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Table of Contents
| Chairman’s Letter to Shareholders | 4 |
| Portfolio Manager’s Comments | 5 |
| Fund Leverage | 9 |
| Common Share Information | 11 |
| Risk Considerations | 13 |
| Performance Overview and Holding Summaries | 14 |
| Report of Independent Registered Public Accounting Firm | 16 |
| Portfolios of Investments | 17 |
| Statement of Assets and Liabilities | 25 |
| Statement of Operations | 26 |
| Statement of Changes in Net Assets | 27 |
| Statement of Cash Flows | 28 |
| Financial Highlights | 30 |
| Notes to Financial Statements | 32 |
| Additional Fund Information | 46 |
| Glossary of Terms Used in this Report | 47 |
| Reinvest Automatically, Easily and Conveniently | 49 |
| Board Members & Officers | 50 |
3
Chairman’s Letter to Shareholders
Dear Shareholders,
Financial markets rallied in the early months of 2019, in sharp contrast to the downturn at the end of 2018, leaving investors to wonder whether such bullishness is warranted or sustainable. By the close of 2018, economic softness in China, Europe and Japan had proven more persistent than expected. The temporary boost to the U.S. economy from tax law changes appeared to be fading. Corporate earnings and profits were slowing, and some corporate managements, especially at high-profile technology companies, were downgrading their outlooks. Politics remained unpredictable, most notably with Brexit and U.S.-China trade talks ongoing. The European Central Bank (ECB) ended its crisis-era monetary stimulus program with pledges to keep interest rates low for an extended period, while at the same time, the U.S. Federal Reserve (Fed) had planned to continue raising interest rates into 2019.
As the new year began, economic data have remained a mixed bag, and first quarter 2019 corporate earnings reports have included both high-profile disappointments and positive surprises, although expectations were lower heading into the quarter. Market sentiment shifted significantly after both the Fed and ECB turned remarkably more dovish in their interest rate projections and lowered their growth forecasts. In fact, neither central bank currently expects to raise their respective interest rates during 2019. While the U.S. and China initially appeared to be making progress on trade talks, negotiations have stalled more recently. While these events did reduce some of the markets’ uncertainty, downside risks still exist.
Nevertheless, we believe the likelihood of a near-term recession remains low. Global growth is indeed slowing, but it’s still positive. The U.S. economy remains strong, even in the face of late cycle pressures. Low unemployment and firming wages should continue to support consumer spending, and the November mid-term elections resulted in change, but no major surprises. In China, the government remains committed to using fiscal stimulus to offset softening exports. Europe also remains vulnerable to trade policy as well as Brexit uncertainty, but underlying strengths in European economies, including low unemployment that drives domestic demand, remain supportive of a mild expansion. In a slower growth environment, there are opportunities for investors who seek them more selectively.
We expect volatility and challenging conditions to persist in 2019 but also think there is potential for upside. You can prepare your investment portfolio by working with your financial advisor to review your goals, timeline and risk tolerance. 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,
Terence J. Toth
Chairman of the Board
May 24, 2019
4
Portfolio Manager’s Comments
Nuveen Taxable Municipal Income Fund
(formerly known as Nuveen Build America Bond Fund) (NBB)
The Fund features portfolio management by Nuveen Asset Management, LLC (NAM), an affiliate of Nuveen, LLC. Portfolio manager Daniel J. Close, CFA, discusses U.S. economic and municipal market conditions, key investment strategies and the twelve-month performance of the Nuveen Taxable Municipal Income Fund (NBB). Dan has managed NBB since its inception in April 2010.
On November 19, 2018, Nuveen Build America Bond Opportunity Fund (NBD) merged into Nuveen Build America Bond Fund (NBB), as approved by NBD shareholders in October 2018. The acquiring fund was renamed the Nuveen Taxable Municipal Income Fund and continues to trade under the ticker NBB.
As previously announced, NBB eliminated its contingent term provision and changed its principal investment policy from a policy of investing at least 80% of assets in Build America Bonds to a policy of investing at least 80% of its assets in taxable municipal securities. NBB’s benchmark also at the same time changed from the Barclays U.S. Aggregate Build America Bond Eligible Index to the Bloomberg Barclays Taxable Municipal Long Bond Index. These changes were effective on the closing date of the merger.
TENDER OFFER
The Fund’s Board of Trustees authorized the Fund to conduct a tender offer pursuant to which the Fund offered to purchase up to 20% of the Fund’s outstanding shares for cash on a pro rata basis at a price per share equal to 100% of the NAV per share, as determined as of the close of regular trading on the NYSE on the expiration date of the tender offer.
On January 2, 2019, Nuveen announced the Fund’s tender offer, which commenced on January 14, 2019 and expired on February 12, 2019. The tender offer was oversubscribed (36% of outstanding shares were tendered), and therefore the Fund purchased 20% of its outstanding shares from participating shareholders on a pro-rata basis based on the number of shares properly tendered.
During the current reporting period, the Fund repurchased and retired their common shares at a weighted average price per share and a weighted average discount per share as shown in the accompanying table.
| | NBB |
| Common shares repurchased and retired through tender offer | 6,838,973 |
| Tender offer price per common share | $20.86 |
| Tender offer discount per common share | 0.00% |
| Refer to Notes to Financial Statements, Note 4 – Fund shares, Tender offer for further details on the tender offer. | |
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.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 manager as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Fund disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein.
For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group (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. Holdings designated N/R are not rated by these national rating agencies.
Bond insurance guarantees only the payment of principal and interest on the bond when due, and not the value of the bonds themselves, which will fluctuate with the bond market and the financial success of the issuer and the insurer. Insurance relates specifically to the bonds in the portfolio and not to the share prices of a Fund. No representation is made as to the insurers’ ability to meet their commitments.
Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.
5
Portfolio Manager’s Comments (continued)
What factors affected the U.S. economy and the national municipal market during the twelve-month reporting period ended March 31, 2019?
The U.S. economy continued its solid expansion, with economic activity rebounding in early 2019 after a slump at the end of 2018. In the first quarter of 2019, gross domestic product (GDP), which measures the value of 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, grew at an annualized rate of 3.2%, according to the Bureau of Economic Analysis “advance” estimate. A jump in exports and a buildup of inventories helped offset slower consumer and business spending in the first three months of 2019. For the full year 2018, U.S. GDP growth came in at 2.9%, as economic activity cooled over the second half of 2018 after peaking at 4.2% (annualized) in the second quarter of 2018.
Consumer spending, the largest driver of the economy, remained well supported by low unemployment, wage gains and tax cuts. As reported by the Bureau of Labor Statistics, the unemployment rate fell to 3.8% in March 2019 from 4.0% in March 2018 and job gains averaged around 211,000 per month for the past twelve months. As the jobs market has tightened, average hourly earnings grew at an annualized rate of 3.2% in March 2019. However, falling energy prices led to a slower rate of inflation over the past twelve months. The Consumer Price Index (CPI) increased 1.9% over the twelve-month reporting period ended March 31, 2019 before seasonal adjustment, as reported by the Bureau of Labor Statistics.
Low mortgage rates and low inventory drove home prices higher during this recovery cycle. But the pace of price increases has slowed as mortgage rates drifted higher and homes have become less affordable. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, was up 4.0% year-over-year in February 2019 (most recent data available at the time this report was prepared). The 10-City and 20-City Composites reported year-over-year increases of 2.6% and 3.0%, respectively.
As some data began pointing to slower momentum in the overall economy, the Federal Reserve (Fed) notably shifted its stance. From December 2015 through December 2018, the Fed had gradually lifted its main policy interest rate to prevent the economy from overheating. In its final meeting of 2018, the Fed indicated that two more rate hikes might be forthcoming in 2019, roiling the markets, which had expected a more dovish tone. However, as more recent data revealed a mixed picture of the economy, the Fed said it would adopt a more “patient” approach, signaling the possibility of no rate hikes in 2019. As expected, the Fed held rates steady at its January 2019 committee meeting. At its March 2019 meeting, the Fed’s forecast showed that additional rate hikes in 2019 were unlikely, and Chairman Powell indicated that the Fed’s next move could be either a rate cut or a rate hike. The Fed again kept rates unchanged, as expected, and announced it will discontinue rolling assets off its balance sheet sooner than expected.
During the twelve-month reporting period, geopolitical news remained a prominent market driver. The U.S. moved forward with tariffs on imported goods from China, as well as on steel and aluminum from Canada, Mexico and Europe. These countries announced retaliatory measures in kind, intensifying concerns about a trade war, although there have been some positive developments. In July 2018, the U.S. and the European Union announced they would refrain from further tariffs while they negotiate trade terms, and in October 2018, the U.S., Mexico and Canada agreed to a new trade deal to replace the North American Free Trade Agreement. At the November 2018 G-20 summit, the U.S. and China settled on a 90-day trade truce, and after the countries resumed trade talks in early 2019, President Trump said he would not increase the tariffs in March 2019 as planned. Brexit negotiations continued to be uncertain, as a deal was not passed in time for the original March 29, 2019 deadline. Prime Minister Theresa May faced significant difficulty getting a plan approved in Parliament, compelling the European Union to agree to an October 31,
6
2019 delay. Europe also contended with Italy’s new euroskeptic coalition government, the “yellow vest” protests in France, immigration policy concerns and political risk in Turkey. The Trump administration issued sanctions on Russian oligarchs and companies in April 2018 (and later eased some of the restrictions) and on Iran in November 2018 after withdrawing from the 2015 nuclear agreement. After topping a four-year high in October 2018, oil prices fell sharply through December 2018 on concerns of a global supply glut due to weaker global growth and the temporary exemptions from the Iranian oil ban granted to several countries. However, oil prices recovered much of those losses over the early months of 2019 as supply conditions looked tighter than expected. On the Korean peninsula, the leaders of South Korea and North Korea met during April 2018 and jointly announced a commitment toward peace, while the U.S. and North Korea held denuclearization summits in June 2018 and February 2019 without securing an agreement. In late December 2018, the U.S. government entered a 35-day partial shutdown due to an impasse on border security funding but averted a second shutdown after the government passed a funding bill in February 2019.
Municipal bonds delivered positive performance in this reporting period. Interest rates were rising through much of the reporting period, as a strong economic backdrop kept the Fed on its course of monetary tightening. The 10-year U.S. Treasury yield peaked at 3.24% in November 2018. However, in December 2018, market volatility spiked as uncertain trade policy, Brexit negotiations, and weak macro data in Europe and China weighed on the U.S. growth outlook. Equities and riskier segments of the bond market sold off sharply in the fourth quarter of 2018. After the Fed’s December meeting, investor expectations for a pause in rate increases drove repricing in the markets, pressuring long-term interest rates meaningfully lower through the end of the reporting period.
Supply and demand conditions in the municipal bond market were favorable to performance in this reporting period, particularly in the latter months. Issuance has been subdued since the passage of the Tax Cuts and Jobs Act of 2017. Because new issue advance refunding bonds are no longer tax exempt under the new tax law, the total supply of municipal bonds has decreased, boosting the scarcity value of existing municipal bonds. For the twelve-month reporting period ending March 31, 2019, taxable municipal bond issuance was 9.4% of all municipal issuance. Municipal bond issuance nationwide totaled $421.9 billion in this reporting period, a 17.4% decrease from the issuance for the twelve-month reporting period ended March 31, 2018. Nevertheless, the overall low level of interest rates encouraged issuers to continue to actively refund their outstanding debt. In these transactions the issuers are issuing new bonds and taking the bond proceeds and redeeming (calling) old bonds. These refunding transactions have ranged from 40% to 60% of total issuance over the past few years. Thus, the net issuance (all bonds issued less bonds redeemed) is actually much lower than the gross issuance. So, while gross issuance volume has been strong, the net has not, and this was an overall positive technical factor on municipal bond investment performance in recent years. Although the pace of refundings is slowing, net negative issuance is expected to continue.
What key strategies were used to manage the Fund during the twelve-month reporting period ended March 31, 2019?
Municipal bonds enjoyed strong gains in the reporting period. Moderate economic growth, falling interest rates and the municipal market’s tight supply and strong demand provided tailwinds to municipal bond performance over the past twelve months.
Overall, our strategy during this reporting period was to continue to add value by pursuing active management. We focused on attractive relative value opportunities to enhance the Fund’s long-term performance potential. In this reporting period, we established a few new positions but mainly added to existing positions. Cash for purchases came from the proceeds generated by a small amount of called and maturing bonds and from selling some positions with lower embedded yield structures.
7
Portfolio Manager’s Comments (continued)
Shareholders should note that with the elimination of the contingent term provision and the expansion of NBB’s investment policy (as described at the beginning of this commentary), the Fund prepared for the 20% tender offer by liquidating a representative share of the portfolio such that the Fund maintained similar duration/yield curve, credit quality and sector positioning before and after the sale. We also shifted our focus to buying less liquid, higher yielding bonds.
How did the Fund perform over the twelve-month reporting period ended March 31, 2019?
The table in the Fund’s Performance Overview and Holding Summaries section of this report provides the Fund’s total returns for the one-year, five-year and since-inception periods ended March 31, 2019. The Fund’s total returns are compared with the performance of the corresponding market indexes.
For the twelve-month reporting period ended March 31, 2019, the total returns on common share net asset value (NAV) for NBB underperformed the return for the Bloomberg Barclays Taxable Municipal Long Bond Index.
Key management factors that influenced the Fund’s returns during this reporting period included duration and yield curve positioning, credit exposure, sector allocation and the use of derivatives. The Fund’s duration and yield curve positioning was unfavorable in the reporting period’s market environment. An overweight to zero to 2-year duration bonds was a drag on relative performance because the shortest duration segment underperformed the market. Credit quality allocations also detracted from relative performance, primarily due to an underweight allocation to BBB rated bonds, which performed strongly in the broad market. Our sector allocations, however, were beneficial to relative results. The outperformance of the Fund’s state general obligation (GO) bonds more than offset the relative underperformance from our allocation to the industrial development revenue sector. Security selection also provided a relative advantage to performance in this reporting period.
The largest driver of relative underperformance was the Fund’s exposure to interest rate futures and swaps. As part of its approach to investing, the Fund uses an integrated leverage and hedging strategy in an effort to enhance current income and total return, while working to maintain a level of interest rate risk similar to that of the Bloomberg Barclays Taxable Municipal Long Bond Index. As part of this integrated strategy, NBB used inverse floating rate securities, bank borrowings and, beginning in April 2018, reverse repurchase agreements (known as reverse repos) as leverage to potentially magnify performance. During this reporting period, we paid down the bank borrowings and bought reverse repos, which cost less than bank borrowings. At the same time, the Fund used interest rate swaps to reduce their leverage-adjusted durations to a level close to that of the Bloomberg Barclays Taxable Municipal Long Bond Index. In addition, the Fund entered into staggered interest rate swaps to partially fix the interest cost of leverage. During this reporting period, the inverse floaters and interest rate swaps performed as expected. Due to the path of interest rates and credit spread contraction over this reporting period, the use of inverse floaters contributed positively to performance but the gains were more than offset by the negative impact of the duration-shortening swaps. Leverage is discussed in more detail later in this report. The Fund also managed the duration of its portfolio by shorting interest rate futures contracts, which had a negative impact on performance during the reporting period.
8
Fund Leverage
IMPACT OF THE FUND’S LEVERAGE STRATEGY ON PERFORMANCE
One important factor impacting the returns of the Fund’s common shares relative to its comparative benchmark was the Fund’s use of leverage through bank borrowings, reverse repurchase agreements and investments in inverse floating rate securities, which represent leveraged investments in underlying bonds. The Fund used leverage because our research has shown that, over time, leveraging provides opportunities for additional income, particularly in the recent market environment where short-term market rates are at or near historical lows, meaning that the short-term rates the Fund has been paying on its leveraging instruments in recent years have been much lower than the interest the Fund has been earning on its portfolio of long-term bonds that it has bought with the proceeds of that leverage.
However, use of leverage can expose Fund common shares to additional price volatility. When the Fund uses leverage, the Fund common shares will experience a greater increase in their net asset value if the municipal bonds acquired through the use of leverage increase in value, but will also experience a correspondingly larger decline in their net asset value if the bonds acquired through leverage decline in value, which will make the shares’ net asset value more volatile, and total return performance more variable, over time.
In addition, common share income in levered funds will typically decrease in comparison to unlevered funds when short-term interest rates increase and increase when short-term interest rates decrease. Over the last few quarters, short-term interest rates have indeed increased from their extended lows after the 2007-09 financial crisis. This increase has reduced common share net income, and also reduced potential for long-term total returns. Nevertheless, the ability to effectively borrow at current short-term rates is still resulting in enhanced common share income, and management believes that the advantages of continuation of leverage outweigh the associated increase in risk and volatility described above.
| NBB’s use of leverage had a positive impact on total return performance during this reporting period. | |
| |
| As of March 31, 2019, the Fund’s percentages of leverage are as shown in the accompanying table. | |
| | NBB |
| Effective Leverage* | 33.89% |
| Regulatory Leverage* | 0.00% |
| * | Effective leverage is a Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of reverse repurchase agreements, certain derivatives and other investments in a Fund’s portfolio that increase the Fund’s investment exposure. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in addition to any regulatory leverage. Regulatory leverage consists of preferred shares issued or borrowings of a Fund. Both of these are part of a Fund’s capital structure. A Fund, however, may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings are excluded from the calculation of a Fund’s effective leverage ratio. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940. |
THE FUND’S REGULATORY LEVERAGE
Bank Borrowings
As noted above, the Fund employed regulatory leverage through the use of bank borrowings. The Fund’s bank borrowing activities are as shown in the accompanying table.
9
| Fund Leverage (continued) | |
| | | | | | | Subsequent to the Close |
| | | Current Reporting Period | | | of the Reporting Period |
| | | | | Average Balance | | | | |
| April 1, 2018 | Draws | Paydowns | March 31, 2019 | Outstanding | | Draws | Paydowns | May 28, 2019 |
| $90,175,000 | $ — | $(90,175,000) | $ — | $90,175,000** | | $ — | $ — | $ — |
| ** For the period April 1, 2018 through April 12, 2018. |
| Refer to Notes to Financial Statements, Note 8 – Fund Leverage, Borrowings for further details. | | |
Reverse Repurchase Agreements
As noted previously, the Fund utilized reverse repurchase agreements. The Fund’s transactions in reverse repurchase agreements are as shown in the accompanying table.
| | | | | | | Subsequent to the Close of |
| | | Current Reporting Period | | | the Reporting Period |
| | | | | Average Balance | | | | |
| April 1, 2018 | Purchases | Sales | March 31, 2019 | Outstanding | | Purchases | Sales | May 28, 2019 |
| $ — | $107,175,000*** | $ — | $107,175,000 | $96,084,348**** | | $26,000,000 | $ — | $133,175,000 |
| *** | In connection with the Fund’s merger, the Fund acquired $12,000,000 of reverse repurchase agreement. See Notes to Financial Statements, Note 1 – General Information and Significant Accounting Policies, Fund Merger for further details. |
| **** | For the period April 13, 2018 (initial purchase of reverse repurchase agreements) through March 31, 2019. |
Refer to Notes to Financial Statements, Note 8 - Fund Leverage, Reverse Repurchase Agreements for further details.
10
Common Share Information
COMMON SHARE DISTRIBUTION INFORMATION
The following information regarding the Fund’s distributions is current as of March 31, 2019. The Fund’s distribution levels may vary over time based on the Fund’s investment activity and portfolio investment value changes.
During the current reporting period, the Fund’s distributions to common shareholders were as shown in the accompanying table.
| | Per Common |
| Monthly Distributions (Ex-Dividend Date) | Share Amounts |
| April 2018 | $0.1030 |
| May | 0.1030 |
| June | 0.1030 |
| July | 0.1030 |
| August | 0.1030 |
| September | 0.1030 |
| October | 0.1030 |
| November | 0.1031 |
| December | 0.1030 |
| January | 0.1030 |
| February | 0.1030 |
| March 2019 | 0.1030 |
| Total Distributions from Net Investment Income | $1.2361 |
| |
| Yields | |
| Market Yield* | 6.02% |
| * Market Yield is based on the Fund’s current annualized monthly distribution divided by the Fund’s current market price as of the end of the reporting period. | |
The Fund seeks to pay regular monthly dividends out of its net investment income at a rate that reflects its past and projected net income performance. To permit the 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. Distributions to shareholders are determined on a tax basis, which may differ from amounts recorded in the accounting records. In instances where the monthly dividend exceeds the earned net investment income, the Fund would report a negative undistributed net ordinary income. Refer to Note 6 – Income Tax Information for additional information regarding the amounts of undistributed net ordinary income and undistributed net long-term capital gains and the character of the actual distributions paid by the Fund during the period.
All monthly dividends paid by the Fund during the current reporting period were paid from net investment income. If a portion of the Fund’s monthly distributions is sourced or comprised of elements other than net investment income, including capital gains and/or a return of capital, shareholders will be notified of those sources. For financial reporting purposes, the per share amounts of the Fund’s distributions for the reporting period are presented in this report’s Financial Highlights. For income tax purposes, distribution information for the 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.
11
Common Share Information (continued)
COMMON SHARE REPURCHASES
During August 2018, the Fund’s Board of Trustees reauthorized an open-market share repurchase program, allowing the Fund to repurchase an aggregate of up to approximately 10% of its outstanding shares. The Fund was prohibited, however, from repurchasing its shares during periods when the Fund had an outstanding tender offer (as described below).
As of March 31, 2019, and since the inception of the Fund’s repurchase programs, the Fund has cumulatively repurchased and retired its outstanding common shares as shown in the accompanying table.
| | NBB |
| Common shares cumulatively repurchased and retired | 0 |
| Common shares authorized for repurchase | 2,645,000 |
TENDER OFFER
The Fund’s Board of Trustees authorized the Fund to conduct a tender offer pursuant to which the Fund offered to purchase up to 20% of the Fund’s outstanding shares for cash on a pro rata basis at a price per share equal to 100% of the NAV per share, as determined on the date the tender offer expires.
On January 2, 2019, Nuveen announced the Fund’s tender offer, which commenced on January 14, 2019 and expired on February 12, 2019. The tender offer was oversubscribed (36% of outstanding shares were tendered), and therefore the Fund purchased 20% of its outstanding shares from participating shareholders on a pro-rata basis based on the number of shares properly tendered.
During the current reporting period, the Fund repurchased and retired their common shares, through the tender offer, at a price per share and a discount per share as shown in the accompanying table.
| | NBB |
| Common shares repurchased and retired through tender offer | 6,838,973 |
| Tender offer price per common share | $20.86 |
| Tender offer discount per common share | 0.00% |
| Refer to Notes to Financial Statements, Note 4 – Fund Shares, Tender Offer for further details on the tender offer. | |
OTHER COMMON SHARE INFORMATION
As of March 31, 2019, and during the current reporting period, the Fund’s common share prices were trading at a premium/(discount) to its common share NAV as shown in the accompanying table.
| | NBB |
| Common share NAV | $21.35 |
| Common share price | $20.52 |
| Premium/(Discount) to NAV | (3.89)% |
| 12-month average premium/(discount) to NAV | (5.47)% |
12
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 Taxable Municipal Income Fund (NBB)
(formerly known as Nuveen Build America Bond Fund)
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. 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. The Fund’s investments in Build America Bonds, which were discontinued in 2010, subject the Fund to tax risk, liquidity risk, and may negatively affect the Fund’s performance. 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. These and other risk considerations such as inverse floater risk, limited term risk, and tax risk are described in more detail on the Fund’s web page at www.nuveen.com/NBB.
13
| | |
NBB | Nuveen Taxable Municipal Income Fund |
| | (formerly known as Nuveen Build America Bond Fund) Performance Overview and Holding Summaries as of March 31, 2019 |
| 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 March 31, 2019 |
| | | Average Annual | |
| | | | Since |
| | 1-Year | 5-Year | Inception |
| NBB at Common Share NAV | 3.06% | 5.98% | 7.66% |
| NBB at Common Share Price | 4.97% | 7.40% | 7.01% |
| Bloomberg Barclays Taxable Municipal Long Bond Index | 5.81% | 6.22% | 7.27% |
Since inception returns are from 4/27/10. 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.
14
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; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.
Fund Allocation | |
(% of net assets) | |
| Long-Term Municipal Bonds | 125.9% |
| Other Assets Less Liabilities | 1.5% |
Net Assets Plus Floating Rate Obligations | |
& Reverse Repurchase Agreements | 127.4% |
| Floating Rate Obligations | (9.1)% |
| Reverse Repurchase Agreements | (18.3)% |
Net Assets | 100% |
Portfolio Credit Quality | |
(% of total investment exposure) | |
| U.S. Guaranteed | 0.2% |
| AAA | 4.2% |
| AA | 63.2% |
| A | 16.9% |
| BBB | 8.1% |
| BB or Lower | 3.4% |
| N/R (not rated) | 4.0% |
Total | 100% |
Portfolio Composition | |
(% of total investments) | |
| Tax Obligation/Limited | 33.8% |
| Transportation | 17.4% |
| Utilities | 14.4% |
| Tax Obligation/General | 12.9% |
| Water and Sewer | 12.8% |
| Other | 8.7% |
Total | 100% |
States and Territories | |
(% of total municipal bonds) | |
| California | 23.0% |
| New York | 12.9% |
| Illinois | 9.0% |
| Texas | 7.7% |
| Ohio | 6.8% |
| Virginia | 4.8% |
| Georgia | 4.1% |
| Washington | 3.6% |
| New Jersey | 2.9% |
| Louisiana | 2.8% |
| Tennessee | 2.7% |
| Other | 19.7% |
Total | 100% |
15
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Nuveen Taxable Municipal Income Fund
(formerly known as Nuveen Build America Bond Fund):
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Nuveen Taxable Municipal Income Fund (the “Fund”), including the portfolio of investments, as of March 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, the statement of cash flows for the year then ended, and the related notes (collectively, the “financial statements”) and the financial highlights for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of March 31, 2019, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of March 31, 2019, by correspondence with custodians and brokers and other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the auditor of one or more Nuveen investment companies since 2014.
Chicago, Illinois
May 28, 2019
16
NBB | Nuveen Taxable Municipal Income Fund |
| | (formerly known as Nuveen Build America Bond Fund) Portfolio of Investments
March 31, 2019 |
| | | | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | LONG-TERM INVESTMENTS – 125.9% (100.0% of Total Investments) | | | |
| | | MUNICIPAL BONDS – 125.9% (100.0% of Total Investments) | | | |
| | | Arizona – 1.2% (1.0% of Total Investments) | | | |
| $ 2,000 | | Arizona Industrial Development Authority, Arizona, Education Facility Revenue Bonds, | 5/19 at 102.50 | BB | $ 1,983,200 |
| | | Basis Schools, Inc. Projects, Series 2018A, 6.000%, 7/01/33, 144A | | | |
| 5,000 | | Mesa, Arizona, Utility System Revenue Bonds, Series 2010, 6.100%, 7/01/34 (4) | 7/20 at 100.00 | Aa2 | 5,235,150 |
| 7,000 | | Total Arizona | | | 7,218,350 |
| | | California – 28.9% (23.0% of Total Investments) | | | |
| | | ABAG Finance Authority for Non-Profit Corporations, California, Special Tax Bonds, | | | |
| | | Community Facilities District 2004-1 Seismic Safety Improvements 690 & 942 Market Street | | | |
| | | Project, Taxable Refunding: | | | |
| 1,950 | | 5.100%, 9/01/28 | No Opt. Call | N/R | 1,986,329 |
| 6,125 | | 5.500%, 9/01/38 | 9/28 at 100.00 | N/R | 6,211,179 |
| 2,520 | | Alameda Corridor Transportation Authority, California, Revenue Bonds, Refunding Taxable | No Opt. Call | BBB+ | 1,484,053 |
| | | Subordinate Lien Series 2004B, 0.000%, 10/01/31 – AMBAC Insured | | | |
| 75 | | Bay Area Toll Authority, California, Revenue Bonds, San Francisco Bay Area Toll Bridge, | No Opt. Call | AA– | 89,738 |
| | | Subordinate Lien, Build America Federally Taxable Bond Series 2010S-1, 6.793%, 4/01/30 | | | |
| 600 | | California Infrastructure and Economic Development Bank, Revenue Bonds, University of | No Opt. Call | AA | 828,684 |
| | | California San Francisco Neurosciences Building, Build America Taxable Bond Series 2010B, | | | |
| | | 6.486%, 5/15/49 | | | |
| 350 | | California School Finance Authority, Charter School Revenue Bonds, City Charter School | No Opt. Call | N/R | 349,808 |
| | | Obligated Group, Taxable Series 2016B, 3.750%, 6/01/20, 144A | | | |
| 4,530 | | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, | No Opt. Call | A+ | 6,831,013 |
| | | Build America Taxable Bond Series 2009G-2, 8.361%, 10/01/34 | | | |
| 2,050 | | California State Public Works Board, Lease Revenue Bonds, Various Capital Projects, | 3/20 at 100.00 | A+ | 2,145,735 |
| | | Build America Taxable Bond Series 2010A-2, 8.000%, 3/01/35 | | | |
| 7,010 | | California State University, Systemwide Revenue Bonds, Build America Taxable Bond Series | No Opt. Call | Aa2 | 9,398,097 |
| | | 2010B, 6.484%, 11/01/41 (4) | | | |
| 7,115 | | California State, General Obligation Bonds, Various Purpose Build America Taxable Bond | 3/20 at 100.00 | AA– | 7,455,239 |
| | | Series 2010, 7.950%, 3/01/36 (4) | | | |
| 4,110 | | California State, General Obligation Bonds, Various Purpose, Build America Taxable Bond | No Opt. Call | AA– | 6,388,872 |
| | | Series 2010, 7.600%, 11/01/40 | | | |
| 2,720 | | California Statewide Communities Development Authority, California, Revenue Bonds, Loma | No Opt. Call | BB | 2,885,512 |
| | | Linda University Medical Center, Series 2014B, 6.000%, 12/01/24 | | | |
| | | Los Angeles Community College District, California, General Obligation Bonds, Build | | | |
| | | America Taxable Bonds, Series 2010: | | | |
| 10,000 | | 6.600%, 8/01/42 (UB) (4) | No Opt. Call | AA+ | 14,427,700 |
| 8,500 | | 6.600%, 8/01/42 | No Opt. Call | AA+ | 12,263,545 |
| 2,000 | | Los Angeles Community College District, Los Angeles County, California, General | No Opt. Call | AA+ | 7,138,640 |
| | | Obligation Bonds, Tender Option Bond Trust 2016-XG002, 21.401%, 8/01/49, 144A (IF) (4) | | | |
| | | Los Angeles County Public Works Financing Authority, California, Lease Revenue Bonds, | | | |
| | | Multiple Capital Projects I, Build America Taxable Bond Series 2010B: | | | |
| 2,050 | | 7.488%, 8/01/33 | No Opt. Call | AA | 2,775,187 |
| 11,380 | | 7.618%, 8/01/40 (4) | No Opt. Call | AA | 17,309,435 |
| 9,390 | | Los Angeles Department of Airports, California, Revenue Bonds, Los Angeles International | No Opt. Call | AA– | 12,148,312 |
| | | Airport, Build America Taxable Bonds, Series 2009C, 6.582%, 5/15/39 (4) | | | |
| | | Los Angeles Department of Water and Power, California, Power System Revenue Bonds, | | | |
| | | Federally Taxable – Direct Payment – Build America Bonds, Series 2010A: | | | |
| 80 | | 5.716%, 7/01/39 | No Opt. Call | AA | 102,591 |
| 725 | | 6.166%, 7/01/40 | 7/20 at 100.00 | AA | 756,472 |
17
NBB | Nuveen Taxable Municipal Income Fund | | |
| | (formerly known as Nuveen Build America Bond Fund) | | |
| | Portfolio of Investments (continued) | | | |
| | March 31, 2019 | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | California (continued) | | | |
| $ 1,685 | | Los Angeles Department of Water and Power, California, Power System Revenue Bonds, | No Opt. Call | AA | $ 2,461,347 |
| | | Federally Taxable – Direct Payment – Build America Bonds, Series 2010D, 6.574%, 7/01/45 | | | |
| 4,000 | | Los Angeles Department of Water and Power, California, Water System Revenue Bonds, | No Opt. Call | AA+ | 14,016,440 |
| | | Tender Option Bond Trust 2016-XFT906, 20.665%, 7/01/50, 144A (IF) (4) | | | |
| 1,110 | | Oakland Redevelopment Agency, California, Housing Set Aside Revenue Bonds, Federally | No Opt. Call | AA– (5) | 1,132,622 |
| | | Taxable Subordinated Series 2011A-T, 7.500%, 9/01/19 (ETM) | | | |
| 3,000 | | Sacramento County Sanitation Districts Financing Authority, California, Revenue Bonds, | No Opt. Call | AA+ | 4,028,040 |
| | | Sacramento Area Sewer District, Build America Bond Series 2010A, 6.325%, 8/01/40 | | | |
| 4,250 | | Sacramento Public Financing Authority, California, Lease Revenue Bonds, Golden 1 Center, | No Opt. Call | A+ | 5,022,777 |
| | | Series 2015, 5.637%, 4/01/50 | | | |
| 2,200 | | San Diego County Regional Transportation Commission, California, Sales Tax Revenue | No Opt. Call | AAA | 3,003,946 |
| | | Bonds, Build America Taxable Bonds Series 2010A, 5.911%, 4/01/48 | | | |
| 1,500 | | San Francisco City and County Public Utilities Commission, California, Water Revenue | No Opt. Call | AA– | 2,195,295 |
| | | Bonds, Taxable Build America Bond Series 2010G, 6.950%, 11/01/50 | | | |
| 1,000 | | San Francisco City and County Redevelopment Financing Authority, California, Tax | No Opt. Call | AA | 1,505,520 |
| | | Allocation Revenue Bonds, San Francisco Redevelopment Projects, Taxable Series 2009E, | | | |
| | | 8.406%, 8/01/39 | | | |
| | | San Francisco City and County, California, Certificates of Participation, 525 Golden | | | |
| | | Gate Avenue, San Francisco Public Utilities Commission Office Project, Tender Option Bond | | | |
| | | 2016-XFT901: | | | |
| 2,000 | | 20.040%, 11/01/41, 144A (IF) (4) | No Opt. Call | AA+ | 5,410,860 |
| 4,000 | | 20.040%, 11/01/41, 144A (IF) (4) | No Opt. Call | AA+ | 10,821,720 |
| 315 | | Stanton Redevelopment Agency, California, Tax Allocation Bonds, Stanton Consolidated | No Opt. Call | A (5) | 323,971 |
| | | Redevelopment Project Series 2011A, 7.000%, 12/01/19 (ETM) | | | |
| 2,000 | | University of California Regents, Medical Center Pooled Revenue Bonds, Taxable Build | No Opt. Call | AA– | 2,782,520 |
| | | America Bond Series 2010H, 6.548%, 5/15/48 | | | |
| 2,505 | | University of California, General Revenue Bonds, Limited Project, Build America Taxable | No Opt. Call | AA– | 3,260,658 |
| | | Bond Series 2010F, 5.946%, 5/15/45 | | | |
| 112,845 | | Total California | | | 168,941,857 |
| | | Colorado – 1.8% (1.4% of Total Investments) | | | |
| 4,000 | | Colorado Bridge Enterprise, Revenue Bonds, Federally Taxable Build America Series 2010A, | No Opt. Call | AA | 5,232,360 |
| | | 6.078%, 12/01/40 | | | |
| 3,100 | | Denver School District 1, Colorado, General Obligation Bonds, Build America Taxable | No Opt. Call | AA+ | 3,813,558 |
| | | Bonds, Series 2009C, 5.664%, 12/01/33 | | | |
| 1,000 | | Regional Transportation District, Colorado, Sales Tax Revenue Bonds, Fastracks Project, | No Opt. Call | AA+ | 1,364,470 |
| | | Build America Series 2010B, 5.844%, 11/01/50 | | | |
| 8,100 | | Total Colorado | | | 10,410,388 |
| | | Connecticut – 1.4% (1.1% of Total Investments) | | | |
| 7,655 | | Harbor Point Infrastructure Improvement District, Connecticut, Special Obligation | 4/20 at 100.00 | N/R | 8,378,474 |
| | | Revenue Bonds, Harbor Point Project, Federally Taxable – Issuer Subsidy – Recovery Zone | | | |
| | | Economic Development Bond Series, 12.500%, 4/01/39 | | | |
| | | Florida – 0.9% (0.7% of Total Investments) | | | |
| 5,000 | | Florida State Board of Education, Public Education Capital Outlay Bonds, Build America | 6/19 at 100.00 | AAA | 5,023,800 |
| | | Taxable Bonds, Series 2010G, 5.750%, 6/01/35 (4) | | | |
| | | Georgia – 5.2% (4.1% of Total Investments) | | | |
| 3,540 | | Cobb-Marietta Coliseum and Exhibit Hall Authority, Georgia, Revenue Bonds, Cobb County | 1/26 at 100.00 | AAA | 3,683,051 |
| | | Coliseum Project, Taxable Series 2015, 4.500%, 1/01/47 | | | |
| 1,111 | | Georgia Municipal Electric Authority, Plant Vogtle Units 3 & 4 Project M Bonds, Taxable | No Opt. Call | A | 1,337,155 |
| | | Build America Bonds Series 2010A, 6.655%, 4/01/57 | | | |
18
| | | | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | Georgia (continued) | | | |
| | | Georgia Municipal Electric Authority, Plant Vogtle Units 3 & 4 Project P Bonds, | | | |
| | | Refunding Taxable Build America Bonds Series 2010A: | | | |
| $ 2,984 | | 7.055%, 4/01/57 – AGM Insured | No Opt. Call | AA | $ 4,015,300 |
| 17,900 | | 7.055%, 4/01/57 | No Opt. Call | BBB+ | 21,176,774 |
| 25,535 | | Total Georgia | | | 30,212,280 |
| | | Illinois – 11.4% (9.0% of Total Investments) | | | |
| 8,080 | | Chicago Transit Authority, Illinois, Sales Tax Receipts Revenue Bonds, Federally Taxable | No Opt. Call | AA | 10,182,497 |
| | | Build America Bonds, Series 2010B, 6.200%, 12/01/40 | | | |
| | | Chicago, Illinois, General Airport Revenue Bonds, O’Hare International Airport, Third | | | |
| | | Lien, Build America Taxable Bond Series 2010B: | | | |
| 12,430 | | 6.845%, 1/01/38 | 1/20 at 100.00 | A | 12,804,765 |
| 355 | | 6.395%, 1/01/40 | No Opt. Call | A | 473,982 |
| 1,000 | | Chicago, Illinois, Wastewater Transmission Revenue Bonds, Build America Taxable Bond | No Opt. Call | AA– | 1,311,570 |
| | | Series 2010B, 6.900%, 1/01/40 | | | |
| 1,500 | | Chicago, Illinois, Water Revenue Bonds, Taxable Second Lien Series 2010B, 6.742%, 11/01/40 | No Opt. Call | AA– | 2,014,395 |
| 2,000 | | Illinois State, General Obligation Bonds, Build America Taxable Bonds, Series 2010-5, | No Opt. Call | BBB | 2,274,080 |
| | | 7.350%, 7/01/35 | | | |
| 14,000 | | Illinois State, General Obligation Bonds, Taxable Build America Bonds, Series 2010-3, | No Opt. Call | BBB | 15,152,060 |
| | | 6.725%, 4/01/35 | | | |
| 11,912 | | Illinois Toll Highway Authority, Toll Highway Revenue Bonds, Build America Taxable | No Opt. Call | AA– | 15,361,596 |
| | | Bonds, Senior Lien Series 2009A, 6.184%, 1/01/34 (4) | | | |
| 2,420 | | Illinois Toll Highway Authority, Toll Highway Revenue Bonds, Build America Taxable | No Opt. Call | AA– | 3,084,484 |
| | | Bonds, Senior Lien Series 2009B, 5.851%, 12/01/34 | | | |
| 2,000 | | Lake County, Illinois, General Obligation Bonds, Series 2010A, 5.250%, 11/30/28 | 11/19 at 100.00 | AAA | 2,036,740 |
| 400 | | Northern Illinois Municipal Power Agency, Power Project Revenue Bonds, Prairie State | No Opt. Call | A2 | 509,896 |
| | | Project, Build America Bond Series 2009C, 6.859%, 1/01/39 | | | |
| 890 | | Northern Illinois Municipal Power Agency, Power Project Revenue Bonds, Prairie State | No Opt. Call | A2 | 1,276,242 |
| | | Project, Build America Taxable Bond Series 2010A, 7.820%, 1/01/40 | | | |
| 56,987 | | Total Illinois | | | 66,482,307 |
| | | Indiana – 2.2% (1.8% of Total Investments) | | | |
| 5,000 | | Indiana University, Consolidated Revenue Bonds, Build America Taxable Bonds, Series | 6/20 at 100.00 | AAA | 5,123,350 |
| | | 2010B, 5.636%, 6/01/35 (4) | | | |
| 5,000 | | Indianapolis Local Public Improvement Bond Bank, Indiana, Build America Bonds, Series | No Opt. Call | AA+ | 6,445,950 |
| | | 2010A-2, 6.004%, 1/15/40 | | | |
| 1,000 | | Indianapolis Local Public Improvement Bond Bank, Indiana, Build America Taxable Bonds, | No Opt. Call | AA+ | 1,272,630 |
| | | Series 2010B-2, 6.116%, 1/15/40 (4) | | | |
| 11,000 | | Total Indiana | | | 12,841,930 |
| | | Kentucky – 2.3% (1.9% of Total Investments) | | | |
| 5,000 | | Kentucky Municipal Power Agency, Power System Revenue Bonds, Prairie State Project, | 9/20 at 100.00 | AA | 6,178,200 |
| | | Tender Option Bond Trust 2016-XFT902, 19.729%, 9/01/37, 144A (IF) (4) | | | |
| 5,450 | | Louisville and Jefferson County Metropolitan Sewer District, Kentucky, Sewer and | No Opt. Call | AA | 7,544,871 |
| | | Drainage System Revenue Bonds, Build America Taxable Bonds Series 2010A, 6.250%, 5/15/43 (4) | | | |
| 10,450 | | Total Kentucky | | | 13,723,071 |
| | | Louisiana – 3.6% (2.8% of Total Investments) | | | |
| 20,350 | | East Baton Rouge Sewerage Commission, Louisiana, Revenue Bonds, Build America Taxable | 2/20 at 100.00 | AA | 20,915,120 |
| | | Bonds, Series 2010B, 6.087%, 2/01/45 (UB) (4) | | | |
| | | Massachusetts – 1.6% (1.3% of Total Investments) | | | |
| 4,000 | | Massachusetts, Transportation Fund Revenue Bonds, Accelerated Bridge Program, Tender | No Opt. Call | AA+ | 9,261,400 |
| | | Option Bond Trust 2016-XFT907, 16.136%, 6/01/40, 144A (IF) (4) | | | |
19
NBB | Nuveen Taxable Municipal Income Fund | | |
| | (formerly known as Nuveen Build America Bond Fund) | | |
| | Portfolio of Investments (continued) | | | |
| | March 31, 2019 | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | Michigan – 1.5% (1.2% of Total Investments) | | | |
| $ 8,855 | | Michigan Tobacco Settlement Finance Authority, Tobacco Settlement Asset-Backed Revenue | No Opt. Call | B– | $ 8,809,574 |
| | | Bonds, Taxable Turbo Series 2006A, 7.309%, 6/01/34 | | | |
| | | Mississippi – 0.4% (0.3% of Total Investments) | | | |
| 2,085 | | Mississippi State, General Obligation Bonds, Build America Taxable Bond Series 2010F, | No Opt. Call | AA | 2,506,837 |
| | | 5.245%, 11/01/34 | | | |
| | | Missouri – 0.3% (0.3% of Total Investments) | | | |
| 1,590 | | Curators of the University of Missouri, System Facilities Revenue Bonds, Build America | No Opt. Call | AA+ | 1,988,963 |
| | | Taxable Bonds, Series 2009A, 5.960%, 11/01/39 | | | |
| | | Nevada – 2.2% (1.8% of Total Investments) | | | |
| 6,700 | | Clark County, Nevada, Airport Revenue Bonds, Senior Lien Series 2009B, 6.881%, 7/01/42 | 7/19 at 100.00 | Aa2 | 6,772,561 |
| 3,300 | | Clark County, Nevada, Airport Revenue Bonds, Taxable Direct Payment Build America Bond | No Opt. Call | Aa2 | 4,997,916 |
| | | Series 2010C, 6.820%, 7/01/45 | | | |
| 1,315 | | Las Vegas, Nevada, Certificates of Participation, City Hall Project, Taxable Build | 9/19 at 100.00 | AA– | 1,343,233 |
| | | America Bond Series 2009B, 7.800%, 9/01/39 | | | |
| 11,315 | | Total Nevada | | | 13,113,710 |
| | | New Jersey – 3.7% (2.9% of Total Investments) | | | |
| 1,000 | | New Jersey Economic Development Authority, School Facilities Construction Financing | 6/20 at 100.00 | A– | 1,033,710 |
| | | Program Bonds, Build America Bond Series 2010CC-1, 6.425%, 12/15/35 | | | |
| 3,000 | | New Jersey Turnpike Authority, Revenue Bonds, Build America Taxable Bonds, Series 2009F, | No Opt. Call | A+ | 4,511,490 |
| | | 7.414%, 1/01/40 | | | |
| 8,805 | | New Jersey Turnpike Authority, Revenue Bonds, Build America Taxable Bonds, Series 2010A, | No Opt. Call | A+ | 12,853,891 |
| | | 7.102%, 1/01/41 | | | |
| 2,000 | | Rutgers State University, New Jersey, Revenue Bonds, Build America Taxable Bond Series | No Opt. Call | Aa3 | 2,483,380 |
| | | 2010H, 5.665%, 5/01/40 | | | |
| 530 | | South Jersey Transportation Authority, New Jersey, Transportation System Revenue Bonds, | No Opt. Call | BBB+ | 626,375 |
| | | Build America Bond Series 2009A-5, 7.000%, 11/01/38 | | | |
| 15,335 | | Total New Jersey | | | 21,508,846 |
| | | New York – 16.3% (12.9% of Total Investments) | | | |
| 25,000 | | Dormitory Authority of the State of New York, State Personal Income Tax Revenue Bonds, | No Opt. Call | AA+ | 31,206,250 |
| | | Build America Taxable Bonds, Series 2010, 5.600%, 3/15/40 (UB) | | | |
| 2,000 | | Dormitory Authority of the State of New York, State Personal Income Tax Revenue Bonds, | No Opt. Call | AA+ | 4,482,540 |
| | | Tender Option Bond Trust 2016-XFT903, 15.326%, 3/15/40, 144A (IF) (4) | | | |
| 5,100 | | Long Island Power Authority, New York, Electric System Revenue Bonds, Build America | No Opt. Call | A– | 6,355,722 |
| | | Taxable Bond Series 2010B, 5.850%, 5/01/41 | | | |
| 1,410 | | Metropolitan Transportation Authority, New York, Dedicated Tax Fund Bonds, Build America | No Opt. Call | AA | 2,110,375 |
| | | Taxable Bonds, Series 2010C, 7.336%, 11/15/39 (4) | | | |
| 1,270 | | Metropolitan Transportation Authority, New York, Transportation Revenue Bonds, Federally | No Opt. Call | AA– | 1,715,859 |
| | | Taxable Issuer Subsidy Build America Bonds, Series 2010A, 6.668%, 11/15/39 | | | |
| 970 | | New York City Industrial Development Agency, New York, Installment Purchase and Lease | No Opt. Call | BBB | 1,047,241 |
| | | Revenue Bonds, Queens Baseball Stadium Project, Series 2006, 6.027%, 1/01/46 – AMBAC Insured | | | |
| | | New York City Municipal Water Finance Authority, New York, Water and Sewer System | | | |
| | | Revenue Bonds, Second Generation Resolution, Build America Taxable Bonds, Fiscal 2011 Series AA: | | | |
| 1,000 | | 5.790%, 6/15/41 | 6/20 at 100.00 | AA+ | 1,037,120 |
| 1,500 | | 5.440%, 6/15/43 (4) | No Opt. Call | AA+ | 1,938,090 |
| | | New York City Municipal Water Finance Authority, New York, Water and Sewer System | | | |
| | | Revenue Bonds, Second Generation Resolution, Build America Taxable Bonds, Series 2010: | | | |
| 2,025 | | 5.952%, 6/15/42 (UB) | No Opt. Call | AA+ | 2,766,980 |
| 2,595 | | 5.952%, 6/15/42 | No Opt. Call | AA+ | 3,545,834 |
20
| | | | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | New York (continued) | | | |
| $ 3,595 | | New York City Municipal Water Finance Authority, New York, Water and Sewer System | No Opt. Call | AA+ | $ 10,228,746 |
| | | Revenue Bonds, Second Generation Resolution, Tender Option Bond Trust 2016-XFT908, 17.023%, | | | |
| | | 6/15/44, 144A (IF) | | | |
| 10,905 | | New York City Transitional Finance Authority, New York, Building Aid Revenue Bonds, | No Opt. Call | AA | 14,553,486 |
| | | Build America Taxable Bond Fiscal 2011 Series 2010S-1B, 6.828%, 7/15/40 (4) | | | |
| 10,000 | | New York City Transitional Finance Authority, New York, Future Tax Secured Bonds, Build | No Opt. Call | AAA | 12,389,700 |
| | | America Taxable Bonds, Series 2010G-1, 5.467%, 5/01/40 (4) | | | |
| 1,500 | | New York City, New York, General Obligation Bonds, Federally Taxable Build America | 12/20 at 100.00 | Aa1 | 1,595,970 |
| | | Bonds, Series 2010-F1, 6.646%, 12/01/31 | | | |
| 68,870 | | Total New York | | | 94,973,913 |
| | | Ohio – 8.6% (6.8% of Total Investments) | | | |
| 6,350 | | American Municipal Power Inc., Ohio, Combined Hydroelectric Projects Revenue Bonds, | No Opt. Call | A | 9,584,055 |
| | | Build America Bond Series 2010B, 7.834%, 2/15/41 | | | |
| 1,500 | | American Municipal Power Inc., Ohio, Meldahl Hydroelectric Projects Revenue Bonds, Build | No Opt. Call | A | 2,243,220 |
| | | America Bond Series 2010B, 7.499%, 2/15/50 | | | |
| 6,690 | | American Municipal Power Ohio Inc., Prairie State Energy Campus Project Revenue Bonds, | No Opt. Call | A1 | 8,731,654 |
| | | Build America Bond Series 2009C, 6.053%, 2/15/43 | | | |
| 25 | | Jobs Ohio Beverage System, Ohio, Statewide Liquor Profits Revenue Bonds, Senior Lien | No Opt. Call | AA | 28,123 |
| | | Taxable Series 2013B, 4.532%, 1/01/35 | | | |
| 17,850 | | Northeast Ohio Regional Sewer District, Wastewater Improvement Revenue Bonds, Build | 11/20 at 100.00 | AA+ | 18,764,277 |
| | | America Taxable Bonds, Series 2010, 6.038%, 11/15/40 (4) | | | |
| 10,575 | | Port of Greater Cincinnati Development Authority, Ohio, Special Obligation TIF Revenue | 1/26 at 100.00 | N/R | 10,316,336 |
| | | Bonds, Cooperative Township Public Parking, Kenwood Collection Redevelopment, Senior Lien | | | |
| | | Series 2016A, 6.600%, 1/01/39 | | | |
| 635 | | Toledo Lucas County Port Authority, Ohio, Revenue Bonds, StoryPoint Waterville Project, | No Opt. Call | N/R | 623,221 |
| | | Taxable Series 2016A-2, 8.500%, 1/15/22, 144A | | | |
| 43,625 | | Total Ohio | | | 50,290,886 |
| | | Oregon – 2.1% (1.6% of Total Investments) | | | |
| 4,000 | | Oregon Department of Administrative Services, Certificates of Participation, Federally | 5/20 at 100.00 | AA | 4,738,200 |
| | | Taxable Build America Bonds, Tender Option Bond Trust 2016-TXG001, 18.732%, 5/01/35, | | | |
| | | 144A (IF) (4) | | | |
| 7,230 | | Warm Springs Reservation Confederated Tribes, Oregon, Tribal Economic Development Bonds, | No Opt. Call | A3 | 7,339,033 |
| | | Hydroelectric Revenue Bonds, Pelton Round Butte Project, Refunding Series 2009A, | | | |
| | | 8.250%, 11/01/19 | | | |
| 11,230 | | Total Oregon | | | 12,077,233 |
| | | Pennsylvania – 1.7% (1.4% of Total Investments) | | | |
| 1,915 | | Commonwealth Financing Authority, Pennsylvania, State Appropriation Lease Bonds, Build | No Opt. Call | A1 | 2,439,767 |
| | | America Taxable Bonds, Series 2009D, 6.218%, 6/01/39 | | | |
| 2,000 | | Pennsylvania State, General Obligation Bonds, Build America Taxable Bonds, Third Series | 7/20 at 100.00 | Aa3 | 2,073,220 |
| | | 2010B, 5.850%, 7/15/30 | | | |
| 1,535 | | Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Build America Taxable Bonds, | No Opt. Call | A+ | 2,017,374 |
| | | Series 2009A, 6.105%, 12/01/39 | | | |
| 2,715 | | Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Build America Taxable Bonds, | No Opt. Call | A+ | 3,444,928 |
| | | Series 2010B, 5.511%, 12/01/45 | | | |
| 8,165 | | Total Pennsylvania | | | 9,975,289 |
| | | South Carolina – 3.3% (2.6% of Total Investments) | | | |
| | | South Carolina Public Service Authority, Electric System Revenue Bonds, Santee Cooper, | | | |
| | | Federally Taxable Build America Series 2010C: | | | |
| 8,980 | | 6.454%, 1/01/50 (UB) | No Opt. Call | A+ | 12,518,300 |
| 2,000 | | 6.454%, 1/01/50 – AGM Insured | No Opt. Call | AA | 2,830,900 |
21
| | | | | |
NBB | Nuveen Taxable Municipal Income Fund | | |
| | (formerly known as Nuveen Build America Bond Fund) | | |
| | Portfolio of Investments (continued) | | | |
| | March 31, 2019 | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | South Carolina (continued) | | | |
| $ 210 | | South Carolina Public Service Authority, Electric System Revenue Bonds, Santee Cooper, | No Opt. Call | A+ | $ 623,719 |
| | | Federally Taxable Build America Bonds, Tender Option Bond Trust 2016-XFT909, 19.769%, | | | |
| | | 1/01/50, 144A (IF) | | | |
| 2,585 | | South Carolina Public Service Authority, Santee Cooper Revenue Obligations, Refunding | No Opt. Call | AA | 3,194,801 |
| | | Series 2013C, 5.784%, 12/01/41 – AGM Insured | | | |
| 13,775 | | Total South Carolina | | | 19,167,720 |
| | | Tennessee – 3.4% (2.7% of Total Investments) | | | |
| 2,500 | | Jackson, Tennessee, Hospital Revenue Bonds, Jackson-Madison County General Hospital | No Opt. Call | A | 2,830,325 |
| | | Project, Series 2018B, 5.308%, 4/01/48 | | | |
| 5,000 | | Metropolitan Government Nashville & Davidson County Convention Center Authority, | No Opt. Call | A+ | 6,902,700 |
| | | Tennessee, Tourism Tax Revenue Bonds, Build America Taxable Bonds, Series 2010A-2, | | | |
| | | 7.431%, 7/01/43 | | | |
| 7,350 | | Metropolitan Government Nashville & Davidson County Convention Center Authority, | No Opt. Call | AA | 10,141,162 |
| | | Tennessee, Tourism Tax Revenue Bonds, Build America Taxable Bonds, Subordinate Lien Series | | | |
| | | 2010B, 6.731%, 7/01/43 | | | |
| 14,850 | | Total Tennessee | | | 19,874,187 |
| | | Texas – 9.7% (7.7% of Total Investments) | | | |
| 2,520 | | Dallas Area Rapid Transit, Texas, Sales Tax Revenue Bonds, Build America Taxable Bonds, | No Opt. Call | AA+ | 3,371,029 |
| | | Series 2009B, 5.999%, 12/01/44 | | | |
| 13,500 | | Dallas Convention Center Hotel Development Corporation, Texas, Hotel Revenue Bonds, | No Opt. Call | A | 17,892,630 |
| | | Build America Taxable Bonds, Series 09B, 7.088%, 1/01/42 | | | |
| 12,720 | | North Texas Tollway Authority, System Revenue Bonds, Taxable Build America Bonds, Series | 2/20 at 100.00 | Baa2 | 13,318,858 |
| | | 2010-B2, 8.910%, 2/01/30 | | | |
| 10,285 | | North Texas Tollway Authority, System Revenue Bonds, Taxable Build America Bond Series | No Opt. Call | A+ | 15,327,633 |
| | | 2009B, 6.718%, 1/01/49 | | | |
| 1,000 | | San Antonio, Texas, Electric and Gas System Revenue Bonds, Junior Lien, Build America | No Opt. Call | AA+ | 1,325,920 |
| | | Taxable Bond Series 2010A, 5.808%, 2/01/41 | | | |
| 10 | | San Antonio, Texas, Electric and Gas System Revenue Bonds, Series 2012, 4.427%, 2/01/42 | No Opt. Call | Aa1 | 11,262 |
| 5,000 | | San Antonio, Texas, General Obligation Bonds, Build America Taxable Bonds, Series 2010B, | 8/20 at 100.00 | AAA | 5,198,850 |
| | | 6.038%, 8/01/40 (4) | | | |
| 45,035 | | Total Texas | | | 56,446,182 |
| | | Utah – 0.7% (0.6% of Total Investments) | | | |
| 4,000 | | Central Utah Water Conservancy District, Utah, Revenue Bonds, Federally Taxable Build | 4/20 at 100.00 | AA+ | 4,118,800 |
| | | America Bonds, Series 2010A, 5.700%, 10/01/40 | | | |
| | | Virginia – 6.1% (4.8% of Total Investments) | | | |
| | | Metropolitan Washington Airports Authority, Virginia, Dulles Toll Road Revenue Bonds, | | | |
| | | Dulles Metrorail & Capital improvement Projects, Second Senior Lien, Build America Bond | | | |
| | | Series 2009D: | | | |
| 1,000 | | 7.462%, 10/01/46 – AGM Insured | No Opt. Call | AA | 1,554,940 |
| 10,260 | | 7.462%, 10/01/46 | No Opt. Call | BBB+ | 15,501,629 |
| 11,420 | | Tobacco Settlement Financing Corporation of Virginia, Tobacco Settlement Asset Backed | 6/25 at 100.00 | B– | 11,060,270 |
| | | Bonds, Refunding Senior Lien Series 2007A, 6.706%, 6/01/46 | | | |
| 6,135 | | Virginia Small Business Finance Authority, Tourism Development Financing Program Revenue | 4/28 at 117.16 | N/R | 7,366,356 |
| | | Bonds, Downtown Norfolk and Virginia Beach Oceanfront Hotel Projects, Series 2018B, 12.000%, | | | |
| | | 4/01/48, 144A | | | |
| 28,815 | | Total Virginia | | | 35,483,195 |
| | | Washington – 4.6% (3.6% of Total Investments) | | | |
| 4,000 | | Seattle, Washington, Municipal Light and Power Revenue Bonds, Federally Taxable Build | No Opt. Call | AA | 8,382,760 |
| | | America Bonds, Tender Option Bond Trust 2016-XFT905, 15.471%, 2/01/40, 144A (IF) (4) | | | |
22
| | | | | | |
Principal | | | Optional Call | | |
Amount (000) | | Description (1) | Provisions (2) | Ratings (3) | Value |
| | | Washington (continued) | | | |
| $ 14,025 | | Washington State Convention Center Public Facilities District, Lodging Tax Revenue | No Opt. Call | Aa3 | $ 18,414,965 |
| | | Bonds, Build America Taxable Bond Series 2010B, 6.790%, 7/01/40 | | | |
| 18,025 | | Total Washington | | | 26,797,725 |
| | | West Virginia – 0.8% (0.7% of Total Investments) | | | |
| 4,875 | | Tobacco Settlement Finance Authority, West Virginia, Tobacco Settlement Asset-Backed | 6/25 at 100.00 | B+ | 4,874,756 |
| | | Bonds, Taxable Turbo Series 2007A, 7.467%, 6/01/47 | | | |
| $ 569,367 | | Total Long-Term Investments (cost $604,406,828) | | | 735,416,793 |
| | | Floating Rate Obligations – (9.1)% | | | (53,090,000) |
| | | Reverse Repurchase Agreements – (18.3)% (6) | | | (107,175,000) |
| | | Other Assets Less Liabilities – 1.5% (7) | | | 8,946,191 |
| | | Net Assets Applicable to Common Shares – 100% | | | 584,097,984 |
Investments in Derivatives | | | | | | | |
Futures Contracts | | | | | | | |
| | | | | | | | Variation |
| | | | | | | Unrealized | Margin |
| | Contract | Number of | Expiration | Notional | | Appreciation | Receivable/ |
Description | Position | Contracts | Date | Amount | Value | (Depreciation) | (Payable) |
| U.S. Treasury Ultra Bond | Short | (925) | 6/19 | $(149,912,616) | $(155,400,000) | $(5,487,384) | $346,875 |
Interest Rate Swaps – OTC Cleared | | | | | | | | | |
| | | | | | | | | | | | Variation |
| | | Fund | Floating | | Fixed Rate | | | | Premiums | Unrealized | Margin |
| | Notional | Pay/Receive | Rate | Fixed Rate | Payment | Effective | Maturity | | Paid | Appreciation | Receivable/ |
| | Amount | Floating Rate | Index | (Annualized) | Frequency | Date (8) | Date | Value | (Received) | (Depreciation) | (Payable) |
| | $15,000,000 | Receive | 3-Month | 2.723% | Semi-Annually | 4/22/20 | 4/22/35 | $ (376,971) | $ 642 | $ (377,613) | $ 52,543 |
| | | | LIBOR | | | | | | | | |
| | 79,000,000 | Receive | 3-Month | 2.979% | Semi-Annually | 10/04/19 | 10/04/29 | (4,016,822) | 1,446 | (4,018,268) | 253,912 |
| | | | LIBOR | | | | | | | | |
| Total | $94,000,000 | | | | | | | $(4,393,793) | $2,088 | $(4,395,881) | $306,455 |
Total interest rate swap premiums paid | | | | | | $2,088 | | |
Total interest rate swap premiums received | | | | | | $ — | | |
Total receivable for variation margin on swap contracts | | | | | | $306,455 |
Total payable for variation margin on swap contracts | | | | | | $ — |
23
| | |
NBB | Nuveen Taxable Municipal Income Fund |
| | (formerly known as Nuveen Build America Bond Fund) |
| | Portfolio of Investments (continued)
March 31, 2019 |
| | |
| (1) | All percentages shown in the Portfolio of Investments are based on net assets applicable to common shares unless otherwise noted. |
(2) | Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns. Optional Call Provisions are not covered by the report of independent registered public accounting firm. |
| (3) | 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. |
| |
| |
| (4) | Investment, or portion of investment, has been pledged to collateralize the net payment obligations for inverse floating rate transactions and/or reverse repurchase agreements. As of the end of the reporting period, investments with a value of $130,928,697 have been pledged as collateral for reverse repurchase agreements. |
| |
| (5) | Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities, which ensure the timely payment of principal and interest. |
| (6) | Reverse Repurchase Agreements as a percentage of Total Investments is 14.6%. |
| (7) | 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 broker and/or the receivable or payable for variation margin as presented on the Statement of Assets and Liabilities, when applicable. |
| |
| (8) | 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. |
| ETM | Escrowed to maturity. |
| IF | Inverse floating rate security issued by a tender option bond (“TOB”) trust, the interest rate on which varies inversely with the Securities Industry Financial Markets Association (SIFMA) short-term rate, which resets weekly, or a similar short-term rate, and is reduced by the expenses related to the TOB trust. |
| |
| LIBOR | London Inter-Bank Offered Rate |
| UB | Underlying bond of an inverse floating rate trust reflected as a financing transaction. See Notes to Financial Statements, Note 3 – Portfolio Securities and Investments in Derivatives, Inverse Floating Rate Securities for more information. |
| | See accompanying notes to financial statements. |
24
Statement of Assets and Liabilities
March 31, 2019
| | | | |
Assets | | | |
| Long-term investments, at value (cost $604,406,828) | | | 735,416,793 | |
Cash collateral at broker for investments in futures contracts(1) | | | 3,600,000 | |
Cash collateral at broker for investments in swaps(1) | | | 4,274,566 | |
| Interest rate swaps premiums paid | | | 2,088 | |
| Receivable for: | | | | |
| Interest | | | 12,143,291 | |
| Investments sold | | | 116,000 | |
| Variation margin on futures contracts | | | 346,875 | |
| Variation margin on swap contracts | | | 306,455 | |
| Other assets | | | 46,031 | |
| Total assets | | | 756,252,099 | |
Liabilities | | | | |
| Cash overdraft | | | 8,242,816 | |
| Reverse repurchase agreements | | | 107,175,000 | |
| Floating rate obligations | | | 53,090,000 | |
| Payable for common share dividends | | | 2,759,443 | |
| Accrued expenses: | | | | |
| Management fees | | | 433,387 | |
| Interest | | | 151,009 | |
| Trustees fees | | | 51,019 | |
| Other | | | 251,441 | |
| Total liabilities | | | 172,154,115 | |
| Net assets applicable to common shares | | $ | 584,097,984 | |
| Common shares outstanding | | | 27,355,891 | |
| Net asset value (“NAV”) per common share outstanding | | $ | 21.35 | |
| | | | | |
Net assets applicable to common shares consist of: | | | | |
| Common shares, $0.01 par value per share | | $ | 273,559 | |
| Paid-in surplus | | | 497,592,914 | |
| Total distributable earnings | | | 86,231,511 | |
| Net assets applicable to common shares | | $ | 584,097,984 | |
| Authorized common shares | | Unlimited | |
(1) | Cash pledged to collateralize the net payment obligations for investments in derivatives. |
See accompanying notes to financial statements.
25
Statement of Operations
Year Ended March 31, 2019
| | | | |
Investment Income | | $ | 40,743,357 | |
Expenses | | | | |
| Management fees | | | 5,008,691 | |
| Interest expense | | | 3,777,950 | |
| Custodian fees | | | 78,665 | |
| Trustees fees | | | 22,610 | |
| Professional fees | | | 93,036 | |
| Shareholder reporting expenses | | | 94,072 | |
| Shareholder servicing agent fees | | | 249 | |
| Stock exchange listing fees | | | 7,299 | |
| Investor relations expenses | | | 8,396 | |
| Merger expenses | | | 752,740 | |
| Other | | | 35,014 | |
| Total expenses | | | 9,878,722 | |
| Net investment income (loss) | | | 30,864,635 | |
Realized and Unrealized Gain (Loss) | | | | |
| Net realized gain (loss) from: | | | | |
| Investments | | | (5,357,815 | ) |
| Futures contracts | | | (5,165,501 | ) |
| Swaps | | | 2,932,852 | |
| Change in net unrealized appreciation (depreciation) of: | | | | |
| Investments | | | 10,449,587 | |
| Futures contracts | | | (5,487,384 | ) |
| Swaps | | | (7,655,816 | ) |
| Net realized and unrealized gain (loss) | | | (10,284,077 | ) |
| Net increase (decrease) in net assets applicable to common shares from operations | | $ | 20,580,558 | |
See accompanying notes to financial statements.
26
Statement of Changes in Net Assets
| | | | | | | |
| | | Year | | | Year(1) | |
| | | Ended | | | Ended | |
| | | 3/31/19 | | | 3/31/18 | |
Operations | | | | | | |
| Net investment income (loss) | | $ | 30,864,635 | | | $ | 31,285,532 | |
| Net realized gain (loss) from: | | | | | | | | |
| Investments | | | (5,357,815 | ) | | | 3,329,114 | |
| Futures contracts | | | (5,165,501 | ) | | | — | |
| Swaps | | | 2,932,852 | | | | 2,650,576 | |
| Change in net unrealized appreciation (depreciation) of: | | | | | | | | |
| Investments | | | 10,449,587 | | | | 11,189,130 | |
| Futures contracts | | | (5,487,384 | ) | | | — | |
| Swaps | | | (7,655,816 | ) | | | (992,592 | ) |
| Net increase (decrease) in net assets applicable to common shares from operations | | | 20,580,558 | | | | 47,461,760 | |
Distributions to Common Shareholders(2) | | | | | | | | |
Dividends(3) | | | (35,034,265 | ) | | | (32,707,013 | ) |
| Decrease in net assets applicable to common shares from distributions to common shareholders | | | (35,034,265 | ) | | | (32,707,013 | ) |
Capital Share Transactions | | | | | | | | |
| Common Shares: | | | | | | | | |
| Issued in Merger | | | 160,226,114 | | | | — | |
| Cost of shares repurchased and retired through tender offer | | | (142,860,745 | ) | | | — | |
| Net increase (decrease) in net assets applicable to common shares from capital share transactions | | | 17,365,369 | | | | — | |
| Net increase (decrease) in net assets applicable to common shares | | | 2,911,662 | | | | 14,754,747 | |
| Net assets applicable to common shares at the beginning of period | | | 581,186,322 | | | | 566,431,575 | |
| Net assets applicable to common shares at the end of period | | $ | 584,097,984 | | | $ | 581,186,322 | |
(1) | Prior period amounts have been conformed to current year presentation. See Notes to Financial Statements, Note 11 – New Accounting Pronouncements for further details. |
(2) | The composition and per share amounts of the Fund’s distributions are presented in the Financial Highlights. The distribution information for the Fund as of its most recent tax year end is presented within the Notes to Financial Statements, Note 6 – Income Tax Information. |
(3) | For the fiscal year ended March 31, 2018, the Fund’s distributions to common shareholders were paid from net investment income. |
See accompanying notes to financial statements.
27
Statement of Cash Flows
Year Ended March 31, 2019
| | | | |
Cash Flows from Operating Activities: | | | |
Net Increase (Decrease) in Net Assets Applicable to Common Shares from Operations | | $ | 20,580,558 | |
| Adjustments to reconcile the net increase (decrease) in net assets applicable to | | | | |
| common shares from operations to net cash provided by (used in) operating activities: | | | | |
| Purchases of investments | | | (29,766,277 | ) |
| Proceeds from sales and maturities of investments | | | 172,876,702 | |
| Proceeds from (Purchases of) short-term investments, net | | | 2,555,990 | |
| Premiums received (paid) for interest rate swaps | | | (295 | ) |
| Amortization (Accretion) of premiums and discounts, net | | | 1,683,242 | |
| (Increase) Decrease in: | | | | |
| Receivable for interest | | | 2,540,725 | |
| Receivable for investments sold | | | (104,000 | ) |
| Receivable for variation margin on future contracts | | | (346,875 | ) |
| Receivable for variation margin on swap contracts | | | (306,455 | ) |
| Other assets | | | 1,786 | |
| Increase (Decrease) in: | | | | |
| Payable for variation margin on swap contracts | | | (255,595 | ) |
| Accrued management fees | | | 33,533 | |
| Accrued interest | | | 131,269 | |
| Accrued Trustees fees | | | 4,872 | |
| Accrued other expenses | | | (135,191 | ) |
| Net realized (gain) loss from investments | | | 5,357,815 | |
| Change in net unrealized (appreciation) depreciation of investments | | | (10,449,587 | ) |
| Net cash provided by (used in) operating activities | | | 164,402,217 | |
Cash Flows from Financing Activities | | | | |
| Proceeds from reverse repurchase agreements | | | 95,175,000 | |
| Repayment of borrowings | | | (90,175,000 | ) |
| Increase (Decrease) in cash overdraft | | | 8,242,816 | |
| Cash distributions paid to common shareholders | | | (34,936,494 | ) |
| Cost of common shares repurchased and retired through tender offer | | | (142,860,745 | ) |
| Net cash provided by (used in) financing activities | | | (164,554,423 | ) |
Net Increase (Decrease) in Cash and Cash Collateral at Brokers | | | (152,206 | ) |
| Cash and cash collateral at brokers at the beginning of period | | | 6,674,707 | |
| Cash and cash collateral acquired in connection with the Merger | | | 1,352,065 | |
| Cash and cash collateral at brokers at the end of period | | $ | 7,874,566 | |
| | | | | |
Supplemental Disclosures of Cash Flow Information(1) | | | | |
| Cash paid for interest (excluding borrowing costs) | | $ | 3,638,632 | |
(1) | See Note to Financial Statements, Note 1 – General Information and Significant Accounting Policies, Fund Merger for more information of the non-cash activities related to the Fund’s Merger. |
See accompanying notes to financial statements.
28
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29
| Selected data for a common share outstanding throughout each period: | | | | |
| | | | | | | Less Distributions | | | |
| | Investment Operations | | | to Common Shareholders | | Common Share |
| | Beginning | Net | Net | | | From | From | | | | |
| | Common | Investment | Realized/ | | | Net | Accumulated | | | | Ending |
| | Share | Income | Unrealized | | | Investment | Net Realized | | | Ending | Share |
| | NAV | (Loss)(a) | Gain (Loss) | Total | | Income | Gains | Total | | NAV | Price |
| Year Ended 3/31: | | | | | | | | | | | |
| 2019 | $21.96 | $1.08 | $(0.45) | $0.63 | | $(1.24) | $ — | $(1.24) | | $21.35 | $20.52 |
| 2018 | 21.41 | 1.18 | 0.61 | 1.79 | | (1.24) | — | (1.24) | | 21.96 | 20.79 |
| 2017 | 22.09 | 1.22 | (0.62) | 0.60 | | (1.28) | — | (1.28) | | 21.41 | 20.90 |
| 2016 | 23.13 | 1.29 | (0.98) | 0.31 | | (1.35) | — | (1.35) | | 22.09 | 21.59 |
| 2015 | 21.45 | 1.37 | 1.70 | 3.07 | | (1.39) | — | (1.39) | | 23.13 | 21.24 |
| | Borrowings at | | | | | | | |
| | the End of Period | | | | | | | |
| | Aggregate | | | | | | | | |
| | Amount | Asset | | | | | | | |
| | Outstanding | Coverage | | | | | | | |
| | (000) | Per $1,000 | | | | | | | |
| Year Ended 3/31: | | | | | | | | | |
| 2019 | $ — | $ — | | | | | | | |
| 2018 | 90,175 | 7,445 | | | | | | | |
| 2017 | 90,175 | 7,281 | | | | | | | |
| 2016 | 89,500 | 7,532 | | | | | | | |
| 2015 | 89,500 | 7,839 | | | | | | | |
30
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Common Share Supplemental Data/ | | | | |
| | | | | | | | | | Ratios Applicable to Common Shares | | | | |
| Common Share | | | | | | | | | | | | | |
Total Returns | | | | | | Ratios to Average Net Assets(c) | | | | |
| | |
| | | | Based on | | | Ending | | | | | | Net | | | Portfolio | |
Based on | | | Share | | | Net | | | | | | Investment | | | Turnover | |
NAV(b) | | | Price(b) | | | Assets (000) | | | Expenses | | | Income (Loss) | | | Rate(d) | |
| | 3.06 | % | | | 4.97 | % | | | $584,098 | | | | 1.64 | % | | | 5.12 | % | | | 4 | % |
| | 8.47 | | | | 5.42 | | | | 581,186 | | | | 1.34 | | | | 5.37 | | | | 6 | |
| | 2.66 | | | | 2.70 | | | | 566,432 | | | | 1.21 | | | | 5.48 | | | | 11 | |
| | 1.63 | | | | 8.66 | | | | 584,597 | | | | 1.13 | | | | 5.93 | | | | 16 | |
| | 14.61 | | | | 15.75 | | | | 612,075 | | | | 1.07 | | | | 6.04 | | | | 13 | |
(a) Per share Net Investment Income (Loss) is calculated using the average daily shares method.
(b) Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending NAV. The actual reinvest price for the last dividend declared in the period may often be based on the Fund’s market price (and not its NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
Total Return Based on Common Share Price is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
(c) • Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings and/or reverse repurchase agreements (as described in Note 8 – Fund
Leverage), where applicable.
• The expense ratios reflect, among other things, all interest expense and other costs related to borrowings and/or reverse repurchase agreements (as described in Note 8 – Fund Leverage) and/or the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse floaters held by the Fund (as described in Note 3 – Portfolio Securities and Investments in Derivatives, Inverse Floating Rate Securities), where applicable, as follows:
| | |
| Year Ended 3/31: | |
| 2019 | 0.63% |
| 2018 | 0.47 |
| 2017 | 0.33 |
| 2016 | 0.22 |
| 2015 | 0.19 |
(d) Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 5 – Investment Transactions) divided by the average long-term market value during the period.
See accompanying notes to financial statements.
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Notes to Financial Statements
1. General Information and Significant Accounting Policies
General Information
Fund Information
The fund covered in this report and its corresponding New York Stock Exchange (“NYSE”) symbol is Nuveen Taxable Municipal Income Fund (NBB) (formerly known as Nuveen Build America Bond Fund) (the “Fund”). The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund was organized as a Massachusetts business trust on December 4, 2009.
In conjunction with the merger mentioned below, NBB’s contingent term policy was eliminated and its name was changed to Nuveen Taxable Municipal Income Fund (NBB). The Fund’s benchmark also changed from the Barclays U.S. Aggregate Build America Bond Eligible to the Bloomberg Barclays Taxable Municipal Long Bond Index. Additionally, NBB conducted a tender offer of twenty percent of its shares as further described in Note 4 ��� Fund Shares, Tender Offer.
The end of the reporting period for the Fund is March 31, 2019, and the period covered by these Notes to Financial Statements is for the fiscal year ended March 31, 2019 (the “current fiscal period”).
Investment Adviser
The Fund’s investment adviser is Nuveen Fund Advisors, LLC (the “Adviser”), a subsidiary of Nuveen, LLC (“Nuveen”). Nuveen is the investment management arm of Teachers Insurance and Annuity Association of America (TIAA). The Adviser has overall responsibility for management of the Fund, oversees the management of the Fund’s portfolio, manages the Fund’s business affairs and provides certain clerical, bookkeeping and other administrative services, and, if necessary, asset allocation decisions. The Adviser has entered into a sub-advisory agreement with Nuveen Asset Management, LLC (the “Sub-Adviser”), a subsidiary of the Adviser, under which the Sub-Adviser manages the investment portfolio of the Fund.
Investment Objectives and Principal Investment Strategies
The Fund’s primary investment objective is to provide current income through investments in taxable municipal securities. The Fund’s secondary investment objective is to seek enhanced portfolio value and total return. The Fund seeks to achieve its investment objective by investing primarily in a diversified portfolio of taxable municipal securities, which make up approximately 80% of its managed assets (as defined in Note 7 – Management Fees and Other Transactions with Affiliates). Prior to November 19, 2018, the Fund invested approximately 80% of its managed assets in taxable municipal securities known as Build America Bonds (“BABs”). BABs include bonds issued by state and local governments to finance capital projects such as public schools, roads, transportation infrastructure, bridges, ports and public buildings, among others, pursuant to the American Recovery and Reinvestment Act of 2009, which offered municipal issuers a federal subsidy equal to 35% of a bond’s interest payments. Under normal circumstances, the Fund may invest 20% of its managed assets in securities other than taxable municipal securities including tax-exempt municipal securities, U.S. Treasury and other U.S. government agency securities. At least 80% of the Fund’s managed assets will be invested in securities that are investment grade quality at the time of purchase, as rated by at least one independent rating agency or judged to be of comparable quality by the Sub-Adviser. In addition, the Fund will use an integrated leverage and hedging strategy so that the Fund has the potential to enhance income and risk-adjusted total return over time. The Fund may employ leverage instruments such as bank borrowings, including loans from certain financial institutions, and portfolio investments that have the economic effect of leverage, including investments in inverse floating rate securities.
Fund Merger
Effective prior to the opening of business on November 19, 2018, Nuveen Build American Bond Opportunity Fund (NBD) (the “Target Fund”) was merged into the Fund (the “Acquiring Fund”) (the “Merger”).
For accounting and performance reporting purposes, the Acquiring Fund is the survivor.
Upon the closing of the Merger, the Target Fund merged with and into a wholly-owned subsidiary of the Acquiring Fund (“Merger Sub”), formed solely for the purpose of consummating the Merger. Shares of the Target Fund were converted into newly issued common shares of the Acquiring Fund. The Merger Sub then distributed its assets to the Acquiring Fund and the Acquiring Fund assumed all the liabilities of the Merger Sub, in complete liquidation and dissolution of the Merger Sub. As a result of the Merger, the assets of the Target Fund and the Acquiring Fund were combined and shareholders of the Target Fund became shareholders of the Acquiring Fund. Holders of common shares of the Target Fund received newly issued
32
common shares of the Acquiring Fund, the aggregate NAV of which was equal to the aggregate NAV of the common shares of the Target Fund held immediately prior to the Merger. However, no fractional Acquiring Fund shares were distributed to Target Fund’s shareholders in connection with the Merger. Details of the Merger are further described in Note 10 – Fund Merger.
Significant Accounting Policies
The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) Topic 946 “Financial Services – Investment Companies.” The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Fund has earmarked securities in its portfolio with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments.
As of the end of the reporting period, the Fund did not have any outstanding when-issued/delayed delivery purchase commitments.
Investment Income
Investment income is comprised of interest income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, and is recorded on an accrual basis. Investment income also reflects payment-in-kind (“PIK”) interest and paydown gains and losses, if any. PIK interest represents income received in the form of securities in lieu of cash.
Professional Fees
Professional fees presented on the Statement of Operations consist of legal fees incurred in the normal course of operations, audit fees, tax consulting fees and, in some cases, workout expenditures. Workout expenditures are incurred in an attempt to protect or enhance an investment or to pursue other claims or legal actions on behalf of Fund shareholders. If a refund is received for workout expenditures paid in a prior reporting period, such amounts will be recognized as “Legal fee refund” on the Statement of Operations.
Dividends and Distributions to Common Shareholders
Dividends from net investment income, if any, are declared monthly. Net realized capital gains from investment transactions, if any, are distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Distributions to common shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
Compensation
The Fund pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Fund from the Adviser or its affiliates. The Fund’s Board of Trustees (“the Board”) has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
Indemnifications
Under the Fund’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Netting Agreements
In the ordinary course of business, the Fund may enter into transactions subject to enforceable International Swaps and Derivatives Association, Inc. (ISDA) master agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset certain securities and derivatives with a specific counterparty, when applicable, as well as any collateral received or delivered to that counterparty based on the terms of the agreements. Generally, the Fund manages its cash collateral and securities collateral on a counterparty basis.
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Notes to Financial Statements (continued)
The Fund’s investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 3 – Portfolio Securities and Investments in Derivatives.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to common shares from operations during the current fiscal period. Actual results may differ from those estimates.
2. Investment Valuation and Fair Value Measurements
The fair valuation input levels as described below are for fair value measurement purposes.
Fair value is defined as the price that would be received upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.
Level 1 – Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
Level 2 – Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spreads, etc.).
Level 3 – Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
Prices of fixed income securities are provided by an independent pricing service (“pricing service”) approved by the Board. The pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market activity, provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the observability of the significant inputs.
Prices of swap contracts are also provided by a pricing service approved by the Board using the same methods as described above and are generally classified as Level 2.
Futures contracts are valued using the closing settlement price or, in the absence of such a price, the last traded price and are generally classified as Level 1.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Board and/or its appointee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s net asset value (“NAV”) (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security’s fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the observability of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Board and/or its appointee.
34
The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of the end of the reporting period:
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Long-Term Investments*: | | | | | | | | | | | | |
| Municipal Bonds | | $ | — | | | $ | 735,416,793 | | | $ | — | | | $ | 735,416,793 | |
| Investments in Derivatives: | | | | | | | | | | | | | | | | |
| Futures Contracts** | | | (5,487,384 | ) | | | — | | | | — | | | | (5,487,384 | ) |
| Interest Rate Swaps** | | | — | | | | (4,395,881 | ) | | | — | | | | (4,395,881 | ) |
| Total | | $ | (5,487,384 | ) | | $ | 731,020,912 | | | $ | — | | | $ | 725,533,528 | |
| * | Refer to the Fund’s Portfolio of Investments for state classifications. |
| ** | Represents net unrealized appreciation (depreciation) as reported in the Fund’s Portfolio of Investments. |
3. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Inverse Floating Rate Securities
The Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond (referred to as an “Underlying Bond”), typically with a fixed interest rate, into a special purpose tender option bond (“TOB”) trust (referred to as the “TOB Trust”) created by or at the direction of the Fund. In turn, the TOB Trust issues (a) floating rate certificates (referred to as “Floaters”), in face amounts equal to some fraction of the Underlying Bond’s par amount or market value, and (b) an inverse floating rate certificate (referred to as an “Inverse Floater”) that represents all remaining or residual interest in the TOB Trust. Floaters typically pay short-term tax-exempt interest rates to third parties who are also provided a right to tender their certificate and receive its par value, which may be paid from the proceeds of a remarketing of the Floaters, by a loan to the TOB Trust from a third party liquidity provider (“Liquidity Provider”), or by the sale of assets from the TOB Trust. The Inverse Floater is issued to a long term investor, such as the Fund. The income received by the Inverse Floater holder varies inversely with the short-term rate paid to holders of the Floaters, and in most circumstances the Inverse Floater holder bears substantially all of the Underlying Bond’s downside investment risk and also benefits disproportionately from any potential appreciation of the Underlying Bond’s value. The value of an Inverse Floater will be more volatile than that of the Underlying Bond because the interest rate is dependent on not only the fixed coupon rate of the Underlying Bond but also on the short-term interest paid on the Floaters, and because the Inverse Floater essentially bears the risk of loss (and possible gain) of the greater face value of the Underlying Bond.
The Inverse Floater held by the Fund gives the Fund the right to (a) cause the holders of the Floaters to tender their certificates at par (or slightly more than par in certain circumstances), and (b) have the trustee of the TOB Trust (the “Trustee”) transfer the Underlying Bond held by the TOB Trust to the Fund, thereby collapsing the TOB Trust.
The Fund may acquire an Inverse Floater in a transaction where it (a) transfers an Underlying Bond that it owns to a TOB Trust created by a third party or (b) transfers an Underlying Bond that it owns, or that it has purchased in a secondary market transaction for the purpose of creating an Inverse Floater, to a TOB Trust created at its direction, and in return receives the Inverse Floater of the TOB Trust (referred to as a “self-deposited Inverse Floater”). The Fund may also purchase an Inverse Floater in a secondary market transaction from a third party creator of the TOB Trust without first owning the Underlying Bond (referred to as an “externally-deposited Inverse Floater”).
An investment in a self-deposited Inverse Floater is accounted for as a “financing” transaction (i.e., a secured borrowing). For a self-deposited Inverse Floater, the Underlying Bond deposited into the TOB Trust is identified in the Fund’s Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund recognizing as liabilities, labeled “Floating rate obligations” on the Statement of Assets and Liabilities, (a) the liquidation value of Floaters issued by the TOB Trust, and (b) the amount of any borrowings by the TOB Trust from a Liquidity Provider to enable the TOB Trust to purchase outstanding Floaters in lieu of a remarketing. In addition, the Fund recognizes in “Investment Income” the entire earnings of the Underlying Bond, and recognizes (a) the interest paid to the holders of the Floaters or on the TOB Trust’s borrowings, and (b) other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust, as a component of “Interest expense” on the Statement of Operations.
In contrast, an investment in an externally-deposited Inverse Floater is accounted for as a purchase of the Inverse Floater and is identified in the Fund’s Portfolio of Investments as “(IF) – Inverse floating rate investment.” For an externally-deposited Inverse Floater, a Fund’s Statement of Assets and Liabilities recognizes the Inverse Floater and not the Underlying Bond as an asset, and the Fund does not recognize the Floaters, or any related borrowings from a Liquidity Provider, as a liability. Additionally, the Fund reflects in “Investment Income” only the net amount of earnings on the Inverse Floater (net of the interest paid to the holders of the Floaters or the Liquidity Provider as lender, and the expenses of the Trust), and does not show the amount of that interest paid or the expenses of the TOB Trust as described above as interest expense on the Statement of Operations.
Fees paid upon the creation of a TOB Trust for self-deposited Inverse Floaters and externally-deposited Inverse Floaters are recognized as part of the cost basis of the Inverse Floater and are capitalized over the term of the TOB Trust.
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Notes to Financial Statements (continued)
As of the end of the reporting period, the aggregate value of Floaters issued by the Fund’s TOB Trust for self-deposited Inverse Floaters and externally-deposited Inverse Floaters was as follows:
Floating Rate Obligations Outstanding | | | |
| Floating rate obligations: self-deposited Inverse Floaters | | $ | 53,090,000 | |
| Floating rate obligations: externally-deposited Inverse Floaters | | | 139,190,000 | |
| Total | | $ | 192,280,000 | |
During the current fiscal period, the average amount of Floaters (including any borrowings from a Liquidity Provider) outstanding and the average annual interest rate and fees related to self-deposited Inverse Floaters, were as follows:
Self-Deposited Inverse Floaters | | | |
| Average floating rate obligations outstanding | | $ | 53,090,000 | |
| Average annual interest rate and fees | | | 2.10 | % |
TOB Trusts are supported by a liquidity facility provided by a Liquidity Provider pursuant to which the Liquidity Provider agrees, in the event that Floaters are (a) tendered to the Trustee for remarketing and the remarketing does not occur, or (b) subject to mandatory tender pursuant to the terms of the TOB Trust agreement, to either purchase Floaters or to provide the Trustee with an advance from a loan facility to fund the purchase of Floaters by the TOB Trust. In certain circumstances, the Liquidity Provider may otherwise elect to have the Trustee sell the Underlying Bond to retire the Floaters that were tendered and not remarketed prior to providing such a loan. In these circumstances, the Liquidity Provider remains obligated to provide a loan to the extent that the proceeds of the sale of the Underlying Bond is not sufficient to pay the purchase price of the Floaters.
The size of the commitment under the loan facility for a given TOB Trust is at least equal to the balance of that TOB Trust’s outstanding Floaters plus any accrued interest. In consideration of the loan facility, fee schedules are in place and are charged by the Liquidity Provider(s). Any loans made by the Liquidity Provider will be secured by the purchased Floaters held by the TOB Trust. Interest paid on any outstanding loan balances will be effectively borne by the Fund that owns the Inverse Floaters of the TOB Trust that has incurred the borrowing and may be at a rate that is greater than the rate that would have been paid had the Floaters been successfully remarketed.
As described above, any amounts outstanding under a liquidity facility are recognized as a component of “Floating rate obligations” on the Statement of Assets and Liabilities by the Fund holding the corresponding Inverse Floaters issued by the borrowing TOB Trust. As of the end of the reporting period, there were no loans outstanding under any such facility.
The Fund may also enter into shortfall and forbearance agreements (sometimes referred to as a “recourse arrangement”) (TOB Trusts involving such agreements are referred to herein as “Recourse Trusts”), under which a Fund agrees to reimburse the Liquidity Provider for the Trust’s Floaters, in certain circumstances, for the amount (if any) by which the liquidation value of the Underlying Bond held by the TOB Trust may fall short of the sum of the liquidation value of the Floaters issued by the TOB Trust plus any amounts borrowed by the TOB Trust from the Liquidity Provider, plus any shortfalls in interest cash flows. Under these agreements, a Fund’s potential exposure to losses related to or on an Inverse Floater may increase beyond the value of the Inverse Floater as a Fund may potentially be liable to fulfill all amounts owed to holders of the Floaters or the Liquidity Provider. Any such shortfall amount in the aggregate is recognized as “Unrealized depreciation on Recourse Trusts” on the Statement of Assets and Liabilities.
As of the end of the reporting period, the Fund’s maximum exposure to the Floaters issued by Recourse Trusts for self-deposited Inverse Floaters and externally-deposited Inverse Floaters was as follows:
Floating Rate Obligations - Recourse Trusts | | | |
| Maximum exposure to Recourse Trusts: self-deposited Inverse Floaters | | $ | 53,090,000 | |
| Maximum exposure to Recourse Trusts: externally-deposited Inverse Floaters | | | 139,190,000 | |
| Total | | $ | 192,280,000 | |
Zero Coupon Securities
A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
Investments in Derivatives
In addition to the inverse floating rate securities in which the Fund may invest, which are considered portfolio securities for financial reporting purposes, the Fund is authorized to invest in certain other derivative instruments such as futures, options and swap contracts. The Fund limits its investments in futures, options on futures and swap contracts to the extent necessary for the Adviser to claim the exclusion from registration by the Commodity Futures Trading Commission as a commodity pool operator with respect to the Fund. The Fund records derivative instruments at fair value, with
36
changes in fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.
Futures Contracts
Upon execution of a futures contract, the Fund is obligated to deposit cash or eligible securities, also known as ‘‘initial margin,’’ into an account at its clearing broker equal to a specified percentage of the contract amount. Cash held by the broker to cover initial margin requirements on open futures contracts, if any, is recognized as ‘‘Cash collateral at broker for investments in futures contracts’’ on the Statement of Assets and Liabilities. Investments in futures contracts obligate the Fund and the clearing broker to settle monies on a daily basis representing changes in the prior days ‘‘mark-to-market’’ of the open contracts. If the Fund has unrealized appreciation the clearing broker would credit the Fund’s account with an amount equal to appreciation and conversely if the Fund has unrealized depreciation the clearing broker would debit the Fund’s account with an amount equal to depreciation. These daily cash settlements are also known as ‘‘variation margin.’’ Variation margin is recognized as a receivable and/or payable for ‘‘Variation margin on futures contracts’’ on the Statement of Assets and Liabilities.
During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by ‘‘marking-to-market’’ on a daily basis to reflect the changes in market value of the contract, which is recognized as a component of ‘‘Change in net unrealized appreciation (depreciation) of futures contracts’’ on the Statement of Operations. When the contract is closed or expired, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and value of the contract when originally entered into, which is recognized as a component of ‘‘Net realized gain (loss) from futures contracts’’ on the Statement of Operations.
Risks of investments in futures contracts include the possible adverse movement in the price of the securities or indices underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and/or that a change in the value of the contract may not correlate with a change in the value of the underlying securities or indices.
During the current fiscal period, the Fund managed the duration of its portfolio by shorting interest rate futures contracts.
The average notional amount of futures contracts outstanding during the current fiscal period was as follows:
| | |
Average notional amount of futures contracts outstanding* | $48,682,339 |
| * | The average notional amount is calculated based on the absolute aggregate notional of contracts outstanding at the beginning of the current fiscal period and at the end of each quarter within the current fiscal period. |
The following table presents the fair value of all futures contracts held by the Fund as of end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
| | | Location on the Statement of Assets and Liabilities |
Underlying | Derivative | Asset Derivative | | (Liability) Derivative |
Risk Exposure | Instrument | Location | Value | | Location | | Value |
| Interest rate | Futures contracts | Receivable for variation | | | | | |
| | | margin on futures contracts* | $(5,487,384) | | — | | $ — |
| * | Value represents unrealized appreciation (depreciation) of futures contracts as reported on the Fund’s Portfolio of Investments and not the asset and/or liability derivatives location as described in the table above. |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on futures contracts on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.
| | | Net Realized | Change in net Unrealized |
Underlying | Derivative | Gain (Loss) from | Appreciation (Depreciation) of |
Risk Exposure | Instrument | Futures Contracts | Futures Contracts |
| Interest rate | Futures contracts | $(5,165,501) | $(5,487,384) |
Interest Rate Swap Contracts
Interest rate swap contracts involve the Fund’s agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment. Forward interest rate swap contracts involve the Fund’s agreement with a counterparty to pay, in the future, a fixed or variable rate payment in exchange for the counterparty paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the “effective date”).
The amount of the payment obligation for an interest rate swap is based on the notional amount and the termination date of the contract. Interest rate swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that the Fund is to receive.
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Notes to Financial Statements (continued)
Interest rate swap contracts are valued daily. Upon entering into an interest rate swap contract (and beginning on the effective date for a forward interest rate swap contract), the Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on the interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Fund’s contractual rights and obligations under the contracts. For an over-the-counter (“OTC”) swap that is not cleared through a clearing house (“OTC Uncleared”), the amount recorded on these transactions is recognized on the Statement of Assets and Liabilities as a component of “Unrealized appreciation or depreciation on interest rate swaps.”
Upon the execution of an OTC swap cleared through a clearing house (“OTC Cleared”), the Fund is obligated to deposit cash or eligible securities, also known as “initial margin,” into an account at its clearing broker equal to a specified percentage of the contract amount. Cash deposited by the Fund to cover initial margin requirements on open swap contracts, if any, is recognized as a component of “Cash collateral at brokers for investments in swaps” on the Statement of Assets and Liabilities. Investments in OTC Cleared swaps obligate the Fund and the clearing broker to settle monies on a daily basis representing changes in the prior day’s “mark-to-market” of the swap contract. If the Fund has unrealized appreciation, the clearing broker will credit the Fund’s account with an amount equal to the appreciation. Conversely, if the Fund has unrealized depreciation, the clearing broker will debit the Fund’s account with an amount equal to the depreciation. These daily cash settlements are also known as “variation margin.” Variation margin for OTC Cleared swaps is recognized as a receivable and/or payable for “Variation margin on swap contracts” on the Statement of Assets and Liabilities. Upon the execution of an OTC Uncleared swap, neither the Fund nor the counterparty is required to deposit initial margin as the trades are recorded bilaterally between both parties to the swap contract, and the terms of the variation margin are subject to a predetermined threshold negotiated by the Fund and the counterparty. Variation margin for OTC Uncleared swaps is recognized as a component of “Unrealized appreciation or depreciation on interest rate swaps” as described in the preceding paragraph.
The net amount of periodic payments settled in cash are recognized as a component of “Net realized gain (loss) from swaps” on the Statement of Operations, in addition to the net realized gain or loss recorded upon the termination of the swap contract. For tax purposes, payments expected to be received or paid on the swap contracts are treated as ordinary income or expense, respectively. Changes in the value of the swap contracts during the fiscal period are recognized as a component of “Change in net unrealized appreciation (depreciation) of swaps” on the Statement of Operations. In certain instances, payments are made or received upon entering into the swap contract to compensate for differences between the stated terms of the swap agreements and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). Payments received or made at the beginning of the measurement period, if any, are recognized as “Interest rate swaps premiums received and/or paid” on the Statement of Assets and Liabilities.
During the current fiscal period, the Fund continued to use swap contracts to reduce the duration of its bond portfolio as well as to fix its interest cost of leverage.
The average notional amount of interest rate swap contracts outstanding during the current fiscal period was as follows:
| |
Average notional amount of interest rate swap contracts outstanding* | $133,200,000 |
* The average notional amount is calculated based on the outstanding notional at the beginning of the current fiscal period and at the end of each fiscal quarter within the current fiscal period.
The following table presents the fair value of all swap contracts held by the Fund as of the end of the reporting period, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
| | | Location on the Statement of Assets and Liabilities |
Underlying | Derivative | Asset Derivatives | | (Liability) Derivatives |
Risk Exposure | Instrument | Location | Value | | Location | | Value |
| Interest rate | Swaps (OTC Cleared) | Receivable for variation | | | | | |
| | | margin on swap contracts**^ | $(4,395,881) | | — | | $ — |
| ** | Value represents the unrealized appreciation (depreciation) of swaps as reported in the Fund’s Portfolio of Investments and not the asset and/or liability amount as described in the table above. |
| ^ | Some swap contracts require a counterparty to pay or receive a premium, which is disclosed on the Statement of Assets and Liabilities and is not reflected in the cumulative unrealized appreciation (depreciation) presented above. |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (deprecation) recognized on swap contracts on the Statement of Operations during the current fiscal period, and the primary underlying risk exposure.
| | | Net Realized | Change in Net Unrealized |
Underlying | Derivative | Gain (Loss) from | Appreciation (Depreciation) of |
Risk Exposure | Instrument | Swaps | Swaps |
| Interest rate | Swaps | $2,932,852 | $(7,655,816) |
38
Market and Counterparty Credit Risk
In the normal course of business the Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose the Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the Fund’s exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities.
The Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.
4. Fund Shares
Tender Offer
The Board has authorized the Fund to conduct a tender offer pursuant to which the Fund would offer to purchase up to 20% of its then outstanding shares for cash on a pro rata basis at a price per share equal 100% of the NAV per share as determined as of the close of regular trading on the NYSE on the expiration date of the tender offer.
On January 2, 2019, Nuveen announced the Fund’s tender offer, which commenced on January 14, 2019 and expired on February 12, 2019. The tender offer was oversubscribed (36% of outstanding shares were tendered), and therefore the Fund purchased 20% of its outstanding shares from participating shareholders on a pro-rata basis based on the number of shares properly tendered.
The final results of the tender offer are as shown in the accompanying table.
| | | |
| Number of common shares outstanding before tender offer | | 34,194,864 |
| Number of common shares authorized for tender offer | | 6,838,973 |
| Purchase price (100% of share NAV on expiration date) | | $20.8631 |
| Number of common shares outstanding after tender offer | | 27,355,891 |
Common Share Transactions | | |
| Transactions in common shares during the Fund’s current and prior fiscal period, where applicable were as follows: | | |
| | Year Ended | Year Ended |
| | 3/31/19 | 3/31/18 |
| Common shares: | | |
| Issued in the Merger | 7,732,879 | — |
| Repurchased and retired through tender offer | (6,838,973) | — |
| Tender offer: | | |
| Price per common share | $20.86 | — |
| Discount per common share | 0.00% | — |
5. Investment Transactions | | |
| Long-term purchases and sales (including maturities but excluding derivative transactions) during the current fiscal period were as follows: | |
| |
| |
| Purchases | | $ 29,766,277 |
| Sales and maturities | | 172,876,702 |
6. Income Tax Information
The Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required.
39
Notes to Financial Statements (continued)
For all open tax years and all major taxing jurisdictions, management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAV of the Fund.
The tables below present the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, as determined on a federal income tax basis, as of March 31, 2019.
For purposes of this disclosure, derivative tax cost is generally the sum of any upfront fees or premiums exchanged and any amounts unrealized for income statement reporting but realized in income and/or capital gains for tax reporting. If a particular derivative category does not disclose any tax unrealized appreciation or depreciation, the change in value of those derivatives have generally been fully realized for tax purposes.
| | | | |
| Tax cost of investments | | $ | 556,207,866 | |
| Gross unrealized: | | | | |
| Appreciation | | $ | 130,192,602 | |
| Depreciation | | | (4,085,527 | ) |
| Net unrealized appreciation (depreciation) of investments | | $ | 126,107,075 | |
| | | | |
| Tax cost of futures contracts | | $ | (5,487,384 | ) |
| Net unrealized appreciation (depreciation) of futures contracts | | | — | |
| | | | |
| Tax cost of swaps | | $ | 2,088 | |
| Net unrealized appreciation (depreciation) of swaps | | | (4,395,881 | ) |
Permanent differences, primarily due to bond premium amortization adjustments, reorganization adjustments, nondeductible reorganization expenses, and treatment of notional principal contracts, resulted in reclassifications among the Fund’s components of common share net assets as of March 31, 2019, the Fund’s tax year end.
The tax components of undistributed net ordinary income and net long-term capital gains as of March 31, 2019, the Fund’s tax year end, were as follows:
| | | | |
Undistributed net ordinary income1 | | $ | 246,428 | |
| Undistributed net long-term capital gains | | | — | |
1 | Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. Undistributed net ordinary income (on a tax basis) has not been reduced for the dividend declared on March 1, 2019, and paid on April 1, 2019. |
The tax character of distributions paid during the Fund’s tax years ended March 31, 2019 and March 31, 2018 was designated for purposes of the dividends paid deduction as follows:
2019 | | | |
Distributions from net ordinary income2 | | $ | 34,942,192 | |
| Distributions from net long-term capital gains | | | — | |
2018 | | | |
Distributions from net ordinary income2 | | $ | 32,707,013 | |
| Distributions from net long-term capital gains | | | — | |
2 Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any. | |
40
As of March 31, 2019, the Fund’s tax year end, the Fund had unused capital losses carrying forward available for federal income tax purposes to be applied against future capital gains, if any. The capital losses are not subject to expiration.
| | | | |
| Not subject to expiration: | | | |
| Short-term | | $ | 8,789,496 | |
| Long-term | | | 24,118,958 | |
| Total | | $ | 32,908,454 | |
A portion of NBB’s capital loss carryforward is subject to limitation under the Internal Revenue Code and related regulations.
7. Management Fees and Other Transactions with Affiliates
Management Fees
The Fund’s management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Sub-Adviser is compensated for its services to the Fund from the management fees paid to the Adviser.
The Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
| | |
| The annual fund-level fee, payable monthly, is calculated according to the following schedule: | |
| | |
Average Daily Managed Assets* | Fund-Level Fee Rate |
| For the first $125 million | 0.4500% |
| For the next $125 million | 0.4375 |
| For the next $250 million | 0.4250 |
| For the next $500 million | 0.4125 |
| For the next $1 billion | 0.4000 |
| For the next $3 billion | 0.3750 |
| For managed assets over $5 billion | 0.3625 |
The annual complex-level fee, payable monthly, is calculated by multiplying the current complex-wide fee rate, determined according to the following schedule by the Fund’s daily managed assets:
| | |
Complex-Level Eligible Asset Breakpoint Level* | Effective Complex-Level Fee Rate at Breakpoint Level |
| $55 billion | 0.2000% |
| $56 billion | 0.1996 |
| $57 billion | 0.1989 |
| $60 billion | 0.1961 |
| $63 billion | 0.1931 |
| $66 billion | 0.1900 |
| $71 billion | 0.1851 |
| $76 billion | 0.1806 |
| $80 billion | 0.1773 |
| $91 billion | 0.1691 |
| $125 billion | 0.1599 |
| $200 billion | 0.1505 |
| $250 billion | 0.1469 |
| $300 billion | 0.1445 |
| * | For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, leverage includes the funds’ use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen open-end and closed-end funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011. As of March 31, 2019, the complex-level fee for the Fund was 0.1588%. |
41
Notes to Financial Statements (continued)
Other Transactions with Affiliates
The Fund is permitted to purchase or sell securities from or to certain other funds managed by the Adviser (“inter-fund trade”) under specified conditions outlined in procedures adopted by the Board. These procedures have been designed to ensure that any inter-fund trades of securities by the Fund from or to another fund that is, or could be, considered an affiliate of the Fund under certain limited circumstances by virtue of having a common investment adviser (or affiliated investment adviser), common officer and/or common trustee complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each inter-fund trade is effected at the current market price as provided by an independent pricing service. Unsettled inter-fund trades as of the end of the reporting period are recognized as a component of “Receivable for investments sold” and/or “Payable for investments purchased” on the Statement of Assets and Liabilities, when applicable.
During the current fiscal period, the Fund did not engage in inter-fund trades pursuant to these procedures.
8. Fund Leverage
Borrowings
The fund began the reporting period with a committed secured 364-day line of credit (“Borrowings”) which permitted the Fund to borrow on a secured basis as a means of leverage. As of the end of the period, the Fund’s maximum commitment amount under these Borrowing is as follows:
| |
Maximum commitment amount | $90,175,000 |
On April 13, 2018 the Fund paid down and terminated its Borrowings agreement as part of reverse repurchase agreement activity further described below. During the period April 1, 2018 through April 13, 2018, the average daily balance outstanding and average annual interest rate on the Fund’s Borrowings were as follows:
| | |
| Average daily balance outstanding | $90,175,000 |
| Average annual interest rate | 2.64% |
In order to maintain these Borrowings, the Fund met certain collateral, asset coverage and other requirements. Borrowings outstanding were fully secured by securities held in the Fund’s portfolio of investments. Interest expense incurred on the Fund’s Borrowings was calculated at a rate per annum equal to the higher of the overnight Federal Funds rate plus 0.75% or (ii) the one-month LIBOR plus 0.75%. In addition to the interest expense, the Fund paid a 0.15% per annum facility fee, based on the unused portion of the commitment amount of the Borrowings at all times when the outstanding Borrowings is greater than 50% of the maximum commitment amount, otherwise the fee was increased to 0.25% per annum. The Fund also incurred an upfront fee of 0.10% at the beginning of the commitment period based on the maximum commitment amount of the Borrowings.
Interest expense, facility fees and other fees incurred on the Borrowings are recognized as a component of “Interest expense” on the Statement of Operations.
Reverse Repurchase Agreements
During the current fiscal period, the Fund entered into a reverse repurchase agreement as a means of leverage.
In a reverse repurchase agreement, the Fund sells to the counterparty a security that it holds with a contemporaneous agreement to repurchase the same security at an agreed-upon price and date, with the Fund retaining the risk of loss that is associated with that security. The Fund will segregate assets determined to be liquid by the Adviser to cover its obligations under reverse repurchase agreements. Securities sold under reverse repurchase agreements are recorded as a liability and recognized as “Reverse repurchase agreements” on the Statement of Assets and Liabilities.
Interest payments made on reverse repurchase agreements are recognized as a component of “Interest expense” on the Statement of Operations.
| As of the end of the reporting period, the Fund’s outstanding balances on its reverse repurchase agreement were as follows: | |
| | | Principal | | | Value and |
Counterparty | Coupon | Amount | Maturity | Value | Accrued Interest |
| Wells Fargo Bank, N.A. | 2.98% | $(107,175,000) | 5/15/19 | $(107,175,000) | $(107,326,009) |
During the current fiscal period, the average daily balance outstanding and average interest rate on the Fund’s reverse repurchase agreement were as follows:
| | |
| Average daily balance outstanding | $96,084,348* |
| Weighted average interest rate | 2.74% |
| * | For the period April 13, 2018 (initial purchase of reverse repurchase agreements) through March 31, 2019. |
42
The following table presents the reverse repurchase agreements subject to netting agreements and the collateral delivered related to those reverse repurchase agreements.
| | | Collateral | |
| | Reverse Repurchase | Pledged to | Net |
Counterparty | Agreements** | counterparty*** | Exposure |
| Wells Fargo Bank, N.A. | $(107,326,009) | $107,326,009 | $ — |
| ** | Represents gross value and accrued interest for the counterparty as reported in the preceding table. |
| *** | As of the end of the reporting period, the value of the collateral pledged to the counterparty exceeded the value of the reverse repurchase agreements. |
9. Inter-Fund Lending
The Securities and Exchange Commission (“SEC”) has granted an exemptive order permitting registered open-end and closed-end Nuveen funds to participate in an inter-fund lending facility whereby the Nuveen funds may directly lend to and borrow money from each other for temporary purposes (e.g., to satisfy redemption requests or when a sale of securities “fails,” resulting in an unanticipated cash shortfall) (the “Inter-Fund Program”). The closed-end Nuveen funds, including the Fund covered by this shareholder report, will participate only as lenders, and not as borrowers, in the Inter-Fund Program because such closed-end funds rarely, if ever, need to borrow cash to meet redemptions. The Inter-Fund Program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the Inter-Fund Program unless it receives a more favorable interest rate than is typically available from a bank or other financial institution for a comparable transaction; (2) no fund may borrow on an unsecured basis through the Inter-Fund Program unless the fund’s outstanding borrowings from all sources immediately after the inter-fund borrowing total 10% or less of its total assets; provided that if the borrowing fund has a secured borrowing outstanding from any other lender, including but not limited to another fund, the inter-fund loan must be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value; (3) if a fund’s total outstanding borrowings immediately after an inter-fund borrowing would be greater than 10% of its total assets, the fund may borrow through the inter-fund loan on a secured basis only; (4) no fund may lend money if the loan would cause its aggregate outstanding loans through the Inter-Fund Program to exceed 15% of its net assets at the time of the loan; (5) a fund’s inter-fund loans to any one fund shall not exceed 5% of the lending fund’s net assets; (6) the duration of inter-fund loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days; and (7) each inter-fund loan may be called on one business day’s notice by a lending fund and may be repaid on any day by a borrowing fund. In addition, a Nuveen fund may participate in the Inter-Fund Program only if and to the extent that such participation is consistent with the fund’s investment objective and investment policies. The Board is responsible for overseeing the Inter-Fund Program.
The limitations detailed above and the other conditions of the SEC exemptive order permitting the Inter-Fund Program are designed to minimize the risks associated with Inter-Fund Program for both the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there is a risk that the loan could be called on one day’s notice or not renewed, in which case the fund may have to borrow from a bank at a higher rate or take other actions to payoff such loan if an inter-fund loan is not available from another fund. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.
During the current reporting period, the Fund did not enter into any inter-fund loan activity.
10. Fund Merger
The Merger as previously described in Note 1 — General Information and Significant Accounting Policies, Fund Merger, was structured to qualify as a tax-free merger under the Internal Revenue Code for federal income tax purposes, and the Target Fund’s shareholders recognized no gain or loss for federal income tax purposes as a result. Prior to the closing of the Merger, the Target Fund distributed all of its net investment income and capital gains, if any. Such a distribution may be taxable to the Target Fund’s shareholders for federal income tax purposes.
Investments
The cost, fair value and net unrealized appreciation (depreciation) of the investments (including investments in derivatives) of the Target Fund as of the date of the Merger, were as follows:
| | |
| | NBD |
| Cost of investments | $140,205,858 |
| Fair value of investments | 173,393,452 |
| Net unrealized appreciation (depreciation) of investments | 33,187,594 |
For financial reporting purposes, assets received and shares issued by the Acquiring Fund were recorded at fair value; however, the cost basis of the investments received from the Target Fund were carried forward to align ongoing reporting of the Acquiring Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
43
Notes to Financial Statements (continued)
Common Shares
The common shares outstanding, net assets applicable to common shares and NAV per common share outstanding immediately before and after the Merger were as follows:
| | |
Target Fund – Prior to Merger | NBD |
| Common shares outstanding | 7,205,250 |
| Net assets applicable to common shares | $160,226,114 |
| NAV per common share outstanding | $ 22.24 |
| |
Acquiring Fund – Prior to Merger | NBB |
| Common shares outstanding | 26,461,985 |
| Net assets applicable to common shares | $548,295,619 |
| NAV per common share outstanding | $ 20.72 |
| |
Acquiring Fund – Post Merger | NBB |
| Common shares outstanding | 34,194,864 |
| Net assets applicable to common shares | $708,521,733 |
| NAV per common share outstanding | $ 20.72 |
Pro Forma Results of Operations (Unaudited)
The beginning of the Target Fund’s current fiscal period was April 1, 2018. Assuming the Merger had been completed on April 1, 2018, the beginning of the Acquiring Fund’s current fiscal period, the pro forma results of operations for the current fiscal period, are as follows:
Acquiring Fund – Pro Forma Results from Operations | NBB |
| Net investment income (loss) | $ 35,874,645 |
| Net realized and unrealized gains (losses) | (19,204,509) |
| Change in net assets resulting from operations | 16,670,136 |
Because the combined investment portfolios for the Merger have been managed as a single integrated portfolio since the Merger was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Fund that have been included in the Statement of Operations for the Acquiring Fund since the Merger was consummated.
Cost and Expenses
In connection with the Merger, the Acquiring Fund incurred certain associated costs and expenses. Such amounts were included as components of “Accrued other expenses” on the Statement of Assets and Liabilities and “Merger expenses” on the Statement of Operations.
11. New Accounting Pronouncements
Disclosure Update and Simplification
During August 2018, the SEC issued Final Rule Release No. 33-10532, Disclosure Update and Simplification (“Final Rule Release No. 33-10532”). Final Rule Release No. 33-10532 amends certain financial statement disclosure requirements to conform to U.S. GAAP. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) remove the requirement to separately state the book basis components of net assets: undistributed (over-distribution of) net investment income (“UNII”), accumulated undistributed net realized gains (losses), and net unrealized appreciation (depreciation) at the balance sheet date. Instead, consistent with U.S. GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) remove the requirement to separately state the sources of distributions paid. Instead, consistent with U.S. GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The amendments also remove the requirement to parenthetically state the book basis amount of UNII on the statement of changes in net assets.
The requirements of Final Rule Release No. 33-10532 are effective November 5, 2018, and the Fund’s Statement of Assets and Liabilities and Statement of Changes in Net Assets for the current reporting period have been modified accordingly. In addition, certain amounts within the Fund’s Statement of Changes in Net Assets for the prior fiscal period have been modified to conform to Final Rule Release No. 33-10532.
44
For the prior fiscal period, the total amount of distributions paid to common shareholders from net investment income and from accumulated net realized gains, if any, are recognized as “Dividends” on the Statement of Changes in Net Assets.
As of March 31, 2018, the Fund’s Statement of Changes in Net Assets reflected the following UNII balance.
| | |
| UNII at the end of period | $(6,100,871) |
FASB Accounting Standards Update (“ASU”) 2017-08 (“ASU 2017-08”) Premium Amortization on Purchased Callable Debt Securities
The FASB has issued ASU 2017-08, which shortens the premium amortization period for purchased non-contingently callable debt securities. ASU 2017-08 specifies that the premium amortization period ends at the earliest call date, for purchased non-contingently callable debt securities. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the implications of ASU 2017-08, if any.
Fair Value Measurement: Disclosure Framework
During August 2018, the FASB issued ASU 2018-13 (“ASU 2018-13”), Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. ASU 2018-13 modifies the disclosures required by Topic 820, Fair Value Measurements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. During the current reporting period, management early implemented this guidance. This implementation did not have a material impact on the Fund’s financial statements.
12. Subsequent Events
Reverse Repurchase Agreements
During April and May 2019, the Fund increased the balance on its reverse repurchase agreement to $133,175,000.
45
Additional Fund Information (Unaudited)
| | | | | | |
Board of Trustees | | | | | |
| Margo Cook* | Jack B. Evans | William C. Hunter | Albin F. Moschner | John K. Nelson | Judith M. Stockdale |
| Carole E. Stone | Terence J. Toth | Margaret L. Wolff | Robert C. Young | | |
| |
| * Interested Board Member. | | | | | |
Fund Manager | Custodian | Legal Counsel | Independent Registered | Transfer Agent and |
| Nuveen Fund Advisors, LLC | State Street Bank | Chapman and Cutler LLP | Public Accounting Firm | Shareholder Services |
| 333 West Wacker Drive | & Trust Company | Chicago, IL 60603 | KPMG LLP | Computershare Trust |
| Chicago, IL 60606 | One Lincoln Street | | 200 East Randolph Street | Company, N.A. |
| | Boston, MA 02111 | | Chicago, IL 60601 | 250 Royall Street |
| | | | | Canton, MA 02021 |
| | | | | (800) 257-8787 |
Distribution Information
The Fund hereby designates its percentage of dividends paid from net ordinary income as dividends qualifying as Interest-Related Dividends and/or short-term capital gain dividends as defined in the Internal Revenue Code Section 871(k) for the taxable year ended March 31, 2019:
| | |
| % of Interest-Related Dividends for the period April 1, 2018 through December 31, 2018 | 100.0% |
| % of Interest-Related Dividends for the period January 1, 2019 through March 31, 2019 | 100.0% |
Portfolio of Investments Information
Each Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its report on Form N-PORT. You may obtain this information on the SEC’s website at http://www.sec.gov.
Nuveen Funds’ Proxy Voting Information
You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request, by calling Nuveen toll-free at (800) 257-8787 or on Nuveen’s website at www.nuveen.com and (ii) a description of the policies and procedures that each fund used to determine how to vote proxies relating to portfolio securities without charge, upon request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov.
CEO Certification Disclosure
Each Fund’s Chief Executive Officer (CEO) has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. Each Fund has filed with the SEC the certification of its CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
Common Share Repurchases
Each Fund intends to repurchase, through its open-market share repurchase program, shares of its own common stock at such times and in such amounts as is deemed advisable. During the period covered by this report, the Fund repurchased shares of its common stock as shown in the accompanying table. Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
| | |
| | NBB |
| Common Shares repurchased | — |
FINRA BrokerCheck
The Financial Industry Regulatory Authority (FINRA) provides information regarding the disciplinary history of FINRA member firms and associated investment professionals. This information as well as an investor brochure describing FINRA BrokerCheck is available to the public by calling the FINRA BrokerCheck Hotline number at (800) 289-9999 or by visiting www.FINRA.org.
46
Glossary of Terms Used in this Report (Unaudited)
| · | Auction Rate Bond: An auction rate bond is a security whose interest payments are adjusted periodically through an auction process, which process typically also serves as a means for buying and selling the bond. Auctions that fail to attract enough buyers for all the shares offered for sale are deemed to have “failed,” with current holders receiving a formula-based interest rate until the next scheduled auction. |
| · | Average Annual Total Return: This is a commonly used method to express an investment’s performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment’s actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered. |
| · | Bloomberg Barclays Aggregate-Eligible Build America Bond Index: An unleveraged index that comprises all direct pay Build America Bonds that are SEC-regulated, taxable, dollar-denominated and have at least one year to final maturity, at least $250 million par amount outstanding, and are determined to be investment grade by Bloomberg Barclays. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees. |
| · | Bloomberg Barclays Taxable Municipal Long Bond Index: A rules-based, market-value-weighted index engineered for the long-term taxable municipal bond market. Bonds in the index have effective maturities of 10+ years. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees. |
| · | Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid, and consequently is a measure of the sensitivity of a bond’s or bond fund’s value to changes when market interest rates change. Generally, the longer a bond’s or fund’s duration, the more the price of the bond or fund will change as interest rates change. |
| · | Effective Leverage: Effective leverage is a fund’s effective economic leverage, and includes both regulatory leverage (see leverage) and the leverage effects of certain derivative investments in a fund’s portfolio. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in addition to any regulatory leverage. |
| · | Forward Interest Rate Swap: A contractual agreement between two counterparties under which one party agrees to make periodic payments to the other for an agreed period of time based on a fixed rate, while the other party agrees to make periodic payments based on a floating rate of interest based on an underlying index. Alternatively, both series of cashflows to be exchanged could be calculated using floating rates of interest but floating rates that are based upon different underlying indices. |
| · | Gross Domestic Product (GDP): The total market value of all final goods and services produced in a country/region in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. |
| · | Inverse Floating Rate Securities: Inverse floating rate securities, also known as inverse floaters or tender option bonds (TOBs), are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt interest rates to third parties in amounts equal to some fraction of the deposited bond’s par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an “inverse floater”) to an investor (such as a fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond’s downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation of the underlying bond’s value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis. |
47
Glossary of Terms Used in this Report (Unaudited) (continued)
| · | Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more than 100% of the investment capital. |
| · | Net Asset Value (NAV) Per Share: A fund’s Net Assets is equal to its total assets (securities, cash, accrued earnings and receivables) less its total liabilities. NAV per share is equal to the fund’s Net Assets divided by its number of shares outstanding. |
| · | Pre-Refunding: Pre-Refunding, also known as advanced refundings or refinancings, is a procedure used by state and local governments to refinance municipal bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to buy U.S. Treasury securities, the interest from which is used to make payments on the higher-yielding bonds. Because of this collateral, pre-refunding generally raises a bond’s credit rating and thus its value. |
| · | Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of a fund. Both of these are part of a fund’s capital structure. Regulatory leverage is subject to asset coverage limits set in the Investment Company Act of 1940. |
| · | S&P Taxable Municipal Index: A broad benchmark index designed to measure the performance of the investment grade U.S. taxable municipal bond market. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees. |
| · | Total Investment Exposure: Total investment exposure is a fund’s assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes a fund’s use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities. |
| · | Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the bond. Income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically. |
48
Reinvest Automatically, Easily and Conveniently
Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account.
Nuveen Closed-End Funds Automatic Reinvestment Plan
Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares. By choosing to reinvest, you’ll be able to invest money regularly and automatically, and watch your investment grow through the power of compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested. It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each month you’ll receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund’s shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares’ net asset value or 95% of the shares’ market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions.
Flexible
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change. You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan. The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct service charge to participants in the Plan at this time.
Call today to start reinvesting distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at (800) 257-8787.
49
Board Members & Officers (Unaudited)
The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. The number of trustees of the Funds is set at ten. None of the trustees who are not “interested” persons of the Funds (referred to herein as “independent board members”) has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the trustees and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
| | | | | |
Name, Year of Birth & Address | Position(s) Held with the Funds | Year First Elected or Appointed and Term(1) | Principal Occupation(s) Including other Directorships During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Board Member |
| |
| Independent Board Members: |
| |
■ TERENCE J. TOTH 1959 333 W. Wacker Drive Chicago, IL 6o6o6 | Chairman and Board Member | 2008 Class II | Formerly, a Co-Founding Partner, Promus Capital (2008-2017); Director, Fulcrum IT Service LLC (since 2010) and Quality Control Corporation (since 2012); member: Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (since 2012), and chair of its Investment Committee; formerly, Director, Legal & General Investment Management America, Inc. (2008-2013); formerly, CEO and President, Northern Trust Global Investments (2004-2007): Executive Vice President, Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board (2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003- 2007) and Northern Trust Hong Kong Board (1997-2004). | 168 |
| |
■ JACK B. EVANS 1948 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 1999 Class III | Chairman (since 2019), formerly, President (1996-2019), The Hall-Perrine Foundation, a private philanthropic corporation; Director and Chairman, United Fire Group, a publicly held company; Director, Public Member, American Board of Orthopaedic Surgery (since 2015); Life Trustee of Coe College and the Iowa College Foundation; formerly, President Pro-Tem of the Board of Regents for the State of Iowa University System; formerly, Director, Alliant Energy and The Gazette Company; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. | 168 |
| |
■ WILLIAM C. HUNTER 1948 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2003 Class I | Dean Emeritus, formerly, Dean, Tippie College of Business, University of Iowa(2006-2012); Director of Wellmark, Inc. (since 2009); past Director (2005-2015), and past President (2010-2014) Beta Gamma Sigma, Inc., The International Business Honor Society; formerly, Director (2004-2018) of Xerox Corporation; Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University. | 168 |
| |
■ ALBIN F. MOSCHNER 1952 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2016 Class III | Founder and Chief Executive Officer, Northcroft Partners, LLC, a management consulting firm (since 2012); Chairman (since 2019), and Director (since 2012), USA Technologies, Inc., a provider of solutions and services to facilitate electronic payment transactions (since 2012); formerly, Director, Wintrust Financial Corporation (1996-2016); previously, held positions at Leap Wireless International, Inc., including Consultant (2011-2012), Chief Operating Officer (2008-2011), and Chief Marketing Officer (2004-2008); formerly, President, Verizon Card Services division of Verizon Communications, Inc. (2000-2003); formerly, President, One Point Services at One Point Communications (1999- 2000); formerly, Vice Chairman of the Board, Diba, Incorporated (1996-1997); formerly, various executive positions (1991-1996) and Chief Executive Officer (1995-1996) of Zenith Electronics Corporation. | 168 |
50
| | | | | |
Name, | Position(s) Held | Year First | Principal | Number |
Year of Birth | with the Funds | Elected or | Occupation(s) | of Portfolios |
& Address | | Appointed | Including other | in Fund Complex |
| | | and Term(1) | Directorships | Overseen by |
| | | | During Past 5 Years | Board Member |
| |
| Independent Board Members (continued): |
| |
■ JOHN K. NELSON 1962 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2013 Class II | Member of Board of Directors of Core12 LLC (since 2008), a private firm which develops branding, marketing and communications strategies for clients; serves on The President’s Council, Fordham University (since 2010); and previously was a Director of The Curran Center for Catholic American Studies (2009-2018) formerly, senior external advisor to the financial services practice of Deloitte Consulting LLP (2012-2014): formerly, Chairman of the Board of Trustees of Marian University (2010 as trustee, 2011-2014 as Chairman); formerly, Chief Executive Officer of ABN AMRO N.V. North America, and Global Head of its Financial Markets Division (2007-2008); prior senior positions held at ABN AMRO include Corporate Executive Vice President and Head of Global Markets-the Americas (2006-2007), CEO of Wholesale Banking North America and Global Head of Foreign Exchange and Futures Markets (2001-2006), and Regional Commercial Treasurer and Senior Vice President Trading-North America (1996-2001); formerly, Trustee at St. Edmund Preparatory School in New York City. | 168 |
| |
■ JUDITH M. STOCKDALE 1947 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 1997 Class I | Board Member, Land Trust Alliance (since 2013) and U.S. Endowment for Forestry and Communities (since 2013); formerly, Executive Director (1994-2012), Gaylord and Dorothy Donnelley Foundation; prior thereto, Executive Director, Great Lakes Protection Fund (1990-1994). | 168 |
| |
■ CAROLE E. STONE 1947 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2007 Class I | Former Director, Chicago Board Options Exchange, Inc. (2006-2017); and C2 Options Exchange, Incorporated (2009-2017); Director, Cboe, L.C. Global Markets, Inc., formerly, CBOE Holdings, Inc. (since 2010); formerly, Commissioner, New York State Commission on Public Authority Reform (2005-2010). | 168 |
| |
■ MARGARET L. WOLFF 1955 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2016 Class I | Formerly, member of the Board of Directors (2013-2017) of Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company (each, a part of Travelers Canada, the Canadian operation of The Travelers Companies, Inc.); formerly, Of Counsel, Skadden, Arps, Slate, Meagher & Flom LLP (Mergers & Acquisitions Group) (2005-2014); Member of the Board of Trustees of New York- Presbyterian Hospital (since 2005); Member (since 2004) and Chair (since 2015) of the Board of Trustees of The John A. Hartford Foundation (a philanthropy dedicated to improving the care of older adults); formerly, Member (2005-2015) and Vice Chair (2011-2015) of the Board of Trustees of Mt. Holyoke College. | 168 |
| |
■ ROBERT L. YOUNG(2) 1963 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2017 Class II | Formerly, Chief Operating Officer and Director, J.P.Morgan Investment Management Inc. (2010-2016); formerly, President and Principal Executive Officer (2013-2016), and Senior Vice President and Chief Operating Officer (2005-2010), of J.P.Morgan Funds; formerly, Director and various officer positions for J.P.Morgan Investment Management Inc. (formerly, JPMorgan Funds Management, Inc. and formerly, One Group Administrative Services) and JPMorgan Distribution Services, Inc. (formerly, One Group Dealer Services, Inc.) (1999-2017). | 166 |
51
Board Members & Officers (Unaudited) (continued)
| | | | | |
Name, | Position(s) Held | Year First | Principal | Number |
Year of Birth | with the Funds | Elected or | Occupation(s) | of Portfolios |
& Address | | Appointed | Including other | in Fund Complex |
| | | and Term(1) | Directorships | Overseen by |
| | | | During Past 5 Years | Board Member |
| |
| Interested Board Member: |
| |
■ MARGO L. COOK(3) 1964 333 W. Wacker Drive Chicago, IL 6o6o6 | Board Member | 2016 Class III | President (since 2017), formerly, Co-Chief Executive Officer and Co-President (2016-2017), formerly, Senior Executive Vice President of Nuveen Investments, Inc.; President, Global Products and Solutions (since 2017), and, Co-Chief Executive Officer (since 2015), formerly, Executive Vice President (2013-2015), of Nuveen Securities, LLC; Executive Vice President (since 2017) of Nuveen, LLC; President (since August 2017), formerly Co-President (2016- 2017), formerly, Senior Executive Vice President of Nuveen Fund Advisors, LLC (Executive Vice President 2011-2015); President (since 2017), Nuveen Alternative Investments, LLC; Chartered Financial Analyst. | 168 |
| |
Name, | Position(s) Held | Year First | Principal | |
Year of Birth | with the Funds | Elected or | Occupation(s) | |
& Address | | Appointed(4) | During Past 5 Years | |
| |
| Officers of the Funds: |
| |
■ CEDRIC H. ANTOSIEWICZ 1962 333 W. Wacker Drive Chicago, IL 6o6o6 | Chief Administrative Officer | 2007 | Senior Managing Director (since 2017), formerly, Managing Director (2004-2017) of Nuveen Securities, LLC; Senior Managing Director (since 2017), formerly, Managing Director (2014-2017) of Nuveen Fund Advisors, LLC. | |
| |
■ NATHANIEL T. JONES 1979 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President and Treasurer | 2016 | Managing Director (since 2017), formerly, Senior Vice President (2016-2017), formerly, Vice President (2011-2016) of Nuveen; Managing Director of Nuveen Fund Advisors, LLC; Chartered Financial Analyst. | |
| |
■ WALTER M. KELLY 1970 333 W. Wacker Drive Chicago, IL 6o6o6 | Chief Compliance Officer and Vice President | 2003 | Managing Director (since 2017), formerly, Senior Vice President (2008-2017) of Nuveen. | |
| |
■ DAVID J. LAMB 1963 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President | 2015 | Managing Director (since 2017), formerly, Senior Vice President of Nuveen (since 2006), Vice President prior to 2006. | |
| |
■ TINA M. LAZAR 1961 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President | 2002 | Managing Director (since 2017), formerly, Senior Vice President (2014-2017) of Nuveen Securities, LLC. | |
52
| | | | |
Name, | Position(s) Held | Year First | Principal | |
Year of Birth | with the Funds | Elected or | Occupation(s) | |
& Address | | Appointed(4) | During Past 5 Years | |
| |
| Officers of the Funds (continued): | | |
| |
■ KEVIN J. MCCARTHY 1966 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President and Assistant Secretary | 2007 | Senior Managing Director (since 2017) and Secretary and General Counsel (since 2016) of Nuveen Investments, Inc., formerly, Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2008-2016); Senior Managing Director (since 2017) and Assistant Secretary (since 2008) of Nuveen Securities, LLC, formerly Executive Vice President (2016-2017) and Managing Director (2008-2016); Senior Managing Director (since 2017), Secretary (since 2016) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC, formerly, Executive Vice President (2016-2017), Managing Director (2008-2016) and Assistant Secretary (2007-2016); Senior Managing Director (since 2017), Secretary (since 2016) and Associate General Counsel (since 2011) of Nuveen Asset Management, LLC, formerly Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2011-2016); Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Investments Advisers, LLC, formerly Executive Vice President (2016-2017); Vice President (since 2007) and Secretary (since 2016), formerly, Assistant Secretary, of NWQ Investment Management Company, LLC, Symphony Asset Management LLC, Santa Barbara Asset Management, LLC and Winslow Capital Management, LLC (since 2010). Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Alternative Investments, LLC. | |
| |
■ WILLIAM T. MEYERS 1966 333 W. Wacker Drive Chicago, IL 60606 | Vice President | 2018 | Senior Managing Director (since 2017), formerly, Managing Director (2016-2017), Senior Vice President (2010-2016) of Nuveen Securities, LLC; and Nuveen Fund Advisors, LLC; Senior Managing Director (since 2017), formerly, Managing Director (2016-2017), Senior Vice President (2010-2016) of Nuveen, has held various positions with Nuveen since 1991. | |
| |
■ MICHAEL A. PERRY 1967 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President | 2017 | Executive Vice President (since 2017), previously Managing Director from 2016), of Nuveen Fund Advisors, LLC and Nuveen Alternative Investments, LLC; Executive Vice President (since 2017), formerly, Managing Director (2015-2017), of Nuveen Securities, LLC; formerly, Managing Director (2010-2015) of UBS Securities, LLC. | |
| |
■ CHRISTOPHER M. ROHRBACHER 1971 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President and Assistant Secretary | 2008 | Managing Director (since 2017) and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2017), formerly, Senior Vice President (2016-2017) and Assistant Secretary (since 2016) of Nuveen Fund Advisors, LLC. | |
| |
■ WILLIAM A. SIFFERMANN 1975 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President | 2017 | Managing Director (since 2017), formerly Senior Vice President (2016-2017) and Vice President (2011-2016) of Nuveen. | |
| |
■ JOEL T. SLAGER 1978 333 W. Wacker Drive Chicago, IL 6o6o6 | Vice President and Assistant Secretary | 2013 | Fund Tax Director for Nuveen Funds (since 2013); previously, Vice President of Morgan Stanley Investment Management, Inc., Assistant Treasurer of the Morgan Stanley Funds (from 2010 to 2013). | |
| |
■ E. SCOTT WICKERHAM 1973 TIAA 730 Third Avenue New York, NY 10017 | Vice President and Controller | 2019 | Senior Managing Director, Head of Fund Administration at Nuveen, LLC (since 2019), formerly, Managing Director; Principal Financial Officer, Principal Accounting Officer and Treasurer (since 2017) to the TIAA-CREF Funds, the TIAA-CREF Life Funds, the TIAA Separate Account VA-1 and the Treasurer (since 2017) to the CREF Accounts; Senior Director, TIAA-CREF Fund Administration (2014-2015); has held various positions with TIAA since 2006. | |
53
Board Members & Officers (Unaudited) (continued)
| | | | |
Name, | Position(s) Held | Year First | Principal |
Year of Birth | with the Funds | Elected or | Occupation(s) |
& Address | | Appointed(4) | During Past 5 Years |
| |
| Officers of the Funds (continued): |
| |
■ MARK L. WINGET 1968 333 W. Wacker Drive Chicago, IL 60606 | Vice President and Assistant Secretary | 2008 | Vice President and Assistant Secretary of Nuveen Securities, LLC (since 2008); Vice President (since 2010) and Associate General Counsel (since 2008) of Nuveen. | |
| |
■ GIFFORD R. ZIMMERMAN 1956 333 W. Wacker Drive Chicago, IL 60606 | Vice President Secretary | 1988 | Managing Director (since 2002), and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Vice President (since 2017), formerly, Managing Director (2003-2017) and Assistant Secretary (since 2003) of Symphony Asset Management LLC; Managing Director and Assistant Secretary (since 2002) of Nuveen Investments Advisers, LLC; Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since 2002), Santa Barbara Asset Management, LLC (since 2006), and of Winslow Capital Management, LLC, (since 2010); Chartered Financial Analyst. | |
| | |
| (1) | The Board of Trustees is divided into three classes, Class I, Class II, and Class III, with each being elected to serve until the third succeeding annual shareholders’ meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed, except two board members are elected by the holders of Preferred Shares, when applicable, to serve until the next annual shareholders’ meeting subsequent to its election or thereafter in each case when its respective successors are duly elected or appointed. The year first elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen Complex. |
| (2) | On May 25, 2017, Mr. Young was appointed as a Board Member, effective July 1, 2017. He is a Board Member of each of the Nuveen Funds, except Nuveen Diversified Dividend and Income Fund and Nuveen Real Estate Income Fund. |
| (3) | “Interested person” as defined in the 1940 Act, by reason of her position with Nuveen, LLC. and certain of its subsidiaries, which are affiliates of the Nuveen Funds. |
| (4) | Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed to any fund in the Nuveen Complex. |
54
Notes
55
Nuveen:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen is the investment manager of TIAA. We have grown into one of the world’s premier global asset managers, with specialist knowledge across all major asset classes and particular strength in solutions that provide income for investors and that draw on our expertise in alternatives and responsible investing. Nuveen is driven not only by the independent investment processes across the firm, but also the insights, risk management, analytics and other tools and resources that a truly world-class platform provides. As a global asset manager, our mission is to work in partnership with our clients to create solutions which help them secure their financial future.
Find out how we can help you.
To learn more about how the products and services of Nuveen may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/closed-end-funds
Nuveen Securities, LLC, member FINRA and SIPC | 333 West Wacker Drive Chicago, IL 60606 | www.nuveen.com
EAN-C-0319D 838661-INV-Y-05/20
