UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21137
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Nuveen Quality Preferred Income Fund 2
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(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
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(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
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Date of fiscal year end: July 31
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Date of reporting period: January 31
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Nuveen Investments
Closed-End
Exchange-Traded
Funds
SEMIANNUAL REPORT January 31, 2004
NUVEEN QUALITY PREFERRED INCOME FUND
JTP
NUVEEN QUALITY PREFERRED INCOME FUND 2
JPS
NUVEEN QUALITY PREFERRED INCOME FUND 3
JHP
Photo of: Man holding up small boy.
Photo of: 2 women with 2 girls looking at seashells.
HIGH CURRENT INCOME
FROM A PORTFOLIO OF
INVESTMENT-GRADE
PREFERRED SECURITIES
Logo: NUVEEN Investments
FASTER INFORMATION
RECEIVE YOUR
NUVEEN FUND REPORT
ELECTRONICALLY
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Registering is easy and only takes a few minutes (see instructions at right).
--------------------------------------------------------------------------------
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WHAT IF I CHANGE MY MIND AND WANT TO RECEIVE INVESTOR MATERIALS THROUGH REGULAR
MAIL DELIVERY AGAIN?
If you decide you do not like receiving your reports electronically, it's a
simple process to go back to regular mail delivery.
--------------------------------------------------------------------------------
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME FROM YOUR FINANCIAL ADVISOR OR BROKERAGE ACCOUNT,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.INVESTORDELIVERY.COM and follow the simple instructions, using
the address sheet that accompanied this report as a guide.
2 You'll be taken to a page with several options. Select the NEW
ENROLLMENT-CREATE screen and follow the simple instructions.
3 Click Submit. Confirm the information you just entered is correct, then
click Submit again.
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.
IF YOUR NUVEEN FUND DIVIDENDS AND STATEMENTS
COME DIRECTLY TO YOU FROM NUVEEN,
FOLLOW THE STEPS OUTLINED BELOW:
1 Go to WWW.NUVEEN.COM
2 Select ACCESS YOUR ACCOUNT. Select the E-REPORT ENROLLMENT section. Click
on Enrollment Today.
3 You'll be taken to a screen that asks for your Social Security number and
e-mail address. Fill in this information, then click Enroll.
4 You should get a confirmation e-mail within 24 hours. If you do not, go
back through these steps to make sure all the information is correct.
5 Use this same process if you need to change your registration information
or cancel internet viewing.
Logo: NUVEEN Investments
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: We remain convinced that maintaining a well-balanced portfolio is
an important way to help you reduce overall investment risk.
Dear SHAREHOLDER
I am pleased to report that over the period ended January 31, 2004, the three
Nuveen Quality Preferred Income Funds continued to provide you with attractive
monthly income, strong total return, and the opportunity for enhanced
diversification within your investment portfolio. For more specific information
about the performance of the Funds, please see the Portfolio Managers'
Perspective and Performance Overview sections of this report.
In the current environment, we remain convinced that a well-balanced portfolio,
structured and monitored with the help of an investment professional, can be an
important tool in helping to reduce overall investment risk and position
yourself to achieve your long-term financial goals. In this context, the
preferred securities in your Nuveen Fund can represent an important element of
diversification within an overall portfolio crafted to perform well through a
variety of market conditions.
As in past letters, I'd also like to direct your attention to the inside front
cover of this report, which explains the quick and easy process to begin
receiving Fund reports like this via e-mail and the internet. Thousands of
Nuveen Fund shareholders already have signed-up, and they are getting their Fund
information faster and more conveniently than ever. I urge you to consider
joining them.
Since 1898, Nuveen Investments has offered financial products and solutions that
incorporate careful research, diversification, and the application of
conservative risk-management principles. We are grateful that you have chosen us
as a partner as you pursue your financial goals. We look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
March 15, 2004
1
Nuveen Closed-End Exchange-traded funds (JTP, JPS, JHP)
Managers' Perspective
The 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 the Funds
for the period ended January 31, 2004.
WHAT WAS THE GENERAL MARKET ENVIRONMENT FOR PREFERRED SECURITIES FOR THE PERIOD
ENDED JANUARY 31, 2004?
For most of this period, market conditions were favorable and, as a result,
preferred securities were among the best performers within the fixed-income
sector for the 12 months ended January 31, 2004. Both individual and
institutional investors were aggressive buyers of preferred securities during
this period because, in our opinion, of the attractive yields that preferred
securities offered relative to alternative investments. The credit quality
environment, especially among the financial industry-oriented issuers, was
positive, reflecting improvement in the general economy and in the equity
markets. New issuance of preferred securities was robust over the period, with a
total of $42.1 billion coming to market during 2003. As of December 31, 2003,
the size of the hybrid preferred securities market, in which the Funds primarily
invest, was approximately $219 billion.
IN THIS ENVIRONMENT, HOW DID THE FUNDS PERFORM?
Each of the Funds performed well during the 12 months ended January 31, 2004.
Their performances, as well as the performance of several widely-followed market
indexes, are shown in the nearby chart.
TOTAL RETURN ON NET ASSET VALUE
12 MONTHS ENDED JANUARY 31, 2004
--------------------------------------------------
JTP 18.56%
JPS 19.77%
JHP 18.14%
Lehman Aggregate Bond Index1 4.85%
Merrill Lynch Preferred Stock
Hybrid Securities Index2 9.39%
--------------------------------------------------
For this performance period, each Fund provided a better total return than the
unleveraged, unmanaged Lehman Aggregate Bond Index and the unleveraged,
unmanaged Merrill Lynch Preferred Stock Hybrid Securities Index.
The Funds' strong performances were a function of several factors. First, as
already noted, the hybrid preferred securities market - which represents the
type of securities in which the Funds primarily invest - performed well over the
period. Second, the Funds benefited from their use of leverage. Leveraging can
add volatility to a Fund's net asset value and share price. However, this
strategy also can provide opportunities for net asset value appreciation and
enhanced income for common shareholders. Third, the Funds maintained a
relatively heavy weighting in financial industry issues when compared with the
indexes. Financial issues tended to outperform many other sectors
1 The Lehman Brothers Aggregate Bond Index is an unmanaged index that includes
all investment-grade, publicly issued, fixed-rate, dollar-denominated,
nonconvertible debt issues and commercial mortgage backed securities with
maturities of at least one year and outstanding par values of $150 million or
more.
2 The Merrill Lynch Preferred Stock Hybrid Securities Index, an unmanaged index
of investment-grade, exchange-traded preferred stocks with outstanding market
values of at least $30 million and at least one year to maturity.
2
over this measurement period. In addition, the Funds also benefited in varying
degrees from their holdings of mandatory convertible securities and from several
specific trades that took advantage of market inefficiencies.
All three Funds continued to provide attractive monthly income through the
period. Each Fund seeks to pay dividends at a rate that reflects the past and
projected performance of the Fund. To permit a Fund to maintain a more stable
monthly dividend, the Fund may pay dividends at a rate that may be more or less
than the amount of net investment income actually earned by the Fund during the
period. If the Fund has cumulatively earned more than it has paid in dividends,
it will hold the excess in reserve as undistributed net investment income (UNII)
as part of the Fund's net asset value. Conversely, if the Fund has cumulatively
paid in dividends more than it has earned, the excess will constitute negative
UNII which will likewise be reflected in the Fund's net asset value. Each Fund
will, over time, pay all its net investment income as dividends to shareholders.
As of January 31, 2004, all three Funds had negative UNII.
As of January 31, 2004, JTP was trading at a premium to its net asset value,
while JPS and JHP were trading at discounts. For additional performance
information, please see the individual Performance Overview pages for your Fund
in this report.
WHAT KEY STRATEGIES AND TACTICS WERE USED TO MANAGE THE FUNDS DURING THE PERIOD
ENDED JANUARY 31, 2004?
For each of these Funds, our strategic goal was to maximize the income generated
from a well-diversified, high quality portfolio of preferred securities. In
addition, we tried to enhance the total return of each Fund by looking to
exploit price inefficiencies between preferred securities valuations and more
senior corporate debt, as well as between $25 par, listed preferred securities
and $1,000 par, unlisted preferred securities of the same issuer.
We also sought to lessen the potential effects of higher future interest rates
on the values of the Funds' holdings by focusing on higher coupon, "cushioned"
issues that trade at a premium to par and are priced on a yield-to-call basis.
We believed that these securities, generally available in the secondary market,
represented better value in many cases than some of the current coupon, new
issues that came to market during the period.
3
NUVEEN QUALITY PREFERRED INCOME FUND
Performance
OVERVIEW As of January 31, 2004
JTP
Portfolio Statistics
==================================================
Share Price $15.87
--------------------------------------------------
Common Share Net Asset Value $15.21
--------------------------------------------------
Premium/(Discount) to NAV 4.34%
--------------------------------------------------
Latest Dividend $.1050
--------------------------------------------------
Market Yield 7.94%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $979,873
--------------------------------------------------
% of Total
Top Five Industries Investments
==================================================
Banking 22%
--------------------------------------------------
Real Estate Investment Trusts 14%
--------------------------------------------------
Banking - Foreign 13%
--------------------------------------------------
Utilities 6%
--------------------------------------------------
Insurance - P&C- Foreign 6%
--------------------------------------------------
% of Total
Top Five Issuers Investments
==================================================
Wachovia Corporation 3.4%
--------------------------------------------------
ING Groep NV 3.2%
--------------------------------------------------
Abbey National Public Limited Company 3.0%
--------------------------------------------------
Zurich Financial Services 2.8%
--------------------------------------------------
HSBC National Public Limited Company 2.7%
--------------------------------------------------
Average Annual Total Return
(Inception 6/25/02)
==================================================
on Share Price on NAV
--------------------------------------------------
1-Year 12.05% 18.56%
--------------------------------------------------
Since Inception 12.19% 12.63%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY DIVIDENDS PER SHARE
Feb 0.105
Mar 0.105
Apr 0.105
May 0.105
Jun 0.105
Jul 0.105
Aug 0.105
Sep 0.105
Oct 0.105
Nov 0.105
Dec 0.105
Jan 0.105
Line Chart:
SHARE PRICE PERFORMANCE
1/31/03 15.42
15.35
15.28
15.29
15.22
15.05
14.98
14.69
14.94
15.11
15.17
15.29
15.14
15.45
15.64
15.68
15.79
15.76
15.73
15.8
16.02
15.79
15.26
14.13
14.7
14.06
14.28
14.61
14.86
14.9
14.86
14.9
15.09
15
15.18
15.49
15.47
15.52
15.42
15.51
15.6
15.55
15.8
15.96
15.97
15.8
1/31/04 15.87
Weekly Closing Price
Past performance is not predictive of future results.
4
Nuveen Quality Preferred Income Fund 2
Performance
OVERVIEW As of January 31, 2004
JPS
Portfolio Statistics
==================================================
Share Price $15.89
--------------------------------------------------
Common Share Net Asset Value $16.15
--------------------------------------------------
Premium/(Discount) to NAV -1.61%
--------------------------------------------------
Latest Dividend $.1050
--------------------------------------------------
Market Yield 7.93%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $1,929,733
--------------------------------------------------
% of Total
Top Five Industries Investments
==================================================
Banking 21%
--------------------------------------------------
Banking - Foreign 15%
--------------------------------------------------
Real Estate Investment Trusts 11%
--------------------------------------------------
Financial 8%
--------------------------------------------------
Utilities 7%
--------------------------------------------------
% of Total
Top Five Issuers Investments
==================================================
Wachovia Corporation 3.6%
--------------------------------------------------
Abbey National Public Limited Company 3.1%
--------------------------------------------------
ING Groep NV 3.0%
--------------------------------------------------
Everest Reinsurance Holdings Inc. 2.9%
--------------------------------------------------
ABN AMRO Bank NV 2.4%
--------------------------------------------------
Average Annual Total Return
(Inception Date 9/24/02)
==================================================
on Share Price on NAV
--------------------------------------------------
1-Year 14.53% 19.77%
--------------------------------------------------
Since Inception 13.13% 18.33%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY DIVIDENDS PER SHARE1
Feb 0.105
Mar 0.105
Apr 0.105
May 0.105
Jun 0.105
Jul 0.105
Aug 0.105
Sep 0.105
Oct 0.105
Nov 0.105
Dec 0.105
Jan 0.105
Line Chart:
SHARE PRICE PERFORMANCE
1/31/03 15.15
15.34
15.25
15.17
15.18
15.06
14.98
14.58
14.97
15.06
15.12
15.24
15.21
15.44
15.67
15.8
15.78
15.85
15.7
15.8
15.94
15.83
15.28
14.39
14.83
14.21
14.66
14.7
14.87
14.96
14.95
14.96
15.17
15.13
15.2
15.43
15.49
15.53
15.54
15.6
15.72
15.68
15.94
16
16
15.84
1/31/04 15.89
Weekly Closing Price
Past performance is not predictive of future results.
1 The Fund paid shareholders a short-term capital gains distribution in
December 2003 of $0.0992 per share.
5
Nuveen Quality Preferred Income Fund 3
Performance
OVERVIEW As of January 31, 2004
JHP
Portfolio Statistics
==================================================
Share Price $15.48
--------------------------------------------------
Common Share Net Asset Value $15.52
--------------------------------------------------
Premium/(Discount) to NAV -0.26%
--------------------------------------------------
Latest Dividend $.1030
--------------------------------------------------
Market Yield 7.98%
--------------------------------------------------
Net Assets Applicable to
Common Shares ($000) $366,806
--------------------------------------------------
% of Total
Top Five Industries Investments
==================================================
Banking 20%
--------------------------------------------------
Real Estate Investment Trusts 10%
--------------------------------------------------
Banking - Foreign 10%
--------------------------------------------------
Insurance - P&C- Foreign 9%
--------------------------------------------------
Financial 8%
--------------------------------------------------
% of Total
Top Five Issuers Investments
==================================================
Wachovia Corporation 3.6%
--------------------------------------------------
ING Groep NV 3.4%
--------------------------------------------------
Zurich Financial Services 2.9%
--------------------------------------------------
SAFECO Corporation 2.5%
--------------------------------------------------
PNCBank Corporation 2.4%
--------------------------------------------------
Average Annual Total Return
(Inception Date 12/18/02)
==================================================
on Share Price on NAV
--------------------------------------------------
1-Year 12.62% 18.14%
--------------------------------------------------
Since Inception 11.49% 16.36%
--------------------------------------------------
Bar Chart:
2003-2004 MONTHLY DIVIDENDS PER SHARE1
Feb 0.103
Mar 0.103
Apr 0.103
May 0.103
Jun 0.103
Jul 0.103
Aug 0.103
Sep 0.103
Oct 0.103
Nov 0.103
Dec 0.103
Jan 0.103
Line Chart:
SHARE PRICE PERFORMANCE
1/31/03 15.05
15.18
15.14
15.06
15.11
15.09
14.98
14.77
14.82
15
15.03
15.1
15.12
15.3
15.38
15.55
15.7
15.47
15.53
15.52
15.64
15.76
15.11
14.07
14.6
14.18
14.25
14.56
14.68
14.71
14.75
14.61
14.9
14.99
15.15
15.14
15.32
15.12
15.31
15.21
15.42
15.21
15.85
15.89
15.73
15.74
1/31/04 15.48
Weekly Closing Price
Past performance is not predictive of future results.
1 The Fund paid shareholders a short-term capital gains distribution in
December 2003 of $0.1232 per share.
6
Shareholder
MEETING REPORT
The Shareholder Meeting was held in Chicago, Illinois on October 22, 2003.
JTP JPS JHP
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APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
Common and Common and Common and
FundPreferred FundPreferred FundPreferred FundPreferred FundPreferred FundPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
William E. Bennett
For 62,553,535 -- 116,860,508 -- 23,003,686 --
Withhold 395,810 -- 75,179 -- 118,964 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Robert P. Bremner
For 62,547,199 -- 116,862,833 -- 23,007,461 --
Withhold 402,146 -- 72,854 -- 115,189 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Lawrence H. Brown
For 62,561,266 -- 116,868,395 -- 23,007,881 --
Withhold 388,079 -- 67,292 -- 114,769 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Jack B. Evans
For 62,567,638 -- 116,871,218 -- 23,008,978 --
Withhold 381,707 -- 64,469 -- 113,672 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Anne E. Impellizzeri
For 62,519,267 -- 116,863,331 -- 23,001,731 --
Withhold 430,078 -- 72,356 -- 120,919 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
William L. Kissick
For 62,542,920 -- 116,861,248 -- 23,005,728 --
Withhold 406,425 -- 74,439 -- 116,922 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Thomas E. Leafstrand
For 62,557,761 -- 116,868,018 -- 23,005,606 --
Withhold 391,584 -- 67,669 -- 117,044 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Peter R. Sawers
For 62,536,110 -- 116,863,153 -- 23,001,043 --
Withhold 413,235 -- 72,534 -- 121,607 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
7
Shareholder
MEETING REPORT (continued)
JTP JPS JHP
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS: (CONTINUED)
Common and Common and Common and
FundPreferred FundPreferred FundPreferred FundPreferred FundPreferred FundPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
William J. Schneider
For -- 15,052 -- 28,497 -- 5,334
Withhold -- 6 -- 24 -- 2
------------------------------------------------------------------------------------------------------------------------------------
Total -- 15,058 -- 28,521 -- 5,336
====================================================================================================================================
Timothy R. Schwertfeger
For -- 15,052 -- 28,497 -- 5,334
Withhold -- 6 -- 24 -- 2
------------------------------------------------------------------------------------------------------------------------------------
Total -- 15,058 -- 28,521 -- 5,336
====================================================================================================================================
Judith M. Stockdale
For 62,529,584 -- 116,865,698 -- 23,007,928 --
Withhold 419,761 -- 69,989 -- 114,722 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
Sheila W. Wellington
For 62,517,074 -- 116,859,998 -- 23,002,528 --
Withhold 432,271 -- 75,689 -- 120,122 --
------------------------------------------------------------------------------------------------------------------------------------
Total 62,949,345 -- 116,935,687 -- 23,122,650 --
====================================================================================================================================
8
Nuveen Quality Preferred Income Fund (JTP)
Portfolio of
INVESTMENTS January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 70.3% (48.4% OF TOTAL INVESTMENTS)
AUTOMOBILE - 0.1%
32,900 Ford Motor Company, Series F, 8.000% (CBTCS) $ 874,318
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE - FOREIGN - 1.0%
382,050 Magna International, Inc., Series B, 8.875% 9,971,505
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS - 1.0%
382,000 Delphi Trust I, 8.250% 10,184,120
------------------------------------------------------------------------------------------------------------------------------------
BANKING - 9.9%
15,000 ABN AMRO Capital Fund Trust VI, 6.250% 386,400
1,000 ABN AMRO North America, Series 144A, 6.590% (a) 1,063,750
102,800 ASBC Capital I, 7.625% 2,800,272
7,200 BAC Capital Trust I, 7.000% 193,896
64,000 BAC Capital Trust II, 7.000% 1,711,360
145,000 BAC Capital Trust III, 7.000% 3,993,300
24,000 BAC Capital Trust IV, 5.875% 611,280
68,300 Bank One Capital II, 8.500% 1,889,178
59,400 Bank One Capital Trust VI, 7.200% 1,590,138
60,100 BNY Capital Trust V, Series F, 5.950% 1,530,747
24,800 Chase Capital Trust VIII, Series H, 8.300% 679,520
198,200 Chittenden Capital Trust I, 8.000% 5,341,490
19,200 Citigroup Capital Trust VI, 6.875% 488,640
103,000 Citigroup Capital Trust VII, 7.100% 2,790,270
50,900 Citigroup Capital Trust VIII, 6.950% 1,361,066
Citigroup Inc.:
20,000 Series F, 6.365% (a) 1,120,000
69,400 Series H, 6.231% (a) 3,747,600
45,000 Series M, 5.864% (a) 2,418,750
120,000 Cobank ABC, Series 144A, 7.000% (a) 6,345,840
123,800 Comerica Capital Trust I, 7.600% 3,356,218
224,795 Compass Capital Trust III, 7.350% 6,022,258
28,400 First Union Capital II, Series II, 7.500% (CORTS) 771,628
8,600 First Union Institutional Capital II, 8.200% (CORTS) 246,820
87,000 Fleet Capital Trust VI, 8.800% 2,386,410
32,100 Fleet Capital Trust VII, 7.200% 858,996
57,900 Harris Preferred Capital Corporation, Series A, 7.375% 1,463,133
32,600 JPM Capital Trust I, Series 2001-1, Class A-1, 7.850% (CBTCS) 876,940
77,200 JPMorgan Chase Capital Trust IX, Series I, 7.500% 2,065,100
29,000 JPMorgan Chase Capital Trust X, 7.000% 782,130
20,000 JPMorgan Chase Trust, Series 2002-6, Class A, 7.125% (SATURNS) 533,400
9
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
KeyCorp:
15,300 Series 2001-7, 7.750% (CORTS) $ 408,663
29,800 Series B, 8.250% (CORTS) 810,262
59,400 KeyCorp, 7.500% (PCARS) 1,612,710
49,300 National Commerce Capital Trust II, 7.700% 1,336,523
37,747 PNC Capital Trust, 6.125% 956,132
29,200 Regions Finance Trust I, 8.000% 793,656
35,700 SunTrust Capital Trust V, 7.050% 962,115
174,400 USB Capital Trust III, 7.750% 4,759,376
418,405 USB Capital Trust IV, 7.350% 11,234,174
39,000 USB Capital Trust V, 7.250% 1,054,950
12,500 VNB Capital Trust I, 7.750% 339,625
19,000 Washington Mutual Capital Trust I, Series 2001-22, Class A-1, 7.650% (CORTS) 505,305
7,700 Wells Fargo Capital Trust IV, 7.000% 210,133
28,200 Wells Fargo Capital Trust V, 7.000% 759,708
92,100 Wells Fargo Capital Trust VII, 5.850% 2,340,261
340,000 Zions Capital Trust B, 8.000% 9,431,600
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 2.7%
11,000 Abbey National plc, 7.250% 291,940
67,800 Abbey National plc, Series B, 7.375% 1,869,246
208,800 ABN AMRO Capital Fund Trust II, 7.125% 5,288,904
100,000 ABN AMRO Capital Fund Trust V, 5.900% 2,475,000
52,300 Banco Totta & Acores Finance, Series A, 8.875% 1,472,574
104,600 BCH Capital Ltd., Series B, 9.430% 2,881,207
265,650 BSCH Finance Ltd., Series Q, 8.625% 7,238,963
37,000 Espirito Santo Overseas, 8.500% 962,370
55,300 National Westminster Bank plc, Series A, 7.875% 1,404,620
75,000 Royal Bank of Scotland Group plc, 5.750% 1,854,750
22,900 Westpac Capital Trust I, 8.000% 590,362
------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 3.9%
50,100 Bear Stearns Capital Trust III, 7.800% 1,352,700
110,000 Lehman Brothers Capital Trust I, 8.000% 2,795,100
118,100 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 3,041,075
113,149 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 2,928,296
35,200 Lehman Brothers Holdings Capital Trust IV, Series L, 6.375% 905,696
Lehman Brothers Holdings Inc.:
30,000 Series D, 5.670% (a) 1,560,750
90,000 Series F, 6.500% (a) 2,472,300
38,500 Merrill Lynch Capital Trust II, 8.000% 1,089,550
186,900 Merrill Lynch Preferred Capital Trust, 7.750% 5,154,702
23,300 Merrill Lynch Preferred Capital Trust IV, 7.120% 635,857
49,300 Merrill Lynch Preferred Capital Trust V, 7.280% 1,360,680
92,000 Morgan Stanley Capital Trust II, 7.250% 2,459,160
188,400 Morgan Stanley Capital Trust III, 6.250% 4,851,300
301,095 Morgan Stanley Capital Trust IV, 6.250% 7,705,021
10
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 1.3%
46,100 EnCana Corporation, 9.500% $ 1,223,955
48,100 Suncor Energy Inc., 9.125% 1,222,702
153,600 Talisman Energy Inc., 9.000% 3,840,000
257,100 Talisman Energy Inc., 8.900% 6,545,766
------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.3%
119,000 Viacom Inc., 7.300% 3,213,000
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.7%
30,176 CIT Group Incorporated, Series CIT, 7.750% (CORTS) 867,560
586,300 Countrywide Capital Trust IV, 6.750% 15,302,430
74,000 Financial Security Assurance Holdings, 6.250% 1,920,300
42,000 General Electric Capital Corporation, 6.100% 1,098,300
51,600 General Motors Acceptance Corporation, 7.350% 1,348,824
127,000 Household Capital Trust V, Series X, 10.000% 3,505,200
59,500 Household Capital Trust VI, 8.250% 1,618,995
17,000 Household Capital Trust VII, 7.500% 460,700
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 4.7%
55,900 ING Capital Funding Trust, 7.700% 1,435,512
26,300 ING Capital Funding Trust II, 9.200% 725,354
563,900 ING Group NV, 7.050% 15,445,221
1,015,458 ING Group NV, 7.200% 27,996,177
------------------------------------------------------------------------------------------------------------------------------------
FOOD - 0.7%
19,100 ConAgra Capital LC, Series B, 5.000% 479,601
65,000 Dairy Farmers of America Inc., Series 144A, 7.875% (a) 6,686,875
------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 1.4%
535,800 Grand Metropolitan Delaware LP, 9.420% 14,112,972
------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.3%
32,300 AGL Capital Trust II, 8.000% 882,113
93,400 Dominion CNG Capital Trust I, 7.800% 2,528,338
------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.3%
108,500 TransCanada Pipeline, 8.250% 2,792,790
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.5%
64,500 AMBAC Financial Group Inc., 5.950% 1,678,290
88,774 AMBAC Financial Group Inc., 5.875% 2,262,849
26,100 MBIA Inc., 8.000% 722,709
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.6%
15,700 American General Capital III, 8.050% 442,112
20,700 American General Capital Trust I, 7.875% 541,098
144,000 Delphi Financial Group Inc., 8.000% 3,859,200
136,600 Great-West L&A Capital Trust I, Series A, 7.250% 3,509,254
77,100 Lincoln National Capital Trust V, Series E, 7.650% 2,119,479
26,900 Lincoln National Capital Trust VI, 6.750% 706,125
70,900 PLC Capital Trust III, 7.500% 1,905,792
11
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE (continued)
410,000 PLC Capital Trust IV, 7.250% $ 11,029,000
58,600 Torchmark Capital Trust I, 7.750% 1,596,850
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.6%
112,600 Hartford Capital Trust III, Series C, 7.450% 3,025,562
42,700 Hartford Life Capital Trust II, Series B, 7.625% 1,137,955
24,600 Safeco Capital Trust I, 8.700% (CORTS) 667,644
26,700 Safeco Capital Trust I, Series 2001-4, 8.750% (CORTS) 720,900
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.2%
59,200 EverestRe Group Limited, 7.850% 1,654,048
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 6.8%
13,900 Ace Capital Trust I, Series 1999, 8.875% 368,350
758,700 Ace Ltd., Series C, 7.800% 21,099,447
760,000 Converium Finance, 8.250% 20,976,000
101,000 PartnerRe Limited, 7.900% 2,760,330
250,000 PartnerRe Limited, Series C, 6.750% 6,590,000
RenaissanceRe Holdings Ltd.:
73,505 Series A, 8.100% 2,041,969
40,000 Series B, 7.300% 1,086,000
XL Capital Ltd.
385,354 Series A, 8.000% 10,824,594
24,000 Series B, 7.625% 662,880
------------------------------------------------------------------------------------------------------------------------------------
OIL - FOREIGN - 0.9%
345,532 Nexen Inc., 7.350% 9,139,321
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.1%
54,300 Rhone-Poulenc Overseas, Series A, 8.125% 1,385,193
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 20.6%
46,658 AMB Property Corporation, Series M, 6.750% 1,171,116
8,500 Archstone-Smith Trust, Series D, 8.750% 221,425
13,400 AvalonBay Communities Inc., Series H, 8.700% 384,580
608,700 BRE Properties, Series B, 8.080% 16,739,250
485,545 CarrAmerica Realty Corporation, Series E, 7.500% 13,061,161
Developers Diversified Realty Corporation:
40,400 Series F, 8.600% 1,104,132
29,000 Series G, 8.000% 784,740
119,000 Series H, 7.375% 3,188,010
Duke-Weeks Realty Corporation:
109,179 Series B, 7.990% 5,854,724
9,300 Series I, 8.450% 257,052
1,097,400 Equity Office Properties Trust, Series G, 7.750% 30,299,214
Equity Residential Properties Trust:
30,400 Series B, 9.125% 832,048
22,100 Series D, 8.600% 619,021
19,000 Firstar Realty LLC, Series 144A, 8.875% 24,073,000
First Industrial Realty Trust Inc.:
10,600 Series C, 8.625% 295,263
87,200 Series D, 7.950% 2,203,544
60,500 Series E, 7.900% 1,536,095
12
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (continued)
HRPT Properties Trust:
218,300 Series A, 9.875% $ 6,018,531
1,096,700 Series B, 8.750% 30,608,897
New Plan Excel Realty Trust:
22,000 Series D, 7.800% 1,198,314
416,000 Series E, 7.625% 11,398,400
101,000 Prologis Trust, Series G, 6.750% 2,532,070
204,400 PS Business Parks Inc., 7.000% 5,058,900
Public Storage Inc.:
7,000 Series D, 9.500% 189,560
16,200 Series E, 10.000% 449,550
22,800 Series F, 9.750% 622,668
20,400 Series L, 8.250% 517,140
24,000 Series Q, 8.600% 657,360
99,000 Series R, 8.000% 2,689,830
200,000 Series S, 7.875% 5,412,000
18,180 Series U, 7.625% 495,405
345,600 Series V, 7.500% 9,396,864
Simon Property Group Inc.:
20,500 Series F, 8.750% 565,595
176,200 Series G, 7.890% 9,691,000
Vornado Realty Trust:
26,100 Series B, 8.500% 674,685
47,700 Series C, 8.500% 1,216,350
310,000 Wachovia Preferred Funding Corporation, 7.250% 8,959,000
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.5%
18,100 SBC Communications Inc., 7.000% 485,261
262,846 Telephone and Data Systems Inc., 7.600% 7,070,557
156,300 United States Cellular Corporation, 8.750% 4,509,255
473,000 Verizon Communications, 6.200% (CBTCS) 11,872,300
6,900 Verizon New England Inc., Series B, 7.000% 182,850
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 0.8%
42,000 Federal Home Loan Mortgage Corporation, 5.000% (a) 1,986,600
189,515 SLM Corporation, 6.000% 4,804,205
33,400 Tennessee Valley Authority, Series D, 6.750% 875,080
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 4.4%
248,300 Alabama Power Company, 5.830% (a) 6,460,766
13,300 Atlantic Capital Trust II, Series C, 7.375% 337,022
92,600 CPL Capital I, Series A, 8.000% 2,358,985
7,100 Delmarva Power Finance, 8.125% 182,470
55,600 Dominion Resources Capital Trust II, 8.400% 1,529,000
77,740 DTE Energy Trust I, 7.800% 2,096,648
20,800 Duke Energy Capital Trust I, Series Q, 7.200% 526,656
8,000 Duke Energy Capital Trust II, 7.200% 202,880
94,800 Energy East Capital Trust I, 8.250% 2,552,964
93,005 Entergy Louisiana Inc., 7.600% 2,543,687
132,051 Georgia Power Company, 5.900% 3,395,031
320,000 Interstate Power & Light Company, Series B, 8.375% (a) 10,560,000
13
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (continued)
64,700 OGE Energy Capital Trust I, 8.375% $ 1,695,140
7,700 Ohio Power Company, 7.375% 194,579
40,000 Potomac Electric Power Company, Series 6, 2.280% (a) 1,661,252
60,800 PSO Capital Trust I, Series A, 8.000% 1,538,240
187,000 Virginia Power Capital Trust, 7.375% 5,054,610
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $644,031,915) 688,031,957
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 8.4% (5.8% OF TOTAL INVESTMENTS)
BANKING - 0.6%
154,000 Citigroup Global Markets, 2.000% 6,001,842
------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.6%
299,400 Keyspan Corporation, 8.750% 16,167,600
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.2%
65,500 PMI Group Inc., 5.875% 1,685,970
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 0.2%
32,000 PartnerRe Limited, 8.000% 1,828,800
------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.7%
139,500 Baxter International Inc., 7.000% 7,205,175
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.5%
263,200 Alltel Corporation, 7.750% 13,291,600
64,300 Citizens Communications Company, 6.750% 1,551,559
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.6%
266,200 Ameren Corporation, 9.750% 7,773,040
21,200 American Electric Power, 9.250% 1,028,412
260,200 Dominion Resources Inc., 8.750% 14,662,270
30,000 FPL Group Inc., 8.000% 1,731,000
153,600 Public Service Enterprise Group, 10.250% 9,773,568
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $74,840,787) 82,700,836
--------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 2.8% (1.9% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 1.1%
10 BBVA Privanza International Gibraltar, Series 144A, 7.764% 10,700,000
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.7%
13,250 Centaur Funding Corporation, Series 144A, Series B, 9.080% 16,955,866
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost $21,548,162) 27,655,866
--------------------------------------------------------------------------------------------------------------------
14
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 51.4% (35.4% OF TOTAL INVESTMENTS)
BANKING - 20.7%
$ 2,000 AgFirst Farm Credit Bank, 7.300%, 10/15/49 $ 2,036,200
1,000 ABN AMRO North America Holding Capital, 6.523%, 12/31/49 1,096,863
2,500 BankAmerica Capital II, Series 2, 8.000%, 12/15/26 2,898,360
2,000 BankAmerica Institutional Capital Trust, Series B, 7.700%, 12/31/26 2,274,616
1,000 BankAmerica Institutional Trust, 8.070%, 12/31/26 1,154,646
5,700 BankBoston Capital Trust II, Series B, 7.750%, 12/15/26 6,405,443
6,000 Barnett Capital I, 8.060%, 12/01/26 6,919,236
2,000 BT Capital Trust, Series B1, 7.900%, 1/15/27 2,282,992
7,900 BT Preferred Capital Trust II, 7.875%, 2/25/27 8,976,707
5,000 Chase Capital Trust I, Series A, 7.670%, 12/01/26 5,603,440
3,000 Corestates Capital Trust I, Series 144A, 8.000%, 12/15/26 3,458,517
1,000 First Chicago NBD Institutional Capital, 7.950%, 12/01/26 1,136,650
500 First Empire Capital Trust II, 8.277%, 6/01/27 587,998
1,500 First Midwest Bancorp Inc., Series 144A, 6.950%, 12/01/33 1,610,079
26,463 First Union Institutional Capital Securities I, 8.040%, 12/01/26 30,799,651
19,500 JPM Capital Trust II, 7.950%, 2/01/27 22,376,133
2,000 KeyCorp Institutional Capital Trust A, 7.826%, 12/01/26 2,252,254
11,150 NB Capital Trust II, 7.830%, 12/15/26 12,850,241
1,000 North Fork Capital Trust I, Capital Securities, 8.700%, 12/15/26 1,200,811
8,000 Peoples Heritage Capital Trust I, Series B, 9.060%, 2/01/27 9,323,392
19,000 PNC Institutional Capital Securities, 7.950%, 12/15/26 21,671,362
17,500 Reliance Capital Trust I, Series B, 8.170%, 5/01/28 19,903,765
1,400 Republic New York Capital II, Capital Securities, 7.530%, 12/04/26 1,554,958
23,000 Summit Capital Trust I, Capital Securities, 8.400%, 3/15/27 26,412,004
1,000 Union Planters Capital Trust A, 8.200%, 12/15/26 1,125,201
4,000 Wachovia Capital Trust I, Capital Securities, Series 144A, 7.640%, 1/15/27 4,563,184
1,050 Wells Fargo Capital Securities, 7.950%, 12/01/26 1,217,895
1,000 Zions Institutional Capital Trust, Series A, 8.536%, 12/15/26 1,169,305
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 9.5%
30,000 Abbey National Capital Trust I, 8.963%, 6/30/20 40,528,350
1,200 Barclays Bank plc, Series 144A, 8.550%, 6/15/49 1,496,141
7,242 Dresdner Funding Trust I, 8.151%, 6/30/31 8,662,033
25,000 HSBC Capital Funding LP, Debt, 10.176%, 6/30/50 37,190,850
5,000 Sparebanken Rogaland, Series 144A Notes, 6.443%, 5/01/49 5,073,500
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.4%
20,900 Phillips 66 Capital Trust II, 8.000%, 1/15/37 23,919,486
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 0.2%
2,000 Keycorp Capital III, 7.750%, 7/15/29 2,341,076
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.9%
9,000 AB Svensk Exportkredit, 6.375%, 10/27/49 9,294,804
15
Nuveen Quality Preferred Income Fund (JTP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.4%
$ 4,000 KN Capital Trust I, Preferred Securities, 8.560%, 4/15/27 $ 4,743,804
7,860 KN Capital Trust III, 7.630%, 4/15/28 8,897,999
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.8%
7,500 Berkeley Capital Trust, 8.197%, 12/20/45 8,128,013
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 0.9%
3,000 American General Institutional Capital, 8.125%, 3/15/46 3,924,864
4,000 MIC Financing Trust I, 8.375%, 2/01/27 4,482,944
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 3.0%
24,410 Sun Life Canada Capital Trust, Capital Securities, 8.526%, 5/06/47 29,018,999
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 6.5%
20,525 Safeco Capital Trust I, Capital Securities, 8.072%, 7/15/37 23,694,532
35,095 Zurich Capital Trust I, 8.376%, 6/01/37 40,105,583
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 1.3%
7,570 Ace Capital Trust II, 9.700%, 4/01/30 10,300,257
2,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 2,241,894
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - OTHER - 0.8%
8,000 Mangrove Bay, Series 144A, Class 3, 6.102%, 7/15/33 8,092,000
------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - 0.6%
5,000 Washington Mutual Capital Trust I, 8.375%, 6/01/27 5,890,825
------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.7%
8,500 Dime Capital Trust I, Series A, 9.330%, 5/06/27 10,578,318
5,000 Great Western Financial Trust II, Series A, 8.206%, 2/01/27 5,801,870
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 0.2%
1,800 Farm Credit Bank of Texas, 7.561%, 11/05/49 1,867,547
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.5%
5,000 PECO Energy Capital Trust IV, 5.750%, 6/15/33 4,531,940
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $459,851,480) 503,669,532
--------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 6.8% (4.7% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 6.2%
11,500 CA Preferred Funding Trust, 7.000%, 1/30/49 11,851,498
25,500 HBOS Capital Funding, 6.850%, 3/01/49 25,791,491
8,850 Lloyds TSB Bank plc, Subordinate Note, 6.900%, 11/22/49 9,165,954
14,000 RBS Capital Trust, Series B, 6.800%, 12/31/49 14,196,420
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.6%
5,500 Old Mutual Capital Funding, Notes, 8.000%, 6/22/53 5,523,683
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $68,076,551) 66,529,046
--------------------------------------------------------------------------------------------------------------------
16
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.9% (3.4% OF TOTAL INVESTMENTS)
AUTOMOBILE - 1.8%
$ 5,000 Ford Motor Company, 8.900%, 1/15/32 $ 5,758,220
3,400 Ford Motor Company, 7.400%, 11/01/46 3,274,234
5,700 Ford Motor Company, 7.700%, 5/15/97 5,565,320
1,260 General Motors Corporation, Senior Debentures, 8.375%, 7/15/33 1,440,779
1,470 General Motors Corporation, 7.375%, 5/23/48 1,427,808
------------------------------------------------------------------------------------------------------------------------------------
BANKING - 0.3%
3,000 Suntrust Bank, Subordinate Note, 5.450%, 12/01/17 3,133,257
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 2.7%
24,500 General Motors Acceptance Corporation, Notes, 8.000%, 11/01/31 26,945,860
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.1%
500 Zurich Reinsurance Centre Holdings Inc., Senior Notes, 7.125%, 10/15/23 491,624
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $41,377,931) 48,037,102
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.5% (0.4% OF TOTAL INVESTMENTS)
5,372 State Street Bank Repurchase Agreement, 0.920%, dated 1/30/04, due 2/02/04,
============= repurchase price $5,372,882, collateralized by U.S. Treasury Bonds 5,372,470
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost 5,372,470) 5,372,470
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,315,099,296) - 145.1% 1,421,996,809
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.2)% (2,123,803)
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (44.9)% (440,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 979,873,006
====================================================================================================================
(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 Receivable Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
See accompanying notes to financial statements.
17
Nuveen Quality Preferred Income Fund 2 (JPS)
Portfolio of
Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 66.3% (47.1% OF TOTAL INVESTMENTS)
AUTOMOBILE - 0.0%
30,000 Ford Motor Company, Series F, 8.000% (CBTCS) $ 797,250
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE - FOREIGN - 0.0%
35,500 Magna International Inc., Series B, 8.875% 926,550
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS - 1.1%
766,000 Delphi Trust I, 8.250% 20,421,560
------------------------------------------------------------------------------------------------------------------------------------
BANKING - 8.7%
152,060 ASBC Capital I, 7.625% 4,142,114
135,900 BAC Capital Trust I, 7.000% 3,659,787
168,500 BAC Capital Trust II, 7.000% 4,505,690
218,300 BAC Capital Trust III, 7.000% 6,011,982
66,500 BAC Capital Trust IV, 5.875% 1,693,755
81,600 BancWest Capital I, 9.500% 2,299,488
68,500 Bank One Capital II, 8.500% 1,894,710
41,400 Bank One Capital V, 8.000% 1,128,150
154,400 Bank One Capital Trust VI, 7.200% 4,133,288
39,700 BankNorth Capital Trust II, 8.000% 1,088,971
17,800 BNY Capital Trust IV, Series E, 6.875% 451,230
54,100 BNY Capital Trust V, Series F, 5.950% 1,377,927
22,800 Chase Capital Trust V, Series E, 7.030% 577,068
2,500 Chase Capital Trust VII, Corporate Debt Derivative, 7.000% 63,275
76,800 Chase Capital Trust VIII, Series H, 8.300% 2,104,320
14,700 Chittenden Capital Trust I, 8.000% 396,165
52,100 Citigroup Capital Trust VI, 6.875% 1,325,945
148,100 Citigroup Capital Trust VII, 7.100% 4,012,029
360,000 Citigroup Capital Trust VIII, 6.950% 9,626,400
Citigroup Inc.:
23,000 Series F, 6.365% (a) 1,288,000
40,000 Series H, 6.231% (a) 2,160,000
45,000 Series M, 5.864% (a) 2,418,750
230,000 Cobank ABC, 144A, 7.000% (a) 12,162,860
239,700 Comerica Capital Trust I, 7.600% 6,498,267
380,125 Compass Capital Trust III, 7.350% 10,183,549
63,300 First Union Capital II, Series II, 7.500% (CORTS) 1,719,861
31,300 First Union Institutional Capital II, 8.200% (CORTS) 898,310
128,300 Fleet Capital Trust VI, 8.800% 3,519,269
79,700 Harris Preferred Capital Corporation, Series A, 7.375% 2,014,019
74,700 JPM Capital Trust, 7.200% (CBTCS) 1,961,622
6,400 JPM Capital Trust I, Series 2001-1, Class A-1, 7.850% (CBTCS) 172,160
18
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
204,100 JPMorgan Chase Capital Trust IX, Series I, 7.500% $ 5,459,675
13,400 JPMorgan Chase Capital Trust X, 7.000% 361,398
43,000 JPMorgan Chase Trust, Series 2002-6, Class A, 7.125% (SATURNS) 1,146,810
33,900 KeyCorp, 7.500% (PCARS) 920,385
KeyCorp:
28,000 Series 2001-7, 7.750% (CORTS) 747,880
91,300 Series B, 8.250% (CORTS) 2,482,447
239,800 National Commerce Capital Trust II, 7.700% 6,500,978
40,000 PNC Capital Trust, 6.125% 1,013,200
34,400 Regions Finance Trust I, 8.000% 934,992
131,900 SunTrust Capital Trust IV, 7.125% 3,550,748
81,800 SunTrust Capital Trust V, 7.050% 2,204,510
610,000 USB Capital Trust III, 7.750% 16,646,900
209,600 USB Capital Trust IV, 7.350% 5,627,760
78,100 USB Capital Trust V, 7.250% 2,112,605
87,600 VNB Capital Trust I, 7.750% 2,380,092
41,000 Washington Mutual Capital Trust I, Series 2001-22, Class A-1, 7.650% (CORTS) 1,090,395
15,700 Wells Fargo Capital Trust IV, 7.000% 428,453
26,400 Wells Fargo Capital Trust V, 7.000% 711,216
20,000 Wells Fargo Capital Trust VI, 6.950% 538,200
139,100 Wells Fargo Capital Trust VII, 5.850% 3,534,531
539,200 Zions Capital Trust B, 8.000% 14,957,408
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 3.9%
780,300 ABN AMRO Capital Fund Trust II, 7.125% 19,764,999
84,500 ABN AMRO Capital Fund Trust VI, 6.250% 2,176,720
35,400 Banco Totta & Acores Finance, Series A, 8.875% 996,733
621,000 Banesto Holdings, Series A-144A, 10.500% 19,639,125
340,500 BCH Capital Ltd., Series B, 9.430% 9,379,073
446,100 BSCH Finance Ltd., Series Q, 8.625% 12,156,225
27,400 Espirito Santo Overseas, 8.500% 712,674
50,000 HSBC USA Inc., Series F, 2.860% (a) 2,745,000
105,200 National Westminster Bank plc, Series A, 7.875% 2,672,080
60,000 Royal Bank of Scotland Group plc, 5.750% 1,483,800
139,100 Westpac Capital Trust I, 8.000% 3,585,998
------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 3.1%
94,900 Bear Stearns Capital Trust III, 7.800% 2,562,300
63,800 Lehman Brothers Capital Trust I, 8.000% 1,621,158
102,800 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 2,647,100
273,100 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 7,067,828
102,900 Lehman Brothers Holdings Capital Trust IV, Series L, 6.375% 2,647,617
Lehman Brothers Holdings Inc.:
42,000 Series C, 5.940% (a) 2,186,100
66,100 Series D, 5.670% (a) 3,438,853
71,000 Series F, 6.500% (a) 1,950,370
23,900 Merrill Lynch Capital Trust, 7.000% 647,451
19
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE (continued)
91,800 Merrill Lynch Capital Trust II, 8.000% $ 2,597,940
60,300 Merrill Lynch Preferred Capital Trust, 7.750% 1,663,074
46,300 Merrill Lynch Preferred Capital Trust IV, 7.120% 1,263,527
95,000 Merrill Lynch Preferred Capital Trust V, 7.280% 2,622,000
3,300 Morgan Stanley, 7.050% (PPLUS) 88,836
80,408 Morgan Stanley Capital Trust II, 7.250% 2,149,306
487,600 Morgan Stanley Capital Trust III, 6.250% 12,555,700
451,600 Morgan Stanley Capital Trust IV, 6.250% 11,556,444
16,000 Morgan Stanley Dean Witter, Series C, 7.250% 412,320
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 0.3%
51,500 EnCana Corporation, 9.500% 1,367,325
43,100 Suncor Energy Inc., 9.125% 1,095,602
75,100 Talisman Energy Inc., 8.900% 1,912,046
67,300 Talisman Energy Inc., 9.000% 1,682,500
------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.1%
71,400 Viacom Inc., 7.300% 1,927,800
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 6.2%
32,600 CIT Group Incorporated, 7.750% (CORTS) 937,250
978,000 Countrywide Capital Trust IV, 6.750% 25,525,800
41,000 Financial Security Assurance Holdings, 6.875% 1,101,670
1,059,618 Financial Security Assurance Holdings, 6.250% 27,497,087
199,700 General Electric Capital Corporation, 6.625% 5,365,939
702,300 General Electric Capital Corporation, 6.100% 18,365,145
526,700 Household Capital Trust V, Series X, 10.000% 14,536,920
617,096 Household Capital Trust VI, 8.250% 16,791,182
30,900 Household Capital Trust VII, 7.500% 837,390
250,000 Household Finance Corporation, 6.875% 6,645,000
16,000 Philadelphia Authority for Industrial Development, Pennsylvania Pension, 6.550% 402,240
42,000 SLM Corporation, Series A, 6.970% (a) 2,391,900
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 4.3%
18,800 CSFB USA, Series 2002-10, 7.000% (SATURNS) 498,388
28,800 ING Capital Funding Trust, 7.700% 739,584
63,600 ING Capital Funding Trust II, 9.200% 1,754,088
1,476,400 ING Group NV, 7.200% 40,704,348
1,406,655 ING Group NV, 7.050% 38,528,280
------------------------------------------------------------------------------------------------------------------------------------
FOOD - 0.7%
125,000 Dairy Farmers of America Inc., 144A, 7.875% (a) 12,859,375
------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 0.1%
106,100 Grand Metropolitan Delaware LP, 9.420% 2,794,674
------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.2%
39,900 AGL Capital Trust II, 8.000% 1,089,669
92,500 Dominion CNG Capital Trust I, 7.800% 2,503,975
20
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.2%
151,100 TransCanada Pipeline, 8.250% $ 3,889,314
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.3%
68,400 AMBAC Financial Group Inc., 5.950% 1,779,768
136,700 AMBAC Financial Group Inc., 5.875% 3,484,483
22,200 MBIA Inc., 8.000% 614,718
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 1.7%
28,200 American General Capital Trust I, 7.875% 737,148
33,200 American General Capital Trust III, 8.050% 934,912
472,557 Delphi Financial Group Inc., 8.000% 12,664,528
25,900 Great-West L&A Capital Trust I, Series A, 7.250% 665,371
60,200 Lincoln National Capital Trust V, Series E, 7.650% 1,654,898
25,000 Lincoln National Capital Trust VI, 6.750% 656,250
88,600 PLC Capital Trust III, 7.500% 2,381,568
440,940 PLC Capital Trust IV, 7.250% 11,861,286
57,200 Torchmark Capital Trust I, 7.750% 1,558,700
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.6%
247,600 Hartford Capital Trust III, Series C, 7.450% 6,653,012
52,700 Hartford Life Capital Trust II, Series B, 7.625% 1,404,455
78,900 Safeco Capital Trust I, 8.700% (CORTS) 2,141,346
59,700 Safeco Capital Trust I, Series 2001-4, 8.750% (CORTS) 1,611,900
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 4.1%
2,827,000 EverestRe Group Limited, 7.850% 78,986,380
5,500 W.R. Berkley, 8.250% (CORTS) 149,380
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 6.7%
967,600 Ace Ltd., Series C, 7.800% 26,908,956
1,505,600 Converium Finance, 8.250% 41,554,560
230,081 PartnerRe Limited, 7.900% 6,288,114
439,320 PartnerRe Limited, Series C, 6.750% 11,580,475
RenaissanceRe Holdings Ltd.:
304,360 Series A, 8.100% 8,455,121
136,500 Series B, 7.300% 3,705,975
XL Capital Ltd.:
554,400 Series A, 8.000% 15,573,096
537,617 Series B, 7.625% 14,848,982
------------------------------------------------------------------------------------------------------------------------------------
OIL - FOREIGN - 0.8%
549,271 Nexen Inc., 7.350% 14,528,218
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.1%
80,000 Rhone-Poulenc Overseas, Series A, 8.125% 2,040,800
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 13.7%
14,000 Archstone-Smith Trust, Series D, 8.750% 364,700
91,900 AvalonBay Communities Inc., Series H, 8.700% 2,637,530
8,700 BRE Properties, Series B, 8.080% 239,250
857,995 CarrAmerica Realty Corporation, Series E, 7.500% 23,080,066
21
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (continued)
Developers Diversified Realty Corporation:
279,800 Series G, 8.000% $ 7,571,388
103,000 Series H, 7.375% 2,759,370
186,650 Duke Realty Investment Corporation, Series B, 7.990% 10,009,106
37,900 Duke-Weeks Realty Corporation, Series I, 8.450% 1,047,556
293,000 Equity Office Properties Trust, Series G, 7.750% 8,089,730
Equity Residential Properties Trust:
81,800 Series B, 9.125% 2,238,866
40,000 Series C, 9.125% 1,116,800
59,750 Series D, 8.600% 1,673,598
1,000 Series N, 6.480% 25,170
First Industrial Realty Trust Inc.:
16,700 Series C, 8.625% 465,179
111,100 Series D, 7.950% 2,807,497
99,800 Series E, 7.900% 2,533,922
2,300 Gables Residential Trust, Series D, 7.500% 60,950
HRPT Properties Trust:
206,200 Series A, 9.875% 5,684,934
1,516,825 Series B, 8.750% 42,334,586
153,000 Kimco Realty Corporation, Series F, 6.650% 3,971,880
New Plan Excel Realty Trust:
147,350 Series D, 7.800% 8,025,978
763,000 Series E, 7.625% 20,906,200
90,328 Prologis Trust, Series G, 6.750% 2,264,523
54,170 PS Business Parks Inc., 7.000% 1,340,708
Public Storage Inc.:
5,000 Series D, 9.500% 135,400
11,000 Series F, 9.750% 300,410
13,700 Series L, 8.250% 347,295
12,700 Series M, 8.750% 331,089
43,800 Series Q, 8.600% 1,199,682
88,295 Series R, 8.000% 2,398,975
12,900 Series S, 7.875% 349,074
72,065 Series T, 7.625% 1,945,755
62,200 Series U, 7.625% 1,694,950
130,300 Series V, 7.500% 3,542,857
250,000 Regency Centers Corporation, 7.450% 6,725,000
Simon Property Group Inc.:
29,800 Series F, 8.750% 822,182
321,041 Series G, 7.890% 17,657,255
Vornado Realty Trust:
33,200 Series B, 8.500% 858,220
40,700 Series C, 8.500% 1,037,850
2,461,900 Wachovia Preferred Funding Corporation, 7.250% 71,148,910
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.4%
4,000 BellSouth Capital Funding Corporation, 7.375% 103,000
4,200 BellSouth Inc., 7.000% (CORTS) 111,048
26,200 SBC Communications Inc., 7.000% 702,422
119,700 Telephone and Data Systems Inc., 7.600% 3,219,930
1,315,700 United States Cellular Corporation, 8.750% 37,957,945
200,000 Verizon Communications, 6.200% (CBTCS) 5,020,000
22
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 1.1%
315,300 Fannie Mae, 5.125% (a) $ 15,402,405
88,600 Federal Home Loan Mortgage Corporation, 5.000% (a) 4,190,780
1,200 SLM Corporation, 6.000% 30,420
90,100 Tennessee Valley Authority, Series D, 6.750% 2,360,620
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 5.9%
340,000 Alabama Power Company, 5.830% (a) 8,846,800
7,000 Alabama Power Company, Series J, 6.750% 178,710
24,900 Atlantic Capital Trust II, Series C, 7.375% 630,966
7,600 Consolidated Edison Company, 7.250% 207,936
12,200 Consolidated Edison Company of New York Inc., 7.500% 333,426
16,000 Consolidated Edison Company of New York Inc., 7.350% 410,240
142,000 CPL Capital I, Series A, 8.000% 3,617,450
9,500 Detroit Edison Company, 7.625% 246,050
1,000 Detroit Edison Company, 7.540% 25,600
36,800 Dominion Resources Capital Trust II, 8.400% 1,012,000
27,200 DTE Energy Trust I, 7.800% 733,584
63,400 Duke Energy Capital Trust I, Series Q, 7.200% 1,605,288
22,800 Duke Energy Capital Trust II, 7.200% 578,208
1,000 Duke Energy Corporation, Series C, 6.600% 25,340
100,200 Energy East Capital Trust I, 8.250% 2,698,386
500 Entergy Arkansas Inc., 6.700% 13,710
48,600 Entergy Louisiana Inc., 7.600% 1,329,210
1,298,000 Entergy Mississippi Inc., 7.250% 35,493,810
3,000 Georgia Power Capital Trust V, 7.125% 81,030
1,200,000 Interstate Power & Light Company, Series B, 8.375% (a) 39,600,000
41,000 OGE Energy Capital Trust I, 8.375% 1,074,200
20,500 Ohio Power Company, 7.375% 518,035
58,847 Potomac Electric Power Company, Series 6, 2.280% (a) 2,443,992
147,400 PSO Capital Trust I, Series A, 8.000% 3,729,220
50,000 Public Service Company of Oklahoma, Series B, 6.000% 1,319,000
11,500 Rochester Gas and Electric Company, Series UU, 6.650% 311,995
253,000 Virginia Power Capital Trust, 7.375% 6,838,590
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $1,184,786,405) 1,279,889,883
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 7.9% (5.6% OF TOTAL INVESTMENTS)
BANKING - 0.4%
210,000 Citigroup Global Markets, 2.000% 8,184,330
------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.2%
437,500 Keyspan Corporation, 8.750% 23,625,000
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.1%
20,000 Hartford Financial Services Group Inc., 7.000% 1,280,000
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.2%
163,500 PMI Group Inc., 5.875% 4,208,490
23
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 0.2%
68,800 PartnerRe Limited, 8.000% $ 3,931,920
------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.7%
265,500 Baxter International Inc., 7.000% 13,713,075
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.6%
546,000 Alltel Corporation, 7.750% 27,573,000
149,300 Citizens Communications Company, 6.750% 3,602,609
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.5%
357,900 Ameren Corporation, 9.750% 10,450,680
46,100 American Electric Power, 9.250% 2,236,311
468,500 Dominion Resources Inc., 8.750% 26,399,975
106,500 FPL Group Inc., 8.000% 6,145,050
334,500 Public Service Enterprise Group, 10.250% 21,284,235
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $133,155,067) 152,634,675
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 4.3% (3.0% OF TOTAL INVESTMENTS)
REAL ESTATE INVESTMENT TRUSTS - 1.3%
240 Union Planters Preferred Fund, Series 144A, 7.750% 25,050,000
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.0%
45,250 Centaur Funding Corporation, Series 144A, Series B, 9.080% 57,905,882
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost $62,787,788) 82,955,882
--------------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 51.9% (36.8% OF TOTAL INVESTMENTS)
BANKING - 19.8%
$ 38,500 ABN AMRO North America Holding Capital, 6.523%, 12/31/49 42,229,226
6,000 AgFirst Farm Credit Bank, 7.300%, 10/15/49 6,108,600
15,000 Ahmanson Capital Trust I, 8.360%, 12/01/26 17,429,550
4,780 BankAmerica Institutional Trust, 8.070%, 12/31/26 5,519,208
26,355 BankBoston Capital Trust I, Series B, 8.250%, 12/15/26 30,872,827
3,031 BankBoston Capital Trust II, Series B, 7.750%, 12/15/26 3,406,123
5,300 Barnett Capital I, 8.060%, 12/01/26 6,111,992
4,000 BT Capital Trust, Series B1, 7.900%, 1/15/27 4,565,984
500 BT Preferred Capital Trust II, 7.875%, 2/25/27 568,146
7,750 Chase Capital Trust I, Series A, 7.670%, 12/01/26 8,685,332
2,229 Corestates Capital Trust I, Series 144A, 8.000%, 12/15/26 2,569,678
5,000 FBS Capital Trust I, 8.090%, 11/15/26 5,815,090
3,500 First Chicago NBD Institutional Capital, 7.950%, 12/01/26 3,978,275
1,500 First Empire Capital Trust I, 8.234%, 2/01/27 1,751,241
3,665 First Hawaiian Capital Trust I, Series B, 8.343%, 7/01/27 4,257,854
1,500 First Midwest Bancorp Inc., Series 144A, 6.950%, 12/01/33 1,610,079
17,095 First Union Capital Trust II, Series A, 7.950%, 11/15/29 21,266,983
22,080 Fleet Capital Trust II, 7.920%, 12/11/26 25,248,436
3,600 JPM Capital Trust I, 7.540%, 1/15/27 4,003,837
24
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
$ 22,085 JPM Capital Trust II, 7.950%, 2/01/27 $ 25,342,405
2,500 KeyCorp Institutional Capital Trust A, 7.826%, 12/01/26 2,815,318
25,000 M&I Capital Trust A, 7.650%, 12/01/26 27,800,750
25,000 Mellon Capital Trust I, Series A, 7.720%, 12/01/26 28,323,425
19,500 NB Capital Trust II, 7.830%, 12/15/26 22,473,516
2,000 North Fork Capital Trust I, Capital Securities, 8.700%, 12/15/26 2,401,622
8,000 North Fork Capital Trust II, 8.000%, 12/15/27 9,026,704
2,000 Peoples Heritage Capital Trust I, Series B, 9.060%, 2/01/27 2,330,848
31,710 PNC Institutional Capital Securities, 7.950%, 12/15/26 36,168,363
8,000 Reliance Capital Trust I, Series B, 8.170%, 5/01/28 9,098,864
3,240 State Street Institutional Capital Trust, Series 144A, 7.940%, 12/30/26 3,742,498
7,500 Union Planters Capital Trust A, 8.200%, 12/15/26 8,439,008
6,000 Zions Institutional Capital Trust, Series A, 8.536%, 12/15/26 7,015,830
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 12.6%
62,474 Abbey National Capital Trust I, 8.963%, 6/30/20 84,398,938
1,200 Barclays Bank plc, Series 144A, 8.550%, 6/15/49 1,496,141
41,000 Barclays Bank plc, Series 144A, 6.860%, 9/29/49 45,563,423
16,065 Dresdner Funding Trust I, 8.151%, 6/30/31 19,215,073
10,000 HSBC Capital Funding LP, Debt, 10.176%, 6/30/50 14,876,340
30,000 KBC Bank Fund Trust III, Series 144A, 9.860%, 11/29/49 38,105,430
18,400 Royal Bank of Scotland Group plc, 7.648%, 8/31/49 22,366,911
5,000 Sparebanken Rogaland, Series 144A Notes, 6.443%, 5/01/49 5,073,500
10,000 UBS Preferred Funding Trust I, 8.622%, 10/29/49 12,390,830
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 0.4%
7,355 Phillips 66 Capital Trust II, 8.000%, 1/15/37 8,417,599
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 1.8%
8,595 Countrywide Capital Trust I, 8.000%, 12/15/26 9,530,170
18,460 Countrywide Capital Trust III, Series B, 8.050%, 6/15/27 21,859,501
3,000 KeyCorp Capital III, 7.750%, 7/15/29 3,511,614
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 1.6%
19,000 AB Svensk Exportkredit, 6.375%, 10/27/49 19,622,364
9,000 St. George Funding Company LLC, 8.485%, 6/30/47 10,654,461
------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.5%
8,750 KN Capital Trust III, 7.630%, 4/15/28 9,905,534
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 0.6%
10,000 Berkeley Capital Trust, 8.197%, 12/20/45 10,837,350
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.6%
33,855 American General Institutional Capital, 8.125%, 3/15/46 44,292,090
6,000 MIC Financing Trust I, 8.375%, 2/01/27 6,724,416
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 2.6%
43,000 Sun Life Canada Capital Trust, Capital Securities, 8.526%, 5/06/47 51,119,088
25
Nuveen Quality Preferred Income Fund 2 (JPS) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 5.0%
$ 38,777 Safeco Capital Trust I, Capital Securities, 8.072%, 7/15/37 $ 44,765,061
44,515 Zurich Capital Trust I, 8.376%, 6/01/37 50,870,496
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 1.6%
14,280 Ace Capital Trust II, 9.700%, 4/01/30 19,430,339
10,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 11,209,470
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - OTHER - 0.4%
8,000 Mangrove Bay, Series 144A, Class 3, 6.102%, 7/15/33 8,092,000
------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.5%
11,825 Dime Capital Trust I, Series A, 9.330%, 5/06/27 14,716,307
13,000 Great Western Financial Trust II, Series A, 8.206%, 2/01/27 15,084,862
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 0.2%
3,500 Farm Credit Bank of Texas, 7.561%, 11/05/49 3,631,341
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.7%
3,000 Georgia Power Capital Trust VI, 4.780%, 11/01/42 3,121,314
11,000 PECO Energy Capital Trust IV, 5.750%, 6/15/33 9,970,268
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $908,659,148) 1,001,829,843
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 5.0% (3.5% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 4.7%
18,600 CA Preferred Funding Trust, 7.000%, 1/30/49 19,168,509
45,050 HBOS Capital Funding, 6.850%, 3/01/49 45,564,967
13,500 Lloyds TSB Bank plc, Subordinate Note, 6.900%, 11/22/49 13,981,963
11,000 RBS Capital Trust, Series B, 6.800%, 12/31/49 11,154,330
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.3%
6,300 Old Mutual Capital Funding, Notes, 8.000%, 6/22/53 6,327,128
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $98,443,568) 96,196,897
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 5.3% (3.7% OF TOTAL INVESTMENTS)
AUTOMOBILE - 1.8%
4,000 Ford Motor Company, 7.450%, 7/16/31 4,072,860
7,525 Ford Motor Company, 8.900%, 1/15/32 8,666,121
21,500 Ford Motor Company, 7.400%, 11/01/46 20,704,715
592 General Motors Corporation, 7.375%, 5/23/48 575,008
------------------------------------------------------------------------------------------------------------------------------------
BANKING - 0.4%
7,000 Suntrust Bank, Subordinate Note, 5.450%, 12/01/17 7,310,933
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 3.0%
52,860 General Motors Acceptance Corporation, Notes, 8.000%, 11/01/31 58,137,062
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.1%
2,000 Zurich Reinsurance Centre Holdings Inc., Senior Notes, 7.125%, 10/15/23 1,966,500
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $87,147,053) 101,433,199
--------------------------------------------------------------------------------------------------------------------
26
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.5% (0.3% OF TOTAL INVESTMENTS)
$ 9,051 State Street Bank Repurchase Agreement, 0.920%, dated 1/30/04, due 2/02/04,
============= repurchase price $9,051,694, collateralized by U.S. Treasury Bonds $ 9,051,000
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $9,051,000) 9,051,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,484,030,029) - 141.2% 2,723,991,379
--------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities - 0.3% 5,741,156
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (41.5)% (800,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 1,929,732,535
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(a) Security is eligible for the Dividends Received Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) Preferred Trusts
(SATURNS) Structured Asset Trust Unit Repackaging.
See accompanying notes to financial statements.
27
Nuveen Quality Preferred Income Fund 3 (JHP)
Portfolio of
Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES - 72.0% (49.8% OF TOTAL INVESTMENTS)
AUTOMOBILE - FOREIGN - 0.1%
13,000 Magna International Inc., Series B, 8.875% $ 339,300
------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE PARTS - 0.7%
96,700 Delphi Trust I, 8.250% 2,578,022
------------------------------------------------------------------------------------------------------------------------------------
BANKING - 11.3%
1,000 ABN AMRO North America, 144A, 6.590% (a) 1,063,750
500 ABN AMRO North America, 144A, Series L, 6.460% (a) 531,875
16,800 ASBC Capital I, 7.625% 457,632
5,500 BAC Capital Trust I, 7.000% 148,115
32,700 BAC Capital Trust II, 7.000% 874,398
91,700 BAC Capital Trust III, 7.000% 2,525,418
20,000 BAC Capital Trust IV, 5.875% 509,400
14,400 BancWest Capital I, 9.500% 405,792
29,000 Bank One Capital II, 8.500% 802,140
8,200 Bank One Capital V, 8.000% 223,450
26,300 Bank One Capital Trust VI, 7.200% 704,051
12,000 Chittenden Capital Trust I, 8.000% 323,400
25,600 Citigroup Capital Trust VII, 7.100% 693,504
46,600 Citigroup Capital Trust VIII, 6.950% 1,246,084
Citigroup Inc.:
19,149 Series F, 6.365% (a) 1,072,344
68,500 Series H, 6.231% (a) 3,699,000
58,601 Series M, 5.864% (a) 3,149,804
46,000 Cobank ABC, 144A, 7.000% (a) 2,432,572
52,500 Comerica Capital Trust I, 7.600% 1,423,275
29,500 Compass Capital Trust III, 7.350% 790,305
23,100 First Union Capital II, Series II, 7.500% (CORTS) 627,627
11,300 First Union Institutional Capital II, 8.200% (CORTS) 324,310
31,000 Fleet Capital Trust VI, 8.800% 850,330
108,000 Fleet Capital Trust VII, 7.200% 2,890,080
21,216 Fleet Capital Trust VIII, 7.200% 569,437
16,800 Harris Preferred Capital Corporation, Series A, 7.375% 424,536
28,000 HSBC USA Inc., Series F, 2.860% (a) 1,537,200
25,000 JPMorgan Chase Trust, Series 2002-6, Class A, 7.125% (SATURNS) 666,750
KeyCorp:
6,300 Series 2001-7, 7.750% (CORTS) 168,273
8,000 Series B, 8.250% (CORTS) 217,520
4,800 KeyCorp, 7.500% (PCARS) 130,320
1,600 National Commerce Capital Trust II, 7.700% 43,376
20,000 PNC Capital Trust, 6.125% 506,600
28
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
BANKING (continued)
4,300 SunTrust Capital Trust IV, 7.125% $ 115,756
17,900 SunTrust Capital Trust V, 7.050% 482,405
88,900 USB Capital Trust III, 7.750% 2,426,081
58,100 USB Capital Trust IV, 7.350% 1,559,985
48,800 USB Capital Trust V, 7.250% 1,320,040
18,400 VNB Capital Trust I, 7.750% 499,928
26,700 Washington Mutual Capital Trust I, Series 2001-22, Class A-1, 7.650% (CORTS) 710,087
80,000 Zions Capital Trust B, 8.000% 2,219,200
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 3.5%
48,000 ABN AMRO Capital Fund Trust II, 7.125% 1,215,840
36,300 Banco Totta & Acores Finance, Series A, 8.875% 1,022,074
211,000 Banesto Holdings, Series A-144A, 10.500% 6,672,875
13,000 BCH Capital Ltd., Series B, 9.430% 358,085
47,300 BSCH Finance Ltd., Series Q, 8.625% 1,288,925
26,500 Espirito Santo Overseas, 8.500% 689,265
30,400 National Westminster Bank plc, Series A, 7.875% 772,160
24,700 Westpac Capital Trust I, 8.000% 636,766
------------------------------------------------------------------------------------------------------------------------------------
BROKERAGE - 6.6%
32,000 Bear Stearns Capital Trust III, 7.800% 864,000
8,800 Lehman Brothers Holdings Capital Trust II, Series J, 7.875% 226,600
365,000 Lehman Brothers Holdings Capital Trust III, Series K, 6.375% 9,446,200
20,100 Merrill Lynch Capital Trust II, 8.000% 568,830
31,600 Merrill Lynch Preferred Capital Trust, 7.750% 871,528
17,900 Merrill Lynch Preferred Capital Trust IV, 7.120% 488,491
72,400 Merrill Lynch Preferred Capital Trust V, 7.280% 1,998,240
40,900 Morgan Stanley, 7.050% (PPLUS) 1,101,028
80,000 Morgan Stanley Capital Trust II, 7.250% 2,138,400
250,000 Morgan Stanley Capital Trust III, 6.250% 6,437,500
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - FOREIGN - 0.8%
32,900 EnCana Corporation, 9.500% 873,495
11,100 Suncor Energy Inc., 9.125% 282,162
37,000 Talisman Energy Inc., 9.000% 925,000
34,700 Talisman Energy Inc., 8.900% 883,462
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 6.2%
42,800 CIT Group Incorporated, 7.750% (CORTS) 1,230,500
100,000 Countrywide Capital Trust IV, 6.750% 2,610,000
151,100 Financial Security Assurance Holdings, 6.250% 3,921,045
111,700 Household Capital Trust V, Series X, 10.000% 3,082,920
14,600 Household Capital Trust VI, 8.250% 397,266
100,500 Household Capital Trust VII, 7.500% 2,723,550
115,000 Household Finance Corporation, 6.875% 3,056,700
100,000 SLM Corporation, Series A, 6.970% (a) 5,695,000
29
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 5.1%
36,900 CSFB USA, Series 2002-10, 7.000% (SATURNS) $ 978,219
503,600 ING Group NV, 7.200% 13,884,252
142,900 ING Group NV, 7.050% 3,914,031
------------------------------------------------------------------------------------------------------------------------------------
FOOD - 0.7%
25,000 Dairy Farmers of America Inc., 144A, 7.875% (a) 2,571,875
------------------------------------------------------------------------------------------------------------------------------------
FOOD - FOREIGN - 0.3%
44,500 Grand Metropolitan Delaware LP, 9.420% 1,172,130
------------------------------------------------------------------------------------------------------------------------------------
GAS - 0.3%
27,900 AGL Capital Trust II, 8.000% 761,949
11,400 Dominion CNG Capital Trust I, 7.800% 308,598
------------------------------------------------------------------------------------------------------------------------------------
GAS - FOREIGN - 0.2%
25,700 TransCanada Pipeline, 8.250% 661,518
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL - 0.1%
20,000 Sherwin Williams Company, Series III, 7.250% (CORTS) 525,800
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 1.5%
92,142 AMBAC Financial Group Inc., 5.950% 2,397,535
127,600 AMBAC Financial Group Inc., 5.875% 3,252,524
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 2.2%
2,500 American General Capital Trust I, 7.875% 65,350
2,300 American General Capital Trust III, 8.050% 64,768
130,000 Delphi Financial Group Inc., 8.000% 3,484,000
3,300 Great-West L&A Capital Trust I, Series A, 7.250% 84,777
103,700 Lincoln National Capital Trust V, Series E, 7.650% 2,850,713
54,600 PLC Capital Trust III, 7.500% 1,467,648
4,800 PLC Capital Trust IV, 7.250% 129,120
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 0.7%
46,200 Hartford Capital Trust III, Series C, 7.450% 1,241,394
14,000 Safeco Capital Trust I, 8.700% (CORTS) 379,960
4,600 Safeco Capital Trust I, Series 2001-4, 8.750% (CORTS) 124,200
32,200 Safeco Corporation, Series 2001-7, 8.250% (SATURNS) 889,364
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 2.0%
258,671 EverestRe Group Limited, 7.850% 7,227,268
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 10.4%
129,200 Ace Ltd., Series C, 7.800% 3,593,052
418,310 Converium Finance, 8.250% 11,545,356
55,700 PartnerRe Limited, 7.900% 1,522,281
140,000 PartnerRe Limited, Series C, 6.750% 3,690,400
RenaissanceRe Holdings Ltd.:
41,500 Series A, 8.100% 1,152,870
255,000 Series B, 7.300% 6,923,250
XL Capital Ltd.:
61,800 Series A, 8.000% 1,735,962
289,400 Series B, 7.625% 7,993,228
30
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
OIL - FOREIGN - 0.9%
121,000 Nexen Inc., 7.350% $ 3,200,450
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - FOREIGN - 0.0%
4,500 Rhone-Poulenc Overseas, Series A, 8.125% 114,795
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 12.9%
3,900 AvalonBay Communities Inc., Series H, 8.700% 111,930
144,200 CarrAmerica Realty Corporation, Series E, 7.500% 3,878,980
Developers Diversified Realty Corporation:
80,000 Series G, 8.000% 2,164,800
30,000 Series H, 7.375% 803,700
11,200 Equity Office Properties Trust, Series G, 7.750% 309,232
Equity Residential Properties Trust:
22,900 Series B 9.125% 626,773
18,500 Series C, 9.125% 516,520
18,000 Series D, 8.600% 504,180
First Industrial Realty Trust Inc.:
5,100 Series C, 8.625% 142,061
248,100 Series D, 7.950% 6,269,487
163,300 Series E, 7.900% 4,146,187
HRPT Properties Trust:
151,400 Series A, 9.875% 4,174,098
213,307 Series B, 8.750% 5,953,398
New Plan Excel Realty Trust:
21,000 Series D, 7.800% 1,143,845
10,000 Series E, 7.625% 274,000
20,000 Prologis Trust, Series G, 6.750% 501,400
Public Storage Inc.:
12,900 Series L, 8.250% 327,015
1,600 Series M, 8.750% 41,712
32,400 Series Q, 8.600% 887,436
66,400 Series R, 8.000% 1,804,088
12,100 Series S, 7.875% 327,426
2,500 Series T, 7.625% 67,500
17,000 Series V, 7.500% 462,230
Simon Property Group Inc.:
4,500 Series F, 8.750% 124,155
68,600 Series G, 7.890% 3,773,000
Vornado Realty Trust:
1,700 Series B, 8.500% 43,945
13,400 Series C, 8.500% 341,700
252,700 Wachovia Preferred Funding Corporation, 7.250% 7,303,030
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.3%
12,900 BellSouth Inc., 7.000% (CORTS) 341,076
69,101 Telephone and Data Systems Inc., 7.600% 1,858,817
157,500 United States Cellular Corporation, 8.750% 4,543,875
24,300 Verizon Communications, 7.625% (CORTS) 669,222
30,000 Verizon Communications, 6.200% (CBTCS) 753,000
12,400 Verizon New England Inc., Series B, 7.000% 328,600
31
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
MARKET
SHARES DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 1.3%
67,700 Fannie Mae, 5.125% (a) $ 3,307,145
23,900 Federal Home Loan Mortgage Corporation, 5.000% (a) 1,130,470
18,300 Tennessee Valley Authority, Series D, 6.750% 479,460
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 1.9%
2,900 Detroit Edison Company, 7.625% 75,110
53,100 Entergy Louisiana Inc., 7.600% 1,452,285
203,447 Entergy Mississippi Inc., 7.250% 5,563,258
1,500 PSO Capital Trust I, Series A, 8.000% 37,950
------------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (cost $250,937,523) 264,234,112
--------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED SECURITIES - 8.5% (5.9% OF TOTAL INVESTMENTS)
BANKING - 0.6%
61,000 Citigroup Global Markets, 2.000% 2,377,353
------------------------------------------------------------------------------------------------------------------------------------
GAS - 1.5%
100,000 Keyspan Corporation, 8.750% 5,400,000
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - 0.0%
5,000 PMI Group Inc., 5.875% 128,700
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 0.2%
12,200 PartnerRe Limited, 8.000% 697,230
------------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS - 0.8%
58,000 Baxter International Inc., 7.000% 2,995,700
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.9%
118,500 Alltel Corporation, 7.750% 5,984,250
40,700 Citizens Communications Company, 6.750% 982,091
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 3.5%
81,900 Ameren Corporation, 9.750% 2,391,480
6,700 American Electric Power, 9.250% 325,017
102,400 Dominion Resources Inc., 8.750% 5,770,240
66,500 Public Service Enterprise Group, 10.250% 4,231,395
------------------------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Securities (cost $28,401,779) 31,283,456
--------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - HYBRID SECURITIES - 4.5% (3.1% OF TOTAL INVESTMENTS)
REAL ESTATE INVESTMENT TRUSTS - 2.0%
70 Union Planters Preferred Fund, Series 144A, 7.750% 7,306,250
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.5%
7,260 Centaur Funding Corporation, Series 144A, Series B, 9.080% 9,290,535
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Hybrid Securities (cost $14,286,149) 16,596,785
--------------------------------------------------------------------------------------------------------------------
32
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED SECURITIES - 48.8% (33.7% OF TOTAL INVESTMENTS)
BANKING - 17.8%
$ 2,000 AgFirst Farm Credit Bank, 7.300%, 10/15/49 $ 2,036,200
5,000 Ahmanson Capital Trust I, 8.360%, 12/01/26 5,809,850
1,000 BankAmerica Capital II, Series 2, 8.000%, 12/15/26 1,159,344
500 BankBoston Capital Trust II, Series B, 7.750%, 12/15/26 561,881
1,000 BT Capital Trust, Series B1, 7.900%, 1/15/27 1,141,496
500 BT Preferred Capital Trust II, 7.875%, 2/25/27 568,146
1,000 First Chicago NBD Institutional Capital, 7.950%, 12/01/26 1,136,650
1,000 First Empire Capital Trust I, 8.234%, 2/01/27 1,167,494
500 First Midwest Bancorp Inc., Series 144A, 6.950%, 12/01/33 536,693
8,485 First Union Capital Trust II, Series A, 7.950%, 11/15/29 10,555,739
9,000 JPM Capital Trust I, 7.540%, 1/15/27 10,009,593
4,000 North Fork Capital Trust I, Capital Securities, 8.700%, 12/15/26 4,803,244
1,000 North Fork Capital Trust II, 8.000%, 12/15/27 1,128,338
3,150 Peoples Heritage Capital Trust I, Series B, 9.060%, 2/01/27 3,671,086
10,200 PNC Institutional Capital Trust B, Series 144A, 8.315%, 5/15/27 12,011,795
4,600 Union Planters Capital Trust A, 8.200%, 12/15/26 5,175,925
3,000 Zions Institutional Capital Trust, Series A, 8.536%, 12/15/26 3,507,915
------------------------------------------------------------------------------------------------------------------------------------
BANKING - FOREIGN - 6.0%
8,000 Abbey National Capital Trust I, 8.963%, 6/30/20 10,807,560
1,200 Barclays Bank plc, Series 144A, 8.550%, 6/15/49 1,496,141
8,692 Barclays Bank plc, Series 144A, 6.860%, 9/29/49 9,659,446
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 1.4%
4,500 Phillips 66 Capital Trust II, 8.000%, 1/15/37 5,150,129
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 0.3%
1,000 Countrywide Capital Trust I, 8.000%, 12/15/26 1,108,804
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 1.4%
2,000 AB Svensk Exportkredit, 6.375%, 10/27/49 2,065,512
2,500 St. George Funding Company LLC, 8.485%, 6/30/47 2,959,573
------------------------------------------------------------------------------------------------------------------------------------
GAS - 2.0%
6,500 KN Capital Trust III, 7.630%, 4/15/28 7,358,397
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - FINANCIAL - 1.5%
5,000 Berkeley Capital Trust, 8.197%, 12/20/45 5,418,675
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - 3.4%
1,000 American General Institutional Capital, 8.125%, 3/15/46 1,308,288
10,000 MIC Financing Trust I, 8.375%, 2/01/27 11,207,360
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - LIFE - FOREIGN - 3.2%
10,000 Sun Life Canada Capital Trust, Capital Securities, 8.526%, 5/06/47 11,888,160
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - MULTILINE - 7.4%
10,038 Safeco Capital Trust I, Capital Securities, 8.072%, 7/15/37 11,588,098
13,500 Zurich Capital Trust I, 8.376%, 6/01/37 15,427,422
33
Nuveen Quality Preferred Income Fund 3 (JHP) (continued)
Portfolio of Investments January 31, 2004 (Unaudited)
PRINCIPAL MARKET
AMOUNT (000) DESCRIPTION(1) VALUE
------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - PROPERTY AND CASUALTY - FOREIGN - 2.2%
$ 3,450 Ace Capital Trust II, 9.700%, 4/01/30 $ 4,694,305
3,000 RenaissanceRe Capital Trust, 8.540%, 3/01/27 3,362,841
------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - OTHER - 0.4%
1,500 Mangrove Bay, Series 144A, Class 3, 6.102%, 7/15/33 1,517,250
------------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOAN - THRIFT - 1.4%
4,225 Dime Capital Trust I, Series A, 9.330%, 5/06/27 5,258,046
------------------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY - 0.2%
700 Farm Credit Bank of Texas, 7.561%, 11/05/49 726,268
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 0.2%
1,000 PECO Energy Capital Trust IV, 5.750%, 6/15/33 906,388
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred Securities (cost $166,473,192) 178,890,052
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL PREFERRED - EURO-MARKET LISTED SECURITIES - 5.4% (3.7% OF TOTAL INVESTMENTS)
BANKING - FOREIGN - 4.5%
4,000 C.A. Preferred Funding Trust, 7.000%, 1/30/49 4,122,260
6,600 HBOS Capital Funding LP, Notes, 6.850%, 3/01/49 6,675,445
2,500 Lloyds TSB Bank plc, Subordinate Note, 6.900%, 11/22/49 2,589,253
3,000 RBS Capital Trust B, 6.800%, 12/31/49 3,042,090
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - FOREIGN - 0.9%
3,200 Old Mutual Capital Funding, Notes, 8.000%, 6/22/53 3,213,779
------------------------------------------------------------------------------------------------------------------------------------
Total Capital Preferred - Euro-Market Listed Securities (cost $20,033,406) 19,642,827
--------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS - 4.8% (3.3% OF TOTAL INVESTMENTS)
AUTOMOBILE - 1.6%
1,000 Ford Motor Company, 7.450%, 7/16/31 1,018,215
5,100 Ford Motor Company, Debenture, 7.400%, 11/01/46 4,911,351
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL - 3.2%
10,500 General Motors Acceptance Corporation, Notes, 8.000%, 11/01/31 11,548,221
------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $15,635,374) 17,477,787
--------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 0.7% (0.5% OF TOTAL INVESTMENTS)
2,462 State Street Bank Repurchase Agreement, 0.920%, dated 1/30/04, due 2/02/04,
============= repurchase price $2,462,189, collateralized by U.S. Treasury Bonds 2,462,000
--------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $2,462,000) 2,462,000
--------------------------------------------------------------------------------------------------------------------
Total Investments (cost $498,229,423) - 144.7% 530,587,019
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.6% 2,218,879
--------------------------------------------------------------------------------------------------------------------
FundPreferred Shares, at Liquidation Value - (45.3)% (166,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 366,805,898
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares unless
otherwise noted.
(a) Security is eligible for the Dividends Received Deduction.
(CBTCS) Corporate Backed Trust Certificates.
(CORTS) Corporate Backed Trust Securities.
(PCARS) Public Credit and Repackaged Securities.
(PPLUS) Preferred Trusts
(SATURNS) Structured Asset Trust Unit Repackaging.
See accompanying notes to financial statements.
34
Statement of
ASSETS AND LIABILITIES January 31, 2004 (Unaudited)
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $1,315,099,296, $2,484,030,029 and
$498,229,423, respectively) $1,421,996,809 $2,723,991,379 $530,587,019
Cash -- 290 135
Receivables:
Dividends 2,813,771 5,947,826 1,244,025
Interest 8,012,052 15,123,091 2,870,734
Investments sold 539,065 290,398 159,719
Other assets 42,437 73,541 1,602
------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,433,404,134 2,745,426,525 534,863,234
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,552,294 5,483,451 1,022,294
Interest rate swaps, at value 10,044,638 8,533,812 647,765
Accrued expenses:
Management fees 667,647 1,211,067 260,037
Other 215,409 378,832 109,744
FundPreferred share dividends payable 51,140 86,828 17,496
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,531,128 15,693,990 2,057,336
------------------------------------------------------------------------------------------------------------------------------------
FundPreferred shares, at liquidation value 440,000,000 800,000,000 166,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 979,873,006 $1,929,732,535 $366,805,898
====================================================================================================================================
Common shares outstanding 64,423,417 119,523,272 23,629,747
====================================================================================================================================
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding) $ 15.21 $ 16.15 $ 15.52
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 644,234 $ 1,195,233 $ 236,297
Paid-in surplus 910,956,929 1,692,640,157 334,123,352
Undistributed (Over-distribution of) net investment income (1,413,445) (1,567,505) (48,108)
Accumulated net realized gain (loss) from investments (27,241,287) 5,090,279 598,813
Net unrealized appreciation of investments and interest rate swap transactions 96,926,575 232,374,371 31,895,544
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $ 979,873,006 $1,929,732,535 $366,805,898
====================================================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited
FundPreferred shares Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
35
Statement of
OPERATIONS Six Months Ended January 31, 2004 (Unaudited)
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $6,944, $0, and $0, respectively) $27,621,950 $ 52,010,268 $10,702,651
Interest 21,391,286 41,215,541 7,467,225
------------------------------------------------------------------------------------------------------------------------------------
Total investment income 49,013,236 93,225,809 18,169,876
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 6,110,467 11,336,460 2,351,069
Net interest expense on interest rate swap transactions 4,489,376 6,682,208 1,310,418
FundPreferred shares - auction fees 554,521 1,008,219 209,206
FundPreferred shares - dividend disbursing agent fees 14,276 20,145 6,805
Shareholders' servicing agent fees and expenses 7,599 5,538 1,669
Custodian's fees and expenses 147,102 272,338 61,006
Trustees' fees and expenses 24,267 52,700 7,434
Professional fees 72,923 87,293 24,192
Shareholders' reports - printing and mailing expenses 103,939 187,471 32,203
Stock exchange listing fees 12,278 41,602 7,828
Investor relations expense 57,423 104,350 38,105
Other expenses 50,730 84,257 16,101
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 11,644,901 19,882,581 4,066,036
Custodian fee credit (1,486) (984) (1,130)
Expense reimbursement (2,229,437) (4,283,218) (836,837)
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 9,413,978 15,598,379 3,228,069
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 39,599,258 77,627,430 14,941,807
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain (loss) from investments 3,279,938 8,070,427 189,049
Change in net unrealized appreciation (depreciation) of investments 74,645,894 153,966,425 32,315,725
Change in net unrealized appreciation (depreciation) of interest rate
swap transactions (3,217,329) (7,900,019) (2,045,737)
------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 74,708,503 154,136,833 30,459,037
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO FUNDPREFERRED SHAREHOLDERS
From net investment income (2,588,573) (4,683,169) (980,273)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable to Common shares from operations $111,719,188 $227,081,094 $ 44,420,571
====================================================================================================================================
See accompanying notes to financial statements.
36
Statement of
Changes in Net Assets (Unaudited)
QUALITY PREFERRED QUALITY PREFERRED QUALITY PREFERRED
INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP)
----------------------------- -------------------------------- ------------------------------
FOR THE FOR THE
PERIOD 9/24/02 PERIOD 12/18/02
SIX MONTHS SIX MONTHS (COMMENCEMENT SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED ENDED OF OPERATIONS) ENDED OF OPERATIONS)
1/31/04 7/31/03 1/31/04 THROUGH 7/31/03 1/31/04 THROUGH 7/31/03
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 39,599,258 $ 83,719,154 $ 77,627,430 $ 120,895,551 $ 14,941,807 $ 15,853,471
Net realized gain (loss)
from investments 3,279,938 (30,328,278) 8,070,427 9,651,211 189,049 3,540,303
Change in net unrealized
appreciation (depreciation)
of investments 74,645,894 47,552,557 153,966,425 85,994,925 32,315,725 41,871
Change in net unrealized
appreciation (depreciation)
of interest rate
swap transactions (3,217,329) (6,753,609) (7,900,019) 313,040 (2,045,737) 1,583,685
Distributions to FundPreferred
shareholders from
net investment income (2,588,573) (6,004,164) (4,683,169) (8,370,051) (980,273) (948,183)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares
from operations 111,719,188 88,185,660 227,081,094 208,484,676 44,420,571 20,071,147
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (40,569,771) (80,491,725) (75,299,662) (112,911,526) (14,596,182) (14,584,390)
From accumulated net
realized gains
from investments -- -- (11,856,709) -- (2,909,963) --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets
applicable to
Common shares from
distributions
to Common shareholders (40,569,771) (80,491,725) (87,156,371) (112,911,526) (17,506,145) (14,584,390)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Common shares:
Net proceeds from sale
of shares -- (119,042) (1,043) 1,708,927,042 105,843 337,150,050
Net proceeds from shares
issued to
shareholders due to
reinvestment of distributions 977,167 29,383,959 -- 1,703,414 286,966 351,072
FundPreferred shares offering costs -- (9,218,088) -- (16,495,026) -- (3,589,491)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
applicable to Common shares from
capital share transactions 977,167 20,046,829 (1,043) 1,694,135,430 392,809 333,911,631
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable
to Common shares 72,126,584 27,740,764 139,923,680 1,789,708,580 27,307,235 339,398,388
Net assets applicable to
Common shares
at the beginning of period 907,746,422 880,005,658 1,789,808,855 100,275 339,498,663 100,275
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to
Common shares
at the end of period $979,873,006 $907,746,422 $1,929,732,535 $1,789,808,855 $366,805,898 $339,498,663
====================================================================================================================================
Undistributed net investment
income at the
end of period $ (1,413,445) $ 2,145,641 $ (1,567,505) $ 787,896 $ (48,108) $ 586,540
====================================================================================================================================
See accompanying notes to financial statements.
37
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). The Funds are registered under the Investment Company Act of 1940, as
amended, as non-diversified, closed-end management investment companies.
Prior to the commencement of operations of Quality Preferred Income 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., and the recording of the organization
expenses ($15,000 and $11,500, respectively) and their reimbursement by Nuveen
Investments, LLC, also a wholly owned subsidiary of Nuveen Investments, Inc.
Each Fund seeks to provide high current income consistent with capital
preservation by investing primarily in a portfolio of preferred securities, debt
securities including convertible debt securities and convertible preferred
securities.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Exchange-listed securities are generally valued at the last sales price on the
securities exchange on which such securities are primarily traded. Securities
traded on a securities exchange for which there are no transactions on a given
day or securities not listed on a securities exchange are valued at the mean of
the closing bid and asked prices. Securities traded on Nasdaq are valued at the
Nasdaq Official Closing Price. The prices of fixed-income securities are
generally provided by an independent pricing service approved by the Funds'
Board of Trustees and based on the mean between the bid and asked prices. When
price quotes are not readily available for fixed income securities, the pricing
service establishes fair market value using a wide range of market data
including yields or prices of securities of comparable quality, type of issue,
coupon, maturity and rating, indications of value from security dealers,
evaluations of anticipated cash flows or collateral, general market conditions
and other information and analysis, including the obligor's credit
characteristics considered relevant by the pricing service. If it is determined
that market prices for a security are unavailable or inappropriate, the Board of
Trustees of the Funds, or its designee, may establish a fair value for the
security. Short-term securities are valued at amortized cost, which approximates
market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At January 31, 2004,
there were no such outstanding purchase commitments in any of the Funds.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income, which
includes the amortization of premiums and accretion of discounts for financial
reporting purposes, is recorded on an accrual basis (see Dividends and
Distributions to Common Shareholders for REIT income recognition policy).
38
Income Taxes
Each Fund intends 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.
The Funds make certain adjustments, at different points in time, to the
character of both (a) the distributions received by the Funds from REITs, and
(b) dividends to Fund shareholders to the extent that such dividends are
attributable to REIT distributions received by the Funds.
Characterization of Receipts from REITs - Distributions from REITs are generally
comprised of investment income, long-term and short-term capital gains, and/or a
return of REIT capital. The actual character of the amounts received by a Fund
from REITs during the period is not known until after the fiscal year-end of the
Funds. For the six months ended January 31, 2004, each Fund applied percentage
estimates (of whether the receipts represented investment income, long-term and
short-term capital gains, or return of capital), based on historical experience,
to its receipts from the REITs and treated as income in the Statement of
Operations only the amount of investment income so calculated. Each Fund will
adjust that estimated breakdown of income type (and consequently its net
investment income) as necessary in the subsequent calendar year when the REITs
inform their shareholders of the actual breakdown of income type.
Characterization of Fund Distributions to Shareholders Derived from
Distributions from REITs - During the six months ended January 31, 2004, each
Fund treated each distribution to its shareholders, to the extent that such
distribution was attributable to receipts from portfolio REITs, as being
entirely from net investment income, because the character of such distributions
made during the period is not known until after the fiscal year-end of the
Funds. Each Fund recharacterizes those distributions as being from ordinary
income, long-term and short-term capital gains, and return of capital, if
necessary, in the subsequent calendar year, based upon the income type breakdown
information conveyed at that time by the REITs whose securities are held in the
Fund's portfolio. Consequently, the financial statements may reflect an
over-distribution of net investment income that is at least partly attributable
to the fact that, as of the date of the financial statements, some of the
amounts received by the Funds from the portfolio REITs, but none of the
dividends paid by the Funds to shareholders from the portfolio REITs during the
period, were treated as something other than ordinary income.
Distributions to Common shareholders of net investment income and net realized
capital gains, if any, are recorded on the ex-dividend date. The amount and
timing of distributions are determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted in
the United States.
FundPreferred Shares
The Funds have issued and outstanding $25,000 stated value FundPreferred shares.
Each Fund's FundPreferred shares are issued in more than one Series. The
dividend rate on each Series may change every seven days, as set pursuant to a
dutch auction process by the auction agent, and is payable at or near the end of
each rate period. The number of shares outstanding, by Series and in total, for
each Fund is as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Number of shares:
Series M 3,520 4,800 3,320
Series T 3,520 4,800 --
Series T2 -- 4,000 --
Series W 3,520 4,800 --
Series TH 3,520 4,800 3,320
Series TH2 -- 4,000 --
Series F 3,520 4,800 --
--------------------------------------------------------------------------------
Total 17,600 32,000 6,640
================================================================================
Effective August 22, 2002, Quality Preferred Income (JTP) issued 3,520 Series M,
3,520 Series T, 3,520 Series W, 3,520 Series TH, and 3,520 Series F, $25,000
stated value FundPreferred shares.
Effective October 18, 2002, Quality Preferred Income 2 (JPS) issued 4,800 Series
M, 4,800 Series T, 4,800 Series W, 4,800 Series TH, and 4,800 Series F, $25,000
stated value FundPreferred shares. In addition, effective November 15, 2002,
Quality Preferred Income 2 (JPS) issued 4,000 Series T2, and 4,000 Series TH2,
$25,000 stated value FundPreferred shares.
Effective February 14, 2003, Quality Preferred Income 3 (JHP) issued 3,320
Series M, and 3,320 Series TH, $25,000 stated value FundPreferred shares.
39
Notes to
Financial Statements (Unaudited) (continued)
Interest Rate Swap Transactions
The Funds are authorized to enter into hedging transactions, including interest
rate swap transactions. The Funds use interest rate swaps with the intent to
reduce or eliminate the risk that an increase in short-term interest rates could
have on Common share net earnings as a result of leverage. Interest rate swaps
involve each Fund's agreement with the swap counterparty to pay a fixed rate
payment in exchange for the counterparty paying the Fund a variable rate payment
that is intended to approximate each Fund's variable rate payment obligation on
FundPreferred shares or any variable rate borrowing. The payment obligation is
based on the notional amount of the swap. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of credit loss with respect to the swap counterparty on interest rate swaps
is limited to the net amount of interest payments that each Fund is to receive.
The Funds have instructed the custodian to segregate assets with a current value
at least equal to the amount of the net payment obligations under any interest
rate swap transactions. Interest rate swap positions are marked to market daily.
Although there are economic advantages of entering into interest rate swap
transactions, there are also additional risks. The Funds help manage the credit
risks associated with interest rate swap transactions by entering into
agreements only with counterparties the Adviser believes have the financial
resources to honor their obligations and by having the Adviser continually
monitor the financial stability of the swap counterparties.
At January 31, 2004, Quality Preferred Income (JTP) had open interest rate swap
agreements with Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
---------------------------------------------------------------------------------------------
$110,000,000 3.1300% 1.1000% 8/29/05 $(2,245,505)
110,000,000 3.8600 1.1000 8/29/07 (3,498,650)
110,000,000 4.3500 1.1000 8/29/09 (4,226,783)
---------------------------------------------------------------------------------------------
$(9,970,938)
=============================================================================================
*Based on LIBOR (London Interbank Offered Rate)
At January 31, 2004, 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% 1.1200% 11/06/05 $(2,329,923)
200,000,000 3.3750 1.1200 11/06/07 (2,538,387)
200,000,000 3.9100 1.1200 11/06/09 (2,718,669)
---------------------------------------------------------------------------------------------
$(7,586,979)
=============================================================================================
*Based on LIBOR (London Interbank Offered Rate)
40
At January 31, 2004, Quality Preferred Income 3 (JHP) had open interest rate
swap agreements with Citibank NA as follows:
UNREALIZED
NOTIONAL TERMINATION APPRECIATION
AMOUNT FIXED RATE FLOATING RATE* DATE (DEPRECIATION)
---------------------------------------------------------------------------------------------
$42,000,000 2.4125% 1.1200% 3/06/06 $(192,936)
42,000,000 3.2550 1.1200 3/06/08 (124,194)
42,000,000 3.8150 1.1200 3/06/10 (144,922)
---------------------------------------------------------------------------------------------
$(462,052)
=============================================================================================
*Based on LIBOR (London Interbank Offered Rate)
Repurchase Agreements
In connection with transactions in repurchase agreements, it is each Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral may be delayed or limited.
Other Derivative Financial Instruments
The Funds may invest in certain derivative financial instruments for the purpose
of hedging their portfolios. The specific derivative instruments will be limited
to U.S. Treasury security or U.S. Government Agency security futures contracts
and options on U.S. Treasury security or U.S. Government Agency security futures
contracts. Although the Funds are authorized to invest in such financial
instruments, and may do so in the future, they did not make any such investments
during the six months ended January 31, 2004.
Offering Costs
Nuveen Investments, LLC has agreed to reimburse all organization expenses
(approximately $15,000, $15,000 and $11,500, respectively) and pay all Common
shares offering costs (other than the sales load) that exceed $.03 per Common
share for Quality Preferred Income (JTP), Quality Preferred Income 2 (JPS) and
Quality Preferred Income 3 (JHP). Quality Preferred Income's (JTP), Quality
Preferred Income 2's (JPS) and Quality Preferred Income 3's (JHP) share of
Common shares offering costs ($1,389,616, $1,479,001 and $527,608, respectively)
were recorded as a reduction of the proceeds from the sale of the Common shares.
Costs incurred by Quality Preferred Income (JTP), Quality Preferred Income 2
(JPS) and Quality Preferred Income 3 (JHP) in connection with their offering of
FundPreferred shares ($9,218,088, $16,495,026, and $3,589,491, respectively)
were recorded as a reduction to paid-in surplus.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
2. FUND SHARES
Transactions in Common and FundPreferred shares were as follows:
QUALITY PREFERRED QUALITY PREFERRED QUALITY PREFERRED
INCOME (JTP) INCOME 2 (JPS) INCOME 3 (JHP)
------------------------ ---------------------------- ----------------------------
FOR THE FOR THE
PERIOD 9/24/02 PERIOD 12/18/02
SIX MONTHS SIX MONTHS (COMMENCEMENT SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED ENDED OF OPERATIONS) ENDED OF OPERATIONS)
1/31/04 7/31/03 1/31/04 THROUGH 7/31/03 1/31/04 THROUGH 7/31/03
------------------------------------------------------------------------------------------------------------------
Common shares:
Shares sold -- -- -- 119,400,000 -- 23,580,000
Shares issued to
shareholders due to
reinvestment of
distributions 66,713 2,049,704 -- 116,272 19,046 23,701
------------------------------------------------------------------------------------------------------------------
66,713 2,049,704 -- 119,516,272 19,046 23,603,701
==================================================================================================================
FundPreferred shares sold -- 17,600 -- 32,000 -- 6,640
==================================================================================================================
41
Notes to
Financial Statements (Unaudited) (continued)
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities but excluding short-term investments)
of investment securities and U.S. Government and agency obligations during the
six months ended January 31, 2004, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
----------------------------------------------------------------------------------------------------------
Purchases:
Investment securities $131,897,030 $194,856,139 $42,267,228
U.S. Government and agency obligations 1,207,688 9,560,859 1,107,047
Sales and maturities:
Investment securities 132,688,766 203,415,345 41,950,800
U.S. Government and agency obligations 1,226,250 9,707,813 1,110,828
==========================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis based on the
information currently available to the Funds. Differences between amounts for
financial statement and federal income tax purposes are primarily due to the
recognition of income on certain securities, which are treated as debt
securities for income tax purposes and equity securities for financial statement
purposes, and timing differences in recognizing certain gains and losses on
security transactions.
At January 31, 2004, the cost of investments were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Cost of investments $1,316,199,638 $2,485,246,169 $498,366,882
================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 2004, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Gross unrealized:
Appreciation $110,287,541 $243,696,138 $33,175,339
Depreciation (4,490,370) (4,950,928) (955,202)
--------------------------------------------------------------------------------
Net unrealized appreciation
of investments $105,797,171 $238,745,210 $32,220,137
================================================================================
42
The tax components of undistributed net ordinary income and net realized gains
at July 31, 2003, the Funds' last fiscal year end, were as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Undistributed net ordinary
income * $17,864,493 $25,684,356 $6,530,948
Undistributed net long-term
capital gains -- -- --
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended July 31,
2003, the Funds' last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Distributions from net
ordinary income * $79,694,828 $108,646,966 $13,076,411
Distributions from net long-term
capital gains -- -- --
================================================================================
*Net ordinary income consists of net taxable income derived from dividends,
interest and net short-term capital gains, if any.
At July 31, 2003, the Funds' last fiscal year end, Quality Preferred Income
(JTP) had an unused capital loss carryforward of $1,653,878 available to be
applied against future capital gains, if any. If not applied, the carryforward
will expire in the year 2011.
Quality Preferred Income (JTP) elected to defer net realized losses from
investments incurred from November 1, 2002 through July 31, 2003 ("post-October
losses") in accordance with Federal income tax regulations. Quality Preferred
Income (JTP) had $28,137,157 of post-October losses that were treated as having
arisen on the first day of the current fiscal year.
Calculation of certain of the amounts presented above (namely, undistributed net
ordinary income for tax purposes) involves the application of complex aspects of
the Internal Revenue Code to certain securities held by the Funds. In
calculating the amount of taxable income derived from these securities,
management made assumptions as to the correct tax treatment of certain of those
securities and made estimates about the tax characteristics of income received
from those securities, based on information currently available to the Funds.
The use of these assumptions and estimates will not affect the qualification of
the Funds as regulated investment companies under Subchapter M of the Internal
Revenue Code, nor is it expected that these assumptions and estimates will be
used in computing taxable income for purposes of preparing the federal and state
income and excise tax returns.
43
Notes to
Financial Statements (Unaudited) (continued)
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, if any.
AVERAGE DAILY MANAGED ASSETS MANAGEMENT FEE
--------------------------------------------------------------------------------
For the first $500 million .9000%
For the next $500 million .8750
For the next $500 million .8500
For the next $500 million .8250
For Managed Assets over $2 billion .8000
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Adviser has entered
into Sub-Advisory Agreements with Spectrum Asset Management, Inc. ("Spectrum"),
under which Spectrum manages the investment portfolios of the Funds. Spectrum is
compensated for its services to the Funds from the management fee paid to the
Adviser. Spectrum also receives compensation on certain portfolio transactions
for providing brokerage services to the Funds.
The Funds pay no compensation directly to those of its Trustees who are
affiliated with the Adviser or to its officers, all of whom receive remuneration
for their services to the Funds from the Adviser or its affiliates.
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.
44
For the first eight years of Quality Preferred Income 2's (JPS) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 2 (JPS) for any
portion of its fees and expenses beyond September 30, 2010.
For the first eight years of Quality Preferred Income 3's (JHP) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily
Managed Assets, for fees and expenses in the amounts and for the time periods
set forth below:
YEAR ENDING YEAR ENDING
DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
*From the commencement of operations.
The Adviser has not agreed to reimburse Quality Preferred Income 3 (JHP) for any
portion of its fees and expenses beyond December 31, 2010.
6. SUBSEQUENT EVENTS - DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their net investment
income which were paid on April 1, 2004, to shareholders of record on March 15,
2004:
QUALITY QUALITY QUALITY
PREFERRED PREFERRED PREFERRED
INCOME INCOME 2 INCOME 3
(JTP) (JPS) (JHP)
--------------------------------------------------------------------------------
Dividend per share $.1050 $.1050 $.1030
================================================================================
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:
2004(d) $14.10 $ .61 $1.17 $(.04) $-- $1.74 $ (.63) $-- $ (.63)
2003 14.12 1.31 .16 (.09) -- 1.38 (1.25) -- (1.25)
2002(a) 14.33 .06 (.25) -- -- (.19) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) 14.97 .65 1.30 (.04) -- 1.91 (.63) (.10) (.73)
2003(b) 14.33 1.02 .79 (.07) -- 1.74 (.95) -- (.95)
QUALITY PREFERRED
INCOME 3 (JHP)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) 14.38 .63 1.29 (.04) -- 1.88 (.62) (.12) (.74)
2003(c) 14.33 .67 .22 (.04) -- .85 (.62) -- (.62)
====================================================================================================================================
Total Returns
--------------------
Based
Offering on
Costs and Ending Common
FundPreferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
======================================================================================
QUALITY PREFERRED
INCOME (JTP)
--------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) $-- $15.21 $15.87 13.45% 12.54%
2003 (.15) 14.10 14.59 4.95 9.15
2002(a) (.02) 14.12 15.15 1.00 (1.47)
QUALITY PREFERRED
INCOME 2 (JPS)
--------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) -- 16.15 15.89 13.65 12.98
2003(b) (.15) 14.97 14.65 4.02 11.22
QUALITY PREFERRED
INCOME 3 (JHP)
--------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) -- 15.52 15.48 13.18 13.31
2003(c) (.18) 14.38 14.36 (.19) 4.62
======================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
------------------------------ --------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
========================================================================================================================
QUALITY PREFERRED
INCOME (JTP)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) $ 979,873 2.44%* 7.84%* 1.97%* 8.30%* 10%
2003 907,746 2.38 8.84 1.91 9.31 45
2002(a) 880,006 .96* 4.51* .64* 4.83* 1
QUALITY PREFERRED
INCOME 2 (JPS)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) 1,929,733 2.12* 7.81* 1.66* 8.27* 8
2003(b) 1,789,809 1.99* 7.59* 1.54* 8.04* 35
QUALITY PREFERRED
INCOME 3 (JHP)
------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2004(d) 366,806 2.28* 7.90* 1.81* 8.37* 8
2003(c) 339,499 1.97* 7.14* 1.53* 7.58* 57
========================================================================================================================
FundPreferred Shares at End of Period
---------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
==================================================================
QUALITY PREFERRED
INCOME (JTP)
------------------------------------------------------------------
Year Ended 7/31:
2004(d) $440,000 $25,000 $80,675
2003 440,000 25,000 76,577
2002(a) -- -- --
QUALITY PREFERRED
INCOME 2 (JPS)
------------------------------------------------------------------
Year Ended 7/31:
2004(d) 800,000 25,000 85,304
2003(b) 800,000 25,000 80,932
QUALITY PREFERRED
INCOME 3 (JHP)
------------------------------------------------------------------
Year Ended 7/31:
2004(d) 166,000 25,000 80,242
2003(c) 166,000 25,000 76,129
==================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and
changes in stock price per share. Total Return on Common Share Net Asset
Value is the combination of reinvested dividend income at net asset value,
reinvested capital gains distributions at net asset value, if any, and
changes in Common share net asset value per share. Total returns are not
annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to FundPreferred
shareholders; income ratios reflect income earned on assets attributable to
FundPreferred shares. Each Ratio of Expenses to Average Net Assets
Applicable to Common Shares and each Ratio of Net Investment Income to
Average Net Assets Applicable to Common Shares includes the effect of the
interest expense paid on interest rate swap transactions as follows:
Ratio of
Net Interest
Expense
to Average
Net Assets
Applicable to
Common Shares
-------------
QUALITY PREFERRED INCOME (JTP)
2004(d) .94%*
2003 .80
2002(a) --
QUALITY PREFERRED INCOME 2 (JPS)
2004(d) .71*
2003(b) .58
QUALITY PREFERRED INCOME 3 (JHP)
2004(d) .73*
2003(c) .51
(a) For the period June 25, 2002 (commencement of operations) through July 31,
2002.
(b) For the period September 24, 2002 (commencement of operations) through July
31, 2003.
(c) For the period December 18, 2002 (commencement of operations) through July
31, 2003.
(d) For the six months ended January 31, 2004.
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 of compounding.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
greater of the net asset value or 95% of the then-current market price. If the
shares are trading at less than net asset value, shares for your account will be
purchased on the open market. Dividends and distributions received to purchase
shares in the open market will normally be invested shortly after the dividend
payment date. No interest will be paid on dividends and distributions awaiting
reinvestment. Because the market price of 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
William E. Bennett
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
Anne E. Impellizzeri
William L. Kissick
Thomas E. Leafstrand
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Sheila W. Wellington
FUND MANAGER
Nuveen Institutional
Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
SUB-ADVISERS
Spectrum Asset
Management, Inc.
4 High Ridge Park
Stamford, CT 06905
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND
SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling Nuveen Investments at (800) 257-8787; and (ii)
on the Commission's website at http://www.sec.gov.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return (including change in NAV and reinvested dividends) that
would have been necessary on an annual basis to equal the investment's actual
performance over the time period being considered.
NET ASSET VALUE (NAV): A fund's NAV is calculated by subtracting the liabilities
of the fund from its total assets and then dividing the remainder by the number
of shares outstanding. Fund NAVs are calculated at the end of each business day.
---------
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period ended January 31, 2004. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
49
Serving Investors
for Generations
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
Managing $90 billion in assets, Nuveen Investments offers access to
a number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in tax-free investments; NWQ, a leader in value-style
equities; Rittenhouse, a leader in growth-style equities; and Symphony, a
leading institutional manager of market-neutral alternative investment
portfolios.
To learn more about the products and services Nuveen Investments offers and for
a prospectus, where applicable, talk to your financial advisor, or call us at
(800) 257-8787. Please read the information carefully before you invest.
Distributed by
Nuveen Investments, LLC | 333 West Wacker Drive | Chicago, Illinois 60606
| www.nuveen.com
ESA-D-0104D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to this filing.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable at this time.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no material changes by which shareholders may recommend nominees to
the registrant's Board of Trustees implemented after the registrant last
provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A (17 CFR 240.14a-101) or this Item.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
because posted on registrant's website at www.nuveen.com/etf.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable
at this time.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Quality Preferred Income Fund 2
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: April 8, 2004
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(Principal Executive Officer)
Date: April 8, 2004
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(Principal Financial Officer)
Date: April 8, 2004
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.