-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ry1L/AwjKOcqjeXzdXQnTDG22qAWTs8fdu74bYKD+b1T6hES8xoSqxrJ1FP7m6aO nHWiufWSsYagNWUv3T0rUg== 0000891804-03-000799.txt : 20030401 0000891804-03-000799.hdr.sgml : 20030401 20030401103257 ACCESSION NUMBER: 0000891804-03-000799 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030131 FILED AS OF DATE: 20030401 EFFECTIVENESS DATE: 20030401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUVEEN QUALITY PREFERRED INCOME FUND 3 CENTRAL INDEX KEY: 0001200446 IRS NUMBER: 0231 STATE OF INCORPORATION: MA FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-21242 FILM NUMBER: 03632957 MAIL ADDRESS: STREET 1: 333 WEST WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 N-30D 1 nv28660.txt ESA-D-0103-D SEMIANNUAL REPORT January 31, 2003 Nuveen Closed-End Exchange-Traded Funds NUVEEN QUALITY PREFERRED INCOME FUNDS JTP JPS JHP Photo: boy in wheat field Photo: seaside cabin HIGH CURRENT INCOME FROM A PORTFOLIO OF INVESTMENT-GRADE PREFERRED SECURITIES Logo: NUVEEN Investments RECEIVE YOUR NUVEEN FUND UPDATES FASTER THAN EVER! By registering for online access, you can view and save on your computer the Fund information you currently receive in the mail. This information then can be retrieved any time, and you can select only the specific pages you want to view or print. Once you sign up, you'll receive an e-mail notice the moment Fund reports are ready. This notice will contain a link to the report - all you have to do is click on the Internet address provided. You'll be saving time, as well as saving printing and distribution expenses for your Fund. Registering for electronic access is easy and only takes a few minutes. (see instructions at right) Your e-mail address is strictly confidential and will not be used for anything other than notifications of shareholder information. And if you decide you don't like receiving your reports electronically, it's a simple process to go back to regular mail delivery. Logo: NUVEEN Investments SIGN UP TODAY -- HERE'S ALL YOU NEED TO DO... 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 Look at the address sheet that accompanied this report. Enter the personal 13-CHARACTER ENROLLMENT NUMBER imprinted near your name on the address sheet. 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 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 the Access Account tab. Select the E-REPORT ENROLLMENT section. Click on Enrollment Page. 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. Photo of: TIMOTHY R. SCHWERTFEGER TIMOTHY R. SCHWERTFEGER CHAIRMAN OF THE BOARD SIDEBAR TEXT: "I URGE YOU TO CONSIDER RECEIVING FUTURE FUND REPORTS AND OTHER FUND INFORMATION BY E-MAIL AND THE INTERNET .....SEE THE INSIDE FRONT COVER OF THIS REPORT FOR STEP-BY-STEP INSTRUCTIONS." Dear SHAREHOLDER I am happy to report that during the period covered by this report all three of the Nuveen Quality Preferred Income Funds successfully completed their initial invest-up phases and, as of the date of this letter, are providing attractive monthly income from their portfolios of investment-grade quality preferred securities. More detailed information on your Fund's management strategies and performance can be found in the Portfolio Managers' Comments and on the Performance Overview pages within this report. Please take the time to read them. In addition to regular income, we believe that an investment like your Nuveen Fund may offer opportunities to reduce the risk of your overall investment portfolio. This is because the prices of preferred securities like those in which your Fund invests may move differently than the prices of the common stocks, mutual funds or other investments you may own. Since one part of your portfolio may be going up when another is going down, portfolio diversification may reduce your overall risk. Your financial advisor can explain the advantages of portfolio diversification in more detail. I urge you to contact him or her soon for more information on this important investment strategy. I also urge you to consider receiving future Fund reports and other Fund information by e-mail and the Internet. Not only will you be able to receive the information faster, but this also may help lower your Fund's expenses. Sign up is quick and easy - see the inside front cover of this report for step-by-step instructions. For some of you, this may be your first Nuveen Fund shareholder report. On behalf of all of us at Nuveen Investments, I'd like to welcome you to the Nuveen family. I'd also like to thank you for making a Nuveen Fund part of the tailored investment program you and your financial advisor have created in order to better meet your overall financial objectives. For more than 100 years, Nuveen has specialized in offering quality investments such as your Nuveen Fund to those seeking to accumulate and preserve wealth. Our commitment to careful research, constant surveillance and judicious trading by a seasoned portfolio management team has never been stronger. Our mission continues to be to assist you and your financial advisor by offering the investment solutions and services that can help you meet your financial objectives. We thank you for choosing us as a partner as you work toward that goal. Sincerely, /s/ Timothy R. Schwertfeger Timothy R. Schwertfeger Chairman of the Board March 17, 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 January 31, 2003. WHAT WAS THE MARKET ENVIRONMENT GENERALLY, AND FOR PREFERRED SECURITIES IN PARTICULAR, OVER THIS REPORTING PERIOD? The U.S. economy and capital markets have witnessed a challenging environment since the middle of 2002. Equity markets continued their pattern of weakness as the Dow Jones Industrial Average and the Standard & Poor's 500 dropped 11.8% and 12.3%, respectively, during the six months ended January 31, 2003. Geopolitical concerns, including the threat of war, fear of a recession and the decline in the stock market all led many investors to seek safe havens such as U. S. Treasury securities. Over the six-months ended January 31, 2003, the yield of the benchmark 10-year Treasury dropped to 3.96% from 4.82% causing prices to rise significantly, since bond prices rise when yields decline. Short-term interest rates have stayed at historic lows, with yields on Treasury bills and money market funds remaining well below 2%. The Federal Reserve helped keep rates low by implementing a 50 basis point easing of the fed funds rate in November 2002. Credit problems related to accounting concerns and a weak economy influenced the corporate markets, resulting in nearly six times as many corporate bond downgrades as upgrades by the major rating agencies during the same period. All things considered, we believe the preferred securities market represented good value during this tumultuous period. While not exhibiting the same degree of price increases as the U. S. Treasury market, preferred security prices generally increased and performed well relative to equities and corporate bonds. The new issue market remained vibrant throughout the period, especially among higher quality issuers. Demand for preferred securities from both the retail and institutional sectors continued to be strong. Individuals were seeking alternatives to the low yields available in money market instruments and to the volatility of the equity markets. Insurance companies, corporations, pension plans, and other institutions appear to have been drawn to preferreds by the potential for attractive yields, lower volatility and the idea that "subordination" (buying junior bonds of a comparatively strong issuer) may be a better way to attain incremental yield than taking more credit risk by buying more senior bonds of weaker issuers. Security selection was crucial over the period, as preferred securities were not immune to the credit problems that plagued the corporate markets. In most cases, sticking to "quality" was a successful strategy over the six-month period. IN THIS ENVIRONMENT HOW DID JTP, JPS, JHP PERFORM? Each of the Funds performed well. As of January 31, 2003, the initial invest-up phases for all three Funds were essentially complete, and all three were trading at premiums to both their initial offering prices and to their respective NAVs. After paying an initial monthly 2 dividend of $0.103 per share, JTP increased its payout to $0.105 in December 2002. JPS also declared an initial monthly dividend of $0.105 per share. In February 2003, shortly after the close of the reporting period, JHP declared its initial monthly dividend of $0.103 per share. The table below shows the price, NAVs and premiums of all three Funds as of 1/31/03: PRICE NAV PREMIUM - -------------------------------------------- JTP 15.42 13.98 10.30% - -------------------------------------------- JPS 15.15 14.71 2.99% - -------------------------------------------- JHP 15.05 14.39 4.59% - -------------------------------------------- Past performance does not guarantee future results. Please see the individual Performance Overview pages in this report for additional information. WHAT WAS YOUR PORTFOLIO MANAGEMENT STRATEGY FOR THIS REPORTING PERIOD AND HOW HAVE YOU BEEN INVESTING THE ASSETS OF THE FUNDS? In keeping with each Fund's intention to provide attractive current income from a quality portfolio, our focus has been on purchasing investment-grade quality preferred securities issued by stable or improving companies. In many cases, these have been entities who have senior debt ratings of A2/A or higher. We have looked for preferreds that have attractive yields relative to the more senior obligations of the same issuer. Analyzing call features, an option that we think often is mispriced by the market, has been an important part of this strategy. Issues trading at a premium with favorable yields-to-call have provided the portfolios with high levels of current income and, we believe, prospects for good price stability over time. We have utilized both $25 par NYSE listed issues as well as $1000 par institutionally traded capital securities, depending on their relative values at any particular point in time. With many issuers having both types of securities outstanding, we also have taken advantage of opportunities to "swap" between the preferreds (e.g. selling a BankAmerica $25 par issue and buying an equivalent amount of their $1000 par capital securities in order to generate additional yield). Each of the Funds also has a small allocation of convertible preferred securities that has provided diversification, attractive yields and some equity market related upside potential. WHAT IS YOUR STRATEGY GOING FORWARD? Our basic strategy will continue to emphasize a focus on relative value and quality issuers. We expect the supply of new issues to continue at a steady pace. This should not only provide us with new opportunities to buy attractive securities, but also should tend to create better investment opportunities in the secondary market, which is often ignored when there is a heavy new issue calendar. One variable we will keep a close eye on is the Bush Administration's proposal to eliminate double taxation on corporate dividends. It is important to note that this will not directly impact the hybrid preferred market in which the Funds primarily invest because the payments from hybrid preferreds are deemed to be interest, not dividends, and are tax deductible to the issuer. Hence double taxation is not an issue and these payments would not be tax-free to the investor even if the proposal passes. There are some implications, however, for supply and demand for hybrid preferreds. Overall, we believe that the effect on the market will be limited. New supply should continue because the after-tax cost of financing likely will still be attractive due to the deductibility of the payments to the issuer. Demand should still be strong from both individuals and institutions funding retirement accounts, insurance companies, and those seeking sources of high nominal income. 3 JTP NUVEEN QUALITY PREFERRED INCOME FUND Performance OVERVIEW As of January 31, 2003 PORTFOLIO STATISTICS ================================================== Share Price $15.42 - -------------------------------------------------- Common Share Net Asset Value $13.98 - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $898,590 - -------------------------------------------------- % OF TOTAL TOP 5 ISSUERS INVESTMENTS ================================================== ING Group NV 3.0% - -------------------------------------------------- Abbey National 2.8% - -------------------------------------------------- HSBC Capital Funding LP 2.6% - -------------------------------------------------- Dresdner Funding Trust 2.6% - -------------------------------------------------- HRPT Properties 2.5% - -------------------------------------------------- % OF TOTAL TOP 5 INDUSTRIES INVESTMENTS ================================================== Banking 20.7% - -------------------------------------------------- Banking - Foreign 11.9% - -------------------------------------------------- Real Estate Investment Trusts 11.4% - -------------------------------------------------- Utilities 10.2% - -------------------------------------------------- Financial 5.9% - -------------------------------------------------- CUMULATIVE TOTAL RETURN INCEPTION DATE 6/02 ================================================== Market NAV - -------------------------------------------------- Since Inception 1.91% -6.99% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY DIVIDENDS PER SHARE 8/02 0.103 9/02 0.103 10/02 0.103 11/02 0.103 12/02 0.105 1/03 0.105 Line Chart: SHARE PRICE PERFORMANCE Weekly Closing Price Past performance is not predictive of future results. 6/28/02 15.4 15.31 15.39 15.45 15.1 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 1/31/03 15.42 4 JPS NUVEEN QUALITY PREFERRED INCOME FUND 2 Performance OVERVIEW As of January 31, 2003 PORTFOLIO STATISTICS ================================================== Share Price $15.15 - -------------------------------------------------- Common Share Net Asset Value $14.71 - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $1,757,441 - -------------------------------------------------- % OF TOTAL TOP 5 ISSUERS1 INVESTMENTS ================================================== Abbey National Capital Trust 3.1% - -------------------------------------------------- Everest RE Capital Trust 2.9% - -------------------------------------------------- ING Group NV 2.8% - -------------------------------------------------- Wachovia Bank Preferred Funding Corp. 2.5% - -------------------------------------------------- General Motors Acceptance Corp. 2.1% - -------------------------------------------------- % OF TOTAL TOP 5 INDUSTRIES1 INVESTMENTS ================================================== Banking 20.2% - -------------------------------------------------- Banking - Foreign 13.8% - -------------------------------------------------- Financial 10.8% - -------------------------------------------------- Utilities 10.5% - -------------------------------------------------- Real Estate Investment Trusts 7.7% - -------------------------------------------------- CUMULATIVE TOTAL RETURN INCEPTION DATE 9/02 ================================================== Market NAV - -------------------------------------------------- Since Inception 3.20% 4.91% - -------------------------------------------------- Bar Chart: 2002-2003 MONTHLY DIVIDENDS PER SHARE 11/02 0.105 12/02 0.105 1/03 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 1/31/03 15.15 1 Excluding U.S. Government and agency obligations. 5 JHP NUVEEN QUALITY PREFERRED INCOME FUND 3 Performance OVERVIEW As of January 31, 2003 PORTFOLIO STATISTICS ================================================== Share Price $15.05 - -------------------------------------------------- Common Share Net Asset Value $14.39 - -------------------------------------------------- Net Assets Applicable to Common Shares ($000) $324,993 - -------------------------------------------------- % OF TOTAL TOP 5 ISSUERS1 INVESTMENTS ================================================== PNC Institutional Capital Trust 3.4% - -------------------------------------------------- ING Group NV 3.2% - -------------------------------------------------- MIC Financing Trust 3.2% - -------------------------------------------------- Barclays Bank plc 3.1% - -------------------------------------------------- Abbey National Capital Trust 3.0% - -------------------------------------------------- % OF TOTAL TOP 5 INDUSTRIES1 INVESTMENTS ================================================== Banking 20.0% - -------------------------------------------------- Banking - Foreign 10.5% - -------------------------------------------------- Insurance - P&C - Foreign 10.0% - -------------------------------------------------- Utilities 8.6% - -------------------------------------------------- Financial 7.7% - -------------------------------------------------- CUMULATIVE TOTAL RETURN INCEPTION DATE 12/02 ================================================== Market NAV - -------------------------------------------------- Since Inception .33% .42% - -------------------------------------------------- THE FUND PAID ITS FIRST MONTHLY DIVIDEND OF $.1030 PER SHARE ON MARCH 3, 2003. 1 Excluding U.S. Government and agency obligations. Bar 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 1/31/03 15.05 6 Shareholder MEETING REPORT The Shareholder Meeting was held March 5, 2003, in Chicago at Nuveen's headquarters.
JTP - ----------------------------------------------------------------------------------------------------------------- APPROVAL OF THE BOARD MEMBERS WAS REACHED AS FOLLOWS: Preferred Preferred Preferred Preferred Preferred Common Shares Shares Shares Shares Shares Shares Series-M Series-T Series-W Series-TH Series-F ================================================================================================================= James E. Bacon For 63,018,633 3,314 3,304 3,319 3,520 3,024 Withhold 380,590 7 4 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total 63,399,223 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= William E. Bennett For 63,029,894 3,314 3,307 3,319 3,520 3,024 Withhold 369,329 7 1 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total 63,399,223 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= Jack B. Evans For 63,037,825 3,314 3,307 3,319 3,520 3,024 Withhold 361,398 7 1 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total 63,399,223 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= Thomas E. Leafstrand For 63,033,528 3,314 3,304 3,319 3,520 3,024 Withhold 365,695 7 4 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total 63,399,223 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= Sheila W. Wellington For 63,002,248 3,314 3,304 3,319 3,520 3,024 Withhold 396,975 7 4 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total 63,399,223 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= William L. Kissick For -- 3,314 3,304 3,319 3,520 3,024 Withhold -- 7 4 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total -- 3,321 3,308 3,319 3,520 3,028 ================================================================================================================= Timothy R. Schwertfeger For -- 3,314 3,307 3,319 3,520 3,024 Withhold -- 7 1 -- -- 4 - ----------------------------------------------------------------------------------------------------------------- Total -- 3,321 3,308 3,319 3,520 3,028 =================================================================================================================
7
Nuveen Quality Preferred Income Fund (JTP) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ $25 PAR PREFERRED SECURITIES - 77.9% (52.2% OF TOTAL INVESTMENTS) AGENCY - 0.1% 33,400 Tennessee Valley Authority, Series D, 6.750% $ 900,798 - ------------------------------------------------------------------------------------------------------------------------------------ AUTO - 0.6% 113,100 Ford Motor Co. Capital Trust I, 9.000% 2,881,788 63,300 General Motors Corp. (HGM), 7.375% 1,590,096 23,700 General Motors Corp. (RGM), 7.250% 585,864 - ------------------------------------------------------------------------------------------------------------------------------------ AUTO - FOREIGN - 1.1% 382,050 Magna International Inc., Series B, 8.875% 10,315,350 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - 8.8% 101,300 Associates Bank Corp. Capital Trust I, 7.625% 2,628,735 68,300 Bank One Capital II, 8.500% 1,906,936 50,300 Bank One Capital VI, 7.200% 1,313,333 7,200 BankAmerica Capital Trust I, 7.000% 190,008 64,000 BankAmerica Capital Trust II, 7.000% 1,681,920 145,000 BankAmerica Capital Trust III, 7.000% 3,886,000 117,399 Chase Capital IV, Series D, 7.340% 2,946,715 24,800 Chase Capital VIII, Series H, 8.250% 683,488 200,000 Chittenden Bank Capital Trust I, 8.000% 5,310,000 28,900 Citicorp Capital III, 7.100% 747,932 18,000 Citigroup Capital VI, 6.875% 464,940 103,000 Citigroup Capital VII, 7.125% 2,733,620 47,600 Citigroup Capital VIII, 6.950% 1,252,832 60,000 Citigroup Inc., Series H, 6.231% (a) 3,120,000 122,500 Comerica Corp. Capital, 7.600% 3,205,825 224,795 Compass Bank Trust III, 7.350% 5,723,281 28,400 First Union Capital I, 7.500% (CORTS) 735,560 8,400 First Union Institutional Capital I, 8.200% (CORTS) 230,832 8,500 Fleet Capital Trust III, 7.050% 213,520 7,100 Fleet Capital Trust IV, 7.170% 179,204 89,000 Fleet Capital Trust VI, 8.800% 2,442,160 32,100 Fleet Capital Trust VII, 7.200% 832,995 57,900 Harris Preferred Capital, Series A, 7.375% 1,463,712 32,600 JPMorgan Chase, Series 2001, 7.850% (CORTS) 847,926 77,200 JPMorgan Chase Capital IX, 7.500% 2,024,184 KeyCorp: 29,800 Series 2001-3, 8.250% (CORTS) 795,064 15,300 Series 2001-7, 7.750% (CORTS) 393,516 59,400 KeyCorp Institutional Capital A, Series 2002-1, 7.500% (CORTS) 1,544,400 8 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BANKING (continued) 44,700 National Commerce Capital Trust II, 7.700% $ 1,193,490 29,200 Regions Financial Trust I, 8.000% 780,224 35,700 Suntrust Bank Capital V, 7.050% 932,841 19,800 US Bancorp Capital II, 7.200% 498,960 174,400 US Bancorp Capital III, 7.750% 4,661,712 418,405 US Bancorp Capital IV, 7.350% 10,932,923 38,400 US Bancorp Capital V, 7.250% 1,008,000 9,400 Valley National Bank Capital Trust I, 7.750% 246,468 19,000 Washington Mutual Inc., Series 2001-22, 7.650% (CORTS) 487,160 17,000 Wells Fargo Capital Trust IV, 7.000% 455,090 7,700 Wells Fargo Capital Trust V, 7.000% 205,205 300,000 Zions Capital Trust B, 8.000% 8,025,000 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 5.8% 273,200 ABN Amro Capital Funding Trust I, 7.500% 6,993,920 208,800 ABN Amro Capital Funding Trust II, 7.125% 5,351,544 24,200 ANZ Exchangeable Preferred Trust, 8.000% 621,940 9,000 ANZ Exchangeable Preferred Trust II, 8.080% 232,650 8,500 Abbey National plc, 7.250% 220,575 67,800 Abbey National plc, Series B, 7.375% 1,783,140 BBVA Privanza International Gibraltar: 14,700 Series C, 8.000% 377,643 10 Series D, 7.000% 9,324,238 104,200 BCH Capital Ltd., Series B, 9.430% 2,891,550 BSCH Finance Ltd.: 206,537 Series F, 8.125% 5,378,223 151,955 Series G, 8.125% 3,966,026 69,091 Series H, 7.790% 1,735,566 265,050 Series Q, 8.625% 7,116,593 46,300 Banco Totta & Acores Financing, Series A, 8.875% 1,266,305 21,300 Barclays Bank plc, 8.000% 547,410 36,800 Espirito Santo Overseas Ltd., Series B, 8.500% 977,040 60,000 NAB Exchangeable Preferred Trust, 8.000% 1,536,000 55,300 National Westminster Bank plc, 7.875% 1,426,740 22,900 Westpac Capital Trust I, 8.000% 597,690 - ------------------------------------------------------------------------------------------------------------------------------------ BROKERAGE- 2.4% 50,100 Bear Stearns Capital Trust III, 7.800% 1,335,165 109,200 Lehman Brothers Holdings Capital Trust I, Series I, 8.000% 2,882,880 118,100 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 3,076,505 61,000 MSDW Capital Trust I, 7.100% 1,549,400 186,900 Merrill Lynch Preferred Capital Trust I, 7.750% 4,992,099 38,500 Merrill Lynch Preferred Capital Trust II, 8.000% 1,051,050 7,300 Merrill Lynch Preferred Capital Trust IV, 7.120% 191,698 44,800 Merrill Lynch Preferred Capital Trust V, 7.280% 1,191,232 77,200 Morgan Stanley Capital Trust II, 7.250% 2,021,868 121,000 Salomon Smith Barney Capital I, 7.200% 3,044,360 9 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 1.1% 399,000 Ultramar Diamond Shamrock Capital I, 8.320% $ 10,078,740 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - FOREIGN - 1.6% 46,100 ENCANA Corp., 9.250% 1,237,785 100,700 Suncor Energy Inc., 9.125% 2,692,718 153,600 Talisman Energy Inc. (TLM A), 9.000% 3,985,920 257,100 Talisman Energy Inc. (TLM B), 8.900% 6,736,020 - ------------------------------------------------------------------------------------------------------------------------------------ ENTERTAINMENT - 0.4% 119,000 Viacom Inc., 7.250% 3,201,100 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 7.7% 760,000 AT&T Capital Corp. (CIC), 8.125% 19,364,800 485,300 AT&T Capital Corp. (CIP), 8.250% 12,467,357 30,176 CIT Capital Trust I, 7.750% (CORTS) 775,523 62,000 Financial Security Assurance Holdings Ltd., 6.250% 1,581,000 193,010 General Motors Acceptance Corp. (GJM), 7.350% 4,852,271 28,500 General Motors Acceptance Corp. (GMA), 7.300% 713,640 30,000 General Electric Capital Corp., 6.008% 773,400 127,000 Household Capital Trust V, Series X, 10.000% 3,520,440 59,500 Household Capital Trust VI, Series F, 8.250% 1,535,100 15,200 Household Capital Trust VII, Series V, 7.500% 384,256 Household International Inc.: 745,586 Series G, 7.600% (a) 18,751,488 138,800 Series 92-A, 8.250% (a) 3,518,580 22,400 Series 01-A, 7.500% (a) 564,032 26,600 MBIA Inc., 8.000% 733,096 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - FOREIGN - 4.8% 55,900 ING Capital Funding Trust I, 7.700% 1,464,580 26,400 ING Capital Funding Trust II, 9.200% 743,688 563,900 ING Group NV (IND), 7.050% 14,379,450 995,458 ING Group NV (INZ), 7.200% 25,573,316 26,200 Swedish Export Credit Corp., 7.375% 673,340 12,500 Swedish Export Credit Corp., Series A, 7.200% 319,875 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD - 0.1% 19,100 ConAgra Capital LC, Series B, 5.000% 466,040 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD - FOREIGN - 1.6% 535,800 Grand Met De Ltd. Partnership, 9.420% 14,734,500 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 3.0% 32,100 AGL Capital Trust II, 8.000% 854,181 560,500 Coastal Finance I, 8.375% 9,847,985 93,400 Dominion CNG Capital Trust I, 7.800% 2,456,420 53,700 Equitable Resources Capital Trust I, 7.350% 1,350,555 142,400 MCN Financing II Trust, 8.625% 3,666,800 22,900 South Jersey Gas Capital Trust I, 8.350% 581,660 325,600 Southern Union Financing Trust, 9.480% 8,348,384 10 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ GAS - FOREIGN - 0.4% 31,400 TransCanada Capital, 8.750% $ 808,550 108,500 TransCanada Pipelines Ltd., 8.250% 2,784,110 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL - 0.5% 162,700 Textron Capital I, 7.920% 4,096,786 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 2.4% 20,700 American General Capital I, 7.875% 558,072 15,700 American General Capital III, 8.050% 441,484 136,600 Great West Life and Annuity Insurance, 7.250% 3,491,496 23,100 Lincoln National Capital III, Series C, 7.400% 582,582 77,100 Lincoln National Capital V, Series E, 7.650% 2,019,249 10,400 Phoenix Companies, Inc., 7.450% 248,352 70,900 Protective Life Company Capital Trust III, 7.500% 1,822,130 410,000 Protective Life Company Capital Trust IV, 7.250% 10,619,000 58,600 Torchmark Capital Trust I, 7.750% 1,523,600 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 1.0% 34,600 Farmers Group Capital II, 8.250% 882,300 126,800 Hartford Capital I, Series A, 7.700% 3,208,040 110,000 Hartford Capital III, Series C, 7.450% 2,795,100 42,700 Hartford Life II, Series B, 7.625% 1,105,503 26,700 SAFECO, Series 2001-4, 8.750% (CORTS) 698,873 24,600 SAFECO Capital Trust I, 8.700% (CORTS) 639,600 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 1.0% 293,600 Travelers/Aetna P&C Capital I, 8.080% 7,413,400 64,600 Travelers/Aetna P&C Capital II, 8.000% 1,625,982 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 4.8% 27,300 Ace Ltd. Capital Trust I, 8.875% 735,462 143,706 Capital RE LLC, Series A, 7.650% 3,599,835 749,000 Converium Finance SA, 8.250% 19,256,790 59,200 Everest RE Capital Trust, 7.850% 1,516,704 59,800 PartnerRe Ltd., Series A, 8.000% 1,504,568 99,000 PartnerRe Ltd. Capital Trust I, 7.900% 2,583,900 RenaissanceRe Holdings Ltd.: 63,505 Series A, 8.100% 1,666,371 40,000 Series B, 7.300% 1,000,230 XL Capital Ltd.: 385,354 Series A, 8.000% 10,308,220 24,000 Series B, 7.625% 624,000 - ------------------------------------------------------------------------------------------------------------------------------------ METALS - FOREIGN - 0.8% 286,000 Placer Dome Inc., Series A, 8.625% 7,235,800 - ------------------------------------------------------------------------------------------------------------------------------------ PAPER - 0.1% 37,800 International Paper Capital Trust III, 7.875% 953,316 - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS - FOREIGN - 0.2% 54,300 Rhone-Poulenc Overseas, Series A, 8.125% 1,385,193 11 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS - 17.0% 29,000 AMB Property Corp., Series A, 8.500% $ 740,080 8,600 Archstone-Smith Trust, Series D, 8.750% 227,900 9,100 Avalonbay Communities Inc., Series H, 8.700% 246,883 BRE Properties Inc.: 12,900 Series A, 8.500% 333,465 608,700 Series B, 8.080% 16,100,115 Duke Realty Investments Corp.: 109,179 Series B, 7.990% 5,547,658 9,300 Series I, 8.450% 247,845 Equity Office Properties Trust: 22,900 Series C, 8.000% 592,423 19,100 Series E, 4.000% 477,882 2,400 Series F, 8.000% 60,600 1,097,400 Series G, 7.748% 28,433,634 Equity Residential Properties: 30,400 Series B, 9.125% 826,272 22,100 Series D, 8.600% 594,932 First Industrial Realty Trust Inc.: 10,600 Series C, 8.625% 284,716 62,200 Series D, 7.950% 1,539,450 60,500 Series E, 7.900% 1,502,820 19,000 Firstar Realty LLC, Series 144A, 8.875% 21,579,250 HRPT Properties Trust: 218,300 Series A, 9.875% 5,758,754 1,096,700 Series B, 8.750% 28,075,520 Kimco Realty: 8,100 Series A, 7.750% 204,120 18,800 Series C, 8.375% 480,152 46,400 New Plan Excel Realty Trust Inc., Series B, 8.625% 1,166,960 Prologis Trust: 89,600 Series D, 7.920% 2,264,192 18,300 Series E, 8.750% 466,833 Public Storage Inc.: 4,300 Series B, 9.200% 109,736 9,000 Series D, 9.500% 245,250 16,200 Series E, 10.000% 464,130 22,800 Series F, 9.750% 632,700 6,400 Series K, 8.250% 166,400 20,400 Series L, 8.250% 527,952 24,000 Series Q, 8.600% 647,520 99,000 Series R, 8.000% 2,631,420 200,000 Series S, 7.875% 5,228,000 326,500 Series V, 7.500% 8,443,290 Simon Property Group Inc.: 20,500 Series F, 8.750% 541,610 176,200 Series G, 7.890% 8,899,862 Vornado Realty Trust: 26,100 Series B, 8.500% 670,770 47,700 Series C, 8.500% 1,219,212 200,000 Wachovia Bank Preferred Funding Corp., Series A, 7.250% 5,170,000 12 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ RETAIL - 1.2% 6,000 Sears Roebuck Acceptance Corp. (SRF), 7.000% $ 149,280 29,800 Sears Roebuck Acceptance Corp. (SRH), 6.950% 743,212 413,000 Sears Roebuck Acceptance Corp. (SRJ), 7.000% 10,325,000 - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 2.8% 9,250 Centaur Funding Corp., Series 144A, 9.080% 9,487,031 10,000 SBC Communications Inc., 7.000% 265,000 183,796 Telephone & Data Systems Capital I, 8.500% 4,607,766 262,846 Telephone & Data Systems Inc., Series A, 7.600% 6,694,688 156,300 US Cellular Corp., 8.750% 4,066,926 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 6.1% 248,300 Alabama Power Co., 5.830% (a) 6,137,976 10,000 Alabama Power Co., Series B, 7.000% 251,800 6,100 Appalachian Power Co., 7.200% 153,110 14,800 Appalachian Power Co., Series B, 7.300% 370,296 41,500 Atlantic Capital I, Series B, 8.250% 1,051,403 13,300 Atlantic Capital II, Series C, 7.375% 336,623 92,600 CPL Capital I, Series A, 8.000% 2,324,260 106,800 Comed Financing I, 8.480% 2,709,516 17,500 Conectiv Inc., 8.125% 448,000 77,740 DTE Energy Trust I, 7.800% 2,056,223 55,600 Dominion Resources Capital Trust II, 8.200% 1,483,408 10,000 Duke Capital Financing Trust II, 7.375% 246,500 3,100 Duke Capital Financing Trust III, 8.375% 80,135 20,800 Duke Energy Capital Trust I, 7.200% 518,752 8,000 Duke Energy Capital Trust II, 7.200% 199,920 94,800 Energy East Capital Trust I, 8.250% 2,498,928 93,005 Entergy LA Inc., 7.600% 2,464,633 11,800 IES Utilities, 7.875% 297,360 320,000 Interstate Power & Light Co., Series 144A, 8.372% (a) 8,050,016 168,600 Montana Power Capital I, 8.450% 3,186,540 58,600 Northwestern Capital Financing I, 7.200% 949,320 156,500 Northwestern Capital Financing II, 8.250% 2,779,440 296,800 Northwestern Capital Financing III, 8.100% 5,283,040 16,200 Northwestern Public Service Capital Financing I, 8.000% 287,550 64,700 OGE Energy Capital Trust, 8.375% 1,691,905 7,700 Ohio Power Co., 7.375% 193,655 1,300 PSE&G Capital Trust II, 8.125% 33,280 15,000 PSE&G Funding Trust II, 8.720% 387,300 60,800 Public Service Oklahoma Capital I, Series A, 8.000% 1,530,336 5,200 South Carolina Electric and Gas Trust I, Series A, 7.550% 130,832 53,100 Southwestern Electric Power Co. Capital I, Series A, 4.000% 1,334,934 3,900 Virginia Electric and Power Co., Series A, 7.150% 98,709 187,000 Virginia Power Capital Trust II, 7.375% 4,916,229 1,000 WPS Resources Capital Trust I, 7.000% 25,304 13 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - FOREIGN - 0.5% 181,100 Yorkshire Capital Trust I, 8.080% $ 4,567,341 - ------------------------------------------------------------------------------------------------------------------------------------ Total $25 Par Preferred Securities (cost $686,237,690) 700,307,080 -------------------------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED SECURITIES - 11.6% (7.8% OF TOTAL INVESTMENTS) COMPUTER - 0.4% 198,100 Electro Data Systems, 7.625% 3,922,380 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 1.7% 299,400 Keyspan Corp., 8.750% 15,128,682 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 0.2% 37,000 PartnerRe Ltd., 8.000% 1,948,050 - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 1.7% 213,200 ALLTEL Corp., 7.750% 10,212,280 250,200 Citizens Communications Co., 6.750% 5,204,160 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 7.6% 420,600 Ameren Corp., 9.750% 11,103,840 283,000 American Electric Power Inc., 9.250% 10,204,980 58,000 Cinergy Corp., 9.500% 3,107,640 260,200 Dominion Resources Inc., 8.750% 12,593,680 177,000 FPL Group, Inc., 8.500% 9,632,340 165,100 Public Service Enterprise Group, 10.250% 8,890,635 100,000 TXU Corp., 8.750% 2,880,000 523,300 Teco Energy Inc., 4.750% 9,367,070 - ------------------------------------------------------------------------------------------------------------------------------------ Total Convertible Preferred Securities (cost $112,975,747) 104,195,737 -------------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL PREFERRED SECURITIES - 55.3% (37.1% OF TOTAL INVESTMENTS) BANKING - 21.7% $ 15,000 ABN Amro North American Holdings, 6.523%, 11/08/12 15,653,865 7,800 BT Preferred Capital Trust II, Series II, 7.875%, 2/25/27 8,378,604 5,700 Bank of Boston Capital Trust II, Series B, 7.750%, 12/15/26 5,811,697 1,000 BankAmerica Institutional Capital A, Series 144A, 8.070%, 12/31/26 1,139,810 2,000 BankAmerica Institutional Capital B, 7.700%, 12/31/26 2,205,916 8,000 Banknorth Group Inc., 9.060%, 2/01/27 9,057,464 6,000 Barnett Capital I, 8.060%, 12/01/26 6,716,136 5,000 Chase Capital I, Series A, 7.670%, 12/01/26 5,342,490 18,000 Corestates Capital, 8.000%, 12/15/26 19,914,084 500 First Empire Capital Trust II, 8.277%, 6/01/27 566,349 11,463 First Union Institutional Capital I, 8.040%, 12/01/26 13,399,009 20,000 JPM Capital Trust II, 7.950%, 2/01/27 21,774,000 11,150 NB Capital Trust II, 7.830%, 12/15/26 12,609,847 1,000 North Fork Capital Trust I, 8.700%, 12/15/26 1,094,320 19,000 PNC Institutional Capital Trust A, 7.950%, 12/15/26 20,338,360 17,500 Reliance Capital Trust I, 8.170%, 5/01/28 18,365,918 14 PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BANKING (continued) $ 1,400 Republic NY Capital, 7.530%, 12/04/26 $ 1,452,066 23,000 Summit Capital Trust I, Series B, 8.400%, 3/15/27 24,564,897 4,000 Wachovia Capital Trust I, 7.640%, 1/15/27 4,334,300 1,050 Wells Fargo Capital, 7.950%, 12/01/26 1,195,386 1,000 Zions Institutional Capital Trust A, Series A, 8.536%, 12/15/26 1,076,715 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 11.9% 30,000 Abbey National Capital Trust I, 8.963%, 6/30/30 37,392,840 33,742 Dresdner Funding Trust I, 8.151%, 6/30/31 34,595,369 25,000 HSBC Capital Funding LP, Series 2, 10.176%, 6/30/30 34,816,200 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 2.6% 21,900 Phillips 66 Capital II, 8.000%, 1/15/37 23,610,018 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 1.0% 9,000 CIT Capital Trust I, 7.700%, 2/15/27 8,960,643 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 1.0% 4,000 KN Capital Trust I, Series B, 8.560%, 4/15/27 4,435,692 4,360 KN Capital Trust III, 7.630%, 4/15/28 4,413,118 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 0.5% 4,000 MIC Financing Trust I, 8.375%, 2/01/27 4,172,016 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - FOREIGN - 2.1% 17,660 Sun Life Canada US Capital Trust I, 8.526%, 5/06/07 18,874,637 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 6.5% 13,983 AFC Capital Trust I, 8.207%, 2/03/27 10,106,381 15,000 SAFECO Capital Trust I, Series B, 8.072%, 7/15/37 15,632,475 35,095 Zurich Capital Trust, 8.376%, 6/01/37 33,054,401 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 5.0% 24,550 Ace Capital Trust II, 9.700%, 4/01/30 29,712,079 2,000 RenaissanceRe Capital Trust, Series B, 8.540%, 3/01/27 2,066,448 18,500 Royal & Sun Alliance Insurance, 8.950%, 10/15/29 13,055,746 - ------------------------------------------------------------------------------------------------------------------------------------ SAVINGS AND LOAN - 0.6% 5,000 Washington Mutual Capital I, 8.375%, 6/01/27 5,687,990 - ------------------------------------------------------------------------------------------------------------------------------------ SAVINGS AND LOAN - THRIFT - 0.8% 6,000 Dime Capital Trust I, Series A, 9.330%, 5/06/27 7,163,562 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 1.6% 12,000 Dominion Resources Capital Trust III, 8.400%, 1/15/31 13,377,084 1,000 PECO Energy Capital Trust III, 7.380%, 4/06/28 962,346 - ------------------------------------------------------------------------------------------------------------------------------------ Total Capital Preferred Securities (cost $496,349,191) 497,080,278 -------------------------------------------------------------------------------------------------------------------- 15 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CORPORATE BONDS - 3.7% (2.5% OF TOTAL INVESTMENTS) AUTO - 0.8% $ 7,500 Ford Motor Company, 8.900%, 1/15/32 $ 7,181,873 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - 0.3% 3,000 Suntrust Bank, 5.450%, 12/01/17 3,111,228 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 2.2% 20,000 General Motors Acceptance Corp., 8.000%, 11/01/31 19,785,320 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 0.4% 4,000 Zurich Reinsurance Center Holdings Inc., 7.125%, 10/15/23 3,359,400 - ------------------------------------------------------------------------------------------------------------------------------------ Total Corporate Bonds (cost $31,785,198) 33,437,821 -------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 0.7% (0.4% OF TOTAL INVESTMENTS) $ 5,972 State Street Bank Repurchase Agreement, 1.220%, dated 1/31/03, due 2/03/03, ============ repurchase price $5,972,607, collateralized by U.S. Treasury Bonds 5,972,000 -------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $5,972,000) 5,972,000 -------------------------------------------------------------------------------------------------------------------- Total Investments (cost $1,333,319,826) - 149.2% 1,340,992,916 -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (0.2)% (2,403,137) -------------------------------------------------------------------------------------------------------------------- FundPreferred Shares, at Liquidation Value - (49.0)% (440,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 898,589,779 ==================================================================================================================== (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. (CORTS) Corporate Backed Trust Securities. See accompanying notes to financial statements.
16 Nuveen Quality Preferred Income Fund 2 (JPS) Portfolio of INVESTMENTS January 31, 2003 (Unaudited)
MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ $25 PAR PREFERRED SECURITIES - 70.0% (48.5% OF TOTAL INVESTMENTS) AGENCY - 0.3% 90,100 Tennessee Valley Authority, Series D, 6.750% $ 2,429,997 42,000 SLM Corp., Series A, 6.970% (a) 2,251,200 - ------------------------------------------------------------------------------------------------------------------------------------ AUTO - 0.1% 44,000 Ford Motor Co. Capital Trust I, 9.000% 1,121,120 20,400 General Motors Corp. (HGM), 7.375% 512,448 - ------------------------------------------------------------------------------------------------------------------------------------ AUTO - FOREIGN - 0.1% 35,500 Magna International Inc., Series B, 8.875% 958,500 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - 10.5% 152,060 Associates Bank Corp. Capital Trust I, 7.625% 3,945,957 81,600 BancWest Capital I, 2.375% 2,346,000 68,500 Bank One Capital II, 8.500% 1,912,520 41,400 Bank One Capital V, 8.000% 1,117,800 144,500 Bank One Capital VI, 7.200% 3,772,895 17,800 Bank of New York Capital IV, Series E, 6.875% 459,418 135,900 BankAmerica Capital Trust I, 7.000% 3,586,401 168,500 BankAmerica Capital Trust II, 7.000% 4,428,180 218,300 BankAmerica Capital Trust III, 7.000% 5,850,440 40,800 BankNorth Capital Trust II, 8.000% 1,071,000 93,100 Chase Capital IV, Series D, 7.340% 2,336,810 22,800 Chase Capital V, Series E, 7.030% 573,420 77,200 Chase Capital VIII, Series H, 8.250% 2,127,632 11,500 Chittenden Bank Capital Trust I, 8.000% 305,325 34,100 Citicorp Capital III, 7.100% 882,508 14,900 Citigroup Capital V, 7.000% 380,695 52,100 Citigroup Capital VI, 6.875% 1,345,743 148,100 Citigroup Capital VII, 7.125% 3,930,574 360,000 Citigroup Capital VIII, 6.950% 9,475,200 30,000 Citigroup Inc., Series H, 6.231% (a) 1,560,000 239,700 Comerica Corp. Capital, 7.600% 6,272,949 380,125 Compass Bank Trust III, 7.350% 9,677,983 63,300 First Union Capital I, 7.500% (CORTS) 1,639,470 31,300 First Union Institutional Capital I, 8.200% (CORTS) 860,124 128,300 Fleet Capital Trust VI, 8.800% 3,520,552 1,431,900 Golden State Bancorp, Series A, 9.125% 37,644,651 79,700 Harris Preferred Capital, Series A, 7.375% 2,014,816 41,000 JPMorgan Chase, 7.125% (SATURNS) 1,045,500 17 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BANKING (continued) JPMorgan Chase: 6,400 Series 2001, 7.850% (CORTS) $ 166,464 71,500 Series 2001-15, 7.540% (CORTS) 1,833,260 204,100 JPMorgan Chase Capital IX, 7.500% 5,351,502 KeyCorp: 91,300 Series 2001-3, 8.250% (CORTS) 2,435,884 26,400 Series 2001-7, 7.750% (CORTS) 679,008 33,900 KeyCorp Institutional Capital A, Series 2002-1, 7.500% (CORTS) 881,400 239,800 National Commerce Capital Trust II, 7.700% 6,402,660 34,800 Regions Financial Trust I, 8.000% 929,856 131,900 Suntrust Capital IV, 7.125% 3,505,902 81,400 Suntrust Bank Capital V, 7.050% 2,126,982 132,200 US Bancorp Capital II, 7.200% 3,331,440 602,600 US Bancorp Capital III, 7.750% 16,107,498 208,100 US Bancorp Capital IV, 7.350% 5,437,653 78,100 US Bancorp Capital V, 7.250% 2,050,125 87,600 Valley National Bank Capital Trust I, 7.750% 2,296,872 41,000 Washington Mutual Inc., Series 2001-22, 7.650% (CORTS) 1,051,240 26,400 Wells Fargo Capital Trust IV, 7.000% 706,728 15,700 Wells Fargo Capital Trust V, 7.000% 418,405 20,000 Wells Fargo Capital Trust VI, 6.950% 527,800 510,200 Zions Capital Trust B, 8.000% 13,647,850 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 5.4% 340,000 ABN Amro Capital Funding Trust I, 7.500% 8,704,000 780,300 ABN Amro Capital Funding Trust II, 7.125% 19,999,089 102,000 ANZ Exchangeable Preferred Trust, 8.000% 2,621,400 61,600 ANZ Exchangeable Preferred Trust II, 8.080% 1,592,360 60,300 BBVA Privanza International Gibraltar, Series C, 8.000% 1,549,107 338,700 BCH Capital Ltd., Series B, 9.430% 9,398,925 BSCH Finance Ltd.: 4,100 Series B, 7.750% 110,700 154,900 Series F, 8.125% 4,033,596 131,000 Series G, 8.125% 3,419,100 88,100 Series H, 7.790% 2,213,072 10,000 Series J, 7.350% 249,700 446,100 Series Q, 8.625% 11,977,785 23,500 Banco Totta & Acores Financing, Series A, 8.875% 642,725 621,000 Banesto Holdings Ltd., Series 144A, 10.500% 18,071,100 3,900 Barclays Bank plc, 8.000% 100,230 27,100 Espirito Santo Overseas Ltd., Series B, 8.500% 719,505 148,500 NAB Exchangeable Preferred Trust, 8.000% 3,801,600 105,200 National Westminster Bank plc, 7.875% 2,714,160 139,100 Westpac Capital Trust I, 8.000% 3,630,510 18 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BROKERAGE - 1.4% 105,900 Bear Stearns Capital Trust, 7.500% $ 2,691,978 94,900 Bear Stearns Capital Trust III, 7.800% 2,529,085 63,800 Lehman Brothers Holdings Capital Trust I, Series I, 8.000% 1,684,320 102,800 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 2,677,940 41,900 MSDW Capital Trust I, 7.100% 1,064,260 60,300 Merrill Lynch Preferred Capital Trust I, 7.750% 1,610,613 91,800 Merrill Lynch Preferred Capital Trust II, 8.000% 2,506,140 500 Merrill Lynch Preferred Capital Trust III, 7.000% 13,100 44,400 Merrill Lynch Preferred Capital Trust IV, 7.120% 1,165,944 87,700 Merrill Lynch Preferred Capital Trust V, 7.280% 2,331,943 80,408 Morgan Stanley Capital Trust II, 7.250% 2,105,886 16,000 Morgan Stanley Dean Witter Co., 7.200% 421,760 154,800 Salomon Smith Barney Capital I, 7.200% 3,894,768 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 0.1% 90,500 Ultramar Diamond Shamrock Capital I, 8.320% 2,286,030 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - FOREIGN - 0.4% 53,000 ENCANA Corp., 9.250% 1,423,050 46,400 Suncor Energy Inc., 9.125% 1,240,736 67,300 Talisman Energy Inc. (TLM A), 9.000% 1,746,435 75,100 Talisman Energy Inc. (TLM B), 8.900% 1,967,620 - ------------------------------------------------------------------------------------------------------------------------------------ ENTERTAINMENT - 0.1% 67,300 Viacom Inc., 7.250% 1,810,370 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 8.4% 20,000 AMBAC Financial Group Inc., 7.080% 505,200 611,100 AT&T Capital Corp. (CIC), 8.125% 15,570,828 130,800 AT&T Capital Corp. (CIP), 8.250% 3,360,252 32,600 CIT Capital Trust I, 7.750% (CORTS) 837,820 6,800 Financial Security Assurance Holdings Ltd. (FSA), 6.950% 171,360 43,000 Financial Security Assurance Holdings Ltd. (FSB), 6.875% 1,121,010 1,059,618 Financial Security Assurance Holdings Ltd. (FSE), 6.250% 27,020,259 199,700 General Electric Capital Corp., 6.625% 5,359,948 8,400 General Motors Acceptance Corp. (GJM), 7.350% 211,176 5,000 General Motors Acceptance Corp. (GMA), 7.300% 125,200 1,000,000 General Electric Capital Corp., 6.008% 25,780,000 250,000 Household Finance Corp., 6.875% 6,304,700 9,800 Household Capital Trust I, Series T, 8.250% 246,960 4,700 Household Capital Trust IV, Series P, 7.250% 116,325 526,700 Household Capital Trust V, Series X, 10.000% 14,600,124 617,096 Household Capital Trust VI, Series F, 8.250% 15,921,077 22,500 Household Capital Trust VII, Series V, 7.500% 568,800 19 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL (continued) Household International Inc.: 105,800 Series G, 7.600% (a) $ 2,660,870 569,730 Series H, 7.625% (a) 14,334,407 9,300 Series 92-A, 8.250% (a) 235,755 475,600 Series 01-A, 7.500% (a) 11,975,608 22,200 MBIA Inc., 8.000% 611,832 16,000 Philadelphia Authority for Industrial Income, Series 1999C, 6.550% 410,400 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - FOREIGN - 4.3% 18,800 Credit Suisse First Boston Trust, 7.000% (SATURNS) 472,538 1,100 Eksportfinans AS, 8.700% 28,061 23,000 ING Capital Funding Trust I, 7.700% 602,600 63,600 ING Capital Funding Trust II, 9.200% 1,791,612 1,338,655 ING Group NV (IND), 7.050% 34,135,703 1,462,100 ING Group NV (INZ), 7.200% 37,561,349 6,500 Swedish Export Credit Corp., 7.375% 167,050 15,300 Swedish Export Credit Corp., Series A, 7.200% 391,527 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD - FOREIGN - 0.2% 106,100 Grand Met De Ltd. Partnership, 9.420% 2,917,750 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 0.7% 38,100 AGL Capital Trust II, 8.000% 1,013,841 69,200 Coastal Finance I, 8.375% 1,215,844 92,500 Dominion CNG Capital Trust I, 7.800% 2,432,750 235,900 Equitable Resources Capital Trust I, 7.350% 5,932,885 10,800 MCN Financing II Trust, 8.625% 278,100 17,300 South Jersey Gas Capital Trust I, 8.350% 439,420 7,800 Southern Union Financing Trust, 9.480% 199,992 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - FOREIGN - 0.2% 11,600 TransCanada Capital, 8.750% 298,700 151,100 TransCanada Pipelines Ltd., 8.250% 3,877,226 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL - 0.7% 467,277 Textron Capital I, 7.920% 11,766,035 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 1.2% 28,200 American General Capital I, 7.875% 760,272 33,400 American General Capital III, 8.050% 939,208 25,900 Great West Life and Annuity Insurance, 7.250% 662,004 49,100 Lincoln National Capital III, Series C, 7.400% 1,238,302 59,000 Lincoln National Capital V, Series E, 7.650% 1,545,210 14,900 Phoenix Companies, Inc., 7.450% 355,812 80,700 Protective Life Company Capital Trust III, 7.500% 2,073,990 440,940 Protective Life Company Capital Trust IV, 7.250% 11,420,346 57,200 Torchmark Capital Trust I, 7.750% 1,487,200 5,500 UNUM Prov Financial Trust I, 8.500% (CORTS) 123,145 17,400 UNUM Prov Trust II, 8.200% (CORTS) 388,368 20 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 1.0% 265,400 Hartford Capital I, Series A, 7.700% $ 6,714,620 247,600 Hartford Capital III, Series C, 7.450% 6,291,516 52,700 Hartford Life II, Series B, 7.625% 1,364,403 59,700 SAFECO, Series 2001-4, 8.750% (CORTS) 1,562,648 78,900 SAFECO Capital Trust I, 8.700% (CORTS) 2,051,400 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 0.4% 285,900 Travelers/Aetna P&C Capital I, 8.080% 7,218,975 23,800 Travelers/Aetna P&C Capital II, 8.000% 599,046 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 9.0% 18,500 Ace Ltd. Capital Trust I, 8.875% 498,390 4,900 Capital RE LLC, Series A, 7.650% 122,745 1,371,600 Converium Finance SA, 8.250% 35,263,836 2,827,000 Everest RE Capital Trust, 7.850% 72,427,740 140,900 PartnerRe Ltd., Series A, 8.000% 3,545,044 230,081 PartnerRe Ltd., Capital Trust I, 7.900% 6,005,114 RenaissanceRe Holdings Ltd.: 304,360 Series A, 8.100% 7,986,406 136,500 Series B, 7.300% 3,413,302 XL Capital Ltd.: 554,400 Series A, 8.000% 14,830,200 537,617 Series B, 7.625% 13,978,042 - ------------------------------------------------------------------------------------------------------------------------------------ METALS - FOREIGN - 0.2% 142,900 Placer Dome Inc., Series A, 8.625% 3,615,370 - ------------------------------------------------------------------------------------------------------------------------------------ PAPER - 0.1% 97,300 International Paper Capital Trust III, 7.875% 2,453,906 - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS - FOREIGN - 0.1% 80,000 Rhone-Poulenc Overseas, Series A, 8.125% 2,040,800 - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS - 11.1% 69,700 AMB Property Corp., Series A, 8.500% 1,778,744 14,500 Archstone-Smith Trust, Series D, 8.750% 384,250 Avalonbay Communities Inc.: 53,800 Series D, 8.000% 1,361,140 91,200 Series H, 8.700% 2,474,256 BRE Properties Inc.: 25,600 Series A, 8.500% 661,760 7,700 Series B, 8.080% 203,665 Carramerica Realty Corp.: 2,300 Series B, 8.570% 58,742 22,000 Series C, 8.550% 559,900 5,500 Series D, 8.450% 139,700 Duke Realty Investments Corp.: 186,650 Series B, 7.990% 9,484,153 16,300 Series E, 8.250% 420,540 33,400 Series I, 8.450% 890,110 21 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS (continued) Equity Office Properties Trust: 47,400 Series C, 8.000% $ 1,226,238 58,400 Series E, 4.000% 1,461,168 10,000 Series F, 8.000% 252,500 293,000 Series G, 7.748% 7,591,630 Equity Residential Properties: 81,800 Series B, 9.125% 2,223,324 40,000 Series C, 9.125% 1,100,000 59,750 Series D, 8.600% 1,608,470 161,900 Series L, 7.625% 4,054,786 First Industrial Realty Trust Inc.: 16,700 Series C, 8.625% 448,562 85,000 Series D, 7.950% 2,103,750 49,800 Series E, 7.900% 1,237,032 HRPT Properties Trust: 166,200 Series A, 9.875% 4,384,356 1,516,825 Series B, 8.750% 38,830,720 Kimco Realty: 5,200 Series A, 7.750% 131,040 12,000 Series C, 8.375% 306,480 New Plan Excel Realty Trust Inc.: 108,400 Series B, 8.625% 2,726,260 145,350 Series D, 7.800% 7,312,922 Prologis Trust: 266,200 Series D, 7.920% 6,726,874 18,900 Series E, 8.750% 482,139 Public Storage Inc.: 5,000 Series D, 9.500% 136,250 11,000 Series F, 9.750% 305,250 9,000 Series K, 8.250% 234,000 13,700 Series L, 8.250% 354,556 12,700 Series M, 8.750% 338,836 28,800 Series Q, 8.600% 777,024 88,295 Series R, 8.000% 2,346,881 11,900 Series S, 7.875% 311,066 57,015 Series T, 7.625% 1,470,987 58,900 Series U, 7.625% 1,528,455 135,900 Series V, 7.500% 3,514,374 Shurgard Storage Centers Inc.: 4,900 Series C, 8.700% 129,850 26,000 Series D, 8.750% 689,000 Simon Property Group Inc.: 29,800 Series F, 8.750% 787,316 321,041 Series G, 7.890% 16,215,781 Vornado Realty Trust: 33,200 Series B, 8.500% 853,240 40,700 Series C, 8.500% 1,040,292 2,422,800 Wachovia Bank Preferred Funding Corp., Series A, 7.250% 62,629,380 - ------------------------------------------------------------------------------------------------------------------------------------ RETAIL - 0.8% 176,800 Sears Roebuck Acceptance Corp. (SRF), 7.000% 4,398,784 178,800 Sears Roebuck Acceptance Corp. (SRH), 6.950% 4,459,272 207,800 Sears Roebuck Acceptance Corp. (SRJ), 7.000% 5,195,000 22 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 4.9% 4,200 Bellsouth, Series 2002-8, 7.000% $ 110,880 4,000 Bellsouth Capital Funding Corp., 7.375% 105,200 45,250 Centaur Funding Corp., Series 144A, 9.080% 46,409,531 31,200 SBC Communications Inc., 7.000% 826,800 70,900 Telephone & Data Systems Capital I, 8.500% 1,777,463 119,700 Telephone & Data Systems Inc., Series A, 7.600% 3,048,759 1,315,700 US Cellular Corp., 8.750% 34,234,514 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 7.9% 340,000 Alabama Power Co., 5.830% (a) 8,404,800 Alabama Power Co.: 16,100 Series B, 7.000% 405,398 18,700 Series C, 7.000% 470,492 7,000 Series J, 6.750% 184,310 51,000 Appalachian Power Co., 7.200% 1,280,100 98,500 Appalachian Power Co., Series B, 7.300% 2,464,470 47,700 Atlantic Capital I, Series B, 8.250% 1,208,480 24,900 Atlantic Capital II, Series C, 7.375% 630,219 28,400 Baltimore Gas and Electric Capital Trust I, 7.160% 714,828 142,000 CPL Capital I, Series A, 8.000% 3,564,200 70,900 Comed Financing I, 8.480% 1,798,733 12,200 Consolidated Edison Co. of New York (EDV), 7.500% 328,912 17,000 Consolidated Edison Co. of New York (EPI), 7.350% 446,760 7,600 Consolidated Edison Inc. (EPB), 7.250% 202,996 22,200 DTE Energy Trust I, 7.800% 587,190 9,500 Detroit Edison Co. (DTA), 7.625% 239,305 1,000 Detroit Edison Co. (DTB), 7.540% 25,310 36,800 Dominion Resources Capital Trust II, 8.200% 981,824 37,100 Duke Capital Financing Trust I, 7.375% 910,063 81,500 Duke Capital Financing Trust II, 7.375% 2,008,975 212,500 Duke Capital Financing Trust III, 8.375% 5,493,125 63,400 Duke Energy Capital Trust I, 7.200% 1,581,196 22,800 Duke Energy Capital Trust II, 7.200% 569,772 800 Duke Energy Co., Series C, 6.600% 20,840 93,100 Energy East Capital Trust I, 8.250% 2,454,116 500 Entergy Arkansas Inc., 6.700% 13,325 47,900 Entergy LA Inc., 7.600% 1,269,350 1,298,000 Entergy Mississippi Inc., 7.250% 33,748,000 600 Georgia Power Capital Trust V, 7.125% 15,708 29,900 Georgia Power Co. (GPB), 6.600% 770,224 5,200 Georgia Power Co. (GPD), 6.875% 130,156 21,400 Gulf Power Capital Trust II, 7.000% 538,745 15,200 IES Utilities, 7.875% 383,040 1,200,000 Interstate Power & Light Co., Series 144A, 8.372% (a) 30,187,560 23 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) 19,600 Indiana Michigan Power Co., Series B, 7.600% $ 491,960 150,000 Kentucky Power Co., Series A, 8.720% 3,849,000 73,000 Montana Power Capital I, 8.450% 1,379,700 12,100 Northwestern Capital Financing I, 7.200% 196,020 65,200 Northwestern Capital Financing II, 8.250% 1,157,952 51,500 Northwestern Capital Financing III, 8.100% 916,700 15,500 Northwestern Public Service Capital Financing I, 8.000% 275,125 38,100 OGE Energy Capital Trust, 8.375% 996,315 20,500 Ohio Power Co., 7.375% 515,575 12,200 PPL Electric Utilities Corp., 4.400% (a) 896,395 120,587 PSE&G Funding Trust II, 8.720% 3,113,556 38,600 Potomac Electric Power Trust I, 7.375% 982,370 50,000 Public Service Co. Oklahoma, Series B, 6.000% 1,307,500 147,400 Public Service Oklahoma Capital I, Series A, 8.000% 3,710,058 11,500 Rochester Gas and Electric Corp., Series UU, 6.648% 313,375 27,300 South Carolina Electric and Gas Trust I, Series A, 7.550% 686,868 218,600 Southwestern Electric Power Co. Capital I, Series A, 4.000% 5,495,604 9,700 Virginia Electric and Power Co., Series A, 7.150% 245,507 253,000 Virginia Power Capital Trust II, 7.375% 6,651,370 44,600 WPS Resources Capital Trust I, 7.000% 1,128,602 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - FOREIGN - 0.4% 281,400 Yorkshire Capital Trust I, 8.080% 7,096,906 - ------------------------------------------------------------------------------------------------------------------------------------ Total $25 Par Preferred Securities (cost $1,196,590,693) 1,230,810,185 -------------------------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED SECURITIES - 7.2% (5.0% OF TOTAL INVESTMENTS) COMPUTER - 0.2% 164,000 Electro Data Systems, 7.625% 3,247,200 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 1.1% 186,600 El Paso Corp., 9.000% 5,681,970 259,500 Keyspan Corp., 8.750% 13,112,535 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 0.3% 103,000 PartnerRe Ltd., 8.000% 5,422,950 - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 1.0% 170,000 ALLTEL Corp., 7.750% 8,143,000 495,000 Citizens Communications Co., 6.750% 10,296,000 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 4.6% 470,000 Ameren Corp., 9.750% 12,408,000 361,400 American Electric Power Inc., 9.250% 13,032,084 216,000 Cinergy Corp., 9.500% 11,573,280 257,000 Dominion Resources Inc., 8.750% 12,438,800 115,000 FPL Group, Inc., 8.500% 6,258,300 325,000 Public Service Enterprise Group, 10.250% 17,501,250 24 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (continued) 112,000 TXU Corp., 8.750% $ 3,225,600 199,900 Teco Energy Inc., 4.750% 3,578,210 - ------------------------------------------------------------------------------------------------------------------------------------ Total Convertible Preferred Securities (cost $119,454,941) 125,919,179 -------------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL PREFERRED SECURITIES - 61.5% (42.7% OF TOTAL INVESTMENTS) BANKING - 18.2% $ 40,000 ABN Amro North American Holdings, 6.523%, 11/08/12 41,743,640 15,000 Ahmanson Capital Trust I, Series A, 8.360%, 12/01/26 16,384,200 26,355 Bank of Boston Capital Trust I, Series B, 8.250%, 12/15/26 28,316,313 3,031 Bank of Boston Capital Trust II, Series B, 7.750%, 12/15/26 3,090,395 2,390 BankAmerica Institutional Capital A, Series 144A, 8.070%, 12/31/26 2,724,146 2,000 Banknorth Group Inc., 9.060%, 2/01/27 2,264,366 7,500 Chase Capital I, Series A, 7.670%, 12/01/26 8,013,735 1,229 Corestates Capital, 8.000%, 12/15/26 1,359,689 5,000 FBS Capital I, 8.090%, 11/15/26 5,600,960 2,500 First Chicago NBD Institutional Capital A, Series 144A, 7.950%, 12/01/26 2,798,128 1,500 First Empire Capital Trust I, 8.234%, 2/01/27 1,635,872 3,665 First Hawaiian Capital Trust I, Series B, 8.343%, 7/01/27 4,065,716 1,000 First Union Capital I, Series A, 7.935%, 1/15/27 1,080,840 15,255 First Union Capital II, Series A, 7.950%, 11/15/29 18,330,667 22,080 Fleet Capital II, 7.920%, 12/11/26 23,560,685 3,600 JPM Capital Trust I, 7.540%, 1/15/27 3,772,368 22,585 JPM Capital Trust II, 7.950%, 2/01/27 24,588,290 25,000 M & I Capital Trust A, 7.650%, 12/01/26 26,806,175 25,000 Mellon Capital I, Series A, 7.720%, 12/01/26 27,470,600 19,500 NB Capital Trust II, 7.830%, 12/15/26 22,053,096 2,000 North Fork Capital Trust I, 8.700%, 12/15/26 2,188,640 31,710 PNC Institutional Capital Trust A, 7.950%, 12/15/26 33,943,652 8,000 Reliance Capital Trust I, 8.170%, 5/01/28 8,395,848 1,500 State Street Institutional Capital A, Series A, 7.940%, 12/30/26 1,658,637 2,000 Union Planters Capital Trust A, 8.200%, 12/15/26 2,161,182 6,000 Zions Institutional Capital Trust A, Series A, 8.536%, 12/15/26 6,460,290 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 14.5% 62,474 Abbey National Capital Trust I, 8.963%, 6/30/30 77,869,343 41,000 Barclays Bank plc, 6.860%, 6/15/32 41,727,422 48,565 Dresdner Funding Trust I, 8.151%, 6/30/31 49,793,257 10,000 HSBC Capital Funding LP, Series 2, 10.176%, 6/30/30 13,926,480 30,000 KBC Bank Funding Trust III, 9.860%, 11/02/09 36,811,740 20,000 Royal Bank of Scotland GRP plc, 7.648%, 9/30/31 23,053,280 10,000 UBS Preferred Funding Trust I, 8.622, 10/01/10 12,012,700 25 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 0.5% $ 7,355 Phillips 66 Capital II, 8.000%, 1/15/37 $ 7,929,300 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 4.1% 26,837 CIT Capital Trust I, 7.700%, 2/15/27 26,719,642 8,595 Countrywide Capital I, 8.000%, 12/15/26 9,197,819 19,460 Countrywide Capital III, Series B, 8.050%, 6/15/27 21,658,260 14,000 St. George Funding Co. LLC, 8.485%, 6/30/07 14,535,430 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - FOREIGN - 0.7% 10,000 ING Capital Funding Trust III, 8.439%, 12/29/49 11,551,660 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 0.3% 5,750 KN Capital Trust III, 7.630%, 4/15/28 5,820,052 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 2.1% 24,855 American General Institutional Capital B, 8.125%, 3/15/46 31,241,393 6,000 MIC Financing Trust I, 8.375%, 2/01/27 6,258,024 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - FOREIGN - 2.4% 40,000 Sun Life Canada US Capital Trust I, 8.526%, 5/06/07 42,751,160 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 3.5% 29,777 SAFECO Capital Trust I, Series B, 8.072%, 7/15/37 31,032,547 31,515 Zurich Capital Trust, 8.376%, 6/01/37 29,682,560 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 3.9% 32,750 Ace Capital Trust II, 9.700%, 4/01/30 39,636,277 10,000 RenaissanceRe Capital Trust, Series B, 8.540%, 3/01/27 10,332,240 26,690 Royal & Sun Alliance Insurance, 8.950%, 10/15/29 18,835,560 - ------------------------------------------------------------------------------------------------------------------------------------ SAVINGS AND LOAN - THRIFT - 1.1% 4,275 Dime Capital Trust I, Series A, 9.330%, 5/06/27 5,104,038 12,905 Great Western Financial Trust II, Series A, 8.206%, 2/01/27 14,188,376 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 7.5% 15,000 Freddie Mac Subordinated Debt, 5.250%, 11/05/12 15,286,965 40,000 Freddie Mac Subordinated Debt, 5.875%, 3/21/11 43,512,680 65,000 Fannie Mae Subordinated Debt, 6.250%, 2/01/11 72,173,140 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 2.7% 23,950 Dominion Resources Capital Trust III, 8.400%, 1/15/31 26,698,430 12,000 Georgia Power Capital Trust VI, 4.875%, 11/01/42 11,898,613 8,000 Southern Co. Capital Trust I, 8.190%, 2/01/37 8,707,201 - ------------------------------------------------------------------------------------------------------------------------------------ Total Capital Preferred Securities (cost $1,052,331,296) 1,080,413,719 -------------------------------------------------------------------------------------------------------------------- 26 PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CORPORATE BONDS - 5.3% (3.7% OF TOTAL INVESTMENTS) AUTO - 1.5% $ 17,900 Ford Motor Company, 7.450%, 7/16/31 $ 15,187,148 12,500 Ford Motor Company, 8.900%, 1/15/32 11,969,788 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - 0.4% 7,000 Suntrust Bank, 5.450%, 12/01/17 7,259,532 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 3.0% 52,860 General Motors Acceptance Corp., 8.000%, 11/01/31 52,292,601 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 0.4% 8,235 Zurich Reinsurance Center Holdings Inc., 7.125%, 10/15/23 6,916,164 - ------------------------------------------------------------------------------------------------------------------------------------ Total Corporate Bonds (cost $90,056,035) 93,625,233 -------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 0.1% (0.1% OF TOTAL INVESTMENTS) $ 2,423 State Street Bank Repurchase Agreement, 1.220%, date 1/31/03, due 2/03/03, ============ repurchase price $2,423,246, collateralized by U.S. Treasury Bonds 2,423,000 -------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $2,423,000) 2,423,000 -------------------------------------------------------------------------------------------------------------------- Total Investments (cost $2,460,855,965) - 144.1% 2,533,191,316 -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.4% 24,249,417 -------------------------------------------------------------------------------------------------------------------- FundPreferred Shares, at Liquidation Value - (45.5)% (800,000,000) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 1,757,440,733 =================================================================================================================== (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. (CORTS) Corporate Backed Trust Securities. (SATURNS) Structured Asset Trust Unit Repackagings. See accompanying notes to financial statements.
27 Nuveen Quality Preferred Income Fund 3 (JHP) Portfolio of INVESTMENTS January 31, 2003 (Unaudited)
MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ $25 PAR PREFERRED SECURITIES - 43.9% (43.3% OF TOTAL INVESTMENTS) AGENCY - 1.7% 10,400 Tennessee Valley Authority, Series D, 6.750% $ 280,488 100,000 SLM Corp., Series A, 6.970% (a) 5,360,000 - ------------------------------------------------------------------------------------------------------------------------------------ AUTO - FOREIGN - 0.1% 6,700 Magna International Inc., Series B, 8.875% 180,900 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - 5.7% 10,500 Associates Bank Corp. Capital Trust I, 7.625% 272,475 10,000 BancWest Capital I, 9.500% 287,500 8,400 Bank One Capital II, 8.500% 234,528 26,300 Bank One Capital VI, 7.200% 686,693 15,100 BankAmerica Capital Trust III, 7.000% 404,680 4,800 Chase Capital IV, Series D, 7.340% 120,480 1,800 Chase Capital VIII, Series H, 8.250% 49,608 12,000 Chittenden Bank Capital Trust I, 8.000% 318,600 25,600 Citigroup Capital VII, 7.125% 679,424 36,600 Citigroup Capital VIII, 6.950% 963,312 106,500 Citigroup Inc., Series H, 6.231% (a) 5,538,000 32,300 Comerica Corp. Capital, 7.600% 845,291 1,700 Compass Bank Trust III, 7.350% 43,282 7,000 First Union Institutional Capital I, 8.200% (CORTS) 192,360 13,900 Fleet Capital Trust VI, 8.800% 381,416 4,300 Fleet Capital Trust VII, 7.200% 111,585 6,000 Fleet Capital Trust VIII, 7.200% 155,700 8,800 Harris Preferred Capital, Series A, 7.375% 222,464 25,000 JPMorgan Chase, 7.125% (SATURNS) 637,500 KeyCorp: 3,200 Series 2001-3, 8.250% (CORTS) 85,376 4,200 Series 2001-7, 7.750% (CORTS) 108,024 7,400 Suntrust Bank Capital V, 7.050% 193,362 20,700 US Bancorp Capital II, 7.200% 521,640 43,200 US Bancorp Capital III, 7.750% 1,154,736 27,100 US Bancorp Capital IV, 7.350% 708,123 13,500 US Bancorp Capital V, 7.250% 354,375 10,300 Valley National Bank Capital Trust I, 7.750% 270,066 23,000 Washington Mutual Inc., Series 2001-22, 7.650% (CORTS) 589,720 80,000 Zions Capital Trust B, 8.000% 2,140,000 28 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 4.4% 52,000 ABN Amro Capital Funding Trust I, 7.500% $ 1,331,200 6,400 ANZ Exchangeable Preferred Trust, 8.000% 164,480 16,600 ANZ Exchangeable Preferred Trust II, 8.080% 429,110 12,800 BCH Capital Ltd., Series B, 9.430% 355,200 BSCH Finance Ltd.: 66,500 Series F, 8.125% 1,731,660 5,500 Series G, 8.125% 143,550 21,300 Series H, 7.790% 535,056 47,300 Series Q, 8.625% 1,270,005 19,400 Banco Totta & Acores Financing, Series A, 8.875% 530,590 211,000 Banesto Holdings Ltd., Series A, 10.500% 6,140,100 Espirito Santo Overseas Ltd.: 2,500 Series A, 8.500% 64,348 16,000 Series B, 8.500% 424,800 17,200 NAB Exchangeable Preferred Trust, 8.000% 440,320 15,000 National Westminster Bank plc, 7.875% 387,000 13,600 Westpac Capital Trust I, 8.000% 354,960 - ------------------------------------------------------------------------------------------------------------------------------------ BROKERAGE - 2.0% 6,000 Bear Stearns Capital Trust, 7.500% 152,520 9,400 Bear Stearns Capital Trust III, 7.800% 250,510 28,900 MSDW Capital Trust I, 7.100% 734,060 7,600 Merrill Lynch Preferred Capital Trust I, 7.750% 202,996 7,600 Merrill Lynch Preferred Capital Trust II, 8.000% 207,480 17,900 Merrill Lynch Preferred Capital Trust IV, 7.120% 470,054 72,400 Merrill Lynch Preferred Capital Trust V, 7.280% 1,925,116 38,900 Morgan Stanley Capital Trust II, 7.250% 1,018,791 55,700 Salomon Smith Barney Capital I, 7.200% 1,401,412 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 0.3% 40,300 Ultramar Diamond Shamrock Capital I, 8.320% 1,017,978 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - FOREIGN - 0.2% 16,500 ENCANA Corp., 9.250% 443,025 1,800 Suncor Energy Inc., 9.125% 48,132 11,600 Talisman Energy Inc. (TLM A), 9.000% 301,020 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 4.5% 28,900 AT&T Capital Corp. (CIC), 8.125% 736,372 3,000 AT&T Capital Corp. (CIP), 8.250% 77,070 6,500 CIT Capital Trust I, 7.750% (CORTS) 167,050 144,500 Financial Security Assurance Holdings Ltd., 6.250% 3,684,750 79,100 Household Capital Trust I, Series T, 8.250% 1,993,320 61,600 Household Capital Trust V, Series X, 10.000% 1,707,552 100,000 Household Capital Trust VII, Series V, 7.500% 2,528,000 115,000 Household Finance Corp., 6.875% 2,900,162 37,200 Household International Inc., Series G, 7.600% (a) 935,580 29 Nuveen Quality Preferred Income Fund 3 (JHP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - FOREIGN - 3.5% 31,900 Credit Suisse First Boston Trust, 7.000% (SATURNS) $ 801,807 33,900 ING Group NV (IND), 7.050% 864,450 377,900 ING Group NV (INZ), 7.200% 9,708,251 - ------------------------------------------------------------------------------------------------------------------------------------ FOOD - FOREIGN - 0.1% 16,700 Grand Met De Ltd. Partnership, 9.420% 459,250 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 0.3% 25,000 AGL Capital Trust II, 8.000% 665,250 12,600 MCN Financing II Trust, 8.625% 324,450 1,700 South Jersey Gas Capital Trust I, 8.350% 43,180 - ------------------------------------------------------------------------------------------------------------------------------------ GAS - FOREIGN - 0.0% 5,000 TransCanada Pipelines Ltd., 8.250% 128,300 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL - 0.3% 39,630 Textron Capital I, 7.920% 997,884 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 0.7% 2,500 American General Capital I, 7.875% 67,400 15,000 Lincoln National Capital III, Series C, 7.400% 378,300 28,700 Lincoln National Capital V, Series E, 7.650% 751,653 39,000 Protective Life Company Capital Trust III, 7.500% 1,002,300 4,800 Protective Life Company Capital Trust IV, 7.250% 124,320 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 0.7% 28,100 Hartford Capital I, Series A, 7.700% 710,930 24,200 Hartford Capital III, Series C, 7.450% 614,922 26,400 SAFECO, 8.250% (SATURNS) 643,632 4,600 SAFECO, Series 2001-4, 8.750% (CORTS) 120,405 10,000 SAFECO Capital Trust I, 8.700% (CORTS) 260,000 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 0.2% 20,700 Travelers/Aetna P&C Capital I, 8.080% 522,675 3,000 Travelers/Aetna P&C Capital II, 8.000% 75,510 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 6.7% 3,900 Ace Ltd. Capital Trust I, 8.875% 105,066 277,000 Converium Finance SA, 8.250% 7,121,670 244,631 Everest RE Capital Trust, 7.850% 6,267,446 17,300 PartnerRe Ltd. Capital Trust I, 7.900% 451,530 RenaissanceRe Holdings Ltd.: 12,300 Series A, 8.100% 322,752 40,000 Series B, 7.300% 1,000,230 XL Capital Ltd.: 40,700 Series A, 8.000% 1,088,725 197,900 Series B, 7.625% 5,145,400 - ------------------------------------------------------------------------------------------------------------------------------------ METALS - FOREIGN - 0.1% 17,400 Placer Dome Inc., Series A, 8.625% 440,220 30 MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ PAPER - 0.2% 27,200 International Paper Capital Trust III, 7.875% $ 685,984 - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS - FOREIGN - 0.0% 4,500 Rhone-Poulenc Overseas, Series A, 8.125% 114,795 - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS - 6.6% 3,000 AMB Property Corp., Series A, 8.500% 76,560 1,100 Avalonbay Communities Inc., Series D, 8.000% 27,830 9,000 Duke Realty Investments Corp., Series E, 8.250% 232,200 Equity Office Properties Trust: 22,530 Series C, 8.000% 582,851 5,800 Series E, 4.000% 145,116 8,200 Series G, 7.748% 212,462 Equity Residential Properties: 22,900 Series B, 9.125% 622,422 18,500 Series C, 9.125% 508,750 15,000 Series D, 8.600% 403,800 75,900 Series L, 7.625% 1,900,916 First Industrial Realty Trust Inc.: 2,300 Series C, 8.625% 61,778 92,900 Series D, 7.950% 2,299,275 29,300 Series E, 7.900% 727,812 HRPT Properties Trust: 18,000 Series A, 9.875% 474,840 135,095 Series B, 8.750% 3,458,432 21,000 New Plan Excel Realty Trust Inc., Series D, 7.800% 1,056,563 10,000 Prologis Trust, Series D, 7.920% 252,700 Public Storage Inc.: 5,000 Series Q, 8.600% 134,900 11,500 Series R, 8.000% 305,670 10,000 Series S, 7.875% 261,400 6,400 Shurgard Storage Centers Inc., Series D, 8.750% 169,600 Simon Property Group Inc.: 1,400 Series F, 8.750% 36,988 68,600 Series G, 7.890% 3,464,986 Vornado Realty Trust: 3,000 Series B, 8.500% 77,100 13,100 Series C, 8.500% 334,836 132,700 Wachovia Bank Preferred Funding Corp., Series A, 7.250% 3,430,295 - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 0.9% 760 Centaur Funding Corp., Series 144A, 9.080% 779,475 32,100 Telephone & Data Systems Capital I, 8.500% 804,747 4,600 Telephone & Data Systems Capital II, 8.040% 113,712 15,000 Telephone & Data Systems Inc., Series A, 7.600% 382,050 19,900 US Cellular Corp., 8.750% 517,798 7,300 Verizon New England Inc., 7.000% 189,727 31 Nuveen Quality Preferred Income Fund 3 (JHP) (continued) Portfolio of INVESTMENTS January 31, 2003 (Unaudited) MARKET SHARES DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 4.5% 2,900 Detroit Edison, 7.625% $ 73,051 181,110 Duke Capital Financing Trust III, 8.375% 4,681,694 48,600 Entergy LA Inc., 7.600% 1,287,900 203,447 Entergy Mississippi Inc., 7.250% 5,289,621 128,900 PSE&G Funding Trust II, 8.720% 3,328,197 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - FOREIGN - 0.2% 22,600 Yorkshire Capital Trust I, 8.080% 569,970 - ------------------------------------------------------------------------------------------------------------------------------------ Total $25 Par Preferred Securities (cost $141,190,630) 142,583,748 -------------------------------------------------------------------------------------------------------------------- CONVERTIBLE PREFERRED SECURITIES - 4.9% (4.8% OF TOTAL INVESTMENTS) GAS - 0.6% 39,000 Keyspan Corp., 8.750% 1,970,670 - ------------------------------------------------------------------------------------------------------------------------------------ TELECOM - 0.8% 35,000 ALLTEL Corp., 7.750% 1,676,500 50,000 Citizens Communications Co., 6.750% 1,040,000 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 3.5% 70,000 Ameren Corp., 9.750% 1,848,000 71,000 American Electric Power Inc., 9.250% 2,560,260 80,000 Dominion Resources Inc., 8.750% 3,872,000 55,000 Public Service Enterprise Group, 10.250% 2,961,750 - ------------------------------------------------------------------------------------------------------------------------------------ Total Convertible Preferred Securities (cost $16,601,900) 15,929,180 -------------------------------------------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL PREFERRED SECURITIES - 46.6% (45.9% OF TOTAL INVESTMENTS) BANKING - 14.6% $ 5,000 Ahmanson Capital Trust I, Series A, 8.360%, 12/01/26 5,461,400 7,485 First Union Capital II, Series A, 7.950%, 11/15/29 8,994,103 9,000 JPMorgan Capital Trust I, 7.540%, 1/15/27 9,430,920 4,000 North Fork Capital Trust I, 8.700%, 12/15/26 4,377,280 10,000 PNC Institutional Capital Trust B, 8.315%, 5/15/27 11,120,140 4,600 Union Planters Capital Trust A, 8.200%, 12/15/26 4,970,719 3,000 Zions Institutional Capital Trust A, Series A, 8.536%, 12/15/26 3,230,145 - ------------------------------------------------------------------------------------------------------------------------------------ BANKING - FOREIGN - 6.2% 8,000 Abbey National Capital Trust I, 8.963%, 6/30/30 9,971,424 10,000 Barclays Bank plc, 6.860%, 6/15/32 10,177,420 - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY - 1.5% 4,500 Phillips 66 Capital II, 8.000%, 1/15/37 4,851,374 - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL - 1.0% 1,000 Countrywide Capital I, 8.000%, 12/15/26 1,070,136 2,047 St. George Funding Co. LLC, 8.485%, 6/30/07 2,125,288 32 PRINCIPAL MARKET AMOUNT (000) DESCRIPTION(1) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ GAS - 1.9% $ 6,000 KN Capital Trust III, 7.630%, 4/15/28 $ 6,073,098 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - LIFE - 3.2% 10,000 MIC Financing Trust I, 8.375%, 2/01/27 10,430,040 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - MULTILINE - 2.9% 10,000 Zurich Capital Trust, 8.376%, 6/01/37 9,418,550 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - FOREIGN - 3.6% 7,000 Ace Capital Trust II, 9.700%, 4/01/30 8,471,876 3,000 RenaissanceRe Capital Trust, Series B, 8.540%, 3/01/27 3,099,672 - ------------------------------------------------------------------------------------------------------------------------------------ SAVINGS AND LOAN - THRIFT - 0.8% 2,225 Dime Capital Trust I, Series A, 9.330%, 5/06/27 2,656,488 - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 10.1% 15,000 Freddie Mac Subordinated Debt, 5.875%, 3/21/11 16,317,255 15,000 Fannie Mae Subordinated Debt, 6.250%, 2/01/11 16,655,340 - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES - 0.8% 2,500 Georgia Power Capital Trust VI, 4.875%, 11/01/42 2,478,877 - ------------------------------------------------------------------------------------------------------------------------------------ Total Capital Preferred Securities (cost $151,285,916) 151,381,545 -------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS - 2.8% (2.8% OF TOTAL INVESTMENTS) FINANCIAL - 2.3% $ 7,500 General Motors Acceptance Corp., 8.000%, 11/01/31 7,419,495 - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE - P&C - 0.5% 2,000 Zurich Reinsurance Center Holdings Inc., 7.125%, 10/15/23 1,679,700 - ------------------------------------------------------------------------------------------------------------------------------------ Total Corporate Bonds (cost $9,221,951) 9,099,195 -------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 3.2% (3.2% OF TOTAL INVESTMENTS) $ 10,459 State Street Bank Repurchase Agreement, 1.220%, date 1/31/03, due 2/03/03, ============ repurchase price $10,460,063, collateralized by U.S. Treasury Bonds 10,459,000 -------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $10,459,000) 10,459,000 -------------------------------------------------------------------------------------------------------------------- Total Investments (cost $328,759,397) - 101.4% 329,452,668 -------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (1.4)% (4,459,543) -------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $324,993,125 ==================================================================================================================== (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. (CORTS) Corporate Backed Trust Securities. (SATURNS) Structured Asset Trust Unit Repackagings. See accompanying notes to financial statements.
33 Statement of ASSETS AND LIABILITIES January 31, 2003 (Unaudited)
QUALITY QUALITY QUALITY PREFERRED PREFERRED PREFERRED INCOME INCOME 2 INCOME 3 (JTP) (JPS) (JHP) - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments, at market value (cost $1,333,319,826, $2,460,855,965 and $328,759,397, respectively) $1,340,992,916 $2,533,191,316 $329,452,668 Cash 710 969 318 Receivables: Dividend 2,607,393 4,931,376 471,606 Interest 8,831,840 19,498,067 2,804,622 Investments sold 293,115 12,481,072 20,531,023 Other assets 18,687 30,943 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 1,352,744,661 2,570,133,743 353,260,237 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased 3,524,802 5,046,562 27,367,246 Interest rate swaps, at value 9,820,954 4,942,573 -- Accrued expenses: Management fees 629,776 1,141,170 152,502 Organization and offering costs -- 814,968 687,163 Other 133,691 668,721 60,201 FundPreferred share dividends payable 45,659 79,016 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 14,154,882 12,693,010 28,267,112 - ------------------------------------------------------------------------------------------------------------------------------------ FundPreferred shares, at liquidation value 440,000,000 800,000,000 -- - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $ 898,589,779 $1,757,440,733 $324,993,125 ==================================================================================================================================== Common shares outstanding 64,283,289 119,449,371 22,587,000 ==================================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 13.98 $ 14.71 $ 14.39 ==================================================================================================================================== NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF: - ------------------------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 642,833 $ 1,194,494 $ 225,870 Paid-in surplus 909,546,005 1,691,296,465 322,655,505 Undistributed net investment income 2,789,671 28,353 1,252,209 Accumulated net realized gain (loss) from investments (12,307,931) (3,305,523) 166,270 Net unrealized appreciation (depreciation) of investments and interest rate swap transactions (2,080,799) 68,226,944 693,271 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $ 898,589,779 $1,757,440,733 $324,993,125 ==================================================================================================================================== Authorized shares: Common Unlimited Unlimited Unlimited FundPreferred shares Unlimited Unlimited Unlimited ====================================================================================================================================
See accompanying notes to financial statements. 34 Statement of OPERATIONS (Unaudited)
QUALITY PREFERRED QUALITY PREFERRED QUALITY PREFERRED INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP) ----------------- ----------------- ---------------- FOR THE PERIOD FOR THE PERIOD 9/24/02 12/19/02 (COMMENCEMENT (COMMENCEMENT SIX MONTHS ENDED OF OPERATIONS) OF OPERATIONS) 1/31/03 THROUGH 1/31/03 THROUGH 1/31/03 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends $ 29,894,023 $ 23,444,474 $ 722,639 Interest 19,675,618 25,518,904 800,707 - ------------------------------------------------------------------------------------------------------------------------------------ Total investment income 49,569,641 48,963,378 1,523,346 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES Management fees 5,594,853 6,915,053 326,806 Net interest expense on interest rate swap transactions 3,055,227 2,645,083 -- FundPreferred shares - auction fees 491,233 542,466 -- FundPreferred shares - dividend disbursing agent fees 12,281 12,049 -- Shareholders' servicing agent fees and expenses 8,985 12,210 1,272 Custodian's fees and expenses 128,839 175,361 9,791 Trustees' fees and expenses 36,500 40,197 1,767 Professional fees 44,649 42,664 10,314 Shareholders' reports - printing and mailing expenses 75,445 94,365 37,860 Investor relations expense 88,435 56,869 -- Other expenses 1,314 916 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 9,537,761 10,537,233 387,810 Custodian free credit (9,561) (30,029) (475) Expense reimbursement (2,035,709) (2,591,749) (116,198) - ------------------------------------------------------------------------------------------------------------------------------------ Net expenses 7,492,491 7,915,455 271,137 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income 42,077,150 41,047,923 1,252,209 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS Net realized gain (loss) from investments (12,414,079) (3,305,523) 166,270 Change in net unrealized appreciation (depreciation) of investments 22,978,311 72,335,351 693,271 Change in net unrealized appreciation (depreciation) of interest rate swap transactions (9,753,889) (4,108,407) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net gain from investments 810,343 64,921,421 859,541 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS From net investment income (3,287,614) (3,399,928) -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to FundPreferred shareholders (3,287,614) (3,399,928) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from operations $ 39,599,879 $102,569,416 $ 2,111,750 ==================================================================================================================================== See accompanying notes to financial statements.
35 Statement of CHANGES IN NET ASSETS (Unaudited)
QUALITY QUALITY QUALITY PREFERRED PREFERRED PREFERRED INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP) ----------------------------- ---------------- --------------- FOR THE FOR THE FOR THE PERIOD PERIOD PERIOD 6/25/02 9/24/02 12/19/02 (COMMENCEMENT (COMMENCEMENT (COMMENCEMENT SIX MONTHS OF OF OF MONTHS ENDED OPERATIONS) OPERATIONS) OPERATIONS) 1/31/03 THROUGH 7/31/02 THROUGH 1/31/03 THROUGH 1/31/03 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net investment income $ 42,077,150 $ 3,965,994 $ 41,047,923 $ 1,252,209 Net realized gain (loss) from investments (12,414,079) 106,148 (3,305,523) 166,270 Change in net unrealized appreciation (depreciation) of investments 22,978,311 (15,343,685) 72,335,351 693,271 Change in net unrealized appreciation (depreciation) of interest rate swap transactions (9,753,889) -- (4,108,407) -- Distributions to FundPreferred shareholders from net investment income (3,287,614) -- (3,399,928) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from operations 39,599,879 (11,271,543) 102,569,416 2,111,750 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO COMMON SHAREHOLDERS From net investment income (39,965,859) -- (37,619,642) -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to Common shareholders (39,965,859) -- (37,619,642) -- - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Common shares: Net proceeds from sale of shares -- 891,176,926 1,708,561,743 322,781,100 Net proceeds from shares issued to shareholders due to reinvestment of distributions 28,188,101 -- 609,441 -- FundPreferred shares offering costs (9,238,000) -- (16,780,500) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares from capital share transactions 18,950,101 891,176,926 1,692,390,684 322,781,100 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets applicable to Common shares 18,584,121 879,905,383 1,757,340,458 324,892,850 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 $898,589,779 $880,005,658 $1,757,440,733 $324,993,125 ==================================================================================================================================== Undistributed net investment income at the end of period $ 2,789,671 $ 3,965,994 $ 28,353 $ 1,252,209 ==================================================================================================================================== See accompanying notes to financial statements.
36 Notes to FINANCIAL STATEMENTS (Unaudited) 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). 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 Funds are registered under the Investment Company Act of 1940 as non-diversified, closed-end management investment companies. 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 Common stocks and other equity-type securities are valued at the last sales price on the securities exchange or Nasdaq on which such securities are primarily traded. Securities traded on a securities exchange or Nasdaq for which there are no transactions on a given day or securities not listed on a securities exchange or Nasdaq are valued at the mean of the closing bid and asked prices. The prices of fixed-income securities are provided by a pricing service 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 or sold 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 in a separate account with a current value at least equal to the amount of the when-issued and/or delayed delivery purchase commitments. At January 31, 2003, there were no outstanding delayed delivery or when-issued 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. 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. Accordingly, temporary over-distributions as a result of these differences may occur and will be classified as either distributions in excess of net investment income and/or distributions in excess of net realized gains from investment transactions, where applicable. 37 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 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 PREFERRED PREFERRED INCOME INCOME 2 (JTP) (JPS) - -------------------------------------------------------------------------- Number of shares: Series M 3,520 4,800 Series T 3,520 4,800 Series T2 -- 4,000 Series W 3,520 4,800 Series TH 3,520 4,800 Series TH2 -- 4,000 Series F 3,520 4,800 - -------------------------------------------------------------------------- Total 17,600 32,000 ========================================================================== 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. 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 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 in a separate account 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 firms the Adviser believes has the financial resources to honor its obligations, by having the Adviser continually monitor the financial stability of that swap counter-party. At January 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% 1.34125% 8/29/05 $(2,352,202) 110,000,000 3.8600 1.34125 8/29/07 (3,277,660) 110,000,000 4.3500 1.34125 8/29/09 (4,124,027) - -------------------------------------------------------------------------------------------------- $(9,753,889) ================================================================================================== *Based on LIBOR (London Interbank Offered Rate)
38 At January 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% 1.38000% 11/6/05 $(1,265,103) 200,000,000 3.3750 1.38000 11/6/07 (1,170,043) 200,000,000 3.9100 1.38000 11/6/09 (1,673,261) - -------------------------------------------------------------------------------------------------- $(4,108,407) ================================================================================================== *Based on LIBOR (London Interbank Offered Rate)
For the period December 19, 2002 (commencement of operations) through January 31, 2003, Quality Preferred Income 3 (JHP) had no interest rate swap transactions. 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. 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 period ended January 31, 2003. Offering Costs Nuveen Investments, LLC has agreed to pay all 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 offering costs ($1,389,181, $1,843,257 and $677,400, respectively) were recorded as a reduction of the proceeds from the sale of Common shares. Costs incurred by Quality Preferred Income (JTP) and Quality Preferred Income 2 (JPS) in connection with their offering of FundPreferred shares ($9,238,000 and $16,780,500, 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. 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 SIX MONTHS OF OPERATIONS) OF OPERATIONS) OF OPERATIONS) ENDED 1/31/03 THROUGH 7/31/02 THROUGH 1/31/03 THROUGH 1/31/03 - ---------------------------------------------------------------------------------------------------------------- Common shares: Shares sold -- 62,300,000 119,400,000 22,580,000 Shares issued to shareholders due to reinvestment of distributions 1,976,289 -- 42,371 -- - ---------------------------------------------------------------------------------------------------------------- 1,976,289 62,300,000 119,442,371 22,580,000 ================================================================================================================ FundPreferred shares sold 17,600 -- 32,000 -- ================================================================================================================
39 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 3. SECURITIES TRANSACTIONS, U.S. GOVERNMENT AND AGENCY OBLIGATIONS Purchases and sales (including maturities) of investment securities, U.S. Government and agency obligations and short-term investments during the six months ended January 31, 2003, were as follows:
QUALITY QUALITY QUALITY PREFERRED PREFERRED PREFERRED INCOME INCOME 2 INCOME 3 (JTP) (JPS)* (JHP)** - ------------------------------------------------------------------------------------------------------------ Purchases: Investment securities $ 771,570,197 $ 2,392,368,827 $ 285,754,204 U.S. Government and agency obligations -- 346,314,809 107,993,191 Short-term investments 4,949,489,000 38,307,049,000 2,870,503,000 Sales and maturities: Investment securities 135,027,415 61,158,016 356,179 U.S. Government and agency obligations 148,437,973 215,243,456 75,219,336 Short-term investments 5,004,615,000 38,304,626,000 2,860,044,000 ============================================================================================================= * For the period September 24, 2002 (commencement of operations) through 1/31/03. ** For the period December 19, 2002 (commencement of operations) through 1/31/03.
4. INCOME TAX INFORMATION The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to recognition of premium amortization and timing differences in recognizing certain gains and losses on security transactions. At January 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 $1,333,464,939 $2,461,290,970 $328,793,561 ====================================================================== 40 Gross unrealized appreciation and gross unrealized depreciation of investments at January 31, 2003, were as follows: QUALITY QUALITY QUALITY PREFERRED PREFERRED PREFERRED INCOME INCOME 2 INCOME 3 (JTP) (JPS) (JHP) - --------------------------------------------------------------------------- Gross unrealized: Appreciation $ 38,965,956 $ 82,973,808 $ 2,307,708 Depreciation (31,437,979) (11,073,462) (1,648,601) - --------------------------------------------------------------------------- Net unrealized appreciation on investments $ 7,527,977 $ 71,900,346 $ 659,107 =========================================================================== The tax components of undistributed ordinary income and net realized gains for Quality Preferred Income (JTP) at July 31, 2002, the Fund's last fiscal year end, were as follows: - --------------------------------------------------------------------------- Undistributed ordinary income * $4,126,165 Undistributed net long-term capital gains -- =========================================================================== *Ordinary income consists of taxable income derived from dividends, interest and net short-term capital gains, if any. Quality Preferred Income (JTP) made no distributions from ordinary income or long-term capital gains during the period June 25, 2002 (commencement of operations) through July 31, 2002, the Fund's last fiscal year end. 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 =========================================================================== 41 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) 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. 42 The Adviser has not agreed to reimburse Quality Preferred Income 2 (JPS) for any portion of its fees and expenses beyond September 30, 2010. For the first eight years of Quality Preferred Income 3's (JHP) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily Managed Assets, for fees and expenses in the amounts, and for the time periods set forth below: YEAR ENDING YEAR ENDING DECEMBER 31, DECEMBER 31, - ------------------------------------------------------------------------------- 2002* .32% 2007 .32% 2003 .32 2008 .24 2004 .32 2009 .16 2005 .32 2010 .08 2006 .32 =============================================================================== * From the commencement of operations. The Adviser has not agreed to reimburse Quality Preferred Income 3 (JHP) for any portion of its fees and expenses beyond December 31, 2010. 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 from the management fee paid to the Adviser. 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. 6. SUBSEQUENT EVENTS Common Share Issuance Effective February 5, 2003, Quality Preferred Income 3 (JHP) issued an additional 1,000,000 Common shares in connection with the exercise by the underwriters of the over-allotment option. The Fund's share of offering costs ($30,000) were recorded as a reduction of the proceeds from the sale of Common shares. FundPreferred Share Issuance On February 14, 2003, Quality Preferred Income 3 (JHP) issued 3,320 Series M and 3,320 Series TH, $25,000 stated value FundPreferred shares. Costs incurred by the Fund in connection with its offering of FundPreferred shares ($3,569,000) were recorded as a reduction to paid-in surplus. 43 Notes to FINANCIAL STATEMENTS (Unaudited) (continued) Interest Rate Swap Transactions On February 14, 2003, Quality Preferred Income 3 (JHP) entered into three interest rate swap agreements with Citibank NA as follows: NOTIONAL TERMINATION AMOUNT FIXED RATE FLOATING RATE* DATE - ----------------------------------------------------------------- $42,000,000 2.4125% 1.34000% 2/06/06 42,000,000 3.2550 1.34000 2/06/08 42,000,000 3.8150 1.34000 2/06/10 ================================================================= *Based on LIBOR (London Interbank Offered Rate) Distributions to Common Shareholders The following Funds declared Common share dividend distributions from their net investment income which were paid on March 3, 2003, to shareholders of record on February 15, 2003: QUALITY QUALITY PREFERRED PREFERRED INCOME INCOME 2 (JTP) (JPS) - ------------------------------------------------------------------ Dividend per share $.1050 $.1050 ================================================================== Quality Preferred Income 3 (JHP) declared a Common share dividend distribution from its net investment income of $.1030 per share which was paid on March 3, 2003, to shareholders of record on February 18, 2003. 44 Financial HIGHLIGHTS (Unaudited) 45 Financial HIGHLIGHTS (Unaudited) 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(b) $14.12 $.65 $ .02 $(.05) $ -- $ .62 $(.62) $-- $(.62) 2002(a) 14.33 .06 (.25) -- -- (.19) -- -- -- QUALITY PREFERRED INCOME 2 (JPS) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2003(c) 14.33 .34 .55 (.03) -- .86 (.32) -- (.32) QUALITY PREFERRED INCOME 3 (JHP) - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended 7/31: 2003(d) 14.33 .06 .03 -- -- .09 -- -- -- ==================================================================================================================================== 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(b) $(.14) $13.98 $15.42 6.24% 3.61% 2002(a) (.02) 14.12 15.15 1.00 (1.47) QUALITY PREFERRED INCOME 2 (JPS) - ------------------------------------------------------------------------------- Year Ended 7/31: 2003(c) (.16) 14.71 15.15 3.20 4.91 QUALITY PREFERRED INCOME 3 (JHP) - ------------------------------------------------------------------------------- Year Ended 7/31: 2003(d) (.03) 14.39 15.05 .33 .42 =============================================================================== 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(b) $ 898,590 2.17%* 9.10%* 1.70%* 9.57%* 23% 2002(a) 880,006 .96* 4.51* .64* 4.83* 1 QUALITY PREFERRED INCOME 2 (JPS) - ----------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2003(c) 1,757,441 1.78* 6.47* 1.33* 6.91* 15 QUALITY PREFERRED INCOME 3 (JHP) - ----------------------------------------------------------------------------------------------------------------- Year Ended 7/31: 2003(d) 324,993 1.07* 3.12* .75* 3.44* 36 ================================================================================================================= 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(b) $440,000 $25,000 $76,056 2002(a) -- -- -- QUALITY PREFERRED INCOME 2 (JPS) - --------------------------------------------------------------- Year Ended 7/31: 2003(c) 800,000 25,000 79,920 QUALITY PREFERRED INCOME 3 (JHP) - --------------------------------------------------------------- Year Ended 7/31: 2003(d) -- -- -- =============================================================== * 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 Interest Expense to Average Net Assets Applicable to Common Shares ------------- QUALITY PREFERRED INCOME (JTP) 2003 (b) .69% 2002 (a) -- QUALITY PREFERRED INCOME 2 (JPS) 2003 (c) .45 QUALITY PREFERRED INCOME 3 (JHP) 2003 (d) -- (a) For the period June 25, 2002 (commencement of operations) through July 31, 2002. (b) For the six months ended January 31, 2003. (c) For the period September 24, 2002 (commencement of operations) through January 31, 2003. (d) For the period December 19, 2002 (commencement of operations) through January 31, 2003. See accompanying notes to financial statements. 46-47 SPREAD
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. 48 Fund INFORMATION BOARD OF TRUSTEES James E. Bacon 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 Chicago, IL INDEPENDENT AUDITORS Ernst & Young LLP Chicago, IL - --------- 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 period ended January 31, 2003. Any future repurchases will be reported to shareholders in the next annual or semiannual report. 49 Serving Investors FOR GENERATIONS PHOTO OF: John Nuveen, Sr. John Nuveen, Sr. For over a century, generations of Americans have relied on Nuveen Investments to help them grow and keep the money they've earned. Financial advisors, investors and their families have associated Nuveen Investments with quality, expertise and dependability since 1898. That is why financial advisors have entrusted the assets of more than 1.3 million investors to Nuveen. With the know-how that comes from a century of experience, Nuveen continues to build upon its reputation for quality. Now, financial advisors and investors can count on Nuveen Investments to help them design customized solutions that meet the far-reaching financial goals unique to family wealth strategies - solutions that can translate into legacies. To find out more about how Nuveen Investments' products and services can help you preserve your financial security, talk with your financial advisor, or call us at (800) 257-8787 for more information, including a prospectus where applicable. Please read that information carefully before you invest. Logo: NUVEEN Investments Distributed by NUVEEN INVESTMENTS, LLC 333 West Wacker Drive o Chicago o Illinois 60606 WWW.NUVEEN.COM ESA-D-0103-D -----END PRIVACY-ENHANCED MESSAGE-----