UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21137
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Nuveen Quality Preferred Income Fund 2
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(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: July 31, 2003
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Date of reporting period: July 31, 2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Nuveen
Closed-End
Exchange-Traded
Funds
ANNUAL REPORT July 31, 2003
NUVEEN
QUALITY PREFERRED
INCOME FUNDS
JTP
JPS
JHP
Photo of: boy in wheat field
Photo of: seaside cabin
HIGH CURRENT INCOME
FROM A PORTFOLIO OF
INVESTMENT-GRADE
PREFERRED SECURITIES
Logo: NUVEEN Investments
FASTER INFORMATION
RECEIVE YOUR
NUVEEN FUND REPORT
ELECTRONICALLY
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your Nuveen Fund information is available. Click on the link and you will be
taken directly to the report. Your Fund report can be viewed and saved on your
computer. Your report will arrive faster via e-mail than by traditional mail.
Registering is easy and only takes a few minutes (see instructions at right).
- --------------------------------------------------------------------------------
SOME COMMON CONCERNS:
WILL MY E-MAIL ADDRESS BE DISTRIBUTED TO OTHER COMPANIES?
No, your e-mail address is strictly confidential and will not be used for
anything other than notification of shareholder information.
WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR
MAIL DELIVERY AGAIN?
If you decide you do not like receiving your reports electronically, it's a
simple process to go back to regular mail delivery.
- --------------------------------------------------------------------------------
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.INVESTORDELIVERY.COM
2 Refer to the address sheet that accompanied this report. Enter the personal
13-CHARACTER ENROLLMENT NUMBER imprinted near your name.
3 You'll be taken to a page with several options. Select the NEW
ENROLLMENT-CREATE screen. Once there, enter your e-mail address (e.g.
yourID@providerID.com), and a personal, 4-digit PIN number of your choice.
(Pick a number that's easy to remember.)
4 Click Submit. Confirm the information you just entered is correct, then
click Submit again.
5 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
6 Use this same process if you need to change your registration information
or cancel internet viewing.
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME DIRECTLY TO YOU FROM NUVEEN,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.NUVEEN.COM
2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click
on Enrollment Today.
3 You'll be taken to a screen that asks for your Social Security number and
e-mail address. Fill in this information, then click Enroll.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
Logo: NUVEEN Investments
Photo of: TIMOTHY R. SCHWERTFEGER
CHAIRMAN OF THE BOARD
SIDEBAR TEXT:"WE REMAIN CONVINCED THAT MAINTAINING A WELL-BALANCED PORTFOLIO
....... IS AN IMPORTANT WAY TO HELP YOU REDUCE OVERALL INVESTMENT RISK."
Dear SHAREHOLDER
I am pleased to report that over the period ended July 31, 2003, your Nuveen
Quality Preferred Income Funds continued to provide you with an attractive
monthly dividend and the opportunity for enhanced diversification within your
investment portfolio. For more specific information about the performance of the
Fund, please see the Portfolio Managers' Comments and Performance Overview
sections of this report.
While the oldest of these three Funds was barely more than one year old as of
July 31, 2003, all three already have experienced a good deal of market price
volatility in their young lives. We know that the ups and downs that come with
this volatility may lead some investors to consider increasing or decreasing
their investments in their Fund. While we encourage you to take a strong
interest in the performance of your investment portfolio, I urge you to discuss
any investment changes with your financial advisor before you act. We remain
convinced that maintaining a well-balanced portfolio, structured and monitored
with the help of an investment professional, is an important way to help you
reduce overall investment risk and position yourself to achieve your long-term
financial goals. In this context, the preferred securities in your Nuveen Fund
can be important building blocks in a portfolio crafted to perform well through
a variety of market conditions.
I'd also like to direct your attention to the inside front cover of this report,
which explains the quick and easy process to begin receiving Fund reports like
this via e-mail and the internet. Thousands of Nuveen Fund shareholders already
have signed-up, and they are getting their Fund information faster and more
conveniently than ever. I urge you to consider joining them.
Since 1898, Nuveen Investments has offered financial products and solutions that
incorporate careful research, diversification, and the application of
conservative risk-management principles. We are grateful that you have chosen us
as a partner as you pursue your financial goals. We look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 15, 2003
1
Nuveen Closed-End Exchange-traded funds (JTP, JPS, JHP)
Managers' PERSPECTIVE
The Nuveen Quality Preferred Income Funds are managed by a team of specialists
at Spectrum Asset Management, Inc., an affiliate of Principal CapitalSM. Mark
Lieb, Bernie Sussman and Phil Jacoby, who have more than 50 years of combined
experience in the preferred securities markets, lead the team. Here Mark, Bernie
and Phil talk about general economic conditions, their management strategy and
the performance of each Fund for the period ended July 31, 2003.
WHAT WAS THE GENERAL MARKET ENVIRONMENT FOR PREFERRED SECURITIES OVER THE TWELVE
MONTHS ENDED JULY 31, 2003?
In our view, it was "a tale of two markets." The first eleven months of the
period saw a bull market for most fixed income investments as interest rates
declined and prices rose across the entire yield curve. Both the two-year and
ten-year U.S. Treasuries saw their yields drop by over 90 basis points to
near-record lows by June 2003. Then came July 2003, which was one of the worst
single months ever for bonds. By the end of that month the two-year U.S.
Treasury had given up about half of the gain achieved over the previous eleven
months, and the yield on the ten-year U.S. Treasury was about the same as one
year earlier.
Despite the weakness exhibited in July, overall it was a very good period for
preferred securities. The new issue calendar was active ($37 billion during the
twelve months ended July 31, 2003) and despite having many securities called for
redemption, the size of the hybrid, or taxable, preferred securities market grew
to $211 billion by the end of the reporting period. The demand for preferred
securities from both institutional and private client investors remained strong,
sparked by the record low yields available in money market instruments,
continued volatility in equity markets, and an emphasis on income by insurance
companies and others.
HOW DID THE FUNDS PERFORM OVER THIS REPORTING PERIOD?
The total return on NAV for JTP for the year ended July 31, 2003, was 9.15% This
compares with 5.41% for the Lehman Brothers Aggregate Index1, a good measure of
the general bond market, and 8.75% for the Merrill Lynch Preferred Stock Hybrid
Securities Index.1 JPS and JHP did not yet have one year of performance history
as of the end of the reporting period.
The performance of all three Funds showed a pattern similar to the general bond
market, painting one picture from August 2002 through June 2003, and a very
different picture in July 2003. For example, as of June 30, 2003, JTP, JPS and
JHP all were trading between 4 - 6% above their original $15 IPO price. After
July's bond market decline, their share prices had fallen to below their IPO
prices -- $14.59 for JTP, $14.65 for JPS, and $14.36 for JHP. The NAV
performance for each Fund followed a different pattern. After the July decline,
JTP's NAV ended the reporting period virtually unchanged from one year earlier
($14.10 vs. $14.12). During the periods between their initial public offerings
and July 31, 2003, both JPS and JHP saw their NAV's rise.
All three funds continued to provide attractive monthly income through the
period, with JTP raising its dividend once during this time.
2
For additional performance information, please see the individual Performance
Overview pages for your Fund in this report.
WHAT STRATEGIES DID YOU EMPLOY IN MANAGING THE FUNDS?
The primary strategy for each of the Funds has been to build a high quality,
diversified portfolio which maximizes the income available to pay an attractive
dividend for a sustained period of time. The emphasis has been on
investment-grade preferred securities, many of which are issued by companies
with AA or A debt ratings. To enhance diversification, we have tried to keep the
holdings of any single issuer within each Fund to about 3% or less of the Fund's
total assets. Each of the three Funds had over 120 distinct issuers as of July
31, 2003. In addition, we've striven to balance our investments in issues that
afford longer call protection but have a higher duration (i.e. more interest
rate risk) with more defensive, higher coupon securities that have attractive
yields-to-call. Finally, although income is each Fund's primary objective, we
have tried to enhance the total return potential of each portfolio through
selective trading to take advantage of inefficiencies in the market.
WHAT DO YOU ANTICIPATE YOUR STRATEGY WILL BE GOING FORWARD?
While we expect the preferred securities market to continue to perform well
relative to other fixed income instruments for the near future, this does not
mean that the market will be immune to increases in interest rates. If interest
rates continue to increase as the economy and stock markets strengthen, the
prices of preferred securities probably will weaken further.
Two important developments that we are watching are the passage of the Jobs and
Growth Tax Relief Reconciliation Act of 2003 and the FASB rule change requiring
Trust preferred securities to be listed as debt instead of equity on the
issuer's balance sheet. The cornerstone of the tax legislation was a reduction
in the tax rate for individuals on dividend income to the capital gains rate of
15%. The payments made by hybrid preferreds in the Fund's portfolios, do not
qualify because they are considered to be interest rather than dividends for tax
purposes. While we have not seen any significant impact on the prices of these
securities, there may be some implications for future issuance. For example, if
the cost of raising capital by selling dividend-paying preferred securities
drops enough, it might reduce the number of new hybrid preferred securities that
come to market.
The FASB change has caused the Fed to review whether to allow banks to continue
to count Trust preferred securities as Tier I capital. If the Fed does change
its view, the assumption is that extant issues will be "grandfathered," but
there might be no further issuance. Moreover, the value to the banks of their
outstanding preferred securities would be much greater, causing them to less
likely be called. This would be good news for the Fund's large holdings in these
types of issues.
In this uncertain environment, we will continue to look for higher coupon,
"cushioned" securities as a way to mitigate some of the interest rate risk.
Although the general credit outlook is more sanguine now than was the case for
most of the last two years, we plan to remain vigilant in our credit analysis
and will stick with the high quality approach that has served us well in the
past. In addition, we will seek opportunities to enhance the diversification of
each Fund's portfolio.
1 The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
all investment-grade, publicly issued, fixed-rate, dollar-denominated, noncon
vertible debt issues and commercial mortgage backed securities with maturities
of at least one year and outstanding par values of $150 million or more. The
Merrill Lynch Preferred Stock Hybrid Securities Index, an unmanaged index of
investment-grade, exchange-traded preferred stocks with outstanding market
values of at least $30 million and at least one year to maturity.
3
NUVEEN QUALITY PREFERRED INCOME FUND
Performance
OVERVIEW As of July 31, 2003
JTP
PORTFOLIO STATISTICS
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Share Price $14.59
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Common Share Net Asset Value $14.10
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Net Assets Applicable to
Common Shares ($000) $907,746
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% OF TOTAL
TOP 5 ISSUERS INVESTMENTS
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Wachovia Corporation 3.3%
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ING Groep NV 3.2%
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Abbey National Public Limited Company 3.0%
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HSBC Holdings Public Limited Company 2.7%
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Zurich Financial Services 2.6%
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% OF TOTAL
TOP 5 INDUSTRIES INVESTMENTS
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Banking 21.1%
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Banking - Foreign 14.7%
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Real Estate Investment Trusts 12.7%
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Utilities 6.6%
- --------------------------------------------------
Insurance - P&C - Foreign 6.1%
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AVERAGE ANNUAL TOTAL
RETURN (INCEPTION 6/25/02)
- --------------------------------------------------
Market NAV
- --------------------------------------------------
1-Year 4.95% 9.15%
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Since Inception 5.45% 6.86%
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Bar Chart:
2002-2003 MONTHLY DIVIDENDS PER SHARE
Aug 0.103
Sep 0.103
Oct 0.103
Nov 0.103
Dec 0.105
Jan 0.105
Feb 0.105
Mar 0.105
Apr 0.105
May 0.105
Jun 0.105
Jul 0.105
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
8/01/02 15.16
15.17
15.25
15.2
15.35
15.33
15.31
15.17
15.48
15.53
15.15
14.84
14.71
14.99
14.99
14.83
14.18
14.7
14.71
14.81
14.94
14.99
15.09
15.16
15.24
15.36
15.42
15.35
15.28
15.29
15.22
15.05
14.98
14.69
14.94
15.11
15.17
15.29
15.14
15.45
15.64
15.68
15.79
15.76
15.73
15.8
16.02
15.79
15.26
14.95
7/31/03 14.59
4
NUVEEN QUALITY PREFERRED INCOME FUND 2
Performance
OVERVIEW As of July 31, 2003
JPS
PORTFOLIO STATISTICS
- ----------------------------------------------------
Share Price $14.65
- ----------------------------------------------------
Common Share Net Asset Value $14.97
- ----------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $1,789,809
- ----------------------------------------------------
% OF TOTAL
TOP 5 ISSUERS INVESTMENTS
- ----------------------------------------------------
Wachovia Corporation 3.5%
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Abbey National Public Limited Company 3.2%
- ----------------------------------------------------
Everest Reinsurance Holdings Inc. 2.9%
- ----------------------------------------------------
ING Groep NV 2.9%
- ----------------------------------------------------
ABN AMRO Bank NV 2.8%
- ----------------------------------------------------
% OF TOTAL
TOP 5 INDUSTRIES INVESTMENTS
- ----------------------------------------------------
Banking 20.1%
- ----------------------------------------------------
Banking - Foreign 15.9%
- ----------------------------------------------------
Real Estate Investment Trusts 10.0%
- ----------------------------------------------------
Utilities 8.6%
- ----------------------------------------------------
Financial 8.0%
- ----------------------------------------------------
CUMULATIVE TOTAL RETURN
(INCEPTION DATE 9/24/02)
- ----------------------------------------------------
Market NAV
- ----------------------------------------------------
Since Inception 4.02% 11.22%
- ----------------------------------------------------
Bar Chart:
2002-2003 MONTHLY DIVIDENDS PER SHARE
Nov 0.105
Dec 0.105
Jan 0.105
Feb 0.105
Mar 0.105
Apr 0.105
May 0.105
Jun 0.105
Jul 0.105
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
9/27/02 15.1
15.15
15.05
15
15
15
15
14.7
14.13
14.5
14.7
14.73
14.86
14.99
15.02
15.14
15.1
15
15.15
15.34
15.25
15.17
15.18
15.06
14.98
14.58
14.97
15.06
15.12
15.24
15.21
15.44
15.67
15.8
15.78
15.85
15.7
15.8
15.94
15.83
15.28
14.95
7/31/03 14.65
5
Nuveen Quality Preferred Income Fund 3
Performance
OVERVIEW As of July 31, 2003
JHP
PORTFOLIO STATISTICS
- --------------------------------------------------
Share Price $14.36
- --------------------------------------------------
Common Share Net Asset Value $14.38
- --------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $339,499
- --------------------------------------------------
% OF TOTAL
TOP 5 ISSUERS INVESTMENTS
- --------------------------------------------------
ING Groep NV 3.3%
- --------------------------------------------------
Wachovia Corporation 3.3%
- --------------------------------------------------
Citigroup 2.8%
- --------------------------------------------------
Zurich Financial Services 2.7%
- --------------------------------------------------
SAFECO Corporation 2.4%
- --------------------------------------------------
% OF TOTAL
TOP 5 INDUSTRIES INVESTMENTS
- --------------------------------------------------
Banking 18.9%
- --------------------------------------------------
Banking - Foreign 10.6%
- --------------------------------------------------
Real Estate Investment Trusts 10.0%
- --------------------------------------------------
Insurance - P&C - Foreign 8.8%
- --------------------------------------------------
Financial 6.6%
- --------------------------------------------------
CUMULATIVE TOTAL RETURN
(INCEPTION DATE 12/18/02)
- --------------------------------------------------
Market NAV
- --------------------------------------------------
Since Inception -0.19% 4.62%
- --------------------------------------------------
Bar Chart:
2003 MONTHLY DIVIDENDS PER SHARE
Feb 0.103
Mar 0.103
Apr 0.103
May 0.103
Jun 0.103
Jul 0.103
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
12/20/02 15.01
15.01
15.02
15.08
15.07
15
15.05
15.18
15.14
15.06
15.11
15.09
14.98
14.77
14.82
15
15.03
15.1
15.12
15.3
15.38
15.55
15.7
15.47
15.53
15.52
15.64
15.76
15.11
14.95
7/31/03 14.36
6
Report of
INDEPENDENT AUDITORS
THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN QUALITY PREFERRED INCOME FUND
NUVEEN QUALITY PREFERRED INCOME FUND 2
NUVEEN QUALITY PREFERRED INCOME FUND 3
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Nuveen Quality Preferred Income Fund, Nuveen
Quality Preferred Income Fund 2, and Nuveen Quality Preferred Income Fund 3 as
of July 31, 2003, and the related statements of operations, changes in net
assets and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of July 31, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures when
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Quality Preferred Income Fund, Nuveen Quality Preferred Income Fund 2,
and Nuveen Quality Preferred Income Fund 3 at July 31, 2003, and the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated therein in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
September 12, 2003
7
Nuveen Quality Preferred Income Fund (JTP)
Portfolio of
INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE-LISTED PREFERRED SECURITIES - 74.1% (50.1% OF TOTAL INVESTMENTS)
AGENCY - 0.3%
42,000 Freddie Mac, Series F, 5.000% (a) $ 2,005,500
33,400 Tennessee Valley Authority, Series D, 6.750% 891,112
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO - 0.5%
33,000 Ford Motor Company, Series F, 8.000% (CBTCS) 818,070
51,240 Ford Motor Company Capital Trust I, 9.000% 1,308,157
63,300 General Motors Corporation, 7.375% 1,558,446
23,700 General Motors Corporation, 7.250% 571,170
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO - FOREIGN - 1.1%
382,050 Magna International Inc., Series B, 8.875% 10,124,325
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - 9.6%
1,000 ABN AMRO North America, Series 144A, 6.590% (a) 1,054,063
101,300 ASBC Capital I, 7.625% 2,690,528
7,200 BAC Capital Trust I, 7.000% 184,680
64,000 BAC Capital Trust II, 7.000% 1,625,600
145,000 BAC Capital Trust III, 7.000% 3,784,500
24,000 BAC Capital Trust IV, 5.875% 583,200
68,300 Bank One Capital Trust II, 8.500% 1,891,910
50,300 Bank One Capital Trust VI, 7.200% 1,295,225
60,100 BNY Capital Trust V, Series F, 5.950% 1,470,046
117,399 Chase Capital Trust IV, Series D, 7.340% 2,954,933
24,800 Chase Capital Trust VIII, Series H, 8.300% 669,600
197,000 Chittenden Capital Trust I, 8.000% 5,122,000
Citigroup Inc.:
20,000 Series F, 6.365% (a) 1,075,000
70,000 Series H, 6.231% (a) 3,663,100
45,000 Series M, 5.864% (a) 2,328,750
28,900 Citicorp Capital III, 7.100% 732,037
18,000 Citigroup Capital Trust VI, 6.875% 458,640
103,000 Citigroup Capital Trust VII, 7.100% 2,685,210
47,600 Citigroup Capital Trust VIII, 6.950% 1,222,844
122,500 Comerica Capital Trust I, 7.600% 3,256,050
224,795 Compass Bank Capital Trust III, 7.350% 5,844,670
8,400 First Union Capital II, 8.200% (CORTS) 235,368
28,400 First Union Capital II, Series II, 7.500% (CORTS) 758,564
89,000 Fleet Capital Trust VI, 8.800% 2,401,220
32,100 Fleet Capital Trust VII, 7.200% 823,044
57,900 Harris Preferred Capital Corporation, Series A, 7.375% 1,463,712
8
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
32,600 JPMorgan Chase Capital Trust I, Series 2001-1, 7.850% (CORTS) $ 869,442
77,200 JPMorgan Chase Capital Trust IX, Series I, 7.500% 2,007,200
KeyCorp:
29,800 Series B, 8.250% (CORTS) 800,130
15,300 Series 2001-7, 7.750% (CORTS) 403,920
59,400 KeyCorp, 7.500% (PCARS) 1,580,040
44,700 National Commerce Capital Trust II, 7.700% 1,191,255
29,200 Regions Finance Trust I, 8.000% 779,640
35,700 Suntrust Capital Trust V, 7.050% 917,490
174,400 US Bancorp Capital Trust III, 7.750% 4,515,216
418,405 US Bancorp Capital Trust IV, 7.350% 10,732,088
38,400 US Bancorp Capital Trust V, 7.250% 973,824
9,400 Valley National Bank Capital Trust I, 7.750% 247,596
19,000 Washington Mutual Capital Trust I, Series 2001-22, 7.650% (CORTS) 495,900
7,700 Wells Fargo Capital Trust IV, 7.000% 199,738
17,000 Wells Fargo Capital Trust V, 7.000% 438,940
92,100 Wells Fargo Capital Trust VII, 5.850% 2,234,346
300,000 Zions Capital Trust B, 8.000% 8,175,000
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 5.0%
273,200 ABN AMRO Capital Funding Trust I, 7.500% 6,898,300
208,800 ABN AMRO Capital Funding Trust II, 7.125% 5,276,376
24,200 ANZ Exchangeable Preferred Trust, 8.000% 611,050
9,000 ANZ Exchangeable Preferred Trust II, 8.080% 228,330
8,500 Abbey National plc, 7.250% 219,130
67,800 Abbey National plc, Series B, 7.375% 1,789,920
46,300 Banco Totta & Acores Finance, Series A, 8.875% 1,279,501
104,600 BCH Capital Ltd., Series B, 9.430% 2,907,880
BSCH Finance Ltd.:
253,837 Series F, 8.125% 6,609,915
162,055 Series G, 8.125% 4,215,051
70,691 Series H, 7.790% 1,774,344
2,500 Series J, 7.350% 62,775
265,650 Series Q, 8.625% 7,108,794
37,400 Espirito Santo Overseas Ltd., 8.500% 985,116
60,000 NAB Exchangeable Preferred Trust, 8.000% 1,518,000
55,300 National Westminster Bank plc, Series A, 7.875% 1,396,325
75,000 Royal Bank of Scotland Group plc, 5.750% 1,724,250
22,900 Westpac Capital Trust I, 8.000% 593,568
- ------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 3.3%
50,100 Bear Stearns Capital Trust III, 7.800% 1,323,642
110,000 Lehman Brothers Capital Trust I, 8.000% 2,813,800
118,100 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 3,054,066
98,949 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 2,471,746
38,500 Merrill Lynch Capital Trust II, 8.000% 1,055,670
186,900 Merrill Lynch Preferred Capital Trust, 7.750% 5,107,977
7,300 Merrill Lynch Preferred Capital Trust IV, 7.120% 187,975
9
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE (continued)
44,800 Merrill Lynch Preferred Capital Trust V, 7.280% $ 1,162,560
92,000 Morgan Stanley Capital Trust II, 7.250% 2,352,440
188,400 Morgan Stanley Capital Trust III, 6.250% 4,593,192
250,095 Morgan Stanley Capital Trust IV, 6.250% 6,072,307
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 1.5%
46,100 ENCANA Corporation, 9.500% 1,233,175
79,400 Suncor Energy Inc., 9.125% 2,101,718
153,600 Talisman Energy Inc., 9.000% 3,924,480
257,100 Talisman Energy Inc., 8.900% 6,617,754
- ------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.3%
119,000 Viacom Inc., 7.250% 3,105,900
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 6.2%
485,300 AT&T Capital Corp., 8.250% 12,287,796
760,000 AT&T Capital Corp., 8.125% 19,182,400
30,176 CIT Group Incorporated, 7.750% (CORTS) 809,019
584,500 Countrywide Capital Trust IV, 6.750% 14,261,800
42,000 General Electric Capital Corp., 6.100% 1,058,400
20,000 General Electric Capital Corp., 5.875% 497,000
95,000 General Motors Acceptance Corporation, 7.350% 2,337,950
28,500 General Motors Acceptance Corporation, 7.300% 705,945
127,000 Household Capital Trust V, Series X, 10.000% 3,511,550
59,500 Household Capital Trust VI, 8.250% 1,576,750
17,000 Household Capital Trust VII, 7.500% 445,910
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 4.8%
55,900 ING Capital Funding Trust, 7.700% 1,429,922
26,400 ING Capital Funding Trust II, 9.200% 722,040
1,015,458 ING Groep NV, 7.200% 26,259,744
563,900 ING Groep NV, 7.050% 14,379,450
26,200 Swedish Export Credit Corp., 7.375% 663,646
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - 0.1%
19,100 ConAgra Capital LC, Series B, 5.000% 479,219
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 1.6%
535,800 Grand Met De Ltd. Partnership, 9.420% 14,396,946
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 2.0%
32,100 AGL Capital Trust II, 8.000% 850,650
96,800 Coastal Finance I, 8.375% 1,926,320
93,400 Dominion CNG Capital Trust I, 7.800% 2,465,760
142,400 MCN Financing Trust II, 8.625% 3,665,376
22,900 South Jersey Gas Capital Trust, 8.350% 583,950
322,500 Southern Union Financing Trust, 9.480% 8,297,925
10
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.3%
108,500 TransCanada Pipelines Ltd., 8.250% $ 2,761,325
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.8%
64,500 AMBAC Financial Group Inc., 5.950% 1,566,705
118,774 AMBAC Financial Group Inc., 5.875% 2,874,331
74,000 Financial Security Assurance Holdings, 6.250% 1,815,960
26,600 MBIA Inc., 8.000% 727,244
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.6%
20,700 American General Capital Trust I, 7.875% 543,375
15,700 American General Capital Trust III, 8.050% 442,740
100,000 Delphi Financial Group Inc., 8.000% 2,540,000
136,600 Great West Life and Annuity Insurance Capital Trust I,
Series A, 7.250% 3,476,470
77,100 Lincoln National Capital Trust V, Series E, 7.650% 2,013,081
70,900 Protective Life Company Capital Trust III, 7.500% 1,858,289
410,000 Protective Life Company Capital Trust IV, 7.250% 10,824,000
58,600 Torchmark Capital Trust I, 7.750% 1,548,798
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.8%
13,600 Farmers Group Capital Trust II, Series B, 8.250% 349,520
81,152 Hartford Capital Trust I, Series A, 7.700% 2,057,203
110,000 Hartford Capital Trust III, Series C, 7.450% 2,799,500
42,700 Hartford Life Capital Trust II, Series B, 7.625% 1,106,357
26,700 SAFECO, 8.750% (CBTCS) 707,817
24,600 SAFECO Capital I, Series II, 8.700% (CORTS) 655,836
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - 0.2%
59,200 Everest Re Capital Trust, 7.850% 1,568,800
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 6.8%
12,900 ACE Capital Trust I, 8.875% 339,399
755,200 Ace Ltd., Series C, 7.800% 18,955,520
760,000 Converium Finance, 8.250% 19,919,600
250,000 PartnerRe Ltd., Series C, 6.750% 6,225,000
99,000 PartnerRe Ltd. Capital Trust I, 7.900% 2,653,200
RenaissanceRe Holdings Ltd.:
67,705 Series A, 8.100% 1,808,401
40,000 Series B, 7.300% 1,036,400
XL Capital Ltd.:
385,354 Series A, 8.000% 10,250,416
24,000 Series B, 7.625% 626,400
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER - 0.1%
37,800 International Paper Capital Trust III, 7.875% 958,986
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.2%
54,300 Rhone-Poulenc Overseas, Series A, 8.125% 1,381,392
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 18.7%
8,600 Archstone-Smith Trust, Series D, 8.750% 230,910
13,400 AvalonBay Communities Inc., Series H, 8.700% 381,900
11
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (continued)
BRE Properties:
12,900 Series A, 8.500% $ 330,563
608,700 Series B, 8.080% 16,495,770
Developers Diversified Realty Corporation:
9,000 Series G, 8.000% 228,150
78,000 Series H, 7.375% 1,911,000
Duke Realty Corp.:
109,179 Series B, 7.990% 5,650,013
9,300 Series I, 8.450% 251,286
Equity Office Properties Trust:
22,900 Series C, 8.625% 587,385
1,097,400 Series G, 7.750% 29,070,126
Equity Residential Properties Trust:
30,400 Series B, 9.125% 825,360
22,100 Series D, 8.600% 618,800
First Industrial Realty Trust Inc.:
10,600 Series C, 8.625% 294,680
87,200 Series D, 7.950% 2,180,872
60,500 Series E, 7.900% 1,509,475
19,000 Firstar Realty LLC, Series 144A, 8.875% 22,230,000
HRPT Properties Trust:
218,300 Series A, 9.875% 5,915,930
1,096,700 Series B, 8.750% 29,172,220
New Plan Excel Realty Trust:
20,000 Series D, 7.800% 966,876
414,000 Series E, 7.625% 10,764,000
89,600 Prologis Trust, Series D, 7.920% 2,269,568
Public Storage Inc.:
7,000 Series D, 9.500% 194,950
16,200 Series E, 10.000% 458,136
22,800 Series F, 9.750% 631,104
6,400 Series K, 8.250% 163,840
20,400 Series L, 8.250% 522,444
24,000 Series Q, 8.600% 644,400
99,000 Series R, 8.000% 2,631,420
200,000 Series S, 7.875% 5,300,000
12,180 Series U, 7.625% 321,308
316,000 Series V, 7.500% 8,374,000
Simon Property Group Inc.:
20,500 Series F, 8.750% 559,650
176,200 Series G, 7.890% 9,365,030
Vornado Realty Trust:
26,100 Series B, 8.500% 664,506
47,700 Series C, 8.500% 1,216,350
285,000 Wachovia Bank Preferred Funding Corporation, 7.250% 7,700,700
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 0.6%
219,600 Sears Roebuck Acceptance Corporation, 7.000% 5,448,276
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 1.8%
10,000 SBC Communications Inc., 7.000% 260,500
183,796 Telephone & Data Systems Capital Trust I, 8.500% 4,650,039
262,846 Telephone & Data Systems Inc., 7.600% 6,902,336
156,300 US Cellular Corporation, 8.750% 4,166,958
12
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.9%
248,300 Alabama Power Company, 5.830% (a) $ 6,331,650
13,300 Atlantic Capital Trust II, Series C, 7.375% 337,155
92,600 CPL Capital I, Series A, 8.000% 2,340,002
13,500 Delmarva Power Finance (Conectiv Inc.), 8.125% 346,140
55,600 Dominion Resources Capital Trust II, 8.400% 1,472,288
77,740 DTE Energy Trust I, 7.800% 2,021,240
20,800 Duke Energy Capital Trust I, Series Q, 7.200% 521,872
8,000 Duke Energy Capital Trust II, 7.200% 204,640
94,800 Energy East Capital Trust I, 8.250% 2,518,836
93,005 Entergy LA Inc., 7.600% 2,456,262
134,751 Georgia Power Company, 5.900% 3,368,775
Interstate Power & Light Company:
11,800 Series A, 7.875% 297,950
320,000 Series B, 8.375% (a) 10,688,000
64,700 OGE Energy Capital Trust I, 8.375% 1,694,493
7,700 Ohio Power Company, 7.375% 194,425
40,000 Potomac Electric Power Company, Series 6, 2.280% (a) 1,660,000
1,300 PSE&G Capital Trust, 8.125% 33,540
60,800 PSO Capital Trust I, Series A, 8.000% 1,533,376
53,100 SWEPCO Capital Trust I, Series A, 7.875% 1,342,368
3,100 Virginia Electric & Power Company, Series A, 7.150% 78,306
187,000 Virginia Power Capital Trust, 7.375% 4,899,400
1,000 WPS Resources Capital Trust I, 7.000% 25,153
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange-Listed Preferred Securities (cost $650,061,826) 672,104,301
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 9.7% (6.5% OF TOTAL INVESTMENTS)
BANKING - 0.6%
154,000 Citigroup Global Markets Holdings, 2.000% 5,430,502
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.7%
299,400 Keyspan Corporation, 8.750% 15,733,470
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 0.2%
32,000 PartnerRe Ltd., 8.000% 1,633,600
- ------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.7%
117,500 Baxter International Inc., 7.000% 5,979,575
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.1%
263,200 ALLTELL Corp., 7.750% 12,633,600
242,200 Citizens Communications Company, 6.750% 6,079,220
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.4%
302,200 Ameren Corporation, 9.750% 8,558,304
125,500 American Electric Power Inc., 9.250% 5,823,200
58,000 Cinergy Corp., 9.500% 3,419,100
260,200 Dominion Resources Inc., 8.750% 13,556,420
153,600 Public Service Enterprise Group, 10.250% 8,970,240
- ------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $82,504,425) 87,817,231
--------------------------------------------------------------------------------------------------------------------
13
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 2.7% (1.9% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 1.1%
10 BBVA Privanza International Gibraltar, Series 144A, 7.764% $10,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 1.6%
13,250 Centaur Funding Corp., Series 144A, 9.080% 14,889,688
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost $21,548,162) 24,889,688
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 50.5% (34.1% OF TOTAL INVESTMENTS)
BANKING - 20.7%
$ 6,500 ABN AMRO North America Holding Capital, Series 144A, 6,929,722
6.523%, 11/08/12
3,000 BankAmerica Capital II, Series 2, 8.000%, 12/15/26 3,222,780
1,000 BankAmerica Institutional Capital Trust A, Series 144A, 1,063,466
8.070%, 12/31/26
2,000 BankAmerica Institutional Capital Trust B, Series 144A, 2,133,400
7.700%, 12/31/26
5,700 Bank of Boston Capital Trust II, Series B, 7.750%, 12/15/26 5,900,030
6,000 Barnett Capital I, 8.060%, 12/01/26 6,380,304
7,800 BT Preferred Capital Trust II, 7.875%, 2/25/27 8,182,824
5,000 Chase Capital Trust I, Series A, 7.670%, 12/01/26 5,120,035
3,000 Corestates Capital Trust I, Series 144A, 8.000%, 12/15/26 3,251,130
500 First Empire Capital Trust II, 8.277%, 6/01/27 540,990
26,463 First Union Institutional Capital I, 8.040%, 12/01/26 28,699,917
20,000 JPM Capital Trust II, 7.950%, 2/01/27 20,918,680
2,000 KeyCorp Institutional Capital Trust A, 7.826%, 12/01/26 2,059,798
11,150 NB Capital Trust II, 7.830%, 12/15/26 11,754,598
1,000 North Fork Capital Trust I, 8.700%, 12/15/26 1,121,610
8,000 Peoples Heritage Capital Trust I (BankNorth Group Inc.), 8,685,296
Series B, 9.060%, 2/01/27
19,000 PNC Institutional Capital Trust A, 7.950%, 12/15/26 19,976,334
17,500 Reliance Capital Trust I, Series B, 8.170%, 5/01/28 18,440,118
1,400 Republic NY Capital Trust IV, 7.530%, 12/04/26 1,422,995
23,000 Summit Capital Trust I, 8.400%, 3/15/27 25,190,290
1,000 Union Planters Capital Trust A, 8.200%, 12/15/26 1,017,644
4,000 Wachovia Bank Capital Trust I, Series 144A, 7.640%, 1/15/27 4,230,480
1,050 Wells Fargo Capital, 7.950%, 12/01/26 1,128,236
1,000 Zions Institutional Capital Trust A, Series A, 8.536%, 12/15/26 1,042,007
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 9.5%
30,000 Abbey National Capital Trust I, 8.963%, 12/29/49 38,957,700
7,242 Dresdner Funding Trust I, 8.151%, 6/30/31 7,336,023
25,000 HSBC Capital Funding LP, 10.176%, 6/30/03 35,436,000
5,000 Sparebanken Rogaland, Series 144A, 6.443%, 5/01/13 4,975,000
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.6%
21,900 Phillips 66 Capital Trust II, 8.000%, 1/15/37 23,290,212
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.0%
4,000 KN Capital Trust I, 8.560%, 4/15/27 4,523,960
4,360 KN Capital Trust III, 7.630%, 4/15/28 4,533,048
14
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.8%
$ 7,500 Berkley Capital Trust, 8.197%, 12/15/45 $ 7,297,710
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 0.8%
3,000 American General Institutional Capital, 8.125%, 3/15/46 3,609,150
4,000 MIC Financing Trust I, 8.375%, 2/01/27 4,101,924
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 2.9%
24,410 Sun Life Canada Capital Trust, 8.526%, 5/06/49 25,951,003
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 6.6%
2,983 AFC Capital Trust I, Series B, 8.207%, 2/03/27 2,565,380
20,525 SAFECO Capital Trust I, 8.072%, 7/15/37 21,880,676
35,095 Zurich Capital Trust I, 8.376%, 6/01/37 35,549,164
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - FOREIGN - 0.9%
8,000 Mangrove Bay, Series 144A, 6.102%, 7/15/33 7,760,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 2.0%
7,570 Ace Capital Trust II, 9.700%, 4/01/30 9,414,885
2,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 2,022,152
7,500 Royal & Sun Alliance Insurance, 8.950%, 10/15/29 6,686,918
- ------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - 0.6%
5,000 Washington Mutual Capital Trust I, 8.375%, 6/01/27 5,463,750
- ------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.6%
8,500 Dime Capital Trust I, Series A, 9.330%, 5/06/27 9,563,648
5,000 Great Western Financial Trust II, Series A, 8.206%, 2/01/27 5,255,960
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.5%
5,000 PECO Energy Capital Trust IV, 5.750%, 6/15/33 4,270,544
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $453,160,740) 458,857,491
--------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 6.7% (4.5% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 6.1%
11,500 C.A. Preferred Funding Trust, 7.000%, 1/30/09 11,214,766
25,500 HBOS Capital Funding LP, Notes, 6.850%, 3/29/49 24,862,500
6,250 Lloyds TSB Bank plc, Subordinate Notes, 6.900%, 11/22/07 6,183,213
13,000 RBS Capital Trust, Series B, 6.800%, 3/31/08 12,757,745
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.6%
5,500 Old Mutual Capital Funding, Notes, 8.000%, 12/22/08 5,486,249
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $64,436,826) 60,504,473
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.0% (2.7% OF TOTAL INVESTMENTS)
AUTO - 1.3%
5,000 Ford Motor Company, Debenture, 8.900%, 1/15/32 4,803,055
5,700 Ford Motor Company, Debenture, 7.700%, 5/15/97 4,725,944
3,400 Ford Motor Company, Debenture, 7.400%, 11/01/46 2,716,848
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - 0.3%
3,000 Suntrust Bank, Subordinate Notes, 5.450%, 12/01/17 3,027,876
15
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.4%
$ 22,500 General Motors Acceptance Corporation, Notes, 8.000%, 11/01/31 $20,815,223
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - 0.0%
500 Zurich Reinsurance Centre Holdings Inc., Senior Notes, 7.125%, 10/15/23 439,301
- ------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $36,737,833) 36,528,247
--------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.3% (0.2% OF TOTAL INVESTMENTS)
2,959 State Street Bank Repurchase Agreement, 0.980%, dated 7/31/03, due 8/01/03,
============= repurchase price $2,958,983, collateralized by U.S. Treasury Bonds 2,958,902
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $2,958,902) 2,958,902
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,311,408,714) - 148.0% 1,343,660,333
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 4,086,089
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (48.5)% (440,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $907,746,422
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(a) Security is eligible for the Dividends Received
Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
See accompanying notes to financial statements.
16
Nuveen Quality Preferred Income Fund 2 (JPS)
Portfolio of
INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE-LISTED PREFERRED SECURITIES - 68.8% (47.9% OF TOTAL INVESTMENTS)
AGENCY - 1.4%
316,000 Fannie Mae, Series L, 5.125% (a) $15,484,000
88,600 Freddie Mac, Series F, 5.000% (a) 4,230,650
42,000 SLM Corporation, Series A, 6.970% (a) 2,379,300
90,100 Tennessee Valley Authority, Series D, 6.750% 2,403,868
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO - 0.1%
30,000 Ford Motor Company, Series F, 8.000% (CBTCS) 743,700
35,000 Ford Motor Company Capital Trust I, 9.000% 893,550
20,400 General Motors Corporation, 7.375% 502,248
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO - FOREIGN - 0.1%
35,500 Magna International Inc., Series B, 8.875% 940,750
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - 8.8%
152,060 ASBC Capital I, 7.625% 4,038,714
135,900 BAC Capital Trust I, 7.000% 3,485,835
168,500 BAC Capital Trust II, 7.000% 4,279,900
218,300 BAC Capital Trust III, 7.000% 5,697,630
300,000 BAC Capital Trust IV, 5.875% 7,290,000
81,600 BancWest Capital I, 9.500% 2,321,520
68,500 Bank One Capital II, 8.500% 1,897,450
41,400 Bank One Capital V, 8.000% 1,114,488
144,500 Bank One Capital VI, 7.200% 3,720,875
35,800 BankNorth Capital Trust II, 8.000% 941,540
17,800 BNY Capital Trust IV, Series E, 6.875% 453,544
54,100 BNY Capital Trust V, Series F, 5.950% 1,323,286
93,100 Chase Capital Trust IV, 7.340% 2,343,327
22,800 Chase Capital Trust V, Series E, 7.030% 572,964
76,800 Chase Capital Trust VIII, 8.300% 2,073,600
12,100 Chittenden Capital Trust I, 8.000% 314,600
35,300 Citicorp Capital III, 7.100% 894,149
52,100 Citigroup Capital Trust VI, 6.875% 1,327,508
148,100 Citigroup Capital Trust VII, 7.100% 3,860,967
360,000 Citigroup Capital Trust VIII, 6.950% 9,248,400
Citigroup Inc.:
23,000 Series F, 6.365% (a) 1,236,250
40,000 Series H, 6.231% (a) 2,093,200
45,000 Series M, 5.864% (a) 2,328,750
239,700 Comerica Capital Trust I, 7.600% 6,371,226
380,125 Compass Bank Capital Trust III, 7.350% 9,883,250
31,300 First Union Capital II, 8.200% (CORTS) 877,026
17
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
63,300 First Union Capital II, Series II, 7.500% (CORTS) $ 1,690,743
128,300 Fleet Capital Trust VI, 8.800% 3,461,534
79,700 Harris Preferred Capital Corporation, Series A, 7.375% 2,014,816
41,000 JPMorgan Chase Capital Trust, Series 2002-6, 7.125% (SATURNS) 1,038,530
71,500 JPMorgan Chase Capital Trust, 7.200% (CBTCS) 1,823,965
6,400 JPMorgan Chase Capital Trust I, Series 2001-1, 7.850% (CBTCS) 170,688
204,100 JPMorgan Chase Capital Trust IX, Series I, 7.500% 5,306,600
KeyCorp:
91,300 Series B, 8.250% (CORTS) 2,451,405
28,000 Series 2001-7, 7.750% (CORTS) 739,200
33,900 KeyCorp, 7.500% (PCARS) 901,740
239,800 National Commerce Capital Trust II, 7.700% 6,390,670
34,300 Regions Finance Trust I, 8.000% 915,810
131,900 SunTrust Capital Trust IV, 7.125% 3,397,744
81,400 SunTrust Capital Trust V, 7.050% 2,091,980
602,600 US Bancorp Capital Trust III, 7.750% 15,601,314
208,100 US Bancorp Capital Trust IV, 7.350% 5,337,765
78,100 US Bancorp Capital Trust V, 7.250% 1,980,616
87,600 Valley National Bank Capital Trust I, 7.750% 2,307,384
41,000 Washington Mutual Capital Trust I, Series 2001-22, 1,070,100
7.650% (CORTS)
15,700 Wells Fargo Capital Trust IV, 7.000% 407,258
26,400 Wells Fargo Capital Trust V, 7.000% 681,648
20,000 Wells Fargo Capital Trust VI, 6.950% 511,200
165,000 Wells Fargo Capital Trust VII, 5.850% 4,002,900
510,200 Zions Capital Trust B, 8.000% 13,902,950
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 5.6%
340,000 ABN AMRO Capital Funding Trust I, 7.500% 8,585,000
780,300 ABN AMRO Capital Funding Trust II, 7.125% 19,718,181
102,000 ANZ Exchangeable Preferred Trust, 8.000% 2,575,500
61,600 ANZ Exchangeable Preferred Trust II, 8.080% 1,562,792
23,500 Banco Totta & Acores Finance, Series A, 8.875% 649,423
621,000 Banesto Holdings, Series A, 10.500% 18,630,000
4,100 BBVA Preferred Capital Ltd., Series B, 7.750% 106,805
341,600 BCH Capital Ltd., Series B, 9.430% 9,496,480
BSCH Finance Ltd.:
154,900 Series F, 8.125% 4,033,596
131,000 Series G, 8.125% 3,407,310
88,100 Series H, 7.790% 2,211,310
212,000 Series J, 7.350% 5,323,320
446,100 Series Q, 8.625% 11,937,636
27,400 Espirito Santo Overseas Ltd., 8.500% 721,716
148,500 NAB Exchangeable Preferred Trust, 8.000% 3,757,050
105,200 National Westminster Bank plc, Series A, 7.875% 2,656,300
60,000 Royal Bank of Scotland Group plc, 5.750% 1,379,400
139,100 Westpac Capital Trust I, 8.000% 3,605,472
18
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 2.8%
105,900 Bear Stearns Capital Trust II, 7.500% $ 2,679,270
94,900 Bear Stearns Capital Trust III, 7.800% 2,507,258
63,800 Lehman Brothers Capital Trust I, 8.000% 1,632,004
102,800 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 2,658,408
273,100 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 6,822,038
500 Merrill Lynch Capital Trust, 7.000% 12,740
91,800 Merrill Lynch Capital Trust II, 8.000% 2,517,156
60,300 Merrill Lynch Preferred Capital Trust, 7.750% 1,647,999
44,400 Merrill Lynch Preferred Capital Trust IV, 7.120% 1,143,300
87,700 Merrill Lynch Preferred Capital Trust V, 7.280% 2,275,815
80,408 Morgan Stanley Capital Trust II, 7.250% 2,056,033
537,600 Morgan Stanley Capital Trust III, 6.250% 13,106,688
451,600 Morgan Stanley Capital Trust IV, 6.250% 10,964,848
16,000 Morgan Stanley Dean Witter, Series C, 7.250% 416,800
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 0.4%
52,800 ENCANA Corporation, 9.500% 1,412,400
46,400 Suncor Energy Inc., 9.125% 1,228,208
67,300 Talisman Energy Inc., 9.000% 1,719,515
75,100 Talisman Energy Inc., 8.900% 1,933,074
- ------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.1%
67,300 Viacom Inc., 7.250% 1,756,530
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 6.3%
130,800 AT&T Capital Corp., 8.250% 3,311,856
611,100 AT&T Capital Corp., 8.125% 15,424,164
32,600 CIT Group Incorporated, 7.750% (CORTS) 874,006
978,000 Countrywide Capital Trust IV, 6.750% 23,863,200
199,700 General Electric Capital Corp., 6.625% 5,042,425
1,000,000 General Electric Capital Corp., 6.100% 25,200,000
10,500 General Electric Capital Corp., 5.875% 260,925
8,400 General Motors Acceptance Corporation, 7.350% 206,724
5,000 General Motors Acceptance Corporation, 7.300% 123,850
526,700 Household Capital Trust V, Series X, 10.000% 14,563,255
617,096 Household Capital Trust VI, 8.250% 16,353,044
22,500 Household Capital Trust VII, 7.500% 590,175
250,000 Household Finance Corporation, 6.875% 6,250,000
16,000 Philadelphia Authority for Industrial Development, 6.550% 405,600
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 4.2%
18,800 CSFB USA, Series 2002-10, 7.000% (SATURNS) 473,196
23,000 ING Capital Funding Trust, 7.700% 588,340
63,600 ING Capital Funding Trust II, 9.200% 1,739,460
1,462,100 ING Groep NV, 7.200% 37,809,906
1,338,655 ING Groep NV, 7.050% 34,135,703
6,500 Swedish Export Credit Corp., 7.375% 164,645
19
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 0.2%
106,100 Grand Met De Ltd. Partnership, 9.420% $ 2,850,907
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.2%
38,100 AGL Capital Trust II, 8.000% 1,009,650
92,500 Dominion CNG Capital Trust I, 7.800% 2,442,000
10,800 MCN Financing Trust II, 8.625% 277,992
17,300 South Jersey Gas Capital Trust, 8.350% 441,150
8,100 Southern Union Financing Trust, 9.480% 208,413
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.2%
151,100 TransCanada Pipelines Ltd., 8.250% 3,845,495
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 1.9%
76,900 AMBAC Financial Group Inc., 5.950% 1,867,901
181,200 AMBAC Financial Group Inc., 5.875% 4,385,040
7,800 Financial Security Assurance Holdings, 6.950% 195,780
43,000 Financial Security Assurance Holdings, 6.875% 1,117,570
1,059,618 Financial Security Assurance Holdings, 6.250% 26,003,026
22,200 MBIA Inc., 8.000% 606,948
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 1.7%
28,200 American General Capital Trust I, 7.875% 740,250
33,400 American General Capital Trust III, 8.050% 941,880
472,557 Delphi Financial Group Inc., 8.000% 12,002,948
25,900 Great West Life and Annuity Insurance Capital Trust I, 659,155
Series A, 7.250%
59,000 Lincoln National Capital Trust V, Series E, 7.650% 1,540,490
80,700 Protective Life Company Capital Trust III, 7.500% 2,115,147
440,940 Protective Life Company Capital Trust IV, 7.250% 11,640,816
57,200 Torchmark Capital Trust I, 7.750% 1,511,796
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.9%
169,856 Hartford Capital Trust I, Series A, 7.700% 4,305,850
247,600 Hartford Capital Trust III, Series C, 7.450% 6,301,420
52,700 Hartford Life Capital Trust II, Series B, 7.625% 1,365,457
78,900 SAFECO Capital I, Series II, 8.700% ( CORTS) 2,103,474
59,700 SAFECO, 8.750% (CBTCS) 1,582,647
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - 4.2%
2,827,000 Everest Re Capital Trust, 7.850% 74,915,500
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 6.8%
967,600 Ace Ltd., Series C, 7.800% 24,286,760
1,505,600 Converium Finance, 8.250% 39,461,776
230,081 PartnerRe Capital Trust I, 7.900% 6,166,171
439,320 PartnerRe Ltd., Series C, 6.750% 10,939,068
RenaissanceRe Holdings Ltd.:
304,360 Series A, 8.100% 8,129,456
136,500 Series B, 7.300% 3,536,715
XL Capital Ltd.:
554,400 Series A, 8.000% 14,747,040
537,617 Series B, 7.625% 14,031,804
20
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER - 0.1%
105,300 International Paper Capital Trust III, 7.875% $ 2,671,461
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.1%
80,000 Rhone-Poulenc Overseas, Series A, 8.125% 2,035,200
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 13.1%
14,500 Archstone-Smith Trust, Series D, 8.750% 389,325
91,900 AvalonBay Communities Inc., Series H, 8.700% 2,619,150
BRE Properties:
25,600 Series A, 8.500% 656,000
8,700 Series B, 8.080% 235,770
CarrAmerica Realty Corporation:
22,000 Series C, 8.550% 559,900
5,500 Series D, 8.450% 139,865
Developers Diversified Realty Corporation:
279,800 Series G, 8.000% 7,092,930
100,000 Series H, 7.375% 2,450,000
Duke Realty Corp.:
186,650 Series B, 7.990% 9,659,138
16,300 Series E, 8.250% 416,954
33,400 Series I, 8.450% 902,468
Equity Office Properties Trust:
47,400 Series C, 8.625% 1,215,810
293,000 Series G, 7.750% 7,761,570
Equity Residential Properties Trust:
81,800 Series B, 9.125% 2,220,870
40,000 Series C, 9.125% 1,119,600
59,750 Series D, 8.600% 1,673,000
1,000 Series N, 6.480% 24,250
First Industrial Realty Trust Inc.:
16,700 Series C, 8.625% 464,260
110,700 Series D, 7.950% 2,768,607
99,800 Series E, 7.900% 2,490,010
2,300 Gables Residential Trust, Series D, 7.500% 57,960
HRPT Properties Trust:
206,200 Series A, 9.875% 5,588,020
1,516,825 Series B, 8.750% 40,347,545
153,000 Kimco Realty Corporation, Series F, 6.650% 3,840,300
New Plan Excel Realty Trust:
147,350 Series D, 7.800% 7,123,459
763,000 Series E, 7.625% 19,838,000
261,000 Prologis Trust, Series D, 7.920% 6,611,130
Public Storage Inc.:
5,000 Series D, 9.500% 139,250
11,000 Series F, 9.750% 304,480
9,000 Series K, 8.250% 230,400
13,700 Series L, 8.250% 350,857
12,700 Series M, 8.750% 332,740
43,800 Series Q, 8.600% 1,176,030
88,295 Series R, 8.000% 2,346,881
12,900 Series S, 7.875% 341,850
72,065 Series T, 7.625% 1,897,471
58,900 Series U, 7.625% 1,553,782
130,500 Series V, 7.500% 3,458,250
21
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (continued)
250,000 Regency Centers Corporation, 7.450% $ 6,512,500
Shurgard Storage Centers Inc.:
4,900 Series C, 8.700% 127,155
26,000 Series D, 8.750% 722,800
Simon Property Group Inc.:
29,800 Series F, 8.750% 813,540
321,041 Series G, 7.890% 17,063,329
Vornado Realty Trust:
33,200 Series B, 8.500% 845,272
40,700 Series C, 8.500% 1,037,850
2,436,900 Wachovia Bank Preferred Funding Corporation, 7.250% 65,845,038
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 0.4%
80,000 Sears Roebuck Acceptance Corporation, 7.000% 1,976,000
124,400 Sears Roebuck Acceptance Corporation, 7.000% 3,086,364
98,000 Sears Roebuck Acceptance Corporation, 6.950% 2,386,300
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.3%
4,000 BellSouth Capital Funding Corporation, 7.375% 101,800
4,200 BellSouth Inc., 7.000% (CORTS) 110,670
26,200 SBC Communications Inc., 7.000% 682,510
70,900 Telephone & Data Systems Capital Trust I, 8.500% 1,793,770
119,700 Telephone & Data Systems Inc., 7.600% 3,143,322
1,315,700 US Cellular Corporation, 8.750% 35,076,562
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.9%
340,000 Alabama Power Company, 5.830% (a) 8,670,000
7,000 Alabama Power Company, Series J, 6.750% 179,900
24,900 Atlantic Capital Trust II, Series C, 7.375% 631,215
28,400 BGE Capital Trust I, 7.160% 714,260
17,000 Consolidated Edison Co. of New York, 7.350% 437,750
12,200 Consolidated Edison Co. of New York, 7.500% 320,494
7,600 Consolidated Edison Inc., 7.250% 198,056
142,000 CPL Capital I, Series A, 8.000% 3,588,340
9,500 Detroit Edison Company, 7.625% 238,640
1,000 Detroit Edison Company, 7.540% 25,200
36,800 Dominion Resources Capital Trust II, 8.400% 974,464
27,200 DTE Energy Trust I, 7.800% 707,200
63,400 Duke Energy Capital Trust I, Series Q, 7.200% 1,590,706
22,800 Duke Energy Capital Trust II, 7.200% 583,224
1,000 Duke Energy Corp., Series C, 6.600% 25,450
93,600 Energy East Capital Trust I, 8.250% 2,486,952
500 Entergy Arkansas Inc., 6.700% 13,150
48,600 Entergy LA Inc., 7.600% 1,283,526
1,298,000 Entergy Mississippi Inc., 7.250% 34,591,700
22
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
3,000 Georgia Power Capital Trust V, 7.125% $ 78,030
35,500 Georgia Power Company, 6.600% 897,085
21,800 Gulf Power Capital Trust II, Series C, 7.000% 548,488
Interstate Power & Light Company:
15,200 Series A, 7.875% 383,800
1,200,000 Series B, 8.375% (a) 40,080,000
41,000 OGE Energy Capital Trust I, 8.375% 1,073,790
20,500 Ohio Power Company, 7.375% 517,625
38,600 Potomac Electric Power Company Trust I, 7.375% 977,352
147,400 PSO Capital Trust I, Series A, 8.000% 3,717,428
50,000 Public Service Company of Oklahoma, Series B, 6.000% 1,214,500
11,500 Rochester Gas & Electric Company, Series UU, 6.650% 299,000
218,600 SWEPCO Capital Trust I, Series A, 7.875% 5,526,208
9,700 Virginia Electric & Power Company, Series A, 7.150% 245,022
253,000 Virginia Power Capital Trust, 7.375% 6,628,500
44,600 WPSR Capital Trust I, 7.000% 1,121,912
58,847 Potomac Electric Power Company, Series 6, 2.280% (a) 2,442,150
12,200 PPL Electric Utilities Corporation, 4.400% (a) 1,029,375
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange-Listed Preferred Securities (cost $1,186,580,457) 1,230,741,882
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 8.0% (5.6% OF TOTAL INVESTMENTS)
BANKING - 0.4%
210,000 Citigroup Global Markets Holdings, 2.000% 7,405,230
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.1%
380,500 Keyspan Corporation, 8.750% 19,995,275
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.1%
37,500 Hartford Financial Services Group Inc., 7.000% 2,062,500
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 0.2%
74,000 PartnerRe Ltd., 8.000% 3,777,700
- ------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.6%
218,500 Baxter International Inc., 7.000% 11,119,465
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 1.9%
430,000 ALLTELL Corp., 7.750% 20,640,000
497,000 Citizens Communications Company, 6.750% 12,474,700
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.7%
389,900 Ameren Corporation, 9.750% 11,041,968
230,900 American Electric Power, 9.250% 10,713,760
116,000 Cinergy Corp., 9.500% 6,838,200
392,000 Dominion Resources Inc., 8.750% 20,423,200
294,500 Public Service Enterprise Group, 10.250% 17,198,800
- ------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $126,893,769) 143,690,798
--------------------------------------------------------------------------------------------------------------------
23
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 4.1% (2.9% OF TOTAL INVESTMENTS)
REAL ESTATE INVESTMENT TRUSTS - 1.3%
240 Union Planters Preferred Fund, Series 144A, 7.750% $22,955,040
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.8%
45,250 Centaur Funding Corporation, Series 144A, 9.080% 50,849,688
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost $62,797,088) 73,804,728
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 52.8% (36.8% OF TOTAL INVESTMENTS)
BANKING - 19.3%
$ 40,000 ABN AMRO North America Holding Capital, Series 144A, 42,644,440
6.523%, 11/08/12
15,000 Ahmanson Capital Trust I, 8.360%, 12/01/26 15,843,270
4,780 BankAmerica Institutional Capital Trust A, Series 144A, 5,083,367
8.070%, 12/31/26
26,355 Bank of Boston Capital Trust I, Series B, 8.250%, 12/15/26 28,331,441
3,031 Bank of Boston Capital Trust II, Series B, 7.750%, 12/15/26 3,137,367
5,300 Barnett Capital I, 8.060%, 12/01/26 5,635,935
500 BT Capital Trust B, Series B1, 7.900%, 1/15/27 517,383
7,500 Chase Capital Trust I, Series A, 7.670%, 12/01/26 7,680,053
2,229 Corestates Capital Trust I, Series 144A, 8.000%, 12/15/26 2,415,590
5,000 FBS Capital Trust I, 8.090%, 11/15/26 5,391,100
2,500 First Chicago NBD Institutional Capital, 7.950%, 12/01/26 2,642,635
1,500 First Empire Capital Trust I, 8.234%, 2/01/27 1,615,500
3,665 First Hawaiian Capital Trust I, Series B, 8.343%, 7/01/27 3,992,688
17,595 First Union Capital Trust II, Series A, 7.950%, 11/15/29 20,221,582
22,080 Fleet Capital Trust II, 7.920%, 12/11/26 22,892,676
3,600 JPM Capital Trust I, 7.540%, 1/15/27 3,663,536
22,585 JPM Capital Trust II, 7.950%, 2/01/27 23,622,419
2,500 KeyCorp Institutional Capital Trust A, 7.826%, 12/01/26 2,574,748
25,000 M & I Capital Trust A, 7.650%, 12/01/26 26,463,500
25,000 Mellon Capital Trust I, Series A, 7.720%, 12/01/26 26,221,950
19,500 NB Capital Trust II, 7.830%, 12/15/26 20,557,368
2,000 North Fork Capital Trust I, 8.700%, 12/15/26 2,243,220
8,000 North Fork Capital Trust II, 8.000%, 12/15/27 8,462,000
2,000 Peoples Heritage Capital Trust I (BankNorth Group Inc.), 2,171,324
Series B, 9.060%, 2/01/27
31,710 PNC Institutional Capital, 7.950%, 12/15/26 33,339,450
8,000 Reliance Capital Trust I, Series B, 8.170%, 5/01/28 8,429,768
3,240 State Street Institutional Capital Trust, Series 144A, 3,555,965
7.940%, 12/30/26
7,500 Union Planters Capital Trust A, 8.200%, 12/15/26 7,632,330
6,000 Zions Institutional Capital Trust, Series A, 8.536%, 12/15/26 6,252,042
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 12.9%
62,474 Abbey National Capital Trust I, 8.963%, 12/29/49 81,128,112
41,000 Barclays Bank plc, Series 144A, 6.860%, 6/15/32 43,018,840
17,065 Dresdner Funding Trust I, 8.151%, 6/30/31 17,286,555
10,000 HSBC Capital Funding LP, 10.176%, 6/30/30 14,174,400
24
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN (continued)
$ 30,000 KBC Bank Fund Trust III, Series 144A, 9.860%, 11/02/09 $37,011,180
18,400 Royal Bank of Scotland Group plc, 7.648%, 8/31/49 21,032,672
5,000 Sparebanken Rogaland, Series 144A, 6.443%, 5/01/13 4,975,000
10,000 UBS Preferred Funding Trust I, 8.622%, 10/01/49 12,123,130
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 0.4%
7,355 Phillips 66 Capital Trust II, 8.000%, 1/15/37 7,821,895
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.5%
8,595 Countrywide Capital Trust I, 8.000%, 12/15/26 8,890,247
19,460 Countrywide Capital Trust III, Series B, 8.050%, 6/15/27 21,737,793
14,000 St. George Funding Company LLC, 8.485%, 6/30/17 14,610,820
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.3%
5,750 KN Capital Trust III, 7.630%, 4/15/28 5,978,218
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.5%
10,000 Berkley Capital Trust, 8.197%, 12/15/45 9,730,280
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.6%
33,855 American General Institutional Capital, 8.125%, 3/15/46 40,729,258
6,000 MIC Financing Trust I, 8.375%, 2/01/27 6,152,886
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 2.6%
43,000 Sun Life Canada Capital Trust, 8.526%, 5/06/49 45,714,590
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 4.8%
38,777 SAFECO Capital Trust I, 8.072%, 7/15/37 41,338,221
44,515 Zurich Capital Trust I, 8.376%, 6/01/37 45,091,069
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - FOREIGN - 0.4%
8,000 Mangrove Bay, Series 144A, 6.102%, 7/15/33 7,760,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 2.2%
14,280 Ace Capital Trust II, 9.700%, 4/01/30 17,760,179
10,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 10,110,760
12,690 Royal & Sun Alliance Insurance, 8.950%, 10/15/29 11,314,264
- ------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.6%
11,825 Dime Capital Trust I, Series A, 9.330%, 5/06/27 13,304,721
14,000 Great Western Financial Trust II, Series A, 8.206%, 2/01/27 14,716,688
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 1.0%
16,700 Fannie Mae, Benchmark Notes, 6.250%, 2/01/11 17,925,329
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.7%
12,000 Georgia Power Capital Trust VI, 4,875%, 11/01/42 11,960,088
11,000 Peco Energy Capital Trust IV, 5.750%, 6/15/33 9,395,198
8,000 Southern Company Capital Trust I, 8.190%, 2/01/37 8,488,559
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $923,735,600) 944,515,599
--------------------------------------------------------------------------------------------------------------------
25
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of INVESTMENTS July 31, 2003
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 4.7% (3.3% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 4.3%
$ 17,000 C.A. Preferred Funding Trust, 7.000%, 1/30/09 $16,578,349
45,050 HBOS Capital Funding LP, Notes, 6.850%, 3/29/49 43,923,750
9,000 Lloyds TSB Bank plc, Subordinate Notes, 6.900%, 11/22/07 8,903,826
9,000 RBS Capital Trust, Series B, 6.800%, 3/31/08 8,832,285
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.4%
6,300 Old Mutual Capital Funding, Notes, 8.000%, 12/22/08 6,284,250
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $90,249,419) 84,522,460
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.8% (3.3% OF TOTAL INVESTMENTS)
AUTO - 1.6%
7,525 Ford Motor Company, Debenture, 8.900%, 1/15/32 7,228,598
4,000 Ford Motor Company, Debenture, 7.450%, 7/16/31 3,424,996
21,500 Ford Motor Company, Debenture, 7.400%, 11/01/46 17,180,070
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - 0.4%
7,000 Suntrust Bank, Subordinate Notes, 5.450%, 12/01/17 7,065,044
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.7%
52,860 General Motors Acceptance Corporation, Notes, 8.000%, 11/01/31 48,901,896
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - 0.1%
2,000 Zurich Reinsurance Centre Holdings Inc., Senior Notes, 7.125%, 10/15/23 1,757,205
- ------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $86,582,018) 85,557,809
--------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.3% (0.2% OF TOTAL INVESTMENTS)
5,719 State Street Bank Repurchase Agreement, 0.980%, dated 7/31/03, due 8/01/03,
============= repurchase price $5,719,156, collateralized by U.S. Treasury Bonds 5,719,000
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $5,719,000) 5,719,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,482,557,351) - 143.5% 2,568,552,276
--------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities - 1.2% 21,256,579
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (44.7)% (800,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $1,789,808,855
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(a) Security is eligible for the Dividends Received
Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(SATURNS) Structured Asset Trust Unit Repackaging.
See accompanying notes to financial statements.
26
Nuveen Quality Preferred Income Fund 3 (JHP)
Portfolio of
INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE-LISTED PREFERRED SECURITIES - 76.9% (52.4% OF TOTAL INVESTMENTS)
AGENCY - 2.4%
19,000 Fannie Mae, Series L, 5.125% (a) $ 931,000
23,900 Freddie Mac, Series F, 5.000% (a) 1,141,225
100,000 SLM Corporation, Series A, 6.970% (a) 5,665,000
18,300 Tennessee Valley Authority, Series D, 6.750% 488,244
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO - FOREIGN - 0.1%
13,000 Magna International Inc., Series B, 8.875% 344,500
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - 11.2%
1,000 ABN AMRO North America, Series 144A, 6.590% (a) 1,054,063
16,600 ASBC Capital I, 7.625% 440,896
5,500 BAC Capital Trust I, 7.000% 141,075
32,700 BAC Capital Trust II, 7.000% 830,580
91,700 BAC Capital Trust III, 7.000% 2,393,370
40,000 BAC Capital Trust IV, 5.875% 972,000
14,400 BancWest Capital I, 9.500% 409,680
29,000 Bank One Capital II, 8.500% 803,300
8,200 Bank One Capital V, 8.000% 220,744
26,300 Bank One Capital VI, 7.200% 677,225
4,900 Chase Capital Trust IV, 7.340% 123,333
12,000 Chittenden Capital Trust I, 8.000% 312,000
Citigroup Inc.:
19,149 Series F, 6.365% (a) 1,029,259
116,500 Series H, 6.231% (a) 6,096,445
58,601 Series M, 5.864% (a) 3,032,602
25,600 Citigroup Capital Trust VII, 7.100% 667,392
46,600 Citigroup Capital Trust VIII, 6.950% 1,197,154
52,500 Comerica Capital Trust I, 7.600% 1,395,450
16,600 Compass Bank Capital Trust III, 7.350% 431,600
KeyCorp:
8,000 Series B, 8.250% (CORTS) 214,800
6,300 Series 2001-7, 7.750% (CORTS) 166,320
4,800 KeyCorp, 7.500% (PCARS) 127,680
11,300 First Union Capital II, 8.200% (CORTS) 316,626
23,100 First Union Capital II, Series II, 7.500% (CORTS) 617,001
31,000 Fleet Capital Trust VI, 8.800% 836,380
108,000 Fleet Capital Trust VII, 7.200% 2,769,120
21,216 Fleet Capital Trust VIII, 7.200% 544,615
16,800 Harris Preferred Capital Corporation, Series A, 7.375% 424,704
25,000 JPMorgan Chase Capital Trust, Series 2002-6, 7.125% (SATURNS) 633,250
1,600 National Commerce Capital Trust II, 7.700% 42,640
27
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
4,300 Suntrust Capital Trust IV, 7.125% $ 110,768
17,200 Suntrust Capital Trust V, 7.050% 442,040
88,900 US Bancorp Capital Trust III, 7.750% 2,301,621
58,100 US Bancorp Capital Trust IV, 7.350% 1,490,265
48,800 US Bancorp Capital Trust V, 7.250% 1,237,568
18,400 Valley National Bank Capital Trust I, 7.750% 484,656
26,700 Washington Mutual Capital Trust I, Series 2001-22, 696,870
7.650% (CORTS)
80,000 Zions Capital Trust B, 8.000% 2,180,000
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 6.2%
75,500 ABN AMRO Capital Funding Trust I, 7.500% 1,906,375
48,000 ABN AMRO Capital Funding Trust II, 7.125% 1,212,960
24,800 ANZ Exchangeable Preferred Trust, 8.000% 626,200
32,800 ANZ Exchangeable Preferred Trust II, 8.080% 832,136
36,300 Banco Totta & Acores Finance, Series A, 8.875% 1,003,151
211,000 Banesto Holdings, Series A, 10.500% 6,330,000
13,000 BCH Capital Ltd., Series B, 9.430% 361,400
BSCH Finance Ltd.:
86,000 Series F, 8.125% 2,239,440
11,500 Series G, 8.125% 299,115
31,600 Series H, 7.790% 793,160
40,000 Series J, 7.350% 1,004,400
47,300 Series Q, 8.625% 1,265,748
Espirito Santo Overseas:
4,900 Series A, 8.500% 125,440
26,500 Series B, 8.500% 698,010
43,200 NAB Exchangeable Preferred Trust, 8.000% 1,092,960
30,400 National Westminster Bank plc, Series A, 7.875% 767,600
24,700 Westpac Capital Trust I, 8.000% 640,224
- ------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 7.3%
8,300 Bear Stearns Capital Trust II, 7.500% 209,990
32,000 Bear Stearns Capital Trust III, 7.800% 845,440
8,800 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 227,568
365,000 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 9,117,700
20,100 Merrill Lynch Capital Trust II, 8.000% 551,142
31,600 Merrill Lynch Preferred Capital Trust, 7.750% 863,628
17,900 Merrill Lynch Preferred Capital Trust IV, 7.120% 460,925
72,400 Merrill Lynch Preferred Capital Trust V, 7.280% 1,878,780
80,000 Morgan Stanley Capital Trust II, 7.250% 2,045,600
305,000 Morgan Stanley Capital Trust III, 6.250% 7,435,900
40,900 Morgan Stanley Trust, 7.050% (PPLUS) 1,065,854
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 0.9%
32,900 ENCANA Corporation, 9.500% 880,075
11,100 Suncor Energy Inc., 9.125% 293,817
37,000 Talisman Energy Inc., 9.000% 945,350
34,700 Talisman Energy Inc., 8.900% 893,178
28
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 5.2%
56,000 AT&T Capital Corp., 8.250% $ 1,417,920
82,900 AT&T Capital Corp., 8.125% 2,092,396
42,800 CIT Group Incorporated, 7.750% (CORTS) 1,147,468
100,000 Countrywide Capital Trust IV, 6.750% 2,440,000
50,000 General Electric Capital Corp., 5.875% 1,242,500
117,600 Household Capital Trust V, Series X, 10.000% 3,251,640
14,600 Household Capital Trust VI, 8.300% 386,900
100,500 Household Capital Trust VII, 7.500% 2,636,115
115,000 Household Finance Corp., 6.875% 2,875,000
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 5.2%
36,900 CSFB USA, Series 2002-10, 7.000% (SATURNS) 928,773
503,600 ING Groep NV, 7.200% 13,023,096
142,900 ING Groep NV, 7.050% 3,643,950
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 0.4%
44,500 Grand Met De Ltd. Partnership, 9.420% 1,195,715
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.4%
27,900 AGL Capital Trust II, 8.000% 739,350
11,400 Dominion CNG Capital Trust I, 7.800% 300,960
13,200 MCN Financing Trust II, 8.625% 339,768
3,200 South Jersey Gas Capital Trust, 8.350% 81,600
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.2%
25,700 TransCanada Pipelines Ltd., 8.250% 654,065
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 0.2%
20,000 Sherwin Williams Company, Series III, 7.250% (CORTS) 514,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 3.2%
98,742 AMBAC Financial Group Inc., 5.950% 2,398,443
200,000 AMBAC Financial Group Inc., 5.875% 4,840,000
151,100 Financial Security Assurance Holdings, 6.250% 3,707,994
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.3%
2,500 American General Capital Trust I, 7.875% 65,625
2,300 American General Capital Trust III, 8.050% 64,860
130,000 Delphi Financial Group Inc., 8.000% 3,302,000
2,200 Great West Life and Annuity Insurance Capital Trust I, 55,990
Series A, 7.250%
103,700 Lincoln National Capital Trust V, Series E, 7.650% 2,707,607
54,600 Protective Life Company Capital Trust III, 7.500% 1,431,066
4,800 Protective Life Company Capital Trust IV, 7.250% 126,720
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 1.0%
39,168 Hartford Capital Trust I, Series A, 7.700% 992,909
46,200 Hartford Capital Trust III, Series C, 7.450% 1,175,790
4,600 SAFECO, 8.750% (CBTCS) 121,946
14,000 SAFECO Capital I, Series II, 8.700% (CORTS) 373,240
32,200 SAFECO, Series 2001-7, 8.250% (SATURNS) 862,316
29
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - 2.0%
258,671 Everest Re Capital Trust, 7.850% $ 6,854,782
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 10.5%
109,200 Ace Ltd., Series C, 7.800% 2,740,920
418,310 Converium Finance, 8.250% 10,963,905
55,700 PartnerRe Capital Trust I, 7.900% 1,492,760
140,000 PartnerRe Ltd., Series C, 6.750% 3,486,000
RenaissanceRe Holdings Ltd.:
41,500 Series A, 8.100% 1,108,465
255,000 Series B, 7.300% 6,607,050
XL Capital Ltd.:
61,800 Series A, 8.000% 1,643,880
289,400 Series B, 7.625% 7,553,340
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER - 0.6%
76,600 International Paper Capital Trust III, 7.875% 1,943,342
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.0%
4,500 Rhone-Poulenc Overseas, Series A, 8.125% 114,480
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 12.7%
2,300 AvalonBay Communities Inc., Series H, 8.700% 65,550
2,500 BRE Properties, Series A, 8.500% 64,063
Developers Diversified Realty Corporation:
80,000 Series G, 8.000% 2,028,000
30,000 Series H, 7.375% 735,000
19,000 Duke Realty Corp., Series E, 8.250% 486,020
Equity Office Properties Trust:
27,030 Series C, 8.625% 693,320
11,200 Series G, 7.750% 296,688
Equity Residential Properties Trust:
22,900 Series B, 9.125% 621,735
18,500 Series C, 9.125% 517,815
18,000 Series D, 8.600% 504,000
First Industrial Realty Trust Inc.:
5,100 Series C, 8.625% 141,780
248,100 Series D, 7.950% 6,204,981
163,300 Series E, 7.900% 4,074,335
HRPT Properties Trust:
151,400 Series A, 9.875% 4,102,940
213,307 Series B, 8.750% 5,673,966
New Plan Excel Realty Trust:
21,000 Series D, 7.800% 1,015,220
10,000 Series E, 7.625% 260,000
13,000 Prologis Trust, Series D, 7.920% 329,290
Public Storage Inc.:
10,600 Series K, 8.250% 271,360
12,900 Series L, 8.250% 330,369
1,600 Series M, 8.750% 41,920
32,400 Series Q, 8.600% 869,940
66,400 Series R, 8.000% 1,764,912
12,100 Series S, 7.875% 320,650
2,500 Series T, 7.625% 65,825
17,000 Series V, 7.500% 450,500
30
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (continued)
6,400 Shurgard Storage Centers Inc., Series D, 8.750% $ 177,920
Simon Property Group Inc.:
4,500 Series F, 8.750% 122,850
68,600 Series G, 7.890% 3,646,090
Vornado Realty Trust:
1,700 Series B, 8.500% 43,282
13,400 Series C, 8.500% 341,700
252,700 Wachovia Bank Preferred Funding Corp., 7.250% 6,827,954
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.9%
8,400 BellSouth Inc., 7.000% (CORTS) 221,340
69,500 Telephone & Data Systems Capital Trust I, 8.500% 1,758,350
39,700 Telephone & Data Systems Capital Trust II, 8.040% 1,000,440
69,101 Telephone & Data Systems Inc., 7.600% 1,814,592
157,500 US Cellular Corp., 8.750% 4,198,950
24,300 Verizon Communications, 7.625% (CORTS) 644,193
12,400 Verizon New England Inc., Series B, 7.000% 319,920
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 2.0%
2,900 Detroit Edison Company, 7.625% 72,848
53,100 Entergy Louisiana Inc., 7.600% 1,402,370
203,447 Entergy Mississippi Inc., 7.250% 5,421,862
1,500 PSO Capital Trust I, Series A, 8.000% 37,829
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange-Listed Preferred Securities (cost $258,629,208) 260,977,642
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 8.4% (5.7% OF TOTAL INVESTMENTS)
BANKING - 0.6%
61,000 Citigroup Global Markets Holdings, 2.000% 2,151,043
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.2%
80,000 Keyspan Corporation, 8.750% 4,204,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - P&C - FOREIGN - 0.2%
15,000 PartnerRe Ltd., 8.000% 765,750
- ------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.6%
43,000 Baxter International Inc., 7.000% 2,188,270
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.0%
98,500 ALLTEL Corp., 7.750% 4,728,000
78,000 Citizens Communications Company, 6.750% 1,957,800
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.8%
90,000 Ameren Corporation, 9.750% 2,548,800
45,200 American Electric Power, 9.250% 2,097,280
90,000 Dominion Resources Inc., 8.750% 4,689,000
55,000 Public Service Enterprise Group, 10.250% 3,212,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $26,748,216) 28,541,943
--------------------------------------------------------------------------------------------------------------------
31
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of INVESTMENTS July 31, 2003
MARKET
SHARES DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 4.4% (3.0% OF TOTAL INVESTMENTS)
REAL ESTATE INVESTMENT TRUSTS - 2.0%
70 Union Planters Preferred Fund, Series144A, 7.750% $ 6,695,220
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOM - 2.4%
7,260 Centaur Funding Corporation, Series 144A, 9.080% 8,158,425
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost 14,290,218) 14,853,645
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 47.6% (32.4% OF TOTAL INVESTMENTS)
BANKING - 15.9%
$ 5,000 Ahmanson Capital Trust I, 8.360%, 12/01/26 5,281,090
500 BT Capital Trust B, Series B1, 7.900%, 1/15/27 517,383
1,000 BankAmerica Capital II, Series 2, 8.000%, 12/15/26 1,074,260
500 Bank of Boston Capital Trust II, Series B, 7.750%, 12/15/26 517,547
1,000 First Empire Capital Trust I, 8.234%, 2/01/27 1,077,000
7,485 First Union Capital Trust II, Series A, 7.950%, 11/15/29 8,602,361
9,000 JPM Capital Trust I, 7.540%, 1/15/27 9,158,841
4,000 North Fork Capital Trust I, 8.700%, 12/15/26 4,486,440
1,000 North Fork Capital Trust II, 8.000%, 12/15/27 1,057,750
10,200 PNC Institutional Capital Trust B, Series 144A, 8.315%, 5/15/27 11,018,448
3,150 Peoples Heritage Capital Trust I (BankNorth Group Inc.), 3,419,835
Series B, 9.060%, 2/01/27
4,600 Union Planters Capital Trust A, 8.200%, 12/15/26 4,681,162
3,000 Zions Institutional Capital Trust, Series A, 8.536%, 12/15/26 3,126,021
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 5.7%
8,000 Abbey National Capital Trust I, 8.963%, 12/29/49 10,388,720
8,692 Barclays Bank plc, Series 144A, 6.860%, 6/15/32 9,119,994
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.4%
4,500 Phillips 66 Capital Trust II, 8.000%, 1/15/37 4,785,660
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 1.7%
1,000 Countrywide Capital Trust I, 8.000%, 12/15/26 1,034,351
4,447 St. George Funding Company LLC, 8.485%, 6/30/17 4,641,023
- ------------------------------------------------------------------------------------------------------------------------------------
GAS - 2.0%
6,500 KN Capital Trust III, 7.630%, 4/15/28 6,757,985
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 1.4%
5,000 Berkley Capital Trust, 8.197%, 12/15/45 4,865,140
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 4.4%
4,000 American General Institutional Capital, 8.125%, 3/15/46 4,812,200
10,000 MIC Financing Trust I, 8.375%, 2/01/27 10,254,810
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 3.1%
10,000 Sun Life Canada Capital Trust, 8.526%, 5/06/49 10,631,300
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 7.2%
10,038 SAFECO Capital Trust I, 8.072%, 7/15/37 10,701,010
13,500 Zurich Capital Trust I, 8.376%, 6/01/37 13,674,704
32
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - FOREIGN - 0.9%
$ 3,000 Mangrove Bay, Series 144A, 6.102%, 7/15/33 $ 2,910,000
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE P&C - FOREIGN - 2.2%
3,450 Ace Capital Trust II, 9.700%, 4/01/30 4,290,800
3,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 3,033,228
- ------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.4%
4,225 Dime Capital Trust I, Series A, 9.330%, 5/06/27 4,753,695
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.3%
1,000 PECO Energy Capital Trust IV, 5.750%, 6/15/33 854,108
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $164,197,241) 161,526,866
--------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 4.5% (3.0% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 3.6%
3,300 C.A. Preferred Funding Trust, 7.000%, 1/30/09 3,218,150
6,000 HBOS Capital Funding LP, Notes, 6.850%, 3/29/49 5,850,000
1,000 Lloyds TSB Bank plc, Subordinate Notes, 6.900%, 11/22/07 989,314
2,000 RBS Capital Trust, Series B, 6.800%, 3/31/08 1,962,730
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.9%
3,200 Old Mutual Capital Funding, Notes, 8.000%, 12/22/08 3,192,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $16,206,699) 15,212,194
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.3% (2.9% OF TOTAL INVESTMENTS)
AUTO - 1.5%
1,000 Ford Motor Company, 7.450%, 7/16/31 856,249
5,100 Ford Motor Company, 7.400%, 11/01/46 4,075,272
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.8%
10,500 General Motors Acceptance Corporation, 8.000%, 11/01/31 9,713,771
- ------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $15,644,129) 14,645,292
-------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.9% (0.6% OF TOTAL INVESTMENTS)
3,136 State Street Bank Repurchase Agreement, 0.980%, dated 7/31/03, due 8/01/03,
============= repurchase price $3,136,085, collateralized by U.S. Treasury Bonds 3,136,000
-------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $3,136,000) 3,136,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $498,851,711) - 147.0% 498,893,582
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 6,605,081
-------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (48.9)% (166,000,000)
-------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $339,498,663
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(a) Security is eligible for the Dividends Received
Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) Preferred Trusts.
(SATURNS) Structured Asset Trust Unit Repackaging.
See accompanying notes to financial statements.
33
Statement of
ASSETS AND LIABILITIES July 31, 2003
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $1,311,408,714, $2,482,557,351 and
$498,851,711, respectively) $1,343,660,333 $2,568,552,276 $498,893,582
Cash -- 441 29,452
Interest rate swaps, at value -- -- 1,404,893
Receivables:
Dividends 2,680,225 5,832,890 1,133,142
Interest 8,392,364 16,477,203 2,856,279
Investments sold 1,928,280 1,572,100 2,730,000
Other assets 40,162 96,843 16,815
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,356,701,364 2,592,531,753 507,064,163
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 78 -- --
Payable for investments purchased 1,188,070 423,569 1,062,156
Interest rate swaps, at value 6,827,309 598,418 --
Accrued expenses:
Management fees 652,801 1,203,645 256,436
Organization and offering costs -- -- 107,128
Other 243,077 412,599 115,520
FundPreferred share dividends payable 43,607 84,667 24,260
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,954,942 2,722,898 1,565,500
- ------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 440,000,000 800,000,000 166,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 907,746,422 $1,789,808,855 $339,498,663
====================================================================================================================================
Common shares outstanding 64,356,704 119,523,272 23,610,701
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 14.10 $ 14.97 $ 14.38
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 643,567 $ 1,195,233 $ 236,107
Paid-in surplus 909,980,429 1,692,641,200 333,730,733
Undistributed net investment income 2,145,641 787,896 586,540
Accumulated net realized gain (loss) from investments (30,521,225) 8,876,561 3,319,727
Net unrealized appreciation of investments and interest rate swap transactions 25,498,010 86,307,965 1,625,556
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 907,746,422 $1,789,808,855 $339,498,663
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
FundPreferred shares Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
34
Statement of
OPERATIONS
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP)
------------ ---------------- ----------------
FOR THE FOR THE
PERIOD 9/24/02 PERIOD 12/19/02
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) OF OPERATIONS)
7/31/03 THROUGH 7/31/03 THROUGH 7/31/03
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $3,416, $0, and $328, respectively) $ 60,819,948 $ 77,399,195 $11,203,203
Interest 40,115,302 66,626,434 7,850,216
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 100,935,250 144,025,629 19,053,419
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 11,543,732 17,986,991 2,566,283
Net interest expense on interest rate swap transactions 7,190,683 8,714,609 1,069,257
FundPreferred shares - auction fees 1,036,712 1,534,247 191,014
FundPreferred shares - dividend disbursing agent fees 25,918 33,777 6,508
Shareholders' servicing agent fees and expenses 11,664 11,925 2,008
Custodian's fees and expenses 317,076 476,907 86,933
Trustees' fees and expenses 71,674 97,800 14,480
Professional fees 106,351 86,079 30,304
Shareholders' reports - printing and mailing expenses 320,330 349,920 68,649
Stock exchange listing fees 14,147 47,933 9,019
Investor relations expense 118,341 171,358 26,063
Other expenses 676,221 426,420 49,577
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 21,432,849 29,937,966 4,120,095
Custodian fee credit (11,466) (35,309) (7,062)
Expense reimbursement (4,205,287) (6,772,579) (913,085)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 17,216,096 23,130,078 3,199,948
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 83,719,154 120,895,551 15,853,471
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments (30,328,278) 9,651,211 3,540,303
Change in net unrealized appreciation (depreciation) of investments 47,552,557 85,994,925 41,871
Change in net unrealized appreciation (depreciation) of
interest rate swap transactions (6,753,609) 313,040 1,583,685
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 10,470,670 95,959,176 5,165,859
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (6,004,164) (8,370,051) (948,183)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $ 88,185,660 $208,484,676 $20,071,147
====================================================================================================================================
See accompanying notes to financial statements.
35
Statement of
CHANGES IN NET ASSETS
QUALITY QUALITY
QUALITY PREFERRED PREFERRED PREFERRED
INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP)
------------------------------ --------------- ---------------
FOR THE FOR THE FOR THE
PERIOD 6/25/02 PERIOD 9/24/02 PERIOD 12/19/02
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
7/31/03 THROUGH 7/31/02 THROUGH 7/31/03 THROUGH 7/31/03
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 83,719,154 $ 3,965,994 $ 120,895,551 $ 15,853,471
Net realized gain (loss) from investments (30,328,278) 106,148 9,651,211 3,540,303
Change in net unrealized appreciation (depreciation)
of investments 47,552,557 (15,343,685) 85,994,925 41,871
Change in net unrealized appreciation (depreciation) of
interest rate swap transactions (6,753,609) -- 313,040 1,583,685
Distributions to FundPreferred shareholders from net
investment income (6,004,164) -- (8,370,051) (948,183)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to Common shares
from operations 88,185,660 (11,271,543) 208,484,676 20,071,147
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (80,491,725) -- (112,911,526) (14,584,390)
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale of shares (119,042) 891,176,926 1,708,927,042 337,150,050
Net proceeds from shares issued to shareholders due to
reinvestment of distributions 29,383,959 -- 1,703,414 351,072
FundPreferred shares offering costs (9,218,088) -- (16,495,026) (3,589,491)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from
capital share transactions 20,046,829 891,176,926 1,694,135,430 333,911,631
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares 27,740,764 879,905,383 1,789,708,580 339,398,388
Net assets applicable to Common shares at the beginning of period 880,005,658 100,275 100,275 100,275
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares at the end of period $907,746,422 $880,005,658 $1,789,808,855 $339,498,663
====================================================================================================================================
Undistributed net investment income at the end of period $ 2,145,641 $ 3,965,994 $ 787,896 $ 586,540
====================================================================================================================================
See accompanying notes to financial statements.
36
Notes to
FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Funds covered in this report and their corresponding Common share New York
Stock Exchange symbols are Nuveen Quality Preferred Income Fund (JTP), Nuveen
Quality Preferred Income Fund 2 (JPS), and Nuveen Quality Preferred Income Fund
3 (JHP). The Funds are registered under the Investment Company Act of 1940, as
amended, as non-diversified, closed-end management investment companies.
Prior to the commencement of operations of Quality Preferred Income (JTP),
Quality Preferred Income 2 (JPS), and Quality Preferred Income 3 (JHP), each
Fund had no operations other than those related to organizational matters, the
initial capital contribution of $100,275 per Fund by Nuveen Institutional
Advisory Corp. (the "Adviser"), a wholly owned subsidiary of Nuveen Investments,
Inc. (formerly, The John Nuveen Company), and the recording of the organization
expenses ($15,000, $15,000 and $11,500, respectively) and their reimbursement by
Nuveen Investments, LLC (formerly, Nuveen Investments), also a wholly owned
subsidiary of Nuveen Investments, Inc.
Each Fund seeks to provide high current income consistent with capital
preservation by investing primarily in a portfolio of preferred securities, debt
securities including convertible debt securities and convertible preferred
securities.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities are
provided by a pricing service approved by the Funds' Board of Trustees and based
on the mean between the bid and asked prices. When price quotes are not readily
available, the pricing service establishes fair market value based on prices of
comparable securities. If it is determined that market prices for a security are
unavailable or inappropriate, the Board of Trustees of the Funds, or its
designee, may establish a fair value for the security. Short-term securities are
valued at amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At July 31, 2003, there
were no such outstanding purchase commitments in any of the Funds.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income, which
includes the amortization of premiums and accretion of discounts for financial
reporting purposes, is recorded on an accrual basis.
37
Notes to
FINANCIAL STATEMENTS (continued)
Income Taxes
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its net investment income to its shareholders. Therefore, no federal income
tax provision is required.
Dividends and Distributions to Common Shareholders
Dividends from net investment income are declared monthly. Net realized capital
gains from investment transactions, if any, are distributed to shareholders not
less frequently than annually. Furthermore, capital gains are distributed only
to the extent they exceed available capital loss carryforwards.
Distributions to Common shareholders of net investment income and net realized
capital gains, if any, 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 accounting principles generally accepted in
the United States.
FundPreferred Shares
The Funds have issued and outstanding $25,000 stated value FundPreferred shares.
Each Fund's FundPreferred shares are issued in more than one Series. The
dividend rate on each Series may change every seven days, as set pursuant to a
dutch auction process by the auction agent, and is payable at or near the end of
each rate period. The number of shares outstanding, by Series and in total, for
each Fund is as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- --------------------------------------------------------------------------------
Number of shares:
Series M 3,520 4,800 3,320
Series T 3,520 4,800 --
Series T2 -- 4,000 --
Series W 3,520 4,800 --
Series TH 3,520 4,800 3,320
Series TH2 -- 4,000 --
Series F 3,520 4,800 --
- --------------------------------------------------------------------------------
Total 17,600 32,000 6,640
================================================================================
Effective August 22, 2002, Quality Preferred Income (JTP) issued 3,520 Series M,
3,520 Series T, 3,520 Series W, 3,520 Series TH, and 3,520 Series F, $25,000
stated value FundPreferred shares.
Effective October 18, 2002, Quality Preferred Income 2 (JPS) issued 4,800 Series
M, 4,800 Series T, 4,800 Series W, 4,800 Series TH, and 4,800 Series F, $25,000
stated value FundPreferred shares. In addition, effective November 15, 2002,
Quality Preferred Income 2 (JPS) issued 4,000 Series T2, and 4,000 Series TH2,
$25,000 stated value FundPreferred shares.
Effective February 14, 2003, Quality Preferred Income 3 (JHP) issued 3,320
Series M, and 3,320 Series TH, $25,000 stated value FundPreferred shares.
38
Interest Rate Swap Transactions
The Funds are authorized to enter into hedging transactions, including interest
rate swap transactions. The Funds use interest rate swaps with the intent to
reduce or eliminate the risk that an increase in short-term interest rates could
have on Common share net earnings as a result of leverage. Interest rate swaps
involve each Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty paying the Fund a variable rate payment
that is intended to approximate each Fund's variable rate payment obligation on
FundPreferred shares or any variable rate borrowing. The payment obligation is
based on the notional amount of the swap. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of credit loss with respect to the swap conterparty on interest rate swaps
is limited to the net amount of interest payments that each Fund is to receive.
The Funds have instructed the custodian to segregate assets with a current value
at least equal to the amount of the net payment obligations under any interest
rate swap transactions. Interest rate swap positions are marked to market daily.
Although there are economic advantages of entering into interest rate swap
transactions, there are also additional risks. The Funds help manage the credit
risks associated with interest rate swap transactions by entering into
agreements only with counterparties the Adviser believes have the financial
resources to honor its obligations, by having the Adviser continually monitor
the financial stability of that swap counterparty.
At July 31, 2003, Quality Preferred Income (JTP) had open interest rate swap
agreements with Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
$110,000,000 3.1300% 1.1000% 8/29/05 $(2,453,543)
110,000,000 3.8600 1.1000 8/29/07 (2,460,044)
110,000,000 4.3500 1.1000 8/29/09 (1,840,022)
- ---------------------------------------------------------------------------------------------------------
$(6,753,609)
=========================================================================================================
*Based on LIBOR (London Interbank Offered Rate)
At July 31, 2003, Quality Preferred Income 2 (JPS) had open interest rate swap
agreements with Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
$200,000,000 2.6300% 1.1175% 11/06/05 $(1,986,909)
200,000,000 3.3750 1.1175 11/06/07 32,516
200,000,000 3.9100 1.1175 11/06/09 2,267,433
- ---------------------------------------------------------------------------------------------------------
$ 313,040
=========================================================================================================
*Based on LIBOR (London Interbank Offered Rate)
At July 31, 2003, Quality Preferred Income 3 (JHP) had open interest rate swap
agreements with Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
$42,000,000 2.4125% 1.1175% 3/06/06 $ 12,200
42,000,000 3.2550 1.1175 3/06/08 541,092
42,000,000 3.8150 1.1175 3/06/10 1,030,393
- ---------------------------------------------------------------------------------------------------------
$1,583,685
=========================================================================================================
*Based on LIBOR (London Interbank Offered Rate)
39
Notes to
FINANCIAL STATEMENTS (continued)
Repurchase Agreements
In connection with transactions in repurchase agreements, it is each Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Other Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments for the purpose
of hedging their portfolios. The specific derivative instruments will be limited
to U.S. Treasury security or U.S. Government Agency security futures contracts
and options on U.S. Treasury security or U.S. Government Agency security futures
contracts. Although the Funds are authorized to invest in such financial
instruments, and may do so in the future, they did not make any such investments
during the fiscal year ended July 31, 2003.
Offering Costs
Nuveen Investments, LLC has agreed to pay all Common shares offering costs
(other than the sales load) that exceed $.03 per Common share for Quality
Preferred Income (JTP), Quality Preferred Income 2 (JPS), and Quality Preferred
Income 3 (JHP). Quality Preferred Income's (JTP), Quality Preferred Income 2's
(JPS), and Quality Preferred Income 3's (JHP) share of Common shares offering
costs ($1,389,616, $1,477,958, and $633,450, respectively) were recorded as a
reduction of the proceeds from the sale of the Common shares.
Costs incurred by Quality Preferred Income (JTP), Quality Preferred Income 2
(JPS), and Quality Preferred Income 3 (JHP) in connection with their offering of
FundPreferred shares ($9,218,088, $16,495,026, and $3,589,491, respectively)
were recorded as a reduction to paid-in surplus.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
40
2. FUND SHARES
Transactions in Common and FundPreferred shares were as follows:
QUALITY QUALITY
PREFERRED PREFERRED
QUALITY PREFERRED INCOME 2 INCOME 3
INCOME (JTP) (JPS) (JHP)
----------------------------- --------------- ---------------
FOR THE FOR THE FOR THE
PERIOD 6/25/02 PERIOD 9/24/02 PERIOD 12/19/02
(COMMENCEMENT (COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) OF OPERATIONS) OF OPERATIONS)
7/31/03 THROUGH 7/31/02 THROUGH 7/31/03 THROUGH 7/31/03
- -----------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- 62,300,000 119,400,000 23,580,000
Shares issued to
shareholders due to
reinvestment of
distributions 2,049,704 -- 116,272 23,701
- -----------------------------------------------------------------------------------------------------------------
2,049,704 62,300,000 119,516,272 23,603,701
- -----------------------------------------------------------------------------------------------------------------
FundPreferred shares sold 17,600 -- 32,000 6,640
=================================================================================================================
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investment securities and U.S.
Government and agency obligations during the fiscal year ended July 31, 2003,
were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS)* (JHP)**
- -------------------------------------------------------------------------------------------------------------
Purchases:
Investment securities $1,056,074,442 $2,911,883,633 $554,213,592
U.S. Government and agency obligations -- 346,314,809 183,057,644
Sales and maturities:
Investment securities 420,373,963 459,199,716 60,034,945
U.S. Government and agency obligations 148,437,973 330,800,933 184,889,902
=============================================================================================================
*For the period September 24, 2002 (commencement of operations) through July
31, 2003.
**For the period December 19, 2002 (commencement of operations) through July 31,
2003.
41
Notes to
FINANCIAL STATEMENTS (continued)
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis based on the
information currently available to the Funds. Differences between amounts for
financial statement and federal income tax purposes are primarily due to the
recognition of income on certain securities, which are treated as debt
securities for income tax purposes and equity securities for financial statement
purposes, and timing differences in recognizing certain gains and losses on
security transactions.
At July 31, 2003, the cost of investments were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- -------------------------------------------------------------------------------------------------------------
Cost of investments $1,321,056,695 $2,485,942,639 $499,020,230
=============================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at July 31, 2003, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- ------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $ 39,136,948 $105,680,715 $ 8,259,899
Depreciation (16,533,310) (23,071,078) (8,386,547)
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments $ 22,603,638 $ 82,609,637 $ (126,648)
============================================================================================================
The tax components of undistributed net ordinary income and net realized gains
at July 31, 2003, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- ------------------------------------------------------------------------------------------------------------
Undistributed net ordinary income * $17,864,493 $25,684,356 $6,530,948
Undistributed net long-term capital gains -- -- --
============================================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended July 31,
2003, was designated for purposes of the dividends paid deduction as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- ------------------------------------------------------------------------------------------------------------
Distributions from net ordinary income * $79,694,828 $108,646,966 $13,076,411
Distributions from net long-term capital gains -- -- --
============================================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
Quality Preferred Income (JTP) made no distributions from net ordinary income or
net long-term capital gains during the fiscal year ended July 31, 2002.
At July 31, 2003, Quality Preferred Income (JTP) had an unused capital loss
carryforward of $1,653,878 available to be applied against future capital gains,
if any. If not applied, the carryforward will expire in the year 2011.
42
Quality Preferred Income (JTP) has elected to defer net realized losses from
investments incurred from November 1, 2002 through July 31, 2003 ("post-October
losses") in accordance with Federal income tax regulations. The Fund has
$28,137,157 of post-October losses that are treated as having arisen in the
following fiscal year.
Calculation of certain of the amounts presented above (namely, undistributed net
ordinary income for tax purposes) involves the application of complex aspects of
the Internal Revenue Code to certain securities held by the Funds. In
calculating the amount of taxable income derived from these securities,
management made assumptions as to the correct tax treatment of those securities
and made estimates about the tax characteristics of income received from those
securities, based on information currently available to the Funds. The use of
these assumptions and estimates will not affect the qualification of the Funds
as regulated investment companies under Subchapter M of the Internal Revenue
Code, nor is it expected that these assumptions and estimates will be used in
computing taxable income for purposes of preparing the federal and state income
and excise tax returns.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under each Fund's investment management agreement with the Adviser, each Fund
pays an annual management fee, payable monthly, at the rates set forth below,
which are based upon each Fund's average daily managed assets. "Managed Assets"
means the average daily net assets of each Fund including assets attributable to
FundPreferred shares and the principal amount of borrowings.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
- --------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with Spectrum Asset Management, Inc. ("Spectrum"),
under which Spectrum manages the investment portfolios of the Funds. Spectrum is
compensated for its services to the Funds from the management fee paid to the
Adviser. An affiliate of Spectrum earns commissions on certain portfolio
transactions for providing brokerage services to the Funds.
The Funds pay no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Funds from the Adviser.
For the first eight years of Quality Preferred Income's (JTP) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts, and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
JUNE 30, JUNE 30,
- --------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income (JTP) for any
portion of its fees and expenses beyond June 30, 2010.
For the first eight years of Quality Preferred Income 2's (JPS) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts, and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 2 (JPS) for any
portion of its fees and expenses beyond September 30, 2010.
43
Notes to
FINANCIAL STATEMENTS (continued)
For the first eight years of Quality Preferred Income 3's (JHP) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts, and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
DECEMBER 31, DECEMBER 31,
- --------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 3 (JHP) for any
portion of its fees and expenses beyond December 31, 2010.
6. SUBSEQUENT EVENTS - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their net investment
income which were paid on September 2, 2003, to shareholders of record on August
15, 2003:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
- --------------------------------------------------------------------------------
Dividend per share $.1050 $.1050 $.1030
================================================================================
44
Financial
HIGHLIGHTS
45
Financial
HIGHLIGHTS
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
------------------------------------------------------------------ -----------------------------
Distributions Distributions
from Net from Net
Beginning Net Investment Capital Investment Capital
Common Realized/ Income to Gains to Income to Gains to
Share Net Unrealized FundPreferred FundPreferred Common Common
Net Asset Investment Investment Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
QUALITY PREFERRED
INCOME (JTP)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 $14.12 $1.31 $ .16 $(.09) $-- $1.38 $(1.25) $-- $(1.25)
2002(a) 14.33 .06 (.25) -- -- (.19) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(b) 14.33 1.02 .79 (.07) -- 1.74 (.95) -- (.95)
QUALITY PREFERRED
INCOME 3 (JHP)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) 14.33 .67 .22 (.04) -- .85 (.62) -- (.62)
====================================================================================================================================
Total Returns
-----------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
===============================================================================
QUALITY PREFERRED
INCOME (JTP)
- -------------------------------------------------------------------------------
Year Ended 7/31:
2003 $(.15) $14.10 $14.59 4.95% 9.15%
2002(a) (.02) 14.12 15.15 1.00 (1.47)
QUALITY PREFERRED
INCOME 2 (JPS)
- -------------------------------------------------------------------------------
Year Ended 7/31:
2003(b) (.15) 14.97 14.65 4.02 11.22
QUALITY PREFERRED
INCOME 3 (JHP)
- -------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) (.18) 14.38 14.36 (.19) 4.62
===============================================================================
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------ -----------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
==================================================================================================================
QUALITY PREFERRED
INCOME (JTP)
- ------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003 $ 907,746 2.38% 8.84% 1.91% 9.31% 45%
2002(a) 880,006 .96* 4.51* .64* 4.83* 1
QUALITY PREFERRED
INCOME 2 (JPS)
- ------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(b) 1,789,809 1.99* 7.59* 1.54* 8.04* 35
QUALITY PREFERRED
INCOME 3 (JHP)
- ------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2003(c) 339,499 1.97* 7.14* 1.53* 7.58* 57
==================================================================================================================
FundPreferred Shares at End of Period
------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
==================================================================
QUALITY PREFERRED
INCOME (JTP)
- ------------------------------------------------------------------
Year Ended 7/31:
2003 $440,000 $25,000 $76,577
2002(a) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
- ------------------------------------------------------------------
Year Ended 7/31:
2003(b) 800,000 25,000 80,932
QUALITY PREFERRED
INCOME 3 (JHP)
- ------------------------------------------------------------------
Year Ended 7/31:
2003(c) 166,000 25,000 76,129
==================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income, reinvested capital
gains distributions, if any, and changes in Common share net asset value
per share. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares. Each Ratio of Expenses to Average Net Assets
Applicable to Common Shares and each Ratio of Net Investment Income to
Average Net Assets Applicable to Common Shares includes the effect of the
interest expense paid on interest rate swap transactions as follows:
Ratio of
Net Interest
Expense
to Average
Net Assets
Applicable to
Common Shares
-------------
QUALITY PREFERRED INCOME (JTP)
2003 .80%
2002 (a) --
QUALITY PREFERRED INCOME 2 (JPS)
2003 (b) .58
QUALITY PREFERRED INCOME 3 (JHP)
2003 (c) .51
(a) For the period June 25, 2002 (commencement of operations) through July 31,
2002.
(b) For the period September 24, 2002 (commencement of operations) through July
31, 2003.
(c) For the period December 19, 2002 (commencement of operations) through July
31, 2003.
See accompanying notes to financial statements.
46-47 SPREAD
Trustees
AND OFFICERS
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 currently set at
six. None of the trustees who are not "interested" persons of the Funds 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.
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
YEAR FIRST PRINCIPAL OCCUPATION(S) OVERSEEN
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR INCLUDING OTHER DIRECTORSHIPS BY
AND ADDRESS WITH THE FUNDS APPOINTED(2) DURING PAST 5 YEARS TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------------
TRUSTEE WHO IS AN INTERESTED PERSON OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger (1) Chairman of the 1994 Chairman and Director (since 1996) of Nuveen 140
3/28/49 Board and Investments, Inc. and Nuveen Investments, LLC;
333 W. Wacker Drive Trustee Director (since 1992) and Chairman (since 1996) of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chairman and Director (since 1997)
of Nuveen Asset Management, Inc.; Director (since 1996)
of Institutional Capital Corporation; Chairman and
Director (since 1999) of Rittenhouse Asset Management,
Inc.; Chairman of Nuveen Investments Advisers Inc.
(since 2002).
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
William E. Bennett Trustee 2001 Private Investor; previously, President and Chief 140
10/16/46 company that Executive Officer, Draper & Kramer, Inc.,
333 W. Wacker Drive a private handles mortgage banking, real estate
Chicago, IL 60606 development, pension advisory and real estate management
(1995-1998). Prior thereto, Executive Vice President
and Chief Credit Officer of First Chicago Corporation and
its principal subsidiary, The First National Bank
of Chicago.
- ------------------------------------------------------------------------------------------------------------------------------------
Jack B. Evans Trustee 1999 President, The Hall-Perrine Foundation, a private 70
10/22/48 philanthropic corporation (since 1996); Director,
333 W. Wacker Drive Alliant Energy; Director and Vice Chairman, United
Chicago, IL 60606 Fire & Casualty Company; Director, Federal Reserve
Bank of Chicago; formerly, President and Chief
Operating Officer, SCI Financial Group, Inc., a
regional financial services firm.
- ------------------------------------------------------------------------------------------------------------------------------------
William L. Kissick Trustee 1992 Professor Emeritus, School of Medicine and the Wharton 70
7/29/32 School of Management and former Chairman, Leonard
333 W. Wacker Drive Davis Institute of Health Economics, University of
Chicago, IL 60606 Pennsylvania; Adjunct Professor, Health Policy and
Management, Yale University.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Leafstrand Trustee 1992 Retired; previously, Vice President in charge of 70
11/11/31 Municipal Underwriting and Dealer Sales at The
333 W. Wacker Drive Northern Trust Company.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Sheila W. Wellington Trustee 1994 President (since 1993) of Catalyst (a not-for-profit 70
2/24/32 organization focusing on women's leadership development
333 W. Wacker Drive in business and the professions).
Chicago, IL 60606
48
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS:
- ------------------------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant Secretary 140
9/9/56 Administrative and Associate General Counsel, formerly, Vice President
333 W. Wacker Drive Officer and Assistant General Counsel of Nuveen Investments, LLC;
Chicago, IL 60606 Managing Director (since 2002), General Counsel and
Assistant Secretary, formerly, Vice President of Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.;
Managing Director (since 2002), Assistant Secretary and
Associate General Counsel, formerly, Vice President (since
2000), of Nuveen Asset Management, Inc.; Assistant
Secretary of Nuveen Investments, Inc. (since 1994);
Assistant Secretary of NWQ Investment Management
Company, LLC (since 2002); Vice President and
Assistant Secretary of Nuveen Investments Advisers Inc.
(since 2002); Managing Director, Associate General
Counsel and Assistant Secretary of Rittenhouse Asset
Management, Inc. (since May 2003); Chartered
Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant 140
2/3/66 and Assistant Vice President (since 2000), previously, Associate of
333 W. Wacker Drive Secretary Nuveen Investments, LLC.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 1999), 140
11/28/67 and Treasurer prior thereto, Assistant Vice President (since 1997);
333 W. Wacker Drive Vice President and Treasurer of Nuveen Investments,
Chicago, IL 60606 Inc. (since 1999); Vice President and Treasurer of
Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp. (since 1999); Vice President and
Treasurer of Nuveen Asset Management, Inc. (since
2002) and of Nuveen Investments Advisers Inc.
(since 2002); Assistant Treasurer of NWQ Investment
Management Company, LLC (since 2002); Chartered
Financial Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Susan M. DeSanto Vice President 2001 Vice President of Nuveen Advisory Corp. (since 2001); 140
9/8/54 previously, Vice President of Van Kampen Investment
333 W. Wacker Drive Advisory Corp. (since 1998); Vice President of Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 2002); prior thereto,
Assistant Vice President of Van Kampen Investment
Advisory Corp. (since 1994).
- ------------------------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President 2000 Vice President (since 2002) and Assistant General 140
9/24/64 and Secretary Counsel (since 1998); formerly, Assistant Vice
333 W. Wacker Drive President (since 1998) of Nuveen Investments, LLC;
Chicago, IL 60606 Vice President (since 2002) and Assistant Secretary
(since 1998), formerly Assistant Vice President
of Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.
49
Trustees
AND OFFICERS (CONTINUED)
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson Vice President 1998 Vice President of Nuveen Investments, LLC; Vice 140
10/24/45 President (since 1998) of Nuveen Advisory Corp. and
333 W. Wacker Drive Nuveen Institutional Advisory Corp.
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Fitzgerald Vice President 1995 Managing Director (since 2002) of Nuveen Investments, 140
3/2/64 LLC; Managing Director (since 2001), formerly Vice
333 W. Wacker Drive President of Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since 1995); Managing
Director of Nuveen Asset Management, Inc. (since
2001); Vice President of Nuveen Investment
Advisers Inc. (since 2002); Chartered Financial
Analyst.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller (since 140
5/31/54 and Controller 1998) of Nuveen Investments, LLC and Vice President and
333 W. Wacker Drive Funds Controller (since 1998) of Nuveen Investments,
Chicago, IL 60606 Inc.; Certified Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen Investments, LLC, 140
3/22/63 previously Assistant Vice President (since 1999);
333 W. Wacker Drive prior thereto, Associate of Nuveen Investments, LLC;
Chicago, IL 60606 Certified Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
Tina M. Lazar Vice President 2002 Vice President (since 1999), previously, Assistant Vice 140
8/27/61 President (since 1993) of Nuveen Investments, LLC.
333 W. Wacker Drive
Chicago, IL 60606
- ------------------------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and Assistant 140
7/27/51 and Assistant General Counsel of Nuveen Investments, LLC; Vice
333 W. Wacker Drive Secretary President and Assistant Secretary of Nuveen Advisory
Chicago, IL 60606 Corp. and Nuveen Institutional Advisory Corp.;
Assistant Secretary of Nuveen Investments, Inc.
and (since 1997) Nuveen Asset Management, Inc.;
Vice President (since 2000), Assistant Secretary and
Assistant General Counsel (since 1998) of Rittenhouse
Asset Management, Inc.; Vice President and Assistant
Secretary of Nuveen Investments Advisers Inc.
(since 2002); Assistant Secretary of NWQ Investment
Management Company, LLC (since 2002).
50
NUMBER OF
PORTFOLIOS
IN FUND
YEAR FIRST COMPLEX
NAME, BIRTHDATE POSITION(S) HELD ELECTED OR PRINCIPAL OCCUPATION(S) OVERSEEN
AND ADDRESS WITH THE FUNDS APPOINTED (3) DURING PAST 5 YEARS BY OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE FUNDS (CONTINUED):
- ------------------------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV Vice President 1996 Managing Director (since 2002) of Nuveen Investments, 140
7/7/65 LLC; Managing Director (since 1997), formerly Vice
333 W. Wacker Drive President (since 1996) of Nuveen Advisory Corp. and
Chicago, IL 60606 Nuveen Institutional Advisory Corp.; Managing Director
of Nuveen Asset Management, Inc. (since 1999).
Chartered Financial Analyst.
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the
Investment Company Act of 1940, because he is an officer and trustee of the
Adviser.
(2) Trustees serve a one-year term until his/her successor is elected. The year
first elected or appointed represents the year in which the Trustee was
first elected or appointed to any fund in the Nuveen Complex.
(3) Officers serve a one-year term through July 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.
51
Build Your Wealth
AUTOMATICALLY
SIDEBAR TEXT: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power compounding. It
is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at 95% of
the then-current market price or at net asset value, whichever is higher. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of shares may increase before purchases
are completed, the average purchase price per share may exceed the market price
at the time of valuation, resulting in the acquisition of fewer shares than if
the dividend or distribution had been paid in shares issued by the Fund. A pro
rata portion of any applicable brokerage commissions on open market purchases
will be paid by Plan participants. These commissions usually will be lower than
those charged on individual transactions.
FLEXIBILITY
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
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.
52
Fund
INFORMATION
BOARD OF TRUSTEES
William E. Bennett
Jack B. Evans
William L. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
FUND MANAGER
Nuveen Institutional
Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
FUND SUB-ADVISER
Spectrum Asset
Management, Inc.
4 High Ridge Park
Stamford, CT 06905
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
GLOSSARY OF TERMS USED IN THIS REPORT
Average Annual Total Return: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
Net Asset Value (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
- ---------
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the fiscal year ended July 31, 2003. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
53
Serving Investors
FOR GENERATIONS
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
Managing $80 billion in assets, Nuveen Investments offers access to
a number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in tax-free investments; NWQ, a leader in value-style
equities; Rittenhouse, a leader in growth-style equities; and Symphony, a
leading institutional manager of market-neutral alternative investment
portfolios.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
NUVEEN INVESTMENTS, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
EAN-D-0703D
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted
a code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The registrant has posted such code of
ethics on its website at www.nuveen.com/etf.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that the registrant has
at least one "audit committee financial expert" (as defined in Item 3 of
Form N-CSR) serving on its audit committee. The registrant's audit committee
financial expert is William E. Bennett, who is "independent" for purposes of
Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
The registrant has adopted the proxy voting policies and procedures of its
Sub-Adviser, Spectrum Asset Management. Spectrum's policies seek to ensure that
proxies are voted solely in the best economic interstes of the registrant and
without undue influence from parties that may have an economic interest in the
outcome of a proxy vote. Spectrum classifies proxy voting into three broad
categories: Routine Administrative Items, Special Interest Issues, and Issues
Having the Potential for Significant Economic Impact. Once it has analyzed and
identified each issue as belonging in a particular category, Spectrum will
cast the client's vote in accordance with the guidelines developed for that
particular category.
On any ocassion when a proxy vote presents a potential conflict of interest,
Spectrum will review the matter and disclose the conflict to the client(s) to
obtain the client's consent prior to voting.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because posted on registrant's website.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certification required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Quality Preferred Income Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: October 8, 2003
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(Principal Executive Officer)
Date: October 8, 2003
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: October 8, 2003
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.