UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21293
Nuveen Multi-Strategy Income and Growth Fund
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Address of principal executive offices) (Zip code)
333 West Wacker Drive
Chicago, IL 60606
Kevin J. McCarthy
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
(Name and address of agent for service)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
Registrant’s telephone number, including area code: (312) 917-7700
Date of
fiscal year end: December 31
Date of
reporting period: December 31, 2008
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 SHAREHOLDERS
|
Annual Report
December 31, 2008 |
Nuveen Investments Closed-End Funds |
|
NUVEEN MULTI-STRATEGY INCOME AND GROWTH FUND JPC NUVEEN MULTI-STRATEGY INCOME AND GROWTH FUND 2 JQC |
Attractive
Distributions from a Portfolio of
Preferred
and Convertible Securities,
Domestic
and Foreign Equities, and Debt Instruments
|
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Chairman’s
LETTER
TO
SHAREHOLDERS
|
ï Robert P. Bremner ï Chairman of the Board | |||||
Dear Shareholders,
I write this letter in a time of continued uncertainty about the
current state of the U.S. financial system and pessimism about
the future of the global economy. Many have observed that the
conditions that led to the crisis have built up over time and
will complicate and extend the course of recovery. At the same
time, government officials in the U.S. and abroad have
implemented a wide range of programs to restore stability to the
financial system and encourage economic recovery. History
teaches us that these efforts will moderate the extent of the
downturn and hasten the inevitable recovery, even though it is
hard to envision that outcome in the current environment.
As you will read in this report, the continuing financial and
economic problems are weighing heavily on the values of equities
real estate and fixed-income assets and unfortunately the
performance of your Nuveen Fund has been similarly affected. In
addition to the financial statements, I hope that you will
carefully review the Portfolio Manager’s Comments, the
Common Share Distribution and Share Price Information and the
Performance Overview sections of this report. These comments
highlight each manager’s pursuit of investment strategies
that depend on thoroughly researched securities, diversified
portfolio holdings and well established investment disciplines
to achieve your Fund’s investment goals. The
Fund Board believes that a consistent focus on long-term
investment goals provides the basis for successful investment
over time and we monitor your Fund with that objective in mind.
Nuveen continues to work on resolving the auction rate preferred
shares situation, but the unsettled conditions in the credit
markets have slowed progress. Nuveen is actively pursuing a
number of solutions, all with the goal of providing liquidity
for preferred shareholders while preserving the potential
benefits of leverage for common shareholders. We appreciate the
patience you have shown as we have worked through the many
issues involved. Please consult the Nuveen website:
www.nuveen.com, for the most recent information.
On behalf of myself and the other members of your Fund’s
Board, we look forward to continuing to earn your trust in the
months and years ahead.
Sincerely,
Robert P. Bremner
Chairman of the Board
February 23, 2009
Chairman of the Board
February 23, 2009
Portfolio Managers’ COMMENTS
|
Nuveen Investments Closed-End Funds
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JPC, JQC |
These Funds are advised by Nuveen Asset Management (NAM),
which determines and oversees the Funds’ asset allocations.
NAM uses a team of sub-advisers with specialties in different
asset classes to manage the Funds’ portfolios. These
sub-advisers include Spectrum Asset Management, Inc., Symphony
Asset Management, LLC, and Tradewinds Global Investors, LLC.
Symphony and Tradewinds are affiliates of Nuveen Investments.
Spectrum, an affiliate of Principal
Capitalsm,
manages preferred securities positions within the
income-oriented portion of each Fund’s portfolio. Mark
Lieb, Bernie Sussman and Phil Jacoby, who have more than
75 years of combined experience in the preferred securities
and other debt markets, lead the team at Spectrum.
Symphony had primary responsibility for the Funds investments
in convertible, high yield and senior loan securities, and for
domestic and international equity investments. The team at
Symphony managing the convertible, high yield and senior loan
portions of each portfolio is led by Gunther Stein and Lenny
Mason, who have more than 25 years of combined investment
management experience. The Symphony team responsible for
managing domestic equity investments is led by Praveen
Gottipalli and David Wang, while the group overseeing the
Funds’ international equity exposure is led by Eric Olson.
On a combined basis, these three equity portfolio managers have
more than 25 years of investment management experience.
Tradewinds manages the portion of the Funds’ assets
invested in global equities. The Tradewinds team is led by Dave
Iben, who has more than 25 years of investment management
experience.
Here representatives from Spectrum, Symphony and Tradewinds
talk about their management strategies and the performance of
both Funds for the twelve-month period ended December 31,
2008.
WHAT WERE THE
GENERAL ECONOMIC CONDITIONS AND MARKET TRENDS DURING THE
TWELVE-MONTH PERIOD?
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
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 Funds disclaim any obligation to update publicly or
revise any forward-looking statements or views expressed herein.
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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
$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.
During the first three quarters of 2008, equity markets across
the globe were highly volatile, while liquidity in the credit
markets was severely contracted. In the U.S., the dollar slid to
an all time low against most major currencies and housing and
retail sales continued to decline. These events led to fiscal
and monetary policy actions intended to avert a recession. The
administration and Congress promptly passed a tax rebate package
and the Federal Reserve took aggressive steps to stabilize the
housing and credit markets. In further efforts to increase
liquidity, the Fed, in collaboration with other central banks,
injected $200 billion into a lending program for
cash-strapped financial institutions. While each time the
government acted the markets reacted favorably, the exuberance
was short-lived.
Equity markets ended 2008 with the worst annual performance in
several decades. Markets across the globe, from the most
developed nations like the U.S. and U.K. to developing
nations like India and China, witnessed unprecedented sell-offs
resulting in equity returns last seen during The Great
Depression. As the ability of corporations to access attractive
financing evaporated, global economic activity, and in
particular the economies of the U.S., Japan and Europe, entered
their first simultaneous recessions since World War II. As
economies weakened, commodities came under immense pressure. In
particular, crude oil, after hitting an all time high of $147 in
the middle of the year fell roughly 70 percent and ended
the year at levels last seen in 2004. The only exceptions were
gold and a few agricultural products such as sugar and cocoa.
Volatility, as measured in the U.S. by the Chicago Board
Options Exchange Volatility Index, broke several records during
the year and hit an all time high of 80.86 in November. In the
closing weeks of the year, global equity markets rallied from
very low bases.
JPC and JQC invest across asset classes, but at all times has
long exposure to corporate 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 much of the credit market. This left the market
fragile coming into 2008, with the average price leveraged loans
at roughly 94% of par. Credit spreads drifted wider throughout
the next several months, with most of the price pressure prior
to the Lehman
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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. The S&P 500 Index
declined 16.8% in October, the largest post-war decline ever
except for the October 1987 crash, with eight days in which the
Dow Jones Industrial Average saw price moves greater than 400
points; high-yield bonds fell by 17%, double the largest move
ever seen to the downside; and leveraged loans fell by 16.5%,
doubling that market’s worst-ever return, which was the
month before. Meanwhile, 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
fourth quarter.
The systematic deleveraging which 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.
The financial services sector volatility caused by the sub-prime
mortgage crisis and the subsequent liquidity crisis and credit
concerns also severely impacted the preferred securities market
over this period. Over 70% of preferred securities come from
issuers in the financial services sector, and many of these
issues experienced rapid and unprecedented price declines,
especially in the second half of the year.
WHAT KEY
STRATEGIES WERE USED TO MANAGE THE FUNDS DURING THIS REPORTING
PERIOD?
The Funds seek to maintain a strategic exposure target of
approximately 70% income-oriented debt securities (preferred
securities and fixed- and floating-rate debt including high
yield debt and senior loans), and 30% equities and equity-like
securities (convertibles and domestic and international
equities). The exact portfolio composition of each Fund will
vary over time as a result of market changes as well as
Nuveen’s view of the portfolio composition that might best
enable the Funds to achieve their investment objectives
consistent with a strategic 70%/30% income/equity mix.
In response to general illiquidity in the credit markets, we
employed several risk management techniques in an effort to
protect Fund shareholders from extreme market moves and the
impact of leveraging within each Fund. For example, we invested
in highly liquid securities such as U.S. Treasuries when
the capital risk of being invested 100% in preferred securities
became temporarily unwise.
For the Funds’ convertible bond, high yield and senior loan
investments, 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 a single issuer. We believe these types of
relative value situations can create attractive investment
opportunities longer-term.
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Throughout the last 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. Given the destruction of wealth
both through the housing and stock market collapse, we believe
that the U.S. consumer will continue to feel the impact of
the weak economy and spend accordingly. To manage the core
domestic equity portion of both Funds, we used both quantitative
and qualitative methods to evaluate securities. The quantitative
screening process served as the starting point for the
decision-making process. The qualitative process then provided a
systematic way of researching companies form a broad
perspective, ensuring the stocks selected for the portfolio were
attractive in all important respects.
The global equity portion of the Funds continued to focus on
buying good or improving business franchises around the globe
whose securities were selling below their intrinsic value. In
2008, we found that the best value opportunities were in the
securities of those businesses that were the most associated
with the growth of the global economy. We continue to like the
materials, food, agriculture and energy sectors, which all
benefit from increased global demand. Conversely, we were
rewarded for not holding financial and retail stocks in the
developed markets, especially during the second half of the
year, as these sectors experienced sizable corrections.
HOW DID THE FUNDS
PERFORM OVER THIS TWELVE-MONTH PERIOD?
The performance of JPC and JQC, as well as a comparative
benchmark, is presented in the accompanying table.
Past performance does not guarantee future results. Current
performance may be higher or lower than the data shown.
Returns do not reflect the deduction of taxes that shareholders
may have to pay on Fund distributions or upon the sale of Fund
shares. For additional information, see the individual
Performance Overview for your Fund in this report.
Average Annual Total
Returns on Common Share Net Asset Value
For the twelve-month period ended
12/31/08
| 1-Year | 5-Year | |||||||
| JPC | -49.27% | -10.34% | ||||||
| JQC | -45.84% | -9.02% | ||||||
| Comparative Benchmark1 | -28.15% | -1.89% | ||||||
1 Comparative benchmark performance is a blended return
consisting of: 1) 33% of the Merrill Lynch Preferred Stock
Hybrid Securities Index, an unmanaged index of investment-grade,
exchange traded preferred issues with outstanding market values
of at least $30 million and at least one year to maturity;
2) 27% of the Lehman Tier 1 Capital Securities Index,
an unmanaged index that includes securities that can generally
be viewed as hybrid fixed-income securities that either receive
regulatory capital treatment or a degree of “equity
credit” from a rating agency; 3) 30% of the Merrill
Lynch All U.S. Convertibles Index consisting of
For the twelve-month period ended December 31, 2008, JPC
and JQC underperformed their comparative benchmark. As noted
earlier, most of the types of securities in which the Funds
invest performed poorly in 2008. This unfavorable environment is
reflected in the returns of the Funds and the comparative
benchmark shown above. Additionally, the major factor in the
significant relative underperformance of these Funds, compared
to that of the unleveraged benchmark, was the Funds’ use of
financial leverage (see below).
Also negatively impacting performance was the high concentration
of preferred securities managed by Spectrum in the financial
service sector, which generally performed poorly. We also owned
small positions in Fannie Mae and Freddie Mac when these
entities went into federal conservatorship. We were able to
reduce our Washington Mutual position, but did continue to own
securities of that institution when it went into receivership.
We also owned a small position of Lehman Brothers securities
when that firm went into bankruptcy.
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approximately 575 securities with par value greater than
$50 million that were issued by U.S. companies or
non-U.S. based
issuers that have a significant business presence in the U.S.;
and 4) 10% of the CSFB High Yield Index, which includes
approximately $375 billion of $U.S.-denominated high yield
debt with a minimum of $75 million in par value and at
least one rating below investment-grade. Index returns do not
include the effects of any management fees or fund expenses. It
is not possible to invest directly in an index.
On the positive side, Spectrum avoided Bear Stearns completely
and were able to reduce positions in Capital One, Pulte Homes,
National City Bank, Lehman Brothers, Royal Bank of Scotland,
Merrill Lynch, and Morgan Stanley, thereby avoiding some of the
losses experienced by the securities issued by each of these
firms.
The Funds’ exposure to core domestic equities managed by
Symphony detracted from total returns due to the broad-based
decline in the equity markets. However, the relative impact of
these holdings was mitigated to a degree by the comparatively
strong returns of our holdings in the financial, consumer
services and commercial services sectors. One of the strongest
individual contributors was Apollo Group, a diversified consumer
services provider. Underperforming sectors included basic
materials, energy and industrials, with computer maker Apple,
Inc. proving to be one of the weakest relative performers.
The Funds’ international equity exposure managed by
Symphony also detracted from the overall Fund returns as the
international market declined in concert with the turmoil in the
U.S. markets. Relative to the MSCI EAFE benchmark, the
Funds’ international equities managed by Symphony
underperformed due in part to exposure to non-EAFE countries
such as Canada and Mexico, and exposure to more volatile
equities. Our positions in defensive equities such as NTT
DOCOMO, Nippon Telegraph & Telephone and Shinogi & Co
Ltd contributed the most relative positive performance. Our
worst contributions were from DNB NOR ASA, AMEC Plc, and
Deutsche Boerse AG.
The global equities held by the Funds and managed by Tradewinds
also were negatively impacted by the turmoil in the
U.S. and worldwide markets. Nevertheless, our holdings in
the materials sector were the largest contributors to positive
relative performance. In particular, our overweight exposure to
the materials sector, and more specifically, the gold industry,
relative to the MSCI All Country World Index, enhanced the
Funds’ returns. Generally, gold companies were aided by
strengthening gold prices and a slowly returning level of
normalcy to equity markets by the end of the year.
Amgen, Inc. also contributed positively to relative returns in
the period. The biotechnology company performed well after it
announced earnings that beat Wall Street’s expectations and
disclosed positive results from an osteoporosis clinical trial
in July.
Despite the relatively good performance of the Funds’
materials sector, Apex Silver Mines Limited was one of the worst
detractors from the Funds’ performance. Apex is a base
metal mining company engaged in the exploration and development
of silver and other mineral properties in Latin America. The
company’s underperformance in 2008 was due to several
factors: a decline in zinc prices as a result of increased
global supply, the company’s production
ramp-up was
slower than expected due to water salinity problems, and the
threat of nationalization after the Bolivian Government’s
move to nationalize the nation’s oil and gas reserves
exacerbated the company’s woes. In November, Sumitomo
Corporation announced a letter of intent to fully acquire the
company’s interest in its San Cristobal mine, the
world’s largest development in silver and zinc. On
January 13th, 2009, after the close of this reporting
period, Apex Silver filed for Chapter 11 bankruptcy.
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The consumer staples sector was Tradewinds’ worst
performing sector during the period, primarily due to protein
providers Smithfield Foods, Inc. and Tyson Foods. Share prices
dropped in the latter half of the year because of strained
credit markets and investor concerns regarding potential
breaches of the companies’ debt covenants. As product
pricing, credit concerns, and supply-demand dynamics appeared to
be on an improving trend line, share price declines started to
stabilize or reverse their course by the end of 2008. We
continue to believe these commodity food companies are strong
long-term business franchises and the Funds continued to hold
their positions in the companies at year end.
After the price of oil retreated from its mid-year high point,
the energy sector incurred one of its worst periods on record in
the fourth quarter of the year. Leading worldwide pressure
pumping and oilfield services provider BJ Services and
multinational energy company Royal Dutch Shell were holdings
that significantly detracted from absolute performance. In our
opinion, long-term supply side fundamentals for oil are as
compelling as ever—even as the market has shifted its
near-term focus to slowing global demand.
For the senior loan sleeve managed by Symphony, we were able to
select some positions which had short-term catalysts that had
the potential to generate price appreciation in spite of the
market’s general direction. These not only included
positive earnings announcements, but also debt repayments and
acquisitions.
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 to run
its course.
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 Funds’ 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 Funds. Although we continue to have conviction within this
area of the market, this exposure did not benefit returns in the
short-run.
The Funds also continue to have exposure to high-yield bonds,
which outperformed both senior loans and convertible bonds on a
relative basis. We believe that much of this outperformance was
technical in nature, and we continue to be more constructive
overall on senior loans with their traditional high-yield
capital structures relative to high-yield bonds.
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IMPACT OF THE
FUNDS’ CAPITAL STRUCTURES AND LEVERAGE STRATEGIES ON
PERFORMANCE
In this generally unfavorable investment environment, the most
significant factor impacting the returns of these Funds relative
to those of their comparative benchmark was the Funds’ use
of financial leverage. The Funds use leverage because their
managers believe that, over time, leveraging provides
opportunities for additional income and total returns for common
shareholders. However, the 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 Funds
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 Funds’ Board
of Trustees has authorized a program to redeem portions of the
Funds’ auction rate preferred and replace the FundPreferred
shares in each Fund’s capital structure with bank
borrowings.
As of December 31, 2008, JPC and JQC had redeemed and/or
noticed for redemption $589,350,000 and $799,200,000
FundPreferred shares, respectively, (83.2% and 82.8%,
respectively, of their original outstanding FundPreferred shares
of $708,000,000 and $965,000,000, respectively), and had
$118,650,000 and $165,800,000, respectively, of FundPreferred
shares still outstanding. While the Funds’ Board and
management continue to work to resolve this situation, the Fund
cannot provide any assurance on when the remaining outstanding
auction rate preferred shares might be redeemed.
For up-to-date information, please visit the Nuveen CEF Auction
Rate Preferred Resource Center at:
http://www.nuveen.com/ResourceCenter/AuctionRatePreferred.aspx.
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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.
Each Fund reduced its quarterly distribution to common
shareholders twice over the course of 2008. Some of the
important factors affecting the amount and composition of these
distributions are summarized below.
The Funds employ 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.
Each 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:
| • | Each 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 a 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 a 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 a Fund’s capital. When a Fund’s returns exceed distributions, it may represent portfolio gains generated, but not realized as a taxable capital gain. In periods when a Fund’s return falls short of distributions, the shortfall will represent |
| 11 | ||||
| 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 a Fund’s total return exceeds distributions. |
| • | Because distribution source estimates are updated during the year based on a Fund’s performance and forecast for its current fiscal year (which is the calendar year for each Fund), estimates on the nature of your distributions provided at the time 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 each
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 each Fund’s distributions.
| As of 12/31/08 (Common Shares) | JPC | JQC | ||||||
|
Inception date
|
3/26/03 | 6/25/03 | ||||||
|
Calendar year ended December 31, 2008:
|
||||||||
|
Per share distribution:
|
||||||||
|
From net investment income
|
$0.69 | $0.72 | ||||||
|
From short-term capital gains
|
0.00 | 0.00 | ||||||
|
From long-term capital gains
|
0.00 | 0.00 | ||||||
|
From return of capital
|
0.31 | 0.28 | ||||||
|
Total per share distribution
|
$1.00 | $1.00 | ||||||
|
Distribution rate on NAV
|
17.86% | 16.56% | ||||||
|
Annualized total returns:
|
||||||||
|
1-Year on NAV
|
-49.27% | -45.84% | ||||||
|
5-Year on NAV
|
-10.34% | -9.02% | ||||||
|
Since inception on NAV
|
-7.06% | -6.97% | ||||||
COMMON SHARE
REPURCHASES AND SHARE PRICE INFORMATION
On November 21, 2007, the Funds’ Board of Trustees approved
an open market share repurchase program, under which each Fund
may repurchase up to 10% of its outstanding common shares. As of
December 31, 2008, JPC and JQC had repurchased 311,100 and
764,500 common shares, respectively, representing approximately
0.3% and 0.5%, respectively, of each Fund’s total common
shares outstanding. During the twelve-month reporting period,
JQC repurchased 38,900 common shares at a weighted average price
and a weighted average discount per common share of $10.95 and
12.44%, respectively.
As of December 31, 2008, the Funds’ share prices were
trading relative to their common share NAVs as shown in the
accompanying table:
|
12/31/08 |
12-Month |
|||
| Discount | Average Discount | |||
|
JPC
|
-17.86% | -15.41% | ||
|
JQC
|
-19.37% | -16.64% | ||
|
12
|
||||
| Fund Snapshot | ||
| Common Share Price | $4.60 | |
| Common Share Net Asset Value | $5.60 | |
| Premium/(Discount) to NAV | -17.86% | |
| Current Distribution Rate1 | 16.35% | |
| Net Assets Applicable to Common Shares ($000) | $556,698 | |
|
Average Annual |
|||||||
|
Total Return |
|||||||
| (Inception 3/26/03) | |||||||
|
On Share |
|||||||
| Price | On NAV | ||||||
|
1-Year
|
-51.80 | % | -49.27% | ||||
|
5-Year
|
-13.35 | % | -10.34% | ||||
|
Since Inception
|
-10.11 | % | -7.06% | ||||
|
Industries |
||
| (as a % of total investments)2 | ||
| Commercial Banks | 16.4% | |
| Insurance | 12.3% | |
| Real Estate | 9.8% | |
| Media | 6.1% | |
| Oil, Gas & Consumable Fuels | 4.4% | |
| Capital Markets | 3.6% | |
| Metals & Mining | 3.5% | |
| Health Care Providers & Services | 2.7% | |
| Electric Utilities | 2.6% | |
| Diversified Financial Services | 2.5% | |
| Diversified Telecommunication Services | 2.4% | |
| Hotels, Restaurants & Leisure | 2.3% | |
| Food Products | 2.1% | |
| Pharmaceuticals | 1.8% | |
| Specialty Retail | 1.6% | |
| Investment Companies | 1.4% | |
| Energy Equipment & Services | 1.3% | |
| Commercial Services & Supplies | 1.2% | |
| Health Care Equipment & Supplies | 1.2% | |
| Short-Term Investments | 2.0% | |
| Other | 18.8% | |
|
Top Five Issuers |
||
| (as a % of total investments)3 | ||
| Wachovia Corporation | 2.3% | |
| Delphi Financial Group, Inc. | 2.2% | |
| PartnerRe Limited | 1.8% | |
| ING Groep N.V. | 1.7% | |
| Deutche Bank AG | 1.7% | |
|
JPC Performance OVERVIEW |
Nuveen
Multi-Strategy Income and Growth 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 common stocks sold short and, call options written and investments in derivatives. |
| 3 | Excluding short-term investments, common stocks sold short, call options written and investments in derivatives. |
| 13 | ||||
| Fund Snapshot | ||
| Common Share Price | $4.87 | |
| Common Share Net Asset Value | $6.04 | |
| Premium/(Discount) to NAV | -19.37% | |
| Current Distribution Rate1 | 15.36% | |
| Net Assets Applicable to Common Shares ($000) | $843,469 | |
|
Average Annual |
||||||
|
Total Return |
||||||
| (Inception 6/25/03) | ||||||
|
On Share |
||||||
| Price | On NAV | |||||
| 1-Year | -49.39 | % | -45.84% | |||
| 5-Year | -11.57 | % | -9.02% | |||
| Since Inception | -10.43 | % | -6.97% | |||
|
Industries |
||
| (as a % of total investments)2 | ||
| Commercial Banks | 17.7% | |
| Insurance | 12.1% | |
| Real Estate | 9.0% | |
| Media | 6.2% | |
| Oil, Gas & Consumable Fuels | 4.5% | |
| Diversified Financial Services | 3.7% | |
| Capital Markets | 3.5% | |
| Metals & Mining | 3.4% | |
| Diversified Telecommunication Services | 3.2% | |
| Health Care Providers & Services | 2.4% | |
| Electric Utilities | 2.4% | |
| Food Products | 2.4% | |
| Hotels, Restaurants & Leisure | 2.2% | |
| Pharmaceuticals | 1.8% | |
| Specialty Retail | 1.7% | |
| Energy Equipment & Services | 1.4% | |
| Investment Companies | 1.3% | |
| Short-Term Investments | 1.6% | |
| Other | 19.5% | |
|
Top Five Issuers |
||
| (as a % of total investments)3 | ||
| AgFirst Farm Credit Bank | 3.4% | |
| Wachovia Corporation | 2.1% | |
| Comcast Corporation | 1.9% | |
| Lincoln National Corporation | 1.7% | |
| ING Groep N.V. | 1.5% | |
|
JQC Performance OVERVIEW |
Nuveen
Multi-Strategy Income and Growth Fund 2 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 common stocks sold short, call options written and investments in derivatives. |
| 3 | Excluding short-term investments, common stocks sold short, call options written and investments in derivatives. |
|
14
|
||||
Report of INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of
Trustees and Shareholders
Nuveen Multi-Strategy Income and Growth Fund
Nuveen Multi-Strategy Income and Growth Fund 2
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of Nuveen
Multi-Strategy Income and Growth Fund and Nuveen Multi-Strategy
Income and Growth Fund 2 (the “Funds”) as of
December 31, 2008, and the related statements of operations
and cash flows for the year then ended, the statements of
changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the periods
indicated therein. 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 conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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. We were
not engaged to perform an audit of the Funds’ internal
control over financial reporting. Our audits included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Funds’ internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting
principles used and significant estimates made by management and
evaluating the overall financial statement presentation. Our
procedures included confirmation of securities owned as of
December 31, 2008, by correspondence with the custodian,
selling or agent banks and brokers or by other appropriate
auditing procedures where replies from selling or agent banks or
brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial positions of Nuveen Multi-Strategy
Income and Growth Fund and Nuveen Multi-Strategy Income and
Growth Fund 2 at December 31, 2008, the results of
their operations and cash flows for the year then ended, the
changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the
periods indicated therein in conformity with US generally
accepted accounting principles.
Chicago, Illinois
February 26, 2009
February 26, 2009
| 15 | ||||
|
JPC
|
Nuveen Multi-Strategy Income and
Growth Fund Portfolio of INVESTMENTS |
|||
| December 31, 2008 | ||||
| Shares | Description (1) | Value | |||||||||||||||||||
| Common Stocks – 35.5% (24.4% of Total Investments) | |||||||||||||||||||||
| Aerospace & Defense – 0.7% | |||||||||||||||||||||
| 56,170 |
BAE Systems PLC
|
$ | 305,684 | ||||||||||||||||||
| 8,000 |
Boeing Company
|
341,360 | |||||||||||||||||||
| 87,660 |
Bombardier Inc., CLass B Shares, DD1
|
315,988 | |||||||||||||||||||
| 1,380 |
Esterline Technologies Corporation, (2)
|
52,288 | |||||||||||||||||||
| 9,030 |
Finmeccanica S.p.A.
|
139,865 | |||||||||||||||||||
| 7,276 |
Lockheed Martin Corporation
|
611,766 | |||||||||||||||||||
| 10,020 |
Orbital Sciences Corporation, (2)
|
195,691 | |||||||||||||||||||
| 11,930 |
Raytheon Company
|
608,907 | |||||||||||||||||||
| 23,400 |
Thales S.A.
|
980,067 | |||||||||||||||||||
| 4,140 |
United Technologies Corporation
|
221,904 | |||||||||||||||||||
|
Total Aerospace & Defense
|
3,773,520 | ||||||||||||||||||||
| Air Freight & Logistics – 0.1% | |||||||||||||||||||||
| 7,160 |
FedEx Corporation
|
459,314 | |||||||||||||||||||
| Airlines – 0.1% | |||||||||||||||||||||
| 12,840 |
Continental Airlines, Inc., (2)
|
231,890 | |||||||||||||||||||
| 4,330 |
UAL Corporation, (2)
|
47,717 | |||||||||||||||||||
|
Total Airlines
|
279,607 | ||||||||||||||||||||
| Auto Components – 0.2% | |||||||||||||||||||||
| 17,250 |
Advance Auto Parts, Inc.
|
580,463 | |||||||||||||||||||
| 28,970 |
Aisin Seiki Company Limited
|
414,928 | |||||||||||||||||||
| 3,390 |
Magna International Inc., Class A
|
101,463 | |||||||||||||||||||
|
Total Auto Components
|
1,096,854 | ||||||||||||||||||||
| Automobiles – 0.3% | |||||||||||||||||||||
| 17,400 |
Daimler-Chrysler AG
|
666,072 | |||||||||||||||||||
| 6,370 |
Toyota Motor Corporation
|
416,853 | |||||||||||||||||||
| 29,750 |
Yamaha Motor Company Limited
|
313,039 | |||||||||||||||||||
|
Total Automobiles
|
1,395,964 | ||||||||||||||||||||
| Beverages – 1.0% | |||||||||||||||||||||
| 1,200 |
Boston Beer Company, (2)
|
34,080 | |||||||||||||||||||
| 71,581 |
Coca Cola Amatil Limited
|
459,987 | |||||||||||||||||||
| 5,120 |
Coca-Cola Company
|
231,782 | |||||||||||||||||||
| 13,380 |
Diageo PLC, Sponsored ADR
|
759,181 | |||||||||||||||||||
| 33,670 |
Fomento Economico Mexicano S.A.
|
1,014,477 | |||||||||||||||||||
| 152,130 |
Foster’s Group Limited
|
585,104 | |||||||||||||||||||
| 35,790 |
Heineken N.V.
|
1,095,773 | |||||||||||||||||||
| 15,290 |
Molson Coors Brewing Company, Class B
|
747,987 | |||||||||||||||||||
| 12,290 |
Pepsi Bottling Group, Inc.
|
276,648 | |||||||||||||||||||
| 4,560 |
PepsiCo, Inc.
|
249,751 | |||||||||||||||||||
| 5,860 |
SABMiller PLC
|
98,406 | |||||||||||||||||||
|
Total Beverages
|
5,553,176 | ||||||||||||||||||||
| Biotechnology – 0.5% | |||||||||||||||||||||
| 9,800 |
Alnylam Pharmaceuticals, Inc., (2)
|
242,354 | |||||||||||||||||||
| 4,700 |
Amgen Inc., (2)
|
271,425 | |||||||||||||||||||
| 8,610 |
Cephalon, Inc., (2)
|
663,314 | |||||||||||||||||||
| 5,340 |
Emergent BioSolutions, Inc., (2)
|
139,427 | |||||||||||||||||||
| 4,370 |
Genentech, Inc., (2)
|
362,317 | |||||||||||||||||||
| 10,720 |
Genzyme Corporation, (2)
|
711,486 | |||||||||||||||||||
| 3,500 |
ISIS Pharmaceuticals, Inc., (2)
|
49,630 | |||||||||||||||||||
| 9,800 |
Novo-Nordisk A/S
|
503,622 | |||||||||||||||||||
|
Total Biotechnology
|
2,943,575 | ||||||||||||||||||||
|
16
|
||||