The Nuveen Tax-Advantaged Floating Rate Fund (NYSE: JFP) today announced that the fund's Board of Trustees approved a restructuring intended to better position the fund to pursue its investment objectives over time, in light of the ongoing difficult market environment and historically high price volatility levels for the securities of middle market banks and other financial institutions in which the fund primarily invests.
As part of the restructuring, the fund intends to discontinue the use of financial leverage and redeem all of its outstanding auction-rate preferred securities ("FundPreferred"). By doing so, the fund is seeking to reduce common share net asset value volatility and potentially mitigate the risk of continued erosion of shareholder capital from the unprecedented disruptions in the financial sector. The redemption process for the fund's FundPreferred is expected to begin shortly and will take place over time, subject to market conditions as well as the fund's on-going ability to liquidate portfolio assets at prices deemed reasonable by the fund's investment manager.
In addition, the Board of Trustees approved the fund's adoption of a new distribution policy. Under the new distribution policy, regular monthly distributions now will be comprised of a combination of the fund's net investment income as well as additional amounts representing a portion of the capital appreciation potential of the fund's common share net asset value (NAV) subsequent to the new distribution policy's implementation, should prices of the fund's portfolio securities recover.
Securities of financial sector companies, including the securities of middle market banks and other financial institutions in which the fund has invested, have experienced significant price declines over the past year and are currently trading at historically low levels. As a result, the fund believes that, should market conditions and prospects for banks and other financial institutions improve, and prices of the fund's portfolio securities consequently recover, NAV appreciation could represent a greater component of the fund's potential future total return than contemplated at the fund's inception. The fund's new distribution policy is intended to permit current and prospective fund shareholders to monetize a portion of any potential NAV appreciation through additional amounts included in the fund's regular monthly distributions. However, particularly in the near term, securities of financial companies may continue to experience heightened levels of price volatility as well as the negative effects of the ongoing credit crisis that has broadly affected financial markets, and significant uncertainty exists regarding the extent and timing of any potential recovery.
Under the fund's new distribution policy, regular monthly distributions may be comprised of one or more of the following sources of return: net investment income; net realized or unrealized portfolio gains, or return of capital. This type of distribution policy is commonly referred to as a "managed distribution policy". Because of price declines in the fund's portfolio securities and its consequent realized and unrealized capital losses since inception, the fund presently expects that the portion of its distributions not representing net investment income will be characterized as a non-taxable return of capital, even if that portion is sourced from NAV appreciation realized subsequent to the fund's implementation of its new distribution policy.
More information about this action and other Nuveen closed-end funds is available at www.nuveen.com/cef.
Nuveen Investments provides high quality investment services designed to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen, Rittenhouse, Santa Barbara, Symphony and Tradewinds. In total, the Company managed $153 billion of assets on March 31, 2008.