued) | |
Portfolio of Investments December 31, 2020 |
For Fund portfolio compliance purposes, the Funds industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease. |
(1) |
All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares unless otherwise noted. |
(2) |
For fair value measurement disclosure purposes, investment classified as Level 2. See Notes to Financial Statements, Note 3 - Investment Valuation and Fair Value Measurements for more information. |
(3) |
Investment, or portion of investment, is hypothecated as described in Notes to Financial Statements, Note 8 - Borrowing Arrangements. The total value of investments hypothecated as of the end of the reporting period was $90,244,635. |
(4) |
Investment, or portion of investment, has been pledged to collateralized the net payment obligations for investments in derivatives. |
(5) |
For financial reporting purposes, the ratings disclosed are the highest of Standard & Poors Group (Standard & Poors), Moodys Investors Service, Inc. (Moodys) or Fitch, Inc. (Fitch) rating. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Ratings below BBB by Standard & Poors, Baa by Moodys or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. Ratings are not covered by the report of independent registered public accounting firm. |
(6) |
Perpetual security. Maturity date is not applicable. |
(7) |
Borrowings as a percentage of Total Investments is 29.1%. |
(8) |
The Fund may pledge up to 100% of its eligible investments (excluding any investments separately pledged as collateral for specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for borrowings. As of the end of the reporting period investments with a value of $225,815,112 have been pledged as collateral for borrowings. |
(9) |
Other assets less liabilities includes the unrealized appreciation (depreciation) of certain over-the-counter (OTC) derivatives as presented on the Statement of Assets and Liabilities, when applicable. The unrealized appreciation (depreciation) of OTC cleared and exchange-traded derivatives is recognized as part of the cash collateral at broker and/or receivable or payable for variation margin as presented on the Statement of Assets and Liabilities, when applicable. Other assets less liabilities also includes the value of options presented on the Statement of Assets and Liabilities. |
(10) |
Exchange-traded, unless otherwise noted. |
(11) |
For disclosure purposes, Notional Amount is calculated by multiplying the Number of Contracts by the Exercise Price by 100. |
(12) |
Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each contract. |
144A |
Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers. |
ADR |
American Depositary Receipt |
LIBOR |
London Inter-Bank offered Rate |
See accompanying notes to financial statements.
24
Statement of Assets and Liabilities
December 31, 2020
Assets |
||||
Long-term investments, at value (cost $254,876,916) |
$ | 332,164,676 | ||
Short-term investments, at value (cost approximates value) |
2,305,374 | |||
Receivable for: |
||||
Dividends |
574,434 | |||
Interest |
731,069 | |||
Investments sold |
642,564 | |||
Reclaims |
320,390 | |||
Other assets |
52,796 | |||
Total assets |
336,791,303 | |||
Liabilities |
||||
Borrowings |
97,400,000 | |||
Call options written, at value (premiums received $858,589) |
846,110 | |||
Unrealized depreciation on interest rate swaps |
5,200,359 | |||
Accrued expenses: |
||||
Management fees |
264,629 | |||
Interest on borrowings |
66,576 | |||
Trustees fees |
43,093 | |||
Other |
134,515 | |||
Total liabilities |
103,955,282 | |||
Net assets applicable to common shares |
$ | 232,836,021 | ||
Common shares outstanding |
14,484,340 | |||
Net asset value (NAV) per common share outstanding |
$ | 16.08 | ||
Net assets applicable to common shares consist of: |
||||
Common shares, $0.01 par value per share |
$ | 144,843 | ||
Paid-in surplus |
161,451,356 | |||
Total distributable earnings |
71,239,822 | |||
Net assets applicable to common shares |
$ | 232,836,021 | ||
Authorized shares: |
||||
Common |
Unlimited | |||
Preferred |
Unlimited |
See accompanying notes to financial statements.
25
Year Ended December 31, 2020
Investment Income |
||||
Dividends |
$ | 9,169,580 | ||
Interest |
2,437,360 | |||
Rehypothecation income |
82,274 | |||
Foreign tax withheld on dividend income |
(323,007 | ) | ||
Total investment income |
11,366,207 | |||
Expenses |
||||
Management fees |
2,976,214 | |||
Interest expense |
1,121,884 | |||
Custodian fees |
85,525 | |||
Trustees fees |
8,581 | |||
Professional fees |
45,798 | |||
Shareholder reporting expenses |
44,718 | |||
Shareholder servicing agent fees |
308 | |||
Stock exchange listing fees |
6,636 | |||
Investor relations expense |
47,791 | |||
Other |
20,610 | |||
Total expenses |
4,358,065 | |||
Net investment income (loss) |
7,008,142 | |||
Realized and Unrealized Gain (Loss) |
||||
Net realized gain (loss) from: |
||||
Investments and foreign currency |
10,668,202 | |||
Options written |
(8,352,109 | ) | ||
Swaps |
(632,201 | ) | ||
Change in net unrealized appreciation (depreciation) of: |
||||
Investments and foreign currency |
(17,169,773 | ) | ||
Options written |
144,445 | |||
Swaps |
(3,674,212 | ) | ||
Net realized and unrealized gain (loss) |
(19,015,648 | ) | ||
Net increase (decrease) in net assets applicable to common shares from operations |
$ | (12,007,506 | ) |
See accompanying notes to financial statements.
26
Statement of Changes in Net Assets
Year
Ended 12/31/20 |
Year
Ended 12/31/19 |
|||||||
Operations |
||||||||
Net investment income (loss) |
$ | 7,008,142 | $ | 6,031,120 | ||||
Net realized gain (loss) from: |
||||||||
Investments and foreign currency |
10,668,202 | 22,684,139 | ||||||
Options written |
(8,352,109 | ) | (2,978,203 | ) | ||||
Swaps |
(632,201 | ) | 201,169 | |||||
Change in net unrealized appreciation (depreciation) of: |
||||||||
Investments and foreign currency |
(17,169,773 | ) | 45,723,760 | |||||
Options written |
144,445 | (114,674 | ) | |||||
Swaps |
(3,674,212 | ) | (2,795,130 | ) | ||||
Net increase (decrease) in net assets applicable to common shares from operations |
(12,007,506 | ) | 68,752,181 | |||||
Distributions to Common Shareholders |
||||||||
Dividends |
(16,263,120 | ) | (17,960,582 | ) | ||||
Return of capital |
(1,023,940 | ) | | |||||
Decrease in net assets applicable to common shares from distributions to common shareholders |
(17,287,060 | ) | (17,960,582 | ) | ||||
Net increase (decrease) in net assets applicable to common shares |
(29,294,566 | ) | 50,791,599 | |||||
Net assets applicable to common shares at the beginning of period |
262,130,587 | 211,338,988 | ||||||
Net assets applicable to common shares at the end of period |
$ | 232,836,021 | $ | 262,130,587 |
See accompanying notes to financial statements.
27
Year Ended December 31, 2020
Cash Flows from Operating Activities: |
||||
Net Increase (Decrease) In Net Assets Applicable to Common Shares from Operations |
$ | (12,007,506 | ) | |
Adjustments to reconcile the net increase (decrease) in net assets applicable to common
|
||||
Purchases of investments |
(76,602,892 | ) | ||
Proceeds from sales and maturities of investments |
107,814,012 | |||
Proceeds from (Purchases of) short-term investments, net |
1,964,671 | |||
Proceeds from (Payments for) closed foreign currency spot contracts |
3,017 | |||
Premiums received for options written |
15,412,426 | |||
Cash paid for terminated options written |
(23,485,731 | ) | ||
Proceeds from litigation settlement |
14,904 | |||
Amortization (Accretion) of premiums and discounts, net |
321,137 | |||
(Increase) Decrease in: |
||||
Receivable for dividends |
(22,870 | ) | ||
Receivable for interest |
(85,068 | ) | ||
Receivable for investments sold |
(642,564 | ) | ||
Receivable for reclaims |
(72,824 | ) | ||
Other assets |
(8,903 | ) | ||
Increase (Decrease) in: |
||||
Accrued management fees |
(31,225 | ) | ||
Accrued interest on borrowings |
(149,856 | ) | ||
Accrued Trustees fees |
(1,518 | ) | ||
Accrued other expenses |
41,513 | |||
Net realized (gain) loss from: |
||||
Investments and foreign currency |
(10,668,202 | ) | ||
Options written |
8,352,109 | |||
Change in net unrealized (appreciation) depreciation of: |
||||
Investments and foreign currency |
17,169,773 | |||
Options written |
(144,445 | ) | ||
Swaps |
3,674,212 | |||
Net cash provided by (used in) operating activities |
30,844,170 | |||
Cash Flows from Financing Activities: |
||||
Proceeds from borrowings |
32,150,000 | |||
(Repayment of) borrowings |
(45,850,000 | ) | ||
Cash distributions paid to common shareholders |
(17,287,060 | ) | ||
Net cash provided by (used in) financing activities |
(30,987,060 | ) | ||
Net Increase (Decrease) in Cash |
(142,890 | ) | ||
Cash at the beginning of period |
142,890 | |||
Cash at the end of period |
| |||
Supplemental Disclosure of Cash Flow Information | ||||
Cash paid for interest on borrowings (excluding borrowing costs) |
$ | 1,271,740 |
See accompanying notes to financial statements.
28
THIS PAGE INTENTIONALLY LEFT BLANK
29
Selected data for a share outstanding throughout each period:
Investment Operations |
Less Distributions to Common Shareholders |
Common Share | ||||||||||||||||||||||||||||||||||||||
Beginning
Common Share NAV |
Net
Investment Income (Loss)(a) |
Net
Realized/ Unrealized Gain (Loss) |
Total |
From
Net Investment Income |
From
Accum- ulated Net Realized Gains |
Return
of Capital |
Total |
Ending
NAV |
Ending
Share Price |
|||||||||||||||||||||||||||||||
Year Ended 12/31: |
|
|||||||||||||||||||||||||||||||||||||||
2020 |
$ | 18.10 | $ | 0.48 | $ | (1.31 | ) | $ | (0.83 | ) | $ | (0.40 | ) | $ | (0.72 | ) | $ | (0.07 | ) | $ | (1.19 | ) | $ | 16.08 | $ | 14.22 | ||||||||||||||
2019 |
14.59 | 0.42 | 4.33 | 4.75 | (0.48 | ) | (0.76 | ) | | (1.24 | ) | 18.10 | 17.32 | |||||||||||||||||||||||||||
2018 |
18.07 | 0.43 | (2.57 | ) | (2.14 | ) | (0.43 | ) | (0.81 | ) | (0.10 | ) | (1.34 | ) | 14.59 | 13.40 | ||||||||||||||||||||||||
2017 |
15.50 | 0.50 | 3.31 | 3.81 | (0.53 | ) | | (0.71 | ) | (1.24 | ) | 18.07 | 17.58 | |||||||||||||||||||||||||||
2016 |
15.67 | 0.54 | 0.53 | 1.07 | (0.54 | ) | | (0.70 | ) | (1.24 | ) | 15.50 | 13.93 |
30
Common Share Supplemental Data/
Ratios Applicable to Common Shares |
||||||||||||||||||||||
Common Share
Total Returns |
Ratios to Average Net Assets(c) | |||||||||||||||||||||
Based
on NAV(b) |
Based on Share Price(b) |
Ending
Net Assets (000) |
Expenses |
Net
Investment Income (Loss) |
Portfolio
Turnover Rate(d) |
|||||||||||||||||
(3.42 | )% | (9.95 | )% | $ | 232,836 | 1.99 | % | 3.19 | % | 25 | % | |||||||||||
33.28 | 39.16 | 262,131 | 2.71 | 2.48 | 20 | |||||||||||||||||
(12.50 | ) | (17.09 | ) | 211,339 | 2.75 | 2.47 | 14 | |||||||||||||||
25.24 | 36.10 | 261,771 | 2.25 | 2.95 | 16 | |||||||||||||||||
6.93 | 9.22 | 224,544 | 2.05 | 3.46 | 19 |
(a) |
Per share Net Investment Income (Loss) is calculated using the average daily shares method. |
(b) |
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending NAV. The actual reinvest price for the last dividend declared in the period may often be based on the Funds market price (and not its NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized. |
Total Return Based on Common Share Price is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
(c) |
Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings (as described in Note 8 Borrowing Arrangements). |
|
Each ratio includes the effect of all interest expense paid and other costs related to borrowings, as follows: |
Ratios of Borrowings Interest Expense
to Average Net Assets Applicable to Common Shares |
||||
Year Ended 12/31: |
|
|||
2020 |
0.51 | % | ||
2019 |
1.25 | |||
2018 |
1.25 | |||
2017 |
0.77 | |||
2016 |
0.53 |
(d) |
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4 Portfolio Securities and Investments in Derivatives) divided by the average long-term market value during the period. |
See accompanying notes to financial statements.
31
1. General Information
Fund Information
Nuveen Tax-Advantaged Dividend Growth Fund (the Fund) is registered under the Investment Company Act of 1940 (the 1940 Act), as amended, as a diversified closed-end management investment company. The Funds common shares are listed on the New York Stock Exchange (NYSE) and trade under the ticker symbol JTD. The Fund was organized as a Massachusetts business trust on February 22, 2007.
The end of the reporting period for the Fund is December 31, 2020, and the period covered by these Notes to Financial Statements is the fiscal year ended December 31, 2020 (the current fiscal period).
Investment Adviser and Sub-Adviser
The Funds investment adviser is Nuveen Fund Advisors, LLC (the Adviser), a subsidiary of Nuveen, LLC (Nuveen). Nuveen is the investment management arm of Teachers Insurance and Annuity Association of America (TIAA). The Adviser has overall responsibility for management of the Fund, oversees the management of the Funds portfolio, manages the Funds business affairs and provides certain clerical, bookkeeping and other administrative services, and, if necessary, asset allocation decisions. The Adviser has entered into sub-advisory agreements with its affiliates Santa Barbara Asset Management, LLC (Santa Barbara), NWQ Investment Management Company, LLC (NWQ) and Nuveen Asset Management, LLC (NAM) (each a Sub-Adviser and collectively, the Sub-Advisers). Santa Barbara manages the portion of the Funds investment portfolio allocated to dividend-paying equity securities. NWQ manages the portion of the Funds investment portfolio allocated to preferred securities and other fixed-income securities. NAM is responsible for the writing of index call options on various equity market indices, while the Adviser manages the Funds investments in swap contracts.
Other Matters
The outbreak of the novel coronavirus (COVID-19) and subsequent global pandemic began significantly impacting the U.S. and global financial markets and economies during the calendar quarter ended March 31, 2020. The worldwide spread of COVID-19 has created significant uncertainty in the global economy. The duration and extent of COVID-19 over the long-term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds normal course of business, results of operations, investments, and cash flows will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
2. Significant Accounting Policies
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which may require the use of estimates made by management and the evaluation of subsequent events. Actual results may differ from those estimates. The Fund is an investment company and follows the accounting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification 946, Financial Services Investment Companies. The net asset value (NAV) for financial reporting purposes may differ from the NAV for processing security and common share transactions. The NAV for financial reporting purposes includes security and common share transactions through the date of the report. Total return is computed based on the NAV used for processing security and common share transactions. The following is a summary of the significant accounting policies consistently followed by the Fund.
Compensation
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 Funds Board of Trustees (the Board) 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.
Distributions to Common Shareholders
Distributions to common shareholders are recorded on the ex-dividend date. The amount, character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
The Fund makes quarterly cash distributions to common shareholders of a stated dollar amount per share. Subject to approval and oversight by the Board, the Fund seeks to maintain a stable distribution level designed to deliver the long-term return potential of the Funds investment strategy through regular quarterly distributions (a Managed Distribution Program). Total distributions during a calendar year generally will be made from the Funds net investment income, net realized capital gains and net unrealized capital gains in the Funds portfolio, if any. The portion of distributions paid attributed to net unrealized gains, if any, is distributed from the Funds assets and is treated by shareholders as a nontaxable distribution (return of capital) for tax purposes. In the event that total distributions during a calendar year exceed the Funds total return on NAV, the difference will reduce NAV per share. If
32
the Funds total return on NAV exceeds total distributions during a calendar year, the excess will be reflected as an increase in NAV per share. The final determination of the source and character of all distributions paid by the Fund during the fiscal year is made after the end of the fiscal year and is reflected in the financial statements contained in the annual report as of December 31 each year.
Foreign Currency Transactions and Translation
To the extent that the Fund invests in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Fund will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Funds investments denominated in that currency will lose value because their currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
The books and records of the Fund are maintained in U.S. dollars. Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollars at the end of each day. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions.
Net realized foreign currency gains and losses resulting from changes in exchange rates associated with (i) foreign currency, (ii) investments and (iii) derivatives include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received are recognized as a component of Net realized gain (loss) from investments and foreign currency on the Statement of Operations, when applicable.
The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with (i) investments and (ii) other assets and liabilities are recognized as a component of Change in net unrealized appreciation (depreciation) of investments and foreign currency on the Statement of Operations, when applicable. The unrealized gains and losses resulting from changes in foreign exchange rates associated with investments in derivatives are recognized as a component of the respective derivatives related Change in net unrealized appreciation (depreciation) on the Statement of Operations, when applicable.
As of the end of the reporting period, the Funds investments in non-U.S. securities were as follows:
Value |
% of Total
Investments |
|||||||
Country: |
||||||||
United Kingdom |
$ | 29,531,291 | 8.8 | % | ||||
Japan |
20,014,203 | 6.0 | ||||||
France |
15,125,478 | 4.5 | ||||||
Canada |
13,684,332 | 4.1 | ||||||
Netherlands |
7,029,096 | 2.1 | ||||||
Hong Kong |
6,869,179 | 2.1 | ||||||
Australia |
5,306,481 | 1.6 | ||||||
Denmark |
4,805,331 | 1.4 | ||||||
Germany |
4,488,154 | 1.3 | ||||||
Italy |
3,849,138 | 1.2 | ||||||
Singapore |
3,711,690 | 1.1 | ||||||
Switzerland |
3,384,747 | 1.0 | ||||||
Spain |
2,556,669 | 0.8 | ||||||
China |
2,228,207 | 0.7 | ||||||
Other |
2,417,058 | 0.7 | ||||||
Total non-U.S. securities |
$ | 125,001,054 | 37.4 | % |
Indemnifications
Under the Funds 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 Funds 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.
Investments and Investment Income
Securities transactions are accounted for as of the trade date for financial reporting purposes. Realized gains and losses on securities transactions are based upon the specific identification method. Dividend income is recorded on the ex-dividend date or, for certain foreign securities, when information is available. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded at fair value. Interest income, which is recorded on an accrual basis and includes accretion of discounts and amortization of premiums for financial reporting purposes. Interest income
33
Notes to Financial Statements (continued)
also reflects payment-in-kind (PIK) interest and fee income, if any. PIK interest represents income received in the form of securities in lieu of cash. Rehypothecation income is comprised of fees earned in connection with the rehypothecation of pledged collateral as further described in Note 8 Borrowing Arrangements.
Netting Agreements
In the ordinary course of business, the Fund may enter into transactions subject to enforceable master repurchase agreements, International Swaps and Derivatives Association, Inc. (ISDA) master agreements or other similar arrangements (netting agreements). Generally, the right to offset in netting agreements allows the Fund to offset certain securities and derivatives with a specific counterparty, when applicable, as well as any collateral received or delivered to that counterparty based on the terms of the agreements. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis.
The Funds investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 4 Portfolio Securities and Investments in Derivatives.
New Accounting Pronouncements and Rule Issuances
Reference Rate Reform
In March 2020, FASB issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The main objective of the new guidance is to provide relief to companies that will be impacted by the expected change in benchmark interest rates at the end of 2021, when participating banks will no longer be required to submit London Interbank Offered Rate (LIBOR) quotes by the UK Financial Conduct Authority (FCA). The new guidance allows companies to, provided the only changes to existing contracts are a change to an approved benchmark interest rate, account for modifications as a continuance of the existing contract without additional analysis. For new and existing contracts, the Fund may elect to apply the optional expedients as of March 12, 2020 through December 31, 2022. Management has not yet elected to apply the optional expedients, but is currently assessing the impact of the ASUs adoption to the Funds financial statements and various filings.
Securities and Exchange Commission (SEC) Adopts New Rules to Modernize Fund Valuation Framework
In December 2020, the SEC voted to adopt a new rule governing fund valuation practices. New Rule 2a-5 under the 1940 Act establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are readily available for purposes of Section 2(a)(41) of the 1940 Act, which requires a fund to fair value a security when market quotation are not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth the recordkeeping requirements associated with fair value determinations. Finally, the SEC is rescinding previously issued guidance on related issues, including the role of a board in determining fair value and the accounting and auditing of fund investments. Rule 2a-5 and Rule 31a-4 will become effective on March 8, 2021, with a compliance date of September 8, 2022. A fund may voluntarily comply with the rules after the effective date, and in advance of the compliance date, under certain conditions. Management is currently assessing the impact of these provisions on the Funds financial statements.
3. Investment Valuation and Fair Value Measurements
The Funds investments in securities are recorded at their estimated fair value utilizing valuation methods approved by the Board. Fair value is defined as the price that would be received upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. U.S. GAAP establishes the three-tier hierarchy which is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect managements assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.
Level 1 | Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities. | |
Level 2 | Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spreads, etc.). | |
Level 3 | Prices are determined using significant unobservable inputs (including managements assumptions in determining the fair value of investments). |
A description of the valuation techniques applied to the Funds major classifications of assets and liabilities measured at fair value follows:
Equity securities and exchange-traded funds listed or traded on a national market or exchange are valued based on their sale price at the official close of business of such market or exchange on the valuation date. Foreign equity securities are valued at the last sale price or official closing price reported on the exchange where traded and converted to U.S. dollars at the prevailing rates of exchange on the date of valuation. To the extent these securities are
34
actively traded and that valuation adjustments are not applied, they are generally classified as Level 1. If there is no official close of business, then the latest available sale price is utilized. If no sales are reported, then the mean of the latest available bid and ask prices is utilized and are generally classified as Level 2.
Prices of certain American Depositary Receipts (ADR) held by the Fund that trade in the United States are valued based on the last traded price, official closing price, or an evaluated price provided by the independent pricing service (pricing service) and are generally classified as Level 1 or 2.
Prices of fixed-income securities are generally provided by the pricing service approved by the Board. The pricing service establishes a securitys fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market activity, provided by the Adviser. These securities are generally classified as Level 2.
For events affecting the value of foreign securities between the time when the exchange on which they are traded closes and the time when the Funds net assets are calculated, such securities will be valued at fair value in accordance with procedures adopted by the Board. These foreign securities are generally classified as Level 2.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Purchased and written options traded and listed on a national market or exchange are valued at the mean of the closing bid and asked prices and are generally classified as Level 1.
Over-the-counter (OTC) options are marked-to-market daily based upon a price supplied by a pricing service. OTC options are generally classified as Level 2.
Swap contracts are marked-to-market daily based upon a price supplied by a pricing service. Swaps are generally classified as Level 2.
Any portfolio security or derivative for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued at fair value, as determined in good faith using procedures approved by the Board. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligors credit characteristics considered relevant. To the extent the inputs are observable and timely, the values would be classified as Level 2 of the fair value hierarchy; otherwise they would be classified as Level 3.
The following table summarizes the market value of the Funds investments as of the end of the reporting period, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Long-Term Investments*: |
||||||||||||||||
Common Stocks |
$ | 179,324,820 | $ | 68,916,320 | ** | $ | | $ | 248,241,140 | |||||||
$1,000 Par (or similar) Institutional Preferred |
| 38,445,848 | | 38,445,848 | ||||||||||||
$25 Par (or similar) Retail Preferred |
27,560,513 | 1,654,069 | ** | | 29,214,582 | |||||||||||
Corporate Bonds |
| 10,707,960 | | 10,707,960 | ||||||||||||
Convertible Preferred Securities |
5,555,146 | | | 5,555,146 | ||||||||||||
Short-Term Investments: |
||||||||||||||||
Repurchase Agreements |
| 2,305,374 | |
|
2,305,374
|
|
||||||||||
Investments in Derivatives: |
||||||||||||||||
Options Written |
(846,110 | ) | | | (846,110 | ) | ||||||||||
Interest Rate Swaps*** |
| (5,200,359 | ) | | (5,200,359 | ) | ||||||||||
Total |
$ | 211,594,369 | $ | 116,829,212 | $ | | $ | 328,423,581 |
* |
Refer to the Funds Portfolio of Investments for industry classifications. |
** |
Refer to the Funds Portfolio of Investments for securities classified as Level 2. |
*** |
Represents net unrealized appreciation (depreciation) as reported in the Funds Portfolio of Investments. |
35
Notes to Financial Statements (continued)
4. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
The following table presents the repurchase agreements for the Fund that are subject to netting agreements as of the end of the reporting period, and the collateral delivered related to those repurchase agreements.
Counterparty |
Short-Term
Investments, at Value |
Collateral
Pledged (From) Counterparty* |
Net
Exposure |
|||||||||
Fixed Income Clearing Corporation |
$ | 2,305,374 | $ | (2,305,374 | ) | $ | |
* |
As of the end of the reporting period, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. Refer to the Funds Portfolio of Investments for details on the repurchase agreements. |
Zero Coupon Securities
A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Investment Transactions
Long-term purchases and sales (including maturities but excluding derivative transactions) during the current fiscal period, aggregated $76,602,892 and $107,814,012, respectively.
The Fund may purchase securities on a when-issued or delayed-delivery basis. Securities purchased on a when-issued or delayed-delivery basis may have extended settlement periods; interest income is not accrued until settlement date. Any securities so purchased are subject to market fluctuation during this period. The Fund has earmarked securities in its portfolio with a current value at least equal to the amount of the when-issued/delayed-delivery purchase commitments. If the Fund has outstanding when-issued/delayed-delivery purchases commitments as of the end of the reporting period, such amounts are recognized on the Statement of Assets and Liabilities.
Investments in Derivatives
The Fund is authorized to invest in certain derivative instruments, such as futures, options and swap contracts. The Fund limits its investments in futures, options on futures and swap contracts to the extent necessary for the Adviser to claim the exclusion from registration by the Commodity Futures Trading Commission as a commodity pool operator with respect to the Fund. The Fund records derivative instruments at fair value with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.
Options Transactions
When the Fund writes an option, an amount equal to the net premium received (the premium less commission) is recognized as a component of Options written, at value on the Statement of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option until the option is exercised or expires or the Fund enters into a closing purchase transaction. The changes in the value of options written during the fiscal period are recognized as a component of Change in net unrealized appreciation (depreciation) of options written on the Statement of Operations. When an option is exercised or expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of Net realized gain (loss) from options written on the Statement of Operations. The Fund, as a writer of an option, has no control over whether the underlying instrument may be sold (called) or purchased (put) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
During the current fiscal period, the Fund wrote call options on stock indexes, while investing in a portfolio that included equities, to enhance risk-adjusted returns while foregoing some upside potential of its equity portfolio.
36
The average notional amount of outstanding options written during the current fiscal period was as follows:
Average notional amount of outstanding options written* |
$(69,229,000) |
* |
The average notional amount is calculated based on the outstanding notional at the beginning of the current fiscal period and at the end of each fiscal quarter within the current fiscal period. |
The following table presents the fair value of all options written by the Fund as of the end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
Location on the Statement of Assets and Liabilities |
||||||||||||||||||
Underlying
Risk Exposure |
Derivative
Instrument |
Asset Derivatives |
(Liability) Derivatives |
|||||||||||||||
Location | Value | Location | Value | |||||||||||||||
Equity price | Options written | | $ | | Options written, at value | $ | (846,110 | ) |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on options written on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.
Underlying Risk Exposure |
Derivative
Instrument |
Net Realized
Gain (Loss) from Options Written |
Change in Net
Unrealized Appreciation (Depreciation) of Options Written |
|||||||
Equity price |
Options written |
$ | (8,352,109 | ) | $ | 144,445 |
Interest Rate Swap Contracts
Interest rate swap contracts involve the Funds agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment. Forward interest rate swap contracts involve the Funds agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the effective date).
The amount of the payment obligation for an interest rate swap is based on the notional amount and the termination date of the contract. Interest rate swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that the Fund is to receive.
Interest rate swap contracts are valued daily. Upon entering into an interest rate swap contract (and beginning on the effective date for a forward interest rate swap contract), the Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on the interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Funds contractual rights and obligations under the contracts. For an OTC swap that is not cleared through a clearing house (OTC Uncleared), the amount recorded on these transactions is recognized on the Statement of Assets and Liabilities as a component of Unrealized appreciation or depreciation on interest rate swaps.
Upon the execution of an OTC swap cleared through a clearing house (OTC Cleared), the Fund is obligated to deposit cash or eligible securities, also known as initial margin, into an account at its clearing broker equal to a specified percentage of the contract amount. Cash deposited by the Fund to cover initial margin requirements on open swap contracts, if any, is recognized as a component of Cash collateral at brokers for investments in swaps on the Statement of Assets and Liabilities. Investments in OTC Cleared swaps obligate the Fund and the clearing broker to settle monies on a daily basis representing changes in the prior days mark-to-market of the swap contract. If the Fund has unrealized appreciation, the clearing broker will credit the Funds account with an amount equal to the appreciation. Conversely, if the Fund has unrealized depreciation, the clearing broker will debit the Funds account with an amount equal to the depreciation. These daily cash settlements are also known as variation margin. Variation margin for OTC Cleared swaps is recognized as a receivable and/or payable for Variation margin on swap contracts on the Statement of Assets and Liabilities. Upon the execution of an OTC Uncleared swap, neither the Fund nor the counterparty is required to deposit initial margin as the trades are recorded bilaterally between both parties to the swap contract, and the terms of the variation margin are subject to a predetermined threshold negotiated by the Fund and the counterparty. Variation margin for OTC Uncleared swaps is recognized as a component of Unrealized appreciation or depreciation on interest rate swaps as described in the preceding paragraph.
The net amount of periodic payments settled in cash are recognized as a component of Net realized gain (loss) from swaps on the Statement of Operations, in addition to the net realized gain or loss recorded upon the termination of the swap contract. For tax purposes, payments expected to be received or paid on the swap contracts are treated as ordinary income or expense, respectively. Changes in the value of the swap contracts during the fiscal period are recognized as a component of Change in net unrealized appreciation (depreciation) of swaps on the Statement of Operations. In certain instances, payments are made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap agreements and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). Payments received
37
Notes to Financial Statements (continued)
or made at the beginning of the measurement period, if any, are recognized as Interest rate swaps premiums received and/or paid on the Statement of Assets and Liabilities.
During the current fiscal period, the Fund continued to use interest rate swap contracts to partially hedge its future interest cost of leverage, which is through the use of bank borrowings.
The average notional amount of interest rate swap contracts outstanding during the current fiscal period was as follows:
Average notional amount of interest rate swap contracts outstanding* |
$52,500,000 |
* |
The average notional amount is calculated based on the outstanding notional at the beginning of the current fiscal period and at the end of each fiscal quarter within the current fiscal period. |
The following table presents the fair value of all swap contracts held by the Fund as of the end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
** |
Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities, when applicable, and is not reflected in the cumulative unrealized appreciation (depreciation) presented above. |
The following table presents the swap contracts subject to netting agreements and the collateral delivered related to those swap contracts as of the end of the reporting period.
Gross Amounts Not Offset on the
Statement of Assets and Liabilities |
||||||||||||||||||||||||
Counterparty |
Gross
Unrealized Appreciation on Interest Rate Swaps*** |
Gross
Unrealized (Depreciation) on Interest Rate Swaps*** |
Net Unrealized
Appreciation (Depreciation) on Interest Rate Swaps |
Interest
Rate Swaps Premiums Paid |
Collateral
Pledged to (from) Counterparty |
Net
Exposure |
||||||||||||||||||
JPMorgan Chase Bank, N.A. |
$ | | $ | (5,200,359 | ) | $ | (5,200,359 | ) | $ | | $ | 5,135,496 | $ | (64,863 | ) |
*** |
Represents gross unrealized appreciation (depreciation) for the counterparty as reported in the Funds Portfolio of Investments. |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on swap contracts on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.
Underlying Risk Exposure |
Derivative
Instrument |
Net Realized Gain (Loss) from Swaps |
Change in Net
Unrealized Appreciation (Depreciation) of Swaps |
|||||||
Interest rate |
Swaps |
$ | (632,201 | ) | $ | (3,674,212 | ) |
Market and Counterparty Credit Risk
In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Funds exposure to counterparty credit risk in respect to these financial assets approximates its carrying value as recorded on the Statement of Assets and Liabilities.
The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
38
5. Fund Shares
The Fund did not have any transactions in common shares during the current and prior fiscal period.
6. Income Tax Information
The Fund intends to distribute substantially all of its net investment company taxable income to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. In any year when the Fund realizes net capital gains, the Fund may choose to distribute all or a portion of its net capital gains to shareholders, or alternatively, to retain all or a portion of its net capital gains and pay federal corporate income taxes on such retained gains.
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to the recognition of unrealized gain or loss for tax (mark-to-market) on options contracts, timing differences in the recognition of income and timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAV of the Fund.
The table below presents the cost and unrealized appreciation (depreciation) of the Funds investment portfolio, as determined on a federal income tax basis, as of December 31, 2020.
For purposes of this disclosure, derivative tax cost is generally the sum of any upfront fees or premiums exchanged and any amounts unrealized for income statement reporting but realized in income and/or capital gains for tax reporting. If a particular derivative category does not disclose any tax unrealized appreciation or depreciation, the change in value of those derivatives have generally been fully realized for tax purposes.
Tax cost of investments |
$ | 257,262,896 | ||
Gross unrealized: |
||||
Appreciation |
$ | 84,377,587 | ||
Depreciation |
(13,216,902 | ) | ||
Net unrealized appreciation (depreciation) of investments |
$ | 71,160,685 |
Permanent differences, primarily due to treatment of notional principal contracts, real estate investment trust adjustments, distribution reallocations, foreign currency transactions, complex securities character adjustments and bond premium amortization adjustments, resulted in reclassifications among the Funds components of net assets as of December 31, 2020, the Funds tax year end.
The tax character of distributions paid during the Funds tax years ended December 31, 2020 and December 31, 2019 was designated for purposes of the dividends paid deduction as follows:
2020 |
||||
Distributions from net ordinary income1 |
$ | 5,831,436 | ||
Distributions from net long-term capital gains2 |
10,431,684 | |||
Return of capital |
1,023,940 |
2019 |
||||
Distributions from net ordinary income1 |
$ | 6,991,310 | ||
Distributions from net long-term capital gains |
10,969,272 | |||
Return of capital |
| |||
1 Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. 2 The Fund hereby designates as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce earnings and profits of the Fund related to net capital gain to zero for the tax year ended December 31, 2020. |
|
39
Notes to Financial Statements (continued)
7. Management Fees
The Funds management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Sub-Advisers are compensated for their services to the Fund from the management fees paid to the Adviser.
The Funds management fee consists of two components a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
Average Daily Managed Assets* | Fund-Level Fee Rate | |||
For the first $500 million |
0.8000 | % | ||
For the next $500 million |
0.7750 | |||
For the next $500 million |
0.7500 | |||
For the next $500 million |
0.7250 | |||
For managed assets over $2 billion |
0.7000 |
The annual complex-level fee, payable monthly, is calculated by multiplying the current complex-wide fee rate, determined according to the following schedule by the Funds daily managed assets:
Complex-Level Eligible Asset Breakpoint Level* | Effective Complex-Level Fee Rate at Breakpoint Level | |||
$55 billion |
0.2000 | % | ||
$56 billion |
0.1996 | |||
$57 billion |
0.1989 | |||
$60 billion |
0.1961 | |||
$63 billion |
0.1931 | |||
$66 billion |
0.1900 | |||
$71 billion |
0.1851 | |||
$76 billion |
0.1806 | |||
$80 billion |
0.1773 | |||
$91 billion |
0.1691 | |||
$125 billion |
0.1599 | |||
$200 billion |
0.1505 | |||
$250 billion |
0.1469 | |||
$300 billion |
0.1445 |
* |
For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, leverage includes the funds use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trusts issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen open-end and closed-end funds that constitute eligible assets. Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Advisers assumption of the management of the former First American Funds effective January 1, 2011, but do not include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year. As of December 31, 2020, the complex-level fee for the Fund was 0.1557%. |
8. Borrowing Arrangements
Borrowings
The Fund has entered into a borrowing arrangement as a means of leverage.
As of the end of the reporting period, the Fund has a $100,000,000 (maximum commitment amount) committed financing agreement (Borrowings). As of the end of the reporting period, the outstanding balance on these Borrowings was $97,400,000.
Interest is charged on these Borrowings at 1-Month LIBOR (London Inter-Bank Offered Rate) plus 0.65% per annum on the amount borrowed. The Fund is typically charged an undrawn fee of 0.50% per annum if the undrawn portion of the Borrowings on that day is more than 20% of the maximum commitment amount. During the current fiscal period, the average daily balance outstanding (which was for the entire current reporting period) and average annual interest rate on these Borrowings were $91,320,765 and 1.17%, respectively.
In order to maintain these Borrowings, the Fund must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities specifically identified in the Funds portfolio of investments (Pledged Collateral).
40
Borrowings outstanding are recognized as Borrowings on the Statement of Assets and Liabilities. Interest expense incurred on the drawn amount and undrawn balance are each recognized as a component of Interest expense on borrowings on the Statement of Operations.
Rehypothecation
The Fund has entered into a Rehypothecation Side Letter (Side Letter) with its prime brokerage lender, allowing it to re-register the Pledged Collateral in its own name or in a name other than the Funds to pledge, repledge, hypothecate, rehyphothecate, sell, lend or otherwise transfer or use the Pledged Collateral (the Hypothecated Securities) with all rights of ownership as described in the Side Letter. Subject to certain conditions, the total value of the outstanding Hypothecated Securities shall not exceed the lesser of (i) 98% of the outstanding balance on the Borrowings to which the Pledged Collateral relates and (ii) 331⁄3% of the Funds total assets. The Fund may designate any Pledged Collateral as ineligible for rehypothecation. The Fund may also recall Hypothecated Securities on demand.
The Fund also has the right to apply and set-off an amount equal to one-hundred percent (100%) of the then-current fair market value of such Pledged Collateral against the current Borrowings under the Side Letter in the event that prime brokerage lender fails to timely return the Pledged Collateral and in certain other circumstances. In such circumstances, however, the Fund may not be able to obtain replacement financing required to purchase replacement securities and, consequently, the Funds income generating potential may decrease. Even if the Fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices.
The Fund will receive a fee in connection with the Hypothecated Securities (Rehypothecation Fees) in addition to any principal, interest, dividends and other distributions paid on the Hypothecated Securities.
As of the end of the reporting period, the Fund had Hypothecated Securities totaling $90,244,635. During the current fiscal period, the Fund earned Rehypothecation Fees of $82,274, which is recognized as Rehypothecation income on the Statement of Operations.
Inter-Fund Borrowing and Lending
The SEC has granted an exemptive order permitting registered open-end and closed-end Nuveen funds to participate in an inter-fund lending facility whereby the Nuveen funds may directly lend to and borrow money from each other for temporary purposes (e.g., to satisfy redemption requests or when a sale of securities fails, resulting in an unanticipated cash shortfall) (the Inter-Fund Program). The closed-end Nuveen funds, including the Fund covered by this shareholder report, will participate only as lenders, and not as borrowers, in the Inter-Fund Program because such closed-end funds rarely, if ever, need to borrow cash to meet redemptions. The Inter-Fund Program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the Inter-Fund Program unless it receives a more favorable interest rate than is typically available from a bank or other financial institution for a comparable transaction; (2) no fund may borrow on an unsecured basis through the Inter-Fund Program unless the funds outstanding borrowings from all sources immediately after the inter-fund borrowing total 10% or less of its total assets; provided that if the borrowing fund has a secured borrowing outstanding from any other lender, including but not limited to another fund, the inter-fund loan must be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value; (3) if a funds total outstanding borrowings immediately after an inter-fund borrowing would be greater than 10% of its total assets, the fund may borrow through the inter-fund loan on a secured basis only; (4) no fund may lend money if the loan would cause its aggregate outstanding loans through the Inter-Fund Program to exceed 15% of its net assets at the time of the loan; (5) a funds inter-fund loans to any one fund shall not exceed 5% of the lending funds net assets; (6) the duration of inter-fund loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days; and (7) each inter-fund loan may be called on one business days notice by a lending fund and may be repaid on any day by a borrowing fund. In addition, a Nuveen fund may participate in the Inter-Fund Program only if and to the extent that such participation is consistent with the funds investment objective and investment policies. The Board is responsible for overseeing the Inter-Fund Program.
The limitations detailed above and the other conditions of the SEC exemptive order permitting the Inter-Fund Program are designed to minimize the risks associated with Inter-Fund Program for both the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there is a risk that the loan could be called on one days notice or not renewed, in which case the fund may have to borrow from a bank at a higher rate or take other actions to payoff such loan if an inter-fund loan is not available from another fund. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.
During the current reporting period, the Fund did not enter into any inter-fund loan activity.
41
(Unaudited)
Current Investment Objective, Investment Policies and Principal Risks of the Fund
NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND (JTD)
Investment Objective
The Funds investment objective is to provide an attractive level of distributions and capital appreciation. In pursuing its investment objective, the Fund seeks to reduce and defer potential federal income tax liabilities incurred by the holders of its common shares in connection with their investment in the Fund.
Investment Policies
The Fund seeks to achieve its investment objective by investing in dividend-paying equity securities consisting primarily of common stocks of mid- to large-cap companies that have attractive dividend income and the potential for future dividend growth and capital appreciation and, to a lesser extent, preferred stocks of mid- to large-cap companies. Mid-cap companies are those with market capitalizations in the range of $1 billion to $4.5 billion. Large-cap companies are considered to be those with market capitalizations in excess of $4 billion. The Fund also sells call options in seeking to enhance risk-adjusted performance relative to an all equity portfolio.
The Fund will invest primarily in the dividend growth equity strategy consisting of dividend-paying equity securities (primarily common stocks). The Fund also may invest in the income-oriented strategy consisting of preferred securities and other fixed income securities, including both fixed and floating rate securities. The Funds investment adviser has entered into sub-advisory agreements with Santa Barbara Asset Management LLC (Santa Barbara) to manage the dividend-growth equity strategy and NWQ Investment Management Company, LLC (NWQ) to manage the Funds income-orientated strategy (each a Sub-Adviser and collectively, the Sub-Advisers).
Under normal market circumstances, the Fund will invest at least 80% of its Managed Assets (as defined below) in securities that are eligible to pay tax-advantaged dividends.
Managed Assets mean the total assets of the Fund, minus the sum of its accrued liabilities (other than Fund liabilities incurred for the express purpose of creating leverage). Total assets for this purpose shall include assets attributable to the Funds use of leverage (whether or not those assets are reflected in the Funds financial statements for purposes of generally accepted accounting principles), and derivatives will be valued at their market value.
Under normal market conditions:
|
The Fund expects to invest more than 25% of its Managed Assets in equity securities of companies principally engaged in the financial services sector and to a lesser extent in other economic sectors, such as the utilities and energy sectors, that historically have provided higher dividend yields than companies in other sectors or industries. |
|
The Fund may invest up to 50% of its Managed Assets in securities of non-U.S. issuers that are U.S. dollar denominated or that are converted into American Depository Receipts (ADRs) or other types of dollar-denominated depositary receipts immediately after purchase. |
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The Fund may invest up to 25% of its Managed Assets in securities that, at the time of investment, are rated below the four highest grades (Ba or BB or lower) by at all NRSROs or are unrated but judged to be of comparable quality. |
|
The Fund may invest up to 10% of is Managed Assets in securities of other open- or closed-end investment companies (including exchange-traded funds (ETFs)) that invest primarily in securities of the types in which the Fund may invest directly. In addition, the Fund may invest a portion of its Managed Assets in pooled investment vehicles (other than investment companies) that invest primarily in securities of the types in which the Fund may invest directly. |
|
The Fund will not write call options on more than 35% of its Managed Assets. |
|
The Fund may buy and sell combinations of call options, put options and futures contracts in both the listed and over-the-counter (OTC) markets on up to 5% of its Managed Assets. |
The foregoing policies apply only at the time of any new investment.
Approving Changes in Investment Policies
The Board of Trustees of the Fund may change a policy described above without a shareholder vote. However, with respect to the Funds policy of investing at least 80% of its Managed Assets in securities that are eligible to pay tax-advantaged dividends, such policy may not be changed without 60 days prior written notice to shareholders.
42
Portfolio Contents
The Fund invests in dividend-paying equity securities, including common stocks. Common stock generally represents an equity ownership interest in an issuer, without preference over and with a lower priority than any other class of securities, including such issuers debt securities, preferred stock and other senior equity securities. Common stocks usually carry voting rights and earn dividends. Common stocks fluctuate in price in response to many factors including historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity, as such the company may or may not pay dividends. Dividends on common stocks are declared at the discretion of the companys board. In addition, common stock generally has the greatest appreciation and depreciation potential because increases and decreases in earnings are usually reflected in a companys stock price.
The Fund invests in securities of companies primarily engaged in the financial services sector. A company is principally engaged in the financial services sector if it owns financial services-related assets that constitute at least 50% of its revenues from providing financial services. Companies in the financial services sector include commercial banks, industrial banks, savings institutions, finance companies, diversified financial services companies, investment banking firms, securities brokerage houses, investment advisory companies, leasing companies, insurance companies and companies providing similar services.
The Fund may invest in preferred securities, including fixed preferred securities and preferred securities issued by Real Estate Investment Trusts (REITs). A REIT is a company that pools investors funds for investment primarily in income-producing real estate or in real estate related loans (such as mortgages) or other interests. Therefore, a REIT normally derives its income from rents or from interest payments, and may realize capital gains by selling properties that have appreciated in value. REITs generally pay relatively high dividends (as compared to other types of companies) and the Fund intends to use these REIT dividends in an effort to meet its primary objective of high current income.
Traditional preferred securities are generally equity securities of the issuer that have priority over the issuers common shares as to the payment of dividends (i.e., the issuer cannot pay dividends on its common shares until the dividends on the preferred shares are current) and as to the payout of proceeds of a bankruptcy or other liquidation, but are subordinate to an issuers senior debt and junior debt as to both types of payments. Additionally, in a bankruptcy or other liquidation, traditional preferred securities are generally subordinate to an issuers trade creditors and other general obligations. Traditional preferred securities may be perpetual or have a term, and typically have a fixed liquidation (or par) value. The term preferred securities also includes certain hybrid securities and other types of preferred securities that do not have the traditional features described above.
The preferred securities in which the Fund may invest also include floating rate securities. Floating rate securities will pay dividends (to the extent declared) at rates that will readjust periodically (generally expected to be quarterly). These securities typically will pay a dividend at a per annum rate equal to the rate paid on three-month U.S. dollar deposits in Europe, plus a specified spread, which is expected to differ depending on the issuer and the market for the issuers floating rate securities at the time of their issuance.
The Fund may invest in convertible securities, which include may convertible preferred stock. Convertible securities may pay interest or dividends that are based on a fixed or floating rate. A convertible security is a preferred stock, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula.
The Fund may also invest in warrants on common stock. A warrant is a certificate that gives the holder of the warrant the right to buy, at a specified time or specified times, from the issuer of the warrant, the common stock of the issuer at a specified price.
The Fund may purchase depositary receipts such as ADRs, European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs). Generally, ADRs, in registered form, are denominated in U.S. dollars and are designated for use in the U.S. securities markets, while EDRs and GDRs are typically in bearer form and may be denominated in non-U.S. currencies and are designed for use in European and other markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying non-U.S. security. ADRs, EDRs and GDRs are deemed to have the same classification as the underlying securities they represent, except that ADRs, EDRs and GDRs shall be treated as indirect non-U.S. investments. Thus, an ADR, EDR or GDR representing ownership of common stock will be treated as common stock.
The Fund may invest in U.S. government debt securities, U.S. local government debt securities and U.S. government agency securities of any maturity, including U.S. government mortgage-backed securities (MBS). U.S. government securities are debt securities issued and/or guaranteed as to principal and interest by the U.S. government that are supported by the full faith and credit of the United States. U.S. government agency securities include debt securities issued and/or guaranteed as to principal and interest by U.S. government agencies, U.S. government-sponsored enterprises and U.S. government instrumentalities that are not direct obligations of the United States. These securities may not be backed by the full faith and credit of the United States. U.S. government-sponsored enterprises and instrumentalities are not agencies of the U.S. government.
The Funds investments will include investment grade and below investment grade securities. Below investment grade securities (such securities are commonly referred to as high yield or junk) generally provide high income in an effort to compensate investors for their higher risk of default, which is the failure to make required interest or principal payments.
43
Shareholder Update (continued)
(Unaudited)
The Fund may buy and sell securities on a when-issued or delayed delivery basis, making payment or taking delivery at a later date, normally within 15 to 45 days of the trade date.
The Fund may enter into repurchase agreements (the purchase of a security coupled with an agreement to resell that security at a higher price) with respect to its permitted investments. The Funds repurchase agreements will provide that the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the agreement, and will be marked-to-market daily. The Fund may also utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction.
The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may be resold only pursuant to Rule 144A under the Securities Act of 1933, as amended (the 1933 Act), and repurchase agreements with maturities in excess of seven days.
The Fund may invest in interest rate and total return swaps. The Fund will enter into swap agreements only with counterparties that meet certain standards of creditworthiness. In an interest rate swap, the Fund and another party typically exchange their respective commitments to pay each other floating for fixed rates of interest at a floating rate referenced to local short-term interest rates and a fixed rate referenced to U.S. interest rates. In a total return swap, the Fund exchanges with another party their respective commitments to pay or receive the total return of an underlying asset and a floating local short-term interest rate.
The Fund may enter into certain derivative instruments for purposes of hedging with respect to the dividend growth equity Strategy against declining equity markets. Such instruments include financial futures contracts, swap contracts (including interest rate and credit default swaps), options on financial futures, options on swap contracts or other derivative instruments. In addition, to seek to enhance the Funds risk-adjusted returns, the Fund, to a limited extent, will write (sell) index call options on various equity market indices.
Use of Leverage
The Fund uses leverage to pursue its investment objective. The Fund may use leverage to the extent permitted by the 1940 Act. The Fund may source leverage through a number of methods including borrowings, entering into reverse repurchase agreements (effectively a secured borrowing) and the issuance of preferred shares of beneficial interest. In addition, the Fund may also use certain derivatives that have the economic effect of leverage by creating additional investment exposure. The amount and sources of leverage will vary depending on market conditions.
Temporary Defensive Periods
During temporary defensive periods the Fund may deviate from its investment objective and policies, and in order to keep the Funds cash fully invested, the Fund may invest any percentage of its total assets in short-term high quality fixed-income securities. The Fund may not achieve its investment objective during such periods.
44
PRINCIPAL RISKS OF THE FUND
The factors that are most likely to have a material effect on the Funds portfolio as a whole are called principal risks. The Fund is subject to the principal risks indicated below, whether through direct investment or derivative positions. The Fund may be subject to additional risks other than those identified and described below because the types of investments made by the Fund can change over time.
Risks of Nuveen Tax-Advantaged
Dividend Growth Fund (JTD) |
Portfolio Level Risks |
Below Investment Grade Risk |
Bond Market Liquidity Risk |
Call Option Risk |
Call Risk |
Common Stock Risk |
Concentration Risk |
Convertible Securities Risk |
Credit Risk |
Credit Spread Risk |
Debt Securities Risk |
Deflation Risk |
Derivatives Risk |
Dividend Paying Securities Risk |
Duration Risk |
Financial Futures and Options Transactions Risk |
Financial Services Sector Risk |
Hedging Risk |
Illiquid Investments Risk |
Income Risk |
Inflation Risk |
Interest Rate Risk |
Large-Cap Company Risk |
Mid-Cap Company Risk |
New Types of Securities |
Non-U.S. Securities Risk |
Other Investment Companies Risk |
Preferred Securities Risk |
Reinvestment Risk |
Swap Transactions Risk |
Tax Treatment of Dividends and Distributions Risk |
Unrated Securities Risk |
Valuation Risk |
Fund and Other Risks |
Anti-Takeover Provisions |
Borrowing Risk |
Counterparty Risk |
45
Shareholder Update (continued)
(Unaudited)
Risks of Nuveen Tax-Advantaged
Dividend Growth Fund (JTD) |
Cybersecurity Risk |
Global Economic Risk |
Investment and Market Risk |
Legislation and Regulatory Risk |
Leverage Risk |
Market Discount from Net Asset Value |
Recent Market Conditions |
Reverse Repurchase Agreement Risk |
Tax Risk |
Portfolio Level Risks:
Below Investment Grade Risk. Securities of below investment grade quality are regarded as having speculative characteristics with respect to the issuers capacity to pay interest and repay principal, and may be subject to higher price volatility and default risk than investment grade securities of comparable terms and duration. Issuers of lower grade securities may be highly leveraged and may not have available to them more traditional methods of financing. The prices of these lower grade securities are typically more sensitive to negative developments, such as a decline in the issuers revenues or a general economic downturn. The secondary market for lower rated securities may not be as liquid as the secondary market for more highly rated securities, a factor which may have an adverse effect on the Funds ability to dispose of a particular security. If a below investment grade security goes into default, or its issuer enters bankruptcy, it might be difficult to sell that security in a timely manner at a reasonable price.
Bond Market Liquidity Risk. Dealer inventories of bonds, which provide an indication of the ability of financial intermediaries to make markets in those bonds, are at or near historic lows in relation to market size. This reduction in market making capacity has the potential to decrease liquidity and increase price volatility in the fixed income markets in which the Fund invests, particularly during periods of economic or market stress. In addition, recent federal banking regulations may cause certain dealers to reduce their inventories of bonds, which may further decrease the Funds ability to buy or sell bonds. As a result of this decreased liquidity, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on performance. If the Fund needed to sell large blocks of bonds to raise cash, those sales could further reduce the bonds prices and hurt performance.
Call Option Risk. As the writer of a call option, the Fund foregoes, during the options life, the opportunity to profit from increases in the market value of the instrument underlying the call option above the sum of the premium and the strike price of the option, but will retain the risk of loss should the market value of the instrument underlying the call option decline. The purchaser of the call option has the right to any appreciation in the value of the underlying instrument over the exercise price upon the exercise of the call option or the expiration date. As the Fund increases the option overlay percentage, its ability to benefit from capital appreciation becomes more limited and the risk of NAV erosion increases. If the Fund experiences NAV erosion, which itself may have a negative effect on the market price of the Funds shares, the Fund will have a reduced asset base over which to write call options, which may eventually lead to reduced distributions to shareholders.
In addition, because the exercise of index options is settled in cash, sellers of index call options, such as the Fund, cannot provide in advance for their potential settlement obligations by acquiring and holding the underlying securities. The Fund bears a risk that the value of the securities held by the Fund will vary from the value of the underlying index and relative to the written index call option positions. Accordingly, the Fund may incur losses on the index call options that it has sold that exceed gains on the Funds equity portfolio. The value of index options written by the Fund, which will be priced daily, will be affected by changes in the value of and dividend rates of the underlying common stocks in the index, changes in the actual or perceived volatility of the stock market and the remaining time to the options expiration. The value of the index options also may be adversely affected if the market for the index options becomes less liquid or smaller.
Call Risk. The Fund may invest in securities that are subject to call risk. Such securities may be redeemed at the option of the issuer, or called, before their stated maturity or redemption date. In general, an issuer will call its instruments if they can be refinanced by issuing new instruments that bear a lower interest rate. The Fund is subject to the possibility that during periods of falling interest rates, an issuer will call its high yielding securities. The Fund would then be forced to invest the unanticipated proceeds at lower interest rates, resulting in a decline in the Funds income.
Common Stock Risk. Common stocks have experienced significantly more volatility in returns and may significantly underperform relative to fixed-income securities during certain periods. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by
46
the Fund. Also, the price of common stocks is sensitive to general movements in the stock market, and a drop in the stock market may depress the price of common stocks to which the Fund has exposure. Common stock prices fluctuate for several reasons, including changes in investors perceptions of the financial condition of an issuer, the general condition of the relevant stock market or the current and expected future conditions of the broader economy, or when political or economic events affecting the issuer in particular or the stock market in general occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase.
Concentration Risk. The Funds investments are concentrated in issuers of one or a few specific economic sectors, so the Fund may be subject to more risks than if it were broadly diversified across the economy.
Convertible Securities Risk. Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks that are typically associated with debt, including but not limited to Interest Rate Risk, Credit Risk, Below Investment Grade Risk and Unrated Securities Risk. The value of a convertible security is influenced by both the yield of non-convertible securities of comparable issuers and by the value of the underlying common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar credit quality. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, the convertible securitys market value tends to reflect the market price of the common stock of the issuing company when that stock price is greater than the convertible securitys conversion price. The conversion price is defined as the predetermined price at which the convertible security could be exchanged for the associated common stock. As the market price of the underlying common stock declines, the price of the convertible security tends to be influenced more by the yield of the convertible security. Thus, the convertible security may not decline in price to the same extent as the underlying common stock. Convertible securities fall below debt obligations of the same issuer in order of preference or priority in the event of a liquidation and are typically unrated or rated lower than such debt obligations.
Credit Risk. Issuers of securities in which the Fund may invest may default on their obligations to pay principal or interest when due. This non-payment would result in a reduction of income to the Fund, a reduction in the value of a security experiencing non-payment and potentially a decrease in the net asset value (NAV) of the Fund. To the extent that the credit rating assigned to a security in the Funds portfolio is downgraded, the market price and liquidity of such security may be adversely affected.
Credit Spread Risk. Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market believes that securities generally have a greater risk of default. Increasing credit spreads may reduce the market values of the Funds securities. Credit spreads often increase more for lower rated and unrated securities than for investment grade securities. In addition, when credit spreads increase, reductions in market value will generally be greater for longer-maturity securities.
Debt Securities Risk. Issuers of debt instruments in which the Fund may invest may default on their obligations to pay principal or interest when due. This non-payment would result in a reduction of income to the Fund, a reduction in the value of a debt instrument experiencing non-payment and, potentially, a decrease in the NAV of the Fund. There can be no assurance that liquidation of collateral would satisfy the issuers obligation in the event of non-payment of scheduled interest or principal or that such collateral could be readily liquidated. In the event of bankruptcy of an issuer, the Fund could experience delays or limitations with respect to its ability to realize the benefits of any collateral securing a security. To the extent that the credit rating assigned to a security in the Funds portfolio is downgraded, the market price and liquidity of such security may be adversely affected.
Deflation Risk. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds portfolio.
Derivatives Risk. The use of derivatives involves additional risks and transaction costs which could leave the Fund in a worse position than if it had not used these instruments. Derivative instruments can be used to acquire or to transfer the risk and returns of a security or other asset without buying or selling the security or asset. These instruments may entail investment exposures that are greater than their cost would suggest. As a result, a small investment in derivatives can result in losses that greatly exceed the original investment. Derivatives can be highly volatile, illiquid and difficult to value. An over-the-counter derivative transaction between the Fund and a counterparty that is not cleared through a central counterparty also involves the risk that a loss may be sustained as a result of the failure of the counterparty to the contract to make required payments. The payment obligation for a cleared derivative transaction is guaranteed by a central counterparty, which exposes the Fund to the creditworthiness of the central counterparty.
It is possible that developments in the derivatives market, including changes in government regulation, could adversely impact the Funds ability to invest in certain derivatives.
Dividend-Paying Securities Risk. The Funds investment in dividend-paying stocks could cause the Fund to underperform similar funds that invest without consideration of a companys track record of paying dividends. Stocks of companies with a history of paying dividends may not participate in a broad market advance to the same degree as most other stocks, and a sharp rise in interest rates or economic downturn could cause a company to unexpectedly reduce or eliminate its dividend. There is no guarantee that the issuers of the stocks held by the Fund will declare dividends in the future or that, if declared, they will remain at their current levels or increase over time. The Fund may also be harmed by changes to the favorable federal income tax treatment generally afforded to dividends.
47
Shareholder Update (continued)
(Unaudited)
Duration Risk. Duration is the sensitivity, expressed in years, of the price of a fixed-income security to changes in the general level of interest rates (or yields). Securities with longer durations tend to be more sensitive to interest rate (or yield) changes, which typically corresponds to increased volatility and risk, than securities with shorter durations. For example, if a security or portfolio has a duration of three years and interest rates increase by 1%, then the security or portfolio would decline in value by approximately 3%. Duration differs from maturity in that it considers potential changes to interest rates, and a securitys coupon payments, yield, price and par value and call features, in addition to the amount of time until the security matures. The duration of a security will be expected to change over time with changes in market factors and time to maturity.
Financial Futures and Options Transactions Risk. The Fund may use certain transactions for hedging the portfolios exposure to credit risk and the risk of increases in interest rates, which could result in poorer overall performance for the Fund. There may be an imperfect correlation between price movements of the futures and options and price movements of the portfolio securities being hedged.
If the Fund engages in futures transactions or in the writing of options on futures, it will be required to maintain initial margin and maintenance margin and may be required to make daily variation margin payments in accordance with applicable rules of the exchanges and the Commodity Futures Trading Commission (CFTC). If the Fund purchases a financial futures contract or a call option or writes a put option in order to hedge the anticipated purchase of securities, and if the Fund fails to complete the anticipated purchase transaction, the Fund may have a loss or a gain on the futures or options transaction that will not be offset by price movements in the securities that were the subject of the anticipatory hedge. There can be no assurance that a liquid market will exist at a time when the Fund seeks to close out a derivatives or futures or a futures option position, and the Fund would remain obligated to meet margin requirements until the position is closed.
Financial Services Sector Risk. The Funds investment in securities issued by financial services companies makes the Fund more susceptible to adverse economic or regulatory occurrences affecting those companies. Investments in financial services companies includes the following risks:
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financial services companies may suffer a setback if regulators change the rules under which they operate; |
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unstable interest rates can have a disproportionate effect on the financial services sector; |
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financial services companies whose securities the Fund may purchase may themselves have concentrated portfolios, such as a high level of loans to real estate developers, which makes them vulnerable to economic conditions that affect that sector; |
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financial services companies have been affected by increased competition, which could adversely affect the profitability or viability of such companies; and |
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financial services companies have been significantly and negatively affected by the downturn in the subprime mortgage lending market and the resulting impact on the worlds economies. |
Hedging Risk. The Funds use of derivatives or other transactions to reduce risk involves costs and will be subject to the investment advisers and/or the Sub-Advisers ability to predict correctly changes in the relationships of such hedge instruments to the Funds portfolio holdings or other factors. No assurance can be given that the investment advisers and/or the Sub-Advisers judgment in this respect will be correct, and no assurance can be given that the Fund will enter into hedging or other transactions at times or under circumstances in which it may be advisable to do so. Hedging activities may reduce the Funds opportunities for gain by offsetting the positive effects of favorable price movements and may result in net losses.
Illiquid Investments Risk. Illiquid investments are investments that are not readily marketable and may include restricted securities, which are securities that may not be resold unless they have been registered under the 1933 Act or that can be sold in a private transaction pursuant to an available exemption from such registration. Illiquid investments involve the risk that the investments will not be able to be sold at the time desired by the Fund or at prices approximating the value at which the Fund is carrying the investments on its books from time to time.
Income Risk. The Funds income could decline due to falling market interest rates. This is because, in a falling interest rate environment, the Fund generally will have to invest the proceeds from maturing portfolio securities in lower-yielding securities.
Inflation Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the common shares and distributions can decline.
Interest Rate Risk. Interest rate risk is the risk that securities in the Funds portfolio will decline in value because of changes in market interest rates. Generally, when market interest rates rise, the market value of such securities will fall, and vice versa. As interest rates decline, issuers of securities may prepay principal earlier than scheduled, forcing the Fund to reinvest in lower-yielding securities and potentially reducing the Funds income. As interest rates increase, slower than expected principal payments may extend the average life of securities, potentially locking in a below-market interest rate and reducing the Funds value. In typical market interest rate environments, the prices of longer-term securities generally fluctuate more than prices of shorter-term securities as interest rates change.
Large-Cap Company Risk. While securities of large-cap companies may be less volatile than those of mid-and small-cap companies, they still involve risk. To the extent the Fund invests in large-capitalization securities, the Fund may underperform funds that invest primarily in securities of smaller capitalization
48
companies during periods when the securities of such companies are in favor. Large-capitalization companies may be unable to respond as quickly as smaller capitalization companies to competitive challenges or to changes in business, product, financial or other market conditions.
Mid-Cap Company Risk. While securities of mid-cap companies may be slightly less volatile than those of small-cap companies, they still involve substantial risk. Mid-cap companies may have limited product lines, markets or financial resources, and they may be dependent on a limited management group. Securities of mid-cap companies may be subject to more abrupt or erratic market movements than those of larger, more established companies or broader market averages in general.
New Types of Securities. New types of securities that pay tax-advantaged dividends, including preferred securities having features other than those described herein, may in the future be offered. The Fund reserves the right to invest in these securities if the Sub-Adviser responsible for the investment believes that doing so would be consistent with the Funds investment objective and policies. Because the market for these instruments would be new, the Fund may have difficulty disposing of them at a suitable price and time. In addition to limited liquidity, these instruments may present other risks, such as high price volatility.
Non-U.S. Securities Risk. Investments in securities of non-U.S. issuers involve special risks, including: less publicly available information about non-U.S. issuers or markets due to less rigorous disclosure or accounting standards or regulatory practices; many non-U.S. markets are smaller, less liquid and more volatile; the economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession; the impact of economic, political, social or diplomatic events; and withholding and other non-U.S. taxes may decrease the Funds return. These risks are more pronounced to the extent that the Fund invests a significant amount of its assets in issuers located in one region.
Other Investment Companies Risk. The Fund may invest in the securities of other investment companies, including ETFs. Investing in an investment company exposes the Fund to all of the risks of that investment companys investments. The Fund, as a holder of the securities of other investment companies, will bear its pro rata portion of the other investment companies expenses, including advisory fees. These expenses are in addition to the direct expenses of the Funds own operations. As a result, the cost of investing in investment company shares may exceed the costs of investing directly in its underlying investments. In addition, securities of other investment companies may be leveraged. As a result, the Fund may be indirectly exposed to leverage through an investment in such securities and therefore magnify the Funds leverage risk.
With respect to ETFs, an ETF that is based on a specific index may not be able to replicate and maintain exactly the composition and relative weighting of securities in the index. The value of an ETF based on a specific index is subject to change as the values of its respective component assets fluctuate according to market volatility. ETFs typically rely on a limited pool of authorized participants to create and redeem shares, and an active trading market for ETF shares may not develop or be maintained. The market value of shares of ETFs and closed-end funds may differ from their NAV.
Preferred Securities Risk. Preferred securities are subordinated to bonds and other debt instruments in a companys capital structure, and therefore are subject to greater credit risk. In addition, preferred stockholders (such as the Fund, to the extent it invests in preferred stocks of other issuers) generally have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred stockholders may elect a number of directors to the issuers board. Generally, once all the arrearages have been paid, the preferred stockholders no longer have voting rights. In the case of certain taxable preferred stocks, holders generally have no voting rights, except (i) if the issuer fails to pay dividends for a specified period of time or (ii) if a declaration of default occurs and is continuing. In such an event, rights of preferred stockholders generally would include the right to appoint and authorize a trustee to enforce the trust or special purpose entitys rights as a creditor under the agreement with its operating company. In certain varying circumstances, an issuer of preferred stock may redeem the securities prior to a specified date. For instance, for certain types of preferred stock, a redemption may be triggered by a change in U.S. federal income tax or securities laws. As with call provisions, a redemption by the issuer may negatively impact the return of the security held by the Fund.
Reinvestment Risk. Reinvestment risk is the risk that income from the Funds portfolio will decline if and when the Fund invests the proceeds from matured, traded or called securities at market interest rates that are below the portfolios current earnings rate. A decline in income could affect the common shares market price, NAV and/or a common shareholders overall returns.
Swap Transactions Risk. The Fund may enter into derivative instruments such as credit default swap contracts and interest rate swaps. Like most derivative instruments, the use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. In addition, the use of swaps requires an understanding by the adviser and/or the Sub-Advisers of not only the referenced asset, rate or index, but also of the swap itself. If the investment adviser and/or the Sub-Advisers are incorrect in its forecasts of default risks, market spreads or other applicable factors or events, the investment performance of the Fund would diminish compared with what it would have been if these techniques were not used.
Tax Treatment of Dividends and Distributions Risk. The Funds investment program and the tax treatment of Fund distributions may be affected by IRS interpretations of the Code and future changes in tax laws and regulations. The favorable tax treatment of tax-advantaged dividends may be changed or discontinued and the higher tax rates applicable to ordinary income may apply to such dividends at such time. In addition, in order for otherwise
49
Shareholder Update (continued)
(Unaudited)
tax-advantaged dividends from the Fund received by individual shareholders to be taxable at long-term capital gain rates, a shareholder must currently hold his or her shares for a certain period of time. Failure by a shareholder to satisfy the holding period requirements will cause Fund income distributions that otherwise would qualify as tax-advantaged dividends to be taxable to the shareholder at ordinary income rates.
Unrated Securities Risk. The Fund may purchase securities that are not rated by any rating organization. The investment adviser may, after assessing such securities credit quality, internally assign ratings to certain of those securities in categories similar to those of rating organizations. Some unrated securities may not have an active trading market or may be difficult to value, which means the Fund might have difficulty selling them promptly at an acceptable price. To the extent that the Fund invests in unrated securities, the Funds ability to achieve its investment objective will be more dependent on the investment advisers credit analysis than would be the case when the Fund invests in rated securities.
Valuation Risk. The securities in which the Fund invests typically are valued by a pricing service utilizing a range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers making markets in such instruments, cash flows and transactions for comparable instruments. There is no assurance that the Fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the Fund. Pricing services generally price securities assuming orderly transactions of an institutional round lot size, but some trades may occur in smaller, odd lot sizes, often at lower prices than institutional round lot trades. Different pricing services may incorporate different assumptions and inputs into their valuation methodologies, potentially resulting in different values for the same securities. As a result, if the Fund were to change pricing services, or if the Funds pricing service were to change its valuation methodology, there could be a material impact, either positive or negative, on the Funds NAV.
Fund Level and Other Risks:
Anti-Takeover Provisions. The Funds organizational documents include provisions that could limit the ability of other entities or persons to acquire control of the Fund or convert the Fund to open-end status. These provisions could have the effect of depriving the common shareholders of opportunities to sell their common shares at a premium over the then-current market price of the common shares.
Borrowing Risk. In addition to borrowing for leverage, the Fund may borrow for temporary or emergency purposes, to pay dividends, repurchase its shares, or clear portfolio transactions. Borrowing may exaggerate changes in the NAV of the Funds shares and may affect the Funds net income. When the Fund borrows money, it must pay interest and other fees, which will reduce the Funds returns if such costs exceed the returns on the portfolio securities purchased or retained with such borrowings. Any such borrowings are intended to be temporary. However, under certain market circumstances, such borrowings might be outstanding for longer periods of time.
Counterparty Risk. Changes in the credit quality of the companies that serve as the Funds counterparties with respect to derivatives or other transactions supported by another partys credit will affect the value of those instruments. Certain entities that have served as counterparties in the markets for these transactions have incurred or may incur in the future significant financial hardships including bankruptcy and losses as a result of exposure to sub-prime mortgages and other lower-quality credit investments. As a result, such hardships have reduced these entities capital and called into question their continued ability to perform their obligations under such transactions. By using such derivatives or other transactions, the Fund assumes the risk that its counterparties could experience similar financial hardships. In the event of the insolvency of a counterparty, the Fund may sustain losses or be unable to liquidate a derivatives position.
Cybersecurity Risk. The Fund and its service providers are susceptible to operational and information security risk resulting from cyber incidents. Cyber incidents refer to both intentional attacks and unintentional events including: processing errors, human errors, technical errors including computer glitches and system malfunctions, inadequate or failed internal or external processes, market-wide technical-related disruptions, unauthorized access to digital systems (through hacking or malicious software coding), computer viruses, and cyber-attacks which shut down, disable, slow or otherwise disrupt operations, business processes or website access or functionality (including denial of service attacks). Cyber incidents could adversely impact the Fund and cause the Fund to incur financial loss and expense, as well as face exposure to regulatory penalties, reputational damage, and additional compliance costs associated with corrective measures. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. Furthermore, the Fund cannot control the cybersecurity plans and systems put in place by its service providers or any other third parties whose operations may affect the Fund.
Global Economic Risk. National and regional economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country, region or market might adversely impact issuers in a different country, region or market. Changes in legal, political, regulatory, tax and economic conditions may cause fluctuations in markets and securities prices around the world, which could negatively impact the value of the Funds investments. Major economic or political disruptions, particularly in large economies like Chinas, may have global negative economic and market repercussions. Additionally, events such as war, terrorism, natural and environmental disasters and the spread of infectious illnesses or other public health emergencies may adversely affect the global economy and the markets and issuers in which the Fund invests. Recent examples of such events include the outbreak of a novel coronavirus known as COVID-19 that was first detected in China in December 2019 and heightened concerns
50
regarding North Koreas nuclear weapons and long-range ballistic missile programs. These events could reduce consumer demand or economic output, result in market closure, travel restrictions or quarantines, and generally have a significant impact on the economy. These events could also impair the information technology and other operational systems upon which the Funds service providers, including the investment adviser and Sub-Advisers, rely, and could otherwise disrupt the ability of employees of the Funds service providers to perform essential tasks on behalf of the Fund. Governmental and quasi-governmental authorities and regulators throughout the world have in the past responded to major economic disruptions with a variety of significant fiscal and monetary policy changes, including but not limited to, direct capital infusions into companies, new monetary programs and dramatically lower interest rates. An unexpected or quick reversal of these policies, or the ineffectiveness of these policies, could increase volatility in securities markets, which could adversely affect the Funds investments.
Investment and Market Risk. An investment in the Funds common shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. Common shares frequently trade at a discount to their NAV. An investment in common shares represents an indirect investment in the securities owned by the Fund. Common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.
Legislation and Regulatory Risk. At any time after the date of this report, legislation or additional regulations may be enacted that could negatively affect the assets of the Fund, securities held by the Fund or the issuers of such securities. Fund shareholders may incur increased costs resulting from such legislation or additional regulation. There can be no assurance that future legislation, regulation or deregulation will not have a material adverse effect on the Fund or will not impair the ability of the Fund to achieve its investment objectives.
The SEC recently adopted rules governing the use of derivatives by registered investment companies, which could affect the nature and extent of derivatives used by the Fund. The full impact of such rules is uncertain at this time. It is possible that such rules, as interpreted, applied and enforced by the SEC, could limit the implementation of the Funds use of derivatives, which could have an adverse impact on the Fund.
Leverage Risk. The use of leverage creates special risks for common shareholders, including potential interest rate risks and the likelihood of greater volatility of NAV and market price of, and distributions on, the common shares. The use of leverage in a declining market will likely cause a greater decline in the Funds NAV, which may result at a greater decline of the common share price, than if the Fund were not to have used leverage.
The Fund will pay (and common shareholders will bear) any costs and expenses relating to the Funds use of leverage, which will result in a reduction in the Funds NAV. The investment adviser may, based on its assessment of market conditions and composition of the Funds holdings, increase or decrease the amount of leverage. Such changes may impact the Funds distributions and the price of the common shares in the secondary market.
The Fund may seek to refinance its leverage over time, in the ordinary course, as current forms of leverage mature or it is otherwise desirable to refinance; however, the form that such leverage will take cannot be predicted at this time. If the Fund is unable to replace existing leverage on comparable terms, its costs of leverage will increase. Accordingly, there is no assurance that the use of leverage may result in a higher yield or return to common shareholders.
The amount of fees paid to the investment adviser and the Sub-Advisers for investment advisory services will be higher if the Fund uses leverage because the fees will be calculated based on the Funds Managed Assets this may create an incentive for the investment adviser and the Sub-Advisers to leverage the Fund or increase the Funds leverage.
Market Discount from Net Asset Value. Shares of closed-end investment companies like the Fund frequently trade at prices lower than their NAV. This characteristic is a risk separate and distinct from the risk that the Funds NAV could decrease as a result of investment activities. Whether investors will realize gains or losses upon the sale of the common shares will depend not upon the Funds NAV but entirely upon whether the market price of the common shares at the time of sale is above or below the investors purchase price for the common shares. Furthermore, management may have difficulty meeting the Funds investment objective and managing its portfolio when the underlying securities are redeemed or sold during periods of market turmoil and as investors perceptions regarding closed-end funds or their underlying investments change. Because the market price of the common shares will be determined by factors such as relative supply of and demand for the common shares in the market, general market and economic circumstances, and other factors beyond the control of the Fund, the Fund cannot predict whether the common shares will trade at, below or above NAV. The common shares are designed primarily for long-term investors, and you should not view the Fund as a vehicle for short-term trading purposes.
Recent Market Conditions. In response to the financial crisis and recent market events, policy and legislative changes by the United States government and the Federal Reserve to assist in the ongoing support of financial markets, both domestically and in other countries, are changing many aspects of financial regulation. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. Withdrawal of government support, failure of efforts in response to the crisis, or investor perception that such efforts are not succeeding, could adversely impact the value and liquidity of certain securities. The severity or duration of adverse economic conditions may also be affected by policy changes made by governments or quasi-governmental organizations, including changes in tax laws and the imposition of trade barriers. The impact of new financial regulation legislation on the markets and the practical implications for market participants may not be fully known for some time. Changes to the Federal Reserve policy may affect the value, volatility and liquidity of dividend and interest paying securities. In addition, the contentious domestic political
51
Shareholder Update (continued)
(Unaudited)
environment, as well as political and diplomatic events within the United States and abroad, such as the U.S. governments inability at times to agree on a long-term budget and deficit reduction plan, the threat of a federal government shutdown and threats not to increase the federal governments debt limit, may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree.
Interest rates have been unusually low in recent years in the United States and abroad but there is consensus that interest rates will increase during the life of the Fund, which could negatively impact the price of debt securities. Because there is little precedent for this situation, it is difficult to predict the impact of a significant rate increase on various markets.
The current political climate has intensified concerns about a potential trade war between China and the United States, as each country has recently imposed tariffs on the other countrys products. These actions may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of Chinas export industry, which could have a negative impact on the Funds performance.
The impact of these developments in the near- and long-term is unknown and could have additional adverse effects on economies, financial markets and asset valuations around the world.
Reverse Repurchase Agreement Risk. A reverse repurchase agreement, in economic essence, constitutes a securitized borrowing by the Fund from the security purchaser. The Fund may enter into reverse repurchase agreements for the purpose of creating a leveraged investment exposure and, as such, their usage involves essentially the same risks associated with a leveraging strategy generally since the proceeds from these agreements may be invested in additional portfolio securities. Reverse repurchase agreements tend to be short-term in tenor, and there can be no assurances that the purchaser (lender) will commit to extend or roll a given agreement upon its agreed-upon repurchase date or an alternative purchaser can be identified on similar terms. Reverse repurchase agreements also involve the risk that the purchaser fails to return the securities as agreed upon, files for bankruptcy or becomes insolvent. The Fund may be restricted from taking normal portfolio actions during such time, could be subject to loss to the extent that the proceeds of the agreement are less than the value of securities subject to the agreement and may experience adverse tax consequences.
Tax Risk. The Fund has elected to be treated and intends to qualify each year as a Regulated Investment Company (RIC) under the Internal Revenue Code of 1986, as amended (the Code). As a RIC, the Fund is not expected to be subject to U.S. federal income tax to the extent that it distributes its investment company taxable income and net capital gains. To qualify for the special tax treatment available to a RIC, the Fund must comply with certain investment, distribution, and diversification requirements. Under certain circumstances, the Fund may be forced to sell certain assets when it is not advantageous in order to meet these requirements, which may reduce the Funds overall return. If the Fund fails to meet any of these requirements, subject to the opportunity to cure such failures under applicable provisions of the Code, the Funds income would be subject to a double level of U.S. federal income tax. The Funds income, including its net capital gain, would first be subject to U.S. federal income tax at regular corporate rates, even if such income were distributed to shareholders and, second, all distributions by the Fund from earnings and profits, including distributions of net capital gain (if any), would be taxable to shareholders as dividends.
52
EFFECTS OF LEVERAGE
The following table is furnished in response to requirements of the SEC. It is designed to illustrate the effects of leverage through the use of senior securities, as that term is defined under Section 18 of the 1940 Act, as well as certain other forms of leverage, such as reverse repurchase agreements, on common share total return, assuming investment portfolio total returns (consisting of income and changes in the value of investments held in the Funds portfolio) of -10%, -5%, 0%, 5% and 10%. The table below reflects the Funds (i) continued use of leverage as of December 31, 2020 as a percentage of Managed Assets (including assets attributable to such leverage), (ii) the estimated annual effective interest expense rate payable by the Fund on such instruments (based on actual leverage costs incurred during the fiscal year ended October 31, 2020) as set forth in the table, and (iii) the annual return that the Funds portfolio must experience (net of expenses) in order to cover such costs of leverage based on such estimated annual effective interest expense rate. The information below does not reflect the Funds use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as certain derivative instruments.
The numbers are merely estimates, used for illustration. The costs of leverage may vary frequently and may be significantly higher or lower than the estimated rate. The assumed investment portfolio returns in the table below are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below.
Nuveen Tax-Advantage
Dividend Growth Fund (JTD) |
||||
Estimated Leverage as a Percentage of Managed Assets (Including Assets Attributable to Leverage) |
29.49 | % | ||
Estimated Annual Effective Leverage Expense Rate Payable by Fund on Leverage |
1.23 | % | ||
Annual Return Fund Portfolio Must Experience (net of expenses) to Cover Estimated Annual Effective Interest Expense Rate on Leverage |
0.36 | % | ||
Common Share Total Return for (10.00)% Assumed Portfolio Total Return |
-14.70 | % | ||
Common Share Total Return for (5.00)% Assumed Portfolio Total Return |
-7.61 | % | ||
Common Share Total Return for 0.00% Assumed Portfolio Total Return |
-0.51 | % | ||
Common Share Total Return for 5.00% Assumed Portfolio Total Return |
6.58 | % | ||
Common Share Total Return for 10.00% Assumed Portfolio Total Return |
13.67 | % |
Common Share total return is composed of two elements the distributions paid by the Fund to holders of common shares (the amount of which is largely determined by the net investment income of the Fund after paying dividend payments on any preferred shares issued by the Fund and expenses on any forms of leverage outstanding) and gains or losses on the value of the securities and other instruments the Fund owns. As required by SEC rules, the table assumes that the Fund is more likely to suffer capital losses than to enjoy capital appreciation. For example, to assume a total return of 0%, the Fund must assume that the income it receives on its investments is entirely offset by losses in the value of those investments. This table reflects hypothetical performance of the Funds portfolio and not the actual performance of the Funds common shares, the value of which is determined by market forces and other factors. Should the Fund elect to add additional leverage to its portfolio, any benefits of such additional leverage cannot be fully achieved until the proceeds resulting from the use of such leverage have been received by the Fund and invested in accordance with the Funds investment objective and policies. As noted above, the Funds willingness to use additional leverage, and the extent to which leverage is used at any time, will depend on many factors.
53
Shareholder Update (continued)
(Unaudited)
DIVIDEND REINVESTMENT PLAN
Nuveen Closed-End Funds Automatic Reinvestment Plan
Your Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares. By choosing to reinvest, youll be able to invest money regularly and automatically, and watch your investment grow through the power of compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each quarter youll receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above NAV at the time of valuation, the Fund will issue new shares at the greater of the NAV or 95% of the then-current market price. If the shares are trading at less than NAV, shares for your account will be purchased on the open market. If Computershare Trust Company, N.A. (the Plan Agent) begins purchasing Fund shares on the open market while shares are trading below NAV, but the Funds shares subsequently trade at or above their NAV before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares NAV or 95% of the shares market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Dividend Reinvestment Plan (the Plan) participants. These commissions usually will be lower than those charged on individual transactions.
Flexible
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change. You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan. The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct service charge to participants in the Plan at this time.
Call today to start reinvesting distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial professional or call us at (800) 257-8787.
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CHANGES OCCURRING DURING THE PRIOR FISCAL YEAR
The following information in this annual report is a summary of certain changes during the most recent fiscal year. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund.
During the most recent fiscal year, there have been no changes to: (i) the Funds investment objective and principal investment policies that have not been approved by shareholders, (ii) the principal risks of the Fund, (iii) the portfolio managers of the Fund; (iv) the Funds charter or by-laws that would delay or prevent a change of control of the Fund that have not been approved by shareholders except as follows:
Changes to Portfolio Managers
Effective March 24, 2020, Jody Hrazanek was no longer a portfolio manager of the Fund.
Amended and Restated By-Laws
On October 5, 2020, after a rigorous and deliberative review, and consistent with the interests of the Nuveen Tax-Advantage Dividend Growth Fund (the Fund) long-term shareholders, the Board of Trustees of the Fund adopted Amended and Restated By-Laws.
Among other changes, the Amended and Restated By-Laws require compliance with certain amended deadlines and procedural and informational requirements in connection with advance notice of shareholder proposals or nominations, including certain information about the proponent and the proposal, or in the case of a nomination, the nominee. Any shareholder considering making a nomination or other proposal should carefully review and comply with those provisions of the Amended and Restated By-Laws.
The Amended and Restated By-Laws also include provisions (the Control Share By-Law) pursuant to which, in summary, a shareholder who obtains beneficial ownership of common shares of the Fund in a Control Share Acquisition may exercise voting rights with respect to such shares only to the extent the authorization of such voting rights is approved by other shareholders of the Fund. The Control Share By-Law is primarily intended to protect the interests of the Fund and its long-term shareholders by limiting the risk that the Fund will become subject to undue influence by opportunistic traders pursuing short-term agendas adverse to the best interests of the Fund and its long-term shareholders. The Control Share By-Law does not eliminate voting rights for common shares acquired in Control Share Acquisitions, but rather entrusts the Funds other non-interested shareholders with determining whether to approve the authorization of the voting rights of the person acquiring such shares.
Subject to various conditions and exceptions, the Control Share By-Law defines a Control Share Acquisition to include an acquisition of common shares that, but for the Control Share By-Law, would give the beneficial owner, upon the acquisition of such shares, the ability to exercise voting power in the election of Trustees of the Fund in any of the following ranges:
(i) |
one-tenth or more, but less than one-fifth of all voting power; |
(ii) |
one-fifth or more, but less than one-third of all voting power; |
(iii) |
one-third or more, but less than a majority of all voting power; or |
(iv) |
a majority or more of all voting power. |
The Control Share By-Law generally excludes certain acquisitions of common shares from the definition of a Control Share Acquisition, including acquisitions of common shares that occurred prior to October 5, 2020, though such shares are included in assessing whether any subsequent share acquisition exceeds one of the enumerated thresholds.
Subject to certain conditions and procedural requirements set forth in the Control Share By-Law, including the delivery of a Control Share Acquisition Statement to the Funds Secretary setting forth certain required information, a shareholder who obtains or proposes to obtain beneficial ownership of common shares in a Control Share Acquisition generally may demand a special meeting of shareholders for the purpose of considering whether the voting rights of such acquiring person with respect to such shares shall be authorized.
This discussion is only a high-level summary of certain aspects of the Amended and Restated By-Laws, and is qualified in its entirety by reference to the Amended and Restated By-Laws. Shareholders should refer to the Amended and Restated By-Laws for more information. A copy of the Amended and Restated By-Laws can be found in the Current Report on Form 8-K filed by the Fund with the Securities and Exchange Commission on October 6, 2020, which is available at www.sec.gov, and may also be obtained by writing to the Secretary of the Fund at 333 West Wacker Drive, Chicago, Illinois 60606.
55
Additional Fund Information (Unaudited)
Board of Trustees* | ||||||||||
Jack B. Evans | William C. Hunter | Albin F. Moschner | John K. Nelson | Judith M. Stockdale | Carole E. Stone | |||||
Matthew Thornton III | Terence J. Toth | Margaret L. Wolff | Robert L. Young |
Investment Adviser Nuveen Fund Advisors, LLC 333 West Wacker Drive Chicago, IL 60606 |
Custodian
State Street
Bank
One Lincoln Street Boston, MA 02111 |
Legal Counsel Chapman and Cutler LLP Chicago, IL 60603 |
Independent Registered
KPMG LLP 200 East Randolph Street Chicago, IL 60601 |
Transfer Agent and
Computershare
Trust Company, N.A.
|
Distribution Information
The Fund hereby designates its percentage of dividends paid from net ordinary income as dividends qualifying for the dividends received deduction (DRD) for corporations and its percentage as qualified dividend income (QDI) for individuals under Section 1(h)(11) of the Internal Revenue Code as shown in the accompanying table. The actual qualified dividend income distributions will be reported to shareholders on Form 1099-DIV which will be sent to shareholders shortly after calendar year end.
JTD | ||||
% DRD |
100.0% | |||
% QDI |
100.0% |
The Fund hereby designates its percentage of dividends paid from net ordinary income as dividends qualifying as Interest-Related Dividends and/or short-term capital gain dividends as defined in Internal Revenue Code Section 871(K) for the taxable year ended December 31, 2020.
JTD | ||||
% of Interest-Related Dividends |
13.9% |
The Fund had the following percentage, or maximum amount allowable, of ordinary dividends treated as Section 163(j) interest dividends pursuant to Section 163(j) of the Internal Revenue Code for the taxable year ended December 31, 2020:
% of Section 163(j) Interest Dividends |
0.3% |
Portfolio of Investments Information
The Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its report on Form N-PORT. You may obtain this information on the SECs website at http://www.sec.gov.
Nuveen Funds Proxy Voting Information
You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request, by calling Nuveen toll-free at (800) 257-8787 or on Nuveens website at www.nuveen.com and (ii) a description of the policies and procedures that each fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov.
CEO Certification Disclosure
The Funds Chief Executive Officer (CEO) has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. The Fund has filed with the SEC the certification of its CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
Common Share Repurchases
The Fund intends to repurchase, through its open-market share repurchase program, shares of its own common stock at such times and in such amounts as is deemed advisable. During the period covered by this report, the Fund repurchased shares of its common stock, as shown in the accompanying table. Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
JTD | ||||
Common shares repurchased |
0 |
FINRA BrokerCheck
The Financial Industry Regulatory Authority (FINRA) provides information regarding the disciplinary history of FINRA member firms and associated investment professionals. This information as well as an investor brochure describing FINRA BrokerCheck is available to the public by calling the FINRA BrokerCheck Hotline number at (800) 289-9999 or by visiting www.FlNRA.org.
56
Glossary of Terms Used in this Report
(Unaudited)
∎ |
Average Annual Total Return: This is a commonly used method to express an investments performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investments 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. |
∎ |
Beta: A measure of the variability of the change in the share price for a fund in relation to a change in the value of the funds market benchmark. Securities with betas higher than 1.0 have been, and are expected to be, more volatile than the benchmark; securities with betas lower than 1.0 have been, and are expected to be, less volatile than the benchmark. |
∎ |
Blended Index (Old): The JTD Blended Index performance is a blended return consisting of: 1) 50% of the return of the S&P 500® Index, 2) 25% of the return the Cboe S&P 500 BuyWrite Index (BXM), which is designed to track the performance of a hypothetical buy-write strategy on the S&P 500® Index, 3) 12.5% of the return of the ICE BofA DRD (dividends received deduction) Preferred Index, which consists of investment grade, DRD-eligible, exchange-traded preferred stocks with one year or more to maturity, and 4) 12.5% of the return of the ICE BofA Fixed Rate Preferred Index, which consists of taxable, fixed rate, U.S. Dollar denominated investment grade, preferred securities listed on a U.S. exchange. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. |
∎ |
Blended Index (new): The JTD Blended Index consists of: 1) 16% of the return of the S&P 500® Index, 2) 34% MSCI EAFE (NET) Index, which is designed to measure developed market equity performance, excluding the U.S. and Canada. 3) 25% of the return the Cboe S&P 500 BuyWrite Index (BXM), 4) 12.5% of the return of the ICE BofA DRD (dividends received deduction) Preferred Index, which consists of investment grade, DRD-eligible, exchange-traded preferred stocks with one year or more to maturity, and 5) 12.5% of the return of the ICE BofA Fixed Rate Preferred Index, which consists of taxable, fixed rate, U.S. Dollar denominated investment grade, preferred securities listed on a U.S. exchange. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. |
∎ |
Chicago Board Options Exchange (Cboe) Volatility Index® (VIX®): An index that is a key measure of market expectations of near-term volatility conveyed by S&P 500® option prices. Since its introduction in 1993, VIX has been considered by many to be the worlds premier barometer of investor sentiment and market volatility (www.cboe.com). Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. |
∎ |
Effective Leverage: Effective leverage is a funds effective economic leverage, and includes both regulatory leverage (see below) and the leverage effects of certain derivative investments in the funds portfolio. |
∎ |
Gross Domestic Product (GDP): The total market value of all final goods and services produced in a country/region in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. |
∎ |
Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more than 100% of the investment capital. |
∎ |
MSCI EAFE Index: The MSCI (Morgan Stanley Capital International) EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index designed to measure developed market equity performance, excluding the U.S. and Canada. The index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees. |
∎ |
Net Asset Value (NAV) Per Share: A funds Net Assets is equal to its total assets (securities, cash, accrued earnings and receivables) less its total liabilities. NAV per share is equal to the funds Net Assets divided by its number of shares outstanding. |
∎ |
Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of the fund. Both of these are part of the funds capital structure. Regulatory leverage is subject to asset coverage limits set in the Investment Company Act of 1940. |
57
(Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. None of the trustees who are not interested persons of the Funds (referred to herein as independent board members) has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the trustees and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each Trustee oversees and other directorships they hold are set forth below.
58
59
Board Members & Officers (continued)
(Unaudited)
60
Name,
Year of Birth & Address |
Position(s) Held
with the Funds |
Year First
Elected or Appointed(2) |
Principal
Occupation(s) During Past 5 Years |
|||
Officers of the Funds: | ||||||
∎ DAVID J. LAMB |
Managing Director of Nuveen Fund Advisors, LLC (since 2020); Managing Director (since 2017), formerly, Senior Vice President of Nuveen, LLC (since 2006), Vice President prior to 2006. | |||||
1963 333 W. Wacker Drive Chicago, IL 6o6o6 |
Chief Administrative Officer |
2015 |
||||
∎ MARK J. CZARNIECKI |
Vice President and Assistant Secretary of Nuveen Securities, LLC (since 2016) and Nuveen Fund Advisors (since 2017); Vice President and Associate General Counsel of Nuveen, LLC (since 2013) and Vice President, Assistant Secretary and Associate General Counsel of Nuveen Asset Management (since 2018). | |||||
1979 901 Marquette Avenue Minneapolis, MN 55402 |
Vice President and Assistant Secretary |
2013 |
||||
∎ DIANA R. GONZALEZ |
Vice President and Assistant Secretary of Nuveen Fund Advisors, LLC (since 2017); Vice President and Associate General Counsel of Nuveen, LLC (since 2017); Associate General Counsel of Jackson National Asset Management, LLC (2012-2017). | |||||
1978 333 W. Wacker Drive Chicago, IL 6o6o6 |
Vice President and Assistant Secretary |
2017 |
||||
∎ NATHANIEL T. JONES |
Managing Director (since 2017), formerly, Senior Vice President (2016-2017), formerly, Vice President (2011-2016) of Nuveen, LLC; Managing Director (since 2015) of Nuveen Fund Advisors, LLC; Chartered Financial Analyst. | |||||
1979 333 W. Wacker Drive Chicago, IL 6o6o6 |
Vice President and Treasurer |
2016 |
||||
∎ TINA M. LAZAR |
Managing Director (since 2017), formerly, Senior Vice President (2014-2017) of Nuveen Securities, LLC. | |||||
1961 333 W. Wacker Drive Chicago, IL 6o6o6 |
Vice President |
2002 |
||||
∎ BRIAN J. LOCKHART |
Managing Director (since 2019) of Nuveen Fund Advisors, LLC; Managing Director (since 2017), formerly, Vice President (2010-2017) of Nuveen, LLC; Head of Investment Oversight (since 2017), formerly, Team Leader of Manager Oversight (2015-2017); Chartered Financial Analyst and Certified Financial Risk Manager. | |||||
1974 333 W. Wacker Drive Chicago, IL 6o6o6 |
Vice President |
2019 |
||||
∎ JACQUES M. LONGERSTAEY |
Senior Managing Director, Chief Risk Officer, Nuveen, LLC (since May 2019); Senior Managing Director (since May 2019) of Nuveen Fund Advisors, LLC; formerly, Chief Investment and Model Risk Officer, Wealth & Investment Management Division, Wells Fargo Bank (NA) (2013-2019). | |||||
1963 8500 Andrew Carnegie Blvd. Charlotte, NC 28262 |
Vice President |
2019 |
||||
∎ KEVIN J. MCCARTHY |
Senior Managing Director (since 2017) and Secretary and General Counsel (since 2016) of Nuveen Investments, Inc., formerly, Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2008-2016); Senior Managing Director (since 2017) and Assistant Secretary (since 2008) of Nuveen Securities, LLC, formerly Executive Vice President (2016-2017) and Managing Director (2008-2016); Senior Managing Director (since 2017), and Secretary (since 2016) of Nuveen Fund Advisors, LLC, formerly, Co-General Counsel (2011-2020), Executive Vice President (2016-2017), Managing Director (2008-2016) and Assistant Secretary (2007-2016); Senior Managing Director (since 2017), Secretary (since 2016) of Nuveen Asset Management, LLC, formerly, Associate General Counsel (2011-2020), Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2011- 2016); Vice President (since 2007) and Secretary (since 2016), formerly, Assistant Secretary, of NWQ Investment Management Company, LLC, Santa Barbara Asset Management, LLC and Winslow Capital Management, LLC (since 2010). Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Alternative Investments, LLC. | |||||
1966 333 W. Wacker Drive Chicago, IL 6o6o6 |
Vice President and Assistant Secretary |
2007 |
||||
61
Board Members & Officers (continued)
(Unaudited)
(1) |
The Board of Trustees is divided into three classes, Class I, Class II, and Class III, with each being elected to serve until the third succeeding annual shareholders meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed, except two board members are elected by the holders of Preferred Shares, when applicable, to serve until the next annual shareholders meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed. The year first elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen complex. |
(2) |
Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed to any fund in the Nuveen complex. |
62
Notes
63
Nuveen:
Serving Investors for Generations
Since 1898, financial professionals and their clients have relied on Nuveen to provide
dependable investment solutions through continued adherence to
proven, long-term investing
principles. Today, we offer a range of high quality solutions designed to
be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen is the investment manager of TIAA. We have grown into one of the worlds premier global asset managers, with specialist knowledge across all major asset classes and particular strength in solutions that provide income for investors and that draw on our expertise in alternatives and responsible investing. Nuveen is driven not only by the independent investment processes across the firm, but also the insights, risk management, analytics and other tools and resources that a truly world-class platform provides. As a global asset manager, our mission is to work in partnership with our clients to create solutions which help them secure their financial future.
Find
out how we can help you.
To learn more about how the products and services of Nuveen may be able to help you meet your financial goals, talk to your financial professional, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at:
www.nuveen.com/closed-end-funds
Nuveen Securities, LLC, member FINRA and SIPC | 333 West Wacker Drive Chicago, IL 60606 | www.nuveen.com | EAN-G-1220D 1509744-INV-Y-02/22 |
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrants principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There were no amendments to or waivers from the Code during the period covered by this report. The registrant has posted the code of ethics on its website at www.nuveen.com/fund-governance. (To view the code, click on Code of Conduct.)
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by this report, the registrants Board of Directors or Trustees (Board) determined that the registrant has at least one audit committee financial expert (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. The registrants audit committee financial experts are Carole E. Stone, Jack B. Evans and William C. Hunter who are independent for purposes of Item 3 of Form N-CSR.
Ms. Stone served for five years as Director of the New York State Division of the Budget. As part of her role as Director, Ms. Stone was actively involved in overseeing the development of the States operating, local assistance and capital budgets, its financial plan and related documents; overseeing the development of the States bond-related disclosure documents and certifying that they fairly presented the States financial position; reviewing audits of various State and local agencies and programs; and coordinating the States system of internal audit and control. Prior to serving as Director, Ms. Stone worked as a budget analyst/examiner with increasing levels of responsibility over a 30 year period, including approximately five years as Deputy Budget Director. Ms. Stone has also served as Chair of the New York State Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York State public authorities. These positions have involved overseeing operations and finances of certain entities and assessing the adequacy of project/entity financing and financial reporting. Currently, Ms. Stone is on the Board of Directors of CBOE Holdings, Inc., of the Chicago Board Options Exchange, and of C2 Options Exchange. Ms. Stones position on the boards of these entities and as a member of both CBOE Holdings Audit Committee and its Finance Committee has involved, among other things, the oversight of audits, audit plans and preparation of financial statements.
Mr. Evans was formerly President and Chief Operating Officer of SCI Financial Group, Inc., a full service registered broker-dealer and registered investment adviser (SCI). As part of his role as President and Chief Operating Officer, Mr. Evans actively supervised the Chief Financial Officer (the CFO) and actively supervised the CFOs preparation of financial statements and other filings with various regulatory authorities. In such capacity, Mr. Evans was actively involved in the preparation of SCIs financial statements and the resolution of issues raised in connection therewith. Mr. Evans has also served on the audit committee of various reporting companies. At such companies, Mr. Evans was involved in the oversight of audits, audit plans, and the preparation of financial statements. Mr. Evans also formerly chaired the audit committee of the Federal Reserve Bank of Chicago.
Mr. Hunter was formerly a Senior Vice President at the Federal Reserve Bank of Chicago. As part of his role as Senior Vice President, Mr. Hunter was the senior officer responsible for all operations of each of the Economic Research, Statistics, and Community and Consumer Affairs units at the Federal Reserve Bank of Chicago. In such capacity, Mr. Hunter oversaw the subunits of the Statistics and Community and Consumer Affairs divisions responsible for the analysis and evaluation of bank and bank holding company financial statements and financial filings. Prior to serving as Senior Vice President at the Federal Reserve Bank of Chicago, Mr. Hunter was the Vice President of the Financial Markets unit at the Federal Reserve Bank of Atlanta where he supervised financial staff and bank holding company analysts who analyzed and evaluated bank and bank holding company financial statements. Mr. Hunter also currently serves on the Boards of Directors of Xerox Corporation and Wellmark, Inc. as well as on the Audit Committees of such Boards. As an Audit Committee member, Mr. Hunters responsibilities include, among other things, reviewing financial statements, internal audits and internal controls over financial reporting. Mr. Hunter also formerly was a Professor of Finance at the University of Connecticut School of Business and has authored numerous scholarly articles on the topics of finance, accounting and economics.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following tables show the amount of fees that KPMG LLP, the Funds auditor, billed to the Funds during the Funds last two full fiscal years. The Audit Committee approved in advance all audit services and non-audit services that KPMG LLP provided to the Funds, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the pre-approval exception). The preapproval exception for services provided directly to the Funds waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by the Funds during the fiscal year in which the services are provided; (B) the Funds did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committees attention, and the Committee (or its delegate) approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its Chair (or, in her absence, any other member of the Audit Committee).
SERVICES THAT THE FUNDS AUDITOR BILLED TO THE FUND
Fiscal Year Ended |
Audit Fees Billed
to Fund 1 |
Audit-Related Fees
Billed to Fund 2 |
Tax Fees
Billed to Fund 3 |
All Other Fees
Billed to Fund 4 |
||||||||||||
December 31, 2020 |
$ | 28,450 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage approved pursuant to pre-approval exception |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2019 |
$ | 27,900 | $ | 0 | $ | 0 | $ | 0 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Percentage approved pursuant to pre-approval exception |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
|
|
|
|
|
|
|
|
1 Audit Fees are the aggregate fees billed for professional services for the audit of the Funds annual financial statements and services provided in connection with statutory and regulatory filings or engagements.
2 Audit Related Fees are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or review of financial statements that are not reported under Audit Fees. These fees include offerings related to the Funds common shares and leverage.
3 Tax Fees are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These fees include: all global withholding tax services; excise and state tax reviews; capital gain, tax equalization and taxable basis calculation performed by the principal accountant.
4 All Other Fees are the aggregate fees billed for products and services other than Audit Fees, Audit-Related Fees and Tax Fees. These fees represent all Agreed-Upon Procedures engagements pertaining to the Funds use of leverage.
SERVICES THAT THE FUNDS AUDITOR BILLED TO THE
ADVISER AND AFFILIATED FUND SERVICE PROVIDERS
The following tables show the amount of fees billed by KPMG LLP to Nuveen Fund Advisors, LLC (formerly Nuveen Fund Advisors, Inc.) (the Adviser), and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund (Affiliated Fund Service Provider), for engagements directly related to the Funds operations and financial reporting, during the Funds last two full fiscal years.
The tables also show the percentage of fees subject to the pre-approval exception. The pre-approval exception for services provided to the Adviser and any Affiliated Fund Service Provider (other than audit, review or attest services) waives the pre-approval requirement if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid to KPMG LLP by the Fund, the Adviser and Affiliated Fund Service Providers during the fiscal year in which the services are provided that would have to be pre-approved by the Audit Committee; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committees attention, and the Committee (or its delegate) approves the services before the Funds audit is completed.
Fiscal Year Ended |
Audit-Related Fees
Billed to Adviser and Affiliated Fund Service Providers |
Tax Fees Billed to
Adviser and Affiliated Fund Service Providers |
All Other Fees
Billed to Adviser and Affiliated Fund Service Providers |
|||||||||
December 31, 2020 |
$ | 0 | $ | 0 | $ | 0 | ||||||
|
|
|
|
|
|
|||||||
Percentage approved pursuant to pre-approval exception |
0 | % | 0 | % | 0 | % | ||||||
|
|
|
|
|
|
|||||||
December 31, 2019 |
$ | 0 | $ | 0 | $ | 0 | ||||||
|
|
|
|
|
|
|||||||
Percentage approved pursuant to pre-approval exception |
0 | % | 0 | % | 0 | % | ||||||
|
|
|
|
|
|
NON-AUDIT SERVICES
The following table shows the amount of fees that KPMG LLP billed during the Funds last two full fiscal years for non-audit services. The Audit Committee is required to pre-approve non-audit services that KPMG LLP provides to the Adviser and any Affiliated Fund Services Provider, if the engagement related directly to the Funds operations and financial reporting (except for those subject to the pre-approval exception described above). The Audit Committee requested and received information from KPMG LLP about any non-audit services that KPMG LLP rendered during the Funds last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating KPMG LLPs independence.
Fiscal Year Ended |
Total Non-Audit Fees
Billed to Fund |
Total Non-Audit Fees
billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) |
Total Non-Audit Fees
billed to Adviser and Affiliated Fund Service Providers (all other engagements) |
Total | ||||||||||||
December 31, 2020 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
December 31, 2019 |
$ | 0 | $ | 0 | $ | 0 | $ | 0 |
Non-Audit Fees billed to Fund for both fiscal year ends represent Tax Fees and All Other Fees billed to Fund in their respective amounts from the previous table.
Less than 50 percent of the hours expended on the principal accountants engagement to audit the registrants financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountants full-time, permanent employees.
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit Committee must approve (i) all non-audit services to be performed for the Fund by the Funds independent accountants and (ii) all audit and non-audit services to be performed by the Funds independent accountants for the Affiliated Fund Service Providers with respect to operations and financial reporting of the Fund. Regarding tax and research projects conducted by the independent accountants for the Fund and Affiliated Fund Service Providers (with respect to operations and financial reports of the Fund) such engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee chair for her verbal approval prior to engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrants Board has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). As of the end of the period covered by this report, the members of the audit committee are Jack B. Evans, William C. Hunter, John K. Nelson, Judith M. Stockdale and Carole E. Stone, Chair.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) See Portfolio of Investments in Item 1.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Nuveen Fund Advisors, LLC is the registrants investment adviser (also referred to as the Adviser). The Adviser is responsible for the on-going monitoring of the Funds investment portfolio, managing the Funds business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged NWQ Investment Management Company, LLC (NWQ), Nuveen Asset Management, LLC (Nuveen Asset Management) and Santa Barbara Asset Management (Santa Barbara) (NWQ, Nuveen Asset Management and Santa Barbara are collectively referred to as Sub-Advisers) as Sub-Advisers to provide discretionary investment advisory services. As part of these services, the Adviser has delegated to each Sub-Adviser the full responsibility for proxy voting and related duties in accordance with each Sub-Advisers policies and procedures. The Adviser periodically monitors each Sub-Advisers voting to ensure that it is carrying out its duties. Each Sub-Advisers proxy voting policies and procedures are attached to this filing as an exhibit.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Nuveen Fund Advisors, LLC (NFALLC) is the registrants investment adviser (NFALLC is also referred to as the Adviser.) NFALLC is responsible for the selection and on-going monitoring of the Funds investment portfolio, managing the Funds business affairs and providing certain clerical, bookkeeping and administrative services. The Adviser has engaged NWQ Investment Management Company, LLC (NWQ), Nuveen Asset Management, LLC (Nuveen Asset Management) and Santa Barbara Asset Management, LLC (Santa Barbara) as Sub-Advisers to provide discretionary investment advisory services; (NWQ, Nuveen Asset Management and Santa Barbara are also collectively referred to as Sub-Advisers). The following section provides information on the portfolio managers at each Sub-Adviser:
NWQ
Item 8(a)(1). |
PORTFOLIO MANAGER BIOGRAPHIES |
Thomas J. Ray, CFA, Managing Director, Co-Head of Fixed Income, Portfolio Manager/Analyst
Prior to joining NWQ in 2015, Tom was a Private Investor. Prior to that, he served as Chief Investment Officer, President and founding member of Inflective Asset Management, LLC; a boutique investment firm specializing in convertible securities. Prior to founding Inflective, Tom also served as portfolio manager at Transamerica Investment Management. Tom graduated from University of Wisconsin with a B.B.A in Finance, Investment & Banking and an M.S. in Finance. He holds the Chartered Financial Analyst designation and is a member of the CFA Institute.
Susi Budiman, CFA, Managing Director and Co-Head of Fixed Income, Portfolio Manager/Analyst
Prior to joining NWQ in 2006, Susi was Portfolio Manager for China Life Insurance Company, Ltd. in Taiwan where she managed multi-sector and multi-currency fixed income portfolios with responsibility for over $1.8 billion in assets under management. Prior to that, she was a currency exchange associate at Fleet National Bank in Singapore covering Asian, Euro, and other major currencies.
Susi earned her B. Comm. in Finance from the University of British Columbia and received her M.B.A. in Finance at the Marshall School of Business at the University of Southern California. She earned her Chartered Financial Analyst designation from the CFA Institute in 2006 and is a member of the Los Angeles Society of Financial Analysts. She also earned her Financial Risk Manager designation in 2003.
Item 8(a)(2). |
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS |
In addition to managing JTD, Mr. Ray and Ms. Budiman are also primarily responsible for the day-to-day portfolio management of the following accounts. Information is provided as of December 31, 2020 unless otherwise indicated:
Portfolio Manager |
Type of Account Managed |
Number
of Accounts |
Assets |
Number of
Accounts with Performance- Based fees |
Assets of
Accounts with Performance- Based Fees |
|||||||||||||
Thomas Ray | Registered Investment Companies | 6 | $ | 2.9 billion | 0 | 0 | ||||||||||||
Other Pooled Investment Vehicles | 3 | $ | 2.4 billion | 0 | 0 | |||||||||||||
Other Accounts | 967 | $ | 919.7 million | * | 0 | 0 | ||||||||||||
Susi Budiman | Registered Investment Companies | 3 | $ | 2.4 billion | 0 | 0 | ||||||||||||
Other Pooled Investment Vehicles | 3 | $ | 2.4 billion | 0 | 0 | |||||||||||||
Other Accounts | 965 | $ | 885.6 million | * | 0 | 0 |
* includes approximately $107.8 million in model-based assets as of 12/31/20
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or perceived conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented with the following potential conflicts, which are not intended to be an exhaustive list:
|
The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. NWQ seeks to manage such competing interests for the time and attention of the portfolio manager by utilizing investment models for the management of most investment strategies. |
|
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, NWQ has adopted procedures for allocating limited opportunities across multiple accounts. |
|
With respect to many of its clients accounts, NWQ determines which broker to utilize when placing orders for execution, consistent with its duty to seek to obtain best execution. However, for to certain other accounts, NWQ may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, NWQ may place separate transactions for certain accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of other accounts. NWQ seeks to minimize market impact by using its discretion in releasing orders in a manner which seeks to cause the least possible impact while keeping within the approximate price range of the discretionary block trade. |
|
Finally, the appearance of a conflict of interest may arise where NWQ has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which the portfolio manager has day-to-day management responsibilities. NWQ periodically performs a comparative analysis of the performance between accounts with performance fees and those without performance fees. |
NWQ has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). |
FUND MANAGER COMPENSATION |
NWQs philosophy is to provide performance-based and market-competitive compensation, while mitigating inappropriate or excessive risk taking. There are three primary components of compensation: (1) base and benefits, (2) annual cash award, and (3) equity-like performance-based plans.
Base pay is determined based upon an analysis of the employees general performance, experience, and market levels of base pay for such positions. Base salary and annual variable compensation targets are reviewed annually, while other benefit plans are periodically reviewed to ensure competitiveness.
The variable compensation is an annual cash award that can be a multiple of the base salary. NWQs annual variable compensation program includes both subjective and objective criteria with emphasis placed on sustained, long-term performance. The subjective portion of the incentive compensation is based on a qualitative evaluation made by each investment professionals supervisor taking into consideration a number of factors, including the investment professionals team collaboration, expense management, support of personnel responsible for asset growth, and his or her compliance with NWQs policies and procedures.
Senior employees participate in equity-like profits interest plans, which provide a meaningful opportunity to participate in the long-term success of the business. These profits interests vest over time and entitle participants to a percentage of NWQs annual profitability, enabling employees to participate in the growth of the overall value of NWQ. These awards allow participants to benefit directly from the financial performance and growth of NWQ over time and ensure that they have a strong alignment of interests with the firms clients over the long term. The profits interests are designed to provide senior personnel with strong incentives to remain with the firm and participate in its success and include non-compete and non-solicitation terms. Additional details regarding the program are proprietary.
Item 8(a)(4). |
OWNERSHIP OF JTD SECURITIES AS OF DECEMBER 31, 2020 |
Name of Portfolio Manager |
None |
$1 -
$10,000 |
$10,001-
$50,000 |
$50,001-
$100,000 |
$100,001-
$500,000 |
$500,001-
$1,000,000 |
Over $1,000,000 | |||||||||||||||||||
Thomas Ray |
X | |||||||||||||||||||||||||
Susi Budiman |
X |
Santa Barbara
Item 8(a)(1). |
PORTFOLIO MANAGER BIOGRAPHY |
David S. Park, CFA, CPA - Co-Head of Santa Barbara Asset Management, LLC, Portfolio Manager and Director of Research
Prior to joining the firm in 2011, David was an equity analyst at HighMark Capital Management, focusing on consumer, technology, telecom and industrials. Preceding this, he held several positions in finance and transactions as a manager for M&A Transaction Support at Ernst & Young, senior analyst at Move, Inc. and as a senior associate at PricewaterhouseCoopers.
David graduated with a B.A. from the University of California, Los Angeles and an M.B.A. from New York University, Leonard N. Stern School of Business. David holds the CFA designation and is a Certified Public Accountant.
David A. Chalupnik, CFA, -, Co-Head of Santa Barbara Asset Management and Portfolio Manager, Head of Nuveen U.S. Active Equities Portfolio Management
David oversees all portfolio management activities for Nuveens actively managed U.S. equities strategies. He is the lead portfolio manager for several core and value-focused equities strategies and related institutional portfolios. David also manages several Santa Barbara Asset Management Dividend Growth strategies.
Prior to joining the firm in 2002, David served as chief investment officer for Duff & Phelps Investment Management Company. David was also head of the equity investment division of Allstate Insurance Company. He began working in the investment industry in 1984.
David graduated with a B.S. in Commerce and an M.B.A. from DePaul University. He holds the CFA designation and is a member of the CFA Institute.
Item 8(a)(2). |
OTHER ACCOUNTS MANAGED |
In addition to managing a portion of the Nuveen Tax-Advantaged Dividend Growth Fund, Mr. Park and Mr. Chalupnik are also primarily responsible for the day-to-day portfolio management of the following accounts. Information is provided as of December 31, 2020:
Portfolio Manager |
Type of Account
|
Number of
Accounts |
Assets |
Number of
Accounts with Performance- Based fees |
Assets of
Accounts with Performance- Based Fees |
|||||||||||||
David Park |
Registered Investment Companies | 3 | $ | 6.0 billion | 0 | 0 | ||||||||||||
Other Pooled Investment Vehicles | 1 | $ | 128 million | 0 | 0 | |||||||||||||
Other Accounts | 2954 | $ | 105 billion | * | 0 | 0 | ||||||||||||
David Chalupnik |
Registered Investment Companies | 6 | $ | 12.1billion | 0 | 0 | ||||||||||||
Other Pooled Investment Vehicles | 1 | $ | 128 million | 0 | 0 | |||||||||||||
Other Accounts | 2972 | $ | 10.8 billion | * | 0 | 0 |
* includes approximately $9.2 billion in model-based assets as of 12/31/20.
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or perceived conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented with the following potential conflicts, which are not intended to be an exhaustive list:
|
The management of multiple accounts may result in the portfolio manager devoting unequal time and attention to the management of each account. Santa Barbara seeks to manage such competing interests for the time and attention of the portfolio manager by utilizing investment models for the management of most investment strategies. |
|
With respect to many of its clients accounts, Santa Barbara determines which broker to utilize when placing orders for execution, consistent with its duty to seek best execution o. However, for certain other accounts, Santa Barbara may be limited by the client with respect to the selection of brokers when the client instructs Santa Barbara to direct trades through a particular broker. Santa Barbara aggregates client orders at the broker level in accordance with a clients brokerage instruction and executes orders utilizing a broker rotation schedule which sequences discretionary trades, client directed trades by broker, and wrap-fee trades including UMA trades. |
|
Finally, the appearance of a conflict of interest may arise where Santa Barbara has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which the portfolio manager has day-to-day management responsibilities. Santa Barbara periodically performs a comparative analysis of the performance between accounts with performance fees and those without performance fees. |
Santa Barbara has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). |
FUND MANAGER COMPENSATION |
Santa Barbaras philosophy is to provide performance-based and market-competitive compensation, while mitigating inappropriate or excessive risk taking. There are three primary components of compensation: (1) base and benefits, (2) annual cash award, and (3) equity-like performance-based plans.
Base pay is determined based upon an analysis of the employees general performance, experience, and market levels of base pay for such positions. Base salary and annual variable compensation targets are reviewed annually, while other benefit plans are periodically reviewed to ensure competitiveness.
The variable compensation is an annual cash award. SBAMs annual variable compensation program includes both subjective and objective criteria. The greater the ability to link investment performance to the role, the greater the weight given to that objective performance determination. Such criteria may include 1, 3 or 5 year performance results versus peer groups and benchmarks. Emphasis is placed on sustained, long-term performance. The subjective portion of the incentive compensation is based on a qualitative evaluation made by each investment professionals supervisor taking into consideration a number of factors, including the investment professionals team collaboration, expense management, support of personnel responsible for asset growth, and his or her compliance with SBAMs policies and procedures.
Senior employees participate in equity-like profits interest plans, which provide a meaningful opportunity to participate in the long-term success of the business. These profits interests vest over time and entitle participants to a percentage of SBAMs annual profitability, enabling employees to participate in the growth of the overall value of SBAM. These awards allow participants to benefit directly from the financial performance and growth of SBAM over time and ensure that they have a strong alignment of interests with the firms clients over the long term. The profits interests are designed to provide senior personnel with strong incentives to remain with the firm and participate in its success including non-compete and non-solicitation terms. Additional details regarding the program are proprietary.
Item 8(a)(4). |
OWNERSHIP OF JTD SECURITIES AS OF DECEMBER 31, 2020 |
Name of Portfolio
|
None |
$1 -
$10,000 |
$10,001-
$50,000 |
$50,001-
$100,000 |
$100,001-
$500,000 |
$500,001-
$1,000,000 |
Over $1,000,000 | |||||||||||||||||||
David Park |
X | |||||||||||||||||||||||||
David Chalupnik |
X |
Nuveen Asset Management
Item 8(a)(1). |
PORTFOLIO MANAGER BIOGRAPHY |
David Friar, Managing Director and Portfolio Manager (since 2011) of Nuveen Asset Management, entered the financial services industry in 1998. He is the lead manager of the equity index, mid cap index, small cap index and enhanced equity index strategies and related institutional portfolios. He joined the team managing the Equity, mid cap and small cap Index Strategies in 2000 and became part of the enhanced equity index team in 2007. He joined the firm in 1999 as a member of the performance measurement group.
Item 8(a)(2). |
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS |
In addition to the Fund, as of December 31, 2020, the portfolio managers are also primarily responsible for the day-to-day portfolio management of the following accounts:
(ii) Number of Other Accounts Managed and Assets by Account Type |
(iii) Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based |
|||||||||||||||||||||||||||||||||||
(i) Name of Portfolio Manager |
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
Other
Registered Investment Companies |
Other
Pooled Investment Vehicles |
Other
Accounts |
||||||||||||||||||||||||||||||
David Friar |
4 | $ | 2.25 billion | 0 | $ | 0 | 0 | $ | 0 | N/A | N/A | N/A | ||||||||||||||||||||||||
2 | * | $ | 48 million |
*Other Accounts-overlay strategies The portfolio manager is responsible for the management of overlay strategies employed by this account that use derivative instruments either to obtain, offset or substitute for certain portfolio exposures beyond those provided by the accounts underlying portfolios.
POTENTIAL MATERIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one account. More specifically, portfolio managers who manage multiple accounts are presented a number of potential conflicts, including, among others, those discussed below.
The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Nuveen Asset Management seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, Nuveen Asset Management has adopted procedures for allocating limited opportunities across multiple accounts.
With respect to many of its clients accounts, Nuveen Asset Management determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, Nuveen Asset Management may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Nuveen Asset Management may place separate, non-simultaneous, transactions for a Fund and other accounts which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where Nuveen Asset Management has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
Conflicts of interest may also arise when the Sub-Adviser invests one or more of its client accounts in different or multiple parts of the same issuers capital structure, including investments in public versus private securities, debt versus equity, or senior versus junior/subordinated debt, or otherwise where there are different or inconsistent rights or benefits. Decisions or actions such as investing, trading, proxy voting, exercising, waiving or amending rights or covenants, workout activity, or serving on a board, committee or other involvement in governance may result in conflicts of interest between clients holding different securities or investments. Generally, individual portfolio managers will seek to act in a manner that they believe serves the best interest of the accounts they manage. In cases where a portfolio manager or team faces a conflict among its client accounts, it will seek to act in a manner that it believes best reflects its overall fiduciary duty, which may result in relative advantages or disadvantages for particular accounts.
Nuveen Asset Management has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
Item 8(a)(3). |
FUND MANAGER COMPENSATION |
Portfolio managers are compensated through a combination of base salary and variable components consisting of (i) a cash bonus; (ii) a long-term performance award; and (iii) participation in a profits interest plan.
Base salary. A portfolio managers base salary is determined based upon an analysis of the portfolio managers general performance, experience and market levels of base pay for such position.
Cash bonus. A portfolio manager is eligible to receive an annual cash bonus that is based on three variables: risk-adjusted investment performance relative to benchmark generally measured over the most recent one, three and five year periods (unless the portfolio managers tenure is shorter), ranking versus Morningstar peer funds generally measured over the most recent one,k three and five year periods (unless the portfolio managers tenure is shorter), and management and peer reviews.
Long-term performance award. A portfolio manager is eligible to receive a long-term performance award that vests after three years. The amount of the award when granted is based on the same factors used in determining the cash bonus. The value of the award at the completion of the three-year vesting period is adjusted based on the risk-adjusted investment performance of Fund(s) managed by the portfolio manager during the vesting period and the performance of the TIAA organization as a whole.
Profits interest plan. Portfolio managers are eligible to receive profits interests in Nuveen Asset Management and its affiliate, Teachers Advisors, LLC, which vest over time and entitle their holders to a percentage of the firms annual profits. Profits interests are allocated to each portfolio manager based on such persons overall contribution to the firms.
There are generally no differences between the methods used to determine compensation with respect to the Fund and the Other Accounts shown in the table above.
Item 8(a)(4). |
OWNERSHIP OF JTD SECURITIES AS OF DECEMBER 31, 2020 |
Name of Portfolio Manager |
None |
$1 - $10,000 |
$10,001-
$50,000 |
$50,001-
$100,000 |
$100,001-
$500,000 |
$500,001-
$1,000,000 |
Over $1,000,000 | |||||||||||||||
David Friar |
X |
|
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 registrants Board implemented after the registrant last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) |
The registrants principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the 1940 Act) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15 (b) under the Securities Exchange Act of 1934, as amended (the Exchange Act) (17 CFR 240.13a-15(b) or 240.15d-15 (b)). |
(b) |
There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. 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 because the code is posted on registrants website at www.nuveen.com/fund-governance and there were no amendments during the period covered by this report. (To view the code, click on Code of Conduct.)
(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.
(a)(4) Change in registrants independent public accountant. Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Tax-Advantaged Dividend Growth Fund
By (Signature and Title) |
/s/ Mark L. Winget |
|||
Mark L. Winget | ||||
Vice President and Secretary | ||||
Date: March 5, 2021 |
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/ David J. Lamb |
|||
David J. Lamb | ||||
Chief Administrative Officer | ||||
(principal executive officer) | ||||
Date: March 5, 2021 | ||||
By (Signature and Title) |
/s/ E. Scott Wickerham |
|||
E. Scott Wickerham | ||||
Vice President and Controller | ||||
(principal financial officer) | ||||
Date: March 5, 2021 |
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