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Nuveen Diversified Dividend and Income Fund (NYSE: JDD)
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OBJECTIVE & INVESTMENT STRATEGY
The fund's investment objectives are high current income and total return.
The fund invests primarily in 1) U.S. and foreign dividend-paying common stocks, 2) dividend-paying common stocks issued by real estate companies, 3) emerging markets sovereign debt, and 4) senior secured loans. The fund expects to invest at least 40%, but no more than 70%, of its managed assets in equity security holdings and at least 30%, but no more than 60%,of its managed assets in debt security holdings. Under normal circumstances, the fund's target weighting is approximately 50% equity and 50% debt. The fund uses leverage.
DISTRIBUTION HISTORY
MANAGED DISTRIBUTION POLICYManaged Distribution Policy: This fund has adopted a Managed Distribution
Policy, designed to provide attractive, quarterly distributions throughout the course of the year. Under this policy, the fund seeks to maintain a stable quarterly distribution amount (in cents per common share), comprised of payments received from portfolio companies, as well as net realized fund portfolio capital gains and, if necessary, a return of capital (representing in some cases
net unrealized capital gains). The fund will determine the tax characteristics of all fund distributions after the end of the calendar year and will provide shareholders such information at that time.
KEY INFORMATION REGARDING DISTRIBUTIONS
| Current Distribution (Quarterly) (As of 10/1/2010) | $0.2350 |
| Monthly Equivalent Distribution | $0.0783 |
| Avg. Earnings/Share** ( As of 7/31/2010) | $0.0375 |
| Annualized 1 Year Total Return on NAV (As of 8/31/2010) | 21.13% |
| Annualized Distribution Rate on NAV †† | 7.99% |
| Annualized Since Inception Total Return on NAV (As of 8/31/2010) | 5.46% |
| Total % of Portfolio Leveraged (As of 7/30/2010) | 21.83% |
| Average Cost of Leverage(13 weeks) (As of 7/30/2010) | 1.32% |
HIGHLIGHTS
- Balanced equity & debt strategy focused on providing current income & total return potential while reducing US interest rates sensitivity
- Diversification potential – lower historical correlations among asset classes provides opportunity for more consistent returns
- Managed by specialists in several non-traditional asset classes, providing retail income-oriented investors access to institutional strategies where active professional management can potentially add value to the fund’s total return
PRICING & DISTRIBUTION
as of
09/01/2010
| Closing Share Price (As of 9/1/2010) | $10.71 |
| Closing NAV per Share (As of 9/1/2010) | $11.76 |
| Premium / Discount | -8.92% |
| Current Distribution Rate (Market price)†† | 8.78% |
| Distribution Amount (Quarterly) | $0.2350 |
CAPITAL STRUCTURE
as of
07/30/2010
| Total Managed Assets | $297,803,761 |
| Common Shares | |
|---|---|
| Total Common Net Assets | $232,803,761 |
| Shares Outstanding | 19,962,818 |
| Avg Daily Volume (in shares) | 62,848 |
| Dollar | Percent | |
|---|---|---|
| Total Structural Leverage | $65,000,000 | 21.83% |
| Effective Leverage | $65,000,000 | 21.83% |
| Asset Coverage 1 | More Information |
FUND BASICS
| CUSIP | 6706EP105 |
| NAV Ticker | XJDDX |
| Inception Date | 9/25/2003 |
| Inception NAV | $14.33 |
| Inception Share Price | $15.00 |
FUND CHARACTERISTICS
as of
06/30/2010
| # of Holdings | 281 |
| % Foreign Holdings ‡ | 25.08% |
| % Large, Mid, Small Cap † | 62.1%,27.5%,10.5% |
| Avg. Maturity (years) * | 9.63 |
| Avg. Leverage Adjusted Duration (years) * | 6.05 |
SHARE PRICE AND NAV HISTORY
Data reflects performance over the previous 12 months
As of
09/01/2010
ASSET ALLOCATION
As of 06/30/2010
CALENDAR YEAR TOTAL RETURNS
As of 08/31/2010
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Share Price | 12.79% | 72.17% | -49.58% | -25.75% | 38.77% | 16.36% | 8.04% | 5.76% | -- | -- |
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NAV | 7.84% | 47.30% | -42.60% | -9.00% | 22.66% | 10.21% | 20.44% | 7.04% | -- | -- |
ANNUALIZED TOTAL RETURNS
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Share Price | 34.37% | -3.66% | 2.08% | -- | 4.29% |
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NAV | 21.13% | -4.73% | 1.00% | -- | 5.46% |
FUND MANAGER
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| NWQ's approach to investing is based upon a bottom-up, fundamental approach. Our Research team focuses on understanding individual companies as businesses rather than simply as stocks by conducting independent research. While we pride ourselves on taking a long-term approach to investing our clients assets, our process is fluid and dynamic. Our portfolios are constantly monitored using and strictly adhering to our research and analyst driven process. NWQ, with over 20 years of investment experience, manages assets for Nuveen mutual funds and managed accounts, as well as for corporate and multiemployer plans, public entities, endowments, foundations and high net worth individuals. |
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| Founded in 1995, Security Capital Research & Management Incorporated (SC-R&M), a leading real estate investment management company, dedicated exclusively to the real estate industry, sub-advises the REITs portion of the Nuveen Funds. The Security Capital record reflects a rigorous investment process directed by an experienced team of investment professionals. This team has been managing their in vestment process virtually since the firm’s inception. Their process provides a strong foundation for our conviction- oriented investment style by integrating important research perspectives on real estate markets, company cash flow potential and equity market pricing trends together with unique execution capabilities in the open market and in the structuring, negotiation and closing of private placement securities. |
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| Founded in 1994 by a team of industry veterans known for their pioneering work in quantitative analysis, Symphony Asset Management LLC is an institutional market leader in alternative and traditional investment strategies. Fundamental to Symphony’s investment philosophy is the concept that both quantitative and qualitative methods have value. The ability to blend these values into a unified, risk-controlled investment process is a skill that sets Symphony apart as an institutional money manager. Prior to implementation, each of our strategies has been thoroughly tested in one of the industry’s most sophisticated research environments. The resulting process is intellectually robust and independent of any one person’s influence or abilities. |
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| The emerging markets sovereign debt portion of the Fund is managed by Wellington Management Company, LLP. Wellington serves as an investment advisor to approximately 1,500 institutions located in over 40 countries. Recognized for their expertise in international and global equity, fixed income and multi-asset portfolios for institutional clients and mutual fund sponsors across the world. |
ANNUAL EXPENSE RATIOS
as of
07/30/2010
| Total Fund | Common Shares | |
|---|---|---|
| Management Fees | 0.71% | 0.92% |
| Interest Expenses | 0.28% | 0.36% |
| Other Expenses | 0.22% | 0.28% |
| Total | 1.21% | 1.56% |
See the fund's Annual Report for full information on expenses.
TOP ISSUERS
as of
06/30/2010
| Issuer | Dollar Value | % of Total Portfolio |
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| Russian Federation: Debt | $3,532,082 | 1.25% |
| Mexico: Debt | $3,393,805 | 1.19% |
| Federal Realty Inve: Equity | $3,112,961 | 1.10% |
| Turkey Republic: Debt | $3,118,988 | 1.09% |
| CA Inc: Equity | $3,104,080 | 1.09% |
| Simon Property Grou: Equity | $3,071,326 | 1.08% |
| Ventas Inc: Equity | $3,023,580 | 1.07% |
| Health Care Propert: Equity | $3,041,175 | 1.07% |
| Boston Properties I: Equity | $3,014,115 | 1.06% |
| Corporate Office Pr: Equity | $3,017,024 | 1.06% |
Data shown represents past performance and is no guarantee of future results. Market price and net asset value (NAV) of a Fund's shares will fluctuate with market conditions. Current performance may be higher or lower than the performance shown.
RISKS
Credit riskThe risk that a security in the fund's portfolio will decline in price, or fail to make dividend or interest payments when due, because the security's issuer defaults or experiences a decline in its financial status. Securities falling lower in a company's capital structure and/or unrated securities and securities with lower credit ratings are expected to have higher credit risk. See subordination.
Risks from Unsecured Adjustable Rate Loans or Insufficient Collateral Securing Adjustable Rate LoansSome of the adjustable rate loans in which the fund may invest will be unsecured, thereby increasing the risk of loss to the fund in the event of Issuer default. Other adjustable rate loans may be secured by specific collateral, but there can be no assurance that liquidating this collateral would satisfy a borrower's obligation to the fund in the event of borrower default, or that such collateral could be readily liquidated under such circumstances.
Non-Investment Grade or Below-Investment Grade Securities RiskInvestments in, or related to, obligors of below investment grade quality, are commonly referred to as "junk bonds". These investments are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal when due and therefore involve a greater risk of default or decline in market value due to adverse economic and issuer-specific developments. Such investments may be less liquid than investment grade securities.
Unrated Investment RiskIn determining whether an unrated security is an appropriate investment for the fund, the manager will seek to determine whether the default probability and financial strength characteristics of the security are comparable to those of issuers of securities rated investment grade quality. The manager will consider information from industry sources, as well as its own quantitative and qualitative analysis, in making such a determination. However, such a determination by the manager is not the equivalent of an investment grade rating by a rating agency.
Illiquid Securities RiskIlliquid securities involve the risk that the securities will not be able to be sold at the time or prices desired by the fund. Illiquid securities are not readily marketable and may include some restricted securities that may be resold to qualified institutional buyers in private transactions but otherwise would not have a regular secondary trading market.
Common Stock RiskAlthough common stocks historically have generated higher average returns than other types of investments, common stocks also have experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of a particular common stock held by the fund. Also, prices of common stocks are sensitive to general movements in the stock market and a drop in the stock market may depress the price of common stocks held by the fund or to which it has exposure.
Value Stock Risks Value stocks are securities that the portfolio manager believes to be undervalued, or mispriced, and that have the prospect for strong improvement on fundamentals. Such companies may have experienced adverse business or industry developments or may be subject to special risks that have caused the common stocks or other equity securities to be out of favor and, in the manager's opinion, undervalued. The risk is if the manager's assessment of a company's prospects is wrong, the price of the company's common stock or other equity securities may fall, or may not approach the value that the manager has placed on them.
Dividend Income RiskA portion of the net investment income paid by the fund to its common shareholders is derived from dividends it receives from the common stocks held in the fund's portfolio Dividends on common stocks are not fixed and can vary significantly over the short term and long term.. There is no guarantee that the issuers of common stocks in which the fund invests will declare dividends in the future or that if declared they will remain at current levels or increase over time.
Real Estate RisksThe fund may invest in various types of securities issued by REITs. As a result, your investment in the fund is linked to the performance of the commercial real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, or cultural developments. REIT prices also may drop because of the failure of borrowers to pay their loans or poor management. There are special risks associated with particular sectors of real estate investments such as retail properties, community centers, office and industrial properties, hotel properties, healthcare properties, multifamily properties and self-storage properties.
Non-U.S. Securities RiskInvestments in securities of non-U.S. issuers involve special risks not typically associated with domestic investments including:
(i) less publicly available information about non-U.S. issuers or markets due to less rigorous disclosure or accounting standards or regulatory practices;
(ii) smaller, less liquid and more volatile markets, meaning that an adviser may not be able to sell the fund's portfolio securities at times, in amounts and at prices it considers reasonable;
(iii) potential adverse effects of fluctuations in currency exchange rates or controls on the value of the fund's investments;
(iv) the economies of non-U.S. countries may grow at slower rates than expected or may experience a downturn or recession;
(v) the security issuer's willingness or ability to repay principal and interest due in a timely manner;
(vi) the impact of adverse economic, political, social or diplomatic events;
(vii) possible seizure, expropriation or nationalization of the company or its assets;
(viii) certain non-U.S. countries may impose restrictions on the ability of non-U.S. issuers to make payments of principal and/or interest to investors located outside the U.S., due to blockage of foreign currency exchanges or otherwise; and
(ix) withholding and other non-U.S. taxes may not be available for pass-through to the fund's shareholders as a deduction from taxable income or as a credit against their U.S. federal income tax liability.
These risks are more pronounced to the extent that the fund invests a significant amount of its assets in companies located in one region. Unanticipated economic, political and social developments may also affect the values of the fund's investments and the fund's availability to make additional investments in such countries.
All of these risks are usually much greater in emerging markets countries. Investments in emerging markets may be considered speculative, due to the higher possibility of hyperinflation, currency devaluations, lower trading volumes, and less liquidity.
Senior Loan Risk Senior loans in which the fund may invest, both secured and unsecured, may not be rated by a national rating agency at the time of investment, generally will not be registered with the Securities and Exchange Commission and generally will not be listed on a securities exchange. In addition, the amount of public information available with respect to senior loans generally is less extensive than that available for more widely rated, registered and exchange-listed securities. Because the interest rates of senior loans reset frequently, if market interest rates fall, the loans' interest rates will be reset to lower levels, potentially reducing the fund's income.
NOTES
1 The ratio of a fund's total managed assets to the sum of (the fund's outstanding preferred shares, at par, plus its outstanding borrowings).
¶ Holdings and their ratings may change over time. Ratings shown are generally the highest rating given by one or more national rating agencies. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Holdings designated “NR” are not rated by a national rating agency, and may be assigned an internal rating by the fund’s investment adviser.
* For the 51.08% of the portfolio invested in debt securities.
**The average earnings per share and UNII figures are monthly amounts based on three month averages for the municipal funds and senior loan funds and six month averages for all other taxable funds. For JRS and 25% of JDD, the average earnings per share represents net REIT cash flow which may consist of income, capital gains and/or a return of capital.
† Percentage are relative to the 49.03% of the portfolio invested in equity securities.
†† Distribution rates represent the latest declared regular distribution, annualized, relative to the most recent daily market price and NAV.
‡ Relative to the fund's total managed assets.
Total return is determined by subtracting the initial investment from the redeemable value of the investment at the end of the investment period, dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all fund distributions have been reinvested.
