The Nuveen Diversified Dividend and Income Fund (JDD) features portfolio management by teams at four separate sub-advisers.

 

NWQ Investment Management Company, LLC, an affiliate of Nuveen Investments, invests its portion of the Fund’s assets in dividend-paying common stocks. Jon Bosse, Chief Investment Officer of NWQ, leads the Fund’s management team at that firm. He has more than 22 years of corporate finance and investment management experience.

 

The real estate portion of the Fund’s investment portfolio is managed by a team at Security Capital Research & Management Incorporated, a wholly-owned subsidiary of JPMorgan Chase & Co. Anthony R. Manno Jr. and Kenneth D. Statz, who each have more than 27 years experience in managing real estate investments, lead the team.

 

Symphony Asset Management, LLC, an affiliate of Nuveen Investments, invests its portion of the Fund’s assets primarily in senior loans. The Symphony team is led by Gunther Stein and Lenny Mason, who have more than 25 years of combined investment management experience.

 

Wellington Management Company, LLP, invests its portion of the Fund’s assets primarily in emerging markets sovereign debt. James W. Valone, who has more than 22 years of investment management experience, heads the team.

 

Here representatives from NWQ, Symphony, Security Capital, and Wellington Management talk about the markets, their management strategies and the performance of the Fund for the twelve-month period ending December 31, 2008.

 

WHAT WERE THE GENERAL ECONOMIC CONDITIONS AND MARKET TRENDS DURING THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2008?

 

The period was dominated by fears of an economic recession, triggered or exacerbated by several significant developments. The cascading effects of sub-prime mortgage defaults, constrained liquidity in the capital markets and limited lending by many financial institutions caused many investors to seek refuge in U.S. Treasury securities. These events forced some financial firms to merge, restructure or go out of business. At the same time, the U.S. government essentially took over Fannie Mae and Freddie Mac, and also intervened on behalf of the giant insurer AIG. By the end of 2008, the U.S. Treasury had disbursed approximately

 

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.

$350 billion of capital to financial institutions and others under the Troubled Assets Relief Program, with indications that a like amount would be distributed in 2009.

 

Another indicator of economic weakness was the U.S. unemployment rate, which soared to 7.2% as of December 31, 2008, compared with 4.9% one year earlier. Practically all segments of the economy showed signs of slowing by the end of the period. During the third quarter of 2008, gross domestic product contracted to an annual rate of 0.5%, the biggest decrease since 2001. Preliminary reports for the fourth quarter showed a contraction of 3.8%, the worst showing in more than 25 years. This was mainly the result of the first decline in consumer spending since 1991 and an 18% drop in residential investment. Fortunately, inflation was not a significant factor as the Consumer Price Index rose just 0.1% in 2008. The Federal Reserve cut the widely followed short-term fed funds rate seven times during 2008, lowering the rate from 4.25% to 0-0.25% as of year end.

 

The Dow Jones Industrial Average suffered its worst annual decline since 1931 and the NASDAQ Composite suffered its worst annual decline ever—even greater than that experienced during the retreat after the technology bubble in 2000. The S&P 500 Index declined approximately 17% in October driven by significant global weakness. This one month decline nearly matched the entire 2008 year to date decline through September. In November, the market continued its downward path, falling another 17% until reaching a bottom in mid-November, whereupon a 13% rally through the end of the year occurred. The problems were spread broadly across all sectors and markets. Spot prices for certain base metals (steel, aluminum, copper) and crude oil declined as much as 50-70% in the last six months of 2008.

 

The stress in the capital markets restricted the availability of credit even to financially strong corporations and individuals. While U.S. Treasury rates have approached zero at the short end (and are nominally low across the yield curve), a number of investment grade companies have had to pay close to double digit yields to access the capital markets. This is exacerbating the decline in economic activity, and has caused many companies to revise their business forecasts downward. By the end of 2008, the U.S. economy was experiencing a recession of uncertain depth and duration. Many companies have announced that business activity effectively “hit a wall” during the fourth quarter. Global markets fell dramatically as well, with many industries going from boom to bust in a period of a few months. The belief that global diversification in non-correlated markets would provide some downside protection was negated given the magnitude of the economic and market disruption.

 

JDD invests across asset classes, but at all times has long exposure to leveraged loans, many of which are rated below investment grade. Throughout late 2007 these assets were under a significant amount of price pressure. Initially, this was catalyzed by the sub-prime mortgage contagion which virtually shut down the structured credit market. This left the credit market fragile coming into 2008, and the average price of the leveraged loan market stood at roughly 94% of par. Spreads in the loan and credit market drifted wider throughout the next several months, with most of the price pressure prior to the Lehman Brothers collapse in mid-September attributable to the oversupply of debt relative to a growing risk aversion, rather than to defaults or fundamental deterioration. Following the bankruptcy filing of Lehman and

the subsequent near-collapse of the financial system, the market saw fundamental deterioration and volatility begin to accelerate. Convertible bonds (which are sensitive to both equity valuations and credit spreads) got hit from both sides as the Merrill Lynch Convertible Bond Index fell 19% in the fourth quarter of 2008.

 

The systematic deleveraging that followed the Lehman Brothers bankruptcy was primarily responsible for most of the weak pricing in the senior loan market during the fourth quarter of 2008. Although the fundamental backdrop was clearly weakening, forced selling of assets as a result of margin calls and mutual fund redemptions combined with deteriorating fundamentals to put continued stress on the market.

 

Real Estate Investment Trust (REIT) security prices plunged during the fourth quarter capping a highly volatile year characterized by deteriorating credit markets, stressed financial institutions and escalating macro-economic concerns for the U.S. and global economies. For both the fourth quarter and the full year, the self-storage, health care and multi-family companies were the relative outperformers among the major property types, while the industrial, lodging and mall companies lagged.

 

Emerging markets were also impacted by the U.S. financial crisis. During the fourth quarter of 2008, conditions worsened considerably as extremely tight liquidity, slowing global growth, falling commodities prices, and a sudden halt in capital flows all put significant pressure on emerging markets debt. Prices between higher and lower rated emerging markets credits were 300 basis points wider during the quarter than earlier in the year, with spreads finishing 2008 at 748 basis points. All told for the year, credit spreads widened by 485 basis points, with virtually all of that widening occurring in the second half of the year. Emerging markets sovereign debt, as measured by the JPMorgan EMBI Global Diversified Equal Weighted Index fell 17.60% in 2008.

 

IN THIS ENVIRONMENT, WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND?

 

For the equity and preferred portion of the Fund’s portfolio, we continued to employ an opportunistic, bottom-up strategy that focused on identifying undervalued companies possessing favorable risk/reward characteristics as well as emerging catalysts that can unlock value or improve profitability. These catalysts included management changes, restructuring efforts, recognition of hidden assets, or a positive change in the underlying fundamentals. We also focused on downside protection, and paid a great deal of attention to a company’s balance sheet and cash flow statement, not just the income statement. We believed that cash flow analysis offers a more objective and truer picture of a company’s financial position than an evaluation based on earnings alone.

 

The portfolio continues its relative underweight position in the finance sector. While valuations on the sector appear attractive, there is still risk and uncertainty due to economic weakness and dysfunctional capital markets. Given the losses stemming from sub-prime mortgages, the financial markets are in the early stages of determining and valuing potential losses in commercial real estate and in commercial, industrial and consumer loans. Generally, we found more compelling risk/reward opportunities in other sectors. The ability to sell assets or raise capital is proving to be a critical but difficult issue, although such transactions if they do occur, can certainly serve as a catalyst for future investment.

 

We have also taken advantage of the extreme dislocations in the equity market to add a number of new investments to the portfolio, including Barrick Gold Corporation, Illinois Tool Works Inc., Ingersoll-Rand Company Limited, Northrop Grumman Corporation, United States Steel Corporation, Union Pacific Corporation, and Wells Fargo & Company. We believed these companies, possessing strong balance sheets, were not only attractively valued but also will be able to take advantage of opportunities resulting from economic and market disruptions. We also established a new position in Merck & Co. Inc. (Merck), although at a lower position size than originally desired as the stock appreciated in the midst of our purchase. Merck offers a compelling valuation and a disciplined management team that has not historically diluted shareholders. In addition, in our opinion, the company has one of the best track records in bringing a number of highly profitable new drugs to market. Although the company is facing patent expirations on several large drugs, it has much greater earnings stability than most of its competitors. On the heels of a public capital raise, we also established a new position in MetLife, Inc. (MetLife). Notwithstanding challenges within the financial sector, we believe MetLife possesses one of the best franchises in the life insurance industry, and its management has demonstrated a superior record for making good acquisitions and generating excellent returns on capital.

 

In managing the real estate portion of the portfolio, we sought to maintain significant property type and geographic diversification while taking into account company credit quality, sector and security-type allocations. Investment decisions were based on a multi-layered analysis of the company, the real estate it owned, its management, and the relative price of the security, with a focus on securities that we believe will be best positioned to generate sustainable income and potential price appreciation over the long run. Across all real estate sectors, we favored companies with properties located in the strongest infill markets. These are “high barrier to entry” locations with constraints that limit new construction, which is a quality that we believe over the long-term has the potential to provide superior value enhancement and a real inflation hedge.

 

The severe deterioration in real estate credit markets in 2008 required an equally strong reappraisal of the financial flexibility of each company in which we invest. As the credit environment changed, we repositioned the portfolio away from companies that we believed were not well positioned in the current tough environment.

 

In the senior loan portion of the Fund, we continued to focus on fundamental asset selection in positioning our credit portfolios for the longer-term. On this fundamental basis, we saw relative value in senior secured bank loans as one of the more attractive areas of the corporate credit market. In many cases, the market saw senior bank loans trading at a higher implied yield than subordinated debt of the same issuer. We believe these types of relative value situations can create attractive investment opportunities longer-term.

 

Throughout the year, we preferred to own the debt of larger businesses that are less-cyclical in nature, particularly those that are able to generate cash flow through market troughs. These include hospital operators and utility and cable companies, as well as others that are not directly dependent on consumer discretionary spending.

 

 

In the emerging markets debt portion of the Fund’s portfolio, we continued to maintain a defensive stance. We favored countries like Brazil and Indonesia that are well-positioned to withstand the global downturn. We also favored countries like Hungary that can benefit from significant International Monetary Fund support and may come out stronger in the end. We are more cautious on the rest of Eastern Europe due to the high external financing needs in that region. Despite its fundamental improvement in recent years, Russia is also of concern given falling oil prices and the rapid depletion of reserves in defense of the Ruble. Local interest rates, viewed on a currency-hedged basis, are attractive in many countries as central banks move to ease monetary policy. Currencies are at risk as the terms of trade deteriorate for many countries and capital flows reverse. Corporate debt is generally unattractive given high issuance needs. We do believe that our defensive positioning leaves us well-positioned to take advantage of attractive market opportunities as they arise, and our positive long-term view of this market remains firmly intact.

 

HOW DID THE FUND PERFORM OVER THE TWELVE-MONTH PERIOD?

 

The performance of JDD, as well as a comparative benchmark, is presented in the accompanying table.

 

Average Annual Total Returns on Common Share Net Asset Value

For the twelve-month period ended 12/31/08

 

		1-Year				5-Year
JDD1			–42.60%				–3.19%
Comparative Benchmark2			–31.42%				0.05%

 

For the twelve months ended December 31, 2008, the total return on net asset value for the Fund underperformed its unleveraged, unmanaged comparative benchmark. As noted earlier, many asset classes performed poorly in 2008. This unfavorable environment is reflected in the returns of the Fund and the benchmark shown above. Additionally, the major factor in the relative underperformance of the Fund, compared to that of the benchmark, was the Fund’s use of financial leverage (see below).

 

As might be expected, the Fund’s return for 2008 was negatively impacted by the performance of its equity investments. The market has offered little or no downside protection for many of our holdings, even punishing companies with no debt and reasonably healthy businesses. While all areas of the equity portion of the portfolio suffered losses due to the selloff in the market, our specific stock selection in the financial services sector was unfavorable compared to the benchmark. We have maintained an underweight position in the finance sector since the second half of 2007; however, our insurance holdings Genworth Financial Inc. and Hartford Financial Services Group, Inc. suffered significant declines during 2008. These stocks were adversely impacted by weak investment portfolio returns and concerns that dislocations in the credit markets will make it difficult for these companies to raise additional capital. During the year we eliminated Genworth Financial, but continue to maintain a position in Hartford Financial as we believe the market has overly discounted the negatives of this company. In early December, Hartford Financial announced a stronger capital position than previously expected,

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which propelled a strong rally in the shares. Also partially offsetting the losses in the financial sector were strong gains in a new position in MetLife, Inc.

 

In addition to the financial sector holdings, our investments in the energy sector, including Chevron Corporation, ConocoPhillips, Eni S.p.A., and Total S.A., were pressured by the decline in oil and natural gas prices brought on by expectations of slowing global economic growth. Slowing economic growth also contributed to the decline in United States Steel Corporation, while shares of Motorola Inc. declined due to ongoing weakness in its handset division. CBS Corporation and Gannett Company Inc. underperformed given the current cyclical and secular decline in the advertising market.

 

In a weak market environment, our investment in Northrop Grumman Inc. rose modestly. Their defense programs are performing well and are sufficiently funded in the Department of Defense’s budget. Our investment in Barrick Gold Corporation appreciated strongly since purchased in early-November as spot bullion prices rose due to the tight credit markets and ongoing volatility in capital markets, and MetLife Inc. posted a gain since we initiated a position in the stock in early-October.

 

We eliminated a number of equity portfolio holdings in the last few months of the year, including several prior to significant price declines. In early October, and weeks prior to the U.S. Treasury’s capital intervention on behalf of the company, we eliminated our position in Citigroup, Inc. after Wells Fargo & Company topped Citigroup’s government assisted acquisition of Wachovia’s banking assets. We believed that acquiring Wachovia’s assets would have strengthened Citigroup’s financial position and that, without those assets, Citigroup was in a weakened position. We also eliminated our holding of Newell Rubbermaid Inc., notwithstanding its significant asset value, given that we believed its debt level introduced greater risk for equity holders. We sold International Paper Company after the company acquired Weyerhauser’s containerboard and recycling assets. While the acquisition may fit strategically, we believed that such a sizable acquisition, which resulted in a leveraged balance sheet during a period of global economic uncertainty, presented added risk. Other positions sold during the year included American International Group Inc., Fannie Mae, Freddie Mac, Genworth Financial Inc., IndyMac Bancorp Inc., Korea Electric Power Corporation, KT Corporation, Telecom Italia S.p.A., and Wachovia Corporation.

 

Looking at the Fund’s preferred stock holdings, risk premiums increased as the extent of the sub-prime market problems became clearer and several financial firms, including Lehman Brothers and Bear Stearns, disappeared. In addition, many firms issued new preferred securities, which in turn forced generally lower prices for existing issues. The Fund’s finance and investment, brokerage and banking sector holdings generally hurt overall performance during this period. The best performing sectors were basic industries, energy and insurance. The portfolio was positioned conservatively during the period with a relative underweight in financials and a comparative overweight in industrials and utilities.

 

In a very volatile period for real estate securities, the Fund’s allocation to securities perceived to be especially defensive benefited overall performance in the first half of 2008. The market also rewarded the Fund’s strong allocation to multi-family and health care related companies as the

fundamental outlook for these segments remained relatively solid despite the turmoil in the overall economy. However, the Fund’s allocation to the retail and lodging sectors lowered the Fund’s relative returns. These segments of the real estate industry are most sensitive to the sharp declines in consumer spending and travel that was especially evident in the fourth quarter.

 

Another factor weighing on overall Fund performance was its portfolio of senior loans. While 2008 left little opportunity to outperform the market on the long side, we were able to select some positions which had the potential to generate price appreciation in spite of the market’s general direction. These opportunities often had some short-term catalyst, such as positive earnings announcements, debt repayments or acquisitions. One such situation was Alltel, which we purchased in front of news that Verizon would be acquiring the company. More generally, we were able to focus on companies with defensive business positions in less-cyclical industries. On a relative basis, these names tended to outperform the broader markets as fundamental deterioration in the economy began.

 

Deleveraging in the financial markets created forced selling across asset classes and was painful for investors forced to sell assets or mark them to the market. In many cases this deleveraging was funded through the sale of assets which had relative liquidity, putting significant price pressure on many of the Fund’s larger, more liquid credit positions. Although the current economic environment is clearly challenging, in many cases the relative oversupply and simultaneous sale of this debt have created what we believe are attractive levels to own these assets for the longer term. In the short-run, however, senior loans, which are mostly non-investment grade and which have floating-rate coupons that are based off short-term interest rates, have struggled. As the market deteriorated, many investors sold senior loans in order to raise cash to fund redemptions or to reduce leverage. The resulting price pressure constrained the overall performance of the Fund. Although we continue to have conviction within this area of the market, this exposure did not benefit returns in the short-run.

 

In the emerging markets debt portion of the portfolio, relative outperformance was primarily driven by our country rotation decisions. The top contributing countries included Peru and Brazil, where we were comparatively overweighted, and Pakistan and Ukraine, where we were relatively underweighted. Security selection within Colombia and Russia also was positive to relative performance. Our lack of exposure to China, Lebanon and Poland were the main detractors from comparative performance.

 

IMPACT OF THE FUND’S CAPITAL STRUCTURE AND LEVERAGE STRATEGY ON PERFORMANCE

 

In this generally unfavorable investment environment, the most significant factor impacting the return of the Fund relative to the comparative benchmark was the Fund’s use of financial leverage. The Fund uses leverage because its managers believe that, over time, leveraging provides opportunities for additional income and total returns for common shareholders. However, use of leverage also can expose common shareholders to additional risk — especially when market conditions are as unfavorable as they were during this period. As the prices of most securities held by the Fund declined during the year, the negative impact of these

valuation changes on common share net asset value and common shareholder total return was magnified by the use of leverage.

 

RECENT DEVELOPMENTS IN THE AUCTION RATE PREFERRED SECURITIES MARKETS

 

As noted in the last shareholder report, beginning in February 2008, more shares were submitted for sale in the regularly scheduled auctions for the auction rate preferred shares issued by these Funds than there were offers to buy. This meant that these auctions “failed to clear,” and that many or all of the Funds’ auction rate preferred shareholders who wanted to sell their shares in these auctions were unable to do so. This decline in liquidity in auction rate preferred shares did not lower the credit quality of these shares, and auction rate preferred shareholders unable to sell their shares received distributions at the “maximum rate” applicable to failed auctions, as calculated in accordance with the pre-established terms of the auction rate preferred shares.

 

These developments generally have not affected the portfolio management or investment policies of these Funds. However, one continuing implication for common shareholders of these auction failures is that the Funds’ cost of leverage will likely be higher, at least temporarily, than it otherwise would have been had the auctions continued to be successful. As a result, the Funds’ future common share earnings may be lower than they otherwise might have been.

 

As noted in the last shareholder report, the Fund’s Board of Trustees has authorized a program to redeem a portion of the Fund’s FundPreferred shares and replace these shares in the Fund’s capital structure with borrowings.

 

As of December 31, 2008, the Fund has redeemed $48,000,000 of its outstanding FundPreferred shares (40% of the Fund’s original $120,000,000 outstanding FundPreferred shares), at liquidation value, using the proceeds provided through a prime brokerage facility with a major bank and from its portfolio sales.

 

On January 15, 2009, after the end of this reporting period, the Fund noticed for redemption $7,000,000 of its currently outstanding $72,000,000 of FundPreferred shares.

 

For up-to-date information, please visit the Nuveen CEF Auction Rate Preferred Resource Center at: http://www.nuveen.com/ResourceCenter/AuctionRatePreferred.aspx.

 

Common Share

Distribution and Share Price

INFORMATION

 

 

The information below regarding your Fund’s distributions is current as of December 31, 2008, and likely will vary over time based on the Fund’s investment activities and portfolio investment value changes.

 

The Fund reduced its quarterly distribution to common shareholders three times over the course of 2008. Some of the important factors affecting the amount and composition of these distributions are summarized below.

 

During the twelve-month period ended December 31, 2008, the Fund employed financial leverage through the issuance of FundPreferred shares, as well as through bank borrowings. Financial leverage provides the potential for higher earnings (net investment income), total returns and distributions over time, but — as noted earlier — also increases the variability of common shareholders’ net asset value per share in response to changing market conditions. Over the reporting period, the impact of financial leverage on the Fund’s net asset value per share contributed positively to the income return and detracted from the price return. The overall impact of financial leverage detracted from the Fund’s total return.

 

The Fund has a managed distribution program. The goal of this program is to provide common shareholders with relatively consistent and predictable cash flow by systematically converting the Fund’s expected long-term return potential into regular distributions. As a result, regular common share distributions throughout the year are likely to include a portion of expected long-term gains (both realized and unrealized), along with net investment income.

 

Important points to understand about the managed distribution program are:

 

•	The Fund seeks to establish a relatively stable common share distribution rate that roughly corresponds to the projected total return from its investment strategy over an extended period of time. However, you should not draw any conclusions about the Fund’s past or future investment performance from its current distribution rate.
•	Actual common share returns will differ from projected long-term returns (and therefore the Fund’s distribution rate), at least over shorter time periods. Over a specific timeframe, the difference between actual returns and total distributions will be reflected in an increasing (returns exceed distributions) or a decreasing (distributions exceed returns) Fund net asset value.
•	Each distribution is expected to be paid from some or all of the following sources:

 

	•	net investment income (regular interest and dividends),
	•	realized capital gains, and
	•	unrealized gains, or, in certain cases, a return of principal (non-taxable distributions).

 

•	A non-taxable distribution is a payment of a portion of the Fund’s capital. When the Fund’s returns exceed distributions, it may represent portfolio gains generated, but not realized as a taxable capital gain. In periods when the Fund’s returns fall short of distributions, the shortfall

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	will represent a portion of your original principal, unless the shortfall is offset during other time periods over the life of your investment (previous or subsequent) when the Fund’s total return exceeds distributions.

 

•

Because distribution source estimates are updated during the year based on the Fund’s performance and forecast for its current fiscal year (which is the calendar year for the Fund), estimates on the nature of your distributions provided at the time the distributions are paid may differ from both the tax information reported to you in your Fund’s IRS Form 1099 statement provided at year end, as well as the ultimate economic sources of distributions over the life of your investment.

 

The following table provides information regarding the Fund’s common share distributions and total return performance for the fiscal year ended December 31, 2008. This information is intended to help you better understand whether the Fund’s returns for the specified time period were sufficient to meet the Fund’s distributions.

 

As of 12/31/08 (Common Shares)		JDD
Inception date			9/25/03
Calendar year ended December 31, 2008:
Per share distribution:
From net investment income			$0.78
From short-term capital gains			0.00
From long-term capital gains			0.06
From return of capital			0.47
Total per share distribution			$1.31
Distribution rate on NAV			15.78%
Annualized total returns:
Excluding retained gain tax credit/refund3:
1-Year on NAV			-42.60%
5-Year on NAV			-3.19%
Since inception on NAV			-1.77%
Including retained gain tax credit/refund3:
1-Year on NAV			-42.60%
5-Year on NAV			-2.21%
Since inception on NAV			-0.82%

 

COMMON SHARE REPURCHASES AND SHARE PRICE INFORMATION

 

The Fund’s Board of Trustees approved an open-market share repurchase program on July 30, 2008, under which the Fund may repurchase up to 10% of its outstanding common shares. As of December 31, 2008, the Fund had not yet repurchased any of its outstanding common shares.

 

As of December 31, 2008, the Fund was trading at a -23.86% discount to its common share NAV, compared with an average discount of -16.18% for the entire twelve-month period.

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JDD Performance OVERVIEW			Nuveen Diversified Dividend and Income Fund                as of December 31, 2008

 

Portfolio Allocation (as a % of total investments)²

 

2007-2008 Distributions Per Common Share

 

Common Share Price Performance — Weekly Closing Price

 

 

1	Current Distribution Rate is based on the Fund’s current annualized quarterly distribution divided by the Fund’s current market price. The Fund’s quarterly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the calendar year the Fund’s cumulative net ordinary income and net realized gains are less than the amount of the Fund’s distributions, a return of capital for tax purposes.
2	Excluding investments in derivatives.
3	As previously explained in the Common Share Distribution and Share Price Information section of this report, the Fund elected to retain a portion of its realized long-term capital gains for the tax years ended December 31, 2007 and December 31, 2006, and pay required federal corporate income taxes on these amounts. These standardized total returns include the economic benefit to Common shareholders of record of this tax credit/refund. The Fund had no retained capital gains for the tax year ended December 31, 2008.

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