UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21137
---------------------
Nuveen Quality Preferred Income Fund 2
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: December 31
------------------
Date of reporting period: June 30, 2005
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT June 30, 2005
Nuveen Investments
Closed-End
Exchange-Traded
Funds
NUVEEN QUALITY PREFERRED INCOME FUND
JTP
NUVEEN QUALITY PREFERRED INCOME FUND 2
JPS
NUVEEN QUALITY PREFERRED INCOME FUND 3
JHP
Photo of: Man, woman and child at the beach.
Photo of: A child.
HIGH CURRENT INCOME FROM A PORTFOLIO OF INVESTMENT-GRADE PREFERRED SECURITIES
Logo: NUVEEN Investments
Photo of: Woman
Photo of: Man and child
Photo of: Woman
NOW YOU CAN RECEIVE YOUR
NUVEEN FUND REPORTS FASTER.
NO MORE WAITING.
SIGN UP TODAY TO RECEIVE NUVEEN FUND INFORMATION BY E-MAIL.
It only takes a minute to sign up for E-Reports. Once enrolled, you'll receive
an e-mail as soon as your Nuveen Investments Fund information is ready -- no
more waiting for delivery by regular mail. Just click on the link within the
e-mail to see the report, and save it on your computer if you wish.
---------------------
DELIVERY DIRECT TO
YOUR E-MAIL INBOX
---------------------
IT'S FAST, EASY & FREE:
WWW.INVESTORDELIVERY.COM
if you get your Nuveen Fund dividends
and statements from your financial
advisor or brokerage account.
OR
WWW.NUVEEN.COM/ACCOUNTACCESS
if you get your Nuveen Fund dividends
and statements directly from Nuveen.
(Be sure to have the address sheet that accompanied this report handy. You'll
need it to complete the enrollment process.)
Logo: NUVEEN Investments
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am pleased to report that for the period ended June 30, 2005, your Fund
continued to provide you with attractive monthly income from a diversified
portfolio of quality preferred securities. For more details about the management
strategy and performance of your Fund, please see the Portfolio Managers'
Comments and Performance Overview sections of this report.
As you'll see as you review this report, we continue to believe that your Fund
provides a valuable source of regular monthly income, and that it also may
provide
"WE CONTINUE TO BELIEVE THAT YOUR FUND PROVIDES A VALUABLE SOURCE OF REGULAR
MONTHLY INCOME, AND THAT IT ALSO MAY PROVIDE AN OPPORTUNITY TO REDUCE THE
OVERALL RISK OF YOUR ENTIRE INVESTMENT PORTFOLIO."
an opportunity to reduce the overall risk of your entire investment portfolio.
This is because the price of your Fund's shares may move differently than the
prices of other investments that you may own. Your financial advisor can explain
the advantages of portfolio diversification in more detail. I urge you to
contact him or her soon for more information on this important investment
strategy.
I also urge you to consider receiving future Fund reports and other Fund
information faster by using e-mail and the Internet. Sign up is quick and easy -
see the inside front cover of this report for step-by-step instructions.
Earlier in 2005, The St. Paul Travelers Companies, Inc., which owned 79% of
Nuveen Investments, Inc. (the parent of your Fund's investment adviser), sold a
substantial portion of its stake in Nuveen. More recently, St. Paul sold the
balance of its shares in Nuveen to us or to others. Please be assured that these
transactions only affect Nuveen's corporate structure, and they do not have any
impact on the investment objectives or management of your Fund.
For more than 100 years, Nuveen has specialized in offering quality investments
such as your Fund to those seeking to accumulate and preserve wealth. Our
mission continues to be to assist you and your financial advisor by offering the
investment solutions and services that can help you secure your long-term
financial goals. We thank you for choosing us as a partner as you work toward
that objective.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 15, 2005
Nuveen Closed-End Exchange-Traded Funds (JTP, JPS, JHP)
The Nuveen Quality Preferred Income Funds are subadvised by a team of
specialists at Spectrum Asset Management, an affiliate of Principal CapitalSM.
Mark Lieb, Bernie Sussman and Phil Jacoby, who have more than 50 years of
combined experience in the preferred securities markets, lead the team. Here
Mark, Bernie and Phil talk about their management strategy and the performance
of each Fund for the six-month period ended June 30, 2005.
WHAT WAS YOUR OVERALL MANAGEMENT STRATEGY FOR THE SIX-MONTH PERIOD ENDED JUNE
30, 2005?
In a surprisingly strong bond market, our focus for this six-month period was on
trying to maintain Fund income levels as much as possible without sacrificing
quality. Contrary to what many market observers predicted, intermediate- and
long-term interest rates dropped significantly during the first six months of
2005 at the same time as the Federal Reserve was raising short-term rates. As
might be expected in this type of environment, a number of the Funds' higher
coupon issues were called away and the proceeds generally had to be reinvested
at lower current rates.
As the period progressed, we tried to turn some of this yield curve flattening
to our advantage by shortening the durations - and therefore reducing the
interest rate risk - of the Funds. We did this by purchasing securities with
shorter effective maturities, since the flatter yield curve meant that we would
give up less income to buy these less risky investments. Helping this process,
certain sectors of both the $1000 par capital securities market and the $25 par
listed securities market also afforded opportunities to reinvest in ways that
provided more yield for a given level of interest rate risk.
Generally, as intermediate- and long-term bonds rallied during this reporting
period, $25 par issues tended to lag behind. This was especially true during the
first three months of 2005, when the $25 par sector experienced one of its worst
quarters ever, both on an absolute basis as well as relative to the general
fixed-income markets. While this hurt the overall performance of the Funds, it
also meant that many $25 par securities were available at yields that were the
most attractive relative to the corporate bond market since 2001. To take
advantage of this situation, we reallocated a small percentage of each Fund's
portfolios into the $25 par sector by selling some $1000 par capital securities.
4
Other parts of the preferred market that appeared very attractive to us were
Dividends Received Deduction (DRD) and the Qualified Dividend Income (QDI)
issues. Due to a recent change by Moody's in how they would evaluate an issuer's
preferred securities, there was a large amount of issuance of this type of paper
during this reporting period. In nearly all cases, the new issues were priced
attractively to the current market and at levels that allowed investors to buy
without giving up much income relative to fully taxable securities. Even though
the Funds do not emphasize tax-advantaged income to either individuals or
corporations as an objective, we increased our concentration in these types of
issues since we believed that we were getting the tax advantages for little or
no cost. Moreover, we believed that there were potential total return benefits
that existed if these types of preferred investments ever begin to trade at
levels that reflect their tax benefits.
HOW DID THE FUNDS PERFORM OVER THE SIX-MONTHS ENDED JUNE 30, 2005?
The performance of each Fund, as well as the performance of several widely
followed market indexes, is shown in the nearby chart.
TOTAL RETURN ON NET ASSET VALUE*
For periods ended June 30, 2005
6-MONTH 1-YEAR
--------------------------------------------------------------------------------
JTP 2.33% 11.99%
--------------------------------------------------------------------------------
JPS 2.40% 12.01%
--------------------------------------------------------------------------------
JHP 2.07% 11.68%
--------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index1 2.52% 6.81%
--------------------------------------------------------------------------------
Merrill Lynch Preferred Stock
Hybrid Securities Index2 -0.54% 8.00%
--------------------------------------------------------------------------------
*Six-month returns are cumulative; one-year returns are annualized.
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 a shareholder may have to pay on Fund distributions or upon the sale
of Fund shares.
For more information, please see the individual Performance Overview pages in
this report.
For the six months ended June 30, 2005, all three Funds underperformed the
unleveraged, unmanaged Lehman Brothers Aggregate Bond Index and outperformed the
Merrill Lynch Preferred Stock Hybrid Securities Index.
1 The Lehman Brothers Aggregate Bond Index is an unmanaged index that
includes all investment-grade, publicly issued, fixed-rate,
dollar-denominated, nonconvertible debt issues and commercial mortgage
backed securities with maturities of at least one year and outstanding par
values of $150 million or more. Index returns do not include the effects of
any sales charges or management fees. It is not possible to invest directly
in an index.
2 The Merrill Lynch Preferred Stock Hybrid Securities Index is an unmanaged
index of investment-grade, exchange-traded preferred stocks with
outstanding market values of at least $30 million and at least one year to
maturity.
5
Helping the performance of the Funds during this period was the decision to
focus on some of the recent DRD and QDI issuance. These purchases produced
positive results quickly as many of these offerings traded immediately to
premiums. The Funds also benefited from the trades that took profits on a number
of $1000 par capital security positions such as Centaur, Abbey National and KN
Energy, with the proceeds then reinvested in both fully taxable and QDI $25 par
securities. All three Funds also were helped by the profits resulting from the
liquidation of a number of convertible securities positions during the period.
We sold our positions in Ameren, Keyspan, Public Service Enterprise and Alltel
at significant gains after having enjoyed book yields of 8% or more from these
issues over the past couple of years.
On the other hand, auto industry securities were a bad news story during the six
month period. As of June 30, 2005, we had liquidated all of our holdings in GM
and Delphi, and most of our holdings in Ford. In hindsight, we wish we had acted
more quickly. The bonds and preferred securities of these issuers traded down
considerably as market share concerns and unfunded pension and healthcare
obligations took center stage in the press. Rating agency downgrades followed
and even though most of our investments were in the senior debt of these
companies, prices of all securities of these companies dropped as investors
reacted to the unfavorable news.
In addition, the underperformance of the $25 par sector relative to both the
$1000 par capital securities sector and the general bond market hurt the
performance of the Funds. We believed this to be a temporary phenomenon, and we
actually increased our concentrations in this sector. While we believe this may
help the Funds over the longer term, it did constrain their performance over
this six month period.
6
Distribution and Share Price
INFORMATION
Each of these Funds uses financial leverage in an effort to enhance its
dividend-paying capabilities. While this strategy adds volatility to a Fund's
net asset value and share price, it generally enhances the amount of income the
Fund has to distribute to its common shareholders. The extent of this benefit is
tied in part to the short-term rates these Funds pay their FundPreferredTM
shareholders. As short-term rates rose through this reporting period, the Funds
paid higher dividends to their FundPreferred shareholders. As a result, the
leveraging strategy - while still beneficial - did not provide as much income
enhancement as it did before short-term interest rates began to rise. Over this
reporting period JTP and JHP announced two reductions in their monthly
distribution to shareholders, while JPS announced three distribution reductions.
Each of these Funds seeks to pay stable distributions at rates that reflect each
Fund's past results and projected future performance. During certain periods,
each Fund may pay distributions at a rate that may be more or less than the
amount of net investment income actually earned by the Fund during the period.
If a Fund has cumulatively earned more than it has paid in distributions, it
holds the excess in reserve as undistributed net investment income (UNII) as
part of the Fund's NAV. Conversely, if a Fund has cumulatively paid
distributions in excess of its earnings, the excess constitutes negative UNII
that is likewise reflected in the Fund's NAV. Each Fund will, over time, pay all
of its net investment income in distributions to shareholders. As of June 30,
2005, each of the Funds in this report had positive UNII balances for both
financial statement and tax purposes.
In addition, due to normal portfolio management activity, common shareholders of
the following Funds received capital gains and/or net ordinary income
distributions at the end of December 2004 as follows:
LONG-TERM CAPITAL GAINS ORDINARY INCOME
(PER SHARE) (PER SHARE)
--------------------------------------------------------------------------------
JPS $0.1587 $0.0300
--------------------------------------------------------------------------------
JHP $0.0588 --
--------------------------------------------------------------------------------
The relatively large distributions from JPS represented important parts of this
Fund's total return for this period. Generally, these types of distributions
were generated by bond calls or by sales of appreciated securities that occurred
in the course of normal portfolio management activities. The proceeds of these
calls or sales then were reinvested in securities paying lower, current interest
rates. On balance, this had a slight negative impact on the Funds' earning power
and was a minor factor in the reductions noted above.
As of June 30, 2005, the Funds' shares were trading at discounts to their NAVs
as shown in the accompanying chart:
6/30/05 6-MONTH AVERAGE
DISCOUNT DISCOUNT
--------------------------------------------------------------------------------
JTP -4.63% -6.31%
--------------------------------------------------------------------------------
JPS -6.35% -7.54%
--------------------------------------------------------------------------------
JHP -2.09% -3.05%
--------------------------------------------------------------------------------
7
Nuveen Quality Preferred Income Fund
JTP
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
$25 Par (or similar) Securities 52.8%
Capital Preferred Securities 43.3%
Convertible Preferred Securities 2.6%
Repurchase Agreements 1.1%
Corporate Bonds 0.2%
Bar Chart:
2004-2005 MONTHLY DIVIDENDS PER SHARE
Jul 0.101
Aug 0.101
Sep 0.101
Oct 0.101
Nov 0.101
Dec 0.097
Jan 0.097
Feb 0.097
Mar 0.097
Apr 0.097
May 0.097
Jun 0.0935
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1//04 13.6
13.69
13.89
13.88
13.92
13.9
13.99
13.71
13.72
13.77
13.83
13.87
13.82
13.65
13.64
13.74
13.69
13.58
13.72
13.86
13.96
13.96
14.04
14.13
14.13
14.01
14.1
14.16
14.2
14.13
14.2
14.26
14.27
14.3
14.36
14.44
14.38
14.37
14.2
14.27
14.46
14.46
14.5
14.6
14.55
14.48
14.54
14.55
14.54
14.59
14.55
14.5
14.56
14.55
14.56
14.57
14.59
14.61
14.67
14.58
14.62
14.58
14.7
14.61
14.6
14.56
14.57
14.65
14.69
14.69
14.75
14.79
14.77
14.7
14.63
14.65
14.62
14.63
14.68
14.63
14.64
14.58
14.62
14.67
14.72
14.8
14.85
14.92
14.94
14.97
14.63
14.22
14.47
14.52
14.55
14.49
14.57
14.59
14.71
14.7
14.73
14.75
14.75
14.77
14.86
14.74
14.65
14.6
14.42
14.55
14.66
14.6
14.52
14.49
14.51
14.36
14.15
13.96
13.81
13.61
13.65
13.83
13.83
13.73
13.71
13.74
13.82
13.93
14
13.99
13.99
14.03
14.11
14.14
14.27
14.28
14.2
14.16
14.18
14.24
14.24
14.25
14.23
14.27
14.25
14.19
14.21
14.25
14.35
14.44
14.49
14.54
14.65
14.74
14.67
14.67
14.6
14.49
14.28
14.27
14.22
14.27
14.17
14
14.03
14.18
14.25
14.34
14.29
14.24
14.21
14.17
14.19
14.2
14.1
14.09
13.85
13.65
13.51
13.32
13.3
13.16
12.96
12.85
13.02
12.95
12.63
12.68
13.08
13.2
13.14
13.17
12.97
13.02
13.09
13.13
13.14
13.17
12.96
12.87
12.88
13.1
13.06
13.03
13
13.02
13.1
13.21
13.27
13.33
13.43
13.43
13.4
13.45
13.4
13.38
13.31
13.33
13.42
13.38
13.44
13.43
13.49
13.49
13.49
13.55
13.62
13.75
13.84
13.82
13.86
13.86
13.89
14.03
14
14.02
13.92
13.92
13.98
13.99
13.93
13.75
13.83
13.8
13.8
13.83
13.85
13.86
14
14.02
14.04
13.99
13.99
13.96
6/30/05 14
PORTFOLIO STATISTICS
------------------------------------
Common Share Price $14.00
------------------------------------
Common Share
Net Asset Value $14.68
------------------------------------
Premium/(Discount) to NAV -4.63%
------------------------------------
Latest Dividend $.0935
------------------------------------
Market Yield 8.01%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $946,257
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Commercial Banks 28.6%
------------------------------------
Insurance 17.5%
------------------------------------
Real Estate 16.3%
------------------------------------
Diversified Financial Services 10.7%
------------------------------------
Capital Markets 8.4%
------------------------------------
Thrifts & Mortgage Finance 4.6%
------------------------------------
Repurchase Agreements 1.1%
------------------------------------
Other 12.8%
------------------------------------
TOP FIVE ISSUERS
(EXCLUDING REPURCHASE AGREEMENTS)
(as a % of total investments)
------------------------------------
Wachovia Corporation 3.4%
------------------------------------
JPMorgan Chase & Company 3.1%
------------------------------------
ING Groep NV 3.0%
------------------------------------
HSBC Holdings Public
Limited Company 2.6%
------------------------------------
Zurich Financial Services 2.5%
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 6/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 4.23% 2.33%
------------------------------------
1-Year 13.01% 11.99%
------------------------------------
Since
Inception 6.09% 9.37%
------------------------------------
8
Nuveen Quality Preferred Income Fund 2
JPS
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
$25 Par (or similar) Securities 54.7%
Capital Preferred Securities 40.9%
Convertible Preferred Securities 2.7%
Repurchase Agreements 1.5%
Corporate Bonds 0.2%
Bar Chart:
2004-2005 MONTHLY DIVIDENDS PER SHARE1
Jul 0.105
Aug 0.105
Sep 0.105
Oct 0.105
Nov 0.105
Dec 0.102
Jan 0.102
Feb 0.102
Mar 0.099
Apr 0.099
May 0.099
Jun 0.096
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1//04 14.2
14.32
14.33
14.31
14.46
14.48
14.65
14.47
14.44
14.43
14.6
14.55
14.47
14.34
14.45
14.43
14.25
14.24
14.45
14.52
14.61
14.61
14.73
14.7
14.72
14.61
14.77
14.8
14.89
14.8
14.88
14.87
14.82
14.85
14.9
14.92
14.88
14.84
14.81
14.81
14.96
15.02
15.01
15.1
15.06
14.95
15.04
15.09
15.09
15.06
15.12
15.01
15.04
15.06
15.13
15.16
15.15
15.13
15.09
15.11
15.06
15.13
15.19
15.07
15
15.06
15.09
15.13
15.13
15.12
15.13
15.19
15.24
15.15
15.12
15.15
15.18
15.21
15.2
15.13
15.09
15.06
15.13
15.25
15.31
15.33
15.33
15.41
15.54
15.64
15.07
14.72
14.93
15.12
15.06
15.03
15.11
15.16
15.2
15.27
15.26
15.16
15.18
15.22
15.23
15.06
14.94
14.95
14.77
14.8
14.92
14.94
14.92
14.88
14.94
14.8
14.66
14.54
14.36
14.3
14.36
14.55
14.59
14.5
14.4
14.41
14.35
14.36
14.4
14.48
14.58
14.54
14.78
14.85
14.84
14.84
14.76
14.81
14.79
14.88
14.96
14.95
14.95
14.98
14.94
14.94
15.04
15.04
15.03
15.09
15.16
15.16
15.26
15.37
15.31
15.31
15.3
15.12
14.86
14.92
14.9
14.85
14.72
14.65
14.82
14.93
14.97
15.05
15.06
14.94
14.8
14.69
14.73
14.8
14.55
14.5
14.24
13.99
13.83
13.58
13.77
13.6
13.4
13.2
13.25
13.31
13.08
13.12
13.49
13.63
13.65
13.6
13.47
13.63
13.57
13.69
13.6
13.68
13.47
13.33
13.37
13.46
13.67
13.55
13.55
13.47
13.44
13.54
13.62
13.75
13.9
13.9
13.95
13.97
14.05
14
14
13.94
14.01
13.94
13.96
13.92
13.92
13.97
13.97
13.99
14.07
14.08
14.17
14.23
14.32
14.31
14.32
14.37
14.4
14.44
14.4
14.49
14.48
14.44
14.32
14.25
14.22
14.08
14.2
14.29
14.31
14.25
14.37
14.36
14.41
14.25
14.25
14.38
6/30/05 14.45
PORTFOLIO STATISTICS
------------------------------------
Common Share Price $14.45
------------------------------------
Common Share
Net Asset Value $15.43
------------------------------------
Premium/(Discount) to NAV -6.35%
------------------------------------
Latest Dividend $.0960
------------------------------------
Market Yield 7.97%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $1,844,588
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Commercial Banks 26.1%
------------------------------------
Insurance 20.2%
------------------------------------
Real Estate 13.8%
------------------------------------
Diversified Financial Services 9.9%
------------------------------------
Capital Markets 9.4%
------------------------------------
Thrifts & Mortgage Finance 4.5%
------------------------------------
Electric Utilities 3.8%
------------------------------------
Repurchase Agreements 1.5%
------------------------------------
Other 10.8%
------------------------------------
TOP FIVE ISSUERS
(EXCLUDING REPURCHASE AGREEMENTS)
(as a % of total investments)
------------------------------------
Wachovia Corporation 3.4%
------------------------------------
JPMorgan Chase & Company 3.1%
------------------------------------
ING Groep NV 3.0%
------------------------------------
EverestRe Group 2.6%
------------------------------------
Sun Life Financial Services
of Canada 2.5%
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/24/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 4.57% 2.40%
------------------------------------
1-Year 13.17% 12.01%
------------------------------------
Since
Inception 7.60% 11.72%
------------------------------------
1 The Fund also paid shareholders capital gains and net ordinary income
distributions in December 2004 of $0.1887 per share.
9
Nuveen Quality Preferred Income Fund 3
JHP
Performance
OVERVIEW As of June 30, 2005
Pie Chart:
PORTFOLIO ALLOCATION
(as a % of total investments)
$25 Par (or similar) Securities 58.4%
Capital Preferred Securities 38.0%
Convertible Preferred Securities 2.5%
Repurchase Agreements 0.9%
Corporate Bonds 0.2%
Bar Chart:
2004-2005 MONTHLY DIVIDENDS PER SHARE1
Jul 0.103
Aug 0.103
Sep 0.103
Oct 0.103
Nov 0.103
Dec 0.1
Jan 0.1
Feb 0.1
Mar 0.1
Apr 0.1
May 0.1
Jun 0.0965
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
7/1//04 13.71
13.89
14.1
14.11
14.25
14.28
14.45
14.36
14.31
14.27
14.37
14.3
14.32
14.16
14.23
14.22
14.15
14.24
14.35
14.34
14.34
14.34
14.44
14.43
14.47
14.42
14.49
14.46
14.54
14.39
14.42
14.52
14.61
14.6
14.64
14.57
14.57
14.6
14.51
14.53
14.61
14.68
14.87
14.91
14.92
14.89
14.91
14.98
14.98
14.88
14.95
14.98
14.95
14.93
14.92
15
14.93
14.97
14.94
14.86
14.97
14.95
14.95
14.94
14.82
14.88
14.89
14.93
14.93
14.93
14.95
14.95
15.02
14.92
14.97
14.91
14.87
14.88
14.92
14.9
14.91
14.9
14.84
14.93
14.94
14.99
15
15.09
15.09
15.19
14.93
14.66
14.85
14.85
14.9
14.89
14.94
14.99
14.92
15
14.96
15
15.01
15.03
15.06
15
14.86
14.82
14.72
14.77
14.87
14.83
14.82
14.83
14.93
14.72
14.62
14.49
14.3
14.25
14.21
14.23
14.23
14.29
14.22
14.3
14.32
14.38
14.44
14.42
14.48
14.42
14.47
14.46
14.55
14.68
14.77
14.78
14.71
14.74
14.72
14.84
14.85
14.85
14.85
14.75
14.89
15.02
15
15.08
15.15
15.14
15.27
15.28
15.32
15.3
15.3
15.14
15.05
15.06
15.02
14.93
14.79
14.6
14.61
14.66
14.86
14.95
14.92
14.85
14.8
14.86
14.86
14.93
14.77
14.75
14.45
14.37
14.16
14.06
13.96
13.9
13.81
13.6
13.39
13.51
13.35
13.39
13.69
14.15
14.1
14.06
13.99
13.93
13.9
13.82
13.85
13.91
13.88
13.68
13.7
13.81
13.99
14
14.08
13.89
13.93
14.11
14.15
14.27
14.39
14.39
14.43
14.47
14.45
14.4
14.45
14.38
14.35
14.3
14.17
14.3
14.18
14.2
14.45
14.31
14.28
14.21
14.27
14.35
14.22
14.4
14.5
14.61
14.63
14.49
14.41
14.45
14.69
14.5
14.47
14.65
14.74
14.56
14.47
14.6
14.51
14.54
14.52
14.54
14.55
14.49
14.42
14.54
6/30/05 14.53
PORTFOLIO STATISTICS
------------------------------------
Common Share Price $14.53
------------------------------------
Common Share
Net Asset Value $14.84
------------------------------------
Premium/(Discount) to NAV -2.09%
------------------------------------
Latest Dividend $.0965
------------------------------------
Market Yield 7.97%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $350,887
------------------------------------
INDUSTRIES
(as a % of total investments)
------------------------------------
Commercial Banks 24.3%
------------------------------------
Insurance 22.8%
------------------------------------
Real Estate 12.9%
------------------------------------
Diversified Financial Services 11.2%
------------------------------------
Capital Markets 9.9%
------------------------------------
Thrifts & Mortgage Finance 4.2%
------------------------------------
Consumer Finance 2.9%
------------------------------------
Repurchase Agreements 0.9%
------------------------------------
Other 10.9%
------------------------------------
TOP FIVE ISSUERS
(EXCLUDING REPURCHASE AGREEMENTS)
(as a % of total investments)
------------------------------------
Wachovia Corporation 3.8%
------------------------------------
ING Groep NV 3.3%
------------------------------------
JPMorgan Chase & Company 3.0%
------------------------------------
Union Planters Corporation 2.5%
------------------------------------
Zurich Financial Services 2.5%
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 12/18/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month
(Cumulative) 4.80% 2.07%
------------------------------------
1-Year 17.06% 11.68%
------------------------------------
Since
Inception 7.36% 10.12%
------------------------------------
1 The Fund also paid shareholders a capital gains distribution in December
2004 of $0.0588 per share.
10
Shareholder
MEETING REPORT
The annual shareholder meeting was held on March 22, 2005, in Chicago at
Nuveen's headquarters.
JTP JPS JHP
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
Common and Common and Common and
Preferred Preferred Preferred Preferred Preferred Preferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
Robert P. Bremner
For 62,271,854 -- 115,370,348 -- 23,058,314 --
Withhold 764,305 -- 945,001 -- 129,506 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
Lawrence H. Brown
For 62,265,166 -- 115,377,065 -- 23,061,631 --
Withhold 770,993 -- 938,284 -- 126,189 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
Jack B. Evans
For 62,285,293 -- 115,397,150 -- 23,066,361 --
Withhold 750,866 -- 918,199 -- 121,459 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
William C. Hunter
For 62,287,700 -- 115,368,108 -- 23,068,201 --
Withhold 748,459 -- 947,241 -- 119,619 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
David J. Kundert
For 62,283,388 -- 115,371,707 -- 23,068,562 --
Withhold 752,771 -- 943,642 -- 119,258 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
William J. Schneider
For -- 16,654 -- 30,040 -- 6,082
Withhold -- 39 -- 150 -- 4
------------------------------------------------------------------------------------------------------------------------------------
Total -- 16,693 -- 30,190 -- 6,086
====================================================================================================================================
Timothy R. Schwertfeger
For -- 16,654 -- 30,039 -- 6,082
Withhold -- 39 -- 151 -- 4
------------------------------------------------------------------------------------------------------------------------------------
Total -- 16,693 -- 30,190 -- 6,086
====================================================================================================================================
11
Shareholder
MEETING REPORT (continued)
JTP JPS JHP
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
Common and Common and Common and
Preferred Preferred Preferred Preferred Preferred Preferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
Judith M. Stockdale
For 62,278,191 -- 115,374,498 -- 23,065,451 --
Withhold 757,968 -- 940,851 -- 122,369 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
Eugene S. Sunshine
For 62,287,681 -- 115,388,082 -- 23,066,898 --
Withhold 748,478 -- 927,267 -- 120,922 --
------------------------------------------------------------------------------------------------------------------------------------
Total 63,036,159 -- 116,315,349 -- 23,187,820 --
====================================================================================================================================
12
Nuveen Quality Preferred Income Fund (JTP)
Portfolio of
INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) SECURITIES - 77.0% (52.8% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.1%
5,300 Daimler Chrysler (CORTS) 7.250% A3 BBB $ 135,150
25,801 Ford Motor Company, Series F (CORTS) 8.000% Baa3 BB+ 607,614
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 5.5%
1,250 ABN AMRO North America, Series L, 144A 6.460% A3 N/R 1,297,656
60,900 Bear Stearns Capital Trust III 7.800% A2 BBB 1,577,310
31,300 BNY Capital Trust V, Series F 5.950% A1 A- 787,195
228,095 Compass Capital Trust III 7.350% A3 BBB- 5,930,470
30,700 First Union Capital II, Series II (CORTS) 7.500% A1 A- 806,489
11,300 First Union Institutional Capital II (CORTS) 8.200% A1 A- 311,428
8,700 Goldman Sachs Capital I, Series A (CORTS) 6.000% A1 A- 217,065
6,500 Goldman Sachs Group Inc. (CORTS) 6.300% A3 A- 161,850
500 Goldman Sachs Group Inc. (SATURNS) 5.750% Aa3 A+ 11,950
81,500 JPMorgan Chase Capital Trust IX, Series I 7.500% A1 A- 2,119,815
108,549 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 BBB+ 2,730,007
63,400 Lehman Brothers Holdings Capital Trust IV, Series L 6.375% A2 BBB+ 1,614,798
13,200 Lehman Brothers Holdings Capital Trust V, Series M 6.000% A2 BBB+ 328,812
103,420 Lehman Brothers Holdings Capital Trust VI, Series N 6.240% A2 BBB+ 2,595,842
35,000 Lehman Brothers Holdings Inc., Series C 5.940% N/R BBB+ 1,776,250
50,000 Lehman Brothers Holdings Inc., Series F 6.500% A3 BBB+ 1,297,500
81,600 Merrill Lynch Capital Trust 7.000% A1 A- 2,145,264
71,800 Merrill Lynch Preferred Capital Trust IV 7.120% A1 A- 1,899,110
88,600 Merrill Lynch Preferred Capital Trust V 7.280% A1 A- 2,371,822
196,100 Merrill Lynch Preferred Capital Trust 7.750% A1 A- 5,137,820
178,400 Morgan Stanley Capital Trust II 7.250% A1 A- 4,616,992
226,700 Morgan Stanley Capital Trust III 6.250% A1 A- 5,699,238
249,095 Morgan Stanley Capital Trust IV 6.250% A1 A- 6,264,739
10,800 Morgan Stanley Capital Trust V 5.750% A1 A+ 256,500
3,400 Morgan Stanley (PPLUS) 7.050% Aa3 A+ 88,230
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 10.1%
24,800 Abbey National plc, Series B 7.250% A1 A- 639,840
68,500 Abbey National plc, Series B 7.375% A2 A 1,835,800
130,000 ABN AMRO Capital Fund Trust V 5.900% A2 A 3,162,900
28,000 ABN AMRO Capital Trust Fund VII 6.080% A2 A 695,800
103,100 ASBC Capital I 7.625% Baa1 BBB- 2,732,150
7,200 BAC Capital Trust I 7.000% Aa3 A 185,832
64,500 BAC Capital Trust II 7.000% Aa3 A 1,680,225
80,000 BAC Capital Trust III 7.000% Aa3 A 2,097,600
185,450 Banco Santander 6.410% A2 BBB+ 4,682,613
52,300 Banco Totta & Acores Finance, Series A 8.875% A3 N/R 1,392,488
66,000 Banesto Holdings, Series A, 144A 10.500% A2 N/R 2,058,375
59,400 Bank One Capital Trust VI 7.200% A1 A- 1,549,152
198,900 Chittenden Capital Trust I 8.000% Baa1 BB+ 5,246,982
116,800 Cobank ABC, 144A 7.000% N/R N/R 6,436,731
133,700 Comerica Capital Trust I 7.600% A3 BBB+ 3,436,090
33,900 Fleet Capital Trust VII 7.200% Aa3 A 873,264
3,800 KeyCorp Capital Trust V 5.875% A3 BBB 94,202
62,900 KeyCorp (PCARS) 7.500% A3 N/R 1,629,110
18,500 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 BBB 487,105
31,300 KeyCorp, Series B (CORTS) 8.250% A3 BBB 799,402
64,900 National Commerce Capital Trust II 7.700% A1 A- 1,693,241
55,300 National Westminster Bank plc, Series A 7.875% Aa2 A+ 1,432,270
13
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS (continued)
200,000 PFCI Capital Corporation 7.750% A3 A- $ 5,500,000
5,000 PNC Capital Trust 6.125% A3 BBB 126,400
30,900 Regions Finance Trust I 8.000% A2 BBB+ 790,422
13,500 Royal Bank of Scotland Group plc, Series L 5.750% A1 A 328,320
27,400 Royal Bank of Scotland Group plc, Series M 6.400% A1 A 706,098
216,762 Royal Bank of Scotland Group plc, Series N 6.350% A1 A 5,499,252
23,500 SunTrust Capital Trust IV 7.125% A1 A- 606,300
79,000 SunTrust Capital Trust V 7.050% A1 A- 2,044,520
175,000 USB Capital Trust III 7.750% Aa3 A- 4,539,500
423,005 USB Capital Trust IV 7.350% Aa3 A- 11,048,891
46,800 USB Capital Trust V 7.250% Aa3 A- 1,216,800
36,700 VNB Capital Trust I 7.750% Baa1 BBB 954,200
28,500 Washington Mutual Capital Trust I, Series 2001-22, 7.650% Baa1 BBB 736,725
Class A-1 (CORTS)
6,236 Well Fargo Capital Trust IX 5.625% Aa2 A 152,907
25,500 Wells Fargo Capital Trust IV 7.000% Aa2 A 664,785
179,700 Wells Fargo Capital Trust V 7.000% Aa2 A 4,643,448
15,900 Wells Fargo Capital Trust VI 6.950% Aa2 A- 415,785
15,900 Wells Fargo Capital Trust VII 5.850% Aa2 A 397,500
379,250 Zions Capital Trust B 8.000% Baa1 BBB- 10,144,938
------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 0.0%
1,800 IBM Inc., Trust Certificates, Series 2001-2 7.100% A1 A+ 46,422
1,400 IBM Trust II (CORTS) 7.125% A1 A+ 36,120
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 0.2%
60,300 Household Capital Trust VI 8.250% A2 BBB+ 1,563,579
25,400 Household Capital Trust VII 7.500% A2 BBB+ 664,464
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 7.6%
17,000 BBVA Preferred Capital Ltd., Series B 7.750% A1 A- 438,090
32,476 CIT Group Incorporated (CORTS) 7.750% A3 BBB+ 894,714
5,000 Citigroup Capital Trust IX 6.000% Aa2 A 125,650
237,600 Citigroup Capital Trust VII 7.125% Aa2 A 6,163,344
272,700 Citigroup Capital Trust VIII 6.950% Aa2 A 6,992,028
51,500 Citigroup Capital Trust XI 6.000% Aa2 A 1,293,680
66,300 Citigroup Inc., Series H 6.231% Aa3 N/R 3,538,431
39,400 Citigroup Inc., Series M 5.864% Aa3 A 2,009,400
3,000 General Electric Capital Corporation (CORTS) 6.000% Aaa AAA 75,720
2,000 General Electric Capital Corporation 5.875% N/R AAA 50,720
7,400 General Electric Capital Corporation 6.100% Aaa AAA 191,660
1,800 Goldman Sachs Group Inc., Series 2004-04 (SATURNS) 6.000% A1 A- 44,424
569,000 ING Group NV 7.050% N/R A- 14,879,350
1,015,458 ING Group NV 7.200% A2 A- 26,757,318
32,600 JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS) 7.850% A1 A- 855,424
73,600 JPMorgan Chase Capital Trust X 7.000% A1 N/R 1,913,600
90,106 JPMorgan Chase Capital Trust XI 5.875% A1 A- 2,212,102
68,900 JPMorgan Chase Capital Trust XVI 6.350% A1 A- 1,745,926
20,000 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 A- 527,200
46,000 Merrill Lynch Capital Trust II 8.000% A1 A- 1,230,500
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4%
3,300 BellSouth Capital Funding (CORTS) 7.100% A1 A 86,691
1,400 BellSouth Corporation (CORTS) 7.000% Aa3 A 35,784
14,800 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A2 A 378,584
5,900 BellSouth Inc. (CORTS) 7.000% A2 A 153,105
83,200 SBC Communications Inc. 7.000% A2 A 2,130,752
1,600 Verizon Communications (CORTS) 7.625% A2 A+ 42,000
5,000 Verizon Communications, Series 2004-1 (SATURNS) 6.125% A2 A+ 124,150
23,700 Verizon New England Inc., Series B 7.000% A2 N/R 619,992
18,500 Verizon South Inc., Series F 7.000% A2 A+ 477,855
14
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 3.5%
77,740 DTE Energy Trust I 7.800% Baa3 BB+ $ 2,034,456
95,305 Entergy Louisiana Inc. 7.600% Baa1 A- 2,497,944
293,196 Georgia Power Company 5.700% Aaa AAA 7,461,838
118,651 Georgia Power Company 5.900% A2 A 3,003,057
2,100 Gulf Power Capital Trust III 7.375% A3 BBB+ 54,915
251,073 Interstate Power and Light Company, Series B 8.375% Baa3 BBB- 8,511,375
1,800 National Rural Utilities Cooperative Finance 7.600% A3 BBB+ 46,206
Corporation
17,800 National Rural Utilities Cooperative Finance 7.400% A3 BBB+ 462,800
Corporation
143,743 National Rural Utilities Cooperative Finance 5.950% A3 BBB+ 3,528,172
Corporation
7,000 Tennessee Valley Authority, Series D 6.750% Aaa AAA 179,130
187,000 Virginia Power Capital Trust 7.375% Baa1 BBB- 4,959,240
------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.7%
64,000 Dairy Farmers of America Inc., 144A 7.875% Ba1 BBB- 6,708,000
------------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.1%
32,300 AGL Capital Trust II 8.000% Baa2 BBB 836,247
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 0.1%
19,400 General Electric Company, Series GE (CORTS) 6.800% Aaa AAA 512,160
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 14.5%
673,500 Ace Ltd., Series C 7.800% Baa2 BBB- 18,049,800
1,102,550 Aegon NV 6.375% A3 A- 27,861,439
1,800 Allstate Corporation (PCARS) 7.150% A2 A- 46,233
10,500 AMBAC Financial Group Inc. 7.000% Aa2 AA 275,730
21,500 AMBAC Financial Group Inc. 5.950% Aa2 AA 549,110
1,800 AMBAC Financial Group Inc. 5.875% Aa2 AA 45,414
18,700 American General Capital III 8.050% Aa3 A+ 483,021
202,000 Delphi Financial Group Inc. 8.000% Baa3 BBB 5,413,600
271,600 EverestRe Capital Trust II 6.200% Baa1 BBB 6,461,364
79,400 EverestRe Group Limited 7.850% Baa1 BBB 2,115,216
2,000 Financial Security Assurance Holdings 6.875% Aa2 AA 51,760
1,400 Financial Security Assurance Holdings 5.600% Aa2 AA 34,902
189,777 Hartford Capital Trust III, Series C 7.450% Baa1 BBB 4,890,553
50,700 Hartford Life Capital Trust II, Series B 7.625% Baa1 BBB 1,310,088
79,200 Lincoln National Capital Trust V, Series E 7.650% Baa1 BBB 2,066,328
31,500 Lincoln National Capital Trust VI 6.750% Baa1 BBB 823,725
24,427 MBIA Inc. 8.000% Aa2 AA 625,331
1,900 MetLife Inc. 5.875% A2 A 47,766
556,700 MetLife Inc., Series B 6.500% Baa1 BBB 14,017,706
250,000 PartnerRe Limited, Series C 6.750% Baa1 BBB+ 6,375,000
67,300 PartnerRe Limited, Series D 6.500% Baa1 BBB+ 1,681,154
113,800 PartnerRe Limited 7.900% A3 BBB+ 2,954,248
79,400 PLC Capital Trust III 7.500% Baa1 BBB+ 2,061,224
410,200 PLC Capital Trust IV 7.250% Baa1 BBB+ 10,747,240
264,165 Prudential plc 6.750% Baa1 A 6,934,331
61,100 RenaissanceRe Holdings Ltd., Series B 7.300% Baa2 BBB+ 1,602,653
13,900 RenaissanceRe Holdings Ltd., Series C 6.080% Baa2 BBB+ 334,295
125,650 RenaissanceRe Holdings Ltd., Series A 8.100% Baa2 BBB+ 3,297,056
40,000 Safeco Capital Trust I (CORTS) 8.700% Baa2 BBB- 1,072,400
34,300 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 BBB- 908,607
2,000 Safeco Capital Trust III (CORTS) 8.072% Baa2 BBB- 54,080
62,500 Torchmark Capital Trust I 7.750% Baa1 A- 1,655,000
17,800 W.R. Berkley Capital Trust, Series 2002-1, (CBTCS) 8.125% Baa3 BBB- 185,832
4,600 W.R. Berkley (CORTS) 8.250% Baa3 BBB- 120,198
391,854 XL Capital Ltd., Series A 8.000% Baa1 BBB+ 10,423,316
75,200 XL Capital Ltd., Series B 7.625% Baa1 BBB+ 1,973,248
------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 0.1%
28,700 Vertex Industries Inc. (PPLUS) 7.625% A2 A+ 753,949
15
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.3%
5,300 The Walt Disney Company 7.000% Baa1 A- $ 138,807
123,700 Viacom Inc. 7.300% A3 BBB+ 3,133,321
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 0.7%
96,200 Dominion CNG Capital Trust I 7.800% Baa1 BBB- 2,518,516
59,100 Dominion Resources Capital Trust II 8.400% Baa2 BBB- 1,526,553
98,300 Energy East Capital Trust I 8.250% Baa3 BBB- 2,580,375
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 1.8%
531,632 Nexen Inc. 7.350% Baa3 BB+ 14,019,136
108,500 TransCanada Pipeline 8.250% A3 BBB 2,810,150
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.1%
23,000 Bristol Myers Squibb Company (CORTS) 6.250% A1 A+ 598,000
5,500 Bristol-Myers Squibb Company Trust (CORTS) 6.800% A1 A+ 143,605
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 23.8%
49,658 AMB Property Corporation, Series M 6.750% Baa2 BBB- 1,276,211
13,400 AvalonBay Communities, Inc., Series H 8.700% Baa2 BBB 375,200
409,400 BRE Properties, Series B 8.080% Baa3 BBB- 10,808,160
17,800 BRE Properties, Series C 6.750% Baa3 BBB- 446,068
42,644 BRE Properties, Series D 6.750% Baa3 BBB- 1,067,166
541,048 CarrAmerica Realty Corporation, Series E 7.500% Baa3 BBB- 13,996,912
385,100 Developers Diversified Realty Corporation, Series H 7.375% Ba1 BBB- 9,758,434
46,200 Developers Diversified Realty Corporation, Series G 8.000% Ba1 BBB- 1,201,200
56,500 Developers Diversified Realty Corporation, Series F 8.600% Ba1 BBB- 1,495,555
156,800 Duke Realty Corporation, Series L 6.600% Baa2 BBB 3,924,704
157,779 Duke-Weeks Realty Corporation, Series B 7.990% Baa2 BBB 8,298,197
10,800 Duke-Weeks Realty Corporation, Series I 8.450% Baa2 BBB 277,128
1,097,400 Equity Office Properties Trust, Series G 7.750% Baa3 BBB 29,322,528
24,700 Equity Residential Properties Trust, Series D 8.600% Baa2 BBB 657,761
30,400 Equity Residential Properties Trust 9.125% Baa2 BBB 770,032
10,600 First Industrial Realty Trust Inc., Series C 8.625% Baa3 BBB- 285,246
19,000 Firstar Realty LLC, 144A 8.875% Aa3 A 26,053,750
57,900 Harris Preferred Capital Corporation, Series A 7.375% A1 A 1,461,975
2,200 HRPT Properties Trust, Series A 9.875% Baa3 BBB- 57,376
1,019,610 HRPT Properties Trust, Series B 8.750% Baa3 BBB- 27,611,039
22,000 New Plan Excel Realty Trust, Series D 7.800% Baa3 BBB- 1,132,314
416,000 New Plan Excel Realty Trust, Series E 7.625% N/R BBB- 10,811,840
10,000 Prologis Trust, Series F 6.750% Baa2 BBB 254,400
107,000 Prologis Trust, Series G 6.750% Baa2 BBB 2,726,360
328,400 PS Business Parks Inc. 7.000% Ba1 BBB- 8,078,640
57,000 PS Business Parks Inc., Series I 6.875% Ba1 BBB- 1,396,500
240,000 PS Business Parks Inc., Series L 7.600% Ba1 BBB- 6,145,200
2,700 Public Storage Inc. 7.125% Baa2 BBB+ 70,362
64,800 Public Storage Inc., Series C 6.600% Baa2 BBB+ 1,632,960
90,000 Public Storage Inc., Series D 6.180% Baa2 BBB+ 2,151,900
2,900 Public Storage Inc., Series E 6.750% Baa2 BBB+ 73,051
25,100 Public Storage Inc., Series Q 8.600% Baa2 BBB+ 645,572
107,000 Public Storage Inc., Series R 8.000% Baa2 BBB+ 2,782,000
202,600 Public Storage Inc., Series S 7.875% Baa2 BBB+ 5,251,392
11,500 Public Storage Inc., Series T 7.625% Baa2 BBB+ 298,310
40,680 Public Storage Inc., Series U 7.625% Baa2 BBB+ 1,063,782
345,600 Public Storage Inc., Series V 7.500% Baa2 BBB+ 9,089,280
6,971 Public Storage Inc., Series X 6.450% Baa2 BBB+ 173,926
91,200 Realty Income Corporation 7.375% Baa3 BBB- 2,389,440
47,500 Regency Centers Corporation 7.450% Baa3 BBB- 1,222,888
21,200 Regency Centers Corporation 7.250% Baa3 BBB- 543,780
20,500 Simon Property Group, Inc., Series F 8.750% Baa2 BBB- 539,765
176,600 Simon Property Group, Inc., Series G 7.890% Baa2 BBB 9,497,548
13,600 United Dominion Realty Trust 8.600% Baa3 BBB- 362,168
323,633 Vornado Realty Trust, Series G 6.625% Baa3 BBB- 8,042,280
16
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE (continued)
319,300 Wachovia Preferred Funding Corporation 7.250% A2 BBB+ $ 9,163,910
2,000 Weingarten Realty Trust, Preferred Securities 6.750% Baa1 A- 52,020
2,500 Weingarten Realty Trust, Series E 6.950% Baa1 A- 65,900
------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.1%
40,000 Sherwin Williams Company, Series III (CORTS) 7.250% A2 A 1,064,000
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 5.0%
5,600 Countrywide Capital Trust II, Series II (CORTS) 8.000% Baa1 BBB+ 146,384
795,520 Countrywide Capital Trust IV 6.750% Baa1 BBB+ 20,651,699
214,900 Fannie Mae 0.000% Aa3 AA- 11,973,970
110,300 Fannie Mae 3.780% Aa3 AA- 5,482,462
58,300 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 3,011,192
65,600 Federal Home Loan Mortgage Corporation 6.140% Aa3 N/R 3,288,200
58,600 Federal Home Loan Mortgage Corporation 5.100% Aa3 AA- 2,531,520
------------------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 0.1%
19,000 Federal Home Loan Mortgage Corporation 5.300% Aa3 AA- 846,688
------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 2.2%
355,846 Telephone and Data Systems Inc. 7.600% Baa1 A- 9,163,035
159,700 United States Cellular Corporation 8.750% Baa1 A- 4,375,780
271,900 United States Cellular Corporation 7.500% Baa1 A- 7,267,887
------------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost $699,230,017) 727,615,525
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 3.7% (2.6% OF TOTAL INVESTMENTS)
DIVERSIFIED FINANCIAL SERVICES - 0.8%
154,000 Citigroup Global Markets 2.000% Aa1 AA- 7,451,752
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.2%
30,000 FPL Group Inc. 8.000% N/R A- 1,938,300
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 0.6%
269,148 Albertson's, Inc. 7.250% Baa2 BBB 6,020,841
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES - 0.3%
54,500 Baxter International Inc. 7.000% Baa1 N/R 3,013,305
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.1%
50,000 XL Capital Ltd. 6.500% A2 A 1,197,500
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 1.6%
260,200 Dominion Resources Inc. 8.750% Baa1 BBB+ 14,428,090
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 0.1%
54,000 PMI Group Inc. 5.875% A1 A 1,324,620
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $32,048,267) 35,374,408
--------------------------------------------------------------------------------------------------------------------
17
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 63.0% (43.3% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 6.7%
2,500 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 A- $ 2,706,128
2,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 A- 2,151,406
1,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 A- 1,074,690
7,900 BT Preferred Capital Trust II 7.875% 2/25/27 A2 N/R 8,540,595
2,250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 A 2,374,628
11,250 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 A 11,770,425
26,463 First Union Institutional Capital Securities I 8.040% 12/01/26 A1 A- 28,689,888
5,500 UBS Preferred Funding Trust I 8.622% 10/29/49 A1 AA- 6,541,728
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 31.6%
9,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 Aa3 AA- 9,350,442
18,250 Abbey National Capital Trust I 8.963% 12/30/49 A2 A- 26,699,130
3,000 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R N/R 3,202,803
2,500 Bank One Capital III 8.750% 9/01/30 A1 A- 3,558,015
2,000 BankAmerica Institutional Capital Trust, 7.700% 12/31/26 Aa3 A 2,153,434
Series B, 144A
5,700 BankBoston Capital Trust II, Series B 7.750% 12/15/26 Aa3 A 6,139,727
1,500 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 BBB- 1,619,778
7,200 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 A+ 8,672,522
10 BBVA Privanza International Gibraltar, 144A 7.764% 9/30/47 A1 N/R 10,425,000
3,000 Centura Capital Trust I, 144A 8.845% 6/01/27 A2 BBB+ 3,352,053
3,000 Corestates Capital Trust I, 144A 8.000% 12/15/26 A1 A 3,250,479
1,700 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 A- 1,950,634
1,000 First Chicago NBD Institutional Capital,144A 7.950% 12/01/26 A1 N/R 1,080,860
1,000 First Empire Capital Trust II 8.277% 6/01/27 Baa1 BBB 1,090,005
1,500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 BBB- 1,733,100
5,750 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 A- 7,013,344
17,150 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 A- 27,525,253
12,000 KBC Bank Fund Trust III, 144A 9.860% 11/02/49 A2 A- 14,476,020
2,000 KeyCorp Capital III 7.750% 7/15/29 A3 BBB 2,488,776
2,000 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 BBB 2,161,120
8,850 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 A+ 9,251,427
11,150 NB Capital Trust II 7.830% 12/15/26 Aa3 A 12,026,613
7,655 Nordbanken AB, 144A 8.950% 11/29/49 A2 A- 8,987,919
1,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 BBB- 1,088,009
8,000 Peoples Heritage Capital Trust I,Series B 9.060% 2/01/27 A3 BB+ 8,689,008
19,000 PNC Institutional Capital Securities, 144A 7.950% 12/15/26 A3 BBB+ 20,443,050
2,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 BBB- 2,230,634
16,000 RBS Capital Trust B 6.800% 12/31/49 A1 A 16,560,240
17,500 Reliance Capital Trust I, Series B 8.170% 5/01/28 N/R N/R 19,555,603
1,400 Republic New York Capital II, Capital Securities 7.530% 12/04/26 A1 A- 1,501,279
1,100 Royal Bank of Scotland Group plc 7.648% 8/31/49 A1 A 1,403,343
2,000 SocGen Real Estate Company LLC, 144A 7.640% 12/29/49 A1 A 2,141,272
5,000 Sparebanken Rogaland, Notes, 144A 6.443% 5/01/49 Baa1 N/R 5,188,530
23,000 Summit Capital Trust I, Capital Securities 8.400% 3/15/27 Aa3 A 25,130,950
1,800 Swedbank ForeningsSparbanken AB, 144A 9.000% 12/29/49 A2 BBB+ 2,129,072
6,676 Union Planters Capital Trust A 8.200% 12/15/26 A2 BBB+ 7,206,662
4,000 Wachovia Capital Trust I, Capital Securities, 144A 7.640% 1/15/27 A1 A- 4,320,848
7,250 Washington Mutual Capital Trust I 8.375% 6/01/27 Baa1 BBB 8,108,473
1,050 Wells Fargo Capital Securities 7.950% 12/01/26 Aa2 A 1,136,695
3,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 BBB 3,283,116
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 7.2%
1,500 BNP Paribas Capital Trust, 144A 9.003% 12/29/49 A1 A+ 1,818,507
4,250 BNP Paribas Capital Trust 7.200% 12/31/49 A1 A+ 4,434,391
5,000 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 A- 5,385,080
25,500 HBOS Capital Funding LP, Notes 6.850% 3/01/49 A1 A 26,437,865
19,500 JPM Capital Trust II 7.950% 2/01/27 A1 A- 21,192,386
8,100 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 N/R 8,579,042
18
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.6%
11,250 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 Baa1 BBB+ $ 15,324,609
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 10.7%
7,570 Ace Capital Trust II 9.700% 4/01/30 Baa1 BBB- 10,476,933
1,000 Allstate Financing II 7.830% 12/01/45 A2 A- 1,077,564
2,000 American General Capital II 8.500% 7/01/30 Aa3 A+ 2,787,484
7,500 Berkeley Capital Trust 8.197% 12/15/45 Baa3 BBB- 7,789,560
2,500 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 Baa1 BBB+ 2,577,543
4,000 MIC Financing Trust I 8.375% 2/01/27 A1 A+ 4,193,652
7,000 Prudential plc 6.500% 6/29/49 Baa1 A 7,061,187
2,000 RenaissanceRe Capital Trust 8.540% 3/01/27 Baa1 BBB+ 2,185,010
26,216 Sun Life Canada Capital Trust, Capital Securities, 144A 8.526% 5/06/47 A1 A+ 28,831,282
31,373 Zurich Capital Trust I, 144A 8.376% 6/01/37 Baa2 A- 34,710,522
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 3.6%
4,000 KN Capital Trust I, Preferred Securities 8.560% 4/15/27 Baa3 BB+ 4,385,256
5,860 KN Capital Trust III 7.630% 4/15/28 Baa3 BB+ 6,879,095
20,900 Phillips 66 Capital Trust II 8.000% 1/15/37 Baa2 BBB 22,794,481
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 1.6%
8,500 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 BBB 9,442,157
5,000 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 BBB 5,433,450
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $566,119,794) 595,971,782
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 0.4% (0.2% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.4%
1,150 Ford Motor Company, Debenture 7.400% 11/01/46 Baa3 BB+ 898,699
4,200 Ford Motor Company, Debenture 7.400% 5/15/97 Baa3 BB+ 3,324,815
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $4,351,418) 4,223,514
--------------------------------------------------------------------------------------------------------------------
19
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL
AMOUNT (000)/ MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.5% (1.1% OF TOTAL INVESTMENTS)
State Street Bank, 2.600%, dated 6/30/05, due 7/01/05,
repurchase price $14,641,274, collateralized by $10,340,000
$ 14,640 U.S. Treasury Bonds, 8.125%, due 8/15/19, value $14,936,326 $14,640,217
============ --------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $14,640,217) 14,640,217
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,316,389,713) - 145.6% 1,377,825,446
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 8,431,985
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (46.5)% (440,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $946,257,431
====================================================================================================================
INTEREST RATE SWAP TRANSACTIONS OUTSTANDING AT JUNE 30, 2005:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FIXED RATE FLOATING RATE** DATE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------
Citibank, N.A. $110,000,000 3.1300% 3.3256% 08/29/05 $ 54,077
Citibank, N.A. 110,000,000 3.8600 3.3256 08/29/07 143,723
Citibank, N.A. 110,000,000 4.3500 3.3256 08/29/09 (1,425,105)
-------------------------------------------------------------------------------------------------------------------
$(1,227,305)
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
* Ratings: Below Baa by Moody's Investor Service, Inc. or
BBB by Standard & Poor's Group are considered to be
below investment grade.
** Based on LIBOR (London Interbank Offered Rate)
144A 144A securities are those which are exempt from
registration under Rule 144A of the Securities Act of
1933, as amended. These securities may only be resold
in transactions exempt from registration which are
normally those transactions with qualified
institutional buyers.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) PreferredPlus Trust.
(SATURNS) Structured Asset Trust Unit Repackaging.
N/R Security is not rated.
See accompanying notes to financial statements.
20
Nuveen Quality Preferred Income Fund 2 (JPS)
Portfolio of
INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) SECURITIES - 77.9% (54.7% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.1%
4,300 Daimler Chrysler (CORTS) 7.500% A3 BBB $ 111,327
2,400 Daimler Chrysler (CORTS) 8.250% A3 BBB 61,752
3,000 Daimler Chrysler (CORTS) 6.875% A3 BBB 75,600
3,400 DaimlerChrysler AG (CORTS) 7.875% A3 BBB 88,400
23,300 DaimlerChrysler Corp. (PPLUS) 7.250% A3 BBB 594,150
32,403 Ford Motor Company, Series F (CORTS) 8.000% Baa3 BB+ 763,091
11,015 Ford Motor Company 0.000% Baa1 BB+ 252,794
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 4.7%
103,100 Bear Stearns Capital Trust III 7.800% A2 BBB 2,670,290
19,300 BNY Capital Trust IV, Series E 6.875% A1 A- 487,325
47,800 BNY Capital Trust V, Series F 5.950% A1 A- 1,202,170
383,825 Compass Capital Trust III 7.350% A3 BBB- 9,979,450
26,900 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 A+ 702,090
63,300 First Union Capital II, Series II (CORTS) 7.500% A1 A- 1,662,891
31,300 First Union Institutional Capital II (CORTS) 8.200% A1 A- 862,628
2,100 Goldman Sachs Capital I, Series A (CORTS) 6.000% A1 A- 52,395
2,000 Goldman Sachs Group Inc. (PPLUS) 6.000% Aa3 A+ 49,920
3,800 Goldman Sachs Group Inc. (SATURNS) 5.750% Aa3 A+ 90,820
366,000 JPMorgan Chase Capital Trust IX, Series I 7.500% A1 A- 9,519,660
323,400 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 BBB+ 8,133,510
102,900 Lehman Brothers Holdings Capital Trust IV, Series L 6.375% A2 BBB+ 2,620,863
37,800 Lehman Brothers Holdings Capital Trust V, Series M 6.000% A2 BBB+ 941,598
42,000 Lehman Brothers Holdings Inc., Series C 5.940% N/R BBB+ 2,131,500
70,000 Lehman Brothers Holdings Inc., Series F 6.500% A3 BBB+ 1,816,500
198,200 Merrill Lynch Capital Trust 7.000% A1 A- 5,210,678
113,500 Merrill Lynch Preferred Capital Trust IV 7.120% A1 A- 3,002,075
188,200 Merrill Lynch Preferred Capital Trust V 7.280% A1 A- 5,038,114
103,500 Merrill Lynch Preferred Capital Trust 7.750% A1 A- 2,711,700
166,508 Morgan Stanley Capital Trust II 7.250% A1 A- 4,309,227
457,500 Morgan Stanley Capital Trust III 6.250% A1 A- 11,501,550
380,000 Morgan Stanley Capital Trust IV 6.250% A1 A- 9,557,000
21,300 Morgan Stanley Capital Trust V 5.750% A1 A+ 505,875
55,200 Morgan Stanley (PPLUS) 7.050% Aa3 A+ 1,432,440
20,000 Safeco Capital Trust I (CORTS) 8.750% Baa2 BBB- 607,900
1,500 Safeco Capital Trust IV (CORTS) 8.375% Baa2 BBB- 41,168
7,600 UBS Preferred Funding Trust III 7.250% A1 AA- 196,080
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 10.3%
119,000 ABN AMRO Capital Fund Trust V 5.900% A2 A 2,895,270
152,060 ASBC Capital I 7.625% Baa1 BBB- 4,029,590
135,900 BAC Capital Trust I 7.000% Aa3 A 3,507,579
168,500 BAC Capital Trust II 7.000% Aa3 A 4,389,425
218,300 BAC Capital Trust III 7.000% Aa3 A 5,723,826
304,100 Banco Santander 6.410% A2 BBB+ 7,678,525
54,100 Banco Totta & Acores Finance, Series A 8.875% A3 N/R 1,440,413
3,600 BancorpSouth Capital Trust I 8.150% Baa2 BB+ 93,960
82,100 BancWest Capital I 9.500% A3 A- 2,112,433
731,000 Banesto Holdings, Series A, 144A 10.500% A2 N/R 22,798,063
198,500 Bank One Capital Trust VI 7.200% A1 A- 5,176,880
58,600 BankNorth Capital Trust II 8.000% A3 BB+ 1,538,836
121,500 Chittenden Capital Trust I 8.000% Baa1 BB+ 3,205,170
14,300 Citigroup Capital X 6.100% Aa2 A 361,075
21
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS (continued)
225,500 Cobank ABC, 144A 7.000% N/R N/R $ 12,427,080
265,100 Comerica Capital Trust I 7.600% A3 BBB+ 6,813,070
36,400 KeyCorp (PCARS) 7.500% A3 N/R 942,760
32,100 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 BBB 845,193
92,900 KeyCorp, Series B (CORTS) 8.250% A3 BBB 2,372,666
267,600 National Commerce Capital Trust II 7.700% A1 A- 6,981,684
112,200 National Westminster Bank plc, Series A 7.875% Aa2 A+ 2,905,980
289,600 PFCI Capital Corporation 7.750% A3 A- 7,964,000
40,500 Regions Finance Trust I 8.000% A2 BBB+ 1,035,990
596,876 Royal Bank of Scotland Group plc, Series N 6.350% A1 A 15,142,744
142,400 SunTrust Capital Trust IV 7.125% A1 A- 3,673,920
157,500 SunTrust Capital Trust V 7.050% A1 A- 4,076,100
714,300 USB Capital Trust III 7.750% Aa3 A- 18,528,942
271,300 USB Capital Trust IV 7.350% Aa3 A- 7,086,356
123,300 USB Capital Trust V 7.250% Aa3 A- 3,205,800
12,100 USB Capital Trust VI 5.750% Aa3 A- 295,240
92,300 VNB Capital Trust I 7.750% Baa1 BBB 2,399,800
43,500 Washington Mutual Capital Trust I, Series 2001-22, 7.650% Baa1 BBB 1,124,475
Class A-1 (CORTS)
49,900 Well Fargo Capital Trust IX 5.625% Aa2 A 1,223,548
34,400 Wells Fargo Capital Trust IV 7.000% Aa2 A 896,808
247,000 Wells Fargo Capital Trust V 7.000% Aa2 A 6,382,480
42,800 Wells Fargo Capital Trust VI 6.950% Aa2 A- 1,119,220
61,300 Wells Fargo Capital Trust VII 5.850% Aa2 A 1,532,500
578,650 Zions Capital Trust B 8.000% Baa1 BBB- 15,478,888
------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS - 0.1%
20,700 IBM Inc. (CORTS) 7.125% A1 A+ 528,885
5,600 IBM Inc., Trust Certificates, Series 2001-2 7.100% A1 A+ 144,424
14,500 IBM Trust II (CORTS) 7.125% A1 A+ 374,100
33,300 IBM Trust III (CORTS) 7.200% A1 A+ 854,811
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 2.8%
620,196 Household Capital Trust VI 8.250% A2 BBB+ 16,081,682
72,200 Household Capital Trust VII 7.500% A2 BBB+ 1,888,752
917,000 HSBC Finance Corporation 6.360% A3 BBB+ 23,383,500
362,100 HSBC Finance Corporation 6.875% A1 A 9,541,335
2,700 HSBC Finance Corporation 6.000% A1 A 67,797
16,100 SLM Corporation 6.000% A2 A 402,500
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 8.1%
75,800 BBVA Preferred Capital Ltd., Series B 7.750% A1 A- 1,953,366
34,600 CIT Group Incorporated (CORTS) 7.750% A3 BBB+ 953,230
6,800 Citigroup Capital Trust IX 6.000% Aa2 A 170,884
467,700 Citigroup Capital Trust VII 7.125% Aa2 A 12,132,138
789,107 Citigroup Capital Trust VIII 6.950% Aa2 A 20,232,703
16,700 Citigroup Capital Trust XI 6.000% Aa2 A 419,504
36,900 Citigroup Inc., Series H 6.231% Aa3 N/R 1,969,353
39,000 Citigroup Inc., Series M 5.864% Aa3 A 1,989,000
10,100 General Electric Capital Corporation 5.875% N/R AAA 256,136
300,700 General Electric Capital Corporation 6.100% Aaa AAA 7,788,130
199,700 General Electric Capital Corporation 6.625% Aaa AAA 5,242,125
3,600 Goldman Sachs Capital I (CORTS) 6.000% A1 A- 88,740
12,000 Goldman Sachs Group Inc., Series 2004-04 (SATURNS) 6.000% A1 A- 296,160
1,433,655 ING Group NV 7.050% N/R A- 37,490,078
1,519,300 ING Group NV 7.200% A2 A- 40,033,555
11,000 ING Group NV 6.200% A2 A- 278,630
800 JP Morgan Chase Capital Trust XII 6.250% A1 A- 20,328
10,600 JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS) 7.850% A1 A- 278,144
89,600 JPM Capital Trust (CORTS) 7.200% A2 A- 2,349,312
3,000 JPMorgan Chase & Company (PCARS) 7.125% A2 A- 77,085
203,600 JPMorgan Chase Capital Trust X 7.000% A1 N/R 5,293,600
10,156 JPMorgan Chase Capital Trust XI 5.875% A1 A- 249,330
22
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (continued)
210,300 JPMorgan Chase Capital Trust XVI 6.350% A1 A- $ 5,329,002
51,200 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 A- 1,349,632
117,500 Merrill Lynch Capital Trust II 8.000% A1 A- 3,143,125
5,000 National Westminster Bank plc 7.760% Aa3 A+ 130,200
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5%
11,500 BellSouth Capital Funding (CORTS) 7.100% A1 A 302,105
15,200 BellSouth Corporation (CORTS) 7.000% Aa3 A 388,512
10,200 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A2 A 260,916
14,000 BellSouth Corporation (CORTS) 7.000% A2 A 359,800
30,900 BellSouth Corporation 7.125% A2 A 790,731
16,300 BellSouth Inc. (CORTS) 7.000% A2 A 422,985
22,800 BellSouth Telecommunications (PPLUS) 7.300% Aa3 A 584,250
104,199 SBC Communications Inc. 7.000% A2 A 2,668,536
30,000 Verizon Communications (CORTS) 7.625% A2 A+ 787,500
6,700 Verizon Communications (CORTS) 7.375% A2 A+ 177,416
68,000 Verizon Global Funding Corporation (SATURNS) 7.500% A2 A+ 1,785,000
15,200 Verizon New England Inc., Series B 7.000% A2 N/R 397,632
7,800 Verizon South Inc., Series F 7.000% A2 A+ 201,474
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 5.0%
189,500 Alabama Power Company 5.830% Baa1 BBB+ 4,827,513
17,200 Consolidated Edison Company of New York Inc. 7.500% A1 A 444,104
27,400 DTE Energy Trust I 7.800% Baa3 BB+ 717,058
5,500 Entergy Arkansas Inc. 6.700% Aaa AAA 143,990
49,000 Entergy Louisiana Inc. 7.600% Baa1 A- 1,284,290
1,299,100 Entergy Mississippi Inc. 7.250% Baa2 A- 34,159,835
3,000 Georgia Power Capital Trust V 7.125% A3 BBB+ 78,360
1,500 Georgia Power Capital Trust VII 5.875% A3 BBB+ 37,725
28,800 Georgia Power Company 5.700% Aaa AAA 732,960
941,500 Interstate Power and Light Company, Series B 8.375% Baa3 BBB- 31,916,850
7,700 National Rural Utilities Cooperative Finance 7.600% A3 BBB+ 197,659
Corporation
5,400 National Rural Utilities Cooperative Finance 7.400% A3 BBB+ 140,400
Corporation
20,000 National Rural Utilities Cooperative Finance 6.100% A3 BBB+ 502,000
Corporation
269,400 National Rural Utilities Cooperative Finance 5.950% A3 BBB+ 6,612,423
Corporation
53,200 Public Service Company of Oklahoma, Series B 6.000% Aaa AAA 1,370,964
1,900 Southern Company Capital Trust I (CORTS) 7.375% Baa1 BBB+ 49,828
56,700 Tennessee Valley Authority, Series D 6.750% Aaa AAA 1,450,953
257,300 Virginia Power Capital Trust 7.375% Baa1 BBB- 6,823,596
------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.7%
122,000 Dairy Farmers of America Inc., 144A 7.875% Ba1 BBB- 12,787,125
------------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.1%
53,500 AGL Capital Trust II 8.000% Baa2 BBB 1,385,115
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES - 0.1%
62,900 Aetna Incorporated 8.500% Baa1 BBB+ 1,642,319
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES - 0.0%
8,200 General Electric Company (CORTS) 6.800% Aaa AAA 216,480
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 17.6%
972,600 Ace Ltd., Series C 7.800% Baa2 BBB- 26,065,680
2,097,900 Aegon NV 6.375% A3 A- 53,013,933
5,400 AMBAC Financial Group Inc. 7.000% Aa2 AA 141,804
39,300 AMBAC Financial Group Inc. 5.950% Aa2 AA 1,003,722
3,000 AMBAC Financial Group Inc. 5.875% Aa2 AA 75,690
38,800 American General Capital III 8.050% Aa3 A+ 1,002,204
474,557 Delphi Financial Group Inc. 8.000% Baa3 BBB 12,718,128
2,639,100 EverestRe Group Limited 7.850% Baa1 BBB 70,305,624
46,500 Financial Security Assurance Holdings 6.875% Aa2 AA 1,203,420
698,000 Financial Security Assurance Holdings 6.250% Aa2 AA 17,889,740
23
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE (continued)
6,300 Financial Security Assurance Holdings 5.600% Aa2 AA $ 157,059
339,900 Hartford Capital Trust III, Series C 7.450% Baa1 BBB 8,759,223
104,600 Hartford Life Capital Trust II, Series B 7.625% Baa1 BBB 2,702,864
94,000 Lincoln National Capital Trust V, Series E 7.650% Baa1 BBB 2,452,460
44,700 Lincoln National Capital Trust VI 6.750% Baa1 BBB 1,168,905
19,413 MBIA Inc. 8.000% Aa2 AA 496,973
7,500 MetLife Inc. 5.875% A2 A 188,550
1,097,500 MetLife Inc., Series B 6.500% Baa1 BBB 27,635,050
639,020 PartnerRe Limited, Series C 6.750% Baa1 BBB+ 16,295,010
25,000 PartnerRe Limited, Series D 6.500% Baa1 BBB+ 624,500
274,681 PartnerRe Limited 7.900% A3 BBB+ 7,130,719
108,700 PLC Capital Trust III 7.500% Baa1 BBB+ 2,821,852
443,040 PLC Capital Trust IV 7.250% Baa1 BBB+ 11,607,648
11,700 PLC Capital Trust V 6.125% Baa1 BBB+ 293,670
222,200 Prudential plc 6.750% Baa1 A 5,832,750
145,800 RenaissanceRe Holdings Ltd., Series B 7.300% Baa2 BBB+ 3,824,334
20,200 RenaissanceRe Holdings Ltd., Series C 6.080% Baa2 BBB+ 485,810
324,060 RenaissanceRe Holdings Ltd., Series A 8.100% Baa2 BBB+ 8,503,334
89,700 Safeco Capital Trust I (CORTS) 8.700% Baa2 BBB- 2,404,857
60,200 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 BBB- 1,594,698
4,700 Safeco Capital Trust III (CORTS) 8.072% Baa2 BBB- 127,088
2,300 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 BBB- 60,490
6,900 Safeco Corporation, Series 2002-5 (SATURNS) 8.250% Baa2 BBB- 181,953
132,300 Torchmark Capital Trust I 7.750% Baa1 A- 3,503,304
2,000 Torchmark Capital Trust II 7.750% Baa1 A- 52,870
21,400 W.R. Berkley Capital Trust, Series 2002-1, (CBTCS) 8.125% Baa3 BBB- 223,416
18,100 W.R. Berkley (CORTS) 8.250% Baa3 BBB- 472,953
565,200 XL Capital Ltd., Series A 8.000% Baa1 BBB+ 15,034,320
598,417 XL Capital Ltd., Series B 7.625% Baa1 BBB+ 15,702,462
------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES - 0.0%
9,200 Vertex Industries Inc. (PPLUS) 7.625% A2 A+ 241,684
------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 0.2%
4,400 The Walt Disney Company 7.000% Baa1 A- 115,236
144,200 Viacom Inc. 7.300% A3 BBB+ 3,652,586
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 0.4%
107,800 Dominion CNG Capital Trust I 7.800% Baa1 BBB- 2,822,204
46,300 Dominion Resources Capital Trust II 8.400% Baa2 BBB- 1,195,929
113,100 Energy East Capital Trust I 8.250% Baa3 BBB- 2,968,875
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 1.5%
909,511 Nexen Inc. 7.350% Baa3 BB+ 23,983,805
151,900 TransCanada Pipeline 8.250% A3 BBB 3,934,210
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.0%
14,700 Bristol Myers Squibb Company (CORTS) 6.250% A1 A+ 382,200
1,400 Bristol-Myers Squibb Company Trust (CORTS) 6.800% A1 A+ 36,554
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 19.6%
95,400 AvalonBay Communities, Inc., Series H 8.700% Baa2 BBB 2,671,200
16,400 BRE Properties, Series B 8.080% Baa3 BBB- 432,960
356,900 BRE Properties, Series C 6.750% Baa3 BBB- 8,943,914
81,006 BRE Properties, Series D 6.750% Baa3 BBB- 2,027,175
1,004,095 CarrAmerica Realty Corporation, Series E 7.500% Baa3 BBB- 25,975,938
1,200 Developers Diversified Realty Corporation 7.500% Ba1 BBB- 30,720
142,900 Developers Diversified Realty Corporation, Series H 7.375% Ba1 BBB- 3,621,086
564,413 Developers Diversified Realty Corporation, Series G 8.000% Ba1 BBB- 14,674,738
103,900 Developers Diversified Realty Corporation, Series F 8.600% Ba1 BBB- 2,750,233
297,700 Duke Realty Corporation, Series L 6.600% Baa2 BBB 7,451,431
220,650 Duke-Weeks Realty Corporation, Series B 7.990% Baa2 BBB 11,604,822
38,600 Duke-Weeks Realty Corporation, Series I 8.450% Baa2 BBB 990,476
24
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE (continued)
5,600 Duke-Weeks Realty Corporation 6.625% Baa2 BBB $ 143,220
378,600 Equity Office Properties Trust, Series G 7.750% Baa3 BBB 10,116,192
54,000 Equity Residential Properties Trust, Series C 9.125% Baa2 BBB 1,412,640
36,484 Equity Residential Properties Trust, Series N 6.480% Baa2 BBB 912,465
65,050 Equity Residential Properties Trust, Series D 8.600% Baa2 BBB 1,732,282
88,800 Equity Residential Properties Trust 9.125% Baa2 BBB 2,249,304
329,500 Federal Realty Investment Trust 8.500% Baa3 BBB- 8,744,930
18,600 First Industrial Realty Trust Inc., Series C 8.625% Baa3 BBB- 500,526
16,800 Harris Preferred Capital Corporation, Series A 7.375% A1 A 424,200
211,200 HRPT Properties Trust, Series A 9.875% Baa3 BBB- 5,508,096
1,546,125 HRPT Properties Trust, Series B 8.750% Baa3 BBB- 41,869,065
153,000 Kimco Realty Corporation, Series F 6.650% Baa2 BBB+ 3,906,090
147,350 New Plan Excel Realty Trust, Series D 7.800% Baa3 BBB- 7,583,928
768,000 New Plan Excel Realty Trust, Series E 7.625% N/R BBB- 19,960,320
1,700 Prologis Trust, Series F 6.750% Baa2 BBB 43,248
97,728 Prologis Trust, Series G 6.750% Baa2 BBB 2,490,109
734,970 PS Business Parks Inc. 7.000% Ba1 BBB- 18,080,262
107,600 PS Business Parks Inc., Series I 6.875% Ba1 BBB- 2,636,200
401,000 PS Business Parks Inc., Series L 7.600% Ba1 BBB- 10,267,605
4,100 Public Storage Inc. 7.125% Baa2 BBB+ 106,846
230,400 Public Storage Inc., Series C 6.600% Baa2 BBB+ 5,806,080
25,000 Public Storage Inc., Series D 6.180% Baa2 BBB+ 597,750
35,000 Public Storage Inc., Series E 6.750% Baa2 BBB+ 881,650
86,300 Public Storage Inc., Series Q 8.600% Baa2 BBB+ 2,219,636
260,795 Public Storage Inc., Series R 8.000% Baa2 BBB+ 6,780,670
46,100 Public Storage Inc., Series S 7.875% Baa2 BBB+ 1,194,912
100,665 Public Storage Inc., Series T 7.625% Baa2 BBB+ 2,611,250
106,200 Public Storage Inc., Series U 7.625% Baa2 BBB+ 2,777,130
148,000 Public Storage Inc., Series V 7.500% Baa2 BBB+ 3,892,400
2,129 Public Storage Inc., Series X 6.450% Baa2 BBB+ 53,119
161,000 Realty Income Corporation 7.375% Baa3 BBB- 4,218,200
303,200 Regency Centers Corporation 7.450% Baa3 BBB- 7,805,884
156,300 Regency Centers Corporation 7.250% Baa3 BBB- 4,009,095
34,500 Simon Property Group, Inc., Series F 8.750% Baa2 BBB- 908,385
326,041 Simon Property Group, Inc., Series G 7.890% Baa2 BBB 17,534,485
56,200 United Dominion Realty Trust 8.600% Baa3 BBB- 1,496,606
3,000 Vornado Realty Trust, Series E 7.000% Baa3 BBB- 76,770
21,500 Vornado Realty Trust, Series F 6.750% Baa3 BBB- 542,875
211,940 Vornado Realty Trust, Series G 6.625% Baa3 BBB- 5,266,709
2,461,900 Wachovia Preferred Funding Corporation 7.250% A2 BBB+ 70,656,530
156,500 Weingarten Realty Trust, Series E 6.950% Baa1 A- 4,125,340
------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.1%
39,800 Sherwin Williams Company, Series III (CORTS) 7.250% A2 A 1,058,680
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 3.6%
2,200 Countrywide Capital Trust II, Series II (CORTS) 8.000% Baa1 BBB+ 57,508
1,043,000 Countrywide Capital Trust IV 6.750% Baa1 BBB+ 27,076,280
245,500 Fannie Mae 0.000% Aa3 AA- 13,678,965
70,200 Fannie Mae 5.125% Aa3 AA- 3,088,800
83,500 Fannie Mae 3.780% Aa3 AA- 4,150,368
45,000 Fannie Mae 5.810% Aa3 AA- 2,205,000
124,200 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 6,414,930
58,200 Federal Home Loan Mortgage Corporation 6.140% Aa3 N/R 2,917,275
107,900 Federal Home Loan Mortgage Corporation 5.100% Aa3 AA- 4,661,280
66,600 Federal Home Loan Mortgage Corporation 5.000% Aa3 AA- 2,897,100
------------------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 0.2%
60,000 Federal Home Loan Mortgage Corporation 5.100% Aa3 AA- 2,625,000
34,000 Federal Home Loan Mortgage Corporation 5.300% Aa3 AA- 1,515,125
25
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 2.2%
163,100 Telephone and Data Systems Inc. 7.600% Baa1 A- $ 4,199,821
1,319,200 United States Cellular Corporation 8.750% Baa1 A- 36,146,080
------------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost $1,380,800,603) 1,436,922,759
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 3.8% (2.7% OF TOTAL INVESTMENTS)
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 0.6%
210,000 Citigroup Global Markets 2.000% Aa1 AA- 10,161,480
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 0.4%
126,500 FPL Group Inc. 8.000% N/R A- 8,173,165
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 0.6%
511,790 Albertson's, Inc. 7.250% Baa2 BBB 11,448,742
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES - 0.4%
128,600 Baxter International Inc. 7.000% Baa1 N/R 7,110,294
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 0.2%
118,000 XL Capital Ltd. 6.500% A2 A 2,826,100
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 1.4%
468,500 Dominion Resources Inc. 8.750% Baa1 BBB+ 25,978,325
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 0.2%
172,300 PMI Group Inc. 5.875% A1 A 4,226,519
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $61,683,044) 69,924,625
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 58.3% (40.9% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 8.7%
15,000 Ahmanson Capital Trust I, 144A 8.360% 12/01/26 Baa1 BBB 16,339,275
1,465 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 A- 1,585,791
4,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 A- 4,302,812
2,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 A- 2,149,380
500 BT Preferred Capital Trust II 7.875% 2/25/27 A2 N/R 540,544
5,000 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 A 5,276,950
18,600 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 A 19,460,436
5,050 First Hawaiian Capital Trust I, Series B 8.343% 7/01/27 A3 A- 5,528,947
1,000 First Security Capital I 8.410% 12/15/26 Aa2 A 1,092,936
17,095 First Union Capital Trust II, Series A 7.950% 11/15/29 A1 A- 22,835,569
25,000 M&I Capital Trust A 7.650% 12/01/26 A2 BBB+ 27,423,500
25,000 Mellon Capital Trust I, Series A 7.720% 12/01/26 A2 A- 26,858,675
3,240 State Street Institutional Capital Trust, 144A 7.940% 12/30/26 A1 A 3,514,149
19,800 UBS Preferred Funding Trust I 8.622% 10/29/49 A1 AA- 23,550,219
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 27.0%
19,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 Aa3 AA- 19,739,822
37,250 Abbey National Capital Trust I 8.963% 12/30/49 A2 A- 54,495,484
7,100 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R N/R 7,579,967
6,500 Bank One Capital III 8.750% 9/01/30 A1 A- 9,250,839
26,355 BankBoston Capital Trust I, Series B 8.250% 12/15/26 Aa3 A 28,631,150
3,031 BankBoston Capital Trust II, Series B 7.750% 12/15/26 Aa3 A 3,264,827
5,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 BBB- 5,399,260
36,000 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 A+ 43,362,612
5,300 Barnett Capital I 8.060% 12/01/26 Aa3 A 5,733,137
2,229 Corestates Capital Trust I, 144A 8.000% 12/15/26 A1 A 2,415,106
3,700 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 A- 4,245,498
3,500 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 N/R 3,783,010
26
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS (continued)
1,500 First Empire Capital Trust I 8.234% 2/01/27 Baa1 BBB $ 1,621,500
1,500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 BBB- 1,733,100
22,080 Fleet Capital Trust II 7.920% 12/11/26 Aa3 A 23,841,896
2,400 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 A- 2,927,309
6,250 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 A- 10,031,069
32,000 KBC Bank Fund Trust III, 144A 9.860% 11/02/49 A2 A- 38,602,720
8,000 KeyCorp Capital III 7.750% 7/15/29 A3 BBB 9,955,104
2,500 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 BBB 2,701,400
13,500 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 A+ 14,112,347
19,500 NB Capital Trust II 7.830% 12/15/26 Aa3 A 21,033,090
14,000 Nordbanken AB, 144A 8.950% 11/29/49 A2 A- 16,437,736
2,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 BBB- 2,176,018
8,000 North Fork Capital Trust II 8.000% 12/15/27 A3 BBB- 8,787,432
2,000 Peoples Heritage Capital Trust I, Series B 9.060% 2/01/27 A3 BB+ 2,172,252
33,085 PNC Institutional Capital Securities, 144A 7.950% 12/15/26 A3 BBB+ 35,597,806
2,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 BBB- 2,230,634
13,100 RBS Capital Trust B 6.800% 12/31/49 A1 A 13,558,697
8,000 Reliance Capital Trust I, Series B 8.170% 5/01/28 N/R N/R 8,939,704
500 Republic New York Capital II, Capital Securities 7.530% 12/04/26 A1 A- 536,171
17,500 Royal Bank of Scotland Group plc 9.118% 3/31/49 A1 A 20,861,908
2,150 Royal Bank of Scotland Group plc 7.648% 8/31/49 A1 A 2,742,897
5,000 Sparebanken Rogaland, Notes, 144A 6.443% 5/01/49 Baa1 N/R 5,188,530
9,000 St. George Funding Company LLC, 144A 8.485% 6/30/47 Baa1 N/R 10,190,367
3,400 Swedbank ForeningsSparbanken AB, 144A 9.000% 12/29/49 A2 BBB+ 4,021,581
7,500 Union Planters Capital Trust A 8.200% 12/15/26 A2 BBB+ 8,096,160
240 Union Planters Preferred Fund, 144A 7.750% 7/15/53 A2 BBB+ 27,525,000
1,000 Wells Fargo Capital Securities 7.950% 12/01/26 Aa2 A 1,082,567
10,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 BBB 10,943,720
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 5.5%
1,000 BNP Paribas Capital Trust, 144A 9.003% 12/29/49 A1 A+ 1,212,338
2,750 BNP Paribas Capital Trust 7.200% 12/31/49 A1 A+ 2,869,312
8,750 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 A- 9,423,890
44,010 HBOS Capital Funding LP, Notes 6.850% 3/01/49 A1 A 45,628,644
3,600 JPM Capital Trust I 7.540% 1/15/27 A1 A- 3,879,774
22,085 JPM Capital Trust II 7.950% 2/01/27 A1 A- 24,001,735
13,800 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 N/R 14,616,146
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.2%
30,250 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 Baa1 BBB+ 41,206,172
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 11.1%
14,280 Ace Capital Trust II 9.700% 4/01/30 Baa1 BBB- 19,763,620
2,000 Allstate Financing II 7.830% 12/01/45 A2 A- 2,155,128
28,000 American General Institutional Capital, 144A 8.125% 3/15/46 Aa3 A+ 38,158,484
10,000 Berkeley Capital Trust 8.197% 12/15/45 Baa3 BBB- 10,386,080
2,000 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 Baa1 BBB+ 2,062,034
6,000 MIC Financing Trust I 8.375% 2/01/27 A1 A+ 6,290,484
10,250 Prudential plc 6.500% 6/29/49 Baa1 A 10,339,595
10,000 RenaissanceRe Capital Trust 8.540% 3/01/27 Baa1 BBB+ 10,925,050
51,700 Sun Life Canada Capital Trust, Capital Securities, 144A 8.526% 5/06/47 A1 A+ 56,857,540
43,000 Zurich Capital Trust I, 144A 8.376% 6/01/37 Baa2 A- 47,574,426
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 1.3%
3,680 KN Capital Trust I, Preferred Securities 8.560% 4/15/27 Baa3 BB+ 4,034,436
10,750 KN Capital Trust III 7.630% 4/15/28 Baa3 BB+ 12,619,500
7,355 Phillips 66 Capital Trust II 8.000% 1/15/37 Baa2 BBB 8,021,694
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 2.5%
8,595 Countrywide Capital Trust I 8.000% 12/15/26 Baa1 BBB+ 8,915,740
8,460 Countrywide Capital Trust III, Series B 8.050% 6/15/27 Baa1 BBB+ 10,567,217
11,825 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 BBB 13,135,702
27
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (continued)
13,000 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 BBB $ 14,126,970
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $1,007,768,223) 1,074,780,321
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 0.3% (0.2% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.3%
7,150 Ford Motor Company, Debenture 7.400% 11/01/46 Baa3 BB+ 5,587,561
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $5,679,599) 5,587,561
--------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.2% (1.5% OF TOTAL INVESTMENTS)
State Street Bank, 2.600%, dated 6/30/05, due 7/01/05, repurchase price $41,299,403,
collateralized by $30,670,000 U.S. Treasury Bonds, 7.125%, due 2/15/23,
$ 41,296 value $42,123,589 41,296,420
============ --------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $41,296,420) 41,296,420
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,497,227,889) - 142.5% 2,628,511,686
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.9% 16,076,410
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (43.4)% (800,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $1,844,588,096
====================================================================================================================
INTEREST RATE SWAP TRANSACTIONS OUTSTANDING AT JUNE 30, 2005:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FIXED RATE FLOATING RATE** DATE (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------
Citibank, N.A. $200,000,000 2.6300% 3.1500% 11/06/05 $ 733,064
Citibank, N.A. 200,000,000 3.3750 3.1500 11/06/07 2,512,458
Citibank, N.A. 200,000,000 3.9100 3.1500 11/06/09 841,781
--------------------------------------------------------------------------------------------------------------------
$4,087,303
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
* Ratings: Below Baa by Moody's Investor Service, Inc. or
BBB by Standard & Poor's Group are considered to be
below investment grade.
** Based on LIBOR (London Interbank Offered Rate)
144A 144A securities are those which are exempt from
registration under Rule 144A of the Securities Act of
1933, as amended. These securities may only be resold
in transactions exempt from registration which are
normally those transactions with qualified
institutional buyers.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) PreferredPlus Trust.
(SATURNS) Structured Asset Trust Unit Repackaging.
N/R Security is not rated.
See accompanying notes to financial statements.
28
Nuveen Quality Preferred Income Fund 3 (JHP)
Portfolio of
INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
$25 PAR (OR SIMILAR) SECURITIES - 85.2% (58.4% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.1%
8,000 DaimlerChrysler AG (CORTS) 7.875% A3 BBB $ 208,000
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS - 7.1%
32,000 Bear Stearns Capital Trust III 7.800% A2 BBB 828,800
50,100 Compass Capital Trust III 7.350% A3 BBB- 1,302,600
39,900 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 A+ 1,041,390
23,100 First Union Capital II, Series II (CORTS) 7.500% A1 A- 606,837
11,300 First Union Institutional Capital II (CORTS) 8.200% A1 A- 311,428
355,900 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 BBB+ 8,950,885
18,300 Merrill Lynch Preferred Capital Trust IV 7.120% A1 A- 484,035
76,100 Merrill Lynch Preferred Capital Trust V 7.280% A1 A- 2,037,197
36,300 Merrill Lynch Preferred Capital Trust 7.750% A1 A- 951,060
80,000 Morgan Stanley Capital Trust II 7.250% A1 A- 2,070,400
212,600 Morgan Stanley Capital Trust III 6.250% A1 A- 5,344,764
40,900 Morgan Stanley (PPLUS) 7.050% Aa3 A+ 1,061,355
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 14.4%
3,700 Abbey National plc, Series B 7.375% A2 A 99,160
105,898 ABN AMRO Capital Trust Fund VII 6.080% A2 A 2,631,565
34,100 ASBC Capital I 7.625% Baa1 BBB- 903,650
60,394 BAC Capital Trust I 7.000% Aa3 A 1,558,769
38,700 BAC Capital Trust II 7.000% Aa3 A 1,008,135
99,500 BAC Capital Trust III 7.000% Aa3 A 2,608,890
64,900 BAC Capital Trust V 6.000% Aa3 A 1,644,566
32,800 Banco Santander 6.410% A2 BBB+ 828,200
37,300 Banco Totta & Acores Finance, Series A 8.875% A3 N/R 993,113
18,600 BancWest Capital I 9.500% A3 A- 478,578
222,200 Banesto Holdings, Series A, 144A 10.500% A2 N/R 6,929,863
32,300 Bank One Capital Trust VI 7.200% A1 A- 842,384
4,800 BankNorth Capital Trust II 8.000% A3 BB+ 126,048
23,000 Chittenden Capital Trust I 8.000% Baa1 BB+ 606,740
44,500 Cobank ABC, 144A 7.000% N/R N/R 2,452,351
54,200 Comerica Capital Trust I 7.600% A3 BBB+ 1,392,940
161,300 Fleet Capital Trust VII 7.200% Aa3 A 4,155,088
26,516 Fleet Capital Trust VIII 7.200% Aa3 A 688,355
6,400 KeyCorp Capital Trust V 5.875% A3 BBB 158,656
7,100 KeyCorp (PCARS) 7.500% A3 N/R 183,890
7,200 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 BBB 189,576
12,500 KeyCorp, Series B (CORTS) 8.250% A3 BBB 319,250
22,400 National Commerce Capital Trust II 7.700% A1 A- 584,416
30,400 National Westminster Bank plc, Series A 7.875% Aa2 A+ 787,360
16,500 National Westminster Bank plc, Series B 7.875% Aa3 A+ 424,050
20,100 PNC Capital Trust 6.125% A3 BBB 508,128
40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 A 1,030,800
104,465 Royal Bank of Scotland Group plc, Series N 6.350% A1 A 2,650,277
17,000 SunTrust Capital Trust IV 7.125% A1 A- 438,600
25,500 SunTrust Capital Trust V 7.050% A1 A- 659,940
110,300 USB Capital Trust III 7.750% Aa3 A- 2,861,182
59,500 USB Capital Trust IV 7.350% Aa3 A- 1,554,140
50,000 USB Capital Trust V 7.250% Aa3 A- 1,300,000
19,000 VNB Capital Trust I 7.750% Baa1 BBB 494,000
31,600 Washington Mutual Capital Trust I, Series 2001-22, 7.650% Baa1 BBB 816,860
Class A-1 (CORTS)
16,000 Well Fargo Capital Trust IX 5.625% Aa2 A 392,320
29
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
-------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS (continued)
35,800 Wells Fargo Capital Trust V 7.000% Aa2 A $ 925,072
87,900 Wells Fargo Capital Trust VII 5.850% Aa2 A 2,197,500
80,800 Zions Capital Trust B 8.000% Baa1 BBB- 2,161,400
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE - 4.3%
14,600 Household Capital Trust VI 8.250% A2 BBB+ 378,578
100,500 Household Capital Trust VII 7.500% A2 BBB+ 2,629,080
120,000 HSBC Finance Corporation 6.360% A3 BBB+ 3,060,000
136,000 HSBC Finance Corporation 6.875% A1 A 3,583,600
95,300 SLM Corporation, Series A 6.970% Baa1 BBB+ 5,444,013
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 8.9%
10,000 BBVA Preferred Capital Ltd., Series B 7.750% A1 A- 257,700
42,900 CIT Group Incorporated (CORTS) 7.750% A3 BBB+ 1,181,895
25,600 Citigroup Capital Trust VII 7.125% Aa2 A 664,064
51,200 Citigroup Capital Trust VIII 6.950% Aa2 A 1,312,768
13,000 Citigroup Capital Trust XI 6.000% Aa2 A 326,560
16,549 Citigroup Inc., Series F 6.365% Aa3 A 871,305
68,500 Citigroup Inc., Series H 6.231% Aa3 N/R 3,655,845
50,901 Citigroup Inc., Series M 5.864% Aa3 A 2,595,951
142,900 ING Group NV 7.050% N/R A- 3,736,835
504,300 ING Group NV 7.200% A2 A- 13,288,305
42,600 JPMorgan Chase Capital Trust X 7.000% A1 N/R 1,107,600
43,800 JPMorgan Chase Capital Trust XVI 6.350% A1 A- 1,109,892
25,800 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 A- 680,088
22,000 Merrill Lynch Capital Trust II 8.000% A1 A- 588,500
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4%
6,000 BellSouth Corporation (CORTS) 7.000% A2 A 154,200
12,900 BellSouth Inc. (CORTS) 7.000% A2 A 334,755
25,200 Verizon Communications (CORTS) 7.625% A2 A+ 661,500
15,300 Verizon New England Inc., Series B 7.000% A2 N/R 400,248
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 2.3%
53,400 Entergy Louisiana Inc. 7.600% Baa1 A- 1,399,614
203,447 Entergy Mississippi Inc. 7.250% Baa2 A- 5,349,639
13,100 Georgia Power Company 5.700% Aaa AAA 333,395
10,500 National Rural Utilities Cooperative Finance Corporation7.600% A3 BBB+ 269,535
4,500 National Rural Utilities Cooperative Finance Corporation7.400% A3 BBB+ 117,000
18,300 Tennessee Valley Authority, Series D 6.750% Aaa AAA 468,297
------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS - 0.7%
23,500 Dairy Farmers of America Inc., 144A 7.875% Ba1 BBB- 2,463,094
------------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES - 0.2%
32,900 AGL Capital Trust II 8.000% Baa2 BBB 851,781
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE PROVIDERS & SERVICES - 0.1%
12,500 Aetna Incorporated 8.500% Baa1 BBB+ 326,375
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 19.0%
133,000 Ace Ltd., Series C 7.800% Baa2 BBB- 3,564,400
398,838 Aegon NV 6.375% A3 A- 10,078,636
30,700 AMBAC Financial Group Inc. 5.950% Aa2 AA 784,078
95,000 AMBAC Financial Group Inc. 5.875% Aa2 AA 2,396,850
8,500 American General Capital III 8.050% Aa3 A+ 219,555
134,400 Delphi Financial Group Inc. 8.000% Baa3 BBB 3,601,920
261,171 EverestRe Group Limited 7.850% Baa1 BBB 6,957,595
151,100 Financial Security Assurance Holdings 6.250% Aa2 AA 3,872,693
68,900 Hartford Capital Trust III, Series C 7.450% Baa1 BBB 1,775,553
106,900 Lincoln National Capital Trust V, Series E 7.650% Baa1 BBB 2,789,021
4,000 MetLife Inc. 5.875% A2 A 100,560
193,700 MetLife Inc., Series B 6.500% Baa1 BBB 4,877,366
140,000 PartnerRe Limited, Series C 6.750% Baa1 BBB+ 3,570,000
30
RATINGS*
-------------------
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE (continued)
55,700 PartnerRe Limited 7.900% A3 BBB+ $ 1,445,972
55,700 PLC Capital Trust III 7.500% Baa1 BBB+ 1,445,972
15,500 PLC Capital Trust IV 7.250% Baa1 BBB+ 406,100
52,544 Prudential plc 6.750% Baa1 A 1,379,280
217,000 RenaissanceRe Holdings Ltd., Series B 7.300% Baa2 BBB+ 5,691,910
41,500 RenaissanceRe Holdings Ltd., Series A 8.100% Baa2 BBB+ 1,088,960
16,400 Safeco Capital Trust I (CORTS) 8.700% Baa2 BBB- 439,684
9,300 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 BBB- 246,357
32,200 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 BBB- 846,860
61,800 XL Capital Ltd., Series A 8.000% Baa1 BBB+ 1,643,880
289,400 XL Capital Ltd., Series B 7.625% Baa1 BBB+ 7,593,856
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 0.3%
17,900 Dominion CNG Capital Trust I 7.800% Baa1 BBB- 468,622
24,300 Energy East Capital Trust I 8.250% Baa3 BBB- 637,875
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 1.7%
187,900 Nexen Inc. 7.350% Baa3 BB+ 4,954,923
34,700 TransCanada Pipeline 8.250% A3 BBB 898,730
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.1%
10,000 Bristol Myers Squibb Company (CORTS) 6.250% A1 A+ 260,000
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 18.8%
10,700 AvalonBay Communities, Inc., Series H 8.700% Baa2 BBB 299,600
135,900 BRE Properties, Series C 6.750% Baa3 BBB- 3,405,654
8,829 BRE Properties, Series D 6.750% Baa3 BBB- 220,946
200,533 CarrAmerica Realty Corporation, Series E 7.500% Baa3 BBB- 5,187,789
30,000 Developers Diversified Realty Corporation, Series H 7.375% Ba1 BBB- 760,200
170,900 Developers Diversified Realty Corporation, Series G 8.000% Ba1 BBB- 4,443,400
26,300 Developers Diversified Realty Corporation, Series F 8.600% Ba1 BBB- 696,161
112,500 Duke Realty Corporation, Series L 6.600% Baa2 BBB 2,815,875
60,644 Equity Office Properties Trust, Series G 7.750% Baa3 BBB 1,620,408
18,500 Equity Residential Properties Trust, Series C 9.125% Baa2 BBB 483,960
20,800 Equity Residential Properties Trust, Series D 8.600% Baa2 BBB 553,904
25,900 Equity Residential Properties Trust 9.125% Baa2 BBB 656,047
55,300 Federal Realty Investment Trust 8.500% Baa3 BBB- 1,467,662
5,100 First Industrial Realty Trust Inc., Series C 8.625% Baa3 BBB- 137,241
131,900 HRPT Properties Trust, Series A 9.875% Baa3 BBB- 3,439,952
240,207 HRPT Properties Trust, Series B 8.750% Baa3 BBB- 6,504,806
21,000 New Plan Excel Realty Trust, Series D 7.800% Baa3 BBB- 1,080,845
35,600 New Plan Excel Realty Trust, Series E 7.625% N/R BBB- 925,244
20,000 Prologis Trust, Series G 6.750% Baa2 BBB 509,600
136,000 PS Business Parks Inc. 7.000% Ba1 BBB- 3,345,600
36,900 PS Business Parks Inc., Series D 9.500% Ba2 BBB- 964,197
8,300 PS Business Parks Inc., Series F 8.750% Ba2 BBB- 218,622
120,000 PS Business Parks Inc., Series L 7.600% Ba1 BBB- 3,072,600
40,900 Public Storage Inc., Series Q 8.600% Baa2 BBB+ 1,051,948
129,533 Public Storage Inc., Series R 8.000% Baa2 BBB+ 3,367,858
19,300 Public Storage Inc., Series S 7.875% Baa2 BBB+ 500,256
22,500 Public Storage Inc., Series T 7.625% Baa2 BBB+ 583,650
11,000 Public Storage Inc., Series U 7.625% Baa2 BBB+ 287,650
17,000 Public Storage Inc., Series V 7.500% Baa2 BBB+ 447,100
12,600 Regency Centers Corporation 7.450% Baa3 BBB- 324,387
80,700 Regency Centers Corporation 7.250% Baa3 BBB- 2,069,955
7,500 Simon Property Group, Inc., Series F 8.750% Baa2 BBB- 197,475
68,600 Simon Property Group, Inc., Series G 7.890% Baa2 BBB 3,689,308
36,400 United Dominion Realty Trust 8.600% Baa3 BBB- 969,332
61,800 Vornado Realty Trust, Series G 6.625% Baa3 BBB- 1,535,730
252,700 Wachovia Preferred Funding Corporation 7.250% A2 BBB+ 7,252,490
39,600 Weingarten Realty Trust, Series E 6.950% Baa1 A- 1,043,856
31
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
RATINGS*
------------------- MARKET
SHARES DESCRIPTION(1) COUPON MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.2%
20,000 Sherwin Williams Company, Series III (CORTS) 7.250% A2 A $ 532,000
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 4.4%
16,600 Countrywide Capital Trust II, Series II (CORTS) 8.000% Baa1 BBB+ 433,924
240,430 Countrywide Capital Trust IV 6.750% Baa1 BBB+ 6,241,563
25,600 Fannie Mae 0.000% Aa3 AA- 1,426,401
42,700 Fannie Mae 5.125% Aa3 AA- 1,878,800
43,800 Fannie Mae 3.780% Aa3 AA- 2,177,079
20,900 Federal Home Loan Mortgage Corporation 6.000% Aa3 AA- 1,079,485
9,000 Federal Home Loan Mortgage Corporation 6.140% Aa3 N/R 451,125
19,900 Federal Home Loan Mortgage Corporation 5.100% Aa3 AA- 859,680
20,800 Federal Home Loan Mortgage Corporation 5.000% Aa3 AA- 904,800
------------------------------------------------------------------------------------------------------------------------------------
U.S. AGENCY - 0.1%
7,000 Federal Home Loan Mortgage Corporation 5.300% Aa3 AA- 311,938
------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 2.1%
116,901 Telephone and Data Systems Inc. 7.600% Baa1 A- 3,010,201
157,500 United States Cellular Corporation 8.750% Baa1 A- 4,315,500
5,300 United States Cellular Corporation 7.500% Baa1 A- 141,666
------------------------------------------------------------------------------------------------------------------------------------
Total $25 Par (or similar) Securities (cost $293,637,462) 299,319,253
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 3.7% (2.5% OF TOTAL INVESTMENTS)
DIVERSIFIED FINANCIAL SERVICES - 0.9%
61,000 Citigroup Global Markets 2.000% Aa1 AA- 2,951,668
------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING - 0.7%
100,196 Albertson's, Inc. 7.250% Baa2 BBB 2,241,385
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE EQUIPMENT & SUPPLIES - 0.4%
28,000 Baxter International Inc. 7.000% Baa1 N/R 1,548,120
------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER - 1.6%
102,400 Dominion Resources Inc. 8.750% Baa1 BBB+ 5,678,080
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 0.1%
20,100 PMI Group Inc. 5.875% A1 A 493,053
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $11,385,461) 12,912,306
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 55.5% (38.0% OF TOTAL INVESTMENTS)
CAPITAL MARKETS - 7.4%
5,000 Ahmanson Capital Trust I, 144A 8.360% 12/01/26 Baa1 BBB 5,446,425
1,000 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 A- 1,082,451
1,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 A- 1,075,703
1,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 A- 1,074,690
500 BT Preferred Capital Trust II 7.875% 2/25/27 A2 N/R 540,544
250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 A 263,848
3,750 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 A 3,923,475
1,000 First Hawaiian Capital Trust I, Series B 8.343% 7/01/27 A3 A- 1,094,841
8,485 First Union Capital Trust II, Series A 7.950% 11/15/29 A1 A- 11,334,297
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS - 21.2%
2,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 Aa3 AA- 2,077,876
1,000 Abbey National Capital Trust I 8.963% 12/30/49 A2 A- 1,462,966
1,900 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R N/R 2,028,442
1,000 BankAmerica Capital II, Series 2 8.000% 12/15/26 Aa3 A 1,081,465
1,500 BankBoston Capital Trust II, Series B 7.750% 12/15/26 Aa3 A 1,615,718
32
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS (continued)
1,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 BBB- $ 1,079,852
6,200 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 A+ 7,468,005
900 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 A- 1,032,689
1,000 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 N/R 1,080,860
1,000 First Empire Capital Trust I 8.234% 2/01/27 Baa1 BBB 1,081,000
500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 BBB- 577,700
1,430 HSBC USA Capital Trust II, 144A 8.380% 5/15/27 N/R A- 1,573,102
2,500 KBC Bank Fund Trust III, 144A 9.860% 11/02/49 A2 A- 3,015,838
1,000 KeyCorp Capital II 6.875% 3/17/29 A3 BBB 1,131,248
2,500 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 A+ 2,613,398
4,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 BBB- 4,352,036
1,500 North Fork Capital Trust II 8.000% 12/15/27 A3 BBB- 1,647,644
3,150 Peoples Heritage Capital Trust I, Series B 9.060% 2/01/27 A3 BB+ 3,421,297
9,200 PNC Institutional Capital Trust B, 144A 8.315% 5/15/27 A3 BBB 10,058,507
1,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 BBB- 1,115,317
4,500 RBS Capital Trust B 6.800% 12/31/49 A1 A 4,657,568
2,500 St. George Funding Company LLC, 144A 8.485% 6/30/47 Baa1 N/R 2,830,658
655 Swedbank ForeningsSparbanken AB, 144A 9.000% 12/29/49 A2 BBB+ 774,746
4,600 Union Planters Capital Trust A 8.200% 12/15/26 A2 BBB+ 4,965,645
70 Union Planters Preferred Fund, 144A 7.750% 7/15/53 A2 BBB+ 8,028,125
3,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 BBB 3,283,116
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES - 6.6%
1,000 BNP Paribas Capital Trust 7.200% 12/31/49 A1 A+ 1,043,386
1,000 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 A- 1,077,016
9,100 HBOS Capital Funding LP, Notes 6.850% 3/01/49 A1 A 9,434,689
9,000 JPM Capital Trust I 7.540% 1/15/27 A1 A- 9,699,435
1,800 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 N/R 1,906,454
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.0%
5,260 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 Baa1 BBB+ 7,165,106
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 14.3%
3,450 Ace Capital Trust II 9.700% 4/01/30 Baa1 BBB- 4,774,824
500 Allstate Financing II 7.830% 12/01/45 A2 A- 538,782
5,000 Berkeley Capital Trust 8.197% 12/15/45 Baa3 BBB- 5,193,040
750 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 Baa1 BBB+ 773,263
10,000 MIC Financing Trust I 8.375% 2/01/27 A1 A+ 10,484,140
1,500 Prudential plc 6.500% 6/29/49 Baa1 A 1,513,112
3,000 RenaissanceRe Capital Trust 8.540% 3/01/27 Baa1 BBB+ 3,277,515
10,000 Sun Life Canada Capital Trust, Capital 8.526% 5/06/47 A1 A+ 10,997,590
Securities, 144A
11,500 Zurich Capital Trust I, 144A 8.376% 6/01/37 Baa2 A- 12,723,393
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS - 2.4%
3,000 KN Capital Trust III 7.630% 4/15/28 Baa3 BB+ 3,521,721
4,500 Phillips 66 Capital Trust II 8.000% 1/15/37 Baa2 BBB 4,907,902
------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE - 1.6%
1,000 Countrywide Capital Trust I 8.000% 12/15/26 Baa1 BBB+ 1,037,317
4,225 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 BBB 4,693,302
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $187,773,615) 194,653,079
--------------------------------------------------------------------------------------------------------------------
33
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS June 30, 2005 (Unaudited)
PRINCIPAL RATINGS*
AMOUNT (000)/ -------------- MARKET
SHARES DESCRIPTION(1) COUPON MATURITY MOODY'S S&P VALUE
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 0.4% (0.2% OF TOTAL INVESTMENTS)
AUTOMOBILES - 0.4%
1,700 Ford Motor Company, Debenture 7.400% 11/01/46 Baa3 BB+ $ 1,328,511
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $1,458,959) 1,328,511
--------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.3% (0.9% OF TOTAL INVESTMENTS)
State Street Bank, 2.600%, dated 6/30/05, due 7/01/05, repurchase price $4,423,827,
$ 4,424 collateralized by $3,125,000 U.S. Treasury Bonds, 8.125%, due 8/15/19, value $4,514,122 4,423,508
============ -------------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements (cost $4,423,508) 4,423,508
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $498,679,005) - 146.1% 512,636,657
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.2% 4,250,120
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (47.3)% (166,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $350,886,777
====================================================================================================================
INTEREST RATE SWAP CONTRACTS OUTSTANDING AT JUNE 30, 2005:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
COUNTERPARTY AMOUNT FIXED RATE FLOATING RATE** DATE (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------
Citibank, N.A. $42,000,000 2.4125% 3.1500% 03/06/06 $ 397,510
Citibank, N.A. 42,000,000 3.2550 3.1500 03/06/08 750,390
Citibank, N.A. 42,000,000 3.8150 3.1500 03/06/10 396,939
-------------------------------------------------------------------------------------------------------------------
$1,544,839
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
* Ratings: Below Baa by Moody's Investor Service, Inc. or
BBB by Standard & Poor's Group are considered to be
below investment grade.
** Based on LIBOR (London Interbank Offered Rate)
144A 144A securities are those which are exempt from
registration under Rule 144A of the Securities Act of
1933, as amended. These securities may only be resold
in transactions exempt from registration which are
normally those transactions with qualified
institutional buyers.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) PreferredPlus Trust.
(SATURNS) Structured Asset Trust Unit Repackaging.
N/R Security is not rated.
See accompanying notes to financial statements.
34
Statement of
ASSETS AND LIABILITIES June 30, 2005 (Unaudited)
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $1,316,389,713, $2,497,227,889
and $498,679,005, respectively) $1,377,825,446 $2,628,511,686 $512,636,657
Cash 190,291 239,840 74,951
Interest rate swaps, at value -- 4,087,303 1,544,839
Receivables:
Dividends 2,020,152 2,704,839 544,377
Interest 7,125,453 11,394,880 2,258,117
Investments sold 1,350,178 2,569,133 278,426
Reclaims -- 40,864 7,211
Other assets 62,049 121,697 22,783
------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,388,573,569 2,649,670,242 517,367,361
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Interest rate swaps, at value 1,227,305 -- --
Payable for investments purchased 36,449 3,176,626 55,030
Accrued expenses:
Management fees 622,447 1,122,881 241,676
Other 298,066 521,830 111,365
FundPreferred share dividends payable 131,871 260,809 72,513
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,316,138 5,082,146 480,584
------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 440,000,000 800,000,000 166,000,000
====================================================================================================================================
Net assets applicable to Common shares $ 946,257,431 $1,844,588,096 $350,886,777
====================================================================================================================================
Common shares outstanding 64,462,104 119,541,842 23,642,721
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 14.68 $ 15.43 $ 14.84
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 644,621 $ 1,195,418 $ 236,427
Paid-in surplus 911,539,984 1,693,035,834 334,356,632
Undistributed net investment income 6,077,844 7,054,735 2,148,767
Accumulated net realized gain (loss) from investments, futures
and interest rate swaps (32,213,446) 7,931,009 (1,357,540)
Net unrealized appreciation (depreciation) of investments and interest rate swaps 60,208,428 135,371,100 15,502,491
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 946,257,431 $1,844,588,096 $350,886,777
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
FundPreferred shares Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
35
Statement of
OPERATIONS Six Months Ended June 30, 2005 (Unaudited)
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $8,366,
$11,731 and $4,093, respectively) $ 25,701,862 $ 50,364,545 $10,256,271
Interest 22,317,315 40,108,529 7,189,966
Total investment income 48,019,177 90,473,074 17,446,237
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 5,974,494 11,008,703 2,289,677
FundPreferred shares - auction fees 545,480 991,780 205,795
FundPreferred shares - dividend disbursing agent fees 12,495 20,569 6,212
Shareholders' servicing agent fees and expenses 5,811 6,004 1,455
Custodian's fees and expenses 159,635 288,190 65,349
Trustees' fees and expenses 14,087 23,954 4,901
Professional fees 38,445 55,248 15,333
Shareholders' reports - printing and mailing expenses 133,282 264,358 48,133
Stock exchange listing fees 12,431 22,929 5,189
Investor relations expense 94,510 128,478 33,325
Other expenses 20,938 38,289 14,536
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 7,011,608 12,848,502 2,689,905
Custodian fee credit (433) (313) (132)
Expense reimbursement (2,201,043) (4,199,793) (822,624)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 4,810,132 8,648,396 1,867,149
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 43,209,045 81,824,678 15,579,088
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from:
Investments 4,890,576 20,637,419 2,083,539
Futures -- 626,810 --
Interest rate swaps (1,670,662) (1,927,391) (312,918)
Change in net unrealized appreciation (depreciation) of:
Investments (20,736,577) (49,899,713) (8,764,215)
Futures -- 313,500 --
Interest rate swaps 2,246,485 2,985,352 519,599
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (15,270,178) (27,264,023) (6,473,995)
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (5,973,035) (10,889,411) (2,312,864)
From accumulated net realized gains from investments -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to Common shares from
distributions to FundPreferred shareholders (5,973,035) (10,889,411) (2,312,864)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $ 21,965,832 $ 43,671,244 $ 6,792,229
====================================================================================================================================
See accompanying notes to financial statements.
36
Statement of
CHANGES IN NET ASSETS (Unaudited)
QUALITY PREFERRED INCOME (JTP) QUALITY PREFERRED INCOME 2 (JPS)
----------------------------------------------- ------------------------------------------------
SIX MONTHS FIVE MONTHS SIX MONTHS FIVE MONTHS
ENDED ENDED YEAR ENDED ENDED ENDED YEAR ENDED
6/30/05 12/31/04 7/31/04 6/30/05 12/31/04 7/31/04
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 43,209,045 $ 38,406,778 $ 88,172,724 $ 81,824,678 $ 71,895,333 $ 169,356,410
Net realized gain (loss) from:
Investments 4,890,576 (789,063) 6,457,519 20,637,419 35,993 24,882,646
Futures -- -- -- 626,810 -- --
Interest rate swaps (1,670,662) (2,754,561) (8,829,243) (1,927,391) (4,109,979) (12,395,021)
Change in net unrealized
appreciation (depreciation) of:
Investments (20,736,577) 34,446,726 15,444,743 (49,899,713) 66,169,186 28,917,818
Futures -- -- -- 313,500 (313,500) --
Interest rate swaps 2,246,485 (130,099) 3,409,919 2,985,352 (1,229,256) 2,018,167
Distributions to FundPreferred
shareholders:
From net investment income (5,973,035) (3,338,840) (5,266,011) (10,889,411) (4,886,184) (9,136,215)
From accumulated net
realized gains
from investments -- -- -- -- (1,197,900) (408,401)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from operations 21,965,832 65,840,941 99,389,651 43,671,244 126,363,693 203,235,404
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (37,291,330) (32,291,619) (80,656,204) (71,366,480) (62,896,099) (157,519,666)
From accumulated net
realized gains
from investments -- -- -- -- (22,062,289) (4,944,168)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (37,291,330) (32,291,619) (80,656,204) (71,366,480) (84,958,388) (162,463,834)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- (2,071) -- -- (3,114)
Net proceeds from shares issued to
shareholders due to
reinvestment of distributions -- 141,543 1,421,340 -- -- 302,695
FundPreferred shares offering costs -- 92 (7,166) -- 92 (2,071)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares from
capital share transactions -- 141,635 1,412,103 -- 92 297,510
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets applicable
to Common shares (15,325,498) 33,690,957 20,145,550 (27,695,236) 41,405,397 41,069,080
Net assets applicable
to Common shares
at the beginning of period 961,582,929 927,891,972 907,746,422 1,872,283,332 1,830,877,935 1,789,808,855
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable
to Common shares
at the end of period $946,257,431 $961,582,929 $927,891,972 $1,844,588,096 $1,872,283,332 $1,830,877,935
====================================================================================================================================
Undistributed net investment
income at the end of period $ 6,077,844 $ 6,133,164 $ 3,356,845 $ 7,054,735 $ 7,485,948 $ 3,372,898
====================================================================================================================================
See accompanying notes to financial statements.
37
Statement of
CHANGES IN NET ASSETS (Unaudited) (continued)
QUALITY PREFERRED INCOME 3 (JHP)
-----------------------------------------------
SIX MONTHS FIVE MONTHS
ENDED ENDED YEAR ENDED
6/30/05 12/31/04 7/31/04
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 15,579,088 $ 14,203,151 $ 32,619,507
Net realized gain (loss) from:
Investments 2,083,539 (292,843) 1,610,865
Futures -- -- --
Interest rate swaps (312,918) (785,894) (2,431,397)
Change in net unrealized appreciation (depreciation) of:
Investments (8,764,215) 12,474,854 10,205,143
Futures -- -- --
Interest rate swaps 519,599 (494,654) (63,791)
Distributions to FundPreferred shareholders:
From net investment income (2,312,864) (1,232,711) (1,783,707)
From accumulated net realized gains
from investments -- (79,282) (225,856)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to
Common shares from operations 6,792,229 23,792,621 39,930,764
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (14,102,883) (12,158,797) (29,147,305)
From accumulated net realized gains
from investments -- (1,336,468) (2,968,711)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (14,102,883) (13,495,265) (32,116,016)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares -- -- 101,605
Net proceeds from shares issued to
shareholders due to
reinvestment of distributions -- -- 489,296
FundPreferred shares offering costs -- -- (4,237)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares from
capital share transactions -- -- 586,664
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares (7,310,654) 10,297,356 8,401,412
Net assets applicable to Common shares
at the beginning of period 358,197,431 347,900,075 339,498,663
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares
at the end of period $350,886,777 $358,197,431 $347,900,075
====================================================================================================================================
Undistributed net investment income
at the end of period $ 2,148,767 $ 2,985,426 $ 2,173,783
====================================================================================================================================
See accompanying notes to financial statements.
38
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The funds (the "Funds") covered in this report and their corresponding Common
share New York Stock Exchange symbols are Nuveen Quality Preferred Income Fund
(JTP), Nuveen Quality Preferred Income Fund 2 (JPS) and Nuveen Quality Preferred
Income Fund 3 (JHP). The Funds are registered under the Investment Company Act
of 1940, as amended, as non-diversified, closed-end management investment
companies.
Each Fund seeks to provide high current income consistent with capital
preservation by investing primarily in a portfolio of preferred securities, debt
securities including convertible debt securities and convertible preferred
securities.
Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the
Funds' previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NIAC or NAC.
The Board of Trustees of the Funds approved a change in the Funds' fiscal year
end from July 31 to December 31 upon completion of the Funds' July 31, 2004
fiscal year.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Securities Valuation
Exchange-listed securities and instruments are generally valued at the last
sales price on the exchange on which such securities or instruments are
primarily traded. Securities or instruments traded on an exchange for which
there are no transactions on a given day or securities or instruments not listed
on an exchange are valued at the mean of the closing bid and asked prices.
Futures contracts are valued using the closing settlement price or, in the
absence of such a price, at the mean of the bid and asked prices. Securities
traded on Nasdaq are valued at the Nasdaq Official Closing Price. The prices of
fixed-income securities are generally provided by an independent pricing service
approved by the Funds' Board of Trustees and based on the mean between the bid
and asked prices. When price quotes are not readily available, the pricing
service or, in the absence of a pricing service for a particular security or
instrument, the Board of Trustees of the Funds, or its designee, may establish
fair market value using a wide variety of market data including yields or prices
of securities of comparable quality, type of issue, coupon, maturity and rating,
market quotes or indications of value from security dealers, evaluations of
anticipated cash flows or collateral, general market conditions and other
information and analysis, including the obligor's credit characteristics
considered relevant by the pricing service or the Board of Trustee's designee.
Short-term securities are valued at amortized cost, which approximates market
value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At June 30, 2005, there
were no such outstanding purchase commitments in any of the Funds.
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities,
when information is available. Interest income, which includes the amortization
of premiums and accretion of discounts for financial reporting purposes, is
recorded on an accrual basis.
39
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all net investment income and net capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required.
Dividends and Distributions to Common Shareholders
Distributions to Common shareholders are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from U.S. generally accepted accounting
principles.
Dividends to Common shareholders are declared monthly. With respect to the REIT
securities held in the Funds' Portfolio of Investments, distributions received
by the Funds are generally comprised of investment income, long-term and
short-term capital gains, and a return of REIT capital. The actual character of
amounts received during the period is not known until after the fiscal year-end.
For the twelve months ended December 31, 2004, the character of distributions to
the Funds from the REITs was as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
2004 (JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Ordinary income* 91.42% 91.38% 84.61%
Long-term and short-term capital gains 8.37 7.83 14.31
Return of REIT capital .21 .79 1.08
================================================================================
* Ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
For the six months ended June 30, 2005, each Fund applied the actual percentages
for the twelve months ended December 31, 2004, described above, to its receipts
from the REITs and treated as income in the Statement of Operations only the
amount of ordinary income so calculated. Each Fund adjusts that estimated
breakdown of income type (and consequently its net investment income) as
necessary early in the following calendar year when the REITs inform their
shareholders of the actual breakdown of income type. For the fiscal period ended
December 31, 2004, each Fund applied the actual character of distributions
reported by the REITs in which the Fund invests to its receipts from the REITS.
If a REIT held in the portfolio of investments did not report the actual
character of its distributions during the period, the Fund treated the
distributions as ordinary income.
For fiscal year ended July 31, 2004, each Fund applied a percentage estimate for
the breakdown of income type, to its receipts from the REITs and treated as
income in the Statement of Operations only the amount of ordinary income so
calculated. Each Fund adjusted that estimated breakdown of income type (and
consequently its net investment income) as necessary in the following calendar
year when the REITs informed their shareholders of the actual breakdown of
income type.
With respect to the portion of each Fund's monthly distribution to its
shareholders derived from the Fund's investments in REIT securities for the six
months ended June 30, 2005, each Fund treated that portion of its distributions
as being entirely from net investment income. The Funds will recharacterize
those distributions as being from ordinary income, long-term and short-term
capital gains, and return of capital, if necessary, at the beginning of the
subsequent year, based upon the income type breakdown information conveyed at
that time by the REITs whose securities are held in each Fund's portfolio. For
the fiscal period ended December 31, 2004, each Fund applied the actual
character of distributions reported by the REITs in which the Fund invests to
the distributions paid to each Funds shareholders.
With respect to the portion of each Fund's monthly distribution to its
shareholders derived from the Fund's investments in REIT securities for the
fiscal year ended July 31, 2004, each Fund treated that portion of its
distribution as being entirely from net investment income. The Funds
recharacterized those distributions as being from ordinary income, long-term and
short-term capital gains, and return of capital, if necessary, in the subsequent
calendar year, based upon the income type breakdown information conveyed at that
time by the REITs whose securities are held in each Fund's portfolio.
40
FundPreferred Shares
The Funds have issued and outstanding FundPreferred shares, $25,000 stated value
per share, as a means of effecting financial leverage. Each Fund's FundPreferred
shares are issued in more than one Series. The dividend rate on each Series is
determined every seven days, pursuant to a dutch auction process overseen by the
auction agent, and is payable at the end of each rate period. The number of
shares outstanding, by Series and in total, for each Fund is as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
2004 (JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Number of shares:
Series M 3,520 4,800 3,320
Series T 3,520 4,800 --
Series T2 -- 4,000 --
Series W 3,520 4,800 --
Series TH 3,520 4,800 3,320
Series TH2 -- 4,000 --
Series F 3,520 4,800 --
--------------------------------------------------------------------------------
Total 17,600 32,000 6,640
================================================================================
Interest Rate Swap Transactions
The Funds may invest in certain derivative financial instruments. The Funds' use
of interest rate swap transactions is intended to mitigate the negative impact
that an increase in short-term interest rates could have on Common share net
earnings as a result of leverage. Interest rate swap transactions involve each
Fund's agreement with the counterparty to pay a fixed rate payment in exchange
for the counterparty paying the Fund a variable rate payment that is intended to
approximate each Fund's variable rate payment obligation on FundPreferred shares
or any variable rate borrowing. The payment obligation is based on the notional
amount of the interest rate swap contract. Interest rate swaps do not involve
the delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to the swap counterparty on such transactions is
limited to the net amount of interest payments that each Fund is to receive.
Interest rate swap positions are valued daily. Although there are economic
advantages of entering into interest rate swap transactions, there are also
additional risks. The Funds help manage the credit risks associated with
interest rate swap transactions by entering into agreements only with
counterparties the Adviser believes have the financial resources to honor their
obligations and by having the Adviser continually monitor the financial
stability of the swap counterparties.
Due to recent clarification provided by the SEC to regulated investment
companies, effective with the July 31, 2004, reporting period, the Funds changed
the way they present net interest expense on interest rate swap transactions in
the financial statements. Net interest expense amounts paid during the year are
included in "Net realized gain (loss) from interest rate swap transactions". Net
interest expense amounts accrued, but not yet paid, at the end of the fiscal
year, are included in "Change in net unrealized appreciation (depreciation) of
interest rate swap transactions". Previously, net interest expense was presented
in "Expenses" and reported as "Net interest expense on interest rate swap
transactions". This reclassification does not alter the tax treatment of
interest rate payments on swap transactions which is to include such payments as
an operating expense for tax purposes.
For the fiscal year ended July 31, 2004, this reclassification, for financial
reporting purposes only, resulted in increases to net investment income,
decreases to net realized gain (loss) from interest rate swap transactions and
decreases to change in net unrealized appreciation (depreciation) of interest
rate swap transactions as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
-------------------------------------------------------------------------------------------------------------
Net investment income $ 8,892,767 $ 13,237,853 $ 2,595,268
Net realized gain (loss) from interest rate swap transactions (8,829,243) (12,395,021) (2,431,397)
Change in net unrealized appreciation (depreciation) of
interest rate swap transactions (63,524) (842,832) (163,871)
=============================================================================================================
Futures Contracts
Each Fund may use futures contracts to hedge against changes in the values of
securities the Fund owns. Each Fund bears the market risk arising from changes
in the value of these financial instruments. At the time a Fund enters into a
futures contract, the Fund deposits and maintains as collateral an initial
margin as required by the exchange on which the transaction is affected.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses on futures contracts. Risk may arise from the
potential inability of the counterparty to meet the terms of the contract. When
a contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
time is was closed.
41
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds'
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Funds' organizational documents, their Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, in the normal course of business, the Funds
enter into contracts that provide general indemnifications to other parties. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common shares were as follows:
QUALITY PREFERRED QUALITY PREFERRED
INCOME (JTP) INCOME 2 (JPS)
------------------------------------- --------------------------------------
SIX MONTHS FIVE MONTHS YEAR SIX MONTHS FIVE MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
6/30/05 12/31/04 7/31/04 6/30/05 12/31/04 7/31/04
-------------------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of distributions -- 9,641 95,759 -- -- 18,570
===================================================================================================================
QUALITY PREFERRED
INCOME 3 (JHP)
--------------------------------------
SIX MONTHS FIVE MONTHS YEAR
ENDED ENDED ENDED
6/30/05 12/31/04 7/31/04
-------------------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of distributions -- -- 32,020
===================================================================================================================
42
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments)
of investment securities during the six months ended June 30, 2005, were as
follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------
Purchases $166,908,075 $313,811,495 $60,169,230
Sales and maturities 173,037,854 360,754,575 63,401,670
============================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis based on the
information currently available to the Funds. Differences between amounts for
financial statement and federal income tax purposes are primarily due to the
recognition of income on certain securities which are treated as debt securities
for income tax purposes and equity securities for financial statement purposes,
and timing differences in recognizing certain gains and losses on investment
transactions.
At June 30, 2005, the cost of investments was as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------
Cost of investments $1,319,062,587 $2,501,971,122 $499,118,339
============================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at June 30, 2005, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $67,622,748 $142,286,492 $17,604,515
Depreciation (8,859,889) (15,745,928) (4,086,197)
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments $58,762,859 $126,540,564 $13,518,318
============================================================================================================
The tax components of undistributed net ordinary income and net realized gains
at July 31, 2004, the Funds' last tax year end, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------
Undistributed net ordinary income * $7,699,609 $14,357,609 $2,824,035
Undistributed net long-term capital gains -- 20,000,209 1,470,615
============================================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the tax year ended July 31, 2004,
the Funds' last tax year end, was designated for purposes of the dividends paid
deduction as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
JULY 31, 2004 (JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------
Distributions from net ordinary income * $86,134,890 $171,962,461 $34,119,989
Distributions from net long-term capital gains -- -- --
============================================================================================================
* Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
43
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
At July 31, 2004, the Funds' last tax year end, Quality Preferred Income (JTP)
had unused capital loss carryforwards of $25,060,612 available for federal
income tax purposes to be applied against future capital gains, if any. If not
applied, $693,161 of the carryforwards will expire in the year 2011 and
$24,367,451 will expire in 2012.
Calculation of certain of the amounts presented above (namely, undistributed net
ordinary income for tax purposes) involves the application of complex aspects of
the Internal Revenue Code to certain securities held by the Funds. In
calculating the amount of taxable income derived from these securities,
management made assumptions as to the correct tax treatment of certain of those
securities and made estimates about the tax characteristics of income received
from those securities, based on information currently available to the Funds.
The use of these assumptions and estimates will not affect the qualification of
the Funds as regulated investment companies under Subchapter M of the Internal
Revenue Code, nor is it expected that these assumptions and estimates will be
used in computing taxable income for purposes of preparing the federal and state
income and excise tax returns.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Each Fund's management fee is separated into two components - a complex-level
component, based on the aggregate amount of all fund assets managed by the
Adviser, and a specific fund-level component, based only on the amount of assets
within each individual fund. This pricing structure enables Nuveen fund
shareholders to benefit from growth in the assets within each individual fund as
well as from growth in the amount of complex-wide assets managed by the Adviser.
As of July 31, 2005, the complex-level fee rate was .1899%.
The annual fund-level fee, payable monthly, for each of the Funds is based upon
the average daily Managed Assets of each Fund as follows:
AVERAGE DAILY MANAGED ASSETS FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $500 million .7000%
For the next $500 million .6750
For the next $500 million .6500
For the next $500 million .6250
For Managed Assets over $2 billion .6000
================================================================================
The annual complex-level fee, payable monthly, which is additive to the
fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the
aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
44
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with Spectrum Asset Management, Inc. ("Spectrum"),
under which Spectrum manages the investment portfolios of the Funds. Spectrum is
compensated for its services to the Funds from the management fees paid to the
Adviser. Spectrum also receives compensation on certain portfolio transactions
for providing brokerage services to the Funds.
The Funds pay no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Funds from the Adviser or its affiliates. The Board of
Trustees has adopted a deferred compensation plan for independent Trustees that
enables Trustees to elect to defer receipt of all or a portion of the annual
compensation they are entitled to receive from certain Nuveen advised Funds.
Under the plan, deferred amounts are treated as though equal dollar amounts had
been invested in shares of select Nuveen advised Funds.
For the first eight years of Quality Preferred Income's (JTP) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
JUNE 30, JUNE 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income (JTP) for any
portion of its fees and expenses beyond June 30, 2010.
For the first eight years of Quality Preferred Income 2's (JPS) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 2 (JPS) for any
portion of its fees and expenses beyond September 30, 2010.
For the first eight years of Quality Preferred Income 3's (JHP) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 3 (JHP) for any
portion of its fees and expenses beyond December 31, 2010.
45
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
6. ANNOUNCEMENT REGARDING PARENT COMPANY OF ADVISER
In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul
Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a
substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million
of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an
additional $400 million of its Nuveen shares on a "forward" basis with payment
for and settlement of these shares delayed for several months, and (D) entered
into agreements with two unaffiliated investment banking firms to sell an amount
equal to most or all of its remaining Nuveen shares for current payment but for
future settlement. Transactions (C) and (D) above were settled in late July,
which effectively reduced St. Paul Travelers' controlling stake in Nuveen and
was deemed an "assignment" (as defined in the 1940 Act) of the investment
management agreements between the Funds and the Adviser, which resulted in the
automatic termination of each agreement under the 1940 Act. In anticipation of
such deemed assignment, the Board of Trustees had approved new ongoing
investment management agreements for each Fund and the submission of those
agreements for approval by each respective Fund's shareholders, which
shareholder approval was received prior to the settlement of transactions (C)
and (D). The new ongoing management agreements took effect upon such settlement.
7. SUBSEQUENT EVENTS - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their net investment
income which were paid on August 1, 2005, to shareholders of record on July 15,
2005, as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Dividend per share $.0935 $.0960 $.0965
================================================================================
46
Financial
HIGHLIGHTS (Unaudited)
47
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------ --------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ FundPreferred FundPreferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income(a) Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
QUALITY PREFERRED
INCOME (JTP)
------------------------------------------------------------------------------------------------------------------------------------
2005(f) $14.92 $ .67 $(.24) $(.09) $ -- $ .34 $ (.58) $ -- $ (.58)
8/1/04-12/31/04 14.40 .60 .47 (.05) -- 1.02 (.50) -- (.50)
Year Ended 7/31:
2004(b) 14.10 1.37 .26 (.08) -- 1.55 (1.25) -- (1.25)
2003 14.12 1.31 .16 (.09) -- 1.38 (1.25) -- (1.25)
2002(c) 14.33 .06 (.25) -- -- (.19) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
------------------------------------------------------------------------------------------------------------------------------------
2005(f) 15.66 .68 (.22) (.09) -- .37 (.60) -- (.60)
8/1/04-12/31/04 15.32 .60 .50 (.04) (.01) 1.05 (.53) (.18) (.71)
Year Ended 7/31:
2004(b) 14.97 1.42 .37 (.08) -- 1.71 (1.32) (.04) (1.36)
2003(d) 14.33 1.02 .79 (.07) -- 1.74 (.95) -- (.95)
QUALITY PREFERRED
INCOME 3 (JHP)
------------------------------------------------------------------------------------------------------------------------------------
2005(f) 15.15 .66 (.27) (.10) -- .29 (.60) -- (.60)
8/1/04-12/31/04 14.71 .60 .46 (.05) -- 1.01 (.51) (.06) (.57)
Year Ended 7/31:
2004(b) 14.38 1.38 .40 (.08) (.01) 1.69 (1.24) (.12) (1.36)
2003(e) 14.33 .67 .22 (.04) -- .85 (.62) -- (.62)
====================================================================================================================================
Total Returns
--------------------
Based
Offering on
Costs and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
=======================================================================================
QUALITY PREFERRED
INCOME (JTP)
---------------------------------------------------------------------------------------
2005(f) $ -- $14.68 $14.00 4.23% 2.33%
8/1/04-12/31/04 -- 14.92 14.00 3.79 7.10
Year Ended 7/31:
2004(b) -- 14.40 13.96 4.20 11.17
2003 (.15) 14.10 14.59 4.95 9.15
2002(c) (.02) 14.12 15.15 1.00 (1.47)
QUALITY PREFERRED
INCOME 2 (JPS)
---------------------------------------------------------------------------------------
2005(f) -- 15.43 14.45 4.57 2.40
8/1/04-12/31/04 -- 15.66 14.40 3.34 6.94
Year Ended 7/31:
2004(b) -- 15.32 14.61 8.98 11.60
2003(d) (.15) 14.97 14.65 4.02 11.22
QUALITY PREFERRED
INCOME 3 (JHP)
---------------------------------------------------------------------------------------
2005(f) -- 14.84 14.53 4.80 2.07
8/1/04-12/31/04 -- 15.15 14.44 4.64 6.81
Year Ended 7/31:
2004(b) -- 14.71 14.34 9.36 11.93
2003(e) (.18) 14.38 14.36 (.19) 4.62
=======================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
----------------------------- --------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
========================================================================================================================
QUALITY PREFERRED
INCOME (JTP)
------------------------------------------------------------------------------------------------------------------------
2005(f) $ 946,257 1.49%* 8.73%* 1.02%* 9.20%* 12%
8/1/04-12/31/04 961,583 1.49* 9.15* 1.02* 9.62* 8
Year Ended 7/31:
2004(b) 927,892 1.51 8.87 1.04 9.33 18
2003 907,746 2.38 8.84 1.91 9.31 45
2002(c) 880,006 .96* 4.51* .64* 4.83* 1
QUALITY PREFERRED
INCOME 2 (JPS)
------------------------------------------------------------------------------------------------------------------------
2005(f) 1,844,588 1.40* 8.48* .94* 8.94* 12
8/1/04-12/31/04 1,872,283 1.40* 8.69* .94* 9.14* 6
Year Ended 7/31:
2004(b) 1,830,878 1.41 8.64 .95 9.10 19
2003(d) 1,789,809 1.99* 7.59* 1.54* 8.04* 35
QUALITY PREFERRED
INCOME 3 (JHP)
------------------------------------------------------------------------------------------------------------------------
2005(f) 350,887 1.54* 8.44* 1.07* 8.92* 12
8/1/04-12/31/04 358,197 1.54* 9.03* 1.07* 9.50* 7
Year Ended 7/31:
2004(b) 347,900 1.55 8.75 1.08 9.22 17
2003(e) 339,499 1.97* 7.14* 1.53* 7.58* 57
========================================================================================================================
FundPreferred Shares at End of Period
-----------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
=================================================================
QUALITY PREFERRED
INCOME (JTP)
-----------------------------------------------------------------
2005(f) $440,000 $25,000 $78,765
8/1/04-12/31/04 440,000 25,000 79,635
Year Ended 7/31:
2004(b) 440,000 25,000 77,721
2003 440,000 25,000 76,577
2002(c) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
-----------------------------------------------------------------
2005(f) 800,000 25,000 82,643
8/1/04-12/31/04 800,000 25,000 83,509
Year Ended 7/31:
2004(b) 800,000 25,000 82,215
2003(d) 800,000 25,000 80,932
QUALITY PREFERRED
INCOME 3 (JHP)
-----------------------------------------------------------------
2005(f) 166,000 25,000 77,844
8/1/04-12/31/04 166,000 25,000 78,945
Year Ended 7/31:
2004(b) 166,000 25,000 77,395
2003(e) 166,000 25,000 76,129
=================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Common Share Net
Asset Value is the combination of changes in Common Share net asset value,
reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ o Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders.
o Income ratios reflect income earned on assets attributable to
FundPreferred shares.
o For the periods presented below each ratio includes the effect of the
interest expense paid on interest rate swap transactions as follows:
Ratio of Net Interest Expense to Average
Net Assets Applicable to Common Shares
----------------------------------------
QUALITY PREFERRED INCOME (JTP)
Year Ended 7/31:
2003 .80%
2002(c) --
QUALITY PREFERRED INCOME 2 (JPS)
Year Ended 7/31:
2003(d) .58*
QUALITY PREFERRED INCOME 3 (JHP)
Year Ended 7/31:
2003(e) .51*
(a) Per share Net Investment Income is calculated using the average daily
shares method.
(b) As discussed in the accompanying notes to financial statements the Funds
changed their method of presentation for net interest expense on interest
rate swap transactions. The effect of this reclassification for the fiscal
year ended July 31, 2004, was as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
----------------------------------
Increase of Net Investment Income per
share with a corresponding
decrease in Net Realized/Unrealized
Investment Gain (Loss) $.14 $.11 $.11
Decrease in each of the Ratios of
Expenses to Average Net Assets
Applicable to Common Shares with
a corresponding increase in each of
the Ratios of Net Investment
Income to Average Net Assets
Applicable to Common Shares .94% .71% .73%
(c) For the period June 25, 2002 (commencement of operations) through July 31,
2002.
(d) For the period September 24, 2002 (commencement of operations) through July
31, 2003.
(e) For the period December 18, 2002 (commencement of operations) through July
31, 2003.
(f) For the six months ended June 30, 2005.
See accompanying notes to financial statements.
48-49 SPREAD
ANNUAL INVESTMENT
MANAGEMENT AGREEMENT
APPROVAL PROCESS
At a meeting held on May 10-12, 2005, the Board of Trustees of the Funds,
including the independent Trustees, unanimously approved the Investment
Management Agreement between each Fund and NAM and the Sub-Advisory Agreement
between NAM and Spectrum for each Fund (NAM and Spectrum are each a "Fund
Adviser").
THE APPROVAL PROCESS
To assist the Board in its evaluation of an advisory contract with a Fund
Adviser, the independent Trustees received a report in adequate time in advance
of their meeting which outlined, among other things, the services provided by
the Fund Adviser; the organization of the Fund Adviser, including the
responsibilities of various departments and key personnel; the Fund's past
performance as well as the Fund's performance compared to funds of similar
investment objectives compiled by an independent third party (a "Peer Group") as
described below and with recognized and/or customized benchmarks (as
appropriate); the profitability of the Fund Adviser and certain industry
profitability analyses for advisers to unaffiliated investment companies; the
expenses of the Fund Adviser in providing the various services; the advisory
fees of the Fund Adviser, including comparisons of such fees with the management
fees of comparable funds in its Peer Group as well as comparisons of the Fund
Adviser's management fees with the fees the Fund Adviser assesses to other types
of investment products or accounts, if any; the soft dollar practices of the
Fund Adviser; and the expenses of each Fund, including comparisons of the Fund's
expense ratios (after any fee waivers) with the expense ratios of its Peer
Group. This information supplements that received by the Board throughout the
year regarding Fund performance, expense ratios, portfolio composition, trade
execution and sales activity.
In addition to the foregoing materials, independent legal counsel to the
independent Trustees provided, in advance of the meeting, a legal memorandum
outlining, among other things, the duties of the Trustees under the 1940 Act as
well as the general principles of relevant state law in reviewing and approving
advisory contracts; the requirements of the 1940 Act in such matters; an
adviser's fiduciary duty with respect to advisory agreements and compensation;
the standards used by courts in determining whether investment company boards of
directors have fulfilled their duties and factors to be considered by the board
in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. In addition, the independent Trustees noted that Spectrum has also
previously made written or oral presentations to the Board providing it with the
opportunity to explain its investment strategies, discuss market conditions, and
highlight any material issues. Many of these presentations were part of site
visits by the Board throughout the year. After the presentations and after
reviewing the written materials, the independent Trustees met privately with
their legal counsel to review the Board's duties in reviewing advisory contracts
and consider the renewal of the advisory contract. It is with this background
that the Trustees considered each advisory contract (which includes sub-advisory
contracts) with a Fund Adviser. The independent Trustees, in consultation with
independent counsel, reviewed the factors set out in judicial decisions and SEC
directives relating to the renewal of advisory contracts. As outlined in more
detail below, the Trustees considered all factors they believed relevant with
respect to each Fund, including the following: (a) the nature, extent and
quality of the services to be provided by the Fund Adviser; (b) the investment
performance of the Fund and the Fund Adviser; (c) the costs of the services to
be provided and profits to be realized by the Fund Adviser and its affiliates
from the relationship with the Fund; (d) the extent to which economies of scale
would be realized as the Fund grows; and (e) whether fee levels reflect these
economies of scale for the benefit of Fund investors.
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of the respective Fund Adviser's
services, the Trustees reviewed information concerning the types of services
that a Fund Adviser or its affiliates provide and are expected to provide to the
Nuveen Funds; narrative and statistical information concerning the Fund's
performance record and how such performance compares to the Fund's Peer Group
and recognized benchmarks and/or customized benchmarks (as described in further
detail in Section B below); information describing the Fund Adviser's
organization and its various departments, the experience and responsibilities of
key personnel, and available resources. In the discussion of key personnel, the
Trustees received materials regarding the changes or additions in personnel of
the applicable Fund Adviser. The Trustees further noted the willingness of the
personnel of NAM to engage in open, candid discussions with the Board. The
Trustees further considered the quality of the Fund Adviser's investment process
in making portfolio management decisions, including any refinements or
improvements to the portfolio management processes, enhancements to technology
and systems that are available to portfolio managers, and any additions of new
personnel which may strengthen or expand the research and investment
capabilities of the Fund Adviser. In their review of the advisory contracts for
the fixed income funds, the Trustees also noted that Nuveen won the Lipper Award
for Best Fund Family: Fixed Income-Large Asset Class, for 2004. Given the
Trustees' experience with the Funds, other Nuveen funds and the Fund Advisers,
the Trustees noted that they were familiar with and continue to have a good
understanding of the organization, operations and personnel of the Fund
Advisers.
50
In addition to advisory services, the independent Trustees considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Funds with such administrative and other services (exclusive
of, and in addition to, any such services provided by others for the Funds) and
officers and other personnel as are necessary for the operations of the
respective Fund. In addition to investment management services, NAM and its
affiliates provide each Fund with a wide range of services, including: preparing
shareholder reports; providing daily accounting; providing quarterly financial
statements; overseeing and coordinating the activities of other service
providers; administering and organizing Board meetings and preparing the Board
materials for such meetings; providing legal support (such as helping to prepare
registration statements, amendments thereto and proxy statements and responding
to regulatory inquiries); and performing other Fund administrative tasks
necessary for the operation of the respective Fund (such as tax reporting and
fulfilling regulatory filing requirements). In addition, in evaluating the
administrative services, the Trustees considered, in particular, a Fund
Adviser's policies and procedures for assuring compliance with applicable laws
and regulations in light of the new SEC regulations governing compliance. The
Trustees noted NAM's focus on compliance and its compliance systems. In their
review, the Trustees considered, among other things, the additions of
experienced personnel to NAM's compliance group and modifications and other
enhancements to NAM's computer systems. In addition to the foregoing, the
Trustees also noted that NAM outsources certain services that cannot be
replicated without significant costs or at the same level of expertise. Such
outsourcing has been a beneficial and efficient use of resources by keeping
expenses low while obtaining quality services. Further, as the Funds utilize a
sub-adviser, the Trustees considered NAM's ability and procedures to monitor
Spectrum's performance, business practices and compliance policies and
procedures. In this regard, the Trustees noted the role of NAM's investment
oversight committee, including its increased personnel, the responsibilities and
experience of the staff, and procedures to monitor sub-advisers, including the
use of site visits.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Funds, the
independent Trustees determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Trustees noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
In evaluating the services of Spectrum, the independent Trustees noted that the
Sub-Advisory Agreements were essentially agreements for portfolio management
services only and Spectrum was not expected to supply other significant
administrative services to the Funds.
Based on their review, the Trustees found that, overall, the nature, extent and
quality of services provided (and expected to be provided) to the Fund under the
Investment Management Agreement or Sub-Advisory Agreement, as applicable, were
of a high level and were quite satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
As previously noted, the Board received a myriad of performance information
regarding each Fund and its Peer Group, if available. Among other things, the
Board received materials reflecting a Fund's historic performance, the Fund's
performance compared to its Peer Group (as available) and its performance
compared to recognized and/or customized benchmarks (as applicable). The
Trustees reviewed performance information including, among other things, total
return information compared with a Fund's Peer Group as well as recognized
and/or customized benchmarks (as appropriate) for the one-, three- and five-year
periods (as applicable) ending December 31, 2004. This information supplements
the Fund performance information provided to the Board at each of their
quarterly meetings. Based on their review, the Trustees determined that the
respective Fund's absolute and relative investment performance over time had
been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
1. FEES AND EXPENSES
In evaluating the management fees and expenses that a Fund is expected to
bear, the Trustees considered the Fund's current management fee structure,
the sub-advisory fee arrangements and the Fund's expected expense ratios in
absolute terms as well as compared with the fees and expense ratios of the
unaffiliated funds in its Peer Group. The Trustees reviewed the financial
information of the respective Fund Adviser, including its respective
revenues, expenses and profitability. In reviewing fees, the Trustees, among
other things, reviewed comparisons of the Fund's gross management fees (fees
after fund-level and complex-wide level breakpoints but before reimbursement
and fee waivers), net management fees (after breakpoints and reimbursements
and fee waivers) and total expense ratios (before and after waivers) with
those of the unaffiliated funds in its Peer Group and peer averages. In this
regard, the Trustees noted that the relative ranking of the Nuveen funds on
fees and expenses was aided by the significant level of fee reductions
provided by the fund-level and complex-wide breakpoint schedules, and the fee
waivers and reimbursements provided by Nuveen for certain funds launched
since 1999. The complex-wide breakpoint schedule was instituted in 2004 and
is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect These Economies of Scale." In its
review, the Trustees noted that all taxable closed-end exchange-traded Nuveen
funds had net expense ratios below or within an acceptable range compared to
peers.
2. COMPARISONS WITH THE FEES OF OTHER CLIENTS
The Trustees further compared the fees of NAM to the fees NAM or an affiliate
thereof assessed for other types of clients (such as separate managed
accounts as well as fees charged on funds that are not offered by Nuveen but
are sub-advised by one of Nuveen's investment management teams). With respect
to separately managed accounts, the advisory fees to such separate managed
accounts are generally lower than those charged to the Fund. The Trustees
noted, however, the additional services that are provided and the costs
incurred by Nuveen in managing and operating registered investment companies,
such as the Funds,
51
ANNUAL INVESTMENT MANAGEMENT
AGREEMENT APPROVAL PROCESS (continued)
compared to individually managed separate accounts. For instance, as
described above, NAM and its affiliates provide numerous services to the
Funds including, but not limited to, preparing shareholder reports; providing
daily accounting; preparing quarterly financial statements; overseeing and
coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such
meetings; providing legal support; and administering all other aspects of the
Fund's operations. Further, the Trustees noted the increased compliance
requirements for funds in light of new SEC regulations and other legislation.
These services are generally not required to the same extent, if at all, for
separate accounts. In addition to the differences in services, the Trustees
also considered, among other things, the differences in product distribution,
investor profiles and account sizes. Accordingly, the Trustees believe that
the nature and number of services provided to operate a Fund merit the higher
fees than those to separate managed accounts.
In considering the fees of Spectrum, the Trustees also considered the pricing
schedule Spectrum charges for similar investment management services for
other fund sponsors or clients. Generally, the sub-advisory fees were at the
lower end of the Sub-Adviser's fee schedule. In addition, the Trustees noted
that such sub-advisory fees and arrangements with the unaffiliated
sub-advisers were established through arms-length negotiations between
Spectrum and NAM.
3. PROFITABILITY OF ADVISERS
In conjunction with its review of fees, the Trustees also considered the
profitability of NAM as well as the profitability of Spectrum. The Trustees
reviewed the respective Fund Adviser's revenues, expenses and profitability
margins (on both a pre-tax and after-tax basis). In reviewing profitability, the
Trustees recognized that one of the most difficult issues in determining
profitability is establishing a method of allocating expenses. Accordingly, the
Trustees reviewed a Fund Adviser's assumptions and methodology of allocating
expenses. In this regard, the methods of allocation used appeared reasonable but
the Board noted the inherent limitations in allocating costs among various
advisory products. The Trustees also recognized that individual fund or product
line profitability of other advisers is generally not publicly available.
Further, profitability may be affected by numerous factors including the types
of funds managed, expense allocations, business mix, etc. and therefore
comparability of profitability is somewhat limited. Nevertheless, to the extent
available, the Trustees considered the respective Fund Adviser's profit margin
compared to the profitability of various publicly-traded investment management
companies and/or investment management companies that publicly disclose some or
all of their financial results compiled by three independent third-party service
providers. The Trustees also reviewed the revenues, expenses and profit margins
of various unaffiliated advisory firms with similar amounts of assets under
management for the last year prepared by NAM. Based on their review, the
Trustees were satisfied that each Fund Adviser's level of profitability from its
relationship with each Fund was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Trustees also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Funds, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the applicable Fund,
the Trustees determined that the advisory fees and expenses of the respective
Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF SCALE
In reviewing the compensation, the Trustees have long understood the benefits of
economies of scale as the assets of a fund grows and have sought to ensure that
shareholders share in these benefits. One method for shareholders to share in
economies of scale is to include breakpoints in the advisory fee schedules that
reduce fees as fund assets grow. Accordingly, the Trustees received and reviewed
the schedules of advisory fees for each Fund, including fund-level breakpoints
thereto. In addition, after lengthy negotiations with management, the Board in
May, 2004 approved a complex-wide fee arrangement pursuant to which fees of the
funds in the Nuveen complex, including the Funds, are reduced as the assets in
the fund complex reach certain levels. The complex-wide fee arrangement was
introduced on August 1, 2004 and the Trustees reviewed data regarding the
reductions of fees for the Funds for the period of August 1, 2004 to December
31, 2004. In evaluating the complex-wide fee arrangement, the Trustees
considered, among other things, the historic and expected fee savings to
shareholders as assets grow, the amount of fee reductions at various asset
levels, and that the arrangement would extend to all Funds in the Nuveen
complex. The Trustees also considered the impact, if any, the complex-wide fee
arrangement may have on the level of services provided. Based on their review,
the Trustees concluded that the breakpoint schedule and complex-wide fee
arrangement currently was acceptable and desirable in providing benefits from
economies of scale to shareholders.
52
E. INDIRECT BENEFITS
In evaluating fees, the Trustees also considered any indirect benefits or
profits the respective Fund Adviser or its affiliates may receive as a result of
its relationship with each Fund. In this regard, the Trustees considered any
benefits from soft dollar arrangements. The Trustees noted that although NAM
manages a large amount of assets, it has very little, if any, brokerage to
allocate. This is due to the fact that NAM typically manages the portfolios of
the municipal funds in the Nuveen complex and municipal bonds generally trade on
a principal basis. Accordingly, NAM does not currently have any soft dollar
arrangements and does not pay excess brokerage commissions (or spreads on
principal transactions) in order to receive research services. The Trustees also
considered the soft dollar arrangements of the sub-adviser. The Trustees noted
that Spectrum also does not use soft dollar arrangements. However, the Trustees
received materials and considered any revenues received by Spectrum in executing
trades through its internal broker-dealer.
In addition to soft dollar arrangements, the Trustees also considered any other
revenues, if any, received by NAM or its affiliates. In this regard, for Nuveen
funds with outstanding preferred shares and new closed-end funds, the Trustees
also considered revenues received by Nuveen for serving as agent for
broker-dealers at its preferred trading desk and for acting as co-manager in the
initial public offering of new closed-end exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority owned subsidiary of St. Paul Travelers
Companies, Inc. ("St. Paul"). As noted, St. Paul earlier this year announced its
intention to divest its equity stake in Nuveen. Nuveen is the parent of NAM.
Pursuant to a series of transactions, St. Paul had begun to reduce its interest
in Nuveen which would ultimately result in a change of control of Nuveen and
therefore NAM. As mandated by the 1940 Act, such a change in control would
result in an assignment of the Investment Management Agreement with NAM and the
automatic termination of such agreement. Accordingly, the Board also considered
the approval of a New Investment Management Agreement with each Fund in light
of, and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for each Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul's
interest will have an impact on the various factors they considered in approving
NAM, such as the scope and quality of services to be provided following the
change of control. In reviewing the St. Paul transactions, the Board considered,
among other things, the impact, if any, on the operations and organizational
structure of NAM; the possible benefits and costs of the transactions to the
respective Fund; the potential implications of any arrangements used by Nuveen
to finance certain of the transactions; the ability of NAM to perform its duties
after the transactions; whether a Fund's fee structure or expense ratio would
change; any changes to the current practices of the respective Fund; any changes
to the terms of the advisory agreement; and any anticipated changes to the
operations of NAM. Based on its review, the Board determined that St. Paul's
divestiture would not affect the nature and quality of services provided by NAM,
the terms of the Investment Management Agreement, including the fees thereunder,
and would not materially affect the organization or operations of NAM.
Accordingly, the Board determined that their analysis of the various factors
regarding their approval of NAM would continue to apply after the change of
control.
In addition to the foregoing, a change in control of NAM may be deemed an
assignment of the Sub-Advisory Agreement between NAM and Spectrum. The Board
therefore considered approval of a New Sub-Advisory Agreement with Spectrum in
light of the anticipated change of control. More specially, the Board considered
approval of each New Sub-Advisory Agreement on substantially identical terms as
the respective Original Sub-Advisory Agreement, to take effect after the change
of control has occurred and the agreement has been approved by Fund
shareholders. In reviewing the impact of the St. Paul divesture on Spectrum, the
Board considered the same factors as outlined previously with respect to their
review of NAM. As with NAM, the Board concluded that the St. Paul divestiture
would not affect the nature and quality of services provided by Spectrum, the
terms of the Sub-Advisory Agreement, including the fees paid thereunder, and
would not materially affect the organization or operations of Spectrum.
Accordingly, the Board determined that their analysis of the various factors
regarding their review and approval of Spectrum, as sub-adviser, would continue
to apply following the change in control.
G. APPROVAL
The Trustees did not identify any single factor discussed previously as
all-important or controlling. The Trustees, including a majority of independent
Trustees, concluded that the terms of the Investment Management and Sub-Advisory
Agreements were fair and reasonable, that the respective Fund Adviser's fees are
reasonable in light of the services provided to each Fund, that the renewal of
the NAM Investment Management Agreement and each Sub-Advisory Agreement should
be approved, and that the new, post-change of control NAM Investment Management
Agreement and the Sub-Advisory Agreements be approved and recommended to
shareholders.
53
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares By
choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of the shares may increase before
purchases are completed, the average purchase price per share may exceed the
market price at the time of valuation, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund. A pro rata portion of any applicable brokerage commissions on open
market purchases will be paid by Plan participants. These commissions usually
will be lower than those charged on individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
54
Other Useful
INFORMATION
In April, 2005, The St. Paul Travelers Companies, Inc. (`'St. Paul Travelers")
sold the majority of its controlling equity interest in Nuveen Investments, Inc.
(`'Nuveen") to the general public. Nuveen is the parent of Nuveen Asset
Management ("NAM"), which is each Fund's investment manager. This sale was
deemed to be an `'assignment" of the investment management agreement between
each Fund and NAM and, if applicable, of the sub-advisory agreement between NAM
and the Fund's sub-adviser. As required by law, the shareholders of each Fund
were asked to approve a new investment management agreement and, if applicable,
a new subadvisory agreement that reflected this change in ownership. The
shareholders of each Fund voted this approval at a Shareholders' Meeting on July
26, 2005. There were no changes to the investment objectives or management of
any Fund as a result of these actions.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING INFORMATION
The Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2005, and (iii) a description of the
policies and procedures that the Fund used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
UNAUDITED INFORMATION
Nuveen Quality Preferred Income Fund, Nuveen Quality Preferred Income Fund 2 and
Nuveen Quality Preferred Income Fund 3 designate up to $86,085,930, $164,333,449
and $32,560,562, respectively, of dividends declared from net investment income
as dividends qualifying for the 70% dividends received deduction for
corporations and as qualified dividend income for individuals under the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The actual amounts will be
disclosed and sent with your other tax information in early 2006.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
MARKET YIELD: Market yield is based on the Fund's current annualized monthly
distribution divided by the Fund's current market price. The Fund's monthly
distributions to its shareholders may be comprised of ordinary income, net
realized capital gains and, if at the end of the calendar year the Funds'
cumulative net ordinary income and net realized gains are less than the amount
of the Fund's distributions, a tax return of capital.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
The Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
55
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $120 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
o Fund details
Learn more o Daily financial news
about Nuveen Funds at o Investor education
WWW.NUVEEN.COM/ETF o Interactive planning tools
Logo: NUVEEN Investments
ESA-E-0605D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Portfolio of Investments in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Quality Preferred Income Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: September 7, 2005
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: September 7, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: September 7, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.