Financial
Highlights
(Unaudited)
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
Investment Operations
|
|
Less Distributions
|
|
|
|
|
|
|
|
|
|
Beginning
Common
Share
NAV
|
|
Net
Investment
Income
(Loss)(a)
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
Distributions
from Net
Investment
Income to
FundPreferred
Shareholders(b)
|
|
Distributions
from
Accumulated
Net Realized
Gains to
FundPreferred
Shareholders(b)
|
|
Total
|
|
From Net
Investment
Income to
Common
Share-
holders
|
|
From
Accum-
ulated
Net
Realized
Gains to
Common
Share-
holders
|
|
Return of
Capital to
Common
Share-
holders
|
|
Total
|
|
Discount
from
Common
Shares
Repurchased
and
Retired
|
|
Ending
Common
Share
NAV
|
|
Ending
Market
Value
|
|
Preferred Income Opportunities (JPC)
|
|
|
|
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
$
|
10.26
|
|
|
$
|
.40
|
|
|
$
|
(.23
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
.17
|
|
|
$
|
(.38
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(.38
|
)
|
|
$
|
|
|
|
$
|
10.05
|
|
|
$
|
8.99
|
|
|
2013
(h)
|
|
|
10.28
|
|
|
|
.46
|
|
|
|
(.04
|
)
|
|
|
|
|
|
|
|
|
|
|
.42
|
|
|
|
(.44
|
)
|
|
|
|
|
|
|
|
|
|
|
(.44
|
)
|
|
|
|
|
|
|
10.26
|
|
|
|
9.35
|
|
|
Year Ended 12/31:
|
|
2012
|
|
|
8.67
|
|
|
|
.76
|
|
|
|
1.61
|
|
|
|
|
|
|
|
|
|
|
|
2.37
|
|
|
|
(.76
|
)
|
|
|
|
|
|
|
|
|
|
|
(.76
|
)
|
|
|
|
|
|
|
10.28
|
|
|
|
9.71
|
|
|
2011
|
|
|
9.62
|
|
|
|
.51
|
|
|
|
(.72
|
)
|
|
|
|
|
|
|
|
|
|
|
(.21
|
)
|
|
|
(.75
|
)
|
|
|
|
|
|
|
|
*
|
|
|
(.75
|
)
|
|
|
.01
|
|
|
|
8.67
|
|
|
|
8.01
|
|
|
2010
|
|
|
8.56
|
|
|
|
.50
|
|
|
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
1.73
|
|
|
|
(.57
|
)
|
|
|
|
|
|
|
(.11
|
)
|
|
|
(.68
|
)
|
|
|
.01
|
|
|
|
9.62
|
|
|
|
8.35
|
|
|
2009
|
|
|
5.60
|
|
|
|
.54
|
|
|
|
3.03
|
|
|
|
|
*
|
|
|
|
|
|
|
3.57
|
|
|
|
(.61
|
)
|
|
|
|
|
|
|
(.02
|
)
|
|
|
(.63
|
)
|
|
|
.02
|
|
|
|
8.56
|
|
|
|
7.49
|
|
|
2008
|
|
|
12.38
|
|
|
|
.86
|
|
|
|
(6.49
|
)
|
|
|
(.15
|
)
|
|
|
|
|
|
|
(5.78
|
)
|
|
|
(.69
|
)
|
|
|
|
|
|
|
(.31
|
)
|
|
|
(1.00
|
)
|
|
|
|
*
|
|
|
5.60
|
|
|
|
4.60
|
|
|
|
|
FundPreferred Shares at End of Period
|
|
Borrowings at End of Period
|
|
Preferred Income Opportunities (JPC)
|
|
Aggregate
Amount
Outstanding
(000)
|
|
Liquidation
and Market
Value
Per Share
|
|
Asset
Coverage
Per Share
|
|
Aggregate
Amount
Outstanding
(000)
|
|
Asset
Coverage
Per $1,000
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
402,500
|
|
|
$
|
3,422
|
|
|
2013
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
402,500
|
|
|
|
3,473
|
|
|
Year Ended 12/31:
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
383,750
|
|
|
|
3,599
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348,000
|
|
|
|
3,416
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,000
|
|
|
|
4,477
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,000
|
|
|
|
4,111
|
|
|
2008
|
|
|
118,650
|
|
|
|
25,000
|
|
|
|
142,298
|
|
|
|
145,545
|
|
|
|
5,640
|
|
|
(a) Per share Net Investment Income (Loss) is calculated using the average daily shares method.
(b) The amounts shown are based on common share equivalents.
(c) Total Return Based on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
Total Return Based on Common Share 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.
Nuveen Investments
50
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
Total Returns
|
|
|
|
Ratios to Average Net Assets
Applicable to Common Shares
Before Reimbursement(d)
|
|
Ratios to Average Net Assets
Applicable to Common Shares
After Reimbursement(d)(e)
|
|
|
|
|
|
Based
on
Common
Share
NAV(c)
|
|
Based
on
Market
Value(c)
|
|
Ending
Net
Assets
Applicable
to Common
Shares (000)
|
|
Expenses
|
|
Net
Investment
Income (Loss)
|
|
Expenses
|
|
Net
Investment
Income (Loss)
|
|
Portfolio
Turnover
Rate(g)
|
|
Preferred Income Opportunities (JPC)
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
|
1.75
|
%
|
|
|
.35
|
%
|
|
$
|
974,840
|
|
|
|
1.70
|
%***
|
|
|
8.02
|
%***
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
19
|
%
|
|
2013
(h)
|
|
|
4.09
|
|
|
|
.63
|
|
|
|
995,460
|
|
|
|
1.67
|
***
|
|
|
7.47
|
***
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
27
|
|
|
Year Ended 12/31:
|
|
2012
|
|
|
28.17
|
|
|
|
31.44
|
|
|
|
997,484
|
|
|
|
1.79
|
|
|
|
7.85
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
123
|
|
|
2011
|
|
|
(2.23
|
)
|
|
|
4.95
|
|
|
|
840,643
|
|
|
|
1.73
|
|
|
|
5.40
|
|
|
|
1.70
|
%
|
|
|
5.43
|
%
|
|
|
34
|
|
|
2010
|
|
|
21.06
|
|
|
|
21.28
|
|
|
|
938,844
|
|
|
|
1.67
|
|
|
|
5.39
|
|
|
|
1.54
|
|
|
|
5.52
|
|
|
|
49
|
|
|
2009
|
|
|
67.37
|
|
|
|
81.73
|
|
|
|
839,846
|
|
|
|
1.80
|
|
|
|
7.76
|
|
|
|
1.57
|
|
|
|
7.99
|
|
|
|
50
|
|
|
2008
|
|
|
(49.27
|
)
|
|
|
(51.80
|
)
|
|
|
556,698
|
|
|
|
2.47
|
|
|
|
8.14
|
|
|
|
2.04
|
|
|
|
8.57
|
|
|
|
36
|
|
|
(d) • Ratios do not reflect the effect of dividend payments to FundPreferred shareholders, where applicable.
• Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to FundPreferred shares and/or borrowings, where applicable.
• Each ratio includes the effect of dividends expense on securities sold short and all interest expense paid and other costs related to borrowings, where applicable as follows:
Preferred Income Opportunities (JPC)
|
|
Ratios of Dividends Expense on
Securities Sold Short to Average
Net Assets Applicable to
Common Shares(f)
|
|
Ratios of Borrowings Interest
Expense to Average Net Assets
Applicable to Common Shares
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
|
|
%
|
|
|
.46
|
%***
|
|
2013
(h)
|
|
|
|
|
|
|
.45
|
***
|
|
Year Ended 12/31:
|
|
2012
|
|
|
|
|
|
|
.52
|
|
|
2011
|
|
|
|
**
|
|
|
.43
|
|
|
2010
|
|
|
|
**
|
|
|
.40
|
|
|
2009
|
|
|
|
**
|
|
|
.45
|
|
|
2008
|
|
|
.01
|
|
|
|
.82
|
|
|
(e) After expense reimbursement from the Adviser, where applicable. As of March 31, 2011, the Adviser is no longer reimbursing the Fund for any fees or expenses.
(f) Effective for periods beginning after December 31, 2011, the Fund no longer makes short sales of securities.
(g) Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 5 Investment Transactions) divided by the average long-term market value during the period.
(h) For the seven months ended July 31, 2013.
(i) For the six months ended January 31, 2014.
N/A The Fund no longer has a contractual reimbursement agreement with the Adviser.
* Rounds to less than $.01 per share.
** Rounds to less than .01%.
*** Annualized.
See accompanying notes to financial statements.
Nuveen Investments
51
Financial Highlights
(Unaudited) (continued)
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
Investment Operations
|
|
Less Distributions
|
|
|
|
|
|
|
|
Total Returns
|
|
|
|
Beginning
Common
Share
NAV
|
|
Net
Investment
Income
(Loss)(a)
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
Total
|
|
From
Net
Investment
Income to
Common
Share-
holders
|
|
From
Accumu-
lated Net
Realized
Gains to
Common
Share-
holders
|
|
Total
|
|
Offering
Costs
|
|
Ending
Common
Share
NAV
|
|
Ending
Market
Value
|
|
Based
on
Common
Share
NAV(b)
|
|
Based
on
Market
Value(b)
|
|
Preferred and Income Term (JPI)
|
|
|
|
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
$
|
25.06
|
|
|
$
|
.98
|
|
|
$
|
(.20
|
)
|
|
$
|
.78
|
|
|
$
|
(1.01
|
)
|
|
$
|
(.49
|
)
|
|
$
|
(1.50
|
)
|
|
$
|
|
|
|
$
|
24.34
|
|
|
$
|
22.55
|
|
|
|
3.21
|
%
|
|
|
1.80
|
%
|
|
2013
|
|
|
23.81
|
|
|
|
1.89
|
|
|
|
1.32
|
|
|
|
3.21
|
|
|
|
(1.86
|
)
|
|
|
(.10
|
)
|
|
|
(1.96
|
)
|
|
|
|
*
|
|
|
25.06
|
|
|
|
23.68
|
|
|
|
13.69
|
|
|
|
.41
|
|
|
2012
(d)
|
|
|
23.88
|
|
|
|
|
*
|
|
|
(.02
|
)
|
|
|
(.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(.05
|
)
|
|
|
23.81
|
|
|
|
25.50
|
|
|
|
(.23
|
)
|
|
|
2.00
|
|
|
Flexible Investment Income (JPW)
|
|
|
|
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
|
18.91
|
|
|
|
.70
|
|
|
|
(.28
|
)
|
|
|
.42
|
|
|
|
(.76
|
)
|
|
|
|
|
|
|
(.76
|
)
|
|
|
|
*
|
|
|
18.57
|
|
|
|
16.58
|
|
|
|
2.37
|
|
|
|
(12.35
|
)
|
|
2013
(h)
|
|
|
19.10
|
|
|
|
.03
|
|
|
|
(.18
|
)
|
|
|
(.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(.04
|
)
|
|
|
18.91
|
|
|
|
19.80
|
|
|
|
(.99
|
)
|
|
|
(1.00
|
)
|
|
|
|
Borrowings at End of Period(e)
|
|
Preferred and Income Term (JPI)
|
|
Aggregate
Amount
Outstanding
(000)
|
|
Asset
Coverage
Per $1,000
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
$
|
225,000
|
|
|
$
|
3,461
|
|
|
2013
|
|
|
225,000
|
|
|
|
3,535
|
|
|
Flexible Investment Income (JPW)
|
|
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
|
27,500
|
|
|
|
3,503
|
|
|
Nuveen Investments
52
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
Ratios to Average Net Assets
Applicable to Common Shares(c)
|
|
|
|
|
|
Ending
Net
Assets
Applicable
to Common
Shares (000)
|
|
Expenses
|
|
Net
Investment
Income (Loss)
|
|
Portfolio
Turnover
Rate(f)
|
|
Preferred and Income Term (JPI)
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
$
|
553,761
|
|
|
|
1.77
|
%**
|
|
|
7.92
|
%**
|
|
|
21
|
%
|
|
2013
|
|
|
570,298
|
|
|
|
1.72
|
|
|
|
7.51
|
|
|
|
57
|
|
|
2012
(d)
|
|
|
476,252
|
|
|
|
.97
|
**
|
|
|
(.96
|
)**
|
|
|
|
|
|
Flexible Investment Income (JPW)
|
|
Year Ended 7/31:
|
|
2014
(i)
|
|
|
68,824
|
|
|
|
1.70
|
**
|
|
|
7.63
|
**
|
|
|
25
|
|
|
2013
(h)
|
|
|
66,297
|
|
|
|
1.40
|
**
|
|
|
1.93
|
**
|
|
|
3
|
|
|
(a) Per share Net Investment Income (Loss) is calculated using the average daily shares method.
(b) Total Return Based on Market Value is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the calculation. Total returns are not annualized.
Total Return Based on Common Share 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.
(c) • Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to borrowings, where applicable.
• Each ratio includes the effect of all interest expense paid and other costs related to borrowings as follows:
Preferred and Income Term (JPI)
|
|
Ratios of Borrowings Interest Expense to
Average Net Assets Applicable to Common Share(e)
|
|
Year Ended 7/31:
|
|
|
2014
|
(i)
|
|
|
.47
|
%**
|
|
|
2013
|
(g)
|
|
|
.48
|
|
|
Flexible Investment Income (JPW)
|
|
|
|
Year Ended 7/31:
|
|
|
2014
|
(j)
|
|
|
.35
|
**
|
|
(d) For the period July 26, 2012 (commencement of operations) through July 31, 2012.
(e) Preferred and Income Term (JPI) and Flexible Investment Income (JPW) did not utilize borrowings prior to the fiscal years ended July 31, 2013 and July 31, 2014, respectively.
(f) Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 5 Investment Transactions) divided by the average long-term market value during the period.
(g) For the period August 29, 2012 (first utilization date of borrowings) through July 31, 2013.
(h) For the period June 25, 2013 (commencement of operations) through July 31, 2013.
(i) For the six months ended January 31, 2014.
(j) For the period August 13, 2013 (first utilization date of borrowings) through January 31, 2014.
* Rounds to less than $.01 per share.
** Annualized.
See accompanying notes to financial statements.
Nuveen Investments
53
Notes to
Financial Statements
(Unaudited)
1. General Information and Significant Accounting Policies
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 Preferred Income Opportunities Fund (JPC) ("Preferred Income Opportunities (JPC)")
• Nuveen Preferred and Income Term Fund (JPI) ("Preferred and Income Term (JPI)")
• Nuveen Flexible Investment Income Fund (JPW) ("Flexible Investment Income (JPW)")
The Funds are registered under the Investment Company Act of 1940, as amended, as diversified closed-end (non-diversified for Preferred and Income Term (JPI)) registered investment companies. Preferred Income Opportunities (JPC), Preferred and Income Term (JPI) and Flexible Investment Income (JPW) were each organized as Massachusetts business trusts on January 27, 2003, April 18, 2012 and March 28, 2013, respectively.
Investment Adviser
The Funds' investment adviser is Nuveen Fund Advisors, LLC (the "Adviser"), a wholly-owned subsidiary of Nuveen Investments, Inc. ("Nuveen"). The Adviser is responsible for each Fund's overall investment strategy and asset allocation decisions. The Adviser has entered into sub-advisory agreements with NWQ Investment Management Company, LLC ("NWQ") and Nuveen Asset Management LLC ("NAM"), a subsidiary of Adviser, (each a "Sub-Adviser" and collectively, the "Sub-Advisers"). NWQ and NAM are each responsible for approximately half of Preferred Income Opportunities' (JPC) portfolio. NAM manages the investment portfolio of Preferred and Income Term (JPI), while NWQ manages the investment portfolio of Flexible Investment Income (JPW). The Adviser is responsible for managing Preferred Income Opportunities' (JPC) and Preferred and Income Term's (JPI) investments in swap contracts.
Investment Objectives
Preferred Income Opportunities' (JPC) investment objective is to provide high current income and total return by investing at least 80% of its managed assets (as defined in Note 7 Management Fees and Other Transactions with Affiliates) in preferred securities, and up to 20% opportunistically over the market cycle in other types of securities, primarily income-oriented securities such as corporate and taxable municipal debt and common equity. At least 60% of its managed assets are rated investment grade (BBB/Baa or better by S&P, Moody's, or Fitch) at the time of investment.
Preferred and Income Term's (JPI) investment objective is to provide a high level of current income and total return. The Fund seeks to achieve its investment objective by investing in preferred securities and other income producing securities. Under normal market conditions, the Fund will invest at least 80% of its managed assets in preferred and other income producing securities. The Fund will invest at least 60% of its managed assets in securities rated investment grade (BBB-/Baa3 or higher) at the time of purchase. The Fund will invest 100% of its managed assets in U.S. dollar denominated securities. The Fund will also invest up to 40% of its managed assets in securities issued by non-U.S. domiciled companies.
Flexible Investment Income's (JPW) investment objectives are to provide high current income and, secondarily, capital appreciation. Under normal circumstances, the Fund will invest at least 80% of its managed assets in income producing securities issued by companies located anywhere in the world. The Fund will invest in income producing securities across the capital structure in any type of debt, preferred or equity securities offered by a particular company, or debt securities issued by a government. The Fund will invest 100% of its managed assets in U.S. dollar-denominated securities, and may invest up to 50% of its managed assets in securities of non-U.S. companies. The Fund may invest up to 40% of its managed assets in equity securities (other than preferred securities). At least 25% of the aggregate market value of the Fund's investments in debt and preferred securities that are of a type customarily rated by a credit rating agency will be rated investment grade, or if unrated, will be judged to be of comparable quality by NWQ The Fund will invest at least 25% of its managed assets in securities issued by financial services companies. The Fund may invest up to 15% of its managed assets in securities and other instruments that, at the time of purchase, are illiquid. The Fund may opportunistically write (sell) covered call options on the Fund's portfolio of equity securities for the purpose of enhancing the Fund's risk-adjusted total return over time. The Fund anticipates using leverage to help achieve its investment objectives. The Fund may utilize leverage in the form of borrowings from a financial institution or the issuance of preferred shares or other senior securities, such as commercial paper or notes.
Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").
Nuveen Investments
54
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same basis used for federal income tax purposes. Investments purchased on a when-issued/delayed delivery basis may have extended settlement periods. Any investments so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to earmark securities in the Funds' portfolios with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments. As of January 31, 2014, the Funds' outstanding when-issued/delayed delivery purchase commitments were as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Outstanding when-issued/delayed delivery purchase commitments
|
|
$
|
1,437,500
|
|
|
$
|
1,550,000
|
|
|
$
|
|
|
|
Investment Income
Dividend income is recorded on the ex-dividend date or, for foreign securities, when information is available. Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Interest income also reflects paydown gains and losses, if any. Other income is comprised of fees earned in connection with the rehypothecation of pledged collateral as further described in Note 8 Borrowing Arrangements.
Professional Fees
Professional fees presented on the Statement of Operations consist of legal fees incurred in the normal course of operations, audit fees, tax consulting fees and, in some cases, workout expenditures. Workout expenditures are incurred in an attempt to protect or enhance an investment or to pursue other claims or legal actions on behalf of Fund shareholders. Should a Fund receive a refund of workout expenditures paid in a prior reporting period, such amounts will be recognized as "Legal fee refund" on the Statement of Operations.
Dividends and Distributions to Common Shareholders
Distributions to common shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.
Dividends to common shareholders are declared monthly. Net realized capital gains from investment transactions, if any, are declared and distributed to shareholders at least annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards.
Flexible Investment Income's (JPW) regular monthly distributions are currently being sourced entirely from net investment income. The Fund's current portfolio is predominantly invested in income producing securities the income from which is expected to be the source of distributions. For periods when the Fund is sourcing its monthly distributions solely from net investment income, the Fund will seek to distribute substantially all of its net investment income over time. There are no assurances given to how long the Fund will source distributions entirely from net investment income.
Market conditions may change, causing the portfolio management team at some future time to focus the mix of portfolio investments less to income-oriented securities. This may cause the regular monthly distributions to be sourced from something other than net investment income. Flexible Investment Income (JPW) has adopted a managed distribution policy permitting it to source its regular monthly distributions from not only net investment income, but also from realized capital gains and/or return of capital. If a managed distribution policy is employed, the Fund will seek to establish a relatively stable common share distribution rate that roughly corresponds to the projected total return from its investment strategy over an extended period of time. Actual common share returns will differ from projected long-term returns, and the difference between actual returns and total distributions will be reflected in an increasing (returns exceed distributions) or a decreasing (distributions exceed returns) Fund net asset value ("NAV"). If the Fund changes to a managed distribution, a press release will be issued describing such change and this change will also be described in subsequent shareholder reports. Additionally, any distribution payment that is sourced from something other than net investment income, there will be a notice issued quantifying the sources of such distribution.
Preferred Shares
The Funds are authorized to issue preferred shares. During prior fiscal periods, Preferred Income Opportunities (JPC) redeemed all of its outstanding preferred shares, at liquidation value. As of January 31, 2014, Preferred and Income Term (JPI) and Flexible Investment Income (JPW) have not issued any preferred shares.
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 expects the risk of loss to be remote.
Nuveen Investments
55
Notes to Financial Statements
(Unaudited) (continued)
Netting Agreements
In the ordinary course of business, the Funds may enter into transactions subject to enforceable master repurchase agreements, International Swaps and Derivative Association, Inc. ("ISDA") master agreements or other similar arrangements ("netting agreements"). Generally, the right to offset in netting agreements allows each Fund to offset any exposure to a specific counterparty with 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. As of January 31, 2014, the Funds were not invested in any portfolio securities or derivatives, other than repurchase agreements and swap contracts further described in Note 3 Portfolio Securities and Investments in Derivatives that are subject to netting agreements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets applicable to common shares from operations during the reporting period. Actual results may differ from those estimates.
2. Investment Valuation and Fair Value Measurements
Investment Valuation
Common stocks and other equity-type securities are valued at the last sales price on the securities exchange on which such securities are primarily traded and are generally classified as Level 1 for fair value measurement purposes. Securities primarily traded on the NASDAQ National Market ("NASDAQ") are valued, except as indicated below, at the NASDAQ Official Closing Price and are generally classified as Level 1. However, securities traded on a securities exchange or NASDAQ for which there were no transactions on a given day or securities not listed on a securities exchange or NASDAQ are valued at the quoted bid price and are generally classified as Level 2. Prices of certain American Depositary Receipts ("ADR") held by the Fund that trade in the United States are valued based on the last traded price, official closing price or the most recent bid price of the underlying non- U.S.-traded stock, adjusted as appropriate for the underlying-to-ADR conversion ratio and foreign exchange rate, and from time-to-time may also be adjusted further to take into account material events that may take place after the close of the local non-U.S. market but before the close of the NYSE, which may represent a transfer from a Level 1 to a Level 2 security.
Prices of fixed-income securities and swap contracts are provided by a pricing service approved by the Funds' Board of Trustees. These securities are generally classified as Level 2. The pricing service establishes a security's fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor's credit characteristics considered relevant. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market activity, provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
Investments in investment companies are valued at their respective NAV on valuation date and are generally classified as Level 1.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
The value of exchange-traded options are based on the mean of the closing bid and ask prices. Exchange-traded options are generally classified as Level 1. Options traded in the over-the-counter market are valued using an evaluated mean price and are generally classified as Level 2.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from pricing services. As a result, the NAV of the Funds' shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed and an investor is not able to purchase, redeem or exchange shares. If significant market events occur between the time of determination of the closing price of a foreign security on an exchange and the time that the Funds' NAV is determined, or if under the Funds' procedures, the closing price of a foreign security is not deemed to be reliable, the security would be valued at fair value as determined in accordance with procedures established in good faith by the Funds' Board of Trustees. These securities are generally classified as Level 2 or Level 3 depending on the priority 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 Funds' Board of Trustees or its designee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a security whose market price is not available from a 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
Nuveen Investments
56
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 priority of the significant inputs. Regardless of the method employed to value a particular security, all valuations are subject to review by the Funds' Board of Trustees or its designee.
Fair Value Measurements
Fair value is defined as the price that the Funds would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The 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, prepayment speeds, credit risk, etc.).
Level 3 Prices are determined using significant unobservable inputs (including management's assumptions in determining the fair value of investments).
The inputs or methodologies used for valuing securities are not an indication of the 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:
Preferred Income Opportunities (JPC)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Long-Term Investments*:
|
|
Common Stocks
|
|
$
|
39,898,148
|
|
|
$
|
1,576,651
|
|
|
$
|
|
|
|
$
|
41,474,799
|
|
|
Convertible Preferred Securities
|
|
|
1,335,520
|
|
|
|
|
|
|
|
|
|
|
|
1,335,520
|
|
|
$25 Par (or similar) Retail Preferred
|
|
|
600,276,249
|
|
|
|
65,044,478
|
|
|
|
|
|
|
|
665,320,727
|
|
|
Corporate Bonds
|
|
|
|
|
|
|
38,544,034
|
|
|
|
|
|
|
|
38,544,034
|
|
|
$1,000 Par (or similar) Institutional Preferred
|
|
|
|
|
|
|
592,499,654
|
|
|
|
|
|
|
|
592,499,654
|
|
|
Investment Companies
|
|
|
6,761,205
|
|
|
|
|
|
|
|
|
|
|
|
6,761,205
|
|
|
Short-Term Investments:
|
|
Repurchase Agreements
|
|
|
|
|
|
|
22,741,190
|
|
|
|
|
|
|
|
22,741,190
|
|
|
Investments in Derivatives:
|
|
Interest Rate Swaps**
|
|
|
|
|
|
|
4,402,656
|
|
|
|
|
|
|
|
4,402,656
|
|
|
Total
|
|
$
|
648,271,122
|
|
|
$
|
724,808,663
|
|
|
$
|
|
|
|
$
|
1,373,079,785
|
|
|
Preferred and Income Term (JPI)
|
|
Long-Term Investments*:
|
|
$25 Par (or similar) Retail Preferred
|
|
$
|
155,826,465
|
|
|
$
|
63,461,760
|
|
|
$
|
|
|
|
$
|
219,288,225
|
|
|
Corporate Bonds
|
|
|
|
|
|
|
6,452,260
|
|
|
|
|
|
|
|
6,452,260
|
|
|
$1,000 Par (or similar) Institutional Preferred
|
|
|
|
|
|
|
541,144,629
|
|
|
|
|
|
|
|
541,144,629
|
|
|
Short-Term Investments:
|
|
Repurchase Agreements
|
|
|
|
|
|
|
6,796,665
|
|
|
|
|
|
|
|
6,796,665
|
|
|
Investments in Derivatives:
|
|
Interest Rate Swaps**
|
|
|
|
|
|
|
2,806,005
|
|
|
|
|
|
|
|
2,806,005
|
|
|
Total
|
|
$
|
155,826,465
|
|
|
$
|
620,661,319
|
|
|
$
|
|
|
|
$
|
776,487,784
|
|
|
Flexible Investment Income (JPW)
|
|
Long-Term Investments*:
|
|
Common Stocks
|
|
$
|
12,048,361
|
|
|
$
|
458,722
|
|
|
$
|
|
|
|
$
|
12,507,083
|
|
|
Convertible Preferred Securities
|
|
|
297,055
|
|
|
|
|
|
|
|
|
|
|
|
297,055
|
|
|
$25 Par (or similar) Retail Preferred
|
|
|
66,582,855
|
|
|
|
1,825,779
|
|
|
|
|
|
|
|
68,408,634
|
|
|
Corporate Bonds
|
|
|
|
|
|
|
8,244,206
|
|
|
|
|
|
|
|
8,244,206
|
|
|
$1,000 Par (or similar) Institutional Preferred
|
|
|
|
|
|
|
5,654,126
|
|
|
|
|
|
|
|
5,654,126
|
|
|
Investment Companies
|
|
|
1,458,256
|
|
|
|
|
|
|
|
|
|
|
|
1,458,256
|
|
|
Short-Term Investments:
|
|
Repurchase Agreements
|
|
|
|
|
|
|
1,313,604
|
|
|
|
|
|
|
|
1,313,604
|
|
|
Total
|
|
$
|
80,386,527
|
|
|
$
|
17,496,437
|
|
|
$
|
|
|
|
$
|
97,882,964
|
|
|
* Refer to the Fund's Portfolio of Investments for industry classifications and breakdown of Common Stocks and $25 Par (or similar) Retail Preferred classified as Level 2.
** Represents net unrealized appreciation (depreciation) as reported in the Fund's Portfolio of Investments.
Nuveen Investments
57
Notes to Financial Statements
(Unaudited) (continued)
The Nuveen funds' Board of Directors/Trustees is responsible for the valuation process and has delegated the oversight of the daily valuation process to the Adviser's Valuation Committee. The Valuation Committee, pursuant to the valuation policies and procedures adopted by the Board of Directors/Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the funds' pricing policies and reporting to the Board of Directors/Trustees. The Valuation Committee is aided in its efforts by the Adviser's dedicated Securities Valuation Team, which is responsible for administering the daily valuation process and applying fair value methodologies as approved by the Valuation Committee. When determining the reliability of independent pricing services for investments owned by the funds, the Valuation Committee, among other things, conducts due diligence reviews of the pricing services and monitors the quality of security prices received through various testing reports conducted by the Securities Valuation Team.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making a fair value determination, based on the facts and circumstances specific to the portfolio instrument. Fair value determinations generally will be derived as follows, using public or private market information:
(i) If available, fair value determinations shall be derived by extrapolating from recent transactions or quoted prices for identical or comparable securities.
(ii) If such information is not available, an analytical valuation methodology may be used based on other available information including, but not limited to: analyst appraisals, research reports, corporate action information, issuer financial statements and shelf registration statements. Such analytical valuation methodologies may include, but are not limited to: multiple of earnings, discount from market value of a similar freely-traded security, discounted cash flow analysis, book value or a multiple thereof, risk premium/yield analysis, yield to maturity and/or fundamental investment analysis.
The purchase price of a portfolio instrument will be used to fair value the instrument only if no other valuation methodology is available or deemed appropriate, and it is determined that the purchase price fairly reflects the instrument's current value.
For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors/Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such testing and fair valuation occurrences are reported to the Board of Directors/Trustees.
3. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Foreign Currency Transactions
To the extent that the Funds invest in securities and/or contracts that are denominated in a currency other than U.S. dollars, the Funds will be subject to currency risk, which is the risk that an increase in the U.S. dollar relative to the foreign currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises in value against a foreign currency, the Funds' investments denominated in that currency will lose value because its currency is worth fewer U.S. dollars; the opposite effect occurs if the U.S. dollar falls in relative value. Investments and other assets and liabilities denominated in foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate prevailing in the foreign currency exchange market at the time of valuation. Purchases and sales of investments and income denominated in foreign currencies are translated into U.S. dollars on the respective dates of such transactions.
Each Fund may invest in non-U.S. securities. As of January 31, 2014, the Funds' investments in non-U.S. securities were as follows:
Preferred Income Opportunities (JPC)
|
|
Value
|
|
% of
Total Investments
|
|
Country:
|
|
United Kingdom
|
|
$
|
76,902,319
|
|
|
|
5.6
|
%
|
|
Netherlands
|
|
|
69,659,410
|
|
|
|
5.1
|
|
|
Spain
|
|
|
37,752,110
|
|
|
|
2.8
|
|
|
Switzerland
|
|
|
34,739,183
|
|
|
|
2.5
|
|
|
Other Countries
|
|
|
95,010,348
|
|
|
|
6.9
|
|
|
Total Non-U.S. Securities
|
|
$
|
314,063,370
|
|
|
|
22.9
|
%
|
|
Nuveen Investments
58
Preferred and Income Term (JPI)
|
|
Value
|
|
% of
Total Investments
|
|
Country:
|
|
United Kingdom
|
|
$
|
89,741,352
|
|
|
|
11.6
|
%
|
|
Netherlands
|
|
|
68,945,884
|
|
|
|
8.9
|
|
|
Spain
|
|
|
39,725,213
|
|
|
|
5.1
|
|
|
France
|
|
|
37,080,815
|
|
|
|
4.8
|
|
|
Other Countries
|
|
|
51,043,817
|
|
|
|
6.6
|
|
|
Total Non-U.S. Securities
|
|
$
|
286,537,081
|
|
|
|
37.0
|
%
|
|
Flexible Investment Income (JPW)
|
|
Country:
|
|
Ireland
|
|
$
|
1,284,563
|
|
|
|
1.3
|
%
|
|
United Kingdom
|
|
|
807,015
|
|
|
|
0.8
|
|
|
Greece
|
|
|
765,316
|
|
|
|
0.8
|
|
|
Israel
|
|
|
598,042
|
|
|
|
0.6
|
|
|
Norway
|
|
|
545,664
|
|
|
|
0.6
|
|
|
Other Countries
|
|
|
1,001,940
|
|
|
|
1.0
|
|
|
Total Non-U.S. Securities
|
|
$
|
5,002,540
|
|
|
|
5.1
|
%
|
|
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, assets and liabilities are translated into U.S. dollars at 4:00 p.m. Eastern Time. Investment transactions, income and expenses are translated on the respective dates of such transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date of the transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of a Fund and the amounts actually received.
The realized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments, forward foreign currency exchange contracts, futures, options purchased, options written and swap contracts are recognized as a component of "Net realized gain (loss) from investments and foreign currency," on the Statement of Operations, when applicable.
The unrealized gains and losses resulting from changes in foreign currency exchange rates and changes in foreign exchange rates associated with other assets and liabilities on investments are recognized as a component of "Change in net unrealized appreciation (depreciation) of investments and foreign currency," on the Statement of Operations, when applicable. The unrealized gains and losses resulting from changes in foreign exchange rates associated with forward foreign currency exchange contracts, futures, options purchased, options written and swap contracts are recognized as a component of "Change in net unrealized appreciation (depreciation) of forward foreign currency exchange contracts, futures contracts, options purchased, options written and swaps," respectively, on the Statement of Operations, when applicable.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is each Fund's policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited.
The following table presents the repurchase agreements for the Funds that are subject to netting agreements as of the end of the reporting period, and the collateral delivered related to those repurchase agreements.
Fund
|
|
Counterparty
|
|
Short-Term
Investments, at Value
|
|
Collateral
Pledged (From)
Counterparty*
|
|
Net
Exposure
|
|
Preferred Income Opportunities (JPC)
|
|
Fixed Income Clearing Corporation
|
|
$
|
22,741,190
|
|
|
$
|
(22,741,190
|
)
|
|
$
|
|
|
|
Preferred and Income Term (JPI)
|
|
Fixed Income Clearing Corporation
|
|
|
6,796,665
|
|
|
|
(6,796,665
|
)
|
|
|
|
|
|
Flexible Investment Income (JPW)
|
|
Fixed Income Clearing Corporation
|
|
|
1,313,604
|
|
|
|
(1,313,604
|
)
|
|
|
|
|
|
* As of January 31, 2014, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. Refer to the Fund's Portfolio of Investments for details on the repurchase agreements.
Zero Coupon Securities
Each Fund is authorized to invest in zero coupon securities. A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the original purchase price of the security at issuance
Nuveen Investments
59
Notes to Financial Statements
(Unaudited) (continued)
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.
Investments in Derivatives
Each Fund is authorized to invest in certain 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 each 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.
Options Transactions
The purchase of options involves the risk of loss of all or a part of the cash paid for the options (the premium). The market risk associated with purchasing options is limited to the premium paid. The counterparty credit risk of purchasing options, however, needs also to take into account the current value of the option, as this is the performance expected from the counterparty. When a Fund purchases an option, an amount equal to the premium paid (the premium plus commission) is recognized as a component of "Options purchased, at value" on the Statement of Assets and Liabilities. When a Fund writes an option, an amount equal to the net premium received (the premium less commission) is recognized as a component of "Options written, at value" on the Statement of Assets and Liabilities and is subsequently adjusted to reflect the current value of the written option until the option is exercised or expires or the Fund enters into a closing purchase transaction. The changes in the value of options purchased during the fiscal period are recognized as a component of "Change in net unrealized appreciation (depreciation) of options purchased" on the Statement of Operations. The changes in the value of options written during the fiscal period are recognized as a component of "Change in net unrealized appreciation (depreciation) of options written" on the Statement of Operations. When an option is exercised or expires or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction, including commission, is recognized as a component of "Net realized gain (loss) from options purchased and/or written" on the Statement of Operations. The Fund, as a writer of an option has no control over whether the underlying instrument may be sold (called) or purchased (put) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
During the six months ended January 31, 2014, Preferred Income Opportunities (JPC) wrote covered call options on common stocks to hedge equity exposure. These options expired prior to the close of this reporting period.
The average notional amount of outstanding options contracts during the six months ended January 31, 2014, was as follows:
Average notional amount outstanding options written*
|
|
$
|
|
**
|
|
* The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year.
** The Fund did not hold any options at the beginning of the fiscal year or at the end of each quarter within the current fiscal year.
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on options contracts during the six months ended January 31, 2014, and the primary underlying risk exposure.
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Net Realized Gain (Loss)
from Options Written
|
|
Change in Net Unrealized
Appreciation (Depreciation)
of Options Written
|
|
Equity price
|
|
Options
|
|
$
|
30,270
|
|
|
$
|
|
|
|
Swap Contracts
Interest rate swap contracts involve the each Fund's agreement with the counterparty to pay or receive a fixed rate payment in exchange for the counterparty receiving or paying a variable rate payment that is intended to approximate the Fund's variable rate payment obligation on any variable rate borrowing. Forward interest rate swap transactions involve each Fund's agreement with a counterparty to pay or receive, in the future, a fixed or variable rate payment in exchange for the counterparty receiving or paying the Fund a variable or fixed rate payment, the accruals for which would begin at a specified date in the future (the "effective date"). The payment obligation is based on the notional amount swap contract. Swap contracts do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to the swap counterparty on such transactions is limited to the net amount of interest payments that each Fund is to receive. Swap contracts are valued daily. Upon entering into an interest rate swap (and beginning on the effective date for a forward interest rate swap), each Fund accrues the fixed rate payment expected to be paid or received and the variable rate payment expected to be received or paid on a daily basis, and recognizes the daily change in the fair value of the Fund's contractual rights and obligations under the contracts. The net amount recorded for these transactions for each counterparty is recognized on the Statement of Assets and Liabilities as a component of "Unrealized appreciation or depreciation on interest rate swaps (,net)" with the change during the fiscal period recognized on the Statement of Operations as a component of "Change in net unrealized appreciation (depreciation) of swaps." Income
Nuveen Investments
60
received or paid by each Fund is recognized as a component of "Net realized gain (loss) from swaps" on the Statement of Operations, in addition to the net realized gains or losses recognized upon the termination of a swap contract, and are equal to the difference between the Fund's basis in the swap contract and the proceeds from (or cost of) the closing transaction. Payments received or made at the beginning of the measurement period are recognized as a component of "Interest rate swap premiums paid and/or received" on the Statement of Assets and Liabilities, when applicable. For tax purposes, periodic payments are treated as ordinary income or expense.
During the six months ended January 31, 2014 Preferred Income Opportunities (JPC) and Preferred and Income Term (JPI) continued to use interest rate swaps to partially fix its interest cost of leverage, which the Funds employ through the use of bank borrowings.
The average notional amount of interest rate swap contracts outstanding during the six months ended January 31, 2014, was as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Average notional amount of interest rate swap contracts outstanding*
|
|
$
|
368,042,000
|
|
|
$
|
168,750,000
|
|
|
* The average notional amount is calculated based on the outstanding notional at the beginning of the fiscal year and at the end of each fiscal quarter within the current fiscal year.
The following table presents the fair value of all interest rate swap contracts held by the Funds as of January 31, 2014, the location of these instruments on the Statement of Assets and Liabilities and the primary underlying risk exposure.
|
|
|
|
Location on the Statement of Assets and Liabilities
|
|
Underlying
|
|
Derivative
|
|
Asset Derivatives
|
|
(Liability) Derivatives
|
|
Risk Exposure
|
|
Instrument
|
|
Location
|
|
Value
|
|
Location
|
|
Value
|
|
Preferred Income Opportunities (JPC)
|
|
Interest rate
|
|
Swaps
|
|
Unrealized appreciation on
interest rate swaps, net
|
|
$
|
6,995,482
|
|
|
Unrealized depreciation on
interest rate swaps
|
|
$
|
(2,472,560
|
)
|
|
Interest rate
|
|
Swaps
|
|
Unrealized appreciation on
interest rate swaps, net
|
|
|
(120,266
|
)
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
6,875,216
|
|
|
|
|
$
|
(2,472,560
|
)
|
|
Preferred and Income Term (JPI)
|
|
Interest rate
|
|
Swaps
|
|
Unrealized appreciation on
interest rate swaps, net
|
|
$
|
2,806,005
|
|
|
|
|
$
|
|
|
|
The following table presents the swap contacts, which are subject to netting agreements, as well as the collateral delivered related to those swap contracts.
Fund
|
|
Counterparty
|
|
Gross
Unrealized
Appreciation
on Interest Rate
Swaps*
|
|
Gross
Unrealized
(Depreciation)
on Interest Rate
Swaps*
|
|
Amounts
Netted on
Statement of
Assets and
Liabilities
|
|
Net Unrealized
Appreciation
(Depreciation)
on Interest Rate
Swaps
|
|
Collateral
Pledged
to (from)
Counterparty
|
|
Net
Exposure
|
|
Preferred Income Opportunities (JPC)
|
|
|
|
JPMorgan
|
|
$
|
6,995,482
|
|
|
$
|
(120,266
|
)
|
|
$
|
(120,266
|
)
|
|
$
|
6,875,216
|
|
|
$
|
(6,875,216
|
)
|
|
$
|
|
|
|
|
|
Morgan Stanley
|
|
|
|
|
|
|
(2,472,560
|
)
|
|
|
|
|
|
|
(2,472,560
|
)
|
|
|
2,472,560
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
6,995,482
|
|
|
$
|
(2,592,826
|
)
|
|
$
|
(120,266
|
)
|
|
$
|
4,402,656
|
|
|
$
|
(4,402,656
|
)
|
|
$
|
|
|
|
Preferred and Income Term (JPI)
|
|
|
|
JPMorgan
|
|
$
|
2,806,005
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,806,005
|
|
|
$
|
(2,806,005
|
)
|
|
$
|
|
|
|
* Represents gross unrealized appreciation (depreciation) for the counterparty as reported in the Fund's Portfolio of Investments.
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on swap contracts on the Statement of Operations during the six months ended January 31, 2014, and the primary underlying risk exposure.
Fund
|
|
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Net Realized
Gain (Loss) from Swaps
|
|
Change in Net Unrealized
Appreciation (Depreciation) of Swaps
|
|
Preferred Income Opportunities (JPC)
|
|
Interest rate
|
|
Swaps
|
|
$
|
(1,003,933
|
)
|
|
$
|
(2,060,410
|
)
|
|
Preferred and Income Term (JPI)
|
|
Interest rate
|
|
Swaps
|
|
|
|
|
|
|
(2,037,414
|
)
|
|
Nuveen Investments
61
Notes to Financial Statements
(Unaudited) (continued)
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.
4. Fund Shares
Common Shares
Transactions in common shares were as follows:
|
|
Preferred Income
Opportunities (JPC)
|
|
|
|
Six Months
Ended
1/31/14
|
|
Seven Months
Ended
7/31/13
|
|
Year
Ended
12/31/12
|
|
Common shares issued to shareholders due to reinvestment of distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred and Income
Term (JPI)
|
|
Flexible Investment
Income (JPW)
|
|
|
|
Six Months
Ended
1/31/14
|
|
Year
Ended
7/31/13
|
|
Six Months
Ended
1/31/14
|
|
For the period 6/25/13
(commencement of operations)
through 7/31/13
|
|
Common shares sold
|
|
|
|
|
|
|
2,739,573
|
|
|
|
200,000
|
|
|
|
3,500,000
|
*
|
|
Common shares issued to shareholders due to reinvestment of distributions
|
|
|
|
|
|
|
9,004
|
|
|
|
|
|
|
|
|
|
|
* Excludes 5,250 shares owned by the Adviser.
5. Investment Transactions
Purchases and sales (including maturities but excluding short-term investments and derivative transactions, where applicable) during the six months ended January 31, 2014, were as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Purchases
|
|
$
|
253,674,524
|
|
|
$
|
165,311,064
|
|
|
$
|
54,028,291
|
|
|
Sales and maturities
|
|
|
268,845,183
|
|
|
|
178,621,997
|
|
|
|
21,621,290
|
|
|
Transactions in options written for the following Fund during the six months ended January 31, 2014, were as follows:
|
|
Preferred Income
Opportunities (JPC)
|
|
|
|
Number of
Contracts
|
|
Premiums
Received
|
|
Options outstanding, beginning of period
|
|
|
|
|
|
$
|
|
|
|
Options written
|
|
|
591
|
|
|
|
30,270
|
|
|
Options expired
|
|
|
(591
|
)
|
|
|
(30,270
|
)
|
|
Options outstanding, end of period
|
|
|
|
|
|
$
|
|
|
|
Nuveen Investments
62
6. Income Tax Information
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to distribute substantially all of its investment company taxable income to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. In any year when the Funds realize net capital gains, each Fund may choose to distribute all or a portion of its net capital gains to shareholders, or alternatively, to retain all or a portion of its net capital gains and pay federal corporate income taxes on such retained gains.
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 recognition of premium amortization, timing differences in the recognition of income on real estate investment trust ("REIT") investments and timing differences in recognizing certain gains and losses on investment transactions. To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital accounts as detailed below. Temporary differences do not require reclassification. Temporary and permanent differences do not impact the NAVs of the Funds.
As of January 31, 2014, the cost and unrealized appreciation (depreciation) of investments (excluding investments in derivatives, where applicable), as determined on a federal income tax basis, were as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Cost of investments
|
|
$
|
1,345,088,284
|
|
|
$
|
760,517,221
|
|
|
$
|
99,536,328
|
|
|
Gross unrealized:
|
|
Appreciation
|
|
$
|
55,046,380
|
|
|
$
|
20,761,139
|
|
|
$
|
952,189
|
|
|
Depreciation
|
|
|
(31,457,535
|
)
|
|
|
(7,596,581
|
)
|
|
|
(2,605,553
|
)
|
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
23,588,845
|
|
|
$
|
13,164,558
|
|
|
$
|
(1,653,364
|
)
|
|
Permanent differences, primarily due to federal taxes paid, notional principal contracts, tax basis earnings and profit adjustments, bond premium amortization adjustments, adjustments for REITs, complex securities character adjustments, litigation proceeds, and foreign currency reclasses, resulted in reclassifications among the Funds' components of common share net assets as of July 31, 2013, the Funds' last tax year end, as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Paid-in-surplus
|
|
$
|
(383,932
|
)
|
|
$
|
(75,649
|
)
|
|
$
|
|
|
|
Undistributed (Over-distribution of) net investment income
|
|
|
(1,106,300
|
)
|
|
|
405,185
|
|
|
|
|
|
|
Accumulated net realized gain (loss)
|
|
|
1,490,232
|
|
|
|
(329,536
|
)
|
|
|
|
|
|
The tax components of undistributed net ordinary income and net long-term capital gains as of July 31, 2013, the Funds' last tax year end, were as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Undistributed net ordinary income
1
|
|
$
|
6,045,230
|
|
|
$
|
16,537,152
|
|
|
$
|
114,911
|
|
|
Undistributed net long-term capital gains
|
|
|
|
|
|
|
9,204
|
|
|
|
|
|
|
1
Net ordinary income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any.
The tax character of distributions paid during the Funds' last tax year ended July 31, 2013, was designated for purposes of the dividends paid deduction as follows:
|
|
Preferred
Income
Opportunities
(JPC)
3
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
4
|
|
Distributions from net ordinary income
2
|
|
$
|
36,836,933
|
|
|
$
|
40,663,121
|
|
|
$
|
|
|
|
Distributions from net long-term capital gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuveen Investments
63
Notes to Financial Statements
(Unaudited) (continued)
The tax character of distributions paid during Preferred Income Opportunities' (JPC) tax year ended December 31, 2012, was designated for purposes of the dividends paid deduction as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Distributions from net ordinary income
2
|
|
$
|
73,683,563
|
|
|
Distributions from net long-term capital gains
|
|
|
|
|
|
Return of Capital
|
|
|
|
|
|
2
Net ordinary income consists of net taxable income derived from dividends, interest, net short-term capital gains and current year earnings and profits attributable to realized gains, if any.
3
For the seven months ended July 31, 2013.
4
For the period June 25, 2013 (commencement of operations) through July 31, 2013.
As of July 31, 2013, the Funds' last tax year end, the following Fund had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied, the carryforwards will expire as shown in the following table. The losses not subject to expiration retain the character reflected and will be utilized first by the Fund, while the losses subject to expiration are considered short-term.
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Expiration:
|
|
July 31, 2016
|
|
$
|
129,811,368
|
|
|
July 31, 2017
|
|
|
204,895,930
|
|
|
July 31, 2018
|
|
|
9,385,427
|
|
|
Not subject to expiration:
|
|
Short-term losses
|
|
|
|
|
|
Long-term losses
|
|
|
|
|
|
Total
|
|
$
|
344,092,725
|
|
|
During the Funds' last tax year ended July 31, 2013, the following Fund utilized capital loss carryforwards as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Utilized capital loss carryforwards
|
|
$
|
30,171,610
|
|
|
7. Management Fees and Other Transactions with Affiliates
Each Fund's management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Sub-Advisers are compensated for their 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 each Fund's shareholders to benefit from growth in the assets within their respective Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Average Daily Managed Assets*
|
|
Preferred
Income
Opportunities
(JPC)
Fund-Level
Fee Rate
|
|
Preferred and
Income
Term
(JPI)
Fund-Level
Fee Rate
|
|
Flexible
Investment
Income
(JPW)
Fund-Level
Fee Rate
|
|
For the first $500 million
|
|
|
.6800
|
%
|
|
|
.7000
|
%
|
|
|
.7000
|
%
|
|
For the next $500 million
|
|
|
.6500
|
|
|
|
.6750
|
|
|
|
.6750
|
|
|
For the next $500 million
|
|
|
.6300
|
|
|
|
.6500
|
|
|
|
.6500
|
|
|
For the next $500 million
|
|
|
.6050
|
|
|
|
.6250
|
|
|
|
.6250
|
|
|
For managed assets over $2 billion
|
|
|
.5800
|
|
|
|
.6000
|
|
|
|
.6000
|
|
|
Nuveen Investments
64
The annual complex-level fee for each Fund, payable monthly, is calculated according to the following schedule:
Complex-Level Managed Asset Breakpoint Level*
|
|
Effective Rate at Breakpoint Level
|
|
$
55
billion
|
|
|
.2000
|
%
|
|
$
56
billion
|
|
|
.1996
|
|
|
$
57
billion
|
|
|
.1989
|
|
|
$
60
billion
|
|
|
.1961
|
|
|
$
63
billion
|
|
|
.1931
|
|
|
$
66
billion
|
|
|
.1900
|
|
|
$
71
billion
|
|
|
.1851
|
|
|
$
76
billion
|
|
|
.1806
|
|
|
$
80
billion
|
|
|
.1773
|
|
|
$
91
billion
|
|
|
.1691
|
|
|
$
125
billion
|
|
|
.1599
|
|
|
$
200
billion
|
|
|
.1505
|
|
|
$
250
billion
|
|
|
.1469
|
|
|
$
300
billion
|
|
|
.1445
|
|
|
* For the fund-level and complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to 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 Funds that constitute "eligible assets." Eligible assets do not include assets attributable to investments in other Nuveen Funds and assets in excess of $2 billion added to the Nuveen Fund complex in connection with the Adviser's assumption of the management of the former First American Funds effective January 1, 2011. As of January 31, 2014, the complex-level fee rate for each of these Funds was .1679%.
The Funds pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Funds from the Adviser or its affiliates. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
8. Borrowing Arrangements
Borrowings
Preferred Income Opportunities (JPC) and Preferred and Income Term (JPI) each entered into a prime brokerage facility with BNP Paribas Prime Brokerage, Inc. ("BNP") while Flexible Investment Income (JPW) entered in to a committed secured 180-day continuous rolling borrowing facility with the Bank of Nova Scotia (collectively "Borrowings") as a means of leverage. Each Fund's maximum commitment amount under these Borrowings is as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Maximum commitment amount
|
|
$
|
405,000,000
|
|
|
$
|
250,000,000
|
|
|
$
|
35,000,000
|
|
|
As of January 31, 2014, each Fund's outstanding balance on its Borrowings was as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)
|
|
Outstanding balance on Borrowings
|
|
$
|
402,500,000
|
|
|
$
|
225,000,000
|
|
|
$
|
27,500,000
|
|
|
During the six months ended January 31, 2014, the average daily balance outstanding and average annual interest rate on each Fund's Borrowings were as follows:
|
|
Preferred
Income
Opportunities
(JPC)
|
|
Preferred and
Income
Term
(JPI)
|
|
Flexible
Investment
Income
(JPW)*
|
|
Average daily balance outstanding
|
|
$
|
402,500,000
|
|
|
$
|
225,000,000
|
|
|
$
|
26,715,116
|
|
|
Average annual interest rate
|
|
|
1.07
|
%
|
|
|
1.07
|
%
|
|
|
.87
|
%
|
|
* During the period August 13, 2013 (first utilization date of borrowings) through January 31, 2014.
Nuveen Investments
65
Notes to Financial Statements
(Unaudited) (continued)
In order to maintain these Borrowings, the Funds must meet certain collateral, asset coverage and other requirements. Borrowings outstanding are fully secured by securities held in each Fund's portfolio of investments ("Pledged Collateral"). For Preferred Income Opportunities (JPC) and Preferred and Income Term (JPI) interest is charged on these Borrowings at 3-Month LIBOR (London Inter-Bank Offered Rate) (during the period August 1, 2013 through December 9, 2013 and 1-month LIBOR thereafter) plus .85% per annum on the amounts borrowed and .50% per annum on the undrawn balance. Flexible Investment Income (JPW) interest is charged on the Borrowings at a rate equal to the 1-month LIBOR plus .70% per annum on the amount borrowed. In addition to the interest expense, Flexible Investment Income (JPW) will pay a commitment fee equal to .15% per annum on the undrawn balance.
Borrowings outstanding are recognized as "Borrowings" on the Statement of Assets and Liabilities. Interest expense incurred on the borrowed amount and undrawn balance and the one-time amendment fee are recognized as a component of "Interest expense on borrowings" on the Statement of Operations.
Rehypothecation
On December 9, 2013, the Adviser entered into a Rehypothecation Side Letter ("Side Letter") with BNP, allowing BNP to re-register the Pledged Collateral in its own name or in a name other than the Funds' to pledge, repledge, hypothecate, rehyphothecate, sell, lend or otherwise transfer or use the Pledged Collateral (the "Hypothecated Securities") with all rights of ownership as described in the Side Letter. Subject to certain conditions, the total value of the outstanding Hypothecated Securities shall not exceed the lesser of (i) 98% of the outstanding balance on the Borrowings to which the Pledged Collateral relates and (ii) 33 1/3% of the Funds' total assets. The Funds may designate any Pledged Collateral as ineligible for rehypothecation. The Funds may also recall Hypothecated Securities on demand.
The Funds also have the right to apply and set-off an amount equal to one-hundred percent (100%) of the then-current fair market value of such Pledged Collateral against the current Borrowings under the Side Letter in the event that BNP fails to timely return the Pledged Collateral and in certain other circumstances. In such circumstances, however, the Funds may not be able to obtain replacement financing required to purchase replacement securities and, consequently, the Funds' income generating potential may decrease. Even if a Fund is able to obtain replacement financing, it might not be able to purchase replacement securities at favorable prices.
The Funds will receive a fee in connection with the Hypothecated Securities ("Rehypothecation Fees") in addition to any principal, interest, dividends and other distributions paid on the Hypothecated Securities.
As of January 31, 2014, Preferred Income Opportunities (JPC) and Preferred and Income Term (JPI) each had Hypothecated Securities totalling $75,452,300 and $175,206,500, respectively. During the period from December 9, 2013 through January 31, 2014, Preferred Income Opportunities (JPC) and Preferred and Income Term (JPI) earned Rehypothecation Fees of $87,208 and $48,750, respectively, which is recognized as "Other income" on the Statement of Operations.
Nuveen Investments
66
Additional
Fund Information
Board of Trustees
William Adams IV*
|
|
Robert P. Bremner
|
|
Jack B. Evans
|
|
William C. Hunter
|
|
David J. Kundert
|
|
John K. Nelson
|
|
William J. Schneider
|
|
Thomas S. Schreier, Jr.*
|
|
Judith M. Stockdale
|
|
Carole E. Stone
|
|
Virginia L. Stringer
|
|
Terence J. Toth
|
|
* Interested Board Member.
Fund Manager
Nuveen Fund Advisors, LLC
333
West Wacker Drive
Chicago, IL 60606
|
|
Custodian
State Street Bank
& Trust Company
Boston, MA 02111
|
|
Legal Counsel
Chapman and Cutler LLP
Chicago, IL 60603
|
|
Independent Registered
Public Accounting Firm
Ernst & Young LLP
Chicago, IL 60606
|
|
Transfer Agent and
Shareholder Services
State Street Bank
& Trust Company
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800
) 257-8787
|
|
Quarterly Form N-Q 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 on Form N-Q. You may obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov or in person at the SEC's Public Reference Room in Washington, D.C. Call the SEC toll-free at (800) SEC -0330 for room hours and operation.
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 Investments 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 Investments 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
The 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.
Share Information
Each Fund intends to repurchase 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.
|
|
JPC
|
|
JPI
|
|
JPW
|
|
Common shares repurchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Any future repurchases will be reported to shareholders in the next annual or semi-annual report.
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.
Nuveen Investments
67
Glossary of Terms
Used in this Report
n
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 offer price and reinvested dividends and capital gains distributions, if any) over the time period being considered.
n
Barclays USD Capital Securities Index:
The Barclays USD Capital Securities component of the Barclays Global Capital Securities Index generally includes Tier 2/Lower Tier 2 bonds, perpetual step-up debt, step-up preferred securities, and term preferred securities. The index returns assume reinvestment of dividends, but do not include the effects of any sales charges or management fees.
n
Basel III:
A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements.
n
BofA/Merrill Lynch Preferred Stock Fixed Rate Index:
An index that tracks the performance of fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. Qualifying securities must be rated investment grade (based on an average of Moody's, S&P, and Fitch) and must have an investment grade rated country of risk (based on an average of Moody's, S&P, and Fitch foreign currency long-term sovereign debt ratings). In addition, qualifying securities must be issued as public securities or through a 144A filing, must be issued in $25, $50 or $100 par/liquidation preference increments, must have a fixed coupon or dividend schedule, and must have a minimum amount outstanding of $100 million. The index returns assume reinvestment of dividends, but do not include the effects of any sales charges or management fees.
n
Effective Leverage:
Effective leverage is a fund's effective economic leverage, and includes both regulatory leverage (see below) and the leverage effects of certain derivative investments in the fund's portfolio that increase the funds' investment exposure.
n
Gross Domestic Product (GDP):
The total market value of all final goods and services produced in a country/region in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
n
JPC Blended Index (Comparative Benchmark):
A blended return consisting of 82.5% of the BofA/Merrill Lynch Preferred Stock Fixed Rate Index and 17.5% of the Barclays Capital Securities Index. The index returns assume reinvestment of dividends, but do not include the effects of any sales charges or management fees.
n
JPI Blended Benchmark Index:
A blended return consisting of the BofA/Merrill Lynch Preferred Stock Fixed Rate Index and the Barclays USD Capital Securities Index. The JPI Blended Benchmark Index is comprised of a 65% weighting in the BofA/Merrill Lynch Preferred Stock Fixed Rate Index, and a 35% weighting in the Barclays USD Capital Securities Index. Benchmark returns assume reinvestment of distributions, but do not include the effects of any sales charges or management fees.
n
Leverage:
Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more than 100% of the investment capital.
n
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.
n
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 forth in the Investment Company Act of 1940.
Nuveen Investments
68
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
Your Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares.
By choosing to reinvest, you'll be able to invest money regularly and automatically, and watch your investment grow through the power of compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each quarter 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.
Nuveen Investments
69
Nuveen Investments:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen Investments to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we offer a range of high quality equity and fixed-income solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen Investments provides high-quality investment services designed to help secure the long-term goals of institutional and individual investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets a wide range of specialized investment solutions which provide investors access to capabilities of its high-quality boutique investment affiliatesNuveen Asset Management, Symphony Asset Management, NWQ Investment Management Company, Santa Barbara Asset Management, Tradewinds Global Investors, Winslow Capital Management and Gresham Investment Management. In total, Nuveen Investments managed approximately $221 billion as of December 31, 2013.
Find out how we can help you.
To learn more about how the products and services of Nuveen Investments may be able to help you meet your financial goals, talk to your financial advisor, or call us at
(800) 257-8787
. Please read the information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which contains this and other relevant information. To obtain a prospectus, please contact your securities representative or
Nuveen Investments, 333 W. Wacker Dr., Chicago, IL 60606
. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at:
www.nuveen.com/cef
Distributed by
Nuveen Securities, LLC | 333 West Wacker Drive | Chicago, IL 60606 | www.nuveen.com/cef
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
a) See Portfolio of Investments in Item 1.
b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrants Board implemented after the registrant last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a)
|
The registrants principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the 1940 Act) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act)(17 CFR 240.13a-15(b) or 240.15d-15(b)).
|
|
|
(b)
|
There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
|
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable to this filing.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR 270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished pursuant to this paragraph will not be deemed filed for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Flexible Investment Income Fund
By (Signature and Title)
|
/s/ Kevin J. McCarthy
|
|
|
Kevin J. McCarthy
|
|
Vice President and Secretary
|
Date: April 8, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)
|
/s/ Gifford R. Zimmerman
|
|
|
Gifford R. Zimmerman
|
|
Chief Administrative Officer
|
|
(principal executive officer)
|
Date: April 8, 2014
By (Signature and Title)
|
/s/ Stephen D. Foy
|
|
|
Stephen D. Foy
|
|
Vice President and Controller
|
|
(principal financial officer)
|
Date: April 8, 2014
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