UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

811-21137

 

Nuveen Quality Preferred Income Fund 2

(Exact name of registrant as specified in charter)

 

Nuveen Investments

333 West Wacker Drive

Chicago, IL 60606

(Address of principal executive offices) (Zip code)

 

Kevin J. McCarthy

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:

July 31

 

 

Date of reporting period:

January 31, 2012

 

 

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.

 


Closed-End Funds

Nuveen Investments

Closed-End Funds

Seeks High Current Income from a Portfolio of
Investment-Grade Preferred Securities

Semi-Annual Report

January 31, 2012

Nuveen Quality Preferred Income Fund

JTP

Nuveen Quality Preferred Income Fund 2

JPS

Nuveen Quality Preferred Income Fund 3

JHP


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Table of Contents

Chairman's Letter to Shareholders   4  
Portfolio Managers' Comments   5  
Fund Leverage and Other Information   7  
Common Share Distribution and Price Information   9  
Performance Overviews   10  
Portfolios of Investments   13  
Statement of Assets & Liabilities   31  
Statement of Operations   32  
Statement of Changes in Net Assets   33  
Statement of Cash Flows   35  
Financial Highlights   36  
Notes to Financial Statements   39  
Reinvest Automatically Easily and Conveniently   50  
Glossary of Terms Used in this Report   52  
Additional Fund Information   55  


Chairman's
Letter to Shareholders

Dear Shareholders,

These are perplexing times for investors. The global economy continues to struggle. The solutions being implemented in the eurozone to deal with the debt crises of many of its member countries are not yet seen as sufficient by the financial markets. The political paralysis in the U.S. has prevented the compromises necessary to deal with the fiscal imbalance and government spending priorities. The efforts by individual consumers, governments and financial institutions to reduce their debts are increasing savings but reducing demand for the goods and services that drive employment. These developments are undermining the rebuilding of confidence by consumers, corporations and investors that is so essential to a resumption of economic growth.

Although it is painfully slow, progress is being made. In Europe, the turnover of a number of national governments reflects the realization by politicians and voters alike that leaders who practiced business as usual had to be replaced by leaders willing to face problems and accept the hard choices needed to resolve them. The recent coordinated efforts by central banks in the U.S. and Europe to provide liquidity to the largest European banks indicates that these monetary authorities are committed to facilitating a recovery in the European banking sector.

In the U.S., the failure of the congressionally appointed Debt Reduction Committee was a blow to those who hoped for a bipartisan effort to finally begin addressing the looming fiscal crisis. Nevertheless, Congress and the administration cannot ignore the issue for long. The Bush era tax cuts are scheduled to expire on December 31, 2012, and six months later the $1.2 trillion of mandatory across-the-board spending cuts under the Budget Control Act of 2011 begin to go into effect. Any legislative modification would require bipartisan support and the prospects for a bipartisan solution are unclear. The impact of these two developments would be a mixed blessing: a meaningful reduction in the annual budget deficit at the cost of slowing the economic recovery.

It is in these particularly volatile markets that professional investment management is most important. Skillful investment teams who have experienced challenging markets and remain committed to their investment disciplines are critical to the success of an investor's long-term objectives. In fact, many long-term investment track records are built during challenging markets when managers are able to protect investors against these economic crosscurrents. Experienced investment teams know that volatile markets put a premium on companies and investment ideas that will weather the short-term volatility and that compelling values and opportunities are opened up when markets overreact to negative developments. By maintaining appropriate time horizons, diversification and relying on practiced investment teams, we believe that investors can achieve their long-term investment objectives.

As always, I encourage you to contact your financial consultant if you have any questions about your investment in a Nuveen Fund. On behalf of the other members of your Fund Board, we look forward to continuing to earn your trust in the months and years ahead.

Sincerely,

Robert P. Bremner
Chairman of the Board
March 22, 2012

Nuveen Investments
4


Portfolio Managers' Comments

Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.

Ratings shown are the highest rating given by one of the following national rating agencies: Standard & Poor's Group, Moody's Investors Service, Inc. or Fitch, Inc. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by a national rating agency.

Nuveen Quality Preferred Income Fund (JTP)
Nuveen Quality Preferred Income Fund 2 (JPS)
Nuveen Quality Preferred Income Fund 3 (JHP)

The Funds are sub-advised by a team of specialists at Spectrum Asset Management, a wholly owned subsidiary of Principal Global Investors, LLC. Mark Lieb and Phil Jacoby, who have more than 50 years of combined experience in the preferred securities markets, lead the team. Here Mark and Phil talk about their management strategy and the performance of each Fund for six-month period ended January 31, 2012.

What key strategies were used to manage the Funds during the six-month period ended January 31, 2012?

The investment objective of each Fund is to seek high current income consistent with capital preservation. Each Fund's secondary objective is to enhance portfolio value. Under normal market conditions, the Funds seek to invest at least 80% of their net assets in preferred securities and up to 20% in debt securities, including convertible debt and convertible preferred securities.

Our basic strategy is to stay relatively balanced between the individual investor-oriented $25 par preferred securities often traded on securities exchanges and the institutional investor-oriented $1000 par preferred securities traded over-the-counter in the capital markets. Both types of securities offer different performance opportunities, which together with the broad diversification benefits of the combined universe, help to produce potentially attractive risk-adjusted rates of return.

We keep a risk-averse posture toward security structure, which is an important core aspect of our effort to preserve capital and provide attractive income over the long term. We also maintain approximately a 60% weighting to U.S. issued securities and a 40% weighting to foreign names as part of the strategy of all three Funds includes seeking to invest in U.S. versus foreign issuers in approximately the same proportion as the Comparative Benchmark.

During the reporting period, we were equal weight in Germany and underweight in France and Britain versus the benchmark. We also were overweight in a number of other countries, such as Canada, Bermuda and Switzerland. On a market sector basis, we were overweight in capital securities by about 5% because of what we saw as the potential for better call protection and more upside opportunity.

Nuveen Investments
5


Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares.

For additional information, see the Performance Overview page for your Fund in this report.

*  Six-month returns are cumulative; all other returns are annualized.

**  Refer to Glossary of Terms Used in this Report for definitions.

How did the Funds perform over this six-month period?

The performance of the Funds, as well as comparative index and benchmark, are presented in the accompanying table.

Average Annual Total Returns on Common Share Net Asset Value

For the periods ended 1/31/12

Fund   6-Month*   1-Year   5-Year  
JTP     1.51 %     5.98 %     -1.95 %  
JPS     0.87 %     5.38 %     -1.21 %  
JHP     0.92 %     5.38 %     -1.66 %  
Barclays Capital U.S. Aggregate Bond Index**     4.25 %     8.66 %     6.70 %  
Comparative Benchmark**     1.80 %     5.30 %     1.26 %  

 

For the six-month period ended January 31, 2012, all three Funds underperformed the Barclays Capital U.S. Aggregate Bond Index and Comparative Benchmark.

During the reporting period, several factors contributed positively to each Fund's performance. In general, U.S. securities did well, followed by Great Britain. As of January 31, 2102, each Fund had more than 70% of its portfolio in issues of companies domiciled in the U.S. or Great Britain. Several holdings in particular contributed to positive performance, including issues from Firstar Realty, Reliance Capital, Credit Suisse, HSBC Holdings, Weingarten Realty Trust, Barclays Bank, First Union Capital Trust and Lincoln National Corporation.

The Funds were impacted negatively throughout the reporting period from protracted European sovereign debt concerns that revalued financial risk in the foreign bank names of the region, as well as in some of the foreign insurance issues. In particular, the French and the German sectors did poorly. While each Fund's holdings in European securities was relatively modest when compared with its U.S. positions, the overall impact of these European holdings was negative. Several of the individual positions that contributed to the Funds underperformance included AXA, Deutsche Bank, Aegon and Swiss Re Capital.

Nuveen Investments
6


Fund Leverage
and Other Information

IMPACT OF THE FUNDS' LEVERAGE STRATEGY ON PERFORMANCE

One important factor impacting the return of the Funds relative to their benchmarks was the Funds' use of leverage through the use of bank borrowings. The Funds use leverage because their managers believe that, over time, leveraging provides opportunities for additional income and total return for common shareholders. However, use of leverage also can expose common shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on common share net asset value and common share total return is magnified by the use of leverage. Conversely, leverage may enhance common share returns during periods when the prices of securities held by a Fund generally are rising. Leverage had a positive impact on the performance of the Funds over this reporting period. During the period, the Funds entered into interest rate swap contracts to partially fix the interest cost of their leverage. This activity detracted modestly from the overall positive impact of leverage, as rates declined slightly while the positions were in place, meaning it would have been better had the interest rates of the leverage floated rather than being partially fixed in the period.

UPDATE ON LITIGATION REGARDING THE FUNDS' REDEMPTION OF AUCTION RATE PREFERRED SHARES

During 2011, certain funds (including these Funds) were named in a consolidated complaint as nominal defendants in a putative shareholder derivative action captioned Martin Safier, et al. v. Nuveen Asset Management, et al. that was filed in the Circuit Court of Cook County, Illinois, Chancery Division (the "Cook County Chancery Court") on February 18, 2011 (the "Complaint"). The Complaint, filed on behalf of purported holders of each fund's common shares, also named Nuveen Fund Advisors, Inc. as a defendant, together with current and former Officers and interested Directors/Trustees of each of the funds (together with the nominal defendants, collectively, the "Defendants"). The Complaint contained allegations regarding breaches of fiduciary duties in connection with the redemption of auction rate preferred shares issued by the funds. The Defendants filed a motion to dismiss the suit and on December 16, 2011, the court granted that motion dismissing the Complaint. The plaintiffs failed to file an appeal of the court's decision within the required time period, resulting in the final disposition of the suit.

RISK CONSIDERATIONS

Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation.

Nuveen Investments
7


Past performance is no guarantee of future results. Fund common shares are subject to a variety of risks, including:

Investment Risk. The possible loss of the entire principal amount that you invest.

Price Risk. Shares of closed-end investment companies like these Funds frequently trade at a discount to their net asset value (NAV). Your common shares at any point in time may be worth less than your original investment, even after taking into account the reinvestment of Fund dividends and distributions.

Leverage Risk. Each Fund's use of leverage creates the possibility of higher volatility for the Fund's per share NAV, market price, distributions and returns. There is no assurance that a Fund's leveraging strategy will be successful.

Tax Risk. The tax treatment of Fund distributions may be affected by new IRS interpretations of the Internal Revenue Code and future changes in tax laws and regulations.

Issuer Credit Risk. This is the risk that a security in a Fund's portfolio will fail to make dividend or interest payments when due.

Interest Rate Risk. Fixed-income securities such as bonds, preferred, convertible and other debt securities will decline in value if market interest rates rise.

Reinvestment Risk. If market interest rates decline, income earned from a Fund's portfolio may be reinvested at rates below that of the original bond that generated the income.

Preferred Stock Risk. Preferred stocks are subordinated to bonds and other debt instruments in a company's capital structure, and therefore are subject to greater credit risk.

Call Risk or Prepayment Risk. Issuers may exercise their option to prepay principal earlier than scheduled, forcing a Fund to reinvest in lower-yielding securities.

Non-U.S. Securities Risk. Investments in non-U.S securities involve special risks not typically associated with domestic investments including currency risk and adverse political, social and economic developments. These risks often are magnified in emerging markets.

Derivatives Strategy Risk. Derivative securities, such as calls, puts, warrants, swaps and forwards, carry risks different from, and possibly greater than, the risks associated with the underlying investments.

Nuveen Investments
8


Common Share Distribution
and Price Information

Distribution Information

The following information regarding your Fund's distributions is current as of January 31, 2012, and likely will vary over time based on each Fund's investment activities and portfolio investment value changes.

During the six-month reporting period, the Funds did not make any changes to their monthly distributions to common shareholders. Some of the important factors affecting the amount and composition of these distributions are summarized below.

The Funds employ leverage through the use of bank borrowings. Financial leverage provides the potential for higher earnings (net investment income), total returns and distributions over time, but—as noted earlier—also increases the variability of common shareholders' net asset value (NAV) per share in response to changing market conditions.

During certain periods, the Funds may pay dividends at a rate that may be more or less than the amount of net investment income actually earned by the Funds during the period. If a Fund has cumulatively earned more than it has paid in dividends, it holds excess in reserve as undistributed net investment income (UNII) as part of the Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in excess of earnings, the excess constitutes negative UNII that is likewise reflected in a Funds' NAV. Each Fund will, over time, pay all of its net investment income as dividends to shareholders. As of January 31, 2012, all three Funds had positive UNII balances, based upon our best estimate, for tax purposes. JTP and JPS had positive UNII balances and JHP had a negative UNII balance for financial reporting purposes.

Common Share Repurchases and Share Price Information

As of January 31, 2012, and since the inception of the Funds' repurchase program, the Funds have not repurchased any of their outstanding common shares.

At January 31, 2012, the Funds' common share prices were trading at (+) premiums/(-) discounts to their common share NAVs as shown in the accompanying table.

Fund   1/31/12
(+) Premium/(-) Discount		   Six-Month Average
(-) Discount		  
JTP   (+)0.62%   (-)2.08%  
JPS   (-)0.59%   (-)4.19%  
JHP   (+)2.31%   (-)2.92%  

Nuveen Investments
9



Fund Snapshot

Common Share Price   $ 8.11    
Common Share Net Asset Value (NAV)   $ 8.06    
Premium/(Discount) to NAV     0.62 %  
Latest Dividend   $ 0.0500    
Market Yield     7.40 %  
Net Assets Applicable to
Common Shares ($000)		   $ 521,220    

 

Leverage

Regulatory Leverage     27.83 %  
Effective Leverage     27.83 %  

 

Average Annual Total Return

(Inception 6/25/02)

    On Share Price   On NAV  
6-Month (Cumulative)     11.79 %     1.51 %  
1-Year     17.59 %     5.98 %  
5-Year     -1.32 %     -1.95 %  
Since Inception     2.53 %     2.65 %  

 

Portfolio Composition

(as a % of total investments)2,4

Insurance     31.7 %  
Commercial Banks     18.5 %  
Real Estate/Mortgage     9.8 %  
Capital Markets     7.0 %  
Diversified Financial Services     6.8 %  
Multi-Utilities     3.6 %  
Short-Term Investments     3.7 %  
Other     18.9 %  

 

Country Allocation

(as a % of total investments)2,4

United States     65.2 %  
United Kingdom     8.6 %  
Netherlands     5.0 %  
Germany     3.6 %  
Switzerland     3.3 %  
Canada     2.9 %  
Other     11.4 %  

 

Top Five Issuers

(as a % of total investments)1,2,4

Firstar Realty LLC     3.2 %  
Reliance Capital Trust     2.5 %  
Centaur Funding Corp     2.5 %  
Aegon NV     2.4 %  
Kimco Realty Corp     2.4 %  

JTP

Performance

OVERVIEW

(Unaudited)

Nuveen Quality Preferred Income Fund

  as of January 31, 2012

Portfolio Allocation (as a % of total investments)2,4

2011-2012 Monthly Distributions Per Common Share

Common Share Price Performance — Weekly Closing Price

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund's Performance Overview page.

1 Excluding short-term investments.

2 Holdings are subject to change.

3 Rounds to less than 0.1%.

4 Excluding investments in derivatives.

Nuveen Investments
10


JPS

Performance

OVERVIEW

(Unaudited)

Nuveen Quality Preferred Income Fund 2

  as of January 31, 2012

Portfolio Allocation (as a % of total investments)2,3

2011-2012 Monthly Distributions Per Common Share

Common Share Price Performance — Weekly Closing Price

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund's Performance Overview page.

1 Excluding short-term investments.

2 Holdings are subject to change.

3 Excluding investments in derivatives.

Fund Snapshot

Common Share Price   $ 8.45    
Common Share Net Asset Value (NAV)   $ 8.50    
Premium/(Discount) to NAV     -0.59 %  
Latest Dividend   $ 0.0550    
Market Yield     7.81 %  
Net Assets Applicable to
Common Shares ($000)		   $ 1,022,239    

 

Leverage

Regulatory Leverage     27.82 %  
Effective Leverage     27.82 %  

 

Average Annual Total Return

(Inception 9/24/02)

    On Share Price   On NAV  
6-Month (Cumulative)     9.11 %     0.87 %  
1-Year     14.80 %     5.38 %  
5-Year     -1.06 %     -1.21 %  
Since Inception     3.29 %     3.52 %  

 

Portfolio Composition

(as a % of total investments)2,3

Insurance     31.6 %  
Commercial Banks     18.7 %  
Real Estate/Mortgage     11.8 %  
Diversified Financial Services     7.6 %  
Capital Markets     6.6 %  
Short-Term Investments     3.9 %  
Other     19.8 %  

 

Country Allocation

(as a % of total investments)2,3

United States     66.0 %  
United Kingdom     7.4 %  
Netherlands     5.8 %  
Germany     4.2 %  
France     3.4 %  
Switzerland     2.7 %  
Other     10.5 %  

 

Top Five Issuers

(as a % of total investments)1,2,3

Wachovia     3.4 %  
Aegon NV     2.7 %  
Centaur Funding Corp     2.6 %  
Vornado Realty LP     2.2 %  
Deutsche Bank AG     2.1 %  

Nuveen Investments
11


Fund Snapshot

Common Share Price   $ 8.42    
Common Share Net Asset Value (NAV)   $ 8.23    
Premium/(Discount) to NAV     2.31 %  
Latest Dividend   $ 0.0520    
Market Yield     7.41 %  
Net Assets Applicable to
Common Shares ($000)		   $ 195,204    

 

Leverage

Regulatory Leverage     27.76 %  
Effective Leverage     27.76 %  

 

Average Annual Total Return

(Inception 12/18/02)

    On Share Price   On NAV  
6-Month (Cumulative)     13.76 %     0.92 %  
1-Year     15.82 %     5.38 %  
5-Year     -1.47 %     -1.66 %  
Since Inception     2.74 %     2.72 %  

 

Portfolio Composition

(as a % of total investments)2,3

Insurance     31.5 %  
Commercial Banks     18.6 %  
Real Estate/Mortgage     11.5 %  
Diversified Financial Services     8.8 %  
Capital Markets     7.5 %  
Short-Term Investments     3.7 %  
Other     18.4 %  

 

Country Allocation

(as a % of total investments)2,3

United States     66.8 %  
United Kingdom     6.6 %  
Netherlands     5.2 %  
Germany     3.9 %  
Australia     3.0 %  
France     3.0 %  
Switzerland     3.0 %  
Other     8.5 %  

 

Top Five Issuers

(as a % of total investments)1,2,3

First Union     3.4 %  
Deutsche Bank AG     3.3 %  
Centaur Funding Corp     3.2 %  
Aegon NV     2.6 %  
XL Group PLC     2.1 %  

JHP

Performance

OVERVIEW

(Unaudited)

Nuveen Quality Preferred Income Fund 3

  as of January 31, 2012

Portfolio Allocation (as a % of total investments)2,3

2011-2012 Monthly Distributions Per Common Share

Common Share Price Performance — Weekly Closing Price

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this Fund's Performance Overview page.

1 Excluding short-term investments.

2 Holdings are subject to change.

3 Excluding investments in derivatives.

Nuveen Investments
12



JTP

Nuveen Quality Preferred Income Fund

Portfolio of INVESTMENTS

  January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    $25 Par (or similar) Preferred Securities – 68.9% (49.2% of Total Investments)  
    Capital Markets – 7.6%  
  137,200     Ameriprise Financial, Inc.           7.750 %         A   $ 3,880,016    
  52,808     BNY Capital Trust V, Series F           5.950 %         A1     1,335,514    
  5,600     Charles Schwab Corporation           7.000 %         BBB+     5,749,632    
  515,776     Credit Suisse           7.900 %         A3     13,544,278    
  480,382     Deutsche Bank Capital Funding Trust II           6.550 %         BBB     10,712,519    
  86,100     Deutsche Bank Contingent Capital Trust III           7.600 %         BBB     2,130,975    
  37,900     Goldman Sachs Group Inc., Series GSC-3 (PPLUS)           6.000 %         A3     866,394    
  2,200     Goldman Sachs Group Inc., Series GSG-1 (PPLUS)           6.000 %         A1     52,888    
  4,500     Goldman Sachs Group Inc., Series GSG-2 (PPLUS)           5.750 %         A1     106,200    
  43,900     Morgan Stanley Capital Trust IV           6.250 %         Baa2     1,030,772    
    Total Capital Markets                             39,409,188    
    Commercial Banks – 7.6%  
  1,100     ABN AMRO North America Capital Funding, 144A           6.968 %         BB+     657,594    
  323,100     Banco Santander Finance           10.500 %         BBB+     8,814,168    
  2,100     Barclays Bank PLC           6.625 %         BBB     47,544    
  118,500     BB&T Capital Trust VI           9.600 %         Baa1     3,146,175    
  30,200     BB&T Capital Trust VII           8.100 %         Baa1     790,334    
  700,500     BPCE SA           13.000 %         BBB-     658,229    
  144,700     First Naigara Finance Group           8.625 %         BB+     3,896,771    
  18,400     HSBC Holdings PLC, (4)           8.000 %         A3     497,168    
  13,800     HSBC Holdings PLC           6.200 %         A3     342,792    
  36,000     KeyCorp Capital Trust X           8.000 %         BBB-     923,040    
  3,500,000     National Australia Bank           8.000 %         Baa1     3,764,250    
  7,100     PNC Financial Services Inc.           6.750 %         BBB     7,346,157    
  25,000     Royal Bank of Scotland Group PLC, Series L           5.750 %         BB     418,250    
  4,300,000     Royal Bank of Scotland Group PLC           7.648 %         BB     3,332,500    
  20,400     Wachovia Capital Trust IX           6.375 %         BBB+     518,568    
  60,000     Wells Fargo Capital Trust IX           5.625 %         BBB+     1,523,400    
  120,000     Wells Fargo Capital Trust XII           7.875 %         BBB+     3,181,200    
    Total Commercial Banks                             39,858,140    
    Diversified Financial Services – 4.5%  
  18,000     Bank of America Corporation           6.375 %         BB+     386,100    
  80,549     Citigroup Capital Trust XI           6.000 %         Baa3     1,885,652    
  10,000     Citigroup Capital Trust XII           8.500 %         Baa3     257,700    
  150,514     Citigroup Capital XIII           7.875 %         Ba1     4,054,847    
  1,900     Citigroup Capital XIV           6.875 %         Baa3     46,816    
  36,800     ING Groep N.V           7.375 %         BBB     805,184    
  625,776     ING Groep N.V           7.200 %         BBB     13,604,370    
  80,308     Merrill Lynch Preferred Capital Trust V           7.280 %         BB+     1,924,983    
  13,651     National Rural Utilities Cooperative Finance Corporation           5.950 %         A3     346,599    
    Total Diversified Financial Services                             23,312,251    
    Diversified Telecommunication Services – 0.7%  
  143,510     Qwest Corporation           7.500 %         BBB-     3,800,145    
    Electric Utilities – 1.2%  
  33,000     Alabama Power Company           6.450 %         BBB+     902,345    
  181,800     Entergy Texas Inc.           7.875 %         BBB+     5,257,656    
    Total Electric Utilities                             6,160,001    
    Food Products – 0.5%  
  28,100     Dairy Farmers of America Inc., 144A           7.875 %         BBB-     2,669,500    

 

Nuveen Investments
13


JTP

Nuveen Quality Preferred Income Fund (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    Insurance – 20.6%  
  795,723     Aegon N.V           6.375 %         Baa1   $ 17,195,574    
  326,106     Allianz SE           8.375 %         A+     8,570,490    
  479,128     Arch Capital Group Limited           8.000 %         BBB     12,318,381    
  3,250,000     Dai-Ichi Mutual Life, 144A           7.250 %         A3     3,393,062    
  228,764     Delphi Financial Group, Inc.           7.376 %         BB+     5,645,896    
  568,382     EverestRe Capital Trust II           6.200 %         Baa1     14,578,998    
  198,951     Markel Corporation           7.500 %         BBB     5,087,177    
  276,263     PartnerRe Limited, Series C           6.750 %         BBB+     7,036,419    
  8,807     PartnerRe Limited, Series D           6.500 %         BBB+     223,081    
  38,600     PLC Capital Trust III           7.500 %         BBB     981,598    
  386,042     PLC Capital Trust IV           7.250 %         BBB     9,743,700    
  166,360     Prudential Financial Inc.           6.750 %         A-     4,270,461    
  4,100,000     Reinsurance Group of America Inc.           6.750 %         BBB-     3,692,891    
  34,500     RenaissanceRe Holdings Limited, Series C           6.080 %         BBB+     864,915    
  232,691     RenaissanceRe Holdings Limited, Series D           6.600 %         BBB+     5,921,986    
  304,651     W. R. Berkley Corporation, Capital Trust II           6.750 %         BBB-     7,716,810    
    Total Insurance                             107,241,439    
    Media – 3.8%  
  131,141     CBS Corporation           6.750 %         BBB     3,338,850    
  612,684     Comcast Corporation           7.000 %         BBB+     15,586,681    
  47,000     Comcast Corporation           6.625 %         BBB+     1,194,270    
    Total Media                             20,119,801    
    Multi-Utilities – 4.1%  
  234,700     Dominion Resources Inc.           8.375 %         BBB     6,853,240    
  185,800     DTE Energy Company           6.500 %         BBB-     5,016,600    
  10,000     Scana Corporation           7.700 %         BBB-     289,200    
  341,815     Xcel Energy Inc.           7.600 %         BBB     9,297,368    
    Total Multi-Utilities                             21,456,408    
    Oil, Gas & Consumable Fuels – 2.3%  
  467,481     Nexen Inc.           7.350 %         BB+     11,892,717    
    Pharmaceuticals – 0.1%  
  13,552     Bristol Myers Squibb Company (CORTS)           6.250 %         A+     347,067    
    Real Estate/Mortgage – 13.7%  
  3,505     CommomWealth REIT           7.500 %         Baa2     76,584    
  164,500     CommomWealth REIT           7.250 %         Baa3     4,099,340    
  1,629     CommomWealth REIT           7.125 %         Baa3     40,920    
  80,607     Duke Realty Corporation, Series L           6.600 %         Baa3     2,020,817    
  145,700     Hospitality Properties Trust, (4)           7.125 %         BB     3,635,215    
  17,861     Kimco Realty Corporation, Series F           6.650 %         Baa2     448,311    
  652,387     Kimco Realty Corporation, Series G           7.750 %         Baa2     17,040,348    
  10,294     Kimco Realty Corporation, Series H           6.900 %         Baa2     285,761    
  134,900     Realty Income Corporation, WI/DD           6.625 %         Baa2     3,365,188    
  92,378     Prologis Inc.           6.750 %         BB     2,280,813    
  12,691     PS Business Parks, Inc.           6.875 %         BBB-     328,062    
  103,607     PS Business Parks, Inc., (4)           6.450 %         BBB-     2,599,893    
  11,699     Public Storage, Inc., Series E           6.750 %         BBB+     294,815    
  4,300     Public Storage, Inc., Series F           6.500 %         BBB+     117,992    
  9,000     Public Storage, Inc., Series M           6.625 %         BBB+     228,150    
  22,544     Public Storage, Inc., Series Q           6.350 %         Baa1     600,121    
  107,100     Public Storage, Inc., Series Y, (4)           6.850 %         BBB+     3,055,702    
  136,000     Public Storage, Inc., (4)           5.900 %         A-     3,413,600    
  70,216     Realty Income Corporation           6.750 %         Baa2     1,774,358    
  8,404     Regency Centers Corporation           7.250 %         Baa3     215,731    
  452,734     Vornado Realty LP           7.875 %         BBB     12,676,552    

 

Nuveen Investments
14


Shares   Description (1)     Coupon     Ratings (2)   Value  
    Real Estate/Mortgage (continued)  
  165,282     Wachovia Preferred Funding Corporation, (3)           7.250 %         BBB+   $ 4,305,596    
  32,329     Weingarten Realty Trust           8.100 %         BBB     782,685    
  298,102     Weingarten Realty Trust           6.500 %         Baa3     7,541,981    
    Total Real Estate/Mortgage                             71,228,535    
    U.S. Agency – 2.0%  
  119,800     Cobank Agricultural Credit Bank, 144A           7.000 %         N/R     5,447,162    
  46,000     Cobank Agricultural Credit Bank           11.000 %         A     2,373,315    
  48,600     Cobank Agricultural Credit Bank           11.000 %         A     2,592,509    
    Total U.S. Agency                             10,412,986    
    Wireless Telecommunication Services – 0.2%  
  18,500     Telephone and Data Systems Inc.           7.000 %         Baa2     493,026    
  28,000     Telephone and Data Systems Inc.           6.875 %         Baa2     736,120    
    Total Wireless Telecommunication Services                             1,229,146    
    Total $25 Par (or similar) Preferred Securities (cost $347,924,596)                             359,137,324    
Principal
Amount (000)		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Corporate Bonds – 7.7% (5.5% of Total Investments)  
    Capital Markets – 1.0%  
$ 1,000     Man Group PLC           5.000 %   8/09/17   Baa3   $ 838,063    
  6,300     State Street Capital Trust IV, (3)           1.560 %   6/15/77   A3     4,254,308    
  7,300     Total Caital Markets                             5,092,371    
    Commercial Banks – 2.1%  
  2,100     BNP Paribas, 144A           5.186 %   6/29/15   BBB+     1,512,000    
  8,400     LBG Capital I PLC, 144A           7.875 %   11/01/20   BB     6,972,000    
  3,400     Lloyds Banking Group LBG Capital 1, 144A           8.000 %   6/15/20   BB-     2,686,000    
  13,900     Total Commercial Banks                             11,170,000    
    Diversified Financial Services – 0.4%  
  3,100     Fortis Hybrid Financing           8.250 %   8/27/49   BBB     2,170,000    
    Electric Utilities – 0.7%  
  3,400     FPL Group Capital Inc.           6.650 %   6/15/17   BBB     3,442,500    
    Insurance – 3.0%  
  2,500     Prudential PLC., Convertible Bond           11.750 %   12/23/14   A-     2,884,375    
  14,150     QBE Capital Funding Trust II, 144A           7.250 %   5/24/41   BBB+     12,513,170    
  16,650     Total Insurance                             15,397,545    
    Multi-Utilities – 0.5%  
  2,000     Dominion Resources Inc.           2.881 %   9/30/66   BBB     1,731,975    
  1,000     Wisconsin Energy Corporation, (3)           6.250 %   5/15/67   Baa1     1,022,500    
  3,000     Total Multi-Utilities                             2,754,475    
$ 47,350     Total Corporate Bonds (cost $42,506,908)                             40,026,891    
Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Capital Preferred Securities – 54.9% (39.2% of Total Investments)  
    Capital Markets – 1.2%  
  1,000     Credit Suisse Guernsey           1.147 %   5/15/17   A3   $ 639,440    
  1,900     Dresdner Funding Trust I, 144A           8.151 %   6/30/31   Ba1     1,415,500    

 

Nuveen Investments
15


JTP

Nuveen Quality Preferred Income Fund (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Capital Markets (continued)  
  1,800     Goldman Sachs Capital II           5.793 %   6/01/12   Baa2   $ 1,228,500    
  5,000     Deutsch Bank Capital Funding Trust           4.901 %   12/29/49   Baa2     3,075,000    
    Total Capital Markets                             6,358,440    
    Commercial Banks – 16.1%  
  4,900     ABN AMRO North America Holding Capital, 144A           6.523 %   12/31/49   BB+     3,675,000    
  2,720     Banco Santander Finance           10.500 %   9/29/49   BBB+     2,774,618    
  900     Barclays Bank PLC, 144A           7.434 %   12/15/17   BBB     882,000    
  2,500     Barclays Bank PLC, Regulation S, 144A           6.860 %   6/15/32   BBB     2,175,000    
  2,800     Barclays Bank PLC           6.278 %   12/15/34   BBB     2,270,626    
  2,500     BB&T Capital Trust IV           6.820 %   6/12/77   Baa1     2,525,000    
  400     First Empire Capital Trust I           8.234 %   2/01/27   BBB     399,908    
  575     First Empire Capital Trust II           8.277 %   6/01/27   BBB     594,486    
  3,500     Fulton Capital Trust I           6.290 %   2/01/36   Baa3     2,887,500    
  300     HBOS Capital Funding LP, 144A           6.071 %   6/30/14   BB     216,000    
  11,650     HSBC Capital Funding LP, Debt           10.176 %   6/30/50   A3     14,679,000    
  4,200     HSBC Financial Capital Trust IX           5.911 %   11/30/35   BBB+     3,633,000    
  2,000     KeyCorp Capital III           7.750 %   7/15/29   BBB-     2,037,534    
  5,000     Nordea Bank AB           8.375 %   3/25/15   BBB+     5,255,000    
  4,150     Rabobank Nederland, 144A           11.000 %   6/30/19   A     5,135,625    
  17,500     Reliance Capital Trust I, Series B           8.170 %   5/01/28   N/R     17,476,568    
  2,000     Societe Generale, 144A           1.333 %   12/31/49   BBB-     976,360    
  700     Societe Generale, 144A           5.922 %   4/05/57   BBB-     518,521    
  8,900     Societe Generale           8.750 %   10/07/49   BBB-     7,342,500    
  1,200     Sovereign Capital Trust VI           7.908 %   6/13/36   BBB+     1,140,000    
  3,000     Sparebanken Rogaland, Notes, 144A           6.443 %   5/01/49   Ba1     2,893,761    
  2,700     Standard Chartered PLC, 144A           6.409 %   1/30/17   BBB+     2,347,520    
  1,550     Standard Chartered PLC, 144A           7.014 %   7/30/37   BBB+     1,497,288    
  700     Wachovia Capital Trust III           5.570 %   3/15/42   BBB+     618,646    
    Total Commercial Banks                             83,951,461    
    Consumer Finance – 0.4%  
  2,100     American Express Company           6.800 %   9/01/66   Baa2     2,121,000    
    Diversified Financial Services – 4.6%  
  200     Bank One Capital III           8.750 %   9/01/30   A2     271,308    
  700     BankAmerica Capital II, Series 2           8.000 %   12/15/26   BB+     686,000    
  4,000     BankAmerica Institutional Capital Trust, Series B, 144A           7.700 %   12/31/26   BB+     3,800,000    
  2,600     Citigroup Capital III           7.625 %   12/01/36   Baa3     2,595,271    
  3,700     CitiGroup Capital XXI           8.300 %   12/21/77   Baa3     3,765,860    
  4,000     JPMorgan Chase Capital Trust XXVII           7.000 %   11/01/39   A2     4,050,400    
  1,140     JPMorgan Chase Capital XXV           6.800 %   10/01/37   A2     1,150,105    
  47,500     JPMorgan Chase Capital Trust XXIX           6.700 %   4/02/40   A2     1,221,700    
  1,800     MBNA Corporation, Capital Trust A           8.278 %   12/01/26   BB+     1,782,000    
  2,509     NB Capital Trust II           7.830 %   12/15/26   BB+     2,446,275    
  2,400     NB Capital Trust IV           8.250 %   4/15/27   BB+     2,370,000    
    Total Diversified Financial Services                             24,138,919    
    Electric Utilities – 0.3%  
  1,500     PPL Capital Funding, Inc.           6.700 %   3/30/17   BB+     1,481,250    
    Insurance – 20.9%  
  4,600     Allstate Corporation           6.125 %   5/15/67   Baa1     4,338,490    
  600     AXA S.A., 144A           6.463 %   12/14/18   Baa1     441,000    
  4,880     AXA           6.379 %   12/14/36   Baa1     3,647,800    
  3,700     AXA           8.600 %   12/15/30   A3     3,804,270    
  8,100     Catlin Insurance Company Limited           7.249 %   1/19/17   BBB+     7,047,000    
  9,925     Glen Meadows Pass Through Trust           6.505 %   2/15/17   BB+     7,443,750    
  5,500     Great West Life & Annuity Capital I, 144A           6.625 %   11/15/34   A-     5,260,019    
  3,800     Great West Life and Annuity Insurance Company, 144A           7.153 %   5/16/16   A-     3,762,000    

 

Nuveen Investments
16


Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Insurance (continued)  
  3,000     Liberty Mutual Group, 144A           7.800 %   3/15/37   Baa3   $ 2,805,000    
  2,500     Lincoln National Corporation           6.050 %   4/20/17   BBB     2,225,000    
  5,100     Lincoln National Corporation           7.000 %   5/17/66   BBB     4,819,500    
  6,300     MetLife Capital Trust IV, 144A           7.875 %   12/15/67   BBB     6,725,250    
  600     MetLife Capital Trust X, 144A           9.250 %   4/08/68   BBB     709,500    
  12,650     National Financial Services Inc.           6.750 %   5/15/37   Baa2     11,167,420    
  1,400     Nationwide Financial Services Capital Trust           7.899 %   3/01/37   Baa2     1,364,009    
  7,225     Oil Insurance Limited, 144A           7.558 %   12/30/56   Baa1     6,501,055    
  7,400     Old Mutual Capital Funding, Notes           8.000 %   6/22/53   Baa3     7,289,000    
  1,000     Progressive Corporation, (3)           6.700 %   6/15/67   A2     1,025,000    
  3,200     Prudential Financial Inc.           8.875 %   6/15/18   BBB+     3,824,000    
  1,000     Prudential PLC           6.500 %   6/29/49   A-     890,000    
  1,100     QBE Capital Funding Trust II, 144A           6.797 %   6/01/49   BBB+     951,903    
  3,000     Swiss Re Capital I           6.854 %   5/25/16   A     2,698,401    
  15,800     XL Capital Ltd           6.500 %   10/15/57   BBB-     13,173,250    
  2,536     ZFS Finance USA Trust II 144A           6.450 %   12/15/65   A     2,383,840    
  5,260     ZFS Finance USA Trust V           6.500 %   5/09/67   A     4,852,350    
    Total Insurance                             109,148,807    
    Multi-Utilities – 0.5%  
  2,300     Dominion Resources Inc.           7.500 %   6/30/16   BBB     2,415,000    
    Real Estate – 4.3%  
  19     Firstar Realty LLC, 144A           8.875 %   12/31/50   A2     22,265,625    
  7     PS Business Parks, Inc.           7.200 %   3/30/55   BBB-     174,018    
    Total Real Estate                             22,439,643    
    Road & Rail – 2.2%  
  10,900     Burlington Northern Santa Fe Funding Trust I           6.613 %   12/15/55   BBB     11,227,000    
    Thrifts & Mortgage Finance – 0.3%  
  2,000     Caisse Nationale Des Caisses d'Epargne et de Prevoyance           6.750 %   1/27/49   BBB-     1,348,856    
    U.S. Agency – 0.8%  
  3     Farm Credit Bank of Texas           10.000 %   12/15/60   A3     3,930,188    
    Wireless Telecommunication Services – 3.3%  
  15     Centaur Funding Corporation, Series B           9.080 %   4/21/20   BBB     17,418,357    
    Total Capital Preferred Securities (cost $285,316,604)                             285,978,921    
Shares   Description (1)     Coupon     Ratings (2)   Value  
    Convertible Preferred Securities – 0.0% (0.0% of Total Investments)  
    Commerical Banks – 0.0%  
  200     Wells Fargo & Company           7.500 %         BBB+   $ 219,000    
    Total Convertible Preferred Securities (cost $203,301)                             219,000    
Shares   Description (1)           Value  
    Investment Companies – 3.3% (2.4% of Total Investments)  
  315,548     BlackRock Credit Allocation Income Trust II                           $ 3,281,699    
  415,561     Flaherty and Crumrine/Claymore Preferred Securities Income Fund Inc.                             7,550,743    
  352,012     John Hancock Preferred Income Fund III                             6,374,937    
      Total Investment Companies (cost $20,807,508)                             17,207,379    

 

Nuveen Investments
17


JTP

Nuveen Quality Preferred Income Fund (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Principal
Amount (000)		   Description (1)     Coupon   Maturity     Value  
    Short-Term Investments – 5.2% (3.7% of Total Investments)  
$ 27,006     Repurchase Agreement with Fixed Income Corporation, dated 1/31/12,
repurchase price $27,005,877, collateralized by $24,400,000,
U.S. Treasury Notes, 4.000%, due 2/15/15, value $27,549,381		           0.010 %   2/01/12         $ 27,005,869    
      Total Short-Term Investments (cost $27,005,869)                             27,005,869    
      Total Investments (cost $723,764,786) – 140.0%                             729,575,384    
      Borrowings – (38.6)% (5), (6)                             (201,000,000 )  
      Other Assets Less Liabilities – (1.4)% (7)                             (7,355,688 )  
      Net Assets Applicable to Common Shares – 100%                           $ 521,219,696    

 

Investments in Derivatives at January 31, 2012

Interest Rates Swaps outstanding:

Counterparty   Notional
Amount		   Fund
Pay/Receive
Floating Rate		   Floating Rate Index   Fixed Rate*   Fixed Rate
Payment
Frequency		   Termination
Date		   Unrealized
Appreciation
(Depreciation)		  
JPMorgan   $ 38,718,750     Receive   1-Month USD-LIBOR     0.360 %   Monthly   3/21/12   $ (2,384 )  
JPMorgan     38,718,750     Receive   1-Month USD-LIBOR     1.193     Monthly   3/21/14     (715,083 )  
Morgan Stanley     38,718,750     Receive   1-Month USD-LIBOR     2.064     Monthly   3/21/16     (2,222,141 )  
                            $ (2,939,608 )  

 

*  Annualized.

 

    For Fund portfolio compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.

  (1)  All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted.

  (2)  Ratings: Using the highest of Standard & Poor's Group ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch") rating. Ratings below BBB by Standard & Poor's, Baa by Moody's or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.

  (3)  Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.

  (4)  Non-income producing; issuer has not declared a dividend within the past twelve months.

  (5)  Borrowings as a percentage of Total Investments is 27.6%.

  (6)  The Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of January 31, 2012, investments with a value of $586,465,520 have been pledged as collateral for Borrowings.

  (7)  Other Assets Less Liabilities includes the net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives at January 31, 2012.

  N/R  Not rated.

  144A  Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers.

  CORTS  Corporate Backed Trust Securities.

  PPLUS  PreferredPlus Trust.

  WI/DD  Purchased on a when-issued or delayed delivery basis.

  USD-LIBOR  United States Dollar–London Inter-Bank Offered Rate.

    See accompanying notes to financial statements.

Nuveen Investments
18



JPS

Nuveen Quality Preferred Income Fund 2

Portfolio of INVESTMENTS

  January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    $25 Par (or similar) Preferred Securities – 66.9% (48.2% of Total Investments)  
    Capital Markets – 6.3%  
  381,200     Ameriprise Financial, Inc.           7.750 %         A   $ 10,780,336    
  11,000     Charles Schwab Corporation           7.000 %         BBB+     11,293,920    
  6,400     Credit Suisse           7.900 %         A3     168,064    
  91,430     Deutsche Bank Capital Funding Trust I           7.350 %         BBB     2,188,834    
  1,281,735     Deutsche Bank Capital Funding Trust II           6.550 %         BBB     28,582,691    
  13,800     Deutsche Bank Capital Funding Trust IX           6.625 %         BBB     310,500    
  40,000     Deutsche Bank Capital Funding Trust V           8.050 %         BBB     1,010,400    
  91,791     Deutsche Bank Capital Funding Trust VIII           6.375 %         BBB     1,955,148    
  256,400     Deutsche Bank Contingent Capital Trust III           7.600 %         BBB     6,345,900    
  70,214     Goldman Sachs Group Inc., Series GSC-3 (PPLUS)           6.000 %         A3     1,605,092    
  5,200     Goldman Sachs Group Inc., Series GSC-4 Class A (PPLUS)           6.000 %         A3     119,392    
  1,040     Goldman Sachs Group Inc., Series GSG-1 (PPLUS)           6.000 %         A1     25,002    
  2,290     Morgan Stanley Capital Trust III           6.250 %         Baa2     53,838    
  2,800     Morgan Stanley Capital Trust V           5.750 %         Baa2     64,960    
    Total Capital Markets                             64,504,077    
    Commercial Banks – 6.6%  
  2,200     ABN AMRO North America Capital Funding, 144A           6.968 %         BB+     1,315,188    
  181,000     Banco Santander Finance           10.500 %         BBB+     4,937,680    
  150,000     Barclays Bank PLC           8.125 %         BBB     3,772,500    
  172,828     BB&T Capital Trust VI           9.600 %         Baa1     4,588,583    
  66,429     BB&T Capital Trust VII           8.100 %         Baa1     1,738,447    
  1,933,500     BPCE SA           13.000 %         BBB-     1,816,825    
  12,630     Fifth Third Capital Trust V           7.250 %         Baa3     322,318    
  2,917     Fifth Third Capital Trust VI           7.250 %         Baa3     74,442    
  146,500     First Naigara Finance Group           8.625 %         BB+     3,945,245    
  10,500,000     HSBC Bank PLC           1.000 %         A-     4,725,000    
  404,800     HSBC Holdings PLC, (4)           8.000 %         A3     10,937,696    
  102,700     HSBC Holdings PLC           6.200 %         A3     2,551,068    
  6,166     KeyCorp Capital Trust X           8.000 %         BBB-     158,096    
  5,600,000     National Australia Bank           8.000 %         Baa1     6,022,800    
  20,000     PNC Financial Services Inc.           6.750 %         BBB     20,693,400    
    Total Commercial Banks                             67,599,288    
    Consumer Finance – 0.0%  
  20,100     HSBC USA Inc., Series H           6.500 %         BBB+     493,857    
    Diversified Financial Services – 4.5%  
  139,900     Citigroup Capital Trust XI           6.000 %         Baa3     3,275,059    
  94,800     Citigroup Capital Trust XII           8.500 %         Baa3     2,442,996    
  271,589     Citigroup Capital XIII           7.875 %         Ba1     7,316,608    
  40,000     Citigroup Capital XVI           6.450 %         Baa3     957,600    
  768,094     ING Groep N.V           7.200 %         BBB     16,698,364    
  731,274     ING Groep N.V           7.050 %         BBB     15,634,638    
    Total Diversified Financial Services                             46,325,265    
    Diversified Telecommunication Services – 0.4%  
  163,080     Qwest Corporation           7.500 %         BBB-     4,318,358    
    Electric Utilities – 1.3%  
  135,400     Alabama Power Company           6.450 %         BBB+     3,702,351    
  59,650     Entergy Louisiana LLC           5.875 %         A-     1,632,024    
  69,300     Entergy Texas Inc.           7.875 %         BBB+     2,004,156    
  214,808     PPL Capital Funding, Inc.           6.850 %         BBB-     5,670,931    
    Total Electric Utilities                             13,009,462    

 

Nuveen Investments
19


JPS

Nuveen Quality Preferred Income Fund 2 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    Food Products – 0.5%  
  53,400     Dairy Farmers of America Inc., 144A           7.875 %         BBB-   $ 5,073,000    
    Insurance – 18.4%  
  1,717,889     Aegon N.V           6.375 %         Baa1     37,123,581    
  617,913     Allianz SE           8.375 %         A+     16,239,557    
  906,906     Arch Capital Group Limited           8.000 %         BBB     23,316,553    
  6,500,000     Dai-Ichi Mutual Life, 144A           7.250 %         A3     6,786,124    
  401,957     Delphi Financial Group, Inc.           7.376 %         BB+     9,920,299    
  310,216     EverestRe Capital Trust II           6.200 %         Baa1     7,957,040    
  450,263     Markel Corporation           7.500 %         BBB     11,513,225    
  579,002     PartnerRe Limited, Series C           6.750 %         BBB+     14,747,181    
  106,700     PLC Capital Trust III           7.500 %         BBB     2,713,381    
  442,669     PLC Capital Trust IV           7.250 %         BBB     11,172,966    
  11,153     Protective Life Corporation           7.250 %         BBB     281,390    
  200,842     Prudential Financial Inc.           9.000 %         BBB+     5,583,408    
  317,875     Prudential Financial Inc.           6.750 %         A-     8,159,851    
  4,000,000     Reinsurance Group of America Inc.           6.750 %         BBB-     3,602,820    
  410,974     RenaissanceRe Holdings Limited, Series D           6.600 %         BBB+     10,459,288    
  716,250     W. R. Berkley Corporation, Capital Trust II           6.750 %         BBB-     18,142,613    
    Total Insurance                             187,719,277    
    Media – 4.6%  
  746,750     CBS Corporation           6.750 %         BBB     19,012,255    
  952,905     Comcast Corporation           7.000 %         BBB+     24,241,903    
  141,449     Comcast Corporation           6.625 %         BBB+     3,594,219    
    Total Media                             46,848,377    
    Multi-Utilities – 4.0%  
  543,823     Dominion Resources Inc.           8.375 %         BBB     15,879,632    
  148,032     Scana Corporation           7.700 %         BBB-     4,281,085    
  766,977     Xcel Energy Inc.           7.600 %         BBB     20,861,774    
    Total Multi-Utilities                             41,022,491    
    Oil, Gas & Consumable Fuels – 2.0%  
  791,610     Nexen Inc.           7.350 %         BB+     20,138,558    
    Pharmaceuticals – 0.0%  
  1,651     Bristol Myers Squibb Company (CORTS)           6.250 %         A+     42,282    
    Real Estate/Mortgage – 16.4%  
  41,286     CommomWealth REIT           7.125 %         Baa3     1,037,104    
  15,000     Digital Realty Trust Inc.           7.000 %         Baa3     385,050    
  162,000     Duke Realty Corporation, Series L           6.600 %         Baa3     4,061,340    
  8,710     Harris Preferred Capital Corporation, Series A           7.375 %         BBB+     221,931    
  321,594     Hospitality Properties Trust, (4)           7.125 %         BB     8,023,770    
  65,646     Kimco Realty Corporation, Series F           6.650 %         Baa2     1,647,715    
  909,886     Kimco Realty Corporation, Series G           7.750 %         Baa2     23,766,222    
  62,865     Kimco Realty Corporation, Series H           6.900 %         Baa2     1,745,132    
  82,301     Prologis Inc.           8.540 %         Baa3     4,580,569    
  6,524     Prologis Inc.           6.750 %         BB     160,947    
  87,050     Prologis Inc.           6.750 %         BB     2,149,265    
  16,607     Prologis Inc.           6.500 %         Baa2     407,536    
  40,581     PS Business Parks, Inc.           7.375 %         BBB-     1,022,641    
  102,852     PS Business Parks, Inc., (4)           6.450 %         BBB-     2,580,948    
  67,600     Public Storage, Inc., (4)           6.850 %         BBB+     1,928,716    
  104,776     Public Storage, Inc.           6.750 %         BBB+     2,640,355    
  20,000     Public Storage, Inc.           6.625 %         BBB+     507,000    
  9,471     Public Storage, Inc.           6.600 %         BBB+     240,658    
  6,400     Public Storage, Inc.           6.500 %         BBB+     175,616    
  196,229     Public Storage, Inc., (4)           5.900 %         A-     4,925,348    
  436,984     Realty Income Corporation           6.750 %         Baa2     11,042,586    
  197,452     Regency Centers Corporation           7.250 %         Baa3     5,068,593    

 

Nuveen Investments
20


Shares   Description (1)     Coupon     Ratings (2)   Value  
    Real Estate/Mortgage (continued)  
  1,079,521     Vornado Realty LP           7.875 %         BBB   $ 30,226,588    
  1,764,827     Wachovia Preferred Funding Corporation           7.250 %         BBB+     45,973,743    
  155,931     Weingarten Realty Trust           8.100 %         BBB     3,775,090    
  148,974     Weingarten Realty Trust           6.950 %         Baa3     3,772,022    
  230,192     Weingarten Realty Trust           6.500 %         Baa3     5,823,858    
    Total Real Estate/Mortgage                             167,890,343    
    U.S. Agency – 1.7%  
  235,100     Cobank Agricultural Credit Bank, 144A           7.000 %         N/R     10,689,715    
  82,000     Cobank Agricultural Credit Bank           11.000 %         A     4,230,692    
  42,800     Cobank Agricultural Credit Bank           11.000 %         A     2,283,115    
    Total U.S. Agency                             17,203,522    
    Wireless Telecommunication Services – 0.2%  
  9,050     Telephone and Data Systems Inc.           7.000 %         Baa2     241,180    
  70,501     Telephone and Data Systems Inc.           6.875 %         Baa2     1,853,471    
    Total Wireless Telecommunication Services                             2,094,651    
    Total $25 Par (or similar) Preferred Securities (cost $667,771,999)                             684,282,808    
Principal
Amount (000)		  
Description (1)		  
 
Coupon		  
Maturity		  
Ratings (2)		  
Value		  
    Corporate Bonds – 7.2% (5.2% of Total Investments)  
    Capital Markets – 1.0%  
$ 600     Man Group PLC           5.000 %   8/09/17   Baa3   $ 502,838    
  14,686     State Street Capital Trust IV, (3)           1.560 %   6/15/77   A3     9,917,265    
  15,286     Total Capital Markets                             10,420,103    
    Commercial Banks – 1.8%  
  4,200     BNP Paribas, 144A           5.186 %   6/29/15   BBB+     3,024,000    
  1,000     Den Norske Bank           0.625 %   2/18/35   Baa1     530,000    
  1,000     Den Norske Bank           0.650 %   2/24/37   Baa1     530,000    
  5,000     Groupe BCPE           3.800 %   12/30/49   BBB-     2,170,750    
  6,500     LBG Capital I PLC, 144A           7.875 %   11/01/20   BB     5,395,000    
  7,500     Lloyds Banking Group LBG Capital 1, 144A           8.000 %   6/15/20   BB-     5,925,000    
  650     Swedbank ForengingsSparbanken AB, 144A           7.500 %   9/11/12   Baa3     649,637    
  25,850     Total Commercial Banks                             18,224,387    
    Diversified Financial Services – 0.2%  
  2,600     Fortis Hybrid Financing           8.250 %   8/27/49   BBB     1,820,000    
    Electric Utilities – 1.1%  
  8,000     FPL Group Capital Inc.           6.650 %   6/15/17   BBB     8,100,000    
  2,900     WPS Resource Corporation           6.110 %   12/01/16   BBB     2,845,625    
  10,900     Total Electric Utilities                             10,945,625    
    Insurance – 2.9%  
  2,000     AXA S.A.           3.675 %   8/06/49   A3     999,660    
  5,200     Prudential PLC.           11.750 %   12/23/49   A-     5,999,500    
  26,420     QBE Capital Funding Trust II, 144A           7.250 %   5/24/41   BBB+     23,363,814    
  33,620     Total Insurance                             30,362,974    
    Multi-Utilities – 0.2%  
  2,000     Wisconsin Energy Corporation           6.250 %   5/15/67   Baa1     2,045,000    
$ 90,256     Total Corporate Bonds (cost $79,055,928)                             73,818,089    

 

Nuveen Investments
21


JPS

Nuveen Quality Preferred Income Fund 2 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Capital Preferred Securities – 55.4% (39.9% of Total Investments)  
    Capital Markets – 1.9%  
  800     BNY Institutional Capital, 144A           7.780 %   12/01/26   A1   $ 814,000    
  8,200     Credit Suisse Guernsey           1.147 %   5/15/17   A3     5,243,408    
  8,500     Credit Suisse thru Claudius Limited           8.250 %   6/27/49   A3     8,772,850    
  4,200     Dresdner Funding Trust I, 144A           8.151 %   6/30/31   Ba1     3,129,000    
  1,900     Goldman Sachs Capital II           5.793 %   6/01/12   Baa2     1,296,750    
    Total Capital Markets                             19,256,008    
    Commercial Banks – 17.6%  
  5,500     AB Svensk Exportkredit, (4)           6.375 %   10/27/49   Aa3     5,178,619    
  6,200     ABN AMRO North America Holding Capital, 144A           6.523 %   12/31/49   BB+     4,650,000    
  12,974     Banco Santander Finance           10.500 %   9/29/49   BBB+     13,234,518    
  2,400     Barclays Bank PLC, Regulation S, 144A           6.860 %   6/15/32   BBB     2,088,000    
  5,000     Barclays Bank PLC           6.278 %   12/15/34   BBB     4,054,690    
  9,153     BB&T Capital Trust IV           6.820 %   6/12/77   Baa1     9,244,530    
  1,500     First Empire Capital Trust I           8.234 %   2/01/27   BBB     1,499,654    
  17,095     First Union Capital Trust II, Series A           7.950 %   11/15/29   BBB+     17,996,163    
  6,800     Fulton Capital Trust I           6.290 %   2/01/36   Baa3     5,610,000    
  5,500     HSBC Bank PLC           0.600 %   6/11/49   A-     2,475,000    
  4,650     HSBC Capital Funding LP, Debt           10.176 %   6/30/50   A3     5,859,000    
  8,352     HSBC Financial Capital Trust IX           5.911 %   11/30/35   BBB+     7,224,480    
  6,000     KeyCorp Capital III           7.750 %   7/15/29   BBB-     6,112,602    
  11,900     Nordea Bank AB           8.375 %   3/25/15   BBB+     12,506,900    
  8,000     North Fork Capital Trust II           8.000 %   12/15/27   Baa3     8,060,000    
  10,530     Rabobank Nederland, 144A           11.000 %   6/30/19   A     13,030,875    
  8,000     Reliance Capital Trust I, Series B           8.170 %   5/01/28   N/R     7,989,288    
  800     Societe Generale, 144A           1.333 %   12/31/49   BBB-     390,544    
  1,300     Societe Generale, 144A           5.922 %   4/05/57   BBB-     962,967    
  24,144     Societe Generale           8.750 %   10/07/49   BBB-     19,918,800    
  3,522     Sovereign Capital Trust VI           7.908 %   6/13/36   BBB+     3,345,900    
  5,000     Sparebanken Rogaland, Notes, 144A           6.443 %   5/01/49   Ba1     4,822,935    
  6,310     Standard Chartered PLC, 144A           6.409 %   1/30/17   BBB+     5,486,242    
  650     Standard Chartered PLC, 144A           7.014 %   7/30/37   BBB+     627,895    
  — (5)   Union Planters Preferred Fund, 144A           7.750 %   7/15/53   B+     17,644,500    
    Total Commercial Banks                             180,014,102    
    Consumer Finance – 1.2%  
  3,900     American Express Company           6.800 %   9/01/66   Baa2     3,939,000    
  7,019     Capital One Capital IV Corporation           6.745 %   2/05/82   Baa3     7,062,869    
  1,180     Capital One Capital VI           8.875 %   5/15/40   Baa3     1,241,275    
    Total Consumer Finance                             12,243,144    
    Diversified Financial Services – 5.8%  
  3,400     Bank One Capital III           8.750 %   9/01/30   A2     4,612,243    
  600     BankAmerica Capital II, Series 2           8.000 %   12/15/26   BB+     588,000    
  14,420     BankAmerica Institutional Capital Trust, Series B, 144A           7.700 %   12/31/26   BB+     13,699,000    
  1,000     BankAmerica Institutional Trust, 144A           8.070 %   12/31/26   BB+     980,000    
  5,400     Citigroup Capital III           7.625 %   12/01/36   Baa3     5,390,177    
  3,000     CitiGroup Capital XXI           8.300 %   12/21/77   Baa3     3,053,400    
  12,811     Countrywide Capital Trust III, Series B           8.050 %   6/15/27   BB+     12,170,450    
  3,000     JPMorgan Chase Capital Trust XVIII           6.950 %   8/17/36   A2     3,033,132    
  1,775     JPMorgan Chase Capital Trust XX Series T           6.550 %   9/29/36   A2     1,785,135    
  8,000     JPMorgan Chase Capital Trust XXVII           7.000 %   11/01/39   A2     8,100,800    
  1,800     JPMorgan Chase Capital XXV           6.800 %   10/01/37   A2     1,815,955    
  17,319     JPMorgan Chase Capital Trust XI           5.875 %   6/15/33   A2     441,635    
  3,200     MBNA Corporation, Capital Trust           8.278 %   12/01/26   BB+     3,168,000    
  300     NB Capital Trust IV           8.250 %   4/15/27   BB+     296,250    
    Total Diversified Financial Services                             59,134,177    

 

Nuveen Investments
22


Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Electric Utilities – 0.9%  
  1,700     FPL Group Capital Inc.           6.350 %   10/01/16   BBB   $ 1,717,000    
  7,700     PPL Capital Funding, Inc.           6.700 %   3/30/17   BB+     7,603,750    
    Total Electric Utilities                             9,320,750    
    Insurance – 22.4%  
  8,714     Allstate Corporation           6.125 %   5/15/67   Baa1     8,218,609    
  2,150     AXA SA, 144A           6.463 %   12/14/18   Baa1     1,580,250    
  9,450     AXA SA, 144A           6.379 %   12/14/36   Baa1     7,063,875    
  11,350     AXA           8.600 %   12/15/30   A3     11,669,854    
  117     Axis Capital Holdings Limited           7.500 %   12/01/15   BBB     11,141,209    
  12,659     Catlin Insurance Company Limited           7.249 %   1/19/17   BBB+     11,013,330    
  23,200     Glen Meadows Pass Through Trust           6.505 %   2/15/17   BB+     17,400,000    
  6,600     Great West Life and Annuity Insurance Company, 144A           7.153 %   5/16/16   A-     6,534,000    
  10,481     Liberty Mutual Group, 144A           7.800 %   3/15/37   Baa3     9,799,735    
  2,500     Lincoln National Corporation           6.050 %   4/20/17   BBB     2,225,000    
  5,946     Lincoln National Corporation           7.000 %   5/17/66   BBB     5,618,970    
  16,600     MetLife Capital Trust IV, 144A           7.875 %   12/15/67   BBB     17,720,500    
  1,400     MetLife Capital Trust X, 144A           9.250 %   4/08/68   BBB     1,655,500    
  21,514     National Financial Services Inc.           6.750 %   5/15/37   Baa2     18,992,559    
  1,200     Nationwide Financial Services Capital Trust           7.899 %   3/01/37   Baa2     1,169,150    
  14,200     Oil Insurance Limited, 144A           7.558 %   12/30/56   Baa1     12,777,160    
  15,600     Old Mutual Capital Funding, Notes           8.000 %   6/22/53   Baa3     15,366,000    
  6,300     Progressive Corporation, (3)           6.700 %   6/15/67   A2     6,457,500    
  5,600     Prudential Financial Inc.           8.875 %   6/15/18   BBB+     6,692,000    
  8,250     Prudential PLC           6.500 %   6/29/49   A-     7,342,500    
  10,400     Swiss Re Capital I           6.854 %   5/25/16   A     9,354,457    
  2,600     White Mountains Re Group Limited           7.506 %   6/30/17   BB+     2,423,616    
  29,650     XL Capital Ltd           6.500 %   10/15/57   BBB-     24,720,688    
  3,600     ZFS Finance USA Trust II 144A           6.450 %   12/15/65   A     3,384,000    
  9,357     ZFS Finance USA Trust V           6.500 %   5/09/67   A     8,631,833    
    Total Insurance                             228,952,295    
    Multi-Utilities – 0.7%  
  6,400     Dominion Resources Inc.           7.500 %   6/30/16   BBB     6,720,000    
    Oil, Gas & Consumable Fuels – 0.2%  
  1,625     TranCanada Pipelines Limited           6.350 %   5/15/17   Baa1     1,642,701    
    Road & Rail – 0.6%  
  6,400     Burlington Northern Santa Fe Funding Trust I           6.613 %   12/15/55   BBB     6,592,000    
    Thrifts & Mortgage Finance – 0.1%  
  500     Onbank Capital Trust I           9.250 %   2/01/27   BBB     511,830    
    U.S. Agency – 0.5%  
  2,800     AgFirst Farm Credit Bank           7.300 %   12/15/53   A     2,854,376    
  2     Farm Credit Bank of Texas           10.000 %   12/15/60   A3     1,965,094    
    Total U.S. Agency                             4,819,470    
    Wireless Telecommunication Services – 3.5%  
  31     Centaur Funding Corporation, Series B           9.080 %   4/21/20   BBB     35,693,357    
    Total Capital Preferred Securities (cost $570,118,606)                             564,899,834    
Shares   Description (1)     Coupon     Ratings (2)   Value  
    Convertible Preferred Securities – 0.3% (0.2% of Total Investments)  
    Commerical Banks – 0.3%  
  3,100,000     Credit Suisse AG           7.875 %   12/12/49   BBB   $ 3,146,500    
    Total Convertible Preferred Securities (cost $3,217,496)                             3,146,500    

 

Nuveen Investments
23


JPS

Nuveen Quality Preferred Income Fund 2 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Shares   Description (1)           Value  
    Investment Companies – 3.6% (2.6% of Total Investments)  
  838,654     BlackRock Credit Allocation Income Trust II                           $ 8,722,002    
  840,122     Flaherty and Crumrine/Claymore Preferred Securities Income Fund Inc.                             15,265,017    
  728,065     John Hancock Preferred Income Fund III                             13,185,256    
    Total Investment Companies (cost $46,842,774)                             37,172,275    
Principal
Amount (000)		   Description (1)     Coupon   Maturity     Value  
    Short-Term Investments – 5.4% (3.9% of Total Investments)  
$ 55,274     Repurchase Agreement with Fixed Income Corporation, dated 1/31/12,
repurchase price $55,274,258, collateralized by $49,935,000,
U.S. Treasury Notes, 4.000%, due 2/15/15, value $56,380,260		           0.010 %   2/01/12         $ 55,274,243    
    Total Short-Term Investments (cost $55,274,243)                             55,274,243    
    Total Investments (cost $1,422,281,046) – 138.8%                             1,418,593,749    
    Borrowings – (38.5)% (6), (7)                             (394,000,000 )  
    Other Assets Less Liabilities – (0.3)% (8)                             (2,354,721 )  
    Net Assets Applicable to Common Shares – 100%                           $ 1,022,239,028    

 

Investments in Derivatives at January 31, 2012

Interest Rates Swaps outstanding:

Counterparty   Notional
Amount		   Fund
Pay/Receive
Floating Rate		   Floating Rate Index   Fixed Rate*   Fixed Rate
Payment
Frequency		   Termination
Date		   Unrealized
Appreciation
(Depreciation)		  
JPMorgan   $ 77,200,000     Receive   1-Month USD-LIBOR     0.360 %   Monthly   3/21/12   $ (4,754 )  
JPMorgan     77,200,000     Receive   1-Month USD-LIBOR     1.193     Monthly   3/21/14     (1,425,778 )  
Morgan Stanley     77,200,000     Receive   1-Month USD-LIBOR     2.064     Monthly   3/21/16     (4,430,652 )  
                            $ (5,861,184 )  

 

*  Annualized

 

    For Fund portfolio compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.

  (1)  All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted.

  (2)  Ratings: Using the highest of Standard & Poor's Group ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch") rating. Ratings below BBB by Standard & Poor's, Baa by Moody's or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.

  (3)  Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.

  (4)  Non-income producing; issuer has not declared a dividend within the past twelve months.

  (5)  Principal Amount (000) rounds to less than $1000.

  (6)  Borrowings as a percentage of Total Investments is 27.8%.

  (7)  The Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of January 31, 2012, investments with a value of $1,164,975,422 have been pledged as collateral for Borrowings.

  (8)  Other Assets Less Liabilities includes the net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives at January 31, 2012.

  N/R  Not rated.

  144A  Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers.

  CORTS  Corporate Backed Trust Securities.

  PPLUS  PreferredPlus Trust.

  USD-LIBOR  United States Dollar–London Inter-Bank Offered Rate.

    See accompanying notes to financial statements.

Nuveen Investments
24



JHP

Nuveen Quality Preferred Income Fund 3

Portfolio of INVESTMENTS

  January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    $25 Par (or similar) Preferred Securities – 64.1% (46.0% of Total Investments)  
    Capital Markets – 8.5%  
  60,600     Ameriprise Financial, Inc.           7.750 %         A   $ 1,713,768    
  2,100     Charles Schwab Corporation           7.000 %         BBB+     2,156,112    
  135,400     Credit Suisse           7.900 %         A3     3,555,604    
  388,759     Deutsche Bank Capital Funding Trust II           6.550 %         BBB     8,669,326    
  2,100     Deutsche Bank Contingent Capital Trust III           7.600 %         BBB     51,975    
  12,200     Goldman Sachs Group Inc., Series GSC-3 (PPLUS)           6.000 %         A3     278,892    
  7,600     Merrill Lynch Capital Trust I           6.450 %         BB+     167,200    
    Total Capital Markets                             16,592,877    
    Commercial Banks – 5.7%  
  400     ABN AMRO North America Capital Funding, 144A           6.968 %         BB+     239,125    
  70,158     Banco Santander Finance           10.500 %         BBB+     1,913,910    
  31,200     BB&T Capital Trust VI,           9.600 %         Baa1     828,360    
  21,200     BB&T Capital Trust VII           8.100 %         Baa1     554,804    
  300,000     BPCE SA           13.000 %         BBB-     281,897    
  1,500,000     HSBC Bank PLC           1.000 %         A-     675,000    
  25,000     HSBC Holdings PLC, (4)           8.000 %         A3     675,500    
  4,500     HSBC USA Inc., Series F           2.858 %         BBB+     199,665    
  2,700,000     National Australia Bank           8.000 %         Baa1     2,903,850    
  2,000     PNC Financial Services Inc.           6.750 %         BBB     2,069,340    
  52,500     Royal Bank of Scotland Group PLC, Series L           5.750 %         BB     878,325    
    Total Commercial Banks                             11,219,776    
    Diversified Financial Services – 6.0%  
  35,700     BAC Capital Trust X           6.250 %         BB+     794,325    
  30,100     BAC Capital Trust XII           6.875 %         BB+     701,631    
  35,000     Citigroup Capital Trust XI           6.000 %         Baa3     819,350    
  54,185     Citigroup Capital XIII           7.875 %         Ba1     1,459,744    
  24,300     Citigroup Capital XVI           6.450 %         Baa3     581,742    
  59,100     Countrywide Capital Trust IV           6.750 %         BB+     1,355,754    
  239,500     ING Groep N.V           7.050 %         BBB     5,120,510    
  10,000     ING Groep N.V           6.125 %         BBB     187,700    
  3,300     Merrill Lynch Capital Trust II           6.450 %         BB+     72,501    
  13,420     Merrill Lynch Capital Trust III           7.375 %         BB+     327,985    
  12,480     National Rural Utilities Cooperative Finance Corporation           5.950 %         A3     316,867    
    Total Diversified Financial Services                             11,738,109    
    Diversified Telecommunication Services – 0.4%  
  26,800     Qwest Corporation           7.500 %         BBB-     709,664    
  4,245     Qwest Corporation           7.375 %         BBB-     112,195    
    Total Diversified Telecommunication Services                             821,859    
    Electric Utilities – 1.4%  
  10,000     Alabama Power Company           6.450 %         BBB+     273,438    
  10,000     Entergy Arkansas Inc.           5.750 %         A-     271,800    
  78,100     Entergy Texas Inc.           7.875 %         BBB+     2,258,652    
    Total Electric Utilities                             2,803,890    
    Food Products – 0.5%  
  10,400     Dairy Farmers of America Inc., 144A           7.875 %         BBB-     988,000    

 

Nuveen Investments
25


JHP

Nuveen Quality Preferred Income Fund 3 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Shares   Description (1)     Coupon     Ratings (2)   Value  
    Insurance – 16.0%  
  319,390     Aegon N.V           6.375 %         Baa1   $ 6,902,018    
  75,054     Allianz SE           8.375 %         A+     1,972,517    
  167,330     Arch Capital Group Limited           8.000 %         BBB     4,302,054    
  1,250,000     Dai-Ichi Mutual Life, 144A           7.250 %         A3     1,305,024    
  90,100     Delphi Financial Group, Inc.           7.376 %         BB+     2,223,668    
  103,767     EverestRe Capital Trust II           6.200 %         Baa1     2,661,624    
  9,900     PartnerRe Limited, Series C           7.250 %         BBB+     266,013    
  167,107     PartnerRe Limited, Series E           6.750 %         BBB+     4,256,215    
  55,878     PLC Capital Trust III           7.500 %         BBB     1,420,978    
  20,130     PLC Capital Trust IV           7.250 %         BBB     508,081    
  3,534     PLC Capital Trust V           6.125 %         BBB     87,608    
  141,063     Protective Life Corporation           7.250 %         BBB     3,559,019    
  63,344     Prudential PLC           6.750 %         A-     1,626,040    
  4,441     W. R. Berkley Corporation, Capital Trust II           6.750 %         BBB-     112,491    
    Total Insurance                             31,203,350    
    Media – 0.8%  
  58,700     CBS Corporation           6.750 %         BBB     1,494,502    
    Multi-Utilities – 2.7%  
  96,366     Dominion Resources Inc.           8.375 %         BBB     2,813,887    
  88,100     Xcel Energy Inc.           7.600 %         BBB     2,396,320    
    Total Multi-Utilities                             5,210,207    
    Oil, Gas & Consumable Fuels – 2.4%  
  180,508     Nexen Inc.           7.350 %         BB+     4,592,124    
    Pharmaceuticals – 0.1%  
  6,500     Bristol Myers Squibb Company (CORTS)           6.250 %         A+     166,465    
    Real Estate/Mortgage – 16.0%  
  8,000     CommomWealth REIT           7.250 %         Baa3     199,360    
  41,916     CommomWealth REIT           7.125 %         Baa3     1,052,930    
  54,287     Hospitality Properties Trust, (4)           7.125 %         BB     1,354,461    
  21,216     Kimco Realty Corporation, Series F           6.650 %         Baa2     532,522    
  148,636     Kimco Realty Corporation, Series G           7.750 %         Baa2     3,882,372    
  58,700     Realty Income Corporation, WI/DD           6.625 %         Baa2     1,464,318    
  11,100     Prologis Inc., Series G           6.750 %         BB     274,059    
  10,000     PS Business Parks, Inc.           6.875 %         BBB-     258,500    
  37,300     PS Business Parks, Inc.           6.700 %         BBB-     936,976    
  7,621     Public Storage, Inc., Series X           6.450 %         BBB+     192,888    
  77,300     Public Storage, Inc., Series Y, (4)           6.850 %         BBB+     2,205,469    
  96,525     Public Storage, Inc.           6.750 %         Baa1     2,431,465    
  17,906     Realty Income Corporation           6.750 %         Baa2     452,485    
  67,709     Regency Centers Corporation           7.250 %         Baa3     1,738,090    
  108,431     Regency Centers Corporation           6.700 %         Baa3     2,716,197    
  155,320     Vornado Realty LP           7.875 %         BBB     4,348,960    
  80,367     Wachovia Preferred Funding Corporation, (3)           7.250 %         BBB+     2,093,560    
  208,831     Weingarten Realty Trust           8.100 %         BBB     5,055,799    
    Total Real Estate/Mortgage                             31,190,411    
    U.S. Agency – 2.0%  
  44,500     Cobank Agricultural Credit Bank, 144A           7.000 %         N/R     2,023,362    
  16,000     Cobank Agricultural Credit Bank           11.000 %         A     825,501    
  20,200     Cobank Agricultural Credit Bank           11.000 %         A     1,077,545    
    Total U.S. Agency                             3,926,408    

 

Nuveen Investments
26


Shares   Description (1)     Coupon     Ratings (2)   Value  
    Wireless Telecommunication Services – 1.6%  
  70,400     Telephone and Data Systems Inc.           7.000 %         Baa2   $ 1,876,160    
  31,000     Telephone and Data Systems Inc.           6.875 %         Baa2     814,990    
  19,791     United States Cellular Corporation           6.950 %         Baa2     525,053    
    Total Wireless Telecommunication Services                             3,216,203    
    Total $25 Par (or similar) Preferred Securities (cost $120,719,308)                             125,164,181    
Principal
Amount (000)		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Corporate Bonds – 5.4% (3.9% of Total Investments)  
    Capital Markets – 0.7%  
$ 200     Man Group PLC           5.000 %   8/09/17   Baa3   $ 167,613    
  1,795     State Street Capital Trust IV           1.560 %   6/15/77   A3     1,212,140    
  1,995     Total Capital Markets                             1,379,753    
    Commercial Banks – 1.2%  
  800     BNP Paribas, 144A           5.186 %   6/29/15   BBB+     576,000    
  250     Den Norske Bank           0.625 %   2/18/35   Baa1     132,500    
  250     Den Norske Bank           0.650 %   2/24/37   Baa1     132,500    
  1,000     Groupe BCPE           3.800 %   12/30/49   BBB-     434,150    
  650     LBG Capital I PLC, 144A           7.875 %   11/01/20   BB     539,500    
  700     Lloyds Banking Group LBG Capital 1, 144A           8.000 %   6/15/20   BB-     553,000    
  3,650     Total Commercial Banks                             2,367,650    
    Diversified Financial Services – 0.1%  
  300     Fortis Hybrid Financing           8.250 %   8/27/49   BBB     210,000    
    Electric Utilities – 0.2%  
  450     FPL Group Capital Inc.           6.650 %   6/15/17   BBB     455,625    
    Insurance – 2.8%  
  6,100     QBE Capital Funding Trust II, 144A           7.250 %   5/24/41   BBB+     5,394,370    
    Multi-Utilities – 0.4%  
  900     Dominion Resources Inc.           2.881 %   9/30/66   BBB     779,388    
$ 13,395     Total Corporate Bonds (cost $11,581,846)                             10,586,786    
Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Capital Preferred Securities – 60.7% (43.5% of Total Investments)  
    Capital Markets – 1.3%  
$ 1,200     BNY Institutional Capital, 144A, (3)           7.780 %   12/01/26   A1   $ 1,221,000    
  400     Credit Suisse Guernsey           1.147 %   5/15/17   A3     255,776    
  900     Deutsche Bank Capital Funding Trust I           3.371 %   12/29/49   BBB     553,500    
  800     Goldman Sachs Capital II           5.793 %   6/01/12   Baa2     546,000    
    Total Capital Markets                             2,576,276    
    Commercial Banks – 18.9%  
  2,200     Abbey National Capital Trust I           8.963 %   6/30/30   BBB+     1,958,000    
  1,000     ABN AMRO North America Holding Capital, 144A           6.523 %   12/31/49   BB+     750,000    
  650     Banco Santander Finance           10.500 %   9/29/49   BBB+     663,052    
  2,300     Barclays Bank PLC, 144A           7.434 %   12/15/17   BBB     2,254,000    
  500     Barclays Bank PLC, Regulation S, 144A           6.860 %   6/15/32   BBB     435,000    
  1,000     Barclays Bank PLC           6.278 %   12/15/34   BBB     810,938    

 

Nuveen Investments
27


JHP

Nuveen Quality Preferred Income Fund 3 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
  2,000     BB&T Capital Trust IV           6.820 %   6/12/77   Baa1   $ 2,020,000    
  1,000     First Empire Capital Trust I           8.234 %   2/01/27   BBB     999,769    
  700     First Empire Capital Trust II           8.277 %   6/01/27   BBB     723,722    
  8,485     First Union Capital Trust II, Series A           7.950 %   11/15/29   BBB+     8,932,287    
  500     Fulton Capital Trust I           6.290 %   2/01/36   Baa3     412,500    
  2,700     HBOS Capital Funding LP, 144A           6.071 %   6/30/14   BB     1,944,000    
  1,500     HSBC Bank PLC           0.600 %   6/11/49   A-     675,000    
  1,500     HSBC Financial Capital Trust IX           5.911 %   11/30/35   BBB+     1,297,500    
  1,900     Nordea Bank AB           8.375 %   3/25/15   BBB+     1,996,900    
  900     North Fork Capital Trust II           8.000 %   12/15/27   Baa3     906,750    
  1,600     Rabobank Nederland, 144A           11.000 %   6/30/19   A     1,980,000    
  200     Societe Generale, 144A           1.333 %   12/31/49   BBB-     97,636    
  200     Societe Generale, 144A           5.922 %   4/05/57   BBB-     148,149    
  2,800     Societe Generale           8.750 %   10/07/49   BBB-     2,310,000    
  100     Standard Chartered PLC, 144A           6.409 %   1/30/17   BBB+     86,945    
  1,200     Standard Chartered PLC, 144A           7.014 %   7/30/37   BBB+     1,159,190    
  — (5)   Union Planters Preferred Fund, 144A           7.750 %   7/15/53   B+     4,411,125    
    Total Commercial Banks                             36,972,463    
    Consumer Finance – 0.9%  
  1,800     Capital One Capital IV Corporation           6.745 %   2/05/82   Baa3     1,811,250    
    Diversified Financial Services – 6.2%  
  2,100     BankAmerica Capital II, Series 2           8.000 %   12/15/26   BB+     2,058,000    
  1,700     CitiGroup Capital XXI           8.300 %   12/21/77   Baa3     1,730,260    
  2,000     JPMorgan Chase Capital Trust XX Series T           6.550 %   9/29/36   A2     2,011,420    
  1,500     JPMorgan Chase Capital Trust XXVII           7.000 %   11/01/39   A2     1,518,900    
  2,340     JPMorgan Chase Capital XXV           6.800 %   10/01/37   A2     2,360,742    
  2,000     NB Capital Trust II           7.830 %   12/15/26   BB+     1,950,000    
  400     NB Capital Trust IV           8.250 %   4/15/27   BB+     395,000    
    Total Diversified Financial Services                             12,024,322    
    Electric Utilities – 1.1%  
  2,000     FPL Group Capital Inc.           7.300 %   9/01/17   BBB     2,106,000    
    Insurance – 25.1%  
  1,700     Allstate Corporation           6.125 %   5/15/67   Baa1     1,603,355    
  150     AXA S.A., 144A           6.463 %   12/14/18   Baa1     110,250    
  4,300     AXA SA, 144A           6.379 %   12/14/36   Baa1     3,214,250    
  1,200     AXA           8.600 %   12/15/30   A3     1,233,817    
  34     Axis Capital Holdings Limited           7.500 %   12/01/15   BBB     3,245,939    
  3,000     Catlin Insurance Company Limited           7.249 %   1/19/17   BBB+     2,610,000    
  3,125     Glen Meadows Pass Through Trust           6.505 %   2/15/17   BB+     2,343,750    
  1,850     Great West Life and Annuity Insurance Company, 144A           7.153 %   5/16/16   A-     1,831,500    
  800     Liberty Mutual Group, 144A           7.800 %   3/15/37   Baa3     748,000    
  4,100     Lincoln National Corporation           7.000 %   5/17/66   BBB     3,874,500    
  3,200     MetLife Capital Trust IV, 144A           7.875 %   12/15/67   BBB     3,416,000    
  4,800     National Financial Services Inc.           6.750 %   5/15/37   Baa2     4,237,440    
  400     Nationwide Financial Services Capital Trust           7.899 %   3/01/37   Baa2     389,717    
  2,800     Oil Insurance Limited, 144A           7.558 %   12/30/56   Baa1     2,519,440    
  1,600     Old Mutual Capital Funding, Notes           8.000 %   6/22/53   Baa3     1,576,000    
  2,000     Progressive Corporation           6.700 %   6/15/67   A2     2,050,000    
  1,500     Prudential Financial Inc.           8.875 %   6/15/18   BBB+     1,792,500    
  1,700     Prudential PLC           6.500 %   6/29/49   A-     1,513,000    
  1,900     Swiss Re Capital I           6.854 %   5/25/16   A     1,708,987    
  900     White Mountains Re Group Limited           7.506 %   6/30/17   BB+     838,944    
  6,600     XL Capital Ltd           6.500 %   10/15/57   BBB-     5,502,750    
  2,700     ZFS Finance USA Trust II 144A           6.450 %   12/15/65   A     2,538,000    
  154     ZFS Finance USA Trust V           6.500 %   5/09/67   A     142,065    
    Total Insurance                             49,040,204    

 

Nuveen Investments
28


Principal
Amount (000)/
Shares		   Description (1)     Coupon   Maturity   Ratings (2)   Value  
    Multi-Utilities – 0.3%  
  500     Dominion Resources Inc.           7.500 %   6/30/16   BBB   $ 525,000    
    Road & Rail – 1.7%  
  3,185     Burlington Northern Santa Fe Funding Trust I           6.613 %   12/15/55   BBB     3,280,550    
    U.S. Agency – 0.9%  
  1,800     AgFirst Farm Credit Bank           7.300 %   12/15/53   A     1,834,956    
    Wireless Telecommunication Services – 4.3%  
  7     Centaur Funding Corporation, Series B           9.080 %   4/21/20   BBB     8,292,282    
    Total Capital Preferred Securities (cost $118,672,641)                             118,463,303    
Shares   Description (1)     Coupon     Ratings (2)   Value  
    Convertible Preferred Securities – 0.1% (0.1% of Total Investments)  
    Commercial Banks – 0.1%  
  1,512     KeyCorp Convertible Preferred Stock           7.750 %         BBB-   $ 163,886    
    Real Estate – 0.0%  
  3,000     CommonWealth REIT           6.500 %         Baa3     63,450    
    Total Convertible Preferred Securities (cost $210,293)                             227,336    
Shares   Description (1)           Value  
    Investment Companies – 3.9% (2.8% of Total Investments)  
  172,099     BlackRock Credit Allocation Income Trust II                           $ 1,789,829    
  161,342     Flaherty and Crumrine/Claymore Preferred Securities Income Fund Inc.                             2,931,584    
  157,399     John Hancock Preferred Income Fund III                             2,850,496    
    Total Investment Companies (cost $9,576,927)                             7,571,909    
Principal
Amount (000)		   Description (1)     Coupon   Maturity     Value  
    Short-Term Investments – 5.2% (3.7% of Total Investments)  
$ 10,183     Repurchase Agreement with Fixed Income Corporation, dated 1/31/12,
repurchase price $10,182,948, collateralized by $9,200,000,
U.S. Treasury Notes, 4.000%, due 2/15/16, value $10,387,472		           0.010 %   2/01/12         $ 10,182,945    
    Total Short-Term Investments (cost $10,182,945)                             10,182,945    
    Total Investments (cost $270,943,960) – 139.4%                             272,196,460    
    Borrowings – (38.4)% (6), (7)                             (75,000,000 )  
    Other Assets Less Liabilities – (1.0)% (8)                             (1,992,810 )  
    Net Assets Applicable to Common Shares – 100%                           $ 195,203,650    

 

Nuveen Investments
29


JHP

Nuveen Quality Preferred Income Fund 3 (continued)

Portfolio of INVESTMENTS January 31, 2012 (Unaudited)

Investments in Derivatives at January 31, 2012

Interest Rates Swaps outstanding:

Counterparty   Notional
Amount		   Pay/Receive
Floating Rate		   Floating Rate Index   Fixed Rate*   Fixed Rate
Payment
Frequency		   Termination
Date		   Unrealized
Appreciation
(Depreciation)		  
JPMorgan   $ 14,725,000     Receive   1-Month USD-LIBOR     0.360 %   Monthly   3/21/12   $ (907 )  
JPMorgan     14,725,000     Receive   1-Month USD-LIBOR     1.193     Monthly   3/21/14     (271,951 )  
Morgan Stanley     14,725,000     Receive   1-Month USD-LIBOR     2.064     Monthly   3/21/16     (845,095 )  
                            $ (1,117,953 )  

 

*  Annualized.

    For Fund portfolio compliance purposes, the Fund's industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. This definition may not apply for purposes of this report, which may combine industry sub-classifications into sectors for reporting ease.

  (1)  All percentages shown in the Portfolio of Investments are based on net assets applicable to Common shares unless otherwise noted.

  (2)  Ratings: Using the highest of Standard & Poor's Group ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's") or Fitch, Inc. ("Fitch") rating. Ratings below BBB by Standard & Poor's, Baa by Moody's or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.

  (3)  Investment, or portion of investment, has been pledged to collateralize the net payment obligations for investments in derivatives.

  (4)  Non-income producing; issuer has not declared a dividend within the past twelve months.

  (5)  Principal Amount (000) rounds to less than $1,000.

  (6)  Borrowings as a percentage of Total Investments is 27.6%.

  (7)  The Fund may pledge up to 100% of its eligible investments in the Portfolio of Investments as collateral for Borrowings. As of January 31, 2012, investments with a value of $226,238,922 have been pledged as collateral for Borrowings.

  (8)  Other Assets Less Liabilities includes the net Unrealized Appreciation (Depreciation) of derivative instruments as noted within Investments in Derivatives at January 31, 2012.

  N/R  Not rated.

  144A  Investment is exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These investments may only be resold in transactions exempt from registration, which are normally those transactions with qualified institutional buyers.

  CORTS  Corporate Backed Trust Securities.

  PPLUS  PreferredPlus Trust.

  WI/DD  Purchased on a when-issued or delayed delivery basis.

  USD-LIBOR  United States Dollar–London Inter-Bank Offered Rate.

    See accompanying notes to financial statements.

Nuveen Investments
30



Statement of

ASSETS & LIABILITIES

  January 31, 2012 (Unaudited)

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Assets  
Investments, at value (cost $723,764,786, $1,422,281,046 and $270,943,960, respectively)   $ 729,575,384     $ 1,418,593,749     $ 272,196,460    
Cash     466,522       202,204       3,205    
Receivables:  
Dividends     782,297       1,280,130       285,207    
Interest     4,831,134       9,992,873       1,816,713    
Investments sold     —       258,557       —    
Other assets     88,853       169,946       31,922    
Total assets     735,744,190       1,430,497,459       274,333,507    
Liabilities  
Borrowings     201,000,000       394,000,000       75,000,000    
Unrealized depreciation on interest rate swaps     2,939,608       5,861,184       1,117,953    
Payables:  
Common share dividends payable     3,182,563       6,482,368       1,215,836    
Investments purchased     6,527,776       280,781       1,464,318    
Accrued expenses:  
Interest on borrowings     16,090       31,585       6,005    
Management fees     522,100       1,004,834       196,509    
Other     336,357       597,679       129,236    
Total liabilities     214,524,494       408,258,431       79,129,857    
Net assets applicable to Common shares   $ 521,219,696     $ 1,022,239,028     $ 195,203,650    
Common shares outstanding     64,632,295       120,321,842       23,719,595    
Net asset value per Common share outstanding (net assets applicable to
Common shares, divided by Common shares outstanding)		   $ 8.06     $ 8.50     $ 8.23    
Net assets applicable to Common shares consist of:  
Common shares, $.01 par value per share   $ 646,323     $ 1,203,218     $ 237,196    
Paid-in surplus     882,006,538       1,687,923,171       329,685,389    
Undistributed (Over-distribution of) net investment income     5,595,039       2,585,802       (471,831 )  
Accumulated net realized gain (loss)     (369,899,194 )     (659,924,682 )     (134,381,651 )  
Net unrealized appreciation (depreciation)     2,870,990       (9,548,481 )     134,547    
Net assets applicable to Common shares   $ 521,219,696     $ 1,022,239,028     $ 195,203,650    
Authorized shares:  
Common     Unlimited       Unlimited       Unlimited    
FundPreferred     Unlimited       Unlimited       Unlimited    

 

See accompanying notes to financial statements.

Nuveen Investments
31


Statement of

OPERATIONS

Six Months Ended January 31, 2012 (Unaudited)

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Investment Income  
Dividends   $ 14,550,174     $ 27,619,687     $ 5,196,715    
Interest     10,982,225       22,415,777       4,245,162    
Total investment income     25,532,399       50,035,464       9,441,877    
Expenses  
Management fees     2,966,108       5,730,270       1,118,411    
Interest expense on borrowings     1,415,330       2,787,827       529,726    
Shareholders' servicing agent fees and expenses     2,641       3,338       599    
Custodian's fees and expenses     52,834       98,651       24,284    
Trustees' fees and expenses     14,817       29,119       5,542    
Professional fees     —       5,688       —    
Shareholders' reports — printing and mailing expenses     86,471       141,869       30,432    
Stock exchange listing fees     10,796       20,097       4,496    
Investor relations expense     49,238       86,397       8,712    
Other expenses     3,782       16,312       —    
Total expenses before custodian fee credit     4,602,017       8,919,568       1,722,202    
Custodian fee credit     (48 )     (57 )     (16 )  
Net expenses     4,601,969       8,919,511       1,722,186    
Net investment income (loss)     20,930,430       41,115,953       7,719,691    
Realized and Unrealized Gain (Loss)  
Net realized gain (loss) from:  
Investments and foreign currency     (321,663 )     (1,448,660 )     (67,472 )  
Interest rate swaps     (565,994 )     (1,128,517 )     (215,251 )  
Change in net unrealized appreciation (depreciation) of:  
Investments and foreign currency     (11,235,636 )     (29,549,861 )     (5,512,749 )  
Interest rate swaps     (1,259,817 )     (2,511,905 )     (479,117 )  
Net realized and unrealized gain (loss)     (13,383,110 )     (34,638,943 )     (6,274,589 )  
Net increase (decrease) in net assets applicable to Common shares from operations   $ 7,547,320     $ 6,477,010     $ 1,445,102    

 

See accompanying notes to financial statements.

Nuveen Investments
32


Statement of

CHANGES in NET ASSETS (Unaudited)

    Quality Preferred Income (JTP)   Quality Preferred Income 2 (JPS)  
    Six Months
Ended
1/31/12		   Seven Months
Ended
7/31/11		   Year
Ended
12/31/10		   Six Months
Ended
1/31/12		   Seven Months
Ended
7/31/11		   Year
Ended
12/31/10		  
Operations  
Net investment income (loss)   $ 20,930,430     $ 22,341,737     $ 41,883,329     $ 41,115,953     $ 44,637,240     $ 83,019,337    
Net realized gain (loss) from:  
Investments and foreign currency     (321,663 )     1,144,421       (3,028,241 )     (1,448,660 )     3,022,882       (9,421,988 )  
Interest rate swaps     (565,994 )     (383,193 )     —       (1,128,517 )     (764,036 )     —    
Change in net unrealized appreciation
(depreciation) of:		  
Investments and foreign currency     (11,235,636 )     12,913,213       64,050,994       (29,549,861 )     18,327,998       122,415,711    
Interest rate swaps     (1,259,817 )     (1,679,791 )     —       (2,511,905 )     (3,349,279 )     —    
Net increase (decrease) in net assets
applicable to Common shares
from operations		     7,547,320       34,336,387       102,906,082       6,477,010       61,874,805       196,013,060    
Distribution to Common Shareholders  
From net investment income     (19,389,688 )     (22,621,303 )     (37,745,260 )     (39,706,209 )     (46,323,910 )     (78,449,841 )  
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders		     (19,389,688 )     (22,621,303 )     (37,745,260 )     (39,706,209 )     (46,323,910 )     (78,449,841 )  
Capital Share Transactions  
Net proceeds from Common shares
issued to shareholders due to
reinvestments of distributions		     —       —       —       —       —       —    
Net increase (decrease) in net assets
applicable to Common shares from
capital share transactions		     —       —       —       —       —       —    
Net increase (decrease) in net assets
applicable to Common shares		     (11,842,368 )     11,715,084       65,160,822       (33,229,199 )     15,550,895       117,563,219    
Net assets applicable to Common shares
at the beginning of period		     533,062,064       521,346,980       456,186,158       1,055,468,227       1,039,917,332       922,354,113    
Net assets applicable to Common
shares at the end of period		   $ 521,219,696     $ 533,062,064     $ 521,346,980     $ 1,022,239,028     $ 1,055,468,227     $ 1,039,917,332    
Undistribution (Over-distribution of)
net investment income at the
end of period		   $ 5,595,039     $ 4,054,297     $ 10,037,866     $ 2,585,802     $ 1,176,058     $ 6,519,710    

 

See accompanying notes to financial statements.

Nuveen Investments
33


Statement of

CHANGES in NET ASSETS (Unaudited) (continued)

    Quality Preferred Income 3 (JHP)  
    Six Months
Ended
1/31/12		   Seven Months
Ended
7/31/11		   Year
Ended
12/31/10		  
Operations  
Net investment income (loss)   $ 7,719,691     $ 8,489,109     $ 15,383,796    
Net realized gain (loss) from:  
Investments and foreign currency     (67,472 )     735,225       476,202    
Interest rate swaps     (215,251 )     (145,731 )     —    
Change in net unrealized appreciation (depreciation) of:  
Investments and foreign currency     (5,512,749 )     2,818,458       20,558,969    
Interest rate swaps     (479,117 )     (638,836 )     —    
Net increase (decrease) in net assets applicable to Common shares
from operations		     1,445,102       11,258,225       36,418,967    
Distribution to Common Shareholders  
From net investment income     (7,399,856 )     (8,633,012 )     (14,608,313 )  
Decrease in net assets applicable to Common shares from distributions
to Common shareholders		     (7,399,856 )     (8,633,012 )     (14,608,313 )  
Capital Share Transactions  
Net proceeds from Common shares issued to shareholders due to
reinvestments of distributions		     19,884       —       25,644    
Net increase (decrease) in net assets applicable to Common shares from
capital share transactions		     19,884       —       25,644    
Net increase (decrease) in net assets applicable to Common shares     (5,934,870 )     2,625,213       21,836,298    
Net assets applicable to Common shares at the beginning of period     201,138,520       198,513,307       176,677,009    
Net assets applicable to Common shares at the end of period   $ 195,203,650     $ 201,138,520     $ 198,513,307    
Undistribution (Over-distribution of) net investment income at
the end of period		   $ (471,831 )   $ (791,666 )   $ 1,697,492    

 

See accompanying notes to financial statements.

Nuveen Investments
34


Statement of

CASH FLOWS

Six Months Ended January 31, 2012 (Unaudited)

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Cash Flows from Operating Activities:  
Net Increase (Decrease) in Net Assets Applicable to Common Shares from Operations   $ 7,547,320     $ 6,477,010     $ 1,445,102    
Adjustments to reconcile the net increase (decrease) in net assets applicable to Common shares
from operations to net cash provided by (used in) operating activities:		  
Purchases of investments     (84,835,270 )     (110,154,063 )     (26,276,146 )  
Proceeds from sales and maturities of investments     53,571,950       71,225,051       16,679,185    
Proceeds from (Purchases of) short-term investments, net     (22,475,255 )     (46,296,973 )     (8,474,942 )  
Proceeds from (Payments for) interest rate swap contracts     (565,994 )     (1,128,517 )     (215,251 )  
Amortization (Accretion) of premiums and discounts, net     147,624       214,636       53,367    
(Increase) Decrease in:  
Receivable for dividends     216,806       539,634       62,410    
Receivable for interest     (504,156 )     (1,188,912 )     (131,971 )  
Receivable for investments sold     626,377       (68,912 )     391,420    
Other assets     51,125       92,547       21,241    
Increase (Decrease) in:  
Payable for investments purchased     6,527,776       280,781       1,464,318    
Accrued interest on borrowings     (5,471 )     (11,216 )     (2,160 )  
Accrued management fees     9,916       7,088       1,441    
Accrued other expenses     1,800       3,620       (8,142 )  
Net realized (gain) loss from:  
Investments and foreign currency     321,663       1,448,660       67,472    
Interest rate swaps     565,994       1,128,517       215,251    
Change in net unrealized (appreciation) depreciation of:  
Investments and foreign currency     11,235,636       29,549,861       5,512,749    
Interest rate swaps     1,259,817       2,511,905       479,117    
Taxes paid on undistributed capital gains     —       —       (5,496 )  
Net cash provided by (used in) operating activities     (26,302,342 )     (45,369,283 )     (8,721,035 )  
Cash Flows from Financing Activities:  
Increase (Decrease) in borrowings     46,125,000       85,200,000       16,100,000    
Cash distributions paid to Common shareholders     (19,373,019 )     (39,628,513 )     (7,375,760 )  
Net cash provided by (used in) financing activities     26,751,981       45,571,487       8,724,240    
Net Increase (Decrease) in Cash     449,639       202,204       3,205    
Cash at the beginning of period     16,883       —       —    
Cash at the End of Period   $ 466,522     $ 202,204     $ 3,205    
Supplemental Disclosure of Cash Flow Information  

 

Cash paid for interest on borrowings (excluding borrowing costs) was $1,288,301, $2,544,043 and $484,386 for Quality Preferred Income (JTP), Quality Preferred Income 2 (JPS) and Quality Preferred Income 3 (JHP), respectively.  
Non-cash financing activities not included herein consists of reinvestments of Common share distributions of $19,884 for Quality Preferred Income 3 (JHP).  

 

See accompanying notes to financial statements.

Nuveen Investments
35



Financial

HIGHLIGHTS (Unaudited)

Selected data for a Common share outstanding throughout each period:

       
        Investment Operations   Less Distributions  
    Beginning
Common
Share
Net Asset
Value		   Net
Investment
Income
(Loss)(a)		   Net
Realized/
Unrealized
Gain (Loss)		   Distributions
from Net
Investment
Income to
FundPreferred
Share-
holders(b)		   Distributions
from Capital
Gains to
FundPreferred
Share-
holders(b)		   Total   Net
Investment
Income to
Common
Share-
holders		   Capital
Gains to
Common
Share-
holders		   Return of
Capital to
Common
Share-
holders		   Total  
Quality Preferred Income (JTP)      
Year Ended 7/31:  
2012(g)   $ 8.25     $ .32     $ (.21 )   $ —     $ —     $ 0.11     $ (.30 )   $ —     $ —     $ (.30 )  
2011(h)     8.07       .35       .18       —       —       .53       (.35 )     —       —       (.35 )  
Year Ended 12/31:  
2010     7.06       .65       .94       —       —       1.59       (.58 )     —       —       (.58 )  
2009     5.25       .63       1.82       — *     —       2.45       (.57 )     —       (.07 )     (.64 )  
2008     11.06       1.10       (5.81 )     (.19 )     —       (4.90 )     (.90 )     —       (.01 )     (.91 )  
2007     14.10       1.29       (2.96 )     (.35 )     —       (2.02 )     (.93 )     —       (.09 )     (1.02 )  
2006     14.20       1.28       .02       (.32 )     —       .98       (1.08 )     —       —       (1.08 )  
Quality Preferred Income 2 (JPS)      
Year Ended 7/31:  
2012(g)     8.77       .34       (.28 )     —       —       .06       (.33 )     —       —       (.33 )  
2011(h)     8.64       .37       .15       —       —       .52       (.39 )     —       —       (.39 )  
Year Ended 12/31:  
2010     7.67       .69       .93       —       —       1.62       (.65 )     —       —       (.65 )  
2009     5.42       .69       2.29       — *     —       2.98       (.70 )     —       (.03 )     (.73 )  
2008     11.57       1.18       (6.18 )     (.18 )     —       (5.18 )     (.97 )     —       —       (.97 )  
2007     14.66       1.34       (2.96 )     (.34 )     (.01 )     (1.97 )     (1.04 )     (.04 )     (.04 )     (1.12 )  
2006     14.77       1.33       (.01 )     (.31 )     —       1.01       (1.12 )     —       —       (1.12 )  
Quality Preferred Income 3 (JHP)      
Year Ended 7/31:  
2012(g)     8.48       .33       (.27 )     —       —       .06       (.31 )     —       —       (.31 )  
2011(h)     8.37       .36       .11       —       —       .47       (.36 )     —       —       (.36 )  
Year Ended 12/31:  
2010     7.45       .65       .89       —       —       1.54       (.62 )     —       —       (.62 )  
2009     5.14       .63       2.34       — *     —       2.97       (.58 )     —       (.08 )     (.66 )  
2008     11.02       1.08       (5.85 )     (.19 )     —       (4.96 )     (.90 )     —       (.02 )     (.92 )  
2007     14.22       1.31       (3.09 )     (.37 )     —       (2.15 )     (.95 )     —       (.10 )     (1.05 )  
2006     14.29       1.31       .05       (.33 )     —       1.03       (1.09 )     —       (.01 )     (1.10 )  

(a)  Per share Net Investment Income (Loss) is calculated using the average daily shares method.

(b)  The amounts shown are based on Common share equivalents.

(c)  Total Return Based 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. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.

  Total Return Based 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. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending net asset value. The actual reinvest price for the last dividend declared in the period may often be based on the Fund's market price (and not its net asset value), and therefore may be different from the price used in the calculation. Total returns are not annualized.

(d)  After expense reimbursement from the Adviser, where applicable. Ratios do not reflect the effect of custodian fee credits earned on the Fund's net cash on deposit with the custodian bank, where applicable. As of June 30, 2010, September 30, 2010 and December 31, 2010, the Adviser is no longer reimbursing Quality Preferred Income (JTP), Quality Preferred Income 2 (JPS) and Quality Preferred Income 3 (JHP), respectively, for any fees and expenses.

Nuveen Investments
36


        Ratios/Supplemental Data  
            Total Returns       Ratios to Average Net Assets
Applicable to Common Shares
Before Reimbursement(e)		   Ratios to Average Net Assets
Applicable to Common Shares
After Reimbursement(d)(e)		      
    Ending
Common
Share
Net Asset
Value		   Ending
Market
Value		   Based
on
Market
Value(c)		   Based
on
Common
Share
Net
Asset
Value(c)		   Ending Net
Assets
Applicable to
Common
Shares (000)		   Expenses   Net
Investment
Income (Loss)		   Expenses   Net
Investment
Income (Loss)		   Portfolio
Turnover
Rate		  
Quality Preferred Income (JTP)  
Year Ended 7/31:  
  2012 (g)   $ 8.06     $ 8.11       11.79 %     1.51 %   $ 521,220       1.81 %**     8.24 %**     1.81 %**     8.24 %**     8 %  
  2011 (h)     8.25       7.54       6.62       6.74       533,062       1.61 **     7.17 **     1.61 **     7.17 **     9    
Year Ended 12/31:  
  2010       8.07       7.40       21.94       23.09       521,347       1.65       8.37       1.60       8.42       20    
  2009       7.06       6.57       53.05       51.85       456,186       1.86       11.04       1.71       11.19       29    
  2008       5.25       4.86       (47.05 )     (46.97 )     339,270       2.01       11.65       1.67       11.99       24    
  2007       11.06       10.33       (24.60 )     (15.32 )     713,945       1.54       9.43       1.11       9.86       32    
  2006       14.10       14.84       29.51       7.26       909,608       1.50       8.70       1.02       9.18       34    
Quality Preferred Income 2 (JPS)  
Year Ended 7/31:  
  2012 (g)     8.50     $ 8.45       9.11       0.87       1,022,239       1.79 **     8.25 **     1.79 **     8.25 **     6    
  2011 (h)     8.77       8.07       7.02       5.99       1,055,468       1.58 **     7.21 **     1.58 **     7.21 **     7    
Year Ended 12/31:  
  2010       8.64       7.90       18.31       21.99       1,039,917       1.59       8.29       1.51       8.37       25    
  2009       7.67       7.25       63.90       61.22       922,354       1.82       11.27       1.64       11.45       27    
  2008       5.42       5.04       (47.49 )     (47.58 )     649,377       1.96       12.02       1.59       12.39       18    
  2007       11.57       10.81       (22.24 )     (14.32 )     1,386,125       1.45       9.35       1.00       9.80       31    
  2006       14.66       15.12       27.75       7.09       1,753,392       1.42       8.72       .95       9.19       34    
Quality Preferred Income 3 (JHP)  
Year Ended 7/31:  
  2012 (g)     8.23     $ 8.42       13.76       0.92       195,204       1.82 **     8.14 **     1.82 **     8.14 **     7    
  2011 (h)     8.48       7.70       4.08       5.69       201,139       1.65 **     7.19 **     1.64 **     7.19 **     8    
Year Ended 12/31:  
  2010       8.37       7.74       20.66       21.49       198,513       1.65       8.05       1.54       8.16       24    
  2009       7.45       6.95       54.50       63.23       176,677       1.87       10.56       1.66       10.77       35    
  2008       5.14       5.08       (45.66 )     (48.00 )     121,870       2.00       11.51       1.60       11.91       30    
  2007       11.02       10.51       (23.61 )     (16.01 )     261,081       1.60       9.38       1.10       9.87       35    
  2006       14.22       14.92       25.00       7.49       336,540       1.56       8.81       1.08       9.29       39    

 

(e)  • Ratios do not reflect the effect of dividend payments to FundPreferred shareholders, where applicable.

  • Net Investment Income ratios reflect income earned and expenses incurred on assets attributable to FundPreferred shares and/or borrowings, where applicable.

  • Each ratio includes the effect of interest expense and other costs related to borrowings as follows:

Ratios of Borrowings Interest Expense to
Average Net Assets Applicable to Common Shares		   Ratios of Borrowings Interest Expense to
Average Net Assets Applicable to Common Shares		   Ratios of Borrowings Interest Expense to
Average Net Assets Applicable to Common Shares		  
Quality Preferred Income (JTP)         Quality Preferred Income 2 (JPS)         Quality Preferred Income 3 (JHP)        
Year Ended 7/31:         Year Ended 7/31:         Year Ended 7/31:        
2012(g)     .56 %**   2012(g)     .56 %**   2012(g)     .56 %**  
2011(h)     .38 **   2011(h)     .37 **   2011(h)     .37 **  
Year Ended 12/31:         Year Ended 12/31:         Year Ended 12/31:        
2010     .41     2010     .39     2010     .38    
2009     .61     2009     .59     2009     .59    
2008     .26     2008     .30     2008     .20    
2007     —     2007     —     2007     —    
2006     —     2006     —     2006     —    

 

(g)  For the six months ended January 31, 2012.

(h)  For the seven months ended July 31, 2011.

*  Rounds to less than $.01 per share.

**  Annualized.

 

See accompanying notes to financial statements.

Nuveen Investments
37


Financial

HIGHLIGHTS (Unaudited) (continued)

    FundPreferred Shares at End of Period   Borrowings at End of Period  
    Aggregate
Amount
Outstanding
(000)		   Liquidation
Value Per
Share		   Asset
Coverage
Per Share		   Aggregate
Amount
Outstanding
(000)		   Asset
Coverage
Per $1,000		  
Quality Preferred Income (JTP)      
Year Ended 7/31:  
2012(g)   $ —     $ —     $ —     $ 201,000     $ 3,593    
2011(h)     —       —       —       154,875       4,442    
Year Ended 12/31:  
2010     —       —       —       154,875       4,366    
2009     —       —       —       153,375       3,974    
2008     64,875       25,000       155,740       86,500       5,672    
2007     440,000       25,000       65,565       —       —    
2006     440,000       25,000       76,682       —       —    
Quality Preferred Income 2 (JPS)      
Year Ended 7/31:  
2012(g)     —       —       —       394,000       3,595    
2011(h)     —       —       —       308,800       4,418    
Year Ended 12/31:  
2010     —       —       —       300,000       4,466    
2009     —       —       —       289,500       4,186    
2008     130,000       25,000       149,880       165,200       5,718    
2007     800,000       25,000       68,316       —       —    
2006     800,000       25,000       79,794       —       —    
Quality Preferred Income 3 (JHP)      
Year Ended 7/31:  
2012(g)     —       —       —       75,000       3,603    
2011(h)     —       —       —       58,900       4,415    
Year Ended 12/31:  
2010     —       —       —       55,000       4,609    
2009     —       —       —       55,000       4,212    
2008     18,100       25,000       193,329       33,000       5,242    
2007     166,000       25,000       64,319       —       —    
2006     166,000       25,000       75,684       —       —    

 

See accompanying notes to financial statements.

Nuveen Investments
38



Notes to

FINANCIAL STATEMENTS (Unaudited)

1. General Information and Significant Accounting Policies

General Information

The funds covered in this report and their corresponding Common share New York Stock Exchange ("NYSE") symbols are Nuveen Quality Preferred Income Fund (JTP), Nuveen Quality Preferred Income Fund 2 (JPS) and Nuveen Quality Preferred Income Fund 3 (JHP) (each a "Fund" and collectively, the "Funds"). The Funds are registered under the Investment Company Act of 1940, as amended, as closed-end registered investment companies.

Quality Preferred Income's (JTP) investment objective is high current income consistent with capital preservation. The Fund's secondary investment objective is to enhance portfolio value. The Fund invests at least 80% of its managed assets in taxable preferred securities that, at the time of investment, are rated investment grade (Baa/BBB or better). The Fund may invest up to 20% of its managed assets in debt securities, including convertibles, rated investment grade at the time of investment.

Quality Preferred Income 2's (JPS) and Quality Preferred Income 3's (JHP) investment objective is high current income consistent with capital preservation. Each Fund's secondary investment objective is to enhance portfolio value. Each Fund invests at least 80% of its managed assets in preferred securities; up to 20% of its managed assets in debt securities, including convertible debt securities and convertible preferred securities; and 100% of each Fund's total assets in securities that, at the time of investment, are investment grade quality (BBB/Baa or better), which may include up to 10% in securities that are rated investment grade by at least one nationally recognized statistical rating organization and lower by another.

Significant Accounting Policies

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 ("U.S. GAAP").

Investment Valuation

Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market ("NASDAQ") are valued, except as indicated below, at the NASDAQ Official Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price and are generally classified as Level 2. Investments in investment companies are valued at their respective net asset values on the valuation date. These investment vehicles are generally classified as Level 1.

Prices of fixed-income securities and interest rate swap contracts are provided by a pricing service approved by the Funds' Board of Trustees. These securities are generally classified as Level 2. When price quotes are not readily available, the pricing service establishes a security's fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor's credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer, or market activity provided by Nuveen Fund Advisors, Inc. (the "Adviser"), a wholly-owned subsidiary of Nuveen Investments, Inc. ("Nuveen"). These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.

Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.

Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Funds' Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a

Nuveen Investments
39


Notes to

FINANCIAL STATEMENTS (Unaudited) (continued)

pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's net asset value (as may be the case in non-U.S. markets on which the security is primarily traded) or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, is not deemed to reflect the security's fair value. As a general principle, the fair value of a security would appear to be the amount that the owner might reasonably expect to receive for it in a current sale. A variety of factors may be considered in determining the fair value of such securities, which may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor's credit characteristics considered relevant. These securities are generally classified as Level 2 or as Level 3 depending on the priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds' Board of Trustees or its designee.

Refer to Footnote 2—Fair Value Measurements for further details on the leveling of securities held by the Funds as of the end of the reporting period.

Investment Transactions

Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. At January 31, 2012, Quality Preferred Income (JTP) and Quality Preferred Income Fund 3 (JHP) had outstanding when-issued/delayed delivery purchase commitments of $3,365,188 and $1,464,318, respectively. There were no outstanding when-issued/delayed delivery purchase commitments in Quality Preferred Income 2 (JPS).

Investment Income

Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Interest income also reflects paydown gains and losses, if any.

Income Taxes

Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies ("RICs"). Therefore, no federal income tax provision is required.

For all open tax years and all major taxing jurisdictions, management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

Dividends and Distributions to Common Shareholders

Dividends to Common shareholders are declared monthly. Net realized capital gains from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.

Distributions to Common shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Nuveen Investments
40


FundPreferred Shares

The Funds are authorized to issue auction rate preferred ("FundPreferred") shares. As of December 31, 2009, Quality Preferred Income (JTP), Quality Preferred Income 2 (JPS) and Quality Preferred Income 3 (JHP) redeemed all of their outstanding FundPreferred shares, at liquidation values of $440,000,000, $800,000,000 and $166,000,000, respectively.

During the fiscal year ended December 31, 2010, lawsuits pursuing claims made in a demand letter alleging that the Funds' Board of Trustees breached their fiduciary duties related to the redemption at par of the Funds' FundPreferred shares had been filed on behalf of shareholders of the Funds, against the Adviser, the Nuveen holding company, the majority owner of the holding company, the lone interested trustee, and current and former officers of the Funds. Nuveen and the other defendants have filed a motion to dismiss the lawsuits, and on December 16, 2011, the court granted that motion dismissing the lawsuits. The plaintiffs failed to file an appeal on the court's decision within the required time period, resulting in the final disposition of the lawsuit.

Foreign Currency Transactions

Each Fund is authorized to engage in foreign currency exchange transactions, including foreign currency forwards, futures, options and swap contracts. To the extent that the Funds invest in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Fund will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Fund's investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.

The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments, other assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern time. Investments, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of a Fund and the amounts actually received.

The realized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments, foreign currency forwards, futures, options purchased, options written and swaps are recognized as a component of "Net realized gain (loss) from investments and foreign currency" on the Statement of Operations, when applicable.

The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of "Change in unrealized appreciation (depreciation) of investments and foreign currency" on the Statement of Operations when applicable. The unrealized gains and losses resulting from changes in foreign exchange rates associated with foreign currency exchange contracts, futures, options purchased, options written and swaps are recognized as a component of "Change in net unrealized appreciation (depreciation) of foreign currency exchange contracts, futures, options purchased, options written and swap contracts" respectively on the Statement of Operations, when applicable.

Interest Rate Swap Contracts

Each Fund is subject to interest rate risk in the normal course of pursuing its investment objectives and is authorized to invest in interest rate swap transactions in an attempt to manage such risk. Each Fund's use of interest rate swap contracts 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 contracts involve each Fund's agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment 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 swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that each Fund is to receive. Interest rate swap positions are valued daily. Each Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on interest rate swap contracts on a daily basis, and recognizes the daily change in the fair value of the Fund's contractual rights and obligations under the contracts. The net amount recorded for these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of "Unrealized appreciation or depreciation on interest rate swaps" with the change during the fiscal period recognized on the Statement of Operations as a component of "Change in net unrealized appreciation (depreciation) of interest rate swaps." Income received or paid by each Fund is recognized as a component of "Net realized gain (loss) from interest rate swaps" on the Statement of Operations, in addition to the net realized gains or losses recognized upon the termination of an interest rate swap contract, and are equal to the difference between the Fund's basis in the interest rate swap and the proceeds from (or cost of) the closing transaction. Payments received or made at the beginning of the measurement period are recognized as a

Nuveen Investments
41


Notes to

FINANCIAL STATEMENTS (Unaudited) (continued)

component of "Interest rate swap premiums paid and/or received" on the Statement of Assets and Liabilities. For tax purposes, periodic payments are treated as ordinary income or expense.

During the six months ended January 31, 2012, each Fund used interest rate swaps to partially fix the interest cost of leverage, which each Fund uses through the use of bank borrowings. The average notional amount of interest rate swap contracts outstanding during the six months ended January 31, 2012, was as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Average notional amount of interest rate swap contracts outstanding*   $ 116,156,250     $ 231,600,000     $ 44,175,000    

 

*  The average notional amount is calculated based on the outstanding notional amount at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal period.

Refer to Footnote 3—Derivative Instruments and Hedging Activities for further details on interest rate swap contract activity.

Market and Counterparty Credit Risk

In the normal course of business each Fund may invest in financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to the transaction to perform (counterparty credit risk). The potential loss could exceed the value of the financial assets recorded on the financial statements. Financial assets, which potentially expose each Fund to counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of each Fund's exposure to counterparty credit risk in respect to these financial assets approximates their carrying value as recorded on the Statement of Assets and Liabilities. Futures contracts, when applicable, expose a Fund to minimal counterparty credit risk as they are exchange traded and the exchange's clearinghouse, which is counterparty to all exchange traded futures, guarantees the futures contracts against default.

Each Fund helps manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations and by having the Adviser monitor the financial stability of the counterparties. Additionally, counterparties may be required to pledge collateral daily (based on the daily valuation of the financial asset) on behalf of each Fund with a value approximately equal to the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when each Fund has an unrealized loss, the Funds have instructed the custodian to pledge assets of the Funds as collateral with a value approximately equal to the amount of the unrealized loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted if and when the valuations fluctuate, either up or down, by at least the pre-determined threshold amount.

Repurchase Agreements

In connection with transactions in repurchase agreements, it is each Fund's policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.

Zero Coupon Securities

Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.

Custodian Fee Credit

Each Fund has an arrangement with the custodian bank whereby certain custodian fees and expenses are reduced by net credits earned on each Fund's cash on deposit with the bank. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which a Fund overdraws its account at the custodian bank.

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42


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. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to Common shares from operations during the reporting period. Actual results may differ from those estimates.

2. Fair Value Measurements

Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below:

Level 1 — Quoted prices in active markets for identical securities.

Level 2 — Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3 — Significant unobservable inputs (including management's assumptions in determining the fair value of investments).

The inputs or methodologies used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of each Fund's fair value measurements as of January 31, 2012:

Quality Preferred Income (JTP)   Level 1   Level 2   Level 3   Total  
Investments:  
$25 Par (or similar) Preferred Securities   $ 302,332,094     $ 56,805,230     $ —     $ 359,137,324    
Corporate Bonds     —       40,026,891       —       40,026,891    
Capital Preferred Securities     1,395,718       284,583,203       —       285,978,921    
Convertible Preferred Securities     219,000       —       —       219,000    
Investment Companies     17,207,379       —       —       17,207,379    
Short-Term Investments     —       27,005,869       —       27,005,869    
Derivatives:  
Interest Rate Swaps*     —       (2,939,608 )     —       (2,939,608 )  
Total   $ 321,154,191     $ 405,481,585     $ —     $ 726,635,776    
Quality Preferred Income 2 (JPS)   Level 1   Level 2   Level 3   Total  
Investments:  
$25 Par (or similar) Preferred Securities   $ 576,718,071     $ 107,564,737     $ —     $ 684,282,808    
Corporate Bonds     —       73,818,089       —       73,818,089    
Capital Preferred Securities     441,635       564,458,199       —       564,899,834    
Convertible Preferred Securities     —       3,146,500       —       3,146,500    
Investment Companies     37,172,275       —       —       37,172,275    
Short-Term Investments     —       55,274,243       —       55,274,243    
Derivatives:  
Interest Rate Swaps*     —       (5,861,184 )     —       (5,861,184 )  
Total   $ 614,331,981     $ 798,400,584     $ —     $ 1,412,732,565    

 

*  Represents net unrealized appreciation (depreciation) as reported in the Fund's Portfolio of Investments.

Nuveen Investments
43


Notes to

FINANCIAL STATEMENTS (Unaudited) (continued)

Quality Preferred Income 3 (JHP)   Level 1   Level 2   Level 3   Total  
Investments:  
$25 Par (or similar) Preferred Securities   $ 106,168,002     $ 18,996,179     $ —     $ 125,164,181    
Corporate Bonds     —       10,586,786       —       10,586,786    
Capital Preferred Securities     —       118,463,303       —       118,463,303    
Convertible Preferred Securities     227,336       —       —       227,336    
Investment Companies     7,571,909       —       —       7,571,909    
Short-Term Investments     —       10,182,945       —       10,182,945    
Derivatives:  
Interest Rate Swaps*     —       (1,117,953 )     —       (1,117,953 )  
Total   $ 113,967,247     $ 157,111,260     $ —     $ 271,078,507    

 

*  Represents net unrealized appreciation (depreciation) as reported in the Fund's Portfolio of Investments.

During the six months ended January 31, 2012, the Funds recognized no significant transfers to or from Level 1, Level 2 or Level 3.

3. Derivative Instruments and Hedging Activities

The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds' investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes. For additional information on the derivative instruments in which the Funds were invested during and at the end of the reporting period, refer to the Portfolios of Investments, Financial Statements and Footnote 1—General Information and Significant Accounting Policies.

The following tables present the fair value of all derivative instruments held by the Funds as of January 31, 2012, the location of these instruments on the Statement of Assets and Liabilities, and the primary underlying risk exposure.

Quality Preferred Income (JTP)

        Location on the Statement of Assets and Liabilities  
Underlying   Derivative   Asset Derivatives   Liability Derivatives  
Risk Exposure   Instrument   Location   Value   Location   Value  
Interest Rate   Swaps   Unrealized appreciation
on interest rate swaps*		   $ —     Unrealized depreciation
on interest rate swaps*		   $ 2,939,608    

 

Quality Preferred Income 2 (JPS)

        Location on the Statement of Assets and Liabilities  
Underlying   Derivative   Asset Derivatives   Liability Derivatives  
Risk Exposure   Instrument   Location   Value   Location   Value  
Interest Rate   Swaps   Unrealized appreciation
on interest rate swaps*		   $ —     Unrealized depreciation
on interest rate swaps*		   $ 5,861,184    

 

Quality Preferred Income 3 (JHP)

        Location on the Statement of Assets and Liabilities  
Underlying   Derivative   Asset Derivatives   Liability Derivatives  
Risk Exposure   Instrument   Location   Value   Location   Value  
Interest Rate   Swaps   Unrealized appreciation
on interest rate swaps*		   $ —     Unrealized depreciation
on interest rate swaps*		   $ 1,117,953    

 

*  Value represents cumulative gross unrealized appreciation (depreciation) of interest rate swap contracts as reported in each Fund's Portfolio of Investments.

 

Nuveen Investments
44


The following tables present the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended January 31, 2012, on derivative instruments, as well as the primary risk exposure associated with each.

Net Realized Gain (Loss) from Interest Rate Swaps   Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Risk Exposure  
Interest Rate   $ (565,994 )   $ (1,128,517 )   $ (215,251 )  
Change in Net Unrealized Appreciation (Depreciation) of Interest Rate Swaps   Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Risk Exposure  
Interest Rate   $ (1,259,817 )   $ (2,511,905 )   $ (479,117 )  

 

4. Fund Shares

Common Shares

Since the inception of the Funds' repurchase program, the Funds have not repurchased any of their outstanding Common shares.

Transactions in Common shares were as follows:

    Quality Preferred
Income (JTP)		   Quality Preferred
Income 2 (JPS)		   Quality Preferred
Income 3 (JHP)		  
    Six
Months
Ended
1/31/12		   Seven
Months
Ended
7/31/11		   Year
Ended
12/31/10		   Six
Months
Ended
1/31/12		   Seven
Months
Ended
7/31/11		   Year
Ended
12/31/10		   Six
Months
Ended
1/31/12		   Seven
Months
Ended
7/31/11		   Year
Ended
12/31/10		  
Common shares issued to shareholders
due to reinvestment of distributions		     —       —       —       —       —       —       2,529       —       3,042    

 

5. Investment Transactions

Purchases and sales (including maturities but excluding short-term investments and derivative transactions) during the six months ended January 31, 2012, were as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Purchases   $ 84,835,270     $ 110,154,063     $ 26,276,146    
Sales and maturities     53,571,950       71,225,051       16,679,185    

 

6. Income Tax Information

The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to recognition of premium amortization, timing differences in the recognition of income and timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as listed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the net asset values of the Funds.

At January 31, 2012, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives), as determined on a federal income tax basis, were as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Cost of investments   $ 722,410,630     $ 1,421,200,312     $ 272,106,008    
Gross unrealized:  
Appreciation   $ 28,672,936     $ 55,101,807     $ 11,750,468    
Depreciation     (21,508,182 )     (57,708,370 )     (11,660,016 )  
Net unrealized appreciation (depreciation) of investments   $ 7,164,754     $ (2,606,563 )   $ 90,452    

Nuveen Investments
45


Notes to

FINANCIAL STATEMENTS (Unaudited) (continued)

Permanent differences, primarily due to expiration of capital loss carryforwards, foreign currency reclasses, adjustments for investments in real estate investment trusts and complex securities character adjustments, resulted in reclassifications among the Funds' components of Common share net assets at July 31, 2011, the Funds' last tax year end, as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Paid-in-surplus   $ (11,325,351 )   $ 2,682,433     $ 2,163,833    
Undistributed (Over-distribution of) net investment income     (5,704,003 )     (3,656,982 )     (2,345,255 )  
Accumulated net realized gain (loss)     17,029,354       974,549       181,422    

 

The tax components of undistributed net ordinary income and net long-term capital gains at July 31, 2011, the Funds' last tax year end, were as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Undistributed net ordinary income *   $ 6,117,637     $ 5,618,546     $ 1,362,074    
Undistributed net long-term capital gains     —       —       —    

 

*  Net ordinary income consists of net taxable income derived from dividends, interest and net short-term capital gains, if any. Undistributed net ordinary income (on a tax basis) has not been reduced for the dividend declared on July 1, 2011, paid on August 1, 2011.

The tax character of distributions paid during the Funds' last tax years ended July 31, 2011 and July 31, 2010, was designated for purposes of the dividends paid deduction as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Distributions from net ordinary income *   $ 38,520,847     $ 79,171,774     $ 14,751,546    
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, 2011, the Funds' last tax year end, the Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Expiration:  
July 31,2015   $ 1,000,781     $ —     $ 1,054,637    
July 31,2016     14,951,415       19,410,408       8,151,820    
July 31,2017     185,142,331       307,494,854       77,582,335    
July 31,2018     164,307,763       317,825,546       47,045,512    
July 31,2019     3,415,543       11,054,414       57,163    
Total   $ 368,817,833     $ 655,785,222     $ 133,891,467    

 

At July 31, 2011, the Fund's last tax year end, $16,197,046 of Quality Preferred Income's (JTP) capital loss carryforward expired.

Nuveen Investments
46


The Funds have elected to defer net realized losses from investments incurred from November 1, 2010 through July 31, 2011, the Funds' last tax year end, ("post-October losses") in accordance with federal income tax regulations. Post-October losses are treated as having arisen on the first day of the current fiscal year. The following Fund has elected to defer post-October losses as follows:

    Quality
Preferred
Income 3
(JHP)		  
Post-October currency losses   $ 7,944    

 

7. Management Fees and Other Transactions with Affiliates

Each Fund's management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within their respective Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.

The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:

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    

 

The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:

Complex-Level Managed Asset Breakpoint Level*   Effective Rate at Breakpoint Level  
$55 billion     .2000 %  
$56 billion     .1996    
$57 billion     .1989    
$60 billion     .1961    
$63 billion     .1931    
$66 billion     .1900    
$71 billion     .1851    
$76 billion     .1806    
$80 billion     .1773    
$91 billion     .1691    
$125 billion     .1599    
$200 billion     .1505    
$250 billion     .1469    
$300 billion     .1445    

 

*  For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to financial leverage. For these purposes, financial leverage includes the funds' use of preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust's issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen funds that constitute "eligible assets." Eligible assets do not include assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser's assumption of the management of the former First American Funds effective January 1, 2011. As of January 31, 2012, the complex-level fee rate for these Funds was .1739%.

The management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Adviser is responsible for the Funds' overall investment strategy and asset allocation decisions. The Adviser has entered into sub-advisory agreements with Spectrum Asset Management, Inc. ("Spectrum"), under which Spectrum manages the investment portfolios of the Funds. The Adviser is responsible for overseeing the Funds' investments in interest rate swap contracts. 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. During the six months ended January 31, 2012, Quality Preferred Income (JTP), Quality Preferred Income 2 (JPS) and Quality Preferred Income 3 (JHP) paid Spectrum commissions of $22,989, $38,451 and $9,155, respectively.

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

Nuveen Investments
47


Notes to

FINANCIAL STATEMENTS (Unaudited) (continued)

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.

8. Borrowing Arrangements

Each Fund has entered into a prime brokerage facility ("Borrowings") with BNP Paribas Prime Brokerage, Inc. ("BNP") as a means of financial leverage. Each Fund's maximum commitment amount under these Borrowings is as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Maximum commitment amount   $ 217,000,000     $ 427,000,000     $ 81,000,000    

 

As of January 31, 2012, each Fund's outstanding balance on its Borrowings was as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Outstanding borrowings   $ 201,000,000     $ 394,000,000     $ 75,000,000    

 

On November 9, 2011, each Fund amended its prime brokerage facility with BNP. Prior to November 9, 2011, each Fund's maximum commitment amount was as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Maximum commitment amount   $ 164,000,000     $ 325,000,000     $ 62,000,000    

 

During the six months ended January 31, 2012, the average daily balance outstanding and average annual interest rate on each Fund's Borrowings were as follows:

    Quality
Preferred
Income
(JTP)		   Quality
Preferred
Income 2
(JPS)		   Quality
Preferred
Income 3
(JHP)		  
Average daily balance outstanding   $ 171,881,890     $ 339,801,575     $ 64,782,677    
Average annual interest rate     1.39 %     1.39 %     1.39 %  

 

In order to maintain these Borrowings, the Funds must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities held in each Fund's portfolio of investments. Interest is charged on these Borrowings for each Fund at 3-Month London Inter-Bank Offered Rate (LIBOR) plus .95% on the amounts borrowed and .85% on the undrawn balance. Each Fund also incurred a one-time .25% amendment fee on the increase to the maximum commitment amount, which was fully expensed during the current reporting period.

Effective January 9, 2012 interest charged on the amount borrowed changed from 3-Month LIBOR plus .95% on the amounts borrowed and .85% on the undrawn balance to 3-Month LIBOR plus .85% on the amounts borrowed and .50% on the undrawn balance. All other terms remain unchanged.

Borrowings outstanding are recognized as "Borrowings" on the Statement of Assets and Liabilities. Interest expense incurred on each Fund's borrowed amount and undrawn balance and the one-time amendment fee are recognized as a component of "Interest expense on borrowings" on the Statement of Operations.

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9. New Accounting Pronouncements

Financial Accounting Standards Board ("FASB") Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements

On April 15, 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-03 ("ASU No. 2011-03"). The guidance in ASU No. 2011-03 is intended to improve the accounting for repurchase agreements and other similar agreements. Specifically, ASU No. 2011-03 modifies the criteria for determining when these transactions would be accounted for as financing transactions (secured borrowings/lending agreements) as opposed to sale (purchase) transactions with commitments to repurchase (resell). The effective date of ASU No. 2011-03 is for interim and annual periods beginning on or after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statement amounts and footnote disclosures, if any.

Fair Value Measurements and Disclosures

On May 12, 2011, the FASB issued ASU No. 2011-04 modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board ("IASB") issued International Financial Reporting Standard ("IFRS") 13, Fair Value Measurement. The objective of the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, ASU No. 2011-04 requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, the reasons for the transfers and ii) for Level 3 fair value measurements, a) quantitative information about significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of ASU No. 2011-04 is for interim and annual periods beginning after December 15, 2011. At this time, management is evaluating the implications of this guidance and the impact it will have to the financial statement amounts and footnote disclosures, if any.

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Reinvest Automatically
Easily and Conveniently

Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account.

Nuveen Closed-End Funds Dividend Reinvestment Plan

Your Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares.

By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested.

It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.

Easy and convenient

To make recordkeeping easy and convenient, each month you'll receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total number of shares you own.

How shares are purchased

The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. If the Plan Agent begins purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund's shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares' net asset value or 95% of the shares' market value on the last business day immediately prior to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be

Nuveen Investments
50


paid by Plan participants. These commissions usually will be lower than those charged on individual transactions.

Flexible

You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change.

You can reinvest whether your shares are registered in your name, or in the name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another firm and continue to participate in the Plan.

The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct service charge to participants in the Plan at this time.

Call today to start reinvesting distributions

For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at (800) 257-8787.

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Glossary of Terms
Used in this Report

•  Average Annual Total Return: This is a commonly used method to express an investment's performance over a particular, usually multi-year time period. It expresses the return that would have been necessary each year to equal the investment's actual cumulative performance (including change in NAV or market price and reinvested dividends and capital gains distributions, if any) over the time period being considered.

•  Barclays Capital Aggregate Bond Index: 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 assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees. It is not possible to invest directly in an index.

•  Comparative Benchmark: A blended return consisting of: 1) 55% of the Merrill Lynch Fixed Rate Index, an unmanaged index of investment-grade, exchange traded preferred stocks with outstanding market values of at least $30 million and at least one year to maturity; and 2) 45% of the Barclays Capital 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. Benchmark returns do not include the effects of any sales charges or management fees. It is not possible to invest directly in this benchmark.

•  Effective Leverage: Effective leverage is a Fund's effective economic leverage, and includes both Regulatory leverage (see below) and the leverage effects of certain derivative investments in the Fund's portfolio that increase the Funds' investment exposure.

•  Leverage: Using borrowed money to invest in securities or other assets, seeking to increase the return of an investment or portfolio.

•  Market Yield (also known as Dividend Yield or Current Yield): Market yield is based on the Fund's current annualized monthly distribution divided by the Fund's current market price. The Fund's monthly distributions to its shareholders may be comprised of ordinary income, net realized capital gains and, if at the end of the calendar year the Fund's cumulative net ordinary income and net realized gains are less than the amount of the Fund's distributions, a tax return of capital.

•  Net Asset Value (NAV): The net market value of all securities held in a portfolio.

•  Net Asset Value (NAV) Per Share: The market value of one share of a mutual fund or closed-end fund. For a Fund, the NAV is calculated daily by taking the Fund's total assets (securities, cash, and accrued earnings), subtracting the Fund's liabilities, and dividing by the number of shares outstanding.

•  Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of the Fund. Both of these are part of a Fund's capital structure. Regulatory leverage is sometimes referred to as "'40 Act Leverage" and is subject to asset coverage limits set forth in the Investment Company Act of 1940.

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Notes

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53


Notes

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54



Additional Fund Information

Board of Trustees

John P. Amboian
Robert P. Bremner
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Judith M. Stockdale
Carole E. Stone
Virginia L. Stringer
Terence J. Toth

Fund Manager

Nuveen Fund Advisors, Inc.
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

Quarterly Portfolio of Investments and Proxy Voting Information

You may obtain (i) each Fund's quarterly portfolio of investments, (ii) information regarding how the Funds voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, and (iii) a description of the policies and procedures that the Funds used to determine how to vote proxies relating to portfolio securities 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 (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 100 F Street NE, Washington, D.C. 20549.

CEO Certification Disclosure

Each Fund's Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.

Each Fund has filed with the SEC the certification of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.

Common Share Information

Each Fund intends to repurchase shares of its own common stock in the future at such times and in such amounts as is deemed advisable. During the period covered by this report, the Funds repurchased shares of their common stock as shown in the accompanying table.

Fund   Common Shares
Repurchased		  
JTP     —    
JPS     —    
JHP     —    

 

Any future repurchases will be reported to shareholders in the next annual or semi-annual report.

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Nuveen Investments:
Serving Investors for Generations

Distributed by
Nuveen Securities, LLC
333 West Wacker Drive
Chicago, IL 60606
www.nuveen.com/cef

Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.

Focused on meeting investor needs.

Nuveen Investments provides high-quality investment services designed to help secure the long-term goals of institutional and individual investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets a wide range of specialized investment solutions which provide investors access to capabilities of its high-quality boutique investment affiliates—Nuveen Asset Management, Symphony Asset Management, NWQ Investment Management Company, Santa Barbara Asset Management, Tradewinds Global Investors, Winslow Capital Management and Gresham Investment Management. In total, Nuveen Investments managed $220 billion as of December 31, 2011.

Find out how we can help you.

To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.

Learn more about Nuveen Funds at: www.nuveen.com/cef

ESA-B-0112D



 

ITEM 2. CODE OF ETHICS.

 

Not applicable to this filing.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

Not applicable to this filing.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Not applicable to this filing.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable to this filing.

 

ITEM 6. SCHEDULE OF INVESTMENTS.

 

a) See Portfolio of Investments in Item 1.

 

b) Not applicable.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable to this filing.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable to this filing.

 

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 have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board 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.

 

(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 to this filing.

 

(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 2

 

By (Signature and Title)

/s/ Kevin J. McCarthy

 

 

Kevin J. McCarthy

 

Vice President and Secretary

 

 

Date: April 5, 2012

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By (Signature and Title)

/s/ Gifford R. Zimmerman

 

 

Gifford R. Zimmerman

 

Chief Administrative Officer

 

(principal executive officer)

 

 

Date: April 5, 2012

 

 

By (Signature and Title)

/s/ Stephen D. Foy

 

 

Stephen D. Foy

 

Vice President and Controller

 

(principal financial officer)

 

 

Date: April 5, 2012