Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions
to Common Shareholders
|
|
|
Common Share
|
|
|
|
|
Beginning
Common
Share
NAV
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
|
Total
|
|
|
From
Net
Investment
Income
|
|
|
From
Accumulated
Net Realized
Gains
|
|
|
Total
|
|
|
Ending
NAV
|
|
|
Ending
Share
Price
|
|
|
NXP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 3/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(e)
|
|
$
|
15.51
|
|
|
$
|
0.29
|
|
|
$
|
0.56
|
|
|
$
|
0.85
|
|
|
$
|
(0.27
|
)
|
|
$
|
—
|
|
|
$
|
(0.27
|
)
|
|
$
|
16.09
|
|
|
$
|
15.72
|
|
|
2019
|
|
|
15.12
|
|
|
|
0.57
|
|
|
|
0.37
|
|
|
|
0.94
|
|
|
|
(0.55
|
)
|
|
|
—
|
|
|
|
(0.55
|
)
|
|
|
15.51
|
|
|
|
14.64
|
|
|
2018
|
|
|
15.00
|
|
|
|
0.56
|
|
|
|
0.11
|
|
|
|
0.67
|
|
|
|
(0.55
|
)
|
|
|
—
|
|
|
|
(0.55
|
)
|
|
|
15.12
|
|
|
|
14.02
|
|
|
2017
|
|
|
15.46
|
|
|
|
0.56
|
|
|
|
(0.47
|
)
|
|
|
0.09
|
|
|
|
(0.55
|
)
|
|
|
—
|
|
|
|
(0.55
|
)
|
|
|
15.00
|
|
|
|
14.03
|
|
|
2016
|
|
|
15.17
|
|
|
|
0.58
|
|
|
|
0.27
|
|
|
|
0.85
|
|
|
|
(0.56
|
)
|
|
|
—
|
|
|
|
(0.56
|
)
|
|
|
15.46
|
|
|
|
14.89
|
|
|
2015
|
|
|
14.43
|
|
|
|
0.60
|
|
|
|
0.76
|
|
|
|
1.36
|
|
|
|
(0.62
|
)
|
|
|
—
|
|
|
|
(0.62
|
)
|
|
|
15.17
|
|
|
|
14.51
|
|
|
|
|
|
NXQ
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 3/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(e)
|
|
|
14.86
|
|
|
|
0.27
|
|
|
|
0.49
|
|
|
|
0.76
|
|
|
|
(0.25
|
)
|
|
|
—
|
|
|
|
(0.25
|
)
|
|
|
15.37
|
|
|
|
14.98
|
|
|
2019
|
|
|
14.52
|
|
|
|
0.53
|
|
|
|
0.31
|
|
|
|
0.84
|
|
|
|
(0.50
|
)
|
|
|
—
|
|
|
|
(0.50
|
)
|
|
|
14.86
|
|
|
|
13.93
|
|
|
2018
|
|
|
14.47
|
|
|
|
0.52
|
|
|
|
0.05
|
|
|
|
0.57
|
|
|
|
(0.52
|
)
|
|
|
—
|
|
|
|
(0.52
|
)
|
|
|
14.52
|
|
|
|
13.47
|
|
|
2017
|
|
|
14.88
|
|
|
|
0.53
|
|
|
|
(0.42
|
)
|
|
|
0.11
|
|
|
|
(0.52
|
)
|
|
|
—
|
|
|
|
(0.52
|
)
|
|
|
14.47
|
|
|
|
13.41
|
|
|
2016
|
|
|
14.64
|
|
|
|
0.55
|
|
|
|
0.23
|
|
|
|
0.78
|
|
|
|
(0.54
|
)
|
|
|
—
|
|
|
|
(0.54
|
)
|
|
|
14.88
|
|
|
|
14.13
|
|
|
2015
|
|
|
13.83
|
|
|
|
0.58
|
|
|
|
0.83
|
|
|
|
1.41
|
|
|
|
(0.60
|
)
|
|
|
—
|
|
|
|
(0.60
|
)
|
|
|
14.64
|
|
|
|
13.94
|
|
|
|
|
|
(a)
|
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, 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 NAV. 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 NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
|
|
Total Return Based on Common Share Price 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.
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share Supplemental Data/
Ratios Applicable to Common Shares
|
|
|
Common Share
Total Returns
|
|
|
|
|
|
Ratios to Average Net Assets
|
|
|
|
|
|
Based
on
NAV(a)
|
|
|
Based
on
Share
Price(a)
|
|
|
Ending
Net
Assets
(000)
|
|
|
Expenses(b)
|
|
|
Net
Investment
Income (Loss)
|
|
|
Portfolio
Turnover
Rate(c)
|
|
|
|
|
|
|
|
|
|
5.53
|
%
|
|
|
9.29
|
%
|
|
$
|
266,603
|
|
|
|
0.26
|
%*
|
|
|
3.65
|
%*
|
|
|
4
|
%
|
|
|
6.34
|
|
|
|
8.51
|
|
|
|
256,937
|
|
|
|
0.26
|
|
|
|
3.77
|
|
|
|
17
|
|
|
|
4.52
|
|
|
|
3.83
|
|
|
|
250,551
|
|
|
|
0.27
|
|
|
|
3.66
|
|
|
|
19
|
|
|
|
0.55
|
|
|
|
(2.20
|
)
|
|
|
248,518
|
|
|
|
0.28
|
|
|
|
3.64
|
|
|
|
28
|
|
|
|
5.78
|
|
|
|
6.82
|
|
|
|
256,228
|
|
|
|
0.28
|
|
|
|
3.88
|
|
|
|
25
|
|
|
|
9.52
|
|
|
|
12.42
|
|
|
|
251,296
|
|
|
|
0.32(d
|
)
|
|
|
4.01(d
|
)
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
5.16
|
|
|
|
9.43
|
|
|
|
272,262
|
|
|
|
0.31
|
%*
|
|
|
3.53
|
%*
|
|
|
6
|
|
|
|
5.95
|
|
|
|
7.32
|
|
|
|
263,310
|
|
|
|
0.31
|
|
|
|
3.64
|
|
|
|
12
|
|
|
|
3.98
|
|
|
|
4.32
|
|
|
|
257,250
|
|
|
|
0.32
|
|
|
|
3.53
|
|
|
|
20
|
|
|
|
0.69
|
|
|
|
(1.56
|
)
|
|
|
256,325
|
|
|
|
0.33
|
|
|
|
3.61
|
|
|
|
27
|
|
|
|
5.46
|
|
|
|
5.46
|
|
|
|
263,530
|
|
|
|
0.33
|
|
|
|
3.76
|
|
|
|
23
|
|
|
|
10.32
|
|
|
|
11.00
|
|
|
|
259,381
|
|
|
|
0.37(d
|
)
|
|
|
4.04(d
|
)
|
|
|
19
|
|
|
|
|
|
(b)
|
The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse
floaters held by the Fund (as described in Note 4 – Portfolio Securities and Investments in Derivatives, Inverse Floating Rate Securities), where applicable, as follows:
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
Year Ended 3/31:
|
|
Year Ended 3/31:
|
|
2020(e)
|
—%
|
|
2020(e)
|
—%
|
|
2019
|
—
|
|
2019
|
—
|
|
2018
|
—
|
|
2018
|
—
|
|
2017
|
—
|
|
2017
|
—
|
|
2016
|
—
|
|
2016
|
—
|
|
2015
|
—
|
|
2015
|
—**
|
|
|
|
|
(c)
|
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4 – Portfolio Securities and Investments in Derivatives, Investment Transactions) divided by the
average long-term market value during the period.
|
|
(d)
|
During the fiscal year ended March 31, 2015, the Adviser voluntarily reimbursed the Fund for certain expenses incurred in connection with its common shares equity shelf program. As a result the expenses and net
investment income (loss) ratios to average net assets applicable to common shares reflect the voluntary expense reimbursement from Adviser. The expenses and net investment income (loss) ratios to average net assets applicable to common shares
excluding this expense reimbursement from Adviser are as follows:
|
|
|
|
|
|
|
|
|
|
|
Ratios to
|
|
|
Ratios to
|
|
|
Average Net Assets
|
|
|
Average Net Assets
|
|
|
|
Net Investment
|
|
|
|
Net Investment
|
|
NXP
|
Expenses(b)
|
Income (Loss)
|
|
NXQ
|
Expenses(b)
|
Income (Loss)
|
|
Year Ended 3/31:
|
|
|
|
Year Ended 3/31:
|
|
|
|
2015
|
0.35%
|
3.98%
|
|
2015
|
0.40%
|
4.01%
|
|
|
|
|
(e)
|
For the six months ended September 30, 2019.
|
|
*
|
Annualized.
|
|
**
|
Rounds to less than 0.01%.
|
See accompanying notes to financial statements.
59
|
|
|
Financial Highlights (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions
to Common Shareholders
|
|
|
Common Share
|
|
|
|
|
Beginning
Common
Share
NAV
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
|
Total
|
|
|
From
Net
Investment
Income
|
|
|
From
Accumulated
Net Realized
Gains
|
|
|
Total
|
|
|
Shelf
Offering
Costs
|
|
|
Premium
Per Share
Sold
through
Shelf
Offering
|
|
|
Ending
NAV
|
|
|
Ending
Share
Price
|
|
|
NXR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 3/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(e)
|
|
$
|
15.85
|
|
|
$
|
0.29
|
|
|
$
|
0.61
|
|
|
$
|
0.90
|
|
|
$
|
(0.26
|
)
|
|
$
|
—
|
|
|
$
|
(0.26
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.49
|
|
|
$
|
16.08
|
|
|
2019
|
|
|
15.39
|
|
|
|
0.56
|
|
|
|
0.42
|
|
|
|
0.98
|
|
|
|
(0.52
|
)
|
|
|
—
|
|
|
|
(0.52
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.85
|
|
|
|
14.73
|
|
|
2018
|
|
|
15.29
|
|
|
|
0.55
|
|
|
|
0.09
|
|
|
|
0.64
|
|
|
|
(0.54
|
)
|
|
|
—
|
|
|
|
(0.54
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.39
|
|
|
|
14.23
|
|
|
2017
|
|
|
15.76
|
|
|
|
0.57
|
|
|
|
(0.51
|
)
|
|
|
0.06
|
|
|
|
(0.53
|
)
|
|
|
—
|
|
|
|
(0.53
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.29
|
|
|
|
14.21
|
|
|
2016
|
|
|
15.34
|
|
|
|
0.58
|
|
|
|
0.40
|
|
|
|
0.98
|
|
|
|
(0.56
|
)
|
|
|
—
|
|
|
|
(0.56
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.76
|
|
|
|
14.89
|
|
|
2015
|
|
|
14.46
|
|
|
|
0.60
|
|
|
|
0.89
|
|
|
|
1.49
|
|
|
|
(0.61
|
)
|
|
|
—
|
|
|
|
(0.61
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.34
|
|
|
|
14.78
|
|
|
|
|
|
NXC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 3/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(e)
|
|
|
15.21
|
|
|
|
0.27
|
|
|
|
0.49
|
|
|
|
0.76
|
|
|
|
(0.26
|
)
|
|
|
—
|
|
|
|
(0.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.71
|
|
|
|
15.72
|
|
|
2019
|
|
|
15.02
|
|
|
|
0.50
|
|
|
|
0.19
|
|
|
|
0.69
|
|
|
|
(0.52
|
)
|
|
|
—
|
|
|
|
(0.52
|
)
|
|
|
0.02
|
|
|
|
—
|
|
|
|
15.21
|
|
|
|
14.12
|
|
|
2018
|
|
|
15.00
|
|
|
|
0.57
|
|
|
|
0.09
|
|
|
|
0.66
|
|
|
|
(0.58
|
)
|
|
|
(0.06
|
)
|
|
|
(0.64
|
)
|
|
|
—
|
|
|
|
—
|
*
|
|
|
15.02
|
|
|
|
13.90
|
|
|
2017
|
|
|
15.68
|
|
|
|
0.60
|
|
|
|
(0.56
|
)
|
|
|
0.04
|
|
|
|
(0.62
|
)
|
|
|
(0.10
|
)
|
|
|
(0.72
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.00
|
|
|
|
14.83
|
|
|
2016
|
|
|
15.52
|
|
|
|
0.64
|
|
|
|
0.19
|
|
|
|
0.83
|
|
|
|
(0.65
|
)
|
|
|
(0.02
|
)
|
|
|
(0.67
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.68
|
|
|
|
16.70
|
|
|
2015
|
|
|
14.83
|
|
|
|
0.66
|
|
|
|
0.82
|
|
|
|
1.48
|
|
|
|
(0.68
|
)
|
|
|
(0.11
|
)
|
|
|
(0.79
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15.52
|
|
|
|
15.40
|
|
|
|
|
|
(a)
|
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, 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 NAV. 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 NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
|
|
Total Return Based on Common Share Price 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.
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share Supplemental Data/
Ratios Applicable to Common Shares
|
|
|
Common Share
Total Returns
|
|
|
|
|
|
Ratios to Average Net Assets
|
|
|
|
|
|
|
|
|
|
|
|
Based
on
NAV(a)
|
|
|
Based
on
Share
Price(a)
|
|
|
Ending
Net
Assets
(000)
|
|
|
Expenses(b)
|
|
|
Net
Investment
Income (Loss)
|
|
|
Portfolio
Turnover
Rate(c)
|
|
|
|
|
|
|
|
|
|
5.71
|
%
|
|
|
11.00
|
%
|
|
$
|
215,121
|
|
|
|
0.31
|
%**
|
|
|
3.52
|
%**
|
|
|
6
|
%
|
|
|
6.53
|
|
|
|
7.31
|
|
|
|
206,778
|
|
|
|
0.32
|
|
|
|
3.62
|
|
|
|
17
|
|
|
|
4.19
|
|
|
|
3.87
|
|
|
|
200,765
|
|
|
|
0.33
|
|
|
|
3.55
|
|
|
|
15
|
|
|
|
0.37
|
|
|
|
(1.09
|
)
|
|
|
199,496
|
|
|
|
0.33
|
|
|
|
3.61
|
|
|
|
29
|
|
|
|
6.56
|
|
|
|
4.76
|
|
|
|
205,595
|
|
|
|
0.34
|
|
|
|
3.81
|
|
|
|
22
|
|
|
|
10.46
|
|
|
|
12.87
|
|
|
|
200,153
|
|
|
|
0.38(d
|
)
|
|
|
3.99(d
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00
|
|
|
|
13.26
|
|
|
|
99,778
|
|
|
|
0.34
|
**
|
|
|
3.50
|
**
|
|
|
1
|
|
|
|
4.82
|
|
|
|
5.44
|
|
|
|
96,573
|
|
|
|
0.55
|
|
|
|
3.38
|
|
|
|
23
|
|
|
|
4.37
|
|
|
|
(2.23
|
)
|
|
|
95,357
|
|
|
|
0.37
|
|
|
|
3.73
|
|
|
|
20
|
|
|
|
0.20
|
|
|
|
(6.98
|
)
|
|
|
94,310
|
|
|
|
0.37
|
|
|
|
3.89
|
|
|
|
24
|
|
|
|
5.51
|
|
|
|
13.25
|
|
|
|
98,494
|
|
|
|
0.37
|
|
|
|
4.18
|
|
|
|
10
|
|
|
|
10.20
|
|
|
|
13.84
|
|
|
|
97,421
|
|
|
|
0.37
|
|
|
|
4.30
|
|
|
|
7
|
|
|
|
|
|
(b)
|
The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse
floaters held by the Fund (as described in Note 4 – Portfolio Securities and Investments in Derivatives, Inverse Floating Rate Securities), where applicable, as follows:
|
|
|
|
|
|
|
|
NXR
|
|
|
NXC
|
|
|
Year Ended 3/31:
|
|
|
Year Ended 3/31:
|
|
|
2020(e)
|
—%
|
|
2020(e)
|
—%
|
|
2019
|
—
|
|
2019
|
—
|
|
2018
|
—
|
|
2018
|
—
|
|
2017
|
—
|
|
2017
|
—
|
|
2016
|
—
|
|
2016
|
—
|
|
2015
|
—
|
|
2015
|
—
|
|
|
|
|
(c)
|
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4 – Portfolio Securities and Investments in Derivatives, Investment Transactions) divided by the
average long-term market value during the period.
|
|
(d)
|
During the fiscal year ended March 31, 2015, the Adviser voluntarily reimbursed the Fund for certain expenses incurred in connection with its common shares equity shelf program. As a result the expenses and net
investment income (loss) ratios to average net assets applicable to common shares reflect the voluntary expense reimbursement from Adviser. The expenses and net investment income (loss) ratios to average net assets applicable to common shares
excluding this expense reimbursement from Adviser are as follows:
|
|
|
|
|
|
|
Ratios to
|
|
|
Average Net Assets
|
|
|
|
Net Investment
|
|
NXR
|
Expenses(b)
|
Income (Loss)
|
|
Year Ended 3/31:
|
|
|
|
2015
|
0.42%
|
3.96%
|
|
|
|
|
(e)
|
For the six months ended September 30, 2019.
|
|
*
|
Rounds to less than $0.01 per share.
|
|
**
|
Annualized.
|
See accompanying notes to financial statements.
61
|
|
|
Financial Highlights (Unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions
to Common Shareholders
|
|
|
Common Share
|
|
|
|
|
Beginning
Common
Share
NAV
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
|
Total
|
|
|
From
Net
Investment
Income
|
|
|
From
Accumulated
Net Realized
Gains
|
|
|
Total
|
|
|
Ending
NAV
|
|
|
Ending
Common
Share
Price
|
|
|
NXN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended 3/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(d)
|
|
$
|
14.08
|
|
|
$
|
0.25
|
|
|
$
|
0.32
|
|
|
$
|
0.57
|
|
|
$
|
(0.24
|
)
|
|
$
|
—
|
|
|
$
|
(0.24
|
)
|
|
$
|
14.41
|
|
|
$
|
13.80
|
|
|
2019
|
|
|
13.93
|
|
|
|
0.50
|
|
|
|
0.15
|
|
|
|
0.65
|
|
|
|
(0.50
|
)
|
|
|
—
|
|
|
|
(0.50
|
)
|
|
|
14.08
|
|
|
|
13.52
|
|
|
2018
|
|
|
14.04
|
|
|
|
0.52
|
|
|
|
(0.09
|
)
|
|
|
0.43
|
|
|
|
(0.54
|
)
|
|
|
—
|
|
|
|
(0.54
|
)
|
|
|
13.93
|
|
|
|
12.98
|
|
|
2017
|
|
|
14.53
|
|
|
|
0.55
|
|
|
|
(0.49
|
)
|
|
|
0.06
|
|
|
|
(0.55
|
)
|
|
|
—
|
|
|
|
(0.55
|
)
|
|
|
14.04
|
|
|
|
13.69
|
|
|
2016
|
|
|
14.52
|
|
|
|
0.57
|
|
|
|
(0.01
|
)
|
|
|
0.56
|
|
|
|
(0.55
|
)
|
|
|
—
|
|
|
|
(0.55
|
)
|
|
|
14.53
|
|
|
|
14.06
|
|
|
2015
|
|
|
13.95
|
|
|
|
0.56
|
|
|
|
0.58
|
|
|
|
1.14
|
|
|
|
(0.57
|
)
|
|
|
—
|
|
|
|
(0.57
|
)
|
|
|
14.52
|
|
|
|
14.13
|
|
|
|
|
|
(a)
|
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, 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 NAV. 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 NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
|
|
Total Return Based on Common Share Price 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.
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share Supplemental Data/
Ratios Applicable to Common Shares
|
|
|
Common Share
Total Returns
|
|
|
|
|
|
Ratios to Average Net Assets
|
|
|
|
|
|
Based
on
NAV(a)
|
|
|
Based
on
Share
Price(a)
|
|
|
Ending
Net
Assets
(000)
|
|
|
Expenses(b)
|
|
|
Net
Investment
Income (Loss)
|
|
|
Portfolio
Turnover
Rate(c)
|
|
|
|
|
|
|
|
|
|
4.05
|
%
|
|
|
3.83
|
%
|
|
$
|
56,572
|
|
|
|
0.40
|
%*
|
|
|
3.44
|
%*
|
|
|
1
|
%
|
|
|
4.80
|
|
|
|
8.26
|
|
|
|
55,270
|
|
|
|
0.42
|
|
|
|
3.59
|
|
|
|
16
|
|
|
|
3.05
|
|
|
|
(1.41
|
)
|
|
|
54,679
|
|
|
|
0.43
|
|
|
|
3.64
|
|
|
|
17
|
|
|
|
0.40
|
|
|
|
1.26
|
|
|
|
55,120
|
|
|
|
0.44
|
|
|
|
3.83
|
|
|
|
29
|
|
|
|
3.98
|
|
|
|
3.63
|
|
|
|
57,031
|
|
|
|
0.42
|
|
|
|
3.97
|
|
|
|
14
|
|
|
|
8.31
|
|
|
|
9.84
|
|
|
|
56,988
|
|
|
|
0.43
|
|
|
|
3.92
|
|
|
|
16
|
|
|
|
|
|
(b)
|
The expense ratios reflect, among other things, the interest expense deemed to have been paid by the Fund on the floating rate certificates issued by the special purpose trusts for the self-deposited inverse
floaters held by the Fund (as described in Note 4 – Portfolio Securities and Investments in Derivatives, Inverse Floating Rate Securities), where applicable, as follows:
|
|
|
|
|
NXN
|
|
|
Year Ended 3/31:
|
|
|
2020(d)
|
0.02%*
|
|
2019
|
0.02
|
|
2018
|
0.02
|
|
2017
|
0.02
|
|
2016
|
0.01
|
|
2015
|
0.01
|
|
|
|
|
(c)
|
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4 – Portfolio Securities and Investments in Derivatives, Investment Transactions) divided by the
average long-term market value during the period.
|
|
(d)
|
For the six months ended September 30, 2019.
|
|
*
|
Annualized.
|
See accompanying notes to financial statements.
63
Notes to
Financial Statements (Unaudited)
1. General Information
Fund Information
The funds covered in this report and their corresponding New York Stock Exchange (“NYSE”) symbols are as follows (each a “Fund” and collectively, the “Funds”):
|
•
|
Nuveen Select Tax-Free Income Portfolio (NXP)
|
|
•
|
Nuveen Select Tax-Free Income Portfolio 2 (NXQ)
|
|
•
|
Nuveen Select Tax-Free Income Portfolio 3 (NXR)
|
|
•
|
Nuveen California Select Tax-Free Income Portfolio (NXC)
|
|
•
|
Nuveen New York Select Tax-Free Income Portfolio (NXN)
|
The Funds are registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as diversified closed-end management investment companies. NXP, NXQ, NXR, NXC, and NXN were organized
as Massachusetts business trusts on January 29, 1992, March 30, 1992, May 28, 1992, March 30, 1992, and March 30, 1992, respectively.
The end of the reporting period for the Funds is September 30, 2019, and the period covered by these Notes to Financial Statements is the six months ended September 30, 2019 (the “current fiscal
period”).
Investment Adviser
The Funds’ investment adviser is Nuveen Fund Advisors, LLC (the “Adviser”), a subsidiary of Nuveen, LLC (“Nuveen”). Nuveen is the investment management arm of Teachers Insurance and Annuity
Association of America (TIAA). The Adviser has overall responsibility for management of the Funds, oversees the management of the Funds’ portfolios, manages the Funds’ business affairs and provides certain clerical, bookkeeping and other
administrative services, and, if necessary, asset allocation decisions. The Adviser has entered into sub-advisory agreements with Nuveen Asset Management, LLC, (the “Sub-Adviser”), a subsidiary of the Adviser, under which the Sub-Adviser manages the
investment portfolios of the Funds.
2. Significant Accounting Policies
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require the use of estimates
made by management and the evaluation of subsequent events. Actual results may differ from those estimates. Each Fund is an investment company and follows the accounting guidance in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification 946, Financial Services — Investment Companies. The net asset value (“NAV”) for financial reporting purposes may differ from the NAV for processing security and common share transactions. The NAV for financial reporting
purposes includes security and common share transactions through the date of the report. Total return is computed based on the NAV used for processing security and common share transactions. The following is a summary of the significant accounting
policies consistently followed by the Funds.
Compensation
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 Funds’ Board of Trustees (the “Board”) has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled
to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
Distributions to Common Shareholders
Distributions to common shareholders are recorded on the ex-dividend date. The amount, character and timing of distributions are determined in accordance with federal income tax regulations, which
may differ from U.S. GAAP.
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.
64
Investments and Investment Income
Securities transactions are accounted for as of the trade date for financial reporting purposes. Realized gains and losses on securities transactions are based upon the specific identification
method. Investment income is comprised of interest income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, and is recorded on an accrual basis. Interest income also reflects payment-in-kind
(“PIK”) interest and paydown gains and losses, if any. PIK interest represents income received in the form of securities in lieu of cash.
Netting Agreements
In the ordinary course of business, the Funds may enter into transactions subject to enforceable International Swaps and Derivatives Association, Inc. (ISDA) master agreements or other similar
arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows each Fund to offset certain securities and derivatives with a specific counterparty, when applicable, as well as any collateral received or delivered to
that counterparty based on the terms of the agreements. Generally, each Fund manages its cash collateral and securities collateral on a counterparty basis.
The Funds’ investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 4 – Portfolio Securities and Investments in Derivatives.
New Accounting Pronouncements and Rule Issuances
FASB Accounting Standards Update (“ASU”) 2017-08 (“ASU 2017-08”) Premium Amortization on Purchased Callable Debt Securities
The FASB has issued ASU 2017-08, which shortens the premium amortization period for purchased non-contingently callable debt securities. ASU 2017-08 specifies that the premium amortization period
ends at the earliest call date, for purchased non-contingently callable debt securities. ASU 2017-08 effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. During the current fiscal period, ASU
2017-08 became effective for the Funds and it did not have a material impact on the Funds’ financial statements.
Fair Value Measurement: Disclosure Framework
During August 2018, the FASB issued ASU 2018-13 (“ASU 2018-13”), Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. ASU 2018-13
modifies the disclosures required by Topic 820, Fair Value Measurements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management early
implemented this guidance and it did not have a material impact on the Funds’ financial statements.
3. Investment Valuation and Fair Value Measurements
The fair valuation input levels as described below are for fair value measurement purposes.
The Funds’ investments in securities are recorded at their estimated fair value. Fair value is defined as the price that would be received 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 following is a summary of the three-tiered hierarchy of valuation input levels.
Level 1 – Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
Level 2 – Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spreads,
etc.).
Level 3 – Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
Prices of fixed income securities are provided by an independent pricing service (“pricing service”) approved by the Board. 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. These securities are generally classified as Level 2. 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 the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the observability
of the significant inputs.
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 Board and/or its appointee 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
65
Notes to Financial Statements (Unaudited) (continued)
security whose market price is not available from a 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 NAV (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 Level 3 depending on the observability of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Board
and/or its appointee.
The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of each Fund’s fair value
measurements as of the end of the reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Long-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
259,362,458
|
|
|
$
|
—
|
|
|
$
|
259,362,458
|
|
|
Short-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
|
—
|
|
|
|
2,538,048
|
|
|
|
—
|
|
|
|
2,538,048
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
261,900,506
|
|
|
$
|
—
|
|
|
$
|
261,900,506
|
|
|
|
|
|
NXQ
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Long-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
267,437,951
|
|
|
$
|
—
|
|
|
$
|
267,437,951
|
|
|
Short-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
|
—
|
|
|
|
2,610,378
|
|
|
|
—
|
|
|
|
2,610,378
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
270,048,329
|
|
|
$
|
—
|
|
|
$
|
270,048,329
|
|
|
|
|
|
NXR
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Long-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
211,480,040
|
|
|
$
|
—
|
|
|
$
|
211,480,040
|
|
|
Short-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
|
—
|
|
|
|
2,025,707
|
|
|
|
—
|
|
|
|
2,025,707
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
213,505,747
|
|
|
$
|
—
|
|
|
$
|
213,505,747
|
|
|
|
|
|
NXC
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Long-Term Investments**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
97,398,928
|
|
|
$
|
—
|
|
|
$
|
97,398,928
|
|
|
Short-Term Investments**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
|
—
|
|
|
|
1,390,000
|
|
|
|
—
|
|
|
|
1,390,000
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
98,788,928
|
|
|
$
|
—
|
|
|
$
|
98,788,928
|
|
|
|
|
|
NXN
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
Long-Term Investments**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
56,852,328
|
|
|
$
|
—
|
|
|
$
|
56,852,328
|
|
|
|
|
|
*
|
Refer to the Fund’s Portfolio of Investments for state classifications.
|
|
**
|
Refer to the Fund’s Portfolio of Investments for industry classifications.
|
66
4. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Inverse Floating Rate Securities
Each Fund is authorized to invest in inverse floating rate securities. An inverse floating rate security is created by depositing a municipal bond (referred to as an “Underlying Bond”), typically
with a fixed interest rate, into a special purpose tender option bond (“TOB”) trust (referred to as the “TOB Trust”) created by or at the direction of one or more Funds. In turn, the TOB Trust issues (a) floating rate certificates (referred to as
“Floaters”), in face amounts equal to some fraction of the Underlying Bond’s par amount or market value, and (b) an inverse floating rate certificate (referred to as an “Inverse Floater”) that represents all remaining or residual interest in the TOB
Trust. Floaters typically pay short-term tax-exempt interest rates to third parties who are also provided a right to tender their certificate and receive its par value, which may be paid from the proceeds of a remarketing of the Floaters, by a loan
to the TOB Trust from a third party liquidity provider (“Liquidity Provider”), or by the sale of assets from the TOB Trust. The Inverse Floater is issued to a long term investor, such as one or more of the Funds. The income received by the Inverse
Floater holder varies inversely with the short-term rate paid to holders of the Floaters, and in most circumstances the Inverse Floater holder bears substantially all of the Underlying Bond’s downside investment risk and also benefits
disproportionately from any potential appreciation of the Underlying Bond’s value. The value of an Inverse Floater will be more volatile than that of the Underlying Bond because the interest rate is dependent on not only the fixed coupon rate of the
Underlying Bond but also on the short-term interest paid on the Floaters, and because the Inverse Floater essentially bears the risk of loss (and possible gain) of the greater face value of the Underlying Bond.
The Inverse Floater held by a Fund gives the Fund the right to (a) cause the holders of the Floaters to tender their certificates at par (or slightly more than par in certain circumstances), and (b)
have the trustee of the TOB Trust (the “Trustee”) transfer the Underlying Bond held by the TOB Trust to the Fund, thereby collapsing the TOB Trust.
The Fund may acquire an Inverse Floater in a transaction where it (a) transfers an Underlying Bond that it owns to a TOB Trust created by a third party or (b) transfers an Underlying Bond that it
owns, or that it has purchased in a secondary market transaction for the purpose of creating an Inverse Floater, to a TOB Trust created at its direction, and in return receives the Inverse Floater of the TOB Trust (referred to as a “self-deposited
Inverse Floater”). A Fund may also purchase an Inverse Floater in a secondary market transaction from a third party creator of the TOB Trust without first owning the Underlying Bond (referred to as an “externally-deposited Inverse Floater”).
An investment in a self-deposited Inverse Floater is accounted for as a “financing” transaction (i.e., a secured borrowing). For a self-deposited Inverse Floater, the Underlying Bond deposited into
the TOB Trust is identified in the Fund’s Portfolio of Investments as “(UB) – Underlying bond of an inverse floating rate trust reflected as a financing transaction,” with the Fund recognizing as liabilities, labeled “Floating rate obligations” on
the Statement of Assets and Liabilities, (a) the liquidation value of Floaters issued by the TOB Trust, and (b) the amount of any borrowings by the TOB Trust from a Liquidity Provider to enable the TOB Trust to purchase outstanding Floaters in lieu
of a remarketing. In addition, the Fund recognizes in “Investment Income” the entire earnings of the Underlying Bond, and recognizes (a) the interest paid to the holders of the Floaters or on the TOB Trust’s borrowings, and (b) other expenses related
to remarketing, administration, trustee, liquidity and other services to a TOB Trust, as a component of “Interest expense and amortization of offering costs” on the Statement of Operations. Earnings due from the Underlying Bond and interest due to
the holders of the Floaters as of the end of the reporting period are recognized as components of “Receivable for interest” and “Payable for interest” on the Statement of Assets and Liabilities, respectively.
In contrast, an investment in an externally-deposited Inverse Floater is accounted for as a purchase of the Inverse Floater and is identified in the Fund’s Portfolio of Investments as “(IF) – Inverse
floating rate investment.” For an externally-deposited Inverse Floater, a Fund’s Statement of Assets and Liabilities recognizes the Inverse Floater and not the Underlying Bond as an asset, and the Fund does not recognize the Floaters, or any related
borrowings from a Liquidity Provider, as a liability. Additionally, the Fund reflects in “Investment Income” only the net amount of earnings on the Inverse Floater (net of the interest paid to the holders of the Floaters or the Liquidity Provider as
lender, and the expenses of the Trust), and does not show the amount of that interest paid or the expenses of the TOB Trust as described above as interest expense on the Statement of Operations.
Fees paid upon the creation of a TOB Trust for self-deposited Inverse Floaters and externally-deposited Inverse Floaters are recognized as part of the cost basis of the Inverse Floater and are
capitalized over the term of the TOB Trust.
As of the end of the reporting period, the aggregate value of Floaters issued by each Fund’s TOB Trust for self-deposited Inverse Floaters and externally-deposited Inverse Floaters was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Obligations Outstanding
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Floating rate obligations: self-deposited Inverse Floaters
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
425,000
|
|
|
Floating rate obligations: externally-deposited Inverse Floaters
|
|
|
2,250,000
|
|
|
|
3,750,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,065,000
|
|
|
Total
|
|
$
|
2,250,000
|
|
|
$
|
3,750,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,490,000
|
|
67
Notes to Financial Statements (Unaudited) (continued)
During the current fiscal period, the average amount of Floaters (including any borrowings from a Liquidity Provider) outstanding, and the average annual interest rate and fees related to
self-deposited Inverse Floaters, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-Deposited Inverse Floaters
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Average floating rate obligations outstanding
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
425,000
|
|
|
Average annual interest rate and fees
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
2.06
|
%
|
TOB Trusts are supported by a liquidity facility provided by a Liquidity Provider pursuant to which the Liquidity Provider agrees, in the event that Floaters are (a) tendered to the Trustee for
remarketing and the remarketing does not occur, or (b) subject to mandatory tender pursuant to the terms of the TOB Trust agreement, to either purchase Floaters or to provide the Trustee with an advance from a loan facility to fund the purchase of
Floaters by the TOB Trust. In certain circumstances, the Liquidity Provider may otherwise elect to have the Trustee sell the Underlying Bond to retire the Floaters that were tendered and not remarketed prior to providing such a loan. In these
circumstances, the Liquidity Provider remains obligated to provide a loan to the extent that the proceeds of the sale of the Underlying Bond is not sufficient to pay the purchase price of the Floaters.
The size of the commitment under the loan facility for a given TOB Trust is at least equal to the balance of that TOB Trust’s outstanding Floaters plus any accrued interest. In consideration of the
loan facility, fee schedules are in place and are charged by the Liquidity Provider(s). Any loans made by the Liquidity Provider will be secured by the purchased Floaters held by the TOB Trust. Interest paid on any outstanding loan balances will be
effectively borne by the Fund that owns the Inverse Floaters of the TOB Trust that has incurred the borrowing and may be at a rate that is greater than the rate that would have been paid had the Floaters been successfully remarketed.
As described above, any amounts outstanding under a liquidity facility are recognized as a component of “Floating rate obligations” on the Statement of Assets and Liabilities by the Fund holding the
corresponding Inverse Floaters issued by the borrowing TOB Trust. As of the end of the reporting period, there were no loans outstanding under any such facility.
Each Fund may also enter into shortfall and forbearance agreements (sometimes referred to as a “recourse arrangement”) (TOB Trusts involving such agreements are referred to herein as “Recourse
Trusts”), under which a Fund agrees to reimburse the Liquidity Provider for the Trust’s Floaters, in certain circumstances, for the amount (if any) by which the liquidation value of the Underlying Bond held by the TOB Trust may fall short of the sum
of the liquidation value of the Floaters issued by the TOB Trust plus any amounts borrowed by the TOB Trust from the Liquidity Provider, plus any shortfalls in interest cash flows. Under these agreements, a Fund’s potential exposure to losses related
to or on an Inverse Floater may increase beyond the value of the Inverse Floater as a Fund may potentially be liable to fulfill all amounts owed to holders of the Floaters or the Liquidity Provider. Any such shortfall amount in the aggregate is
recognized as “Unrealized depreciation on Recourse Trusts” on the Statement of Assets and Liabilities.
As of the end of the reporting period, each Fund’s maximum exposure to the Floaters issued by Recourse Trusts for self-deposited Inverse Floaters and externally-deposited Inverse Floaters was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Obligations – Recourse Trusts
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Maximum exposure to Recourse Trusts: self-deposited Inverse Floaters
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
425,000
|
|
|
Maximum exposure to Recourse Trusts: externally-deposited Inverse Floaters
|
|
|
2,250,000
|
|
|
|
3,750,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
2,250,000
|
|
|
$
|
3,750,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
425,000
|
|
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.
Investment Transactions
Long-term purchases and sales (including maturities) during the current fiscal period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Purchases
|
|
$
|
11,310,455
|
|
|
$
|
16,321,227
|
|
|
$
|
13,348,802
|
|
|
$
|
2,299,344
|
|
|
$
|
2,123,861
|
|
|
Sales and maturities
|
|
|
12,385,921
|
|
|
|
14,786,134
|
|
|
|
13,597,541
|
|
|
|
1,441,966
|
|
|
|
607,472
|
|
68
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
earmarked securities in their portfolios with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments.
As of the end of the reporting period, the following Fund’s outstanding when-issued/delayed delivery purchase commitments were as follows:
|
|
|
|
|
NXN
|
|
Outstanding when-issued/delayed delivery purchase commitments
|
$420,572
|
Investments in Derivatives
In addition to the inverse floating rate securities in which each Fund may invest, which are considered portfolio securities for financial reporting purposes, each Fund is authorized to invest in
certain other derivative instruments, such as futures, options and swap contracts. Each Fund limits its investments in futures, options on futures and swap contracts to the extent necessary for the Adviser to claim the exclusion from registration by
the Commodity Futures Trading Commission as a commodity pool operator with respect to the Fund. 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.
Although the Funds are authorized to invest in derivative instruments and may do so in the future, they did not make any such investments during the current fiscal period.
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.
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.
5. Fund Shares
Common Shares Equity Shelf Program and Offering Costs
NXC has filed a registration statement with the Securities and Exchange Commission (“SEC”) authorizing the Fund to issue additional common shares through one or more equity shelf programs (“Shelf
Offering”), which became effective with the SEC during a prior fiscal period.
Under this Shelf Offering, the Fund, subject to market conditions, may raise additional equity capital by issuing additional common shares from time to time in varying amounts and by different
offering methods at a net price at or above the Fund’s NAV per common share. In the event the Fund’s Shelf Offering registration statement is no longer current, the Fund may not issue additional common shares until a post-effective amendment to the
registration statement has been filed with the SEC.
Additional authorized common shares, common shares sold and offering proceeds, net of offering costs under the Fund’s Shelf Offering during the Fund’s prior fiscal period were as follows:
|
|
|
|
|
|
|
|
|
|
|
NXC
|
|
|
|
|
|
|
|
Six Months
|
|
|
Year
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
9/30/19
|
|
|
3/31/19
|
|
|
|
|
|
Additional authorized common shares
|
|
|
—
|
|
|
|
600,000
|
*
|
|
Common shares sold
|
|
|
—
|
|
|
|
—
|
|
|
Offering proceeds, net of offering costs
|
|
$
|
—
|
|
|
$
|
106,141
|
|
|
|
|
|
*
|
Represents additional authorized common shares for the period April 1, 2018 through July 31, 2018.
|
69
Notes to Financial Statements (Unaudited) (continued)
Costs incurred by the Fund in connection with its initial shelf registration are recorded as a prepaid expense and recognized as “Deferred offering costs” on the Statement of Assets and Liabilities.
These costs are amortized pro rata as common shares are sold and are recognized as a component of “Proceeds from shelf offering, net of offering costs” on the Statement of Changes in Net Assets. Any deferred offering costs remaining one year after
effectiveness of the initial shelf registration will be expensed. Costs incurred by the Fund to keep the shelf registration current are expensed as incurred and recognized as a component of “other expenses” on the Statement of Operations.
Common Shares Transactions
The Funds did not have any transactions in common shares during the current and prior fiscal period.
6. Income Tax Information
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. Therefore, no federal income tax provision is required. Furthermore, each Fund intends to satisfy conditions that will enable
interest from municipal securities, which is exempt from regular federal and designated state income taxes, to retain such tax-exempt status when distributed to shareholders of the Funds. Net realized capital gains and ordinary income distributions
paid by the Funds are subject to federal taxation.
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.
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 timing differences in
recognizing taxable market discount, timing differences in recognizing certain gains and losses on investment transactions and the treatment of investments in inverse floating rate securities reflected as financing transactions, if any. To the extent
that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAVs of the
Funds.
The table below presents the cost and unrealized appreciation (depreciation) of each Fund’s investment portfolio, as determined on a federal income tax basis, as of September 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Tax cost of investments
|
|
$
|
221,652,135
|
|
|
$
|
235,094,636
|
|
|
$
|
176,247,645
|
|
|
$
|
87,106,624
|
|
|
$
|
52,462,797
|
|
|
Gross unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appreciation
|
|
|
40,371,210
|
|
|
|
35,142,692
|
|
|
|
37,361,918
|
|
|
|
11,743,787
|
|
|
|
4,003,710
|
|
|
Depreciation
|
|
|
(122,839
|
)
|
|
|
(188,999
|
)
|
|
|
(103,816
|
)
|
|
|
(61,483
|
)
|
|
|
(38,971
|
)
|
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
40,248,371
|
|
|
$
|
34,953,693
|
|
|
$
|
37,258,102
|
|
|
$
|
11,682,304
|
|
|
$
|
3,964,739
|
|
Permanent differences, primarily due to expiration of capital loss carryforwards, taxable market discount and nondeductible offering costs, resulted in reclassifications among the Funds’ components
of net assets as of March 31, 2019, the Funds’ last tax year end.
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains as of March 31, 2019, the Funds’ last tax year end, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Undistributed net tax-exempt income1
|
|
$
|
906,039
|
|
|
$
|
722,409
|
|
|
$
|
539,411
|
|
|
$
|
157,982
|
|
|
$
|
62,098
|
|
|
Undistributed net ordinary income2
|
|
|
2,520
|
|
|
|
6,243
|
|
|
|
1,092
|
|
|
|
—
|
|
|
|
—
|
|
|
Undistributed net long-term capital gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
1
|
Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividend declared on March 1, 2019, paid on April 1, 2019.
|
|
2
|
Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.
|
The tax character of distributions paid during the Funds’ last tax year ended March 31, 2019 was designated for purposes of the dividends paid deduction as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
Distributions from net tax-exempt income
|
|
$
|
8,832,787
|
|
|
$
|
8,882,196
|
|
|
$
|
6,704,420
|
|
|
$
|
3,267,547
|
|
|
$
|
1,977,592
|
|
|
Distributions from net ordinary income2
|
|
|
214,602
|
|
|
|
45,521
|
|
|
|
105,362
|
|
|
|
28,068
|
|
|
|
555
|
|
|
Distributions from net long-term capital gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
2
|
Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.
|
70
As of March 31, 2019, the Funds’ last tax year end, the Funds had unused capital losses carrying forward available for federal income tax purposes to be applied against future capital gains, if any.
The capital losses are not subject to expiration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
NXN
|
|
|
|
|
|
Not subject to expiration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
|
|
$
|
246,781
|
|
|
$
|
471,803
|
|
|
$
|
106,961
|
|
|
$
|
305,729
|
|
|
$
|
1,038,943
|
|
|
Long-term
|
|
|
4,277,519
|
|
|
|
8,561,360
|
|
|
|
2,024,580
|
|
|
|
—
|
|
|
|
271,683
|
|
|
Total
|
|
$
|
4,524,300
|
|
|
$
|
9,033,163
|
|
|
$
|
2,131,541
|
|
|
$
|
305,729
|
|
|
$
|
1,310,626
|
|
As of March 31, 2019, the Funds’ last tax year end, $335,742 of NXQ’s capital loss carryforward expired.
During the Funds’ last tax year ended March 31, 2019, the following Funds utilized capital loss carryforwards as follows:
|
|
|
|
|
|
|
|
|
|
|
NXP
|
|
|
NXR
|
|
|
Utilized capital loss carryforwards
|
|
$
|
425,454
|
|
|
$
|
371,899
|
|
7. Management Fees and Other Transactions with Affiliates
Management Fees
Each Fund’s management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Sub-Adviser is compensated for its services to the
Funds from the management fees paid to the Adviser.
Each Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within each individual 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, payable monthly, for NXP, is calculated according to the following schedule:
|
|
|
|
|
|
|
|
NXP
|
|
|
Average Daily Net Assets*
|
|
Fund-Level Fee Rate
|
|
|
For the first $125 million
|
|
|
0.0500
|
%
|
|
For the next $125 million
|
|
|
0.0375
|
|
|
For the next $250 million
|
|
|
0.0250
|
|
|
For the next $500 million
|
|
|
0.0125
|
|
The annual fund-level fee, payable monthly, for each Fund (excluding NXP) is calculated according to the following schedule:
|
|
|
|
|
|
|
|
NXQ
|
|
|
|
|
NXR
|
|
|
|
|
NXC
|
|
|
|
|
NXN
|
|
|
Average Daily Net Assets*
|
|
Fund-Level Fee Rate
|
|
|
For the first $125 million
|
|
|
0.1000
|
%
|
|
For the next $125 million
|
|
|
0.0875
|
|
|
For the next $250 million
|
|
|
0.0750
|
|
|
For the next $500 million
|
|
|
0.0625
|
|
|
For the next $1 billion
|
|
|
0.0500
|
|
|
For the next $3 billion
|
|
|
0.0250
|
|
|
For managed assets over $5 billion
|
|
|
0.0125
|
|
71
Notes to Financial Statements (Unaudited) (continued)
The annual complex-level fee, payable monthly, for each Fund is calculated by multiplying the current complex-wide fee rate, determined according to the following schedule by the Funds’ daily net
assets:
|
|
|
|
|
|
Complex-Level Eligible Asset Breakpoint Level*
|
|
Effective Complex-Level Fee Rate at Breakpoint Level
|
|
|
$55 billion
|
|
|
0.2000
|
%
|
|
$56 billion
|
|
|
0.1996
|
|
|
$57 billion
|
|
|
0.1989
|
|
|
$60 billion
|
|
|
0.1961
|
|
|
$63 billion
|
|
|
0.1931
|
|
|
$66 billion
|
|
|
0.1900
|
|
|
$71 billion
|
|
|
0.1851
|
|
|
$76 billion
|
|
|
0.1806
|
|
|
$80 billion
|
|
|
0.1773
|
|
|
$91 billion
|
|
|
0.1691
|
|
|
$125 billion
|
|
|
0.1599
|
|
|
$200 billion
|
|
|
0.1505
|
|
|
$250 billion
|
|
|
0.1469
|
|
|
$300 billion
|
|
|
0.1445
|
|
|
|
|
* For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For
these purposes, 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 open-end and closed-end funds that constitute “eligible assets.” Eligible assets do not include assets
attributable to investments in other Nuveen funds or assets in excess of a determined amount (originally $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, but do not include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year. As of September 30, 2019, the complex-level
fee for each Fund was 0.1570%.
|
Other Transactions with Affiliates
Each Fund is permitted to purchase or sell securities from or to certain other funds managed by the Adviser (“inter-fund trade”) under specified conditions outlined in procedures adopted by the
Board. These procedures have been designed to ensure that any inter-fund trade of securities by the Fund from or to another fund that is, or could be, considered an affiliate of the Fund under certain limited circumstances by virtue of having a
common investment adviser (or affiliated investment adviser), common officer and/or common trustee complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each inter-fund trade is effected at the current market price as
provided by an independent pricing service. Unsettled inter-fund trades as of the end of the reporting period are recognized as a component of “Receivable for investments sold” and/or “Payable for investments purchased” on the Statement of Assets and
Liabilities, when applicable.
During the current fiscal period, the following Funds engaged in inter-fund trades pursuant to these procedures as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-Fund Trades
|
|
NXP
|
|
|
NXQ
|
|
|
NXR
|
|
|
NXC
|
|
|
Purchases
|
|
$
|
1,077,090
|
|
|
$
|
1,077,090
|
|
|
$
|
2,466,536
|
|
|
$
|
—
|
|
|
Sales
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,441
|
|
8. Borrowing Arrangements
Committed Line of Credit
The Funds, along with certain other funds managed by the Adviser (“Participating Funds”), have established a 364-day, $2.65 billion standby credit facility with a group of lenders, under which the
Participating Funds may borrow for various purposes other than leveraging for investment purposes. Each Participating Fund is allocated a designated proportion of the facility’s capacity (and its associated costs, as described below) based upon a
multi-factor assessment of the likelihood and frequency of its need to draw on the facility, the size of the Fund and its anticipated draws, and the potential importance of such draws to the operations and well-being of the Fund, relative to those of
the other Funds. A Fund may effect draws on the facility in excess of its designated capacity if and to the extent that other Participating Funds have undrawn capacity. The credit facility expires in June 2020 unless extended or renewed.
72
The credit facility has the following terms: a fee of 0.15% per annum on unused commitment amounts, and interest at a rate equal to the higher of (a) one-month LIBOR (London Inter-Bank Offered Rate)
plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statement of Operations, and
along with commitment fees, have been allocated among such Participating Funds based upon the relative proportions of the facility’s aggregate capacity reserved for them and other factors deemed relevant by the Adviser and the Board of each
Participating Fund.
During the current fiscal period, the Funds did not utilize this facility.
Inter-Fund Borrowing and Lending
The SEC has granted an exemptive order permitting registered open-end and closed-end Nuveen funds to participate in an inter-fund lending facility whereby the Nuveen funds may directly lend to and
borrow money from each other for temporary purposes (e.g., to satisfy redemption requests or when a sale of securities “fails,” resulting in an unanticipated cash shortfall) (the “Inter-Fund Program”). The closed-end Nuveen funds, including the Funds
covered by this shareholder report, will participate only as lenders, and not as borrowers, in the Inter-Fund Program because such closed-end funds rarely, if ever, need to borrow cash to meet redemptions. The Inter-Fund Program is subject to a
number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the Inter-Fund Program unless it receives a more favorable interest rate than is typically available from a bank or other
financial institution for a comparable transaction; (2) no fund may borrow on an unsecured basis through the Inter-Fund Program unless the fund’s outstanding borrowings from all sources immediately after the inter-fund borrowing total 10% or less of
its total assets; provided that if the borrowing fund has a secured borrowing outstanding from any other lender, including but not limited to another fund, the inter-fund loan must be secured on at least an equal priority basis with at least an
equivalent percentage of collateral to loan value; (3) if a fund’s total outstanding borrowings immediately after an inter-fund borrowing would be greater than 10% of its total assets, the fund may borrow through the inter-fund loan on a secured
basis only; (4) no fund may lend money if the loan would cause its aggregate outstanding loans through the Inter-Fund Program to exceed 15% of its net assets at the time of the loan; (5) a fund’s inter-fund loans to any one fund shall not exceed 5%
of the lending fund’s net assets; (6) the duration of inter-fund loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days; and (7) each inter-fund loan may be called on one business day’s
notice by a lending fund and may be repaid on any day by a borrowing fund. In addition, a Nuveen fund may participate in the Inter-Fund Program only if and to the extent that such participation is consistent with the fund’s investment objective and
investment policies. The Board is responsible for overseeing the Inter-Fund Program.
The limitations detailed above and the other conditions of the SEC exemptive order permitting the Inter-Fund Program are designed to minimize the risks associated with Inter-Fund Program for both the
lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there is a risk that the loan could be called on one day’s notice or not renewed, in which case the fund may
have to borrow from a bank at a higher rate or take other actions to payoff such loan if an inter-fund loan is not available from another fund. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional
borrowing costs.
During the current reporting period, none of the Funds covered by this shareholder report have entered into any inter-fund loan activity.
73
Additional Fund
Information
|
|
|
|
|
|
|
|
|
Board of Trustees
|
|
|
|
|
|
|
|
Margo Cook*
|
Jack B. Evans
|
William C. Hunter
|
Albin F. Moschner
|
John K. Nelson
|
Judith M. Stockdale
|
|
Carole E. Stone
|
Terence J. Toth
|
Margaret L. Wolff
|
Robert L. Young
|
|
|
|
|
|
* Interested Board Member.
|
|
|
|
|
|
|
|
Fund Manager
|
|
Custodian
|
Legal Counsel
|
Independent Registered
|
Transfer Agent and
|
|
Nuveen Fund Advisors, LLC
|
State Street Bank
|
Chapman and Cutler LLP
|
Public Accounting Firm
|
Shareholder Services
|
|
333 West Wacker Drive
|
|
& Trust Company
|
Chicago, IL 60603
|
KPMG LLP
|
|
Computershare Trust
|
|
Chicago, IL 60606
|
|
One Lincoln Street
|
|
200 East Randolph Street
|
Company, N.A.
|
|
|
|
Boston, MA 02111
|
|
Chicago, IL 60601
|
250 Royall Street
|
|
|
|
|
|
|
|
Canton, MA 02021
|
|
|
|
|
|
|
|
(800) 257-8787
|
Portfolio of Investments Information
Each Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its
report on Form N-Port. You may obtain this information on the SEC’s website at http://www.sec.gov.
Nuveen Funds’ Proxy Voting Information
You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request, by
calling Nuveen toll-free at (800) 257-8787 or on Nuveen’s website at www.nuveen.com and (ii) a description of the policies and procedures that each fund used to determine how to vote proxies relating to portfolio securities without charge, upon
request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov.
CEO Certification Disclosure
Each Fund’s Chief Executive Officer (CEO) 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 CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
Common Share Repurchases
Each Fund intends to repurchase, through its open-market share repurchase program, shares of its own common stock at such times and in such amounts as is deemed advisable. During the period covered
by this report, each Fund repurchased shares of its common stock as shown in the accompanying table. Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
|
|
|
|
|
|
|
|
|
NXP
|
NXQ
|
NXR
|
NXC
|
NXN
|
|
Common Shares repurchased
|
—
|
—
|
—
|
—
|
—
|
FINRA BrokerCheck
The Financial Industry Regulatory Authority (FINRA) provides information regarding the disciplinary history of FINRA member firms and associated investment professionals. This information as well as
an investor brochure describing FINRA BrokerCheck is available to the public by calling the FINRA BrokerCheck Hotline number at (800) 289-9999 or by visiting www.FINRA.org.
Glossary of Terms Used in this Report
|
■
|
Auction Rate Bond: An auction rate bond is a security whose interest payments are adjusted periodically through an
auction process, which process typically also serves as a means for buying and selling the bond. Auctions that fail to attract enough buyers for all the shares offered for sale are deemed to have “failed,” with current holders receiving a
formula-based interest rate until the next scheduled auction.
|
|
■
|
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.
|
|
■
|
Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid,
and consequently is a measure of the sensitivity of a bond’s or bond fund’s value to changes when market interest rates change. Generally, the longer a bond’s or fund’s duration, the more the price of the bond or fund will change as
interest rates change.
|
|
■
|
Effective Leverage: Effective leverage is a fund’s effective economic leverage, and includes both regulatory
leverage (see leverage) and the leverage effects of certain derivative investments in the fund’s portfolio. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in
addition to any regulatory leverage.
|
|
■
|
Industrial Development Revenue Bond (IDR): A unique type of revenue bond issued by a state or local government
agency on behalf of a private sector company and intended to build or acquire factories or other heavy equipment and tools.
|
|
■
|
Inverse Floating Rate Securities: Inverse floating rate securities, also known as inverse floaters or tender
option bonds (TOBs), are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust. This trust, in turn, (a) issues floating rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the deposited bond’s par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an “inverse floater”) to an investor (such
as a fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates’ holders, and in
most circumstances the holder of the inverse floater bears substantially all of the underlying bond’s downside invest- ment risk. The holder of the inverse floater typically also benefits disproportionately from any potential appreciation
of the underlying bond’s value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis.
|
|
■
|
Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more
than 100% of the investment capital.
|
|
■
|
Net Asset Value (NAV) Per Share: A fund’s Net Assets is equal to its total assets (securities, cash, accrued
earnings and receivables) less its total liabilities. NAV per share is equal to the fund’s Net Assets divided by its number of shares outstanding.
|
|
■
|
Pre-Refunding: Pre-Refunding, also known as advanced refundings or refinancings, is a procedure used by state and
local governments to refinance municipal bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to buy U.S. Treasury securities, the interest from which is used to make payments on the
higher-yielding bonds. Because of this collateral, pre-refunding generally raises a bond’s credit rating and thus its value.
|
|
■
|
Regulatory Leverage: Regulatory leverage consists of preferred shares issued by or borrowings of a fund. Both of
these are part of a fund’s capital structure. Regulatory leverage is subject to asset coverage limits set in the Investment Company Act of 1940.
|
75
Glossary of Terms Used in this Report (continued)
|
■
|
S&P Municipal Bond California Index: An unleveraged, market value-weighted index designed to measure the
performance of the tax-exempt, investment grade California municipal bond market. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
|
|
■
|
S&P Municipal Bond Index: An unleveraged, market value-weighted index designed to measure the performance of
the tax-exempt, investment grade U.S. municipal bond market. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
|
|
■
|
S&P Municipal Bond New York Index: An unleveraged, market value-weighted index designed to measure the
performance of the tax-exempt, investment grade New York municipal bond market. Index returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.
|
|
■
|
Total Investment Exposure: Total investment exposure is a fund’s assets managed by the Adviser that are
attributable to financial leverage. For these purposes, financial leverage includes a fund’s use of preferred stock and borrowings and 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.
|
|
■
|
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of the
bond. Income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market prices of
zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
|
76
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 Automatic
Reinvestment Plan
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 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.
77
Annual Investment Management Agreement Approval Process (Unaudited)
At a meeting held on May 21-23, 2019 (the “May Meeting”), the Board of Trustees (each, a “Board” and each Trustee, a
“Board Member”) of each Fund, including the Board Members who are not “interested persons” (as defined under the Investment Company Act of 1940 (the “1940 Act”)) (the “Independent Board Members”), approved, for its respective Fund, the renewal of the management agreement (each, an “Investment Management Agreement”) with Nuveen Fund
Advisors, LLC (the “Adviser”) pursuant to which the Adviser serves as investment adviser to such Fund and the sub-advisory agreement (each, a “Sub-Advisory Agreement”)
with Nuveen Asset Management, LLC (the “Sub-Adviser”) pursuant to which the Sub-Adviser serves as the sub-adviser to such Fund. Following an initial two-year period, the Board, including the Independent Board
Members, is required under the 1940 Act to review and approve each Investment Management Agreement and Sub-Advisory Agreement on behalf of the applicable Fund on an annual basis. The Investment Management Agreements and Sub-Advisory Agreements are
collectively referred to as the “Advisory Agreements” and the Adviser and the Sub-Adviser are collectively, the “Fund Advisers” and each, a “Fund Adviser.”
In response to a request on behalf of the Independent Board Members by independent legal counsel, the Board received and reviewed prior to the May Meeting extensive materials specifically prepared
for the annual review of Advisory Agreements by the Adviser as well as by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data. The materials provided in
connection with the annual review covered a breadth of subject matter including, but not limited to, a description of the nature, extent and quality of services provided by the Fund Advisers; a review of the Sub-Adviser and investment team; an
analysis of fund performance in absolute terms and as compared to the performance of certain peer funds and benchmarks with a focus on any performance outliers; an analysis of the fees and expense ratios of the Nuveen funds in absolute terms and as
compared to those of certain peer funds with a focus on any expense outliers; a description of portfolio manager compensation; a review of the secondary market trading of shares of the Nuveen closed-end funds (including, among other things, an
analysis of performance, distribution and valuation and capital raising trends in the broader closed-end fund market and in particular with respect to Nuveen closed-end funds; a review of the leverage management actions taken on behalf of the Nuveen
closed-end funds and their resulting impact on performance; and a description of the distribution management process and any capital management activities); a review of the performance of various service providers; a description of various
initiatives Nuveen had undertaken or continued during the year for the benefit of particular fund(s) and/or the complex; a description of the profitability or financial data of Nuveen and the Sub-Adviser; and a description of indirect benefits
received by the Fund Advisers as a result of their relationships with the Nuveen funds. The Board Members held an in-person meeting on April 17-18, 2019 (the “April Meeting”), in part, to review and discuss
the performance of the Nuveen funds and the Adviser’s evaluation of the various sub-advisers to the Nuveen funds. The Independent Board Members asked questions and requested additional information that was provided for the May Meeting.
The information prepared specifically for the annual review of the Advisory Agreements supplemented the information provided to the Board and its committees throughout the year. The Board and its
committees met regularly during the year and the information provided and topics discussed were relevant to the review of the Advisory Agreements. Some of these reports and other data included, among other things, materials that outlined the
investment performance of the Nuveen funds; strategic plans of the Adviser which may impact the services it provides to the Nuveen funds; the review of the Nuveen funds and applicable investment teams; the management of leverage financing for
closed-end funds; the secondary market trading of the closed-end funds and any actions to address discounts; compliance, regulatory and risk management matters; the trading practices of the various sub-advisers; valuation of securities; fund
expenses; and overall market and regulatory developments. The Board further continued its practice of seeking to meet periodically with the various sub-advisers to the Nuveen funds and their investment teams, when feasible. The Independent Board
Members considered the review of the Advisory Agreements to be an ongoing process and employed the accumulated information, knowledge, and experience the Board Members had gained during their tenure on the boards governing the Nuveen
78
funds and working with the Fund Advisers in their review of the Advisory Agreements. The contractual arrangements are a result of multiple years of review, negotiation and information provided in
connection with the boards’ annual review of the Nuveen funds’ advisory arrangements and oversight of the Nuveen funds.
The Independent Board Members were advised by independent legal counsel during the annual review process as well as throughout the year, including meeting in executive sessions with such counsel at
which no representatives from the Adviser or the Sub-Adviser were present. In connection with their annual review, the Independent Board Members also received a memorandum from independent legal counsel outlining their fiduciary duties and legal
standards in reviewing the Advisory Agreements.
In deciding to renew the Advisory Agreements, the Independent Board Members did not identify a particular factor or information as determinative or controlling, but rather the decision reflected the
comprehensive consideration of all the information provided, and each Board Member may have attributed different levels of importance to the various factors and information considered in connection with the approval process. The following summarizes
the principal factors and information, but not all the factors, the Board considered in deciding to renew the Advisory Agreements and its conclusions.
A. Nature, Extent and Quality of Services
In evaluating the renewal of the Advisory Agreements, the Independent Board Members received and considered information regarding the nature, extent and quality of the applicable
Fund Adviser’s services provided to the respective Fund with particular focus on the services and enhancements to such services provided during the last year. The Board recognized that the Adviser provides a comprehensive set of services necessary to
operate the Nuveen funds in a highly regulated industry and noted that the scope of such services has expanded over the years as a result of regulatory, market and other developments, such as the development of the liquidity management program and
expanded compliance programs. Some of the functions the Adviser is responsible for include, but are not limited to: product management (such as analyzing a fund’s position in the marketplace, setting dividends, preparing shareholder and intermediary
communications and other due diligence support); investment oversight (such as analyzing fund performance, sub-advisers and investment teams and analyzing trade executions of portfolio transactions, soft dollar practices and securities lending
activities); securities valuation services (such as executing the daily valuation process for portfolio securities and developing and recommending changes to valuation policies and procedures); risk management (such as overseeing operational and
investment risks, including stress testing); fund administration (such as preparing fund tax returns and other tax compliance services, overseeing the Nuveen funds’ independent public accountants and other service providers; managing fund budgets and
expenses; and helping to fulfill the funds’ regulatory filing requirements); oversight of shareholder services and transfer agency functions (such as oversight and liaison of transfer agent service providers which include registered shareholder
customer service and transaction processing); Board relations services (such as organizing and administering Board and committee meetings, preparing various reports to the Board and committees and providing other support services); compliance and
regulatory oversight services (such as developing and maintaining a compliance program to ensure compliance with applicable laws and regulations, monitoring compliance with applicable fund policies and procedures and adherence to investment
restrictions, and evaluating the compliance programs of the Nuveen fund sub-advisers and certain other service providers); legal support and oversight of outside law firms (such as with respect to filing and updating registration statements;
maintaining various regulatory registrations; and providing legal interpretations regarding fund activities, applicable regulations and implementation of policies and procedures); and leverage, capital and distribution management services. In
reviewing the scope and quality of services, the Board recognized the continued efforts and resources the Adviser and its affiliates have employed to continue to enhance their services for the benefit of the complex as well as particular Nuveen funds
over recent years. Such service enhancements have included, but are not limited to:
|
●
|
Fund Improvements and Product Management Initiatives – continuing to proactively manage the Nuveen fund complex as
a whole and at the individual fund level with an aim to enhance the shareholder outcomes through, among other things,
|
79
Annual Investment Management Agreement Approval Process (Unaudited) (continued)
repositioning funds, merging funds, reviewing and updating investment policies and benchmarks, modifying the composition of certain portfolio management teams and analyzing various
data to help devise such improvements;
|
●
|
Capital Initiatives – continuing to invest capital to support new funds with initial capital as well as to
facilitate modifications to the strategies or structure of existing funds;
|
|
●
|
Compliance Program Initiatives – continuing efforts to enhance the compliance program through, among other
things, internally integrating various portfolio management teams and aligning compliance support accordingly, completing a comprehensive review of existing policies and procedures and revising such policies and procedures as
appropriate, enhancing compliance-related technologies and workflows, and optimizing compliance shared services across the organization and affiliates;
|
|
●
|
Risk Management and Valuation Services – continuing efforts to strengthen the risk management functions, including
through, among other things, enhancing the interaction and reporting between the investment risk management team and various affiliates, increasing the efficiency of risk monitoring performed on the Nuveen funds through improved
reporting, continuing to implement risk programs designed to provide a more disciplined and consistent approach to identifying and mitigating operational risks, continuing progress on implementing a liquidity program that complies with
the new liquidity regulatory requirements and continuing to oversee the daily valuation process;
|
|
●
|
Additional Compliance Services – continuing investment of time and resources necessary to develop the compliance
policies and procedures and other related tools necessary to meet the various new regulatory requirements affecting the Nuveen funds that have been adopted over recent years;
|
|
●
|
Government Relations – continuing efforts of various Nuveen teams and affiliates to advocate and communicate their
positions with lawmakers and other regulatory bodies on issues that will impact the Nuveen funds;
|
|
●
|
Business Continuity, Disaster Recovery and Information Services – establishing an information security program to
help identify and manage information security risks, periodically testing disaster recovery plans, maintaining and updating business continuity plans and providing reports to the Board, at least annually, addressing, among other things,
management’s security risk assessment, cyber risk profile, incident tracking and other relevant information technology risk-related reports;
|
|
●
|
Expanded Dividend Management Services – continuing to expand the services necessary to manage the dividends among
the varying types of Nuveen funds that have developed as the Nuveen complex has grown in size and scope; and
|
|
●
|
with respect specifically to closed-end funds, such initiatives also included:
|
|
|
●●
|
Leverage Management Services – continuing to actively manage leverage including developing new
leverage instruments, refinancing existing leverage and negotiating reductions in associated leverage expenses;
|
|
|
●●
|
Capital Management Services – ongoing capital management efforts through a share repurchase
program as well as a shelf offering program that raises additional equity capital in seeking to enhance shareholder value;
|
|
|
●●
|
Data and Market Analytics – continuing focus on analyzing data and market analytics to better
understand the ownership cycles and secondary market experience of closed-end funds; and
|
|
|
●●
|
Closed-end Fund Investor Relations Program – maintaining the closed-end fund investor relations
program which, among other things, raises awareness, provides educational materials and cultivates advocacy for closed-end funds and the Nuveen closed-end fund product line.
|
In addition to the services provided by the Adviser, the Board also considered the risks borne by the Adviser and its affiliates in managing the Nuveen funds, including
entrepreneurial, operational, reputational, regulatory and litigation risks.
80
The Board further considered the division of responsibilities between the Adviser and the Sub-Adviser and recognized that the Sub-Adviser and its investment personnel generally are
responsible for the management of each Fund’s portfolio. The Board noted that the Adviser oversees the Sub-Adviser and considered an analysis of the Sub-Adviser provided by the Adviser which included, among other things, the Sub-Adviser’s assets
under management and changes thereto, a summary of the investment team and changes thereto, the investment approach of the team and the performance of the funds sub-advised by the Sub-Adviser over various periods. The Board further considered at the
May Meeting or prior meetings evaluations of the Sub-Adviser’s compliance program and trade execution. The Board noted that the Adviser recommended the renewal of the Sub-Advisory Agreements.
Based on its review, the Board determined, in the exercise of its reasonable business judgment, that it was satisfied with the nature, extent and quality of services provided to
the respective Funds under each applicable Advisory Agreement.
B. The Investment Performance of the Funds and Fund Advisers
In evaluating the quality of the services provided by the Fund Advisers, the Board also received and considered the investment performance of the Nuveen funds they advise. In this
regard, the Board reviewed Fund performance over the quarter, one-, three-and five-year periods ending December 31, 2018 as well as performance data for the first quarter of 2019 ending March 29, 2019. Unless otherwise indicated, the performance data
referenced below reflects the periods ended December 31, 2018. The Board considered the Adviser’s analysis of each fund’s performance, with particular focus on funds that were considered performance outliers and the factors contributing to their
performance. The Board also noted that it received performance data of the Nuveen funds during its quarterly meetings throughout the year and took into account the discussions that occurred at these Board meetings regarding fund performance. In this
regard, in its evaluation of Nuveen fund performance at meetings throughout the year, the Board considered performance information for the funds for different time periods, both absolute and relative to appropriate benchmarks and peers, with
particular attention to information indicating underperformance of the respective funds and discussed with the Adviser the reasons for such underperformance.
The Board reviewed both absolute and relative fund performance during the annual review. With respect to the latter, the Board considered fund performance in comparison to the
performance of peer funds (the “Performance Peer Group”) and recognized and/or customized benchmarks (i.e., generally benchmarks derived from multiple recognized benchmarks). In considering performance data,
the Board is aware of certain inherent limitations with such data, including that differences between the objective(s), strategies and other characteristics of the Nuveen funds compared to the respective Performance Peer Group and/or benchmark(s)
(such as differences in the use of leverage) will necessarily contribute to differences in performance results and limit the value of the comparative information. To assist the Board in its review of the comparability of the relative performance, the
Adviser has ranked the relevancy of the peer group to the funds as low, medium or high. Depending on the facts and circumstances, however, the Board may be satisfied with a fund’s performance notwithstanding that its performance may be below its
benchmark or peer group for certain periods. In addition, the performance data may vary significantly depending on the end date selected, and shareholders may evaluate fund performance based on their own holding period which may differ from the
performance periods reviewed by the Board leading to different results. Further, the Board considered a fund’s performance in light of the overall financial market conditions during the respective periods. As noted above, the Board reviewed, among
other things, Nuveen fund performance over various periods ended December 31, 2018, and the Board was aware of the market decline in the fourth quarter of 2018 and considered performance from the first quarter of 2019 as well. The Board also noted
that a shorter period of underperformance may significantly impact longer term performance.
In addition to the foregoing, the Board recognized the importance of secondary market trading to shareholders and considered the evaluation of premiums and discounts at which the
shares of the Nuveen closed-end funds trade to be a continuing priority for the Board. The Board and/or its Closed-end Fund committee consider premium and discount data at each quarterly meeting throughout the year as well as during the annual
review.
81
Annual Investment Management Agreement Approval Process (Unaudited) (continued)
In their review of performance, the Independent Board Members focused, in particular, on the Adviser’s analysis of Nuveen funds determined to be underperforming performance
outliers. The Board recognized that some periods of underperformance may only be temporary while other periods of underperformance may indicate a broader issue that may require a corrective action. Accordingly, with respect to any Nuveen funds for
which the Board had identified performance issues, the Board monitors such funds closely until performance improves, discusses with the Adviser the reasons for such results, considers whether any steps are necessary or appropriate to address such
issues, and reviews the results of any efforts undertaken.
The Board’s determinations with respect to each Fund are summarized below.
For Nuveen Select Tax-Free Income Portfolio, the Board noted that the Fund ranked in the second quartile of its Performance Peer Group for the one-year period and first quartile
for the three- and five-year periods. In its review, the Board, however, noted that the Performance Peer Group was classified as low for relevancy. In addition, the Fund’s performance was slightly below its benchmark for the one-year period and the
Fund outperformed its benchmark for the three- and five-year periods. The Board was satisfied with the Fund’s overall performance.
For Nuveen Select Tax-Free Income Portfolio 2, the Board noted that the Fund ranked in the second quartile of its Performance Peer Group for the one-, three- and five-year periods.
In its review, the Board, however, noted that the Performance Peer Group was classified as low for relevancy. In addition, although the Fund’s performance was below the performance of its benchmark for the one-year period, the Fund outperformed its
benchmark for the three- and five-year periods. The Board was satisfied with the Fund’s overall performance.
For Nuveen Select Tax-Free Income Portfolio 3, the Board noted that the Fund ranked in the first quartile of its Performance Peer Group and outperformed its benchmark for the one-,
three- and five-year periods. In its review, the Board, however, noted that the Performance Peer Group was classified as low for relevancy. The Board was satisfied with the Fund’s overall performance.
For Nuveen California Select Tax-Free Income Portfolio, the Board noted that the Fund ranked in the second quartile of its Performance Peer Group for the one- and three-year
periods and third quartile for the five-year period. In its review, the Board, however, noted that the Performance Peer Group was classified as low for relevancy. In addition, although the Fund’s performance was below the performance of its benchmark
for the one-year period, the Fund outperformed its benchmark for the three- and five-year periods. The Board was satisfied with the Fund’s overall performance.
For Nuveen New York Select Tax-Free Income Portfolio, the Board noted that although the Fund ranked in the fourth quartile of its Performance Peer Group for the five-year period,
the Fund ranked in the first quartile for the one-year period and second quartile for the three-year period. In its review, the Board, however, noted that the Performance Peer Group was classified as low for relevancy. In addition, the Fund’s
performance was below the performance of its benchmark for the one-year period, but the Fund outperformed its benchmark for the three- and five-year periods. The Board was satisfied with the Fund’s overall performance.
C. Fees, Expenses and Profitability
1. Fees and Expenses
In its annual review, the Board considered the fees paid to the Fund Advisers and the total operating expense ratio of each Nuveen fund. More specifically, the Independent Board
Members reviewed, among other things, each fund’s gross and net management fee rates and net total expense ratio in relation to those of a comparable universe of funds (the “Peer Universe”) established by
Broadridge. The Independent Board Members reviewed the methodology Broadridge employed to establish its Peer Universe and recognized that differences between the applicable fund and its respective Peer Universe as well as changes to the composition
of the Peer Universe from year to year may limit some of the value of the comparative data. The Independent Board Members also considered a fund’s operating expense ratio as it more directly reflected the shareholder’s costs in investing in the
respective fund.
82
In their review, the Independent Board Members considered, in particular, each fund with a net expense ratio (excluding investment-related costs of leverage) of six basis points or
higher compared to that of its peer average (each, an “Expense Outlier Fund”) and an analysis as to the factors contributing to each such fund’s higher relative net expense ratio. In addition, although the
Board reviewed a fund’s total net expenses both including and excluding investment-related expenses (i.e., leverage costs) and taxes for certain of the closed-end funds, the Board recognized that leverage
expenses will vary across the Nuveen funds and in comparison to peers because of differences in the forms and terms of leverage employed by the respective fund. Accordingly, in reviewing the comparative data between a fund and its peers, the Board
generally considered the fund’s net expense ratio and fees (excluding leverage costs and leveraged assets) to be higher if they were over 10 basis points higher, slightly higher if they were 6 to 10 basis points higher, in line if they were within
approximately 5 basis points higher than the peer average and below if they were below the peer average of the Peer Universe. The Independent Board Members also considered, in relevant part, a fund’s net management fee and net total expense ratio in
light of its performance history.
In their review of the fee arrangements for the Nuveen funds, the Independent Board Members considered the management fee schedules, including the complex-wide and fund-level
breakpoint schedules, as applicable. The Board noted that across the Nuveen fund complex, the complex-wide fee breakpoints reduced fees by $51.5 million and fund-level breakpoints reduced fees by $55.1 million in 2018.
With respect to the Sub-Adviser, the Board considered the sub-advisory fee paid to the Sub-Adviser, including any breakpoint schedule, and as described below, comparative data of
the fees the Sub-Adviser charges to other clients, if any.
The Independent Board Members noted that each Fund had a net management fee and a net expense ratio that were below its respective peer averages. Based on its review of the
information provided, the Board determined that each Fund’s management fees (as applicable) to a Fund Adviser were reasonable in light of the nature, extent and quality of services provided to the Fund.
2. Comparisons with the Fees of Other Clients
In determining the appropriateness of fees, the Board also reviewed information regarding the fee rates the respective Fund Advisers charged to certain other types of clients and
the type of services provided to these other clients. With respect to the Adviser and/or the Sub-Adviser, such other clients may include retail and institutional managed accounts, passively managed exchange-traded funds sub-advised by the Sub-Adviser
but that are offered by another fund complex and municipal managed accounts offered by an unaffiliated adviser. With respect to the Sub-Adviser, the Board reviewed, among other things, the fee range and average fee of municipal retail wrap accounts
and municipal institutional accounts.
In addition to the comparative fee data, the Board also reviewed, among other things, a description of the different levels of services provided to certain other clients compared
to the services provided to the Nuveen funds as well as the differences in portfolio investment policies, investor profiles, account sizes and regulatory requirements, all of which contribute to the variations in the fee schedules. The Board noted,
among other things, the wide range of services in addition to investment management services provided to the Nuveen funds when the Adviser is principally responsible for all aspects of operating the funds, including the increased regulatory
requirements that must be met in managing the funds, the larger account sizes of managed accounts and the increased entrepreneurial, legal and regulatory risks that the Adviser incurs in sponsoring and managing the funds. In general, higher fee
levels reflect higher levels of service provided by the Adviser, increased investment management complexity, greater product management requirements, and higher levels of business risk or some combination of these factors. The Board further
considered that the Sub-Adviser’s fee is essentially for portfolio management services and therefore more comparable to the fees it receives for retail wrap accounts and other external sub-advisory mandates. The Board concluded the varying levels of
fees were justified given, among other things, the inherent differences in the products and the level of services provided to the Nuveen funds versus other clients, the differing regulatory requirements and legal liabilities and the entrepreneurial,
legal and regulatory risks incurred in sponsoring and advising a registered investment company.
83
Annual Investment Management Agreement Approval Process (Unaudited) (continued)
3. Profitability of Fund Advisers
In conjunction with their review of fees, the Independent Board Members considered information regarding Nuveen’s level of profitability for its advisory services to the Nuveen
funds for the calendar years 2018 and 2017. The Board reviewed, among other things, Nuveen’s net margins (pre-tax) (both including and excluding distribution expenses); gross and net revenue margins (pre- and post-tax); revenues, expenses, and net
income (pre-tax and after-tax and before distribution) of Nuveen for fund advisory services; and comparative profitability data comparing the adjusted margins of Nuveen compared to the adjusted margins of certain peers with publicly available data
and with the most comparable assets under management (based on asset size and asset composition) for each of the last two calendar years. The Board also reviewed the revenues and expenses the Adviser derived from its exchange-traded fund product line
that was launched in 2016. The Independent Board Members noted that Nuveen’s net margins were higher in 2018 than the previous year and considered the key drivers behind the revenue and expense changes that impacted Nuveen’s net margins between the
years. The Board considered the costs of investments in the Nuveen business, including the investment of seed capital in certain Nuveen funds and additional investments in infrastructure and technology. The Independent Board Members also noted that
Nuveen’s adjusted margins from its relationships with the Nuveen funds were on the low range compared to the adjusted margins of the peers; however, the Independent Board Members recognized the inherent limitations of the comparative data of other
publicly traded peers given that the calculation of profitability is rather subjective and numerous factors (such as types of funds, business mix, cost of capital, methodology to allocate expenses and other factors) can have a significant impact on
the results.
The Independent Board Members also reviewed a description of the expense allocation methodology employed to develop the financial information and a summary of the history of
changes to the methodology over the ten-year period from 2008 to 2018, and recognized that other reasonable allocation methodologies could be employed and lead to significantly different results. The Board noted that two Independent Board Members,
along with independent counsel, serve as the Board’s liaisons to review profitability and discuss any proposed changes to the methodology prior to the full Board’s review.
Aside from Nuveen’s profitability, the Board recognized that the Adviser is a subsidiary of Nuveen, LLC, the investment management arm of Teachers Insurance and Annuity Association
of America (“TIAA”). As such, the Board also reviewed a balance sheet for TIAA reflecting its assets, liabilities and capital and contingency reserves for the 2018 and 2017 calendar years to consider the
financial strength of TIAA having recognized the importance of having an adviser with significant resources.
In addition to Nuveen, the Independent Board Members also considered the profitability of the Sub-Adviser from its relationships with the Nuveen funds. In this regard, the
Independent Board Members reviewed the Sub-Adviser’s revenues, expenses and revenue margins (pre- and post-tax) for its advisory activities for the calendar year ended December 31, 2018. The Independent Board Members also reviewed a profitability
analysis reflecting the revenues, expenses and revenue margin (pre- and post-tax) by asset type for the Sub-Adviser for the calendar year ending December 31, 2018 and the pre- and post-tax revenue margin from 2018 and 2017.
In evaluating the reasonableness of the compensation, the Independent Board Members also considered any other ancillary benefits derived by the respective Fund Adviser from its
relationship with the Nuveen funds as discussed in further detail below.
Based on a consideration of all the information provided, the Board noted that Nuveen’s and the Sub-Adviser’s level of profitability was acceptable and not unreasonable in light of
the services provided.
D. Economies of Scale and Whether Fee Levels Reflect These Economies of Scale
With respect to economies of scale, the Independent Board Members noted that although economies of scale are difficult to measure, the Adviser shares the benefits of economies of
scale in various ways including breakpoints in the management fee schedule (subject to limited exceptions), fee waivers and/or expense limitations, the pricing of Nuveen funds at scale at inception and investments in its business which can enhance
the services provided to the funds for the fees paid. With respect to
84
breakpoint schedules, because the Board had previously recognized that economies of scale may occur not only when the assets of a particular Nuveen fund grow but also when the
assets in the complex grow, the Nuveen funds generally pay the Adviser a management fee comprised of a fund-level component and a complex-level component each with its own breakpoint schedule, subject to certain exceptions. In general terms, the
breakpoint schedule at the fund level reduces fees as assets in the particular fund pass certain thresholds and the breakpoint schedule at the complex level reduces fees on the Nuveen funds as the eligible assets in the complex pass certain
thresholds. The Independent Board Members reviewed, among other things, the fund-level and complex-level fee schedules. In addition, with respect to the Nuveen closed-end funds, the Independent Board Members noted that, although such funds may from
time-to-time make additional share offerings, the growth of their assets would occur primarily through the appreciation of such funds’ investment portfolios.
In addition, the Independent Board Members recognized the Adviser’s continued reinvestment in its business through, among other things, investments in its business infrastructure
and information technology, portfolio accounting system as well as other systems and platforms that will, among other things, support growth, simplify and enhance information sharing, and enhance the investment process to the benefit of all of the
Nuveen funds.
Based on its review, the Board concluded that the current fee arrangements together with the Adviser’s reinvestment in its business appropriately shared any economies of scale with
shareholders.
E. Indirect Benefits
The Independent Board Members received and considered information regarding other benefits the respective Fund Adviser or its affiliates may receive as a result of their
relationship with the Nuveen funds. The Board considered that an affiliate of the Adviser serves as co-manager in the initial public offerings of new closed-end funds for which it may receive revenue and serves as an underwriter on shelf offerings of
existing closed-end funds for which it receives compensation. In addition, the Independent Board Members also noted that the Sub-Adviser engages in soft dollar transactions pursuant to which it may receive the benefit of research products and other
services provided by broker-dealers executing portfolio transactions on behalf of the applicable Nuveen funds.
The Board, however, noted that the benefits for the Sub-Adviser when transacting in fixed-income securities may be more limited as such securities generally trade on a principal
basis and therefore do not generate brokerage commissions. Further, the Board noted that although the Sub-Adviser may benefit from the receipt of research and other services that it may otherwise have to pay for out of its own resources, the research
may also benefit the Nuveen funds to the extent it enhances the ability of the Sub-Adviser to manage such funds or is acquired through the commissions paid on portfolio transactions of other clients.
Based on their review, the Board concluded that any indirect benefits received by a Fund Adviser as a result of its relationship with the Funds were reasonable and within
acceptable parameters.
F. Other Considerations
The Board Members did not identify any single factor discussed previously as all-important or controlling. The Board Members, including the Independent Board Members, concluded
that the terms of each Advisory Agreement were fair and reasonable, that the respective Fund Adviser’s fees were reasonable in light of the services provided to each Fund and that the Advisory Agreements be renewed.
85
Notes
Notes
Nuveen:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we
offer a range of high quality solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen is the investment manager of TIAA. We have grown into one of the world’s premier global asset managers, with specialist knowledge across all major asset classes and particular strength in
solutions that provide income for investors and that draw on our expertise in alternatives and responsible investing. Nuveen is driven not only by the independent investment processes across the firm, but also the insights, risk management, analytics
and other tools and resources that a truly world-class platform provides. As a global asset manager, our mission is to work in partnership with our clients to create solutions which help them secure their financial future.
Find out how we can help you.
To learn more about how the products and services of Nuveen 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, 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/closed-end-funds
|
Nuveen Securities, LLC, member FINRA and SIPC | 333 West Wacker Drive Chicago, IL 60606 | www.nuveen.com
|
|
ESA-B-0919D 1000790-INV-B-11/20