Nuveen Mortgage Opportunity Term Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number  

811-22329

Nuveen Mortgage Opportunity Term Fund

 

(Exact name of registrant as specified in charter)

Nuveen Investments

333 West Wacker Drive, Chicago, IL 60606

 

(Address of principal executive offices)  (Zip code)

Gifford R. Zimmerman

Nuveen Investments

333 West Wacker Drive, Chicago, IL 60606

 

(Name and address of agent for service)

Registrant’s telephone number, including area code:   (312) 917-7700                    

Date of fiscal year end:   December 31                       

Date of reporting period:   June 30, 2017                    

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policy making roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss.3507.


ITEM 1. REPORTS TO STOCKHOLDERS.


     LOGO
Closed-End Funds   

 

     Nuveen
     Closed-End Funds

 

 

 

 

       

 

 

Semi-Annual Report  June 30, 2017

 

     
           
JLS            
Nuveen Mortgage Opportunity Term Fund  
           
JMT            
Nuveen Mortgage Opportunity Term Fund 2  
           

 


 

 

     

 

           
 

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LOGO


Table

of Contents

 

Chairman’s Letter to Shareholders

     4  

Portfolio Manager’s Comments

     5  

Fund Leverage

     7  

Share Information

     8  

Risk Considerations

     10  

Performance Overview and Holding Summaries

     12  

Shareholder Meeting Report

     16  

Portfolios of Investments

     17  

Statement of Assets & Liabilities

     31  

Statement of Operations

     32  

Statement of Changes in Net Assets

     33  

Statement of Cash Flows

     34  

Financial Highlights

     36  

Notes to Financial Statements

     38  

Additional Fund Information

     46  

Glossary of Terms Used in this Report

     47  

Reinvest Automatically, Easily and Conveniently

     49  

Annual Investment Management Agreement Approval Process

     50  

 

NUVEEN     3  


Chairman’s Letter

to Shareholders

 

LOGO

Dear Shareholders,

Some of the key assumptions driving the markets higher at the beginning of 2017 have recently come into question. Following the collapse of the health care reform bill in the Senate, progress on the rest of the White House’s pro-growth fiscal agenda, including tax reform and large infrastructure projects, is expected to be delayed. Economic growth projections, in turn, have been lowered, and with inflation recently waning, the markets are expecting fewer rate hikes from the Federal Reserve (Fed) than the Fed itself had predicted. Yet, asset prices continued to rise.

Investors have largely looked beyond policy disappointments and focused instead on the healthy profits reported by U.S. companies during the first two quarters of 2017. U.S. growth has remained slow and steady, European growth has surprised to the upside and concern that China would decelerate too rapidly has eased, further contributing to an optimistic tone in the markets. Additionally, political risk in Europe has moderated, with the election of mainstream candidates in the Dutch and French elections earlier this year.

The remainder of the year could bring challenges to this benign macro environment. The debt ceiling looms, with a vote needed from Congress to raise or suspend the nation’s borrowing limit before the Treasury is unable to pay its bills in full or on time (likely in early October). The mechanics of the U.K.’s separation from the European Union remain to be seen, as “Brexit” negotiations develop. A tightening of financial conditions in China or a more aggressive-than-expected policy action from the Fed, European Central Bank or Bank of Japan could also turn into headwinds.

Market volatility readings have been remarkably low lately, but conditions can change quickly. As market conditions evolve, Nuveen remains committed to rigorously assessing opportunities and risks. If you’re concerned about how resilient your investment portfolio might be, we encourage you to talk to your financial advisor. On behalf of the other members of the Nuveen Fund Board, we look forward to continuing to earn your trust in the months and years ahead.

Sincerely,

 

LOGO

William J. Schneider

Chairman of the Board

August 23, 2017

 

 

  4     NUVEEN


Portfolio Manager’s

Comments

 

Nuveen Mortgage Opportunity Term Fund (JLS)

Nuveen Mortgage Opportunity Term Fund 2 (JMT)

The investment adviser for both Funds is Nuveen Fund Advisors, LLC (NFA), an affiliate of Nuveen, LLC. NFA is responsible for determining each Fund’s overall investment strategy and monitoring the performance of Wellington Management Company LLP (Wellington Management), the sub-adviser for both Funds. Wellington Management is responsible for implementing each Fund’s direct investments in mortgage-backed securities and other permitted investments. Michael F. Garrett serves as portfolio manager for these Funds.

Here Michael talks about his management strategy and the performance of the Funds for the six-month reporting period ended June 30, 2017.

What key strategies were used to manage the Funds during this six-month reporting period ended June 30, 2017?

Both Funds seek to generate total returns by investing in a diverse portfolio of mortgage-backed securities (MBS), consisting primarily of non-agency residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS). Under normal circumstances, both Funds will invest at least 80% of their managed assets in MBS, primarily non-agency RMBS and CMBS. Both JLS and JMT may be leveraged directly to a maximum effective leverage of 33% of total net asset value. Each Fund has a limited term of ten years from its inception, at which time all of their net assets will be distributed to shareholder of record. JLS’s since inception date is November 25, 2009 and JMT’s since inception date is February 23, 2010.

We maintained our cautious outlook for CMBS, and continued to believe that the non-agency RMBS sector offered better relative value and we positioned the Funds accordingly. The Funds continue to be conservatively positioned within RMBS, with a bias toward higher quality collateral to try to protect against downside risk in the event of a prolonged path toward economic recovery.

CMBS posted positive absolute returns during the six-month reporting period. The spread on the CMBS index ended the reporting period slightly tighter, while securities lower in the capital structure significantly outperformed. Our longer-term CMBS outlook remains constructive due to favorable commercial real estate (CRE) fundamentals. However, given pockets of structural weakness such as retail and oil, investors will need to be judicious in their credit analysis and security selection. We favor select single-borrower credit bonds, seasoned (2010 – 2013) credit bonds, certain interest-only (IO) bonds, Freddie K credit bonds, and front-pay high quality new issues.

 

 

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives or circumstances and in consultation with his or her advisors.

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

For financial recording purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s (S&P), Moody’s Investors Service, Inc. (Moody’s) or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

 

NUVEEN     5  


Portfolio Manager’s Comments (continued)

 

Commercial real estate fundamentals are generally healthy, supported by a growing U.S. economy with some pockets of concern. The secular shift in retail is a long-term concern for lower quality malls and tighter lending conditions in this space could increase the risk of maturity defaults. Additionally, oil risk continues to plague many property types in the affected regions (e.g. Texas, North Dakota). Underwriting standards in new issuance continues to deteriorate as the cycle ages. The number of delinquent and specially serviced post-crisis loans continues to increase at a measured pace, but the percentage of troubled loans relative to the universe of properties remains low. CMBS issuance has re-emerged, although we expect higher financing costs to cap issuance. We expect positive net issuance in 2017. Secondary trading volumes and liquidity have declined as dealer balance sheets remain limited.

The non-agency RMBS market generated strong, positive absolute returns during the six-month reporting period. We have a constructive outlook on most non-agency RMBS, given the continuing recovery of the U.S. housing market supporting credit and the positive technical tailwinds. Given the recent spread tightening, near-term return potential is primarily driven by income, especially in the legacy non-agency RMBS and agency credit risk transfer sectors where spreads have continued to tighten. Securitizations in non-traditional sectors, such as, non- and re-performing loans, re-securitizations, and non-qualified mortgages, are also attractive opportunities to provide financing on assets historically financed on bank balance sheets.

The current economic recovery and demographic mix in the U.S. should continue to support housing demand amid low inventory levels. Home price appreciation continues to surprise to the upside and may continue its momentum. We anticipate about 4-5% in home price growth for 2017. Risks to fundamentals include rising rates, decreasing affordability, and potential housing policy changes. Net supply has been negative, providing a tailwind for legacy non-agency RMBS, as long-term investors hold their positions and reinvest paydowns. The legacy sector’s liquidity has declined, although this is experienced more when buying than selling. Uncertainty around trustee litigations in the legacy sector has also negatively affected liquidity. Meanwhile, the CRT market has grown and matured which has lowered volatility and increased liquidity in that sector of the market. The capital market is filling in as a term financing alternative to bank balance sheets as demand for RMBS credit remains strong.

How did the Funds perform during this six-month reporting period ended June 30, 2017?

The tables in the Performance Overview and Holding Summaries section of this report provide total returns for the six-month, one-year, five-year and since inception periods ended June 30, 2017. Each Fund’s total returns at net asset value (NAV) are compared with the performance of a corresponding market index. For the six-month reporting period, JLS and JMT both outperformed the Bloomberg Barclays U.S. Aggregate Bond Index. This index reflects the general performance of the bond market, but not the specific MBS market in which the Funds primarily invest. The total returns for the Funds were positive, as the broader securitized sectors generated positive returns for the six-month reporting period.

Within the Funds, returns for the reporting period were positive across the broad sectors. The primary contributor to the Funds’ absolute returns was the allocation to residential credit, both credit risk transfer and legacy (Alt-A, prime, subprime), where spreads tightened significantly. The allocation to CMBS also positively impacted performance during the reporting period, primarily driven by multi-family Freddie K bonds.

Our approach to sector allocation has remained consistent since the Funds’ launch. Both Funds seek to generate total returns by investing in a diverse portfolio of MBS consisting primarily of non-agency RMBS and CMBS. While we are cautious on CMBS, we continue to favor residential credit from a relative value perspective, and have a bias to the higher quality collateral types within each sector. With an emphasis on the long-term, we continued to focus on finding opportunities to add securities we feel were best positioned to provide stability of principal and attractive income over the duration of the Funds’ limited terms.

The only subsector which detracted from performance was subordinate legacy CMBS bonds. These bonds posted a negative absolute return in aggregate, which detracted modestly from performance during the reporting period.

 

  6     NUVEEN


Fund

Leverage

 

IMPACT OF THE FUNDS’ LEVERAGE STRATEGIES ON PERFORMANCE

One important factor impacting the return of the Funds relative to their comparative benchmarks was the Funds’ use of leverage through the use of bank borrowings. The Funds use leverage because our research has shown that, over time, leveraging provides opportunities for additional income and total return for shareholders. However, use of leverage also can expose shareholders to additional volatility. For example, as the prices of securities held by a Fund decline, the negative impact of these valuation changes on NAV and total return is magnified by the use of leverage. Conversely, leverage may enhance returns during periods when the prices of securities held by a Fund generally are rising. Leverage had a positive effect on performance during the current reporting period.

As of June 30, 2017, the Funds’ percentages of leverage are as shown in the accompanying table.

 

     JLS        JMT  

Effective Leverage*

    25.98        27.19

Regulatory Leverage*

    25.98        27.19
* Effective leverage is a Fund’s effective economic leverage, and includes both regulatory leverage and the leverage effects of certain derivative and other investments in a Fund’s portfolio that increase the Fund’s investment exposure. Regulatory leverage consists of preferred shares issued or borrowings of a Fund. Both of these are part of a Fund’s capital structure. A Fund, however, may from time to time borrow on a typically transient basis in connection with its day-to-day operations, primarily in connection with the need to settle portfolio trades. Such incidental borrowings are excluded from the calculation of a Fund’s effective leverage ratio. Regulatory leverage is subject to asset coverage limits set forth in the Investment Company Act of 1940.

THE FUNDS’ REGULATORY LEVERAGE

Bank Borrowings

As noted above, the Funds employ regulatory leverage through the use of bank borrowings. The Funds’ bank borrowings activities are as shown in the accompanying table.

 

    Current Reporting Period           Subsequent to the Close of
the Reporting Period
 
Fund   January 1, 2017     Draws     Paydowns     June 30, 2017     Average Balance
Outstanding
           Draws     Paydowns     August 25, 2017  

JLS

  $ 147,200,000     $     —     $     —     $ 147,200,000     $ 147,200,000       $     —     $     —     $ 147,200,000  

JMT

  $ 46,200,000     $     $     $ 46,200,000     $ 46,200,000             $     $     $ 46,200,000  

Refer to Notes to Financial Statements, Note 8 – Borrowing Arrangements for further details.

 

NUVEEN     7  


Share

Information

 

DISTRIBUTION INFORMATION

The following information regarding the Funds’ distributions is as of June 30, 2017.

The Funds have a cash flow-based distribution program. Under this program, each Fund seeks to maintain an attractive and stable regular distribution based on the Fund’s net cash flow received from its portfolio investments. Fund distributions are not intended to include expected portfolio appreciation; however, each Fund invests in securities that make payments which ultimately may be fully or partially treated as gains or return of capital for tax purposes. This tax treatment will generally “flow through” to the Fund’s distributions, but the specific tax treatment is often not known with certainty until after the end of the Fund’s tax year. As a result, regular distributions throughout the year are likely to be re-characterized for tax purposes as either long-term gains (both realized and unrealized), or as a non-taxable return of capital.

The figures in the table below provide an estimate as of June 30, 2017 of the sources (for tax purposes) of each Fund’s distributions. These sources estimates include amounts currently estimated to be attributable to realized gains and/or returns of capital. The Funds attribute these non-income sources equally to each regular distribution throughout the fiscal year. The estimated information shown below is for the distributions paid on common shares for all prior months in the current fiscal year. These amounts should not be used for tax reporting purposes, and the distribution sources may differ for financial reporting than for tax reporting. The final determination of the tax characteristics of all distributions paid in 2017 will be made in early 2018 and reported to you on Form 1099-DIV. More details about the tax characteristics of each Fund’s distributions are available on www.nuveen.com/CEFdistributions.

Data as of June 30, 2017

 

    Current Month
Estimated Percentage of Distribution
    Fiscal YTD
Estimated Per
Share Amounts
 
Fund   Net
Investment
Income
    Realized
Gains
    Return of
Capital
    Total
Distributions
    Net
Investment
Income
    Realized
Gains
    Return of
Capital
 

JLS (FYE 12/31)

    78.3     21.7     0.0   $ 0.6810     $ 0.5330     $ 0.1480     $ 0.0000  

JMT (FYE 12/31)

    75.9     24.1     0.0   $ 0.6750     $ 0.5120     $ 0.1630     $ 0.0000  

The following table provides information regarding Fund distributions and total return performance over various time periods. This information is intended to help you better understand whether Fund returns for the specified time periods were sufficient to meet Fund distributions.

Data as of June 30, 2017

 

    Inception
Date
   Latest
Monthly
Per Share
Distribution
     Annualized      Cumulative  
Fund         Current
Distribution on
NAV
     1-Year
Return on
NAV
     5-Year
Return on
NAV
     Fiscal YTD
Distributions on
NAV
    

Fiscal

YTD Return
on NAV

 

JLS (FYE 12/31)

  11/25/2009    $ 0.1135        5.16      14.13      9.98      2.58      8.28

JMT (FYE 12/31)

  2/23/2010    $ 0.1125        5.32      14.01      9.97      2.66      8.05

 

  8     NUVEEN


 

SHARE REPURCHASES

During August 2017 (subsequent to the close of the reporting period), the Funds’ Board of Trustees reauthorized an open-market share repurchase program, allowing each Fund to repurchase an aggregate of up to approximately 10% of its outstanding shares.

As of June 30, 2017, and since the inception of the Funds’ repurchase programs, the Funds have cumulatively repurchased and retired their outstanding shares as shown in the accompanying table.

 

     JLS        JMT  

Shares cumulatively repurchased and retired

    0          0  

Shares authorized for repurchase

    1,590,000          485,000  

OTHER SHARE INFORMATION

As of June 30, 2017, and during the current reporting period, the Funds’ share prices were trading at a premium/(discount) to their NAVs as shown in the accompanying table.

 

     JLS        JMT  

NAV

  $ 26.39        $ 25.39  

Share price

  $ 25.61        $ 24.58  

Premium/(Discount) to NAV

    (2.96 )%         (3.19 )% 

6-month average premium/(discount) to NAV

    (4.10 )%         (4.47 )% 

 

NUVEEN     9  


Risk

Considerations

 

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

Nuveen Mortgage Opportunity Term Fund (JLS)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Investing in mortgage-backed securities entails credit risk, the risk that the servicer fails to perform its duties, liquidity risks, interest rate risks, structure risks, pre-payment risk, and geographical concentration risks. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. These and other risk considerations including the Fund’s limited term are described in more detail on the Fund’s web page at www.nuveen.com/JLS.

Nuveen Mortgage Opportunity Term Fund 2 (JMT)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Investing in mortgage-backed securities entails credit risk, the risk that the servicer fails to perform its duties, liquidity risks, interest rate risks, structure risks, pre-payment risk, and geographical concentration risks. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. These and other risk considerations including the Fund’s limited term are described in more detail on the Fund’s web page at www.nuveen.com/JMT.

 

  10     NUVEEN


THIS PAGE INTENTIONALLY LEFT BLANK

 

NUVEEN     11  


JLS

 

Nuveen Mortgage Opportunity Term Fund

Performance Overview and Holding Summaries as of June 30, 2017

 

Refer to Glossary of Terms Used in this Report for further definition of terms used in this section.

Average Annual Total Returns as of June 30, 2017

 

    Cumulative        Average Annual  
     6-Month        1-Year        5-Year        Since
Inception
 
JLS at NAV     8.28%          14.13%          9.98%          9.16%  
JLS at Share Price     9.33%          18.57%          9.07%          8.52%  
Bloomberg Barclays U.S. Aggregate Bond Index     2.27%          (0.31)%          2.21%          3.47%  

Since inception returns are from 11/25/09. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Share Price Performance — Weekly Closing Price

 

LOGO

 

  12     NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

Asset-Backed Securities     11.8%  
Mortgage-Backed Securities     117.7%  
U.S. Government and Agency Obligations     1.3%  
Repurchase Agreements     6.6%  
Other Assets Less Liabilities     (2.3)%  

Net Assets Plus Borrowings

    135.1%  
Borrowings     (35.1)%  

Net Assets

    100%  

Credit Quality

(% of total long-term investments)

 

AAA/U.S. Guaranteed     5.4%  
AA    
3.5%
 
A     5.2%  
BBB     26.7%  
BB or Lower     38.8%  
N/R (not rated)     20.4%  

Total

    100%  
 

 

NUVEEN     13  


JMT

 

Nuveen Mortgage Opportunity Term Fund 2

Performance Overview and Holding Summaries as of June 30, 2017

 

Refer to Glossary of Terms Used in this Report for further definition of terms used in this section.

Average Annual Total Returns as of June 30, 2017

 

    Cumulative        Average Annual  
     6-Month        1-Year        5-Year        Since
Inception
 
JMT at NAV     8.05%          14.01%          9.97%          9.11%  
JMT at Share Price     9.16%          17.94%          9.14%          8.47%  
Bloomberg Barclays U.S. Aggregate Bond Index     2.27%          (0.31)%          2.21%          3.56%  

Since inception returns are from 2/23/10. Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

Share Price Performance — Weekly Closing Price

 

LOGO

 

  14     NUVEEN


 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Certain bonds backed by U.S. Government or agency securities are regarded as having an implied rating equal to the rating of such securities. Holdings designated N/R are not rated by these national rating agencies.

 

Fund Allocation

(% of net assets)

 

Asset-Backed Securities     13.3%  
Mortgage-Backed Securities     119.3%  
U.S. Government and Agency Obligations     1.3%  
Repurchase Agreements     6.0%  
Other Assets Less Liabilities     (2.5)%  

Net Assets Plus Borrowings

    137.4%  
Borrowings     (37.4)%  

Net Assets

    100%  

Credit Quality

(% of total long-term investments)

 

AAA/U.S. Guaranteed     5.5%  
AA     4.1%  
A     5.7%  
BBB     25.6%  
BB or Lower     40.8%  
N/R (not rated)     18.3%  

Total

    100%  
 

 

NUVEEN     15  


Shareholder

Meeting Report

 

The annual meeting of shareholders was held in the offices of Nuveen on April 6, 2017 for JLS and JMT; at this meeting the shareholders were asked to elect Board Members.

 

        JLS        JMT  
        Common
Shares
      

Common
Shares

 

Approval of the Board Members was reached as follows:

         

William Adams IV

         

For

       14,697,285          4,374,354  

Withhold

       237,187          115,061  

Total

       14,934,472          4,489,415  

David J. Kundert

         

For

       14,637,895          4,350,491  

Withhold

       296,577          138,924  

Total

       14,934,472          4,489,415  

John K. Nelson

         

For

       14,695,879          4,374,958  

Withhold

       238,593          114,457  

Total

       14,934,472          4,489,415  

Terence J. Toth

         

For

       14,704,414          4,374,958  

Withhold

       230,058          114,457  

Total

       14,934,472          4,489,415  

 

  16     NUVEEN


JLS

 

Nuveen Mortgage Opportunity Term Fund

  

Portfolio of Investments

   June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
 

LONG-TERM INVESTMENTS – 130.8% (95.2% of Total Investments)

 

 

ASSET-BACKED SECURITIES – 11.8% (8.6% of Total Investments)

 

$ 2,590    

Atlas Senior Loan Fund Ltd, Series 2012-2A, 144A

    5.070%        1/30/24        BBB      $ 2,590,655  
  755    

BlueMountain Collateralized Loan Obligation, Series 2014-1A, 144A

    4.620%        4/30/26        BBB        759,138  
  2,305    

Bowman Park CLO Limited, Series 2014-1A, 144A

    4.536%        11/23/25        BBB-        2,308,356  
  975    

CIFC Funding Limited, Series 2012-2A, 144A

    4.868%        12/05/24        BBB        975,394  
  885    

CIFC Funding Limited, Series 2012-3A, 144A

    5.039%        1/29/25        BBB+        885,347  
  2,100    

CIFC Funding Limited, Series 2014-3A, 144A

    4.553%        7/22/26        Baa3        2,101,436  
  4,245    

DT Auto Owner Trust, Series 2017-2A, 144A

    2.440%        2/15/21        AA        4,246,619  
  970    

Green Tree Agency Funding Trust, Manufactured Housing Contract Pass-Through Certificates, Series 2016-T1, 144A

    2.380%        10/15/48        AAA        965,983  
  1,180    

Honor Automobile Trust, Series 2016-1A, 144A

    5.760%        4/15/21        BBB        1,217,301  
  1,995    

Magnetite CLO Limited, Series 2012-7A, 144A

    4.908%        1/15/25        A2        2,001,310  
  1,215    

Marine Park CLO Limited, Series 2012-1A, 144A

    4.731%        5/18/23        BBB        1,215,145  
  2,500    

Octagon Investment Partners, Series 2013-1A, 144A

    4.155%        10/25/25        BBB        2,499,865  
  4,041    

Prestige Auto Receivables Trust, Series 2016-2A, 144A

    3.910%        11/15/22        BBB        4,086,510  
  3,900    

Santander Drive Auto Receivables Trust, Series 2015-5

    3.650%        12/15/21        A-        3,986,040  
  780    

Seneca Park CLO Limited, Asset-Backed Securities, Series 2014-1A, 144A

    4.658%        7/17/26        Baa3        780,010  
  610    

SLM Student Loan Trust, Series 2003-4, 144A

    1.996%        3/15/33        AAA        602,303  
  1,581    

SLM Student Loan Trust, Series 2003-7A, 144A

    2.446%        12/15/33        AAA        1,596,796  
  4,066    

SLM Student Loan Trust, Series 2008-5

    2.856%        7/25/23        AA+        4,176,294  
  2,045    

SLM Student Loan Trust, Series 2012-6

    1.966%        5/26/26        Ba1        2,036,067  
  1,143    

Sofi Consumer Loan Program Trust, Series 2016-3, 144A

    3.050%        12/26/25        N/R        1,154,198  
  2,224    

Sofi Consumer Loan Program Trust, Series 2017-1, 144A

    3.280%        1/26/26        N/R        2,252,449  
  1,683    

Sofi Consumer Loan Program Trust, Series 2017-3, 144A

    2.770%        5/25/26        AA        1,691,955  
  1,725    

Sofi Consumer Loan Program Trust, Series 2017-4, 144A, (WI/DD)

    2.500%        6/25/26        AA        1,724,688  
  1,550    

United Auto Credit Securitization Trust, Series 2017-1, 144A

    5.090%        3/10/23        BB-        1,549,658  
  2,315    

Voya CLO Limited, Series 2012-3AR, 144A

    5.108%        10/15/22        BBB        2,318,396  
$ 49,378    

Total Asset-Backed Securities (cost $49,331,395)

                               49,721,913  
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES – 117.7% (85.7% of Total Investments)                       
$ 1,177    

Angel Oak Mortgage Trust, Series 2016-1, 144A

    3.644%        1/25/47        A      $ 1,179,407  
  2,839    

Angel Oak Mortgage Trust, Series 2016-1, 144A

    3.500%        7/25/46        N/R        2,848,345  
  1,770    

Angel Oak Mortgage Trust, Series 2017-2, 144A (WI/DD)

    2.478%        7/25/47        AAA        1,769,979  
  6,500    

Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2005-W2

    1.706%        10/25/35        BB        6,247,431  
  1,767    

Bank of America Alternative Loan Trust, Pass-Through Certificates, Series 2006-6

    6.000%        7/25/46        Caa3        1,551,166  
  2,020    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-1

    5.842%        9/10/45        Baa1        2,015,489  
  5,330    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7

    3.167%        9/15/48        BBB-        4,269,444  
  1,605    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7, 144A

    3.261%        9/15/48        BB-        970,628  
  4,952    

Bank of America Funding Trust, Series 2007-A 2A1

    1.372%        2/20/47        CCC        4,632,255  
  3,125    

Bank of America Merrill Lynch Large Loan Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-200P, 144A

    3.716%        4/14/33        BB-        2,932,615  
  1,591    

Bank of America Mortgage Securities Inc., Mortgage Pass-Through Certificates, Series 2007-1

    6.000%        3/25/37        Caa3        1,449,946  
  3,513    

Bayview Opportunity Master Fund Trust, Series 2016-CRT1, 144A

    2.794%        10/27/27        A-        3,512,465  
  5,871    

Bayview Opportunity Master Fund Trust, Series 2017-CRT1, 144A

    3.194%        10/25/28        BBB-        5,875,409  
  2,959    

Bayview Opportunity Master Fund Trust, Series 2017-CRT2, 144A

    3.044%        11/25/27        BBB-        2,956,339  
  1,508    

Bayview Opportunity Master Fund Trust, Series 2017-NPL1, 144A

    3.598%        1/28/32        N/R        1,504,700  
  3,225    

BB UBS Trust, Series 2012-SHOW, 144A

    4.160%        11/5/36        Baa1        3,155,615  
  5,815    

BCAP LLC Trust, Mortgage Pass-Through Certificates, Series 2006-AA2

    1.386%        1/25/37        Caa3        5,053,942  

 

NUVEEN     17  


JLS    Nuveen Mortgage Opportunity Term Fund   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 4,704    

BCAP LLC Trust, Mortgage Pass-Through Certificates, Series 2007 AA1 2A1

    1.396%        3/25/37        Caa3      $ 4,431,915  
  1,037    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2005-12

    3.282%        2/25/36        Caa3        1,023,559  
  3,922    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2005-12

    3.709%        2/25/36        Caa3        3,646,588  
  1,724    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2005-3

    3.579%        6/25/35        Caa2        1,665,226  
  2,858    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2006-4

    3.225%        10/25/36        N/R        2,517,866  
  2,287    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.390%        2/25/47        N/R        1,994,202  
  12    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2007-4

    4.344%        6/25/47        N/R        11,269  
  6,490    

Carrington Mortgage Loan Trust, Asset-Backed Pass-Through Certificates, Series 2005-NC5

    1.696%        10/25/35        BB        6,225,200  
  3,792    

Carrington Securities LP, Mortgage Loan Trust Asset-Backed Pass-Through Certificates, Series 2007-HE1

    1.174%        6/25/37        Ba1        3,566,929  
  1,858    

CDGJ Commercial Mortgage Trust, Mortgage Pass-Through Certificates, Series 2014-BXCH, 144A

    5.377%        12/15/27        BB-        1,865,368  
  3,899    

Chaseflex Trust, Series 2007-2

    1.304%        5/25/37        CCC        3,641,547  
  730    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-GC29, 144A

    3.110%        4/10/48        BBB-        537,786  
  981    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2017-CD3, 144A

    3.250%        2/10/50        BBB-        805,132  
  2,275    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2017-CD4, 144A

    3.300%        5/10/50        BBB-        1,894,919  
  822    

Citigroup Mortgage Loan Inc., Mortgage Pass-Through Certificates, Series 2006- AR2

    3.517%        3/25/36        Caa2        726,991  
  862    

Citigroup Mortgage Loan Trust Inc., Mortgage Pass-Through Certificates, Series 2005-3

    3.443%        8/25/35        Caa2        764,144  
  2,248    

Citigroup Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2006-AR7

    3.347%        11/25/36        N/R        2,028,891  
  1,036    

Citigroup Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-AR8

    3.257%        7/25/37        Caa2        949,914  
  315    

Commercial Mortgage Pass-Through Certificates, Series 2012-CR3, 144A

    4.927%        10/15/45        A-        305,266  
  3,820    

Commercial Mortgage Pass-Through Certificates, Series 2012-CR4, 144A

    4.725%        10/15/45        BBB        3,306,773  
  3,250    

Commercial Mortgage Pass-Through Certificates, Series CR5 A4, 144A

    4.475%        12/10/45        Baa3        2,904,541  
  1,130    

Core Industrial Trust, Series 2015-CALW, 144A

    3.979%        2/10/34        B        1,101,843  
  453    

Countrywide Alternative Loan Trust, Mortgage Pass-Through Certificates, Series 2006-6CB

    5.750%        5/25/36        Ca        334,943  
  4,146    

Countrywide Alternative Loan Trust, Securitization Pass-Through Certificates, Series 2007-HY7C A1

    1.356%        8/25/37        Caa2        3,415,687  
  870    

Countrywide CHL Mortgage Pass-Through Trust, Series 2005-HY10

    3.553%        2/20/36        Caa2        733,208  
  1,568    

Countrywide CHL Mortgage Pass-Through Trust, Series 2006-HYB1

    3.234%        3/20/36        Caa3        1,349,141  
  3,350    

Countrywide Home Loans Mortgage Pass-Through Certificates, Series 2005-HYB7

    3.027%        11/20/35        Caa3        3,070,308  
  2,845    

Credit Suisse Adjustable Rate Mortgage Trust, Series 2005-9

    1.756%        11/25/35        BBB+        2,662,781  
  2,405    

Credit Suisse First Boston Mortgage Acceptance Corporation, Adjustable Rate Mortgage-Backed Pass-Through Certificates, Series 2005-12

    3.451%        3/25/36        Caa3        2,146,816  
  761    

Credit Suisse First Boston Mortgage Securities Corporation, Adjustable Rate Mortgage-Backed Pass-Through Certificates, Series 2006-2

    3.351%        5/25/36        D        708,133  
  3,910    

CSAIL Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-C1, 144A

    3.942%        4/15/50        BBB-        3,379,013  
  4,700    

CSAIL Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-C3

    3.504%        8/15/48        BBB-        3,583,925  
  1,015    

Fannie Mae Connecticut Avenue Securities, Series 2016-C03

    13.966%        10/25/28        N/R        1,407,486  
  2,600    

Fannie Mae Connecticut Avenue Securities, Series 2016-C03

    7.116%        10/25/28        B        3,032,431  
  2,780    

Fannie Mae, Connecticut Ave Securities, Series 2015-C04

    6.766%        4/25/28        BB-        3,129,312  
  313    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C04

    2.666%        1/25/29        Baa2        316,426  
  2,970    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    11.966%        1/25/29        N/R        3,731,706  
  2,448    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    5.666%        1/25/29        B        2,699,772  
  799    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    2.566%        1/25/29        BBB-        805,828  

 

  18     NUVEEN


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 15    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C01

    6.966%        7/25/29        N/R      $ 17,058  
  5,545    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C02

    6.716%        9/25/29        N/R        6,095,030  
  4,000    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C03

    6.066%        10/25/29        N/R        4,279,638  
  2,185    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C04

    6.266%        11/25/29        N/R        2,326,912  
  1,645    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C04

    4.066%        11/25/29        B        1,668,121  
  2,812    

First Horizon Alternative Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2006-FA3

    6.000%        7/25/36        Ca        2,320,432  
  1,752    

First Horizon Alternative Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2006-FA3

    6.000%        7/25/36        Ca        1,445,654  
  2,477    

First Horizon Alternative Mortgage Securities Trust, Pass-Through Certificates, Series 2005-A7

    3.079%        9/25/35        Caa2        2,218,649  
  2,381    

First Horizon Alternative Mortgage Securities Trust, Pass-Through Certificates, Series 2006-AA2

    3.070%        5/25/36        Ca        2,147,517  
  17,710    

Freddie Mac Collateralized Mortgage REMIC, Series 4338, (I/O)

    2.568%        6/25/42        Aaa        2,537,073  
  4,045    

Freddie Mac Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series K720, 144A

    3.389%        7/25/22        Ba2        3,694,388  
  3,250    

Freddie Mac Multifamily Aggregation Period Risk Transfer Trust, Series 2017-KT01, 144A

    4.566%        2/25/20        Aaa        3,253,295  
  3,175    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, 144A

    3.951%        8/25/47        Baa3        3,213,382  
  1,531    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2013-K31, 144A

    3.742%        7/25/46        Baa2        1,511,951  
  2,000    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2014-K715, 144A

    4.126%        2/25/46        Baa2        2,044,165  
  3,160    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K44, 144A

    3.810%        1/25/48        BBB-        3,048,941  
  2,320    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K45, 144A

    3.591%        4/25/48        BBB-        2,213,009  
  2,600    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K50, 144A

    3.779%        10/25/48        BBB-        2,469,349  
  1,295    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K714, 144A

    3.849%        1/25/47        Baa3        1,313,508  
  2,890    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K718, 144A

    3.547%        2/25/22        Ba2        2,703,756  
  1,299    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K56, 144A

    4.072%        6/25/49        BBB-        1,208,055  
  810    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K59, 144A

    3.575%        11/25/49        A-        790,276  
  1,070    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K60, 144A

    3.537%        12/25/49        BBB-        966,312  
  1,400    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K722, 144A

    3.966%        7/25/49        BBB-        1,319,631  
  980    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K724, 144A

    3.504%        11/25/23        BBB        961,446  
  1,740    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K725, 144A

    3.880%        2/25/24        BBB        1,623,468  
  975    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K726, 144A

    3.971%        4/25/24        BBB        921,088  
  2,300    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-KF30, 144A

    4.245%        3/25/27        N/R        2,299,937  
  1,630    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K013, (I/O)

    2.909%        1/25/43        Aaa        153,251  
  17,405    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K025, (I/O)

    1.811%        11/25/40        Aaa        1,418,264  
  22,841    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K031, (I/O)

    1.714%        7/25/41        Aaa        1,958,220  
  16,460    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K034, (I/O)

    1.782%        9/25/41        Aaa        1,482,999  
  13,300    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K037, (I/O)

    2.281%        1/25/42        Aaa        1,648,197  
  4,220    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K061, (I/O)

    2.205%        5/25/27        Aaa        676,677  

 

NUVEEN     19  


JLS    Nuveen Mortgage Opportunity Term Fund   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 5,400    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K701, (I/O)

    2.162%        7/25/48        Aaa      $ 38,403  
  31,850    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K714, (I/O)

    1.851%        1/25/42        Aaa        1,744,781  
  13,450    

Freddie Mac Multifamily Structures Pass- Through Certificates, Series 2011-K012, (I/O)

    2.329%        1/25/41        Aaa        990,496  
  775    

Freddie Mac Multifamily Trust, Structured Pass-Through Certificates, Series 2014-K37, 144A

    4.558%        1/25/47        A-        809,944  
  15,800    

Freddie Mac Structured Pass-Through Certificates, Series K711 X3, (I/O)

    1.675%        8/25/40        Aaa        485,727  
  4,900    

General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2007-C1

    5.606%        12/10/49        Ba3        4,943,067  
  2,501    

Ginnie Mae Mortgage Pool, (I/O)

    4.000%        9/16/26        Aaa        284,773  
  13,731    

Ginnie Mae Mortgage Pool, (I/O)

    3.000%        12/16/27        Aaa        1,228,401  
  2,132    

GMAC Mortgage Corporation, Mortgage Pass-Through Certificates, Series 2005-AR5

    3.208%        9/19/35        CCC        1,722,315  
  2,591    

GMACM Mortgage Corporation, Mortgage Pass-Through Certificates, Series 2005-AF2

    6.000%        12/25/35        N/R        2,287,515  
  2,316    

GMACM Mortgage Corporation, Mortgage Pass-Through Certificates, Series 2006-AR1

    3.808%        4/19/36        Caa3        2,143,411  
  4,179    

Goldman Sachs GSAA Home Equity Trust, Series 2007-8

    1.666%        8/25/37        B3        3,901,148  
  259    

Goldman Sachs Mortgage Securities Corporation, GSR Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-AR1

    3.292%        3/25/47        D        241,150  
  2,726    

Goldman Sachs Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-AR1 2A4

    3.417%        1/25/36        N/R        2,642,634  
  4,115    

Goldman Sachs Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2014-GC20, 144A

    5.020%        4/10/47        BBB-        2,989,961  
  2,370    

Goldman Sachs Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2017-GS5, 144A

    3.509%        3/10/50        BBB-        1,987,533  
  1,710    

Goldman Sachs Mortgage Securities Trust, Series 2014-GC18

    5.109%        1/10/47        A3        1,763,156  
  1,125    

Government National Mortgage Association Pool, (I/O)

    4.500%        10/20/39        Aaa        134,145  
  2,564    

GSR Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2007-AR2

    3.621%        5/25/37        D        2,235,950  
  4,404    

HomeBanc Mortgage Trust, Mortgage-Backed Notes, Series 2005-5

    1.476%        1/25/36        Caa1        3,938,596  
  3,073    

HomeBanc Mortgage Trust, Mortgage-Backed Notes, Series 2006-2

    1.396%        12/25/36        B3        2,873,041  
  1,661    

IndyMac INDA Mortgage Loan Trust, Series 2007-AR3

    3.499%        7/25/37        Caa2        1,510,516  
  2,943    

IndyMac INDX Mortgage Loan Trust, Series 07-AR5

    3.503%        5/25/37        Ca        2,474,290  
  3,374    

IndyMac INDX Mortgage Loan Trust, Series 2005-AR11

    3.196%        8/25/35        Caa3        2,793,663  
  428    

IndyMac INDX Mortgage Loan Trust, Series 2005-AR23

    3.135%        11/25/35        Caa3        377,384  
  669    

IndyMac INDX Mortgage Loan Trust, Series 2006-AR11

    3.608%        6/25/36        Ca        600,314  
  1,300    

InSite Issuer LLC, Series 2016-1A, 144A

    6.414%        11/15/46        BB-        1,337,214  
  3,019    

JP Morgan Alternative Loan Trust, Mortgage Pass-Through Certificates, Series 2006-S4

    5.960%        12/25/36        Ca        2,853,432  
  3,335    

JP Morgan Chase Commercial Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates Trust, Series 2013-C16, 144A

    5.140%        12/15/46        BBB-        3,189,234  
  712    

JP Morgan Chase Commercial Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2006-S4 A5

    6.000%        1/25/37        Caa3        583,942  
  1,705    

JP Morgan Chase Commercial Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2011-C5, 144A

    5.588%        8/15/46        Baa3        1,726,731  
  5,000    

JP Morgan Chase Commercial Mortgage Securities Trust, Pass-Through Certificates, Series 2006-LDP9

    5.337%        5/15/47        Ba1        4,956,282  
  125    

JP Morgan Chase Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-CB17 AM

    5.464%        12/12/43        Baa3        124,830  
  3,658    

JP Morgan JPMBB Commercial Mortgage Securities Trust, Pass-Through Certificates, Series 2014-C23, 144A

    4.107%        9/15/47        BBB-        3,087,561  
  4,200    

JP Morgan Mortgage Acquisition Corporation, Asset-Backed Pass-Through Certificates, Series 2007-CH5

    1.476%        6/25/37        Ba3        3,848,709  
  2,425    

JP Morgan Mortgage Acquisition Trust, Series 2006-A6

    3.329%        10/25/36        Caa2        2,161,532  
  1,044    

JP Morgan Mortgage Trust, Mortgage Pass-Through Certificates, Series 2006-A4

    3.562%        6/25/36        Caa2        983,816  
  1,045    

JPMBD Commercial Mortgage Securities Trust, Series 2016-C4, 144A

    3.225%        12/15/49        BBB-        808,569  
  1,457    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2016-3, 144A

    3.051%        9/01/21        N/R        1,445,293  

 

  20     NUVEEN


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 2,542    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2016-4, 144A

    2.995%        10/01/21        N/R      $ 2,530,705  
  2,035    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2016-5, 144A

    3.051%        11/01/21        N/R        2,033,641  
  2,690    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2017-1, 144A

    3.051%        1/01/22        N/R        2,684,170  
  2,472    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2017-2, 144A

    3.051%        2/01/22        N/R        2,473,981  
  1,168    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates, Series 2017-3, 144A

    3.051%        4/01/22        N/R        1,180,226  
  2,316    

Merrill Lynch Mortgage Backed Securities Trust, Mortgage Loan Asset Backed Notes, Series 2007-2

    3.560%        8/25/36        Caa2        2,137,102  
  3,945    

Merrill Lynch Mortgage Backed Securities Trust, Mortgage Loan Asset Backed Notes, Series 2007-3

    3.535%        6/25/37        D        3,313,918  
  3,900    

ML_CFC Commercial Mortgage Trust, Pass-Through Certificates, Series 2007-8

    6.076%        8/12/49        BB        3,899,391  
  1,925    

Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, 144A

    4.990%        2/15/47        BBB-        1,747,261  
  4,130    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-HQ8

    5.628%        3/12/44        AA        4,124,539  
  2,045    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-TOP21, 144A

    5.411%        10/12/52        Ba2        1,452,052  
  1,525    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-TOP21, 144A

    5.411%        10/12/52        B2        137,250  
  396    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-IQ14

    5.920%        4/15/49        A+        400,596  
  2,653    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25

    5.574%        11/12/49        Ba2        2,679,371  
  2,025    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2008-T29, 144A

    6.503%        1/11/43        BBB-        2,011,534  
  1,510    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK2, 144A

    3.000%        11/15/49        BBB-        1,214,766  
  2,079    

Morgan Stanley Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2006-3AR

    3.447%        3/25/36        Caa3        1,798,173  
  459    

Morgan Stanley Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-15AR

    3.298%        11/25/37        CCC        389,826  
  3,299    

Mortgage IT Trust, Mortgage-Backed Notes, Series 2005-5

    1.476%        12/25/35        Baa2        3,083,729  
  866    

Nationstar HECM Loan Trust, Series 2017-1A, 144A

    1.968%        5/25/27        Aaa        866,171  
  611    

New Residential Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2016-3A, 144A

    3.250%        9/25/56        Aaa        621,313  
  2,006    

Opteum Mortgage Acceptance Corporation, Asset-Backed Pass-Through Certificates, Series 2006-1

    1.516%        4/25/36        CCC        1,868,663  
  2,870    

Residential Accredit Loans Inc., Hybrid Adjustable Rate Mortgages, Series 2006-QA6

    1.406%        7/25/36        Caa3        2,521,157  
  4,380    

Residential Accredit Loans Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2005-QA10 A31

    4.110%        9/25/35        Caa3        3,715,015  
  2,552    

Residential Accredit Loans Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QS1

    5.750%        1/25/36        Caa3        2,395,188  
  1,204    

Residential Accredit Loans Inc., RALI Mortgage Asset-Backed Pass-Through Certificates, Series 2005-QA6

    3.961%        5/25/35        Caa3        939,651  
  947    

Residential Accredit Loans Inc., RALI Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA1

    4.320%        1/25/36        Caa3        788,147  
  1,586    

Residential Accredit Loans Inc., RALI Mortgage Asset-Backed Pass-Through Certificates, Series 2007-QS2

    6.250%        1/25/37        Caa3        1,301,885  
  7,295    

Residential Asset Mortgage Products, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-NC2

    1.506%        2/25/36        A2        7,022,141  
  1,182    

Residential Funding Mortgage Securities I Inc., Mortgage Pass-Through Certificates Series 2006-SA2

    4.555%        8/25/36        N/R        1,039,942  
  1,816    

Residential Funding Mortgage Securities I Inc., Mortgage Pass-Through Certificates Series 2007-SA3

    4.622%        7/27/37        N/R        1,616,496  
  1,062    

Residential Funding Mortgage Securities I Inc., Mortgage Pass-Through Certificates, Series 2006-SA3

    4.351%        9/25/36        N/R        862,798  

 

NUVEEN     21  


JLS    Nuveen Mortgage Opportunity Term Fund   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 1,853    

Residential Funding Mortgage Securities I Inc., Mortgage Pass-Through Certificates, Series 2007-SA2

    3.972%        4/25/37        Caa2      $ 1,781,595  
  1,981    

Residential Funding Mortgage Securities I Inc., Mortgage Pass-Through Certificates, Series 2007-SA2

    3.972%        4/25/37        Caa2        1,905,604  
  3,594    

Sequoia Mortgage Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.357%        2/20/47        D        3,215,293  
  3,792    

Structured Adjustable Rate Mortgage Loan Pass-Through Trust, Series 2007-6 2A1

    1.406%        7/25/37        CCC        3,462,551  
  2,967    

Structured Agency Credit Risk Debt Notes, Series 2014-DN2

    2.866%        4/25/24        AA-        3,014,380  
  1,142    

Structured Agency Credit Risk Debt Notes, Series 2015-DNA1

    10.416%        10/25/27        N/R        1,483,488  
  5,361    

Structured Agency Credit Risk Debt Notes, Series 2015-DNA3

    4.066%        4/25/28        BBB+        5,552,878  
  3,505    

Structured Agency Credit Risk Debt Notes, Series 2015-HQ2

    3.166%        5/25/25        A        3,571,295  
  500    

Structured Agency Credit Risk Notes, Series 2015-HQA1

    10.016%        3/25/28        N/R        576,365  
  2,256    

Structured Agency Credit Risk Notes, Series 2015-HQA2

    11.716%        5/25/28        N/R        2,830,100  
  4,340    

Structured Agency Credit Risk Notes, Series 2016-DNA1

    6.766%        7/25/28        Ba2        5,119,951  
  4,775    

Structured Agency Credit Risk Notes, Series 2016-DNA1

    4.116%        7/25/28        Baa1        4,971,097  
  250    

Structured Agency Credit Risk Notes, Series 2016-DNA2

    11.716%        10/25/28        N/R        314,231  
  4,880    

Structured Agency Credit Risk Notes, Series 2016-HQA1

    3.966%        9/25/28        BBB-        5,063,688  
  3,283    

Structured Agency Credit Risk Notes, Series 2016-HQA2

    3.466%        11/25/28        Baa2        3,373,655  
  2,500    

Structured Agency Credit Risk Notes, Series 2016-HQA3

    10.216%        3/25/29        N/R        2,825,301  
  4,074    

Structured Agency Credit Risk Notes, Series 2016-HQA3

    2.566%        3/25/29        BBB-        4,139,757  
  3,385    

Structured Agency Credit Risk Notes, Series 2016-HQA4

    9.966%        4/25/29        N/R        3,737,994  
  4,260    

Structured Agency Credit Risk Notes, Series 2016-HQA4

    2.324%        4/25/29        BBB-        4,307,698  
  1,650    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    12.466%        10/25/29        N/R        1,747,691  
  3,400    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    4.666%        10/25/29        B+        3,590,737  
  4,063    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    2.416%        10/25/29        BBB-        4,122,311  
  8,950    

Structured Agency Credit Risk Notes, Series 2017-HQA1

    6.216%        8/25/29        N/R        9,535,580  
  3,948    

Structured Agency Credit Risk Notes, Series 2017-HQA1

    2.416%        8/25/29        Baa3        3,991,770  
  1,805    

Structured Agency Credit Risk Notes, Series 2017-HQA2

    5.909%        12/25/29        N/R        1,882,122  
  2,923    

SunTrust Adjustable Rate Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.546%        2/25/37        N/R        2,540,287  
  1,906    

SunTrust Adjustable Rate Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-2

    3.611%        4/25/37        N/R        1,574,786  
  1,207    

SunTrust Adjustable Rate Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-4

    3.560%        10/25/37        Caa1        1,148,315  
  1,320    

TMSQ Mortgage Trust, Series 2014-1500, 144A

    3.963%        10/10/36        Baa1        1,285,836  
  1,808    

Vericrest Opportunity Loan Transferee, Series 2017-NPL1, 144A

    3.250%        5/25/47        N/R        1,810,594  
  2,129    

Vericrest Opportunity Loan Transferee, Series 2017-NPL2, 144A

    3.500%        3/25/47        N/R        2,132,839  
  3,898    

Vericrest Opportunity Loan Transferee, Series 2017-NPL3, 144A

    3.500%        3/25/47        N/R        3,910,094  
  2,427    

Vericrest Opportunity Loan Transferee, Series 2017-NPL4, 144A

    3.375%        4/25/47        N/R        2,425,176  
  2,600    

Vericrest Opportunity Loan Transferee, Series 2017-NPL5, 144A

    5.375%        5/28/47        N/R        2,589,605  
  4,990    

Vericrest Opportunity Loan Transferee, Series 2017-NPL7, 144A

    5.375%        4/25/59        N/R        4,971,988  
  2,275    

Vericrest Opportunity Loan Transferee, Series 2017-NPL8, 144A, (3)

    5.000%        6/25/47        N/R        2,262,840  
  3,825    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-C21, 144A

    5.468%        10/15/44        B+        3,422,916  
  2,555    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C30

    5.413%        12/15/43        B+        2,588,040  
  1,366    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C31

    6.126%        4/15/47        B3        1,386,099  
  2,834    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C31

    5.660%        4/15/47        A+        2,893,589  
  1,294    

Washington Mutual Mortgage Pass-Through Certificates Trust,
Series 2006-AR14

    2.708%        11/25/36        D        1,228,976  
  1,930    

Washington Mutual Mortgage Pass-Through Certificates, Series 2006-AR

    2.567%        1/25/37        D        1,733,001  
  4,350    

Washington Mutual Mortgage Pass-Through Certificates, Series 2006-AR17

    1.512%        12/25/46        Caa3        3,780,198  
  1,730    

Washington Mutual Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-5

    6.000%        7/25/36        Ca        1,457,603  
  4,101    

Washington Mutual Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-AR

    2.812%        12/25/36        N/R        3,565,618  
  2,074    

Washington Mutual Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-AR7

    1.712%        7/25/46        Caa3        1,882,901  

 

  22     NUVEEN


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                       
$ 1,299    

Washington Mutual Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2007-HY1

    1.376%        2/25/37        Caa3      $ 1,052,025  
  846    

Wells Fargo Alternative Loan Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2007-PA1

    6.000%        3/25/37        Caa3        760,985  
  2,033    

Wells Fargo Alternative Loan Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2007-PA6

    3.186%        12/28/37        N/R        1,987,195  
  4,850    

Wells Fargo Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-NXS1

    4.240%        5/15/48        BBB-        4,198,929  
  735    

Wells Fargo Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK1, 144A

    3.000%        8/15/49        BBB-        592,491  
  2,263    

Wells Fargo Mortgage Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2007-AR8

    3.139%        11/25/37        Caa2        2,136,292  
  2,831    

Wells Fargo Mortgage Backed Securities, Collateralized Mortgage Obligation, Series 2007-AR7 A1

    3.161%        12/28/37        Caa3        2,716,665  
  2,430    

Wells Fargo-RBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2014-C20, 144A

    3.986%        5/15/47        N/R        1,890,289  
$ 681,675    

Total Mortgage-Backed Securities (cost $478,907,373)

                               493,441,170  
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 1.3% (0.9% of Total Investments)                       
$ 4,700    

U.S. Treasury Bonds

    3.625%        8/15/43        Aaa      $ 5,413,629  
$ 4,700    

Total U.S. Government and Agency Obligations (cost $5,227,159)

                               5,413,629  
 

Total Long-Term Investments (cost $533,465,927)

 

                       548,576,712  
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Value  
      SHORT-TERM INVESTMENTS – 6.6% (4.8% of Total Investments)                    
      REPURCHASE AGREEMENTS – 6.6% (4.8% of Total Investments)                    
$ 27,438    

Repurchase Agreement with Fixed Income Clearing Corporation, dated 6/30/17, repurchase price $27,438,183, collateralized by $27,700,000, U.S. Treasury Notes, 2.125%, due 2/29/24, value $27,991,293

    0.120%        7/03/17      $ 27,437,909  
 

Total Short-Term Investments (cost $27,437,909)

 

              27,437,909  
 

Total Investments (cost $560,903,836) – 137.4%

 

              576,014,621  
 

Borrowings – (35.1)% (4), (5)

 

              (147,200,000
 

Other Assets Less Liabilities – (2.3)%

 

              (9,460,180
 

Net Assets – 100%

                    $ 419,354,441  

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

 

(1) All percentages shown in the Portfolio of Investments are based on net assets.

 

(2) For financial reporting purposes, the ratings disclosed are the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.

 

(3) Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board. For fair value measurement disclosure purposes, investment classified as Level 3. See Notes to Financial Statements, Note 2 – Investment Valuation and Fair Value Measurements for more information.

 

(4) Borrowings as a percentage of Total Investments is 25.6%.

 

(5) The Fund segregates 100% of its eligible investments (excluding any investments separately pledged as collateral for specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for borrowings.

 

(I/O) Interest only security.

 

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

 

(WI/DD) Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.

 

NUVEEN     23  

See accompanying notes to financial statements.


JMT

 

Nuveen Mortgage Opportunity Term Fund 2

  

Portfolio of Investments

   June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      LONG-TERM INVESTMENTS – 133.9% (95.7% of Total Investments)                           
      ASSET-BACKED SECURITIES – 13.3% (9.5% of Total Investments)                           
$ 770    

Atlas Senior Loan Fund Ltd, Series 2012-2A, 144A

    5.070%        1/30/24        BBB      $ 770,195  
  250    

BlueMountain Collateralized Loan Obligation, Series 2014-1A, 144A

    4.620%        4/30/26        BBB        251,370  
  680    

Bowman Park CLO Limited, Series 2014-1A, 144A

    4.536%        11/23/25        BBB-        680,990  
  275    

CIFC Funding Limited, Series 2012-2A, 144A

    4.868%        12/5/24        BBB        275,111  
  300    

CIFC Funding Limited, Series 2012-3A, 144A

    5.039%        1/29/25        BBB+        300,118  
  625    

CIFC Funding Limited, Series 2014-3A, 144A

    4.553%        7/22/26        Baa3        625,427  
  1,255    

DT Auto Owner Trust, Series 2017-2A, 144A

    2.440%        2/15/21        AA        1,255,479  
  290    

Green Tree Agency Funding Trust, Manufactured Housing Contract Pass-Through Certificates, Series 2016-T1, 144A

    2.380%        10/15/48        AAA        288,799  
  550    

Magnetite CLO Limited, Series 2012-7A, 144A

    4.908%        1/15/25        A2        551,740  
  360    

Marine Park CLO Limited, Series 2012-1A, 144A

    4.731%        5/18/23        BBB        360,043  
  750    

Octagon Investment Partners, Series 2013-1A, 144A

    4.155%        10/25/25        BBB        749,959  
  1,196    

Prestige Auto Receivables Trust, Series 2016-2A, 144A

    3.910%        11/15/22        BBB        1,209,469  
  1,100    

Santander Drive Auto Receivables Trust, Series 2015-5

    3.650%        12/15/21        A-        1,124,268  
  235    

Seneca Park CLO Limited, Asset-Backed Securities, Series 2014-1A, 144A

    4.658%        7/17/26        Baa3        235,003  
  180    

SLM Student Loan Trust, Series 2003-4, 144A

    1.996%        3/15/33        AAA        177,882  
  467    

SLM Student Loan Trust, Series 2003-7A, 144A

    2.446%        12/15/33        AAA        471,401  
  942    

SLM Student Loan Trust, Series 2008-1, Class A1

    1.806%        1/25/22        A        937,127  
  1,196    

SLM Student Loan Trust, Series 2008-5

    2.856%        7/25/23        AA+        1,228,563  
  1,130    

SLM Student Loan Trust, Series 2008-9 Class A

    2.656%        4/25/23        AA+        1,154,109  
  611    

SLM Student Loan Trust, Series 2012-6

    1.966%        5/26/26        Ba1        608,425  
  338    

Sofi Consumer Loan Program Trust, Series 2016-3, 144A

    3.050%        12/26/25        N/R        341,848  
  659    

Sofi Consumer Loan Program Trust, Series 2017-1, 144A

    3.280%        1/26/26        N/R        667,235  
  495    

Sofi Consumer Loan Program Trust, Series 2017-3, 144A

    2.770%        5/25/26        AA        497,347  
  530    

Sofi Consumer Loan Program Trust, Series 2017-4, 144A, (WI/DD)

    2.500%        6/25/26        AA        529,904  
  445    

United Auto Credit Securitization Trust, Series 2017-1, 144A

    5.090%        3/10/23        BB-        444,902  
  685    

Voya CLO Limited, Series 2012-3AR, 144A

    5.108%        10/15/22        BBB        686,005  
$ 16,314    

Total Asset-Backed Securities (cost $16,295,032)

                               16,422,719  
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES – 119.3% (85.3% of Total Investments)                           
$ 839    

Angel Oak Mortgage Trust, Series 2016-1, 144A

    3.500%        7/25/46        N/R      $ 841,480  
  351    

Angel Oak Mortgage Trust, Series 2017-1, 144A

    3.644%        1/25/47        A        351,239  
  525    

Angel Oak Mortgage Trust, Series 2017-2, 144A, (WI/DD)

    2.478%        7/25/47        AAA        524,994  
  2,000    

Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2005-W2

    1.706%        10/25/35        BB        1,922,287  
  538    

Bank of America Alternative Loan Trust, Pass-Through Certificates, Series 2006-6

    6.000%        7/25/46        Caa3        472,094  
  925    

Bank of America Merrill Lynch Large Loan Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-200P, 144A

    3.716%        4/14/33        BB-        868,054  
  530    

Bank of America Mortgage Securities Inc., Mortgage Pass-Through Certificates, Series 2007-1

    6.000%        3/25/37        Caa3        483,315  
  600    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-1

    5.842%        9/10/45        Baa1        598,660  
  1,565    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7

    3.167%        9/15/48        BBB-        1,253,598  
  495    

Bank of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7, 144A

    3.261%        9/15/48        BB-        299,353  
  1,541    

Bank of America Funding Trust, Series 2007-A 2A1

    1.372%        2/20/47        CCC        1,441,573  
  991    

Bayview Opportunity Master Fund Trust, Series 2016-CRT1, 144A

    2.794%        10/27/27        A-        990,695  
  1,737    

Bayview Opportunity Master Fund Trust, Series 2017-CRT1, 144A

    3.194%        10/25/28        BBB-        1,738,166  
  876    

Bayview Opportunity Master Fund Trust, Series 2017-CRT2, 144A

    3.044%        11/25/27        BBB-        875,738  
  446    

Bayview Opportunity Master Fund Trust, Series 2017-NPL1, 144A

    3.598%        1/28/32        N/R        444,938  
  975    

BB UBS Trust, Series 2012-SHOW, 144A

    4.160%        11/5/36        Baa1        954,023  

 

  24     NUVEEN


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                           
$ 1,792    

BCAP LLC Trust, Mortgage Pass-Through Certificates, Series 2006-AA2

    1.386%        1/25/37        Caa3      $ 1,557,789  
  1,463    

BCAP LLC Trust, Mortgage Pass-Through Certificates, Series 2007 AA1 2A1

    1.396%        3/25/37        Caa3        1,378,141  
  533    

Bear Stearns Adjustable Rate Mortgage Trust, Series 2005-3

    3.579%        6/25/35        Caa2        514,536  
  1,182    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2006-4

    3.225%        10/25/36        N/R        1,041,389  
  314    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2005-12

    3.282%        2/25/36        Caa3        310,086  
  1,201    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2005-12

    3.709%        2/25/36        Caa3        1,117,072  
  545    

Bear Stearns Adjustable Rate Mortgage Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.390%        2/25/47        N/R        475,445  
  2,000    

Carrington Mortgage Loan Trust, Asset-Backed Pass-Through Certificates, Series 2005-NC5

    1.696%        10/25/35        BB        1,918,397  
  1,170    

Carrington Securities LP, Mortgage Loan Trust Asset-Backed Pass-Through Certificates, Series 2007-HE1

    1.366%        6/25/37        Ba1        1,100,463  
  547    

CDGJ Commercial Mortgage Trust, Mortgage Pass-Through Certificates, Series 2014-BXCH, 144A

    5.377%        12/15/27        BB-        548,900  
  1,208    

Chaseflex Trust, Series 2007-2

    1.304%        5/25/37        CCC        1,128,467  
  210    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-GC29, 144A

    3.110%        4/10/48        BBB-        154,706  
  290    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2017-CD3, 144A

    3.250%        2/10/50        BBB-        238,296  
  685    

Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2017-CD4, 144A

    3.300%        5/10/50        BBB-        570,558  
  108    

Citigroup Mortgage Loan Trust Inc., Mortgage Pass-Through Certificates, Series 2006- AR2

    3.517%        3/25/36        Caa2        95,657  
  133    

Citigroup Mortgage Loan Trust Inc., Mortgage Pass-Through Certificates, Series 2005-3

    3.443%        8/25/35        Caa2        118,055  
  337    

Citigroup Mortgage Loan Trust Inc., Mortgage Pass-Through Certificates, Series 2007-AR8

    3.257%        7/25/37        Caa2        309,196  
  190    

Commercial Mortgage Pass-Through Certificates, Series 2012-CR3, 144A

    4.927%        10/15/45        A-        184,129  
  1,180    

Commercial Mortgage Pass-Through Certificates, Series 2012-CR4, 144A

    4.725%        10/15/45        BBB        1,021,464  
  970    

Commercial Mortgage Pass-Through Certificates, Series CR5 A4, 144A

    4.475%        12/10/45        Baa3        866,894  
  350    

Core Industrial Trust, Series 2015-CALW, 144A

    3.979%        2/10/34        B        341,279  
  1,125    

Countrywide Alternative Loan Trust, Mortgage Pass-Through Certificates, Series 2006-6CB

    5.750%        5/25/36        Ca        831,854  
  1,274    

Countrywide Alternative Loan Trust, Securitization Pass-Through Certificates, Series 2007-HY7C A1

    1.356%        8/25/37        Caa2        1,049,263  
  1,298    

Countrywide CHL Mortgage Pass-Through Trust, Series 2006-HYB1

    3.234%        3/20/36        Caa3        1,116,899  
  1,040    

Countrywide Home Loans Mortgage Pass-Through Certificates, Series 2005-HYB7

    3.027%        11/20/35        Caa3        953,357  
  963    

Countrywide Home Loans, Mortgage Pass-Through Trust, Series 2007-HY04

    3.164%        9/25/47        N/R        895,316  
  898    

Credit Suisse Adjustable Rate Mortgage Trust, Series 2005-9

    1.756%        11/25/35        BBB+        840,737  
  392    

Credit Suisse First Boston Mortgage Acceptance Corporation, Adjustable Rate Mortgage-Backed Pass-Through Certificates, Series 2005-12

    3.451%        3/25/36        Caa3        349,539  
  230    

Credit Suisse First Boston Mortgage Securities Corporation, Adjustable Rate Mortgage-Backed Pass-Through Certificates, Series 2006-2

    3.351%        5/25/36        D        214,022  
  1,150    

CSAIL Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-C1, 144A

    3.942%        4/15/50        BBB-        993,828  
  1,400    

CSAIL Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-C3

    3.504%        8/15/48        BBB-        1,067,552  
  300    

Fannie Mae Connecticut Avenue Securities, Series 2016-C03

    13.966%        10/25/28        N/R        416,006  
  800    

Fannie Mae Connecticut Avenue Securities, Series 2016-C03

    7.116%        10/25/28        B        933,056  
  815    

Fannie Mae, Connecticut Avenue Securities, Series 2015-C04

    6.766%        4/25/28        BB-        917,406  
  95    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C04

    2.666%        1/25/29        Baa2        95,918  
  880    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    11.966%        1/25/29        N/R        1,105,691  
  717    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    5.666%        1/25/29        B        790,742  
  234    

Fannie Mae, Connecticut Avenue Securities, Series 2016-C05

    2.566%        1/25/29        BBB-        235,961  
  10    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C01

    6.966%        7/25/29        N/R        11,372  
  1,635    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C02

    6.716%        9/25/29        N/R        1,797,182  
  1,250    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C03

    6.066%        10/25/29        N/R        1,337,387  
  595    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C04

    6.266%        11/25/29        N/R        633,644  
  475    

Fannie Mae, Connecticut Avenue Securities, Series 2017-C04

    4.066%        11/25/29        B        481,676  

 

NUVEEN     25  


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                           
$ 973    

First Horizon Alternative Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2006-FA3

    6.000%        7/25/36        Ca      $ 803,059  
  512    

First Horizon Alternative Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2006-FA3

    6.000%        7/25/36        Ca        422,681  
  1,036    

First Horizon Alternative Mortgage Securities Trust, Pass-Through Certificates, Series 2005-A7

    3.079%        9/25/35        Caa2        927,814  
  711    

First Horizon Alternative Mortgage Securities Trust, Pass-Through Certificates, Series 2006-AA2

    3.070%        5/25/36        Ca        641,466  
  5,230    

Freddie Mac Collateralized Mortgage REMIC, Series 4338, (I/O)

    2.568%        6/25/42        Aaa        749,232  
  1,196    

Freddie Mac Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series K720, 144A

    3.389%        7/25/22        Ba2        1,092,637  
  965    

Freddie Mac Multifamily Aggregation Period Risk Transfer Trust, Series 2017-KT01, 144A

    4.566%        2/25/20        Aaa        965,978  
  1,175    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, 144A

    3.951%        8/25/47        Baa3        1,189,204  
  600    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2014-K715, 144A

    4.126%        2/25/46        Baa2        613,250  
  935    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K44, 144A

    3.810%        1/25/48        BBB-        902,139  
  660    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K45, 144A

    3.591%        4/25/48        BBB-        629,563  
  385    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K714, 144A

    3.849%        1/25/47        Baa3        390,502  
  865    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K718, 144A

    3.547%        2/25/22        Ba2        809,256  
  384    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K56, 144A

    4.072%        6/25/49        BBB-        357,116  
  480    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K59, 144A

    3.575%        11/25/49        A-        468,312  
  315    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K60, 144A

    3.537%        12/25/49        BBB-        284,475  
  270    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2016-K722, 144A

    3.966%        7/25/49        BBB-        254,500  
  290    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K724, 144A

    3.504%        11/25/23        BBB        284,510  
  515    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K725, 144A

    3.880%        2/25/24        BBB        480,509  
  290    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-K726, 144A

    3.971%        4/25/24        BBB        273,965  
  675    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2017-KF30, 144A

    4.245%        3/25/27        N/R        674,981  
  770    

Freddie Mac Multifamily Mortgage Trust, Structured Pass-Through Certificates, Series 2015-K50, 144A

    3.779%        10/25/48        BBB-        731,307  
  5,375    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K025, (I/O)

    1.811%        11/25/40        Aaa        437,987  
  7,001    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K031, (I/O)

    1.714%        7/25/41        Aaa        600,189  
  5,015    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K034, (I/O)

    1.782%        9/25/41        Aaa        451,837  
  3,975    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K037, (I/O)

    2.281%        1/25/42        Aaa        492,585  
  1,245    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K061, (I/O)

    2.205%        5/25/27        Aaa        199,636  
  10,374    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K714, (I/O)

    1.851%        1/25/42        Aaa        568,273  
  1,300    

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K013, (I/O)

    2.909%        1/25/43        Aaa        122,225  
  4,579    

Freddie Mac Multifamily Structures Pass-Through Certificates, Series 2011-K012, (I/O)

    2.329%        1/25/41        Aaa        337,191  
  225    

Freddie Mac Multifamily Trust, Structured Pass-Through Certificates,
Series 2014-K37, 144A

    4.558%        1/25/47        A-        235,145  
  4,885    

Freddie Mac Structured Pass-Through Certificates, Series K711 X3, (I/O)

    1.675%        8/25/40        Aaa        150,188  
  1,450    

General Electric Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2007-C1

    5.606%        12/10/49        Ba3        1,462,744  
  738    

Ginnie Mae Mortgage Pool, (I/O)

    4.000%        9/16/26        Aaa        84,053  
  4,069    

Ginnie Mae Mortgage Pool, (I/O)

    3.000%        12/16/27        Aaa        364,040  
  797    

GMACM Mortgage Corporation, Mortgage Pass-Through Certificates,
Series 2005-AF2

    6.000%        12/25/35        N/R        703,678  
  693    

GMACM Mortgage Corporation, Mortgage Pass-Through Certificates,
Series 2006-AR1

    3.808%        4/19/36        Caa3        641,357  

 

  26     NUVEEN
JMT    Nuveen Mortgage Opportunity Term Fund 2   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                           
$ 1,290    

Goldman Sachs GSAA Home Equity Trust, Series 2007-8

    1.666%        8/25/37        B3      $ 1,204,502  
  271    

Goldman Sachs Mortgage Securities Corporation, GSR Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-AR1

    3.292%        3/25/47        D        252,651  
  890    

Goldman Sachs Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2006-AR1 2A4

    3.417%        1/25/36        N/R        862,571  
  1,130    

Goldman Sachs Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2014-GC20, 144A

    5.020%        4/10/47        BBB-        821,059  
  701    

Goldman Sachs Mortgage Securities Trust, Mortgage Pass-Through Certificates, Series 2017-GS5, 144A

    3.509%        3/10/50        BBB-        587,874  
  525    

Goldman Sachs Mortgage Securities Trust, Series 2014-GC18

    5.109%        1/10/47        A3        541,320  
  375    

Government National Mortgage Association Pool, (I/O)

    4.500%        10/20/39        Aaa        44,715  
  261    

GSR Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2007-AR2

    3.621%        5/25/37        D        227,717  
  1,359    

HomeBanc Mortgage Trust, Mortgage-Backed Notes, Series 2005-5

    1.476%        1/25/36        Caa1        1,215,740  
  922    

HomeBanc Mortgage Trust, Mortgage-Backed Notes, Series 2006-2

    1.396%        12/25/36        B3        861,912  
  621    

IndyMac INDA Mortgage Loan Trust, Series 2007-AR3

    3.499%        7/25/37        Caa2        564,645  
  880    

IndyMac INDX Mortgage Loan Trust, Series 07-AR5

    3.503%        5/25/37        Ca        739,736  
  1,006    

IndyMac INDX Mortgage Loan Trust, Series 2005-AR11

    3.196%        8/25/35        Caa3        833,020  
  1,386    

IndyMac INDX Mortgage Loan Trust, Series 2005-AR23

    3.135%        11/25/35        Caa3        1,223,322  
  196    

IndyMac INDX Mortgage Loan Trust, Series 2006-AR11

    3.608%        6/25/36        Ca        175,757  
  559    

IndyMac INDX Mortgage Loan Trust, Series 2006-AR3

    2.942%        3/25/36        Ca        494,873  
  385    

InSite Issuer LLC, Series 2016-1A, 144A

    6.414%        11/15/46        BB-        396,021  
  915    

JP Morgan Alternative Loan Trust, Mortgage Pass-Through Certificates,
Series 2006-S4

    5.960%        12/25/36        Ca        864,676  
  221    

JP Morgan Chase Commercial Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2006-S4 A5

    6.000%        1/25/37        Caa3        181,022  
  505    

JP Morgan Chase Commercial Mortgage Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 2011-C5, 144A

    5.588%        8/15/46        Baa3        511,437  
  980    

JP Morgan Chase Commercial Mortgage Securities Corporation, Pass-Through Certificates Trust, Series 2013-C16, 144A

    5.140%        12/15/46        BBB-        937,166  
  1,300    

JP Morgan Chase Commercial Mortgage Securities Trust, Pass-Through Certificates, Series 2006-LDP9

    5.337%        5/15/47        Ba1        1,288,633  
  38    

JP Morgan Chase Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-CB17 AM

    5.464%        12/12/43        Baa3        37,992  
  1,084    

JP Morgan JPMBB Commercial Mortgage Securities Trust, Pass-Through Certificates, Series 2014-C23, 144A

    4.107%        9/15/47        BBB-        914,958  
  1,250    

JP Morgan Mortgage Acquisition Corporation, Asset-Backed Pass-Through Certificates, Series 2007-CH5

    1.476%        6/25/37        Ba3        1,145,449  
  740    

JP Morgan Mortgage Acquisition Trust, Series 2006-A6

    3.329%        10/25/36        Caa2        659,450  
  330    

JP Morgan Mortgage Trust, Mortgage Pass-Through Certificates,
Series 2006-A4

    3.562%        6/25/36        Caa2        310,566  
  305    

JPMBD Commercial Mortgage Securities Trust, Series 2016-C4, 144A

    3.225%        12/15/49        BBB-        236,325  
  144    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2016-3, 144A

    3.051%        9/1/21        N/R        142,941  
  752    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2016-4, 144A

    2.995%        10/1/21        N/R        748,527  
  601    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2016-5, 144A

    3.051%        11/1/21        N/R        600,538  
  795    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2017-1, 144A

    3.051%        1/1/22        N/R        792,947  
  728    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2017-2, 144A

    3.051%        2/1/22        N/R        728,734  
  344    

LSTAR Securities Investment Trust, Mortgage Pass-Through Certificates,
Series 2017-3, 144A

    3.051%        4/1/22        N/R        347,701  
  1,011    

Merrill Lynch Mortgage-Backed Securities Trust, Mortgage Loan Asset-Backed Notes, Series 2007-2

    3.560%        8/25/36        Caa2        932,425  
  1,206    

Merrill Lynch Mortgage-Backed Securities Trust, Mortgage Loan Asset-Backed Notes, Series 2007-3

    3.535%        6/25/37        D        1,012,916  
  1,100    

ML_CFC Commercial Mortgage Trust, Pass-Through Certificates, Series 2007-8

    6.076%        8/12/49        BB        1,099,828  
  575    

Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C14, 144A

    4.990%        2/15/47        BBB-        521,909  
  625    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-TOP21, 144A

    5.411%        10/12/52        Ba2        443,781  

 

NUVEEN     27  


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                           
$ 440    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-TOP21, 144A

    5.411%        10/12/52        B2      $ 39,600  
  1,230    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-HQ8

    5.628%        3/12/44        AA        1,228,374  
  119    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-IQ14

    5.920%        4/15/49        A+        120,179  
  792    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-TOP25

    5.574%        11/12/49        Ba2        800,332  
  600    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2008-T29, 144A

    6.503%        1/11/43        BBB-        596,010  
  445    

Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK2, 144A

    3.000%        11/15/49        BBB-        357,994  
  167    

Morgan Stanley Mortgage Loan Trust, Mortgage Pass-Through Certificates,
Series 2006-3AR

    3.447%        3/25/36        Caa3        144,125  
  1,290    

Morgan Stanley Mortgage Loan Trust, Mortgage Pass-Through Certificates,
Series 2007-13

    6.000%        10/25/37        D        1,092,459  
  544    

Mortgage Asset Securitization Transactions Inc., Adjustable Rate Mortgage Pass-Through Certificates, Series 2007-HF2

    1.334%        9/25/37        B1        501,107  
  440    

Mortgage IT Trust, Mortgage-Backed Notes, Series 2005-5

    1.476%        12/25/35        Baa2        411,202  
  262    

Nationstar HECM Loan Trust, Series 2017-1A, 144A

    1.968%        5/25/27        Aaa        261,964  
  183    

New Residential Mortgage Loan Trust, Mortgage Pass-Through Certificates,
Series 2016-3A, 144A

    3.250%        9/25/56        Aaa        185,652  
  584    

Opteum Mortgage Acceptance Corporation, Asset-Backed Pass-Through Certificates, Series 2006-1

    1.516%        4/25/36        CCC        544,482  
  893    

Residential Accredit Loans Inc., Hybrid Adjustable Rate Mortgages, Series 2006-QA6

    1.406%        7/25/36        Caa3        784,018  
  1,362    

Residential Accredit Loans Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2005-QA10 A31

    4.110%        9/25/35        Caa3        1,154,927  
  788    

Residential Accredit Loans Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QS1

    5.750%        1/25/36        Caa3        739,230  
  497    

Residential Accredit Loans Inc., RALI Mortgage Asset-Backed Pass-Through Certificates, Series 2007-QS2

    6.250%        1/25/37        Caa3        407,590  
  719    

Residential Accredit Loans Inc., RALI Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA1

    4.320%        1/25/36        Caa3        598,639  
  2,255    

Residential Asset Mortgage Products, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-NC2

    1.506%        2/25/36        A2        2,170,655  
  247    

Residential Funding Mortgage Securities I, Mortgage Pass-Through Certificates, Series 2007-SA2

    3.972%        4/25/37        Caa2        237,016  
  1,064    

Residential Funding Mortgage Securities I, Mortgage Pass-Through Certificates, Series 2007-SA2

    3.972%        4/25/37        Caa2        1,022,486  
  1,101    

Sequoia Mortgage Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.357%        2/20/47        D        985,452  
  1,164    

Structured Adjustable Rate Mortgage Loan Pass-Through Trust, Series 2007-6 2A1

    1.406%        7/25/37        CCC        1,063,498  
  878    

Structured Agency Credit Risk Debt Notes, Series 2014-DN2

    2.866%        4/25/24        AA-        892,148  
  339    

Structured Agency Credit Risk Debt Notes, Series 2015-DNA1

    10.416%        10/25/27        N/R        440,512  
  1,547    

Structured Agency Credit Risk Debt Notes, Series 2015-DNA3

    4.066%        4/25/28        BBB+        1,602,698  
  900    

Structured Agency Credit Risk Debt Notes, Series 2015-HQ2

    3.166%        5/25/25        A        917,278  
  629    

Structured Agency Credit Risk Notes, Series 2015-HQA2

    11.716%        5/25/28        N/R        788,922  
  1,292    

Structured Agency Credit Risk Notes, Series 2016-DNA1

    6.766%        7/25/28        Ba2        1,524,188  
  1,425    

Structured Agency Credit Risk Notes, Series 2016-DNA1

    4.116%        7/25/28        Baa1        1,483,521  
  1,443    

Structured Agency Credit Risk Notes, Series 2016-HQA1

    3.966%        9/25/28        BBB-        1,497,316  
  1,109    

Structured Agency Credit Risk Notes, Series 2016-HQA2

    3.466%        11/25/28        Baa2        1,139,623  
  810    

Structured Agency Credit Risk Notes, Series 2016-HQA3

    10.216%        3/25/29        N/R        915,398  
  1,196    

Structured Agency Credit Risk Notes, Series 2016-HQA3

    2.566%        3/25/29        BBB-        1,215,304  
  1,015    

Structured Agency Credit Risk Notes, Series 2016-HQA4

    9.966%        4/25/29        N/R        1,120,846  
  1,260    

Structured Agency Credit Risk Notes, Series 2016-HQA4

    2.324%        4/25/29        BBB-        1,274,108  
  470    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    12.466%        10/25/29        N/R        497,827  
  1,000    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    4.666%        10/25/29        B+        1,056,099  
  1,214    

Structured Agency Credit Risk Notes, Series 2017-DNA2

    2.416%        10/25/29        BBB-        1,231,666  
  2,130    

Structured Agency Credit Risk Notes, Series 2017-HQA1

    6.216%        8/25/29        N/R        2,269,361  
  1,174    

Structured Agency Credit Risk Notes, Series 2017-HQA1

    2.416%        8/25/29        Baa3        1,187,675  

 

  28     NUVEEN
JMT    Nuveen Mortgage Opportunity Term Fund 2   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)


Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      MORTGAGE-BACKED SECURITIES (continued)                           
$ 530    

Structured Agency Credit Risk Notes, Series 2017-HQA2

    5.909%        12/25/29        N/R      $ 552,645  
  1,094    

SunTrust Adjustable Rate Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2007-1

    3.546%        2/25/37        N/R        950,439  
  380    

TMSQ Mortgage Trust, Series 2014-1500, 144A

    3.963%        10/10/36        Baa1        370,165  
  501    

Vericrest Opportunity Loan Transferee, Series 2017-NPL1, 144A

    3.250%        5/25/47        N/R        501,320  
  641    

Vericrest Opportunity Loan Transferee, Series 2017-NPL2, 144A

    3.500%        3/25/47        N/R        642,196  
  1,146    

Vericrest Opportunity Loan Transferee, Series 2017-NPL3, 144A

    3.500%        3/25/47        N/R        1,150,028  
  718    

Vericrest Opportunity Loan Transferee, Series 2017-NPL4, 144A

    3.375%        4/25/47        N/R        717,831  
  780    

Vericrest Opportunity Loan Transferee, Series 2017-NPL5, 144A

    5.375%        5/28/47        N/R        776,881  
  1,505    

Vericrest Opportunity Loan Transferee, Series 2017-NPL7, 144A

    5.375%        4/25/59        N/R        1,499,568  
  685    

Vericrest Opportunity Loan Transferee, Series 2017-NPL8, 144A, (3)

    5.000%        6/25/47        N/R        681,339  
  791    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C30

    5.413%        12/15/43        B+        801,060  
  455    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C31

    6.126%        4/15/47        B3        462,034  
  854    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-C31

    5.660%        4/15/47        A+        872,040  
  1,175    

Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-C21, 144A

    5.468%        10/15/44        B+        1,051,484  
  388    

Washington Mutual Mortgage Pass-Through Certificates Trust, Series 2006-AR14

    2.708%        11/25/36        D        368,249  
  458    

Washington Mutual Mortgage Pass-Through Certificates, Series 2006-AR

    2.567%        1/25/37        D        411,117  
  1,297    

Washington Mutual Mortgage Pass-Through Certificates, Series 2006-AR17

    1.512%        12/25/46        Caa3        1,126,864  
  384    

Washington Mutual Mortgage Securities Corporation, Mortgage Pass-Through Certificates, Series 2007-HY1

    1.376%        2/25/37        Caa3        311,144  
  623    

Washington Mutual Mortgage Securities Corporation. Mortgage Pass-Through Certificates, Series 2006-AR7

    1.712%        7/25/46        Caa3        565,170  
  1,089    

Wells Fargo Alternative Loan Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2007-PA1

    6.000%        3/25/37        Caa3        979,198  
  623    

Wells Fargo Alternative Loan Trust, Mortgage Asset-Backed Pass-Through Certificates Series 2007-PA6

    3.186%        12/28/37        N/R        609,020  
  1,440    

Wells Fargo Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2015-NXS1

    4.240%        5/15/48        BBB-        1,246,692  
  215    

Wells Fargo Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK1, 144A

    3.000%        8/15/49        BBB-        173,314  
  690    

Wells Fargo Mortgage Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2007-AR8

    3.139%        11/25/37        Caa2        651,780  
  574    

Wells Fargo Mortgage Backed Securities, Collateralized Mortgage Obligation, Series 2007-AR7 A1

    3.161%        12/28/37        Caa3        550,514  
  730    

Wells Fargo-RBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2014-C20, 144A

    3.986%        5/15/47        N/R        567,864  
$ 204,960    

Total Mortgage-Backed Securities (cost $143,013,311)

                               147,515,911  
Principal
Amount (000)
    Description (1)   Coupon      Maturity      Ratings (2)      Value  
      U.S. GOVERNMENT AND AGENCY OBLIGATIONS – 1.3% (0.9% of Total Investments)                       
$ 1,425    

U.S. Treasury Bonds

    3.625%        8/15/43        Aaa      $ 1,641,366  
$ 1,425    

Total U.S. Government and Agency Obligations (cost $1,584,830)

                               1,641,366  
 

Total Long-Term Investments (cost $160,893,173)

                               165,579,996  

 

NUVEEN     29  


JMT    Nuveen Mortgage Opportunity Term Fund 2   
   Portfolio of Investments (continued)    June 30, 2017 (Unaudited)

 

Principal
Amount (000)
    Description (1)   Coupon      Maturity              Value  
      SHORT-TERM INVESTMENTS – 6.0% (4.3% of Total Investments)                           
      REPURCHASE AGREEMENTS – 6.0% (4.3% of Total Investments)                           
$ 7,440    

Repurchase Agreement with Fixed Income Clearing Corporation, dated 6/30/17, repurchase price $7,440,026, collateralized by $7,740,000, U.S. Treasury Notes, 2.000%, due 11/15/26, value $7,588,830

    0.120%        7/03/17               $ 7,439,952  
 

Total Short-Term Investments (cost $7,439,952)

                               7,439,952  
 

Total Investments (cost $168,333,125) – 139.9%

                               173,019,948  
 

Borrowings – (37.4)% (4), (5)

                               (46,200,000
 

Other Assets Less Liabilities – (2.5)%

                               (3,129,303
 

Net Assets – 100%

                             $ 123,690,645  

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

 

(1) All percentages shown in the Portfolio of Investments are based on net assets.

 

(2) For financial reporting purposes, the ratings disclosed are the highest of Standard & Poor’s Group (“Standard & Poor’s”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”) rating. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Ratings below BBB by Standard & Poor’s, Baa by Moody’s or BBB by Fitch are considered to be below investment grade. Holdings designated N/R are not rated by any of these national rating agencies.

 

(3) Investment valued at fair value using methods determined in good faith by, or at the discretion of, the Board. For fair value measurement disclosure purposes, investment classified as Level 3. See Notes to Financial Statements, Note 2 – Investment Valuation and Fair Value Measurements for more information.

 

(4) Borrowings as a percentage of Total Investments is 26.7%.

 

(5) The Fund segregates 100% of its eligible investments (excluding any investments separately pledged as collateral for specific investments in derivatives, when applicable) in the Portfolio of Investments as collateral for borrowings.

 

(I/O) Interest only security.

 

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

 

(WI/DD) Investment, or portion of investment, purchased on a when-issued or delayed delivery basis.

 

  30     NUVEEN

See accompanying notes to financial statements.


Statement of

Assets and Liabilities

   June 30, 2017 (Unaudited)

 

      JLS        JMT  

Assets

       

Long-term investments, at value (cost $533,465,927 and $160,893,173, respectively)

   $ 548,576,712        $ 165,579,996  

Short-term investments, at value (cost approximates value)

     27,437,909          7,439,952  

Cash

     45,454           

Receivable for:

       

Interest

     1,730,613          549,405  

Investments sold

     3,512,400          884,114  

Other assets

     40,270          4,911  

Total assets

     581,343,358          174,458,378  

Liabilities

       

Cash overdraft

              7,214  

Borrowings

     147,200,000          46,200,000  

Payable for:

       

Dividends

     1,774,601          528,833  

Investments purchased

     11,985,710          3,631,238  

Accrued expenses:

       

Management fees

     507,328          154,550  

Interest on borrowings

     310,190          97,356  

Trustees fees

     39,023          2,044  

Other

     172,065          146,498  

Total liabilities

     161,988,917          50,767,733  

Net assets

   $ 419,354,441        $ 123,690,645  

Shares outstanding

     15,888,417          4,871,277  

Net asset value (“NAV”) per share outstanding

   $ 26.39        $ 25.39  

Net assets consist of:

                   

Shares, $0.01 par value per share

   $ 158,884        $ 48,713  

Paid-in surplus

     372,372,911          110,607,759  

Undistributed (Over-distribution of) net investment income

     3,455,689          429,079  

Accumulated net realized gain (loss)

     28,256,172          7,918,271  

Net unrealized appreciation (depreciation)

     15,110,785          4,686,823  

Net assets

   $ 419,354,441        $ 123,690,645  

Authorized shares

     Unlimited          Unlimited  

 

See accompanying notes to financial statements.

 

NUVEEN     31  


Statement of

Operations

   Six Months Ended June 30, 2017 (Unaudited)

 

      JLS       

JMT

 

Investment Income

   $ 16,300,813        $ 5,210,798  

Expenses

       

Management fees

     3,011,843          918,602  

Interest expense on borrowings

     1,817,597          570,469  

Custodian fees

     10,837          9,542  

Trustees fees

     8,478          2,534  

Professional fees

     89,235          80,897  

Shareholder reporting expenses

     29,025          9,319  

Shareholder servicing agent fees

     88          88  

Stock exchange listing fees

     3,449          3,449  

Investor relations expense

     60,013          18,185  

Other

     11,461          11,120  

Total expenses

     5,042,026          1,624,205  

Net investment income (loss)

     11,258,787          3,586,593  

Realized and Unrealized Gain (Loss)

       

Net realized gain (loss) from investments

     14,566,361          3,997,682  

Change in net unrealized appreciation (depreciation) of investments

     6,744,972          1,787,900  

Net realized and unrealized gain (loss)

     21,311,333          5,785,582  

Net increase (decrease) in net assets from operations

   $ 32,570,120        $ 9,372,175  

 

See accompanying notes to financial statements.

 

  32     NUVEEN


Statement of

Changes in Net Assets

   (Unaudited)

 

     JLS        JMT  
      Six Months
Ended
6/30/17
       Year
Ended
12/31/16
       Six Months
Ended
6/30/17
       Year
Ended
12/31/16
 

Operations

                 

Net investment income (loss)

   $ 11,258,787        $ 24,842,532        $ 3,586,593        $ 7,291,667  

Net realized gain (loss) from:

                 

Investments

     14,566,361          1,976,786          3,997,682          260,275  

Futures contracts

              (91,714                 (19,108

Change in net unrealized appreciation (depreciation) of:

                 

Investments

     6,744,972          (531,861        1,787,900          (57,561

Futures contracts

              (19,600                 (6,605

Net increase (decrease) in net assets from operations

     32,570,120          26,176,143          9,372,175          7,468,668  

Distributions to Shareholders

                 

From net investment income

     (10,820,012        (22,672,771        (3,288,112        (6,941,570

From accumulated net realized gains

              (4,499,600                 (1,199,796

Decrease in net assets from distributions to shareholders

     (10,820,012        (27,172,371        (3,288,112        (8,141,366

Net increase (decrease) in net assets

     21,750,108          (996,228        6,084,063          (672,698

Net assets at the beginning of period

     397,604,333          398,600,561          117,606,582          118,279,280  

Net assets at the end of period

   $ 419,354,441        $ 397,604,333        $ 123,690,645        $ 117,606,582  

Undistributed (Over-distribution of) net investment income at the end of period

   $ 3,455,689        $ 3,016,914        $ 429,079        $ 130,598  

 

See accompanying notes to financial statements.

 

NUVEEN     33  


Statement of

Cash Flows

   Six Months Ended June 30, 2017 (Unaudited)

 

      JLS        JMT  

Cash Flows from Operating Activities:

       

Net Increase (Decrease) In Net Assets from Operations

   $ 32,570,120        $ 9,372,175  

Adjustments to reconcile the net increase (decrease) in net assets from operations to net cash provided by (used in) operating activities:

       

Purchases of investments

     (258,940,698        (76,905,049

Proceeds from sales and maturities of investments

     266,370,677          77,509,205  

Proceeds from (Purchases of) short-term investments, net

     (13,601,846        (2,494,130

Taxes paid

     (101,996        (30,250

Amortization (Accretion) of premiums and discounts, net

     (1,324,842        (410,448

(Increase) Decrease in:

       

Receivable for interest

     (148,516        (76,364

Receivable for investments sold

     (3,512,400        (884,114

Other assets

     (4,576        (3,721

Increase (Decrease) in:

       

Payable for investments purchased

     11,985,710          3,631,238  

Accrued management fees

     1,005          69  

Accrued interest on borrowings

     23,122          7,257  

Accrued Trustees fees

     2,900          1,098  

Accrued other expenses

     (75,717        (72,169

Net realized (gain) loss from:

       

Investments

     (14,566,361        (3,997,682

Paydowns

     (2,906,659        (1,127,572

Change in net unrealized (appreciation) depreciation of investments

     (6,744,972        (1,787,900

Net cash provided by (used in) operating activities

     9,024,951          2,731,643  

Cash Flows from Financing Activities:

       

Increase (Decrease) in cash overdraft balance

              7,214  

Cash distributions paid to shareholders

     (9,045,411        (2,759,279

Net cash provided by (used in) financing activities

     (9,045,411        (2,752,065

Net Increase (Decrease) in Cash

     (20,460        (20,422

Cash at the beginning of period

     65,914          20,422  

Cash at the end of period

   $ 45,454        $  
Supplemental Disclosure of Cash Flow Information    JLS        JMT  

Cash paid for interest on borrowings (excluding borrowing costs)

   $ 1,794,475        $ 563,212  

 

See accompanying notes to financial statements.

 

  34     NUVEEN


THIS PAGE INTENTIONALLY LEFT BLANK

 

NUVEEN     35  


Financial

Highlights (Unaudited)

 

Selected data for a share outstanding throughout each period:

 

           Investment Operations      Less Distributions                
     Beginning
NAV
     Net
Investment
Income
(Loss)(a)
     Net
Realized/
Unrealized
Gain (Loss)
     Total      From
Net
Investment
Income
     From
Accumulated
Net
Realized
Gains
     Return
of
Capital
     Total      Ending
NAV
     Ending
Share
Price
 

JLS

 

Year ended 12/31:

 

                       

2017(f)

  $ 25.02      $ 0.71      $ 1.34      $ 2.05      $ (0.68    $      $      $ (0.68    $ 26.39      $ 25.61  

2016

    25.09        1.56        0.08        1.64        (1.43      (0.28             (1.71      25.02        24.07  

2015

    26.16        1.28        (0.83      0.45        (1.13      (0.25      (0.14      (1.52      25.09        22.71  

2014

    25.84        1.25        0.62        1.87        (1.00      (0.55 )*            (1.55      26.16        23.15  

2013

    26.59        1.08        0.99        2.07        (1.44      (1.38 )*            (2.82      25.84        23.14  

2012

    21.89        1.27        5.50        6.77        (1.42      (0.65             (2.07      26.59        27.22  

JMT

 

Year ended 12/31:

 

                       

2017(f)

    24.14        0.74        1.19        1.93        (0.68                    (0.68      25.39        24.58  

2016

    24.28        1.50        0.04        1.54        (1.43      (0.25             (1.68      24.14        23.16  

2015

    25.41        1.20        (0.80      0.40        (1.01      (0.19      (0.33      (1.53      24.28        22.29  

2014

    25.08        1.22        0.67        1.89        (0.85      **       (0.71      (1.56      25.41        23.17  

2013

    26.95        1.06        0.79        1.85        (1.43      (2.26      (0.03      (3.72      25.08        22.97  

2012

    21.78        1.19        6.05        7.24        (1.51      (0.56             (2.07      26.95        27.18  

 

    Borrowings at the End of Period(b)  
     Aggregate
Amount
Outstanding
(000)
       Asset
Coverage
Per $1,000
 

JLS

 

Year Ended 12/31:

 

2017(f)

  $ 147,200        $ 3,849  

2016

    147,200          3,701  

2015

    147,200          3,708  

2014

    147,200          3,823  

2013

    124,550          4,296  

JMT

 

Year Ended 12/31:

 

2017(f)

    46,200          3,677  

2016

    46,200          3,546  

2015

    46,200          3,560  

2014

    46,200          3,679  

2013

    39,450          4,097  

 

  36     NUVEEN


            Ratios/Supplemental Data  
Total Returns           Ratios to Average Net Assets(d)        
Based
on
NAV(c)
    Based
on
Share
Price(c)
    Ending
Net
Assets
(000)
    Expenses     Net
Investment
Income (Loss)
    Portfolio
Turnover
Rate(e)
 
                                             
         
  8.28     9.33   $ 419,354       2.48 %***      5.55 %***      50
  6.79       13.97       397,604       2.42       6.29       73  
  1.71       4.82       398,601       2.24       4.96       24  
  7.31       6.72       415,575       2.20       4.72       17  
  7.96       (4.85     410,532       2.22       3.99       22  
  32.15       45.47       422,117       1.45       5.22       12  
                                             
         
  8.05       9.16       123,691       2.71 ***      5.98 ***      50  
  6.56       11.83       117,607       2.67       6.24       76  
  1.56       3.01       118,279       2.47       4.79       23  
  7.63       7.81       123,780       2.42       4.72       16  
  7.05       (1.84     122,193       2.38       3.91       21  
  34.56       44.87       130,855       1.61       4.84       12  

 

(a) Per share Net Investment Income (Loss) is calculated using the average daily shares method.
(b) The Fund did not use borrowings prior to the fiscal year ended December 31, 2013.
(c) Total Return Based on NAV is the combination of changes in 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 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.

(d)     • Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to reverse repurchase agreements and/or borrowings (as described in Note 8 – Borrowing Arrangements).
  Each ratio includes the effect of all interest expense paid and other costs related to borrowings and/or reverse repurchase agreements, where applicable, as follows:

 

Ratios of Interest Expense        

to Average Net Assets(b)

 

JLS

 

Year ended 12/31:

 

2017(f)

    0.90 %*** 

2016

    0.79  

2015

    0.63  

2014

    0.60  

2013

    0.65  

2012

    0.02  
Ratios of Interest Expense        
to Average Net Assets(b)
 

JMT

 

Year ended 12/31:

 

2017(f)

    0.95 %*** 

2016

    0.84  

2015

    0.66  

2014

    0.63  

2013

    0.66  

2012

    0.01  
 

 

(e) 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.
(f) For the six months ended June 30, 2017.
* Revised. See Notes to Financial Statements, Note 6 – Income Tax Information for further details.
** Rounds to less than $0.01 per share.
*** Annualized.

 

See accompanying notes to financial statements.

 

NUVEEN     37  


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 Mortgage Opportunity Term Fund (JLS)

 

    Nuveen Mortgage Opportunity Term Fund 2 (JMT)

The Funds are registered under the Investment Company Act of 1940, as amended, as non-diversified closed-end management investment companies. JLS and JMT were organized as Massachusetts business trusts on September 10, 2009 and December 16, 2009, respectively. It is anticipated that JLS and JMT will terminate on November 30, 2019 and February 28, 2020, respectively. Upon termination, the Funds will distribute all of their assets to shareholders of record as of the date of termination.

The end of the reporting period for the Funds is June 30, 2017, and the period covered by these Notes to Financial Statements is the six months ended June 30, 2017 (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 Wellington Management Company LLP (“Wellington Management”) (”Wellington Management”) and Nuveen Asset Management, LLC (“NAM”). Wellington Management manages the Funds’ investments in mortgage-backed securities (“MBS”) and other permitted investments.

Investment Objectives and Principal Investment Strategies

Each Fund’s investment objective is to generate attractive total returns through opportunistic investments in MBS. Each Fund seeks to achieve its investment objective by investing primarily in non-agency residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). Each Fund may also invest up to 20% of its managed assets (as defined in Note 7 – Management Fees and Other Transactions with Affiliates) in other permitted investments, including cash and cash equivalents, U.S. treasury securities, non-mortgage related asset-backed securities, inverse floating rate securities, municipal securities, interest rate futures, interest rate swaps and swaptions, non-MBS credit default swaps (including swaps based on a credit default swap index, such as the CMBX index) and other synthetic mortgage-related exposure, including equity investments in mortgage real estate investment trusts (“REITs”), as permitted by the 1940 Act.

Significant Accounting Policies

Each Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 “Financial Services – Investment Companies.” The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

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 earmarked securities in their portfolios with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments.

 

  38     NUVEEN


 

As of the end of the reporting period, the Funds’ outstanding when-issued/delayed delivery purchase commitments were as follows:

 

     JLS        JMT  

Outstanding when-issued/delayed delivery purchase commitments

    3,499,013          1,056,187  

Investment Income

Investment income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. Investment income also reflects paydown gains and losses, if any.

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. If a refund is received for 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 Shareholders

Distributions to 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.

Each Fund makes monthly cash distributions to shareholders of a stated dollar amount per share. Subject to approval and oversight by the Funds’ Board of Trustees (the “Board”), each Fund seeks to establish a distribution rate that roughly corresponds to the cash flows from its investment strategies through regular distributions (a “Cash Flow-Based Distribution Program”). Each Fund seeks to establish a relatively stable common share distribution rate that roughly corresponds to the Fund’s net cash flows after expense from its investments over an extended period of time. Actual net cash flows the Funds receive may differ from each Fund’s distribution rate over shorter time periods over a specific timeframe. The portion of distributions paid attributed to net unrealized gains, if any, is distributed from a Fund’s assets and is treated by shareholders as a non-taxable distribution (“Return of Capital”) for tax purposes. In the event that total distributions during a calendar year exceed a Fund’s total return on net asset value (“NAV”), the difference will reduce NAV per share. If a Fund’s total return on NAV exceeds total distributions during a calendar year, the excess will be reflected as an increase in NAV per share. The final determination of the source and character of all distributions for the fiscal year is made after the end of the fiscal year and is reflected in the financial statements contained in the annual report as of December 31 each year.

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 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.

Leverage

Each Fund intends to use leverage to enhance the total return potential of its overall investment strategy. Each Fund intends to limit its combined effective leverage ratio (measured by the aggregate dollar amount of all leverage facilities, whether direct or indirect) to 33% of its managed assets.

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.

Netting Agreements

In the ordinary course of business, the Funds may enter into transactions subject to enforceable master repurchase agreements, 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 3 – Portfolio Securities and Investments in Derivatives.

 

NUVEEN     39  


Notes to Financial Statements (Unaudited) (continued)

 

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 from operations during the current fiscal period. Actual results may differ from those estimates.

2. Investment Valuation and Fair Value Measurements

The fair valuation input levels as described below are for fair value measurement purposes.

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, 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).

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.

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

Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the 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 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:

 

JLS    Level 1      Level 2      Level 3      Total  

Long-Term Investments:

           

Asset-Backed Securities

   $      $ 49,721,913      $      $ 49,721,913  

Mortgage-Backed Securities

            491,178,330        2,262,840      493,441,170  

U.S. Government and Agency Obligations

            5,413,629               5,413,629  

Short-Term Investments:

           

Repurchase Agreements

            27,437,909               27,437,909  

Total

   $      $ 573,751,781      $ 2,262,840      $ 576,014,621  

 

  40     NUVEEN


 

JMT    Level 1      Level 2      Level 3      Total  

Long-Term Investments:

           

Asset-Backed Securities

   $      $ 16,422,719      $      $ 16,422,719  

Mortgage-Backed Securities

            146,834,572        681,339      147,515,911  

U.S. Government and Agency Obligations

            1,641,366               1,641,366  

Short-Term Investments:

           

Repurchase Agreements

            7,439,952               7,439,952  

Total

   $      $ 172,338,609      $ 681,339      $ 173,019,948  
* Refer to the Fund’s Portfolio of Investments for securities classified as Level 3.

The Board is responsible for the valuation process and has appointed 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, is responsible for making fair value determinations, evaluating the effectiveness of the Funds’ pricing policies and reporting to the Board. 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, 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.

3. Portfolio Securities and Investments in Derivatives

Portfolio Securities

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
 
JLS   

Fixed Income Clearing Corporation

   $ 27,437,909        $ (27,437,909      $  
JMT   

Fixed Income Clearing Corporation

     7,439,952          (7,439,952         
* As of the end of the reporting period, 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.

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 the Fund. The Funds record derivative instruments at fair value with changes in fair value

 

NUVEEN     41  


Notes to Financial Statements (Unaudited) (continued)

 

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.

4. Fund Shares

The Funds did not have any transactions in shares during the current and prior fiscal period.

5. Investment Transactions

Long-term purchases and sales (including maturities) during the current fiscal period were as follows:

 

     JLS        JMT  

Purchases

  $ 258,940,698        $ 76,905,049  

Sales and maturities

    266,370,677          77,509,205  

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 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. Therefore, no federal income tax provision is required.

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

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 market discount accretion on investments, recognition of unrealized gain or loss for tax (mark-to-market) on futures contracts 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 June 30, 2017, the cost and unrealized appreciation (depreciation) of investments, as determined on a federal income tax basis, were as follows:

 

    

JLS

      

JMT

 

Cost of investments

  $ 550,048,651        $ 165,529,204  

Gross unrealized:

      

Appreciation

  $ 36,482,542        $ 7,786,333  

Depreciation

    (10,516,572        (295,589

Net unrealized appreciation (depreciation) of investments

  $ 25,965,970        $ 7,490,744  

 

  42     NUVEEN


 

Permanent differences, primarily due to investments in MBS and treatment of notional principal contracts, resulted in reclassifications among the Funds’ components of net assets as of December 31, 2016, the Funds’ last tax year-end, as follows:

 

       

JLS

     JMT  

Paid-in surplus

     $ 6,955,391      $ (81,369

Undistributed (Over-distribution of) net investment income

       678,067        (273,462

Accumulated net realized gain (loss)

       (7,633,458      354,831  
The tax components of undistributed net ordinary income and net long-term capital gains as of December 31, 2016, the Funds’ last tax year end, were as follows:  
       

JLS

    

JMT

 

Undistributed net ordinary income

     $ 5,344,163      $ 788,054  

Undistributed net long-term capital gains

       472,148        448,569  
The tax character of distributions paid during the Funds’ last tax year ended December 31, 2016 was designated for purposes of the dividends paid deduction as follows:  
       

JLS

    

JMT

 

Distributions from net ordinary income1

     $ 22,672,771      $ 6,941,570  

Distributions from net long-term capital gains

       4,499,600        1,199,796  

Return of capital

               

1      Net ordinary income consists of net taxable income derived from dividends and interest, and net short-term capital gains, if any.

       

During the prior reporting period JLS identified a miscalculation in the character of the distributions (capital gain vs return of capital) during the fiscal years ended December 31, 2013 and 2014. For each reporting period, the miscalculation, which resulted in a cumulative understatement of realized gains and an overstatement of return of capital of $5,979,775 as of December 31, 2014, did not impact net assets, total return or total distributions declared and paid to the Fund shareholders for any period. JLS has presented the revised per share components for the fiscal years ended December 31, 2013 and 2014 in the December 31, 2016 Financial Highlights to reclassify the return of capital of $0.06 and $0.32, respectively, to a realized gain distribution.  

7. Management Fees

Management Fees

Pursuant to an investment management agreement between each Fund and the Adviser, the Adviser receives 40% of each Fund’s total annual management fee. The Adviser’s portion of the management fee compensates the Adviser for overall investment advisory and administrative services provided to each Fund and general office facilities. Pursuant to an investment sub-advisory agreement between each Fund and Wellington Management, Wellington Management receives 60% of each Fund’s total annual management fee. NAM 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 each fund is calculated according to the following schedule:

 

Average Daily Managed Assets1   JLS
JMT
Fund-Level Fee
 

For the first $125 million

    0.9500

For the next $125 million

    0.9375  

For the next $150 million

    0.9250  

For the next $600 million

    0.9125  

For managed assets over $1 billion

    0.9000  

 

NUVEEN     43  


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 Fund’s daily managed assets:

 

Complex-Level Managed Asset Breakpoint Level2      Effective 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  
1  “Managed assets” means the total assets of the Fund, minus the sum of its accrued liabilities (other than the Fund liabilities incurred for the express purpose of creating effective leverage). Total assets for this purpose shall include assets attributable to each Fund’s use of effective leverage (whether or not those assets are reflected in the Fund’s financial statements for the purposes of U.S. GAAP).
2  The complex-level fee is based on the aggregate daily managed assets (as “managed assets” is defined in each Nuveen fund’s investment management agreement with the Adviser, which generally includes assets attributable to any preferred shares that may be outstanding and any borrowings (including the issuance of commercial paper or notes)) of the Nuveen 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. As of June 30, 2017, the complex-level fee for each Fund was 0.1606%.

8. Borrowing Arrangements

Each Fund has entered into a borrowing arrangement (“Borrowings”) with a bank as a means of leverage. Each Fund’s maximum commitment amount under its Borrowings is as follows:

 

     JLS        JMT  

Maximum commitment amount

  $ 148,000,000        $ 46,500,000  

As of the end of the reporting period, each Fund’s outstanding balance on its Borrowings was as follows:

 

     JLS        JMT  

Outstanding balance on Borrowings

  $ 147,200,000        $ 46,200,000  

Interest charged on the outstanding balance on Borrowings for each Fund its equal to the 3-Month LIBOR (London Inter-Bank Offered Rate) plus 1.45% per annum on the amount borrowed. In addition to interest expense, each Fund may also pay a fee of 1.45%, which shall accrue daily based on the amount of the difference between 90% of the maximum commitment amount and the drawn balance, when such drawn balance is less than 90% of the maximum commitment amount.

During the current fiscal period, the average daily balance outstanding and average annual interest rate on each Fund’s Borrowings were as follows:

 

     JLS        JMT  

Average daily balance outstanding

  $ 147,200,000        $ 46,200,000  

Average annual interest rate

    2.46        2.46

In order to maintain these Borrowings, each Fund must meet certain collateral, asset coverage and other requirements. Each Fund’s Borrowings outstanding are fully secured by eligible securities held in its Portfolio of Investments.

Each Fund’s Borrowings outstanding is recognized as “Borrowings” on the Statement of Assets and Liabilities. Interest expense incurred on the borrowed amount and undrawn balance are recognized as a component of “Interest expense on borrowings” on the Statement of Operations.

Inter-Fund Borrowing and Lending

The Securities and Exchange Commission (“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

 

  44     NUVEEN


 

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 interfund 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 May 2017, the Board approved the Nuveen funds participation in the Inter-Fund Program. During the current reporting period, none of the Funds have entered into any inter-fund loan activity.

9. New Accounting Pronouncements

Amendments to Regulation S-X

In October 2016, the SEC adopted new rules and amended existing rules (together, the “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date of the amendments to Regulation S-X is August 1, 2017. Management is still evaluating the impact of the final rules, if any.

Accounting Standards Update (“ASU”) 2017-08 (“ASU 2017-08”) Premium Amortization on Purchased Callable Debt Securities

During March 2017, the Financial Accounting Standards Board (“FASB”) 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 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the implications of ASU 2017-08, if any.

 

NUVEEN     45  


Additional

Fund Information

 

Board of Trustees          

Margo Cook*

 

Jack B. Evans

 

William C. Hunter

 

David J. Kundert

 

Albin F. Moschner

 

John K. Nelson

William J. Schneider

 

Judith M. Stockdale

 

Carole E. Stone

 

Terence J. Toth

 

Margaret L. Wolff

 

Robert L. Young**

 

* Interested Board Member.
** Effective July 1, 2017.

 

         

Fund Manager

Nuveen Fund Advisors, LLC

333 West Wacker Drive

Chicago, IL 60606

 

Custodian

State Street Bank

& Trust Company

One Lincoln Street

Boston, MA 02111

 

Legal Counsel

Chapman and Cutler LLP

Chicago, IL 60603

 

Independent Registered
Public Accounting Firm

PricewaterhouseCoopers LLP

One North Wacker Drive

Chicago, IL 60606

 

Transfer Agent and
Shareholder Services

Computershare Trust
Company, N.A.

250 Royall Street

Canton, MA 02021

(8oo) 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 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.

 

 

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.

 

     JLS        JMT  

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.

 

  46     NUVEEN


Glossary of Terms

Used in this Report

 

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

 

  Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that includes all investment-grade, publicly issued, fixed-rate, dollar denominated, non-convertible debt issues and commercial mortgage backed securities with maturities of at least one year and outstanding par values of $150 million or more. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.

 

  Bloomberg Barclays Commercial Mortgage-Backed Securities (CMBS) Aggregate Index: An index that measures the performance of the commercial mortgage-backed securities market. Benchmark returns assume reinvestment of distributions, but do not reflect any applicable sales charges or management fees.

 

  Credit Risk Transfer (CRT) Securities: These are general obligations of the U. S. Federal National Mortgage Associate (Fannie Mae) and the U.S. Federal Home Loan Mortgage Corporation (Freddie Mac). These Government Sponsored Enterprises (GSEs) are mandated to expand the secondary market for residential mortgage loans through securitization.

 

  Commercial Mortgage-Backed Securities (CMBS): Commercial mortgage-backed securities are backed by cash flows of a mortgage or pool of mortgages on commercial real estate. CMBS generally are structured to provide protection to the senior class investors against potential losses on the underlying mortgage loans. CMBS are typically characterized by the following: i) loans on multi-family housing, non-residential property, ii) payments based on the amortization schedule of 25-30 years with a balloon payment due usually after 10 years, and iii) restrictions on prepayments.

 

  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 below) and the leverage effects of certain derivative investments in the fund’s portfolio that increase the fund’s investment exposure.

 

  Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to more than 100% of the investment capital.

 

  Mortgage-Backed Securities (MBS): Mortgage-backed securities (MBS) are bonds backed by pools of mortgages, usually with similar characteristics, and which return principal and interest in each payment. MBS are composed of residential mortgages (RMBS) or commercial mortgages (CMBS). RMBS are further divided into agency RMBS and non-agency RMBS, depending on the issuer.

 

  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.

 

  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.

 

 

Residential Mortgage-Backed Securities (RMBS): Residential mortgage-backed securities are securities the payments on which depend primarily on the cash flow from residential mortgage loans made to borrowers that are secured by residential real estate.

 

NUVEEN     47  


Glossary of Terms

Used in this Report (continued)

 

 

RMBS consist of agency and non-agency RMBS. Agency RMBS have agency guarantees that assure investors that they will receive timely payment of interest and principal, regardless of delinquency or default rates on the underlying loans. Agency RMBS include securities issued by the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, and other federal agencies, or issues guaranteed by them. Non-agency RMBS do not have agency guarantees. Non-agency RMBS have credit enhancement built into the structure to shield investors from borrower delinquencies. The spectrum of non-agency residential mortgage loans includes traditional jumbo loans (prime), alternative-A loans (Alt-A), and home equity loans (subprime).

 

  48     NUVEEN


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 (8oo) 257-8787.

 

 

NUVEEN     49  


Annual Investment

Management Agreement Approval Process

 

The Board of Trustees (each, a “Board,” and each Trustee, a “Board Member”) of each Fund, including the Board Members who are not parties to the applicable advisory or sub-advisory agreements or “interested persons” of any such parties (the “Independent Board Members”), oversees the management of its respective Fund, including the performance of Nuveen Fund Advisors, LLC, the Funds’ investment adviser (the “Adviser”), and Nuveen Asset Management, LLC (“NAM”) and Wellington Management Company LLP (“Wellington”), the Funds’ sub-advisers (collectively, the “Sub-Advisers”). As required by applicable law, after the initial term of the respective Fund following commencement of its operations, the Board is required to consider annually whether to renew the Fund’s management agreement with the Adviser (the “Investment Management Agreement”) and the sub-advisory agreements with the Sub-Advisers (each, a “Sub-Advisory Agreement” and, together with the Investment Management Agreement, the “Advisory Agreements”). Accordingly, the Board met in person on April 11-12, 2017 (the “April Meeting”) and May 23-25, 2017 (the “May Meeting”) to consider the approval of each Advisory Agreement that was up for renewal for an additional one-year period.

The Board considered its review of the Advisory Agreements as an ongoing process encompassing the information received and the deliberations the Board and its committees have had throughout the year. The Board met regularly during the year and received materials and discussed topics that were relevant to the annual consideration of the renewal of the Advisory Agreements, including, among other things, overall market performance and developments; fund investment performance; investment team review; valuation of securities; compliance, regulatory and risk management matters; and other developments. The Board had also established several standing committees, including the Open-end Fund Committee and Closed-end Fund Committee, which met regularly throughout the year to permit the Board Members to delve deeper into the topics particularly relevant to the respective product line. The Board further continued its practice of seeking to meet periodically with the sub-advisers and their investment teams. The accumulated information, knowledge, and experience the Board Members had gained during their tenure on the Board governing the Funds and working with the Fund Advisers (as defined below) were taken into account in their review of the Advisory Agreements.

In addition to the materials received by the Board or its committees throughout the year, the Board reviewed extensive additional materials prepared specifically for its annual review of the Advisory Agreements in response to a request by independent legal counsel on behalf of the Independent Board Members. The materials addressed a variety of topics, including, but not limited to, a description of the services provided by the Adviser and the Sub-Advisers (the Adviser and the Sub-Advisers are each a “Fund Adviser”); an analysis of fund performance including comparative industry data and a detailed focus on performance outliers; an analysis of the Sub-Advisers; an analysis of the fees and expense ratios of the Nuveen funds in absolute terms and in comparison to the fees and expenses of peers with a focus on any expense outliers; an assessment of shareholder services for the Nuveen funds and of the performance of certain service providers; a review of initiatives instituted or continued during the past year; a review of premium/discount trends and leverage management for the closed-end funds; and information regarding the profitability of the Fund Advisers, the compensation of portfolio managers, and compliance and risk matters. The materials provided in connection with the annual review included information compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge” or “Lipper”), an independent provider of investment company data, comparing, in relevant part, each Fund’s fees and expenses with those of a comparable universe of funds (the “Peer Universe”), as selected by Broadridge (the “Broadridge Report”). The Independent Board Members also received a memorandum from independent legal counsel outlining their fiduciary duties and legal standards in reviewing the Advisory Agreements.

As part of its annual review, the Board met at the April Meeting to review the investment performance of the Funds and to consider the Adviser’s analysis of each Sub-Adviser evaluating, among other things, the Sub-Adviser’s assets under management, investment team, performance, organizational stability, and investment approach. During the review, the Independent Board Members requested and received additional information from management. At the May Meeting, the Board, including the Independent Board Members, continued its review and ultimately approved the continuation of the Advisory Agreements for an additional year. Throughout the year and throughout their review of the Advisory Agreements, the Independent Board Members were assisted by independent legal counsel and met with counsel separately without management present. In deciding to renew the Advisory Agreements, the Independent Board Members did not identify a particular factor as determinative, but rather the

 

  50     NUVEEN


 

decision reflected the comprehensive consideration of all the information presented, and each Board Member may have attributed different weights to the various factors and information considered in connection with the approval process. The following summarizes the principal factors, but not all the factors, the Board considered in its review of 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 and the resulting performance of each Fund. The Board recognized the myriad of services the Adviser and its affiliates provided to manage and operate the Nuveen funds, including (a) product management (such as managing distributions, positioning the product in the marketplace, maintaining and enhancing shareholder communications and reporting to the Board); (b) investment oversight, risk management and securities valuation (such as overseeing the sub-advisers and other service providers, analyzing investment performance and risks, overseeing risk management and disclosure, executing the daily valuation of securities, and analyzing trade execution); (c) fund administration (such as helping to prepare fund tax returns and complete other tax compliance matters and helping to prepare regulatory filings and shareholder reports); (d) fund board administration (such as preparing board materials and organizing and providing assistance for board meetings); (e) compliance (such as helping to devise and maintain the Nuveen funds’ compliance program and test for adherence); (f) legal support (such as helping to prepare registration statements and proxy statements, interpreting regulations and policies and overseeing fund activities); (g) with respect to certain closed-end funds, providing leverage, capital and distribution management services; and (h) with respect to certain open-end funds with portfolios that have a leverage component, providing such leverage management services.

The Board further noted the Adviser’s continued dedication to investing in its business to enhance the quality and breadth of the services provided to the Funds. The Board recognized the Adviser’s investment in staffing over recent years to support the services provided to the Nuveen funds in key areas, including in investment services, product management, retail distribution and information technology, closed-end funds and structured products, as well as in fund administration, operations and risk management. The Board further noted the Adviser’s continued commitment to enhancing its compliance program by, among other things, restructuring the compliance organization, developing a unified compliance program, adding compliance staff, and developing and/or revising policies and procedures as well as building further infrastructure to address new regulatory requirements or guidance and the growth of the complex. The Board also considered the enhancements to Nuveen’s cybersecurity capabilities, systems and processes to value securities, stress test reporting and risk and control self-assessments.

In addition, the Independent Board Members considered information highlighting the various initiatives that the Adviser had implemented or continued over recent years to benefit the open-end fund and closed-end fund product lines and/or particular Nuveen funds. The Board noted the Adviser’s continued efforts to rationalize the open-end fund and closed-end fund product lines through, among other things, mergers, liquidations and repositionings in seeking to provide enhanced shareholder value over the years through increased efficiency, reduced costs, improved performance and revised investment approaches that are more relevant to current shareholder needs. With respect to closed-end Nuveen funds, such initiatives included (a) an increased level of leverage management activities in 2016 and 2017 resulting from the rollover of existing facilities, the negotiation of improved terms and pricing to reduce leverage costs, the innovation of new leverage structures, the rebalancing of leverage of various funds as a result of mergers or new investment mandates, and the restructuring of tender option bonds to be compliant with new regulatory requirements; (b) an increased level of capital management activities (i.e., the management of the issuance and repurchase of shares of certain closed-end funds) during 2016 as a result of market demand as well as an implementation of a cross department review system for shares trading at certain discount levels; (c) continued refinements to a database to permit further analysis of the closed-end fund marketplace and shareholder base; (d) the development of enhanced secondary market board reporting and commentary; (e) the reconfiguration of the framework for determining and maintaining closed-end fund benchmarks to permit more consistency across the complex; and (f) the development of product innovations for new closed-end offerings, including target term funds. The Board also recognized the Adviser’s continued commitment to supporting the closed-end product line through its award winning investor relations support program through which Nuveen seeks to educate investors and financial advisers regarding closed-end funds.

 

NUVEEN     51  


Annual Investment Management Agreement Approval Process (continued)

 

In its review, the Board recognized that initiatives that attracted assets to the Nuveen family of funds generally benefited the Nuveen funds in the complex as fixed costs would be spread over a larger asset base and, as described below, through the complex-wide fee arrangement which generally provides that the management fees of the Nuveen funds (subject to limited exceptions) are reduced as asset levels in the complex reach certain breakpoints in the fee schedule.

Similarly, the Board considered the sub-advisory services provided by the Sub-Advisers to the Funds. The Sub-Advisers generally provided portfolio advisory services for the Funds. The Board reviewed the Adviser’s analysis of each Sub-Adviser which evaluated, among other things, the respective investment team and any changes thereto, the stability and history of the organization, the assets under management, the investment approach and the performance of the Nuveen funds it sub-advises. 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

As part of its evaluation of the services provided by the Fund Advisers, the Board reviewed Fund performance over the quarter, one-, three- and five-year periods ending December 31, 2016 as well as performance data for the first quarter of 2017 ending March 31, 2017. The Board reviewed performance on an absolute basis and 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). For closed-end funds, the Board (or the Closed-end Fund Committee) also reviewed, among other things, the premium or discount to net asset value of the Nuveen closed-end funds as of a specified date and over various periods as well as in comparison to the premium/discount average in their respective Lipper peer category. The Independent Board Members continued to recognize the importance of secondary market trading for the shares of the closed-end funds and the evaluation of the premium and discount levels was a continuing priority for them. The review and analysis of performance information during the annual review of Advisory Agreements incorporated the discussions and performance information the Board Members have had at each of their quarterly meetings throughout the year.

In evaluating performance data, the Independent Board Members recognized some of the limitations of such data and the difficulty in establishing appropriate peer groups and benchmarks for certain of the Nuveen funds. They recognized that each fund operates pursuant to its own investment objective(s), parameters and restrictions which may differ from that of the Performance Peer Group or benchmark. Certain funds may also utilize leverage which may provide benefits or risks to their portfolio compared to an unlevered benchmark. The Independent Board Members had noted that management had classified the Performance Peer Groups as low, medium and high in relevancy to the applicable fund as a result of these differences or other factors. The Independent Board Members recognized that the variations between the Performance Peer Group or benchmark and the applicable Fund will lead to differing performance results and may limit the value of the comparative performance data in assessing the particular Fund’s performance.

In addition, the Independent Board Members recognized that the performance data is a snapshot in time, in this case as of the end of the 2016 calendar year or end of the first quarter of 2017. A different period may generate significantly different results and longer term performance can be adversely affected by even one period of significant underperformance. Further, a shareholder’s experience in a Fund depends on his or her own holding period which may differ from that reviewed by the Independent Board Members.

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 and the factors contributing to the respective fund’s performance and any efforts to address performance concerns. With respect to any Nuveen funds for which the Board has identified performance issues, the Board monitors such funds closely until performance improves, discusses with the Adviser the reasons for such results, considers any steps necessary or appropriate to address such issues, and reviews the results of any efforts undertaken. The Board, however, acknowledged that shareholders chose to invest or remain invested in a fund knowing that the Adviser and applicable sub-adviser(s) manage the fund, knowing the fund’s investment strategy and seeking exposure to that strategy (even if the strategy was “out of favor” in the marketplace) and knowing the fund’s fee structure.

 

  52     NUVEEN


 

For Nuveen Mortgage Opportunity Term Fund (the “Mortgage Fund”), the Board noted that the Fund performed well against its Performance Peer Group ranking in the first quartile for the one-year period and the second quartile for the three- and five-year periods. The Fund also outperformed its benchmark in the one-, three- and five-year periods. The Board was satisfied with the Fund’s overall performance.

For Nuveen Mortgage Opportunity Term Fund 2 (the “Mortgage Fund 2”), the Board noted that the Fund performed well against its Performance Peer Group, ranking in the second quartile in the one- and three-year periods and the first quartile in the five-year period. The Fund also outperformed its benchmark in the one-, three- and five-year periods. The Board was satisfied with the Fund’s overall performance.

 

C.   Fees, Expenses and Profitability
  1.   Fees and Expenses

The Board evaluated the management fees and other fees and expenses of each Fund. The Board reviewed and considered, among other things, the gross and net management fees paid by the Funds. The Board further considered the net total expense ratio of each Fund (expressed as a percentage of average net assets) as the expense ratio is most reflective of the investors’ net experience in a Fund as it directly reflected the costs of investing in the respective Fund.

In addition, the Board reviewed the Broadridge Report comparing, in relevant part, each Fund’s gross and net advisory fees and net total expense ratio with those of a Peer Universe. The Independent Board Members also reviewed the methodology regarding the construction of the applicable Peer Universe by Broadridge. In reviewing the comparative data, the Board was aware that various factors may limit some of the usefulness of the data, such as differences in size of the peers; the composition of the Peer Universe; changes each year of funds comprising the Peer Universe; levels of expense reimbursements and fee waivers; and differences in the type and use of leverage. Nevertheless, in reviewing a fund’s fees and expenses compared to the fees and expenses of its peers (excluding leverage costs and leveraged assets), the Board generally considered a fund’s expenses and fees 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 Board noted that the substantial majority of the Nuveen funds had a net expense ratio that was near or below their respective peer average.

The Independent Board Members noted that the Funds each had a net management fee and a net expense ratio higher than its respective peer average. The Independent Board Members noted that, for each Fund, the net expense ratio was higher than the average of the Peer Universe generally due to costs associated with a change in the form of leverage in 2013 and the limited size of the peer group. The Independent Board Members were satisfied with the explanation of the differential.

In their evaluation of the management fee schedule, the Independent Board Members also reviewed the fund-level and complex-wide breakpoint schedules, as described in further detail below. With respect to closed-end funds, the Board considered the effects of leverage on fees and expenses, including the calculation of management fees for funds with tender option bonds.

Based on their 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

The Board also reviewed information regarding the respective Fund Adviser’s fee rates for providing advisory services to other types of clients. For the Adviser and/or affiliated Sub-Adviser (NAM), such other clients may include: separately managed accounts (such as retail, institutional or wrap accounts), other investment companies that are not offered by Nuveen but are sub-advised by NAM, foreign investment companies offered by Nuveen, and collective investment trusts. The Board further noted that the Adviser also advises certain exchange-traded funds (“ETFs”) sponsored by Nuveen.

In reviewing the fee rates assessed to other clients, with respect to NAM, the Board reviewed, among other things, the range of fees assessed for managed accounts and the foreign investment companies offered by Nuveen. With respect to foreign funds, the Board noted that unlike the management fees for the Nuveen funds, the management fees for the foreign funds may include distribution fees paid to intermediaries. The Board also reviewed the average fee rate for certain strategies

 

NUVEEN     53  


Annual Investment Management Agreement Approval Process (continued)

 

offered by NAM. With respect to Wellington, the Independent Board Members considered the Sub-Adviser’s financial information for its advisory activities with respect to the applicable Nuveen funds.

The Board recognized the inherent differences between the Nuveen funds and the other types of clients. The Board considered information regarding these various differences which included, among other things, the services required, average account sizes, types of investors targeted, legal structure and operations, and applicable laws and regulations. The Independent Board Members recognized that the foregoing variations resulted in different economics among the product structures and culminated in varying management fees among the types of clients and the Nuveen funds. In general, the Board noted that higher fee levels reflected higher levels of service provided by the Fund Adviser, increased investment management complexity, greater product management requirements and higher levels of business risk or some combination of the foregoing. The Board recognized the breadth of services the Adviser provided to support the Nuveen funds as summarized above and noted that many of such administrative services may not be required to the same extent or at all for the institutional clients or other clients. The Board further recognized the passive management of ETFs compared to the active management required of other Nuveen funds would contribute to differing fee levels.

The Independent Board Members noted that the sub-advisory fees paid each Sub-Adviser, however, were generally for portfolio management services. With respect to NAM (the affiliated Sub-Adviser), the Board noted such sub-advisory fees were more comparable to the fees of retail wrap accounts and other external sub-advisory mandates. With respect to Wellington (the unaffiliated Sub-Adviser), the Independent Board Members noted that such fees were the result of arm’s length negotiations.

Given the inherent differences in the various products, particularly the extensive services provided to the Funds, the Board concluded that such facts justify the different levels of fees.

 

  3.   Profitability of Fund Advisers

In conjunction with their review of fees, the Independent Board Members also considered Nuveen’s level of profitability for its advisory services to the Nuveen funds for the calendar years 2016 and 2015. In considering profitability, the Independent Board Members considered the level of profitability realized by Nuveen before the imposition of any distribution and marketing expenses incurred by the firm from its own resources. In evaluating the profitability, the Independent Board Members evaluated the analysis employed in developing the profitability figures, including the assumptions and methodology employed in allocating expenses. The Independent Board Members recognized the inherent limitations to any cost allocation methodology as different and reasonable approaches may be used and yet yield differing results. The Independent Board Members further reviewed an analysis of the history of the profitability methodology used explaining any changes to the methodology over the years. The Board has appointed two Independent Board Members, who along with independent legal counsel, helped to review and discuss the methodology employed to develop the profitability analysis each year and any proposed changes thereto and to keep the Board apprised of such changes during the year.

In their review, the Independent Board Members evaluated, among other things, Nuveen’s adjusted operating margins, the gross and net revenue margins (pre-tax and after-tax) for advisory activities for the Nuveen funds, and the revenues, expenses, and net income (pre-tax and after-tax) of Nuveen for each of the last two calendar years. The Independent Board Members also reviewed an analysis of the key drivers behind the changes in revenues and expenses that impacted profitability in 2016 versus 2015. The Board, however, observed that Nuveen’s operating margins for its advisory activities in 2016 were similar to that of 2015.

In addition to reviewing Nuveen’s profitability in absolute terms, the Independent Board Members also reviewed the adjusted total company margins of other advisory firms that had publicly available information and comparable assets under management (based on asset size and asset composition). The Independent Board Members, however, noted that the usefulness of the comparative data may be limited as the other firms may have a different business mix and their profitability data may be affected by numerous other factors such as the types of funds managed, the cost allocation methodology used, and their capital structure. Nevertheless, the Board noted that Nuveen’s adjusted operating margins appeared comparable to the adjusted margins of the peers.

Further, the Adviser is a subsidiary of Nuveen, LLC, the investment management arm of Teachers Insurance and Annuity Association of America (“TIAA”). To have a fuller picture of the financial condition and strength of the TIAA complex,

 

  54     NUVEEN


 

together with Nuveen, the Board reviewed a balance sheet for TIAA reflecting its assets, liabilities and capital and contingency reserves for the 2016 and 2015 calendar years.

In addition to the Adviser’s profitability, the Independent Board Members also considered the profitability of the Sub-Advisers from their relationships with the Nuveen funds. With respect to NAM, 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, 2016. The Independent Board Members also reviewed a profitability analysis reflecting the revenues, expenses and revenue margin (pre- and post-tax) by asset type for NAM for the calendar year ending December 31, 2016. With respect to Wellington, the Board reviewed the revenues, expenses and net income (pre-tax and after-tax) of such Sub-Adviser for the year ended December 31, 2016 and the revenues such Sub-Adviser received from each Nuveen fund it sub-advises for the 2014, 2015 and 2016 calendar years.

In evaluating the reasonableness of the compensation, the Independent Board Members also considered other amounts paid to a Fund Adviser for its services to the Funds as well as indirect benefits (such as soft dollar arrangements), if any, the Fund Adviser and its affiliates received or were expected to receive that were directly attributable to the management of a Fund. See Section E below for additional information on indirect benefits a Fund Adviser may receive as a result of its relationship with the Funds.

Based on a consideration of all the information provided, the Board noted that Nuveen’s and each 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

When evaluating the level of the advisory fees, the Independent Board Members considered whether there will be any economies of scale that may be realized by the Fund Adviser as a Fund grows and the extent to which these economies were shared with the Funds and shareholders. The Board recognized that economies of scale are difficult to measure with precision; however, the Board considered that there were several ways the Fund Adviser may share the benefits of economies of scale with the Nuveen funds, including through breakpoints in the management fee schedule reducing the fee rates as asset levels grow, fee waivers and/or expense limitation agreements and the Adviser’s investment in its business which can enhance the services provided to the Nuveen funds. With respect to the fee structure, the Independent Board Members have recognized that economies of scale may be realized when a particular fund grows, but also when the total size of the fund complex grows (even if the assets of a particular fund in the complex have not changed or have decreased). Accordingly, subject to certain exceptions, the funds in the Nuveen complex pay a management fee to the Adviser which is generally comprised of a fund-level component and complex-level component, each of which has a breakpoint schedule. Subject to certain exceptions, the fund-level fee component declines as the assets of the particular fund grow and the complex-level fee component declines when eligible assets of all the Nuveen funds (except for Nuveen ETFs which are subject to a unitary fee) in the Nuveen complex combined grow. In addition, with respect to 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.

The Independent Board Members reviewed the breakpoint and complex-wide schedules and any savings achieved from fee reductions as a result of the fund-level and complex-level breakpoints for the 2016 calendar year.

In addition, the Independent Board Members recognized the Adviser’s ongoing investment in its business to expand or enhance the services provided to the benefit of all of the Nuveen funds.

Based on their review, the Board concluded that the current fee structure was acceptable and reflected economies of scale to be shared with shareholders when assets under management increase.

 

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, including compensation paid to affiliates of a Fund Adviser for services rendered to the funds and research services received by a Fund Adviser from broker-dealers that execute fund trades. The Independent Board Members noted that affiliates of the Adviser may receive compensation for

 

NUVEEN     55  


Annual Investment Management Agreement Approval Process (continued)

 

serving as a co-manager for initial public offerings of new Nuveen closed-end funds and as underwriter on shelf offerings for certain existing funds. The Independent Board Members considered the compensation paid for such services in 2016.

In addition to the above, the Independent Board Members considered that the Funds’ portfolio transactions are allocated by the Sub-Advisers and, in the case of NAM, such Sub-Adviser may benefit from research received from broker-dealers that execute Fund portfolio transactions. The Board noted, however, that with respect to transactions in fixed income securities, such securities generally trade on a principal basis and do not generate soft dollar credits. Although the Board recognized NAM may benefit from soft dollar arrangements if it does not have to pay for this research out of its own assets, the Board also recognized that the research may benefit the Funds to the extent it enhances the ability of such Sub-Adviser to manage the Funds. With respect to Wellington, the Sub-Adviser has not participated in soft dollar arrangements with respect to Fund portfolio transactions.

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.

 

  56     NUVEEN


Notes

 

 

NUVEEN     57  


Notes

 

 

  58     NUVEEN


Notes

 

 

NUVEEN     59  


LOGO

 

    

 

     
           

 

           
  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 management arm 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/cef

  

 

                 
  Securities offered through Nuveen Securities, LLC, member FINRA and SIPC | 333 West Wacker Drive Chicago, IL 60606 | www.nuveen.com   

 

ESA-K-0617D        243971-INV-B-08/18


Item 2. Code of Ethics.

Not applicable to this filing.

Item 3. Audit Committee Financial Expert.

Not applicable to this filing.

Item 4. Principal Accountant Fees and Services.

Not applicable to this filing.

Item 5. Audit Committee of Listed Registrants.

Not applicable to this filing.

Item 6. Schedule of Investments.

(a) See Portfolio of Investments in Item 1.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to this filing.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable to this filing.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board implemented after the registrant last provided disclosure in response to this item.

Item 11. Controls and Procedures.

 

(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

File the exhibits listed below as part of this Form.

(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable to this filing.

(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: See 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 registration specifically incorporates it by reference: See 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 Mortgage Opportunity Term Fund

 

By (Signature and Title)   

/s/ Gifford R. Zimmerman

  
   Gifford R. Zimmerman   
   Vice President and Secretary   

Date: September 7, 2017

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/ Cedric H. Antosiewicz

  
   Cedric H. Antosiewicz   
   Chief Administrative Officer   
   (principal executive officer)   

Date: September 7, 2017

 

By (Signature and Title)   

/s/ Stephen D. Foy

  
   Stephen D. Foy   
   Vice President and Controller   
   (principal financial officer)   

Date: September 7, 2017