Nuveen Preferred Securities Income Fund

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 Preferred Securities Income Fund

 

(Exact name of registrant as specified in charter)

Nuveen Investments

333 West Wacker Drive

Chicago, IL 60606

 

(Address of principal executive offices) (Zip code)

Kevin J. McCarthy

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:    July 31                                

Date of reporting period:    July 31, 2016                   

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.


     LOGO
Closed-End Funds   

 

     Nuveen
     Closed-End Funds

 

 

 

 

       

 

 

Annual Report  July 31, 2016

 

     
           
JPC            
Nuveen Preferred Income Opportunities Fund  
           
JPI            
Nuveen Preferred and Income Term Fund  
           
JPS            
Nuveen Preferred Securities Income Fund
(formerly known as Nuveen Quality Preferred Income Fund 2)
 
           
JPW            
Nuveen Flexible Investment Income Fund  

 


 

 

     

 

           
 

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LOGO


Table

of Contents

 

Chairman’s Letter to Shareholders

     4   

Portfolio Managers’ Comments

     5   

Fund Leverage

     18   

Common Share Information

     19   

Risk Considerations

     22   

Performance Overview and Holding Summaries

     24   

Shareholder Meeting Report

     32   

Report of Independent Registered Public Accounting Firm

     33   

Portfolios of Investments

     34   

Statement of Assets and Liabilities

     61   

Statement of Operations

     62   

Statement of Changes in Net Assets

     63   

Statement of Cash Flows

     65   

Financial Highlights

     66   

Notes to Financial Statements

     70   

Additional Fund Information

     87   

Glossary of Terms Used in this Report

     88   

Reinvest Automatically, Easily and Conveniently

     91   

Annual Investment Management Agreement Approval Process

     92   

Board Members & Officers

     99   

 

NUVEEN     3   


Chairman’s Letter

to Shareholders

 

LOGO

Dear Shareholders,

The U.S. economy is now seven years into the recovery, but its pace remains stubbornly subpar compared to past recoveries. Economic data continues to be a mixed bag, as it has been throughout this expansion period. While the unemployment rate fell below its pre-recession level and wages have grown, a surprisingly weak jobs growth report in May cast doubt over the future strength of the labor market. Subsequent employment reports have been stronger, however, easing fears that a significant downtrend was emerging. The housing market has improved markedly but its contribution to the recovery has been lackluster. Deflationary pressures, including weaker commodity prices, have kept inflation much lower for longer than many expected.

The U.S.’s modest expansion and positive employment trends led the U.S. Federal Reserve (Fed) to begin its path toward policy “normalization” by raising its benchmark interest rate at its December 2015 meeting. However, since then, the Fed has remained on hold for reasons ranging from domestic to international, which helped continue to prop up asset prices despite bouts of short-term volatility.

Outside the U.S., optimism has been harder to come by. Investors continue to question whether China’s economy is finally stabilizing or still slowing. The U.K.’s June 23rd “Brexit” vote to leave the European Union introduced a new set of economic and political uncertainties to the already fragile conditions across Europe. Moreover, there are growing concerns that global central banks’ unprecedented efforts to revive growth may be showing signs of fatigue. Interest rates are currently negative in Europe and Japan and near or at zero in the U.S., U.K. and elsewhere. Yet, growth has remained subdued.

With global economic growth still looking fairly fragile, and few near-term catalysts for improvement, we anticipate that turbulence remains on the horizon for the time being. In this environment, Nuveen remains committed to both managing downside risks and seeking upside potential. If you’re concerned about how resilient your investment portfolio might be, we encourage you to talk to your financial advisor.

On behalf of the other members of the Nuveen Fund Board, we look forward to continuing to earn your trust in the months and years ahead.

Sincerely,

 

LOGO

William J. Schneider

Chairman of the Board

September 23, 2016

 

 

  4      NUVEEN


Portfolio Managers’

Comments

 

Nuveen Preferred Income Opportunities Fund (JPC)

Nuveen Preferred and Income Term Fund (JPI)

Nuveen Preferred Securities Income Fund (JPS) (formerly known as Nuveen Quality Preferred Income Fund 2)

Nuveen Flexible Investment Income Fund (JPW)

Nuveen Asset Management, LLC (NAM) and NWQ Investment Management Company, LLC (NWQ), both affiliates of Nuveen Investments, Inc., are sub-advisers for the Nuveen Preferred Income Opportunities Fund (JPC). NAM and NWQ each manage approximately half of the Fund’s investment portfolio. Douglas Baker, CFA and Brenda Langenfeld, CFA, are the portfolio managers for the NAM team. The NWQ income-oriented investment team is led by Thomas J. Ray, CFA and Susi Budiman, CFA. The Nuveen Preferred and Income Term Fund (JPI) features management by Nuveen Asset Management, LLC (NAM), an affiliate of Nuveen Investments, Inc. Douglas Baker, CFA, and Brenda Langenfeld, CFA, have served as the Fund’s portfolio managers since its inception. The Nuveen Preferred Securities Income Fund (JPS) is sub-advised by a team of specialists at Spectrum Asset Management, a wholly owned subsidiary of Principal Global Investors, LLC. Mark Lieb and Phil Jacoby lead the team. The Nuveen Flexible Investment Income Fund (JPW) features portfolio management by NWQ Investment Management Company, LLC (NWQ), an affiliate of Nuveen Investments, Inc. Thomas J. Ray, CFA, and Susi Budiman, CFA, are the portfolio managers.

Effective January 31, 2016, the primary and secondary benchmarks for JPI changed in order to better represent the current investible universe of preferred securities. The BofA/Merrill Lynch U.S. All Capital Securities Index is the new Primary Benchmark. The secondary blended benchmark now consists of 60% BofA/Merrill Lynch U.S. All Capital Securities Index and 40% BofA/Merrill Lynch Contingent Capital Index. This secondary blended benchmark better aligns the portfolios with the investible universe of preferreds and hybrids by adding the contingent capital index to the performance benchmark. The secondary blended benchmark also better reflects the portfolios’ positioning with regard to $25 par securities and $1,000 par securities, as well as from a credit quality and duration perspective. The BofA/Merrill Lynch Contingent Capital Index has a recent inception date of December 31, 2013.

Additionally, JPI and JPC each has revised its investment policies to eliminate the previous 40% of assets limit on non-U.S. issuers in order to allow for increased investments in U.S. dollar-denominated contingent capital securities (CoCos).

Effective June 15, 2016, JPC changed its investment policies to remove CoCos from the 20% “Other Securities” investment strategies category and include them in the 80% principal investment strategies category.

 

 

Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s (S&P), Moody’s Investors Service, Inc. (Moody’s) or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies. Ratings are not covered by the report of independent registered public accounting firm.

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

 

NUVEEN     5   


Portfolio Managers’ Comments (continued)

 

During October, 2015, the Board of Trustees for the Nuveen closed-end funds approved a plan to merge Nuveen Quality Preferred Income Fund (JTP) and Nuveen Quality Preferred Income Fund 3 (JHP) into the acquiring Fund, Nuveen Quality Preferred Income Fund 2 (JPS). During March 2016, shareholder approval was completed. The reorganization became effective on May 9, 2016, at which time the Nuveen Quality Preferred Income Fund 2 was renamed the Nuveen Preferred Securities Income Fund (keeping its ticker symbol of JPS). See Notes to Financial Statements, Notes 1 – General Information and Significant Accounting Policies, Fund Reorganizations for further information.

Additionally, in October 2015, the Board approved changes to both JPS’s non-fundamental investment policies related to the minimum allocation to investment grade securities and the Fund’s secondary blended benchmark index. These changes were made to better align JPS’s strategies with the evolution in the preferred securities market since the Fund’s launch in 2002. JPS’s minimum allocation to investment grade securities was reduced from 80% to 65% and the existing 45% limit on U.S. dollar-denominated preferred securities of non-U.S. issuers was eliminated. JPS’s blended benchmark index consisted of 55% BofA/Merrill Lynch Preferred Securities Fixed Rate Index and 45% Barclays Tier 1 Capital Securities Index. Its new blended benchmark index consists of 60% BofA/Merrill Lynch All Capital Securities Index and 40% BofA/Merrill Lynch Contingent Capital Index.

Here the portfolio management teams discuss the U.S. economy and market conditions, their management strategies and the performance of the Funds for the twelve-month reporting period ended July 31, 2016.

What factors affected the U.S. economy and financial markets during the twelve-month reporting period ended July 31, 2016?

Over the twelve-month reporting period, U.S. economic data continued to point to subdued growth, rising employment and tame inflation. Economic activity has continued to hover around a 2% annualized growth rate since the end of the Great Recession in 2009, as measured by real gross domestic product (GDP), which is the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes. For the second quarter of 2016, real GDP increased at an annual rate of 1.1%, as reported by the “second” estimate of the Bureau of Economic Analysis, up from 0.8% in the first quarter of 2016.

The labor and housing markets improved over the reporting period, although the momentum appeared to slow toward the end of the reporting period. As reported by the Bureau of Labor Statistics, the unemployment rate fell to 4.9% in July 2016 from 5.3% in July 2015, and job gains averaged slightly above 200,000 per month for the past twelve months. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.1% annual gain in June 2016 (most recent data available at the time this report was prepared) (effective July 26, 2016, the S&P/Case-Shiller U.S. National Home Price Index was renamed the S&P CoreLogic Case-Shiller U.S. National Home Price Index). The 10-City and 20-City Composites reported year-over-year increases of 4.3% and 5.1%, respectively.

Consumers, whose purchases comprise the largest component of the U.S. economy, benefited from employment growth and firming wages over the twelve-month reporting period. Although consumer spending gains were rather muted in the latter half of 2015, a spending surge in the second quarter of 2016 helped offset weaker business investment. A backdrop of low inflation also contributed to consumers’ willingness to buy. The Consumer Price Index (CPI) rose 0.8% over the twelve-month reporting period ended July 2016 on a seasonally adjusted basis, as reported by the U.S. Bureau of Labor Statistics. The core CPI (which excludes food and energy) increased 2.2% during the same period, slightly above the Fed’s unofficial longer term inflation objective of 2.0%.

Business investment remained weak over the reporting period. Corporate earnings growth slowed during 2015, reflecting an array of factors ranging from weakening demand amid sluggish U.S. and global growth to the impact of falling commodity prices and a strong U.S. dollar. Although energy prices rebounded off their lows and the dollar pared some of its gains in the first half of 2016, caution prevailed. Financial market turbulence in early 2016 and political uncertainties surrounding the U.K.’s “Brexit” vote to leave the European Union (EU) and the upcoming U.S. presidential election dampened capital spending.

 

  6      NUVEEN


 

With the current expansion considered to be on solid footing, the U.S. Federal Reserve (Fed) prepared to raise one of its main interest rates, which had been held near zero since December 2008 to help stimulate the economy. After delaying the rate change for most of 2015 because of a weak global economic growth outlook, the Fed announced in December 2015 that it would raise the fed funds target rate by 0.25%. The news was widely expected and therefore had a relatively muted impact on the financial markets.

Although the Fed continued to emphasize future rate increases would be gradual, investors worried about the pace. This, along with uncertainties about the global macroeconomic backdrop, another downdraft in oil prices and a spike in stock market volatility triggered significant losses across assets that carry more risk and fueled demand for “safe haven” assets such as Treasury bonds and gold from January through mid-February, however, fear began to subside in March. The Fed held the rate steady at both the January and March policy meetings, as well as lowered its expectations to two rate increases in 2016 from four. Also boosting investor confidence were reassuring statements from the European Central Bank (ECB), some positive economic data in the U.S. and abroad, a retreat in the U.S. dollar and an oil price rally. At its April meeting, the Fed indicated its readiness to raise its benchmark rate at the next policy meeting in June. However, a very disappointing jobs growth report in May and the significant uncertainty surrounding the U.K.’s Brexit vote led the Fed to again hold rates steady at its June and July meetings.

The U.K.’s vote on June 23, 2016 to leave the EU caught investors off guard. In response, U.K. sterling fell precipitously, global equities were turbulent and safe-haven assets such as gold, the U.S. dollar and U.S. Treasuries saw notable inflows. However, the markets stabilized fairly quickly, buoyed by reassurances from global central banks and a perception that the temporary price rout presented an attractive buying opportunity. Although many political and economic uncertainties for the U.K. and the EU remain, market volatility was relatively subdued throughout July, as concerns of a Brexit-induced financial crisis abated.

Earlier in the reporting period, macroeconomic uncertainty driven by the economic trouble in emerging economies, falling commodity prices, along with uncertainty around the Fed’s hiking cycle all contributed to the significant volatility to both equity and credit markets. By the end of the reporting period however, riskier assets did recover. Common equity and high yield bonds generated total return of 5.38% as measured by the Russell 1000® Value Index and 4.92% for the BofA/Merrill Lynch U.S. High Yield Index. Investment grade corporate bonds did better with a 9.39% return as measured by the BofA/Merrill Lynch U.S. Corporate Index. The best performing asset class was undoubtedly the preferred market, with a 10.51% return as measured by the BofA/Merrill Lynch Preferred Securities Fixed Rate Index. The $1,000 par dominated BofA/Merrill Lynch U.S. All Capital Securities Index posted a 5.1% return during the reporting period and the $25 par dominated BofA/Merrill Lynch Core Plus Fixed Rate Preferred Securities Index posted a 10.5% return.

What key strategies were used to manage the Funds during this twelve-month reporting period ended July 31, 2016 and how did these strategies influence performance?

Nuveen Preferred Income Opportunities Fund (JPC)

The table in the Performance Overview and Holding Summaries section of this report provides total return performance for the Fund for the one-year, five-year and ten-year periods ended July 31, 2016. For the twelve-month reporting period ended July 31, 2016 the Fund’s common shares at net asset value (NAV) outperformed the JPC Blended Index, but underperformed the BofA/Merrill Lynch Preferred Securities Fixed Rate Index.

JPC invests at least 80% of its managed assets in preferred securities and up to 20% opportunistically over the market cycle in other types of securities, primarily income oriented securities such as corporate and taxable municipal debt and common equity. The Fund is managed by two experienced portfolio teams with distinctive, complementary approaches to the preferred market. NAM employs a debt-oriented approach that combines top down relative value analysis of industry sectors with fundamental credit analysis. NWQ’s investment process identifies undervalued securities within a company’s capital structure that offer the most attractive risk/reward potential. This multi-team approach gives investors access to a broader investment universe with greater diversification potential.

 

NUVEEN     7   


Portfolio Managers’ Comments (continued)

 

Nuveen Asset Management

For the portion of the Fund managed by NAM, the Fund seeks to achieve its investment objective of providing a high level of current income and total return by investing in preferred securities and other income producing securities. The Fund’s portfolio is actively managed seeking to capitalize on strong and continuously improving credit fundamentals across our issuer base, coupled with arguably wide credit spreads (the difference between current yields on preferred securities and U.S. Treasury Bonds and other fixed income benchmarks) for the preferred security asset class. The Fund’s strategy focuses opportunistically on highly regulated industries, like utilities, banks and insurance companies, with a current emphasis broadly on financial services companies.

We employ a credit-based investment approach, using a top-down process to position the portfolio in a manner that reflects the investment team’s overall macro-economic outlook, while also incorporating a bottom-up approach that focuses on fundamental credit research, security structure selection, and option adjusted spread (OAS) analysis. The process begins with identifying the investable universe of $1,000 par and $25 par preferred securities. In an effort to capitalize on the inefficiencies between different investor bases within the preferred securities market, we tactically and strategically shift capital between the $25 par exchange listed market and the $1,000 par over-the-counter market. Periods of volatility may drive notably different valuations between these two markets, as will periods where valuations trend in one direction or another for an extended period of time. This dynamic is often related to differences in how retail and institutional markets perceive and price risk, as well as differences in retail and institutional investors’ ability to source substitute investments. Technical factors such as new issue supply may also influence the relative valuations between $25 par exchange listed structures and $1,000 par over-the-counter structures.

We continually monitor developments across the domestic and international financial markets, but we do not anticipate materially changing the Fund’s relative positioning strategy in the near future. We feel that valuations on the $25 par retail side of the market have run rich versus the $1,000 par institutional side of the market. We will likely maintain an overweight to $1,000 par securities as a result of this relative value opportunity, and because of our desire to position defensively against rising interest rates. Indeed, we have been concerned about the potential impact of rising rates on preferred security valuations for several quarters now. Callable fixed rate coupon securities, like many preferred securities, contain an additional risk, also known as duration extension risk, which is not applicable to non-callable fixed income structures. Duration on callable fixed rate coupon securities tends to extend during periods of rising interest rates, exactly the time when investors benefit least from higher duration. Luckily, there are coupon structures within the preferred securities market, like floating rate coupons and fixed-to-variable rate coupons that do not expose investors to the aforementioned duration extension risk. Given our concern regarding the potential impact of rising interest rates on preferred security valuations, we favor fixed-to-variable rate coupon structures which, all else equal, provide a lower duration profile on day one, and almost no duration extension risk versus traditional fixed rate coupon structures. One final note, fixed-to-variable rate securities are more common on the $1,000 par side of the market, and thus another reason in addition to relative value considerations for our current, and foreseeable, overweight to $1,000 par securities relative to the JPC Blended Index.

As mentioned in previous reports, the population of “new generation” preferred securities, such as contingent capital securities (otherwise known as CoCos), have indeed become an increasingly meaningful presence within the preferred/hybrid security marketplace. We estimate the total CoCo universe today to be just over $400 billion in size, with total capacity over the next few years eventually totaling between $500 billion and $600 billion based upon the current size of international banks’ balance sheets. As a reminder, international bank capital standards outlined in Basel III require new Additional Tier 1 (AT1)-qualifying and Tier 2-qualifying securities to contain explicit loss absorbing features upon the breach of certain predetermined capital thresholds. These loss-absorbing features come in one of three structures, including equity conversion, permanent write-down of principle or temporary write-down of principle with the possibility of future write-up when/if the issuer is able to replenish capital levels back above the threshold trigger level. We have allocated modestly to this new universe of securities. In our opinion, we have focused on those issuers that have

 

  8      NUVEEN


 

meaningful capital cushions above regulatory minimum capital levels. Focusing exposure on these better capitalized issuers helps minimize to a great extent the likelihood of a conversion event, or a skipped coupon payment. In addition to the seeking out those issuers with the larger capital cushions, we also favor those issuers that have, or have nearly, issued their full regulatory amount of AT1 securities, to reduce the impact that future new issue supply might have on secondary valuations.

With respect to the Fund’s allocation to lower investment grade and below investment grade securities, we continue to believe that these segments will, over the long term, provide a more compelling risk-adjusted return profile than higher rated preferred/hybrid securities. Lower rated securities are often overlooked by retail and institutional investors, and especially by investors with investment grade-only mandates. Until recently, below investment grade preferred securities typically were not index eligible, limiting the potential investor base and frequently creating opportunities for the Fund within this particular segment of the asset class. While lower rated preferred securities may exhibit periods of higher price volatility, we believe the return potential is disproportionately higher due to inefficiencies inherent in the segment. In addition, this lower rated segment of the asset class tends to exhibit lower interest rate sensitivity than higher rated security structures. As a result, this allocation also helps to express our desire to be positioned defensively against rising interest rates. Also, please note that preferred/hybrid securities are typically rated several notches below an issuer’s senior unsecured debt rating. Consequently, in most instances, a BB rated preferred/hybrid security has been issued by an entity with an investment grade senior unsecured credit rating of BBB or higher. From a fundamental perspective, we do not believe that below investment grade rated preferred securities exposes our investors to the same risks found in other below investment grade categories like traditional high yield bonds or senior loans.

There is another interesting note to consider regarding recent ratings trends across the preferred/hybrid market. Over the past few years, the rating agencies have revised their methodologies for preferred securities which have resulted in a broad drift lower in average ratings for the asset class. This is primarily driven by the fact that the rating agencies no longer place a high likelihood of government support for the preferred security investor during times of crisis. In our opinion, these same rating agencies have yet to fully recognize the tremendous improvement in bank balance sheets post financial crisis, nor have they acknowledged the lower risk profile of the bank business model under the monumental amount of new regulatory oversight. At some point, we do expect rating agencies to take these factors into consideration and eventually to rate bank-issued preferred securities higher than what we observe today.

As with any fixed income asset class, preferred securities are not immune from the impact of rising interest rates. We seek to minimize the impact of higher rates on the market value of the Fund’s portfolio by establishing a position in less interest rate sensitive securities, like fixed-to-variable rate and variable rate coupon structures. We also feel that rising interest rates are frequently the result of an improving macro-economic landscape and one where the current domestic economic recovery has likely gained meaningful traction. In this type of environment, risk premiums should shrink, reflecting the lower risk profile of the overall market. As a result, credit spreads should also narrow. We believe that credit spread compression in the preferred security asset class could help mitigate the negative impact of rising interest rates.

While our allocation to $1,000 par preferred securities was about equal to the JPC Blended Index as of July 31, 2016, on average during the reporting period the Fund was overweight these structures. Versus the previous JPC Blended Index, the benchmark for performance through January 31, 2016, we maintained a meaningful overweight to $1,000 par securities. The new JPC Blended Index had a larger allocation to $1,000 par securities and as of July 31, 2016, both the JPC sleeve managed by NAM and the new JPC Blended Index had a 68% allocation to that side of the market. The Fund’s overweight to $1,000 par structures detracted from relative performance. In this prolonged low interest rate environment, retail investors’ demand for income producing securities has grown dramatically. With the single-minded focus on income, retail investors continued to drive valuations on the $25 par side of the market to increasingly higher levels. Looking at the two sides of the market another way, valuations have run so high on the $25 par side of the market that there is now a large population of these securities trading at a negative yield-to-worst. Given that valuations between the two sides of the market have divided so dramatically, we do expect valuations to normalize in the near future.

 

NUVEEN     9   


Portfolio Managers’ Comments (continued)

 

Our overweight in the $1,000 par side of the market was also heavily concentrated in fixed-to-variable rate coupon structures, which, all else being equal, have lower interest rate sensitivity and lower duration extension risk compared to preferred/hybrid securities with standard fixed rate coupons. Given our outlook for gradually rising interest rates, the fixed-to-variable rate structures were better aligned with our strategy versus traditional fixed rate coupon securities. However, as of July 31, 2016 the Fund had 0.6 year longer effective duration versus the new JPC Blended Index. Despite having roughly 10% more fixed-to-variable rate exposure versus the new Blended Index at the end of the reporting period, the allocation within the JPC sleeve managed by NAM compared to the new Blended Index indeed had more exposure to non-call 10-year structures versus non-call 5-year structures, the former having inherently more duration than the latter. Given that interest rates actually decreased during the reporting period, relative performance of the JPC sleeve managed by NAM benefitted at the margin from the slightly longer duration profile. In addition, the non-call 10-year structures have greater key rate duration exposure further out the curve versus non-call 5-year structures. As a result, the flattening of the slope between 5-year U.S. Treasuries and 10-year U.S. Treasuries during the reporting period also contributed to relative outperformance versus the new JPC Blended Index. Unfortunately, the relative performance between $1,000 par and $25 par was a much greater factor on relative performance and resulted in the JPC sleeve managed by NAM slightly underperforming its new Blended Index.

Finally, while the JPC sleeve managed by NAM was underweight to CoCos versus the new JPC Blended Index, the Fund was actually overweight CoCo securities during the first six months of the reporting period when compared to the old JPC Blended Index. The old JPC Blended Index had no exposure to CoCos, while the Fund had an approximate 15% allocation to that segment of the market during the reporting period. Unfortunately, during the first half of the reporting period, the CoCo market was affected by several negative headlines resulting in the BofA/Merrill Lynch Contingent Capital Index posting a -1.6% total return for the six-month reporting period starting July 31, 2015 and ending January 31, 2016. During the second half of the reporting period, and with the onset of the new JPC Blended Index with its 40% allocation to CoCos, the Fund naturally transitioned from being overweight to underweight CoCos on a relative basis. While being overweight CoCO securities during the first half of the reporting period detracted from performance, the relative underweight to CoCos during the second half of the reporting period benefitted relative performance. For the twelve-month reporting period, the relative impact from the initial underweight and latter overweight to CoCos ended-up being inconsequential to performance.

NWQ Investment Management Company

For the portion of the Fund managed by NWQ, we seek to achieve high income and a measure of capital appreciation. While the Fund’s investments are primarily preferred securities, a portion of the Fund allows the flexibility to invest across the capital structure in any type of debt, preferred or equity securities offered by a particular company. The portfolio management team then evaluates all available investment choices within a selected company’s capital structure to determine the portfolio investment that may offer the most favorable risk-adjusted return potential. The Fund’s portfolio is constructed with an emphasis on seeking a sustainable level of income and an overall analysis for downside risk management.

Earlier in the reporting period, macroeconomic uncertainty driven by the economic trouble in emerging economies, falling commodity prices, along with uncertainty around the Fed’s hiking cycle all contributed to the significant volatility to both equity and credit markets. By the end of the reporting period however, riskier assets did recover. Common equity and high yield bonds generated total return of 5.38% as measured by the Russell 1000® Value Index and 4.92% for the BofA/Merrill Lynch U.S. High Yield Index. Investment grade corporate bonds did better with a 9.39% return as measured by the BofA/Merrill Lynch U.S. Corporate Index. Best performing asset class was undoubtedly the preferred market, with a 10.51% return as measured by the BofA/Merrill Lynch Preferred Securities Fixed Rate Index.

Through security selection, we reduced our exposure to common stocks and increased our exposure to investment grade bonds as many stocks have reached our target prices while we saw more attractive opportunities in bonds issued by high quality companies. This move has helped us protect some downside risks when as we went through several

 

  10      NUVEEN


 

periods of intense volatility during the reporting period. The Fund’s average credit quality stayed the same, with an overweight in the BBB-BB rated part of the credit spectrum. We increased duration as we invested in longer maturity investment grade bonds, which also helped us as rates declined during the reporting period.

During the reporting period, our preferred, investment grade bonds, equity and high yield holdings contributed to performance. Several sectors contributed to the Fund’s performance, in particular our holdings in the industrial sector. However, our banking sector holdings detracted from performance.

Several of our holdings performed well during the reporting period, including National Storage Affiliates Trust (NSA) common stock. NSA is a self-storage real estate investment trust (REIT) that contributed to performance after posting strong results in its first year as a public company and closing its valuation discount versus other self-storage REITs. NSA has beaten and raised acquisition expectations and its stores continue to put up solid fundamental growth.

Also positively contributing to performance was Hercules Technology Growth Capital, Inc. common stock. The company is a leading specialty finance company focused on providing senior secured venture growth loans to high growth, innovative venture capital-backed companies in a broadly diversified variety of technology, life sciences and sustainable and renewable technology industries. The stock performed well during the reporting period as the company announced solid earnings during the reporting period.

Lastly, MGM Growth Properties contributed to performance. This REIT consists of U.S. properties operated by MGM. The master lease with MGM has a 10-year term with extension options on all properties, with cross-default and corporate parent guarantee protections. The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) growth is expected to be stable in the low- to mid-single digits. We believe its high quality assets, favorable master lease terms and attractive dividend yield that may offer better downside protection. However, we think the downside risks are its asset concentration (single tenant) and expected minimal external growth opportunities near-term. When we initiated the position at the company’s IPO, we thought the incremental 150 basis point pick up in yield versus the outstanding MGM Growth Properties senior notes (which were trading at around 5% yield-to-maturity) offered an attractive risk-reward opportunity on the common stock. The stock rallied further during the second quarter of 2016 when the company announced its acquisition of the Borgata property from Boyd. This acquisition alleviated some of the company’s downside risks because it provided MGM greater diversity outside Las Vegas and is incremental to MGM’s rental income.

Detracting from performance was Seagate Technology, which designs, manufactures and markets hard disk drives for use in enterprise storage, servers, desktops, laptop computers, and other consumer electronic devices. It also has a growing solid state drive and storage systems portfolio. Recent weak demand within PC markets dragged the stock price lower as earnings were expected to be negatively affected by lower volumes. However, we believe negative sentiment has already been priced into the share price and the company has other catalysts, which include growth in the enterprise space, deferring operating expenditure plans and share buybacks, to offset recent weak stock performance. Gilead Sciences, Inc. common stock also detracted from performance. The stock came under pressure because of negative political and media coverage pertaining to drug pricing. Although we wouldn’t completely dismiss the potential for price controls, we feel they are very unlikely. Much of the focus has been on off-patent drugs or newly acquired drugs that underwent significant price increases. Gilead has expensive drug therapies, but they are novel in their development and treat diseases that are life threatening. As fundamentals prevail and earnings are reported we believe investors may be rewarded with a stock trading at attractive multiples of projected earnings and free cash flows, a strong management team and catalysts for future growth. Lastly, the senior debt of Gibson Brands Inc. detracted from performance. Gibson underperformed as the company’s entry into the consumer electronics business has experienced difficulties which have weighed on its financial performance. This was partially offset by strength in its guitar business.

We have always been cognizant of the risk of an interest rate rise when making investment decisions, therefore, we think the Fund has been positioned to moderate potential rate impact through investments in shorter duration preferred

 

NUVEEN     11   


Portfolio Managers’ Comments (continued)

 

securities such as those with higher coupon or fix-to-float structure as well as increasing exposure to other asset classes through security selection. Higher interest rates would decrease the call risk of bond holdings and conversely lower rates would increase the call risk of bond holdings, all other factors remaining constant. Effective duration would increase as interest rates rise.

During the reporting period, the Fund wrote covered call options on common stocks to hedge equity exposure. These options had a positive impact on performance.

Nuveen Preferred and Income Term Fund (JPI)

The table in the Performance Overview and Holding Summaries section of this report provides total return performance for the Fund for the one-year and since inception periods ended July 31, 2016. For the twelve-month reporting period ended July 31, 2016, the Fund’s shares at net asset value (NAV) underperformed the BofA/Merrill Lynch U.S. All Capital Securities Index, the new JPI Blended Benchmark Index, the old JPI Blended Benchmark and the BofA/Merrill Lynch Preferred Securities Fixed Rate Index.

The Fund seeks to achieve its investment objective of providing a high level of current income and total return by investing in preferred securities and other income producing securities. The Fund’s portfolio is actively managed seeking to capitalize on strong and continuously improving credit fundamentals across our issuer base, coupled with arguably wide credit spreads (the difference between current yields on preferred securities and U.S. Treasury Bonds and other fixed income benchmarks) for the preferred security asset class. The Fund’s strategy focuses opportunistically on highly regulated industries, like utilities, banks and insurance companies, with a current emphasis broadly on financial services companies.

We employ a credit-based investment approach, using a top-down process to position the portfolio in a manner that reflects the investment team’s overall macro-economic outlook, while also incorporating a bottom-up approach that focuses on fundamental credit research, security structure selection, and option adjusted spread (OAS) analysis. The process begins with identifying the investable universe of $1,000 par and $25 par preferred securities. In an effort to capitalize on the inefficiencies between different investor bases within the preferred securities market, we tactically and strategically shift capital between the $25 par exchange listed market and the $1,000 par over-the-counter market. Periods of volatility may drive notably different valuations between these two markets, as will periods where valuations trend in one direction or another for an extended period of time. This dynamic is often related to differences in how retail and institutional markets perceive and price risk, as well as differences in retail and institutional investors’ ability to source substitute investments. Technical factors such as new issue supply may also influence the relative valuations between $25 par exchange listed structures and $1,000 par over-the-counter structures.

We continually monitor developments across the domestic and international financial markets, but we do not anticipate materially changing the Fund’s relative positioning strategy in the near future. We feel that valuations on the $25 par retail side of the market have run rich versus the $1,000 par institutional side of the market. We will likely maintain an overweight to $1,000 par securities as a result of this relative value opportunity, and because of our desire to position defensively against rising interest rates. Indeed, we have been concerned about the potential impact of rising rates on preferred security valuations for several quarters now. Callable fixed rate coupon securities, like many preferred securities, contain an additional risk, also known as duration extension risk, which is not applicable to non-callable fixed income structures. Duration on callable fixed rate coupon securities tends to extend during periods of rising interest rates, exactly the time when investors benefit least from higher duration. Luckily, there are coupon structures within the preferred securities market, like floating rate coupons and fixed-to-variable rate coupons that do not expose investors to the aforementioned duration extension risk. Given our concern regarding the potential impact of rising interest rates on preferred security valuations, we favor fixed-to-variable rate coupon structures which, all else equal, provide a lower duration profile on day one, and almost no duration extension risk versus traditional fixed rate coupon structures.

 

  12      NUVEEN


 

Fixed-to-variable rate securities are more common on the $1,000 par side of the market, and thus another reason in addition to relative value considerations for our current, and foreseeable, overweight to $1,000 par securities relative to the JPI Blended Index.

As mentioned in previous reports, the population of “new generation” preferred securities, such as contingent capital securities (otherwise known as CoCos), have indeed become an increasingly meaningful presence within the preferred/hybrid security marketplace. We estimate the total CoCo universe today to be just over $400 billion in size, with total capacity over the next few years eventually totaling between $500 billion and $600 billion based upon the current size of international banks’ balance sheets. As a reminder, international bank capital standards outlined in Basel III require new Additional Tier 1 (AT1)-qualifying and Tier 2-qualifying securities to contain explicit loss absorbing features upon the breach of certain predetermined capital thresholds. These loss-absorbing features come in one of three structures, including equity conversion, permanent write-down of principle or temporary write-down of principle with the possibility of future write-up when/if the issuer is able to replenish capital levels back above the threshold trigger level. We have allocated modestly to this new universe of securities. In our opinion, we have focused on those issuers that have meaningful capital cushions above regulatory minimum capital levels. Focusing exposure on these better capitalized issuers helps minimize to a great extent the likelihood of a conversion event, or a skipped coupon payment. In addition to the seeking out those issuers with the larger capital cushions, we also favor those issuers that have, or have nearly, issued their full regulatory amount of AT1 securities, to reduce the impact that future new issue supply might have on secondary valuations.

With respect to the Fund’s allocation to lower investment grade and below investment grade securities, we continue to believe that these segments will, over the long term, provide a more compelling risk-adjusted return profile than higher rated preferred/hybrid securities. Lower rated securities are often overlooked by retail and institutional investors, and especially by investors with investment grade only mandates. Until recently, below investment grade preferred securities typically were not index eligible, limiting the potential investor base and frequently creating opportunities for the Fund within this particular segment of the asset class. While lower rated preferred securities may exhibit periods of higher price volatility, we believe the return potential is disproportionately higher due to inefficiencies inherent in the segment. In addition, this lower rated segment of the asset class tends to exhibit lower interest rate sensitivity than higher rated security structures. As a result, this allocation also helps to express our desire to be positioned defensively against rising interest rates. Also, please note that preferred/hybrid securities are typically rated several notches below an issuer’s senior unsecured debt rating. Consequently, in most instances, a BB rated preferred/hybrid security has been issued by an entity with an investment grade senior unsecured credit rating of BBB or higher. From a fundamental perspective, we do not believe that below investment grade rated preferred securities exposure our investors to the same risks found in other below investment grade categories like traditional high yield bonds or senior loans.

There is another interesting note to consider regarding recent ratings trends across the preferred/hybrid market. Over the past few years, the rating agencies have revised their methodologies for preferred securities which have resulted in a broad drift lower in average ratings for the asset class. This is primarily driven by the fact that the rating agencies no longer place a high likelihood of government support for the preferred security investor during times of crisis. In our opinion, these same rating agencies have yet to fully recognize the tremendous improvement in bank balance sheets post financial crisis, nor have they acknowledged the lower risk profile of the bank business model under the monumental amount of new regulatory oversight. At some point, we do expect rating agencies to take these factors into consideration and eventually to rate bank-issued preferred securities higher than what we observe today.

As with any fixed income asset class, preferred securities are not immune from the impact of rising interest rates. As mentioned above, we seek to minimize the impact of higher rates on the market value of the Fund’s portfolio by establishing a position in less interest rate sensitive securities, like fixed-to-variable rate and variable rate coupon structures. We also feel that rising interest rates are frequently the result of an improving macro-economic landscape, and one

 

NUVEEN     13   


Portfolio Managers’ Comments (continued)

 

where the current domestic economic recovery has likely gained meaningful traction. In this type of environment, risk premiums should shrink, reflecting the lower risk profile of the overall market. As a result, credit spreads should also narrow. We believe that credit spread compression in the preferred security asset class could help mitigate the negative impact of rising interest rates.

While our allocation to $1,000 par preferred securities was about equal to the JPI Blended Index as of July 31, 2016, on average during the reporting period the Fund was overweight these structures. Versus the previous JPI Blended Index, the benchmark for performance through January 31, 2016, we maintained a meaningful overweight to $1,000 par securities. The new JPI Blended Index had a larger allocation to $1,000 par securities and as of July 31, 2016, both JPI and the new JPI Blended Index had a 68% allocation to that side of the market. The Fund’s overweight to $1,000 par structures detracted from relative performance. In this prolonged low interest rate environment, retail investors’ demand for income producing securities has grown dramatically. With the single-minded focus on income, retail investors continued to drive valuations on the $25 par side of the market to increasingly higher levels. Looking at the two sides of the market another way, valuations have run so high on the $25 par side of the market that there is now a large population of these securities trading at a negative yield-to-worst. Given that valuations between the two sides of the market have bifurcated so dramatically, we do expect valuations to normalize in the near future.

Our overweight in the $1,000 par side of the market was also heavily concentrated in fixed-to-variable rate coupon structures, which, all else being equal, have lower interest rate sensitivity and lower duration extension risk compared to preferred/hybrid securities with standard fixed rate coupons. Given our outlook for gradually rising interest rates, the fixed-to-variable rate structures were better aligned with our strategy versus traditional fixed rate coupon securities. However, as of July 31, 2016 the Fund had 0.6 year longer effective duration versus the new JPI Blended Index. Despite having roughly 10% more fixed-to-variable rate exposure versus the new Blended Index at the end of the reporting period, JPI’s allocation compared to the new JPI Blended Index indeed had more exposure to non-call 10-year structures versus non-call 5-year structures, the former having inherently more duration than the latter. Given that interest rates actually decreased during the reporting period, relative performance of JPI benefitted at the margin from the slightly longer duration profile. In addition, the non-call 10-year structures have greater key rate duration exposure further out the curve versus non-call 5-year structures. As a result, the flattening of the slope between 5-year U.S. Treasuries and 10-year U.S. Treasuries during the twelve-month reporting period also contributed to relative outperformance versus the new JPI Blended Index. Unfortunately, the relative performance between $1,000 par and $25 par was a much greater factor on relative performance and resulted in JPI slightly underperforming its new JPI Blended Index.

Finally, while JPI was underweight to CoCos versus the new JPI Blended Index, the Fund was actually overweight CoCo securities during the first six months of the reporting period when compared to the old JPI Blended Index. The old JPI Blended Index had no exposure to CoCos, while the Fund had an approximate 15% allocation to that segment of the market during the reporting period. Unfortunately, during the first half of the reporting period, the CoCo market was affected by several negative headlines resulting in the BofA/Merrill Lynch Contingent Capital Index posting a -1.6% total return for the six-month reporting period starting July 31, 2015 and ending January 31, 2016. During the second half of the reporting period, and with the onset of the new JPI Blended Index with its 40% allocation to CoCos, the Fund naturally transitioned from being overweight to underweight CoCos on a relative basis. While being overweight CoCO securities during the first half of the period detracted from performance, the relative underweight to CoCos during the second half of the period benefitted relative performance. For the twelve-month reporting period, the relative impact from the initial underweight and latter overweight to CoCos ended-up being inconsequential to performance.

Nuveen Preferred Securities Income Fund (JPS) (formerly Nuveen Quality Preferred Income Fund 2)

The tables in the Performance Overview and Holding Summaries section of this report provide total return performance for the Fund for the one-year, five-year and ten-year periods ended July 31, 2016. For the twelve-month reporting period ended July 31, 2016 the Fund’s common shares at net asset value (NAV) outperformed the Barclays U.S.

 

  14      NUVEEN


 

Aggregate Bond Index and the new JPS Blended Benchmark. The new JPS Blended Benchmark Index, which is a secondary benchmark, consists of 60% BofA/ Merrill Lynch All Capital Securities Index and 40% BofA/Merrill Lynch Contingent Capital Index.

The investment objective of the Fund is to seek high current income consistent with capital preservation with a secondary objective to enhance portfolio value relative to the broad market for preferred securities. Under normal market conditions, the Fund seeks to invest at least 80% of its net assets in preferred securities and up to 20% of its net assets in debt securities, including convertible debt and convertible preferred securities.

Our broad strategy during the reporting period was to reposition the Fund during and after its reorganization into higher yielding below investment grade preferred securities and more fixed-to-variable type coupon structures. We keep a risk-averse posture toward security structure and portfolio structure, which is an important core aspect of our efforts to preserve capital and provide attractive income relative to senior corporate credit. Extension risk, the risk that a security’s duration will lengthen, due to a decrease in prepayments caused by rising interest rates, is endemic to the $25 par sector. As a result, we reduced our concentrations in this sector from roughly 33% down to 20% by the end of the reporting period. We then repositioned the Fund into the fixed-to-variable capital securities sector. Overall, concentrations in below investment grade securities were increased from 10% to 32% and capital securities were increased from 63% to 79% with the objective of increasing the Fund’s potential for higher net earnings.

During the reporting period, the U.S. Fed raised its target funds rate by 25 basis points in December 2015. There was also a sharp correction in the S&P 500® Index during the January and February 2016 period. Deflation and slow growth has kept both the ECB and the Bank of Japan in accommodative positions. More recently the Bank of England has cut its key benchmark rate and has begun a quantitative easing program of its own on the heels of the UK’s vote to leave the EU.

Despite the brief pause during the beginning of 2016, preferred securities performed well over the course of the reporting period. The positive total return has been aided by several factors, including the consistent decline in long-term U.S. Treasury rates, additional easy money from global central banks and constructive fundamental capital formation in the banking sector. Capital securities were the top performers for the reporting period, including General Electric Company 5% and QBE Cap Funding III Limited 7.25% being among the best. The main detractors were Catlin Insurance Company Limited 7.249% and Glen Meadows Pass Through Trust 6.505, which the market is pricing on its expectation that it will not be called when the call options become active next year but will likely switch to paying a floating rate coupon.

We positioned the Fund to play the intermediate part of the yield curve on average by moving more underweight the $25 par sector and overweight more intermediate $1,000 par sector. The Fund is positioned this way because we prefer to take more credit risk than duration risk. Additionally, we like the structural benefits of the contingent capital securities (“CoCo”) sector which has resettable intermediate fixed rate coupons. The CoCo sector received some good fundamental news through regulatory changes this summer whereby coupon payments should gain more certainty because the capital that EU member banks will be required to hold in order to pay the coupons was reduced. This change by the ECB gives the EU banks more cushion to absorb losses before a capital trigger can begin to limit the maximum distributable amounts. We increased the Fund’s concentrations in CoCo securities to approximately 30% during the reporting period in order to augment the potential for higher net earnings.

Nuveen Flexible Investment Income Fund (JPW)

The table in the Performance Overview and Holding Summaries section of this report provides total return performance for the Fund for the one-year and since inception periods ended July 31, 2016. For the twelve-month reporting period ended July 31, 2016, the Fund’s common shares at net asset value (NAV) outperformed the Barclays U.S. Aggregate Bond Index.

 

NUVEEN     15   


Portfolio Managers’ Comments (continued)

 

JPW invests at least 80% of its managed assets in income producing preferred, debt and equity securities issued by companies located anywhere in the world. Up to 50% of its managed assets may be in securities issued by non-U.S. companies, though all (100%) Fund assets will be in U.S. dollar-denominated securities. Up to 40% of its managed assets may consist of equity securities, not including preferred securities. Up to 75% of investments in debt and preferred securities that are of a type customarily rated by a credit rating agency, may be rated below investment grade, or if unrated, will be judged to be of comparable quality by NWQ. The Fund will invest at least 25% in securities issued by financial services companies.

The Fund’s investment objectives are to provide high current income and, secondarily, capital appreciation. The Fund seeks to achieve its investment objectives by investing in undervalued securities with attractive investment characteristics. The Fund’s portfolio is actively managed by NWQ and has the flexibility to invest across the capital structure in any type of debt, preferred or equity securities offered by a particular company. The portfolio management team then evaluates all available investment choices within a selected company’s capital structure to determine the portfolio investment that may offer the most favorable risk-adjusted return potential. The Fund’s portfolio is constructed with an emphasis on seeking a sustainable level of income and an overall analysis for downside risk management.

Earlier in the reporting period, macroeconomic uncertainty driven by the economic trouble in emerging economies, falling commodity prices, along with uncertainty around the Fed’s hiking cycle all contributed to the significant volatility to both equity and credit markets. By the end of the reporting period however, riskier assets did recover. Common equity and high yield bonds generated a total return of 5.38% as measured by the Russell 1000® Value Index and 4.92% for the BofA/Merrill Lynch U.S. High Yield Index. Investment grade corporate bonds did better with a 9.39% return as measured by the BofA/Merrill Lynch U.S. Corporate Index. The best performing asset class was the preferred market, with a 10.51% return as measured by the BofA/Merrill Lynch Preferred Securities Fixed Rate Index.

Through security selection, we reduced our exposure to common stocks and increased investment grade bonds as many stocks have reached our target prices while we saw more attractive opportunities in bonds issued by high quality companies. This move has helped us protect some downside risks when as we went through several periods of intense volatility during the reporting period. The Fund’s average credit quality stayed the same, with an overweight in the BBB-BB rated part of the spectrum. We increased duration as we invested in longer maturity investment grade bonds, which also helped us as rates declined during the reporting period.

During the reporting period, our preferred, investment grade bonds, equity and high yield holdings contributed to performance. Several sectors contributed to the Fund’s performance, in particular our holdings in the industrial sector. However, our banking sector holdings detracted from performance.

Several of our holdings performed well during the reporting period, including National Storage Affiliates Trust (NSA) common stock. NSA is a self-storage real estate investment trust (REIT) that contributed to performance after posting strong results in its first year as a public company and closing its valuation discount versus other self-storage REITs. NSA has beaten and raised acquisition expectations, and its stores continue to put up solid fundamental growth.

Also positively contributing to performance was Hercules Technology Growth Capital, Inc. common stock. The company is a leading specialty finance company focused on providing senior secured venture growth loans to high growth, innovative venture capital-backed companies in a broadly diversified variety of technology, life sciences and sustainable and renewable technology industries. The stock performed well during the reporting period as the company announced solid earnings during the reporting period.

Lastly, MGM Growth Properties contributed to performance. This REIT consists of U.S. properties operated by MGM. The master lease with MGM has a 10-year term with extension options on all properties, with cross-default and corporate parent guarantee protections. The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) growth is expected to be stable in the low- to mid-single digits. We believe its high quality assets, favorable

 

  16      NUVEEN


 

master lease terms and attractive dividend yield should offer better downside protection. However, we think the downside risks are its asset concentration (single tenant) and expected minimal external growth opportunities near-term, plus Las Vegas cyclicality. When we initiated the position at the company’s IPO, we thought the incremental 150 basis point pick up in yield versus the outstanding MGM Growth Properties senior notes (which were trading at around 5% yield-to-maturity) offered an attractive risk-reward opportunity on the common stock. The stock rallied further during the second quarter of 2016 when the company announced its acquisition of the Borgata property from Boyd. This acquisition alleviated some of the company’s downside risks because it provided MGM greater diversity outside Las Vegas and is incremental to MGM’s rental income and accretes adjusted funds from operations (AFFO) per share without adding net leverage.

Positions that detracted from performance included Seagate Technology. The company designs, manufactures and markets hard disk drives for use in enterprise storage, servers, desktops, laptop computers and other consumer electronic devices. It also has a growing solid state drive and storage systems portfolio. Recent weak demand within PC markets dragged the stock price lower as earnings were expected to be negatively affected by lower volumes. However, we believe negative sentiment has already been priced into the share price and the company has other catalysts, which include growth in the enterprise space, deferring operating expenditure plans, and share buybacks, to offset recent weak stock performance.

Also detracting from performance was Gilead Sciences, Inc. common stock. The stock came under pressure because of negative political and media coverage pertaining to drug pricing. Although we wouldn’t completely dismiss the potential for price controls, we feel they are unlikely. Also, most of the focus has been on off-patent drugs or newly acquired drugs that underwent significant price increases. Gilead certainly has expensive drug therapies, but they are novel in their development and treat diseases that are life threatening. As fundamentals prevail and earnings are reported we believe investors may be rewarded with a stock trading at attractive multiples of projected earnings and free cash flows, a strong management team and catalysts for future growth.

Lastly, CVR Partners LP holding detracted from performance. During the third quarter of 2015, the share price dropped sharply as the company reported a third quarter loss, no dividend and uncertainty about the merger between CVR Partners and Rentech Nitrogen. The stock rebounded but not enough to recover completely.

We have always been cognizant of the risk of an interest rate rise when making investment decisions, therefore, we think the Fund has been positioned to minimize potential rate impact through investments in shorter duration preferred securities such as those with higher coupon or fix-to-float structure as well as increasing exposure to other asset classes through security selection. Higher interest rates would decrease the call risk of bond holdings and conversely lower rates would increase the call risk of bond holdings, all other factors remaining constant. Effective duration would increase as interest rates rise.

During the reporting period, the Fund wrote covered call options on common stocks to hedge equity exposure. The options had a positive impact on performance.

 

NUVEEN     17   


Fund

Leverage

 

IMPACT OF THE FUNDS’ LEVERAGE STRATEGIES ON PERFORMANCE

One important factor impacting the returns of the Funds relative to their benchmarks was the Funds’ use of leverage through the use of bank borrowings. The Funds use leverage because our research has shown that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share NAV and common shareholder total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by a Fund generally are rising. The Funds’ use of leverage had a positive impact on performance during this reporting period.

JPC, JPI and JPS continued to use swap contracts to partially fix the interest cost of leverage, which as mentioned previously, is through the use of bank borrowings. During this reporting period, these swap contracts detracted from overall Fund performance.

As of July 31, 2016, the Funds’ percentages of leverage are shown in the accompanying table.

 

     JPC        JPI        JPS        JPW  

Effective Leverage*

    28.36        28.67        32.41        28.18

Regulatory Leverage*

    28.36        28.67        32.41        28.18
* Effective leverage is the Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in a Fund’s portfolio that increase the Fund’s investment exposure. Regulatory leverage consists of preferred shares issued or borrowings of the Fund. Both of these are part of the Fund’s capital structure. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940.

THE FUNDS’ LEVERAGE

Bank Borrowings

As noted above, the Funds employ regulatory leverage through the use of bank borrowings. The Funds’ bank borrowing activities are as shown in the accompanying table.

 

     Current Reporting Period      Subsequent to the Close of
the Reporting Period
 
Fund    August 1, 2015      Draws      Paydowns      July 31, 2016      Average Balance
Outstanding
     Draws      Paydowns      September 28, 2016  

JPC

   $ 404,100,000       $   —       $       $ 404,100,000      $ 404,100,000       $   —       $       $ 404,100,000   

JPI

   $ 225,000,000       $       $       $ 225,000,000      $ 225,000,000       $       $       $ 225,000,000   

JPS

   $ 465,800,000       $ 479,200,000       $       $ 945,000,000      $ 552,326,776       $       $ 150,000,000       $ 795,000,000   

JPW

   $ 30,000,000       $ 2,500,000       $ (5,500,000    $ 27,000,000      $ 26,575,137       $       $   —       $ 27,000,000   

Refer to Notes to Financial Statements, Note 8 – Borrowing Arrangements for further details.

Reverse Repurchase Agreement

Subsequent to the current fiscal period, JPS entered into a $150,000,000 reverse repurchase agreement as a means of leverage. In conjunction with receipt of the $150,000,000, the Fund paid down $150,000,000 of its outstanding Borrowings.

 

  18      NUVEEN


Common Share

Information

 

JPC, JPI AND JPS COMMON SHARE DISTRIBUTION INFORMATION

The following information regarding JPC’s, JPI’s and JPS’s distributions is as of July 31, 2016. Each Fund’s distribution

levels may vary over time based on each Fund’s investment activity and portfolio investment value changes.

During the current reporting period, each Fund’s distributions to common shareholders were as shown in the accompanying table.

 

    Per Common Share Amounts  
Monthly Distributions (Ex-Dividend Date)   JPC        JPI        JPS  

August 2015

  $ 0.0670         $ 0.1625         $ 0.0580   

September

    0.0670           0.1625           0.0580   

October

    0.0670           0.1625           0.0580   

November

    0.0670           0.1625           0.0580   

December

    0.0670           0.1625           0.0580   

January

    0.0670           0.1625           0.0580   

February

    0.0670           0.1625           0.0580   

March

    0.0670           0.1625           0.0580   

April

    0.0670           0.1625           0.0580   

May*

    0.0670           0.1625           0.0580   

June

    0.0670           0.1625           0.0590   

July 2016

    0.0670           0.1625           0.0620   

Total Monthly Per Share Distributions

  $ 0.8040         $ 1.9500         $ 0.7010   

Ordinary Income Distribution**

  $         $ 0.0026         $   

Total Distributions from Net Investment Income

  $ 0.8040         $ 1.9526         $ 0.7010   

Total Distributions from Long-Term Capital Gains**

  $         $ 0.1824         $   

Total Distributions

  $ 0.8040         $ 2.1350         $ 0.7010   
                               

Current Distribution Rate***

    7.71        7.93        7.73
* In connection with JPS's reorganization, the Fund declared a dividend of $0.0457 per common share with an ex-dividend date of May 17, 2016, payable on June 1, 2016 and a dividend of $0.0123 per common share with an ex-dividend date of May 4, 2016, payable on June 1, 2016.
** Distributions paid in December 2015.
*** Current distribution rate 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 fiscal year the Fund’s cumulative net ordinary income and net realized gains are less than the amount of the Fund’s distributions, a return of capital for tax purposes.

JPC, JPI and JPS seek to pay regular monthly dividends out of their net investment income at a rate that reflects their past and projected net income performance. To permit each Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net income actually earned by the Fund during the period. If a Fund has cumulatively earned more than it has paid in dividends, it will hold the excess in reserve as undistributed net investment income (UNII) as part of the Fund’s net asset value. Conversely, if a Fund has cumulatively paid in dividends more than it has earned, the excess will constitute a negative UNII that will likewise be reflected in the Fund’s net asset value. Each Fund will, over time, pay all its net investment income as dividends to shareholders.

As of July 31, 2016, JPC, JPI and JPS had positive UNII balances for tax purposes. JPC and JPI had negative UNII balances while JPS had a positive UNII balance for financial reporting purposes.

 

NUVEEN     19   


Common Share Information (continued)

 

All monthly dividends paid by JPC, JPI and JPS during the current reporting period, were paid from net investment income. If a portion of the Funds’ monthly distributions were sourced from or comprised of elements other than net investment income, including capital gains and/or a return of capital, shareholders would have received a notice to that effect. For financial reporting purposes, the composition and per share amounts of each Fund’s dividends for the reporting period are presented in this report’s Statement of Changes in Net Assets and Financial Highlights, respectively. For income tax purposes, distribution information for each Fund as of its most recent tax year end is presented in Note 6 – Income Tax Information within the Notes to Financial Statements of this report.

JPW DISTRIBUTION INFORMATION

The following information regarding JPW’s distributions is current as of July 31, 2016, the Fund’s fiscal and tax year end, and may differ from previously issued distribution notifications.

The Fund has a cash flow-based distribution program. Under this program, the Fund seeks to maintain an attractive and stable regular distribution based on the Fund’s net cash flow received from its portfolio investments. Fund distributions are not intended to include expected portfolio appreciation; however, the Fund invests in securities that make payments which ultimately may be fully or partially treated as gains or return of capital for tax purposes. This tax treatment will generally “flow through” to the Fund’s distributions, but the specific tax treatment is often not known with certainty until after the end of the Fund’s tax year. As a result, regular distributions throughout the year are likely to be re-characterized for tax purposes as either long-term gains (both realized and unrealized), or as a non-taxable return of capital.

The figures in the table below provide the sources (for tax purposes) of the Fund’s distributions as of July 31, 2016. These sources include amounts attributable to realized gains and/or returns of capital. The information shown below is for the distributions paid on common shares for all prior months in the current fiscal year. These amounts should not be used for tax reporting purposes, and the distribution sources may differ for financial reporting than for tax reporting. The final determination of the tax characteristics of all distributions paid in 2016 will be made in early 2017 and reported to you on Form 1099-DIV. More details about the tax characteristics of the Fund’s distributions are available on www.nuveen.com/CEFdistributions.

Data as of July 31, 2016

 

Fiscal YTD
Percentage of Distributions
    Fiscal YTD
Per Share Amounts
 
Net
Investment
Income
    Realized
Gains
    Return of
Capital
    Total
Distributions
    Net
Investment
Income
    Realized
Gains
    Return of
Capital
 
  85.9%        0.0%        14.1%        $1.4140        $1.2150        $0.0000        $0.1990   

The following table provides information regarding Fund distributions and total return performance over various time periods. This information is intended to help you better understand whether Fund returns for the specified time periods were sufficient to meet Fund distributions.

Data as of July 31, 2016

 

            Annualized     Cumulative  
Inception
Date
    Latest
Monthly
Per Share
Distribution
    Current
Distribution on
NAV
    1-Year
Return on
NAV
    Since Inception
Return on
NAV
    Calendar YTD
Distributions on
NAV
    Calendar
YTD Return
on NAV
 
  6/25/2013        $0.1130        7.29%        8.49%        7.91%        4.38%        13.50%   

 

  20      NUVEEN


 

COMMON SHARE REPURCHASES

During August 2016 (subsequent to the close of this reporting period), the Funds’ Board of Trustees reauthorized an open-market share repurchase program, allowing each Fund to repurchase an aggregate of up to approximately 10% of its outstanding shares.

As of July 31, 2016, and since the inception of the Funds’ repurchase programs, the Funds have cumulatively repurchased and retired their outstanding common shares as shown in the accompanying table.

 

     JPC        JPI        JPS        JPW  

Common shares cumulatively repurchased and retired

    2,826,100           0           0           6,500   

Common shares authorized for repurchase

    9,690,000           2,275,000           12,040,000           370,000   

During the current reporting period, the following Fund repurchased and retired its common shares at a weighted average price per common share and a weighted average discount per common share as shown in the accompanying table.

 

        JPW  

Common shares repurchased and retired

       6,500   

Weighted average price per common share repurchased and retired

       $14.28   

Weighted average discount per common share repurchased and retired

       15.28

OTHER COMMON SHARE INFORMATION

As of July 31, 2016, and during the current reporting period, the Funds’ common share prices were trading at a premium/(discount) to their common share NAVs as shown in the accompanying table.

 

     JPC        JPI        JPS        JPW  

Common share NAV

    $10.53           $24.60           $9.67           $18.61   

Common share price

    $10.43           $24.59           $9.63           $16.78   

Premium/(Discount) to NAV

    (0.95 )%         (0.04 )%         (0.41 )%         (9.83 )% 

12-month average premium/(discount) to NAV

    (6.91 )%         (3.97 )%         (3.84 )%         (12.73 )% 

 

NUVEEN     21   


Risk

Considerations

 

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation.

Nuveen Preferred Income Opportunities Fund (JPC)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure, and therefore are subject to greater credit risk. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Lower credit debt securities may be more likely to fail to make timely interest or principal payments. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. Certain types of preferred or debt securities with special loss absorption provisions, such as contingent capital securities (CoCos), may be or become so subordinated that they present risks equivalent to, or in some cases even greater than, the same company’s common stock. These and other risk considerations such as concentration and foreign securities risk are described in more detail on the Fund’s web page at www.nuveen.com/JPC.

Nuveen Preferred and Income Term Fund (JPI)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure, and therefore are subject to greater credit risk. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Lower credit debt securities may be more likely to fail to make timely interest or principal payments. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. Certain types of preferred or debt securities with special loss absorption provisions, such as contingent capital securities (CoCos), may be or become so subordinated that they present risks equivalent to, or in some cases even greater than, the same company’s common stock. For these and other risks, including the Fund’s limited term and concentration risk, see the Fund’s web page at www.nuveen.com/JPI.

Nuveen Preferred Securities Income Fund (JPS) (formerly Nuveen Quality Preferred Income Fund 2)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure, and therefore are subject to greater credit risk. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a Fund’s leverage strategy will be successful. Certain types of preferred or debt securities with special loss absorption provisions, such as contingent capital securities (CoCos), may be or become so subordinated that they present risks equivalent to, or in some cases even greater than, the same company’s common stock. These and other risks such as concentration and foreign securities risk are described in more detail on the Fund’s web page at www.nuveen.com/JPS.

 

  22      NUVEEN


 

Nuveen Flexible Investment Income Fund (JPW)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure, and therefore are subject to greater credit risk. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Lower credit debt securities may be more likely to fail to make timely interest or principal payments. Prices of equity securities may decline significantly over short or extended periods of time. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. Certain types of preferred or debt securities with special loss absorption provisions, such as contingent capital securities (CoCos), may be or become so subordinated that they present risks equivalent to, or in some cases even greater than, the same company’s common stock. For these and other risks such as concentration and foreign securities risk, please see the Fund’s web page at www.nuveen.com/JPW.

 

NUVEEN     23   


JPC

 

Nuveen Preferred Income Opportunities Fund

Performance Overview and Holding Summaries as of July 31, 2016

 

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

Average Annual Total Returns as of July 31, 2016

 

    Average Annual  
     1-Year        5-Year        10-Year  
JPC at Common Share NAV     9.01%           9.92%           5.73%   
JPC at Common Share Price     23.47%           13.24%           7.39%   
JPC Blended Index (Comparative Benchmark)     3.51%           7.06%           5.71%   
BofA/Merrill Lynch Preferred Securities Fixed Rate Index     10.51%           7.67%           3.78%   

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Common Share Price Performance — Weekly Closing Price

LOGO

 

  24      NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

Common Stocks     5.1%   
$25 Par (or similar) Retail Preferred     60.8%   
Convertible Preferred Securities     1.6%   
Corporate Bonds     12.4%   
$1,000 Par (or similar) Institutional Preferred     59.3%   
Repurchase Agreements     0.6%   
Other Assets Less Liabilities     (0.2)%   

Net Assets Plus Borrowings

    139.6%   
Borrowings     (39.6)%   

Net Assets

    100%   

Portfolio Composition

(% of total investments)1

 

Banks     31.0%   
Insurance     19.9%   
Capital Markets     9.6%   
Real Estate Investment Trust     8.8%   
Food Products     5.0%   
Diversified Financial Services     4.3%   
Industrial Conglomerates     3.5%   
Other     17.5%   
Repurchase Agreements     0.4%   

Total

    100%   

 

Country Allocation

(% of total investments)1

 

United States     81.1%   
United Kingdom     6.2%   
France     2.8%   
Australia     1.8%   
Switzerland     1.8%   
Other     6.3%   

Total

    100%   
 

 

Top Five Issuers

(% of total long-term investments)1

 

Citigroup Inc.     3.6%   
General Electric Company     3.0%   
Wells Fargo & Company     2.7%   
Cobank Agricultural Credit Bank     2.6%   
JPMorgan Chase & Company     2.6%   

Credit Quality

(% of total long-term fixed-income investments)

 

AA     3.0%   
A     1.9%   
BBB     44.5%   
BB or Lower     34.3%   
N/R (not rated)     16.3%   

Total

    100%   
 

 

1 Excluding investments in derivatives.

 

NUVEEN     25   


JPI

 

Nuveen Preferred and Income Term Fund

Performance Overview and Holding Summaries as of July 31, 2016

 

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

Average Annual Total Returns as of July 31, 2016

 

    Average Annual  
     1-Year        Since
Inception
 
JPI at Common Share NAV     7.96%           9.67%   
JPI at Common Share Price     20.97%           8.96%   
BofA/Merrill Lynch U.S. All Capital Securities Index     8.11%           8.54%   
BofA/Merrill Lynch Preferred Securities Fixed Rate Index     10.51%           6.96%   
Blended Benchmark (New Comparative Index)     8.73%           6.77%   
Blended Benchmark (Old Comparative Index)     9.70%           7.00%   

Since inception returns are from 7/26/12. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Common Share Price Performance — Weekly Closing Price

 

LOGO

 

  26      NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

$25 Par (or similar) Retail Preferred     44.7%   
Corporate Bonds     10.9%   
$1,000 Par (or similar) Institutional Preferred     84.0%   
Other Assets Less Liabilities     0.6%   

Net Assets Plus Borrowings

    140.2%   
Borrowings     (40.2)%   

Net Assets

    100%   

 

Portfolio Composition

(% of total investments)1

 

Banks

    38.3%   

Insurance

    24.9%   

Capital Markets

    9.2%   

Diversified Financial Services

    6.5%   

Food Products

    4.4%   

Other

    16.7%   

Total

    100%   

Country Allocation

(% of total investments)1

 

United States     69.3%   
United Kingdom     9.8%   
France     5.4%   
Switzerland     3.5%   
Australia     3.5%   
Other     8.5%   

Total

    100%   
 

 

Top Five Issuers

(% of total long-term investments)1

 

Citigroup Inc.

    3.8%   

Farm Credit Bank of Texas

    3.6%   

Cobank Agricultural Credit Bank

    3.4%   

General Electric Company

    3.3%   

Morgan Stanley

    3.1%   

Credit Quality

(% of total long-term investments)1

 

AA     3.3%   
A     2.9%   
BBB     50.6%   
BB or Lower     39.0%   
N/R (not rated)     4.2%   

Total

    100%   
 
1 Excluding investments in derivatives.

 

NUVEEN     27   


JPS

 

Nuveen Preferred Securities Income Fund

(formerly known as Nuveen Quality Preferred Income Fund 2)

Performance Overview and Holding Summaries as of July 31, 2016

 

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

Average Annual Total Returns as of July 31, 2016

 

    Average Annual  
     1-Year        5-Year        10-Year  
JPS at Common Share NAV     6.77%           9.63%           4.61%   
JPS at Common Share Price     14.48%           11.86%           4.92%   
Barclays U.S. Aggregate Bond Index     5.94%           3.57%           5.06%   
Blended Benchmark (New Comparative Index)     6.31%           N/A           N/A   
Blended Benchmark (Old Comparative Index)     8.32%           7.86%           5.32%   

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Common Share Price Performance — Weekly Closing Price

 

LOGO

 

  28      NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

$25 Par (or similar) Retail Preferred     30.7%   
Convertible Preferred Securities     0.7%   
Corporate Bonds     8.3%   
$1,000 Par (or similar) Institutional Preferred     102.8%   
Investment Companies     1.3%   
Repurchase Agreements     4.3%   
Other Assets Less Liabilities     (0.2)%   

Net Assets Plus Borrowings

    147.9%   
Borrowings     (47.9)%   

Net Assets

    100%   

Portfolio Composition

(% of total investments)1

 

Banks     49.3%   
Insurance     20.5%   
Capital Markets     8.0%   
Other     18.4%   
Investment Companies     0.9%   
Repurchase Agreements     2.9%   

Total

    100%   

 

Country Allocation

(% of total investments)1

 

United States     55.4%   
United Kingdom     15.8%   
France     7.3%   
Switzerland     5.4%   
Netherlands     5.2%   
Other     10.9%   

Total

    100%   
 

 

Top Five Issuers

(% of total long-term investments)1

 

General Electric Company     3.4%   
Royal Bank of Scotland Group PLC     3.2%   
Lloyd’s Banking Group PLC     3.0%   
Citigroup Inc.     3.0%   
UBS Group AG     2.9%   

Credit Quality

(% of total long-term fixed-income investments)

 

AA     3.4%   
A     4.0%   
BBB     60.7%   
BB or Lower     31.9%   

Total

    100%   
 

 

1 Excluding investments in derivatives.

 

NUVEEN     29   


JPW

 

Nuveen Flexible Investment Income Fund

Performance Overview and Holding Summaries as of July 31, 2016

 

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

Average Annual Total Returns as of July 31, 2016

 

    Average Annual  
     1-Year        Since
Inception
 
JPW at Common Share NAV     8.49%           7.91%   
JPW at Common Share Price     12.89%           3.91%   
Barclays U.S. Aggregate Bond Index     5.94%           4.40%   
BofA/Merrill Lynch Preferred Securities Fixed Rate Index     10.51%           8.90%   

Since inception returns are from 6/25/13. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Common Share Price Performance — Weekly Closing Price

 

LOGO

 

  30      NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

Common Stocks     21.8%   
$25 Par (or similar) Retail Preferred     34.0%   
Convertible Preferred Securities     4.5%   
Corporate Bonds     64.4%   
$1,000 Par (or similar) Institutional Preferred     11.7%   
Common Stock Rights     1.6%   
Repurchase Agreements     0.4%   
Other Assets Less Liabilities     0.8%   

Net Assets Plus Borrowings

    139.2%   
Borrowings     (39.2)%   

Net Assets

    100%   

 

Portfolio Composition

(% of total investments)1

 

Banks     11.8%   
Real Estate Investment Trust     10.4%   
Diversified Telecommunication Services     6.6%   
Capital Markets     6.1%   
Wireless Telecommunication Services     4.7%   
Insurance     4.4%   
Food Products     4.3%   
Machinery     4.1%   
Pharmaceuticals     3.9%   
Consumer Finance     3.7%   
Chemicals     3.6%   
Technology Hardware, Storage & Peripherals     3.3%   
Media     3.0%   
Specialty Retail     3.0%   
Semiconductors & Semiconductor Equipment     2.6%   
Commercial Services & Supplies     2.5%   
Industrial Conglomerates     2.4%   
Other     19.3%   
Repurchase Agreements     0.3%   

Total

    100%   

Credit Quality

(% of total long-term fixed-income investments)

 

A     2.5%   
BBB     19.5%   
BB or Lower     47.6%   
N/R (not rated)     30.4%   

Total

    100%   

Top Five Issuers

(% of total long-term investments)1

 

Frontier Communications Corporation     3.5%   
Viacom Inc.     2.3%   
CHS Inc.     2.0%   
L Brands, Inc.     2.0%   
Dish DBS Corporation     2.0%   

Country Allocation

(% of total investments)1

 

United States     87.3%   
United Kingdom     3.5%   
Canada     2.9%   
Belgium     1.4%   
Germany     1.3%   
Other     3.6%   

Total

    100%   
 

 

1 Excluding investments in derivatives.

 

NUVEEN     31   


Shareholder

Meeting Report

 

The annual meeting of shareholders was held in the offices of Nuveen Investments on January 19, 2016 for JTP, JPS and JHP; at this meeting the shareholders were asked to vote to approve an Agreement and Plan of Reorganization, to approve Issuance of Additional Shares and to elect Board Members. The meeting was subsequently adjourned to February 19, 2016 and additionally adjourned to March 22, 2016.

The annual meeting of shareholders was held in the offices of Nuveen Investments on April 22, 2016 for JPC, JPI and JPW; at this meeting the shareholders were asked to elect Board Members.

 

      JPC      JPI      JPW      JPS      JTP      JHP  
      Common
Shares
     Common
Shares
     Common
Shares
     Common
Shares
     Common
Shares
     Common
Shares
 

To approve an Agreement and Plan of Reorganization

                 

For

                                     32,820,534         12,544,496   

Against

                                     2,295,973         762,105   

Abstain

                                     1,298,597         420,622   

BNV

                                     24,588,402         8,511,085   

Total

                                     61,003,506         22,238,308   

To approve the issuance of additional common shares in connection with each Reorganization.

                 

For

                             56,731,586                   

Against

                        4,584,231         

Abstain

                             2,384,090                   

Total

                             63,699,907                   

Approval of the Board Members was reached as follows:

                 

William C. Hunter

                 

For

     80,290,626         19,229,027         3,053,388                           

Withhold

     2,004,098         384,247         135,933                           

Total

     82,294,724         19,613,274         3,189,321                           

Judith M. Stockdale

                 

For

     80,034,232         19,190,176         3,019,380                           

Withhold

     2,260,492         423,098         169,941                           

Total

     82,294,724         19,613,274         3,189,321                           

Carole E. Stone

                 

For

     80,180,617         19,182,751         3,011,588                           

Withhold

     2,114,107         430,523         177,733                           

Total

     82,294,724         19,613,274         3,189,321                           

Margaret L. Wolff

                 

For

     80,205,874         19,197,243         3,019,124                           

Withhold

     2,088,850         416,031         170,197                           

Total

     82,294,724         19,613,274         3,189,321                           

 

  32      NUVEEN


Report of

Independent Registered Public Accounting Firm

 

To the Board of Trustees and Shareholders of

Nuveen Preferred Income Opportunities Fund

Nuveen Preferred and Income Term Fund

Nuveen Preferred Securities Income Fund (formerly known as Nuveen Quality Preferred Income Fund 2)

Nuveen Flexible Investment Income Fund:

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Nuveen Preferred Income Opportunities Fund, Nuveen Preferred and Income Term Fund, Nuveen Preferred Securities Income Fund and Nuveen Flexible Investment Income Fund (the “Funds”) as of July 31, 2016, and the related statements of operations and cash flows for the year then ended and the statements of changes in net assets and the financial highlights for each of the years in the two-year period then ended. The financial highlights for the periods presented through July 31, 2014, were audited by other auditors whose report dated September 25, 2014, expressed an unqualified opinion on those financial highlights. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2016, by correspondence with the custodian and brokers or other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Funds as of July 31, 2016, the results of their operations and their cash flows for the year then ended and the changes in their net assets and the financial highlights for each of the years in the two-year period then ended, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Chicago, Illinois

September 28, 2016

 

NUVEEN     33   


JPC

 

Nuveen Preferred Income Opportunities Fund

  

Portfolio of Investments

   July 31, 2016

 

Shares     Description (1)                           Value  
 

LONG-TERM INVESTMENTS – 139.2% (99.6% of Total Investments)

  

        
 

COMMON STOCKS – 5.1% (3.6% of Total Investments)

          
      Air Freight & Logistics – 0.2%                           
  15,600     

United Parcel Service, Inc., Class B

                             $ 1,686,360   
      Banks – 0.3%                           
  97,900     

CIT Group Inc.

                               3,383,424   
      Biotechnology – 0.3%                           
  39,600     

Gilead Sciences, Inc.

                               3,147,012   
      Capital Markets – 0.5%                           
  119,035     

Ares Capital Corporation

             1,802,190   
  151,368     

Hercules Technology Growth Capital, Inc.

             2,007,140   
  101,032     

TPG Specialty Lending, Inc.

                               1,773,112   
 

Total Capital Markets

                               5,582,442   
      Industrial Conglomerates – 0.8%                           
  136,300     

Philips Electronics

             3,620,128   
  41,200     

Siemens AG, Sponsored ADR, (2)

                               4,471,930   
 

Total Industrial Conglomerates

                               8,092,058   
      Insurance – 0.2%                           
  55,900     

Unum Group

                               1,867,619   
      Media – 0.4%                           
  106,355     

National CineMedia, Inc., (3)

             1,657,011   
  46,435     

Viacom Inc., Class B, (3)

                               2,111,399   
 

Total Media

                               3,768,410   
      Multiline Retail – 0.3%                           
  83,300     

Nordstrom, Inc.

                               3,684,359   
      Pharmaceuticals – 1.0%                           
  138,800     

AstraZeneca PLC, Sponsored ADR

             4,738,632   
  121,200     

GlaxoSmithKline PLC, Sponsored ADR

                               5,462,484   
 

Total Pharmaceuticals

                               10,201,116   
      Real Estate Investment Trust – 0.5%                           
  40,000     

Apartment Investment & Management Company, Class A

             1,838,800   
  106,500     

MGM Growth Properties LLC, Class A

                               2,887,215   
 

Total Real Estate Investment Trust

                               4,726,015   
      Software – 0.2%                           
  42,000     

Oracle Corporation

                               1,723,680   
      Tobacco – 0.4%                           
  187,015     

Vector Group Ltd., (3)

                               4,131,161   
 

Total Common Stocks (cost $50,527,720)

                               51,993,656   

 

  34      NUVEEN


Shares     Description (1)   Coupon              Ratings (4)      Value  
 

$25 PAR (OR SIMILAR) RETAIL PREFERRED – 60.8% (43.5% of Total Investments)

  

  
      Banks – 14.2%                           
  128,500     

AgriBank FCB, (2)

    6.875%            BBB+      $ 13,873,990   
  15,202     

Boston Private Financial Holdings Inc.

    6.950%            N/R        403,614   
  148,007     

Citigroup Inc.

    8.125%            BB+        4,221,160   
  445,498     

Citigroup Inc.

    7.125%            BB+        13,400,580   
  53,769     

Citigroup Inc.

    6.875%            BB+        1,600,703   
  172,975     

Cobank Agricultural Credit Bank, (2)

    6.250%            BBB+        17,902,913   
  63,055     

Cobank Agricultural Credit Bank, (2)

    6.200%            BBB+        6,433,584   
  38,725     

Cobank Agricultural Credit Bank, (2)

    6.125%            BBB+        3,755,117   
  219,725     

Countrywide Capital Trust III

    7.000%            BBB–        5,594,199   
  128,220     

Cowen Group, Inc.

    8.250%            N/R        3,385,008   
  152,903     

Fifth Third Bancorp.

    6.625%            Baa3        4,741,522   
  117,760     

First Naigara Finance Group

    8.625%            Baa3        3,048,806   
  123,900     

FNB Corporation

    7.250%            Ba2        4,029,228   
  138,932     

HSBC Holdings PLC

    8.000%            Baa1        3,727,546   
  414,200     

Huntington BancShares Inc.

    6.250%            Baa3        11,477,482   
  46,421     

PNC Financial Services

    6.125%            Baa2        1,407,485   
  260,212     

Private Bancorp Incorporated

    7.125%            N/R        6,825,361   
  79,430     

Regions Financial Corporation

    6.375%            BB        2,138,256   
  449,744     

Regions Financial Corporation

    6.375%            BB        13,015,591   
  133,300     

TCF Financial Corporation

    7.500%            BB–        3,547,113   
  132,000     

U.S. Bancorp.

    6.500%            A3        4,048,440   
  216,373     

Webster Financial Corporation

    6.400%            Baa3        5,729,557   
  107,000     

Wells Fargo REIT

    6.375%            BBB+        2,975,670   
  66,775     

Western Alliance Bancorp.

    6.250%            N/R        1,708,772   
  187,983     

Zions Bancorporation

    7.900%            BB–        5,073,661   
  43,293     

Zions Bancorporation

    6.300%                  BB–        1,324,333   
 

Total Banks

                               145,389,691   
      Capital Markets – 8.1%                           
  130,200     

Apollo Investment Corporation

    6.875%            BBB–        3,503,682   
  112,775     

Apollo Investment Corporation

    6.625%            BBB–        2,943,428   
  187,440     

Capitala Finance Corporation

    7.125%            N/R        4,777,846   
  133,500     

Charles Schwab Corporation

    6.000%            BBB        3,723,315   
  74,047     

Charles Schwab Corporation

    5.950%            BBB        2,035,552   
  120,805     

Fifth Street Finance Corporation

    6.125%            BBB–        3,087,776   
  17,350     

Gladstone Capital Corporation

    6.750%            N/R        440,517   
  43,089     

Gladstone Investment Corporation

    7.125%            N/R        1,114,712   
  89,100     

Goldman Sachs Group, Inc.

    5.500%            Ba1        2,411,937   
  65,013     

Hercules Technology Growth Capital Incorporated

    7.000%            BBB–        1,655,881   
  56,207     

Hercules Technology Growth Capital Incorporated

    7.000%            BBB–        1,428,220   
  163,458     

Hercules Technology Growth Capital Incorporated

    6.250%            BBB–        4,246,639   
  284,951     

Ladenburg Thalmann Financial Services Inc.

    8.000%            N/R        7,009,795   
  726,900     

Morgan Stanley

    7.125%            Ba1        21,923,304   
  219,900     

Morgan Stanley

    6.875%            Ba1        6,487,050   
  67,500     

Northern Trust Corporation

    5.850%            BBB+        1,865,700   
  261,622     

Solar Capital Limited

    6.750%            BBB–        6,619,037   
  51,445     

State Street Corporation

    5.350%            Baa1        1,423,483   
  74,800     

Stifel Financial Corporation

    6.250%            BB–        1,970,232   
  139,645     

Triangle Capital Corporation

    6.375%                  N/R        3,595,859   
 

Total Capital Markets

                               82,263,965   
      Consumer Finance – 2.2%                           
  272,000     

Discover Financial Services

    6.500%            BB–        7,251,520   
  409,024     

GMAC Capital Trust I

    8.125%            B+        10,397,390   
  90,659     

SLM Corporation, Series A

    6.970%                  Ba3        4,532,950   
 

Total Consumer Finance

                               22,181,860   
      Diversified Financial Services – 1.6%                           
  30,291     

KKR Financial Holdings LLC

    7.500%            A–        799,682   
  322,399     

KKR Financial Holdings LLC

    7.375%            BBB        8,482,318   

 

NUVEEN     35   


JPC    Nuveen Preferred Income Opportunities Fund
   Portfolio of Investments (continued)    July 31, 2016

 

Shares     Description (1)   Coupon              Ratings (4)      Value  
      Diversified Financial Services (continued)                           
  141,562     

Main Street Capital Corporation

    6.125%            N/R      $ 3,683,443   
  125,300     

PennantPark Investment Corporation

    6.250%                  BBB–        3,152,548   
 

Total Diversified Financial Services

                               16,117,991   
      Diversified Telecommunication Services – 1.1%                           
  135,165     

Qwest Corporation

    7.000%            BBB–        3,531,861   
  178,815     

Qwest Corporation

    6.875%            BBB–        4,777,937   
  70,600     

Qwest Corporation

    6.625%            BBB–        1,844,778   
  53,900     

Verizon Communications Inc.

    5.900%                  A–        1,499,498   
 

Total Diversified Telecommunication Services

                               11,654,074   
      Electric Utilities – 0.3%                           
  136,900     

Entergy Arkansas Inc., (2)

    6.450%                  Baa3        3,439,613   
      Food Products – 3.7%                           
  249,300     

CHS Inc.

    7.875%            N/R        7,586,199   
  428,392     

CHS Inc.

    7.100%            N/R        12,988,845   
  444,804     

CHS Inc., (5)

    6.750%            N/R        13,010,517   
  23,000     

Dairy Farmers of America Inc., 144A, (2)

    7.875%            Baa3        2,438,000   
  19,500     

Dairy Farmers of America Inc., 144A, (2)

    7.875%                  Baa3        2,028,610   
 

Total Food Products

                               38,052,171   
      Insurance – 12.8%                           
  45,878     

Aegon N.V

    8.000%            Baa1        1,249,258   
  392,846     

Arch Capital Group Limited

    6.750%            BBB+        10,822,907   
  302,283     

Argo Group US Inc.

    6.500%            BBB–        7,974,226   
  126,452     

Aspen Insurance Holdings Limited

    7.250%            BBB–        3,349,713   
  408,600     

Aspen Insurance Holdings Limited

    5.950%            BBB–        11,824,884   
  403,874     

Axis Capital Holdings Limited

    6.875%            BBB        10,654,196   
  56,900     

Delphi Financial Group, Inc., (2)

    7.376%            BB+        1,226,906   
  235,211     

Endurance Specialty Holdings Limited

    6.350%            BBB–        6,611,781   
  38,500     

Hanover Insurance Group

    6.350%            BB+        1,000,230   
  138,124     

Hartford Financial Services Group Inc.

    7.875%            BBB–        4,332,950   
  561,100     

Kemper Corporation

    7.375%            Ba1        15,654,690   
  298,139     

Maiden Holdings Limited

    8.250%            BB        7,957,330   
  67,000     

Maiden Holdings Limited

    6.625%            BBB–        1,738,650   
  233,932     

Maiden Holdings NA Limited

    8.000%            BBB–        6,105,625   
  265,933     

Maiden Holdings NA Limited

    7.750%            BBB–        7,222,740   
  100,195     

National General Holding Company

    7.625%            N/R        2,605,070   
  76,400     

National General Holding Company

    7.500%            N/R        1,971,120   
  153,954     

National General Holding Company

    7.500%            N/R        3,998,185   
  310,872     

Reinsurance Group of America Inc.

    6.200%            BBB        9,525,118   
  361,700     

Reinsurance Group of America, Inc.

    5.750%            BBB        9,682,709   
  204,400     

Torchmark Corporation

    6.125%                  BBB+        5,441,128   
 

Total Insurance

                               130,949,416   
      Oil, Gas & Consumable Fuels – 0.8%                           
  206,105     

Nustar Logistics Limited Partnership

    7.625%            Ba2        5,245,372   
  40,113     

Scorpio Tankers Inc.

    7.500%            N/R        1,032,910   
  76,005     

Scorpio Tankers Inc.

    6.750%                  N/R        1,876,563   
 

Total Oil, Gas & Consumable Fuels

                               8,154,845   
      Real Estate Investment Trust – 10.0%                           
  112,344     

AG Mortgage Investment Trust

    8.000%            N/R        2,795,119   
  57,165     

Apartment Investment & Management Company

    6.875%            BB        1,529,164   
  74,350     

Apollo Commercial Real Estate Finance

    8.625%            N/R        1,918,230   
  141,555     

Arbor Realty Trust Incorporated

    7.375%            N/R        3,619,561   
  133,192     

Ashford Hospitality Trust Inc.

    9.000%            N/R        3,357,770   
  37,399     

Ashford Hospitality Trust Inc.

    8.450%            N/R        954,796   
  64,615     

Capstead Mortgage Corporation

    7.500%            N/R        1,640,575   
  186,579     

Cedar Shopping Centers Inc., Series A

    7.250%            N/R        4,908,893   

 

  36      NUVEEN


Shares     Description (1)   Coupon              Ratings (4)      Value  
      Real Estate Investment Trust (continued)                           
  208,314     

Chesapeake Lodging Trust

    7.750%            N/R      $ 5,501,573   
  79,861     

Colony Financial Inc.

    7.500%            N/R        2,030,865   
  97,520     

Colony Financial Inc.

    7.125%            N/R        2,408,744   
  23,967     

Colony Financial Inc.

    8.500%            N/R        625,059   
  50,200     

Coresite Realty Corporation

    7.250%            N/R        1,327,790   
  270,925     

DDR Corporation

    6.500%            Baa3        6,992,574   
  182,479     

Digital Realty Trust Inc.

    7.375%            Baa3        5,218,899   
  59,270     

Digital Realty Trust Inc.

    7.000%            Baa3        1,509,607   
  258,495     

Dupont Fabros Technology

    6.625%            Ba2        7,268,879   
  70,136     

Hospitality Properties Trust

    7.125%            Baa3         1,848,785   
  49,519     

Invesco Mortgage Capital Inc.

    7.750%            N/R        1,261,249   
  133,675     

LaSalle Hotel Properties

    6.300%            N/R        3,607,888   
  111,053     

MFA Financial Inc.

    8.000%            N/R        2,846,288   
  182,859     

Northstar Realty Finance Corporation

    8.875%            N/R        4,706,791   
  51,926     

Northstar Realty Finance Corporation

    8.750%            N/R        1,319,959   
  121,633     

Northstar Realty Finance Corporation

    8.250%            N/R        3,066,368   
  72,400     

Penn Real Estate Investment Trust

    7.375%            N/R        1,911,360   
  200,000     

Penn Real Estate Investment Trust

    8.250%            N/R        5,264,000   
  135,971     

Regency Centers Corporation

    6.625%            Baa2        3,524,368   
  123,310     

Senior Housing Properties Trust, (5)

    5.625%            BBB–        3,164,135   
  57,203     

STAG Industrial Inc.

    9.000%            BB+        1,470,117   
  7,474     

Summit Hotel Properties Inc.

    7.875%            N/R        199,855   
  133,525     

Sunstone Hotel Investors Inc.

    6.950%            N/R        3,638,556   
  149,300     

Urstadt Biddle Properties

    7.125%            N/R        3,965,408   
  259,195     

VEREIT, Inc.

    6.700%                  N/R        7,003,449   
 

Total Real Estate Investment Trust

                               102,406,674   
      Real Estate Management & Development – 0.3%                           
  110,000     

Kennedy-Wilson Inc.

    7.750%                  BB–        2,888,600   
      Specialty Retail – 0.8%                           
  256,074     

TravelCenters of America LLC

    8.000%            N/R        6,552,934   
  55,650     

TravelCenters of America LLC

    8.000%                  N/R        1,419,075   
 

Total Specialty Retail

                               7,972,009   
      Thrifts & Mortgage Finance – 1.0%                           
  52,102     

Everbank Financial Corporation

    6.750%            N/R        1,354,652   
  160,700     

Federal Agricultural Mortgage Corporation

    6.875%            N/R        4,462,639   
  143,400     

Federal Agricultural Mortgage Corporation

    6.000%                  N/R        4,213,092   
 

Total Thrifts & Mortgage Finance

                               10,030,383   
      U.S. Agency – 2.8%                           
  260,300     

Farm Credit Bank of Texas, (2)

    6.750%                  Baa1        28,112,400   
      Wireless Telecommunication Services – 1.1%                           
  391,199     

United States Cellular Corporation

    7.250%                  Ba1        10,695,381   
 

Total $25 Par (or similar) Preferred Securities (cost $571,233,818)

                               620,309,073   
Shares     Description (1)   Coupon      Maturity      Ratings (4)      Value  
 

CONVERTIBLE PREFERRED SECURITIES – 1.6% (1.1% of Total Investments)

  

  
      Banks – 1.0%                           
  7,225     

Wells Fargo & Company

    7.500%         N/A (6)         BBB      $ 9,618,353   
      Diversified Telecommunication Services – 0.3%                           
  34,400     

Frontier Communications Corporation

    11.125%         6/29/18         N/R        3,401,472   
      Pharmaceuticals – 0.3%                           
  3,725     

Teva Pharmaceutical Industries Limited, (2)

    7.000%         12/15/18         N/R        3,298,488   
 

Total Convertible Preferred Securities (cost $14,990,802)

                               16,318,313   

 

NUVEEN     37   


JPC    Nuveen Preferred Income Opportunities Fund
   Portfolio of Investments (continued)    July 31, 2016

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (4)      Value  
 

CORPORATE BONDS – 12.4% (8.9% of Total Investments)

  

        
      Banks – 4.5%                           
$ 6,000     

Bank of America Corporation

    6.250%         N/A (6)         BB+      $ 6,285,000   
  4,160     

Bank of America Corporation

    6.300%         N/A (6)         BB+        4,533,098   
  8,570     

Citigroup Inc.

    5.950%         N/A (6)         BB+        8,824,529   
  7,985     

Citigroup Inc.

    5.875%         N/A (6)         BB+        8,039,857   
  5,055     

ING Groep N.V, (7)

    6.500%         N/A (6)         BBB–        4,833,844   
  9,430     

JPMorgan Chase & Company

    5.300%         N/A (6)         BBB–        9,708,185   
  3,550     

Standard Chartered PLC, 144A, (7)

    6.500%         N/A (6)         BBB–        3,379,600   
  44,750     

Total Banks

                               45,604,113   
      Beverages – 0.1%                           
  1,100     

Cott Beverages Inc., (3)

    6.750%         1/01/20         B–        1,153,625   
      Biotechnology – 0.3%                           
  3,500     

AMAG Pharmaceuticals Inc., 144A

    7.875%         9/01/23         B+        3,389,750   
      Capital Markets – 1.3%                           
  2,050     

BGC Partners Inc.

    5.375%         12/09/19         BBB–        2,163,648   
  11,100     

Goldman Sachs Group Inc.

    5.375%         N/A (6)         Ba1        11,269,885   
  13,150     

Total Capital Markets

                               13,433,533   
      Chemicals – 0.2%                           
  1,625     

CVR Partners LP / CVR Nitrogen Finance Corp., 144A

    9.250%         6/15/23         B+        1,661,563   
      Commercial Services & Supplies – 0.5%                           
  1,520     

GFL Environmental Corporation, 144A

    7.875%         4/01/20         B        1,569,400   
  1,775     

GFL Environmental Corporation, 144A

    9.875%         2/01/21         B        1,925,875   
  1,580     

R.R. Donnelley & Sons Company, (3)

    6.500%         11/15/23         BB–        1,556,300   
  4,875     

Total Commercial Services & Supplies

                               5,051,575   
      Diversified Financial Services – 0.3%                           
  3,170     

BNP Paribas, 144A, (7)

    7.625%         N/A (6)         BBB–        3,293,630   
      Diversified Telecommunication Services – 0.7%                           
  6,900     

Frontier Communications Corporation, (3)

    11.000%         9/15/25         BB        7,374,375   
      Food Products – 0.1%                           
  1,310     

Land O Lakes Capital Trust I, 144A, (3)

    7.450%         3/15/28         BB+        1,408,250   
      Health Care Providers & Services – 0.1%                           
  1,565     

Kindred Healthcare Inc., (3)

    6.375%         4/15/22         B–        1,443,713   
      Insurance – 0.3%                           
  2,430     

Security Benefit Life Insurance Company, 144A

    7.450%         10/01/33         BBB        2,894,412   
      Machinery – 0.6%                           
  3,200     

Dana Financing Luxembourg Sarl, 144A

    6.500%         6/01/26         BB+        3,280,000   
  2,703     

Meritor Inc.

    6.750%         6/15/21         B+        2,594,880   
  5,903     

Total Machinery

                               5,874,880   
      Media – 0.7%                           
  5,350     

Dish DBS Corporation, 144A

    7.750%         7/01/26         Ba3        5,547,281   
  1,470     

Dish DBS Corporation

    5.875%         11/15/24         Ba3        1,418,550   
  6,820     

Total Media

                               6,965,831   
      Real Estate Investment Trust – 0.4%                           
  3,525     

Communications Sales & Leasing Inc.

    8.250%         10/15/23         BB–        3,599,905   

 

  38      NUVEEN


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (4)      Value  
      Real Estate Management & Development – 0.3%                           
$ 3,200     

Greystar Real Estate Partners, LLC, 144A

    8.250%         12/01/22         BB–      $ 3,398,016   
      Specialty Retail – 0.7%                           
  6,450     

L Brands, Inc.

    6.875%         11/01/35         BB+        6,840,225   
      Technology Hardware, Storage & Peripherals – 0.5%         
  4,100     

Western Digital Corporation, 144A

    10.500%         4/01/24         BB+        4,622,750   
      Wireless Telecommunication Services – 0.8%                           
  1,925     

Altice Financing SA, 144A

    7.500%         5/15/26         BB–        1,944,250   
  5,875     

Viacom Inc.

    6.875%         4/30/36         BBB+        6,748,213   
  7,800     

Total Wireless Telecommunication Services

                               8,692,463   
$ 122,173     

Total Corporate Bonds (cost $122,674,607)

                               126,702,609   
Principal
Amount (000)/
Shares
    Description (1)   Coupon      Maturity      Ratings (4)      Value  
 

$1,000 PAR (OR SIMILAR) INSTITUTIONAL PREFERRED – 59.3% (42.5% of Total Investments)

  

  
      Banks – 23.4%                           
$ 2,320     

Australia and New Zealand Banking Group Limited of the United Kingdom, 144A, (7)

    6.750%         N/A (6)         Baa1      $ 2,522,357   
  2,000     

Banco Bilbao Vizcaya Argentaria S.A, Reg S, (7)

    9.000%         N/A (6)         BB        2,065,000   
  600     

Banco Santander SA, Reg S, (7)

    6.375%         N/A (6)         Ba1        548,090   
  1,476     

Bank of America Corporation

    8.000%         N/A (6)         BB+        1,499,808   
  19,390     

Bank of America Corporation, (5)

    6.500%         N/A (6)         BB+        21,171,455   
  3,575     

Barclays Bank PLC, 144A, (3)

    10.180%         6/12/21         A–        4,569,561   
  15,935     

Barclays PLC, (7)

    8.250%         N/A (6)         BB+        16,213,863   
  2,925     

Citigroup Inc., (5)

    5.800%         N/A (6)         BB+        2,925,000   
  4,005     

Citigroup Inc.

    6.250%         N/A (6)         BB+        4,315,388   
  7,805     

Citigroup Inc.

    6.125%         N/A (6)         BB+        8,115,483   
  7,214     

Citizens Financial Group Inc.

    5.500%         N/A (6)         BB+        7,105,790   
  7,790     

Cobank Agricultural Credit Bank

    6.250%         N/A (6)         BBB+        8,431,499   
  3,960     

Commerzbank AG, 144A, (3)

    8.125%         9/19/23         BBB        4,607,183   
  2,465     

Credit Agricole SA, 144A, (7)

    8.125%         N/A (6)         Ba1        2,594,413   
  3,950     

Credit Agricole, S.A, 144A, (7)

    6.625%         N/A (6)         Ba1        3,764,350   
  1,000     

HSBC Bank PLC

    1.188%         N/A (6)         A3        571,250   
  500     

HSBC Bank PLC

    0.975%         N/A (6)         A3        293,500   
  4,204     

HSBC Capital Funding LP, Debt, 144A

    10.176%         N/A (6)         Baa1        6,179,880   
  3,615     

HSBC Holdings PLC, (7)

    6.875%         N/A (6)         BBB        3,723,450   
  10,175     

Intesa Sanpaolo SpA, 144A, (7)

    7.700%         N/A (6)         Ba3        9,233,813   
  4,700     

JPMorgan Chase & Company

    7.900%         N/A (6)         BBB–        4,888,000   
  19,230     

JPMorgan Chase & Company

    6.750%         N/A (6)         BBB–        21,655,864   
  125     

JPMorgan Chase & Company

    6.100%         N/A (6)         BBB–        132,969   
  20,390     

Lloyd’s Banking Group PLC, (7)

    7.500%         N/A (6)         BB+        20,339,024   
  1,960     

M&T Bank Corporation

    6.450%         N/A (6)         Baa2        2,180,500   
  4,000     

Nordea Bank AB, 144A, (7)

    6.125%         N/A (6)         BBB        3,960,000   
  10,695     

PNC Financial Services Inc.

    6.750%         N/A (6)         Baa2        12,018,506   
  4,883     

Royal Bank of Scotland Group PLC

    7.648%         N/A (6)         BB        5,725,318   
  3,325     

Royal Bank of Scotland Group PLC, (7)

    7.500%         N/A (6)         BB–        3,233,563   
  13,906     

Societe Generale, 144A, (7)

    7.875%         N/A (6)         BB+        13,210,700   
  4,995     

SunTrust Bank Inc.

    5.625%         N/A (6)         Baa3        5,157,338   
  250     

U.S. Bancorp.

    5.125%         N/A (6)         A3        262,815   
  3,750     

Wachovia Capital Trust III

    5.570%         N/A (6)         BBB        3,750,000   
  8,641     

Wells Fargo & Company, (5)

    7.980%         N/A (6)         BBB        9,190,136   
  17,350     

Wells Fargo & Company

    5.875%         N/A (6)         BBB        19,106,687   
  3,450     

Zions Bancorporation

    7.200%         N/A (6)         BB–        3,639,750   
 

Total Banks

                               238,902,303   

 

NUVEEN     39   


JPC    Nuveen Preferred Income Opportunities Fund
   Portfolio of Investments (continued)    July 31, 2016

 

Principal
Amount (000)/
Shares
    Description (1)   Coupon      Maturity      Ratings (4)      Value  
      Capital Markets – 3.5%                           
$ 3,270     

Bank of New York Mellon Corporation

    4.950%         N/A (6)         Baa1      $ 3,335,400   
  8,920     

Credit Suisse Group AG, 144A, (7)

    7.500%         N/A (6)         BB        9,232,200   
  3,790     

Goldman Sachs Group Inc.

    5.300%         N/A (6)         Ba1        3,851,588   
  5,880     

Morgan Stanley

    5.550%         N/A (6)         Ba1        5,953,500   
  1,975     

State Street Corporation

    5.250%         N/A (6)         Baa1        2,073,750   
  7,055     

UBS Group AG, Reg S, (7)

    7.125%         N/A (6)         BB+        7,235,961   
  3,675     

UBS Group AG, Reg S, (7)

    7.000%         N/A (6)         BB+        3,922,599   
 

Total Capital Markets

                               35,604,998   
      Consumer Finance – 2.0%                           
  5,271     

American Express Company

    5.200%         N/A (6)         Baa2        5,178,758   
  1,900     

American Express Company

    4.900%         N/A (6)         Baa2        1,833,500   
  13,730     

Capital One Financial Corporation

    5.550%         N/A (6)         Baa3        13,925,653   
 

Total Consumer Finance

                               20,937,911   
      Diversified Financial Services – 4.2%                           
  14,800     

Agstar Financial Services Inc., 144A

    6.750%         N/A (6)         BB        15,701,874   
  4,065     

BNP Paribas, 144A, (7)

    7.375%         N/A (6)         BBB–        4,146,300   
  5,670     

BNP Paribas, 144A

    7.195%         N/A (6)         BBB        6,278,816   
  2,300     

Depository Trust & Clearing Corporation, 144A

    4.875%         N/A (6)         A+        2,328,750   
  10,243     

Rabobank Nederland, 144A

    11.000%         N/A (6)         Baa2        12,522,067   
  1,530     

Voya Financial Inc., (3)

    5.650%         5/15/53         Baa3        1,476,450   
 

Total Diversified Financial Services

                               42,454,257   
      Electric Utilities – 1.7%                           
  16,265     

Emera, Inc., (3)

    6.750%         6/15/76         BBB–        17,529,604   
      Food Products – 3.1%                           
  23,545     

Land O’ Lakes Incorporated, 144A

    8.000%         N/A (6)         BB        24,781,113   
  6,750     

Land O’Lakes Inc., 144A

    8.000%         N/A (6)         BB        7,104,375   
 

Total Food Products

                               31,885,488   
      Industrial Conglomerates – 4.1%                           
  39,281     

General Electric Company, (5)

    5.000%         N/A (6)         AA–        42,251,626   
      Insurance – 14.5%                           
  7,365     

Aviva PLC, Reg S

    8.250%         N/A (6)         BBB        7,947,792   
  1,205     

AXA SA, (3)

    8.600%         12/15/30         A3        1,694,013   
  2,460     

Cloverie PLC Zurich Insurance, Reg S

    8.250%         N/A (6)         A        2,659,924   
  2,300     

CNP Assurances, Reg S

    7.500%         N/A (6)         BBB+        2,480,320   
  29,045     

Financial Security Assurance Holdings, 144A, (3)

    6.400%         12/15/66         BBB+        20,767,174   
  1,755     

Friends Life Group PLC, Reg S

    7.875%         N/A (6)         A–        1,908,375   
  2,108     

La Mondiale SAM, Reg S

    7.625%         N/A (6)         BBB        2,261,252   
  6,590     

Liberty Mutual Group, 144A, (3)

    7.800%         3/15/37         Baa3        7,331,375   
  9,335     

MetLife Capital Trust IV, 144A, (3)

    7.875%         12/15/37         BBB        11,570,733   
  4,160     

MetLife Capital Trust X, 144A, (3)

    9.250%         4/08/38         BBB        5,943,600   
  3,425     

MetLife Inc.

    5.250%         N/A (6)         BBB        3,427,740   
  1,150     

Nationwide Financial Services Capital Trust, (3)

    7.899%         3/01/37         Baa2        1,378,994   
  9,550     

Nationwide Financial Services Inc., (3)

    6.750%         5/15/37         Baa2        9,884,250   
  6,855     

Provident Financing Trust I, (3)

    7.405%         3/15/38         Baa3        7,705,226   
  3,315     

Prudential Financial Inc., (3)

    5.875%         9/15/42         BBB+        3,673,849   
  13,335     

QBE Cap Funding III Limited, 144A, (3)

    7.250%         5/24/41         BBB        14,868,524   
  2,340     

QBE Insurance Group Limited, Reg S

    6.750%         12/02/44         BBB        2,571,075   
  18,955     

Sirius International Group Limited, 144A

    7.506%         N/A (6)         BB+        19,026,081   
  20,553     

Symetra Financial Corporation, 144A, (3)

    8.300%         10/15/37         Baa2        20,835,604   
 

Total Insurance

                               147,935,901   
      Machinery – 0.2%                           
  2,215     

Stanley Black & Decker Inc., (3)

    5.750%         12/15/53         BBB+        2,354,102   

 

  40      NUVEEN


Principal
Amount (000)/
Shares
    Description (1)   Coupon      Maturity      Ratings (4)      Value  
      Metals & Mining – 0.6%                           
$ 5,825     

BHP Billiton Finance USA Limited, 144A

    6.250%         10/19/75         A–      $ 6,305,563   
      Real Estate Investment Trust – 1.5%                           
  12     

Sovereign Real Estate Investment Trust, 144A

    12.000%         N/A (6)         Ba1        14,865,350   
      Specialty Retail – 0.3%                           
  2,650     

Aquarius & Investments PLC fbo SwissRe, Reg S

    8.250%         N/A (6)         N/R        2,864,101   
      U.S. Agency – 0.2%                           
  1,700     

Farm Credit Bank of Texas

    10.000%         N/A (6)         Baa1        2,040,000   
 

Total $1,000 Par (or similar) Institutional Preferred (cost $578,614,273)

  

                       605,931,204   
 

Total Long-Term Investments (cost $1,338,041,220)

                               1,421,254,855   
Principal
Amount (000)
    Description (1)   Coupon      Maturity              Value  
      SHORT–TERM INVESTMENTS – 0.6% (0.4% of Total Investments)                
      REPURCHASE AGREEMENTS – 0.6% (0.4% of Total Investments)                
$ 6,077     

Repurchase Agreement with Fixed Income Clearing Corporation dated 7/29/16, repurchase price $6,077,133, collateralized by $4,635,000 U.S. Treasury Bonds,
3.750%, due 11/15/43, value $6,205,106

    0.030%         8/01/16                $ 6,077,118   
 

Total Short-Term Investments (cost $6,077,118)

                               6,077,118   
 

Total Investments (cost $1,344,118,338) – 139.8%

                               1,427,331,973   
 

Borrowings – (39.6)% (8), (9)

                               (404,100,000
 

Other Assets Less Liabilities – (0.2)% (10)

                               (2,515,296
 

Net Assets Applicable to Common Shares – 100%

                             $ 1,020,716,677   

Investments in Derivatives as of July 31, 2016

Call Options Written

 

Number of
Contracts
       Description      Notional
Amount (11)
       Expiration
Date
       Strike
Price
       Value  
  (488     

CIT Group Inc.

     $ (1,805,600        10/21/16         $ 37         $ (37,576
  (413     

Nordstrom, Inc.

       (1,858,500        10/21/16           45           (90,034
  (559     

Unum Group

       (2,012,400        9/16/16           36           (20,963
  (1,460     

Total Call Options Written (premium received $156,444)

     $ (5,676,500                            $ (148,573

Interest Rate Swaps

 

Counterparty   Notional
Amount
    Fund
Pay/
Receive
Floating
Rate
    Floating
Rate
Index
    Fixed Rate
(Annu
alized)
    Fixed
Rate
Payment
Frequency
    Effective
Date (12)
    Optional
Termination
Date
    Termi
nation
Date
    Value     Unrealized
Appreciation
(Depreciation)
 

JPMorgan
Chase Bank, N.A.

  $ 114,296,000        Receive        1-Month
USD-
LIBOR-ICE
       1.462     Monthly        1/03/17        12/01/18        12/01/20      $ (3,127,182   $ (4,181,580

JPMorgan
Chase Bank, N.A.

    114,296,000        Receive        1-Month USD-
LIBOR-ICE
       1.842        Monthly        1/03/17        12/01/20        12/01/22        (6,428,051     (7,956,198
    $ 228,592,000                                                              $ (9,555,233   $ (12,137,778

 

NUVEEN     41   


JPC    Nuveen Preferred Income Opportunities Fund
   Portfolio of Investments (continued)    July 31, 2016

 

 

For Fund portfolio compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.

 

(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares unless otherwise noted.

 

(2) For fair value measurement disclosure purposes, investment classified as Level 2. See Notes to Financial Statements, Note 2 – Investment Valuation and Fair Value Measurements for more information.

 

(3) Investment, or a portion of investment, is hypothecated as described in the Notes to Financial Statements, Note 8 – Borrowing Arrangements, Rehypothecation. The total value of investments hypothecated as of the end of the reporting period was $144,435,630.

 

(4) For financial reporting purposes, the ratings disclosed are the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies. Ratings are not covered by the report of independent registered public accounting firm.

 

(5) Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.

 

(6) Perpetual security. Maturity date is not applicable.

 

(7) Contingent Capital Securities (“CoCos”) are debt or preferred securities with loss absorption characteristics built into the terms of the security for the benefit of the issuer, for example an automatic write-down of principal or a mandatory conversion into the issuer’s common stock under certain adverse circumstances, such as the issuer’s capital ratio falling below a specified level. As of the end of the reporting period, the Fund’s total investment in CoCos was $117,452,757, representing 11.5% and 8.2% of Net Assets Applicable to Common Shares and Total Investments, respectively.

 

(8) The Fund may pledge up to 100% of its eligible investments (excluding any investments separately pledged as collateral for specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for borrowings. As of the end of the reporting period, investments with a value of $922,688,853 have been pledged as collateral for borrowings.

 

(9) Borrowings as a percentage of Total Investments is 28.3%.

 

(10) Other assets less liabilities includes the unrealized appreciation (depreciation) of certain over-the-counter (“OTC”) derivatives as presented on the Statement of Assets and Liabilities, when applicable. The unrealized appreciation (depreciation) of OTC-cleared and exchange-traded derivatives is recognized as part of the cash collateral at brokers and/or the receivable or payable for variation margin as presented on the Statement of Assets and Liabilities, when applicable. Other assets less liabilities also includes the value of options as presented on the Statement of Assets and Liabilities.

 

(11) For disclosure purposes, Notional Amount is calculated by multiplying the Number of Contracts by the Strike Price by 100.

 

(12) Effective date represents the date on which both the Fund and counterparty commence interest payment accruals on each contract.

 

144A Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers.

 

Reg S Regulation S allows U.S. companies to sell securities to persons or entities located outside of the United States without registering those securities with the Securities and Exchange Commission. Specifically, Regulation S provides a safe harbor from the registration requirements of the Securities Act for the offers and sales of securities by both foreign and domestic issuers that are made outside the United States.

 

ADR American Depositary Receipt

 

REIT Real Estate Investment Trust

 

USD-LIBOR-ICE United States Dollar – London Inter-Bank Offered Rate – Intercontinental Exchange

 

See accompanying notes to financial statements.

 

  42      NUVEEN


JPI

 

Nuveen Preferred and Income Term Fund

  

Portfolio of Investments

   July 31, 2016

 

Shares     Description (1)   Coupon              Ratings (2)      Value  
 

LONG-TERM INVESTMENTS – 139.6% (100.0% of Total Investments)

  

 

$25 PAR (OR SIMILAR) RETAIL PREFERRED – 44.7% (32.0% of Total Investments)

  

      Banks – 14.1%  
  143,400     

AgriBank FCB, (3)

    6.875%            BBB+      $ 15,482,726   
  355,166     

Citigroup Inc.

    7.125%            BB+        10,683,393   
  44,969     

Citigroup Inc.

    6.875%            BB+        1,338,727   
  163,800     

Cobank Agricultural Credit Bank, (3)

    6.250%            BBB+        16,953,300   
  40,797     

Cobank Agricultural Credit Bank, (3)

    6.200%            BBB+        4,162,571   
  15,100     

Countrywide Capital Trust III

    7.000%            BBB–        384,446   
  117,900     

Fifth Third Bancorp.

    6.625%            Baa3        3,656,079   
  157,500     

Huntington BancShares Inc.

    6.250%            Baa3        4,364,325   
  38,600     

PNC Financial Services

    6.125%            Baa2        1,170,352   
  124,753     

Private Bancorp Incorporated

    7.125%            N/R        3,272,271   
  87,100     

Regions Financial Corporation

    6.375%            BB        2,344,732   
  331,800     

Regions Financial Corporation

    6.375%            BB        9,602,292   
  19,600     

U.S. Bancorp.

    6.500%            A3        601,132   
  114,600     

Wells Fargo REIT

    6.375%            BBB+        3,187,026   
  46,410     

Zions Bancorporation

    6.300%                  BB–        1,419,682   
 

Total Banks

                               78,623,054   
      Capital Markets – 4.8%  
  94,900     

Goldman Sachs Group, Inc.

    5.500%            Ba1        2,568,943   
  461,300     

Morgan Stanley

    7.125%            Ba1        13,912,807   
  235,300     

Morgan Stanley

    6.875%            Ba1        6,941,350   
  71,300     

Northern Trust Corporation

    5.850%            BBB+        1,970,732   
  54,750     

State Street Corporation

    5.350%                  Baa1        1,514,933   
 

Total Capital Markets

                               26,908,765   
      Consumer Finance – 1.4%  
  149,800     

Discover Financial Services

    6.500%            BB–        3,993,668   
  156,285     

GMAC Capital Trust I

    8.125%                  B+        3,972,765   
 

Total Consumer Finance

                               7,966,433   
      Diversified Financial Services – 0.3%  
  71,600     

KKR Financial Holdings LLC

    7.375%                  BBB        1,883,796   
      Electric Utilities – 0.4%                           
  81,000     

Entergy Arkansas Inc., (3)

    6.450%                  Baa3        2,035,125   
      Food Products – 3.9%                           
  267,600     

CHS Inc.

    7.875%            N/R        8,143,068   
  161,100     

CHS Inc.

    7.100%            N/R        4,884,552   
  141,800     

CHS Inc.

    6.750%            N/R        4,147,650   
  24,000     

Dairy Farmers of America Inc., 144A, (3)

    7.875%            Baa3        2,544,000   
  20,500     

Dairy Farmers of America Inc., 144A, (3)

    7.875%                  Baa3        2,132,642   
 

Total Food Products

                               21,851,912   
      Insurance – 12.3%  
  14,421     

Aegon N.V

    8.000%            Baa1        392,684   
  168,500     

Arch Capital Group Limited

    6.750%            BBB+        4,642,175   
  59,200     

Aspen Insurance Holdings Limited

    7.250%            BBB–        1,568,208   
  432,500     

Aspen Insurance Holdings Limited

    5.950%            BBB–        12,516,550   
  177,623     

Axis Capital Holdings Limited

    6.875%            BBB        4,685,695   
  61,100     

Delphi Financial Group, Inc., (3)

    7.376%            BB+        1,317,469   
  147,600     

Hartford Financial Services Group Inc.

    7.875%            BBB–        4,630,212   
  395,100     

Kemper Corporation

    7.375%            Ba1        11,023,290   
  323,546     

Maiden Holdings Limited

    8.250%            BB        8,635,443   

 

NUVEEN     43   


JPI    Nuveen Preferred and Income Term Fund
   Portfolio of Investments (continued)    July 31, 2016

 

Shares     Description (1)   Coupon              Ratings (2)      Value  
      Insurance (continued)  
  163,333     

Maiden Holdings NA Limited

    7.750%            BBB–      $ 4,436,124   
  205,000     

Reinsurance Group of America Inc.

    6.200%            BBB        6,281,200   
  239,900     

Reinsurance Group of America, Inc.

    5.750%            BBB        6,422,123   
  74,800     

Torchmark Corporation

    6.125%                  BBB+        1,991,176   
 

Total Insurance

                               68,542,349   
      Oil, Gas & Consumable Fuels – 1.0%                           
  219,800     

Nustar Logistics Limited Partnership

    7.625%                  Ba2        5,593,910   
      Thrifts & Mortgage Finance – 1.6%                           
  172,400     

Federal Agricultural Mortgage Corporation

    6.875%            N/R        4,787,548   
  146,600     

Federal Agricultural Mortgage Corporation

    6.000%                  N/R        4,307,108   
 

Total Thrifts & Mortgage Finance

                               9,094,656   
      U.S. Agency – 4.9%                           
  255,100     

Farm Credit Bank of Texas, (3)

    6.750%                  Baa1        27,550,800   
 

Total $25 Par (or similar) Retail Preferred (cost $228,651,492)

                               250,050,800   
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
 

CORPORATE BONDS – 10.9% (7.8% of Total Investments)

  

      Banks – 7.3%                           
$ 6,330     

Bank of America Corporation

    6.250%         N/A (4)         BB+      $ 6,630,675   
  2,850     

Bank of America Corporation

    6.300%         N/A (4)         BB+        3,105,608   
  5,390     

ING Groep N.V, (5)

    6.500%         N/A (4)         BBB–        5,154,188   
  12,110     

JPMorgan Chase & Company

    6.750%         N/A (4)         BBB–        13,637,676   
  9,955     

JPMorgan Chase & Company

    5.300%         N/A (4)         BBB–        10,248,673   
  2,110     

M&T Bank Corporation

    6.450%         N/A (4)         Baa2        2,347,375   
  38,745     

Total Banks

                               41,124,195   
      Capital Markets – 2.1%                           
  11,735     

Goldman Sachs Group Inc.

    5.375%         N/A (4)         Ba1        11,914,603   
      Diversified Financial Services – 0.6%                           
  3,360     

BNP Paribas, 144A, (5)

    7.625%         N/A (4)         BBB–        3,491,040   
      Food Products – 0.3%                           
  1,410     

Land O Lakes Capital Trust I, 144A, (6)

    7.450%         3/15/28         BB+        1,515,750   
      Insurance – 0.6%                           
  2,600     

Security Benefit Life Insurance Company, 144A

    7.450%         10/01/33         BBB        3,096,902   
$ 57,850     

Total Corporate Bonds (cost $58,604,955)

                               61,142,490   
Principal
Amount (000)/
Shares
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
 

$1,000 PAR (OR SIMILAR) INSTITUTIONAL PREFERRED – 84.0% (60.2% of Total Investments)

  

      Banks – 32.0%                           
$ 2,450     

Australia and New Zealand Banking Group Limited of the United Kingdom, 144A, (5)

    6.750%         N/A (4)         Baa1      $ 2,663,696   
  2,200     

Banco Bilbao Vizcaya Argentaria S.A, Reg S, (5)

    9.000%         N/A (4)         BB        2,271,500   
  600     

Banco Santander SA, Reg S, (5)

    6.375%         N/A (4)         Ba1        548,090   
  1,557     

Bank of America Corporation

    8.000%         N/A (4)         BB+        1,582,114   
  6,125     

Bank of America Corporation

    6.500%         N/A (4)         BB+        6,687,734   
  4,000     

Barclays Bank PLC, 144A

    10.180%         6/12/21         A–        5,112,796   
  16,080     

Barclays PLC, (5)

    8.250%         N/A (4)         BB+        16,361,400   

 

  44      NUVEEN


Principal
Amount (000)/
Shares
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      Banks (continued)                           
$ 325     

Citigroup Inc.

    6.250%         N/A (4)         BB+