N-CSR 1 file001.txt NUVEEN QUALITY PREFERRED INCOME FUND UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21082 --------------------- Nuveen Quality Preferred Income Fund ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Jessica R. Droeger Nuveen Investments 333 West Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: (312) 917-7700 ------------------- Date of fiscal year end: December 31 ------------------ Date of reporting period: December 31, 2005 ------------------ 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. ------------------------------- Annual Report December 31, 2005 ------------------------------- Nuveen Investments Exchange-Traded Closed-End Funds NUVEEN QUALITY PREFERRED INCOME FUND JTP NUVEEN QUALITY PREFERRED INCOME [GRAPHIC OMITTED] FUND 2 JPS NUVEEN QUALITY PREFERRED INCOME FUND 3 JHP HIGH CURRENT INCOME FROM A PORTFOLIO OF INVESTMENT-GRADE PREFERRED SECURITIES [LOGO] NUVEEN Investments [PHOTOS OMITTED] NOW YOU CAN RECEIVE YOUR NUVEEN FUND REPORTS FASTER. -------------------------------------------------------------------------------- NO MORE WAITING. SIGN UP TODAY TO RECEIVE NUVEEN FUND INFORMATION BY E-MAIL. It only takes a minute to sign up for E-Reports. Once enrolled, you'll receive an e-mail as soon as your Nuveen Investments Fund information is ready -- no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report, and save it on your computer if you wish. -------------------------------------------------------------------------------- DELIVERY DIRECT TO YOUR E-MAIL INBOX IT'S FAST, EASY & FREE: www.investordelivery.com if you get your Nuveen Fund dividends and statements from your financial advisor or brokerage account. OR www.nuveen.com/accountaccess if you get your Nuveen Fund dividends and statements directly from Nuveen. (Be sure to have the address sheet that accompanied this report handy. You'll need it to complete the enrollment process.) [LOGO] NUVEEN Investments [PHOTO OMITTED] Timothy R. Schwertfeger Chairman of the Board Chairman's Letter to Shareholders I am very pleased to report that for the year ended December 31, 2005, your Fund continued to provide you with attractive monthly income from a diversified portfolio of quality preferred securities. For more information on your Fund's performance, please read the Portfolio Managers' Comments, the Distribution and Share Price Information, and the Performance Overview sections of this report. Portfolio diversification is a recognized way to try to reduce some of the risk that comes with investing. Since one part of your portfolio may be going up when another is going down, portfolio diversification may help smooth your investment returns over time. In addition to providing regular monthly income, a preferred securities investment like your Fund may help you achieve and benefit from greater portfolio diversification. Your financial advisor can explain these potential advantages in more detail. I urge you to contact him or her soon for more information on this important investment strategy. "In addition to providing regular monthly income, a preferred securities investment like your Fund may help you achieve and benefit from greater portfolio diversification." As you look through this report, be sure to review the inside front cover. This contains information on how you can receive future Fund reports and other Fund information faster by using e-mails and the Internet. Sign up is quick and easy - just follow the step-by-step instructions. As we noted in our last shareholder report, The St. Paul Travelers Companies, Inc., which had owned 79% of Nuveen Investments, Inc. (the parent of your Fund's investment adviser), had sold a substantial portion of its stake in Nuveen. Since then, St. Paul has sold the balance of its shares to Nuveen Investments or to others. Please be assured that these transactions only affected Nuveen's corporate structure, and they do not have any impact on the investment objectives or management of your Fund. At Nuveen Investments, our mission continues to be to assist you and your financial advisor by offering investment services and products that can help you to secure your financial objectives. We are grateful that you have chosen us as a partner as you pursue your financial goals, and 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 February 15, 2006 Nuveen Exchange-Traded Closed-End Funds (JTP, JPS, JHP) Portfolio Managers' Comments The Nuveen Quality Preferred Income Funds are subadvised by a team of specialists at Spectrum Asset Management, Inc., an affiliate of Principal Capital(SM). 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 their management strategy and the performance of each Fund for the 12-month period ended December 31, 2005. What were the general economic conditions and market trends over the course of 2005? The U.S. economy posted another year of growth in 2005. The Gross Domestic Product grew 3.5% during the year, in line with the rise of the Consumer Price Index. The U.S. equity market, as measured by the Standard & Poor's 500 Index, produced a return of 4.91%. The Federal Reserve continued to be on guard against an increase in the rate of inflation, raising the closely-watched short-term fed funds rate to 4.25% by year end. (On January 31, 2006, after the close of this reporting period, the Fed raised the fed funds rate to 4.50%.) As with most fixed income investors, participants in the preferred market spent much of the year concerned with Fed tightening, potential inflation, rising energy prices, and the economic impact of natural disasters. Credit spreads began 2005 at historically narrow levels relative to U.S. Treasury and corporate bonds, and individual investors began to shy away from $25 par preferreds early in the year fearing poor performance as the Fed continued to raise the fed funds rate. The $25 par market also suffered from what was at times more new issue supply than could readily be absorbed. Consequently, the Merrill Lynch Preferred Stock Hybrid Index returned 0.46% in 2005, which is the worst performance for this index since 1999. The year also saw significant new issuance of DRD (dividends received deduction) preferred securities. This new DRD supply caused some price weakness during the summer, but DRDs rallied during the fourth quarter and outperformed other preferreds as well as the general bond market. The $1000 par Capital Security sector, targeted to institutional investors, also experienced healthy new issuance. Fortunately, institutional investors were ravenous for the incremental yield afforded by this sector and the strong demand prevented any of the dislocations we saw in the $25 par market. The Lehman Tier 1 Capital Securities Index rise of 3.68% for the year far outpaced returns in the $25 sector. Many of the new securities in the institutional sector utilized a new structure which provided more equity 4 credit for the issuers and provided higher yields for investors. The advent of these new types of "enhanced equity" preferreds is expected to foster a broad expansion of the hybrid preferred securities market, which reached a size of about $276 billion by year end following record new issuance of $46 billion in 2005. (Hybrid preferred carry stated maturities and fixed coupons, but they can be treated by companies as equity for financial statement purposes.) What strategies and tactics did you use to manage the Funds' assets? We did some rebalancing between the $25 par and $1000 par Capital Security sectors because of relative value considerations. We sold $1000 par Capital Securities, which were aggressively bid up, and bought the relatively cheaper $25 par securities. This decreased the Capital Security concentrations in the Funds. Many of the Capital Security sales were high coupon callable securities that were trading to their first call date and had little to no upside. As a result we also were being proactive in managing upcoming call exposure within the Funds' portfolios. We also reduced the Funds' exposure to mandatory convertible preferreds, as many of these issues were approaching their "maturity" date. How did the Funds perform over the 12-months ended December 31, 2005? The performance of each Fund, as well as the performance of a relevant index and benchmark, is shown in the nearby chart. Total Return on Net Asset Value For the 12-month period ended December 31, 2005 JTP 2.89% -------------------------------------------------------------------------------- JPS 3.01% -------------------------------------------------------------------------------- JHP 2.88% -------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index(1) 2.43% -------------------------------------------------------------------------------- Comparative Benchmark(2) 1.92% -------------------------------------------------------------------------------- Past performance does not guarantee future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that a shareholder may have to pay on Fund distributions or upon the sale of Fund shares. For more information, please see the individual Performance Overview pages in this report. (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. Index returns do not include the effects of any sales charges or management fees. It is not possible to invest directly in an index. (2) Comparative benchmark performance is a blended return consisting of: 1) 55% of the Merrill Lynch Preferred Stock Hybrid Securities Index is 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; and 2) 45% of the Lehman Tier 1 Capital Securities Index, an unmanaged index that includes securities that can generally be viewed as hybrid fixed- income securities that either receive regulatory capital treatment or a degree of "equity credit" from a rating agency. 5 Over the course of what turned out to be a difficult 12-month period, all three Funds outperformed the Lehman Brothers Aggregate Bond Index and a comparative benchmark. Taking advantage of the large amount of new issuance in the preferred DRD sector and the attractiveness of their yields compared to other preferreds, we increased our concentration in these securities and reaped the benefits as these positions generally performed well toward the end of the year. In addition, in keeping with our strategy of selling Capital Securities and purchasing $25 par securities due to their relative values, we sold high coupon U.S. bank trust preferred securities which become callable in late 2006 or early 2007. These securities were priced to their first call dates because the market fully expected them to get called. Selling these short duration securities, which had little to no price upside, throughout 2005 positioned the Funds ahead of the call cycle, especially as the short end of the yield curve sold off. We also bought several of the new "enhanced equity" issues which provided relatively higher income levels and attractive total return opportunities. We began 2005 with a relatively light concentration in the automotive industry, when compared with the sector's standing in the preferred market. Nevertheless, in hindsight, the positions were not small enough. Many of these holdings were in the senior debt which we had bought when it looked cheap compared to their $25 par preferred counterparts. We began selling Ford and General Motors in January 2005 (for a profit) and had been selling Delphi since 2004. We took some losses when we liquidated our position in Delphi early in the year while it was still making payments and thereby avoided the huge price declines that accompanied Delphi's subsequent bankruptcy filing. These three automotive names were the worst performers in 2005. As of year end, we had no exposure to Ford, GM and Delphi, and a relatively small position in Daimler Chrysler. 6 Distribution and Share Price Information Each of these Funds uses financial leverage in an effort to enhance its dividend-paying capabilities. While this strategy adds volatility to a Fund's net asset value and share price, it generally enhances the amount of income the Fund has to distribute to its common shareholders. The extent of this benefit is tied in part to the short-term rates these Funds pay their FundPreferredTM shareholders. As short-term rates rose through this reporting period, the Funds paid higher dividends to their FundPreferred shareholders. As a result, the leveraging strategy did not provide as much income enhancement as it did before short-term interest rates began to rise. Over this reporting period JTP and JHP announced two reductions in their monthly distribution to shareholders, while JPS announced three distribution reductions. Each of these Funds seeks to pay stable distributions at rates that reflect each Fund's past results and projected future performance. During certain periods, each Fund may pay distributions 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 a Fund has cumulatively earned more than it has paid in distributions, it holds the excess in reserve as undistributed net investment income (UNII) as part of the Fund's NAV. Conversely, if a Fund has cumulatively paid distributions in excess of its earnings, the excess constitutes negative UNII that is likewise reflected in the Fund's NAV. Each Fund will, over time, pay all of its net investment income in distributions to shareholders. As of December 31, 2005, each of the Funds in this report had positive UNII balances for both financial statement and tax purposes. In addition, due to normal portfolio management activity, common shareholders of the following Funds received capital gains and net ordinary income distributions at the end of December 2005, as follows: Long-Term Capital Gains Ordinary Income (per share) (per share) -------------------------------------------------------------------------------- JPS $ 0.1615 $ 0.0232 -------------------------------------------------------------------------------- JHP $ 0.0787 $ 0.0135 -------------------------------------------------------------------------------- The relatively large distributions from JPS represented important parts of this Fund's total return for this period. Generally, these types of distributions were generated by calls or by sales of appreciated securities that occurred in the course of normal portfolio management activities. This had a slight negative impact on the Funds' earning power per share and was a minor factor in the per share distribution reductions noted above. As of December 31, 2005, the Funds' shares were trading at discounts to their NAVs as shown in the accompanying chart: 12/31/05 12-Month Average Discount Discount -------------------------------------------------------------------------------- JTP -12.68% -8.09% -------------------------------------------------------------------------------- JPS -13.34% -8.77% -------------------------------------------------------------------------------- JHP - 9.59% -4.24% -------------------------------------------------------------------------------- 7 Nuveen Quality Preferred Income Fund JTP Performance Overview As of December 31, 2005 Portfolio Statistics -------------------------------------------------------------------------------- Common Share Price $ 12.40 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 14.20 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -12.68% -------------------------------------------------------------------------------- Latest Dividend $ .0900 -------------------------------------------------------------------------------- Market Yield 8.71% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 915,598 -------------------------------------------------------------------------------- Average Annual Total Return (Inception 6/25/02) -------------------------------------------------------------------------------- On Share Price On NAV -------------------------------------------------------------------------------- 1-Year -3.69% 2.89% -------------------------------------------------------------------------------- Since Inception 2.86% 8.15% -------------------------------------------------------------------------------- Industries (as a % of total investments) -------------------------------------------------------------------------------- Commercial Banks 29.3% -------------------------------------------------------------------------------- Insurance 17.7% -------------------------------------------------------------------------------- Real Estate 17.1% -------------------------------------------------------------------------------- Capital Markets 9.3% -------------------------------------------------------------------------------- Diversified Financial Services 8.9% -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 3.7% -------------------------------------------------------------------------------- Short-Term Investments 1.7% -------------------------------------------------------------------------------- Other 12.3% -------------------------------------------------------------------------------- Top Five Issuers (excluding Short-Term Investments) (as a % of total investments) -------------------------------------------------------------------------------- ING Group NV 3.0% -------------------------------------------------------------------------------- Wachovia Corporation 2.9% -------------------------------------------------------------------------------- JPMorgan Chase & Company 2.7% -------------------------------------------------------------------------------- HSBC Holdings Public Limited Company 2.6% -------------------------------------------------------------------------------- Banco Santander Central Hispano 2.6% -------------------------------------------------------------------------------- Portfolio Allocation (as a % of total investments) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] ----------------------------------------------- $25 Par (or similar) Securities 57.4% ----------------------------------------------- Capital Preferred Securities 39.5% ----------------------------------------------- Short-Term Investments 1.7% ----------------------------------------------- Convertible Preferred Securities 0.9% ----------------------------------------------- Corporate Bonds 0.5% ----------------------------------------------- 2005 Monthly Distributions Per Share -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] Jan 0.097 ----------------------------------------------- Feb 0.097 ----------------------------------------------- Mar 0.097 ----------------------------------------------- Apr 0.097 ----------------------------------------------- May 0.097 ----------------------------------------------- Jun 0.0935 ----------------------------------------------- Jul 0.0935 ----------------------------------------------- Aug 0.0935 ----------------------------------------------- Sep 0.09 ----------------------------------------------- Oct 0.09 ----------------------------------------------- Nov 0.09 ----------------------------------------------- Dec 0.09 Share Price Performance -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Weekly Closing Price 01/01/05 13.99 13.99 14.03 14.11 14.14 14.27 14.28 14.20 14.16 14.18 14.24 14.24 14.25 14.23 14.27 14.25 14.19 14.21 14.25 14.35 14.44 14.49 14.54 14.65 14.74 14.67 14.67 14.60 14.49 14.28 14.27 14.22 14.27 14.17 14.00 14.03 14.18 14.25 14.34 14.29 14.24 14.21 14.17 14.19 14.20 14.10 14.09 13.85 13.65 13.51 13.32 13.30 13.16 12.96 12.85 13.02 12.95 12.63 12.68 13.08 13.20 13.14 13.17 12.97 13.02 13.09 13.13 13.14 13.17 12.96 12.87 12.88 13.10 13.06 13.03 13.00 13.02 13.10 13.21 13.27 13.33 13.43 13.43 13.40 13.45 13.40 13.38 13.31 13.33 13.42 13.38 13.44 13.43 13.49 13.49 13.49 13.55 13.62 13.75 13.84 13.82 13.86 13.86 13.89 14.03 14.00 14.02 13.92 13.92 13.98 13.99 13.93 13.75 13.83 13.80 13.80 13.83 13.85 13.86 14.00 14.02 14.04 13.99 13.99 13.96 14.00 14.08 14.04 14.02 14.06 13.95 13.88 13.93 13.85 13.81 13.77 13.77 13.73 13.71 13.67 13.65 13.65 13.63 13.62 13.69 13.73 13.73 13.67 13.74 13.72 13.71 13.67 13.45 13.60 13.61 13.52 13.55 13.52 13.46 13.54 13.44 13.44 13.48 13.53 13.47 13.48 13.52 13.52 13.53 13.65 13.72 13.70 13.60 13.57 13.59 13.59 13.56 13.49 13.43 13.28 13.24 13.10 13.17 13.25 13.20 13.16 13.08 12.99 13.04 13.06 13.06 13.04 13.02 12.90 12.74 12.79 12.86 12.87 12.70 12.42 12.37 12.47 12.40 12.39 12.25 12.46 12.49 12.45 12.32 12.40 12.40 12.42 12.42 12.42 12.49 12.48 12.43 12.44 12.47 12.33 12.27 12.20 12.11 12.10 12.08 12.01 11.98 11.98 12.19 12.28 12.30 12.31 12.24 12.28 12.25 12.24 12.25 12.21 12.17 12.17 12.12 11.93 12.07 12.13 12.09 11.96 11.91 11.96 12.14 12.21 12.20 12.23 12.27 12.40 12/31/05 12.40 Past performance is not predictive of future results. 8 Nuveen Quality Preferred Income Fund 2 JPS Performance Overview As of December 31, 2005 Portfolio Allocation (as a % of total investments) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] $25 Par (or similar) Securities 57.2% ----------------------------------------------- Capital Preferred Securities 39.8% ----------------------------------------------- Short-Term Investments 1.5% ----------------------------------------------- Convertible Preferred Securities 1.0% ----------------------------------------------- Corporate Bonds 0.5% ----------------------------------------------- 2005 Monthly Distributions Per Share -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] Jan 0.102 ----------------------------------------------- Feb 0.102 ----------------------------------------------- Mar 0.099 ----------------------------------------------- Apr 0.099 ----------------------------------------------- May 0.099 ----------------------------------------------- Jun 0.096 ----------------------------------------------- Jul 0.096 ----------------------------------------------- Aug 0.096 ----------------------------------------------- Sep 0.093 ----------------------------------------------- Oct 0.093 ----------------------------------------------- Nov 0.093 ----------------------------------------------- Dec 0.093 ----------------------------------------------- Share Price Performance -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Weekly Closing Price 01/01/05 14.48 14.58 14.54 14.78 14.85 14.84 14.84 14.76 14.81 14.79 14.88 14.96 14.95 14.95 14.98 14.94 14.94 15.04 15.04 15.03 15.09 15.16 15.16 15.26 15.37 15.31 15.31 15.30 15.12 14.86 14.92 14.90 14.85 14.72 14.65 14.82 14.93 14.97 15.05 15.06 14.94 14.80 14.69 14.73 14.80 14.55 14.50 14.24 13.99 13.83 13.58 13.77 13.60 13.40 13.20 13.25 13.31 13.08 13.12 13.49 13.63 13.65 13.60 13.47 13.63 13.57 13.69 13.60 13.68 13.47 13.33 13.37 13.46 13.67 13.55 13.55 13.47 13.44 13.54 13.62 13.75 13.90 13.90 13.95 13.97 14.05 14.00 14.00 13.94 14.01 13.94 13.96 13.92 13.92 13.97 13.97 13.99 14.07 14.08 14.17 14.23 14.32 14.31 14.32 14.37 14.40 14.44 14.40 14.49 14.48 14.44 14.32 14.25 14.22 14.08 14.20 14.29 14.31 14.25 14.37 14.36 14.41 14.25 14.25 14.38 14.45 14.50 14.51 14.58 14.58 14.59 14.58 14.59 14.52 14.49 14.50 14.47 14.42 14.37 14.30 14.33 14.35 14.41 14.50 14.54 14.60 14.60 14.55 14.56 14.54 14.48 14.35 14.06 14.13 14.22 14.18 14.15 14.12 14.12 14.13 14.10 14.10 14.12 14.12 14.16 14.06 14.12 14.13 14.14 14.28 14.26 14.28 14.22 14.22 14.21 14.20 14.17 14.06 13.98 13.84 13.81 13.80 13.70 13.79 13.71 13.71 13.74 13.69 13.52 13.58 13.62 13.65 13.63 13.52 13.52 13.59 13.46 13.38 13.26 13.02 13.03 13.07 12.95 12.99 12.88 12.99 13.11 13.09 13.05 13.10 13.12 13.29 13.22 13.28 13.15 13.15 13.07 13.06 13.10 12.97 12.91 12.88 12.73 12.73 12.65 12.63 12.57 12.62 12.73 12.81 12.88 12.93 12.90 13.13 13.18 13.08 13.10 13.03 13.04 13.21 13.11 12.75 13.00 12.92 12.84 12.72 12.69 12.62 12.62 12.70 12.58 12.59 12.66 12.80 12/31/05 12.80 Past performance is not predictive of future results. Portfolio Statistics -------------------------------------------------------------------------------- Common Share Price $ 12.80 -------------------------------------------------------------------------------- Common Share Net Asset Value $ 14.77 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -13.34% -------------------------------------------------------------------------------- Latest Dividend $ .0930 -------------------------------------------------------------------------------- Market Yield 8.72% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 1,765,543 -------------------------------------------------------------------------------- Average Annual Total Return (Inception 9/24/02) -------------------------------------------------------------------------------- On Share Price On NAV -------------------------------------------------------------------------------- 1-Year -2.06% 3.01% -------------------------------------------------------------------------------- Since Inception 4.29% 10.03% -------------------------------------------------------------------------------- Industries (as a % of total investments) -------------------------------------------------------------------------------- Commercial Banks 28.8% -------------------------------------------------------------------------------- Insurance 21.1% -------------------------------------------------------------------------------- Real Estate 14.6% -------------------------------------------------------------------------------- Capital Markets 8.6% -------------------------------------------------------------------------------- Diversified Financial Services 8.4% -------------------------------------------------------------------------------- Electric Utilities 3.4% -------------------------------------------------------------------------------- Thrifts & Mortgage Finance 2.9% -------------------------------------------------------------------------------- Short-Term Investments 1.5% -------------------------------------------------------------------------------- Other 10.7% -------------------------------------------------------------------------------- Top Five Issuers (excluding Short-Term Investments) (as a % of total investments) -------------------------------------------------------------------------------- Wachovia Corporation 3.7% -------------------------------------------------------------------------------- ING Group NV 3.0% -------------------------------------------------------------------------------- JPMorgan Chase & Company 2.6% -------------------------------------------------------------------------------- EverestRe Group 2.4% -------------------------------------------------------------------------------- Banco Santander Central Hispano 2.3% -------------------------------------------------------------------------------- 9 Nuveen Quality Preferred Income Fund 3 JHP Performance Overview As of December 31, 2005 Portfolio Statistics -------------------------------------------------------------------------------- Common Share Price $ 12.92 -------------------------------------------------------------------------------- SCommon Share Net Asset Value $ 14.29 -------------------------------------------------------------------------------- Premium/(Discount) to NAV -9.59% -------------------------------------------------------------------------------- Latest Dividend $ .0945 -------------------------------------------------------------------------------- Market Yield 8.78% -------------------------------------------------------------------------------- Net Assets Applicable to Common Shares ($000) $ 337,858 -------------------------------------------------------------------------------- Average Annual Total Return (Inception 12/18/02) -------------------------------------------------------------------------------- On Share Price On NAV -------------------------------------------------------------------------------- 1-Year -2.16% 2.88% -------------------------------------------------------------------------------- Since Inception 3.73% 8.65% -------------------------------------------------------------------------------- Industries (as a % of total investments) -------------------------------------------------------------------------------- Commercial Banks 27.1% -------------------------------------------------------------------------------- Insurance 22.7% -------------------------------------------------------------------------------- Real Estate 13.1% -------------------------------------------------------------------------------- Capital Markets 10.5% -------------------------------------------------------------------------------- Diversified Financial Services 9.2% -------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 2.8% -------------------------------------------------------------------------------- Short-Term Investments 1.5% -------------------------------------------------------------------------------- Other 13.1% -------------------------------------------------------------------------------- Top Five Issuers (excluding Short-Term Investments) (as a % of total investments) -------------------------------------------------------------------------------- Wachovia Corporation 3.8% -------------------------------------------------------------------------------- ING Group NV 3.3% -------------------------------------------------------------------------------- JPMorgan Chase & Company 3.1% -------------------------------------------------------------------------------- Union Planters Corporation 2.6% -------------------------------------------------------------------------------- Zurich Financial Services 2.3% -------------------------------------------------------------------------------- Portfolio Allocation (as a % of total investments) [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] ----------------------------------------------- $25 Par (or similar) Securities 61.1% ----------------------------------------------- Capital Preferred Securities 36.1% ----------------------------------------------- Short-Term Investments 1.5% ----------------------------------------------- Convertible Preferred Securities 0.9% ----------------------------------------------- Corporate Bonds 0.4% ----------------------------------------------- 2005 Monthly Distributions Per Share -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.] Jan 0.1 ----------------------------------------------- Feb 0.1 ----------------------------------------------- Mar 0.1 ----------------------------------------------- Apr 0.1 ----------------------------------------------- May 0.1 ----------------------------------------------- Jun 0.0965 ----------------------------------------------- Jul 0.0965 ----------------------------------------------- Aug 0.0965 ----------------------------------------------- Sep 0.0945 ----------------------------------------------- Oct 0.0945 ----------------------------------------------- Nov 0.0945 ----------------------------------------------- Dec 0.0945 Share Price Performance -------------------------------------------------------------------------------- [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Weekly Closing Price 01/01/05 14.42 14.48 14.42 14.47 14.46 14.55 14.68 14.77 14.78 14.71 14.74 14.72 14.84 14.85 14.85 14.85 14.75 14.89 15.02 15.00 15.08 15.15 15.14 15.27 15.28 15.32 15.30 15.30 15.14 15.05 15.06 15.02 14.93 14.79 14.60 14.61 14.66 14.86 14.95 14.92 14.85 14.80 14.86 14.86 14.93 14.77 14.75 14.45 14.37 14.16 14.06 13.96 13.90 13.81 13.60 13.39 13.51 13.35 13.39 13.69 14.15 14.10 14.06 13.99 13.93 13.90 13.82 13.85 13.91 13.88 13.68 13.70 13.81 13.99 14.00 14.08 13.89 13.93 14.11 14.15 14.27 14.39 14.39 14.43 14.47 14.45 14.40 14.45 14.38 14.35 14.30 14.17 14.30 14.18 14.20 14.45 14.31 14.28 14.21 14.27 14.35 14.22 14.40 14.50 14.61 14.63 14.49 14.41 14.45 14.69 14.50 14.47 14.65 14.74 14.56 14.47 14.60 14.51 14.54 14.52 14.54 14.55 14.49 14.42 14.54 14.53 14.56 14.53 14.56 14.64 14.58 14.61 14.65 14.58 14.61 14.54 14.55 14.52 14.49 14.45 14.39 14.54 14.56 14.65 14.92 14.84 14.84 14.85 14.94 14.93 14.89 14.78 14.62 14.64 14.80 14.64 14.69 14.70 14.60 14.50 14.68 14.62 14.65 14.67 14.67 14.75 14.65 14.67 14.57 14.61 14.55 14.55 14.62 14.57 14.63 14.59 14.65 14.51 14.40 14.32 14.24 14.19 14.20 14.16 14.14 13.99 13.85 13.76 13.62 13.75 13.82 13.78 13.76 13.76 13.72 13.73 13.72 13.47 13.24 13.00 13.05 13.01 13.02 13.04 12.96 13.06 13.20 13.15 13.07 13.09 13.12 13.20 13.30 13.27 13.20 13.23 13.34 13.33 13.30 13.18 13.09 13.10 13.06 12.94 12.86 12.73 12.81 12.72 12.79 12.84 12.80 12.84 12.81 12.90 12.90 12.84 12.82 12.77 12.71 12.69 12.63 12.39 12.43 12.49 12.57 12.50 12.41 12.45 12.50 12.61 12.75 12.81 12.91 12.92 12/31/05 12.92 Past performance is not predictive of future results. 10 Shareholder Meeting Report Approval of the new investment management agreement and sub-advisory agreements were the proposals voted upon at the July 26, 2005, shareholder meeting held at The Northern Trust Bank. Approval of the Board Members was the proposal voted upon at the November 15, 2005, shareholder meeting held at the offices of Nuveen Investments
JTP JPS JHP --------------------------------------------------------------------------------------------------------------------- Approval of the new investment management agreement was reached as follows: Common and Common and Common and Preferred shares Preferred shares Preferred shares voting together voting together voting together as a class as a class as a class ===================================================================================================================== For 61,442,199 111,901,427 22,591,613 Against 545,550 923,727 159,700 Abstain 640,605 1,128,256 205,026 --------------------------------------------------------------------------------------------------------------------- Total 62,628,354 113,953,410 22,956,339 ===================================================================================================================== Approval of the new sub-advisory agreement between Nuveen Asset Management and Spectrum Asset Management, Inc. was reached as follows: Common and Common and Common and Preferred shares Preferred shares Preferred shares voting together voting together voting together as a class as a class as a class ===================================================================================================================== For 61,380,367 111,808,697 22,575,897 Against 569,219 974,606 173,069 Abstain 678,768 1,170,107 207,373 --------------------------------------------------------------------------------------------------------------------- Total 62,628,354 113,953,410 22,956,339 =====================================================================================================================
11 Report of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders Nuveen Quality Preferred Income Fund Nuveen Quality Preferred Income Fund 2 Nuveen Quality Preferred Income Fund 3 We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Nuveen Quality Preferred Income Fund, Nuveen Quality Preferred Income Fund 2 and Nuveen Quality Preferred Income Fund 3 as of December 31, 2005, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Nuveen Quality Preferred Income Fund, Nuveen Quality Preferred Income Fund 2 and Nuveen Quality Preferred Income Fund 3 at December 31, 2005, and the results of their operations for the year then ended, and changes in their net assets and their financial highlights for the periods indicated therein in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois February 14, 2006 12 Nuveen Quality Preferred Income Fund (JTP) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Convertible Preferred Securities - 1.3% (0.9% of Total Investments) Diversified Financial Services - 0.2% 23,134 Citigroup Global Markets 2.000% Aa1 $ 1,133,797 ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 7,241 FPL Group Inc. 8.000% A- 448,725 ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 14,980 Albertson's, Inc. 7.250% BBB- 337,799 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 50,000 XL Capital Ltd. 6.500% A2 1,117,000 ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.9% 157,677 Dominion Resources Inc. 8.750% Baa1 8,200,781 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 0.1% 54,000 PMI Group Inc. 5.875% A1 1,331,100 ----------------------------------------------------------------------------------------------------------------------------------- Total Convertible Preferred Securities (cost $12,315,687) 12,569,202 --------------------------------------------------------------------------------------------------------------------- Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- $25 Par (or similar) Securities - 84.1% (57.4% of Total Investments) Automobiles - 0.0% 5,300 Daimler Chrysler, Series DCX (CORTS) 7.250% A3 117,130 ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 7.1% 1,250 ABN AMRO North America, Series L, 144A, (3) 6.460% A3 1,275,000 60,900 Bear Stearns Capital Trust III 7.800% A2 1,549,905 338,500 BNY Capital Trust V, Series F 5.950% A1 8,201,855 233,595 Compass Capital Trust III 7.350% A3 5,914,625 34,900 First Union Capital II, Series II (CORTS) 7.500% A1 906,702 13,400 First Union Institutional Capital II (CORTS) 8.200% A1 361,934 11,700 Goldman Sachs Capital I, Series A (CORTS) 6.000% A1 271,089 72,600 Goldman Sachs Group Inc., (3) 6.200% A2 1,851,300 6,900 Goldman Sachs Group Inc., (CORTS) 6.300% A- 170,430 12,000 Goldman Sachs Group Inc., Series GSC-3 (PPLUS) 6.000% A1 280,800 5,100 Goldman Sachs Group Inc., Series GSG-1 (PPLUS) 6.000% Aa3 120,717 12,100 Goldman Sachs Group Inc., Series 2004-04, (SATURNS) 6.000% A1 281,325 8,600 Goldman Sachs Group Inc., Series 2004-06, (SATURNS) 6.000% A1 200,380 4,600 Goldman Sachs Group Incorporated (SATURNS) 5.750% Aa3 103,132 108,549 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 2,723,494 68,400 Lehman Brothers Holdings Capital Trust IV, Series L 6.375% A2 1,717,524 25,700 Lehman Brothers Holdings Capital Trust V, Series M 6.000% A2 614,744 105,420 Lehman Brothers Holdings Capital Trust VI, Series N 6.240% A2 2,597,549 35,000 Lehman Brothers Holdings Inc., Series C, (3) 5.940% BBB+ 1,750,000 50,000 Lehman Brothers Holdings Inc., Series F, (3) 6.500% A- 1,312,500 46,000 Merrill Lynch Capital Trust II 8.000% A1 1,190,480 198,700 Merrill Lynch Preferred Capital Trust 7.750% A1 5,086,720 128,100 Merrill Lynch Preferred Capital Trust III 7.000% A1 3,281,922 78,700 Merrill Lynch Preferred Capital Trust IV 7.120% A1 2,024,951 102,000 Merrill Lynch Preferred Capital Trust V 7.280% A1 2,664,240 5,700 Morgan Stanley (PPLUS) 7.050% Aa3 145,635 194,600 Morgan Stanley Capital Trust II 7.250% A1 4,956,462 227,900 Morgan Stanley Capital Trust III 6.250% A1 5,558,481 249,095 Morgan Stanley Capital Trust IV 6.250% A1 6,038,063 31,300 Morgan Stanley Capital Trust V 5.750% A+ 711,762 28,900 Washington Mutual Capital Trust I, Series 2001-22, Class A-1 (CORTS) 7.650% Baa1 729,725 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 64,593,446 -----------------------------------------------------------------------------------------------------------------------------------
13 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 11.6% 69,000 Abbey National plc, Series B 7.250% A1 $ 1,752,600 102,800 Abbey National plc, Series B 7.375% A 2,712,892 1,200 Abbey National plc, Series C 7.375% A2 30,720 134,500 ABN AMRO Capital Fund Trust V 5.900% A 3,186,305 34,500 ABN AMRO Capital Trust Fund VII 6.080% A 841,800 103,700 ASBC Capital I 7.625% Baa1 2,656,794 7,200 BAC Capital Trust I 7.000% Aa3 182,592 64,500 BAC Capital Trust II 7.000% Aa3 1,642,170 80,000 BAC Capital Trust III 7.000% Aa3 2,040,800 194,550 Banco Santander 6.410% A2 4,883,205 52,300 Banco Totta & Acores Finance, Series A 8.875% A3 1,340,188 3,600 BancorpSouth Capital Trust I 8.150% Baa2 91,584 66,000 Banesto Holdings, Series A, 144A 10.500% A2 1,980,000 64,300 Bank One Capital Trust VI 7.200% A1 1,642,222 11,700 BankNorth Capital Trust II 8.000% A3 301,626 10 BBVA Privanza International Gibraltar, 144A 7.764% A1 10,350,000 198,900 Chittenden Capital Trust I 8.000% Baa1 5,105,763 116,800 Cobank ABC, 144A, (3) 7.000% N/R 6,041,013 140,900 Comerica Capital Trust I 7.600% A3 3,557,725 33,900 Fleet Capital Trust VII 1.800% Aa3 854,958 16,200 HSBC Finance Corporation 6.000% A1 394,632 64,300 KeyCorp (PCARS) 7.500% A3 1,633,220 81,950 KeyCorp Capital Trust V 5.875% A3 1,921,728 18,500 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 481,925 31,300 KeyCorp, Series B (CORTS) 8.250% A3 785,943 67,800 National Commerce Capital Trust II 7.700% A1 1,728,900 55,300 National Westminster Bank plc, Series A 7.875% Aa2 1,405,173 9,300 PNC Capital Trust 6.125% A3 224,409 42,800 Regions Finance Trust I 8.000% A2 1,076,420 13,500 Royal Bank of Scotland Group plc, Series L 5.750% A1 311,175 27,400 Royal Bank of Scotland Group plc, Series M 6.400% A1 696,508 216,762 Royal Bank of Scotland Group plc, Series N 6.350% A1 5,447,229 30,300 SunTrust Capital Trust IV 7.125% A1 765,681 81,500 SunTrust Capital Trust V 7.050% A1 2,062,765 175,000 USB Capital Trust III 7.750% Aa3 4,459,000 423,005 USB Capital Trust IV 7.350% Aa3 10,799,318 46,800 USB Capital Trust V 7.250% Aa3 1,186,380 10,000 USB Capital Trust VII 5.875% Aa3 233,200 37,200 VNB Capital Trust I 7.750% Baa1 947,856 7,236 Wells Fargo Capital Trust IX 5.625% Aa2 165,560 25,500 Wells Fargo Capital Trust IV 7.000% Aa2 651,780 218,800 Wells Fargo Capital Trust V 7.000% Aa2 5,531,264 56,000 Wells Fargo Capital Trust VI 6.950% Aa2 1,414,560 29,200 Wells Fargo Capital Trust VII 5.850% Aa2 701,676 3,100 Wells Fargo Capital Trust VIII 5.625% Aa2 71,951 379,250 Zions Capital Trust B 8.000% Baa1 9,883,255 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 106,176,465 ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 1,600 IBM Inc. (CORTS) 7.125% A+ 40,304 2,100 IBM Inc., Trust Certificates, Series 2001-2 7.100% A+ 53,235 4,200 IBM Trust II (CORTS) 7.125% A+ 105,588 ----------------------------------------------------------------------------------------------------------------------------------- Total Computers & Peripherals 199,127 ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.3% 60,300 Household Capital Trust VI 8.250% A2 1,531,620 25,400 Household Capital Trust VII 7.500% A2 648,716 27,200 SLM Corporation 6.000% A 644,640 ----------------------------------------------------------------------------------------------------------------------------------- Total Consumer Finance 2,824,976 -----------------------------------------------------------------------------------------------------------------------------------
14
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 9.0% 17,000 BBVA Preferred Capital Ltd., Series B 7.750% A1 $ 428,825 197,600 CIT Group Inc., Series A, (3) 6.350% BBB+ 5,107,960 38,376 CIT Group Incorporated (CORTS) 7.750% A3 1,035,384 12,000 Citigroup Capital Trust IX 6.000% Aa2 290,640 258,700 Citigroup Capital Trust VII 7.125% Aa2 6,563,219 455,200 Citigroup Capital Trust VIII 6.950% Aa2 11,480,144 55,900 Citigroup Capital Trust XI 6.000% Aa2 1,364,519 66,300 Citigroup Inc., Series H, (3) 6.231% Aa3 3,474,120 39,400 Citigroup Inc., Series M, (3) 5.864% Aa3 2,015,310 2,000 General Electric Capital Corporation 5.875% AAA 48,760 7,400 General Electric Capital Corporation 6.100% AAA 186,702 10,800 General Electric Capital Corporation 6.625% AAA 272,808 3,000 General Electric Capital Corporation, (CORTS) 6.000% AAA 74,250 569,000 ING Group N.V. 7.050% A 14,560,710 1,015,458 ING Group N.V. 7.200% A 26,066,807 32,600 JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS) 7.850% A1 847,274 1,700 JPMorgan Chase & Company (PCARS) 7.125% A2 42,534 81,500 JPMorgan Chase Capital Trust IX, Series I 7.500% A1 2,077,435 82,400 JPMorgan Chase Capital Trust X 7.000% A1 2,095,432 97,606 JPMorgan Chase Capital Trust XI 5.875% A1 2,259,579 71,100 JPMorgan Chase Capital Trust XVI 6.350% A1 1,778,922 20,300 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 523,740 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 82,595,074 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.7% 93,400 AT&T Inc. 7.000% A 2,342,472 7,600 BellSouth Capital Funding (CORTS) 7.100% A1 195,852 4,300 BellSouth Corporation 7.125% A 108,145 69,235 BellSouth Corporation (CORTS) 7.000% Aa3 1,737,106 29,300 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A 733,379 6,300 BellSouth Inc. (CORTS) 7.000% A 162,792 2,200 Verizon Communications (CORTS) 7.625% A+ 56,232 8,800 Verizon Communications, Series 2004-1 (SATURNS) 6.125% A+ 207,064 23,900 Verizon New England Inc., Series B 7.000% A3 609,450 19,900 Verizon South Inc., Series F 7.000% A 504,266 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Telecommunication Services 6,656,758 ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 3.5% 2,300 BGE Capital Trust II 6.200% A3 58,880 77,740 DTE Energy Trust I 7.800% Baa3 1,979,260 109,205 Entergy Louisiana Inc. 7.600% A- 2,772,715 2,000 Entergy Mississippi Inc. 7.250% A- 51,840 56,400 Georgia Power Capital Trust V 7.125% A3 1,422,972 293,196 Georgia Power Company 5.700% AAA 7,151,050 3,000 Georgia Power Company 6.000% AAA 77,190 2,000 Georgia Power Company 5.750% A 46,060 118,651 Georgia Power Company 5.900% A 2,865,422 2,100 Gulf Power Capital Trust III 7.375% A3 53,067 251,073 Interstate Power and Light Company, Series B, (3) 8.375% BBB- 8,373,285 2,600 National Rural Utilities Cooperative Finance Corporation 7.600% A3 65,572 24,000 National Rural Utilities Cooperative Finance Corporation 7.400% A3 614,400 5,000 National Rural Utilities Cooperative Finance Corporation 6.750% A3 126,950 36,900 National Rural Utilities Cooperative Finance Corporation 6.100% A3 880,434 2,000 Southern Company Capital Trust I (CORTS) 8.000% BBB+ 51,800 8,000 Southern Company Capital Trust VI 7.125% BBB+ 206,160 14,200 Tennessee Valley Authority, Series D 6.750% AAA 340,800 191,400 Virginia Power Capital Trust 7.375% Baa1 4,903,668 ----------------------------------------------------------------------------------------------------------------------------------- Total Electric Utilities 32,041,525 -----------------------------------------------------------------------------------------------------------------------------------
15 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.7% 64,000 Dairy Farmers of America Inc., 144A, (3) 7.875% BBB- $ 6,428,000 ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 32,300 AGL Capital Trust II 8.000% BBB 822,035 ----------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 21,700 General Electric Company, Series GE (CORTS) 6.800% AAA 564,851 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 16.4% 622,600 Ace Ltd., Series C 7.800% Baa2 16,249,860 1,161,650 Aegon N.V. 6.375% A- 29,343,279 37,000 Aegon N.V. 6.500% A- 920,560 2,800 Allstate Corporation (PCARS) 7.150% A2 70,924 10,500 AMBAC Financial Group Inc. 7.000% AA 264,810 21,500 AMBAC Financial Group Inc. 5.950% AA 516,000 2,800 AMBAC Financial Group Inc. 5.875% AA 66,948 211,400 Delphi Financial Group, Inc. 8.000% BBB 5,515,426 338,000 EverestRe Capital Trust II 6.200% Baa1 7,486,700 86,800 EverestRe Group Limited 7.850% Baa1 2,211,664 5,000 Financial Security Assurance Holdings 6.875% AA 127,300 4,600 Financial Security Assurance Holdings 6.250% AA 116,472 1,400 Financial Security Assurance Holdings 5.600% AA 31,486 205,377 Hartford Capital Trust III, Series C 7.450% Baa1 5,189,877 53,400 Hartford Life Capital Trust II, Series B 7.625% Baa1 1,360,632 79,600 Lincoln National Capital Trust V, Series E 7.650% Baa1 2,022,636 34,500 Lincoln National Capital Trust VI 6.750% Baa1 872,850 10,400 MetLife Inc. 5.875% A 249,808 616,400 MetLife Inc., Series B, (3) 6.500% Baa1 15,977,088 126,300 PartnerRe Limited 7.900% A3 3,220,650 292,500 PartnerRe Limited, Series C 6.750% BBB+ 7,069,725 72,700 PartnerRe Limited, Series D 6.500% BBB+ 1,703,361 80,000 PLC Capital Trust III 7.500% BBB+ 2,036,800 411,800 PLC Capital Trust IV 7.250% BBB+ 10,492,664 6,500 PLC Capital Trust V 6.125% BBB+ 154,635 264,165 Prudential plc 6.750% A 6,807,532 125,650 RenaissanceRe Holdings Ltd., Series A 8.100% BBB+ 3,176,432 61,100 RenaissanceRe Holdings Ltd., Series B 7.300% BBB 1,543,386 13,900 RenaissanceRe Holdings Ltd., Series C 6.080% BBB+ 280,780 40,000 Safeco Capital Trust I (CORTS) 8.700% Baa2 1,120,800 32,300 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 843,192 6,800 Safeco Capital Trust III (CORTS) 8.072% Baa2 179,520 1,900 Safeco Corporation, Series 2002-5 (SATURNS) 8.250% Baa2 49,571 31,500 Saint Paul Capital Trust I 7.600% Baa1 807,975 62,800 Torchmark Capital Trust I 7.750% A- 1,620,868 3,500 Torchmark Capital Trust II 7.750% A- 89,775 5,500 W.R. Berkley (CORTS) 8.250% BBB- 140,910 27,900 W.R. Berkley Capital Trust, Series 2002-1, (CBTCS) 8.125% BBB- 283,464 315,400 W.R. Berkley Corporation 6.750% BBB- 7,885,000 391,854 XL Capital Ltd, Series A 8.000% Baa1 9,968,766 75,200 XL Capital Ltd, Series B 7.625% Baa1 1,917,600 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 149,987,726 ----------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 29,400 Vertex Industries Inc. (PPLUS) 7.625% A+ 752,493 ----------------------------------------------------------------------------------------------------------------------------------- Media - 0.4% 124,800 CBS Corporation 7.300% BBB+ 3,138,720 9,600 The Walt Disney Company 7.000% A- 244,800 ----------------------------------------------------------------------------------------------------------------------------------- Total Media 3,383,520 ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 4,100 Nordstrom Inc. (CORTS) 7.625% A- 105,370 -----------------------------------------------------------------------------------------------------------------------------------
16
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.7% 98,100 Dominion CNG Capital Trust I 7.800% Baa1 $ 2,503,512 58,600 Dominion Resources Capital Trust II 8.400% Baa2 1,490,198 100,400 Energy East Capital Trust I 8.250% BBB- 2,576,264 ----------------------------------------------------------------------------------------------------------------------------------- Total Multi-Utilities 6,569,974 ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.8% 532,332 Nexen, Inc. 7.350% Baa3 13,744,812 108,500 TransCanada Pipeline 8.250% A3 2,800,385 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 16,545,197 ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 23,000 Bristol-Myers Squibb Company (CORTS) 6.250% A+ 588,800 12,800 Bristol-Myers Squibb Company Trust (CORTS) 6.800% A+ 328,064 ----------------------------------------------------------------------------------------------------------------------------------- Total Pharmaceuticals 916,864 ----------------------------------------------------------------------------------------------------------------------------------- Real Estate - 25.1% 50,458 AMB Property Corporation, Series M 6.750% Baa2 1,230,671 13,400 AvalonBay Communities, Inc., Series H 8.700% BBB 365,820 409,400 BRE Properties, Series B 8.080% BBB- 10,349,632 17,800 BRE Properties, Series C 6.750% BBB- 440,016 42,644 BRE Properties, Series D 6.750% Baa3 1,044,778 487,209 CarrAmerica Realty Corporation, Series E 7.500% BBB- 12,302,027 29,600 Developers Diversified Realty Corporation 7.500% Ba1 740,000 56,900 Developers Diversified Realty Corporation, Series F 8.600% BBB- 1,461,192 47,300 Developers Diversified Realty Corporation, Series G 8.000% BBB- 1,213,245 404,900 Developers Diversified Realty Corporation, Series H 7.375% BBB- 10,082,010 156,800 Duke Realty Corporation, Series L 6.600% Baa2 3,797,696 157,779 Duke-Weeks Realty Corporation, Series B 7.990% BBB 7,967,840 8,000 Duke-Weeks Realty Corporation, Series I 8.450% BBB 200,400 1,099,100 Equity Office Properties Trust, Series G 7.750% BBB- 27,983,086 25,800 Equity Residential Properties Trust, Series D 8.600% BBB 658,932 10,600 First Industrial Realty Trust, Inc., Series C 8.625% BBB- 272,314 19,000 Firstar Realty LLC, 144A 8.875% Aa3 25,151,250 57,900 Harris Preferred Capital Corporation, Series A 7.375% A1 1,456,185 2,800 HRPT Properties Trust, Series A 9.875% BBB- 71,204 1,039,210 HRPT Properties Trust, Series B 8.750% BBB- 26,915,539 22,000 New Plan Excel Realty Trust, Series D 7.800% BBB- 1,130,250 418,600 New Plan Excel Realty Trust, Series E 7.625% BBB- 10,527,790 10,000 Prologis Trust, Series F 6.750% BBB 247,900 107,000 Prologis Trust, Series G 6.750% BBB 2,642,900 328,400 PS Business Parks, Inc. 7.000% BBB- 7,947,280 57,000 PS Business Parks, Inc., Series I 6.875% BBB- 1,330,950 240,000 PS Business Parks, Inc., Series L 7.600% BBB- 6,084,000 4,100 Public Storage, Inc. 7.125% BBB+ 104,345 64,800 Public Storage, Inc., Series C 6.600% BBB+ 1,562,976 90,000 Public Storage, Inc., Series D 6.180% BBB+ 2,004,300 2,900 Public Storage, Inc., Series E 6.750% BBB+ 71,775 59,400 Public Storage, Inc., Series F 6.450% BBB+ 1,372,140 23,100 Public Storage, Inc., Series Q 8.600% BBB+ 577,962 116,600 Public Storage, Inc., Series R 8.000% BBB+ 2,951,146 209,600 Public Storage, Inc., Series S 7.875% BBB+ 5,317,552 16,500 Public Storage, Inc., Series T 7.625% BBB+ 418,440 40,680 Public Storage, Inc., Series U 7.625% BBB+ 1,029,611 347,600 Public Storage, Inc., Series V 7.500% BBB+ 8,971,556 6,971 Public Storage, Inc., Series X 6.450% BBB+ 161,588 93,500 Realty Income Corporation 7.375% BBB- 2,398,275 47,500 Regency Centers Corporation 7.450% BBB- 1,199,375 22,400 Regency Centers Corporation 7.250% BBB- 562,688 20,500 Simon Property Group, Inc., Series F 8.750% Baa2 521,725 176,600 Simon Property Group, Inc., Series G 7.890% BBB 9,094,900
17 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Real Estate (continued) 13,700 United Dominion Realty Trust 8.600% BBB- $ 352,364 323,633 Vornado Realty Trust, Series G 6.625% BBB- 7,547,122 67,700 Vornado Realty Trust, Series H 6.750% BBB- 1,604,490 189,300 Vornado Realty Trust, Series I 6.625% BBB- 4,395,546 489,900 Wachovia Preferred Funding Corporation 7.250% A2 13,687,806 2,000 Weingarten Realty Trust, Preferred Securities 6.750% A- 52,260 2,500 Weingarten Realty Trust, Series E 6.950% A- 63,875 ----------------------------------------------------------------------------------------------------------------------------------- Total Real Estate 229,638,724 ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 45,700 Sherwin Williams Company, Series III (CORTS) 7.250% A+ 1,189,114 5,900 Sherwin Williams Trust (CORTS) 7.500% A+ 152,397 ----------------------------------------------------------------------------------------------------------------------------------- Total Specialty Retail 1,341,511 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 2.3% 11,000 Countrywide Capital Trust II, Series II, (CORTS) 8.000% BBB+ 280,500 12,200 Countrywide Capital Trust III (PPLUS) 8.050% BBB+ 318,054 799,020 Countrywide Capital Trust IV 6.750% BBB+ 20,159,275 4,600 Washington Mutual Incorporated (CORTS) 7.750% Baa1 116,380 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 20,874,209 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 1.8% 110,300 Fannie Mae, (3) 6.129% AA- 5,533,200 19,000 Federal Home Loan Mortgage Corporation 5.300% AA- 846,095 23,500 Federal Home Loan Mortgage Corporation 5.810% Aa3 1,116,250 58,300 Federal Home Loan Mortgage Corporation, (3) 6.000% AA- 2,827,550 65,600 Federal Home Loan Mortgage Corporation, (3) 6.140% Aa3 3,266,880 12,000 Federal Home Loan Mortgage Corporation, (3) 5.100% AA- 513,750 58,600 Federal Home Loan Mortgage Corporation, (3) 5.100% AA- 2,519,800 ----------------------------------------------------------------------------------------------------------------------------------- Total U.S. Agency 16,623,525 ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 2.2% 355,846 Telephone and Data Systems Inc. 7.600% A- 8,921,054 159,700 United States Cellular Corporation 8.750% A- 4,185,737 283,900 United States Cellular Corporation 7.500% A- 7,154,280 ----------------------------------------------------------------------------------------------------------------------------------- Total Wireless Telecommunication Services 20,261,071 ----------------------------------------------------------------------------------------------------------------------------------- Total $25 Par (or similar) Securities (cost $759,528,748) 770,019,571 ---------------------------------------------------------------------------------------------------------------------
Principal Amount (000) Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Corporate Bonds - 0.7% (0.5% of Total Investments) Commercial Banks - 0.1% $ 1,000 HBOS plc, Series 144A 6.413% 9/29/49 A1 1,015,000 ----------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.4% 3,700 Stanley Works Capital Trust I, 144A 5.902% 12/01/45 Baa1 3,682,862 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 1,800 AIG Capital Trust I, 144A 5.900% 12/21/65 A 1,808,995 ----------------------------------------------------------------------------------------------------------------------------------- 6,500 Total Corporate Bonds (cost $6,458,419) 6,506,857 -----------------------------------------------------------------------------------------------------------------------------------
Principal Amount (000) /Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Preferred Securities - 58.0% (39.5% of Total Investments) Capital Markets - 6.5% 2,500 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 2,659,305 2,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 2,113,602 1,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 1,057,300
18
Principal Amount (000) /Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets (continued) 7,900 BT Preferred Capital Trust II 7.875% 2/25/27 A2 $ 8,390,574 2,250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 2,333,147 11,250 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 11,636,663 16,463 First Union Institutional Capital Securities I 8.040% 12/01/26 A1 17,469,301 5,500 UBS Preferred Funding Trust I 8.622% 10/29/49 AA- 6,297,703 7,250 Washington Mutual Capital Trust I 8.375% 6/01/27 Baa1 7,815,333 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 59,772,928 ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 31.3% 9,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 AA- 9,222,129 18,250 Abbey National Capital Trust I 8.963% 6/30/50 A2 24,903,895 3,000 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R 3,082,542 2,500 Bank One Capital III 8.750% 9/01/30 A1 3,370,302 1,500 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 1,591,515 7,200 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 8,315,690 3,000 Centura Capital Trust I, 144A 8.845% 6/01/27 A2 3,264,099 2,000 Corestates Capital Trust I, 144A 8.000% 12/15/26 A1 2,120,678 1,700 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 1,883,000 1,000 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 1,058,388 1,000 First Empire Capital Trust II 8.277% 6/01/27 Baa1 1,076,179 1,500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 1,665,264 25,500 HBOS Capital Funding LP, Notes 6.850% 3/23/49 A1 25,930,542 5,750 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 6,735,665 17,150 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 26,276,201 12,000 KBC Bank Fund Trust III, 144A 9.860% 5/02/50 A2 13,888,896 2,000 KeyCorp Capital III 7.750% 7/15/29 A3 2,426,252 2,000 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 2,117,938 8,850 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 8,997,414 11,150 NB Capital Trust II 7.830% 12/15/26 Aa3 11,829,526 7,655 Nordbanken AB, 144A 8.950% 11/29/49 A 8,644,700 1,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 1,069,163 8,000 Peoples Heritage Capital Trust I, Series B 9.060% 2/01/27 A3 8,577,232 200 PFCI Capital Corporation 7.750% 8/17/52 A- 5,406,260 19,000 PNC Institutional Capital Securities, 144A 7.950% 12/15/26 A3 20,150,412 2,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 2,063,752 16,000 RBS Capital Trust B 6.800% 12/31/49 A1 16,246,704 17,500 Reliance Capital Trust I, Series B 8.170% 5/01/28 N/R 19,088,457 1,400 Republic New York Capital II, Capital Securities 7.530% 12/04/26 A1 1,476,675 2,000 SocGen Real Estate Company LLC, 144A 7.640% 12/29/49 A1 2,081,728 5,000 Sparebanken Rogaland, Notes, 144A 6.443% 5/01/49 Baa1 5,038,150 23,000 Summit Capital Trust I, Capital Securities 8.400% 3/15/27 Aa3 24,568,140 1,800 Swedbank ForeningsSparbanken AB, 144A 9.000% 9/17/50 A2 2,067,561 2,000 Union Planters Capital Trust A 8.200% 12/15/26 A2 2,125,360 4,000 Wachovia Capital Trust I, Capital Securities, 144A 7.640% 1/15/27 A1 4,236,096 3,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 3,204,048 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 285,800,553 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 3.9% 4,250 BNP Paribas Capital Trust 7.200% 12/31/49 A+ 4,363,003 1,500 BNP Paribas Capital Trust, 144A 9.003% 12/29/49 A+ 1,737,981 3,000 Citigroup Capital X 6.100% 9/30/33 Aa2 73,170 19,500 JPM Capital Trust II 7.950% 2/01/27 A1 20,780,195 8,100 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 8,520,026 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 35,474,375 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 1.6% 11,250 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 A- 14,575,781 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 9.2% 7,570 Ace Capital Trust II 9.700% 4/01/30 Baa1 10,562,928 1,000 Allstate Financing II 7.830% 12/01/45 A2 1,055,437 2,000 American General Capital II 8.500% 7/01/30 Aa3 2,694,616
19 Nuveen Quality Preferred Income Fund (JTP) (continued) Portfolio of Investments December 31, 2005
Principal Amount (000) /Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Insurance (continued) 2,500 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 BBB+ $ 2,489,160 4,000 MIC Financing Trust I 8.375% 2/01/27 A+ 4,099,404 7,000 Prudential plc 6.500% 6/29/49 A 6,946,674 2,000 RenaissanceRe Capital Trust 8.540% 3/01/27 BBB+ 2,083,670 26,216 Sun Life Canada Capital Trust, Capital Securities, 144A 8.526% 5/06/47 A+ 28,271,098 24,373 Zurich Capital Trust I, 144A 8.376% 6/01/37 A- 26,386,673 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 84,589,660 ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 3.6% 4,000 KN Capital Trust I, Preferred Securities 8.560% 4/15/27 Baa3 4,285,908 5,860 KN Capital Trust III 7.630% 4/15/28 Baa3 6,506,241 20,900 Phillips 66 Capital Trust II 8.000% 1/15/37 A3 22,249,325 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 33,041,474 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.6% 8,500 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 9,306,676 5,000 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 5,340,700 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 14,647,376 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 0.3% 68,600 Fannie Mae 5.100% 4/15/49 AA- 2,939,085 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Preferred Securities (cost $517,549,398) 530,841,232 ---------------------------------------------------------------------------------------------------------------------
Principal Amount (000) Description(1) Coupon Maturity Value ----------------------------------------------------------------------------------------------------------------------------------- Short-Term Investments - 2.5% (1.7% of Total Investments) Repurchase Agreement with State Street Bank, dated 12/30/05, repurchase price $22,690,959, collateralized by $16,830,000 U.S. Treasury $ 22,683 Bonds, 7.875%, due 2/15/21, valued at $23,141,250 3.250% 1/03/06 22,682,768 ============---------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $22,682,768) 22,682,768 --------------------------------------------------------------------------------------------------------------------- Total Investments (cost $1,318,535,020) - 146.6% 1,342,619,630 --------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.5% 12,978,094 --------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (48.1)% (440,000,000) --------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 915,597,724 =====================================================================================================================
Interest Rate Swaps outstanding at December 31, 2005
Fixed Rate Paid Fixed Rate Floating Rate Floating Rate Unrealized Notional by the Fund Payment Received Payment Termination Appreciation Counterparty Amount (annualized) Frequency by the Fund(4) Frequency Date (Depreciation) --------------------------------------------------------------------------------------------------------------------- Citigroup Inc. $ 55,000,000 4.604% Monthly 4.320% Monthly 6/06/2006 $ 5,370 Citigroup Inc. 55,000,000 4.713% Monthly 4.320% Monthly 12/06/2006 25,223 Citigroup Inc. 110,000,000 3.860% Monthly 4.380% Monthly 8/29/2007 1,536,032 Citigroup Inc. 110,000,000 4.350% Monthly 4.380% Monthly 8/29/2009 1,444,477 --------------------------------------------------------------------------------------------------------------------- $ 3,011,102 =====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Ratings (not covered by the report of independent registered public accounting firm): Using the higher of Standard & Poor's or Moody's rating. Ratings below Baa by Moody's Investor Service, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (3) Security is eligible for the Dividends Received Deduction. (4) Based on LIBOR (London Inter-Bank Offered Rate). N/R Investment is not rated. 144A Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. CBTCS Corporate Backed Trust Certificates. CORTS Corporate Backed Trust Securities. PCARS Public Credit and Repackaged Securities. PPLUS PreferredPlus Trust. SATURNS Structured Asset Trust Unit Repackaging. See accompanying notes to financial statements. 20 Nuveen Quality Preferred Income Fund 2 (JPS) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Convertible Preferred Securities - 1.5% (1.0% of Total Investments) Diversified Financial Services - 0.1% 31,546 Citigroup Global Markets 2.000% Aa1 $ 1,546,069 ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 30,533 FPL Group Inc. 8.000% A- 1,892,130 ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 28,484 Albertson's, Inc. 7.250% BBB- 642,314 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 118,000 XL Capital Ltd 6.500% A2 2,636,120 ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.9% 282,689 Dominion Resources Inc. 8.750% Baa1 14,702,655 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 0.3% 172,300 PMI Group Inc. 5.875% A1 4,247,195 ----------------------------------------------------------------------------------------------------------------------------------- Total Convertible Preferred Securities (cost $23,056,240) 25,666,483 --------------------------------------------------------------------------------------------------------------------- Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- $25 Par (or similar) Securities - 82.2% (57.2% of Total Investments) Automobiles - 0.0% 4,300 Daimler Chrysler, Series DCX (CORTS) 7.500% A3 100,405 2,400 Daimler Chrysler, Series DCX (CORTS) 8.250% A3 61,176 3,000 Daimler Chrysler, Series DCX (CORTS) 6.875% A3 63,060 3,400 DaimlerChrysler AG (CORTS) 7.875% A3 83,708 23,300 DaimlerChrysler Corp. (PPLUS) 7.250% A3 561,530 ----------------------------------------------------------------------------------------------------------------------------------- Total Automobiles 869,879 ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 5.1% 103,100 Bear Stearns Capital Trust III 7.800% A2 2,623,895 19,300 BNY Capital Trust IV, Series E 6.875% A1 485,395 51,300 BNY Capital Trust V, Series F 5.950% A1 1,242,999 395,625 Compass Capital Trust III 7.350% A3 10,017,225 28,600 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 719,290 63,300 First Union Capital II, Series II (CORTS) 7.500% A1 1,644,534 31,300 First Union Institutional Capital II (CORTS) 8.200% A1 845,413 6,300 Goldman Sachs Capital I (CORTS) 6.000% A1 148,019 2,100 Goldman Sachs Capital I, Series A (CORTS) 6.000% A1 48,657 179,900 Goldman Sachs Group Inc., (3) 6.200% A2 4,587,450 9,900 Goldman Sachs Group Inc., Series GSC-3 (PPLUS) 6.000% A1 231,660 2,000 Goldman Sachs Group Inc., Series GSG-1 (PPLUS) 6.000% Aa3 47,340 3,000 Goldman Sachs Group Inc., Series GSG-2 (PPLUS) 5.750% Aa3 68,220 3,000 Goldman Sachs Group Inc., Series 2003-11 (SATURNS) 5.625% Aa3 66,720 13,700 Goldman Sachs Group Inc., Series 2004-04 (SATURNS) 6.000% A1 318,525 1,600 Goldman Sachs Group Inc., Series 2004-06 (SATURNS) 6.000% A1 37,280 3,800 Goldman Sachs Group Incorporated (SATURNS) 5.750% Aa3 85,196 323,800 Lehman Brothers Holdings Capital Trust III, Series K 6.375% A2 8,124,142 102,900 Lehman Brothers Holdings Capital Trust IV, Series L 6.375% A2 2,583,819 58,800 Lehman Brothers Holdings Capital Trust V, Series M 6.000% A2 1,406,496 42,000 Lehman Brothers Holdings Inc., Series C, (3) 5.940% BBB+ 2,100,000 70,000 Lehman Brothers Holdings Inc., Series F, (3) 6.500% A- 1,837,500 122,400 Merrill Lynch Capital Trust II 8.000% A1 3,167,712 107,900 Merrill Lynch Preferred Capital Trust 7.750% A1 2,762,240 209,300 Merrill Lynch Preferred Capital Trust III 7.000% A1 5,362,266
21 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets (continued) 129,700 Merrill Lynch Preferred Capital Trust IV 7.120% A1 $ 3,337,181 228,700 Merrill Lynch Preferred Capital Trust V 7.280% A1 5,973,644 55,200 Morgan Stanley (PPLUS) 7.050% Aa3 1,410,360 168,008 Morgan Stanley Capital Trust II 7.250% A1 4,279,164 459,900 Morgan Stanley Capital Trust III 6.250% A1 11,216,961 380,000 Morgan Stanley Capital Trust IV 6.250% A1 9,211,200 43,500 Morgan Stanley Capital Trust V 5.750% A+ 989,190 46,400 UBS Preferred Funding Trust III 7.250% AA- 1,176,240 44,500 Washington Mutual Capital Trust I, Series 2001-22, Class A-1 (CORTS) 7.650% Baa1 1,123,625 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 89,279,558 ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 11.0% 119,000 ABN AMRO Capital Fund Trust V 5.900% A 2,819,110 7,000 ABN AMRO Capital Trust Fund VII 6.080% A 170,800 158,960 ASBC Capital I 7.625% Baa1 4,072,555 136,100 BAC Capital Trust I 7.000% Aa3 3,451,496 168,500 BAC Capital Trust II 7.000% Aa3 4,290,010 218,300 BAC Capital Trust III 7.000% Aa3 5,568,833 304,100 Banco Santander 6.410% A2 7,632,910 54,100 Banco Totta & Acores Finance, Series A 8.875% A3 1,386,313 11,400 BancorpSouth Capital Trust I 8.150% Baa2 290,016 731,000 Banesto Holdings, Series A, 144A 10.500% A2 21,930,000 204,000 Bank One Capital Trust VI 7.200% A1 5,210,160 67,300 BankNorth Capital Trust II 8.000% A3 1,734,994 121,500 Chittenden Capital Trust I 8.000% Baa1 3,118,905 225,500 Cobank ABC, 144A, (3) 7.000% N/R 11,663,086 268,700 Comerica Capital Trust I 7.600% A3 6,784,675 362,100 HSBC Finance Corporation 6.875% A1 9,407,358 36,500 HSBC Finance Corporation 6.000% A1 889,140 39,600 KeyCorp (PCARS) 7.500% A3 1,005,840 8,500 KeyCorp Capital Trust V 5.875% A3 199,325 32,500 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 846,625 99,000 KeyCorp, Series B (CORTS) 8.250% A3 2,485,890 270,400 National Commerce Capital Trust II 7.700% A1 6,895,200 5,000 National Westminster Bank plc 7.760% Aa3 128,050 112,200 National Westminster Bank plc, Series A 7.875% Aa2 2,851,002 5,800 PNC Capital Trust 6.125% A3 139,954 50,500 Regions Finance Trust I 8.000% A2 1,270,075 596,876 Royal Bank of Scotland Group plc, Series N 6.350% A1 14,999,494 173,800 SunTrust Capital Trust IV 7.125% A1 4,391,926 162,200 SunTrust Capital Trust V 7.050% A1 4,105,282 714,300 USB Capital Trust III 7.750% Aa3 18,200,364 315,800 USB Capital Trust IV 7.350% Aa3 8,062,374 132,200 USB Capital Trust V 7.250% Aa3 3,351,270 63,300 USB Capital Trust VI 5.750% Aa3 1,448,304 118,600 USB Capital Trust VII 5.875% Aa3 2,765,752 92,300 VNB Capital Trust I 7.750% Baa1 2,351,804 55,900 Wells Fargo Capital Trust IX 5.625% Aa2 1,278,992 38,700 Wells Fargo Capital Trust IV 7.000% Aa2 989,172 301,600 Wells Fargo Capital Trust V 7.000% Aa2 7,624,448 43,100 Wells Fargo Capital Trust VI 6.950% Aa2 1,088,706 61,300 Wells Fargo Capital Trust VII 5.850% Aa2 1,473,039 578,650 Zions Capital Trust B 8.000% Baa1 15,079,619 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 193,452,868 ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.1% 22,400 IBM Inc. (CORTS) 7.125% A+ 564,256 9,100 IBM Inc., Trust Certificates, Series 2001-2 7.100% A+ 230,685 20,200 IBM Trust II (CORTS) 7.125% A+ 507,828 39,200 IBM Trust III (CORTS) 7.200% A+ 1,003,912 ----------------------------------------------------------------------------------------------------------------------------------- Total Computers & Peripherals 2,306,681 -----------------------------------------------------------------------------------------------------------------------------------
22
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 2.4% 620,196 Household Capital Trust VI 8.250% A2 $ 15,752,978 73,600 Household Capital Trust VII 7.500% A2 1,879,744 917,000 HSBC Finance Corporation 6.360% A3 23,429,350 39,900 SLM Corporation 6.000% A 945,630 ----------------------------------------------------------------------------------------------------------------------------------- Total Consumer Finance 42,007,702 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 9.3% 78,800 BBVA Preferred Capital Ltd., Series B 7.750% A1 1,987,730 407,000 CIT Group Inc., Series A, (3) 6.350% BBB+ 10,520,950 38,100 CIT Group Incorporated (CORTS) 7.750% A3 1,027,938 14,900 Citigroup Capital Trust IX 6.000% Aa2 360,878 476,200 Citigroup Capital Trust VII 7.125% Aa2 12,081,194 828,207 Citigroup Capital Trust VIII 6.950% Aa2 20,887,381 37,300 Citigroup Capital Trust XI 6.000% Aa2 910,493 36,900 Citigroup Inc., Series H, (3) 6.231% Aa3 1,933,560 39,000 Citigroup Inc., Series M, (3) 5.864% Aa3 1,994,850 10,400 Citigroup, Series CIT (CORTS) 6.750% A3 261,040 14,100 General Electric Capital Corporation 5.875% AAA 343,758 300,700 General Electric Capital Corporation 6.100% AAA 7,586,661 199,700 General Electric Capital Corporation 6.625% AAA 5,044,422 3,900 General Electric Capital Corporation, (CORTS) 6.000% AAA 96,525 1,445,555 ING Group N.V. 7.050% A 36,991,752 1,523,600 ING Group N.V. 7.200% A 39,110,812 11,000 ING Group N.V. 6.200% A 272,800 91,500 JPM Capital Trust (CORTS) 7.200% A2 2,368,935 11,600 JPM Capital Trust I, Series 2001-1, Class A-1 (CORTS) 7.850% A1 301,484 9,700 JPMorgan Chase & Company (PCARS) 7.125% A2 242,694 366,000 JPMorgan Chase Capital Trust IX, Series I 7.500% A1 9,329,340 203,600 JPMorgan Chase Capital Trust X 7.000% A1 5,177,548 22,156 JPMorgan Chase Capital Trust XI 5.875% A1 512,911 210,900 JPMorgan Chase Capital Trust XVI 6.350% A1 5,276,718 52,900 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 1,364,820 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 165,987,194 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.6% 114,999 AT&T Inc. 7.000% A 2,884,175 17,500 BellSouth Capital Funding (CORTS) 7.100% A1 450,975 33,300 BellSouth Corporation 7.125% A 837,495 21,600 BellSouth Corporation (CORTS) 7.000% Aa3 541,944 16,300 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A 407,989 15,100 BellSouth Corporation, Series BLS, (CORTS) 7.000% A 386,636 16,300 BellSouth Inc. (CORTS) 7.000% A 421,192 28,400 BellSouth Telecommunications (PPLUS) 7.300% Aa3 714,260 30,600 Verizon Communications (CORTS) 7.625% A+ 782,136 7,600 Verizon Communications (CORTS) 7.375% A+ 193,952 70,100 Verizon Global Funding Corporation (SATURNS) 7.500% A+ 1,781,942 22,100 Verizon New England Inc., Series B 7.000% A3 563,550 13,000 Verizon South Inc., Series F 7.000% A 329,420 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Telecommunication Services 10,295,666 ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 4.8% 189,500 Alabama Power Company, (3) 5.830% BBB+ 4,620,010 2,800 Consolidated Edison Company 7.250% A2 71,764 17,200 Consolidated Edison Company of New York Inc. 7.500% A1 434,300 27,400 DTE Energy Trust I 7.800% Baa3 697,604 1,600 Entergy Arkansas Inc. 6.000% AAA 40,048 5,500 Entergy Arkansas Inc. 6.700% AAA 138,710 56,750 Entergy Louisiana Inc. 7.600% A- 1,440,883 1,299,100 Entergy Mississippi Inc. 7.250% A- 33,672,672 3,000 Georgia Power Capital Trust V 7.125% A3 75,690 1,800 Georgia Power Capital Trust VII 5.875% A3 43,650 30,900 Georgia Power Company 5.700% AAA 753,651
23 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities (continued) 941,500 Interstate Power and Light Company, Series B, (3) 8.375% BBB- $ 31,399,025 2,500 Mississippi Power Company 5.625% AAA 59,925 8,900 National Rural Utilities Cooperative Finance Corporation 7.600% A3 224,458 30,200 National Rural Utilities Cooperative Finance Corporation 7.400% A3 773,120 1,700 National Rural Utilities Cooperative Finance Corporation 6.750% A3 43,163 18,400 National Rural Utilities Cooperative Finance Corporation 5.950% A3 434,240 53,200 Public Service Company of Oklahoma, Series B 6.000% AAA 1,341,704 2,900 Southern Company Capital Trust I (CORTS) 7.375% BBB+ 74,965 3,700 Tennessee Valley Authority, Series A 4.081% AAA 89,207 59,800 Tennessee Valley Authority, Series D 6.750% AAA 1,435,200 265,500 Virginia Power Capital Trust 7.375% Baa1 6,802,110 ----------------------------------------------------------------------------------------------------------------------------------- Total Electric Utilities 84,666,099 ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.7% 122,000 Dairy Farmers of America Inc., 144A, (3) 7.875% BBB- 12,253,375 ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 53,500 AGL Capital Trust II 8.000% BBB 1,361,575 ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.1% 62,900 Aetna Inc. 8.500% BBB+ 1,602,692 ----------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 8,600 General Electric Company, Series GE (CORTS) 6.800% AAA 223,858 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 19.2% 972,600 Ace Ltd., Series C 7.800% Baa2 25,384,860 2,119,800 Aegon N.V. 6.375% A- 53,546,148 131,200 Aegon N.V. 6.500% A- 3,264,256 21,300 AMBAC Financial Group Inc. 7.000% AA 537,186 56,600 AMBAC Financial Group Inc. 5.950% AA 1,358,400 4,800 AMBAC Financial Group Inc. 5.875% AA 114,768 479,357 Delphi Financial Group, Inc. 8.000% BBB 12,506,424 2,417,400 EverestRe Group Limited 7.850% Baa1 61,595,352 55,900 Financial Security Assurance Holdings 6.875% AA 1,423,214 704,200 Financial Security Assurance Holdings 6.250% AA 17,830,344 11,700 Financial Security Assurance Holdings 5.600% AA 263,133 369,200 Hartford Capital Trust III, Series C 7.450% Baa1 9,329,684 105,300 Hartford Life Capital Trust II, Series B 7.625% Baa1 2,683,044 94,000 Lincoln National Capital Trust V, Series E 7.650% Baa1 2,388,540 55,300 Lincoln National Capital Trust VI 6.750% Baa1 1,399,090 7,500 MetLife Inc. 5.875% A 180,150 1,097,500 MetLife Inc., Series B, (3) 6.500% Baa1 28,447,200 301,581 PartnerRe Limited 7.900% A3 7,690,316 644,020 PartnerRe Limited, Series C 6.750% BBB+ 15,565,963 27,400 PartnerRe Limited, Series D 6.500% BBB+ 641,982 108,700 PLC Capital Trust III 7.500% BBB+ 2,767,502 453,140 PLC Capital Trust IV 7.250% BBB+ 11,546,007 19,600 PLC Capital Trust V 6.125% BBB+ 466,284 5,600 Prudential Financial Inc. (CORTS) 6.000% A- 132,664 223,000 Prudential plc 6.750% A 5,746,710 324,060 RenaissanceRe Holdings Ltd., Series A 8.100% BBB+ 8,192,237 145,800 RenaissanceRe Holdings Ltd., Series B 7.300% BBB 3,682,908 20,200 RenaissanceRe Holdings Ltd., Series C 6.080% BBB+ 408,040 90,500 Safeco Capital Trust I (CORTS) 8.700% Baa2 2,535,810 21,100 Safeco Capital Trust I (CORTS) 8.750% Baa2 624,560 59,900 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 1,563,690 4,800 Safeco Capital Trust III (CORTS) 8.072% Baa2 126,720 3,100 Safeco Capital Trust IV (CORTS) 8.375% Baa2 83,127 2,600 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 67,093 8,100 Safeco Corporation, Series 2002-5 (SATURNS) 8.250% Baa2 211,329 129,500 Saint Paul Capital Trust I 7.600% Baa1 3,321,675
24
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Insurance (continued) 132,300 Torchmark Capital Trust I 7.750% A- $ 3,414,663 6,900 Torchmark Capital Trust II 7.750% A- 176,985 21,200 W.R. Berkley (CORTS) 8.250% BBB- 543,144 26,800 W.R. Berkley Capital Trust, Series 2002-1 (CBTCS) 8.125% BBB- 272,288 711,146 W.R. Berkley Corporation 6.750% BBB- 17,778,650 570,300 XL Capital Ltd, Series A 8.000% Baa1 14,508,432 598,417 XL Capital Ltd, Series B 7.625% Baa1 15,259,634 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 339,580,206 ----------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 16,100 Vertex Industries Inc. (PPLUS) 7.625% A+ 412,080 ----------------------------------------------------------------------------------------------------------------------------------- Media - 0.3% 166,800 CBS Corporation 7.300% BBB+ 4,195,020 18,200 The Walt Disney Company 7.000% A- 464,100 2,900 The Walt Disney Company (CORTS) 6.875% A- 74,385 ----------------------------------------------------------------------------------------------------------------------------------- Total Media 4,733,505 ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 5,700 Nordstrom Inc. (CORTS) 7.625% A- 146,490 ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.4% 119,400 Dominion CNG Capital Trust I 7.800% Baa1 3,047,088 46,300 Dominion Resources Capital Trust II 8.400% Baa2 1,177,409 120,200 Energy East Capital Trust I 8.250% BBB- 3,084,332 ----------------------------------------------------------------------------------------------------------------------------------- Total Multi-Utilities 7,308,829 ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.6% 910,411 Nexen, Inc. 7.350% Baa3 23,506,812 151,900 TransCanada Pipeline 8.250% A3 3,920,539 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 27,427,351 ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 13,700 Bristol-Myers Squibb Company (CORTS) 6.250% A+ 350,720 7,300 Bristol-Myers Squibb Company Trust (CORTS) 6.800% A+ 187,099 ----------------------------------------------------------------------------------------------------------------------------------- Total Pharmaceuticals 537,819 ----------------------------------------------------------------------------------------------------------------------------------- Real Estate - 21.0% 95,400 AvalonBay Communities, Inc., Series H 8.700% BBB 2,604,420 16,400 BRE Properties, Series B 8.080% BBB- 414,592 356,900 BRE Properties, Series C 6.750% BBB- 8,822,568 81,006 BRE Properties, Series D 6.750% Baa3 1,984,647 925,955 CarrAmerica Realty Corporation, Series E 7.500% BBB- 23,380,364 40,467 Developers Diversified Realty Corporation 7.500% Ba1 1,011,675 135,925 Developers Diversified Realty Corporation, Series F 8.600% BBB- 3,490,554 639,813 Developers Diversified Realty Corporation, Series G 8.000% BBB- 16,411,203 183,623 Developers Diversified Realty Corporation, Series H 7.375% BBB- 4,572,213 5,600 Duke-Weeks Realty Corporation 6.625% BBB 137,928 220,650 Duke-Weeks Realty Corporation, Series B 7.990% BBB 11,142,825 39,900 Duke-Weeks Realty Corporation, Series I 8.450% BBB 999,495 298,900 Duke Realty Corporation, Series L 6.600% Baa2 7,239,358 380,900 Equity Office Properties Trust, Series G 7.750% BBB- 9,697,714 54,000 Equity Residential Properties Trust, Series C 9.125% BBB 1,370,520 68,250 Equity Residential Properties Trust, Series D 8.600% BBB 1,743,105 36,484 Equity Residential Properties Trust, Series N 6.480% BBB 870,873 332,800 Federal Realty Investment Trust 8.500% BBB- 8,576,256 18,300 First Industrial Realty Trust, Inc., Series C 8.625% BBB- 470,127 16,800 Harris Preferred Capital Corporation, Series A 7.375% A1 422,520 213,100 HRPT Properties Trust, Series A 9.875% BBB- 5,419,133 1,579,825 HRPT Properties Trust, Series B 8.750% BBB- 40,917,468 149,500 Kimco Realty Corporation, Series F 6.650% BBB+ 3,842,150 199,550 New Plan Excel Realty Trust, Series D 7.800% BBB- 10,251,881
25 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Real Estate (continued) 770,900 New Plan Excel Realty Trust, Series E 7.625% BBB- $ 19,388,135 1,700 Prologis Trust, Series F 6.750% BBB 42,143 97,728 Prologis Trust, Series G 6.750% BBB 2,413,882 734,970 PS Business Parks, Inc. 7.000% BBB- 17,786,274 107,600 PS Business Parks, Inc., Series I 6.875% BBB- 2,512,460 401,000 PS Business Parks, Inc., Series L 7.600% BBB- 10,165,350 6,000 Public Storage, Inc. 7.125% BBB+ 152,700 230,400 Public Storage, Inc., Series C 6.600% BBB+ 5,557,248 35,200 Public Storage, Inc., Series D 6.180% BBB+ 783,904 38,600 Public Storage, Inc., Series E 6.750% BBB+ 955,350 60,066 Public Storage, Inc., Series F 6.450% BBB+ 1,387,525 86,300 Public Storage, Inc., Series Q 8.600% BBB+ 2,159,226 264,295 Public Storage, Inc., Series R 8.000% BBB+ 6,689,306 50,700 Public Storage, Inc., Series S 7.875% BBB+ 1,286,259 131,065 Public Storage, Inc., Series T 7.625% BBB+ 3,323,808 108,700 Public Storage, Inc., Series U 7.625% BBB+ 2,751,197 148,000 Public Storage, Inc., Series V 7.500% BBB+ 3,819,880 2,129 Public Storage, Inc., Series X 6.450% BBB+ 49,350 164,100 Realty Income Corporation 7.375% BBB- 4,209,165 309,100 Regency Centers Corporation 7.450% BBB- 7,804,775 245,100 Regency Centers Corporation 7.250% BBB- 6,156,912 16,100 Regency Centers Corporation 6.700% BBB- 394,450 34,500 Simon Property Group, Inc., Series F 8.750% Baa2 878,025 326,041 Simon Property Group, Inc., Series G 7.890% BBB 16,791,112 58,600 United Dominion Realty Trust 8.600% BBB- 1,507,192 9,200 Vornado Realty Trust, Series E 7.000% BBB- 232,024 22,300 Vornado Realty Trust, Series F 6.750% BBB- 529,625 213,940 Vornado Realty Trust, Series G 6.625% BBB- 4,989,081 112,800 Vornado Realty Trust, Series H 6.750% BBB- 2,673,360 226,700 Vornado Realty Trust, Series I 6.625% BBB- 5,263,974 2,461,900 Wachovia Preferred Funding Corporation 7.250% A2 68,785,486 156,500 Weingarten Realty Trust, Series E 6.950% A- 3,998,575 ----------------------------------------------------------------------------------------------------------------------------------- Total Real Estate 371,231,342 ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 50,900 Sherwin Williams Company, Series III (CORTS) 7.250% A+ 1,324,418 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.5% 4,600 Countrywide Capital Trust II, Series II (CORTS) 8.000% BBB+ 117,300 1,043,000 Countrywide Capital Trust IV 6.750% BBB+ 26,314,890 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 26,432,190 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 1.7% 2,800 Fannie Mae,(3) 4.750% AA- 114,292 20,300 Fannie Mae,(3) 5.810% AA- 1,015,000 70,200 Fannie Mae,(3) 5.125% AA- 3,101,436 83,500 Fannie Mae,(3) 6.129% AA- 4,188,778 34,000 Federal Home Loan Mortgage Corporation 5.300% AA- 1,514,064 124,200 Federal Home Loan Mortgage Corporation,(3) 6.000% AA- 6,023,700 58,700 Federal Home Loan Mortgage Corporation,(3) 6.140% Aa3 2,923,260 60,000 Federal Home Loan Mortgage Corporation,(3) 5.100% AA- 2,568,750 84,600 Federal Home Loan Mortgage Corporation,(3) 5.000% AA- 3,671,640 107,900 Federal Home Loan Mortgage Corporation,(3) 5.100% AA- 4,639,700 ----------------------------------------------------------------------------------------------------------------------------------- Total U.S. Agency 29,760,620 ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 2.2% 164,900 Telephone and Data Systems Inc. 7.600% A- 4,134,043 1,319,200 United States Cellular Corporation 8.750% A- 34,576,232 ----------------------------------------------------------------------------------------------------------------------------------- Total Wireless Telecommunication Services 38,710,275 ----------------------------------------------------------------------------------------------------------------------------------- Total $25 Par (or similar) Securities (cost $1,429,627,569) 1,451,912,272 ---------------------------------------------------------------------------------------------------------------------
26
Principal Amount (000) Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Corporate Bonds - 0.7% (0.5% of Total Investments) Commercial Banks - 0.1% $ 2,000 HBOS plc, Series 144A 6.413% 9/29/49 A1 $ 2,030,000 ----------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.4% 7,000 Stanley Works Capital Trust I, 144A 5.902% 12/01/45 Baa1 6,967,576 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 3,500 AIG Capital Trust I, 144A 5.900% 12/21/65 A 3,517,490 ----------------------------------------------------------------------------------------------------------------------------------- 12,500 Total Corporate Bonds (cost $12,421,048) 12,515,066 ----------------------------------------------------------------------------------------------------------------------------------- Principal Amount (000)/ Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Preferred Securities - 57.3% (39.8% of Total Investments) Capital Markets - 7.3% 15,000 Ahmanson Capital Trust I, 144A 8.360% 12/01/26 Baa1 15,881,850 1,465 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 1,558,353 4,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 4,227,204 2,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 2,114,600 500 BT Preferred Capital Trust II 7.875% 2/25/27 A2 531,049 5,000 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 5,184,770 18,600 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 19,239,282 5,050 First Hawaiian Capital Trust I, Series B 8.343% 7/01/27 A- 5,439,390 1,000 First Security Capital I 8.410% 12/15/26 Aa2 1,067,636 17,095 First Union Capital Trust II, Series A 7.950% 11/15/29 A1 21,755,285 25,000 Mellon Capital Trust I, Series A 7.720% 12/01/26 A2 26,487,125 3,240 State Street Institutional Capital Trust, 144A 7.940% 12/30/26 A1 3,439,228 19,800 UBS Preferred Funding Trust I 8.622% 10/29/49 AA- 22,671,733 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 129,597,505 ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 30.5% 19,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 AA- 19,468,939 37,250 Abbey National Capital Trust I 8.963% 6/30/50 A2 50,831,238 7,100 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R 7,295,349 6,500 Bank One Capital III 8.750% 9/01/30 A1 8,762,786 21,000 BankBoston Capital Trust I, Series B 8.250% 12/15/26 Aa3 22,373,631 5,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 5,305,050 36,000 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 41,578,452 2,000 Corestates Capital Trust I, 144A 8.000% 12/15/26 A1 2,120,678 3,700 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 4,098,294 1,500 First Empire Capital Trust I 8.234% 2/01/27 Baa1 1,601,266 1,500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 1,665,264 22,080 Fleet Capital Trust II 7.920% 12/11/26 Aa3 23,431,649 44,010 HBOS Capital Funding LP, Notes 6.850% 3/23/49 A1 44,753,065 2,400 HSBC Capital Funding LP, 144A 9.547% 12/31/49 A1 2,811,408 6,250 HSBC Capital Funding LP, Debt 10.176% 6/30/50 A1 9,575,875 32,000 KBC Bank Fund Trust III, 144A 9.860% 5/02/50 A2 37,037,056 8,000 KeyCorp Capital III 7.750% 7/15/29 A3 9,705,008 2,500 KeyCorp Institutional Capital Trust A 7.826% 12/01/26 A3 2,647,423 13,500 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 13,724,869 25,000 M&I Capital Trust A 7.650% 12/01/26 A2 26,428,500 19,500 NB Capital Trust II 7.830% 12/15/26 Aa3 20,688,408 14,000 Nordbanken AB, 144A 8.950% 11/29/49 A 15,810,032 2,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 2,138,326 8,000 North Fork Capital Trust II 8.000% 12/15/27 A3 8,657,160 2,000 Peoples Heritage Capital Trust I, Series B 9.060% 2/01/27 A3 2,144,308 290 PFCI Capital Corporation 7.750% 8/17/52 A- 7,828,264 33,085 PNC Institutional Capital Securities, 144A 7.950% 12/15/26 A3 35,088,231 2,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 2,063,752 13,100 RBS Capital Trust B 6.800% 12/31/49 A1 13,301,989
27 Nuveen Quality Preferred Income Fund 2 (JPS) (continued) Portfolio of Investments December 31, 2005
Principal Amount (000)/ Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks (continued) $ 8,000 Reliance Capital Trust I, Series B 8.170% 5/01/28 N/R $ 8,726,152 500 Republic New York Capital II, Capital Securities 7.530% 12/04/26 A1 527,384 17,500 Royal Bank of Scotland Group plc 9.118% 3/31/49 A1 20,065,885 5,000 Sparebanken Rogaland, Notes, 144A 6.443% 5/01/49 Baa1 5,038,150 9,000 St. George Funding Company LLC, 144A 8.485% 12/31/47 Baa1 9,816,822 3,400 Swedbank ForeningsSparbanken AB, 144A 9.000% 9/17/50 A2 3,905,393 7,500 Union Planters Capital Trust A 8.200% 12/15/26 A2 7,970,100 240 Union Planters Preferred Fund, 144A 7.750% 7/15/53 A2 26,955,000 10,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 10,680,160 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 536,621,316 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 2.6% 2,750 BNP Paribas Capital Trust 7.200% 12/31/49 A+ 2,823,120 1,000 BNP Paribas Capital Trust, 144A 9.003% 12/29/49 A+ 1,158,654 18,800 Citigroup Capital X 6.100% 9/30/33 Aa2 458,532 3,600 JPM Capital Trust I 7.540% 1/15/27 A1 3,802,666 22,085 JPM Capital Trust II 7.950% 2/01/27 A1 23,534,902 13,800 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 14,515,599 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 46,293,473 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 2.2% 30,250 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 A- 39,192,656 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 10.8% 14,280 Ace Capital Trust II 9.700% 4/01/30 Baa1 19,925,841 2,000 Allstate Financing II 7.830% 12/01/45 A2 2,110,874 28,000 American General Institutional Capital, 144A 8.125% 3/15/46 Aa3 36,455,272 2,000 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 BBB+ 1,991,328 6,000 MIC Financing Trust I 8.375% 2/01/27 A+ 6,149,106 10,250 Prudential plc 6.500% 6/29/49 A 10,171,916 10,000 RenaissanceRe Capital Trust 8.540% 3/01/27 BBB+ 10,418,350 51,700 Sun Life Canada Capital Trust, Capital Securities, 144A 8.526% 5/06/47 A+ 55,752,815 43,000 Zurich Capital Trust I, 144A 8.376% 6/01/37 A- 46,552,617 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 189,528,119 ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.3% 3,680 KN Capital Trust I, Preferred Securities 8.560% 4/15/27 Baa3 3,943,035 10,750 KN Capital Trust III 7.630% 4/15/28 Baa3 11,935,510 7,355 Phillips 66 Capital Trust II 8.000% 1/15/37 A3 7,829,846 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 23,708,391 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 2.4% 5,595 Countrywide Capital Trust I 8.000% 12/15/26 BBB+ 5,725,621 8,460 Countrywide Capital Trust III, Series B 8.050% 6/15/27 BBB+ 10,198,259 11,825 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 12,947,228 13,000 Great Western Financial Trust II, Series A 8.206% 2/01/27 Baa1 13,885,820 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 42,756,928 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 0.2% 64,434 Fannie Mae 5.100% 4/15/49 AA- 2,760,597 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Preferred Securities (cost $974,714,545) 1,010,458,985 ---------------------------------------------------------------------------------------------------------------------
28
Principal Amount (000) Description(1) Coupon Maturity Value ----------------------------------------------------------------------------------------------------------------------------------- Short-Term Investments - 2.1% (1.5% of Total Investments) Repurchase Agreement with State Street Bank, dated 12/30/05, repurchase price $37,813,726, $ 37,800 collateralized by $39,095,000 U.S. Treasury Bonds, 4.000%, due 11/15/12, valued at $38,557,444 3.250% 1/03/06 $ 37,800,076 ============----------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $37,800,076) 37,800,076 --------------------------------------------------------------------------------------------------------------------- Total Investments (cost $2,477,619,478) - 143.8% 2,538,352,882 --------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.5% 27,189,627 --------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (45.3)% (800,000,000) --------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $1,765,542,509 =====================================================================================================================
Interest Rate Swaps outstanding at December 31, 2005
Fixed Rate Paid Fixed Rate Floating Rate Floating Rate Unrealized Notional by the Fund Payment Received Payment Termination Appreciation Counterparty Amount (annualized) Frequency by the Fund(4) Frequency Date (Depreciation) --------------------------------------------------------------------------------------------------------------------- Citigroup Inc. $100,000,000 4.604% Monthly 4.320% Monthly 6/06/2006 $ 9,764 Citigroup Inc. 100,000,000 4.713% Monthly 4.320% Monthly 12/06/2006 45,860 Citigroup Inc. 200,000,000 3.375% Monthly 4.320% Monthly 11/06/2007 4,954,070 Citigroup Inc. 200,000,000 3.910% Monthly 4.320% Monthly 11/06/2009 5,944,972 --------------------------------------------------------------------------------------------------------------------- $10,954,666 =====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Ratings (not covered by the report of independent registered public accounting firm): Using the higher of Standard & Poor's or Moody's rating. Ratings below Baa by Moody's Investor Service, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (3) Security is eligible for the Dividends Received Deduction. (4) Based on LIBOR (London Inter-Bank Offered Rate). N/R Investment is not rated. 144A Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. CBTCS Corporate Backed Trust Certificates. CORTS Corporate Backed Trust Securities. PCARS Public Credit and Repackaged Securities. PPLUS PreferredPlus Trust. SATURNS Structured Asset Trust Unit Repackaging. See accompanying notes to financial statements. 29 Nuveen Quality Preferred Income Fund 3 (JHP) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Convertible Preferred Securities - 1.3% (0.9% of Total Investments) Diversified Financial Services - 0.1% 9,164 Citigroup Global Markets 2.000% Aa1 $ 449,128 ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 5,576 Albertson's, Inc. 7.250% BBB- 125,739 ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 1.1% 62,052 Dominion Resources Inc. 8.750% Baa1 3,227,325 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 0.1% 20,100 PMI Group Inc. 5.875% A1 495,465 ----------------------------------------------------------------------------------------------------------------------------------- Total Convertible Preferred Securities (cost $3,965,204) 4,297,657 --------------------------------------------------------------------------------------------------------------------- Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- $25 Par (or similar) Securities - 90.0% (61.1% of Total Investments) Automobiles - 0.1% 8,000 DaimlerChrysler AG (CORTS) 7.875% A3 196,960 ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 8.0% 32,000 Bear Stearns Capital Trust III 7.800% A2 814,400 53,600 Compass Capital Trust III 7.350% A3 1,357,152 39,900 CSFB USA, Series 2002-10 (SATURNS) 7.000% Aa3 1,003,485 23,100 First Union Capital II, Series II (CORTS) 7.500% A1 600,138 11,300 First Union Institutional Capital II (CORTS) 8.200% A1 305,213 5,200 Goldman Sachs Group Inc., Series GSC-3 (PPLUS) 6.000% A1 121,680 1,200 Goldman Sachs Group Inc., Series GSG-1 (PPLUS) 6.000% Aa3 28,404 4,500 Goldman Sachs Group Incorporated (SATURNS) 5.750% Aa3 100,890 355,900 Lehman Brothers Holdings Capital Trust III, Series 6.375% A2 8,929,531 8,000 Lehman Brothers Holdings Capital Trust V, Series M 6.000% A2 191,360 22,000 Merrill Lynch Capital Trust II 8.000% A1 569,360 36,300 Merrill Lynch Preferred Capital Trust 7.750% A1 929,280 1,700 Merrill Lynch Preferred Capital Trust III 7.000% A1 43,554 20,400 Merrill Lynch Preferred Capital Trust IV 7.120% A1 524,892 81,100 Merrill Lynch Preferred Capital Trust V 7.280% A1 2,118,332 41,400 Morgan Stanley (PPLUS) 7.050% Aa3 1,057,770 80,000 Morgan Stanley Capital Trust II 7.250% A1 2,037,600 212,600 Morgan Stanley Capital Trust III 6.250% A1 5,185,314 10,100 Morgan Stanley Capital Trust V 5.750% A+ 229,674 33,600 Washington Mutual Capital Trust I, Series 2001-22, Class A-1 (CORTS) 7.650% Baa1 848,400 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 26,996,429 ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 17.1% 83,300 Abbey National plc, Series B 7.250% A1 2,115,820 17,300 Abbey National plc, Series B 7.375% A 456,547 105,898 ABN AMRO Capital Trust Fund VII 6.080% A 2,583,911 38,000 ASBC Capital I 7.625% Baa1 973,560 65,594 BAC Capital Trust I 7.000% Aa3 1,663,464 38,700 BAC Capital Trust II 7.000% Aa3 985,302 99,500 BAC Capital Trust III 7.000% Aa3 2,538,245 6,000 BAC Capital Trust IV 5.875% Aa3 143,400 65,600 BAC Capital Trust V 6.000% Aa3 1,582,272 8,900 BAC Capital Trust VIII 6.000% Aa3 214,223 34,800 Banco Santander 6.410% A2 873,480 37,300 Banco Totta & Acores Finance, Series A 8.875% A3 955,813
30
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks (continued) 2,600 BancorpSouth Capital Trust I 8.150% Baa2 $ 66,144 222,200 Banesto Holdings, Series A, 144A 10.500% A2 6,666,000 33,200 Bank One Capital Trust VI 7.200% A1 847,928 4,800 BankNorth Capital Trust II 8.000% A3 123,744 24,600 Chittenden Capital Trust I 8.000% Baa1 631,482 44,500 Cobank ABC, 144A, (3) 7.000% N/R 2,301,585 57,400 Comerica Capital Trust I 7.600% A3 1,449,350 164,700 Fleet Capital Trust VII 1.800% Aa3 4,153,734 35,316 Fleet Capital Trust VIII 7.200% Aa3 897,733 136,700 HSBC Finance Corporation 6.875% A1 3,551,466 5,000 HSBC Finance Corporation 6.000% A1 121,800 7,400 KeyCorp (PCARS) 7.500% A3 187,960 7,400 KeyCorp Capital Trust V 5.875% A3 173,530 7,200 KeyCorp, Series 2001-7 (CORTS) 7.750% A3 187,560 13,000 KeyCorp, Series B (CORTS) 8.250% A3 326,430 22,900 National Commerce Capital Trust II 7.700% A1 583,950 30,400 National Westminster Bank plc, Series A 7.875% Aa2 772,464 16,500 National Westminster Bank plc, Series B 7.875% Aa3 420,090 21,400 PNC Capital Trust 6.125% A3 516,382 40,000 Royal Bank of Scotland Group plc, Series M 6.400% A1 1,016,800 104,465 Royal Bank of Scotland Group plc, Series N 6.350% A1 2,625,205 17,000 SunTrust Capital Trust IV 7.125% A1 429,590 25,500 SunTrust Capital Trust V 7.050% A1 645,405 110,300 USB Capital Trust III 7.750% Aa3 2,810,444 102,000 USB Capital Trust IV 7.350% Aa3 2,604,060 59,000 USB Capital Trust V 7.250% Aa3 1,495,650 16,100 USB Capital Trust VII 5.875% Aa3 375,452 19,000 VNB Capital Trust I 7.750% Baa1 484,120 16,000 Wells Fargo Capital Trust IX 5.625% Aa2 366,080 51,000 Wells Fargo Capital Trust V 7.000% Aa2 1,289,280 12,600 Wells Fargo Capital Trust VI 6.950% Aa2 318,276 87,900 Wells Fargo Capital Trust VII 5.850% Aa2 2,112,237 80,800 Zions Capital Trust B 8.000% Baa1 2,105,648 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 57,743,616 ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 1,200 IBM Inc., Trust Certificates, Series 2001-2 7.100% A+ 30,420 ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 3.3% 14,600 Household Capital Trust VI 8.250% A2 370,840 101,300 Household Capital Trust VII 7.500% A2 2,587,202 120,000 HSBC Finance Corporation 6.360% A3 3,066,000 95,300 SLM Corporation, Series A, (3) 6.970% BBB+ 5,048,994 ----------------------------------------------------------------------------------------------------------------------------------- Total Consumer Finance 11,073,036 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 9.4% 10,000 BBVA Preferred Capital Ltd., Series B 7.750% A1 252,250 37,000 CIT Group Inc., Series A, (3) 6.350% BBB+ 956,450 43,800 CIT Group Incorporated (CORTS) 7.750% A3 1,181,724 7,200 Citigroup Capital Trust IX 6.000% Aa2 174,384 28,600 Citigroup Capital Trust VII 7.125% Aa2 725,582 55,900 Citigroup Capital Trust VIII 6.950% Aa2 1,409,798 17,800 Citigroup Capital Trust XI 6.000% Aa2 434,498 16,549 Citigroup Inc., Series F,(3) 6.365% Aa3 852,274 68,500 Citigroup Inc., Series H,(3) 6.231% Aa3 3,589,400 50,901 Citigroup Inc., Series M,(3) 5.864% Aa3 2,603,586 142,900 ING Group N.V. 7.050% A 3,656,811 504,300 ING Group N.V. 7.200% A 12,945,381 42,600 JPMorgan Chase Capital Trust X 7.000% A1 1,083,318 43,800 JPMorgan Chase Capital Trust XVI 6.350% A1 1,095,876
31 Nuveen Quality Preferred Income Fund 3 (JHP) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services (continued) 25,800 JPMorgan Chase Trust, Series 2002-6, Class A (SATURNS) 7.125% A1 $ 665,640 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 31,626,972 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.5% 4,900 BellSouth Corporation, Series 2001-3 (SATURNS) 7.125% A 122,647 7,200 BellSouth Corporation, Series BLS (CORTS) 7.000% A 184,356 13,600 BellSouth Inc. (CORTS) 7.000% A 351,424 25,600 Verizon Communications (CORTS) 7.625% A+ 654,336 15,900 Verizon New England Inc., Series B 7.000% A3 405,450 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Telecommunication Services 1,718,213 ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 2.6% 53,500 Entergy Louisiana Inc. 7.600% A- 1,358,365 203,447 Entergy Mississippi Inc. 7.250% A- 5,273,346 13,100 Georgia Power Company 5.700% AAA 319,509 12,000 National Rural Utilities Cooperative Finance Corporation 7.600% A3 302,640 5,300 National Rural Utilities Cooperative Finance Corporation 7.400% A3 135,680 27,718 National Rural Utilities Cooperative Finance Corporation 5.950% A3 654,145 18,300 Tennessee Valley Authority, Series D 6.750% AAA 439,200 8,900 Virginia Power Capital Trust 7.375% Baa1 228,018 ----------------------------------------------------------------------------------------------------------------------------------- Total Electric Utilities 8,710,903 ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.7% 23,500 Dairy Farmers of America Inc., 144A, (3) 7.875% BBB- 2,360,281 ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.2% 32,900 AGL Capital Trust II 8.000% BBB 837,305 ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.1% 12,500 Aetna Inc. 8.500% BBB+ 318,500 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 20.4% 133,000 Ace Ltd., Series C 7.800% Baa2 3,471,300 406,738 Aegon N.V. 6.375% A- 10,274,202 33,000 Aegon N.V. 6.500% A- 821,040 32,300 AMBAC Financial Group Inc. 5.950% AA 775,200 95,400 AMBAC Financial Group Inc. 5.875% AA 2,281,014 136,300 Delphi Financial Group, Inc. 8.000% BBB 3,556,067 102,600 EverestRe Capital Trust II 6.200% Baa1 2,272,590 305,571 EverestRe Group Limited 7.850% Baa1 7,785,949 151,100 Financial Security Assurance Holdings 6.250% AA 3,825,852 69,200 Hartford Capital Trust III, Series C 7.450% Baa1 1,748,684 106,900 Lincoln National Capital Trust V, Series E 7.650% Baa1 2,716,329 25,400 MetLife Inc. 5.875% A 610,108 193,700 MetLife Inc., Series B, (3) 6.500% Baa1 5,020,704 64,600 PartnerRe Limited 7.900% A3 1,647,300 143,800 PartnerRe Limited, Series C 6.750% BBB+ 3,475,646 3,000 PartnerRe Limited, Series D 6.500% BBB+ 70,290 56,800 PLC Capital Trust III 7.500% BBB+ 1,446,128 15,500 PLC Capital Trust IV 7.250% BBB+ 394,940 4,500 PLC Capital Trust V 6.125% BBB+ 107,055 52,544 Prudential plc 6.750% A 1,354,059 41,500 RenaissanceRe Holdings Ltd., Series A 8.100% BBB+ 1,049,120 133,800 RenaissanceRe Holdings Ltd., Series B 7.300% BBB 3,379,788 15,000 Safeco Capital Trust I (CORTS) 8.700% Baa2 420,300 11,000 Safeco Capital Trust I, Series 2001-4 (CORTS) 8.750% Baa2 287,155 32,600 Safeco Corporation, Series 2001-7 (SATURNS) 8.250% Baa2 841,243 2,500 Saint Paul Capital Trust I 7.600% Baa1 64,125 32,600 W.R. Berkley Capital Trust, Series 2002-1 (CBTCS) 8.125% BBB- 331,216
32
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Insurance (continued) 7,000 W.R. Berkley Corporation 6.750% BBB- $ 175,000 61,800 XL Capital Ltd, Series A 8.000% Baa1 1,572,192 289,400 XL Capital Ltd, Series B 7.625% Baa1 7,379,700 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 69,154,296 ----------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% 1,900 The Walt Disney Company 7.000% A- 48,450 ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.3% 17,900 Dominion CNG Capital Trust I 7.800% Baa1 456,808 24,500 Energy East Capital Trust I 8.250% BBB- 628,670 ----------------------------------------------------------------------------------------------------------------------------------- Total Multi-Utilities 1,085,478 ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.8% 195,200 Nexen, Inc. 7.350% Baa3 5,040,064 34,700 TransCanada Pipeline 8.250% A3 895,607 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 5,935,671 ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 10,400 Bristol-Myers Squibb Company (CORTS) 6.250% A+ 266,240 3,500 Bristol-Myers Squibb Company Trust (CORTS) 6.800% A+ 89,705 ----------------------------------------------------------------------------------------------------------------------------------- Total Pharmaceuticals 355,945 ----------------------------------------------------------------------------------------------------------------------------------- Real Estate - 19.3% 10,700 AvalonBay Communities, Inc., Series H 8.700% BBB 292,110 135,900 BRE Properties, Series C 6.750% BBB- 3,359,448 8,029 BRE Properties, Series D 6.750% Baa3 196,711 182,209 CarrAmerica Realty Corporation, Series E 7.500% BBB- 4,600,777 26,700 Developers Diversified Realty Corporation, Series F 8.600% BBB- 685,656 171,200 Developers Diversified Realty Corporation, Series G 8.000% BBB- 4,391,280 32,000 Developers Diversified Realty Corporation, Series H 7.375% BBB- 796,800 112,900 Duke Realty Corporation, Series L 6.600% Baa2 2,734,438 60,644 Equity Office Properties Trust, Series G 7.750% BBB- 1,543,996 18,500 Equity Residential Properties Trust, Series C 9.125% BBB 469,530 20,800 Equity Residential Properties Trust, Series D 8.600% BBB 531,232 56,200 Federal Realty Investment Trust 8.500% BBB- 1,448,274 5,100 First Industrial Realty Trust, Inc., Series C 8.625% BBB- 131,019 131,900 HRPT Properties Trust, Series A 9.875% BBB- 3,354,217 246,707 HRPT Properties Trust, Series B 8.750% BBB- 6,389,711 21,000 New Plan Excel Realty Trust, Series D 7.800% BBB- 1,078,875 36,100 New Plan Excel Realty Trust, Series E 7.625% BBB- 907,915 20,000 Prologis Trust, Series G 6.750% BBB 494,000 136,000 PS Business Parks, Inc. 7.000% BBB- 3,291,200 36,900 PS Business Parks, Inc., Series D 9.500% BBB- 936,153 8,300 PS Business Parks, Inc., Series F 8.750% BBB- 211,069 120,000 PS Business Parks, Inc., Series L 7.600% BBB- 3,042,000 3,000 Public Storage, Inc. 7.125% BBB+ 76,350 16,100 Public Storage, Inc., Series F 6.450% BBB+ 371,910 40,900 Public Storage, Inc., Series Q 8.600% BBB+ 1,023,318 133,833 Public Storage, Inc., Series R 8.000% BBB+ 3,387,313 20,800 Public Storage, Inc., Series S 7.875% BBB+ 527,696 26,900 Public Storage, Inc., Series T 7.625% BBB+ 682,184 11,000 Public Storage, Inc., Series U 7.625% BBB+ 278,410 17,000 Public Storage, Inc., Series V 7.500% BBB+ 438,770 3,000 Public Storage, Inc., Series X 6.450% BBB+ 69,540 2,700 Realty Income Corporation 7.375% BBB- 69,255 12,600 Regency Centers Corporation 7.450% BBB- 318,150 84,500 Regency Centers Corporation 7.250% BBB- 2,122,640 25,900 Regency Centers Corporation 6.700% BBB- 634,550
33 Nuveen Quality Preferred Income Fund 3 (JHP) (continued) Portfolio of Investments December 31, 2005
Shares Description(1) Coupon Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Real Estate (continued) 7,500 Simon Property Group, Inc., Series F 8.750% Baa2 $ 190,875 68,600 Simon Property Group, Inc., Series G 7.890% BBB 3,532,900 39,500 United Dominion Realty Trust 8.600% BBB- 1,015,940 61,800 Vornado Realty Trust, Series G 6.625% BBB- 1,441,176 4,500 Vornado Realty Trust, Series I 6.625% BBB- 104,490 252,700 Wachovia Preferred Funding Corporation 7.250% A2 7,060,438 39,600 Weingarten Realty Trust, Series E 6.950% A- 1,011,780 ----------------------------------------------------------------------------------------------------------------------------------- Total Real Estate 65,244,096 ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 20,900 Sherwin Williams Company, Series III (CORTS) 7.250% A+ 543,818 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.9% 18,100 Countrywide Capital Trust II, Series II (CORTS) 8.000% BBB+ 461,550 241,430 Countrywide Capital Trust IV 6.750% BBB+ 6,091,279 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 6,552,829 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 1.9% 43,800 Fannie Mae, (3) 6.129% AA- 2,197,227 7,000 Federal Home Loan Mortgage Corporation 5.300% AA- 311,719 9,000 Federal Home Loan Mortgage Corporation 5.810% Aa3 427,500 20,800 Federal Home Loan Mortgage Corporation, (3) 5.000% AA- 902,720 20,900 Federal Home Loan Mortgage Corporation, (3) 6.000% AA- 1,013,650 9,000 Federal Home Loan Mortgage Corporation, (3) 6.140% Aa3 448,200 5,000 Federal Home Loan Mortgage Corporation, (3) 5.100% AA- 214,063 19,900 Federal Home Loan Mortgage Corporation, (3) 5.100% AA- 855,700 ----------------------------------------------------------------------------------------------------------------------------------- Total U.S. Agency 6,370,779 ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 2.1% 116,901 Telephone and Data Systems Inc. 7.600% A- 2,930,705 157,500 United States Cellular Corporation 8.750% A- 4,128,075 5,300 United States Cellular Corporation 7.500% A- 133,560 ----------------------------------------------------------------------------------------------------------------------------------- Total Wireless Telecommunication Services 7,192,340 ----------------------------------------------------------------------------------------------------------------------------------- Total $25 Par (or similar) Securities (cost $305,287,314) 304,096,337 --------------------------------------------------------------------------------------------------------------------- Principal Amount (000) Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Corporate Bonds - 0.6% (0.4% of Total Investments) Household Durables - 0.4% $ 1,400 Stanley Works Capital Trust I, 144A 5.902% 12/01/45 Baa1 1,393,515 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 700 AIG Capital Trust I, 144A 5.900% 12/21/65 A 703,498 ----------------------------------------------------------------------------------------------------------------------------------- 2,100 Total Corporate Bonds (cost $2,084,166) 2,097,013 ----------------------------------------------------------------------------------------------------------------------------------- Principal Amount (000)/ Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Preferred Securities - 53.2% (36.1% of Total Investments) Capital Markets - 7.4% 5,000 Ahmanson Capital Trust I, 144A 8.360% 12/01/26 Baa1 5,293,950 1,000 Bank of New York Capital I, Series B 7.970% 12/31/26 A1 1,063,722 1,000 BT Capital Trust, Series B1 7.900% 1/15/27 A2 1,056,801 1,000 BT Institutional Capital Trust B, 144A 7.750% 12/01/26 A2 1,057,300
34
Principal Amount (000)/ Shares Description(1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets (continued) 500 BT Preferred Capital Trust II 7.875% 2/25/27 A2 $ 531,049 250 C.A. Preferred Fund Trust II 7.000% 10/30/49 A1 259,239 3,750 C.A. Preferred Funding Trust 7.000% 1/30/49 A1 3,878,888 1,000 First Hawaiian Capital Trust I, Series B 8.343% 7/01/27 A- 1,077,107 8,485 First Union Capital Trust II, Series A 7.950% 11/15/29 A1 10,798,104 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Markets 25,016,160 ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 22.7% 2,000 AB Svensk Exportkredit, 144A 6.375% 10/27/49 AA- 2,049,362 1,000 Abbey National Capital Trust I 8.963% 6/30/50 A2 1,364,597 1,900 AgFirst Farm Credit Bank 7.300% 12/15/53 N/R 1,952,277 1,000 BankAmerica Capital II, Series 2 8.000% 12/15/26 Aa3 1,062,330 1,500 BankBoston Capital Trust II, Series B 7.750% 12/15/26 Aa3 1,589,753 1,000 BanPonce Trust I, Series A 8.327% 2/01/27 Baa1 1,061,010 6,200 Barclays Bank plc, 144A 8.550% 6/15/49 Aa3 7,160,733 900 DBS Capital Funding Corporation, 144A 7.657% 3/15/49 A1 996,882 1,000 First Chicago NBD Institutional Capital, 144A 7.950% 12/01/26 A1 1,058,388 1,000 First Empire Capital Trust I 8.234% 2/01/27 Baa1 1,067,511 500 First Midwest Bancorp Inc. 6.950% 12/01/33 Baa2 555,088 9,100 HBOS Capital Funding LP, Notes 6.850% 3/23/49 A1 9,253,644 1,430 HSBC USA Capital Trust II, 144A 8.380% 5/15/27 A- 1,540,377 2,500 KBC Bank Fund Trust III, 144A 9.860% 5/02/50 A2 2,893,520 1,000 KeyCorp Capital II 6.875% 3/17/29 A3 1,105,898 2,500 Lloyds TSB Bank plc, Subordinated Note 6.900% 11/22/49 Aa2 2,541,642 4,000 North Fork Capital Trust I, Capital Securities 8.700% 12/15/26 A3 4,276,652 1,500 North Fork Capital Trust II 8.000% 12/15/27 A3 1,623,218 3,150 Peoples Heritage Capital Trust I, Series B 9.060% 2/01/27 A3 3,377,285 5,000 PNC Institutional Capital Trust B, 144A 8.315% 5/15/27 A3 5,375,705 1,000 Popular North American Capital Trust I 6.564% 9/15/34 Baa1 1,031,876 4,500 RBS Capital Trust B 6.800% 12/31/49 A1 4,569,386 2,500 St. George Funding Company LLC, 144A 8.485% 12/31/47 Baa1 2,726,895 655 Swedbank ForeningsSparbanken AB, 144A 9.000% 9/17/50 A2 752,362 4,600 Union Planters Capital Trust A 8.200% 12/15/26 A2 4,888,328 70 Union Planters Preferred Fund, 144A 7.750% 7/15/53 A2 7,861,875 3,000 Zions Institutional Capital Trust, Series A 8.536% 12/15/26 Baa1 3,204,048 ----------------------------------------------------------------------------------------------------------------------------------- Total Commercial Banks 76,940,642 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 4.1% 1,000 BNP Paribas Capital Trust 7.200% 12/31/49 A+ 1,026,589 1,000 Chase Capital Trust I, Series A 7.670% 12/01/26 A1 1,056,966 10,300 Citigroup Capital X 6.100% 9/30/33 Aa2 251,217 9,000 JPM Capital Trust I 7.540% 1/15/27 A1 9,506,664 1,800 Old Mutual Capital Funding, Notes 8.000% 6/22/53 Baa2 1,893,339 ----------------------------------------------------------------------------------------------------------------------------------- Total Diversified Financial Services 13,734,775 ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 2.0% 5,260 Centaur Funding Corporation, Series B, 144A 9.080% 4/21/20 A- 6,814,988 ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 12.8% 3,450 Ace Capital Trust II 9.700% 4/01/30 Baa1 4,814,016 500 Allstate Financing II 7.830% 12/01/45 A2 527,719 750 Mangrove Bay, Class 3, 144A 6.102% 7/15/33 BBB+ 746,748 10,000 MIC Financing Trust I 8.375% 2/01/27 A+ 10,248,510 1,500 Prudential plc 6.500% 6/29/49 A 1,488,573 3,000 RenaissanceRe Capital Trust 8.540% 3/01/27 BBB+ 3,125,505 10,000 Sun Life Canada Capital Trust, Capital Securities, 144A 8.526% 5/06/47 A+ 10,783,910 10,500 Zurich Capital Trust I, 144A 8.376% 6/01/37 A- 11,367,500 ----------------------------------------------------------------------------------------------------------------------------------- Total Insurance 43,102,481 -----------------------------------------------------------------------------------------------------------------------------------
35 Nuveen Quality Preferred Income Fund 3 (JHP) (continued) Portfolio of Investments December 31, 2005
Principal Amount (000)/ Shares Description (1) Coupon Maturity Ratings(2) Value ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 2.4% 3,000 KN Capital Trust III 7.630% 4/15/28 Baa3 $ 3,330,840 4,500 Phillips 66 Capital Trust II 8.000% 1/15/37 A3 4,790,525 ----------------------------------------------------------------------------------------------------------------------------------- Total Oil, Gas & Consumable Fuels 8,121,365 ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.7% 1,000 Countrywide Capital Trust I 8.000% 12/15/26 BBB+ 1,023,346 4,225 Dime Capital Trust I, Series A 9.330% 5/06/27 Baa1 4,625,965 ----------------------------------------------------------------------------------------------------------------------------------- Total Thrifts & Mortgage Finance 5,649,311 ----------------------------------------------------------------------------------------------------------------------------------- U.S. Agency - 0.1% 6,700 Fannie Mae 5.100% 4/15/49 AA- 287,053 ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Preferred Securities (cost $177,335,449) 179,666,775 --------------------------------------------------------------------------------------------------------------------- Principal Amount (000) Description (1) Coupon Maturity Value ----------------------------------------------------------------------------------------------------------------------------------- Short-Term Investments - 2.2% (1.5% of Total Investments) Repurchase Agreement with State Street Bank, dated 12/30/05, repurchase price $7,475,919, collateralized by $7,730,000 U.S. Treasury Bonds, 4.000%, due 11/15/12, $ 7,473 valued at $7,623,713 3.250% 1/03/06 7,473,220 ============----------------------------------------------------------------------------------------------------------------------- Total Short-Term Investments (cost $7,473,220) 7,473,220 --------------------------------------------------------------------------------------------------------------------- Total Investments (cost $496,145,353) - 147.3% 497,631,002 --------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 1.8% 6,226,662 --------------------------------------------------------------------------------------------------------------------- Preferred Shares, at Liquidation Value - (49.1)% (166,000,000) --------------------------------------------------------------------------------------------------------------------- Net Assets Applicable to Common Shares - 100% $ 337,857,664 =====================================================================================================================
Interest Rate Swap Contracts Outstanding at December 31, 2005:
Fixed Rate Paid Fixed Rate Floating Rate Floating Rate Unrealized Notional by the Fund Payment Received Payment Termination Appreciation Counterparty Amount (annualized) Frequency by the Fund(4) Frequency Date (Depreciation) --------------------------------------------------------------------------------------------------------------------- Citigroup Inc. $42,000,000 2.413% Monthly 4.320% Monthly 3/06/2006 $ 203,839 Citigroup Inc. 42,000,000 3.255% Monthly 4.320% Monthly 3/06/2008 1,322,173 Citigroup Inc. 42,000,000 3.815% Monthly 4.320% Monthly 3/06/2010 1,506,796 --------------------------------------------------------------------------------------------------------------------- $ 3,032,808 =====================================================================================================================
(1) All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted. (2) Ratings (not covered by the report of independent registered public accounting firm): Using the higher of Standard & Poor's or Moody's rating. Ratings below Baa by Moody's Investor Service, Inc. or BBB by Standard & Poor's Group are considered to be below investment grade. (3) Security is eligible for the Dividends Received Deduction. (4) Based on LIBOR (London Inter-Bank Offered Rate). N/R Investment is not rated. 144A Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. CBTCS Corporate Backed Trust Certificates. CORTS Corporate Backed Trust Securities. PCARS Public Credit and Repackaged Securities. PPLUS PreferredPlus Trust. SATURNS Structured Asset Trust Unit Repackaging. See accompanying notes to financial statements. 36 Statement of Assets and Liabilities December 31, 2005
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) ------------------------------------------------------------------------------------------------------------------ Assets Investments, at value (cost $1,318,535,020, $2,477,619,478 and $496,145,353, respectively) $ 1,342,619,630 $ 2,538,352,882 $ 497,631,002 Unrealized appreciation on interest rate swaps 3,011,102 10,954,666 3,032,808 Receivables: Dividends 2,447,827 3,593,038 824,521 Interest 8,532,353 12,466,203 2,417,872 Investments sold 1,043,564 2,169,024 399,407 Reclaims -- 40,864 7,211 Other assets 74,448 137,423 14,469 ------------------------------------------------------------------------------------------------------------------ Total assets 1,357,728,924 2,567,714,100 504,327,290 ------------------------------------------------------------------------------------------------------------------ Liabilities Payable for investments purchased 944,577 80,213 32,386 Accrued expenses: Management fees 627,585 1,131,305 243,511 Other 356,508 626,382 123,678 FundPreferred share dividends payable 202,530 333,691 70,051 ------------------------------------------------------------------------------------------------------------------ Total liabilities 2,131,200 2,171,591 469,626 ------------------------------------------------------------------------------------------------------------------ FundPreferred shares, at liquidation value 440,000,000 800,000,000 166,000,000 ------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $ 915,597,724 $ 1,765,542,509 $ 337,857,664 ================================================================================================================== Common shares outstanding 64,462,104 119,541,842 23,642,721 ================================================================================================================== Net asset value per Common share outstanding (net assets applicable to Common shares, divided by Common shares outstanding) $ 14.20 $ 14.77 $ 14.29 ================================================================================================================== Net assets applicable to Common shares consist of: ------------------------------------------------------------------------------------------------------------------ Common shares, $.01 par value per share $ 644,621 $ 1,195,418 $ 236,427 Paid-in surplus 911,539,984 1,693,035,834 334,356,632 Undistributed (Over-distribution of) net investment income 8,725,182 12,953,839 1,949,002 Accumulated net realized gain (loss) from investments and derivative transactions (32,407,775) (13,330,652) (3,202,854) Net unrealized appreciation (depreciation) of investments and derivative transactions 27,095,712 71,688,070 4,518,457 ------------------------------------------------------------------------------------------------------------------ Net assets applicable to Common shares $ 915,597,724 $ 1,765,542,509 $ 337,857,664 ================================================================================================================== Authorized shares: Common Unlimited Unlimited Unlimited FundPreferred shares Unlimited Unlimited Unlimited ==================================================================================================================
See accompanying notes to financial statements. 37 Statement of Operations Year Ended December 31, 2005
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) ------------------------------------------------------------------------------------------------------------------ Investment Income Dividends (net of foreign tax withheld of $8,366, $11,731 and $4,093, respectively) $ 50,776,468 $ 101,881,541 $ 21,190,442 Interest 42,452,437 75,760,522 13,702,264 ------------------------------------------------------------------------------------------------------------------ Total investment income 93,228,905 177,642,063 34,892,706 ------------------------------------------------------------------------------------------------------------------ Expenses Management fees 11,946,853 22,017,335 4,576,378 FundPreferred shares - auction fees 1,091,225 1,986,947 410,083 FundPreferred shares - dividend disbursing agent fees 26,082 38,501 13,462 Shareholders' servicing agent fees and expenses 11,499 13,868 2,743 Custodian's fees and expenses 314,871 566,887 130,776 Trustees' fees and expenses 26,237 50,116 9,830 Professional fees 64,571 102,260 26,725 Shareholders' reports - printing and mailing expenses 226,225 432,052 80,787 Stock exchange listing fees 25,069 46,238 10,463 Investor relations expense 203,091 327,484 72,873 Other expenses 41,529 67,882 26,699 ------------------------------------------------------------------------------------------------------------------ Total expenses before custodian fee credit and expense reimbursement 13,977,252 25,649,570 5,360,819 Custodian fee credit (706) (1,575) (256) Expense reimbursement (4,404,201) (8,403,718) (1,645,255) ------------------------------------------------------------------------------------------------------------------ Net expenses 9,572,345 17,244,277 3,715,308 ------------------------------------------------------------------------------------------------------------------ Net investment income 83,656,560 160,397,786 31,177,398 ------------------------------------------------------------------------------------------------------------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) from: Investments 10,256,942 29,542,155 2,801,561 Futures -- 626,810 -- Interest rate swaps (1,997,325) (1,219,301) (22,484) Change in net unrealized appreciation (depreciation) of: Investments (58,087,700) (120,450,106) (21,236,219) Futures -- 313,500 -- Interest rate swaps 6,484,892 9,852,715 2,007,568 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) (43,343,191) (81,334,227) (16,449,574) ------------------------------------------------------------------------------------------------------------------ Distributions to FundPreferred Shareholders From net investment income (13,746,475) (21,967,419) (4,959,898) From accumulated net realized gains -- (2,969,505) (324,959) ------------------------------------------------------------------------------------------------------------------ Decrease in net assets applicable to Common shares from distributions to FundPreferred shareholders (13,746,475) (24,936,924) (5,284,857) ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets applicable to Common shares from operations $ 26,566,894 $ 54,126,635 $ 9,442,967 ==================================================================================================================
See accompanying notes to financial statements. 38
Statement of Changes in Net Assets Quality Preferred Income (JTP) ----------------------------------------------------- Five Months Year Ended Ended Year Ended 12/31/05 12/31/04 7/31/04 ----------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 83,656,560 $ 38,406,778 $ 88,172,724 Net realized gain (loss) from: Investments 10,256,942 (789,063) 6,457,519 Futures -- -- -- Interest rate swaps (1,997,325) (2,754,561) (8,829,243) Change in net unrealized appreciation (depreciation) of: Investments (58,087,700) 34,446,726 15,444,743 Futures -- -- -- Interest rate swaps 6,484,892 (130,099) 3,409,919 Distributions to FundPreferred shareholders: From net investment income (13,746,475) (3,338,840) (5,266,011) From accumulated net realized gains -- -- -- ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from operations 26,566,894 65,840,941 99,389,651 ----------------------------------------------------------------------------------------------------------------- Distributions to Common Shareholders From net investment income (72,552,099) (32,291,619) (80,656,204) From accumulated net realized gains -- -- -- ----------------------------------------------------------------------------------------------------------------- Decrease in net assets applicable to Common shares from distributions to Common shareholders (72,552,099) (32,291,619) (80,656,204) ----------------------------------------------------------------------------------------------------------------- Capital Share Transactions Common shares: Offering costs adjustments -- -- (2,071) Net proceeds from shares issued to shareholders due to reinvestment of distributions -- 141,543 1,421,340 FundPreferred shares offering costs adjustments -- 92 (7,166) ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from capital share transactions -- 141,635 1,412,103 ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares (45,985,205) 33,690,957 20,145,550 Net assets applicable to Common shares at the beginning of period 961,582,929 927,891,972 907,746,422 ----------------------------------------------------------------------------------------------------------------- Net assets applicable to Common shares at the end of period $ 915,597,724 $ 961,582,929 $ 927,891,972 ================================================================================================================= Undistributed (Over-distribution of) net investment income at the end of period $ 8,725,182 $ 6,133,164 $ 3,356,845 ================================================================================================================= Quality Preferred Income 2 (JPS) ----------------------------------------------------- Five Months Year Ended Ended Year Ended 12/31/05 12/31/04 7/31/04 ----------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 160,397,786 $ 71,895,333 $ 169,356,410 Net realized gain (loss) from: Investments 29,542,155 35,993 24,882,646 Futures 626,810 -- -- Interest rate swaps (1,219,301) (4,109,979) (12,395,021) Change in net unrealized appreciation (depreciation) of: Investments (120,450,106) 66,169,186 28,917,818 Futures 313,500 (313,500) -- Interest rate swaps 9,852,715 (1,229,256) 2,018,167 Distributions to FundPreferred shareholders: From net investment income (21,967,419) (4,886,184) (9,136,215) From accumulated net realized gains (2,969,505) (1,197,900) (408,401) ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from operations 54,126,635 126,363,693 203,235,404 ----------------------------------------------------------------------------------------------------------------- Distributions to Common Shareholders From net investment income (138,788,080) (62,896,099) (157,519,666) From accumulated net realized gains (22,079,378) (22,062,289) (4,944,168) ----------------------------------------------------------------------------------------------------------------- Decrease in net assets applicable to Common shares from distributions to Common shareholders (160,867,458) (84,958,388) (162,463,834) ----------------------------------------------------------------------------------------------------------------- Capital Share Transactions Common shares: Offering costs adjustments -- -- (3,114) Net proceeds from shares issued to shareholders due to reinvestment of distributions -- -- 302,695 FundPreferred shares offering costs adjustments -- 92 (2,071) ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from capital share transactions -- 92 297,510 ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares (106,740,823) 41,405,397 41,069,080 Net assets applicable to Common shares at the beginning of period 1,872,283,332 1,830,877,935 1,789,808,855 ----------------------------------------------------------------------------------------------------------------- Net assets applicable to Common shares at the end of period $ 1,765,542,509 $ 1,872,283,332 $ 1,830,877,935 ================================================================================================================= Undistributed (Over-distribution of) net investment income at the end of period $ 12,953,839 $ 7,485,948 $ 3,372,898 =================================================================================================================
See accompanying notes to financial statements. 39 Statement of Changes in Net Assets (continued)
Quality Preferred Income 3 (JHP) ----------------------------------------------------- Five Months Year Ended Ended Year Ended 12/31/05 12/31/04 7/31/04 ----------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 31,177,398 $ 14,203,151 $ 32,619,507 Net realized gain (loss) from: Investments 2,801,561 (292,843) 1,610,865 Futures -- -- -- Interest rate swaps (22,484) (785,894) (2,431,397) Change in net unrealized appreciation (depreciation) of: Investments (21,236,219) 12,474,854 10,205,143 Futures -- -- -- Interest rate swaps 2,007,568 (494,654) (63,791) Distributions to FundPreferred shareholders: From net investment income (4,959,898) (1,232,711) (1,783,707) From accumulated net realized gains (324,959) (79,282) (225,856) ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from operations 9,442,967 23,792,621 39,930,764 ----------------------------------------------------------------------------------------------------------------- Distributions to Common Shareholders From net investment income (27,602,875) (12,158,797) (29,147,305) From accumulated net realized gains (2,179,859) (1,336,468) (2,968,711) ----------------------------------------------------------------------------------------------------------------- Decrease in net assets applicable to Common shares from distributions to Common shareholders (29,782,734) (13,495,265) (32,116,016) ----------------------------------------------------------------------------------------------------------------- Capital Share Transactions Common shares: Offering costs adjustments -- -- 101,605 Net proceeds from shares issued to shareholders due to reinvestment of distributions -- -- 489,296 FundPreferred shares offering costs adjustments -- -- (4,237) ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares from capital share transactions -- -- 586,664 ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets applicable to Common shares (20,339,767) 10,297,356 8,401,412 Net assets applicable to Common shares at the beginning of period 358,197,431 347,900,075 339,498,663 ----------------------------------------------------------------------------------------------------------------- Net assets applicable to Common shares at the end of period $ 337,857,664 $ 358,197,431 $ 347,900,075 ================================================================================================================= Undistributed (Over-distribution of) net investment income at the end of period $ 1,949,002 $ 2,985,426 $ 2,173,783 =================================================================================================================
See accompanying notes to financial statements. 40 Notes to Financial Statements 1. General Information and Significant Accounting Policies The funds (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. 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 Board of Trustees of the Funds approved a change in the Funds' fiscal year end from July 31 to December 31 upon completion of the Funds' July 31, 2004 fiscal year. Effective January 1, 2005, Nuveen Institutional Advisory Corp. ("NIAC"), the Funds' previous Adviser, and its affiliate, Nuveen Advisory Corp. ("NAC"), were merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the Adviser to all funds previously advised by either NIAC or NAC. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles. Investment Valuation Exchange-listed securities and instruments, other than futures, are generally valued at the last sales price on the exchange on which such securities or instruments are primarily traded. Securities or instruments traded on an exchange for which there are no transactions on a given day or securities or instruments not listed on an 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. Futures contracts are valued using the closing settlement price or, in the absence of such a price, at the mean of the bid and asked prices. Prices of the other derivative instruments are provided by an independent pricing service approved by the Funds' Board of Trustees. The prices of fixed-income securities are generally also 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, the pricing service or, in the absence of a pricing service for a particular security or instrument, the Board of Trustees of the Funds, or its designee, may establish fair market value using a wide variety of market data including yields or prices of securities of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor's credit characteristics considered relevant by the pricing service or the Board of Trustee's designee. Short-term investments are valued at amortized cost, which approximates market value. Investment Transactions Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method. Investments purchased on a when-issued or delayed delivery basis may have extended settlement periods. Any investments 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 December 31, 2005, the Funds' had no such outstanding purchase commitments. 41 Notes to Financial Statements (continued) Investment Income Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Interest income, which includes the amortization of premiums and accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Professional Fees Professional fees presented in the Statement of Operations consist of legal fees incurred in the normal course of operations, audit fees, tax consulting fees and, in some cases, workout expenditures. Workout expenditures are incurred in an attempt to protect or enhance an investment, or to pursue other claims or legal actions on behalf of Fund shareholders. Federal Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income tax provision is required. Dividends and Distributions to Common Shareholders Distributions to Common shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. Distributions to Common shareholders are declared monthly. With respect to the Real Estate Investment Trust ("REIT") securities held in the Funds' Portfolio of Investments, distributions received by the Funds are generally comprised of ordinary income, long-term and short-term capital gains, and a return of REIT capital. The actual character of amounts received during the period is not known until after the fiscal year-end. For the fiscal year ended December 31, 2005, the character of distributions to the Funds from the REITs was as follows: Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------- Ordinary income 77.28% 74.67% 78.86% Long-term and short-term capital gains 22.72 25.33 21.14 Return of REIT capital -- -- -- ================================================================================ For the fiscal year ended December 31, 2004, the character of distributions to the Funds from the REITs was as follows: Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------- Ordinary income 91.42% 91.38% 84.61% Long-term and short-term capital gains 8.37 7.83 14.31 Return of REIT capital .21 .79 1.08 ================================================================================ For the fiscal year ended July 31, 2004, the character of distributions to the Funds from the REITs was as follows: Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------- Ordinary income 88.48% 90.38% 79.75% Long-term and short-term capital gains 11.31 8.93 19.20 Return of REIT capital .21 .69 1.05 ================================================================================ 42 For the fiscal year ended December 31, 2005, and the fiscal period ended December 31, 2004, each Fund applied the actual character of distributions reported by the REITs in which the Fund invests to its receipts from the REITS. If a REIT held in the portfolio of investments did not report the actual character of its distributions during the period, the Fund treated the distributions as ordinary income. For fiscal year ended July 31, 2004, each Fund applied a percentage estimate for the breakdown of income type, to its receipts from the REITs and treated as income in the Statement of Operations only the amount of ordinary income so calculated. Each Fund adjusted that estimated breakdown of income type (and consequently its net investment income) as necessary in the following calendar year when the REITs informed their shareholders of the actual breakdown of income type. For the fiscal year ended December 31, 2005, and the fiscal period ended December 31, 2004, each Fund applied the actual character of distributions reported by the REITs in which the Fund invests to the distributions paid to each Funds shareholders. With respect to the portion of each Fund's monthly distribution to its shareholders derived from the Fund's investments in REIT securities for the fiscal year ended July 31, 2004, each Fund treated that portion of its distribution as being entirely from net investment income. The Funds recharacterized 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 were held in each Fund's portfolio. FundPreferred Shares The Funds have issued and outstanding FundPreferred shares, $25,000 stated value per share, as a means of effecting financial leverage. Each Fund's FundPreferred shares are issued in more than one Series. The dividend rate paid by the Fund on each Series is determined every seven days, pursuant to a dutch auction process overseen by the auction agent, and is payable at 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 ================================================================================ Interest Rate Swap Transactions The Funds may invest in certain derivative financial instruments. The Funds' use of interest rate swap transactions is intended to mitigate the negative impact that an increase in short-term interest rates could have on Common share net earnings as a result of leverage. Interest rate swap transactions involve each Fund's agreement with the 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 interest rate swap contract. Interest rate swaps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that each Fund is to receive. Interest rate swap positions are valued 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. 43 Notes to Financial Statements (continued) Due to clarification provided by the SEC to regulated investment companies, effective with the July 31, 2004 reporting period, the Funds changed the way they present net interest expense on interest rate swap transactions in the financial statements. Net interest expense amounts paid during the year are included in "Net realized gain (loss) from interest rate swap transactions". Net interest expense amounts accrued, but not yet paid, at the end of the fiscal year, are included in "Change in net unrealized appreciation (depreciation) of interest rate swap transactions". Previously, net interest expense was presented in "Expenses" and reported as "Net interest expense on interest rate swap transactions". This reclassification does not alter the tax treatment of interest rate payments on swap transactions which is to include such payments as an operating expense for tax purposes. For the fiscal year ended July 31, 2004, this reclassification, for financial reporting purposes only, resulted in increases to net investment income, decreases to net realized gain (loss) from interest rate swap transactions and decreases to change in net unrealized appreciation (depreciation) of interest rate swap transactions as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) ---------------------------------------------------------------------------------------------------------- Net investment income $ 8,892,767 $ 13,237,853 $ 2,595,268 Net realized gain (loss) from interest rate swap transactions (8,829,243) (12,395,021) (2,431,397) Change in net unrealized appreciation (depreciation) of interest rate swap transactions (63,524) (842,832) (163,871) ==========================================================================================================
Futures Contracts Each Fund may use futures contracts to hedge against changes in the values of securities the Fund owns. Each Fund bears the market risk arising from changes in the value of these financial instruments. At the time a Fund enters into a futures contract, the Fund deposits and maintains as collateral an initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses on futures contracts. Risk may arise from the potential inability of the counterparty to meet the terms of the contract. When a contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time is was closed. At December 31, 2005, there were no open futures contracts in any of the Funds. Repurchase Agreements In connection with transactions in repurchase agreements, it is the Funds' 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. 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. 44 Indemnifications Under the Funds' organizational documents, their Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts that provide general indemnifications to other parties. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 shares were as follows:
Quality Preferred Quality Preferred Income (JTP) Income 2 (JPS) ---------------------------------- ----------------------------------- Year Five Months Year Year Five Months Year Ended Ended Ended Ended Ended Ended 12/31/05 12/31/04 7/31/04 12/31/05 12/31/04 7/31/04 -------------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions -- 9,641 95,759 -- -- 18,570 ==============================================================================================================
Quality Preferred Income 3 (JHP) ----------------------------------- Year Five Months Year Ended Ended Ended 12/31/05 12/31/04 7/31/04 -------------------------------------------------------------------------------------------------------------- Common shares issued to shareholders due to reinvestment of distributions -- -- 32,020 ==============================================================================================================
3. Investment Transactions Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the fiscal year ended December 31, 2005, were as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Purchases $ 255,175,849 $ 425,983,525 $82,060,124 Sales and maturities 269,429,029 493,256,057 90,943,826 ==============================================================================================================
45 Notes to Financial Statements (continued) 4. Income Tax Information The following information is presented on an income tax basis based on the information currently available to the Funds. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in the recognition of income and timing differences in recognizing certain gains and losses on investment transactions. At December 31, 2005, the cost of investments was as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Cost of investments $1,325,016,071 $2,485,900,712 $496,769,283 ==============================================================================================================
Gross unrealized appreciation and gross unrealized depreciation of investments at December 31, 2005, were as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Gross unrealized: Appreciation $ 38,901,473 $ 87,309,497 $ 9,159,989 Depreciation (21,297,914) (34,857,327) (8,298,270) -------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments $ 17,603,559 $ 52,452,170 $ 861,719 ==============================================================================================================
The tax components of undistributed net ordinary income and net realized gains at July 31, 2005, the Funds' last tax year end, were as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Undistributed net ordinary income * $3,556,793 $ 8,682,726 $1,603,497 Undistributed net long-term capital gains -- 19,370,073 1,521,742 ==============================================================================================================
* Net ordinary income consists of net taxable income derived from dividends, interest and net short-term capital gains, if any. 46 The tax character of distributions paid during the tax years ended July 31, 2005 and July 31, 2004, was designated for purposes of the dividends paid deduction as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 July 31, 2005 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Distributions from net ordinary income * $86,458,729 $168,985,896 $32,675,994 Distributions from net long-term capital gains -- 19,485,262 1,415,750 ============================================================================================================== Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 July 31, 2004 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------------------------------------- Distributions from net ordinary income * $86,134,890 $171,962,461 $34,119,989 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, 2005, the Funds' last tax year end, Quality Preferred Income (JTP) had unused capital loss carryforwards of $22,268,801 available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire in the year 2012. 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. 5. Management Fee and Other Transactions with Affiliates Each Fund's management fee is separated into two components - a complex-level component, based on the aggregate amount of all fund assets managed by the Adviser, and a specific fund-level component, based only on the amount of assets within each individual fund. This pricing structure enables Nuveen fund shareholders to benefit from growth in the assets within each individual fund as well as from growth in the amount of complex-wide assets managed by the Adviser. The annual fund-level fee, payable monthly, for each Fund is based upon the average daily Managed Assets of each Fund as follows: Average Daily Managed Assets Fund-Level Fee Rate -------------------------------------------------------------------------------- For the first $500 million .7000% For the next $500 million .6750 For the next $500 million .6500 For the next $500 million .6250 For Managed Assets over $2 billion .6000 ================================================================================ 47 Notes to Financial Statements (continued) The annual complex-level fee, payable monthly, which is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S., is based on the aggregate amount of total fund assets managed as stated in the table below. As of December 31, 2005, the complex-level fee rate was .1895%. Complex-Level Assets(1) Complex-Level Fee Rate -------------------------------------------------------------------------------- For the first $55 billion .2000% For the next $1 billion .1800 For the next $1 billion .1600 For the next $3 billion .1425 For the next $3 billion .1325 For the next $3 billion .1250 For the next $5 billion .1200 For the next $5 billion .1175 For the next $15 billion .1150 For Managed Assets over $91 billion(2) .1400 ================================================================================ (1) The complex-level fee component of the management fee for the funds is calculated based upon the aggregate Managed Assets ("Managed Assets" means the average daily net assets of each fund including assets attributable to all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds in the U.S. (2) With respect to the complex-wide Managed Assets over $91 billion, the fee rate or rates that will apply to such assets will be determined at a later date. In the unlikely event that complex-wide Managed Assets reach $91 billion prior to a determination of the complex-level fee rate or rates to be applied to Managed Assets in excess of $91 billion, the complex-level fee rate for such complex-wide Managed Assets shall be .1400% until such time as a different rate or rates is determined. 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 fees 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. The Board of Trustees has adopted a deferred compensation plan for independent Trustees that enables Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen advised Funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen advised Funds. 48 For the first eight years of Quality Preferred Income's (JTP) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily Managed Assets, for fees and expenses in the amounts and for the time periods set forth below: Year Ending Year Ending June 30, June 30, -------------------------------------------------------------------------------- 2002* .32% 2007 .32% 2003 .32 2008 .24 2004 .32 2009 .16 2005 .32 2010 .08 2006 .32 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Quality Preferred Income (JTP) for any portion of its fees and expenses beyond June 30, 2010. For the first eight years of Quality Preferred Income 2's (JPS) operations, the Adviser has agreed to reimburse the Fund, as a percentage of average daily Managed Assets, for fees and expenses in the amounts and for the time periods set forth below: Year Ending Year Ending September 30, September 30, -------------------------------------------------------------------------------- 2002* .32% 2007 .32% 2003 .32 2008 .24 2004 .32 2009 .16 2005 .32 2010 .08 2006 .32 ================================================================================ * From the commencement of operations. The Adviser has not agreed to reimburse Quality Preferred Income 2 (JPS) for any portion of its fees and expenses beyond September 30, 2010. 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. 49 Notes to Financial Statements (continued) 6. Announcement Regarding Parent Company of Adviser In early April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers"), which owned 79% of Nuveen, (A) completed a public offering of a substantial portion of its equity stake in Nuveen, (B) sold Nuveen $200 million of its Nuveen shares, (C) entered into an agreement with Nuveen to sell an additional $400 million of its Nuveen shares on a "forward" basis with payment for and settlement of these shares delayed for several months, and (D) entered into agreements with two unaffiliated investment banking firms to sell an amount equal to most or all of its remaining Nuveen shares for current payment but for future settlement. Transactions (C) and (D) above were settled in late July, which effectively reduced St. Paul Travelers' controlling stake in Nuveen and was deemed an "assignment" (as defined in the 1940 Act) of the investment management agreements between the Funds and the Adviser, which resulted in the automatic termination of each agreement under the 1940 Act. In anticipation of such deemed assignment, the Board of Trustees had approved new ongoing investment management agreements for each Fund and the submission of those agreements for approval by each respective Fund's shareholders, which shareholder approval was received prior to the settlement of transactions (C) and (D). The new ongoing management agreements took effect upon such settlement. 7. Subsequent Events - Distributions to Common Shareholders The Funds declared Common share distributions which were paid on February 1, 2006, to shareholders of record on January 15, 2006, as follows: Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 July 31, 2005 (JTP) (JPS) (JHP) -------------------------------------------------------------------------------- Distributions per share $.0900 $.0930 $.0945 ================================================================================ 50 Financial Highlights 51 Financial Highlights Selected data for a Common share outstanding throughout each period:
Investment Operations ------------------------------------------------------------------ Distributions Distributions from Net from Beginning Investment Capital Common Net Income to Gains to Share Net Realized/ FundPreferred FundPreferred Net Asset Investment Unrealized Share- Share- Value Income(a) Gain (Loss) holders+ holders+ Total ----------------------------------------------------------------------------------------------------------- Quality Preferred Income (JTP) ----------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 $ 14.92 $ 1.30 $ (.68) $ (.21) $ -- $ .41 8/1/04-12/31/04 14.40 .60 .47 (.05) -- 1.02 Year Ended 7/31: 2004(b) 14.10 1.37 .26 (.08) -- 1.55 2003 14.12 1.31 .16 (.09) -- 1.38 2002(c) 14.33 .06 (.25) -- -- (.19) Quality Preferred Income 2 (JPS) ----------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 15.66 1.34 (.69) (.18) (.02) .45 8/1/04-12/31/04 15.32 .60 .50 (.04) (.01) 1.05 Year Ended 7/31: 2004(b) 14.97 1.42 .37 (.08) -- 1.71 2003(d) 14.33 1.02 .79 (.07) -- 1.74 Quality Preferred Income 3 (JHP) ----------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 15.15 1.32 (.70) (.21) (.01) .40 8/1/04-12/31/04 14.71 .60 .46 (.05) -- 1.01 Year Ended 7/31: 2004(b) 14.38 1.38 .40 (.08) (.01) 1.69 2003(e) 14.33 .67 .22 (.04) -- .85 =========================================================================================================== Less Distributions ------------------------------------- Offering Net Capital Costs and Ending Investment Gains to FundPreferred Common Income to Common Share Share Ending Common Share- Underwriting Net Asset Market Shareholders holders Total Discounts Value Value --------------------------------------------------------------------------------------------------------------- Quality Preferred Income (JTP) --------------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 $ (1.13) $ -- $ (1.13) $ -- $ 14.20 $ 12.40 8/1/04-12/31/04 (.50) -- (.50) -- 14.92 14.00 Year Ended 7/31: 2004(b) (1.25) -- (1.25) -- 14.40 13.96 2003 (1.25) -- (1.25) (.15) 14.10 14.59 2002(c) -- -- -- (.02) 14.12 15.15 Quality Preferred Income 2 (JPS) --------------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 (1.16) (.18) (1.34) -- 14.77 12.80 8/1/04-12/31/04 (.53) (.18) (.71) -- 15.66 14.40 Year Ended 7/31: 2004(b) (1.32) (.04) (1.36) -- 15.32 14.61 2003(d) (.95) -- (.95) (.15) 14.97 14.65 Quality Preferred Income 3 (JHP) --------------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 (1.17) (.09) (1.26) -- 14.29 12.92 8/1/04-12/31/04 (.51) (.06) (.57) -- 15.15 14.44 Year Ended 7/31: 2004(b) (1.24) (.12) (1.36) -- 14.71 14.34 2003(e) (.62) -- (.62) (.18) 14.38 14.36 ===============================================================================================================
* Annualized. ** Total Return on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. Total Return on Common Share Net Asset Value is the combination of changes in Common Share net asset value, reinvested dividend income at net asset value and reinvested capital gains distributions at net asset value, if any. Total returns are not annualized. *** After custodian fee credit and expense reimbursement, where applicable. + The amounts shown are based on Common share equivalents. ++ o Ratios do not reflect the effect of dividend payments to FundPreferred shareholders. o Income ratios reflect income earned on assets attributable to FundPreferred shares. o For the periods presented below each ratio 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) Year Ended 7/31: 2003 .80% 2002(c) -- Quality Preferred Income 2 (JPS) Year Ended 7/31: 2003(d) .58* Quality Preferred Income 3 (JHP) Year Ended 7/31: 2003(e) .51* (a) Per share Net Investment Income is calculated using the average daily shares method. (b) As discussed in the accompanying notes to financial statements the Funds changed their method of presentation for net interest expense on interest rate swap transactions. The effect of this reclassification for the fiscal year ended July 31, 2004, was as follows:
Quality Quality Quality Preferred Preferred Preferred Income Income 2 Income 3 (JTP) (JPS) (JHP) ------------------------------------- Increase of Net Investment Income per share with a corresponding decrease in Net Realized/Unrealized Investment Gain (Loss) $ .14 $ .11 $ .11 Decrease in each of the Ratios of Expenses to Average Net Assets Applicable to Common Shares with a corresponding increase in each of the Ratios of Net Investment Income to Average Net Assets Applicable to Common Shares .94% .71% .73%
(c) For the period June 25, 2002 (commencement of operations) through July 31, 2002. (d) For the period September 24, 2002 (commencement of operations) through July 31, 2003. (e) For the period December 18, 2002 (commencement of operations) through July 31, 2003. 52 Total Returns ------------------ Based on Based Share on Net Market Asset Value** Value** -------------------------------------------------------- Quality Preferred Income (JTP) -------------------------------------------------------- Year ended 12/31: 2005 (3.69)% 2.89% 8/1/04-12/31/04 3.79 7.10 Year Ended 7/31: 2004(b) 4.20 11.17 2003 4.95 9.15 2002(c) 1.00 (1.47) Quality Preferred Income 2 (JPS) -------------------------------------------------------- Year ended 12/31: 2005 (2.06) 3.01 8/1/04-12/31/04 3.34 6.94 Year Ended 7/31: 2004(b) 8.98 11.60 2003(d) 4.02 11.22 Quality Preferred Income 3 (JHP) -------------------------------------------------------- Year ended 12/31: 2005 (2.16) 2.88 8/1/04-12/31/04 4.64 6.81 Year Ended 7/31: 2004(b) 9.36 11.93 2003(e) (.19) 4.62 --------------------------------------------------------
Ratios/Supplemental Data ------------------------------------------------------------------------------------------ Before Credit/Reimbursement After Credit/Reimbursement*** ------------------------------- ----------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Expenses to Income to Expenses to Income to Ending Net Average Average 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 12/31: 2005 $ 915,598 1.49% 8.47% 1.02% 8.94% 19% 8/1/04-12/31/04 961,583 1.49* 9.15* 1.02* 9.62* 8 Year Ended 7/31: 2004(b) 927,892 1.51 8.87 1.04 9.33 18 2003 907,746 2.38 8.84 1.91 9.31 45 2002(c) 880,006 .96* 4.51* .64* 4.83* 1 Quality Preferred Income 2 (JPS) ------------------------------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 1,765,543 1.40 8.32 .94 8.78 17 8/1/04-12/31/04 1,872,283 1.40* 8.69* .94* 9.14* 6 Year Ended 7/31: 2004(b) 1,830,878 1.41 8.64 .95 9.10 19 2003(d) 1,789,809 1.99* 7.59* 1.54* 8.04* 35 Quality Preferred Income 3 (JHP) ------------------------------------------------------------------------------------------------------------------------------- Year ended 12/31: 2005 337,858 1.54 8.48 1.07 8.96 16 8/1/04-12/31/04 358,197 1.54* 9.03* 1.07* 9.50* 7 Year Ended 7/31: 2004(b) 347,900 1.55 8.75 1.08 9.22 17 2003(e) 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 12/31: 2005 $ 440,000 $ 25,000 $ 77,023 8/1/04-12/31/04 440,000 25,000 79,635 Year Ended 7/31: 2004(b) 440,000 25,000 77,721 2003 440,000 25,000 76,577 2002(c) -- -- -- Quality Preferred Income 2 (JPS) -------------------------------------------------------------------------------- Year ended 12/31: 2005 800,000 25,000 80,173 8/1/04-12/31/04 800,000 25,000 83,509 Year Ended 7/31: 2004(b) 800,000 25,000 82,215 2003(d) 800,000 25,000 80,932 Quality Preferred Income 3 (JHP) -------------------------------------------------------------------------------- Year ended 12/31: 2005 166,000 25,000 75,882 8/1/04-12/31/04 166,000 25,000 78,945 Year Ended 7/31: 2004(b) 166,000 25,000 77,395 2003(e) 166,000 25,000 76,129 -------------------------------------------------------------------------------- See accompanying notes to financial statements. 53 Board Members and Officers The management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board Members of the Funds. The number of board members of the Fund is currently set at nine. None of the board members who are not "interested" persons of the Funds has ever been a director or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the board members and officers of the Funds, their principal occupations and other affiliations during the past five years, the number of portfolios each oversees and other directorships they hold are set forth below.
Number of Portfolios Principal Occupation(s) in Fund Complex Name, Birthdate Position(s) Held Year First Elected Including other Directorships Overseen by and Address with the Funds or Appointed(2) During Past 5 Years Board Member ------------------------------------------------------------------------------------------------------------------------------------ Board members who is an interested person of the Funds: ------------------------------------------------------------------------------------------------------------------------------------ Timothy R. Chairman of 1994 Chairman (since 1996) and Director of Nuveen 156 Schwertfeger(1) the Board Investments, Inc., Nuveen Investments, LLC, 3/28/49 and Trustee Nuveen Advisory Corp. and Nuveen Institutional 333 W. Wacker Drive Advisory Corp.(3); Director (since 1996) of Chicago, IL 60606 Institutional Capital Corporation; Chairman and Director (since 1997) of Nuveen Asset Management; Chairman and Director of Rittenhouse Asset Management, Inc. (since 1999); Chairman of Nuveen Investments Advisers Inc. (since 2002). Board members who are not interested persons of the Funds: ------------------------------------------------------------------------------------------------------------------------------------ Robert P. Bremner Board member 1997 Private Investor and Management Consultant. 156 8/22/40 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ Lawrence H. Brown Board member 1993 Retired (since 1989) as Senior Vice President of 156 7/29/34 The Northern Trust Company; Director (since 333 W. Wacker Drive 2002) Community Advisory Board for Highland Park Chicago, IL 60606 and Highwood, United Way of the North Shore. ------------------------------------------------------------------------------------------------------------------------------------ Jack B. Evans Board member 1999 President, The Hall-Perrine Foundation, a 156 10/22/48 private philanthropic corporation (since 1996); 333 W. Wacker Drive Director and Vice Chairman, United Fire Group, a Chicago, IL 60606 publicly held company; Adjunct Faculty Member, University of Iowa; Director, Gazette Companies; Life Trustee of Coe College and Iowa College Foundation; formerly, Director, Alliant Energy; formerly, Director, Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm. ------------------------------------------------------------------------------------------------------------------------------------ William C. Hunter Board member 2004 Dean and Distinguished Professor of Finance, 156 3/6/48 School of Business at the University of 333 W. Wacker Drive Connecticut (since 2002); previously, Senior Chicago, IL 60606 Vice President and Director of Research at the Federal Reserve Bank of Chicago (1995-2003); Director (since 1997), Credit Research Center at Georgetown University; Director (since 2004) of Xerox Corporation; Director SS&C Technologies, Inc. (May 2005-October 2005). ------------------------------------------------------------------------------------------------------------------------------------ David J. Kundert Board member 2005 Retired (since 2004) as Chairman, JPMorgan 154 10/28/42 Fleming Asset Management, President and CEO, 333 W. Wacker Drive Banc One Investment Advisors Corporation, and Chicago, IL 60606 President, One Group Mutual Funds; prior thereto, Executive Vice President, Banc One Corporation and Chairman and CEO, Banc One Investment Management Group; Board of Regents, Luther College; member of the Wisconsin Bar Association; member of Board of Directors, Friends of Boerner Botanical Gardens.
54
Number of Portfolios Principal Occupation(s) in Fund Complex Name, Birthdate Position(s) Held Year First Elected Including other Directorships Overseen by and Address with the Funds or Appointed(2) During Past 5 Years Board Member ------------------------------------------------------------------------------------------------------------------------------------ Board members who are not interested persons of the Funds (continued): ------------------------------------------------------------------------------------------------------------------------------------ William J. Schneider Board member 1997 Chairman of Miller-Valentine Partners Ltd., a 156 9/24/44 real estate investment company; formerly, 333 W. Wacker Drive Senior Partner and Chief Operating Officer Chicago, IL 60606 (retired, December 2004), of Miller-Valentine Group; formerly, Vice President, Miller-Valentine Realty; Board Member, Chair of the Finance Committee and member of the Audit Committee of Premier Health Partners, the not-for-profit company of Miami Valley Hospital; Vice President, Dayton Philharmonic Orchestra Association; Board Member, Regional Leaders Forum, which promotes cooperation on economic development issues; Director, Dayton Development Coalition; formerly, Member, Community Advisory Board, National City Bank, Dayton, Ohio and Business Advisory Council, Cleveland Federal Reserve Bank. ------------------------------------------------------------------------------------------------------------------------------------ Judith M. Stockdale Board member 1997 Executive Director, Gaylord and Dorothy 156 12/29/47 Donnelley Foundation (since 1994); prior 333 W. Wacker Drive thereto, Executive Director, Great Lakes Chicago, IL 60606 Protection Fund (from 1990 to 1994). ------------------------------------------------------------------------------------------------------------------------------------ Eugene S. Sunshine Board member 2005 Senior Vice President for Business and Finance, 156 1/22/50 Northwestern University (since 1997); Director 333 W. Wacker Drive (since 2003), Chicago Board Options Exchange; Chicago, IL 60606 Director (since 2003), National Mentor Holdings, a privately-held, national provider of home and community-based services; Chairman (since 1997), Board of Directors, Rubicon, a pure captive insurance company owned by Northwestern University; Director (since 1997), Evanston Chamber of Commerce and Evanston Inventure, a business development organization. Number of Portfolios in Fund Complex Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) Overseen and Address with the Funds or Appointed(4) During Past 5 Years by Officer ------------------------------------------------------------------------------------------------------------------------------------ Officers of the Funds ------------------------------------------------------------------------------------------------------------------------------------ Gifford R. Zimmerman Chief 1988 Managing Director (since 2002), Assistant 156 9/9/56 Administrative Secretary and Associate General Counsel, 333 W. Wacker Drive Officer formerly, Vice President and Assistant General Chicago, IL 60606 Counsel, of Nuveen Investments, LLC; Managing Director (2002-2004), General Counsel (1998-2004) and Assistant Secretary, formerly, Vice President of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); Managing Director (since 2002) and Assistant Secretary and Associate General Counsel, formerly, Vice President (since 1997), of Nuveen Asset Management; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Assistant Secretary of NWQ Investment Management Company, LLC. (since 2002); Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Managing Director, Associate General Counsel and Assistant Secretary of Rittenhouse Asset Management, Inc. (since 2003); Chartered Financial Analyst.
55 Board Members and Officers (continued)
Number of Portfolios in Fund Complex Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) Overseen and Address with the Funds or Appointed(4) During Past 5 Years by Officer ------------------------------------------------------------------------------------------------------------------------------------ Officers of the Funds (continued): ------------------------------------------------------------------------------------------------------------------------------------ Julia L. Antonatos Vice President 2004 Managing Director (since 2005), formerly Vice 156 9/22/63 President (since 2002); formerly, Assistant Vice 333 W. Wacker Drive President (since 2000) of Nuveen Investments, Chicago, IL 60606 LLC; Chartered Financial Analyst. ------------------------------------------------------------------------------------------------------------------------------------ Michael T. Atkinson Vice President 2000 Vice President (since 2002), formerly, Assistant 156 2/3/66 and Assistant Vice President (since 2000) of Nuveen 333 W. Wacker Drive Secretary Investments, LLC. Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ Peter H. D'Arrigo Vice President 1999 Vice President of Nuveen Investments, LLC (since 156 11/28/67 and Treasurer 1999); Vice President and Treasurer (since 1999) 333 W. Wacker Drive of Nuveen Investments, Inc.; Vice President and Chicago, IL 60606 Treasurer (1999-2004) of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); Vice President and Treasurer of Nuveen Asset Management (since 2002) and of Nuveen Investments Advisers Inc. (since 2002); Assistant Treasurer of NWQ Investment Management Company, LLC. (since 2002); Vice President and Treasurer of Nuveen Rittenhouse Asset Management, Inc. (since 2003); Chartered Financial Analyst. ------------------------------------------------------------------------------------------------------------------------------------ John N. Desmond Vice President 2005 Vice President, Director of Investment 156 8/24/61 Operations, Nuveen Investments, LLC (since 333 W. Wacker Drive January 2005); formerly, Director, Business Chicago, IL 60606 Manager, Deutsche Asset Management (2003-2004), Director, Business Development and Transformation, Deutsche Trust Bank Japan (2002-2003); previously, Senior Vice President, Head of Investment Operations and Systems, Scudder Investments Japan, (2000-2002), Senior Vice President, Head of Plan Administration and Participant Services, Scudder Investments (1995-2002). ------------------------------------------------------------------------------------------------------------------------------------ Jessica R. Droeger Vice President 1998 Vice President (since 2002), Assistant Secretary 156 9/24/64 and Secretary and Assistant General Counsel (since 1998) 333 W. Wacker Drive formerly, Assistant Vice President (since 1998) Chicago, IL 60606 of Nuveen Investments, LLC; Vice President (2002-2004) and Assistant Secretary (1998-2004) formerly, Assistant Vice President of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); Vice President and Assistant Secretary (since 2005) of Nuveen Asset Management. ------------------------------------------------------------------------------------------------------------------------------------ Lorna C. Ferguson Vice President 1998 Managing Director (since 2004), formerly, Vice 156 10/24/45 President of Nuveen Investments, LLC, Managing 333 W. Wacker Drive Director (2004) formerly, Vice President Chicago, IL 60606 (1998-2004) of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); Managing Director (since 2005) of Nuveen Asset Management. ------------------------------------------------------------------------------------------------------------------------------------ William M. Fitzgerald Vice President 1995 Managing Director (since 2002), formerly, Vice 156 3/2/64 President of Nuveen Investments; Managing 333 W. Wacker Drive Director (1997-2004) of Nuveen Advisory Corp. Chicago, IL 60606 and Nuveen Institutional Advisory Corp.(3); Managing Director of Nuveen Asset Management (since 2001); Vice President of Nuveen Investments Advisers Inc. (since 2002); Chartered Financial Analyst.
56
Number of Portfolios in Fund Complex Name, Birthdate Position(s) Held Year First Elected Principal Occupation(s) Overseen and Address with the Funds or Appointed(4) During Past 5 Years by Officer ------------------------------------------------------------------------------------------------------------------------------------ Officers of the Funds (continued): ------------------------------------------------------------------------------------------------------------------------------------ Stephen D. Foy Vice President 1998 Vice President (since 1993) and Funds Controller 156 5/31/54 and Controller (since 1998) of Nuveen Investments, LLC; 333 W. Wacker Drive formerly, Vice President and Funds Controller Chicago, IL 60606 (1998-2004) of Nuveen Investments, Inc.; Certified Public Accountant. ------------------------------------------------------------------------------------------------------------------------------------ James D. Grassi Vice President 2004 Vice President and Deputy Director of Compliance 156 4/13/56 and Chief (since 2004) of Nuveen Investments, LLC, Nuveen 333 W. Wacker Drive Compliance Investments Advisers Inc., Nuveen Asset Chicago, IL 60606 Officer Management and Rittenhouse Asset Management, Inc.; previously, Vice President and Deputy Director of Compliance (2004) of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); formerly, Senior Attorney (1994-2004), The Northern Trust Company. ------------------------------------------------------------------------------------------------------------------------------------ David J. Lamb Vice President 2000 Vice President (since 2000) of Nuveen 156 3/22/63 Investments, LLC; Certified Public Accountant. 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ Tina M. Lazar Vice President 2002 Vice President of Nuveen Investments, LLC (since 156 8/27/61 1999). 333 W. Wacker Drive Chicago, IL 60606 ------------------------------------------------------------------------------------------------------------------------------------ Larry W. Martin Vice President 1988 Vice President, Assistant Secretary and 156 7/27/51 and Assistant Assistant General Counsel of Nuveen Investments, 333 W. Wacker Drive Secretary LLC; Vice President and Assistant Secretary of Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.(3); Vice President (since 2005) and Assistant Secretary of Nuveen Investments, Inc.; Vice President (since 2005) and Assistant Secretary (since 1997) of Nuveen Asset Management; Vice President (since 2000), Assistant Secretary and Assistant General Counsel (since 1998) of Rittenhouse Asset Management, Inc.; Vice President and Assistant Secretary of Nuveen Investments Advisers Inc. (since 2002); Assistant Secretary of NWQ Investment Management Company, LLC (since 2002).
(1) Mr. Schwertfeger is an "interested person" of the Funds, as defined in the Investment Company Act of 1940, because he is an officer and board member of the Adviser. (2) Board members serve an indefinite term until his/her successor is elected. The year first elected or appointed represents the year in which the board member was first elected or appointed to any fund in the Nuveen Complex. (3) Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were reorganized into Nuveen Asset Management, effective January 1, 2005. (4) Officers serve one year terms through July of each year. The year first elected or appointed represents the year in which the Officer was first elected or appointed to any fund in the Nuveen Complex. 57 Reinvest Automatically Easily and Conveniently Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account Nuveen Exchange-Traded Closed-End Funds Dividend Reinvestment Plan Your Nuveen Exchange-Traded Closed-End 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 the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the 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. Flexible 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. Call today to start reinvesting dividends and/or distributions For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at (800) 257-8787. 58 Other Useful Information In April, 2005, The St. Paul Travelers Companies, Inc. ("St. Paul Travelers") sold the majority of its controlling equity interest in Nuveen Investments, Inc. ("Nuveen") to the general public. Nuveen is the parent of Nuveen Asset Management ("NAM"), which is each Fund's investment manager. This sale was deemed to be an "assignment" of the investment management agreement between each Fund and NAM and, if applicable, of the sub-advisory agreement between NAM and the Fund's sub-adviser. As required by law, the shareholders of each Fund were asked to approve a new investment management agreement and, if applicable, a new subadvisory agreement that reflected this change in ownership. The shareholders of each Fund voted this approval at a Shareholders' Meeting on July 26, 2005. There were no changes to the investment objectives or management of any Fund as a result of these actions. Quarterly Portfolio of Investments and Proxy voting information The Fund's (i) quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent 12-month period ended June 30, 2005, and (iii) a description of the policies and procedures that the Fund used to determine how to vote proxies relating to portfolio securities are available without charge, upon request, by calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at www.nuveen.com. You may also obtain this and other Fund information directly from the Securities and Exchange Commission ("SEC"). The SEC may charge a copying fee for this information. Visit the SEC on-line at http://www.sec.gov or in person at the SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation. You may also request Fund information by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section at 450 Fifth Street NW, Washington, D.C. 20549. CEO Certification Disclosure Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. Each Fund has filed with the Securities and Exchange Commission the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act. Distribution Information Nuveen Quality Preferred Income Fund (JTP), Nuveen Quality Preferred Income Fund 2 (JPS) and Nuveen Quality Preferred Income Fund 3 (JHP) designate 15.22%, 12.12% and 11.60%, respectively, of dividends declared from net investment income as dividends qualifying for the 70% dividends received deduction for corporations and 21.15%, 17.41% and 17.85%, respectively, as qualified dividend income for individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003. Board of Trustees Robert P. Bremner Lawrence H. Brown Jack B. Evans William C. Hunter David J. Kundert William J. Schneider Timothy R. Schwertfeger Judith M. Stockdale Eugene S. Sunshine Fund Manager Nuveen Asset Management 333 West Wacker Drive Chicago, IL 60606 Custodian State Street Bank & Trust Company Boston, MA Transfer Agent and Shareholder Services State Street Bank & Trust Company Nuveen Funds P.O. Box 43071 Providence, RI 02940-3071 (800) 257-8787 Legal Counsel Chapman and Cutler LLP Chicago, IL Independent Registered Public Accounting Firm Ernst & Young LLP Chicago, IL The 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 covered by this report. Any future repurchases will be reported to shareholders in the next annual or semiannual report. 59 [GRAPHIC OMITTED] Learn more about Nuveen Funds at www.nuveen.com/etf Nuveen Investments: 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. We offer many different investing solutions for our clients' different needs. Managing more than $135 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 fixed-income 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. Find out how we can help you reach your financial goals. To learn more about the products and services Nuveen Investments offers, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Be sure to obtain a prospectus, where applicable. Investors should consider the investment objective and policies, risk considerations, charges and expenses of the Fund carefully before investing. The prospectus contains this and other information relevant to an investment in the Fund. For a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money. o Share prices o Fund details o Daily financial news o Investor education o Interactive planning tools [LOGO] NUVEEN Investments EAN-E-1205D ITEM 2. CODE OF ETHICS. As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There were no amendments to or waivers from the Code during the period covered by this report. The registrant has posted the code of ethics on its website at www.nuveen.com/etf. (To view the code, click on the Investor Resources drop down menu box, click on Fund Governance and then click on Code of Conduct.) ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Directors or Trustees determined that the registrant has at least one "audit committee financial expert" (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. The registrant's audit committee financial expert is Jack B. Evans, Chairman of the Audit Committee, who is "independent" for purposes of Item 3 of Form N-CSR. Mr. Evans was formerly President and Chief Operating Officer of SCI Financial Group, Inc., a full service registered broker-dealer and registered investment adviser ("SCI"). As part of his role as President and Chief Operating Officer, Mr. Evans actively supervised the Chief Financial Officer (the "CFO") and actively supervised the CFO's preparation of financial statements and other filings with various regulatory authorities. In such capacity, Mr. Evans was actively involved in the preparation of SCI's financial statements and the resolution of issues raised in connection therewith. Mr. Evans has also served on the audit committee of various reporting companies. At such companies, Mr. Evans was involved in the oversight of audits, audit plans, and the preparation of financial statements. Mr. Evans also formerly chaired the audit committee of the Federal Reserve Bank of Chicago. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Nuveen Quality Preferred Income Fund The following tables show the amount of fees that Ernst & Young LLP, the Fund's auditor, billed to the Fund during the Fund's last two full fiscal years. For engagements with Ernst & Young LLP the Audit Committee approved in advance all audit services and non-audit services that Ernst & Young LLP provided to the Fund, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the "pre-approval exception"). The pre-approval exception for services provided directly to the Fund waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by the Fund to its accountant during the fiscal year in which the services are provided; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committee's attention, and the Committee (or its delegate) approves the services before the audit is completed. The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee). SERVICES THAT THE FUND'S AUDITOR BILLED TO THE FUND
AUDIT FEES BILLED AUDIT-RELATED FEES TAX FEES ALL OTHER FEES FISCAL YEAR ENDED TO FUND BILLED TO FUND BILLED TO FUND BILLED TO FUND ------------------------------------------------------------------------------------------------------------------------------ December 31, 2005 $ 18,494 $ 0 $ 2,386 $ 3,750 ------------------------------------------------------------------------------------------------------------------------------ Percentage approved 0% 0% 0% pursuant to pre-approval exception ------------------------------------------------------------------------------------------------------------------------------ December 31, 2004 (1) $ 17,026 $ 0 $ 4,740 $ 3,450 ------------------------------------------------------------------------------------------------------------------------------ Percentage approved 0% 0% 0% pursuant to pre-approval exception ------------------------------------------------------------------------------------------------------------------------------
The above "Tax Fees" were billed for professional services for tax advice, tax compliance, and tax planning. (1) This fund changed its fiscal year end from July 31 to December 31. For the stub period ending, 12/31/04 the fund incurred the following fees : Audit fees of $17,026 ; Tax fees of $2,272 ; and All Other fees of $1,800. SERVICES THAT THE FUND'S AUDITOR BILLED TO THE ADVISER AND AFFILIATED FUND SERVICE PROVIDERS The following tables show the amount of fees billed by Ernst & Young LLP to Nuveen Asset Management ("NAM" or the "Adviser"), and any entity controlling, controlled by or under common control with NAM ("Control Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service Provider"), for engagements directly related to the Fund's operations and financial reporting, during the Fund's last two full fiscal years. The tables also show the percentage of fees subject to the pre-approval exception. The pre-approval exception for services provided to the Adviser and any Affiliated Fund Service Provider (other than audit, review or attest services) waives the pre-approval requirement if: (A) the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid to Ernst & Young LLP by the Fund, the Adviser and Affiliated Fund Service Providers during the fiscal year in which the services are provided that would have to be pre-approved by the Audit Committee; (B) the Fund did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to the Audit Committee's attention, and the Committee (or its delegate) approves the services before the Fund's audit is completed.
FISCAL YEAR ENDED AUDIT-RELATED FEES TAX FEES BILLED TO ALL OTHER FEES BILLED TO ADVISER AND ADVISER AND BILLED TO ADVISER AFFILIATED FUND AFFILIATED FUND AND AFFILIATED FUND SERVICE PROVIDERS SERVICE PROVIDERS SERVICE PROVIDERS ----------------------------------------------------------------------------------------------------------- December 31, 2005 $ 0 $ 282,575 $ 0 ----------------------------------------------------------------------------------------------------------- Percentage approved 0% 0% 0% pursuant to pre-approval exception ----------------------------------------------------------------------------------------------------------- December 31, 2004 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------------------- Percentage approved 0% 0% 0% pursuant to pre-approval exception -----------------------------------------------------------------------------------------------------------
The above "Tax Fees" are primarily fees billed to the Adviser for Fund tax return preparation. NON-AUDIT SERVICES The following table shows the amount of fees that Ernst & Young LLP billed during the Fund's last two full fiscal years for non-audit services. For engagements entered into on or after May 6, 2003, the Audit Committee is required to pre-approve non-audit services that Ernst & Young LLP provides to the Adviser and any Affiliated Fund Services Provider, if the engagement related directly to the Fund's operations and financial reporting (except for those subject to the de minimis exception described above). The Audit Committee requested and received information from Ernst & Young LLP about any non-audit services that Ernst & Young LLP rendered during the Fund's last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating Ernst & Young LLP's independence.
FISCAL YEAR ENDED TOTAL NON-AUDIT FEES BILLED TO ADVISER AND AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES PROVIDERS (ENGAGEMENTS BILLED TO ADVISER AND RELATED DIRECTLY TO THE AFFILIATED FUND SERVICE TOTAL NON-AUDIT FEES OPERATIONS AND FINANCIAL PROVIDERS (ALL OTHER BILLED TO FUND REPORTING OF THE FUND) ENGAGEMENTS) TOTAL ------------------------------------------------------------------------------------------------------------------------------ December 31, 2005 $ 6,136 $ 282,575 $ 0 $ 288,711 December 31, 2004 (2) $ 8,190 $ 0 $ 0 $ 8,190
The above "Non-Audit Fees billed to Adviser" for 2005 include "Tax-Fees" billed to Adviser in the amount of $282,575 from previous table. (2) This fund changed its fiscal year end from July 31 to December 31. For the stub period ending, 12/31/04 the fund incurred total Non-Audit fees of $4,072. Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit Committee must approve (i) all non-audit services to be performed for the Fund by the Fund's independent accountants and (ii) all audit and non-audit services to be performed by the Fund's independent accountants for the Affiliated Fund Service Providers with respect to operations and financial reporting of the Fund. Regarding tax and research projects conducted by the independent accountants for the Fund and Affiliated Fund Service Providers (with respect to operations and financial reports of the Fund) such engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee chairman for his verbal approval prior to engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The registrant's Board of Directors or Trustees has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). The members of the audit committee are Robert P. Bremner, Lawrence H. Brown, Jack B. Evans, William J. Schneider and Eugene S. Sunshine. ITEM 6. SCHEDULE OF INVESTMENTS. See Portfolio of Investments in Item 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Adviser has engaged Spectrum Asset Management, Inc. ("Spectrum" or "Sub-Adviser") as Sub-Adviser to provide discretionary investment advisory services. As part of these services, the Adviser has also delegated to the Sub-Adviser the full responsibility for proxy voting and related duties in accordance with the Sub-Adviser's policy and procedures. The Adviser periodically will monitor the Sub-Adviser's voting to ensure that they are carrying out their duties. The Sub-Adviser's proxy voting policies and procedures are summarized as follows: Spectrum has adopted a Policy on Proxy Voting for Investment Advisory Clients (the "Voting Policy"), which provides that Spectrum aims to ensure that, when delegated proxy voting authority by a client, Spectrum acts (1) solely in the interest of the client in providing for ultimate long-term stockholder value, and (2) without undue influence from individuals or groups who may have an economic interest in the outcome of a proxy vote. Spectrum relies on the custodian bank to deliver proxies to Spectrum for voting. Spectrum has selected Institutional Shareholder Services, Inc. ("ISS") to assist with Spectrum's proxy voting responsibilities. Spectrum generally follows ISS standard proxy voting guidelines which embody the positions and factors Spectrum considers important in casting proxy votes. In connection with each proxy vote, ISS prepares a written analysis and recommendation based on its guidelines. In order to avoid any conflict of interest for ISS, the CCO will require ISS to deliver additional information or certify that ISS has adopted policies and procedures to detect and mitigate such conflicts of interest in issuing voting recommendations. Spectrum also may obtain voting recommendations from two proxy voting services as an additional check on the independence of ISS' voting recommendations. Spectrum may, on any particular proxy vote, diverge from ISS' guidelines or recommendations. In such a case, Spectrum's Voting Policy requires that: (i) the requesting party document the reason for the request; (ii) the approval of the Chief Investment Officer; (iii) notification to appropriate compliance personnel; (iv) a determination that the decision is not influenced by any conflict of interest; and (v) a written record of the process. When Spectrum determines not to follow ISS' guidelines or recommendations, Spectrum classifies proxy voting issues into three broad categories: (1) Routine Administrative Items; (2) Special Interest Issues; and (3) Issues having the Potential for Significant Economic Impact, and casts proxy votes in accordance with the philosophy and decision guidelines developed for that category in the Voting Policy. o Routine Administrative Items. Spectrum is willing to defer to management on matters of a routine administrative nature. Examples of issues on which Spectrum will normally defer to management's recommendation include selection of auditors, increasing the authorized number of common shares and the election of unopposed directors. o Special Interest Issues. In general, Spectrum will abstain from voting on shareholder social, political, environmental proposals because their long-term impact on share value cannot be calculated with any reasonable degree of confidence. o Issues Having the Potential for Significant Economic Impact. Spectrum is not willing to defer to management on proposals which have the potential for major economic impact on the corporation and value of its shares and believes such issues should be carefully analyzed and decided by shareholders. Examples of such issues are classification of board of directors' cumulative voting and supermajority provisions, defensive strategies (e.g., greenmail prevention), business combinations and restructurings and executive and director compensation. Conflicts of Interest. There may be a material conflict of interest when Spectrum votes, on behalf of a client, a proxy that is solicited by an affiliated person of Spectrum or another Spectrum client. To avoid such conflicts, Spectrum has established procedures under its Voting Policy to seek to ensure that voting decisions are based on a client's best interests and are not the product of a material conflict. In addition to employee monitoring for potential conflicts, the CCO reviews Spectrum's and its affiliates' material business relationships and personal and financial relationships of senior personnel of Spectrum and its affiliates to monitor for conflicts of interest. If a conflict of interest is identified, Spectrum considers both financial and non-financial materiality to determine if a conflict of interest is material. If a material conflict of interest is found to exist, the CCO discloses the conflict to affected clients and obtains consent from each client in the manner in which Spectrum proposed to vote. Spectrum clients can obtain a copy of the Voting Policy or information on how Spectrum voted their proxies by calling Spectrum's Compliance Department at (203) 322-0189. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. SPECTRUM ASSET MANAGEMENT A. PORTFOLIO MANAGER BIOGRAPHY BERNARD M. SUSSMAN is Chief Investment Officer and Chairman of Spectrum's Investment Committee. Prior to joining Spectrum in 1995, Mr. Sussman was with Goldman Sachs & Co. for nearly 18 years. MARK A. LIEB is Chief Financial Officer and is responsible for business development. Prior to founding Spectrum in 1987, Mr. Lieb was a Founder, Director and Partner of DBL Preferred Management, Inc., a wholly owned corporate cash management subsidiary of Drexel Burnham Lambert, Inc. L. PHILLIP JACOBY, IV is a Senior Vice President and joined Spectrum in 1995. From 1989-1995, Mr. Jacoby was a Senior Investment Officer at USL Capital Corporation (a subsidiary of Ford Motor Corporation) and was co-portfolio manager of a $600 million preferred stock portfolio. B. OTHER ACCOUNTS MANAGED BY SPECTRUM
------------------------------------------------------------------------------------------------------------------------------------ (a)(1) (a)(2) For each person identified in column (a)(1), provide (a)(3) PERFORMANCE FEE ACCOUNTS. For each of Identify number of accounts other than the Funds managed by the the categories in column (a)(2), provide number portfolio person within each category below and the total assets in of accounts and the total assets in the accounts manager(s) of the accounts managed within each category below with respect to which the ADVISORY FEE IS BASED the Adviser ON THE PERFORMANCE OF THE ACCOUNT to be named in the Fund prospectus ------------------------------------------------------------------------------------------------------------------------------------ Registered Investment Other Pooled Other Accounts Registered Other Pooled Other Accounts Companies Investment Investment Investment Vehicles Vehicles Companies ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- ------- Number Total Number Total Number Total Number Total Number of Total Number Total of Assets of Assets of Assets of Assets Accounts Assets of Assets Accounts ($mills) Accounts ($mill) Accounts ($mill) Accounts Accounts ($mill) ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- ------- ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- ------- Bernard M. Sussman 10 $8.12 16 $2.52 42 $2.58 - - - - - - ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- ------- Mark A. Lieb 10 $8.12 16 $2.52 42 $2.58 - - - - - - ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- ------- Phil Jacoby 10 $8.12 16 $2.52 38 $2.57 - - - - - - ------------- --------- ------------ ---------- -------- ---------- --------- ------- ------- ---------- --------- --------- -------
C. POTENTIAL MATERIAL CONFLICTS OF INTEREST As described above, the portfolio manager may manage other accounts with investment strategies similar to the Fund, including other investment companies and separately managed accounts. Fees earned by the sub-advisers may vary among these accounts and the portfolio managers may personally invest in some but not all of these accounts. These factors could create conflicts of interest because a portfolio manager may have incentives to favor certain accounts over others, resulting in other accounts outperforming the Fund. A conflict may also exist if a portfolio manager identified a limited investment opportunity that may be appropriate for more than one account, but the Fund is not able to take full advantage of that opportunity due to the need to allocate that opportunity among multiple accounts. In addition, the portfolio manager may execute transactions for another account that may adversely impact the value of securities held by the Fund. However, the sub-advisers believe that these risks are mitigated by the fact that accounts with like investment strategies managed by a particular portfolio manager are generally managed in a similar fashion, subject to exceptions to account for particular investment restrictions or policies applicable only to certain accounts, differences in cash flows and account sizes, and similar factors. In addition, each sub-adviser has adopted trade allocation procedures that require equitable allocation of trade orders for a particular security among participating accounts. D. FUND MANAGER COMPENSATION All employees of Spectrum Asset Management are paid a base salary and discretionary bonus. The bonus is paid quarterly and may represent a significant proportion of an individual's total annual compensation. Discretionary bonuses are determined by management after consideration of several factors including but not necessarily limited to: o Changes in overall firm assets under management (employees have no direct incentive to increase assets) o Portfolio performance relative to benchmarks o Contribution to client servicing o Compliance with firm and/or regulatory policies and procedures o Work ethic o Seniority and length of service o Contribution to overall functioning of organization E. OWNERSHIP OF JTP SECURITIES AS DECEMBER 31, 2005.
-------------------- ------- ------------ ------------------ ------------------- -------------------- ------------- --------------- Portfolio Manager None $1-$10,000 $10,001-$50,000 $50,001-$100,000 $100,001-$500,000 $500,001 - over $1,000,000 $1,000,000 -------------------- ------- ------------ ------------------ ------------------- -------------------- ------------- --------------- Bernard M. Sussman X -------------------- ------- ------------ ------------------ ------------------- -------------------- ------------- --------------- Mark A. Lieb X -------------------- ------- ------------ ------------------ ------------------- -------------------- ------------- --------------- Phil Jacoby X -------------------- ------- ------------ ------------------ ------------------- -------------------- ------------- ---------------
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no material changes to the procedures by which shareholders may recommend nominees to the registrant's Board during the reporting period and implemented after the registrant last provided disclosure in response to this Item. ITEM 11. 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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable because the code is posted on registrant's website at www.nuveen.com/etf and there were no amendments during the period covered by this report. (To view the code, click on the Investor Resources drop down menu box, click on Fund Governance and then Code of Conduct.) (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. (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 ----------------------------------------------------------- By (Signature and Title)* /s/ Jessica R. Droeger ---------------------------------------------- Jessica R. Droeger Vice President and Secretary Date: March 8, 2006 ------------------------------------------------------------------- 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: March 8, 2006 ------------------------------------------------------------------- By (Signature and Title)* /s/ Stephen D. Foy ---------------------------------------------- Stephen D. Foy Vice President and Controller (principal financial officer) Date: March 8, 2006 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.