Statement of Assets and Liabilities
November 30, 2019 (Unaudited)
|
|
|
|
Assets
|
|
|
|
Long-term investments, at value (cost $83,540,227)
|
|
$
|
83,370,158
|
|
Cash
|
|
|
663,734
|
|
Receivable for:
|
|
|
|
|
Interest
|
|
|
1,137,312
|
|
Investments sold
|
|
|
368,000
|
|
Other assets
|
|
|
881
|
|
Total assets
|
|
|
85,540,085
|
|
Liabilities
|
|
|
|
|
Payable for dividends
|
|
|
125,890
|
|
Accrued expenses:
|
|
|
|
|
Management fees
|
|
|
38,955
|
|
Custodian fees
|
|
|
10,330
|
|
Professional fees
|
|
|
14,412
|
|
Shareholder reporting expenses
|
|
|
10,679
|
|
Trustees fees
|
|
|
873
|
|
Other
|
|
|
9,355
|
|
Total liabilities
|
|
|
210,494
|
|
Net assets applicable to common shares
|
|
$
|
85,329,591
|
|
Common shares outstanding
|
|
|
8,622,711
|
|
Net asset value (“NAV”) per common share outstanding
|
|
$
|
9.90
|
|
|
|
|
|
|
Net assets applicable to common shares consist of:
|
|
|
|
|
Common shares, $0.01 par value per share
|
|
$
|
86,227
|
|
Paid-in surplus
|
|
|
84,526,223
|
|
Total distributable earnings
|
|
|
717,141
|
|
Net assets applicable to common shares
|
|
$
|
85,329,591
|
|
Authorized shares:
|
|
|
|
|
Common
|
|
Unlimited
|
|
Preferred
|
|
Unlimited
|
|
See accompanying notes to financial statements.
20
Six Months Ended November 30, 2019 (Unaudited)
|
|
|
|
Investment Income
|
|
$
|
1,212,337
|
|
Expenses
|
|
|
|
|
Management fees
|
|
|
237,946
|
|
Custodian fees
|
|
|
12,801
|
|
Trustees fees
|
|
|
1,158
|
|
Professional fees
|
|
|
14,772
|
|
Shareholder reporting expenses
|
|
|
13,176
|
|
Shareholder servicing agent fees
|
|
|
6,797
|
|
Stock exchange listing fees
|
|
|
3,442
|
|
Investor relations expenses
|
|
|
2,853
|
|
Other
|
|
|
5,025
|
|
Total expenses
|
|
|
297,970
|
|
Net investment income (loss)
|
|
|
914,367
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
|
Net realized gain (loss) from investments
|
|
|
(5,474
|
)
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(11,076
|
)
|
Net realized and unrealized gain (loss)
|
|
|
(16,550
|
)
|
Net increase (decrease) in net assets applicable to common shares from operations
|
|
$
|
897,817
|
|
See accompanying notes to financial statements.
21
Statement of Changes in Net Assets
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
11/30/19
|
|
|
5/31/19
|
|
Operations
|
|
|
|
|
|
|
Net investment income (loss)
|
|
$
|
914,367
|
|
|
$
|
1,973,753
|
|
Net realized gain (loss) from investments
|
|
|
(5,474
|
)
|
|
|
(31,162
|
)
|
Change in net unrealized appreciation (depreciation) of investments
|
|
|
(11,076
|
)
|
|
|
1,154,673
|
|
Net increase (decrease) in net assets applicable to common shares from operations
|
|
|
897,817
|
|
|
|
3,097,264
|
|
Distributions to Common Shareholders
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
(776,044
|
)
|
|
|
(1,590,890
|
)
|
Decrease in net assets applicable to common shares from distributions to common shareholders
|
|
|
(776,044
|
)
|
|
|
(1,590,890
|
)
|
Net increase (decrease) in net assets applicable to common shares
|
|
|
121,773
|
|
|
|
1,506,374
|
|
Net assets applicable to common shares at the beginning of period
|
|
|
85,207,818
|
|
|
|
83,701,444
|
|
Net assets applicable to common shares at the end of period
|
|
$
|
85,329,591
|
|
|
$
|
85,207,818
|
|
See accompanying notes to financial statements.
22
THIS PAGE INTENTIONALLY LEFT BLANK
23
Financial Highlights
(Unaudited)
Selected data for a common share outstanding throughout each period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations
|
|
|
Less Distributions to
Common Shareholders
|
|
|
Common Share
|
|
|
|
Beginning
Common
Share
NAV
|
|
|
Net
Investment
Income
(Loss)
|
|
|
Net
Realized/
Unrealized
Gain (Loss)
|
|
|
Total
|
|
|
From
Net
Investment
Income
|
|
|
From
Accumulated
Net Realized
Gains
|
|
|
Total
|
|
|
Offering
Costs
|
|
|
Ending
NAV
|
|
|
Ending
Share
Price
|
|
Year Ended 5/31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020(f)
|
|
$
|
9.88
|
|
|
$
|
0.11
|
|
|
$
|
—
|
|
|
$
|
0.11
|
|
|
$
|
(0.09
|
)
|
|
$
|
—
|
|
|
$
|
(0.09
|
)
|
|
$
|
—
|
|
|
$
|
9.90
|
|
|
$
|
9.74
|
|
2019
|
|
|
9.71
|
|
|
|
0.23
|
|
|
|
0.12
|
|
|
|
0.35
|
|
|
|
(0.18
|
)
|
|
|
—
|
|
|
|
(0.18
|
)
|
|
|
—
|
|
|
|
9.88
|
|
|
|
9.60
|
|
2018
|
|
|
9.70
|
|
|
|
0.25
|
|
|
|
(0.03
|
)
|
|
|
0.22
|
|
|
|
(0.21
|
)
|
|
|
—
|
|
|
|
(0.21
|
)
|
|
|
—
|
|
|
|
9.71
|
|
|
|
9.45
|
|
2017
|
|
|
9.91
|
|
|
|
0.26
|
|
|
|
(0.23
|
)
|
|
|
0.03
|
|
|
|
(0.24
|
)
|
|
|
—
|
|
|
|
(0.24
|
)
|
|
|
—
|
|
|
|
9.70
|
|
|
|
9.76
|
|
2016(e)
|
|
|
9.85
|
|
|
|
0.07
|
|
|
|
0.07
|
|
|
|
0.14
|
|
|
|
(0.06
|
)
|
|
|
—
|
|
|
|
(0.06
|
)
|
|
|
(0.02
|
)
|
|
|
9.91
|
|
|
|
9.95
|
|
|
|
|
|
|
|
|
|
|
|
VMTP Shares
at the End of Period
|
|
|
|
|
Aggregate
|
|
|
Asset
|
|
|
|
|
Amount
|
|
|
Coverage
|
|
|
|
|
Outstanding
|
|
|
Per $100,000
|
|
|
|
|
|
(000)
|
|
|
Share
|
|
|
Year Ended 5/31:
|
|
|
|
|
|
|
|
|
2020(f)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2019
|
|
|
—
|
|
|
|
—
|
|
|
2018
|
|
|
—
|
|
|
|
—
|
|
|
2017
|
|
|
28,300
|
|
|
|
395,466
|
|
|
2016(e)
|
|
|
28,300
|
|
|
|
401,661
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share Supplemental Data/
Ratios Applicable to Common Shares
|
|
Common Share
Total Returns
|
|
|
|
|
|
Ratios to Average Net Assets(b)
|
|
|
|
|
|
|
|
Based
|
|
|
Ending
|
|
|
|
|
|
Net
|
|
|
|
|
Based
|
|
|
on
|
|
|
Net
|
|
|
|
|
|
Investment
|
|
|
Portfolio
|
|
on
|
|
|
Share
|
|
|
Assets
|
|
|
|
|
|
Income
|
|
|
Turnover
|
|
NAV(a)
|
|
|
Price(a)
|
|
|
|
(000
|
)
|
|
Expenses(c)
|
|
|
(Loss)
|
|
|
Rate(d)
|
|
|
|
|
1.12
|
%
|
|
|
2.40
|
%
|
|
$
|
85,330
|
|
|
|
0.70
|
%*
|
|
|
2.14
|
%*
|
|
|
4
|
%
|
|
3.69
|
|
|
|
3.57
|
|
|
|
85,208
|
|
|
|
0.71
|
|
|
|
2.34
|
|
|
|
12
|
|
|
2.32
|
|
|
|
(1.01
|
)
|
|
|
83,701
|
|
|
|
1.50
|
|
|
|
2.57
|
|
|
|
8
|
|
|
0.32
|
|
|
|
0.53
|
|
|
|
83,617
|
|
|
|
1.53
|
|
|
|
2.68
|
|
|
|
18
|
|
|
1.22
|
|
|
|
0.10
|
|
|
|
85,370
|
|
|
|
1.28
|
*
|
|
|
2.15
|
*
|
|
|
2
|
|
|
|
(a)
|
Total Return Based on Common Share NAV is the combination of changes in common share NAV, reinvested dividend income at NAV and reinvested capital gains distributions at NAV, if any. The last dividend declared
in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending NAV. The actual reinvest price for the last dividend declared in the period may often be based on the Fund’s
market price (and not its NAV), and therefore may be different from the price used in the calculation. Total returns are not annualized.
|
|
Total Return Based on Common Share Price is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the
average price paid per share at the time of reinvestment. The last dividend declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the ending market price. The actual
reinvestment for the last dividend declared in the period may take place over several days, and in some instances may not be based on the market price, so the actual reinvestment price may be different from the price used in the
calculation. Total returns are not annualized.
|
(b)
|
Net Investment Income (Loss) ratios reflect income earned and expenses incurred on assets attributable to preferred shares issued by the Fund, where applicable.
|
(c)
|
The expense ratios reflect, among other things, all interest expense and other costs related to preferred shares where applicable, as follows:
|
|
|
|
|
|
Year Ended 5/31:
|
|
|
|
|
2020(f)
|
|
|
—
|
%
|
|
2019
|
|
|
—
|
|
|
2018
|
|
|
0.61
|
|
|
2017
|
|
|
0.60
|
|
|
2016(e)
|
|
|
0.34
|
*
|
|
|
|
(d)
|
Portfolio Turnover Rate is calculated based on the lesser of long-term purchases or sales (as disclosed in Note 4 – Portfolio Securities and Investments in Derivatives, Investment Transactions) divided by the
average long-term market value during the period.
|
(e)
|
For the period January 26, 2016 (commencement of operations) through May 31, 2016.
|
(f)
|
For the six months ended November 30, 2019.
|
*
|
Annualized.
|
See accompanying notes to financial statements.
25
Notes to
Financial Statements
(Unaudited)
1. General Information
Fund Information
The fund covered in this report and its corresponding New York Stock Exchange (“NYSE”) symbol is Nuveen Municipal 2021 Target Term Fund (NHA) (the “Fund”). The Fund is registered under the
Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company. The Fund was organized as a Massachusetts business trust on October 13, 2015.
The end of the reporting period for the Fund is November 30, 2019, and the period covered by these Notes to Financial Statements is for the six months ended November 30, 2019 (the “current fiscal
period”).
Investment Adviser
The Fund’s 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 Fund, oversees the management of the Fund’s portfolio, manages the Fund’s business affairs and provides certain clerical, bookkeeping and other
administrative services, and, if necessary, asset allocation decisions. The Adviser has entered into a sub-advisory agreement with Nuveen Asset Management, LLC (the “Sub-Adviser”), a subsidiary of the Adviser, under which the Sub-Adviser manages
the investment portfolio of the Fund.
2. Significant Accounting Policies
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require the use of estimates
made by management and the evaluation of subsequent events. Actual results may differ from those estimates. The Fund is an investment company and follows the accounting guidance in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification 946, Financial Services—Investment Companies. The net asset value (“NAV”) for financial reporting purposes may differ from the NAV for processing security and common share transactions. The NAV for financial reporting
purposes includes security and common share transactions through the date of the report. Total return is computed based on the NAV used for processing security and common share transactions. The following is a summary of the significant accounting
policies consistently followed by the Fund.
Compensation
The Fund pays no compensation directly to those of its trustees who are affiliated with the Adviser or to its officers, all of whom receive remuneration for their services to the Fund from the
Adviser or its affiliates. The Fund’s Board of Trustees (the “Board”) has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled
to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of select Nuveen-advised funds.
Distributions to Common Shareholders
Distributions to common shareholders are recorded on the ex-dividend date. The amount, character and timing of distributions are determined in accordance with federal income tax regulations, which
may differ from U.S. GAAP.
Indemnifications
Under the Fund’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the
normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Investments and Investment Income
Securities transactions are accounted for as of the trade date for financial reporting purposes. Realized gains and losses on securities transactions are based upon the specific identification
method. Investment income is comprised of interest income, which reflects the amortization of premiums and accretion of discounts for financial reporting purposes, and is recorded on an accrual basis. Interest income also reflects payment-in-kind
(“PIK”) interest and paydown gains and losses, if any. PIK interest represents income received in the form of securities in lieu of cash.
26
Netting Agreements
In the ordinary course of business, the Fund may enter into transactions subject to enforceable International Swaps and Derivatives Association, Inc. (ISDA) master agreements or other similar
arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the 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, the Fund manages its cash collateral and securities collateral on a counterparty basis.
The Fund’s investments subject to netting agreements as of the end of the reporting period, if any, are further described in Note 4 – Portfolio Securities and Investments in Derivatives.
New Accounting Pronouncements and Rule Issuances
FASB Accounting Standards Update (“ASU”) 2017-08 (“ASU 2017-08”) Premium Amortization on Purchased Callable Debt Securities
The FASB has issued ASU 2017-08, which shortens the premium amortization period for purchased non-contingently callable debt securities. ASU 2017-08 specifies that the premium amortization period
ends at the earliest call date, for purchased non-contingently callable debt securities. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. During the current fiscal period,
ASU 2017-08 became effective for the Fund and it did not have a material impact on the Fund’s financial statements.
Fair Value Measurement: Disclosure Framework
During August 2018, the FASB issued ASU 2018-13 (“ASU 2018-13”), Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. ASU 2018-13
modifies the disclosures required by Topic 820, Fair Value Measurements. The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has
early implemented this guidance and it did not have a material impact on the Fund’s financial statements.
3. Investment Valuation and Fair Value Measurements
The fair valuation input levels as described below are for fair value measurement purposes.
The Fund’s investments in securities are recorded at their estimated fair value. Fair value is defined as the price that would be received upon selling an investment or transferring a liability in
an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to
establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources
independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information
available in the circumstances. The following is a summary of the three-tiered hierarchy of valuation input levels.
Level 1 – Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
Level 2 – Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spread,
etc.).
Level 3 – Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
Prices of fixed income securities are provided by an independent pricing service (“pricing service”) approved by the Board. The pricing service establishes a security’s fair value using methods
that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows
or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2. In pricing certain securities, particularly less
liquid and lower quality securities, the pricing service may consider information about a security, its issuer or market activity provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the
observability of the significant inputs.
Certain securities may not be able to be priced by the pre-established pricing methods as described above. Such securities may be valued by the Board and/or its appointee at fair value. These
securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market
price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no current market quotation; a 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 the 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
27
Notes to Financial Statements (Unaudited) (continued)
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 the Fund’s fair value
measurements as of the end of the reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Long-Term Investments*:
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal Bonds
|
|
$
|
—
|
|
|
$
|
83,370,158
|
|
|
$
|
—
|
|
|
$
|
83,370,158
|
|
|
|
*
|
Refer to the Fund’s Portfolio of Investments for state classifications.
|
4. Portfolio Securities and Investments in Derivatives
Portfolio Securities
Zero Coupon Securities
A zero coupon security does not pay a regular interest coupon to its holders during the life of the security. Income to the holder of the security comes from accretion of the difference between the
original purchase price of the security at issuance and the par value of the security at maturity and is effectively paid at maturity. The market prices of zero coupon securities generally are more volatile than the market prices of securities that
pay interest periodically.
Investment Transactions
Long-term purchases and sales (including maturities) during the current fiscal period were as follows:
|
|
|
|
Purchases
|
|
$
|
7,161,259
|
|
Sales and maturities
|
|
|
3,315,000
|
|
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 Fund has
earmarked securities in its portfolio with a current value at least equal to the amount of the when-issued/delayed delivery purchase commitments.
As of the end of the reporting period, the Fund did not have any outstanding when issued/delayed delivery purchase commitments.
Investments in Derivatives
The Fund is authorized to invest in certain derivative instruments such as futures, options and swap contracts. The 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 Fund records derivative instruments at fair value, with changes in
fair value recognized on the Statement of Operations, when applicable. Even though the Fund’s investments in derivatives may represent economic hedges, they are not considered to be hedge transactions for financial reporting purposes.
Although the Fund is authorized to invest in derivative instruments, and may do so in the future, it did not make any such investments during the current fiscal period.
Market and Counterparty Credit Risk
In the normal course of business the 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 the Fund to
counterparty credit risk, consist principally of cash due from counterparties on forward, option and swap transactions, when applicable. The extent of the 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.
The 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 the Fund with a value approximately equal to
the amount of any unrealized gain above a pre-determined threshold. Reciprocally, when the Fund has an unrealized loss, the Fund has instructed the custodian to pledge assets of the Fund 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.
28
5. Fund Shares
Common Share Transactions
There were no transactions in common shares during the Fund’s current and prior fiscal periods.
6. Income Tax Information
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies. In any year, the Fund may choose to distribute all or a
portion of net investment income and net capital gains to shareholders, or retain a portion of its net investment income and net capital gains and pay corporate income taxes on such retained net investment income and retained net capital gains. The
Fund intends to distribute at least the percentage of its net investment income and gains to maintain its status as a regulated investment company for U.S. federal income tax purposes.
Furthermore, the Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from regular federal income tax, to retain such tax-exempt status when
distributed to shareholders of the Fund. Net realized capital gains and ordinary income distributions paid by the Fund are subject to federal taxation.
For all open tax years and all major taxing jurisdictions, management of the Fund 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 Fund is also not aware of any tax positions
for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
The following information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in
recognizing taxable market discount 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 NAV of the Fund.
The table below presents the cost and unrealized appreciation (depreciation) of the Fund’s investment portfolio, as determined on a federal income tax basis, as of November 30, 2019.
|
|
|
|
Tax cost of investments
|
|
$
|
83,048,497
|
|
Gross unrealized:
|
|
|
|
|
Appreciation
|
|
$
|
1,090,507
|
|
Depreciation
|
|
|
(768,846
|
)
|
Net unrealized appreciation (depreciation) of investments
|
|
$
|
321,661
|
|
Permanent differences, primarily due to paydowns, federal taxes paid and taxable market discount, resulted in reclassifications among the Fund’s components of net assets as of May 31, 2019, the
Fund’s last tax year end.
The tax components of undistributed net tax-exempt income, net ordinary income and net long-term capital gains as of May 31, 2019, the Fund’s last tax year end, were as follows:
|
|
|
|
Undistributed net tax-exempt income1
|
|
$
|
735,174
|
|
Undistributed net ordinary income2
|
|
|
13,762
|
|
Undistributed net long-term capital gains
|
|
|
—
|
|
|
|
1
|
Undistributed net tax-exempt income (on a tax basis) has not been reduced for the dividend declared on May 1, 2019, paid on June 3, 2019.
|
2
|
Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.
|
The tax character of distributions paid during the Fund’s last tax year ended May 31, 2019 was designated for purposes of the dividends paid deduction as follows:
|
|
|
|
Distributions from net tax-exempt income
|
|
$
|
1,581,068
|
|
Distributions from net ordinary income2
|
|
|
22,756
|
|
Distributions from net long-term capital gains
|
|
|
—
|
|
|
|
2
|
Net ordinary income consists of taxable market discount income and net short-term capital gains, if any.
|
29
Notes to Financial Statements (Unaudited) (continued)
As of May 31, 2019, the Fund’s last tax year end, the Fund had unused capital losses carrying forward available for federal income tax purposes to be applied against future capital gains, if any.
The capital losses are not subject to expiration.
|
|
|
|
Not subject to expiration:
|
|
|
|
Short-term
|
|
$
|
—
|
|
Long-term
|
|
|
273,756
|
|
Total
|
|
$
|
273,756
|
|
7. Management Fees and Other Transactions with Affiliates
Management Fees
The Fund’s management fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Sub-Adviser is compensated for its services to the
Fund from the management fees paid to the Adviser.
The Fund’s management fee consists of two components – a fund-level fee, based only on the amount of assets within the Fund, and a complex-level fee, based on the aggregate amount of all eligible
fund assets managed by the Adviser. This pricing structure enables Fund shareholders to benefit from growth in the assets within the Fund as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, is calculated according to the following schedule:
|
|
|
|
Average Daily Managed Assets*
|
|
Fund-Level Fee Rate
|
|
For the first $125 million
|
|
|
0.4000
|
%
|
For the next $125 million
|
|
|
0.3875
|
|
For the next $250 million
|
|
|
0.3750
|
|
For the next $500 million
|
|
|
0.3625
|
|
For the next $1 billion
|
|
|
0.3500
|
|
For the next $3 billion
|
|
|
0.3250
|
|
For managed assets over $5 billion
|
|
|
0.3125
|
|
The annual complex-level fee, payable monthly, 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 Eligible Asset Breakpoint Level*
|
|
Effective Complex-Level Fee Rate at Breakpoint Level
|
|
$55 billion
|
|
|
0.2000
|
%
|
$56 billion
|
|
|
0.1996
|
|
$57 billion
|
|
|
0.1989
|
|
$60 billion
|
|
|
0.1961
|
|
$63 billion
|
|
|
0.1931
|
|
$66 billion
|
|
|
0.1900
|
|
$71 billion
|
|
|
0.1851
|
|
$76 billion
|
|
|
0.1806
|
|
$80 billion
|
|
|
0.1773
|
|
$91 billion
|
|
|
0.1691
|
|
$125 billion
|
|
|
0.1599
|
|
$200 billion
|
|
|
0.1505
|
|
$250 billion
|
|
|
0.1469
|
|
$300 billion
|
|
|
0.1445
|
|
|
*
|
For the complex-level fees, managed assets include closed-end fund assets managed by the Adviser that are attributable to certain types of leverage. For these purposes, leverage includes the fund’s use of
preferred stock and borrowings and certain investments in the residual interest certificates (also called inverse floating rate securities) in tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has
been effectively financed by the trust’s issuance of floating rate securities, subject to an agreement by the Adviser as to certain funds to limit the amount of such assets for determining managed assets in certain circumstances. The
complex-level fee is calculated based upon the aggregate daily managed assets of all Nuveen open-end and close-end funds that constitute “eligible assets.” Eligible assets do not include assets attributable to investments in other Nuveen
funds and assets in excess of a determined amount (originally $2 billion) added to the Nuveen fund complex in connection with the Adviser’s assumption of the management of the former First American Funds effective January 1, 2011, but do
not include certain assets of certain Nuveen funds that were reorganized into funds advised by an affiliate of the Adviser during the 2019 calendar year. As of November 30, 2019, the complex-level fee for the Fund was 0.1562%.
|
30
Other Transactions with Affiliates
The Fund is permitted to purchase or sell securities from or to certain other funds managed by the Adviser (“inter-fund trade”) under specified conditions outlined in procedures adopted by the
Board. These procedures have been designed to ensure that any inter-fund trade of securities by the Fund from or to another fund that is, or could be, considered an affiliate of the Fund under certain limited circumstances by virtue of having a
common investment adviser (or affiliated investment adviser), common officer and/or common trustee complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each inter-fund trade is effected at the current market price
as provided by an independent pricing service. Unsettled inter-fund trades as of the end of the reporting period are recognized as a component of “Receivable for investments sold” and/or “Payable for investments purchased” on the Statement of
Assets and Liabilities, when applicable.
During the current fiscal period, the Fund did not engage in inter-fund trades pursuant to these procedures.
8. Borrowing Arrangements
Committed Line of Credit
The Fund, along with certain other funds managed by the Adviser (“Participating Funds”), have established a 364-day, $2.65 billion standby credit facility with a group of lenders, under which the
Participating Funds may borrow for various purposes other than leveraging for investment purposes. Each Participating Fund is allocated a designated proportion of the facility’s capacity (and its associated costs, as described below) based upon a
multi-factor assessment of the likelihood and frequency of its need to draw on the facility, the size of the Fund and its anticipated draws, and the potential importance of such draws to the operations and well-being of the Fund, relative to those
of the other Funds. A Fund may effect draws on the facility in excess of its designated capacity if and to the extent that other Participating Funds have undrawn capacity. The credit facility expires in June 2020 unless extended or renewed.
The credit facility has the following terms: a fee of 0.15% per annum on unused commitment amounts, and interest at a rate equal to the higher of (a) one-month LIBOR (London Inter-Bank Offered
Rate) plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. Participating Funds paid administration, legal and arrangement fees, which are recognized as a component of “Other expenses” on the Statement of
Operations, and along with commitment fees, have been allocated among such Participating Funds based upon the relative proportions of the facility’s aggregate capacity reserved for them and other factors deemed relevant by the Adviser and the Board
of each Participating Fund.
During the current fiscal period, the Fund did not utilize this facility.
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 Fund covered by this shareholder report, will participate only as lenders, and not as borrowers, in the Inter-Fund Program because such closed-end funds rarely, if ever, need to borrow cash to meet
redemptions. The Inter-Fund Program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the Inter-Fund Program unless it receives a more favorable interest rate
than is typically available from a bank or other financial institution for a comparable transaction; (2) no fund may borrow on an unsecured basis through the Inter-Fund Program unless the fund’s outstanding borrowings from all sources immediately
after the inter-fund borrowing total 10% or less of its total assets; provided that if the borrowing fund has a secured borrowing outstanding from any other lender, including but not limited to another fund, the inter-fund loan must be secured on
at least an equal priority basis with at least an equivalent percentage of collateral to loan value; (3) if a fund’s total outstanding borrowings immediately after an inter-fund borrowing would be greater than 10% of its total assets, the fund may
borrow through the inter-fund loan on a secured basis only; (4) no fund may lend money if the loan would cause its aggregate outstanding loans through the Inter-Fund Program to exceed 15% of its net assets at the time of the loan; (5) a fund’s
inter-fund loans to any one fund shall not exceed 5% of the lending fund’s net assets; (6) the duration of inter-fund loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days; and (7)
each inter-fund loan may be called on one business day’s notice by a lending fund and may be repaid on any day by a borrowing fund. In addition, a Nuveen fund may participate in the Inter-Fund Program only if and to the extent that such
participation is consistent with the fund’s investment objective and investment policies. The Board is responsible for overseeing the Inter-Fund Program.
The limitations detailed above and the other conditions of the SEC exemptive order permitting the Inter-Fund Program are designed to minimize the risks associated with Inter-Fund Program for both
the lending fund and the borrowing fund. However, no borrowing or lending activity is without risk. When a fund borrows money from another fund, there is a risk that the loan could be called on one day’s notice or not renewed, in which case the
fund may have to borrow from a bank at a higher rate or take other actions to payoff such loan if an inter-fund loan is not available from another fund. Any delay in repayment to a lending fund could result in a lost investment opportunity or
additional borrowing costs.
During the current reporting period, the Fund did not enter into any inter-fund loan activity.
31
Additional Fund
Information
|
|
|
|
|
|
Board of Trustees
|
|
|
|
|
|
Margo Cook*
|
Jack B. Evans
|
William C. Hunter
|
Albin F. Moschner
|
John K. Nelson
|
Judith M. Stockdale
|
Carole E. Stone
|
Terence J. Toth
|
Margaret L. Wolff
|
Robert C. Young
|
|
|
|
* Interested Board Member.
|
|
|
Fund Manager
|
Custodian
|
Legal Counsel
|
Independent Registered
|
Transfer Agent and
|
Nuveen Fund Advisors, LLC
|
State Street Bank
|
Chapman and Cutler LLP
|
Public Accounting Firm
|
Shareholder Services
|
333 West Wacker Drive
|
& Trust Company
|
Chicago, IL 60603
|
KPMG LLP
|
|
Computershare Trust
|
Chicago, IL 60606
|
One Lincoln Street
|
|
200 East Randolph Street
|
Company, N.A.
|
|
Boston, MA 02111
|
|
Chicago, IL 60601
|
250 Royall Street
|
|
|
|
|
|
Canton, MA 02021
|
|
|
|
|
|
(800) 257-8787
|
Portfolio of Investments Information
The Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its
report on Form N-PORT. You may obtain this information on the SEC’s website at http://www.sec.gov.
Nuveen Funds’ Proxy Voting Information
You may obtain (i) information regarding how each fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request, by
calling Nuveen toll-free at (800) 257-8787 or on Nuveen’s website at www.nuveen.com and (ii) a description of the policies and procedures that each fund used to determine how to vote proxies relating to portfolio securities without charge, upon
request, by calling Nuveen toll free at (800) 257-8787. You may also obtain this information directly from the SEC. Visit the SEC on-line at http://www.sec.gov.
CEO Certification Disclosure
The Fund’s Chief Executive Officer (CEO) has submitted to the New York Stock Exchange (NYSE) the annual CEO certification as required by Section 303A.12(a) of the NYSE Listed Company Manual. The
Fund has filed with the SEC the certification of its CEO and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act.
Common Share Repurchases
The 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, the 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.
|
|
Common shares repurchased
|
—
|
FINRA BrokerCheck
The Financial Industry Regulatory Authority (FINRA) provides information regarding the disciplinary history of FINRA member firms and associated investment professionals. This information as well
as an investor brochure describing FINRA BrokerCheck is available to the public by calling the FINRA BrokerCheck Hotline number at (800) 289-9999 or by visiting www.FINRA.org.
32
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.
|
■
|
Duration: Duration is a measure of the expected period over which a bond’s principal and interest will be paid,
and consequently is a measure of the sensitivity of a bond’s or bond fund’s value to changes when market interest rates change. Generally, the longer a bond’s or fund’s duration, the more the price of the bond or fund will change as
interest rates change.
|
■
|
Effective Leverage: Effective leverage is a fund’s effective economic leverage, and includes both regulatory
leverage (see leverage) and the leverage effects of certain derivative investments in a fund’s portfolio. Currently, the leverage effects of Tender Option Bond (TOB) inverse floater holdings are included in effective leverage values, in
addition to any regulatory leverage.
|
■
|
Industrial Development Revenue Bond (IDR): A unique type of revenue bond issued by a state or local government
agency on behalf of a private sector company and intended to build or acquire factories or other heavy equipment and tools.
|
■
|
Inverse Floating Rate Securities: Inverse floating rate securities, also known as inverse floaters or tender
option bonds (TOBs), are created by depositing a municipal bond, typically with a fixed interest rate, into a special purpose trust. This trust, in turn, (a) issues float- ing rate certificates typically paying short-term tax-exempt
interest rates to third parties in amounts equal to some fraction of the deposited bond’s par amount or market value, and (b) issues an inverse floating rate certificate (sometimes referred to as an “inverse floater”) to an investor
(such as a Fund) interested in gaining investment exposure to a long-term municipal bond. The income received by the holder of the inverse floater varies inversely with the short-term rate paid to the floating rate certificates’
holders, and in most circumstances the holder of the inverse floater bears substantially all of the underlying bond’s downside investment risk. The holder of the inverse floater typically also benefits disproportionately from any
potential appreciation of the underlying bond’s value. Hence, an inverse floater essentially represents an investment in the underlying bond on a leveraged basis.
|
■
|
Leverage: Leverage is created whenever a fund has investment exposure (both reward and/or risk) equivalent to
more than 100% of the investment capital.
|
■
|
Net Asset Value (NAV) Per Share: A fund’s Net Assets is equal to its total assets (securities, cash, accrued
earnings and receivables) less its total liabilities. NAV per share is equal to the fund’s Net Assets divided by its number of shares outstanding.
|
■
|
Pre-Refunding: Pre-Refunding, also known as advanced refundings or refinancings, is a procedure used by state
and local governments to refinance municipal bonds to lower interest expenses. The issuer sells new bonds with a lower yield and uses the proceeds to buy U.S.
Treasury securities, the interest from which is used to make payments on the higher-yielding bonds. Because of this collateral, pre-refunding generally raises a bond’s credit rating and thus its value.
|
33
Glossary of Terms Used in this Report (continued)
■
|
S&P Short Duration Municipal Yield Index: An index that contains all bonds in the S&P Municipal Bond
Index that mature between 1 month and 12 years, and maintains a 10% weighting to AA rated bonds, 10% to A rated bonds, 20% to BBB rated bonds and 60% to below investment grade and non-rated bonds. Index returns assume reinvestment of
distributions, but do not reflect any applicable sales charges or management fees.
|
■
|
Total Investment Exposure: Total investment exposure is a fund’s assets managed by the Adviser that are
attributable to financial lever- age. For these purposes, financial leverage includes a fund’s use of preferred stock and borrowings and investments in the residual interest certificates (also called inverse floating rate securities) in
tender option bond (TOB) trusts, including the portion of assets held by a TOB trust that has been effectively financed by the trust’s issuance of floating rate securities.
|
■
|
Zero Coupon Bond: A zero coupon bond does not pay a regular interest coupon to its holders during the life of
the bond. Income to the holder of the bond comes from accretion of the difference between the original purchase price of the bond at issuance and the par value of the bond at maturity and is effectively paid at maturity. The market
prices of zero coupon bonds generally are more volatile than the market prices of bonds that pay interest periodically.
|
34
Reinvest Automatically, Easily and Conveniently
Nuveen makes reinvesting easy. A phone call is all it takes to set up your reinvestment account.
Nuveen Closed-End Funds Automatic
Reinvestment Plan
Nuveen Closed-End Fund allows you to conveniently reinvest distributions in additional Fund shares. By choosing to reinvest, you’ll be able to invest money regularly and automatically, and watch
your investment grow through the power of compounding. Just like distributions in cash, there may be times when income or capital gains taxes may be payable on distributions that are reinvested. It is important to note that an automatic
reinvestment plan does not ensure a profit, nor does it protect you against loss in a declining market.
Easy and convenient
To make recordkeeping easy and convenient, each month you’ll receive a statement showing your total distributions, the date of investment, the shares acquired and the price per share, and the total
number of shares you own.
How shares are purchased
The shares you acquire by reinvesting will either be purchased on the open market or newly issued by the Fund. If the shares are trading at or above net asset value at the time of valuation, the
Fund will issue new shares at the greater of the net asset value or 95% of the then-current market price. If the shares are trading at less than net asset value, shares for your account will be purchased on the open market. If the Plan Agent begins
purchasing Fund shares on the open market while shares are trading below net asset value, but the Fund’s shares subsequently trade at or above their net asset value before the Plan Agent is able to complete its purchases, the Plan Agent may cease
open-market purchases and may invest the uninvested portion of the distribution in newly-issued Fund shares at a price equal to the greater of the shares’ net asset value or 95% of the shares’ market value on the last business day immediately prior
to the purchase date. Distributions received to purchase shares in the open market will normally be invested shortly after the distribution payment date. No interest will be paid on distributions awaiting reinvestment. Because the market price of
the shares may increase before purchases are completed, the average purchase price per share may exceed the market price at the time of valuation, resulting in the acquisition of fewer shares than if the distribution had been paid in shares issued
by the Fund. A pro rata portion of any applicable brokerage commissions on open market purchases will be paid by Plan participants. These commissions usually will be lower than those charged on individual transactions.
Flexible
You may change your distribution option or withdraw from the Plan at any time, should your needs or situation change. You can reinvest whether your shares are registered in your name, or in the
name of a brokerage firm, bank, or other nominee. Ask your investment advisor if his or her firm will participate on your behalf. Participants whose shares are registered in the name of one firm may not be able to transfer the shares to another
firm and continue to participate in the Plan. The Fund reserves the right to amend or terminate the Plan at any time. Although the Fund reserves the right to amend the Plan to include a service charge payable by the participants, there is no direct
service charge to participants in the Plan at this time.
Call today to start reinvesting distributions
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in or withdraw from the Plan, speak with your financial advisor or call us at (800) 257-8787.
35
Nuveen:
Serving Investors for Generations
Since 1898, financial advisors and their clients have relied on Nuveen to provide dependable investment solutions through continued adherence to proven, long-term investing principles. Today, we
offer a range of high quality solutions designed to be integral components of a well-diversified core portfolio.
Focused on meeting investor needs.
Nuveen is the investment manager of TIAA. We have grown into one of the world’s premier global asset managers, with specialist knowledge across all major asset classes and particular strength in
solutions that provide income for investors and that draw on our expertise in alternatives and responsible investing. Nuveen is driven not only by the independent investment processes across the firm, but also the insights, risk management,
analytics and other tools and resources that a truly world-class platform provides. As a global asset manager, our mission is to work in partnership with our clients to create solutions which help them secure their financial future.
Find out how we can help you.
To learn more about how the products and services of Nuveen may be able to help you meet your financial goals, talk to your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest. Investors should consider the investment objective and policies, risk considerations, charges and expenses of any investment carefully. Where applicable, be sure to obtain a prospectus, which
contains this and other relevant information. To obtain a prospectus, please contact your securities representative or Nuveen, 333 W. Wacker Dr., Chicago, IL 60606. Please read the prospectus carefully before you invest or send money.
Learn more about Nuveen Funds at: www.nuveen.com/closed-end-funds
Nuveen Securities, LLC member of FINRA and SIPC | 333 West Wacker Drive Chicago, IL 60606 | www.nuveen.com
|
|
ESA-E-1119D 1049650-INV-B-01/21