Annual Certified Shareholder Report by an Investment Company — Form N-CSR — ICA’40 Filing Table of Contents
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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.
Exchange-Traded
Funds
31 July
2020
Nuveen Exchange-Traded
Funds
Fund
Name
Listing
Exchange
Ticker
Symbol
Nuveen
Enhanced Yield U.S. Aggregate Bond ETF
NYSE
Arca
NUAG
Nuveen
Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
NYSE
Arca
NUSA
Nuveen
ESG High Yield Corporate Bond ETF
NYSE
Arca
NUHY
Nuveen
ESG U.S. Aggregate Bond ETF
NYSE
Arca
NUBD
Beginning on January 1, 2021, as permitted by regulations
adopted by the Securities and Exchange Commission, paper copies of the Funds annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made
available on the Funds website (www.nuveen.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you have already elected to receive shareholder reports
electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically anytime by contacting the financial intermediary (such as a
broker-dealer or bank) through which you hold your shares.
You may elect to receive all future shareholder reports in
paper free of charge at any time by contacting your financial intermediary. Your election to receive reports in paper will apply to all funds held in your account with your financial intermediary.
Annual Report
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The COVID-19 crisis is taking an unprecedented toll on our
health, societies, economies and financial markets. Our thoughts are with you during this time of significant disruption caused by the disease and its economic fallout. With many regions of the world suppressing the initial spread of the virus,
governments and public health officials face the extraordinary challenge of balancing the resumption of economic activity with public safety. New clusters of infection emerged in the U.S. and other countries following their reopening this summer
while a new school year and Northern Hemisphere flu season have added new concerns. Nevertheless, an economic recovery has gained traction, as jobs, consumer spending, manufacturing and other indicators have begun to rebound from their weakest
levels. Additionally, progress toward a vaccine has been promising, while the timeline is unknown. Markets have recently taken an optimistic view, bouts of elevated volatility are likely to continue, with economic data, coronavirus infection rates
and the upcoming U.S. presidential election under scrutiny.
While we do not want to understate the dampening effect on the
global economy, it is important to differentiate short-term interruptions from the longer-lasting implications to the economy. Prior to the COVID-19 crisis, some areas of the global economy were showing signs of improvement after trade tensions had
weighed on economic activity for much of 2019. More recently, countries that have reopened have seen marked improvement in some near-term economic indicators. Central banks and governments around the world have announced economic stimulus measures
and pledged to continue doing what it takes to support their economies. In the U.S., the Federal Reserve has cut its benchmark interest rate to near zero and introduced similar programs that helped revive the U.S. economy after the 2008 financial
crisis. The U.S. Government has approved three relief packages, including a $2 trillion-dollar package directly supporting businesses and individuals. The Coronavirus Aid, Relief and Economic Security Act, called the CARES Act, has provided direct
payments and expanded unemployment benefits to individuals, loans and grants to small businesses, loans and other money to large corporations and funding for hospitals, public health, education and state and local governments. In the European Union,
the European Central Bank recently increased the size of its Pandemic Emergency Purchase Program, known as PEPP, to $1.6 trillion from $878 billion and extended its duration to June 2021.
In the meantime, patience and a long-term perspective are key
for investors. When market fluctuations are the leading headlines day after day, it’s tempting to “do something.” However, your long-term goals can’t be met with short-term thinking. We encourage you to talk to your financial
professional, who can review your time horizon, risk tolerance and investment goals. 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.
Nuveen Enhanced Yield
U.S. Aggregate Bond ETF (NUAG)
Nuveen Enhanced Yield 1-5
Year U.S. Aggregate Bond ETF (NUSA)
Nuveen ESG High Yield
Corporate Bond ETF (NUHY)
Nuveen ESG U.S. Aggregate Bond
ETF (NUBD)
These Funds feature portfolio management by
Teachers Advisors, LLC, an affiliate of Nuveen Fund Advisors, LLC. Portfolio managers include Lijun (Kevin) Chen, CFA, and Yong (Mark) Zheng, CFA. Kevin has managed the Funds since their inceptions and Mark was added as a portfolio manager in June
2018. Here they discuss U.S. economic and market conditions, key investment strategies and the twelve-month performance of the Funds.
What factors affected the U.S. economy and the bond market during
the twelve-month annual reporting period ended July 31, 2020?
The longest economic expansion in U.S. history came to an
abrupt halt in early 2020 amid the COVID-19 coronavirus pandemic. To slow the spread of the virus, large portions of the economy were shut down, with companies closing either temporarily or permanently and most of the U.S. population under
stay-at-home orders during March and April 2020. A phased reopening began toward the end of May 2020, but the disruption to the economy has been swift and severe. In June 2020, the National Bureau of Economic Research announced that the economic
expansion that began in June 2009 officially ended in February 2020, marking the start of a recession (a several months’ long contraction across the broad economy). As expected, the U.S. economy suffered a sharp contraction in the second
quarter of 2020, with gross domestic product (GDP) down 32.9% on an annualized basis according to the Bureau of Economic Analysis “advance” estimate. GDP measures the value of goods and services produced by the nation’s economy
less the value of the goods and services used up in production, adjusted for price changes. In the second quarter, steep declines in consumer spending, business investment and exports weighed on economic activity, offsetting increased government
spending. By comparison, the annualized GDP growth rate shrank 5% in the first quarter of 2020, after expanding 2.4% in the fourth quarter of 2019 and 2.2% in 2019 overall.
Consumer spending, the largest driver of the economy, was well
supported earlier in this reporting period by low unemployment, wage gains and tax cuts. However, the COVID-19 crisis containment measures drove a significant drop in consumer spending and a sharp rise in unemployment starting in March 2020. The
Bureau of Labor Statistics said the unemployment rate rose to 10.2% in July 2020 from 3.7% in July 2019. The economy added 1.8 million jobs in July, but non-farm employment remained 12.9 million below the February 2020 level. The average hourly
earnings rate appeared to soar, growing at an annualized rate of 4.8% in July 2020, despite the spike in unemployment. Earnings data were skewed by the concentration of job losses in lower-wage work, which effectively elimi-
This material is not intended to be a recommendation or investment advice,
does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. 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 and 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 managers as of
the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements and the views expressed herein are subject to change at any time, due to numerous market and other
factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.
Each Fund uses credit quality ratings for its portfolio
securities provided by Moody’s, S&P and Fitch. For NUAG and NUSA, if all three of Moody’s, S&P, and Fitch provide a rating for a security, an average of the ratings is used; if two of the three agencies rate a security, an
average of the two is used; and if only one rating agency rates a security, that rating is used. For NUHY and NUBD, if all three of Moody’s, S&P, and Fitch provide a rating for a security, the middle rating is used; if two of the three
agencies rate a security, the lower rating is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are
subject to change. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities are included in the U.S. Treasury/Agency category.
Refer to the Glossary of Terms Used in this Report for further
definition of the terms used within this section.
nated most of the low-wage data, resulting in an average of mostly higher
numbers. The overall trend of inflation weakened considerably, which was attributed to large decreases in gasoline, apparel, air travel and lodging prices offsetting an increase in food prices. The Bureau of Labor Statistics said the Consumer Price
Index (CPI) increased 1.0% over the twelve-month ended July 31, 2020 before seasonal adjustment.
Low mortgage rates and low inventory drove home prices
moderately higher in this reporting period, although the period measured only partially reflects the shutdown. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, was up 4.3% year-over-year
in June 2020 (most recent data available at the time this report was prepared). The 10-City and 20-City Composites reported year-over-year increases of 2.8% and 3.5%, respectively.
With economic momentum slowing in 2019 from 2018’s
stronger pace, the U.S. Federal Reserve (Fed) cut its benchmark interest rate by 0.25% at each of the July 2019, September 2019 and October 2019 policy committee meetings. Markets registered disappointment with the Fed’s explanation that the
rate cuts were a “mid-cycle adjustment,” rather than a prolonged easing period, and its signal that there would be no additional rate cuts in 2019. Also in the latter half of 2019, the Fed announced it would stop shrinking its bond
portfolio sooner than scheduled, as well as began buying short-term Treasury bills to help money markets operate smoothly and maintain short-term borrowing rates at low levels. Fed Chairman Powell emphasized that the Treasury bill purchases were not
a form of quantitative easing. The Fed continued its Treasury bill buying in January 2020, as well as left its benchmark interest rate unchanged, while noting the emerging COVID-19 risks.
As the outbreak spread to the U.S. and significant
restrictions on social and economic activity were imposed starting in March 2020, the Fed enacted an array of emergency measures to stabilize the financial system and support the markets, including cutting its main interest rate to near zero,
offering lending programs to aid small and large companies and allowing unlimited bond purchases, known as quantitative easing. There were no policy changes at the Fed’s April, June and July 2020 meetings, where Chairman Powell reiterated a
commitment to keep rates near zero until the economy recovers and continued to issue a cautious outlook for the U.S. economy. Also at the July meeting, the Fed extended some of its pandemic funding facilities by another three months to December
2020.
Meanwhile, the U.S. government approved three aid
packages, totaling more than $100 billion in funding to health agencies and employers offering paid leave and $2 trillion allocated across direct payments to Americans, an expansion of unemployment insurance, loans to large and small businesses,
funding to hospitals and health agencies and support to state and local governments.
While trade and tariff policy drove market sentiment for most
of the twelve-month reporting period, the outbreak of the novel coronavirus and its associated disease COVID-19 rapidly dwarfed all other market concerns starting in late February 2020. Equity and commodity markets sold-off and safe-haven assets
rallied in March 2020 as China, other countries and then the United States initiated quarantines, restricted travel and shuttered factories and businesses. The potential economic shock was particularly difficult to assess, which amplified market
volatility. An ill-timed oil price war between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC member Russia, which caused oil prices to plunge in March 2020, exacerbated the market sell-off.
Outside the U.S., many countries implemented lockdowns and
restrictions on business activity to reduce infection rates, with a deep impact to their economies. Pandemic responses included central bank monetary easing and quantitative easing, fiscal relief programs, the loosening of fiscal rules and, in the
case of emerging markets, emergency financing and debt relief from bilateral creditors and international organizations such as the International Monetary Fund and World Bank. The U.K. formally exited the European Union (EU) at the end of January
2020, triggering the one-year transition period, but Brexit talks were temporarily paused during the virus lockdown. When negotiations resumed, the U.K. continued to indicate it would not seek an extension. Italy’s prime minister unexpectedly
resigned in August 2019, and the newly formed coalition government appeared to take a less antagonistic stance towards the EU. To help relieve the COVID-19 crisis impact on Italy and other more indebted Southern European countries, the European
Commission proposed a €750 billion aid program to be funded by all member states, which was unanimously approved in July 2020. In Asia, northern countries were among the first to successfully reduce infection rates and relax COVID-19 crisis
restrictions, but pockets of the disease re-emerged. The widespread anti-government protests roiling Hong Kong throughout 2019 had dissipated amid the lockdown, but tensions flared in late May 2020 when China unexpectedly announced a national
security law perceived as a threat to Hong Kong’s sovereignty. India took stringent lockdown steps in March 2020 but still saw a rapid increase in cases. Latin American countries
entered the health crisis in already weakened positions, with high government
debt and widespread civil unrest. Venezuela’s economic and political crisis continued to deepen. Argentina surprised the market with the return of a less market-friendly administration but continued to pursue a restructuring of its debt.
Brazil’s Bolsonaro administration achieved a legislative win on pension reform but had not fully delivered on reviving economic growth. As COVID-19 spread to Latin America, the inconsistent government responses, reduced testing capabilities,
weaker health care systems, food shortages and public protests contributed to accelerating infection and death rates.
Prior to the COVID-19 crisis, global markets had become more
bullish on the outlook for 2020 as trade policy and Brexit appeared to make progress at the end of 2019. The U.S. and China agreed on a partial trade deal, which included rolling back some tariffs, increasing China’s purchases of U.S.
agriculture products and the consideration of intellectual property, technology and financial services rights. The “phase one” deal was signed on January 15, 2020. While much of the focus remained on the U.S.-China relationship, trade
spats between the U.S. and Mexico, the EU, Brazil and Argentina also arose throughout the reporting period. In January 2020, the U.S. Congress fully approved the U.S., Mexico and Canada Agreement (USMCA), which replaces the North American Free Trade
Agreement. With more clarity on trade deals, the trade-related deterioration in global manufacturing and export data was expected to improve. However, the COVID-19 crisis has since upended those assumptions. Furthermore, tensions between the U.S.
and China escalated amid the COVID-19 crisis, with both sides stoking resentment about the management of the health crisis, Hong Kong’s sovereignty, trade policy and technology issues.
Performance was positive across U.S. bond markets during the
twelve-month reporting period, driven by a substantial decline in yields. Prompt and aggressive action by the Fed and other global central banks to circumvent a liquidity crisis helped markets recover meaningfully from the March 2020 COVID-19 crisis
sell-off. Notably during the reporting period, government bonds benefited from their status as safe-haven assets while non-government sectors, such as corporate bonds, also performed well as investors sought higher yielding assets despite the
economic uncertainty arising from the COVID-19 crisis.
Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
What key strategies were used to manage the Fund during the
twelve-month reporting period and how did these strategies influence performance?
The Fund employs a passive management (or
“indexing”) approach, seeking to track the investment results, before fees and expenses, of the ICE BofA Enhanced Yield U.S. Broad Bond Index (the “NUAG Enhanced Index”). The NUAG Enhanced Index is designed to broadly capture
the U.S. investment grade fixed income market and uses a rules-based weighting methodology that seeks to enhance yield while maintaining comparable risk. The NUAG Enhanced Index is primarily comprised of U.S. government securities, debt securities
issued by U.S. corporations, residential and commercial mortgage-backed securities, asset-backed securities and U.S. dollar-denominated debt securities issued by non-U.S. corporations that are publicly offered for sale in the U.S. The Fund generally
invests in a sample of the securities in the NUAG Enhanced Index whose risk, return and other characteristics resemble the risk, return and other characteristics of the NUAG Enhanced Index. Under normal market conditions, the Fund invests at least
80% of its assets, exclusive of collateral held from securities lending, in component securities of the NUAG Enhanced Index. The Fund rebalances its holdings monthly in response to the monthly NUAG Enhanced Index rebalances.
During the reporting period, the Fund has remained fully
invested within its allocation targets to track the NUAG Enhanced Index. As of July 31, 2020, the Fund’s net assets were invested in 40.3% securitized debt, 30.8% corporate debt, 23.4% U.S. Treasuries and 4.7% government-related debt.
How did the Fund perform during the twelve-month reporting period
ended July 31, 2020?
The table in the Fund’s
Performance Overview and Expense Ratios section of this report provides the Fund’s total return performance information for the one-year and since inception periods ended July 31, 2020. The Fund’s total returns at net asset value (NAV)
are compared with the performance of the NUAG Enhanced Index, which the Fund is designed to track. The Fund’s total return outperformed the NUAG Enhanced Index during the reporting period.
The Fund’s relative outperformance during the reporting
period is mainly attributable to the representative sampling process that utilizes a sub-set of Index securities in an effort to provide exposure similar to that of the NUAG Enhanced Index, which leads the Fund to be overweight, underweight, and, in
some cases, not invested at all in certain securities as compared to the Index. Transaction costs related to the Fund’s acquisition of portfolio securities, as well as fees and expenses incurred by the Fund that are not incurred by the NUAG
Enhanced Index reduce relative performance. The NUAG Enhanced Index is unmanaged and therefore its returns do not reflect any fees or expenses, which would detract from its performance. You cannot invest directly in an index.
Fixed income markets posted strong performance for the
twelve-month reporting period overall, despite the significant market volatility driven by the COVID-19 crisis uncertainty in March 2020. Prior to the advent of the health crisis, markets had been focused on the Feds three interest rate cuts in the
second half of 2019, which were intended to help extend the economic cycle in the face of growing downside risks from trade tensions and weaker growth abroad. Economic and social activity restrictions to control the spread of COVID-19 drove a severe
downward spiral in financial markets, including the corporate and municipal bond markets, in March 2020. The turmoil was short-lived, however. Massive monetary and fiscal interventions helped stabilize credit conditions and support investor
sentiment, while economic indicators began to improve with the economy reopening in May 2020.
Yields fell across the yield curve, with the largest decline
at the shorter end. Treasury yields on the 1-year bond fell to 0.11% as of July 31, 2020 from 2.01% on July 31, 2019, the 10-year fell to 0.54% from 2.02% and the 30-year fell to 1.20% from 2.53%. Corporate credit markets performed well during the
reporting period, with spreads narrowing after a dramatic widening during the March 2020 sell-off. Investment grade issuance was particularly strong, as companies rushed to take advantage of the low interest rate environment. New supply was met with
strong investor demand, which was enhanced by the Fed acting as a backstop to corporate credit markets. High yield corporate bonds performed well but underperformed the investment grade segment during the reporting period. Not surprisingly, in 2020
so far, credit ratings downgrades have increased and high yield default activity has risen, most prominently in the energy sector. Securitized markets also benefited from spread tightening, amid positive technicals aided by Fed support and
better-than-expected mortgage market trends. However, assets with greater COVID-19 crisis exposure, such as retail and hotels, remained under stress.
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
(NUSA)
What key strategies were used to manage the Fund
during the twelve-month reporting period and how did these strategies influence performance?
The Fund employs a passive management (or
“indexing”) approach, seeking to track the investment results, before fees and expenses, of the ICE BofA Enhanced Yield 1-5 Year U.S. Broad Bond Index (the “NUSA Enhanced Index”). The NUSA Enhanced Index is designed to
broadly capture the 1-5 year U.S. investment grade fixed income market and uses a rules-based weighting methodology that seeks to enhance yield while maintaining comparable risk. The NUSA Enhanced Index is primarily comprised of U.S. government
securities, debt securities issued by U.S. corporations, residential and commercial mortgage-backed securities, asset-backed securities and U.S. dollar-denominated debt securities issued by non-U.S. corporations that are publicly offered for sale in
the U.S. The Fund generally invests in a sample of the securities in the NUSA Enhanced Index whose risk, return and other characteristics resemble the risk, return and other characteristics of the NUSA Enhanced Index. Under normal market conditions,
the Fund invests at least 80% of its assets and the amount of any borrowings for investment purposes in component securities of the NUSA Enhanced Index. The Fund rebalances its holdings monthly in response to the monthly NUSA Enhanced Index
rebalances.
During the reporting period, the Fund has
remained fully invested within its allocation targets to track the NUSA Enhanced Index. As of July 31, 2020, the Fund’s net assets were invested in 42.9% corporate debt, 30.1% securitized debt, 26.1% U.S. Treasuries, and 1.5%
government-related debt.
How did the Fund perform during
the twelve-month reporting period ended July 31, 2020?
The table in the Fund’s Performance Overview and Expense
Ratios section of this report provides the Fund’s total return performance information for the one-year and since inception periods ended July 31, 2020. The Fund’s total returns at net asset value (NAV) are compared with the performance
of the NUSA Enhanced Index, which the Fund is designed to track. The Fund’s total return outperformed that of the NUSA Enhanced Index during the reporting period.
The Fund’s relative outperformance during the reporting
period is mainly attributable to the representative sampling process that utilizes a sub-set of Index securities in an effort to provide exposure similar to that of the NUSA Enhanced Index, which leads the Fund to be overweight, underweight, and, in
some cases, not invested at all in certain securities as compared to the Index. Transaction costs related to the Fund’s acquisition of portfolio securities, as well as fees and expenses incurred by the Fund that are not incurred by the NUSA
Enhanced Index reduce relative performance. The NUSA Enhanced Index is unmanaged and therefore its returns do not reflect any fees or expenses, which would detract from its performance. You cannot invest directly in an index.
Fixed income markets posted strong performance for the
twelve-month reporting period overall, despite the significant market volatility driven by the COVID-19 crisis uncertainty in March 2020. Prior to the advent of the health crisis, markets had been focused on the Feds three interest rate cuts in the
second half of 2019, which were intended to help extend the economic cycle in the face of growing downside risks from trade tensions and weaker growth abroad. Economic and social activity restrictions to control the spread of COVID-19 drove a severe
downward spiral in financial markets, including the corporate and municipal bond markets, in March 2020. The turmoil was short-lived, however. Massive monetary and fiscal interventions helped stabilize credit conditions and support investor
sentiment, while economic indicators began to improve with the economy reopening in May 2020.
Yields fell across the yield curve, with the largest decline
at the shorter end. Treasury yields on the 1-year bond fell to 0.11% as of July 31, 2020 from 2.01% on July 31, 2019, the 10-year fell to 0.54% from 2.02% and the 30-year fell to 1.20% from 2.53%. Corporate credit markets performed well during the
reporting period, with spreads narrowing after a dramatic widening during the March 2020 sell-off. Investment grade issuance was particularly strong, as companies rushed to take advantage of the low interest rate environment. New supply was met with
strong investor demand, which was enhanced by the Fed acting as a backstop to corporate credit markets. High yield corporate bonds performed well but underperformed the investment grade segment during the reporting period. Not surprisingly, in 2020
so far, credit ratings downgrades have increased and high yield default activity has risen, most prominently in the energy sector. Securitized markets also benefited from spread tightening, amid positive technicals aided by Fed support and
better-than-expected mortgage market trends. However, assets with greater COVID-19 crisis exposure, such as retail and hotels, remained under stress.
Nuveen ESG High Yield Corporate Bond ETF (NUHY)
What key strategies were used to manage the Fund during the
abbreviated reporting period and how did these strategies influence performance?
The Fund employs a passive management (or
“indexing”) approach, investing in a diversified portfolio of U.S. dollar-denominated, high yield, fixed-rate corporate bonds that satisfy certain environmental, social and governance (“ESG”) criteria. The Fund seeks to track
the investment results, before fees and expenses, of the Bloomberg Barclays MSCI U.S. High Yield Very Liquid ESG Select Index (“the NUHY Select Index”). The NUHY Select Index is composed of U.S. dollar-denominated below investment grade
corporate bonds with above average liquidity that satisfy certain ESG and low-carbon criteria. Below investment grade bonds are commonly referred to as “high yield” or “junk” bonds. The NUHY Select Index selects from the
securities included in the Bloomberg Barclays U.S. High Yield Very Liquid Index (the “Base Index”), which is designed to broadly capture the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Under normal market
conditions, the Fund invests at least 80% of the sum of its net assets and the amount of any borrowings for investment purposes in component securities of the NUHY Select Index. To the extent the NUHY Select Index concentrates (i.e., holds 25% or
more of its total assets) in the securities of companies in a particular industry or group of industries, the Fund will concentrate its investments to approximately the same extent as the NUHY Select Index. The Fund rebalances its holdings monthly
in response to the monthly NUHY Select Index rebalances.
During the abbreviated reporting period, the Fund worked to
fully invest within its allocation targets to track the NUHY Select Index. As of July 31, 2020, the Fund’s net assets were invested in the following corporate bond sectors: 88.3% industrials, 9.0% financial institutions and 0.5% utilities and
1.1% government agency debt.
How did the Fund perform during the abbreviated reporting period
ended July 31, 2020?
The table in the Fund’s
Performance Overview and Expense Ratios section of this report provides the Fund’s total return performance for the abbreviated reporting period from the Fund’s commencement of operations on September 25, 2019 through July 31, 2020. The
Fund’s total returns at net asset value (NAV) are compared with the performance of the NUHY Select Index, which the Fund is designed to track. The Fund’s total return trailed that of the NUHY Select Index over this abbreviated reporting
period.
The Fund's relative underperformance is mainly
attributable to the transaction costs related to the Fund’s acquisition of portfolio securities, as well as fees and expenses incurred by the Fund that are not incurred by the NUHY Select Index. Additionally, costs and expenses tend to be
elevated during a Fund’s start-up phase when the portfolio is being fully invested, which is captured in this abbreviated reporting period. The NUHY Select Index is unmanaged and therefore its returns do not reflect any fees or expenses, which
would detract from its performance. You cannot invest directly in an index.
The high yield corporate bond market managed positive
performance during the abbreviated reporting period. Prior to the advent of the health crisis, markets had been focused on the Feds three interest rate cuts in the second half of 2019, which were intended to help extend the economic cycle in the
face of growing downside risks from trade tensions and weaker growth abroad. Economic and social activity restrictions to control the spread of COVID-19 drove a severe downward spiral in financial markets, including the corporate and municipal bond
markets, in March 2020. The turmoil was short-lived, however. Massive monetary and fiscal interventions helped stabilize credit conditions and support investor sentiment, while economic indicators began to improve with the economy reopening in May
2020.
High yield corporate bonds rebounded after a
dramatic widening during the March 2020 sell-off. Not surprisingly in 2020, credit ratings downgrades have increased, and high yield default activity has risen, most prominently in the energy sector. However, high yield corporate bonds performed
well, supported by investor demand for higher yielding assets, minimal negative surprises in the second quarter 2020 earnings season and improved sentiment, driven in part by the Fed acting as a backstop to the corporate bond market.
Nuveen ESG U.S. Aggregate Bond
ETF (NUBD)
What key strategies were used to manage
the Fund during the twelve-month reporting period and how did these strategies influence performance?
The Fund employs a passive management (or
“indexing”) approach, investing in a diversified portfolio of U.S. investment grade bonds that satisfy certain environmental, social and governance (“ESG”) criteria. The Fund seeks to track the investment results, before fees
and expenses, of the Bloomberg Barclays MSCI U.S. Aggregate ESG Select Index (“the NUBD Select Index”). The NUBD Select Index is composed of U.S. investment grade fixed income securities that satisfy certain ESG and low-carbon criteria,
including U.S. government securities, debt securities issued by U.S. corporations, residential and commercial mortgage-backed securities, asset-backed securities and U.S. dollar-denominated debt securities issued by non-U.S. corporations that are
publicly offered for sale in the U.S. The NUBD Select Index selects from the securities included in the Bloomberg Barclays U.S. Aggregate Bond Index (the “Base Index”), which is designed to broadly capture the U.S. investment grade,
taxable fixed income market. Under normal market conditions, the Fund invests at least 80% of the sum of its net assets and the amount of any borrowings for investment purposes in component securities of the NUBD Select Index. To the extent the NUBD
Select Index concentrates (i.e., holds 25% or more of its total assets) in the securities of companies in a particular industry or group of industries, the Fund will concentrate its investments to approximately the same extent as the NUBD Select
Index. The Fund rebalances its holdings monthly in response to the monthly NUBD Select Index rebalances.
During the reporting period, the Fund remained fully invested
within its allocation targets to track the NUBD Select Index. As of July 31, 2020, the Fund’s net assets were invested in 37.2% U.S. Treasuries, 28.8% securitized debt, 27.4% corporate debt and 5.8% government-related debt.
How did the Fund perform during the twelve-month reporting period
ended July 31, 2020?
The table in the Fund’s
Performance Overview and Expense Ratios section of this report provides the Fund’s total return performance for the one-year and since inception periods ended July 31, 2020. The Fund’s total returns at net asset value (NAV) are compared
with the performance of the NUBD Select Index, which the Fund is designed to track. The Fund’s total return outperformed that of the NUBD Select Index during the reporting period.
The Fund’s relative outperformance is mainly
attributable to the representative sampling process that utilizes a sub-set of Index securities in an effort to provide exposure similar to that of the NUBD Select Index, which leads the Fund to be overweight, underweight and, in some cases, not
invested at all in certain securities as compared to the Index. Transaction costs related to the Fund’s acquisition of portfolio securities, as well as fees and expenses incurred by the Fund that are not incurred by the NUBD Select Index
reduce relative performance. The NUBD Select Index is unmanaged and therefore its returns do not reflect any fees or expenses, which would detract from its performance. You cannot invest directly in an index.
Fixed income markets posted strong performance for the
twelve-month reporting period overall, despite the significant market volatility driven by the COVID-19 crisis uncertainty in March 2020. Prior to the advent of the health crisis, markets had been focused on the Federal Reserve’s three
interest rate cuts in the second half of 2019, which were intended to help extend the economic cycle in the face of growing downside risks from trade tensions and weaker growth abroad. Economic and social activity restrictions to control the spread
of COVID-19 drove a severe downward spiral in financial markets, including the corporate and municipal bond markets, in March 2020. The turmoil was short-lived, however. Massive monetary and fiscal interventions helped stabilize credit conditions
and support investor sentiment, while economic indicators began to improve with the economy reopening in May 2020.
Yields fell across the yield curve, with the largest decline
at the shorter end. Treasury yields on the 1-year bond fell to 0.11% as of July 31, 2020 from 2.01% on July 31, 2019, the 10-year fell to 0.54% from 2.02% and the 30-year fell to 1.20% from 2.53%. Corporate credit markets performed well during the
reporting period, with spreads narrowing after a dramatic widening during the March 2020 sell-off. Investment grade issuance was particularly strong, as companies rushed to take advantage of the low interest rate environment. New supply was met with
strong investor demand, which was enhanced by the Fed acting as a backstop to corporate credit markets. High yield corporate bonds performed well but underperformed the investment grade segment during the reporting period. Not surprisingly, in 2020
so far, credit ratings downgrades have increased and high yield default activity has risen, most prominently in the energy sector. Securitized markets also benefited from spread tightening, amid positive technicals aided by Fed support and
better-than-expected mortgage market trends. However, assets with greater COVID-19 crisis exposure, such as retail and hotels, remained under stress.
Investing involves risk;
principal loss is possible. This is no guarantee the Fund's investment objective will be achieved. An exchange-traded fund seeks to generally track the investment results of an index; however the Fund may underperform, outperform or be more volatile
than the referenced index. Interest rate risk occurs when interest rates rise causing bond prices to fall. Credit risk arises from an issuer's ability to make interest and
principal payments when due, as well as the prices of bonds declining when an issuer's credit quality is expected to deteriorate. These and other risk considerations are described in detail in the Fund's prospectus.
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
Investing involves risk; principal loss is possible. There is
no guarantee the Fund's investment objectives will be achieved. This ETF seeks to generally track the investment results of an index; however the Fund may underperform, outperform or be more volatile than the referenced index. Interest rate risk is the risk that the value of the Fund's portfolio will decline because of rising interest rates. Credit Risk is the risk that an issuer of a debt security
may be unable or unwilling to make interest and principal payments when due and the related risk that the value of a debt security may decline because of concerns about the issuer's ability or willingness to make such payments. These and other risk
considerations are described in detail in the Fund's prospectus.
Nuveen ESG High Yield Corporate Bond ETF
Investing involves risk; principal loss is possible. There is
no guarantee the Fund’s investment objectives will be achieved. This ETF seeks to generally track the investment results of an index; however the Fund may underperform, outperform or be more volatile than the referenced index. In addition,
because the Index selects securities for inclusion based on environmental, social, and governance (ESG) criteria, the Fund may forgo some market opportunities available to funds that don’t use these
criteria. Investments in below investment grade or high yield securities are subject to liquidity risk and heightened credit risk. Credit risk arises from an
issuer’s ability to make interest and principal payments when due, as well as the prices of bonds declining when an issuer’s credit quality is expected to deteriorate. The Fund is subject to interest rate
risk; as interest rates rise, bond prices fall. These and other risk considerations, such as call, concentration and income risks, are described in detail in the Fund’s prospectus.
Nuveen ESG U.S. Aggregate Bond ETF
Investing involves risk; principal loss is possible. There is
no guarantee the Fund's investment objectives will be achieved. An exchange-traded fund seeks to generally track the investment results of an index; however the Fund may underperform, outperform or be more volatile than the referenced index. Because
the Index selects securities for inclusion based on environmental, social, and governance (ESG) criteria, the Fund may forgo some market opportunities available to funds that don't use these criteria. Interest rate risk occurs when interest rates rise causing bond prices to fall. Credit risk arises from an issuer's credit quality is expected to deteriorate. These and other
risk considerations are described in detail in the Fund's prospectus.
Dividend Information
Each Fund seeks to pay monthly dividends out of its net
investment income. Monthly distributions are not expected to be a level amount from period-to-period. Each Fund will, over time, pay all its net investment income as dividends to shareholders.
All monthly dividends paid by each Fund during the current
reporting period were paid from net investment income. If a portion of the Fund's monthly distributions is sourced or comprised of elements other than net investment income, including capital gains and/or a return of capital, shareholders will be
notified of those sources. For financial reporting purposes, the per share amounts of each Fund's dividends for the reporting period are presented in this report's Financial Highlights. For income tax purposes, distribution information for NUAG,
NUSA, NUHY and NUDB as of their most recent tax year end is presented in Note 6 - Income Tax Information within the Notes to Financial Statements of this report.
The Fund
Performance and Expense Ratios for each Fund are shown within this section of the report.
Fund Performance
Returns quoted represent past performance, which is no guarantee
of future results. Investment returns and principal value will fluctuate so that when shares are sold, they may be worth more or less than their original cost. Current performance may be higher or lower than the
performance shown.
Total returns for a period of
less than one year are not annualized (i.e. cumulative returns). Returns assume reinvestment of dividends and capital gains. Market price returns are based on the closing market price as of the end of the reporting period. For performance current to
the most recent month-end visit nuveen.com or call (800) 257-8787.
Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the sale of Fund shares.
Expense Ratios
The expense ratios shown are as of each Fund's most recent
prospectus. The expense ratios shown reflect total operating expenses (before fee waivers and/or expense reimbursements, if any). The expense ratios include management fees and other fees and expenses.
Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
Refer
to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this section. Refer to the Glossary of Terms Used in this Report for definitions of terms used within this
section.
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NUSA)
Refer
to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this section. Refer to the Glossary of Terms Used in this Report for definitions of terms used within this
section.
Refer
to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this section. Refer to the Glossary of Terms Used in this Report for definitions of terms used within this
section.
Refer
to the first page of this Fund Performance and Expense Ratios section for further explanation of the information included within this section. Refer to the Glossary of Terms Used in this Report for definitions of terms used within this
section.
Dividend Rate is the average dividend per share for the
current reporting period divided by the offering price per share at period end.
The SEC 30-Day Yield is a standardized measure of a
fund’s yield that accounts for the future amortization of premiums or discounts of bonds held in the fund’s portfolio. The SEC 30-Day Yield is computed under an SEC standardized formula and is based on the maximum offer price per share.
Dividend Rate may differ from the SEC 30-Day Yield because the fund may be paying out more or less than it is earning and it may not include the effect of amortization of bond premium.
Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
Dividend
Rate
2.96%
SEC
30-Day Yield
1.54%
Nuveen Enhanced Yield 1-5 Year U.S.
Aggregate Bond ETF (NUSA)
This data relates to the securities held in each Fund's
portfolio of investments as of the end of this reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.
Each Fund uses credit quality ratings for its portfolio
securities provided by Moody's, S&P and Fitch. For NUAG and NUSA, if all three of Moody's S&P, and Fitch provide a rating for a security, an average of the ratings is used; if two of the three agencies rate a security, an average of the two
is used; and if only one rating agency rates a security, that rating is used. For NUHY and NUBD, if all three of Moody's S&P, and Fitch provide a rating for a security, the middle rating is used; if two of the three agencies rate a security, the
lower rating is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are subject to change. U.S.
Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities are included in the U.S. Treasury/Agency category.
Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
Fund
Allocation
(% of net assets)
Securitized
40.3%
Corporate
Debt
30.8%
U.S.
Treasury
23.4%
Government
Related - Long-Term
4.7%
U.S.
Government and Agency Obligations
1.7%
Other
Assets Less Liabilities
(0.9)%
Net
Assets
100%
Corporate
Debt: Industries
(% of total corporate debt
holdings)
As a
shareholder of the Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other applicable Fund expenses. The Examples
below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.
The Examples below are based on an investment of $1,000
invested at the beginning of the period and held through the period ended July 31, 2020.
The information under “Actual Performance,”
together with the amount you invested, allows you to estimate actual expenses incurred over the reporting period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60) and multiply the result by
the cost shown for your Fund in the row entitled “Expenses Incurred During Period” to estimate the expenses incurred on your account during this period.
The information under “Hypothetical Performance”
provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The
hypothetical account values and expenses may not be used to estimate the actual ending account balance or expense you incurred for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do
so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to
highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the hypothetical information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In
addition, if these transaction costs were included, your costs would have been higher.
Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG)
Actual
Performance
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,053.80
Expenses
Incurred During Period
$
1.02
Hypothetical
Performance
(5% annualized return before expenses)
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,023.87
Expenses
Incurred During the Period
$
1.01
Expenses are equal to the Fund's annualized net expense ratio
of 0.20% multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
(NUSA)
Actual
Performance
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,062.10
Expenses
Incurred During Period
$
1.03
Hypothetical
Performance
(5% annualized return before expenses)
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,023.87
Expenses
Incurred During the Period
$
1.01
Expenses are equal to the Fund's annualized net expense ratio
of 0.20% multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Nuveen ESG High Yield Corporate Bond ETF (NUHY)
Actual
Performance
Beginning
Account Value
$1,000.00
Ending
Account Value
$
998.00
Expenses
Incurred During Period
$
2.97
Hypothetical
Performance
(5% annualized return before expenses)
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,023.12
Expenses
Incurred During the Period
$
3.01
Expenses are equal to the Fund's annualized net expense ratio
of 0.35% multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Nuveen ESG U.S. Aggregate Bond ETF (NUBD)
Actual
Performance
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,032.40
Expenses
Incurred During Period
$
1.01
Hypothetical
Performance
(5% annualized return before expenses)
Beginning
Account Value
$1,000.00
Ending
Account Value
$1,023.87
Expenses
Incurred During the Period
$
1.01
Expenses are equal to the Fund's annualized net expense ratio
of 0.20% multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
Report of Independent Registered Public Accounting
Firm
To the Shareholders and Board of Trustees of
Nushares ETF Trust:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and
liabilities of Nuveen Enhanced Yield U.S. Aggregate Bond ETF, Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF, Nuveen ESG High Yield Corporate Bond ETF and Nuveen ESG U.S. Aggregate Bond ETF (four of the funds comprising Nushares ETF Trust)
(the Funds), including the portfolios of investments, as of July 31, 2020, the related statements of operations for the year then ended (the period from September 25, 2019 (commencement of operations) to July 31, 2020 for Nuveen ESG High Yield
Corporate Bond ETF), the statements of changes in net assets for each of the years in the two-year period then ended (period from September 25, 2019 to July 31, 2020 for Nuveen ESG High Yield Corporate Bond ETF), and the related notes (collectively,
the financial statements) and the financial highlights for each of the years in the three-year period then ended and period from September 14, 2016 (commencement of operations) to July 31, 2017 for Nuveen Enhanced Yield U.S. Aggregate Bond ETF, the
three-year period then ended and period from March 31, 2017 (commencement of operations) to July 31, 2017 for Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF, the period from September 25, 2019 to July 31, 2020 for Nuveen ESG High Yield
Corporate Bond ETF, and the two-year period then ended and period from September 29, 2017 (commencement of operations) to July 31, 2018 for Nuveen ESG U.S. Aggregate Bond ETF. In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of the Funds as of July 31, 2020, the results of their operations for the year then ended (the period from September 25, 2019 to July 31, 2020 for Nuveen ESG High Yield Corporate Bond ETF),
the changes in their net assets for each of the years in the two-year period then ended (period from September 25, 2019 to July 31, 2020 for Nuveen ESG High Yield Corporate Bond ETF), and the financial highlights for each of the years in the
three-year period then ended and period from September 14, 2016 to July 31, 2017 for Nuveen Enhanced Yield U.S. Aggregate Bond ETF, the three-year period then ended and period from March 31, 2017 to July 31, 2017 for Nuveen Enhanced Yield 1-5 Year
U.S. Aggregate Bond ETF, the period from September 25, 2019 to July 31, 2020 for Nuveen ESG High Yield Corporate Bond ETF and the two-year period then ended and period from September 29, 2017 to July 31, 2018 for Nuveen ESG U.S. Aggregate Bond ETF
in conformity with U.S. generally accepted accounting principles
Basis for Opinion
These financial statements and financial highlights are the
responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of July 31, 2020, by correspondence with custodians
and brokers or other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and
financial highlights. We believe that our audits provide a reasonable basis for our opinion.
Bay
Area Toll Authority, California, Revenue Bonds, San Francisco Bay Area Toll Bridge, Subordinate Lien, Build America Federally Taxable Bond Series 2010S-1 (No Optional Call)
6.918%
4/01/40
AA-
152,766
10
Board
of Regents of the University of Texas System, Revenue Financing System Bonds, Green Series 2016B (No Optional Call)
3.852%
8/15/46
AAA
13,832
0
(4)
California
State, General Obligation Bonds, Various Purpose Build America Taxable Bond Series 2010 (Optional Call: 8/20 at 100.00)
7.950%
3/01/36
Aa2
7
125
Chicago
O'Hare International Airport (No Optional Call)
Commonwealth
Financing Authority, Pennsylvania, State Appropriation Lease Bonds, Plancon Program, Taxable Series 2018A (No Optional Call)
3.864%
6/01/38
A1
$114,429
95
Dormitory
Authority of the State of New York, Revenue Bonds, Montefiore Obligated Group, Taxable Series 2018B (Optional Call: 8/28 at 100.00)
4.946%
8/01/48
AA
107,418
60
Health
& Educational Facilities Authority of the State of Missouri (No Optional Call)
3.086%
9/15/51
AA+
69,974
95
Illinois
State, General Obligation Bonds, Pension Funding Series 2003 (No Optional Call)
5.100%
6/01/33
BBB-
99,751
95
Los
Angeles Unified School District, Los Angeles County, California, General Obligation Bonds, Build America Taxable Bonds, Series 2009KRY (No Optional Call)
5.750%
7/01/34
Aa3
134,334
175
Metropolitan
Transportation Authority, New York, Transportation Revenue Bonds, Build America Taxable Bonds, Series 2009A-1 (No Optional Call)
5.871%
11/15/39
A+
207,582
29
Municipal
Electric Authority of Georgia, Plant Vogtle Units 3 & 4 Project J Bonds, Taxable Build America Bonds Series 2010A (No Optional Call)
6.637%
4/01/57
A
44,220
125
New
Jersey Transportation Trust Fund Authority, Transportation System Bonds, Federally Taxable Issuer Subsidy Build America Bonds, Series 2010B (No Optional Call)
6.561%
12/15/40
BBB+
161,711
30
Ohio
State University, General Receipts Bonds, Multiyear Debt Issuance Program, Taxable Series 2016B (No Optional Call)
3.798%
12/01/46
Aa1
39,258
60
Phoenix,
Arizona, Various Purpose General Obligation Bonds, Build America Taxable Bonds, Series 2009A (No Optional Call)
5.269%
7/01/34
AA+
75,476
110
Sales
Tax Securitization Corp (No Optional Call)
3.820%
1/01/48
AA-
123,259
81
Texas
State, General Obligation Bonds, Transportation Commission, Build America Taxable Bonds, Series 2010A (No Optional Call)
4.631%
4/01/33
AAA
103,562
135
University
of California, General Revenue Bonds, Taxable Series 2019BD (No Optional Call)
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)
The
Fund uses credit quality ratings for its portfolio securities provided by Moody's, S&P and Fitch. If all three of Moody's, S&P, and Fitch provide a rating for a security, an average of the ratings is used; if two of the three agencies rate
a security, an average of the two is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are subject to
change. Holdings designated N/R are not rated by Moody's, S&P or Fitch. Ratings are not covered by the report of independent registered public accounting firm.
(3)
Optional
Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns.
Optional Call Provisions are not covered by the report of independent registered public accounting firm.
(4)
Principal
Amount (000) rounds to less than $1,000.
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
Purchased
on a when-issued or delayed delivery basis.
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)
The
Fund uses credit quality ratings for its portfolio securities provided by Moody's, S&P and Fitch. If all three of Moody's, S&P, and Fitch provide a rating for a security, an average of the ratings is used; if two of the three agencies rate
a security, an average of the two is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are subject to
change. Holdings designated N/R are not rated by Moody's, S&P or Fitch. Ratings are not covered by the report of independent registered public accounting firm.
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
Purchased
on a when-issued or delayed delivery basis.
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)
The
Fund uses credit quality ratings for its portfolio securities provided by Moody's, S&P and Fitch. If all three of Moody's, S&P, and Fitch provide a rating for a security, the middle is used; if two of the three agencies rate a security, the
lower rating is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are subject to change. Holdings
designated N/R are not rated by Moody's, S&P or Fitch. Ratings are not covered by the report of independent registered public accounting firm.
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.
International
Bank for Reconstruction & Development (No Optional Call)
1.500%
8/28/24
AAA
$560,215
250
Province
of Alberta Canada (No Optional Call)
1.000%
5/20/25
Aa2
253,600
100
Province
of British Columbia Canada (No Optional Call)
1.750%
9/27/24
AAA
105,481
100
Province
of Manitoba Canada (No Optional Call)
2.600%
4/16/24
Aa2
107,707
516
Province
of Ontario Canada (No Optional Call)
1.750%
1/24/23
Aa3
533,719
150
Province
of Quebec Canada (No Optional Call)
1.500%
2/11/25
Aa2
156,398
176
Province
of Quebec Canada (No Optional Call)
2.500%
4/20/26
Aa2
193,585
3,086
Total
Municipal Bonds
3,372,000
Sovereign
Debt – 1.1%
200
Chile
Government International Bond
2.550%
1/27/32
A+
214,702
416
Colombia
Government International Bond
2.625%
3/15/23
Baa2
426,400
14
Hungary
Government International Bond
7.625%
3/29/41
BBB
24,434
200
Israel
Government International Bond
2.750%
7/03/30
AA-
221,000
250
Panama
Government International Bond
0.045%
5/15/47
BBB+
330,938
96
Peruvian
Government International Bond
5.625%
11/18/50
A3
163,680
200
Uruguay
Government International Bond
0.041%
11/20/45
BBB
247,000
1,376
Total
Sovereign Debt
1,628,154
$
7,515
Total
Government Related (cost $8,161,844)
8,652,770
Total
Long-Term Investments (cost $137,302,779)
146,325,633
Principal
Amount (000)
Description
(1)
Coupon
Maturity
Ratings
(2)
Value
SHORT-TERM
INVESTMENTS – 2.9%
U.S.
GOVERNMENT AND AGENCY OBLIGATIONS – 2.9%
$
4,230
Federal
Agricultural Mortgage Corp Discount Notes
0.000%
8/03/20
N/R
$
4,230,000
$
4,230
Total
Short-Term Investments (cost $4,230,000)
4,230,000
Total
Investments (cost $141,532,779) – 102.1%
150,555,633
Other
Assets Less Liabilities – (2.1)%
(3,066,653)
Net
Assets – 100%
$
147,488,980
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)
The
Fund uses credit quality ratings for its portfolio securities provided by Moody's, S&P and Fitch. If all three of Moody's, S&P, and Fitch provide a rating for a security, the middle is used; if two of the three agencies rate a security, the
lower rating is used; and if only one rating agency rates a security, that rating is used. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Credit ratings are subject to change. Holdings
designated N/R are not rated by Moody's, S&P or Fitch. Ratings are not covered by the report of independent registered public accounting firm.
(3)
Optional
Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain mortgage-backed securities may be subject to periodic principal paydowns.
Optional Call Provisions are not covered by the report of independent registered public accounting firm.
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
Purchased
on a when-issued or delayed delivery basis.
Per share Net
Investment Income (Loss) is calculated using the average daily shares method.
(b)
Total
Return Based on NAV reflects the change in NAV over the period, including the assumed reinvestment of distributions, if any, at NAV on each ex-dividend payment date during the period. Total Return Based on Market Price reflects the change in the
market price per share over the period, including the assumed reinvestment of distributions, if any, at the ending market price per share on each ex-dividend payment date during the period. Total returns are not annualized.
(c)
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. Portfolio Turnover Rate excludes securities received
or delivered as a result of processing in-kind creations or redemptions of Fund shares (as disclosed in Note 4 - Fund Shares).
Nushares ETF Trust (the “Trust”) is an open-end
management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust is comprised of Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NUAG), Nuveen Enhanced Yield 1-5 Year U.S. Aggregate
Bond ETF (NUSA), Nuveen ESG High Yield Corporate Bond ETF (NUHY) and Nuveen ESG U.S. Aggregate Bond ETF (NUBD) (each a “Fund” and collectively, the “Funds”), as diversified funds, among others. The Trust was organized as a
Massachusetts business trust on February 20, 2015. Shares of the Funds are listed and traded on the NYSE Arca (the “Exchange”).
The end of the reporting period for the Funds is July 31, 2020,
and the period covered by these Notes to Financial Statements for NUAG, NUSA and NUBD is the fiscal year ended July 31, 2020 and for NUHY is September 25, 2019 (commencement of operations) through July 31, 2020 (the "current fiscal period").
Investment Adviser and Sub-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. The Adviser has entered into sub-advisory agreements with Teachers Advisors,
LLC (the “Sub-Adviser”), an affiliate of the Adviser, under which the Sub-Adviser manages the investment portfolios of the Funds.
Other Matters
The outbreak of the novel coronavirus (“COVID-19”)
and subsequent global pandemic began significantly impacting the U.S. and global financial markets and economies during the calendar quarter ended March 31, 2020. The worldwide spread of COVID-19 has created significant uncertainty in the global
economy. The duration and extent of COVID-19 over the long-term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds' normal course of business, results of operations,
investments, and cash flows will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
2. Significant Accounting Policies
The accompanying financial statements were prepared in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require the use of estimates made by management and the evaluation of subsequent events. Actual results may differ from
those estimates. Each Fund is an investment company and follows 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 creation unit transactions. The NAV for financial reporting purposes includes security and creation unit transactions through the date of
the report. Total return is computed based on the NAV used for processing security and creation unit transactions. The following is a summary of the significant accounting policies consistently followed by the Funds.
Compensation
The Trust 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 Trust from the Adviser or its affiliates. The Funds' Board of Trustees (the "Board") has adopted a deferred compensation plan
for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from certain Nuveen-advised funds. Under the plan, deferred amounts are treated as though equal
dollar amounts had been invested in shares of select Nuveen-advised funds.
Distributions to 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.
Under the Trust’s organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts that provide general indemnifications to other
parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, the Trust 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 includes
accretion of discounts for financial reporting purposes and, is recorded on an accrual basis. Investment 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.
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 Funds and it did not have a material impact on the Funds' financial
statements.
Fair Value Measurement: Disclosure
Framework
During August 2018, the FASB issued ASU 2018-13
(“ASU 2018-13”), Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. ASU 2018-13 modifies the disclosures required by Topic 820, Fair Value Measurements.
The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Management has early implemented this guidance and it did not have a material impact on
the Funds' financial statements.
Reference Rate
Reform
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The main objective of the new guidance is to provide relief to companies
that will be impacted by the expected change in benchmark interest rates at the end of 2021, when participating banks will no longer be required to submit London Interbank Offered Rate (LIBOR) quotes by the UK Financial Conduct Authority (FCA). The
new guidance allows companies to, provided the only changes to existing contracts are a change to an approved benchmark interest rate, account for modifications as a continuance of the existing contract without additional analysis. For new and
existing contracts, the Funds may elect to apply the optional expedients as of March 12, 2020 through December 31, 2022. Management has not yet elected to apply the optional expedients, but is currently assessing the impact of the ASU’s
adoption to the Funds' financial statements and various filings.
3. Investment Valuation and Fair Value
Measurements
The fair valuation input levels as described
below are for fair value measurement purposes.
The Funds'
investments in securities are recorded at their estimated fair value. Fair value is defined as the price that would be received upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal
or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure
purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect
the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of
the three-tiered hierarchy of valuation input levels.
Level 1
– Inputs are unadjusted and prices are determined using quoted prices in active markets for identical securities.
Level 2
– Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, credit spreads, etc.).
Level 3
– Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments).
Prices of fixed-income securities are provided by an
independent pricing service (“pricing service”) approved by the Board. The pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of
comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including
the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2. In pricing certain securities, particularly less liquid and lower quality securities, the pricing service may consider information
about a security, its issuer or market activity, provided by the Adviser. These securities are generally classified as Level 2 or Level 3 depending on the observability of the significant inputs.
Certain securities may not be able to be priced by the pre-established pricing
methods as described above. Such securities may be valued by the Board and/or its appointee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; debt securities that have gone into default and for which there is no
current market quotation; a 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:
4. Portfolio Securities and Investments in Derivatives
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, but
excluding in-kind transactions) during the current fiscal period were as follows:
NUAG
NUSA
NUHY
NUBD
Purchases:
Investment
securities
$233,162,765
$22,231,440
$27,105,077
$88,418,231
U.S.
Government and agency obligations
42,557,768
11,491,037
—
—
Sales
and maturities:
Investment
securities
224,868,780
11,612,020
20,974,858
16,556,183
U.S.
Government and agency obligations
29,798,835
4,665,818
—
364,884
In-kind transactions during the
current fiscal period were as follows:
NUAG
NUSA
NUHY
NUBD
In-kind
purchases
$226,736,464
$
—
$50,167,038
$15,320,343
In-kind
sales
237,459,350
9,682,822
—
2,776,344
The Funds may purchase securities
on a when-issued or delayed-delivery basis. Securities purchased on a when-issued or delayed-delivery basis may have extended settlement periods; interest income is not accrued until settlement date. Any securities 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. If a Fund has outstanding
when-issued/delayed-delivery purchases commitments as of the end of the reporting period, such amounts are recognized on the Statement of Assets and Liabilities.
Investments in Derivatives
Each Fund is authorized to invest in certain derivative
instruments. The Funds record derivative instruments at fair value, with changes in fair value recognized on the Statement of Operations, when applicable. Even though the Funds' investments in derivatives may represent economic hedges, they are not
considered to be hedge transactions for financial reporting purposes.
Although each Fund is 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.
Each Fund issues and redeems its shares on a continuous basis
at NAV only in aggregations of a specified number of shares or multiples thereof (“Creation Units”). Only certain institutional investors (referred to as “Authorized Participants”) who have entered into agreements with Nuveen
Securities, LLC, the Funds' distributor, may purchase and redeem Creation Units. Once created, shares of the Funds trade on the Exchange at market prices and are only available to individual investors through their brokers.
Creation Units are purchased and redeemed in-kind for a
designated portfolio of securities included in each Fund’s respective Index and/or a specified amount of cash. Authorized Participants are charged fixed transaction fees in connection with purchasing and redeeming Creation Units. Authorized
Participants transacting in Creation Units for cash may also pay an additional variable charge to compensate the relevant Fund for certain transaction costs (i.e., taxes on currency or other financial transactions, and brokerage costs) and market
impact expenses it incurs in purchasing or selling portfolio securities. Such variable charges, if any, are included in “Proceeds from shares sold” on the Statements of Changes in Net Assets.
Transactions in Fund shares during the current fiscal period
were as follows:
NUAG
NUSA
Year
Ended
7/31/20
Year
Ended
7/31/19
Year
Ended
7/31/20
Year
Ended
7/31/19
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
sold
17,500,000
$
439,401,562
5,000,000
$
119,215,650
900,000
$
22,618,439
200,000
$
4,875,760
Shares
redeemed
(17,300,000)
(429,469,590)
(8,400,000)
(200,733,010)
(600,000)
(15,045,450)
(200,000)
(4,951,480)
Net
increase (decrease)
200,000
$
9,931,972
(3,400,000)
$
(81,517,360)
300,000
$
7,572,989
—
$
(75,720)
NUHY
NUBD
For
the Period
9/25/19
(commencement of
operations) through
7/31/20
Year
Ended
7/31/20
Year
Ended
7/31/19
Shares
Amount
Shares
Amount
Shares
Amount
Shares
sold
2,300,002
$57,327,420
3,400,000
$89,150,650
1,200,000
$
29,521,639
Shares
redeemed
(2)
(50)
(200,000)
(5,194,200)
(700,000)
(17,525,220)
Net
increase (decrease)
2,300,000
$57,327,370
3,200,000
$83,956,450
500,000
$
11,996,419
6. Income Tax Information
Each Fund is a separate taxpayer for federal income tax
purposes. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated
investment companies. Therefore, no federal income tax provision is required.
For all open tax years and all major taxing jurisdictions,
management of the Funds has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the
last four tax year ends and the interim tax period since then). Furthermore, management of the Funds is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly
change in the next twelve months.
The following
information is presented on an income tax basis. Differences between amounts for financial statement and federal income tax purposes are primarily due to timing differences in recognizing 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.
The table below presents the cost and
unrealized appreciation (depreciation) of each Fund’s investment portfolio, as determined on a federal income tax basis, as of July 31, 2020.
NUAG
NUSA
NUHY
NUBD
Tax
cost of investments
$79,151,442
$35,181,343
$55,160,357
$141,863,175
Gross
unrealized:
Appreciation
$
2,589,133
$
918,359
$
1,334,601
$
8,734,833
Depreciation
(154,970)
(14,301)
(894,758)
(42,375)
Net
unrealized appreciation (depreciation) of investments
Permanent differences, primarily due to redemption in-kind, bond premium
amortization adjustments, and paydowns resulted in reclassifications among the Funds' components of net assets as of July 31, 2020, the Funds' tax year end.
The tax components of undistributed net ordinary income and net
long-term capital gains as of July 31, 2020, the Funds' tax year end, were as follows:
NUAG
NUSA
NUHY
NUBD
Undistributed
net ordinary income1
$220,238
$92,174
$316,622
$328,878
Undistributed
net long-term capital gains
—
—
—
—
1
Net ordinary
income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any.
The tax character of distributions paid during the Funds' tax
years ended July 31, 2020 and July 31, 2019 was designated for purposes of the dividends paid deduction as follows:
2020
NUAG
NUSA
NUHY
2
NUBD
Distributions
from net ordinary income1
$3,772,060
$894,030
$1,805,740
$2,152,900
Distributions
from net long-term capital gains
—
—
—
—
2019
NUAG
NUSA
NUBD
Distributions
from net ordinary income1
$3,510,400
$855,950
$1,392,050
Distributions
from net long-term capital gains
—
—
—
1
Net ordinary
income consists of net taxable income derived from dividends, interest, and net short-term capital gains, if any.
As of July 31, 2020, the Funds’ tax year end, the Funds
had unused capital losses carrying forward available for federal income tax purposes to be applied against future capital gains, if any. The capital losses are not subject to expiration.
NUAG
NUSA
NUHY
NUBD
Not
subject to expiration:
Short-term
$
—
$
28,655
$1,888,460
$202,693
Long-term
846,276
204,239
—
85,295
Total
$846,276
$232,894
$1,888,460
$287,988
During the Funds’ tax year
ended July 31, 2020, the following Funds utilized capital loss carryforwards as follows:
NUAG
NUSA
Utilized
capital loss carryforwards
$413,529
$41,970
7. Management Fees and
Other Transactions with Affiliates
Management Fees
Each Fund’s management fee compensates the Adviser for
its investment advisory services to the Funds. The Sub-Adviser is compensated for its services to the Funds from the management fees paid to the Adviser. The Adviser is responsible for substantially all other expenses of the Funds, except any future
distribution and/or service fees, interest expenses, taxes, acquired fund fees and expenses, fees incurred in acquiring and disposing of portfolio securities, fees and expenses of the independent trustees (including any trustees’ counsel
fees), certain compensation expenses of the Funds’ chief compliance officer, litigation expenses and extraordinary expenses.
The annual management fee, payable monthly, for each Fund is
based on a percentage of average daily net assets according to the following rates:
The tables below show the number and percentage of
days during the current fiscal period that each Fund's market price was greater than its NAV per share (i.e., at premium) and less than its NAV per share (i.e., at a discount). The market price is determined using the midpoint between the highest
bid and the lowest offer on the applicable Fund's listing exchange, as of the time that the Fund's NAV is calculated (normally 4:00 p.m. Eastern Time).
Additional Fund Information (Unaudited) (continued)
Distribution Information: The Funds hereby designate their percentages of dividends paid from net ordinary income as dividends qualifying as Interest-Related Dividends and/or short-term capital gain dividends as defined in Internal Revenue Code
Section 871(k) for the taxable periods ending December 31, 2019 and July 31, 2020:
Portfolio of Investments
Information: Each Fund is required to file its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its
report on Form N-PORT. You may obtain this information on the SEC's website at http://www.sec.gov.
Nuveen Funds’ Proxy Voting Information: You may obtain (i) information regarding how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, without charge, upon request by calling Nuveen
toll-free at (800) 257-8787 or 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.
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.
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 MSCI U.S. Aggregate ESG Select Index: The Index is composed of U.S. investment grade fixed income securities that satisfy certain ESG and low-carbon criteria, including U.S. government securities, debt securities issued by U.S. corporations, residential and
commercial mortgage-backed securities, asset-backed securities and U.S. dollar-denominated debt securities issued by non-U.S. governments and corporations that are publicly offered for sale in the U.S. The index returns assume reinvestment of
dividends, but do not include the effects of any sales charges or management fees.
Bloomberg Barclays MSCI U.S. High Yield Very Liquid ESG Select
Index: An index designed to utilize certain environmental, social, and governance (ESG) criteria to select from the securities included in the Bloomberg Barclays U.S. High Yield Very Liquid Index, which is designed
to broadly capture the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. The Index is rebalanced monthly. It is not possible to invest directly in an index.
Bloomberg Barclays U.S. Aggregate Bond Index: The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass through securities and asset-backed securities. These major sectors are
subdivided into more specific indexes that are calculated and reported on a regular basis. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.
Bloomberg Barclays U.S. Government/Credit 1-5 Year Bond Index: An index that measures the performance of U.S. dollar-denominated U.S. Treasury bonds, government related bonds and investment grade U.S. corporate bonds that have a remaining maturity of greater than or equal to one
year and less than five years. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.
Gross Domestic Product (GDP):
The total market value of all final goods and services produced in a country/region in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of
imports.
ICE BofA Enhanced Yield U.S. Broad Bond
Index: This index provides exposure to the broad U.S. investment grade bond market. This included U.S. government and Treasury debt as well corporate bonds. The index uses a fundamental weighting scheme to generate
higher yield while maintaining comparable risk. Index returns assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.
ICE BofA 1-5 Year U.S. Broad Market Index: This index consists of U.S. dollar-denominated, investment grade taxable debt securities with fixed rate coupons that have a remaining term to final maturity, or an average life, of less than five years. Index returns
assume reinvestment of distributions, but do not include the effects of any applicable sales charges or management fees.
Glossary of Terms Used in this Report (Unaudited) (continued)
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.
Annual Investment Management Agreement Approval
Process
The Board of Trustees of Nushares ETF Trust (the
“Board,” and each Trustee, a “Board Member”), including the Board Members who are not “interested persons” (as defined under the Investment Company Act of 1940 (the “1940 Act”)) (the “Independent
Board Members”), is responsible for determining whether to initially approve or, after an initial term, to renew, each Fund’s advisory arrangements. A discussion of the Board’s most recent approval of the renewal of the advisory
arrangements for Nuveen Enhanced Yield U.S. Aggregate Bond ETF (the “Enhanced Yield U.S. Aggregate Bond ETF”), Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (the “Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF”) and
Nuveen ESG U.S. Aggregate Bond ETF (the “ESG U.S. Aggregate Bond ETF”) is set forth in Part I below. The advisory arrangements for Nuveen ESG High Yield Corporate Bond ETF (the “ESG High Yield Corporate Bond ETF”) have not
yet been up for renewal. A discussion of the Board’s initial approval of the advisory arrangements for the ESG High Yield Corporate Bond ETF is set forth in Part II below.
PART I
Nuveen Enhanced Yield U.S. Aggregate Bond ETF
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
Nuveen ESG U.S. Aggregate Bond ETF
At a meeting held on May 19-21, 2020 (the “May
Meeting”), the Board, which is comprised entirely of Independent Board Members, approved, for the Enhanced Yield U.S. Aggregate Bond ETF, the Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF and the ESG U.S. Aggregate Bond ETF (for purposes of
this Part I, collectively, the “Funds” and each, a “Fund”), the renewal of the management agreement (for purposes of this Part I, each, an “Investment Management Agreement”) with Nuveen Fund Advisors, LLC (the
“Adviser”) pursuant to which the Adviser serves as the investment adviser to the respective Fund and the sub-advisory agreement (for purposes of this Part I, each, a “Sub-Advisory Agreement”) with Teachers Advisors, LLC (the
“Sub-Adviser”) pursuant to which the Sub-Adviser serves as the investment sub-adviser to the respective Fund. Although the 1940 Act requires that continuances of the Advisory Agreements (as defined below) be approved by the in-person
vote of a majority of the Independent Board Members, the May Meeting was held virtually through the internet in view of the health risks associated with holding an in-person meeting during the COVID-19 pandemic and governmental restrictions on
gatherings. The May Meeting was held in reliance on an order issued by the Securities and Exchange Commission on March 13, 2020, as extended on March 25, 2020, which provided registered investment companies temporary relief from the in-person voting
requirements of the 1940 Act with respect to the approval of a fund's advisory agreement in response to the challenges arising in connection with the COVID-19 pandemic.
Following up to an initial two-year period, the Board considers
the renewal of each Investment Management Agreement and Sub-Advisory Agreement on behalf of the applicable Fund on an annual basis. For purposes of this Part I, the Investment Management Agreements and Sub-Advisory Agreements are collectively
referred to as the “Advisory Agreements” and the Adviser and the Sub-Adviser are collectively, the “Fund Advisers” and each, a “Fund Adviser.” Throughout the year, the Board and its committees meet regularly and,
at these meetings, review an extensive array of topics and information that are relevant to its annual consideration of the renewal of the advisory agreements for the Nuveen funds. Such information may address, among other things, fund performance;
the Adviser’s strategic plans; the review of the funds and investment teams; compliance, regulatory and risk management matters; the trading practices of the various sub-advisers to the funds; valuation of securities; fund expenses; and
overall market and regulatory developments.
In addition
to the information and materials received during the year, the Board, in response to a request made on its behalf by independent legal counsel, received extensive materials and information prepared specifically for its annual consideration of the
renewal of the advisory agreements for the Nuveen funds by the Adviser and by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data. The materials cover a wide range of topics including,
but not limited to, a description of the nature, extent and quality of services provided by the Fund Advisers; a review of each sub-adviser to the Nuveen funds and the applicable investment teams; an analysis of fund performance in absolute terms
and as compared to the performance of certain peer funds and benchmarks with a focus on any performance outliers; an analysis of the fees and expense ratios of the Nuveen funds in absolute terms and as compared to those of certain peer funds with a
focus on any expense outliers; a description of portfolio manager compensation; a review of the performance of various service providers; a description of various initiatives Nuveen had undertaken or continued during the year for the benefit of
particular fund(s) and/or the complex; a description of the profitability or financial data of Nuveen and the sub-advisers to the Nuveen funds; and a description of indirect benefits received by the Adviser and the sub-advisers as a result of their
relationships with the Nuveen funds.
In continuing its
practice, the Board met prior to the May Meeting to begin its considerations of the renewal of the Advisory Agreements. Accordingly, on April 27-28, 2020 (the “April Meeting”), the Board met to review and discuss, in part, the
performance of the Nuveen funds and the Adviser’s evaluation of each sub-adviser to the Nuveen funds. In its review, the Board recognized the volatile market conditions occurring during the first half of 2020 arising, in part, from the public
health crisis caused by the novel coronavirus known as COVID-19 and the resulting impact on fund performance. Ac-
Annual Investment Management Agreement Approval Process (continued)
cordingly, the Board reviewed, among other things, fund performance reflecting
the more volatile periods, including for various time periods ended the first quarter of 2020 and for various time periods ended April 17, 2020. At the April Meeting, the Board Members asked questions and requested additional information that was
provided for the May Meeting. In continuing its review of the Nuveen funds in light of the extraordinary market conditions experienced in early 2020, the Board received updated fund performance data reflecting various time periods ended May 8, 2020
for its May Meeting. The Board also continued its practice of seeking to meet periodically with the various sub-advisers to the Nuveen funds and their investment teams, when feasible.
The Independent Board Members considered the review of the
advisory agreements for the Nuveen funds to be an ongoing process and employed the accumulated information, knowledge, and experience the Board Members had gained during their tenure on the boards governing the Nuveen funds and working with the
Adviser and sub-advisers in their review of the advisory agreements. The contractual arrangements are a result of multiple years of review, negotiation and information provided in connection with the boards’ annual review of the Nuveen
funds’ advisory arrangements and oversight of the Nuveen funds.
The Independent Board Members were advised by independent legal
counsel during the annual review process as well as throughout the year, including meeting in executive sessions with such counsel at which no representatives from the Adviser or the Sub-Adviser were present. In connection with their annual review,
the Independent Board Members also received a memorandum from independent legal counsel outlining their fiduciary duties and legal standards in reviewing the Advisory Agreements.
The Board’s decision to renew the Advisory Agreements was
not based on a single identified factor, but rather the decision reflected the comprehensive consideration of all the information provided throughout the year and at the April and May Meetings, and each Board Member may have attributed different
levels of importance to the various factors and information considered in connection with the approval process. The following summarizes the principal factors and information, but not all the factors, the Board considered in deciding to renew the
Advisory Agreements and its conclusions.
A. Nature,
Extent and Quality of Services
In evaluating the renewal
of the Advisory Agreements, the Independent Board Members received and considered information regarding the nature, extent and quality of the applicable Fund Adviser’s services provided to the respective Fund with particular focus on the
services and enhancements to such services provided during the last year. The Independent Board Members considered the Investment Management Agreements and the Sub-Advisory Agreements separately in the course of their review. With this approach,
they considered the respective roles of the Adviser and the Sub-Adviser in providing services to the Funds.
With respect to the Adviser, the Board recognized that the
Adviser has provided a vast array of services the scope of which has expanded over the years in light of regulatory, market and other developments, such as the development of a liquidity management program and expanded compliance programs for the
Nuveen funds. The Board also noted the extensive resources, tools and capabilities the Adviser and its affiliates devoted to the various operations of the Nuveen funds. These services include, but are not limited to: investment oversight, risk
management and securities valuation services (such as analyzing investment performance and risk data; overseeing and reviewing the various sub-advisers to the Nuveen funds and their investment teams; overseeing trade execution, soft dollar practices
and securities lending activities; providing daily valuation services and developing related valuation policies, procedures and methodologies; overseeing risk disclosure; periodic testing of investment and liquidity risks; participating in financial
statement and marketing disclosures; participating in product development; and participating in leverage management and liquidity monitoring); product management (such as analyzing a fund’s position in the marketplace, setting dividends,
preparing shareholder and intermediary communications and other due diligence support); fund administration (such as preparing fund tax returns and other tax compliance services, overseeing the funds’ independent public accountants and other
service providers; managing fund budgets and expenses; and helping to fulfill the funds’ regulatory filing requirements); oversight of shareholder services and transfer agency functions (such as overseeing transfer agent service providers
which include registered shareholder customer service and transaction processing; and overseeing proxy solicitation and tabulation services); Board relations services (such as organizing and administering Board and committee meetings, preparing
various reports to the Board and committees and providing other support services); compliance and regulatory oversight services (such as devising compliance programs; managing compliance policies; monitoring compliance with applicable fund policies
and laws and regulations; and evaluating the compliance programs of the various sub-advisers to the Nuveen funds and certain other service providers); and legal support and oversight of outside law firms (such as helping to prepare and file
registration statements and proxy statements; overseeing fund activities and providing legal interpretations regarding such activities; and negotiating agreements with other fund service providers).
The Board also recognized that the Adviser and its affiliates
have undertaken a number of initiatives over the previous year that benefited the complex and/or particular Nuveen funds including, but not limited to:
Fund
Improvements and Product Management Initiatives – continuing to proactively manage the Nuveen fund complex as a whole and at the individual fund level with an aim to enhance the shareholder outcomes through, among other things,
rationalizing the product line and gaining efficiencies through mergers, repositionings and liquidations; launching new share classes; reviewing and updating investment policies and benchmarks; closing funds to new investments; rebranding the
exchange-traded fund (“ETF”) product line; and integrating certain investment teams and changing the portfolio managers serving various funds;
•
Capital
Initiatives – continuing to invest capital to support new Nuveen funds with initial capital as well as to facilitate modifications to the strategies or structure of existing funds;
•
Liquidity
Management – implementing the liquidity risk management program which was designed to assess and manage the liquidity risk of the Nuveen funds. The Board noted that this program was particularly helpful in addressing the high
volatility and liquidity challenges that arose in the market, particularly for the high yield municipal sector, during the first half of 2020;
•
Compliance
Program Initiatives – continuing efforts to mitigate compliance risk, increase operating efficiencies, strengthen key compliance program elements and support international business growth and other objectives through, among other
things, integrating various investment teams across affiliates, consolidating marketing review functions, enhancing compliance related technologies and establishing and maintaining shared broad-based compliance policies throughout the organization
and its affiliates;
•
Risk
Management and Valuation Services – continuing efforts to provide Nuveen with a more disciplined and consistent approach to identifying and mitigating the firm’s operational risks through, among other things, enhancing the
interaction and reporting between the investment risk management team and various affiliates and adopting a risk operational framework across the complex;
•
Regulatory
Matters – continuing efforts to monitor regulatory trends and advocate on behalf of the Nuveen funds, to implement and comply with new or revised rules and mandates and to respond to regulatory inquiries and exams;
•
Government
Relations – continuing efforts of various Nuveen teams and affiliates to develop policy positions on a broad range of issues that may impact the Nuveen funds, advocate and communicate these positions to lawmakers and other
regulatory authorities and work with trade associations to ensure these positions are represented;
•
Business
Continuity, Disaster Recovery and Information Services – continuing to periodically test business continuity and disaster recovery plans, maintain an information security program designed to identify and manage information
security risks, and provide reports to the Board, at least annually, addressing, among other things, management’s security risk assessment, cyber risk profile, potential impact of new or revised laws and regulations, incident tracking and
other relevant information technology risk-related reports; and
•
Expanded
Dividend Management Services – continuing to manage the dividends among the varying types of Nuveen funds within the Nuveen complex to be consistent with the respective fund’s product design and investing resources to
develop systems to assist in the process for newer products such as target term funds and ETFs.
The Board also noted the benefits to shareholders of investing
in a Nuveen fund, as each Nuveen fund is a part of a large fund complex with a variety of investment disciplines, capabilities, expertise and resources available to navigate and support the funds including during stressed times as occurred in the
market in the first half of 2020. In addition to the services provided by the Adviser, the Board also considered the risks borne by the Adviser and its affiliates in managing the Nuveen funds, including entrepreneurial, operational, reputational,
regulatory and litigation risks.
The Board further
considered the division of responsibilities between the Adviser and the Sub-Adviser and recognized that the Sub-Adviser and its investment personnel generally are responsible for the management of each Fund’s portfolio under the oversight of
the Adviser and the Board. The Board considered an analysis of the Sub-Adviser provided by the Adviser which included, among other things, the Sub-Adviser’s assets under management and changes thereto, a summary of the applicable investment
team and changes thereto, the investment approach of the team and the performance of the funds sub-advised by the Sub-Adviser over various periods. The Board further considered at the May Meeting or prior meetings evaluations of the
Sub-Adviser’s compliance program and trade execution. The Board also considered the structure of investment personnel compensation programs and whether this structure provides appropriate incentives to act in the best interests of the
respective Nuveen funds. The Board noted that the Adviser recommended the renewal of the Sub-Advisory Agreements.
Based on its review, the Board determined, in the exercise of
its reasonable business judgment, that it was satisfied with the nature, extent and quality of services provided to the respective Funds under each applicable Advisory Agreement.
B. The Investment Performance of the Funds and Fund
Advisers
In evaluating the quality of the services
provided by the Fund Advisers, the Board also received and considered a variety of investment performance data of the Nuveen funds they advise. In this regard, the Board reviewed, among other things, Fund performance over the quarter, one- and
three- year periods ending December 31, 2019 (or for shorter periods available to the extent a Fund was not in existence during such periods). Unless otherwise indicated, the performance data referenced below reflects the periods ended December 31,2019. In general, the year 2019 was a period of
Annual Investment Management Agreement Approval Process (continued)
strong market performance. However, as noted above, the Board recognized the
unprecedented market volatility and decline that occurred in early 2020 and the significant impact it would have on fund performance. As a result, the Board reviewed performance data capturing more recent time periods, including performance data
reflecting the first quarter of 2020 as well as performance data for various periods ended April 17, 2020 for its April Meeting and May 8, 2020 for its May Meeting. In addition, for funds that had changes in portfolio managers, the Board considered
performance data of such funds before and after such changes. In considering performance data, the Board is aware of certain inherent limitations with such data, including that differences between the objective(s), strategies and other
characteristics of the Nuveen funds compared to certain peer groups and/or benchmark(s) as well as differences in the composition of the peer groups over time will necessarily contribute to differences in performance results and limit the value of
the comparative information.
As noted above, the Board
reviewed fund performance over various periods ended December 31, 2019 as well as the first quarter of 2020 and various time periods ended April 17, 2020 and May 8, 2020. In light of the significant market decline in the early part of 2020, the
Board noted that a shorter period of underperformance may significantly impact longer term performance. Further, the Board recognized that performance data may differ significantly depending on the ending date selected and accordingly, performance
results for periods ended at the year-end of 2019 may vary significantly from performance results for periods ended in the first quarter of 2020, particularly given the extraordinary market conditions at that time as the impact of COVID-19 and other
market developments unfolded. The Board considered a fund’s performance in light of the overall financial market conditions. In addition, the Board recognized that shareholders may evaluate performance based on their own holding periods which
may differ from the periods reviewed by the Board and lead to differing results.
With respect to Nuveen ETFs, the Board noted that the Nuveen
ETFs, including the Funds, are designed to track the performance of a specified index (the “Underlying Index”). In its review, the Board received and reviewed, among other things, the net asset value performance of each Fund, the
performance of such Fund’s Underlying Index and parent index, such Fund’s relative performance compared to the performance of peer funds (the “Performance Peer Group”) and such Fund’s tracking error and excess return
compared to its Underlying Index. Given each Fund’s investment objective of seeking investment results that correspond generally to the performance of its Underlying Index, however, the Board recognized that the extent to which a Fund tracked
its benchmark was of greater relevance in assessing the performance for such Fund and therefore placed more emphasis on the tracking error and correlation data provided.
In addition to the performance data prepared in connection with
the annual review of the advisory agreements of the Nuveen funds, the Board reviewed fund performance throughout the year at its quarterly meetings representing differing time periods and took into account the discussions that occurred at these
Board meetings in evaluating a fund’s overall performance. The Board also considered, among other things, the Adviser’s analysis of each Nuveen fund’s performance, with particular focus on funds that were considered performance
outliers (both overperformance and underperformance), the factors contributing to the performance and any steps taken to address any performance concerns. Given the volatile market conditions of early 2020, the Board considered the Adviser’s
analysis of the impact of such conditions on the Nuveen funds’ performance.
The Board evaluated performance in light of various factors,
including general market conditions, issuer-specific information, asset class information, fund cash flows and other factors. Accordingly, depending on the facts and circumstances, the Board may be satisfied with a fund’s performance
notwithstanding that its performance may be below its benchmark or peer group for certain periods. However, with respect to any Nuveen funds for which the Board had identified performance issues, the Board monitors such funds closely until
performance improves, discusses with the Adviser the reasons for such results, considers whether any steps are necessary or appropriate to address such issues, and reviews the results of any efforts undertaken.
The Board’s determinations with respect to each Fund are
summarized below.
For the Enhanced Yield U.S. Aggregate
Bond ETF, the Board considered, among other things, the Fund’s performance for the one- and three-year periods ended December 31, 2019, the performance of its Underlying Index for such periods, the correlation between the Fund’s
performance and that of its Underlying Index, and the Fund’s tracking difference and excess return as compared to its Underlying Index. The Board further noted that the Fund ranked in the first quartile of its Performance Peer Group for the
one-year period ended December 31, 2019 and second quartile of its Performance Peer Group for the three-year period ended December 31, 2019. With the market decline in the first quarter of 2020, the Board reviewed the performance of the Fund and its
Underlying Index for the one- and three-year periods ended March 31, 2020 as well as the Fund’s tracking difference as compared to its Underlying Index. The Board noted that the Fund ranked in the second quartile of its Performance Peer Group
for the one-year period ended March 31, 2020 and third quartile for the three-year period ended March 31, 2020. Given the Fund’s investment objective, however, the Board placed more emphasis on its review of the correlation and tracking
difference data. The Board was satisfied with the Fund’s overall performance.
For the Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF, the
Board considered, among other things, the Fund’s performance for the one-year period ended December 31, 2019, the performance of its Underlying Index for such period, the correlation between the Fund’s performance and that of its
Underlying Index, and the Fund’s tracking difference and excess return as compared to its Underlying Index. The Board further noted that the Fund ranked in the third quartile of its Performance Peer Group for the one-year period ended December31, 2019. With the market decline in the first quarter of 2020, the Board reviewed the performance of the Fund and its Underlying Index for the one- and three-year periods ended March 31, 2020 as well as the Fund’s tracking difference as
compared to its Underlying Index. The Board noted that the Fund ranked in the second quartile of its Perfor-
mance Peer Group for the one-year period ended March 31, 2020 and first
quartile for the three-year period ended March 31, 2020. Given the Fund’s investment objective, however, the Board placed more emphasis on its review of the correlation and tracking difference data. The Board was satisfied with the
Fund’s overall performance.
For the ESG U.S.
Aggregate Bond ETF, the Board considered, among other things, the Fund’s performance for the one-year period ended December 31, 2019, the performance of its Underlying Index for such period, the correlation between the Fund’s performance
and that of its Underlying Index, and the Fund’s tracking difference and excess return as compared to its Underlying Index. The Board further noted that the Fund ranked in the third quartile of its Performance Peer Group for the one-year
period ended December 31, 2019. With the market decline in the first quarter of 2020, the Board reviewed the performance of the Fund and its Underlying Index for the one-year period ended March 31, 2020 as well as the Fund’s tracking
difference as compared to its Underlying Index. The Board noted that the Fund ranked in the first quartile of its Performance Peer Group for the one-year period ended March 31, 2020. Given the Fund’s investment objective, however, the Board
placed more emphasis on its review of the correlation and tracking difference data. The Board considered that the Fund was relatively new with a limited performance history available, limiting the ability to make a meaningful assessment of
performance. Nevertheless, the Board was satisfied with the Fund’s overall performance.
C. Fees, Expenses and Profitability
1. Fees and Expenses
As part of its annual review, the Board
generally considered the contractual management fee and net management fee (the management fee after taking into consideration fee waivers and/or expense reimbursements, if any) paid by a Nuveen fund to the Adviser in light of the nature, extent and
quality of the services provided. The Board also considered the total operating expense ratio of a Nuveen fund before and after any fee waivers and/or expense reimbursements. With respect to the Nuveen ETFs, such as the Funds, however, the Board
recognized that the fund pays the Adviser a unitary fee and therefore, the Board reviewed the unitary fee compared to the gross and net management fees and net total expense ratios of a group of comparable funds (the “Peer Group”)
established by Broadridge. The Independent Board Members reviewed the methodology Broadridge employed to establish its Peer Group and recognized that differences between the applicable fund and its respective Peer Group as well as changes to the
composition of the Peer Group from year to year may limit some of the value of the comparative data. The Independent Board Members also considered a fund’s operating expense ratio as it more directly reflected the shareholder’s costs in
investing in the respective fund.
In
their review, the Independent Board Members considered, in particular, each Nuveen fund with a net expense ratio of six basis points or higher compared to that of its peer average (each, an “Expense Outlier Fund”) and an analysis as to
the factors contributing to each such fund’s higher relative net expense ratio. Accordingly, in reviewing the comparative data between a fund and its peers, the Board generally considered the fund’s net expense ratio 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 Group. The Independent Board Members also considered, in relevant part, a fund’s net management fee and net total expense ratio in light of its performance history.
As noted above, the Board recognized that
each Fund pays the Adviser a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of such Fund, other than any distribution and/or service fees, interest expenses, taxes, acquired
fund fees and expenses, expenses incurred in acquiring and disposing of portfolio securities, fees and expenses of the Independent Board Members (including any of their counsel’s fees), certain expenses of such Fund’s chief compliance
officer, litigation expenses and extraordinary expenses. Unlike the typical fee arrangements of the other Nuveen funds in which the funds pay a variety of fees and expenses such as investment advisory fees, transfer agency fees, audit fees,
custodian fees, administration fees, compliance expenses, recordkeeping expenses, marketing and shareholder service fees, distribution charges and other expenses, each Fund pays the Adviser a unified fee, and the Adviser is responsible for providing
such services or arranging and supervising third parties to provide such services (subject to the noted exceptions). Under the unified fee structure, the Board recognized that the Adviser generally bears the risks of the operating costs rising (and
benefits if such expenses decrease) and therefore has an incentive to be administratively efficient. As part of the Board’s analysis of the fee level of a Fund, the Independent Board Members reviewed, among other things, the unified fee
compared to the gross and net management fees and net total expense ratios of its respective Peer Group.
With respect to the Sub-Adviser, the Board
also considered the sub-advisory fee schedule paid to the Sub-Adviser in light of the sub-advisory services provided to the Fund and comparative data of the fees the Sub-Adviser charges to other clients, if any. In its review, the Board recognized
that the compensation paid to the Sub-Adviser is the responsibility of the Adviser, not the Funds.
The Board noted that each Fund had a net
management fee and a net expense ratio that were below the respective peer averages.
Based on its review of the information
provided, the Board determined that each Fund’s management fees (as applicable) to a Fund Adviser were reasonable in light of the nature, extent and quality of services provided to the Fund.
Annual Investment Management Agreement Approval Process (continued)
2. Comparisons with the Fees of Other
Clients
In determining the
appropriateness of fees, the Board also considered information regarding the fee rates the respective Fund Advisers charged to certain other types of clients and the type of services provided to these other clients. With respect to the Adviser
and/or the Sub-Adviser, such other clients may include foreign investment companies offered by Nuveen and sub-advised by the Sub-Adviser; and certain funds advised by the Sub-Adviser. The Board further noted that the Adviser also advised and the
Sub-Adviser sub-advised additional ETFs sponsored by Nuveen.
The Board recognized that the Funds had an
affiliated sub-adviser and, with respect to affiliated sub-advisers, reviewed, among other things, the range of fees assessed for foreign investment companies and ETFs offered by Nuveen. The Board also reviewed the management fees and expense ratios
of certain funds advised by the Sub-Adviser in the TIAA-CREF family of funds.
In considering the fee data of other
clients, the Board considered, among other things, the differences in the amount, type and level of services provided to the Nuveen funds relative to other clients as well as the differences in portfolio investment policies, investor profiles,
account sizes and regulatory requirements, all of which contribute to the variations in the fee schedules. The Board recognized the complexity and myriad of services the Adviser had provided to the Nuveen funds compared to the other types of clients
as the Adviser is principally responsible for all aspects of operating the funds, including complying with the increased regulatory requirements required when managing the funds as well as the increased entrepreneurial, legal and regulatory risks
that the Adviser incurs in sponsoring and managing the funds. Further, with respect to ETFs, the Board considered that Nuveen ETFs are passively managed compared to the active management of the other Nuveen funds which contributed to the differences
in fee levels between the Nuveen ETFs and other Nuveen funds. In general, higher fee levels reflect higher levels of service provided by the Adviser, increased investment management complexity, greater product management requirements, and higher
levels of business risk or some combination of these factors. The Board further considered that the Sub-Adviser’s fee is essentially for portfolio management services. The Board concluded the varying levels of fees were justified given, among
other things, the inherent differences in the products and the level of services provided to the Nuveen funds versus other clients, the differing regulatory requirements and legal liabilities and the entrepreneurial, legal and regulatory risks
incurred in sponsoring and advising a registered investment company.
3. Profitability of Fund Advisers
In their review, the Independent Board
Members considered information regarding Nuveen’s level of profitability for its advisory services to the Nuveen funds for the calendar years 2019 and 2018. The Board reviewed, among other things, Nuveen’s net margins (pre-tax) (both
including and excluding distribution expenses); gross and net revenue margins (pre- and post-tax); revenues, expenses, and net income (pre-tax and after-tax and before distribution) of Nuveen for fund advisory services; and comparative profitability
data comparing the margins of Nuveen compared to the adjusted margins of certain peers with publicly available data and with the most comparable assets under management (based on asset size and asset composition) for each of the last two calendar
years. The Board also reviewed the revenues and expenses the Adviser derived from its ETF product line for the 2018 and 2019 calendar years.
In reviewing the profitability data, the
Independent Board Members recognized the subjective nature of calculating profitability as the information is not audited and is dependent on cost allocation methodologies to allocate expenses of Nuveen and its affiliates between the fund and
non-fund businesses. The expenses to be allocated include direct expenses in servicing the Nuveen funds as well as indirect and/or shared costs (such as overhead, legal and compliance) some of which are attributed to the Nuveen funds pursuant to the
cost allocation methodologies. The Independent Board Members reviewed a description of the cost allocation methodologies employed to develop the financial information and a summary of the history of changes to the methodology over the eleven-year
period from 2008 to 2019. The Board had also appointed three Independent Board Members, along with the assistance of independent counsel, to serve as the Board’s liaisons to review the development of the profitability data and any proposed
changes to the cost allocation methodology prior to incorporating any such changes and to report to the full Board. The Board recognized that other reasonable and valid allocation methodologies could be employed and could lead to significantly
different results. Based on the data, the Independent Board Members noted that Nuveen’s net margins were higher in 2019 than the previous year and considered the key drivers behind the revenue and expense changes that impacted Nuveen’s
net margins between the years. The Board also noted the reinvestments of some of the profits into the business through, among other things, the investment of seed capital in certain funds and continued investments in enhancements to information
technology, internal infrastructure and data management improvements and global investment and innovation projects.
As noted above, the Independent Board
Members also considered Nuveen’s margins from its relationship to the Nuveen funds compared to the adjusted margins of certain peers with publicly available data and with the most comparable assets under management (based on asset size and
asset composition) to Nuveen for the calendar years 2019 and 2018. The Independent Board Members noted that Nuveen’s margins from its relationships with the Nuveen funds were on the low range compared to the adjusted margins of the peers. The
Independent Board Members, however, recognized that it is difficult to make comparisons of profitability with other investment adviser peers given that comparative data is not generally public and the calculation of profitability is subjective and
affected by numerous factors (such as types of funds a peer manages, its business mix, its cost of capital, the numerous assumptions underlying the methodology used to allocate expenses and other factors) which can have a significant impact on the
results.
Aside from Nuveen’s profitability, the
Board recognized that the Adviser is a subsidiary of Nuveen, LLC, the investment management arm of Teachers Insurance and Annuity Association of America (“TIAA”). As such, the Board also reviewed a balance sheet for TIAA reflecting its
assets, liabilities and capital and contingency reserves for the 2019 and 2018 calendar years to consider the financial strength of TIAA. The Board recognized the benefit of having an investment adviser and its parent with significant resources,
particularly during periods of market stress.
In addition to Nuveen, the Independent Board
Members also considered the profitability of the Sub-Adviser from its relationships with the Nuveen funds. In this regard, the Independent Board Members reviewed, among other things, the Sub-Adviser’s revenues, expenses and net operating
income for its advisory services to the Nuveen ETFs and closed-end funds for 2019.
In evaluating the reasonableness of the
compensation, the Independent Board Members also considered any other ancillary benefits derived by the respective Fund Adviser from its relationship with the Nuveen funds as discussed in further detail below.
Based on a consideration of all the
information provided, the Board noted that Nuveen’s and the Sub-Adviser’s level of profitability was acceptable and not unreasonable in light of the services provided.
D. Economies of Scale and Whether Fee Levels Reflect These
Economies of Scale
The Board considered whether there
have been economies of scale with respect to the management of the Nuveen funds and whether these economies of scale have been appropriately shared with the funds. The Board recognized that although economies of scale are difficult to measure, there
are several methods to help share the benefits of economies of scale, including breakpoints in the management fee schedule, fee waivers and/or expense limitations, the pricing of Nuveen funds at scale at inception and investments in Nuveen’s
business which can enhance the services provided to the funds for the fees paid. The Board noted that Nuveen generally has employed these various methods. In this regard, the Board noted that, with respect to the Nuveen funds generally, although the
management fee of the Adviser is typically comprised of a fund-level component and a complex-level component each with its own breakpoint schedule, the Nuveen ETFs do not have breakpoint schedules. The Board recognized that the Nuveen ETFs
(including the Funds) pay a unified fee and as a result, any reduction in fixed costs associated with the management of these funds would benefit the Adviser. However, the Independent Board Members noted that the unified fee schedule provides
shareholders with a level of certainty of the expenses of the Nuveen ETFs. The Independent Board Members considered that the unified fees generally provide inherent economies of scale because the Nuveen ETF would maintain a competitive fixed fee
over the annual contract period even if the particular fund’s assets declined and/or operating costs rose. As the Nuveen ETFs do not have breakpoints, they do not participate in the complex-level fee programs. In addition, given that the
Nuveen ETFs were recently launched in 2016, the Independent Board Members recognized the Adviser’s costs in operating the Nuveen ETFs during the start-up phase.
The Independent Board Members also recognized the
Adviser’s continued reinvestment in its business through, among other things, investments in its business infrastructure and information technology, portfolio accounting system and other systems and platforms that will, among other things,
support growth, simplify and enhance information sharing, and enhance the investment process to the benefit of all of the Nuveen funds.
Based on its review, the Board concluded that the current fee
arrangements together with the Adviser’s reinvestment in its business appropriately shared any economies of scale with shareholders. The Board further concluded that the absence of a fund-level and/or complex-level breakpoint schedule or
arrangement (as applicable) was acceptable.
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. In addition, the Independent Board Members also noted that various sub-advisers may
engage in soft dollar transactions pursuant to which they may receive the benefit of research products and other services provided by broker-dealers executing portfolio transactions on behalf of the applicable Nuveen funds, although the Board
recognized that certain sub-advisers may be phasing out the use of soft dollars over time. The Board noted that the Sub-Adviser does not participate in soft dollar arrangements with respect to Fund portfolio transactions.
Annual Investment Management Agreement Approval Process (continued)
Based on its 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.
PART
II
Nuveen ESG High Yield Corporate Bond
ETF
At the meeting held on September 19, 2019 (the
“Meeting”), the Board Members, including the Independent Board Members, considered and approved the investment management agreement (for purposes of this Part II, the “Investment Management Agreement”) pursuant to which
Nuveen Fund Advisors, LLC (the “Adviser”) serves as the investment adviser to Nuveen ESG High Yield Corporate Bond ETF (for purposes of this Part II, the “Fund”), a series of Nushares ETF Trust (the “Trust”), and
the investment sub-advisory agreement (for purposes of this Part II, the “Sub-Advisory Agreement”) with Teachers Advisors, LLC (the “Sub-Adviser”) pursuant to which the Sub-Adviser serves as the investment sub-adviser to the
Fund. For purposes of this Part II, (a) the Adviser and the Sub-Adviser are each hereafter a “Fund Adviser” and (b) the Investment Management Agreement and the Sub-Advisory Agreement are each hereafter an “Advisory Agreement”
and collectively, the “Advisory Agreements.”
To assist the Board in its evaluation of an Advisory Agreement
with a Fund Adviser at the Meeting, the Independent Board Members had received, in adequate time in advance of the Meeting or at prior meetings, materials which outlined, among other things:
•
the nature, extent and
quality of the services expected to be provided by the Fund Adviser;
•
the organization of the Fund
Adviser, including the responsibilities of various departments and key personnel;
•
the relevant expertise and
background of the Fund Adviser with respect to the Fund’s investment strategy;
•
certain performance-related
information (as described below);
•
certain profitability-related
information (as described below);
•
the
Fund’s proposed unitary fee structure, including comparisons of the Fund’s proposed net expense ratio with the net expense ratios of comparable funds; and
•
the soft
dollar practices of the Fund Adviser, if any.
At the Meeting and/or at prior meetings, the Adviser made
presentations to and responded to questions from the Board. During the Meeting and/or at prior meetings, the Independent Board Members also met privately with their legal counsel to, among other things, review the Board’s duties under the 1940
Act, the general principles of state law in reviewing and approving advisory contracts, the standards used by courts in determining whether investment company boards of directors have fulfilled their duties, factors to be considered in voting on
advisory contracts and an adviser’s fiduciary duty with respect to advisory agreements and compensation. It is with this background that the Independent Board Members considered the Advisory Agreements. As outlined in more detail below, the
Independent Board Members considered various factors they believed relevant with respect to the Fund. Each Board Member may have accorded different weight to the various factors and information discussed below in reaching his or her conclusions with
respect to the Fund’s Advisory Agreements. The Board Members also drew on information they had received in their capacity as trustees and directors, as applicable, of other registered investment companies advised by the Fund Advisers.
A. Nature, Extent and Quality of Services
The Independent Board Members considered the nature, extent and
quality of the respective Fund Adviser’s services, including portfolio management services and administrative services. Given that the Adviser and the Sub-Adviser already serve as adviser and sub-adviser, respectively, to other Nuveen funds
overseen by the Board Members, the Board has a good understanding of each such Fund Adviser’s organization, operations, personnel and services. As the Independent Board Members meet regularly throughout the year to oversee the Nuveen funds,
including funds currently advised by the Fund Advisers, the Independent Board Members, have, in part, relied upon their knowledge from their meetings and any other interactions throughout the year with the respective Fund Adviser in evaluating the
Advisory Agreements.
The Independent Board Members
recognized that open-end exchange-traded funds (“ETFs”) were a relatively recent addition to the Nuveen fund product line (i.e., added in 2016). They considered information about the structure, investment objective, investment strategy
and other characteristics of the Fund. Additionally, they observed that the Fund was expected to seek to track the investment results of a specified underlying index (the “Index”).
The Board noted that the Fund would be a registered investment
company that would operate in a regulated industry. In considering the services that were expected to be provided by the Fund Advisers, at the Meeting and/or at prior meetings, the Board has recognized that the Adviser provides a comprehensive set
of services necessary to operate the Nuveen funds in a highly regulated industry and has noted that the scope of such services has expanded over the years as a result of regulatory, market and other developments, such as the development of the
liquidity management program and expanded compliance programs. Some of the functions the Adviser is responsible for include, but are not limited to: product management (such as analyzing a fund’s position in the marketplace, setting dividends,
preparing shareholder and intermediary communications and other due diligence support); investment oversight (such as analyzing fund performance, sub-advisers and investment teams and analyzing trade executions of portfolio transactions, soft dollar
practices and securities lending activities); securities valuation services (such as executing the daily valuation process for portfolio securities and developing and recommending changes to valuation policies and procedures); risk management (such
as overseeing operational and investment risks, including stress testing); fund administration (such as preparing fund tax returns and other tax compliance services, overseeing the Nuveen funds’ independent public accountants and other service
providers; managing fund budgets and expenses; and helping to fulfill the funds’ regulatory filing requirements); oversight of shareholder services and transfer agency functions (such as oversight and liaison of transfer agent service
providers which include registered shareholder customer service and transaction processing); Board relations services (such as organizing and administering Board and committee meetings, preparing various reports to the Board and committees and
providing other support services); compliance and regulatory oversight services (such as developing and maintaining a compliance program to ensure compliance with applicable laws and regulations, monitoring compliance with applicable fund policies
and procedures and adherence to investment restrictions, and evaluating the compliance programs of the Nuveen fund sub-advisers and certain other service providers); and legal support and oversight of outside law firms (such as with respect to
filing and updating registration statements; maintaining various regulatory registrations; and providing legal interpretations regarding fund activities, applicable regulations and implementation of policies and procedures). The Board was aware,
however, that services provided to ETFs may in some respects differ from those provided to other Nuveen funds. The Independent Board Members noted that the Adviser would oversee the Sub-Adviser, which was generally expected to provide portfolio
advisory services to the Fund. In addition, the Independent Board Members recognized the relevant experience and expertise of the investment team expected to manage the Fund. In this regard, they noted that the portfolio managers that were expected
to serve the Fund also serve as portfolio managers to certain other Nuveen ETFs.
Based on their review, the Independent Board Members found
that, overall, the nature, extent and quality of services expected to be provided to the Fund under each Advisory Agreement were satisfactory.
B. Investment Performance
The Fund was new and, therefore, did not have its own
performance history. The Independent Board Members, however, were familiar with the performance records of other Nuveen funds advised by the Adviser and noted that the Sub-Adviser manages other Nuveen ETFs. In addition, the Independent Board Members
reviewed certain historical performance-related data pertaining to the Index as well as the Fund’s contemplated secondary index (including (i) returns for the 1- year, 2- year annualized, 3- year annualized and since inception (i.e., beginning
June 30, 2015) annualized periods as of December 31, 2018 and (ii) calendar year returns for 2016 through 2018).
C. Fees, Expenses and Profitability
1. Fees and Expenses
In evaluating the management fees and
expenses that the Fund was expected to bear, the Independent Board Members considered, among other things, the Fund’s proposed unitary fee structure and its proposed net expense ratio in absolute terms as well as compared with the net expense
ratios of comparable ETFs.
In
considering the Fund’s proposed unitary fee structure, the Independent Board Members took into account the Adviser’s representation that unitary fee structures were generally common for ETFs. They noted that under this structure, the
Fund would pay a fee to the Adviser and, in turn, the Adviser would be generally responsible for the fees incurred by the Fund (such as custody fees, transfer agency fees, index licensing fees, and stock exchange listing fees, as well as the fee
paid to the Sub -Adviser), subject to certain exceptions (which included the management fee, any payments under the Trust’s distribution and service plan, interest expenses, taxes, acquired fund fees and expenses, expenses incurred in
acquiring and disposing of portfolio securities, certain compensation expenses of the Fund’s chief compliance officer, fees and expenses of the Independent Board Members and their counsel, litigation expenses and extraordinary expenses). In
this regard, the Independent Board Members were provided with estimates of the Fund’s anticipated expenses, including those that would be paid by the Adviser from the unitary fee and those that would be excluded from the unitary fee, to the
extent available.
In addition, in
considering the proposed unitary fee structure, the Independent Board Members took into account that the Adviser would generally bear the risk that certain of the Fund’s operating expenses would increase (but would also benefit if such
expenses decrease) and the degree of expense stability that would be afforded to the Fund’s shareholders. Additionally, the Independent Board Members reviewed, among other things, the Fund’s proposed unitary fee as well as comparative
data pertaining to unitary fees of the ETFs included in peer groups comprised of the ten most recently launched high yield bond ETFs (the “Recently Launched ETFs Peer Group”) and the ten largest high yield bond ETFs (the “Largest
ETFs Peer Group”). The Independent Board Members noted that (a) as compared to the Recently Launched ETFs Peer Group, the proposed unitary
Annual Investment Management Agreement Approval Process (continued)
fee to be charged to the Fund was equal to the median fee
and the average fee, and below the weighted average fee and (b) as compared to the Largest ETFs Peer Group, the proposed unitary fee to be charged to the Fund was below the median fee, average fee and weighted average fee. Further, the Independent
Board Members considered the proposed sub-advisory fee for the Fund, which, as noted above, will be paid by the Adviser out of its unitary fee.
Based on their review of the fee and expense
information provided, the Independent Board Members determined that the Fund’s unitary fee was reasonable in light of the nature, extent and quality of services to be provided to the Fund.
2. Comparisons with the Fees of Other
Clients
The Board considered that the
Fund will pay a unitary fee, which will differ from most other investment companies advised by the Adviser which pay a variety of fees, such as the investment advisory fee; Rule 12b-1 fees, if any; transfer agency fees; custody fees; and other
expenses. The Board believed the unitary fee structure provides certain benefits to shareholders as it clearly discloses the cost of owning Fund shares, provides a level of cost certainty by shifting to the Adviser the risk that some of the costs of
operating the Fund may rise, and provides an incentive to the Adviser to maximize administrative efficiencies. As noted, the Board considered the unitary fee to be paid by the Fund in comparison to the unitary fees of the ETFs included in the
Recently Launched ETFs Peer Group and the Largest ETFs Peer Group.
The Board has also noted at prior meetings
that the Adviser and/or the Sub-Adviser provide services to other types of clients, which may include foreign investment companies offered by Nuveen, certain funds advised by the Sub-Adviser and other ETFs sponsored by Nuveen. In this regard, the
Board has previously reviewed, among other things, the range of fees assessed for foreign investment companies and ETFs offered by Nuveen and the management fees and expense ratios of certain funds advised by the Sub-Adviser in the TIAA-CREF family
of funds. In addition to the comparative fee data, the Board has also reviewed, among other things, a description of the different levels of services provided to certain other clients compared to the services provided to the Nuveen funds as well as
the differences in portfolio investment policies, investor profiles, account sizes and regulatory requirements, all of which contribute to the variations in fee schedules. The Board has also noted, among other things, the wide range of services in
addition to investment management services provided to the Nuveen funds when the Adviser is principally responsible for all aspects of operating the funds, including the increased regulatory requirements that must be met in managing the funds and
the increased entrepreneurial, legal and regulatory risks that the Adviser incurs in sponsoring and managing the funds. The Board has also considered that the Nuveen ETFs are passively managed compared to the active management of the other Nuveen
funds, which has contributed to the differences in fee levels between Nuveen ETFs and other Nuveen funds. In general, the Board has noted that the higher fee levels reflect higher levels of service provided by the Adviser, increased investment
management complexity, greater product management requirements, and higher levels of business risk or some combination of these factors. The Board has further considered that the Sub-Adviser’s fee is essentially for portfolio management
services. The Board has concluded that varying levels of fees are justified given, among other things, the inherent differences in the products and the level of services provided to the Nuveen funds versus other clients, the differing regulatory
requirements and legal liabilities and the entrepreneurial, legal and regulatory risks incurred in sponsoring and advising a registered investment company.
3. Profitability of Fund Advisers
At the time of the Meeting, historical
information regarding the costs of services provided by the Adviser to the Fund and the profitability of the Fund to the Adviser was not available as the Fund had not commenced operations and it was not possible to predict the effect on
profitability of the Fund. The Independent Board Members, however, considered the estimated operating expenses to be paid by the Adviser pursuant to the unitary fee.
Further, at prior meetings, conjunction with
their review of fees, the Independent Board Members have considered information regarding Nuveen’s level of profitability for its advisory services to the Nuveen funds for the calendar years 2018 and 2017. In this regard, the Board has
reviewed, among other things, Nuveen’s net margins (pre-tax) (both including and excluding distribution expenses); gross and net revenue margins (pre- and post-tax); revenues, expenses, and net income (pre-tax and after-tax and before
distribution) of Nuveen for fund advisory services; and comparative profitability data comparing the adjusted margins of Nuveen compared to the adjusted margins of certain peers with publicly available data and with the most comparable assets under
management (based on asset size and asset composition) for each of the last two calendar years. The Board has also reviewed the revenues and expenses the Adviser derived from its ETF product line that was launched in 2016. The Independent Board
Members have noted that Nuveen’s net margins were higher in 2018 than the previous year and have considered the key drivers behind the revenue and expense changes that impacted Nuveen’s net margins between the years. The Board has
considered the costs of investments in the Nuveen business, including the investment of seed capital in certain Nuveen funds and additional investments in infrastructure and technology. The Independent Board Members have also noted that
Nuveen’s adjusted margins from its relationships with the Nuveen funds were on the low range compared to the adjusted margins of the peers; however, the Independent Board Members have recognized the inherent limitations of the comparative data
of other publicly traded peers given that the calculation of profitability is rather subjective and numerous factors (such as types of funds, business mix, cost of capital, methodology to allocate expenses and other factors) can have a significant
impact on the results.
The Independent Board Members have also
reviewed a description of the expense allocation methodology employed to develop the financial information and a summary of the history of changes to the methodology over the ten-year period from 2008 to 2018, and have recognized that other
reasonable allocation methodologies could be employed and lead to significantly different results. The Board has noted that two Independent Board Members, along with independent counsel, serve as the Board’s liaisons to review profitability
and discuss any proposed changes to the methodology prior to the full Board’s review.
Aside from Nuveen’s profitability, the
Board has recognized that the Adviser is a subsidiary of Nuveen, LLC, the investment management arm of Teachers Insurance and Annuity Association of America (“TIAA”). As such, the Board has also reviewed a balance sheet for TIAA
reflecting its assets, liabilities and capital and contingency reserves for the 2018 and 2017 calendar years to consider the financial strength of TIAA having recognized the importance of having an adviser with significant resources.
In evaluating the reasonableness of the
compensation, the Independent Board Members have also considered any other ancillary benefits derived by the respective Fund Adviser from its relationship with the Nuveen funds as discussed in further detail below.
Based on a consideration of all the
information provided, the Board has noted that Nuveen’s level of profitability was acceptable and not unreasonable in light of the services provided.
D. Economies of Scale and Whether Fee Levels Reflect These
Economies of Scale
With respect to economies of scale,
the Independent Board Members have recognized that, in general, as the assets of a particular fund or the Nuveen complex in the aggregate increase over time, economies of scale may be realized with respect to the management of the funds. In this
regard, the Independent Board Members considered whether economies of scale were expected to be achieved as the Fund grows and whether any such economies of scale were expected to be shared with shareholders. Although the Independent Board Members
have recognized that economies of scale are difficult to measure, they have noted that the Adviser shares the benefits of economies of scale in various ways, including through breakpoints in the management fee schedules (subject to limited
exceptions), fee waivers and/or expense limitations, the pricing of Nuveen funds at scale at inception and investments in its business which can enhance the services provided to the Nuveen funds for the fees paid. Most of the funds in the Nuveen
complex pay a management fee to the Adviser which is generally comprised of a fund-level component and a complex- level component, each of which has a breakpoint schedule. Generally, the fund level fee component declines as the assets of a
particular fund grow. Pursuant to the complex-wide fee arrangement, generally, the complex- level fee component declines when eligible assets of the funds in the Nuveen complex combined grow.
Notwithstanding the foregoing, the Independent Board Members
recognized that the unitary fee structure does not have breakpoints and that the Fund (like other Nuveen ETFs) would not participate in the complex-level fee program. However, the Independent Board Members acknowledged, at the Meeting and/or at
prior meetings, that as ETFs were relatively new to the Nuveen fund family, there would be ongoing review with respect to the fee structure employed for these types of funds. They have further recognized that although a unitary fee provides
shareholders with a level of certainty with respect to the expenses of a Nuveen ETF, the Adviser will benefit from any reductions in certain fixed costs associated with managing the Nuveen ETF (although the Adviser also has the risk if such fixed
costs rise).
In addition, at the Meeting and/or at prior
meetings, the Independent Board Members have recognized the Adviser’s continued reinvestment in its business through, among other things, investments in its business infrastructure and information technology, portfolio accounting system as
well as other systems and platforms that will, among other things, support growth, simplify and enhance information sharing, and enhance the investment process to the benefit of all of the Nuveen funds.
Based on their review, the Independent Board Members concluded
that the proposed unitary fee structure (which would not include breakpoints or participation in the complex-level fee program) was acceptable.
E. Indirect Benefits
The Independent Board Members considered information received
at the Meeting and/or at prior meetings regarding other benefits that a Fund Adviser or its affiliates may receive as a result of their relationship with the Nuveen funds. The Independent Board Members have considered whether the Sub-Adviser may
engage in soft dollar transactions pursuant to which it may receive the benefit of research products and other services provided by broker-dealers executing portfolio transactions on behalf of the applicable Nuveen funds. The Board noted that the
Sub-Adviser does not participate in soft dollar arrangements with respect to Nuveen fund portfolio transactions.
Based on their review, the Independent Board Members concluded
that any indirect benefits expected to be received by a Fund Adviser as a result of its relationship with the Fund were reasonable and within acceptable parameters.
F. Approval
The Independent Board Members did not identify any single
factor discussed previously as all-important or controlling. The Board Members, including a majority of the Independent Board Members, concluded that the terms of the Investment Management Agreement and the Sub-Advisory Agreement were fair and
reasonable, that the respective Fund Adviser’s fees were reasonable in light of the services to be provided to the Fund and that the Investment Management Agreement and Sub-Advisory Agreement should be and were approved on behalf of the
Fund.
Discussion
of the operation and effectiveness of the Funds’ liquidity risk management program
In compliance with Rule 22e-4 under the Investment Company Act
of 1940, as amended (the “Liquidity Rule”), each Fund covered in this Report (the “Funds”) has adopted and implemented a liquidity risk management program (the “Program”), which is designed to manage the
Fund’s liquidity risk. The Program consists of various protocols for assessing and managing each Fund’s liquidity risk. The Funds’ Board of Trustees previously designated Nuveen Fund Advisors, LLC, the Funds’ investment
adviser, as the Administrator of the Program. The adviser’s Liquidity Monitoring and Analysis Team (“LMAT”) carries out day-to-day Program management with oversight by the adviser’s Liquidity Oversight Sub-Committee (the
LOSC”). The LOSC is composed of personnel from the adviser and Teachers Advisors, LLC, an affiliate of the adviser.
At a May 20, 2020 meeting of the Board, the Administrator
provided the Board with a written report addressing the Program’s operation, adequacy and effectiveness of implementation for calendar year 2019 (the “Review Period”), as required under the Liquidity Rule. The report noted that the
Program has been and continues to be adequately and effectively implemented to monitor and (as applicable) respond to each Fund’s liquidity developments.
In accordance with the Program, the LMAT assesses each
Fund’s liquidity risk no less frequently than annually based on various factors, such as (i) the Fund’s investment strategy and the liquidity of portfolio investments, (ii) cash flow projections, and (iii) holdings of cash and cash
equivalents, borrowing arrangements, and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four
liquidity categories (including the most liquid, “Highly Liquid”, and the least liquid, “Illiquid”, discussed below). The classification is based on a determination of how long it is reasonably expected to take to convert the
investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading, and
investment-specific considerations, as well as market depth, and use third-party vendor data.
Any Fund that does not primarily hold highly liquid investments
must, among other things, determine a minimum percentage of Fund assets that must be invested in highly liquid investments (a “Highly Liquid Investment Minimum”). During the Review Period, each Fund primarily held Highly Liquid
investments and therefore was exempt from the requirement to adopt a Highly Liquid Investment Minimum and to comply with the related requirements under the Liquidity Rule.
The Liquidity Rule also limits a Fund’s investments in
Illiquid investments. Specifically, the Liquidity Rule prohibits a Fund from acquiring Illiquid investments if doing so would result in the Fund holding more than 15% of its net assets in Illiquid investments, and requires certain reporting to the
Fund Board and the Securities and Exchange Commission any time a Fund’s holdings of Illiquid investments exceeds 15% of net assets. During the Review Period, no Fund exceeded the 15% limit on Illiquid investments.
The
management of the Funds, including general supervision of the duties performed for the Funds by the Adviser, is the responsibility of the Board of Trustees of the Funds. None of the Trustees who are not “interested” persons of the Funds
(referred to herein as “Independent Trustees”) has ever been a Trustee or employee of, or consultant to, Nuveen or its affiliates. The names and business addresses of the Trustees and officers of the Funds, their principal occupations
and other affiliations during the past five years, the number of portfolios each Trustee oversees and other directorships they hold are set forth below.
The Funds’ Statement of Additional Information
(“SAI”) includes more information about the Trustees. To request a free copy, call Nuveen Investments at (800) 257-8787 or visit the Funds’ website at www.nuveen.com.
Name,
Year of Birth
& Address
Position(s)
Held with
the Funds
Year
First
Elected or
Appointed (1)
Principal
Occupation(s)
Including other Directorships
During Past 5 Years
Number
of
Portfolios in
Fund Complex
Overseen by
Trustee
Independent
Trustees (2):
Terence
J. Toth
1959
333 W. Wacker Drive Chicago, IL60606
Chairman
and
Trustee
2008
Formerly,
a Co-Founding Partner, Promus Capital (2008-2017); Director, Quality Control Corporation (since 2012); member: Catalyst Schools of Chicago Board (since 2008) and Mather Foundation Board (since 2012), and chair of its investment committee; formerly,
Director, Fulcrum IT Services LLC (2010-2019); formerly, Director, Legal & General Investment Management America, Inc. (2008-2013); formerly, CEO and President, Northern Trust Global Investments (2004-2007); Executive Vice President,
Quantitative Management & Securities Lending (2000-2004); prior thereto, various positions with Northern Trust Company (since 1994); formerly, Member, Northern Trust Mutual Funds Board (2005-2007), Northern Trust Global Investments Board
(2004-2007), Northern Trust Japan Board (2004-2007), Northern Trust Securities Inc. Board (2003- 2007) and Northern Trust Hong Kong Board (1997-2004).
Chairman
(since 2019), formerly, President (1996-2019), The Hall-Perrine Foundation, a private philanthropic corporation; Director and Chairman, United Fire Group, a publicly held company; Director, Public member, American Board of Orthopaedic Surgery
(since 2015); Life Trustee of Coe College and the Iowa College Foundation; formerly, President Pro-Tem of the Board of Regents for the State of Iowa University System; formerly, Director, Alliant Energy and The Gazette Company; formerly, Director,
Federal Reserve Bank of Chicago; formerly, President and Chief Operating Officer, SCI Financial Group, Inc., a regional financial services firm.
Principal
Occupation(s)
Including other Directorships
During Past 5 Years
Number
of
Portfolios in
Fund Complex
Overseen by
Trustee
William
C. Hunter
1948
333 W. Wacker Drive Chicago, IL60606
Trustee
2003
Dean
Emeritus, formerly, Dean, Tippie College of Business, University of Iowa (2006-2012); Director of Wellmark, Inc. (since 2009); past Director (2005-2015), and past President (2010- 2014) Beta Gamma Sigma, Inc., The International Business Honor
Society; formerly, Director (2004-2018) of Xerox Corporation; Dean and Distinguished Professor of Finance, School of Business at the University of Connecticut (2003-2006); previously, Senior Vice President and Director of Research at the Federal
Reserve Bank of Chicago (1995-2003); formerly, Director (1997-2007), Credit Research Center at Georgetown University.
155
Albin
F. Moschner
1952
333 W. Wacker Drive Chicago, IL60606
Trustee
2016
Founder
and Chief Executive Officer, Northcroft Partners, LLC, a management consulting firm (since 2012); formerly, Chairman (2019), and Director (2012-2019), USA Technologies, Inc., a provider of solutions and services to facilitate electronic payment
transactions; formerly, Director, Wintrust Financial Corporation (1996-2016); previously, held positions at Leap Wireless International, Inc., including Consultant (2011-2012), Chief Operating Officer (2008-2011), and Chief Marketing Officer
(2004-2008); formerly, President, Verizon Card Services division of Verizon Communications, Inc. (2000-2003); formerly, President, One Point Services at One Point Communications (1999-2000); formerly, Vice Chairman of the Board, Diba, Incorporated
(1996-1997); formerly, various executive positions (1991-1996) and Chief Executive Officer (1995-1996) of Zenith Electronics Corporation.
155
John
K. Nelson
1962
333 W. Wacker Drive Chicago, IL60606
Trustee
2013
Member
of Board of Directors of Core12 LLC. (since 2008), a private firm which develops branding, marketing and communications strategies for clients; served The President's Council of Fordham University (2010-2019) and previously a Director of the Curran
Center for Catholic American Studies (2009-2018); formerly, senior external advisor to the Financial Services practice of Deloitte Consulting LLP. (2012-2014); former Chair of the Board of Trustees of Marian University (2010-2014 as trustee,
2011-2014 as Chair); formerly Chief Executive Officer of ABN AMRO Bank N.V., North America, and Global Head of the Financial Markets Division (2007-2008), with various executive leadership roles in ABN AMRO Bank N.V. between 1996 and 2007.
155
Judith
M. Stockdale
1947
333 W. Wacker Drive Chicago, IL60606
Trustee
1997
Board
Member, Land Trust Alliance (since 2013); formerly, Board Member, U.S. Endowment for Forestry and Communities (2013-2019); formerly, Executive Director (1994-2012), Gaylord and Dorothy Donnelley Foundation; prior thereto, Executive Director, Great
Lakes Protection Fund (1990-1994).
155
Carole
E. Stone
1947
333 W. Wacker Drive Chicago, IL60606
Trustee
2007
Former
Director, Chicago Board Options Exchange (2006-2017), and C2 Options Exchange, Incorporated (2009-2017); former Director, Cboe Global Markets, Inc., formerly, CBOE Holdings, Inc. (2010-May 2020); formerly, Commissioner, New York State Commission on
Public Authority Reform (2005-2010).
Principal
Occupation(s)
Including other Directorships
During Past 5 Years
Number
of
Portfolios in
Fund Complex
Overseen by
Trustee
Margaret
L. Wolff
1955
333 W. Wacker Drive Chicago, IL60606
Trustee
2016
Formerly,
member of the Board of Directors (2013-2017) of Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company (each, a part of Travelers Canada, the Canadian operation of The Travelers Companies, Inc.); formerly, Of
Counsel, Skadden, Arps, Slate, Meagher & Flom LLP (Mergers & Acquisitions Group) (2005-2014); Member of the Board of Trustees of New York-Presbyterian Hospital (since 2005); Member (since 2004) and Chair (since 2015) of the Board of Trustees
of The John A. Hartford Foundation (a philanthropy dedicated to improving the care of older adults); formerly, Member (2005-2015) and Vice Chair (2011-2015) of the Board of Trustees of Mt. Holyoke College.
155
Robert
L. Young
1963
333 W. Wacker Drive Chicago, IL60606
Trustee
2017
Formerly,
Chief Operating Officer and Director, J.P. Morgan Investment Management Inc. (2010-2016); formerly, President and Principal Executive Officer (2013-2016), and Senior Vice President and Chief Operating Officer (2005-2010), of J.P. Morgan Funds;
formerly, Director and various officer positions for J.P. Morgan Investment Management Inc. (formerly, JPMorgan Funds Management, Inc. and formerly, One Group Administrative Services) and JPMorgan Distribution Services, Inc. (formerly, One Group
Dealer Services, Inc.) (1999-2017).
155
Name,
Year of Birth
& Address
Position(s)
Held with
the Funds
Year
First
Elected or
Appointed(3)
Principal
Occupation(s)
During Past 5 Years
Officers
of the Funds:
Jordan
M. Farris
1980
333 W. Wacker Drive Chicago, IL60606
Chief
Administrative
Officer
2019
Managing
Director (since 2017), formerly Vice President (2016-2017), Head of Product Management and Development, ETFs, Nuveen Securities, LLC; Director, Guggenheim Funds Distributors (2013-2016).
Vice
President and Assistant Secretary of Nuveen Securities, LLC (since 2016) and Nuveen Fund Advisors (since 2017); Vice President and Associate General Counsel of Nuveen (since 2013) and Vice President, Assistant Secretary and Associate General
Counsel of Nuveen Asset Management (since 2018).
Diana
R. Gonzalez
1978
333 W. Wacker Drive Chicago, IL60606
Vice
President
and Assistant
Secretary
2017
Vice
President and Assistant Secretary of Nuveen Fund Advisors, LLC (since 2017); Vice President and Associate General Counsel of Nuveen (since 2017); Associate General Counsel of Jackson National Asset Management (2012-2017).
Nathaniel
T. Jones
1979
333 W. Wacker Drive Chicago, IL60606
Vice
President
and Treasurer
2016
Managing
Director (since 2017), formerly, Senior Vice President (2016-2017), formerly, Vice President (2011- 2016) of Nuveen; Managing Director (since 2015) of Nuveen Fund Advisors, LLC; Chartered Financial Analyst.
Walter
M. Kelly
1970
333 W. Wacker Drive Chicago, IL60606
Chief
Compliance
Officer and Vice
President
2003
Managing
Director (since 2017), formerly, Senior Vice President (2008-2017) of Nuveen Investments Holdings, Inc.
Managing
Director (since 2017), formerly, Senior Vice President (2014-2017) of Nuveen Securities, LLC.
Brian
J. Lockhart
1974
333 W. Wacker Drive Chicago, IL60606
Vice
President
2019
Managing
Director (since 2019) of Nuveen Fund Advisors, LLC; Managing Director (since 2017), formerly, Vice President (2010-2017) of Nuveen; Head of Investment Oversight (since 2017), formerly, Team Leader of Manager Oversight (2015-2017); Chartered
Financial Analyst and Certified Financial Risk Manager.
Jacques
M. Longerstaey
1963
8500 Andrew Carnegie Blvd. Charlotte, NC28262
Vice
President
2019
Senior
Managing Director, Chief Risk Officer, Nuveen, LLC (since May 2019); Senior Managing Director (since May 2019) of Nuveen Fund Advisors, LLC; formerly, Chief Investment and Model Risk Officer, Wealth & Investment Management Division, Wells Fargo
Bank (NA) (from 2013-2019).
Kevin
J. McCarthy
1966
333 W. Wacker Drive Chicago, IL60606
Vice
President
and Assistant Secretary
2007
Senior
Managing Director (since 2017) and Secretary and General Counsel (since 2016) of Nuveen Investments, Inc., formerly, Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2008-2016); Senior Managing Director (since
2017) and Assistant Secretary (since 2008) of Nuveen Securities, LLC, formerly Executive Vice President (2016-2017) and Managing Director (2008-2016); Senior Managing Director (since 2017), Secretary (since 2016) and Co-General Counsel (since 2011)
of Nuveen Fund Advisors, LLC, formerly, Executive Vice President (2016-2017), Managing Director (2008-2016) and Assistant Secretary (2007-2016); Senior Managing Director (since 2017), Secretary (since 2016) and Associate General Counsel (since 2011)
of Nuveen Asset Management, LLC, formerly Executive Vice President (2016-2017) and Managing Director and Assistant Secretary (2011-2016); Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Investments Advisers, LLC, formerly
Executive Vice President (2016-2017); Vice President (since 2007) and Secretary (since 2016), formerly, Assistant Secretary, of NWQ Investment Management Company, LLC, Symphony Asset Management, LLC, Santa Barbara Asset Management, LLC and Winslow
Capital Management, LLC (since 2010). Senior Managing Director (since 2017) and Secretary (since 2016) of Nuveen Alternative Investments, LLC.
Jon
Scott Meissner
1973
8500 Andrew Carnegie Blvd. Charlotte, NC28262
Vice
President
2019
Managing
Director of Mutual Fund Tax and Financial Reporting groups at Nuveen (since 2017); Managing Director of Nuveen Fund Advisors, LLC (since 2019); Senior Director of Teachers Advisors, LLC and TIAA-CREF Investment Management, LLC (since 2016); Senior
Director (since 2015) Mutual Fund Taxation to the TIAA-CREF Funds, the TIAA-CREF Life Funds, the TIAA Separate Account VA-1 and the CREF Accounts; has held various positions with TIAA since 2004.
Executive
Vice President, Global Head of Product at Nuveen (since November 2019); Co-Chief Executive Officer of Nuveen Securities, LLC (since March 2020); Managing Member MDR Collaboratory LLC (since 2018); Managing Director, Head of Wealth Management
Product Structuring & COO Multi Asset Investing. The Blackstone Group (2013-2017).
Christopher
M. Rohrbacher
1971
333 W. Wacker Drive Chicago, IL60606
Vice
President
and
Secretary
2008
Managing
Director (since 2017) and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2017), formerly, Senior Vice President (2016-2017), Co-General Counsel (since 2019) and Assistant Secretary (since 2016) of Nuveen Fund Advisors, LLC;
Managing Director (since 2017), formerly, Senior Vice President (2012-2017) and Associate General Counsel (since 2016), formerly, Assistant General Counsel (2008-2016) of Nuveen.
William
A. Siffermann
1975
333 W. Wacker Drive Chicago, IL60606
Vice
President
2017
Managing
Director (since 2017), formerly Senior Vice President (2016-2017) and Vice President (2011-2016) of Nuveen.
E.
Scott Wickerham
1973
TIAA
730 Third Avenue New York, NY10017
Vice
President
and Controller
2019
Senior
Managing Director, Head of Fund Administration at Nuveen, LLC (since 2019), formerly, Managing Director; Senior Managing Director (since 2019), Nuveen Fund Advisors, LLC; Principal Financial Officer, Principal Accounting Officer and Treasurer
(since 2017) to the TIAA-CREF Funds, the TIAA-CREF Life Funds, the TIAA Separate Account VA-1 and the Treasurer (since 2017) to the CREF Accounts; Senior Director, TIAA-CREF Fund Administration (2014-2015); has held various positions with TIAA since
2006.
Gifford
R. Zimmerman
1956
333 W. Wacker Drive Chicago, IL60606
Vice
President
and Assistant
Secretary
1988
Managing
Director (since 2002), and Assistant Secretary of Nuveen Securities, LLC; Managing Director (since 2004) and Assistant Secretary (since 1994) of Nuveen Investments, Inc.; Managing Director (since 2002), Assistant Secretary (since 1997) and
Co-General Counsel (since 2011) of Nuveen Fund Advisors, LLC; Managing Director, Assistant Secretary and Associate General Counsel of Nuveen Asset Management, LLC (since 2011); Vice President (since 2017), formerly, Managing Director (2003-2017) and
Assistant Secretary (since 2003) of Symphony Asset Management LLC ; Managing Director and Assistant Secretary (since 2002) of Nuveen Investments Advisers, LLC; Vice President and Assistant Secretary of NWQ Investment Management Company, LLC (since
2002), Santa Barbara Asset Management, LLC (since 2006) and of Winslow Capital Management, LLC, (since 2010); Chartered Financial Analyst.
(1)
Trustees serve an indefinite term until his/her successor is elected or appointed. The year first elected or appointed represents the year in which the director was first elected or appointed to any
fund in the Nuveen fund complex.
(2)
Matthew Thornton III has been nominated for election to the Board of Trustees of the Funds and the boards of all other funds in the Nuveen complex, each such appointment effective as of November 16,2020. If Mr. Thornton is elected to the board of each such fund for which he has been nominated and assuming his appointments become effective, Mr. Thornton will oversee all the portfolios in the Nuveen fund complex. Mr. Thornton's principal
occupation and other directorships during the past five years are as follows:
Formerly, Executive Vice President and Chief Operating Officer (2018-2019), FedEx Freight Corporation, a subsidiary of FedEx Corporation ("FedEx")
(provider of transportation, e-commerce and business services through its portfolio of companies); formerly, Senior Vice President, U.S. Operations (2006-2018), Federal Express Corporation, a subsidiary of FedEx; formerly, Member of the Board of
Directors (2012-2018), Safe Kids Worldwide® (a non-profit organization dedicated to preventing childhood injuries); member of the Board of Directors
(since 2014), The Sherwin-Williams Company (develops, manufactures, distributes and sells paints, coatings and related products).
(3)
Officers serve one year terms through August of each year. The year first elected or appointed represents the year in which the officer was first elected or appointed to any fund in the Nuveen fund
complex.
Since 1898, financial professionals 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 professional, 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, IL60606. Please read the prospectus carefully before you invest or send money.
Nuveen Securities, LLC, member FINRA and SIPC | 333 West Wacker Drive
Chicago, IL60606 | www.nuveen.com NAN-ENHUS-0720D1316902-INV-Y-09/21
ITEM 2.
CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. There were no amendments to or waivers from the code during the period covered by this report. The registrant has posted the code of ethics on its website at
www.nuveen.com/fund-governance. (To view the code, click on Code of Conduct.)
ITEM 3.
AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by this report, the registrant’s Board of Directors or Trustees (“Board”) determined that the registrant has at least one “audit committee financial
expert” (as defined in Item 3 of Form N-CSR) serving on its Audit Committee. The registrant’s audit committee financial experts are Carole E. Stone, Jack B. Evans and William C. Hunter, who are “independent” for purposes of
Item 3 of Form N-CSR.
Ms. Stone served for five years as Director of the New York State Division of the Budget. As part
of her role as Director, Ms. Stone was actively involved in overseeing the development of the State’s operating, local assistance and capital budgets, its financial plan and related documents; overseeing the development of the State’s
bond-related disclosure documents and certifying that they fairly presented the State’s financial position; reviewing audits of various State and local agencies and programs; and coordinating the State’s system of internal audit and
control. Prior to serving as Director, Ms. Stone worked as a budget analyst/examiner with increasing levels of responsibility over a 30 year period, including approximately five years as Deputy Budget Director. Ms. Stone has also served as Chair of
the New York State Racing Association Oversight Board, as Chair of the Public Authorities Control Board, as a Commissioner on the New York State Commission on Public Authority Reform and as a member of the Boards of Directors of several New York
State public authorities. These positions have involved overseeing operations and finances of certain entities and assessing the adequacy of project/entity financing and financial reporting. Currently, Ms. Stone is on the Board of Directors of CBOE
Holdings, Inc., of the Chicago Board Options Exchange, and of C2 Options Exchange. Ms. Stone’s position on the boards of these entities and as a member of both CBOE Holdings’ Audit Committee and its Finance Committee has involved, among
other things, the oversight of audits, audit plans and preparation of financial statements.
Mr. Evans was formerly President
and Chief Operating Officer of SCI Financial Group, Inc., a full service registered broker-dealer and registered investment adviser (“SCI”). As part of his role as President and Chief Operating Officer, Mr. Evans actively supervised the
Chief Financial Officer (the “CFO”) and actively supervised the CFO’s preparation of financial statements and other filings with various regulatory authorities. In such capacity, Mr. Evans was actively involved in the preparation of
SCI’s financial statements and the resolution of issues raised in connection therewith. Mr. Evans has also served on the audit committee of various reporting companies. At such companies, Mr. Evans was involved in the oversight of audits, audit
plans, and the preparation of financial statements. Mr. Evans also formerly chaired the audit committee of the Federal Reserve Bank of Chicago.
Mr. Hunter was formerly a Senior Vice President at the Federal Reserve Bank of Chicago. As part of his role as Senior Vice President, Mr. Hunter was the senior officer responsible for all operations of
each of the Economic Research, Statistics, and Community and Consumer Affairs units at the Federal Reserve Bank of Chicago. In such capacity, Mr. Hunter oversaw the subunits of the Statistics and Community and Consumer Affairs divisions responsible
for the analysis and evaluation of bank and bank holding company financial statements and financial filings. Prior to serving as Senior Vice President at the Federal Reserve Bank of Chicago, Mr. Hunter was the Vice President of the Financial Markets
unit at the Federal Reserve Bank of Atlanta where he supervised financial staff and bank holding company analysts who analyzed and evaluated bank and bank holding company financial statements. Mr. Hunter also currently serves on the Boards of
Directors of Xerox Corporation and Wellmark, Inc. as well as on the Audit Committees of such Boards. As an Audit Committee member, Mr. Hunter’s responsibilities include, among other things, reviewing financial statements, internal audits and
internal controls over financial reporting. Mr. Hunter also formerly was a Professor of Finance at the University of Connecticut School of Business and has authored numerous scholarly articles on the topics of finance, accounting and economics.
ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following tables show the amount of fees that KPMG LLP, the Funds’ auditor, billed to the Funds’ during the Funds’ last two full fiscal years. The Audit Committee approved in advance
all audit services and non-audit services that KPMG LLP provided to the Funds, except for those non-audit services that were subject to the pre-approval exception under Rule 2-01 of Regulation S-X (the “pre-approval exception”). The
preapproval exception for services provided directly to the Funds waives the pre-approval requirement for services other than audit, review or attest services if: (A) the aggregate amount of all such services provided constitutes no more than 5% of
the total amount of revenues paid by the Funds during the fiscal year in which the services are provided; (B) the Funds did not recognize the services as non-audit services at the time of the engagement; and (C) the services are promptly brought to
the Audit Committee’s attention, and the Committee (or its delegate) approves the services before the audit is completed.
The Audit Committee has delegated certain pre-approval responsibilities to its Chair (or, in her absence, any other member of the Audit
Committee).
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
18,330
0
0
0
Total
$
73,270
$
0
$
0
$
0
1
“Audit Fees” are the aggregate fees billed for professional services for the audit of the Fund’s annual financial statements and
services provided in connection with statutory and regulatory filings or engagements.
2
“Audit-Related Fees” are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or
review of financial statements that are not reported under “Audit Fees”. These fees include offerings related to the Fund’s common shares and leverage.
3
“Tax Fees” are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These fees include: all
global withholding tax services; excise and state tax reviews; capital gain, tax equalization and taxable basis calculations performed by the principal accountant.
4
“All Other Fees” are the aggregate fees billed for products and services other than “Audit Fees”, “Audit-Related Fees”
and “Tax Fees”. These fees represent all “Agreed-Upon Procedures” engagements pertaining to the Fund’s use of leverage.
5
Fund commenced operations on 9/26/2019
Percentage Approved Pursuant to Pre-approval Exception
Audit Fees Billed to Funds
Audit-Related Fees Billed to Funds
Tax Fees Billed to Funds
All Other Fees Billed to Funds
Fund Name
Nuveen Enhanced Yield U.S. Aggregate Bond ETF
0
%
0
%
0
%
0
%
Nuveen ESG U.S. Aggregate Bond ETF
0
%
0
%
0
%
0
%
Nuveen ESG High Yield Corporate Bond ETF
0
%
0
%
0
%
0
%
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
17,980
0
0
0
Total
$
53,890
$
0
$
0
$
0
1
“Audit Fees” are the aggregate fees billed for professional services for the audit of the Fund’s annual financial statements and
services provided in connection with statutory and regulatory filings or engagements.
2
“Audit-Related Fees” are the aggregate fees billed for assurance and related services reasonably related to the performance of the audit or
review of financial statements that are not reported under “Audit Fees”. These fees include offerings related to the Fund’s common shares and leverage.
3
“Tax Fees” are the aggregate fees billed for professional services for tax advice, tax compliance, and tax planning. These fees include: all
global withholding tax services; excise and state tax reviews; capital gain, tax equalization and taxable basis calculations performed by the principal accountant.
4
“All Other Fees” are the aggregate fees billed for products and services other than “Audit Fees”, “Audit-Related Fees”
and “Tax Fees”. These fees represent all “Agreed-Upon Procedures” engagements pertaining to the Fund’s use of leverage.
5
Fund commenced operations on 9/26/2019
Percentage Approved Pursuant to Pre-approval Exception
Audit Fees Billed to Funds
Audit-Related Fees Billed to Funds
Tax Fees Billed to Funds
All Other Fees
Billed to Funds
Fund Name
Nuveen Enhanced Yield U.S. Aggregate Bond ETF
0
%
0
%
0
%
0
%
Nuveen ESG U.S. Aggregate Bond ETF
0
%
0
%
0
%
0
%
Nuveen ESG High Yield Corporate Bond ETF
0
%
0
%
0
%
0
%
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
Total Non-Audit Fees billed to Adviser
and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Trust)
Total Non-Audit Fees billed to Adviser
and Affiliated Fund Service Providers (all other engagements)
Total
Fund Name
Nuveen Enhanced Yield U.S. Aggregate Bond ETF
0
0
0
0
Nuveen ESG U.S. Aggregate Bond ETF
0
0
0
0
Nuveen ESG High Yield Corporate Bond ETF
0
0
0
0
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
0
0
0
0
Total
$
0
$
0
$
0
$
0
“Non-Audit Fees billed to Fund” for both fiscal year ends represent “Tax Fees” and
“All Other Fees” billed to Fund in their respective amounts from the previous table.
Less than 50 percent of the
hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time,
permanent employees.
Total Non-Audit Fees billed to Adviser
and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Trust)
Total Non-Audit Fees billed to Adviser
and Affiliated Fund Service Providers (all other engagements)
Total
Fund Name
Nuveen Enhanced Yield U.S. Aggregate Bond ETF
0
0
0
0
Nuveen ESG U.S. Aggregate Bond ETF
0
0
0
0
Nuveen ESG High Yield Corporate Bond ETF
0
0
0
0
Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF
0
0
0
0
Total
$
0
$
0
$
0
$
0
“Non-Audit Fees billed to Fund” for both fiscal year ends represent “Tax Fees” and
“All Other Fees” billed to Fund in their respective amounts from the previous table.
Audit
Committee Pre-Approval Policies and Procedures. Generally, the Audit Committee must approve (i) all non-audit services to be performed for the Funds by the
Funds’ independent accountant and (ii) all audit and non-audit services to be performed by the Funds’ independent accountant for the Affiliated Fund Service Providers with respect to the
operations and financial reporting of the Funds. Regarding tax and research projects conducted by the independent accountant for the Funds and Affiliated Fund Service Providers (with respect to operations and financial reports of the Trust), such
engagements will be (i) pre-approved by the Audit Committee if they are expected to be for amounts greater than $10,000; (ii) reported to the Audit Committee Chair for her verbal approval prior to
engagement if they are expected to be for amounts under $10,000 but greater than $5,000; and (iii) reported to the Audit Committee at the next Audit Committee meeting if they are expected to be for an amount under $5,000.
ITEM 5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant is an issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”). The registrant’s Board has a separately designated Audit Committee
established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78c(a)(58)(A)). As of the end of the period covered by this report, the members of the audit committee are Jack B. Evans, William C.
Hunter, John K. Nelson, Judith M. Stockdale and Carole E. Stone, Chair.
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 registrant.
ITEM 8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this registrant.
ITEM 9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to this registrant.
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 of Trustees 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 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.
DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13.
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 because the code is posted on registrant’s website at www.nuveen.com/fund-governance and there were no amendments during the period covered by this report. (To view the code, click on
Code of Conduct.)
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 to this registrant.
(a
)(4)
Change in the registrant’s independent public accountant. Not applicable.
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.
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.
