<PAGE>
As filed with the Securities and Exchange Commission on August 20, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[X]
Registration No. 333-03715
Pre-Effective Amendment No.
--- [_]
Post-Effective Amendment No. 3
--- [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[X]
Registration No. 811-07619
Amendment No. 5
--- [_]
NUVEEN INVESTMENT TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
333 West Wacker Drive, Chicago, 60606
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copies to:
Gifford R. Zimmerman-Vice President Eric F. Fess, Esq.
and Assistant Secretary Chapman and Cutler
333 West Wacker Drive 111 West Monroe Street
Chicago, Illinois 60606 Chicago, Illinois 60603
(Name and Address of Agent for
Service)
It is proposed that this filing will become effective (check appropriate box):
[_]
immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph
(a)(1)
[_]
[X]
75 days after filing pursuant to par-
agraph (a)(2)
on (date) pursuant to paragraph (b)
[_]
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph
(a)(2) of Rule 485.
[_]
If appropriate, check the following box:
[_]
This post-effective amendment designates a new effective date for a previ-
ously filed post-effective amendment.
PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT HAS
PREVIOUSLY ELECTED TO REGISTER UNDER THE SECURITIES ACT OF 1933 AN INDEFINITE
NUMBER OF ITS SHARES OF BENEFICIAL INTEREST OF ITS SERIES DESIGNATED NUVEEN
GROWTH AND INCOME STOCK FUND, NUVEEN BALANCED STOCK AND BOND FUND, AND NUVEEN
BALANCED MUNICIPAL AND STOCK FUND, AND BY THIS AMENDMENT ELECTS TO REGISTER AN
INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL INTEREST OF ITS SERIES DESIG-
NATED NUVEEN BALANCED CALIFORNIA MUNICIPAL AND STOCK FUND. REGISTRANT'S RULE
24F-2 NOTICE FOR ITS FISCAL YEAR ENDING JUNE 30, 1997 WILL BE FILED ON OR BE-
FORE AUGUST 29, 1997.
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<PAGE>
This Post-Effective Amendment no. 3 is being filed on behalf of the Registrant
for the purpose of adding a new series of the Nuveen Investment Trust called
the Nuveen Balanced California Municipal and Stock Fund.
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 3
The Registration Statement comprises the following papers and contents:
The Facing Sheet
Part A-Prospectus for Nuveen Balanced California Municipal
and Stock Fund
Part B-Statement of Additional Information for the Nuveen
Growth and Income Stock Fund, the Nuveen Balanced Stock and
Bond Fund, Nuveen Balanced Municipal and Stock Fund and the
Nuveen Balanced California Municipal and Stock Fund.
Part C-Other Information
Signatures
Index to Exhibits
Exhibits
The prospectuses for Nuveen Growth and Income Stock Fund, Nuveen Balanced Stock
and Bond Fund, and the Nuveen Balanced Municipal and Stock Fund are not af-
fected by and therefore not included in this Post-Effective No. 3.
<PAGE>
NUVEEN
Balanced California
Municipal and Stock Fund
[PHOTO APPEARS HERE]
Prospectus
,1997
<PAGE>
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INVESTING IN NUVEEN MUTUAL FUNDS
Since our founding in 1898, John Nuveen & Co. has been synonymous with invest-
ments that withstand the test of time. Today, we offer a range of equity and
fixed-income mutual funds designed to suit the unique circumstances and finan-
cial planning needs of mature investors. More than 1.3 million investors have
entrusted Nuveen to help them maintain the lifestyle they currently enjoy.
Value-investing -- purchasing the securities of established, well-known compa-
nies at an attractive price -- is the cornerstone of Nuveen's investment
philosophy. That's why we've enlisted Institutional Capital Corporation (ICAP)
as the equity portfolio manager for the Nuveen Balanced California Municipal
and Stock Fund. ICAP, like Nuveen, is a conservative, research-driven invest-
ment manager that invests for value. With this fund, Nuveen and ICAP seek to
help you build capital and grow tax-free income, helping offset the effects of
inflation.
This prospectus describes in detail the investment objectives, policies and
risks of the Nuveen Balanced California Municipal and Stock Fund. We invite
you to discuss the contents with your financial adviser, or you may call us at
800-621-7227 for additional information.
<PAGE>
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NUVEEN BALANCED CALIFORNIA MUNICIPAL AND STOCK FUND
Prospectus
, 1997
The NUVEEN BALANCED CALIFORNIA MUNICIPAL AND STOCK FUND (the "Fund") is a
mutual fund that seeks to provide over time an attractive after-tax total
return through a combination of income exempt from regular federal and Cali-
fornia state income taxes, and long-term capital appreciation, and preservation
of capital in adverse markets. The Fund pursues this objective by investing in
a diversified portfolio of securities consisting of investment grade quality
municipal obligations exempt from regular federal and California state income
taxes and U.S. dollar denominated equity securities of companies with market
capitalizations of at least $500 million. The Fund is designed to offer you a
tax-conscious investment strategy that reduces taxable distributions and offers
a balance between after-tax total returns and capital preservation.
The Fund offers you Flexible Purchase Options, which provide the flexibility to
purchase Fund shares in the same manner you typically make other mutual fund
investments. You may choose from one of four alternative classes of Fund shares
(Classes A, B, C and R), each with a different combination of sales charges,
ongoing fees, eligibility requirements, and other features. Your financial
adviser will be able to assist you in determining which share class is best for
you. See "Flexible Purchase Options," "How to Buy Fund Shares" and "Summary of
Fund Expenses."
The Fund is a series of The Nuveen Investment Trust (the "Trust"). This
Prospectus contains information you should know before investing in the Fund.
Please retain it for future reference. You can find more detailed information
about the Fund in the Statement of Additional Information dated August 1, 1996,
as amended February 1, 1997 and [ ], 1997, and as amended from time to
time. For a free copy of this Statement, write to the Nuveen Mutual Funds, 333
West Wacker Drive, Chicago, IL 60606, or call Nuveen toll-free at 800-621-7227.
The Statement has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. Shares
of the Fund involve investment risks, including possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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PAGE 1
<PAGE>
<TABLE>
<C> <S>
CONTENTS
3 SUMMARY OF FUND EXPENSES
4 SUMMARY INFORMATION ABOUT THE FUND
4 INVESTMENT OBJECTIVE
4 HOW THE FUND PURSUES ITS OBJECTIVE
4 THE BENEFITS OF BALANCING STOCKS
WITH MUNICIPAL BONDS
6 HOW TO DETERMINE IF THE FUND IS
RIGHT FOR YOU
6 FUND FEATURES AND BENEFITS
7 RISKS AND SPECIAL CONSIDERATIONS
7 WHO IS RESPONSIBLE FOR THE
OPERATION OF THE FUND?
7 ADDITIONAL INFORMATION ABOUT THE
FUND'S INVESTMENTS
11 FLEXIBLE PURCHASE OPTIONS
12 HOW TO BUY FUND SHARES
17 DISTRIBUTION AND SERVICE PLAN
17 HOW TO REDEEM FUND SHARES
19 MANAGEMENT OF THE FUND
20 HOW THE FUND SHOWS PERFORMANCE
20 DISTRIBUTIONS AND TAXES
20 TAX MATTERS
21 NET ASSET VALUE
22 GENERAL INFORMATION
</TABLE>
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PAGE 2
<PAGE>
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SUMMARY OF FUND EXPENSES
The purpose of the tables below is to help you understand all expenses and fees
that you would bear directly or indirectly as a Fund shareholder. The percent-
ages shown are estimated for the current fiscal year. Actual fees and expenses
may be greater or less than those shown. An example of how the expenses work
follows these tables.
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION
EXPENSES (AS A PERCENT
OF OFFERING PRICE)(1) CLASS A CLASS B CLASS C CLASS R(2)
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<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 5.25%(3) None None None
Maximum Sales Charge Imposed on Reinvested
Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge (as a percentage of
lesser of purchase price or redemption
proceeds) None(4) 5%(5) 1%(6) None
</TABLE>
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<TABLE>
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<CAPTION>
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENT OF
AVERAGE DAILY NET ASSETS) CLASS A CLASS B CLASS C CLASS R
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<S> <C> <C> <C> <C>
Management Fees .75% .75% .75% .75%
Rule 12b-1 Fees(7) .25% 1.00% 1.00% None
Other Operating Expenses (after
reimbursement)(8) .10% .10% .10% .10%
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Total Expenses 1.10% 1.85% 1.85% .85%
</TABLE>
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(1) Investment dealers and other firms may independently charge additional fees
for shareholder transactions or for advisory services; please see their mate-
rials for details.
(2) Class R Shares are available for purchase only under certain limited
circumstances, or by specified classes of investors. See "How to Buy Fund
Shares--Class R Shares."
(3) Reduced sales charges apply to purchases of $50,000 or more. See "How to
Buy Fund Shares--Class A Shares."
(4) Certain Class A purchases at net asset value of $1 million or more may be
subject to a 1% contingent deferred sales charge if redeemed within 18 months
of purchase. See "How to Buy Fund Shares--Class A Shares."
(5) Class B Shares redeemed within six years of purchase are subject to a
contingent deferred sales charge of 5% during the first year, 4% during the
second and third years, 3% during the fourth year, 2% during the fifth year,
and 1% during the sixth year.
(6) Class C Shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(7) Class A, Class B and Class C Shares are subject to an annual service fee of
.25% of the average daily net assets to compensate Authorized Dealers for
ongoing account services. In addition, Class B and Class C Shares are subject
to annual distribution fees of .75% of the average daily net assets to reim-
burse Nuveen for costs in connection with the sale of Fund shares. See "Distri-
bution and Service Plan." Long-term holders of Class B and Class C Shares may
pay more in Rule 12b-1 fees than the economic equivalent of the maximum front-
end sales charge permitted under the National Association of Securities Dealers
Rules of Fair
Practice.
(8) The investment adviser has agreed to waive fees and reimburse expenses
through July 31, 1998 in order to prevent Total Expenses (excluding any distri-
bution or service fees and extraordinary expenses) from exceeding .85% of the
average daily net asset value of any class of Fund shares. Absent reimburse-
ment, "Other Operating Expenses" are estimated to be .25%.
EXAMPLE*
For the Fund, you would pay the following expenses on a $1,000 investment over
various time periods, assuming (1) a 5% annual rate of return and (2) redemp-
tion at the end of each time period:
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<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
Class A $63 $86
Class B** $58 $90
Class C*** $19 $58
Class R $ 9 $27
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</TABLE>
*This example does not represent past or future expenses, which may be greater
or less than those shown. Moreover, the Fund's actual rate of return may be
greater or less than the hypothetical 5% return shown in this example. This
example assumes that the percentage amounts listed under Annual Operating
Expenses remain the same in each of the periods. For additional information
about the Fund's fees and expenses, see "Distribution and Service Plan" and
"Management of the Fund."
**Assumes that the shareholder redeemed on the first day of the next year and
the contingent deferred sales charge was applied as follows: 1 year (4%) and 3
years (3%). If instead the shareholder had redeemed on the last day of the
prior year, the expenses would have been as follows: 1 year $68 and 3 years
$100. See "How to Buy Fund Shares--Class B Shares."
***Assumes that the shareholder redeemed on the first day of the second year
and the contingent deferred sales charge was not applicable for any of the
periods shown. If instead the shareholder had redeemed on the last day of the
first year, the expenses in the first year would have been $29. See "How to Buy
Fund Shares--Class C Shares."
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PAGE 3
<PAGE>
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SUMMARY INFORMATION ABOUT THE FUND
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INVESTMENT OBJECTIVE
The Fund seeks to provide over time an attractive after-tax total return
through a combination of capital appreciation and income exempt from regular
federal and California state income taxes and capital preservation in adverse
markets. The investment objective may not be changed without shareholder
approval. There is no assurance that this objective will be realized.
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HOW THE FUND PURSUES ITS OBJECTIVE
The Fund invests in a conservative mix of municipal bonds which pay interest
exempt from federal and California state income taxes (the "California Munic-
ipal Obligations") and equities. The Fund will seek capital growth primarily
through its equity investments. The Fund invests in California Municipal Obli-
gations in order to reduce risk and preserve capital, and to provide monthly
current income exempt from regular federal and California state income taxes.
Dividends earned on the Fund's equity investments are distributed annually and
are taxable as ordinary income. Please see "Additional Information About the
Fund's Investments" for a more detailed discussion.
The Fund's equity portfolio manager, Institutional Capital Corporation
("ICAP"), pursues a value-oriented approach to select equity securities for the
equity portion of the Fund's investment portfolio. Equity securities are
initially screened using proprietary valuation models on the basis of each
security's relative price-earnings ratio and earnings stability. ICAP then
conducts extensive company research on the securities that pass this initial
screen in order to identify those securities with a clear company-specific or
thematic catalyst which ICAP believes will trigger significant price apprecia-
tion over a defined nine to eighteen month period. The most attractive 40-45
securities identified are purchased by ICAP for the Fund's investment portfo-
lio. ICAP then monitors the performance of its investments closely; if an
investment underperforms expectations and ICAP's expectations of the invest-
ment's future performance potential no longer meet its original purchase crite-
ria, ICAP will quickly replace the security in order to prevent continued
underperformance.
The Fund's municipal portfolio manager, Nuveen Institutional Advisory Corp.
("NIAC"), pursues a value-oriented approach to select California Municipal
Obligations for the fixed-income portion of the Fund's investment portfolio.
The Fund invests only in investment-grade quality municipal securities, and
diversifies across different industry sectors in order to further reduce risk.
The Fund seeks to moderate its exposure to interest rates by purchasing munic-
ipal securities having a broad range of effective maturities in order to create
and maintain a diversified portfolio with intermediate characteristics. In so
doing, the Fund seeks to prudently balance over economic cycles the Fund's
exposure to interest rates and its ability to provide stable current income
exempt from regular federal and California state income taxes.
NIAC selects municipal securities on the basis of its evaluation of each bond's
relative value in terms of current yield, price, credit quality and future
prospects. When making investment decisions, NIAC utilizes the resources of
Nuveen's award-winning research team of more than 30 professionals dedicated to
following the municipal markets. On a daily basis, Nuveen's research analysts
prepare credit reviews of individual municipal securities available for
purchase, monitor the continued creditworthiness of the Fund's current munic-
ipal portfolio, and analyze economic, political and demographic trends
affecting the municipal markets. By emphasizing fundamental research and
continuous monitoring of investments, NIAC seeks to identify those municipal
securities that over time offer the best value consistent with the Fund's
investment objective.
Over time, the Fund may gradually shift the mix of its investment portfolio in
order to emphasize capital appreciation in favorable markets and capital pres-
ervation in adverse markets. The Fund will shift its asset mix within defined
ranges for each investment category in response to changing market conditions,
and will rebalance when necessary in order to prevent the portfolio's invest-
ment mix from moving outside these defined ranges under normal market condi-
tions.
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THE BENEFITS OF BALANCING STOCKS WITH MUNICIPAL BONDS
Through a tax-conscious, balanced strategy the Fund seeks to provide the growth
potential of stocks with less risk than an all-stock fund, as well as the bene-
fits of stable current income exempt from regular federal and California state
income taxes. The benefits of balancing stocks with municipal bonds in an
investment portfolio can be seen in the chart below, which represents the
returns and risk of a hypothetical balanced investment portfolio.
BALANCING STOCKS WITH MUNICIPAL BONDS 1/80 -- 12/96
[LOGO CHART APPEARS HERE]
Average Amount Variability of
Total Return(%) Returns(%)
Before-Tax
100% Municipals
40% Stocks/60% Municipals
100% Stocks
After-Tax
100% Municipals
40% Stocks/60% Municipals
100% Stocks
Before-tax After-tax
Variability of Average Annual Variability of Average Annual
Returns (%) Total Return (%) Returns (%) Total Return (%)
14.81% 15.80% 15.04% 11.26%
14.23% 15.50% 14.45% 11.15%
13.67% 15.18% 13.89% 11.04%
13.12% 14.87% 13.34% 10.92%
12.60% 14.54% 12.81% 10.80%
12.10% 14.21% 12.30% 10.67%
11.63% 13.88% 11.82% 10.54%
11.18% 13.53% 11.36% 10.41%
10.77% 13.19% 10.94% 10.28%
10.40% 12.84% 10.56% 10.14%
10.06% 12.48% 10.21% 10.01%
9.77% 12.12% 9.91% 9.86%
9.53% 11.76% 9.65% 9.73%
9.35% 11.39% 9.45% 9.58%
9.21% 11.02% 9.31% 9.42%
9.14% 10.63% 9.22% 9.26%
9.12% 10.24% 9.19% 9.09%
9.17% 9.86% 9.21% 8.93%
9.27% 9.47% 9.30% 8.76%
9.42% 9.07% 9.45% 8.57%
9.64% 8.67% 9.65% 8.38%
Stock returns are represented by the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500"), a widely-recognized, unmanaged index of common
stock
- - --------------------------------------------------------------------------------
PAGE 4
<PAGE>
prices. S&P 500 returns assume reinvestment of all dividends paid by the stocks
included in the index, but do not include brokerage commissions or other fees
an investor would incur by investing in the portfolio of stocks comprising the
index. Municipal bond returns are represented by the Lehman 10-Year Municipal
Bond Index (the "Lehman 10-Year Index"), an unmanaged index of fixed-rate,
investment grade municipal bonds with maturities from 8 to 12 years that
reflect the overall municipal bond marketplace. Lehman 10-Year Index returns
are available beginning in January 1980 and assume reinvestment of all coupon
income on the bonds included in the index. For purposes of calculating after-
tax returns, portfolio turnover in each asset class was assumed to equal the
projected portfolio turnover rates of those classes in the Fund. Ordinary
income was taxed at the highest marginal tax rate of 39.6% and realized capital
gains were taxed at the long-term individual rate of 28%. All returns used in
the chart above are quarterly returns.
The foregoing example depicts the performance of unmanaged indices and does not
depict the performance of the Fund or of any investment product managed by NIAC
or ICAP. There can be no assurance that the return and risk characteristics of
the municipal and equity markets in the future will resemble those in the past;
nor can there be assurance that the Fund's future performance will be compa-
rable to that of those indices.
The Fund's balanced portfolio of California Municipal Obligations and stocks is
designed to build capital and grow tax-free income over time. The following
chart illustrates that, over the past twenty years, a hypothetical $10,000
investment in municipal bonds and stocks made on April 1, 1977 with gains
compounded would have grown to over $29,100--an increase of 192%. Over the same
period, annual tax-free income would have increased by 158%. By compounding
both income and gains, annual tax-free income would have increased even further
through the power of tax-free compounding--by 543%.
Growing Capital Fuels Income Growth
[LOGO BAR CHART APPEARS HERE]
4/77 3/97
Capital Growth
Initial Investment $10,000
With Gains Reinvested $29,156 192%
With Gains and Income Reinvested $73,855 639%
Year 1 Year 20
Tax-Free Income
Initial Income $255
With Gains Reinvested $658 +158%
With Gains and Income Reinvested $1,640 +543%
The performance illustrations above and on the following page are based upon a
hypothetical $10,000 investment in a fixed 60%/40% mix of municipal bonds and
stocks. Municipal bond returns reflect the returns on the Lehman 10-Year Index.
Stock returns reflect the returns on the ICAP Equity Only Composite, a
composite of the private accounts managed by ICAP with investment objectives,
policies and strategies substantially similar to that used by ICAP in managing
the equity portion of the Fund's investment portfolio. Performance results take
into account sales charges and projected Class A operating expenses as summa-
rized in the Summary of Fund Expenses, but do not reflect the taxes a share-
holder would incur on income or capital gain distributions with an actual fund
investment. The foregoing example depicts the performance of an unmanaged index
in combination with the performance of the ICAP Equity Only Composite and
should not be interpreted as indicative of the Fund's future performance.
Further, the historical relationship between municipal bonds and stocks may be
different in the future, and there can be no assurance that actual Fund perfor-
mance will be comparable to the hypothetical performance results shown.
Diversification is a time-tested strategy that can help protect an investment
over time. Because the prices of stocks and bonds often move in different
directions as market conditions change, a balanced investment of municipal
bonds and stocks can help reduce risk and preserve the capital which is a
source of future income.
Over the past 20 years, there have been four periods in which the stock market
declined by more than 10% and there have been four periods in which the bond
market declined by more than 5%. The following charts show that during these
drops in either the stock or bond markets, an investment in the hypothetical
balanced portfolio of municipal bonds and stocks would have provided signifi-
cantly greater capital protection than a portfolio of stocks or bonds alone.
[LOGO BAR CHART APPEARS HERE]
Preserving Capital When Stocks Decline
Stocks 60% Muni/40% ICAP
1/77 - 3/78 -11.75% 2.08%
4/81 - 6/82 -13.47% -2.21%
10/87 - 12/87 -22.63% -3.97%
7/90 - 9/90 -13.78% -4.80%
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PAGE 5
<PAGE>
[LOGO BAR CHART APPEARS HERE]
Preserving Capital When Bonds Decline
Bonds 60% Muni/40% ICAP
1/80 - 3/80 -14.08% -11.71%
7/80 - 12/81 -21.39% -7.38%
4/87 - 9/87 -5.88% 2.90%
1/94 - 4/94 -7.38% -4.22%
Stock returns are represented by the S&P 500. Municipal bond returns are
represented by the Lehman 10-Year Index. The historical relationship between
the performance of municipal bonds and stocks may be different in the future.
The foregoing illustrations are not intended to predict future Fund perfor-
mance.
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HOW TO DETERMINE IF THE FUND IS RIGHT FOR YOU
WHO SHOULD INVEST
The Fund may be a suitable investment if:
. you are a tax-conscious investor seeking to reduce the impact of taxes on
your investment returns
. you are seeking the growth potential of stocks but are concerned about the
higher risks of mutual funds investing only in stocks
. you are seeking the growth potential of stocks yet also desire capital pres-
ervation and current tax-free income
. you are looking for a balanced approach to achieving your financial goals in
a single investment
. you have a long-term investment horizon
WHO SHOULD NOT INVEST
The Fund may not be a suitable investment if:
. you are looking for a balanced mutual fund for a tax-deferred account
. you are unwilling to accept some fluctuations in share price
. you have a short-term investment horizon
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FUND FEATURES AND BENEFITS
LOW MINIMUM INVESTMENT
You can start your investment with a low initial purchase of $3,000 ($1,000
for an Individual Retirement Account) in a particular share class. Additional
investments can be made for as little as $50. Exceptions to these minimums are
made for participants in the Fund's automatic deposit, group purchase or rein-
vestment programs. See "How to Buy Fund Shares" for more details.
FLEXIBLE PURCHASE OPTIONS
The Fund offers four classes of shares--Classes A, B, C and R. Each class
offers a different combination of sales charges, ongoing fees, eligibility
requirements and other features. This permits you and your financial adviser
to choose the share class which best meets your investment needs. You and your
adviser will want to consider:
. the amount of your current investment
. current holdings in the Fund
. length of time you expect to hold the shares
. timing and amount of any future Fund investments
. other relevant information
See "Flexible Purchase Options," "How to Buy Fund Shares" and "How to Redeem
Fund Shares" for further discussion of the Fund's flexible purchase options.
EXCHANGE PRIVILEGE
Shares of the Fund may be quickly and easily exchanged by telephone, without a
sales charge, for shares of the same or equivalent class of any other Nuveen
Mutual Fund or for shares of certain Nuveen money market funds.
DIVIDEND REINVESTMENT
All income dividends or capital gains paid with respect to each class of
shares will be reinvested automatically into additional shares of the same
class without a sales charge, unless you elect to receive them in cash.
INVESTMENT OF NUVEEN UNIT TRUST DISTRIBUTIONS
Distributions from any Nuveen Unit Trust may be used to buy Class A Shares of
the Fund without a sales charge.
AUTOMATIC DEPOSIT AND WITHDRAWAL PLANS
The Fund offers a number of options to help you manage additions to, and with-
drawals from, your account. These include automatic deposit, direct deposit
and payroll deduction plans for adding to your account on a regular basis. If
you need periodic withdrawals, and own shares totaling $10,000 or more, you
can arrange to have $50 or more sent directly from your account monthly or
quarterly.
ELECTRONIC FUND TRANSFERS
Nuveen's Fund Direct lets you link your Fund account to your account at a bank
or other financial institution. You may use Fund Direct to transfer money
electronically between accounts, to purchase shares by phone, to invest
through an automatic deposit plan, or to send payments directly to your bank
account.
- - -------------------------------------------------------------------------------
PAGE 6
<PAGE>
TELEPHONE REDEMPTION
You may establish free telephone redemption privileges for your account.
EASY LIQUIDITY
You may redeem all or some of your Fund shares on any business day at the then
net asset value. Class B and Class C Shares, as well as certain Class A
purchases of $1 million or more at net asset value, may be subject to a contin-
gent deferred sales charge upon redemption. See "How to Redeem Fund Shares."
- - --------------------------------------------------------------------------------
RISKS AND SPECIAL CONSIDERATIONS
You should consider certain other factors about the Fund before investing. The
value and market risk of the Fund's investment portfolio will tend to vary with
changes in its asset allocations among investment classes and changes in the
municipal and equity markets. The Fund's investments in municipal bonds will be
subject to interest rate and credit risk. In general, the market value of the
Fund's investments in municipal bonds will increase when interest rates decline
and decrease when interest rates rise. Credit risk is the risk that an issuer
of a municipal bond is unable to meet its obligation to make interest and prin-
cipal payments. In general, lower rated municipal bonds are perceived to carry
a greater degree of risk in the issuer's ability to make interest and principal
payments. Municipal bonds with longer maturities (durations) or lower ratings
generally provide higher current income, but are subject to greater price fluc-
tuations due to changes in market conditions than bonds with shorter maturities
or higher ratings, respectively. Because the fixed income portion of the Fund's
investment portfolio is primarily invested in municipal bonds from California,
the Fund bears investment risk from the economic, political or regulatory
changes that could adversely affect municipal bond issuers in the state and
therefore the value of the Fund's investment portfolio. In addition, the Fund's
investments in stocks will be subject to equity market risk, i.e. the risk that
equity prices could decline over short or even extended periods. The equity
markets tend to be cyclical, with periods of generally rising prices and
periods of generally declining prices. Although the prices of fixed-income and
equity securities often rise and fall at different times so that a fall in
price of one will be offset by a rise in, or at least buffered by price
stability in, the other, prices in the two markets often move in tandem.
Accordingly, the Fund should be considered a long-term investment, designed to
provide the best results when held for a multi-year period. The Fund may not be
suitable if you have a short-term investment horizon. In addition, investments
by the Fund in American Depository Receipts ("ADRs") of foreign companies
involve opportunities and risks not typically associated with investing in U.S.
companies. There are also special risks associated with options and futures
transactions. See "Additional Information About the Fund's Investments."
- - --------------------------------------------------------------------------------
WHO IS RESPONSIBLE FOR THE OPERATION OF THE FUND?
The following organizations work together to provide the services and features
offered by the Fund:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORGANIZATION FUNCTION DUTIES
- - -------------------------------------------------------------------------------------
<S> <C> <C>
John Nuveen & Co. Fund Sponsor and Sponsors and manages
Incorporated Principal the offering of Fund shares
("Nuveen") Underwriter
Nuveen Fund Manager; Manages the Fund's
Institutional Municipal municipal portfolio,
Advisory Corp. Portfolio Manager oversees the Fund's
("NIAC") equity portfolio manager,
manages the Fund's
business affairs and
provides day-to-day
administrative services to
the Fund
Institutional Equity Portfolio Manages the Fund's
Capital Manager equity investment
Corporation portfolio
("ICAP")
Shareholder Transfer Agent; Maintains shareholder
Services, Inc. Shareholder accounts, handles share
("SSI") Services Agent; redemptions and exchanges
Dividend and dividend
Paying Agent payments
The Chase Custodian Maintains custody of
Manhattan the Fund's investments
Bank ("Chase") and provides certain
accounting services to the
Fund
- - -------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
HOW THE FUND DIVERSIFIES ITS INVESTMENT PORTFOLIO
The Fund's investment portfolio will be invested in a diversified portfolio of
Equity Securities and California Municipal Obligations. The Fund's target
investment mix is 60% California Municipal Obligations, 35% Equity Securities
and 5% cash equivalents, reflecting the Fund's anticipated average allocation
of its investment portfolio over a full market cycle. The Fund may gradually
shift the allocation of the investment portfolio in order to emphasize capital
appreciation in favorable market environments and capital preservation in
adverse market environments. The Fund will shift its investment mix within
defined ranges for each asset category based upon each category's relative risk
and reward characteristics. The Fund will also rebalance its investment port-
folio when necessary in order to prevent the Fund's investment mix from moving
outside defined ranges for each asset category under normal market conditions.
The table below summarizes the Fund's target investment mix and the allowable
range for each asset category.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TARGET ALLOWABLE
ASSET CATEGORY INVESTMENT MIX RANGE
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
Equity Securities 35% 30%-50%
California Municipal Obligations 60% 50%-70%
Cash Equivalents 5% 0%-10%
- - ----------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
PAGE 7
<PAGE>
The Fund's Board of Trustees from time to time may also adjust the Fund's
target investment mix and the allowable range for each asset category if,
after consultation with NIAC and ICAP, the Board determines that such a change
is in the best interests of shareholders, provided, however, that the minimum
allowable allocation for California Municipal Obligations may not be set below
50%.
During temporary defensive periods, the Fund may invest any percentage of its
assets in temporary investments, as described below under "Temporary Invest-
ments." During such periods, which may occur at a time when the Fund would
otherwise rebalance its investment mix, the proportion of the Fund's assets
invested in an asset category may fall outside the allowable range for that
asset category.
HOW THE FUND SELECTS INVESTMENTS
As equity portfolio manager, ICAP selects equity securities on the basis of
its evaluation of each security's relative value in terms of projected rela-
tive price-earnings ratios and earnings stability. When making investment
decisions, ICAP develops an economic framework (including an interest rate,
inflation, and business cycle outlook) and analyzes strategic economic and/or
industry themes to identify appropriate investments. ICAP uses a variety of
proprietary research techniques and computer models to search for equity secu-
rities believed to possess the best relative value based on proprietary price-
/earnings projections and an analysis of earnings stability. Furthermore, a
clear catalyst must exist, either stock-specific, industry or economic, which
ICAP believes will trigger significant price appreciation within a definable
period. In order to enhance its internal research, ICAP also utilizes a wide
variety of external sources for investment information including recognized
strategists, economists, technical and fundamental analysts, corporate execu-
tives, and industry sources.
For each investment, ICAP establishes an upside price target and a downside
risk potential. This strategy allows for continuous monitoring of fundamental
conditions and stock price performance. Although ICAP typically expects the
investment potential of each investment to be realized over a nine to eighteen
month time period, it is not unusual for equities to be held for a longer
period if justified by their potential future performance. Investments that
underperform expectations are reviewed intensively. If the risk/reward profile
of a particular investment becomes unattractive or the reasons for owning the
security no longer appear valid, the investment typically is sold expedi-
tiously to avoid continued underperformance.
The Fund's municipal portfolio manager, Nuveen Institutional Advisory Corp.
("NIAC"), pursues a value-oriented approach for selecting municipal securities
for the Fund's investment portfolio. The Fund invests only in investment-grade
quality California Municipal Obligations, and diversifies across different
industry sectors in order to further reduce risk. The Fund seeks to moderate
its exposure to interest rates by purchasing California Municipal Obligations
having a range of effective remaining maturities in order to create and main-
tain a diversified portfolio with overall performance characteristics similar
to an otherwise comparable portfolio of intermediate-term municipal securi-
ties. In so doing, the Fund seeks to prudently balance over economic cycles
the Fund's exposure to interest rates and its ability to provide stable
current income exempt from regular federal and California state income taxes.
The Fund will invest substantially all (in excess of 80%) of its assets allo-
cated to municipal investments in a portfolio of California Municipal Obliga-
tions with effective remaining maturities of no more than 15 years. The Fund
will actively manage the effective remaining maturities of the California
Municipal Obligations in the Fund's investment portfolio, and will adjust its
holdings of California Municipal Obligations in response to prevailing market
conditions in order to preserve the portfolio's intermediate characteristics
and insure that at all times substantially all of the California Municipal
Obligations in which the Fund invests continue to have a remaining effective
maturity of no more than 15 years.
The Fund's foregoing policy of investing in California Municipal Obligations
with effective remaining maturities of no more than 15 years will not limit
the stated or nominal maturities of the California Municipal Obligations in
which the Fund invests. The effective remaining maturity of a California
Municipal Obligation may be shorter than its stated maturity as a result of
the coupon, the actual or expected payment schedule, or other terms or condi-
tions of an issue that cause the security to trade and therefore have the risk
of price fluctuation similar to an otherwise comparable, but shorter-maturity,
security. For example, a California Municipal Obligation with an above-market
coupon having a stated maturity of 25 years and a par call in 12 years will
have volatility characteristics similar to an otherwise comparable 12-year
California Municipal Obligation; a housing revenue California Municipal Obli-
gation with a stated maturity of 30 years structured to have an expected matu-
rity of five years will have volatility characteristics similar to a five-year
California Municipal Obligation; and a 20-year California Municipal Obligation
advance refunded to a premium call in ten years will have volatility charac-
teristics similar to a ten-year California Municipal Obligation.
NIAC selects municipal securities on the basis of its evaluation of each
bond's relative value in terms of current yield, price, credit quality and
future prospects. When making investment decisions, NIAC utilizes the
resources of Nuveen's award-winning research team of more than 30 profes-
sionals dedicated to following the municipal markets. On a daily basis,
Nuveen's research analysts prepare credit reviews of individual municipal
securities available for purchase, monitor the continued creditworthiness of
the Fund's current municipal portfolio, and analyze economic, political and
demographic trends affecting the municipal markets. By emphasizing fundamental
research and continuous monitoring of investments, NIAC seeks to identify
those municipal securities that over time offer the best value consistent with
the Fund's investment objective.
The Fund focuses its municipal investments in California Municipal Obligations
that are either rated investment grade (AAA/Aaa to BBB/Baa) by independent
rating agencies at the time of purchase, or are unrated but judged to be
investment grade by NIAC. Bond ratings are furnished by Standard & Poor's
Corporation ("S&P"), Fitch Investors Services ("Fitch"), and Moody's Investors
Services ("Moody's"). Bond ratings represent the opinions of the rating agen-
cies; they are not absolute standards of quality. Bonds rated in the lowest
investment grade category may have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weak-
ened capacity to make principal and
- - -------------------------------------------------------------------------------
PAGE 8
<PAGE>
interest payments than is the case with higher grade bonds. A general descrip-
tion of ratings is set forth in the Statement of Additional Information.
If suitable municipal bonds from California are not available at attractive
prices and yields, the Fund may invest in municipal bonds of U.S. territories
(such as Puerto Rico and Guam) which are exempt from regular federal, Cali-
fornia state and local income taxes. The Fund may not invest more than 20% of
their net assets in these territorial municipal bonds.
EQUITY SECURITIES
Under normal market conditions, the Fund will invest the assets allocated to
equity investments primarily in U.S. dollar denominated equity securities of
companies with market capitalizations of at least $500 million ("Equity Securi-
ties"). Equity Securities include, but are not limited to, common stocks;
preferred stocks; warrants to purchase common stocks or preferred stocks; secu-
rities convertible into common or preferred stocks, such as convertible bonds
and debentures; and other securities with equity characteristics.
Convertible bonds and debentures must be rated Baa or higher by Moody's or BBB
or higher by S&P, Duff & Phelps, Inc. ("D&P") or Fitch. Bonds rated Baa or BBB,
although considered investment grade, have speculative characteristics and may
be subject to greater fluctuations in value than higher-rated bonds. A general
description of ratings may be found in the Statement of Additional Information.
In addition, the Fund may invest indirectly in equity securities of foreign
issuers through investments in American Depository Receipts ("ADRs"), described
later in this section.
CALIFORNIA MUNICIPAL OBLIGATIONS
California Municipal Obligations are municipal bonds from California that pay
interest that is exempt from regular federal and California state income taxes.
As noted above, California Municipal Obligations may include debt obligations
issued by certain possessions and territories of the United States. California
Municipal Obligations are issued to obtain funds for various public purposes.
These purposes include the construction and maintenance of public facilities
such as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
California Municipal Obligations may be issued include the refinancing of
outstanding obligations and the obtaining of funds for general operating
expenses and for loans to other public institutions and facilities. Certain
industrial development, private activity and pollution control bonds also may
be included within the term California Municipal Obligations if the interest
paid thereon qualifies as exempt from regular federal and California state
income taxes. The two principal classifications of California Municipal Obliga-
tions are "general obligation" and "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue bonds (e.g., industrial
development bonds) are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source.
California Municipal Obligations may also include participations in lease obli-
gations or installment purchase contract obligations (collectively, "lease
obligations") of municipal authorities or entities. Certain "non-appropriation"
lease obligations may present special risks because the municipality's obliga-
tion to make future lease or installment payments depends on money being appro-
priated each year for this purpose. The Fund will seek to minimize these risks
by only investing in those lease obligations where the issuer has a strong
incentive to continue making appropriations until maturity. See "Investment
Policies and Techniques--Investment in Municipal Obligations" in the Statement
of Additional Information for further information about lease obligations.
California Municipal Obligations in which the Fund will invest bear interest
that, in the opinion of bond counsel to the issuer, is exempt from federal and
California state income taxes, although such interest may be subject to the
federal alternative minimum tax.
The yields on California Municipal Obligations are dependent on a variety of
factors, including the condition of the financial markets in general and the
municipal bond market in particular and the size, maturity and rating of a
particular issue. The market value of California Municipal Obligations will
vary inversely with changes in prevailing interest rate levels and as a result
of changing evaluations of the ability of their issuers to meet interest and
principal payments.
TEMPORARY INVESTMENTS
During certain temporary periods, in order to keep cash on hand fully invested
or as a defensive measure in response to prevailing market conditions, the Fund
may invest without limitation in cash equivalent and short-term fixed income
securities ("temporary investments"). Temporary investments are high quality,
short-term securities that are either exempt from regular federal or California
income taxes or are taxable. The Fund intends to invest in taxable temporary
investments only in the event that suitable tax-exempt temporary investments
are not available at reasonable prices and yields.
Tax-exempt temporary investments include municipal securities maturing in three
years or less from the date of issuance such as tax-exempt notes (including
bond anticipation notes, tax anticipation notes, and revenue anticipation
notes) and municipal commercial paper. Taxable temporary investments in which
the Fund may invest include: U.S. Government securities or securities rated
within the highest grade by Moody's, S&P or Fitch, and which mature within one
year from the date of purchase or carry a variable or floating rate of inter-
est; certificates of deposit issued by U.S. banks with assets of at least $1
billion; commercial paper or corporate notes, bonds or debentures with a
remaining maturity of one year or less; and repurchase agreements entered into
only with respect to obligations of the U.S. government, its agencies or
instrumentalities, certificates of deposit and bankers acceptances.
A repurchase agreement is a contract under which the Fund would acquire a secu-
rity for a relatively short period, and the seller would agree to buy back such
security at a fixed price and time. Repurchase agreements could involve certain
risks in the event of the default or insolvency of the other party to the
agreement, including possible delays or restrictions upon a Fund's ability to
dispose of the under-
- - --------------------------------------------------------------------------------
PAGE 9
<PAGE>
lying securities. See the Statement of Additional Information under "Invest-
ment Policies and Techniques--Short-Term Taxable Fixed Income Securities and
Short-Term Tax-Exempt Fixed Income Securities" for additional information.
WHEN-ISSUED SECURITIES
In order to lock in a fixed price on a security it intends to purchase, the
Fund may invest without limitation in securities purchased on a when-issued or
delayed delivery basis ("When-Issued Securities"). Although the payment and
terms of these securities are established at the time the purchaser enters
into the commitment, these securities may be delivered and paid for at a
future date, generally within 45 days. The Fund will segregate and maintain
cash, cash equivalents, U.S. government securities, or other high-quality,
liquid debt securities in an amount at least equal to the amount of
outstanding commitments for When-Issued Securities at all times. Such securi-
ties involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date.
AMERICAN DEPOSITORY RECEIPTS ("ADRS")
ADRs are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying foreign security and denominated in U.S. dollars.
The Fund may invest up to 20% of its net assets in ADRs or other instruments
denominated in U.S. dollars that permit indirect investment in foreign securi-
ties. ADRs do not eliminate all the risk inherent in investing in foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund
avoids currency risks during the settlement period.
Investments in securities of foreign issuers involve risks in addition to the
usual risks inherent in domestic investments, including currency risks. The
value of a foreign security in U.S. dollars tends to decrease when the value
of the U.S. dollar rises against the foreign currency in which the security is
denominated and tends to increase when the value of the U.S. dollar falls
against such currency.
Some ADRs may not be sponsored by the issuer. ADRs are affected by the fact
that in many countries there is less publicly available information about
issuers than is available in the reports and ratings published about companies
in the U.S. and companies may not be subject to uniform accounting, auditing
and financial reporting standards. Other risks inherent in foreign investments
include expropriation; confiscatory taxation; withholding taxes on dividends
and interest; less extensive regulation of foreign brokers, securities markets
and issuers; diplomatic developments; and political or social instability.
Foreign economies may differ favorably or unfavorably from the U.S. economy in
various respects, and many foreign securities are less liquid and their prices
tend to be more volatile than comparable U.S. securities. From time to time,
foreign securities may be difficult to liquidate rapidly without adverse price
effects.
CERTAIN INVESTMENT STRATEGIES AND LIMITATIONS
The Fund may engage in options and futures transactions, which are sometimes
referred to as derivative transactions. The Fund's options and futures trans-
actions may include instruments such as stock index options and futures
contracts. Such transactions may be used for several reasons, including
hedging unrealized portfolio gains. The Fund will only engage in futures and
options transactions that, pursuant to regulations promulgated by the
Commodity Futures Trading Commission (the "CFTC"), constitute bona fide
hedging or other permissible risk management transactions and will not enter
into such transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of the Fund's total assets. In addition,
the Fund will not enter into options and futures transactions if more than 30%
of the Fund's net assets would be committed to such instruments.
The ability of the Fund to benefit from options and futures is largely depen-
dent upon NIAC's or ICAP's ability to correctly use such instruments, which
may involve skills different from those associated with managing securities
generally. The Fund could lose money on a futures transaction or an option
could expire worthless, in addition to the Fund suffering a loss on the value
of its portfolio assets. For a further discussion of options and futures
transactions, please see the Statement of Additional Information.
The Fund may lend its portfolio securities, up to 33 1/3% of its total assets,
to broker-dealers or institutional investors. The loans will be secured
continuously by collateral at least equal to the value of the securities lent
by "marking to market" daily. The Fund will continue to receive the equivalent
of the interest or dividends paid by the issuer of the securities lent and
will retain the right to call, upon notice, the lent securities. The Fund may
also receive interest on the investment of the collateral or a fee from the
borrower as compensation for the loan. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to firms deemed by the portfolio manager to be of good standing.
The Fund may invest up to 15% of its net assets in illiquid securities, which
include, but are not limited to, restricted securities (securities the dispo-
sition of which is restricted under the federal securities laws); securities
which may be resold pursuant to Rule 144A under the Securities Act of 1933 but
that are deemed to be illiquid; and repurchase agreements with maturities in
excess of seven days.
PORTFOLIO TURNOVER
Under normal market conditions, the Fund expects annual portfolio turnover for
the municipal portion of the portfolio to be significantly less than 75%, as
the Fund will attempt to achieve its municipal investment objectives by
prudent selection of California Municipal Obligations with a view to holding
them for investment. However, the rate of municipal turnover will not be a
limiting factor if it is desirable to sell or purchase California Municipal
Obligations.
The Fund anticipates that its annual equity portfolio turnover rate will be
between 100% and 125% under normal market conditions, and will generally not
exceed 150%. A turnover rate of 100% would occur, for example, if the Fund
sold and replaced securities valued at 100% of its net assets within one year.
In addition to the foregoing, the Fund may be required to purchase or sell
California Municipal Obligations and
- - -------------------------------------------------------------------------------
PAGE 10
<PAGE>
Equity Securities pursuant to a required reallocation of assets as described
under "How the Fund Diversifies its Investment Portfolio" and the anticipated
portfolio turnover rates set forth above are made without regard to such a
required reallocation of assets.
OTHER INVESTMENT POLICIES AND RESTRICTIONS
The Fund will not invest more than 5% of its net assets in warrants and trans-
actions in short sales against the box. The Fund also will not have more than
25% of its assets invested in any one industry sector, such as electric utili-
ties or health care. In addition, the Fund has adopted several restrictions on
the investments and other activities of the Fund that may not be changed
without shareholder approval. For example, the Fund may not:
. With respect to 75% of its total assets, purchase the securities of any
issuer (except securities issued or guaranteed by the U.S. government or any
agency or instrumentality thereof) if, as a result, (i) more than 5% of the
Fund's total assets would be invested in securities of that issuer, or (ii)
the Fund would hold more than 10% of the outstanding voting securities of
that issuer.
. Borrow money, except that the Fund may borrow money from banks for temporary
or emergency purposes and not for investment purposes and then only in an
amount not exceeding (a) 10% of the value of its total assets at the time of
borrowing or (b) one-third of the value of the Fund's total assets including
the amount borrowed, in order to meet redemption requests which might other-
wise require the untimely disposition of securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in the value of assets will not be considered a violation.
Except as specifically noted above or in the Statement of Additional Informa-
tion, the Fund's investment policies are not fundamental and may be changed
without shareholder approval. For a more complete description of investment
restrictions that may be changed without a shareholder vote, see the Statement
of Additional Information.
- - --------------------------------------------------------------------------------
FLEXIBLE PURCHASE OPTIONS
The Fund has adopted Flexible Purchase Options that offers you four alternative
classes of Fund shares (Classes A, B, C and R), each with a different combina-
tion of sales charges, ongoing fees, eligibility requirements, and other
features. The Fund's Flexible Purchase Options are designed to permit you and
your financial adviser to choose the method of purchasing shares that you
believe is most beneficial given the amount of your investment, any current
holdings of Fund shares, the length of time you expect to hold your investment
and other relevant circumstances. A summary of the four classes of Fund shares
is set forth below:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED ANNUAL
SALES ANNUAL 12B-1 12B-1
UP-FRONT SALES CHARGE DISTRIBUTION SERVICE
CHARGE "CDSC" FEE FEE
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 5.25%(1) None(2) None .25%
Class B None 5%(3) .75%(4) .25%
Class C None 1%(5) .75% .25%
Class R None None None None
- - -------------------------------------------------------------------------------------------
</TABLE>
(1) Maximum up-front sales charge, which is reduced for purchases of $50,000 or
more. Up-front sales charge may be reduced or waived for certain purchases.
(2) Certain Class A purchases at net asset value of $1 million or more may
be subject to a 1% CDSC if redeemed within 18 months of purchase.
(3) CDSC in the first year. CDSC declines to 0% after six years.
(4) Class B Shares convert to Class A Shares after eight years, which reduces
the ongoing expenses borne by an investor.
(5) CDSC is applicable to shares redeemed within 12 months of purchase.
For more information regarding features of each class, see "How to Buy Fund
Shares," "How to Redeem Fund Shares" and "Distribution and Service Plan" below.
When you purchase Class A Shares, you will normally pay an up-front sales
charge. As a result, you will have less money invested initially and you will
own fewer Class A Shares than you would in the absence of an up-front sales
charge. Alternatively, when you purchase Class B or Class C Shares, you will
not pay an up-front sales charge and all of your monies will be fully invested
at the time of purchase. However, Class B and Class C Shares are subject to an
annual distribution fee, which constitutes an asset-based sales charge whose
purpose is the same as an up-front sales charge. In addition, Class B Shares
when redeemed are subject to a CDSC, which will vary depending on the length of
time you owned your shares. Class B Shares automatically convert to Class A
Shares eight years after purchase in order to limit the distribution fees you
pay over the life of your investment. Class C Shares are subject to a CDSC of
1% if redeemed within 12 months of purchase. Because Class C Shares do not
convert to Class A Shares and continue to pay an annual distribution fee indef-
initely, Class C Shares should normally not be purchased by an investor who
expects to hold shares for significantly longer than eight years. Class A,
Class B and Class C Shares are subject to annual service fees, which are iden-
tical in amount and are used to compensate Authorized Dealers for providing you
with ongoing account services. You may qualify for a reduced sales charge or a
sales charge waiver on a purchase of Class A Shares, as described under "How
the Class A Sales Charge May Be Reduced or Waived." Class R Shares are avail-
able for purchase at a price equal to their net asset value, but only under
certain circumstances or for certain categories of investors, as described
below under "How to Buy Fund Shares--Class R Shares."
In deciding whether to purchase Class A, Class B, Class C or Class R Shares,
you should consider all relevant factors, including the dollar amount of your
purchase, any current holdings of Fund shares, the length of time you expect to
hold the shares and whether a CDSC would apply, the amount of any applicable
up-front sales charge, the amount of any applicable distribution or service
fees that may be incurred while you own the shares, whether or not you will be
reinvesting income or capital gain distributions in additional shares, whether
or not you meet applicable eligibility requirements or qualify for a sales
charge waiver or reduction, and the relative level of services that your finan-
cial adviser may provide to different classes. Authorized Dealers and other
persons distributing the Fund's shares may receive different compensation for
selling different classes of shares.
Each class of shares represents an interest in the same portfolio of invest-
ments. Each class of shares is identical in all
- - --------------------------------------------------------------------------------
PAGE 11
<PAGE>
respects except that each class has its own sales charge structure, each class
bears its own class expenses, including distribution and service fees, and
each class has exclusive voting rights with respect to any distribution or
service plan applicable to its shares. In addition, Class B Shares are subject
to a conversion feature. As a result of the differences in the expenses borne
by each class of shares, and differences in the purchase and redemption
activity for each class, net income per share, dividends per share and net
asset value per share will vary among the Fund's classes of shares.
Upon notice to all Authorized Dealers, Nuveen may reallow to Authorized
Dealers electing to participate up to the full applicable Class A Share up-
front sales charge during periods and for transactions specified in the
notice. The reallowances made during these periods may be based upon attain-
ment of minimum sales levels. Furthermore, Nuveen may from time to time
provide additional promotional support and make additional reallowances only
to certain Authorized Dealers who sell or are expected to sell certain minimum
amounts of the Fund or other Nuveen Mutual Funds and Nuveen Unit Trusts during
specified time periods. Promotional support may include providing sales liter-
ature to and holding informational or educational programs for the benefit of
such Authorized Dealers' representatives, seminars for the public, and adver-
tising and sales campaigns. Nuveen may reimburse a participating Authorized
Dealer for up to one-half of specified media costs incurred in the placement
of advertisements which jointly feature the Authorized Dealer and Nuveen Funds
and Nuveen Unit Trusts.
Such reimbursement will be based on the number of its financial advisers who
have sold Nuveen Fund shares and Nuveen Unit Trust units during the prior
calendar year according to an established schedule. Any such support or reim-
bursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amount that a Fund will receive from such a sale. The staff of
the Securities and Exchange Commission takes the position that dealers who
receive 90% or more of the applicable sales charge may be deemed underwriters
under the Securities Act of 1933, as amended.
- - -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
CLASS A SHARES
You may purchase Class A Shares at a public offering price equal to the appli-
cable net asset value per share plus an up-front sales charge imposed at the
time of purchase as set forth below. You may qualify for a reduced sales
charge, or the sales charge may be waived in its entirety, as described below
under "How the Class A Sales Charge May Be Reduced or Waived." Class A Shares
are also subject to an annual service fee of .25%. See "Flexible Purchase
Options" and "Distribution and Service Plan."
The up-front sales charge schedule for Class A Shares is as follows:
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS % OF REALLOWANCE AS
AS % OF PUBLIC NET AMOUNT % OF PUBLIC
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.25% 5.54% 5.00%
$50,000 but less
than $100,000 4.25% 4.44% 4.00%
$100,000 but less
than $250,000 3.50% 3.63% 3.25%
$250,000 but less
than $500,000 2.75% 2.83% 2.50%
$500,000 but less
than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0.00% 0.00% 0.00%*
- - ------------------------------------------------------------------------------------
</TABLE>
*Authorized Dealers are eligible to receive a commission from Nuveen as
discussed below.
The Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown above to Authorized Dealers. See "Flexible Purchase
Options" for more information about reallowances and other compensation to
Authorized Dealers.
Certain commercial banks may make Class A Shares of the Fund available to
their customers on an agency basis. Pursuant to the agreements between Nuveen
and these banks, some or all of the sales charge paid by a bank customer in
connection with a purchase of Class A Shares may be retained by or paid to the
bank. Certain banks and other financial institutions may be required to
register as securities dealers in certain states.
Class A purchases of $1 million or more are sold at net asset value without an
up-front sales charge. Nuveen pays Authorized Dealers of record on such Class
A Share purchases a sales commission equal to the sum of 1.00% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of purchases
over $5.0 million amount of the purchase. If such shares are redeemed within
18 months of purchase, a CDSC of 1% of the lower of the purchase price or the
redemption proceeds may be imposed upon the redemption. Shares purchased by
investors investing $1 million or more who have made arrangements with Nuveen
and whose dealer of record waived the commission are not subject to the CDSC.
HOW THE CLASS A SALES CHARGE MAY BE REDUCED OR WAIVED
There are several ways to reduce or eliminate the up-front sales charge:
. cumulative discount;
. letter of intent;
. purchases with monies representing distributions from Nuveen-sponsored Unit
Trusts;
. group purchase programs;
. reinvestment of redemption proceeds from non-affiliated funds; and
. special sales charge waivers for certain categories of investors.
You may qualify for a reduced sales charge as shown above on a purchase of
Class A Shares if the amount of your
- - -------------------------------------------------------------------------------
PAGE 12
<PAGE>
purchase, when added to the value that day of all of your prior purchases of
shares of the Fund or of another Nuveen Mutual Fund, or units of a Nuveen Unit
Trust, on which an up-front sales charge or ongoing distribution fee is
imposed, falls within the amounts stated in the table. You or your financial
adviser need to notify Nuveen or SSI of any cumulative discount level you have
achieved at the time you purchase your shares.
You may qualify for a reduced sales charge on a purchase of Class A Shares if
you plan to purchase Class A Shares of Nuveen Mutual Funds over the next 13
months and the total amount of your purchases would, if purchased at one time,
qualify you for one of the reduced sales charges shown above. In order to take
advantage of this option, you need to complete the applicable section of the
Application Form or sign and deliver either to an Authorized Dealer or to SSI
a written Letter of Intent in a form acceptable to Nuveen. A Letter of Intent
states that you intend, but are not obligated, to purchase over the next 13
months a stated total amount of Class A Shares that would qualify you for a
reduced sales charge shown above. You may count shares of a Nuveen Mutual Fund
that you already own on which you paid an up-front sales charge or an ongoing
distribution fee and any Class B and Class C Shares of a Nuveen Mutual Fund
that you purchase over the next 13 months towards completion of your invest-
ment program, but you will receive a reduced sales charge only on new Class A
Shares you purchase over that period. You cannot count Class A Shares that you
purchase without a sales charge through investment of distributions from a
Nuveen Mutual Fund, a Nuveen Unit Trust or otherwise, towards completion of
your Letter of Intent program.
By establishing a Letter of Intent, you agree that your first purchase of
Class A Shares following execution of the Letter of Intent will be at least 5%
of the total amount of your intended purchases. You further agree that shares
representing 5% of the total amount of your intended purchases will be held in
escrow pending completion of these purchases. All dividends and capital gains
distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the
total purchases, less redemptions, are less than the amount specified, you
must pay Nuveen an amount equal to the difference between the amounts paid for
these purchases and the amounts that would have been paid if the higher sales
charge had been applied. If you do not pay the additional amount within 20
days after written request by Nuveen or your financial adviser, Nuveen will
redeem an appropriate number of your escrowed Class A Shares to meet the
required payment. By establishing a Letter of Intent, you irrevocably appoint
Nuveen as attorney to give instructions to redeem any or all of your escrowed
shares, with full power of substitution in the premises.
You or your financial adviser need to notify Nuveen or SSI whenever you make a
purchase of Fund shares that you wish to be covered under the Letter of Intent
option.
You may purchase Class A Shares without an up-front sales charge if you are
investing distributions from a Nuveen Unit Trust. There is no initial or
subsequent minimum investment requirement for such purchases.
If you are a member of a qualified group, you may purchase Class A Shares of
the Fund or of another Nuveen Mutual Fund at the reduced sales charge appli-
cable to the group's purchases taken as a whole. A "qualified group" is one
which has a purpose other than investment, has ten or more participating
members, has agreed to include Fund sales publications in mailings to members
and has agreed to comply with certain administrative requirements relating to
its group purchases.
Under any group purchase program, the minimum monthly investment in Class A
Shares of any particular fund or portfolio by each participant is $50, and the
minimum initial investment in Class A Shares of any particular fund or port-
folio for each participant in the program is $3,000. No certificates will be
issued for any participant's account. All dividends and other distributions by
the Fund will be reinvested in additional Class A Shares of the Fund. No
participant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each partici-
pant must fill out special application materials, which the group adminis-
trator may obtain from the group's financial adviser by checking the appli-
cable box on the enclosed Application Form or by calling SSI toll-free at 800-
621-7227. See the Statement of Additional Information for more complete infor-
mation about "qualified groups" and group purchase programs.
You may also purchase Class A Shares at net asset value without a sales charge
if the purchase takes place through an Authorized Dealer and represents the
reinvestment of the proceeds of the redemption of shares of one or more regis-
tered investment companies not affiliated with Nuveen. You need to provide
appropriate documentation that the redemption occurred not more than one year
prior to the reinvestment of the proceeds in Class A Shares, and that you
either paid an up-front sales charge or were subject to a contingent deferred
sales charge upon the redemption of the shares of the other investment
company.
Class A Shares of the Fund may be purchased at net asset value without a sales
charge and in any amount by officers, trustees and former trustees of the
Trust; bona fide, full-time and retired employees of Nuveen or ICAP, any
parent company of Nuveen, and subsidiaries thereof, or their immediate family
members (as defined below); any person who, for at least 90 days, has been an
officer, director or bona fide employee of any Authorized Dealer, or their
immediate family members; officers and directors of bank holding companies
that make Fund shares available directly or through subsidiaries or bank
affiliates or their immediate family members; bank or broker-affiliated trust
departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, advisory,
custodial or similar capacity; investors purchasing on a periodic fee, asset-
based fee or no transaction fee basis through a broker-dealer sponsored mutual
fund purchase program; and clients of investment advisers, financial planners
or other financial intermediaries that charge periodic or asset-based fees for
their services.
PAGE-13---------------------------------------------------------------------
<PAGE>
For further details about these special categories and their eligibility
requirements, please consult your financial adviser or the Statement of Addi-
tional Information, or call Nuveen at 800-621-7227.
Any Class A Shares purchased pursuant to a special sales charge waiver must be
acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Fund. You or your
financial adviser need to notify Nuveen or SSI whenever you make a purchase of
Class A Shares that you wish to be covered under these special sales charge
waivers. All of the above categories of investors are also eligible to
purchase Class R Shares, as described below under "Class R Shares." Finally,
Class A Shares may be issued at net asset value without a sales charge in
connection with the acquisition by the Fund of another investment company.
GENERAL
In determining the amount of your purchases of Class A Shares that may qualify
for a reduced sales charge, the following purchases may be combined: (1) all
purchases by a trustee or other fiduciary for a single trust estate or fidu-
ciary account; (2) all purchases by individuals and their immediate family
members (i.e., their spouses, parents, children, grandparents, grandchildren,
parents-in-law, sons- and daughters-in-law, siblings, a sibling's spouse, and
a spouse's siblings); or (3) all purchases made through a group purchase
program as described above.
The reduced sales charge programs may be modified or discontinued by the Fund
at any time.
FOR MORE INFORMATION ABOUT THE PURCHASE OF CLASS A SHARES OR REDUCED SALES
CHARGE PROGRAMS, OR TO OBTAIN THE REQUIRED APPLICATION FORMS, CALL NUVEEN
TOLL-FREE AT 800-621-7227.
CLASS B SHARES
You may purchase Class B Shares at a public offering price
equal to the applicable net asset value per share without any
up-front sales charge. Since Class B Shares are sold without an initial sales
charge, the full amount of your purchase payment will be invested in Class B
Shares. Class B Shares are subject to an annual distribution fee to compensate
Nuveen for its costs in connection with the sale of Class B shares, and are
also subject to an annual service fee to compensate Authorized Dealers for
providing you with ongoing financial advice and other account services.
You may be subject to a CDSC if you redeem your Class B shares within a speci-
fied period after purchase, as shown in the table below. See "Flexible
Purchase Options" and "Distribution and Service Plan." Nuveen compensates
Authorized Dealers for sales of Class B Shares at the time of sale at the rate
of 4.00% of the amount of Class B Shares purchased, which represents a sales
commission of 3.75% plus an advance on the first year's annual service fee of
.25%.
If redeemed prior to the end of the sixth year after purchase, Class B Shares
may be subject to a CDSC, as set forth below:
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE CDSC
- - ------------------------------------------------------------------------------
<S> <C>
0-1 5%
1-2 4%
2-3 4%
3-4 3%
4-5 2%
5-6 1%
- - ------------------------------------------------------------------------------
</TABLE>
Class B Shares acquired through the reinvestment of dividends are not subject
to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares' cost
or net asset value at the time of redemption. For more information regarding
the imposition of the CDSC, see "How to Redeem Fund Shares--Class B Shares,"
below.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net
asset value without the imposition of any sales load, fee, or other charge, so
that the value of each shareholder's account immediately before conversion
will be the same as the value of the account immediately after conversion.
Class B Shares acquired through reinvestment of distributions will convert
into Class A Shares based on the date of the initial purchase to which such
shares relate. For this purpose, Class B Shares acquired through reinvestment
of distributions will be attributed to particular purchases of Class B Shares
in accordance with such procedures as the Board of Trustees may determine from
time to time. Class B Shares that are converted to Class A Shares will remain
subject to an annual service fee that is identical in amount for both Class B
Shares and Class A Shares. Since net asset value per share of the Class B
Shares and the Class A Shares may differ at the time of conversion, a share-
holder may receive more or fewer Class A Shares than the number of Class B
Shares converted. Any conversion of Class B Shares into Class A Shares will be
subject to the continuing availability of an opinion of counsel or a private
letter ruling from the Internal Revenue Service to the effect that the conver-
sion of shares would not constitute a taxable event under federal income tax
law. Conversion of Class B Shares into Class A Shares might be suspended if
such an opinion or ruling were no longer available.
CLASS C SHARES
You may purchase Class C Shares at a public offering price equal to the appli-
cable net asset value per share without any up-front sales charge. Class C
Shares are subject to an annual distribution fee to compensate Nuveen for its
costs in connection with the sale of Class C Shares. Class C Shares are also
subject to an annual service fee of .25% to compensate Authorized Dealers for
providing you with ongoing financial advice and other account services. Nuveen
compensates Authorized Dealers for sales of Class C Shares at the time of the
sale at a rate of 1% of the amount of Class C Shares purchased, which repre-
sents a sales commission of .75% plus an advance on the first year's annual
service fee of .25%. See "Flexible Purchase Options" and "Distribution and
Service Plan."
Redemptions of Class C Shares within 12 months of purchase may be subject to a
CDSC of 1% of the lower of
- - -------------------------------------------------------------------------------
PAGE 14
<PAGE>
the purchase price or redemption proceeds. See "How to Redeem Fund Shares--
Class C Shares."
CLASS R SHARES
If you are making an initial purchase of $1 million or more of Fund Shares in
a single transaction, you may purchase Class R Shares at a public offering
price equal to the applicable net asset value per share without any up-front
sales charge or ongoing distribution or service fees. You also may purchase
Class R Shares subject only to the Fund's minimum investment requirement of
$3,000 if you are within the following specified categories of investors who
are eligible to purchase Class A Shares at net asset value without an up-front
sales charge: officers, trustees and former trustees of the Fund; bona fide,
full-time and retired employees of Nuveen or ICAP, any parent company of
Nuveen, and subsidiaries thereof, or their immediate family members; any
person who, for at least 90 days, has been an officer, director or bona fide
employee of any Authorized Dealer, or their immediate family members; officers
and directors of bank holding companies that make Fund shares available
directly or through subsidiaries or bank affiliates or their immediate family
members; and bank or broker-affiliated trust departments investing funds over
which they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
investors purchasing on a periodic fee, asset-based fee or no transaction fee
basis through a broker-dealer sponsored mutual fund purchase program; and
clients of investment advisers, financial planners or other financial interme-
diaries that charge periodic or asset-based fees for their services. For
further details about these special categories and their eligibility require-
ments, please consult your financial adviser or the Statement of Additional
Information, or call Nuveen at 800-621-7227.
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the differ-
ences between these two classes of shares. Class A Shares are subject to an
annual service fee to compensate Authorized Dealers for providing you with
ongoing account services. Class R Shares are not subject to a distribution or
service fee and, consequently, holders of Class R Shares may not receive the
same types or levels of services from Authorized Dealers. In choosing between
Class A Shares and Class R Shares, you should weigh the benefits of the serv-
ices to be provided by Authorized Dealers against the annual service fee
imposed upon the Class A Shares.
INITIAL AND SUBSEQUENT PURCHASE OF SHARES
You may buy Fund shares through Authorized Dealers or by calling or directing
your financial adviser to call Nuveen toll-free at 800-843-6765. You may pay
for your purchase by Federal Reserve draft or by check made payable to "Nuveen
Balanced California Municipal and Stock Fund, Class [A], [B], [C], [R],"
delivered to the financial adviser through whom the investment is to be made
for forwarding to the Fund's shareholder services agent, SSI. When making your
initial investment, you must also furnish the information necessary to estab-
lish your Fund account by completing and enclosing with your payment the
attached Application Form. After your initial investment, you may make subse-
quent purchases at any time by forwarding to your financial adviser or SSI a
check in the amount of your purchase made payable to "Nuveen Balanced Cali-
fornia Municipal and Stock Fund, Class [A], [B], [C], [R]," and indicating on
the check your account number. All payments need to be in U.S. dollars and
should be sent directly to SSI at its address listed on the back cover of this
Prospectus. A check drawn on a foreign bank or payable other than to the order
of the Fund generally will not be acceptable. You may also wire Federal Funds
directly to SSI, but you may be charged a fee for this. For instructions on
how to make Fund purchases by wire transfer, call Nuveen toll-free at 800-621-
7227.
PURCHASE PRICE
The price at which you purchase a class of Fund shares is based on the next
calculation of the net asset value for that share class after the order is
placed. The net asset value per share of each share class is determined as of
the close of trading (normally 4:00 p.m. Eastern Time) on each day the New
York Stock Exchange is open for business. See "Net Asset Value," below for a
description of how net asset value is calculated.
MINIMUM INVESTMENT REQUIREMENTS
Generally, your first purchase of any class of the Fund's shares needs to be
for $3,000 or more ($1,000 or more for an Individual Retirement Account). The
minimum initial investment amount may be lower for accounts opened through
fee-based programs for which the program sponsor has established a single
master account with the fund's transfer agent and performs all sub-accounting
services related to that account. Additional purchases may be in amounts of
$50 or more. These minimums may be changed at any time by the Fund. There are
exceptions to these minimums for shareholders who qualify under one or more of
the Fund's automatic investment, group purchase or reinvestment programs.
SYSTEMATIC INVESTMENT PROGRAMS
The Fund offers you several opportunities to capture the benefits of "dollar
cost averaging" through systematic investment programs. In a regularly
followed dollar cost averaging program, you would purchase more shares when
Fund share prices are lower and fewer shares when Fund share prices are
higher, so that the average price paid for Fund shares is less than the
average price of the Fund shares over the same time period. Dollar cost aver-
aging does not assure profits or protect against losses in a steadily
declining market. Since dollar cost averaging involves continuous investment
regardless of fluctuating price levels, you should consider your financial
ability to continue investing in declining as well as rising markets before
deciding to invest in this way. The Fund offers two different types of system-
atic investment programs:
Once you have established a Fund account, you may make regular investments in
an amount of $25 or more each month by authorizing SSI to draw preauthorized
checks on your bank account. There is no obligation to continue payments and
you may terminate your participation at any time at your discretion. No charge
in addition to the applicable sales charge is made in connection with this
Plan, and there is no cost to the Fund. To obtain an application form for the
Automatic Deposit Plan, check the applicable box on the enclosed Application
Form or call Nuveen toll-free at 800-621-7227.
- - -------------------------------------------------------------------------------
PAGE 15
<PAGE>
Once you have established a Fund account, you may, with your employer's
consent, make regular investments in Fund shares of $25 or more per pay period
by authorizing your employer to deduct this amount automatically from your
paycheck. There is no obligation to continue payments and you may terminate
your participation at any time at your discretion. No charge in addition to the
applicable sales charge is made for this Plan, and there is no cost to the
Fund. To obtain an application form for the Payroll Direct Deposit Plan, check
the applicable box on the enclosed Application Form or call Nuveen toll-free at
800-621-7227.
OTHER SHAREHOLDER PROGRAMS
You may exchange shares of a class of the Fund for shares of the same class of
any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset
value without a sales charge, by sending a written request to the Fund, c/o
Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330. Similarly,
Class A, Class B, Class C and Class R Shares of other Nuveen Mutual Funds may
be exchanged for the same class of shares of the Fund at net asset value
without a sales charge. Exchanges of shares from any Nuveen money market fund
will be made into Class A Shares, Class B Shares, Class C Shares or Class R
Shares (if eligible) of the Fund at the public offering price. If, however, a
sales charge has previously been paid on the investment represented by the
exchanged shares (i.e., the shares to be exchanged were originally issued in
exchange for shares on which a sales charge was paid), the exchange of shares
from a Nuveen money market fund will be made into shares of the Fund at net
asset value. Class A Shares, Class C Shares or Class R Shares may be exchanged
for shares of any Nuveen money market fund, but Class B Shares may not be
exchanged for shares of a Nuveen money market fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time
of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on
when you purchased your original shares and the CDSC schedule of the fund from
which you exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment require-
ment of the Nuveen Mutual Fund being purchased. For federal income tax
purposes, any exchange constitutes a sale and purchase of shares and may result
in capital gain or loss. Before making any exchange, you should obtain the
Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully.
If the registration of the account for the Fund you are purchasing is not
exactly the same as that of the fund account from which the exchange is made,
written instructions from all holders of the account from which the exchange is
being made must be received, with signatures guaranteed by a member of an
approved Medallion Guarantee Program or in such other manner as may be accept-
able to the Fund. You may also exchange shares by telephone if you authorize
telephone exchanges by checking the applicable box on the enclosed Application
Form or by calling Nuveen toll-free at 800-621-7227 to obtain an authorization
form. The exchange privilege may be modified or discontinued by the Fund at any
time upon prior written notice to shareholders of the Fund.
The exchange privilege is not intended to permit the Fund to be used as a
vehicle for short-term trading. Excessive exchange activity may interfere with
portfolio management, raise expenses, and otherwise have an adverse effect on
all shareholders. In order to limit excessive exchange activity and in other
circumstances where Fund management believes doing so would be in the best
interest of the Fund, the Fund reserves the right to revise or terminate the
exchange privilege, or limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to the extent
required by law.
If you redeemed Class A, Class B or Class C Shares of the Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up
to one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement privi-
lege can be exercised only once for any redemption, and reinvestment will be
made at the net asset value next calculated after reinstatement of the appro-
priate class of Fund shares. If you reinstate shares that were subject to a
CDSC, your holding period as of the redemption date also will be reinstated for
purposes of calculating a CDSC. The federal income tax consequences of any
capital gain realized on a redemption will not be affected by reinstatement,
but a capital loss may be disallowed in whole or in part depending on the
timing, the amount of the reinvestment and the fund from which the redemption
occurred.
You can use Fund Direct to link your Fund account to your account at a bank or
other financial institution. Fund Direct enables you to transfer money elec-
tronically between these accounts and perform a variety of account transac-
tions. These include purchasing shares by telephone, investing through an Auto-
matic Deposit Plan, and sending dividends, distributions, redemption payments
or Automatic Withdrawal Plan payments directly to your bank account. Please
refer to the Application for details, or call SSI at 800-621-7227 for more
information.
Fund Direct privileges may be requested via an Application you obtain by
calling 800-621-7227. Fund Direct privileges will apply to each shareholder
listed in the registration on your account as well as to your Authorized Dealer
representative of record unless and until SSI receives written instructions
terminating or changing those privileges. After you establish Fund Direct for
your account, any change of bank account information must be made by signature-
guaranteed instructions to SSI signed by all shareholders who own the account.
Purchases may be made by telephone only after your account has been estab-
lished. To purchase shares in amounts up to $250,000 through a telephone repre-
sentative, call SSI at 800-621-7227. The purchase payment will be debited from
your bank account.
FOR MORE INFORMATION ABOUT THESE PURCHASE OPTIONS AND TO OBTAIN THE APPLICATION
FORMS REQUIRED FOR SOME OF THEM, CALL NUVEEN TOLL-FREE AT 800-621-7227.
PAGE-16-----------------------------------------------------------------------
<PAGE>
ADDITIONAL INFORMATION
If you choose to invest in the Fund, an account will be opened and maintained
for you by SSI, the Fund's shareholder services agent. Share certificates will
be issued to you only upon written request to SSI, and no certificates will be
issued for fractional shares. The Fund reserves the right to reject any
purchase order and to waive or increase minimum investment requirements. A
change in registration or transfer of shares held in the name of your financial
adviser's firm can only be made by an order in good form from the financial
adviser acting on your behalf.
Authorized Dealers are encouraged to open single master accounts. However, some
Authorized Dealers may wish to use SSI's sub-accounting system to minimize
their internal recordkeeping requirements. An Authorized Dealer or other
investor requesting shareholder servicing or accounting other than the master
account or sub-accounting service offered by SSI will be required to enter into
a separate agreement with another agent for these services for a fee that will
depend upon the level of services to be provided.
Subject to the rules and regulations of the Securities and Exchange Commission,
the Fund reserves the right to suspend the continuous offering of its shares at
any time, but no suspension shall affect your right of redemption as described
below.
- - --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B and Class C Shares
will be subject to an annual distribution fee and Class A, Class B and Class C
Shares will be subject to an annual service fee. Class R Shares will not be
subject to either distribution or service fees.
The distribution fee applicable to Class B and Class C Shares under the Plan
will be payable to reimburse Nuveen for services and expenses incurred in
connection with the distribution of such Shares. The distribution fee primarily
reimburses Nuveen for providing compensation to Authorized Dealers, including
Nuveen, either at the time of sale or on an ongoing basis. The other expenses
for which Nuveen may be reimbursed include, without limitation, expenses of
printing and distributing prospectuses to persons other than shareholders of
the Fund, expenses of preparing, printing and distributing advertising and
sales literature and reports to shareholders used in connection with the sale
of such Shares, certain other expenses associated with the distribution of such
Shares, and any other distribution-related expenses that may be authorized from
time to time by the Board of Trustees.
The service fee applicable to Class A, Class B and Class C Shares under the
Plan will be paid to Nuveen to compensate Authorized Dealers, including Nuveen,
in connection with the provision of ongoing account services to shareholders.
These services may include establishing and maintaining shareholder accounts,
answering shareholder inquiries and providing other personal services to share-
holders.
The Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan applicable to Class A Shares.
The Fund may spend up to .75 of 1% per year of the average daily net assets of
Class B Shares as a distribution fee and up to .25 of 1% per year of the
average daily net assets of Class B Shares as a service fee under the Plan
applicable to Class B Shares. The Fund may spend up to .75 of 1% per year of
the average daily net assets of Class C Shares as a distribution fee and up to
.25 of 1% per year of the average daily net assets of Class C Shares as a
service fee under the Plan applicable to Class C Shares.
- - --------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
You may redeem your Fund shares at any time for cash at the net asset value
next computed after the redemption instructions and any required documents and
certificates are received in proper form, as described below. There is no
charge for the redemption of Class R Shares.
CLASS A SHARES
Class A Shares are normally redeemed at net asset value, without any CDSC.
However, in the case of Class A purchases of $1 million or more at net asset
value, where the dealer of record has not waived the sales commission, a CDSC
of 1% is imposed on any redemptions within 18 months of purchase.
CLASS B SHARES
Class B Shares redeemed within 6 years of purchase may be subject to a CDSC.
The level of the CDSC is determined by how long you have owned your shares, as
described under "How to Buy Fund Shares--Class B Shares," above.
CLASS C SHARES
Class C Shares are redeemed at net asset value, without any CDSC, except that a
CDSC of 1% is imposed upon redemptions of Class C Shares within 12 months of
purchase.
OPERATION OF THE CDSC
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless you specify another order. No CDSC is charged on shares
purchased as a result of automatic reinvestment of dividends or capital gains
paid. In addition, no CDSC will be charged on exchanges of shares into another
Nuveen Mutual Fund or money market fund. Your holding period is calculated on a
monthly basis and begins the first day of the month in which the order for
investment is received. The CDSC is calculated based on the lower of the
redeemed shares' cost or net asset value at the time of the redemption and is
deducted from the redemption proceeds. Nuveen receives the amount of any CDSC
you pay. The CDSC may be waived under certain special circumstances, as
described in the Statement of Additional Information.
- - --------------------------------------------------------------------------------
PAGE 17
<PAGE>
You may redeem shares by sending a written request for redemption directly to
the Fund, c/o Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-
5330, accompanied by duly endorsed certificates, if issued. Requests for
redemption and share certificates, if issued, must be signed by each share-
holder and, if the redemption proceeds exceed $50,000 or are payable other
than to the shareholder of record at the address of record (which address may
not have changed in the preceding 60 days), the signature must be guaranteed
by a member of an approved Medallion Guarantee Program or in such other manner
as may be acceptable to the Fund. You will receive payment based on the net
asset value per share next determined after receipt by the Fund of a properly
executed redemption request in proper form. A check for the redemption
proceeds will be mailed to you within seven days after receipt of your redemp-
tion request. For accounts registered in the name of a broker-dealer, payment
will be forwarded within three business days. However, if any shares to be
redeemed were purchased by check within 15 days prior to the date the redemp-
tion request is received, the Fund will not mail the redemption proceeds until
the check received for the purchase of shares has cleared, which may take up
to 15 days.
If you have authorized telephone redemption and your account address has not
changed within the last 60 days, you can redeem shares that are held in non-
certificate form and that are worth $50,000 or less by calling Nuveen at 800-
621-7227. While you or anyone authorized by you may make telephone redemption
requests, redemption checks will be issued only in the name of the shareholder
of record and will be mailed to the address of record. If your telephone
request is received prior to 4:00 p.m. eastern time, the redemption check will
normally be mailed the next business day. For requests received after 4:00
p.m. eastern time, the redemption will be effected at 4:00 p.m. eastern time
the following business day and the check will normally be mailed on the second
business day after the request.
If you have authorized electronic fund redemption or established Fund Direct
privileges, you can take advantage of the following expedited redemption
procedures to redeem shares held in non-certificate form that are worth at
least $1,000. You may make electronic fund redemption requests through a phone
representative or Fund Direct redemption requests by calling Nuveen at 800-
621-7227. If a redemption request is received by 4:00 p.m. eastern time, the
redemption will be made as of 4:00 p.m. that day. If the redemption request is
received after 4:00 p.m. eastern time, the redemption will be made as of 4:00
p.m. the following business day. Proceeds of electronic fund redemptions will
normally be wired on the second business day following the redemption, but may
be delayed one additional business day if the Federal Reserve Bank of Boston
or the Federal Reserve Bank of New York is closed on the day redemption
proceeds would ordinarily be wired. The Fund reserves the right to charge a
fee for electronic fund redemption. Proceeds of redemptions through Fund
Direct will normally be wired to your Fund Direct bank account on the second
or third business day after the redemption.
Before you may redeem shares electronically by phone or through Fund Direct,
you need to complete the telephone redemption authorization section of the
enclosed Application Form or the Fund Direct Application Form and return it to
Nuveen or SSI. If you did not authorize telephone redemption when you opened
your account, you may obtain a telephone redemption authorization form by
writing the Fund or by calling Nuveen toll-free at 800-621-7227. Proceeds from
electronic share redemptions will be transferred by Federal Reserve wire only
to the commercial bank account specified by the shareholder on the Application
Form. You need to send a written request to Nuveen or SSI in order to estab-
lish multiple accounts, or to change the account or accounts designated to
receive redemption proceeds. These requests must be signed by each account
owner with signatures guaranteed by a member of an approved Medallion Guar-
antee Program or in such other manner as may be acceptable to the Fund.
Further documentation may be required from corporations, executors, trustees
or personal representatives.
For the convenience of shareholders, the Fund has authorized Nuveen as its
agent to accept orders from financial advisers by wire or telephone for the
redemption of Fund shares. The redemption price is the first net asset value
of the appropriate share class determined following receipt of an order placed
by the financial adviser. The Fund makes payment for the redeemed shares to
the securities representatives who placed the order promptly upon presentation
of required documents with signatures guaranteed as described above. Neither
the Fund nor Nuveen charges any redemption fees other than any CDSC as
described above. However, your financial adviser may charge you for serving as
agent in the redemption of shares.
The Fund reserves the right to refuse telephone redemptions and, at its
option, may limit the timing, amount or frequency of these redemptions. Tele-
phone redemption procedures may be modified or terminated at any time, on 30
days' notice, by the Fund. The Fund, SSI and Nuveen will not be liable for
following telephone instructions reasonably believed to be genuine. The Fund
employs procedures reasonably designed to confirm that telephone instructions
are genuine. These procedures include recording all telephone instructions and
requiring up to three forms of identification prior to acting upon a caller's
instructions. If the Fund does not follow reasonable procedures for protecting
shareholders against loss on telephone transactions, it may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
If you own Fund shares currently worth at least $10,000, you may establish an
Automatic Withdrawal Plan by completing an application form for the Plan. You
may obtain an application form by checking the applicable box on the enclosed
Application Form or by calling Nuveen toll-free at 800-621-7227.
The Plan permits you to request periodic withdrawals on a monthly, quarterly,
semi-annual or annual basis in an amount of $50 or more. Depending upon the
size of the withdrawals requested under the Plan and fluctuations in the net
asset value of Fund shares, these withdrawals may reduce or even exhaust your
account.
The purchase of Class A Shares, other than through reinvestment, while you are
participating in the Automatic Withdrawal Plan with respect to Class A Shares
will usually be disadvantageous because you will be paying a sales charge on
any Class A Shares you purchase at the same time you are redeeming shares.
Similarly, use of the Automatic Withdrawal Plan for Class B Shares held for
less
- - -------------------------------------------------------------------------------
PAGE 18
<PAGE>
than six years or Class C Shares held for less than 12 months may be disadvan-
tageous because the newly-purchased Class B or Class C Shares will be subject
to the CDSC.
The Fund may suspend the right of redemption of Fund shares or delay payment
more than seven days (a) during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that trading of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for any other periods that the Securities and Exchange
Commission by order may permit for protection of Fund shareholders.
The Fund may, from time to time, establish a minimum total investment for Fund
shareholders, and the Fund reserves the right to redeem your shares if your
investment is less than the minimum after giving you at least 30 days' notice.
If any minimum total investment is established, and if your account is below
the minimum, you will be allowed 30 days following the notice in which to
purchase sufficient shares to meet the minimum. So long as the Fund continues
to offer shares at net asset value to holders of Nuveen Unit Trusts who are
investing their Nuveen Unit Trust distributions, no minimum total investment
will be established for the Fund.
- - --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
The management of the Fund, including general supervision of the duties
performed for the Fund by NIAC under the Management Agreement, is the responsi-
bility of the Board of Trustees of the Trust.
Overall management of the Fund is the responsibility of NIAC, which is located
at 333 West Wacker Drive, Chicago, Illinois 60606. NIAC oversees the management
of the Fund's investment portfolio, manages the Fund's business affairs and
provides certain day-to-day administrative services to the Fund. NIAC has
entered into a Sub-Advisory Agreement with ICAP under which ICAP manages the
Fund's equity investments.
NIAC manages the Fund's municipal investments and is responsible for the peri-
odic rebalancing of the Fund's investment portfolio in order to achieve the
Fund's target investment mix. The day to day management of the Fund's municipal
portfolio is the responsibility of [ ]. NIAC places orders for
the purchase and sale of California Municipal Obligations and is responsible
for selecting the broker-dealers who execute the portfolio transactions.
Consistent with the Fund's investment objective, NIAC's day-to-day management
of the Fund's California Municipal Obligations is characterized by an emphasis
on value investing, a process which involves the search for California Munic-
ipal Obligations with favorable characteristics that, in NIAC's judgment, have
not yet been recognized in the marketplace. The process of searching for such
undervalued or underrated securities is an ongoing one that draws upon the
resources of the portfolio managers of the various Nuveen funds and senior
management of NIAC. All portfolio management decisions are subject to weekly
review by NIAC's management and to quarterly review by the Board of Trustees.
NIAC is a wholly-owned subsidiary of Nuveen, which has sponsored or under-
written more than $60 billion of investment company securities. Nuveen, the
principal underwriter of the Fund's shares, is sponsor of the Nuveen Tax-Free
Unit Trust, a registered unit investment trust. It is also the principal under-
writer for the Nuveen Mutual Funds, and served as co-managing underwriter for
the shares of the Nuveen Exchange-Traded Funds. Over 1,000,000 individuals have
invested to date in Nuveen investment products. Founded in 1898, Nuveen is a
subsidiary of The John Nuveen Company which, in turn, is approximately 80%
owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located in St.
Paul, Minnesota, and is principally engaged in providing property-liability
insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, the Fund has
agreed to pay an annual management fee as follows:
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE FUND MANAGEMENT FEE
- - ------------------------------------------------------------------------------
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
- - ------------------------------------------------------------------------------
</TABLE>
All fees and expenses are accrued daily and deducted before payment of divi-
dends to investors. In addition to the Fund management fee paid to NIAC and the
distribution and service fees paid to Nuveen, the Fund is responsible for its
own expenses that are not covered under such agreements, including, without
limitation: custodial, transfer agent, accounting and legal fees; interest
charges; brokerage commissions; organizational expenses; and extraordinary
expenses. The Fund also pays a portion of the Nuveen Investment Trust's general
administrative expenses allocated in proportion to the net assets of each Fund.
In order to prevent total operating expenses (excluding any distribution or
service fees and extraordinary expenses) from exceeding .85 of 1% of the
average daily net asset value of any class of shares of the Fund for the year
ended July 31, 1998, NIAC has agreed to waive all or a portion of its manage-
ment fees or reimburse certain expenses of the Fund.
ICAP was founded in 1970 and is located at 225 West Wacker Drive, Suite 2400,
Chicago, IL 60606. Under the Sub-Advisory Agreement, NIAC pays ICAP a portfolio
management fee on a specified proportion of the Fund's average daily net asset
value, such proportion to be equal to the Fund's target investment mix with
respect to Equity Securities. The portfolio management fee is paid at an annual
rate as set forth below, and is determined by reference to the average daily
market value of the equity assets of all Nuveen-sponsored investment products
for which ICAP is designated as portfolio manager:
<TABLE>
- - ------------------------------------------------------------------------------
<CAPTION>
PORTION OF NUVEEN AVERAGE DAILY PORTFOLIO
NET ASSETS MANAGED BY ICAP MANAGEMENT FEE
- - ------------------------------------------------------------------------------
<S> <C>
For the first $500 million .35 of 1%
For the next $500 million .30 of 1%
For assets over $1 billion .25 of 1%
- - ------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
PAGE 19
<PAGE>
The investment decisions made with respect to the Fund's equity investments are
made through a team approach, with all of the ICAP investment professionals
contributing to the process. ICAP currently maintains a staff of 12 investment
professionals. Each of the investment officers and other investment profes-
sionals of ICAP has developed an expertise in at least one functional invest-
ment area, including equity research, strategy, fixed income analysis, quanti-
tative research, technical research, and trading. A key element in the decision
making process is a formal investment committee meeting generally held each
business day and attended by all the investment professionals. These meetings
also provide for the ongoing review of ICAP's investment positions. Pertinent
information from outside sources is shared and incorporated into the investment
outlook. The investment strategy, asset sectors, and individual security hold-
ings are reviewed to verify their continued appropriateness. Investment recom-
mendations are presented to the committee for decisions.
ICAP provides continuous advice and recommendations concerning the assets of
the Fund allocated to Equity Securities, and is responsible for selecting the
broker-dealers who execute the portfolio's transactions. In executing such
transactions, ICAP seeks to obtain the best net results for the Fund. ICAP also
serves as investment adviser to the ICAP Funds, Inc. and to pension and profit-
sharing plans, and other institutional and private investors. As of August 1,
1997, ICAP had approximately $8 billion under management. Mr. Robert H. Lyon,
President of ICAP, owns shares representing 51% of the voting rights of ICAP.
In addition, The John Nuveen Company owns preferred shares of ICAP, which are
convertible after several years into a 20% common stock interest of ICAP.
- - --------------------------------------------------------------------------------
HOW THE FUND SHOWS PERFORMANCE
The Fund may quote its yield or total return in reports to shareholders, sales
literature and advertisements. The Fund may also from time to time compare its
investment results to various passive indices or other mutual funds with
similar investment objectives. Comparative performance information may include
data from Lipper Analytical Services, Inc., Morningstar, Inc. and other
industry publications. See the Statement of Additional Information for a more
detailed discussion.
All total return figures assume the reinvestment of all dividends and measure
the net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in the
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over
the specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Average annual total return and cumulative total return are based upon
the historical results of the Fund and are not necessarily representative of
the future performance of the Fund.
- - --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The Fund will pay monthly tax-exempt income dividends to shareholders at a
level rate that reflects the past and projected net tax-exempt income of the
Fund and that results, over time, in the distribution of substantially all of
the Fund's net tax-exempt income. To maintain a more stable monthly distribu-
tion, the Fund may from time to time distribute less than the entire amount of
net tax-exempt income earned in a particular period. This undistributed net
tax-exempt income would be available to supplement future distributions, which
might otherwise have been reduced by a decrease in the Fund's monthly net
income due to fluctuations in investment income or expenses. As a result, the
tax-exempt income distributions paid by the Fund for any particular monthly
period may be more or less than the amount of net tax-exempt income actually
earned by the Fund during such period. Undistributed net tax-exempt income is
included in the Fund's net asset value and, correspondingly, distributions from
previously undistributed net tax-exempt income are deducted from the Fund's net
asset value. It is not expected that this dividend policy will impact the
management of the Fund's portfolio.
Net ordinary taxable income, including dividends received on the Fund's equity
investments, and net realized capital gains, if any, will be paid annually.
When a dividend or capital gain is distributed, the Fund's net asset value
decreases by the amount of the payment. ANY DISTRIBUTION OF ORDINARY TAXABLE
INCOME AND CAPITAL GAIN WILL BE SUBJECT TO FEDERAL INCOME TAX, EVEN IF THE
DISTRIBUTION OCCURS SHORTLY AFTER A PURCHASE OF FUND SHARES. All dividends or
capital gains distributions will automatically be reinvested in additional
shares of the same class of the Fund at the then prevailing net asset value
unless an investor specifically requests that either dividends or capital
gains, or both, be paid in cash. The election to receive dividends or reinvest
them may be changed by writing to: Nuveen Funds, c/o Shareholder Services,
Inc., P.O. Box 5330, Denver, CO 80217-5330. Such notice needs to be received at
least 5 days prior to the record date of any dividend or capital gain distribu-
tion.
- - --------------------------------------------------------------------------------
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The Fund intends to operate as a "Regulated Investment Company" under
Subchapter M of the Internal Revenue Code, and therefore will not be liable for
federal income taxes to the extent earnings are distributed on a timely basis.
The fixed income portion of the Fund's investment portfolio is primarily
invested in municipal bonds from California or in municipal bonds whose income
is otherwise exempt from regular federal and state income taxes. The Fund
intends to satisfy conditions so that the interest from the California Munic-
ipal Obligations will be exempt from regular federal and California state
income taxes when distributed to the Shareholders of the Fund. All or a portion
of these tax-exempt dividends, however, may be subject to the federal alterna-
tive minimum tax as set forth below.
- - --------------------------------------------------------------------------------
PAGE 20
<PAGE>
Each year the Fund intends to distribute substantially all of its net tax-
exempt income from California Municipal Obligations, any ordinary taxable
income, including dividends from Equity Securities, recognized market discount
and net realized short-term capital gains, and net realized long-term capital
gains, if any.
For federal income tax purposes, all dividends paid by the Fund that are
derived from taxable net investment income and net short-term capital gains are
taxable as ordinary income whether reinvested or received in cash unless you
are exempt from taxation or entitled to tax deferral. Distributions paid by the
Fund from net long-term capital gains, whether received in cash or reinvested
in additional shares, are taxable as long-term capital gain. The capital gain
holding period for this purpose is determined by the length of time the Fund
has held the security and not the length of time you have held shares in the
Fund. For non-corporate taxpayers, however, net capital gains (i.e., the excess
of net long-term capital gain over net short-term capital loss) will be taxed
at a maximum marginal rate of 28%. On August 5, 1997, the President signed the
Taxpayer Relief Act of 1997 (the "1997 Act"). The 1997 Act reduces the maximum
stated marginal tax rate for capital gains for certain investments held for
more than 18 months to 20 percent (10 percent in the case of certain taxpayers
in the lowest tax bracket).
Federal tax law imposes an alternative minimum tax with respect to both corpo-
rations and individuals based on certain items of tax preference. Interest on
certain California Municipal Obligations is included as an item of tax prefer-
ence in determining the amount of a taxpayer's alternative minimum taxable
income. To the extent that the Fund receives income from California Municipal
Obligations treated as a tax preference item for purposes of the federal alter-
native minimum tax, a portion of the dividends paid by it, although otherwise
exempt from federal and California state income taxes, will be taxable to
holders of Shares to the extent that their tax liability is determined under
the alternative minimum tax. In addition, for corporations, alternative minimum
taxable income is increased by 75% of the difference between an alternative
measure of income ("adjusted current earnings") and the amount otherwise deter-
mined to be the alternative minimum taxable income. The Fund will annually
supply Shareholders with a report indicating the percentage of Fund income
attributable to California Municipal Obligations that is treated as a tax pref-
erence item for purposes of the federal alternative minimum tax.
Shareholders will be required to disclose on their federal income tax returns
the amount of tax-exempt interest earned during the year, including exempt-
interest dividends from the Fund.
Under certain circumstances, a corporate shareholder may be entitled to the
dividends received deduction with respect to such shareholder's taxable divi-
dends which are attributable to dividends received by the Fund on its Equity
Securities.
More specific state tax information can be found below in the Appendix. In
addition, a more detailed summary of the provisions of the Code and regulations
thereunder presently in effect as they directly govern the taxation of the Fund
and its Shareholders appears in the Statement of Additional Information. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Fund transactions. Share-
holders are advised to consult with their own tax advisers for more detailed
information concerning Federal income tax matters.
GENERAL
If you do not furnish the Fund with your correct social security number or
employer identification number, the Fund is required by federal law to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
This section is not intended to be a full discussion of federal and state
income tax laws and the effect of such laws on you. A more detailed summary
appears in the Stateent of Additional Information. There may be other federal,
state, or local tax considerations applicable to a particular investor. You are
urged to consult your own tax adviser.
- - --------------------------------------------------------------------------------
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of trading
(normally 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is
open for business. The Fund's net asset value may not be calculated on days
during which the Fund receives no orders to purchase shares and no shares are
tendered for redemption. Net asset value for a class of Fund shares is computed
by calculating the total value of the class' portion of the Fund's portfolio
investments and other assets, subtracting any liabilities or other debts, and
dividing by the total number of shares outstanding. The result, rounded to the
nearest cent, is the net asset value per share. In determining net asset value,
expenses are accrued and applied daily and securities and other assets for
which market quotations are available are valued at market value. Common stocks
and other equity-type securities are valued at the last sales price on the
national securities exchange or Nasdaq on which such securities are primarily
traded; however, securities traded on a national securities exchange or Nasdaq
for which there were no transactions on a given day or securities not listed on
a national securities exchange or Nasdaq are valued at the most recent bid
prices. Municipal obligations are valued by a pricing service approved and
supervised by the Fund's Board of Trustees. When securities for which price
quotes are not readily available (which is usually the case for municipal secu-
rities), the pricing service establishes fair market value based on yields or
prices of municipal bonds of comparable quality, type of issue, coupon, matu-
rity and rating; indications as to value from securities dealers; and general
market conditions. The pricing service may employ electronic data processing
techniques and/or a matrix system to determine valuations. Debt securities
having remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair
market value of such securities is their amortized cost. Under this method of
valuation, a security is initially valued at its acquisition cost, and there-
after amortization of any discount or premium is assumed each day, regardless
of the impact of fluctuating interest rates on the market value of the secu-
rity. Regardless of the method employed to value a particular security, all
valuations are subject to review by the officers of the Fund under the general
supervision of the Board of Trustees.
- - --------------------------------------------------------------------------------
PAGE 21
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL INFORMATION
The Custodian of the assets of the Fund is The Chase Manhattan Bank ("Chase"),
4 New York Plaza, New York, New York 10004-2413. Chase also provides certain
accounting services to the Fund. The Fund's transfer, shareholder services and
dividend paying agent, Shareholder Services, Inc., P.O. Box 5330, Denver, CO
80217-5330, performs bookkeeping, data processing and administrative services
for the maintenance of shareholder accounts.
The Fund is a series of the Nuveen Investment Trust ("Trust"). The Trust is an
open-end diversified management investment company under the Investment Company
Act of 1940. The Trust was organized as a Massachusetts business trust on May
6, 1996. The Board of Trustees is authorized to issue an unlimited number of
shares in one or more series or "Funds," which may be divided into classes of
shares. Currently, there are four series authorized and outstanding, each of
which is divided into four classes of shares designated as Class A Shares,
Class B Shares, Class C Shares and Class R Shares. Each class of shares repre-
sents an interest in the same portfolio of investments of a Fund. Each class of
shares has equal rights as to voting, redemption, dividends and liquidation,
except that each bears different class expenses, including different distribu-
tion and service fees, and each has exclusive voting rights with respect to any
distribution or service plan applicable to its shares. There are no conversion,
preemptive or other subscription rights, except that Class B Shares automati-
cally convert into Class A Shares of the same Fund, as described above. The
Board of Trustees has the right to establish additional series and classes of
shares in the future, to change those series or classes and to determine the
preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of share-
holders. Shareholders owning more than 10% of the outstanding shares of the
Trust have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts, share-
holders of such a trust may, under certain circumstances, be held personally
liable as partners for its obligations. However, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust further provides for indemnification out
of the assets and property of the Trust for all loss and expense of any share-
holder held personally liable for the obligations of the Trust. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which both inadequate insurance existed and the
Trust itself was unable to meet its obligations. The Trust believes the likeli-
hood of the occurrence of these circumstances is remote.
APPENDIX
- - --------------------------------------------------------------------------------
SPECIAL STATE CONSIDERATIONS
Because the Fund primarily purchases municipal bonds from California, the Fund
also bears investment risk from economic, political or regulatory changes that
could adversely affect municipal bond issuers in the state and therefore the
value of the Fund's investment portfolio. The following discussion of special
state considerations was obtained from official offering statements of these
issuers and has not been independently verified by the Fund. The discussion
includes general state tax information related to an investment in Fund shares.
Because tax laws are complex and often change, you should consult your tax
adviser about the state tax consequences of a specific fund investment. See the
Statement of Additional Information for further information.
CALIFORNIA
California's economy, the largest in the nation, is undergoing steady growth
following a recession from mid-1990 to late 1993 in which the construction,
manufacturing and financial services industries were adversely affected, job
losses were severe, and substantial, broad-based revenue shortfalls affected
both the state and local governments. All the recession job losses had been
replaced by mid-1996, and new jobs are being created at a rate of 400,000 per
year. The state's unemployment rate was 6.2% in mid-1997 and average personal
income was $23,764 in 1996, and growing at over 6% per year. California's
general obligation bonds are rated A1 by Moody's and A+ by Standard and Poor's.
The taxing authority of California's governmental entities is limited due to
the adoption of "Proposition 13" and other amendments to the California Consti-
tution. Proposition 13, adopted by voters in 1978, limits to 1% of full cash
value the rate of ad valorem property taxes on real property and generally
restricts the reassessment of property to 2% per year, except upon new
construction or change of ownership (subject to a number of exemptions). The
state and local governments are also subject to annual "appropriations limits"
imposed by Article XIIIB of the California Constitution, which limits the state
and local governments from spending the proceeds of tax revenues, regulatory
licenses, user charges or other fees beyond imposed appropriations limits which
are adjusted annually to reflect changes in cost of living and population.
On November 5, 1996, California voters approved Proposition 218 which added
Articles XIIIC and XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased and in
some cases existing taxes, assessments and property-related fees and charges.
Proposition 218 also extends the initiative power to include the reduction or
repeal of any local taxes, assessments, fees and charges.
- - --------------------------------------------------------------------------------
PAGE 22
<PAGE>
At this time it is not clear exactly how Proposition 218 will be interpreted by
a court. The complex and ambiguous nature of the foregoing limitations makes it
impossible to fully determine their impact on California Municipal Obligations
or the ability of the state and local governments to pay debt service on Cali-
fornia Municipal Obligations.
California is estimated to end its 1996-97 fiscal year with a general fund
budget reserve of approximately $408 million. As a result of the improved reve-
nues, the state's cash position has substantially recovered, with no external
borrowing over the end of the fiscal year. On August 11, 1997, the Legislature
adopted Fiscal Year 1997-98 Budget Act, containing almost $53 billion in
General Fund expenditures.
California's finances have dramatically improved since 1994 and the economy is
much more diversified than it was in the 1980's. However, should the financial
condition of California deteriorate again, its credit ratings could be reduced,
and the market value and marketability of all outstanding notes and bonds
issued by California, its public authorities or local governments could be
adversely affected.
Tax Treatment.
The Fund's regular monthly dividends will not be subject to California personal
income taxes to the extent they are paid out of income earned on California
municipal obligations or U.S. government securities. You will be subject to
California personal income taxes, however, to the extent the Fund distributes
any taxable income or realized capital gains, or if you sell or exchange shares
of the Fund and realize capital gain on the transaction.
The treatment of corporate shareholders of the Fund differs from that described
above. Corporate shareholders should refer to the Statement of Additional
Information for more detailed information.
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PAGE 23
<PAGE>
Nuveen Family of Mutual Funds
Nuveen's family of funds offers a range of funds designed to help
you reach your financial goals. The funds below are grouped by
investment objective.
GROWTH AND INCOME FUNDS
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Balanced California Municipal and Stock Fund
MUNICIPAL BOND FUNDS
National Funds
Long-Term
Insured Long-Term
Intermediate-Term
Limited-Term
State Funds
Alabama Michigan
Arizona Missouri
California/1/ New Jersey/2/
Colorado New Mexico
Connecticut New York/1/
Florida/2/ North Carolina
Georgia Ohio
Kansas Pennsylvania
Kentucky/3/ South Carolina
Louisiana Tennessee
Maryland Virginia
Massachusetts/1/ Wisconsin
Notes
1. Long-term and insured long-term portfolios.
2. Long-term and intermediate-term portfolios.
3. Long-term and limited-term portfolios.
[LOGO]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227 EBAL-PR-BMSF 6/97
<PAGE>
Statement of Additional Information
August 1, 1996, as amended February 1, 1997 and , 1997
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN GROWTH AND INCOME STOCK FUND
NUVEEN BALANCED STOCK AND BOND FUND
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
NUVEEN BALANCED CALIFORNIA MUNICIPAL AND STOCK FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained from certain securities representatives, banks and other financial
institutions that have entered into sales agreements with John Nuveen & Co. In-
corporated, or from the Fund, c/o John Nuveen & Co. Incorporated, 333 West
Wacker Drive, Chicago, Illinois 60606. This Statement of Additional Information
relates to, and should be read in conjunction with, as to each Fund the Pro-
spectus for that Fund. The Prospectuses for the Funds (other than the Nuveen
Balanced California Municipal and Stock Fund) are dated August 1, 1996, as
amended or supplemented, and the Prospectus for the Nuveen Balanced California
Municipal and Stock Fund is dated , as amended or supplemented.
<TABLE>
<S> <C>
Table of Contents Page
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General Information B-2
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Investment Policies and Restrictions B-2
- - --------------------------------------------------------------------------
Investment Policies and Techniques B-5
- - --------------------------------------------------------------------------
Management B-27
- - --------------------------------------------------------------------------
Fund Manager and Portfolio Manager B-30
- - --------------------------------------------------------------------------
Portfolio Transactions B-31
- - --------------------------------------------------------------------------
Net Asset Value B-33
- - --------------------------------------------------------------------------
Tax Matters B-33
- - --------------------------------------------------------------------------
Performance Information B-40
- - --------------------------------------------------------------------------
Additional Information on the Purchase and Redemption of Fund Shares B-44
- - --------------------------------------------------------------------------
Distribution and Service Plans B-51
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Independent Public Accountants and Custodian B-52
- - --------------------------------------------------------------------------
Financial Statements B-53
- - --------------------------------------------------------------------------
Report of Independent Public Accountants B-54
- - --------------------------------------------------------------------------
Appendix A--Ratings of Investments A-1
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</TABLE>
<PAGE>
GENERAL INFORMATION
Nuveen Growth and Income Stock Fund, Nuveen Balanced Stock and Bond Fund,
Nuveen Balanced Municipal and Stock Fund and Nuveen Balanced California Munici-
pal and Stock Fund (individually a "Fund" and collectively the "Funds") are se-
ries of the Nuveen Investment Trust (the "Trust"), an open-end diversified man-
agement series investment company. The Nuveen Balanced Municipal and Stock Fund
and the Nuveen Balanced California Municipal and Stock Fund may also be re-
ferred to herein as the "Muni/Stock Fund" and the "California Muni/Stock Fund,"
respectively. Each series of the Trust represents shares of beneficial interest
in a separate portfolio of securities and other assets, with its own objectives
and policies. Currently, four series of the Trust are authorized and outstand-
ing.
Certain matters under the Investment Company Act of 1940 which must be submit-
ted to a vote of the holders of the outstanding voting securities of a series
company shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding voting securities of each se-
ries affected by such matter.
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT RESTRICTIONS
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus for that Fund. A Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of the Fund:
(1) With respect to 75% of its total assets, purchase the securities of any is-
suer (except securities issued or guaranteed by the United States government or
any agency or instrumentality thereof) if, as a result, (i) more than 5% of the
Fund's total assets would be invested in securities of that issuer, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that is-
suer.
(2) Borrow money, except that the Fund may (i) borrow money from banks for tem-
porary or emergency purposes (but not for leverage or the purchase of invest-
ments) and (ii) engage in other transactions permissible under the Investment
Company Act of 1940 that may involve a borrowing (such as, investing in When-
Issued Securities or certain futures and options), provided that the combina-
tion of (i) and (ii) shall not exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed), less the Fund's liabilities (other than
borrowings). This limitation shall not apply to the California Muni/Stock Fund.
Instead, the California Muni/Stock Fund shall not borrow money except from
banks for temporary or emergency purposes and not for investment purposes and
then only in an amount not exceeding (i) 10% of the value of its total assets
at the time of borrowing or (ii) one-third of the value of the Fund's total as-
sets including the amount borrowed, in order to meet redemption requests which
might otherwise require the untimely disposition of securities.
(3) Act as an underwriter of another issuer's securities, except to the extent
that the Fund may be deemed to be an underwriter within the meaning of the Se-
curities Act of 1933 in connection with the purchase and sale of portfolio se-
curities.
(4) Make loans to other persons, except through (i) the purchase of debt secu-
rities permissible under the Fund's investment policies, (ii) repurchase agree-
ments, or (iii) the lending of portfolio securities, pro-
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<PAGE>
vided that no such loan of portfolio securities may be made by the Fund if, as
a result, the aggregate of such loans would exceed 33 1/3% of the value of the
Fund's total assets.
(5) Purchase or sell physical commodities unless acquired as a result of owner-
ship of securities or other instruments (but this shall not prevent the Fund
from purchasing or selling options, futures contracts, or other derivative in-
struments, or from investing in securities or other instruments backed by phys-
ical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prohibit the Fund from pur-
chasing or selling securities or other instruments backed by real estate or of
issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment Company
Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers whose prin-
cipal business activities are in the same industry (except that this restric-
tion shall not be applicable to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof and, in the case of the
Muni/Stock Fund and the California Muni/Stock Fund, to Municipal Obligations
and California Municipal Obligations (as applicable), other than those Munici-
pal Obligations and California Municipal Obligations backed only by the assets
and revenues of non-governmental users).
If a percentage restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the invest-
ment or the total assets will not constitute a violation of that restriction.
For the purpose of applying the limitation set forth in restriction (1) above
to Municipal Obligations or California Municipal Obligations (collectively,
"Municipal Securities"), an issuer shall be deemed the sole issuer of a secu-
rity when its assets and revenues are separate from other governmental entities
and its securities are backed only by its assets and revenues. Similarly, in
the case of a non-governmental user, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed only by the as-
sets and revenues of the non-governmental user, then such non-governmental user
would be deemed to be the sole issuer. Where a security is also backed by the
enforceable obligation of a superior or unrelated governmental or other entity
(other than a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or other entity. Where a
security is guaranteed by a governmental entity or some other facility, such as
a bank guarantee or letter of credit, such a guarantee or letter of credit
would be considered a separate security and would be treated as an issue of
such government, other entity or bank. When a Municipal Security is insured by
bond insurance, it shall not be considered a security that is issued or guaran-
teed by the insurer; instead, the issuer of such Municipal Security will be de-
termined in accordance with the principles set forth above. The foregoing re-
strictions do not limit the percentage of the assets of the Muni/Stock Fund or
the California Muni/Stock Fund that may be invested in Municipal Obligations or
California Municipal Obligations, respectively, insured by any given insurer.
The foregoing fundamental investment policies, together with the investment ob-
jective of each of the Nuveen Growth and Income Stock Fund, the Nuveen Balanced
Stock and Bond Fund, the Muni/Stock Fund, and California Muni/Stock Fund and
certain other policies specifically identified in the prospectus, cannot be
changed without approval by holders of a "majority of the Fund's outstanding
voting shares."
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<PAGE>
As defined in the Investment Company Act of 1940, this means the vote of (i)
67% or more of the Fund's shares present at a meeting, if the holders of more
than 50% of the Fund's shares are present or represented by proxy, or (ii) more
than 50% of the Fund's shares, whichever is less.
In addition to the foregoing fundamental investment policies, each Fund is also
subject to the following non-fundamental restrictions and policies, which may
be changed by the Board of Trustees. A Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain se-
curities equivalent in kind and amount to the securities sold short at no added
cost, and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to constitute
selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such short-
term credits as are necessary for the clearance of transactions; and provided
that margin deposits in connection with futures contracts, options on futures
contracts, or other derivative instruments shall not constitute purchasing se-
curities on margin.
(3) Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and then
such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of the
Fund's total assets at the time of the borrowing or investment. This limita-
tion, shall not apply to the California Muni/Bond Fund. With respect to this
Fund, the Fund may not pledge, mortgage or hypothecate its assets, except that,
to secure permissible borrowings described above, it may pledge securities hav-
ing a market value at the time of pledge not exceeding 10% of the value of such
Fund's total assets.
(4) Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions there-
of) if, as a result, more than 5% of its total assets would be invested in the
securities of issuers that, including predecessors or unconditional guarantors,
have a record of less than three years of continuous operation. This policy
does not apply to securities of pooled investment vehicles or mortgage or as-
set-backed securities. This limitation does not apply to the California
Muni/Stock Fund.
(5) Purchase securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and applicable state law.
(6) Enter into futures contracts or related options if more than 30% of the
Fund's net assets would be represented by futures contracts or more than 5% of
the Fund's net assets would be committed to initial margin deposits and premi-
ums on futures contracts and related options.
(7) Invest in direct interests in oil, gas or other mineral exploration pro-
grams or leases; however, the Fund may invest in the securities of issuers that
engage in these activities.
(8) Purchase securities when borrowings exceed 5% of its total assets. If due
to market fluctuations or other reasons, the value of the Fund's assets falls
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so.
(9) Each Fund may not invest in illiquid securities if, as a result of such in-
vestment, more than 15% of the Fund's net assets would be invested in illiquid
securities.
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<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds' investment
objectives, policies, and techniques that are described in the Prospectus for
each Fund.
INVESTMENT IN MUNICIPAL OBLIGATIONS
Portfolio Investments
Except to the extent the Muni/Stock Fund and the California Muni/Stock Fund in-
vest in temporary investments as described below, all of the Muni/Stock Fund's
investments in Municipal Obligations and the California Muni/Stock Fund's in-
vestments in California Municipal Obligations will be comprised of tax-exempt
Municipal Obligations or California Municipal Obligations, as the case may be,
that are either (1) rated at the time of purchase within the four highest
grades (Baa or BBB or better) by Moody's Investors Services, Inc. ("Moody's"),
by Standard & Poor's Ratings Group ("S&P") or in the case of the California
Muni/Bond Fund, by Fitch Services, Inc. ("Fitch") or (2) unrated but which, in
the opinion of the NIAC, have credit characteristics equivalent to, and will be
of comparable quality to, Municipal Obligations or California Municipal Obliga-
tions, as the case may be, so rated; provided, however, that not more than 20%
of the Muni/Stock Fund's investments in Municipal Obligations or the California
Muni/Stock Fund's investments in California Municipal Obligations, may be in
such unrated bonds. The foregoing policies are fundamental policies of the
Muni/Stock Fund but are non-fundamental policies of the California Muni/Stock
Fund. Municipal Securities rated Baa or BBB are considered "investment grade"
securities; Municipal Securities rated Baa are considered medium grade obliga-
tions which lack outstanding investment characteristics and in fact have specu-
lative characteristics as well, while Municipal Securities rated BBB are re-
garded as having an adequate capacity to pay principal and interest. Municipal
Securities rated AAA in which the Fund may invest may have been so rated on the
basis of the existence of insurance guaranteeing the timely payment, when due,
of all principal and interest. A general description of Moody's, S&P's and
Fitch's ratings is set forth in Appendix A hereto. The ratings of Moody's, S&P
and Fitch represent their opinions as to the quality of the Municipal Securi-
ties they rate. It should be emphasized, however, that ratings are general and
are not absolute standards of quality. Consequently, Municipal Securities with
the same maturity, coupon and rating may have different yields while obliga-
tions of the same maturity and coupon with different ratings may have the same
yield.
The foregoing policies as to rating of investments in securities will apply
only at the time of the purchase of a security, and the Fund will not be re-
quired to dispose of securities in the event Moody's, S&P or Fitch downgrades
its assessment of the credit characteristics of a particular issuer.
The municipal portfolio manager of the Muni/Stock Fund and the California
Muni/Stock Fund pursues a value oriented approach for selecting municipal secu-
rities by seeking to identify underrated or undervalued Municipal Securities
(i.e., Municipal Obligations with respect to the Muni/Stock Fund and California
Municipal Obligations with respect to the California Muni/Stock Fund). Under-
rated Municipal Securities are those whose ratings do not, in NIAC's opinion,
reflect their true value. Such Municipal Securities may be underrated because
of the time that has elapsed since their rating was assigned or reviewed, or
because of positive factors that may not have been fully taken into account by
rating agencies, or for
B-5
<PAGE>
other similar reasons. Municipal Securities that are undervalued or that rep-
resent undervalued municipal market sectors are Municipal Securities that, in
NIAC's opinion, are worth more than the value assigned to them in the market-
place. Municipal Securities of particular types or purposes (e.g., hospital
bonds, industrial revenue bonds or bonds issued by a particular municipal is-
suer) may be undervalued because there is a temporary excess of supply in that
market sector, or because of a general decline in the market price of Munici-
pal Securities of the market sector for reasons that do not apply to the par-
ticular Municipal Securities that are considered undervalued. The Muni/Stock
Fund's investment in underrated or undervalued Municipal Obligations and the
California Muni/Stock Fund's investment in underrated or undervalued Califor-
nia Municipal Obligations, will be based on NIAC's belief that their prices
should ultimately reflect their true value.
The Funds have not established any limit on the percentage of their respective
portfolio of investments in Municipal Securities that may be invested in Mu-
nicipal Obligations or California Municipal Obligations, as the case may be,
subject to the alternative minimum tax provisions of Federal tax law. Conse-
quently, a substantial portion of the current income produced by the Funds may
be includable in alternative minimum taxable income. Special considerations
apply to corporate investors. See "Tax Matters."
Also included within the general category of Municipal Obligations described
in the Muni/Stock Fund Prospectus and California Municipal Obligations in the
California Muni/Stock Fund Prospectus are participations in lease obligations
or installment purchase contract obligations (hereinafter collectively called
"Municipal Lease Obligations") of municipal authorities or entities. Although
a Municipal Lease Obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged, a Municipal
Lease Obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the Municipal Lease Obliga-
tion. However, certain Municipal Lease Obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In the case of a "non-appropriation" lease,
the Fund's ability to recover under the lease in the event of non-appropria-
tion or default will be limited solely to the repossession of the leased prop-
erty, without recourse to the general credit of the lessee, and disposition or
releasing of the property might prove difficult. The Muni/Stock Fund will seek
to minimize these risks by not investing more than 20% of the assets allocated
to investments in Municipal Obligations in Municipal Lease Obligations that
contain "non-appropriation" clauses, and by only investing in those "non-ap-
propriation" Municipal Lease Obligations where (1) the nature of the leased
equipment or property is such that its ownership or use is essential to a gov-
ernmental function of the municipality, (2) appropriate covenants will be ob-
tained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (3) the lease obli-
gor has maintained good market acceptability in the past, and (4) the invest-
ment is of a size that will be attractive to institutional investors. The Cal-
ifornia Muni/Stock Fund will seek to minimize the special risks associated
with "non-appropriation" lease obligations by investing only in those non-ap-
propriation leases where NIAC has determined that the issuer has a strong in-
centive to continue making appropriations and timely payment until the
security's maturity.
During temporary defensive periods (e.g., times when, in NIAC's opinion, the
ability of the Fund to meet its long-term investment objectives and preserve
the asset value of the Fund may be adversely
B-6
<PAGE>
affected by significant adverse market, economic, political, or other circum-
stances), and in order to keep cash on hand fully invested, the Fund may invest
any percentage of its assets in temporary investments. Temporary investments
may be either tax-exempt or taxable. To the extent the Muni/Stock Fund and the
California Muni/Stock Fund invest in taxable temporary investments, the Funds
will not at such times be in a position to achieve that portion of the Fund's
investment objective of seeking income exempt from federal income tax (or fed-
eral and California state income taxes in the case of the California Muni/Stock
Fund). For further information, see "Short-Term Tax-Exempt Fixed Income Securi-
ties" and "Short-Term Taxable Fixed Income Securities."
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the obliga-
tions of such issuers may become subject to the laws enacted in the future by
Congress, state legislatures or referenda extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
Municipal Obligations or California Municipal Obligations may be materially af-
fected.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL OBLIGATIONS
As described in the California Muni/Stock Fund Prospectus, except to the extent
the Fund invests in temporary investments, the Fund will invest substantially
all of its assets allocated to the fixed income portion of its portfolio in
California Municipal Obligations. The Fund is therefore susceptible to politi-
cal, economic or regulatory factors affecting issuers of California Municipal
Obligations.
These include the possible adverse effects of certain California constitutional
amendments, legislative measures, voter initiatives and other matters that are
described below. The following information provides only a brief summary of the
complex factors affecting the financial situation in California (the "State")
and is derived from sources that are generally available to investors and are
believed to be accurate. No independent verification has been made of the accu-
racy or completeness of any of the following information. It is based in part
on information obtained from various State and local agencies in California or
contained in Official Statements for various California Municipal Obligations.
During the early 1990's, California experienced significant financial difficul-
ties, which reduced its credit standing, but the state's finances have improved
since 1994. The ratings of certain related debt of other issuers for which Cal-
ifornia has an outstanding lease purchase, guarantee or other contractual obli-
gation (such as for state-insured hospital beds) are generally linked directly
to California's rating. Should the financial condition of California deterio-
rate again, its credit ratings could be further reduced, and the market value
and marketability of all outstanding notes and bonds issued by California, its
public authorities or local governments could be adversely affected.
Economic Overview
California's economy is the largest among the 50 states and one of the largest
in the world. The State's population of more than 32 million represents over
12% of the total United States population and grew
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<PAGE>
by 26% in the 1980s, more than double the national rate. Population growth
slowed to less than 1% annually in 1994 and 1995, but rose to 1.9% in 1996.
During the early 1990's, net population growth in the State was due to births
and foreign immigration.
Total personal income in the State, at an estimated $760 billion in 1995, ac-
counts for almost 13% of all personal income in the nation. Total employment is
over 14 million, the majority of which is in the service, trade and manufactur-
ing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst eco-
nomic, fiscal and budget conditions since the 1930s. Construction, manufactur-
ing (especially aerospace), and financial services, among others, were all se-
verely affected, particularly in Southern California. Job losses were the worst
of any post-war recession. Employment levels stabilized by late 1993 and steady
job growth has occurred since early 1994. Pre-recession job levels are expected
to be reached in 1996. Unemployment, while remaining higher than the national
average, has come down substantially from its 10% peak to 6.5% in spring, 1997.
Economic indicators show a steady and strong recovery underway in California
since the start of 1994 particularly in export-related industries, services,
electronics, entertainment and tourism, although the residential housing sector
has been weaker than in prior recoveries. Any delay or reversal of the recovery
may create new shortfalls in State revenues.
Constitutional Limitations on Taxes, Other Charges and Appropriations
Limitation on Property Taxes. Certain California Municipal Obligations may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of Cali-
fornia local governments and districts are limited by Article XIIIA of the Cal-
ifornia Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise ad valorem taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against the
assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This sys-
tem has resulted in widely varying amounts of tax on similarly situated proper-
ties. Several lawsuits have been filed challenging the acquisition-based as-
sessment system of Proposition 13, but it was upheld by the U.S. Supreme Court
in 1992.
Article XIIIA prohibits local governments from raising revenues through ad va-
lorem property taxes above the 1% limit; it also requires voters of any govern-
ment unit to give two-thirds approval to levy any "special tax." Court deci-
sions, however, allowed a non-voter approved levy of "general taxes" which were
not dedicated to a specific use.
Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the voters
of the State approved Proposition 218, called the "Right to Vote on Taxes Act."
Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which
contain a number of provisions affecting the ability of local agencies to levy
and collect both existing and future taxes, assessments, fees and charges.
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<PAGE>
Article XIIIC requires that all new or increased local taxes be submitted to
the electorate before they become effective. Taxes for general governmental
purposes require a majority vote and taxes for specific purposes require a
two-thirds vote. Further, any general purpose tax which was imposed, extended
or increased without voter approval after December 31, 1994 must be approved
by a majority vote within two years.
Article XIIID contains several new provisions making it generally more diffi-
cult for local agencies to levy and maintain "assessments" for municipal serv-
ices and programs. Article XIIID also contains several new provisions affect-
ing "fees" and "charges", defined for purposes of Article XIIID to mean "any
levy other than an ad valorem tax, a special tax, or an assessment, imposed by
a [local government] upon a parcel or upon a person as an incident of property
ownership, including a user fee or charge for a property related service." All
new and existing property related fees and charges must conform to require-
ments prohibiting, among other things, fees and charges which generate reve-
nues exceeding the funds required to provide the property related service or
are used for unrelated purposes. There are new notice, hearing and protest
procedures for levying or increasing property related fees and charges, and,
except for fees or charges for sewer, water and refuse collection services (or
fees for electrical and gas service, which are not treated as "property relat-
ed" for purposes of Article XIIID), no property related fee or charge may be
imposed or increased without majority approval by the property owners subject
to the fee or charge or, at the option of the local agency, two-thirds voter
approval by the electorate residing in the affected area.
In addition to the provisions described above, Article XIIIC removes limita-
tions on the initiative power in matters of local taxes, assessments, fees and
charges. Consequently, local voters could, by future initiative, repeal, re-
duce or prohibit the future imposition or increase of any local tax, assess-
ment, fee or charge. It is unclear how this right of local initiative may be
used in cases where taxes or charges have been or will be specifically pledged
to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be de-
termined by the courts with respect to a number of matters, and it is not pos-
sible at this time to predict with certainty the outcome of such determina-
tions. Proposition 218 is generally viewed as restricting the fiscal flexibil-
ity of local governments, and for this reason, some ratings of California cit-
ies and counties have been, and others may be, reduced.
Appropriations Limits. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California Con-
stitution, enacted by the voters in 1979 and significantly amended by Proposi-
tions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits the
State or any covered local government from spending "appropriations subject to
limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds from regu-
latory licenses, user charges or other fees, to the extent that such proceeds
exceed the cost of providing the product or service, but "proceeds of taxes"
exclude most State subventions to local governments. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such as reasonable
user charges or fees, and certain other non-tax funds, including bond pro-
ceeds.
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Among the expenditures not included in the Article XIIIB appropriations limit
are (1) the debt service cost of bonds issued or authorized prior to January 1,
1979, or subsequently authorized by the voters, (2) appropriations arising from
certain emergencies declared by the Governor, (3) appropriations for certain
capital outlay projects, (4) appropriations by the State of post-1989 increases
in gasoline taxes and vehicle weight fees, and (5) appropriations made in cer-
tain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect changes
in cost of living and population, and any transfers of service responsibilities
between government units. The definitions for such adjustments were liberalized
in 1990 to follow more closely growth in the State's economy.
"Excess" revenues are measured over a two-year cycle. Local governments must
return any excess to taxpayers by rate reductions. The State must refund 50% of
any excess, with the other 50% paid to schools and community colleges. With
more liberal annual adjustment factors since 1988, and depressed revenues since
1990 because of the recession, few governments are currently operating near
their spending limits, but this condition may change over time. Local govern-
ments may by voter approval exceed their spending limits for up to four years.
During Fiscal Year 1986-87, State receipts from proceeds of taxes exceeded its
appropriations limit by $1.1 billion, which was returned to taxpayers. Since
that year, appropriations subject to limitation have been under the State lim-
it. State appropriations were $7.0 billion under the limit for Fiscal Year
1996-97.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC, and XIIID of the
California Constitution, the ambiguities and possible inconsistencies in their
terms, and the impossibility of predicting future appropriations or changes in
population and cost of living, and the probability of continuing legal chal-
lenges, it is not currently possible to determine fully the impact of these Ar-
ticles on California Municipal Obligations or on the ability of the State or
local governments to pay debt service on such California Municipal Obligations.
It is not possible, at the present time, to predict the outcome of any pending
litigation with respect to the ultimate scope, impact or constitutionality of
these Articles, or the impact of any such determinations upon State agencies or
local governments, or upon their ability to pay debt service on their obliga-
tions. Further initiatives or legislative changes in laws or the California
Constitution may also affect the ability of the State or local issuers to repay
their obligations.
Obligations of the State of California
Under the California Constitution, debt service on outstanding general obliga-
tion bonds is the second charge to the General Fund after support of the public
school system and public institutions of higher education. As of August 1,
1997, the State had outstanding approximately $17.8 billion of long-term gen-
eral obligation bonds, plus $1.008 billion of general obligation commercial pa-
per which will be refunded by long-term bonds in the future, and $6.2 billion
of lease-purchase debt supported by the State General Fund. The State also had
about $9.3 billion of authorized and unissued general obligation bonds and
lease-purchase debt. In FY 1996-97, debt service on general obligation bonds
and lease-purchase debt was approximately 5.2% of General Fund revenues.
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Recent Financial Results
The principal sources of General Fund revenues in 1995-96 were the California
personal income tax (45% of total revenues), the sales tax (34%), bank and
corporation taxes (13%), and the gross premium tax on insurance (2%). The
State maintains a Special Fund for Economic Uncertainties (the "SFEU"), de-
rived from General Fund revenues, as a reserve to meet cash needs of the Gen-
eral Fund, but which is required to be replenished as soon as sufficient reve-
nues are available. Year-end balances in the SFEU are included for financial
reporting purposes in the General Fund balance. Because of the recession and
an accumulated budget deficit, no reserve was budgeted from 1992-93 to 1995-
96.
General. Throughout the 1980's, State spending increased rapidly as the State
population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by Prop-
osition 13 and other laws. The largest State program is assistance to local
public school districts. In 1988, an initiative (Proposition 98) was enacted
which (subject to suspension by a two-thirds vote of the Legislature and the
Governor) guarantees local school districts and community college districts a
minimum share of State General Fund revenues (currently about 35%).
Starting in mid-1990, the State has faced adverse economic, fiscal and budget
conditions. The 1990-1994 economic recession seriously affected State tax rev-
enues. It also caused increased expenditures for health and welfare programs.
The State is also facing a structural imbalance in its budget with the largest
programs supported by the General Fund (education, health, welfare and correc-
tions) growing at rates significantly higher than the growth rates for the
principal revenue sources of the General Fund. These structural concerns will
be exacerbated in coming years by the expected need to substantially increase
capital and operating funds for corrections as a result of a "Three Strikes"
law enacted in 1994.
Recent Budgets. As a result of the recession and these factors, among others,
the State experienced substantial revenue shortfalls, and greater than antici-
pated social service costs, in the early 1990's. The State accumulated and
sustained a budget deficit in the budget reserve, the SFEU, approaching $2.8
billion at its peak at June 30, 1993. The Legislature and Governor agreed on a
number of different steps to respond to the adverse financial conditions and
produce Budget Acts in the years 1991-92 to 1995-96 (although not all actions
were taken in each year):
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and some funding sources from the
State to local governments, coupled with some reduction in mandates on
local government;
. transfer of about $3.6 billion in annual local property tax revenues
from cities, counties, redevelopment agencies and some other districts
to local school districts, thereby reducing state funding for schools;
. reduction in growth of support for higher education programs, coupled
with increases in student fees;
. revenue increases (particularly in the 1992-93 Fiscal Year budget), most
of which were for a short duration;
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. increased reliance on aid from the federal government to offset the
costs of incarcerating, educating and providing health and welfare serv-
ices to undocumented aliens (although these efforts have produced much
less federal aid than the State Administration had requested); and
. various one-time adjustment and accounting changes (some of which have
been challenged in court).
The combination of stringent budget actions cutting State expenditures, and the
turnaround of the economy by late 1993, finally led to the restoration of posi-
tive financial results with revenues equaling or exceeding expenditures start-
ing in FY 1992-93. As a result, the accumulated budget deficit of $2.8 billion
was eliminated by June 30, 1997 when the State showed a positive budget reserve
of about $281 million.
A consequence of the accumulated budget deficits in the early 1990's together
with other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual budget,
was to significantly reduce the State's cash resources available to pay its on-
going obligations. The State's cash condition became so serious that from late
spring 1992 until 1995, the State had to rely on issuance of short term notes
which matured in a subsequent fiscal year to finance its ongoing deficit, and
pay current obligations. For a two-month period in the summer of 1992, pending
adoption of the annual Budget Act, the State was forced to issue registered
warrants (IOUs) to some of its suppliers, employees, and other creditors. With
the repayment of the last of these deficit notes in April, 1996, the State does
not plan to rely further on external borrowing across fiscal years, but will
continue its normal cash flow borrowings during a fiscal year.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996. Revenues
for the Fiscal Year were initially estimated to total $47.643 billion, a 3.3
percent increase over the final estimated 1995-96 revenues. The Budget Act con-
tained General Fund appropriations totaling $47.251 billion, a 4.0 percent in-
crease over the final estimated 1995-96 expenditures. The principal features of
the 1996-97 Budget Act included substantially increased funding for schools and
community college districts, much of which was budgeted to fund class-size re-
ductions in grades K-3. The funding increases have brought K-12 expenditures to
almost $4,800 per pupil, an almost 15% increase over the level prevailing dur-
ing the recession years. The budget also included cuts in health and welfare
costs which proved lower than anticipated because of less than expected aid
from the federal government related to illegal immigrants.
With signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest budget
reserve in the SFEU of $305 million, as of June 30, 1997. The General Fund fund
balance on that date, however, reflects $1.45 billion of "loans" which the Gen-
eral Fund made to local schools in the recession years, representing cash out-
lays above the mandatory minimum funding level. Settlement of litigation over
these transactions in July 1996 calls for repayment of these loans over the pe-
riod ending in 2001-02, about equally split between outlays from the General
Fund and from schools' entitlements. The 1996-97 Budget Act contained a $150
million appropriation from the General Fund toward this settlement.
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The Department of Finance has reported that, based on stronger than expected
revenues reflecting the continued strength of the State's economic recovery,
General Fund revenues and transfers for the full 1996-97 fiscal year were some
$2 billion above the initial projections, at about $49.8 billion. This was off-
set by required increased payments to schools, and lower than expected savings
resulting from federal welfare reform actions and federal aid for illegal immi-
grants. Total expenditures in the fiscal year were about $49.6 billion.
Fiscal Year 1997-98 Budget. With continued strong economic recovery and surging
tax receipts, the State entered the 1997-98 Fiscal Year in the strongest finan-
cial position in the decade. However, in May 1997, the California Supreme Court
ruled that the State had acted illegally in 1993 and 1994 by using a deferral
of payments to the Public Employees Retirement Fund to help balance earlier
budgets. In response to this court decision, the Governor ordered an immediate
repayment to the Retirement Fund of about $1.36 billion, which was made in
early August, 1997, and substantially "used up" the expected additional reve-
nues of the fiscal year. On August 11, 1997, the legislature passed the 1997-98
Budget Act, totaling approximately $53 billion in General Fund expenditures.
Although the State's strong economy is producing record revenues to the State
government, the State's budget continues to be under stress from mandated
spending on education, a rising prison population, and social needs of a grow-
ing population with many immigrants. These factors which limit State spending
growth assurances that, if economic conditions weaken, or other factors inter-
cede, the State will not experience budget gaps in the future.
Bond Rating. The ratings on California's long-term general obligation bonds
were reduced in the early 1990's from "AAA" levels which had existed prior to
the recession. In 1996, Fitch and Standard & Poor's raised their ratings of
California's general obligation bonds, which as of April 1997 were assigned
ratings of "A+" from Standard & Poor's, "A1" from Moody's and "A+" from Fitch.
There can be no assurance that such ratings will be maintained in the future.
It should be noted that the creditworthiness of obligations issued by local
California issuers may be unrelated to the creditworthiness of obligations is-
sued by the State of California, and that there is no obligation on the part of
the State to make payment on such local obligations in the event of default.
Legal Proceedings.
The State is involved in certain legal proceedings (described in the State's
recent financial statements) that, if decided against the State, may require
the State to make significant future expenditures or may substantially impair
revenues. Trial courts have recently entered tentative decisions or injunctions
which would overturn several parts of the state's recent budget compromises.
The matters covered by these lawsuits include reductions in welfare payments
and the use of certain cigarette tax funds for health costs. All of these cases
are subject to further proceedings and appeals, and if California eventually
loses, the final remedies may not have to be implemented in one year.
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Obligations of Other Issuers
Other Issuers of California Municipal Obligations. There are a number of state
agencies, instrumentalities and political subdivisions of the State that issue
Municipal Obligations, some of which may be conduit revenue obligations payable
from payments from private borrowers. These entities are subject to various
economic risks and uncertainties, and the credit quality of the securities is-
sued by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.
State Assistance. Property tax revenues received by local governments declined
more than 50% following passage of Proposition 13. Subsequently, the California
Legislature enacted measures to provide for the redistribution of the State's
General Fund surplus to local agencies, the reallocation of certain State reve-
nues to local agencies and the assumption of certain governmental functions by
the State to assist municipal issuers to raise revenues. Total local assistance
from the State's General Fund was budgeted at approximately 75% of General Fund
expenditures in recent years, including the effect of implementing reductions
in certain aid programs. To reduce State General Fund support for school dis-
tricts, the 1992-93 and 1993-94 Budget Acts caused local governments to trans-
fer $3.9 billion of property tax revenues to school districts, representing
loss of the post-Proposition 13 "bailout" aid. Local governments have in return
received greater revenues and greater flexibility to operate health and welfare
programs. While the Governor initially proposed to grant new aid to local gov-
ernments from the State's improved fiscal condition in 1997-98, the decision to
repay the State pension fund eliminated these moneys.
To the extent the State should be constrained by its Article XIIIB appropria-
tions limit, or its obligation to conform to Proposition 98, or other fiscal
considerations, the absolute level, or the rate of growth, of State assistance
to local governments may continue to be reduced. Any such reductions in State
aid could compound the serious fiscal constraints already experienced by many
local governments, particularly counties. At least one rural county (Butte)
publicly announced that it might enter bankruptcy proceedings in August 1990,
although such plans were put off after the Governor approved legislation to
provide additional funds for the county. Other counties have also indicated
that their budgetary condition is extremely grave. Los Angeles County, the
largest in the State, was forced to make significant cuts in services and per-
sonnel, particularly in the health care system, in order to balance its budget
in FY 1995-96 and FY 1996-97. Los Angeles County's debt was downgraded by
Moody's and S&P in the summer of 1995. Orange County, which emerged from Fed-
eral Bankruptcy Court protection in June 1996, has significantly reduced county
services and personnel, and faces strict financial conditions following large
investment fund losses in 1994 which resulted in bankruptcy.
Counties and cities may face further budgetary pressures as a result of changes
in welfare and public assistance programs, which were enacted in August, 1997
in order to comply with the federal welfare reform law.
Assessment Bonds. California Municipal Obligations which are assessment bonds
may be adversely affected by a general decline in real estate values or a slow-
down in real estate sales activity. In many cases, such bonds are secured by
land which is undeveloped at the time of issuance but anticipated to be devel-
oped within a few years after issuance. In the event of such reduction or slow-
down, such development may not occur or may be delayed, thereby increasing the
risk of a default on the bonds. Because the special assessments or taxes secur-
ing these bonds are not the personal liability of the owners of the property
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assessed, the lien on the property is the only security for the bonds. More-
over, in most cases the issuer of these bonds is not required to make payments
on the bonds in the event of delinquency in the payment of assessments or tax-
es, except from amounts, if any, in a reserve fund established for the bonds.
California Long-Term Lease Obligations. Based on a series of court decisions,
certain California long-term lease obligations, though typically payable from
the general fund of the State or a municipality, are not considered "indebted-
ness" requiring voter approval. Such leases, however, are subject to "abate-
ment" in the event the facility being leased is unavailable for beneficial use
and occupancy by the municipality during the term of the lease. Abatement is
not a default, and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement occurs. The
most common cases of abatement are failure to complete construction of the fa-
cility before the end of the period during which lease payments have been capi-
talized and uninsured casualty losses to the facility (e.g., due to earth-
quake). In the event abatement occurs with respect to a lease obligation, lease
payments may be interrupted (if all available insurance proceeds and reserves
are exhausted) and the certificates may not be paid when due. Litigation is
brought from time to time which challenges the constitutionality of such lease
arrangements.
Other Considerations
The repayment of industrial development securities secured by real property may
be affected by California laws limiting foreclosure rights of creditors. Secu-
rities backed by healthcare and hospital revenues may be affected by changes in
State regulations governing cost reimbursements to health care providers under
Medi-Cal (the State's Medicaid program), including risks related to the policy
of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax alloca-
tion" bonds issued by California redevelopment agencies. Such bonds are secured
solely by the increase in assessed valuation of a redevelopment project area
after the start of redevelopment activity. In the event that assessed values in
the redevelopment project decline (e.g., because of a major natural disaster
such as an earthquake), the tax increment revenue may be insufficient to make
principal and interest payments on these bonds. Both Moody's and S&P suspended
ratings on California tax allocation bonds after the enactment of Articles
XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all reve-
nues produced by a tax rate increase go directly to the taxing entity which in-
creased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which, typically, are the issuers of tax
allocation securities) no longer receive an increase in tax increment when
taxes on property in the project area are increased to repay voter-approved
bonded indebtedness.
The effect of these various constitutional and statutory changes upon the abil-
ity of California municipal securities issuers to pay interest and principal on
their obligations remains unclear. Furthermore, other measures affecting the
taxing or spending authority of California or its political subdivisions may be
approved or enacted in the future. Legislation has been or may be introduced
which would modify existing taxes or other revenue-raising measures or which
either would further limit or, alternatively, would increase the abilities of
state and local governments to impose new taxes or increase existing
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taxes. It is not possible, at present, to predict the extent to which any such
legislation will be enacted. Nor is it possible, at present, to determine the
impact of any such legislation on California Municipal Obligations in which the
Fund may invest, future allocations of state revenues to local governments or
the abilities of state or local governments to pay the interest on, or repay
the principal of, such California Municipal Obligations.
Substantially all of California is within an active geologic region subject to
major seismic activity. Northern California in 1989 and Southern California in
1994 experienced major earthquakes causing billions of dollars in damages. The
federal government provided more than $13 billion in aid for both earthquakes,
and neither event is expected to have any long-term negative economic impact.
Any California Municipal Obligation in the Fund could be affected by an inter-
ruption of revenues because of damaged facilities, or, consequently, income tax
deductions for casualty losses or property tax assessment reductions. Compensa-
tory financial assistance could be constrained by the inability of (i) an is-
suer to have obtained earthquake insurance coverage; (ii) an insurer to perform
on its contracts of insurance in the event of widespread losses; or (iii) the
federal or State government to appropriate sufficient funds within their re-
spective budget limitations.
SHORT-TERM INVESTMENTS
Short-Term Taxable Fixed Income Securities
The Nuveen Growth and Income Stock Fund may invest up to 35% of its total as-
sets and, for temporary defensive purposes up to 100% of its total assets, in
cash equivalents and short-term taxable fixed income securities. The Nuveen
Balanced Stock and Bond Fund may invest up to 20% of its total assets and, for
temporary defensive purposes up to 100% of its total assets, in cash equiva-
lents and short-term taxable fixed income securities. For temporary defensive
purposes the Muni/Stock Fund and the California Muni/Stock Fund may invest up
to 100% of their respective total assets in cash equivalents and short-term
taxable fixed income securities, although the Funds intend to invest in taxable
temporary investments only in the event that suitable tax-exempt temporary in-
vestments are not available at reasonable prices and yields. Short-term taxable
fixed income securities are defined to include, without limitation, the follow-
ing:
(1) U.S. government securities, including bills, notes and bonds differing as
to maturity and rates of interest, which are either issued or guaranteed by the
U.S. Treasury or by U.S. government agencies or instrumentalities. U.S. govern-
ment agency securities include securities issued by (a) the Federal Housing Ad-
ministration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, and the Government National Mortgage As-
sociation, whose securities are supported by the full faith and credit of the
United States; (b) the Federal Home Loan Banks, Federal Intermediate Credit
Banks, and the Tennessee Valley Authority, whose securities are supported by
the right of the agency to borrow from the U.S. Treasury; (c) the Federal Na-
tional Mortgage Association, whose securities are supported by the discretion-
ary authority of the U.S. government to purchase certain obligations of the
agency or instrumentality; and (d) the Student Loan Marketing Association,
whose securities are supported only by its credit. While the U.S. government
provides financial support to such U.S. government-sponsored agencies or in-
strumentalities, no assurance can be given that it always will do so since it
is not so obligated by law. The U.S. government, its agencies, and instrumen-
talities do
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not guarantee the market value of their securities, and consequently, the value
of such securities may fluctuate.
(2) Certificates of Deposit issued against funds deposited in a bank or savings
and loan association. Such certificates are for a definite period of time, earn
a specified rate of return, and are normally negotiable. If such certificates
of deposit are non-negotiable, they will be considered illiquid securities and
be subject to the Fund's 15% restriction on investments in illiquid securities.
Pursuant to the certificate of deposit, the issuer agrees to pay the amount de-
posited plus interest to the bearer of the certificate on the dated specified
thereon. Under current FDIC regulations, the maximum insurance payable as to
any one certificate of deposit is $100,000; therefore, certificates of deposit
purchased by the Fund may not be fully insured.
(3) Bankers' acceptances which are short-term credit instruments used to fi-
nance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
asset or it may be sold in the secondary market at the going rate of interest
for a specific maturity.
(4) Repurchase agreements which involve purchases of debt securities. In such
an action, at the time the Fund purchases the security, it simultaneously
agrees to resell and redeliver the security to the seller, who also simultane-
ously agrees to buy back the security at a fixed price and time. This assures a
predetermined yield for the Fund during its holding period since the resale
price is always greater than the purchase price and reflects an agreed-upon
market rate. Such actions afford an opportunity for the Fund to invest tempo-
rarily available cash. The Fund may enter into repurchase agreements only with
respect to obligations of the U.S. government, its agencies or instrumentali-
ties; certificates of deposit; or bankers acceptances in which the Fund may in-
vest. Repurchase agreements may be considered loans to the seller, collateral-
ized by the underlying securities. The risk to the Fund is limited to the abil-
ity of the seller to pay the agreed-upon sum on the repurchase date; in the
event of default, the repurchase agreement provides that the affected Fund is
entitled to sell the underlying collateral. If the value of the collateral de-
clines after the agreement is entered into, however, and if the seller defaults
under a repurchase agreement when the value of the underlying collateral is
less than the repurchase price, the Fund could incur a loss of both principal
and interest. ICAP monitors the value of the collateral at the time the action
is entered into and at all times during the term of the repurchase agreement.
ICAP does so in an effort to determine that the value of the collateral always
equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If
the seller were to be subject to a federal bankruptcy proceeding, the ability
of a Fund to liquidate the collateral could be delayed or impaired because of
certain provisions of the bankruptcy laws.
(5) Bank time deposits, which are monies kept on deposit with banks or savings
and loan associations for a stated period of time at a fixed rate of interest.
There may be penalties for the early withdrawal of such time deposits, in which
case the yields of these investments will be reduced.
(6) Commercial paper, which are short-term unsecured promissory notes, includ-
ing variable rate master demand notes issued by corporations to finance their
current operations. Master demand notes are direct lending arrangements between
the Fund and a corporation. There is no secondary market for the notes. Howev-
er, they are redeemable by the Fund at any time. ICAP will consider the finan-
cial condition of
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the corporation (e.g., earning power, cash flow, and other liquidity ratios)
and will continuously monitor the corporation's ability to meet all of its fi-
nancial obligations, because the Fund's liquidity might be impaired if the cor-
poration were unable to pay principal and interest on demand. Investments in
commercial paper will be limited to commercial paper rated in the two highest
categories by a major rating agency or unrated commercial paper which is, in
the opinion of ICAP, of comparable quality.
Short-Term Tax-Exempt Fixed Income Securities
During certain temporary periods, in order to keep cash on hand fully invested
or a a defensive measure in response to prevailing market conditions, the
Muni/Stock Fund and California Muni/Stock Fund may invest up to 100% of their
respective total assets as "temporary investments" in cash equivalent and
short-term fixed income securities that are either taxable or tax-exempt. The
short-term taxable fixed income securities are described above. Short-term tax-
exempt fixed income securities are securities that are exempt from regular fed-
eral income tax with respect to the Muni/Stock Fund and from federal or Cali-
fornia income tax with respect to the California Muni/Stock Fund. Short-term
tax-exempt fixed income securities are defined to include, without limitation,
the following:
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. Tax anticipation notes are usually
general obligations of the issuer. A weakness in an issuer's capacity to raise
taxes due to, among other things, a decline in its tax base or a rise in delin-
quencies, could adversely affect the issuer's ability to meet its obligations
on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they also constitute general obliga-
tions of the issuer. A decline in the receipt of projected revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those
described above to commercial banks as evidence of borrowings. The purposes for
which the notes are issued are varied but they are frequently issued to meet
short-term working capital or capital-project needs. These notes may have risks
similar to the risks associated with TANs and RANs.
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Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available there-
from. Maturities of municipal paper generally will be shorter than the maturi-
ties of TANs, BANs or RANs. There is a limited secondary market for issues of
municipal paper.
Certain Municipal Obligations and California Municipal Obligations may carry
variable or floating rates of interest whereby the rate of interest is not
fixed but varies with changes in specified market rates or indices, such as a
bank prime rate or a tax-exempt money market index.
While the various types of notes described above as a group represent the major
portion of the tax-exempt note market, other types of notes are occasionally
available in the marketplace and the Funds may invest in such other types of
notes to the extent permitted under their respective investment objective, pol-
icies and limitations. Such notes may be issued for different purposes and may
be secured differently from those mentioned above.
HEDGING STRATEGIES
General Description of Hedging Strategies
Each Fund may engage in hedging activities. NIAC or ICAP may cause a Fund to
utilize a variety of financial instruments, including options, futures con-
tracts (sometimes referred to as "futures") and options on futures contracts to
attempt to hedge the Fund's holdings.
Hedging instruments on securities generally are used to hedge against price
movements in one or more particular securities positions that the Fund owns or
intends to acquire. Hedging instruments on stock indices, in contrast, gener-
ally are used to hedge against price movements in broad equity market sectors
in which the Fund has invested or expects to invest. The use of hedging instru-
ments is subject to applicable regulations of the Securities and Exchange Com-
mission (the "SEC"), the several options and futures exchanges upon which they
are traded, the Commodity Futures Trading Commission (the "CFTC") and various
state regulatory authorities. In addition, the Fund's ability to use hedging
instruments will be limited by tax considerations.
General Limitations on Futures and Options Transactions
The Trust has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for a Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations.The Fund will not enter into futures and
options transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of the Fund's total assets. In addition,
the Fund will not enter into futures contracts and options transactions if more
than 30% of its net assets would be committed to such instruments.
B-19
<PAGE>
The foregoing limitations are not fundamental policies of a Fund and may be
changed without shareholder approval as regulatory agencies permit. Various ex-
changes and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to in-
crease the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
Each Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered invest-
ment companies and, if the guidelines so require, will set aside cash, U.S.
government securities, high grade liquid debt securities and/or other liquid
assets permitted by the SEC and CFTC in a segregated custodial account in the
amount prescribed. Securities held in a segregated account cannot be sold while
the futures or options position is outstanding, unless replaced with other per-
missible assets, and will be marked-to-market daily.
Stock Index Options
Each Fund may (i) purchase stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions, and/or (iii) write cov-
ered options on stock indexes for hedging purposes. Stock index options are put
options and call options on various stock indexes. In most respects, they are
identical to listed options on common stocks. The primary difference between
stock options and index options occurs when index options are exercised. In the
case of stock options, the underlying security, common stock, is delivered.
However, upon the exercise of an index option, settlement does not occur by de-
livery of the securities comprising the index. The option holder who exercises
the index option receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to the difference between the closing price of the stock index
and the exercise price of the option expressed in dollars times a specified
multiple.
A stock index fluctuates with changes in the market values of the stock in-
cluded in the index. For example, some stock index options are based on a broad
market index, such as the Standard & Poor's 500 or the Value Line Composite In-
dex or a narrower market index, such as the Standard & Poor's 100. Indexes may
also be based on an industry or market segment, such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indexes
are currently traded on the following exchanges: the Chicago Board of Options
Exchange, the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
A Fund's use of stock index options is subject to certain risks. Successful use
by the Funds of options on stock indexes will be subject to the ability of ICAP
to correctly predict movements in the directions of the stock market. This re-
quires different skills and techniques than predicting changes in the prices of
individual securities. In addition, a Fund's ability to effectively hedge all
or a portion of the securities in its portfolio, in anticipation of or during a
market decline through transactions in put options on stock indexes, depends on
the degree to which price movements in the underlying index correlate with the
price movements of the securities held by a Fund. Inasmuch as a Fund's securi-
ties will not duplicate the components of an index, the correlation will not be
perfect. Consequently, each Fund will bear the risk
B-20
<PAGE>
that the prices of its securities being hedged will not move in the same amount
as the prices of its put options on the stock indexes. It is also possible that
there may be a negative correlation between the index and a Fund's securities
which would result in a loss on both such securities and the options on stock
indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of stock index
options involves the risk that the premium and transaction costs paid by a Fund
in purchasing an option will be lost as a result of unanticipated movements in
prices of the securities comprising the stock index on which the option is
based.
Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If a Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned securi-
ties in order to satisfy its obligation under the option to deliver such secu-
rities. If a Fund is unable to effect a closing sale transaction with respect
to options on securities that it has purchased, it would have to exercise the
option in order to realize any profit and would incur transaction costs upon
the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Funds.
Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Funds. Expiration of a call option written by a Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
If a Fund writes options, or purchases puts that are subject to the loss defer-
ral rules of Section 1092 of the Internal Revenue Code of 1986, as amended (the
"Code"), any losses on such options transactions, to the extent they do not ex-
ceed the unrecognized gains on the securities covering the options, may be sub-
ject to deferral until the securities covering the options have been sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Funds will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition, such
B-21
<PAGE>
positions must be marked-to-market as of the last business day of the year, and
gain or loss must be recognized for federal income tax purposes in accordance
with the 60%/40% rule discussed above even though the position has not been
terminated. A "nonequity option" includes an option with respect to any group
of stocks or a stock index if there is in effect a designation by the CFTC of a
contract market for a contract based on such group of stocks or indexes. For
example, options involving stock indexes such as the Standard & Poor's 500 in-
dex would be "nonequity options" within the meaning of Code Section 1256.
Futures Contracts
Each Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge against
movements in the equity markets, in order to establish more definitely the ef-
fective return on securities held or intended to be acquired by the Funds or
for other purposes permissible under the CEA. Each Fund's hedging may include
sales of Futures as an offset against the effect of expected declines in stock
prices and purchases of Futures as an offset against the effect of expected in-
creases in stock prices. The Funds will not enter into Futures Contracts which
are prohibited under the CEA and will, to the extent required by regulatory au-
thorities, enter only into Futures Contracts that are traded on national
futures exchanges and are standardized as to maturity date and underlying fi-
nancial instrument. The principal interest rate Futures exchanges in the United
States are the Board of Trade of the City of Chicago and the Chicago Mercantile
Exchange. Futures exchanges and trading are regulated under the CEA by the
CFTC.
An index Futures Contract is an agreement pursuant to which the parties agree
to take or make delivery of an amount of cash equal to the difference between
the value of the index at the close of the last trading day of the contract and
the price at which the index Futures Contract was originally written. Transac-
tion costs are incurred when a Futures Contract is bought or sold and margin
deposits must be maintained. A Futures Contract may be satisfied by delivery or
purchase, as the case may be, of the instrument or by payment of the change in
the cash value of the index. More commonly, Futures Contracts are closed out
prior to delivery by entering into an offsetting transaction in a matching
Futures Contract. Although the value of an index might be a function of the
value of certain specified securities, no physical delivery of those securities
is made. If the offsetting purchase price is less than the original sale price,
a gain will be realized; if it is more, a loss will be realized. Conversely, if
the offsetting sale price is more than the original purchase price, a gain will
be realized; if it is less, a loss will be realized. The transaction costs must
also be included in these calculations. There can be no assurance, however,
that the Funds will be able to enter into an offsetting transaction with re-
spect to a particular Futures Contract at a particular time. If the Funds are
not able to enter into an offsetting transaction, the Funds will continue to be
required to maintain the margin deposits on the Futures Contract.
Margin is the amount of funds that must be deposited by each Fund with its cus-
todian in a segregated account in the name of the futures commission merchant
in order to initiate Futures trading and to maintain the Fund's open positions
in Futures Contracts. A margin deposit is intended to ensure the Fund's perfor-
mance of the Futures Contract. The margin required for a particular Futures
Contract is set by the exchange on which the Futures Contract is traded and may
be significantly modified from time to time by the exchange during the term of
the Futures Contract. Futures Contracts are customarily
B-22
<PAGE>
purchased and sold on margins that may range upward from less than 5% of the
value of the Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if
the value of a position increases because of favorable price changes in the
Futures Contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Fund. In computing daily net asset value,
each Fund will mark to market the current value of its open Futures Contracts.
The Funds expect to earn interest income on their margin deposits.
Because of the low margin deposits required, Futures trading involves an ex-
tremely high degree of leverage. As a result, a relatively small price movement
in a Futures Contract may result in immediate and substantial loss, as well as
gain, to the investor. For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a subsequent 10% decrease
in the value of the Futures Contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the Futures Contract were closed out. Thus, a pur-
chase or sale of a Futures Contract may result in losses in excess of the
amount initially invested in the Futures Contract. However, a Fund would pre-
sumably have sustained comparable losses if, instead of the Futures Contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The day limit estab-
lishes the maximum amount that the price of a Futures Contract may vary either
up or down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular type of Futures
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of Futures positions and sub-
jecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Funds seek to close out a Futures position. The Funds would continue to be re-
quired to meet margin requirements until the position is closed, possibly re-
sulting in a decline in the Funds' net asset value. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active second-
ary market will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes, in-
cluding, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
B-23
<PAGE>
Options on Futures
Each Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate
an existing position. A futures option gives the holder the right, in return of
the premium paid, to assume a long position (call) or short position (put) in a
Futures Contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the Futures Contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or expira-
tion, a futures option may be closed out by an offsetting purchase or sale of a
futures option of the same series.
The Funds may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Funds use put and call options on se-
curities or indexes. The purchase of put options on Futures Contracts is analo-
gous to the purchase of puts on securities or indexes so as to hedge the Funds'
securities holdings against the risk of declining market prices. The writing of
a call option or the purchasing of a put option on a Futures Contract consti-
tutes a partial hedge against declining prices of the securities which are de-
liverable upon exercise of the Futures Contract. If the futures price at expi-
ration of a written call option is below the exercise price, the Fund will re-
tain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's holdings of securi-
ties. If the futures price when the option is exercised is above the exercise
price, however, the Fund will incur a loss, which may be offset, in whole or in
part, by the increase in the value of the securities held by the Fund that were
being hedged. Writing a put option or purchasing a call option on a Futures
Contract serves as a partial hedge against an increase in the value of the se-
curities the Fund intends to acquire.
As with investments in Futures Contracts, each Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts writ-
ten by it. Such margin deposits will vary depending on the nature of the under-
lying Futures Contract (and the related initial margin requirements), the cur-
rent market value of the option, and other futures positions held by the Fund.
The Funds will set aside in a segregated account at the Funds' custodian liquid
assets, such as cash, U.S. government securities or other high grade liquid
debt obligations equal in value to the amount due on the underlying obligation.
Such segregated assets will be marked to market daily, and additional assets
will be placed in the segregated account whenever the total value of the segre-
gated account falls below the amount due on the underlying obligation.
The risks associated with the use of options on Futures Contracts include the
risk that a Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Funds' successful use of options on Futures Contracts depends on ICAP's ability
to correctly predict the movement in prices of Futures Contracts and the under-
lying instruments, which may prove to be incorrect. In addition, there may be
imperfect correlation between the instruments being hedged and the Futures Con-
tract subject to the option. For additional information, see "Futures Con-
tracts."
Federal Income Tax Treatment of Futures Contracts
For federal income tax purposes, each Fund is required to recognize as income
for each taxable year its net unrealized gains and losses on Futures Contracts
as of the end of the year, as well as gains and losses
B-24
<PAGE>
actually realized during the year. Except for transactions in Futures Contracts
that are classified as part of a "mixed straddle" under Code Section 1256, any
gain or loss recognized with respect to a Futures Contract is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Futures Contract. In the case of a
Futures transaction not classified as a "mixed straddle," the recognition of
losses may be required to be deferred to a later taxable year.
Sales of Futures Contracts that are intended to hedge against a change in the
value of securities held by a Fund may affect the holding period of such secu-
rities and, consequently, the nature of the gain or loss on such securities
upon disposition.
The Funds will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on Futures transactions. Such dis-
tributions will be combined with distributions of capital gains realized on the
Funds' other investments and shareholders will be advised of the nature of the
payments.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Illiquid Securities
The Fund may invest in illiquid securities (i.e., securities that are not read-
ily marketable). For purposes of this restriction, illiquid securities include,
but are not limited to, restricted securities (securities the disposition of
which is restricted under the federal securities laws), securities that may
only be resold pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), but that are deemed to be illiquid; and repur-
chase agreements with maturities in excess of seven days. However, the Fund
will not acquire illiquid securities if, as a result, such securities would
comprise more than 15% of the value of the Fund's net assets. The Board of
Trustees or its delegate has the ultimate authority to determine, to the extent
permissible under the federal securities laws, which securities are liquid or
illiquid for purposes of this 15% limitation. The Board of Trustees has dele-
gated to Institutional Capital Corporation ("ICAP") the day-to-day determina-
tion of the illiquidity of any equity or taxable fixed-income security and to
Nuveen Institutional Advisory Corp. ("NIAC") as to any municipal security, al-
though it has retained oversight and ultimate responsibility for such determi-
nations. Although no definitive liquidity criteria are used, the Board of
Trustees has directed ICAP and NIAC to look to such factors as (i) the nature
of the market for a security (including the institutional private resale mar-
ket; the frequency of trades and quotes for the security; the number of dealers
willing to purchase or sell the security; and the amount of time normally
needed to dispose of the security, the method of soliciting offers and the me-
chanics of transfer), (ii) the terms of certain securities or other instruments
allowing for the disposition to a third party or the issuer thereof (e.g., cer-
tain repurchase obligations and demand instruments), and (iii) other permissi-
ble relevant factors.
Restricted securities may be sold only in privately negotiated transactions or
in a public offering with respect to which a registration statement is in ef-
fect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a
B-25
<PAGE>
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less favora-
ble price than that which prevailed when it decided to sell. Illiquid securi-
ties will be priced at fair value as determined in good faith by the Board of
Trustees or its delegate. If, through the appreciation of illiquid securities
or the depreciation of liquid securities, the Fund should be in a position
where more than 15% of the value of its net assets are invested in illiquid se-
curities, including restricted securities which are not readily marketable, the
affected Fund will take such steps as is deemed advisable, if any, to protect
liquidity.
Short Sales Against the Box
When ICAP believes that the price of a particular security held by a Fund may
decline, it may make "short sales against the box" to hedge the unrealized gain
on such security. Selling short against the box involves selling a security
which the Fund owns for delivery at a specified date in the future. The Fund
will limit its transactions in short sales against the box to 5% of its net as-
sets. In addition, the Fund will limit its transactions such that the value of
the securities of any issuer in which it is short will not exceed the lesser of
2% of the value of the Fund's net assets or 2% of the securities of any class
of the issuer. If, for example, the Fund bought 100 shares of ABC at $40 per
share in January and the price appreciates to $50 in March, the Fund might
"sell short" the 100 shares at $50 for delivery the following July. Thereafter,
if the price of the stock declines to $45, it will realize the full $1,000 gain
rather than the $500 gain it would have received had it sold the stock in the
market. On the other hand, if the price appreciates to $55 per share, the Fund
would be required to sell at $50 and thus receive a $1,000 gain rather than the
$1,500 gain it would have received had it sold the stock in the market. The
Fund may also be required to pay a premium for short sales which would par-
tially offset any gain.
Warrants
Each Fund may invest in warrants if, after giving effect thereto, not more than
5% of its net assets will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5%, not more than 2% of its
assets at the time of purchase may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. Investing in
warrants is purely speculative in that they have no voting rights, pay no divi-
dends, and have no rights with respect to the assets of the corporation issuing
them. Warrants basically are options to purchase equity securities at a spe-
cific price for a specific period of time. They do not represent ownership of
the securities but only the right to buy them. Warrants are issued by the is-
suer of the security, which may be purchased on their exercise. The prices of
warrants do not necessarily parallel the prices of the underlying securities.
When-Issued Securities
Each Fund may from time to time purchase securities on a "when-issued" basis.
The price of securities purchased on a when-issued basis is fixed at the time
the commitment to purchase is made, but delivery and payment for the securities
take place at a later date. Normally, the settlement date occurs within 45 days
of the purchase. During the period between the purchase and settlement, no pay-
ment is made by the Fund to the issuer and no interest is accrued on debt secu-
rities or dividend income is earned on equity securities. Forward commitments
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in value of the Fund's other assets. While when-issued securities may be sold
prior to the settlement date, the Fund
B-26
<PAGE>
intends to purchase such securities with the purpose of actually acquiring
them. At the time the Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The Fund does not believe that net
asset value will be adversely affected by purchases of securities on a when-is-
sued basis.
The Fund will maintain cash, U.S. government securities and high grade liquid
debt securities equal in value to commitments for when-issued securities. Such
segregated securities either will mature or, if necessary be sold on or before
the settlement date. When the time comes to pay for when-issued securities, the
Fund will meet its obligations from then available cash flow, sale of the secu-
rities held in the separate account, described above, sale of other securities
or, although it would not normally expect to do so, from the sale of the when-
issued securities themselves (which may have a market value greater or less
than the Fund's payment obligation).
Unseasoned Companies
Each Fund (other than the California Muni/Stock Fund) may not invest more than
5% of its net assets in unseasoned issuers. While smaller companies generally
have potential for rapid growth, they often involve higher risks because they
lack the management experience, financial resources, product diversification,
and competitive strengths of larger corporations. In addition, in many instanc-
es, the securities of smaller companies are traded only over-the-counter or on
regional securities exchanges, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the securi-
ties of smaller companies may be subject to wider price fluctuations. When mak-
ing large sales, the Fund may have to sell portfolio holdings of small compa-
nies at discounts from quoted prices or may have to make a series of smaller
sales over an extended period of time due to the trading volume in smaller com-
pany securities.
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed for the Fund under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is fixed at seven,
three of whom are "interested persons" (as the term "interested persons" is de-
fined in the Investment Company Act of 1940) and four of whom are "disinter-
ested persons." The names and business addresses of the trustees and officers
of the Trust and their principal occupations and other affiliations during the
past five years are set forth below, with those trustees who are "interested
persons" of the Trust indicated by an asterisk.
<TABLE>
- - -------------------------------------------------------------------------------
<CAPTION>
POSITION AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- - -------------------------------------------------------------------------------
<C> <C> <C> <S>
Anthony T. Dean* 52 Chairman and Trustee President (since July 1996) and
333 West Wacker Drive Director, formerly Executive
Chicago, IL 60606 Vice President, of The John
Nuveen Company (from March 1992
to July 1996) and of John
Nuveen & Co. Incorporated;
Director (since October 1992)
and President (since July
1996), formerly Executive Vice
President (from May 1994 to
July 1996) of Nuveen
Institutional Advisory Corp.
and Nuveen Advisory Corp.
</TABLE>
- - --------------------------------------------------------------------------------
B-27
<PAGE>
<TABLE>
- - ---------------------------------------------------------------------------------
<CAPTION>
POSITION AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- - ---------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 48 President and Trustee Chairman (since July
333 West Wacker Drive 1996) and Director,
Chicago, IL 60606 formerly Executive Vice
President, of The John
Nuveen Company (from
March 1992 to July 1996)
and of John Nuveen & Co.
Incorporated; Director
(since October 1992) and
Chairman (since July
1996), formerly
Executive Vice President
(from May 1994 to July
1996) of Nuveen
Institutional Advisory
Corp and Nuveen Advisory
Corp.
- - ---------------------------------------------------------------------------------
Robert H. Lyon* 47 Trustee President and a Director
225 West Wacker Drive of the ICAP Funds Inc.
Chicago, IL 60606 (since its inception in
December 1994);
President, Chief
Investment Officer, and
a Director of ICAP
(since 1992).
- - ---------------------------------------------------------------------------------
James E. Bacon 66 Trustee Business consultant.
114 W. 47th St.
New York, New York 10036
- - ---------------------------------------------------------------------------------
William L. Kissick 65 Trustee Professor, School of
University of Pennsylvania Medicine and the Wharton
224 NEB/2L School of Management and
Philadelphia, PA 19104 Chairman, Leonard Davis
Institute of Health
Economics, University of
Pennsylvania.
- - ---------------------------------------------------------------------------------
Thomas E. Leafstrand 65 Trustee Retired (since 1990),
412 W. Franklin previously Vice
Wheaton, IL 60187 President in charge of
Municipal Underwriting
and Dealer Sales at The
Northern Trust Company.
- - ---------------------------------------------------------------------------------
Sheila W. Wellington 65 Trustee President (since 1993)
250 Park Avenue of Catalyst (a not-for-
New York, New York 10003 profit organization
focusing on women's
leadership development
in business and the
professions).
- - ---------------------------------------------------------------------------------
Bruce P. Bedford 57 Executive Vice President Executive Vice President
333 West Wacker Drive of John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp. (since
January 1997); prior
thereto, Chairman and
CEO of Flagship
Resources Inc. and
Flagship Financial Inc.
and the Flagship funds.
- - ---------------------------------------------------------------------------------
Kathleen M. Flannagan 50 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since June
1996) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
- - ---------------------------------------------------------------------------------
Anna R. Kucinskis 50 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated.
</TABLE>
- - --------------------------------------------------------------------------------
B-28
<PAGE>
<TABLE>
- - -------------------------------------------------------------------------------
<CAPTION>
POSITION AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
- - -------------------------------------------------------------------------------
<C> <C> <C> <S>
Larry W. Martin 45 Vice President and Vice President (since September
333 West Wacker Drive Assistant Secretary 1992), Assistant Secretary and
Chicago, IL 60606 Assistant General Counsel of
John Nuveen & Co. Incorporated;
Vice President (since May 1993)
and Assistant Secretary of
Nuveen Advisory Corp; Vice
President (since May 1993) and
Assistant Secretary of Nuveen
Institutional Advisory Corp.;
Assistant Secretary of The John
Nuveen Company (since February
1993).
- - -------------------------------------------------------------------------------
O. Walter Renfftlen 58 Vice President and Vice President and Controller of
333 West Wacker Drive Controller The John Nuveen Company, John
Chicago, IL 60606 Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
- - -------------------------------------------------------------------------------
Ronald E. Toupin, Jr. 39 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory Corp.
Chicago, IL 60606
- - -------------------------------------------------------------------------------
H. William Stabenow 63 Vice President and Vice President and Treasurer of
333 West Wacker Drive Treasurer The John Nuveen Company, John
Chicago, IL 60606 Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
- - -------------------------------------------------------------------------------
Gifford R. Zimmerman 40 Vice President and Vice President (since September
333 West Wacker Drive Assistant Secretary 1992), Assistant Secretary and
Chicago, IL 60606 Assistant General Counsel of
John Nuveen & Co. Incorporated;
Vice President (since May 1993)
and Assistant Secretary of
Nuveen Advisory Corp.; Vice
President (since May 1993) and
Assistant Secretary of Nuveen
Institutional Advisory Corp.
</TABLE>
- - --------------------------------------------------------------------------------
Anthony T. Dean, Thomas E. Leafstrand and Timothy R. Schwertfeger serve as mem-
bers of the Executive Committee of the Board of Trustees. The Executive Commit-
tee, which meets between regular meetings of the Board of Trustees, is autho-
rized to exercise all of the powers of the Board of Trustees.
Mr. Dean and Mr. Schwertfeger are also directors or trustees, as the case may
be, of 95 Nuveen open-end funds and closed-end funds advised by Nuveen Advisory
Corp.
The other trustees of the Trust (other than Mr. Lyon) are also trustees of five
closed-end funds advised by NIAC. Mr. Lyon is also a director of ICAP and ICAP
Funds, Inc.
B-29
<PAGE>
The following table sets forth compensation paid by the Trust to each of the
trustees who are not designated "interested persons" during the period from the
Trust's inception (August 7, 1996) to the Trust's fiscal year ended June 30,
1997 and the total compensation that the Nuveen Funds paid to such trustees
during the year ended June 30, 1997. The Trust has no retirement or pension
plans. The officers and trustees affiliated with Nuveen serve without any com-
pensation from the Trust.
<TABLE>
<CAPTION>
TOTAL**
COMPENSATION
FROM TRUST
AGGREGATE AND FUND
COMPENSATION COMPLEX
FROM THE PAID TO
NAME OF TRUSTEE TRUST TRUSTEES
-------------------------------- ------------ ------------
<S> <C> <C>
James E. Bacon.................. $ 6,141.80 $ 28,000.00
William L. Kissick.............. $ 6,141.80 $ 28,000.00
Thomas E. Leafstrand............ $ 6,847.52 $ 29,800.00
Sheila W. Wellington............ $ 6,141.80 $ 28,000.00
---------- -----------
Total......................... 25,272.92 113,800.00
========== ===========
</TABLE>
- - --------
**Based on the compensation paid to the independent trustees for the year ended
June 30, 1997 for services to five closed-end funds advised by NIAC.
Each trustee who is not affiliated with NIAC or ICAP receives a $20,000 annual
retainer for serving as a director or trustee of all funds for which NIAC
serves as investment adviser or manager and a $1,000 fee per day plus expenses
for attendance at all meetings held on a day on which a regularly scheduled
Board meeting is held, a $500 fee per day plus expenses for attendance in per-
son or a $500 fee per day plus expenses for attendance by telephone at a meet-
ing held on a day on which no regular Board meeting is held and a $100 fee per
day plus expenses for attendance in person or by telephone at a meeting of the
Executive Committee held solely to declare dividends. The annual retainer, fees
and expenses are allocated among the funds for which NIAC serves as investment
adviser or manager on the basis of relative net asset sizes. The Trust requires
no employees other than its officers, all of whom are compensated by NIAC.
As of August 13, 1997, the Registrant does not know of any person who owns of
record or beneficially 5% or more of any class of a Fund's shares. In addition,
as of August 13, 1997, the officers and directors of each Fund, in the aggre-
gate, own less than 1% of the shares of the Fund.
FUND MANAGER AND PORTFOLIO MANAGER
Fund Manager. NIAC acts as the manager of each Fund, with responsibility for
the overall management of each Fund. Its address is 333 West Wacker Drive, Chi-
cago, Illinois 60606. For the Nuveen Growth and Income Stock Fund and the
Nuveen Balanced Stock and Bond Fund, NIAC has entered into a Sub-Advisory
Agreement with ICAP under which ICAP, subject to NIAC's supervision, manages
the Fund's investment portfolio. For the Muni/Stock Fund and the California
Muni/Stock Fund, NIAC has entered into a Sub-Advisory Agreement with ICAP under
which ICAP, subject to NIAC's supervision, manages the Fund's equity invest-
ments. NIAC is also responsible for managing the Fund's business affairs and
providing day-to-day administrative services to the Fund. For additional infor-
mation regarding the management services performed by NIAC and ICAP, see the
section "Management of the Fund" in the Fund's Prospectus.
B-30
<PAGE>
NIAC is a wholly-owned subsidiary of Nuveen, which is also the principal un-
derwriter of the Fund's shares. Nuveen is sponsor of the Nuveen Tax-Free Unit
Trust, a registered unit investment trust, is also the principal underwriter
for the Nuveen Mutual Funds, and has served as co-managing underwriter for the
shares of the Nuveen Exchange-Traded Funds. Over 1,000,000 individuals have
invested to date in Nuveen's funds and trusts. Founded in 1898, Nuveen is a
subsidiary of The John Nuveen Company which, in turn, is approximately 78%
owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located in St.
Paul, Minnesota, and is principally engaged in providing property-liability
insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, each of the
Funds has agreed to pay an annual management fee at rates set forth in the
Fund's Prospectus under "Management of the Fund." In addition, NIAC has agreed
to waive all or a portion of its management fee or reimburse certain expenses
of the Fund for the year ending July 31, 1997 in order to prevent total oper-
ating expenses (excluding distribution or service fees, and extraordinary ex-
penses) from exceeding .85% (.95% for the Nuveen Growth and Income Stock Fund)
of the average daily net asset value of any class of shares of the Fund. Ac-
cordingly, for the period from inception (August 7, 1996) through the fiscal
year ended June 30, 1997, the Nuveen Growth and Stock Fund, the Nuveen Bal-
anced Stock and Bond Fund, and the Nuveen Balanced Municipal and Stock Fund
paid management fees net of expense reimbursements of $2,202,100, $0.00, and
$10,679, respectively. During this same period, NIAC waived fees and reim-
bursed expenses of $283,295, $125,664, and $131,924 to the Nuveen Growth and
Income Stock Fund, the Nuveen Balanced Stock and Bond Fund, and the Nuveen
Balanced Municipal and Stock Fund, respectively.
Sub-Adviser. ICAP was founded in 1970 and is located at 225 West Wacker Drive,
Suite 2400, Chicago, IL 60606. Under the Sub-Advisory Agreement for each Fund,
ICAP is compensated by NIAC for its investment advisory services with respect
to all or a portion of each Fund's assets at the rates set forth in the Fund's
Prospectus under "Management of the Fund."
With regard to Fund assets subject to the Sub-Advisory Agreement, ICAP pro-
vides continuous advice and recommendations concerning the Fund's investments,
and is responsible for selecting the broker-dealers who execute the portfolio
transactions. ICAP also serves as investment adviser to the ICAP Funds, Inc.
and to pension and profit-sharing plans, and other institutional and private
investors. As of August 1, 1997, ICAP had approximately $8 billion under man-
agement. Mr. Robert H. Lyon, President of ICAP, owns shares representing 51%
of the voting rights of ICAP. For the period from the Fund's inception (August
7, 1996) to the fiscal year ended June 30, 1997, NIAC paid ICAP for its serv-
ices to the Nuveen Growth and Income Stock Fund, the Nuveen Balanced Stock and
Bond Fund, and the Nuveen Balanced Municipal and Stock Fund, $957,992.43,
$31,184.98, and $18,182.47, respectively.
PORTFOLIO TRANSACTIONS
NIAC (with respect to transactions in Municipal Obligations and California Mu-
nicipal Obligations) and ICAP (with respect to other transactions) are respon-
sible for decisions to buy and sell securities for the Funds and for the
placement of the Funds' securities business, the negotiation of the commis-
sions to be paid on brokered transactions, the prices for principal trades in
securities, and the allocation of portfolio
B-31
<PAGE>
brokerage and principal business. It is the policy of both NIAC and ICAP to
seek the best execution at the best security price available with respect to
each transaction, and with respect to brokered transactions, in light of the
overall quality of brokerage and research services provided to the respective
adviser and its advisees. The best price to the Funds means the best net price
without regard to the mix between purchase or sale price and commission, if
any. Purchases may be made from underwriters, dealers, and, on occasion, the
issuers. Commissions will be paid on the Funds' futures and options transac-
tions, if any. The purchase price of portfolio securities purchased from an
underwriter or dealer may include underwriting commissions and dealer spreads.
The Funds may pay mark-ups on principal transactions. In selecting broker-
dealers and in negotiating commissions, the portfolio manager considers the
firm's reliability, the quality of its execution services on a continuing ba-
sis and its financial condition. Brokerage will not be allocated based on the
sale of a Fund's shares. NIAC expects that all transactions in Municipal Obli-
gations and California Municipal Obligations will be effected on a principal
(as opposed to an agency) basis and, accordingly, does not expect to pay any
brokerage commissions on such transactions.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay
a broker or dealer who supplies brokerage and research services a commission
for effecting a transaction in excess of the amount of commission another bro-
ker or dealer would have charged for effecting the transaction. Brokerage and
research services include (a) furnishing advice as to the value of securities,
the advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b) fur-
nishing analyses and reports concerning issuers, industries, securities, eco-
nomic factors and trends, portfolio strategy, and the performance of accounts;
and (c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement, and custody).
In selecting brokers, ICAP considers investment and market information and
other research, such as economic, securities and performance measurement re-
search, provided by such brokers, and the quality and reliability of brokerage
services, including execution capability, performance, and financial responsi-
bility. Accordingly, the commissions charged by any such broker may be greater
than the amount another firm might charge if ICAP determines in good faith
that the amount of such commissions is reasonable in relation to the value of
the research information and brokerage services provided by such broker to
ICAP or the Funds. ICAP believes that the research information received in
this manner provides the Funds with benefits by supplementing the research
otherwise available to the Funds. The Management Agreement and the Sub-Advi-
sory Agreement provide that such higher commissions will not be paid by the
Funds unless the applicable adviser determines in good faith that the amount
is reasonable in relation to the services provided. The investment advisory
fees paid by the Funds to NIAC under the Management Agreement or the
subadvisory fees paid by NIAC to ICAP under the Sub-Advisory Agreement are not
reduced as a result of receipt by either NIAC or ICAP of research services.
NIAC and ICAP each place portfolio transactions for other advisory accounts
managed by them. Research services furnished by firms through which the Funds
effect their securities transactions may be used by NIAC and/or ICAP in ser-
vicing all of its accounts; not all of such services may be used by NIAC
and/or ICAP in connection with the Funds. NIAC and ICAP believe it is not pos-
sible to measure separately the benefits from research services to each of the
accounts (including the Funds) managed by
B-32
<PAGE>
them. Because the volume and nature of the trading activities of the accounts
are not uniform, the amount of commissions in excess of those charged by an-
other broker paid by each account for brokerage and research services will
vary. However, NIAC and ICAP believe such costs to the Funds will not be dis-
proportionate to the benefits received by the Funds on a continuing basis. NIAC
and ICAP seek to allocate portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell securities by the Funds and another ad-
visory account. In some cases, this procedure could have an adverse effect on
the price or the amount of securities available to the Funds. In making such
allocations between the Fund and other advisory accounts, the main factors con-
sidered by NIAC and ICAP are the respective investment objectives, the relative
size of portfolio holdings of the same or comparable securities, the availabil-
ity of cash for investment and the size of investment commitments generally
held.
For the period from inception (August 7, 1996) through the fiscal year ended
June 30, 1997, the Nuveen Growth and Income Stock Fund, the Nuveen Balanced
Stock and Bond Fund, and the Nuveen Balanced Municipal and Stock Fund paid
$724,507.90, $17,862.76, and $19,613.70, respectively, in brokerage commis-
sions.
Under the Investment Company Act of 1940, a Fund may not purchase portfolio se-
curities from any underwriting syndicate of which Nuveen is a member except un-
der certain limited conditions set forth in Rule 10f-3. The Rule sets forth re-
quirements relating to, among other things, the terms of a security purchased
by the Fund, the amount of securities that may be purchased in any one issue
and the assets of the Fund that may be invested in a particular issue. In addi-
tion, purchases of securities made pursuant to the terms of the Rule must be
approved at least quarterly by the Board of Trustees, including a majority of
the trustees who are not interested persons of the Trust.
NET ASSET VALUE
As stated in the Prospectuses, each Fund's net asset value per share is deter-
mined separately for each class of those Fund's shares as of the close of trad-
ing (normally 4:00 p.m. eastern time) on each day the New York Stock Exchange
(the "Exchange") is open for business. The Exchange is not open for trading on
New Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per
share of a class of shares of a Fund will be computed by dividing the value of
the Fund's assets attributable to the class, less the liabilities attributable
to the class, by the number of shares of the class outstanding.
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax matters is based upon the advice
of Chapman and Cutler, counsel to the Trust.
As described in the Prospectuses, each of the Funds intends to qualify under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") for
tax treatment as a regulated investment company. In order to qualify as a regu-
lated investment company, a Fund (i) must elect to be treated as a
B-33
<PAGE>
regulated investment company and (ii) for each taxable year thereafter must
satisfy certain requirements relating to the source of its income, diversifica-
tion of its assets, and distributions of its income to shareholders. First, the
Fund must derive at least 90% of its annual gross income (including tax-exempt
interest) from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities, foreign cur-
rencies or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of invest-
ing in such stock, securities or currencies (the "90% gross income test"). Sec-
ond, the Fund must diversify its holdings so that, at the close of each quarter
of its taxable year, (i) at least 50% of the value of its total assets is com-
prised of cash, cash items, United States Government securities, securities of
other regulated investment companies and other securities limited in respect of
any one issuer to an amount not greater in value than 5% of the value of the
Fund's total assets and to not more than 10% of the outstanding voting securi-
ties of such issuer, and (ii) not more than 25% of the value of the Fund's to-
tal assets is invested in the securities of any one issuer (other than United
States Government securities and securities of other regulated investment com-
panies) or two or more issuers controlled by a Fund and engaged in the same,
similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal income
tax in any taxable year for which it distributes at least 90% of the sum of (i)
its "investment company taxable income" (without regard to its net capital
gain, i.e., the excess of its net long-term capital gain over its short-term
capital loss) and (ii) its net tax-exempt interest (the excess of its gross
tax-exempt interest income over certain disallowed deductions). In addition, to
the extent the Fund timely distributes to shareholders at least 98% of its tax-
able income (including any net capital gain), it will not be subject to the 4%
excise tax on certain undistributed income of "regulated investment companies."
The Fund intends to make timely distributions in compliance with these require-
ments and consequently it is anticipated that they generally will not be re-
quired to pay the excise tax. A Fund may retain for investment its net capital
gain. However, if the Fund retains any net capital gain or any investment com-
pany taxable income, it will be subject to federal income tax at regular corpo-
rate rates on the amount retained. If the Fund retains any net capital gain,
such Fund may designate the retained amount as undistributed capital gains in a
notice to its shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their shares of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by such Fund against their federal income tax liabilities if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of the Fund will
be increased by an amount equal under current law to 65% of the amount of un-
distributed net capital gains included in the shareholder's gross income. Each
Fund intends to distribute at least annually to its shareholders all or sub-
stantially all of its investment company taxable income, net tax-exempt inter-
est and net capital gain.
Treasury regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain, to elect (unless it has
made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or
any net foreign currency loss incurred after October 31 as if they had been in-
curred in the succeeding year.
B-34
<PAGE>
If any of the Funds engages in hedging transactions involving financial
futures and options, these transactions will be subject to special tax rules,
the effect of which may be to accelerate income to a Fund, defer a Fund's
losses, cause adjustments in the holding periods of a Fund's securities, con-
vert long-term capital gains into short-term capital gains and convert short-
term capital losses into long-term capital losses. These rules could therefore
affect the amount, timing and character of distributions to shareholders.
Prior to purchasing shares in one of the Funds, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the divi-
dend or distribution and will be subject to federal income tax to the extent
it is a distribution of ordinary income or capital gain.
In any taxable year of a Fund, distributions from the Fund, other than distri-
butions which are designated as capital gains dividends (or exempt interest
dividends, in the case of Muni/Stock Fund and the California Muni/Stock Fund)
will to the extent of the earnings and profits on such Fund constitute divi-
dends for Federal income tax purposes which are taxable as ordinary income to
shareholders. To the extent that distributions to a shareholder in any year
exceed the Fund's current and accumulated earnings and profits, they will be
treated as a return of capital and will reduce the shareholder's basis in his
or her shares and, to the extent that they exceed his or her basis, will be
treated as gain from the sale of such shares as discussed below. It should be
noted that certain legislative proposals have been made which could affect the
calculation of basis for shareholders holding securities that are substan-
tially identical to the Fund's securities. Distributions of the Fund's net
capital gain which are properly designated as capital gain dividends by the
Fund will be taxable to the shareholders as long-term capital gain, regardless
of the length of time the shares have been held by a shareholder. Distribu-
tions will be taxed in the manner described (i.e., as ordinary income, long-
term capital gain, return of capital or exempt-interest dividends) even if re-
invested in additional shares of a Fund.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the follow-
ing January, will be treated as having been distributed by each Fund (and re-
ceived by the shareholders) on December 31 of the year such dividends are de-
clared.
The redemption or exchange of the shares of a Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of corpo-
rations at the rates applicable to ordinary income. For taxpayers other than
corporations, net capital gains (which is defined as net long-term capital
gain over net short-term capital loss for the taxable year) are subject to a
maximum marginal stated tax rate of either 28% or 20%, depending upon the
holding period of the capital assets. In particular, net capital gain, exclud-
ing net gain from property held more than one year but not more than 18 months
and gain on certain other assets, is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax bracket).
Net capital gain that is not taxed at the maximum marginal stated tax rate of
20% (or 10%) as described in the preceding sentence, is generally subject to a
maximum marginal stated tax rate of 28%. The date on which a share is acquired
(i.e., the "trade date") is excluded for purposes of determining the holding
period of the share. It should be noted that legislative proposals are intro-
duced from time to time that affect tax rates and could affect relative dif-
ferences at which ordinary income and capital gains are taxed.
B-35
<PAGE>
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered "con-
version transactions" effective for transactions entered into after April 30,
1993. Shareholders and prospective investors should consult with their tax ad-
visers regarding the potential effect of this provision on their investment in
shares of a Fund.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of the Fund
are held by fewer than 500 persons, additional taxable income may be realized
by the individual (and other non-corporate) shareholders in excess of the dis-
tributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of a Fund or another fund are subsequently acquired without payment of
a sales load or with the payment of a reduced sales load pursuant to the rein-
vestment or exchange privilege. Any disregarded portion of such load will re-
sult in an increase in the shareholder's tax basis in the shares subsequently
acquired. Moreover, losses recognized by a shareholder on the redemption or
exchange of shares of a Fund held for six months or less are disallowed to the
extent of any distribution of exempt-interest dividends received with respect
to such shares and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distributions of long-term capital gains
made with respect to such shares. In addition, no loss will be allowed on the
redemption or exchange of shares of a Fund if the shareholder purchases other
shares of such Fund (whether through reinvestment of distributions or other-
wise) or the shareholder acquires or enters into a contract or option to ac-
quire securities that are substantially identical to shares of a Fund within a
period of 61 days beginning 30 days before and ending 30 days after such re-
demption or exchange. If disallowed, the loss will be reflected in an adjust-
ment to the basis of the shares acquired.
If in any year a Fund should fail to qualify under Subchapter M for tax treat-
ment as a regulated investment company, the Fund would incur a regular corpo-
rate federal income tax upon its income for that year (other than interest in-
come from Municipal Obligations and California Municipal Obligations), and
distributions to its shareholders would be taxable to shareholders as ordinary
dividend income for federal income tax purposes to the extent of the Fund's
available earnings and profits.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification num-
ber (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
Shareholders who are non-resident aliens are subject to U.S. withholding tax
on ordinary income dividends at a rate of 30% or such lower rate as prescribed
by an applicable tax treaty.
B-36
<PAGE>
A corporate shareholder may be entitled to a 70% dividends received deduction
with respect to any portion of such shareholder's ordinary income dividends
which are attributable to dividends received by a Fund on certain Equity Secu-
rities (other than corporate shareholders, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding corporation tax). A Fund will designate the portion
of any taxable dividend which is eligible for this deduction. However, a cor-
porate shareholder should be aware that Sections 246 and 246A of the Code im-
pose additional limitations on the eligibility of dividends for the 70% divi-
dends received deduction. These limitations include a requirement that stock
(and therefore Shares of a Fund) must generally be held at least 46 days (as
determined under, and during the period specified in, Section 246(c) of the
Code). Regulations have been issued which address special rules that must be
considered in determining whether the 46 day holding requirement is met. More-
over, the allowable percentage of the deduction will generally be reduced from
70% if a corporate shareholder owns Shares of the Fund the financing of which
is directly attributable to indebtedness incurred by such corporation. It
should be noted that various legislative proposals that would affect the divi-
dends received deduction have been introduced. To the extent dividends re-
ceived by a Fund are attributable to foreign corporations, a corporate share-
holder will not be entitled to the dividends received deduction with respect
to its share of such foreign dividends since the dividends received deduction
is generally available only with respect to dividends paid by domestic corpo-
rations. It should be noted that payments to a Fund of dividends on Equity Se-
curities that are attributable to foreign corporations may be subject to for-
eign withholding taxes. Corporate shareholders should consult with their tax
advisers with respect to the limitations on, and possible modifications to,
the dividends received deduction.
Nuveen Balanced Municipal and Stock Fund and Nuveen Balanced California
Municipal and Stock Fund Tax Matters
In addition to the matters discussed above, the Muni/Stock Fund and the Cali-
fornia Muni/Stock Fund intend to qualify to pay "exempt-interest" dividends as
defined under the Code. Under the Code, at the close of each quarter of its
taxable year, if at least 50% of the value of the Fund's total assets consists
of obligations described in Code Section 103(a)) ("Municipal Securities")
(i.e., Municipal Obligations in the case of the Muni/Stock Fund and California
Municipal Obligations in the case of the California Muni/Stock Fund), the Fund
shall be qualified to pay exempt-interest dividends to its Shareholders. Ex-
empt-interest dividends are dividends or any part thereof (other than a capi-
tal gain dividend) paid by the Fund which are attributable to interest on Mu-
nicipal Securities (net of expenses and any bond premium amortization with re-
spect to Municipal Securities) to the extent such interest is excludible from
gross income under Section 103 of the Code and are so designated by the Fund.
Exempt-interest dividends will be excluded from gross income of the owners of
the shares for federal income tax purposes, except in the case of certain sub-
stantial users as described below. Such exempt-interest dividends may be taken
into account in determining the federal alternative minimum tax, as described
below. Insurance proceeds received by the Muni/Stock Fund or California
Muni/Stock Fund under any insurance policies in respect of scheduled interest
payments on defaulted Municipal Securities, as described herein, may be taken
into account in determining the amount of exempt-interest dividends provided
that, at the time such policies are purchased, the amounts paid for such poli-
cies are reasonable, customary and consistent with the reasonable expectation
that the respective issuer of the Municipal Securities, rather than the insur-
er, will pay debt service on the Municipal Securities; in the case of non-ap-
propriation by a
B-37
<PAGE>
political subdivision, however, there can be no assurance that payments made by
the insurer representing interest on such "non-appropriation" Municipal Lease
Obligations may be taken into account in determining the amount of exempt-in-
terest dividends. If a Fund purchases a Municipal Security at a market dis-
count, any gain realized by the Fund upon sale or redemption of the Municipal
Security will be treated as taxable interest income to the extent such gain
does not exceed the market discount, and any gain realized in excess of the
market discount generally will be treated as capital gain. The Funds will be
required by the Code to allocate their respective expenses proportionately be-
tween their tax-exempt income and taxable income (excluding net realized long-
term capital gains). Distributions to shareholders by the Funds of net income
received, if any, from taxable dividends, market discount on Municipal Securi-
ties treated as interest and net short-term capital gains, if any, realized by
the Funds will be taxable to shareholders as ordinary income. Distributions of
net realized long-term capital gains, if any, are taxable as long-term capital
gains, as discussed above.
In general, market discount is the amount (if any) by which the stated redemp-
tion price at maturity exceeds the Fund's purchase price (except to the extent
that such difference, if any, is attributable to original issue discount not
yet accrued), subject to a statutory de minimis rule. Accretion of market dis-
count is taxable as ordinary income. Market discount that accretes while the
Fund holds a Municipal Security would be recognized as ordinary income by the
Fund when principal payments are received on the Municipal Security, upon sale
or at redemption (including early redemption) or at the Fund's election, as
such market discount accrues. Market discount income recognized by the Fund
will result in taxable dividends to the shareholders.
For purposes of computing the alternative minimum tax for individuals and cor-
porations and the Superfund tax for corporations, interest on certain private
activity bonds (which includes most industrial and housing bonds) issued on or
after August 8, 1986 is included as a preference item. The Funds will annually
supply their shareholders with a report indicating the percentage of the re-
spective Fund's income attributable to Municipal Securities that is treated as
a tax preference item for purposes of the federal alternative minimum tax.
Moreover, for corporations, the alternative minimum taxable income is increased
by 75% of the difference between an alternative measure of income ("adjusted
current earnings") and the amount otherwise determined to be the alternative
minimum taxable income. Interest on all Municipal Securities, and therefore all
exempt-interest dividends received from the Fund, are included in calculating
adjusted current earnings. Under current Code provisions, the Superfund Tax
does not apply to tax years beginning on or after January 1, 1996. Legislative
proposals have been made that would extend the Superfund Tax.
Individuals whose "modified income" exceeds a base amount will be subject to
federal income tax on up to one-half of their social security benefits. Modi-
fied income currently includes adjusted gross income, one-half of social secu-
rity benefits and tax-exempt interest, including exempt-interest dividends from
the Funds. In addition, individuals whose modified income exceeds certain base
amounts are required to include in gross income up to 85% of their social secu-
rity benefits.
The interest on private activity bonds in most instances is not federally tax-
exempt to a person who is a "substantial user" of a facility financed by such
bonds or a "related person" of such "substantial user." As a result, the Funds
may not be an appropriate investment for shareholders who are considered either
B-38
<PAGE>
a "substantial user" or a "related person" within the meaning of the Code. In
general, a "substantial user" of a facility includes a "non-exempt person who
regularly uses a part of such facility in his trade or business." "Related per-
sons" are in general defined to include persons among whom there exists a rela-
tionship, either by family or business, which would result in a disallowance of
losses in transactions among them under various provisions of the Code (or if
they are members of the same controlled group of corporations under the Code),
including a partnership and each of its partners (and their spouses and minor
children), an S corporation and each of its shareholders (and their spouses and
minor children) and various combinations of these relationships. The foregoing
is not a complete statement of all of the provisions of the Code relating to
the definitions of "substantial user" and "related person." For additional in-
formation, investors should consult their tax advisers before investing in the
Fund.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of a fund that distributes exempt-interest dividends is
not deductible for Federal income tax purposes. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of purchas-
ing or carrying particular assets, the purchase or ownership of shares may be
considered to have been made with borrowed funds even though such funds are not
directly traceable to the purchase or ownership of shares.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
federal income taxation of the Funds and their shareholders and relates only to
the federal income tax status of the Fund and to tax treatment of distributions
by the Fund to United States shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The
Code and Treasury Regulations are subject to change by legislative or adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Funds and the
income tax consequences to their shareholders, as well as with respect to for-
eign, state and local tax consequences of ownership of Fund shares.
CALIFORNIA STATE TAX MATTERS
The following is a general, abbreviated summary of certain provisions of the
applicable California tax law as presently in effect as it directly governs the
taxation of resident individual and corporate shareholders of the California
Muni/Stock Fund. This summary does not address the taxation of other sharehold-
ers nor does it discuss any local taxes that may be applicable. These provi-
sions are subject to change by legislative or administrative action, and any
such change may be retroactive with respect to transactions of the California
Muni/Stock Fund.
The following is based on the assumptions that the California Muni/Stock Fund
will qualify under Subchapter M of the Code as a regulated investment company,
that it will satisfy the conditions which will cause distributions of the Cali-
fornia Muni/Stock Fund attributable to California Municipal Obligations to
qualify as exempt-interest dividends to shareholders, and that they will dis-
tribute all interest and dividends they receive to the California Muni/Stock
Fund's shareholders.
B-39
<PAGE>
The California Muni/Stock Fund will not be subject to the California corporate
franchise tax. The California Muni/Stock Fund will be subject to the Califor-
nia corporate income tax only if it has a sufficient nexus with California. If
it is subject to the California corporate income tax, it does not expect to
pay a material amount of such tax.
Distributions by the California Muni/Stock Fund that are attributable to in-
terest on any obligation of California and its political subdivisions or to
interest on obligations of the United States, its territories, possessions or
instrumentalities that are exempt from state taxation under federal law will
not be subject to the California personal income tax. All other distributions,
including distributions attributable to capital gains, will be subject to the
California personal income tax.
All distributions of California Muni/Stock Fund to corporate shareholders, re-
gardless of source, will be subject to the California corporate franchise tax.
Gain on the sale, exchange, or other disposition of shares of the California
Muni/Stock Fund will be subject to the California personal income and corpo-
rate franchise taxes.
Shares of the California Funds may be subject to the California estate tax if
held by a California decedent at the time of death.
Shareholders are advised to consult with their own tax advisers for more de-
tailed information concerning California tax matters.
PERFORMANCE INFORMATION
As explained in the Prospectuses, the historical investment performance of the
Funds may be shown in the form of "average annual total return," and "cumula-
tive total return" each of which will be calculated separately for each class
of shares.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical, $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation as-
sumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the "redeem-
able value" of that investment at the end of the period. The cumulative total
return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder
B-40
<PAGE>
by the initial investment and expressing the result as a percentage. The cal-
culation assumes that all income and capital gains distributions by a Fund
have been reinvested at net asset value on the reinvestment dates during the
period. Cumulative total return may also be shown as the increased dollar
value of the hypothetical investment over the period. Cumulative total return
calculations that do not include the effect of the sales charge would be re-
duced if such charge were included.
From time to time, each Fund may compare its risk-adjusted performance with
other investments that may provide different levels of risk and return. For
example, a Fund may compare its risk level, as measured by the variability of
its periodic returns, or its RISK-ADJUSTED TOTAL RETURN, with those of other
funds or groups of funds. Risk-adjusted total return would be calculated by
adjusting each investment's total return to account for the risk level of the
investment.
The risk level for a class of shares of a Fund, and any of the other invest-
ments used for comparison, would be evaluated by measuring the variability of
the investment's return, as indicated by the standard deviation of the invest-
ment's monthly returns over a specified measurement period (e.g., two years).
An investment with a higher standard deviation of monthly returns would indi-
cate that a fund had greater price variability, and therefore greater risk,
than an investment with a lower standard deviation.
THE RISK-ADJUSTED TOTAL RETURN for a class of shares of a Fund and for other
investments over a specified period would be evaluated by dividing (a) the re-
mainder of the investment's annualized two-year total return minus the
annualized total return of an investment in Treasury bill securities (essen-
tially a risk-free return) over that period, by (b) the standard deviation of
the investment's monthly returns for the period. This ratio is sometimes re-
ferred to as the "Sharpe measure" of return. An investment with a higher
Sharpe measure would be regarded as producing a higher return for the amount
of risk assumed during the measurement period than an investment with a lower
Sharpe measure.
Class A Shares of each Fund are sold at net asset value plus a current maximum
sales charge of 5.25% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Re-
turns and net asset value of each class of shares of the Funds will fluctuate.
Factors affecting the performance of the Funds include general market condi-
tions, operating expenses and investment management. Any additional fees
charged by a securities representative or other financial services firm would
reduce returns described in this section. Shares of the Funds are redeemable
at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and sales
literature, a Fund may also compare its performance with that of: (1) the Con-
sumer Price Index and (2) equity mutual funds or mutual fund indexes as re-
ported by Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc.
("Morningstar"), Wiesenberger Investment Companies Service ("Wiesenberger")
and CDA Investment Technologies, Inc. ("CDA") or similar independent services
which monitor the performance of mutual funds, or other industry or financial
publications such as Barron's, Changing Times, Forbes and Money Magazine. Per-
formance comparisons by these indexes, services or publications may rank mu-
tual funds over different periods of time by means of aggregate, average,
year-by-year, or other types of total return and performance figures. Any
given performance quotation or performance comparison should not be considered
as representative of the performance of the Funds for any future period.
B-41
<PAGE>
There are differences and similarities between the investments which the Funds
may purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include the effect of any sales charges.
NUVEEN GROWTH AND INCOME STOCK FUND
THE FUND COMMENCED OPERATIONS ON AUGUST 7, 1996. THE TABLE BELOW REPRESENTS THE
INVESTMENT RETURNS FOR THE SPECIFIED PERIODS ON THE FUND'S CLASS A, CLASS B,
CLASS C AND CLASS R SHARES. THE TOTAL RETURN FIGURES FOR CLASS A SHARES ARE
SHOWN BOTH WITH AND WITHOUT THE EFFECT OF THE MAXIMUM SALES CHARGE. THE TOTAL
RETURN FIGURES FOR THE CLASS B AND CLASS C SHARES INCLUDE THE EFFECT OF THE AP-
PLICABLE CDSC.
<TABLE>
<CAPTION>
NUVEEN GROWTH AND INCOME FUND
-------------------------------
CUMULATIVE
-----------------------
1ST HALF INCEPTION
1997 8/7/96-6/30/97
-------- --------------
<S> <C> <C>
Class ANAV 19.74% 36.30%
Class APOP 13.45% 29.14%
Class B+ 14.23% 30.37%
Class C++ 18.14% 34.26%
Class R 19.94% 36.65%
</TABLE>
- - --------
+The total return figures for Class B shares take into account a 5.00% CDSC.
++The total return figures for Class C shares take into account a 1.00% CDSC.
THE TABLE BELOW PRESENTS ANNUAL INVESTMENT RETURNS FOR THE ICAP DISCRETIONARY
EQUITY COMPOSITE BETWEEN DECEMBER 31, 1987 AND DECEMBER 31, 1996 AND THE RETURN
FOR THE FIRST HALF OF 1997. THE ICAP DISCRETIONARY EQUITY COMPOSITE REPRESENTS
THE COMPOSITE PERFORMANCE OF THE 40 MANAGED ACCOUNTS TOTALLING APPROXIMATELY
$2.4 BILLION FOR WHICH ICAP SERVES AS INVESTMENT ADVISER AND THAT HAVE THE SAME
INVESTMENT OBJECTIVES AND POLICIES AS THE FUND.
<TABLE>
<CAPTION>
1ST
HALF ANNUAL TOTAL RETURNS FOR THE YEAR ENDING DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Discretionary Eq-
uity Composite (Gross). 20.58 26.44 38.16 1.95 16.58 7.38 33.63 1.47 33.54 9.37 29.08
ICAP Discretionary Eq-
uity Composite (Net)... 19.92 25.01 36.63 0.74 15.24 6.12 32.15 0.26 32.05 8.09 27.63
S&P 500................. 20.62 22.96 37.43 1.31 9.99 7.67 30.55 (3.17) 31.49 16.81 5.23
Lipper Growth and Income
Index.................. 15.93 20.69 31.17 (0.41) 14.62 9.64 27.75 (5.99) 23.74 18.35 2.63
</TABLE>
B-42
<PAGE>
NUVEEN BALANCED STOCK AND BOND FUND
THE FUND COMMENCED OPERATIONS ON AUGUST 7, 1996. THE TABLE BELOW REPRESENTS THE
INVESTMENT RETURNS FOR THE SPECIFIED PERIODS ON THE FUND'S CLASS A, CLASS B,
CLASS C AND CLASS R SHARES. THE TOTAL RETURN FIGURES FOR CLASS A SHARES ARE
SHOWN BOTH WITH AND WITHOUT THE EFFECT OF THE MAXIMUM SALES CHANGE. THE TOTAL
RETURN FIGURES FOR THE CLASS B AND CLASS C SHARES INCLUDE THE EFFECT OF THE AP-
PLICABLE CDSC.
<TABLE>
<CAPTION>
BALANCED STOCK AND BOND
---------------------------------------------------------------------------
CUMULATIVE
-----------------------
1ST HALF INCEPTION
1997 8/7/96-6/30/97
-------- --------------
<S> <C> <C>
Class ANAV........................................ 10.91% 22.04%
Class APOP........................................ 5.09% 15.63%
Class B+.......................................... 5.55% 16.26%
Class C++......................................... 9.55% 20.26%
Class R........................................... 11.05% 22.30%
</TABLE>
+The total return figures for Class B shares take into account a 5.00% CDSC.
++The total return figures for Class C shares take into account a 1.00% CDSC.
THE TABLE BELOW PRESENTS ANNUAL INVESTMENT RETURNS FOR THE ICAP BALANCED COM-
POSITE BETWEEN DECEMBER 31, 1987 AND DECEMBER 31, 1996 AND THE RETURN FOR THE
FIRST HALF OF 1997. THE ICAP BALANCED COMPOSITE REPRESENTS THE COMPOSITE PER-
FORMANCE OF THE 8 MANAGED ACCOUNTS TOTALLING APPROXIMATELY $370 MILLION FOR
WHICH ICAP SERVES AS INVESTMENT ADVISER AND THAT HAVE THE SAME INVESTMENT OB-
JECTIVES AND POLICIES AS THE FUND.
<TABLE>
<CAPTION>
1ST
HALF ANNUAL TOTAL RETURNS FOR THE YEAR ENDING DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Balanced Composite
(Gross)................ 12.25 17.52 29.09 0.21 13.81 7.34 31.04 2.69 31.14 8.57 27.52
ICAP Balanced Composite
(Net).................. 11.67 16.29 27.76 (0.89) 12.61 6.18 29.70 1.57 29.80 7.40 26.20
Balanced Index.......... 10.59 12.32 24.40 (0.30) 9.07 7.33 21.51 3.99 21.09 10.95 5.74
Lipper Balanced Index... 11.19 13.01 24.88 (2.04) 11.94 7.47 25.84 0.65 19.70 11.18 4.15
</TABLE>
The gross performance results of the ICAP Discretionary Equity Composite and
the ICAP Balanced Composite reflect the investment performance of the respec-
tive composites before deduction of any investment advisory fees or other ex-
penses. The net performance results of the ICAP Discretionary Equity Composite
and the ICAP Balanced Composite reflect the deduction of the projected annual
operating expenses for Class A shares of the Nuveen Growth and Income Stock
Fund and the Nuveen Balanced Stock and Bond Fund, respectively, as summarized
in the Summary of Fund Expenses section of each Fund's prospectus. The perfor-
mance information above of the ICAP Discretionary Equity Composite and ICAP
Balanced Composite should not be interpreted as indicative of future perfor-
mance of a fund. The Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500") is a widely-recognized, unmanaged index of common stock prices. S&P
500 returns assume reinvestment of all dividends paid by the stocks included in
the index, but do not include brokerage commissions or other fees an investor
would incur by investing in the portfolio of stocks comprising the index. The
Lipper Growth and Income Index represents the composite returns of the 30 larg-
est funds comprising the Lipper Growth and Income Objective and assumes rein-
vestment of all fund dividends and distributions. The Balanced Fund Index rep-
resents the investment performance of an unmanaged index comprised 55% of the
S&P 500 and 45% of the Lehman Brothers Intermediate Treasury Index (the "Lehman
Index"). The Lehman
B-43
<PAGE>
Index is an unmanaged index of all public obligations of the U.S. Treasury,
U.S. Government agencies, quasi-federal corporations and corporate debt guaran-
teed by the U.S. Government with maturities between one and ten years and an
outstanding par value of at least $100 million. The Lipper Balanced Index rep-
resents the composite returns of the 30 largest funds comprising the Lipper
Balanced Objective and assumes reinvestment of all fund dividends and
distributions.
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
THE FUND COMMENCED INVESTMENT OPERATIONS ON AUGUST 7, 1996. THE TABLE BELOW
REPRESENTS THE INVESTMENT RETURNS FOR THE PERIODS SPECIFIED ON THE FUND'S CLASS
A, CLASS B, CLASS C AND CLASS R SHARES. THE TOTAL RETURN FIGURES FOR CLASS A
SHARES ARE SHOWN BOTH WITH AND WITHOUT THE EFFECT OF THE MAXIMUM SALES CHARGE.
THE TOTAL RETURN FIGURES FOR THE CLASS B AND CLASS C SHARES INCLUDE THE EFFECT
OF THE APPLICABLE CDSC.
<TABLE>
<CAPTION>
BALANCED MUNICIPAL STOCK AND BOND
------------------------------------
CUMULATIVE
-----------------------
1ST HALF INCEPTION
1997 8/7/96-6/30/97
-------- --------------
<S> <C> <C>
Class ANAV 9.61% 18.05%
Class APOP 3.86% 11.86%
Class B+ 4.26% 12.32%
Class C++ 8.21% 16.27%
Class R 9.84% 18.38%
</TABLE>
+The total return figures for Class B shares take into account a 5.00% CDSC.
++The total return figures for Class C shares take into account a 1.00% CDSC.
TOTAL RETURNS REFLECT PAST PERFORMANCE AND ARE NOT PREDICTIVE OF FUTURE RE-
SULTS.
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES
As described in the Prospectuses, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and pref-
erences.
Each class of shares of a Fund represents an interest in the same portfolio of
investments. Each class of shares is identical in all respects except that each
class bears its own class expenses, including distribution and administration
expenses, and each class has exclusive voting rights with respect to any dis-
tribution or service plan applicable to its shares. As a result of the differ-
ences in the expenses borne by each class of shares, net income per share, div-
idends per share and net asset value per share will vary among a Fund's classes
of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include distri-
bution and service fees.
The minimum initial investment is $3,000 per fund share class, and may be lower
for accounts opened through fee-based programs for which the program sponsor
has established a single master account with the fund's transfer agent and per-
forms all sub-accounting services related to that account.
B-44
<PAGE>
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES
Rights of Accumulation. You may qualify for a reduced sales charge on a pur-
chase of Class A Shares of any Fund if the amount of your purchase, when added
to the value that day of all of your prior purchases of shares of any Fund or
of another Nuveen Mutual Fund, or units of a Nuveen unit trust, on which an up-
front sales charge or ongoing distribution fee is imposed, or is normally im-
posed, falls within the amounts stated in the Class A sales charges and commis-
sions table in "How to Buy Fund Shares" in the Prospectus. You or your finan-
cial adviser must notify Nuveen or the Fund's transfer agent of any cumulative
discount whenever you plan to purchase Class A Shares of a Fund that you wish
to qualify for a reduced sales charge.
Letter of Intent. You may qualify for a reduced sales charge on a purchase of
Class A Shares of any Fund if you plan to purchase Class A Shares of Nuveen Mu-
tual Funds over the next 13 months and the total amount of your purchases
would, if purchased at one time, qualify you for one of the reduced sales
charges shown in the Class A sales charges and commissions table in "How to Buy
Fund Shares" in the Prospectus. In order to take advantage of this option, you
must complete the applicable section of the Application Form or sign and de-
liver either to an Authorized Dealer or to the Fund's transfer agent a written
Letter of Intent in a form acceptable to Nuveen. A Letter of Intent states that
you intend, but are not obligated, to purchase over the next 13 months a stated
total amount of Class A shares that would qualify you for a reduced sales
charge shown above. You may count shares of a Nuveen Mutual Fund that you al-
ready own on which you paid an up-front sales charge or an ongoing distribution
fee and any Class C Shares of a Nuveen Mutual Fund that you purchase over the
next 13 months towards completion of your investment program, but you will re-
ceive a reduced sales charge only on new Class A Shares you purchase with a
sales charge over the 13 months. You cannot count towards completion of your
investment program Class A Shares that you purchase without a sales charge
through investment of distributions from a Nuveen Mutual Fund or a Nuveen unit
trust, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class
A Shares of a Fund following execution of the Letter of Intent will be at least
5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an ap-
propriate number of your escrowed Class A Shares to meet the required payment.
By establishing a Letter of Intent, you irrevocably appoint Nuveen as attor
-
B-45
<PAGE>
ney to give instructions to redeem any or all of your escrowed shares, with
full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions. You may purchase Class A
Shares without an up-front sales charge by reinvestment of distributions from
any of the various unit trusts sponsored by Nuveen. There is no initial or sub-
sequent minimum investment requirement for such reinvestment purchases.
Group Purchase Programs. If you are a member of a qualified group, you may pur-
chase Class A Shares of any Fund or of another Nuveen Mutual Fund at the re-
duced sales charge applicable to the group's purchases taken as a whole. A
"qualified group" is one which has previously been in existence, has a purpose
other than investment, has ten or more participating members, has agreed to in-
clude Fund sales publications in mailings to members and has agreed to comply
with certain administrative requirements relating to its group purchases.
Under any group purchase program, the minimum monthly investment in Class A
Shares of any particular Fund or portfolio by each participant is $50, and the
minimum initial investment in Class A Shares of any particular Fund or portfo-
lio for each participant in the program is $3,000. No certificate will be is-
sued for any participant's account. All dividends and other distributions by a
Fund will be reinvested in additional Class A Shares of the same Fund. No par-
ticipant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each partici-
pant must fill out special application materials, which the group administrator
may obtain from the group's financial adviser, by calling Nuveen toll-free at
(800) 621-7227.
Reinvestment of Redemption Proceeds from Unaffiliated Funds. You may also pur-
chase Class A Shares at net asset value without a sales charge if the purchase
takes place through an Authorized Dealer and represents the reinvestment of the
proceeds of the redemption of shares of one or more registered investment com-
panies not affiliated with Nuveen. You must provide appropriate documentation
that the redemption occurred not more than one year prior to the reinvestment
of the proceeds in Class A Shares, and that you either paid an up-front sales
charge or were subject to a contingent deferred sales charge in respect of the
redemption of such shares of such other investment company.
Class A Shares of a Fund may be purchased at net asset value without a sales
charge, and Class R Shares may be purchased, by the following categories of in-
vestors:
. officers, trustees and former trustees of the Trust;
. bona fide, full-time and retired employees of Nuveen or ICAP, any parent
company of Nuveen, and subsidiaries thereof, or their immediate family
members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
B-46
<PAGE>
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program; and
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices.
Any Class A Shares purchased pursuant to a special sales charge waiver must be
acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your fi-
nancial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered un-
der these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment com-
pany. All purchases under the special sales charge waivers will be subject to
minimum purchase requirements as established by the Funds.
In determining the amount of your purchases of Class A Shares of any Fund that
may qualify for a reduced sales charge, the following purchases may be com-
bined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their imme-
diate family members (i.e., their spouses, parents, children, grandparents,
grandchildren parents-in-law, sons-and daughters-in-law, siblings, a sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
Class R Share Purchase Eligibility. Class R Shares are available for purchases
of $1 million or more and for purchases using dividends and capital gains dis-
tributions on Class R Shares. Class R Shares also are available for the fol-
lowing categories of investors:
. officers, trustees and former trustees of the Trust;
. bona fide, full-time and retired employees of Nuveen or ICAP, any parent
company of Nuveen, and subsidiaries thereof, or their immediate family
members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
B-47
<PAGE>
. investors purchasing on a periodic fee, asset-based fee or no transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices.
. with respect to the Nuveen Growth and Income Stock Fund and the Nuveen
Balanced Stock and Bond Fund, any pension, profit-sharing, 401(k), IRA
or other similar plans maintained by or for the benefit of such persons.
In addition, purchasers of Nuveen unit investment trusts may reinvest their
distributions from such unit investment trusts in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund
shares). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund.
The reduced sales charge programs may be modified or discontinued by the Funds
at any time.
For more information about the purchase of Class A Shares or reduced sales
charge programs, or to obtain the required application forms, call Nuveen toll-
free at (800) 621-7227.
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
Class A Shares are normally redeemed at net asset value, without any Contingent
Deferred Sales Charge ("CDSC"). However, in the case of Class A Shares pur-
chased at net asset value because the purchase amount exceeded $1 million,
where the Authorized Dealer did not waive the sales commission, a CDSC of 1% is
imposed on any redemption within 18 months of purchase. In the case of Class B
Shares redeemed within six years of purchase, a CDSC is imposed, beginning at
5% for redemptions within the first year, declining to 4% for redemptions
within years two and three, and declining by 1% each year thereafter until dis-
appearing after the sixth year. Class C Shares are redeemed at net asset value,
without any CDSC, except that a CDSC of 1% is imposed upon redemption of Class
C Shares that are redeemed within 12 months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund ac-
count due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. You may not
exchange Class B Shares for shares of a Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A or Class C shares subject to a
CDSC are exchanged for shares of a Nuveen money market fund, the CDSC would be
imposed on the subsequent
B-48
<PAGE>
redemption of those money market fund shares, and the period during which the
shareholder holds the money market fund shares would be counted in determining
the remaining duration of the CDSC. The Fund may elect not to so count the pe-
riod during which the shareholder held the money market fund shares, in which
event the amount of any applicable CDSC would be reduced in accordance with
applicable SEC rules by the amount of any 12b-1 plan payments to which those
money market funds shares may be subject.
The CDSC may be waived or reduced under the following six special circumstanc-
es: 1) redemptions within one year following the death or disability, as de-
fined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended, of
a shareholder; 2) in whole or in part for redemptions of shares by sharehold-
ers with accounts in excess of specified breakpoints that correspond to the
breakpoints under which the up-front sales charge on Class A Shares is reduced
pursuant to Rule 22d-1 under the Act; 3) redemptions of shares purchased under
circumstances or by a category of investors for which Class A Shares could be
purchased at net asset value without a sales charge; 4) in connection with the
exercise of a reinstatement privilege whereby the proceeds of a redemption of
a Fund's shares subject to a sales charge are reinvested in shares of certain
Funds within a specified number of days; 5) in connection with the exercise of
a Fund's right to redeem all shares in an account that does not maintain a
certain minimum balance or that the applicable board has determined may have
material adverse consequences to the shareholders of such Fund; and 6) redemp-
tions made pursuant to a Fund's automatic withdrawal plan, up to 12% annually
of the original investment amount. If a Fund waives or reduces the CDSC, such
waiver or reduction would be uniformly applied to all Fund shares in the par-
ticular category. In waiving or reducing a CDSC, the Funds will comply with
the requirements of Rule 22d-1 of the Investment Company Act of 1940, as
amended.
GENERAL MATTERS
The Funds may encourage registered representatives and their firms to help ap-
portion their assets among bonds, stocks and cash, and may seek to participate
in programs that recommend a portion of their assets be invested in equity se-
curities, equity and debt securities, or equity and municipal securities.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected to sell certain minimum amounts of shares of the Nuveen mutual funds
during specified time periods.
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Funds may advertise and create spe-
cific investment programs and systems. For example, this may include informa-
tion on how to use the Funds to accumulate assets for future education needs
or periodic payments such as insurance premiums. The Funds may produce soft-
ware or additional sales literature to promote the advantages of using the
Funds to meet these and other specific investor needs.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the
B-49
<PAGE>
Nuveen money market funds may be purchased on days on which the Federal Reserve
Bank of Boston is normally open for business. In addition to the holidays ob-
served by the Fund, the Nuveen money market funds observe and will not make
fund shares available for purchase on the following holidays: Martin Luther
King's Birthday, Columbus Day and Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares of
the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Each Fund may suspend the right of redemption, or delay payment to redeeming
shareholders for more than seven days, when the New York Stock Exchange is
closed (not including customary weekend and holiday closings); when trading in
the markets a Fund normally uses is restricted, or the SEC determines that an
emergency exists so that trading of a Fund's portfolio securities or determina-
tion of a Fund's net assets value is not reasonably practical; or the SEC by
order permits the suspension of the right of redemption or the delay in payment
to redeeming shareholders for more than seven days.
Shares will be registered in the name of the investor or the investor's finan-
cial adviser. A change in registration or transfer of shares held in the name
of a financial adviser may only be made by an order in good form from the fi-
nancial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share certifi-
cates will be issued for fractional shares.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Fund
Shares" in the Prospectus.
Nuveen serves as the principal underwriter of the shares of the Funds pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement,
the Trust appointed Nuveen to be its agent for the distribution of the Funds'
shares on a continuous offering basis. Nuveen sells shares to or through bro-
kers, dealers, banks or other qualified financial intermediaries (collectively
referred to as "Dealers"), or others, in a manner consistent with the then ef-
fective registration statement of the Trust. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Funds' shares, including printing and distrib-
uting of prospectuses and statements of additional information to other than
existing shareholders, the printing and distributing of sales literature, ad-
vertising and payment of compensation and giving of concessions to dealers.
Nuveen receives for its services the excess, if any, of the sales price of a
Fund's shares less the net asset value of those shares, and reallows a majority
or all of such amounts to the Dealers who sold the shares; Nuveen may act as
such a Dealer. Nuveen also receives compensation pursuant to a distribution
plan adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plans." Nuveen receives any CDSCs imposed on redemp-
tions of Shares, but any amounts as to which a reinstatement privilege is not
exercised are set off against and reduce amounts otherwise payable to Nuveen
pursuant to the distribution plan.
B-50
<PAGE>
DISTRIBUTION AND SERVICE PLANS
Each Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the In-
vestment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will all be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B Shares, and Class C Shares under
each Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of such Shares. These expenses in-
clude payments to Authorized Dealers, including Nuveen, who are brokers of rec-
ord with respect to the Shares, as well as, without limitation, expenses of
printing and distributing prospectuses to persons other than shareholders of
the Fund, expenses of preparing, printing and distributing advertising and
sales literature and reports to shareholders used in connection with the sale
of such Shares, certain other expenses associated with the distribution of such
Shares, and any distribution-related expenses that may be authorized from time
to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C Shares
under each Fund's Plan will be payable to Authorized Dealers in connection with
the provision of ongoing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering share-
holder inquiries and providing other personal services to shareholders.
Each Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan as applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a distribution fee and up to
.25 of 1% per year of the average daily net assets of each of the Class B
Shares and Class C Shares as a service fee under the Plan as applicable to such
classes.
For the period from inception (August 7, 1996) to the fiscal year ended June
30, 1997, the Nuveen Growth and Income Stock Fund, the Nuveen Balanced Stock
and Bond Fund and the Nuveen Balanced Municipal and Stock Fund paid 12b-1 fees
pursuant to their respective 12b-1 Plan in the amounts set forth in the table
below. For this period, 100% of the service fees and distribution fees were
paid out as compensation to Authorized Dealers.
<TABLE>
<CAPTION>
COMPENSATION PAID TO
AUTHORIZED DEALERS FROM
INCEPTION TO END OF
FISCAL 1997
-----------------------
<S> <C>
Nuveen Growth and Income Stock Fund
Class A............................................... $721,457
Class B............................................... $ 16,725
Class C............................................... $ 6,701
--------
Total............................................... $744,883
Nuveen Balanced Stock and Bond Fund
Class A............................................... $ 22,683
Class B............................................... $ 292
Class C............................................... $ 772
--------
Total............................................... $ 23,747
Nuveen Balanced Municipal and Stock Fund
Class A............................................... $ 33,029
Class B............................................... $ 818
Class C............................................... $ 458
--------
Total............................................... $ 34,305
</TABLE>
B-51
<PAGE>
Under each Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested Trustees who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
trustees who vote to approve such continuance conclude, in the exercise of rea-
sonable business judgment and in light of their fiduciary duties under applica-
ble law, that there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders. The Plan may not be amended to increase materially
the cost which a class of shares may bear under the Plan without the approval
of the shareholders of the affected class, and any other material amendments of
the Plan must be approved by the non-interested trustees by a vote cast in per-
son at a meeting called for the purpose of considering such amendments. During
the continuance of the Plan, the selection and nomination of the non-interested
trustees of the Trust will be committed to the discretion of the non-interested
trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 have been selected as auditors for the Trust. In addi-
tion to audit services, Arthur Andersen LLP will provide consultation and as-
sistance on accounting, internal control, tax and related matters. The finan-
cial statements included in this Statement of Additional Information have been
audited by Arthur Andersen LLP as indicated in their report with respect there-
to, and are included in reliance upon the authority of said firm as experts in
giving said report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
B-52
<PAGE>
FINANCIAL STATEMENTS
NUVEEN INVESTMENT TRUST
STATEMENT OF NET ASSETS
JULY 29, 1996
<TABLE>
<CAPTION>
GROWTH AND BALANCED STOCK BALANCED MUNICIPAL
INCOME STOCK FUND AND BOND FUND AND STOCK FUND
----------------- -------------- ------------------
<S> <C> <C> <C>
Assets:
Cash..................... $ 33,360 $ 33,360 $ 33,360
Deferred organization
costs (note 2).......... 180,000 180,000 180,000
-------- -------- --------
Total assets........... 213,360 213,360 213,360
-------- -------- --------
Liabilities:
Organization costs ac-
crued................... 180,000 180,000 180,000
-------- -------- --------
Net assets................. $ 33,360 $ 33,360 $ 33,360
======== ======== ========
Shares outstanding (note
1):
Class A shares........... 417 417 417
Class B shares........... 417 417 417
Class C shares........... 417 417 417
Class R shares........... 417 417 417
Net asset value and redemp-
tion price per share:
Class A, B, C and R
shares.................. $ 20.00 $ 20.00 $ 20.00
======== ======== ========
Offering price per share:
Class B, C and R shares
at net asset value...... $ 20.00 $ 20.00 $ 20.00
======== ======== ========
Class A shares at net as-
set value plus maximum
sales
charge of 5.25% of of-
fering price............ $ 21.11 $ 21.11 $ 21.11
======== ======== ========
</TABLE>
(1) THE TRUST:
The Trust was organized as a Massachusetts business trust on May 6, 1996 and
has been inactive since that date except for matters relating to its organiza-
tion, its registration as an open-end series investment company and the regis-
tration of its shares under the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended, and the sale of the outstanding shares
to Nuveen Institutional Advisory Corp., the Trust's investment adviser. The
Trust's shares are issued in separate series. Additional series may be added in
the future. Each series issues its own shares at a price equal to net asset
value for the Class B, C, and R shares and at varying sales charges for the
Class A shares.
(2) DEFERRED ORGANIZATION COSTS:
The Trust expects to incur approximately $540,000 in organization costs. These
costs have been divided equally among the Funds and will be amortized over a
60-month period beginning with the commencement of Trust operations.
Nuveen Institutional Advisory Corp., the Trust's initial shareholder, has
agreed that if any of the initial shares are redeemed during the first 60
months of the Trust's operations by any holder thereof, the proceeds of redemp-
tion will be reduced by the pro rata share of the unamortized organization ex-
penses as of the date of redemption. The pro rata share by which the redemption
proceeds shall be reduced shall be derived by dividing the number of original
shares redeemed by the total number of original shares outstanding at the time
of redemption.
(3) RELATED PARTIES:
Nuveen Institutional Advisory Corp., will act as investment adviser for and
manage the investment and reinvestment of the assets of each series and will
administer each of their business affairs. For these services each series has
agreed to pay an annual management fee as described in each series' Prospectus.
B-53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and Board of Trustees of
Nuveen Investment Trust
We have audited the accompanying statement of net assets of Nuveen Investment
Trust (a Massachusetts business trust) comprising the Nuveen Growth and Income
Stock Fund, Nuveen Balanced Stock and Bond Fund and Nuveen Balanced Municipal
and Stock Fund as of July 29, 1996. The statement of net assets is the respon-
sibility of Nuveen Investment Trust's management. Our responsibility is to ex-
press an opinion on the statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of net assets is free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the statement of net assets. Our proce-
dures included confirmation of cash held by the custodian as of July 29, 1996.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statement of net assets referred to above presents fairly,
in all material respects, the net assets of the Funds constituting the Nuveen
Investment Trust as of July 29, 1996, in conformity with generally accepted ac-
counting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 29, 1996
B-54
<PAGE>
NUVEEN GROWTH AND INCOME STOCK FUND
SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--87.6%
AUTOMOTIVE--3.1%
269,250 General Motors Corporation............................ $ 15,010,688
- - --------------------------------------------------------------------------------
BANKS--8.8%
249,900 Banc One Corporation.................................. 10,745,700
363,300 C S Holding Group Sponsored ADR....................... 9,300,843
104,200 Citicorp.............................................. 10,732,600
43,000 Wells Fargo & Company................................. 11,599,250
- - --------------------------------------------------------------------------------
CHEMICALS--6.4%
149,950 Dow Chemical Company.................................. 11,752,331
124,950 E.I. du Pont de Nemours and Company, Ltd.............. 11,792,156
142,800 W.R. Grace & Company.................................. 7,389,900
- - --------------------------------------------------------------------------------
COMMUNICATIONS--0.9%
68,400 Motorola, Inc......................................... 4,198,050
- - --------------------------------------------------------------------------------
COMPUTER SYSTEMS--2.9%
92,050 International Business Machines Corporation........... 13,899,550
- - --------------------------------------------------------------------------------
DEFENSE--7.1%
137,200 Boeing Company........................................ 14,594,650
119,700 Northrop Grumman Corporation.......................... 9,905,175
207,600 Raytheon Company...................................... 9,990,750
- - --------------------------------------------------------------------------------
ELECTRONICS--0.7%
165,500 General Instrument Corporation........................ 3,578,937
- - --------------------------------------------------------------------------------
ENTERTAINMENT--6.2%
334,700 Host Marriott Corp. .................................. 5,355,200
211,750 ITT Corporation+...................................... 9,184,656
386,800 Philips Electronic N.V. .............................. 15,472,000
- - --------------------------------------------------------------------------------
FINANCIAL SERVICES--2.1%
222,600 Travelers Group, Incorporated......................... 10,100,475
- - --------------------------------------------------------------------------------
FOOD, TOBACCO, BEVERAGE--2.0%
101,500 Loews Corporation..................................... 9,566,375
- - --------------------------------------------------------------------------------
</TABLE>
B-55
<PAGE>
<TABLE>
<CAPTION>
SHARES DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE--3.1%
97,850 Aetna Inc. ........................................... $ 7,828,000
331,800 Tenet Healthcare Corporation+......................... 7,258,125
- - --------------------------------------------------------------------------------
INSURANCE--2.8%
232,750 Allstate Corporation.................................. 13,470,406
- - --------------------------------------------------------------------------------
MEDIA--2.0%
143,000 Dun & Bradstreet Corporation.......................... 3,396,250
182,950 E.W. Scripps Company.................................. 6,403,250
- - --------------------------------------------------------------------------------
METALS--0.0%
1,800 Allegheny Teledyne Inc. .............................. 41,400
- - --------------------------------------------------------------------------------
PHARMACEUTICALS--8.2%
192,550 American Home Products Corporation.................... 11,288,244
1,400 Bristol-Myers Squibb Company.......................... 152,250
299,450 Novartis AG Sponsored ADR............................. 17,094,291
331,800 Rhone-Poulenc SA ADR.................................. 11,239,725
- - --------------------------------------------------------------------------------
OIL--6.1%
154,200 Amoco Corporation..................................... 12,413,100
377,500 Elf Acquitaine ADR.................................... 17,081,875
- - --------------------------------------------------------------------------------
RETAIL--4.5%
304,700 Federated Department Stores, Inc.+.................... 10,397,888
491,400 Wal-Mart Stores, Inc. ................................ 11,240,775
- - --------------------------------------------------------------------------------
SERVICES/MISCELLANEOUS--3.3%
332,000 Pennisular and Oriental Steam Navigation Company...... 6,704,176
285,400 WMX Technologies, Inc................................. 9,311,175
- - --------------------------------------------------------------------------------
TELEPHONE--8.2%
345,800 MCI Communications Corporation........................ 11,303,338
284,800 NYNEX Corporation .................................... 13,706,000
403,900 Pacific Telesis Group................................. 14,843,325
- - --------------------------------------------------------------------------------
TOYS--1.7%
137,800 Hasbro, Inc. ......................................... 5,356,975
101,000 Mattel, Inc. ......................................... 2,802,750
- - --------------------------------------------------------------------------------
TRANSPORTATION--7.5%
108,000 AMR Corporation+...................................... 9,517,500
140,700 Burlington Northern Santa Fe.......................... 12,152,963
243,200 Union Pacific Corporation............................. 14,622,400
- - --------------------------------------------------------------------------------
Total Common Stocks--(cost $419,173,583).............. 423,795,467
- - --------------------------------------------------------------------------------
PREFERRED STOCKS--1.5%
124,100 Nokia Corp. Preferred ADS............................. 7,151,262
- - --------------------------------------------------------------------------------
Total Preferred Stocks--(cost $6,928,856)............. 7,151,262
- - --------------------------------------------------------------------------------
</TABLE>
B-56
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS--13.9%
Coca-Cola Company, Commercial Paper, effective yield
200,000 of 5.36%, 1/09/97................................... $ 199,762
12,000,000 Federal Home Loan Bank Discount Notes, effective
yield of 5.41%, 1/23/97............................. 11,960,473
15,000,000 Federal Home Loan Bank Discount Notes, effective
yield of 5.51%, 1/30/97............................. 14,933,784
20,000,000 Federal Home Loan Mortgage Corporation Discount
Notes, effective yield of 5.85%, 1/02/97............ 19,996,750
Xerox Corporation, Commercial Paper, effective yield
200,000 of 5.39%, 1/16/97................................... 199,552
Xerox Corporation, Commercial Paper, effective yield
20,000,000 of 5.81%, 1/07/97................................... 19,980,666
- - --------------------------------------------------------------------------------
Total Short-Term Investments--(cost $67,270,987).... 67,270,987
- - --------------------------------------------------------------------------------
Total Investments (cost $493,373,426)--103.0%....... 498,217,716
- - --------------------------------------------------------------------------------
Other Assets Less Liabilities--(3.0)%............... (14,383,380)
- - --------------------------------------------------------------------------------
Net Assets--100.0%.................................. $483,834,336
- - --------------------------------------------------------------------------------
</TABLE>
+Non-income producing.
See accompanying notes to financial statements.
B-57
<PAGE>
STATEMENT OF NET ASSETS
SEMIANNUAL REPORT
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities, at market value (cost $493,373,426) (note
1)............................................................. $498,217,716
Cash............................................................ 5,795,348
Receivables:
Dividends and interest........................................ 133,525
Shares sold................................................... 4,280,611
Deferred organization costs (note 1)............................ 166,052
Other assets.................................................... 51,114
------------
Total assets................................................ 508,644,366
------------
LIABILITIES
Payables:
Investments purchased......................................... 22,135,632
Shares redeemed............................................... 2,232,696
Accrued expenses:
Management fees (note 4)...................................... 146,589
Other......................................................... 295,113
------------
Total liabilities........................................... 24,810,030
------------
Net assets (note 6)............................................... $483,834,336
============
Class A Shares (note 1)
Net assets........................................................ $476,141,581
------------
Shares outstanding................................................ 23,567,904
------------
Net asset value and redemption price per share.................... $ 20.20
------------
Offering price per share (net asset value per share plus maximum
sales charge of 5.25% of offering price)......................... $ 21.32
============
Class B Shares (note 1)
Net assets........................................................ $ 9,371
------------
Shares outstanding................................................ 464
------------
Net asset value, offering and redemption price per share.......... $ 20.20
============
Class C Shares (note 1)
Net assets........................................................ $ 9,371
------------
Shares outstanding................................................ 464
------------
Net asset value, offering and redemption price per share.......... $ 20.20
============
Class R Shares (note 1)
Net assets........................................................ $ 7,674,013
------------
Shares outstanding................................................ 379,841
------------
Net asset value, offering and redemption price per share.......... $ 20.20
============
</TABLE>
See accompanying notes to financial statements.
B-58
<PAGE>
STATEMENT OF OPERATIONS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME (NOTE 1)
Dividends........................................................ $ 159,236
Interest......................................................... 496,745
----------
Total investment income........................................ 655,981
----------
Expenses:
Management fees (note 4)......................................... 160,298
12b-1 distribution and service fees (note 5)..................... 42,602
Shareholders' servicing agent fees and expenses.................. 28,143
Custodian's fees and expenses.................................... 25,750
Trustees' fees and expenses (note 4)............................. 3,325
Professional fees................................................ 7,362
Shareholders' reports--printing and mailing expenses............. 12,388
Federal and state registration fees.............................. 11,503
Amortization of deferred organization costs (note 1)............. 13,948
Other expenses................................................... 551
----------
Total expenses before expense reimbursement.................... 305,870
Expense reimbursement from investment adviser (note 4)........... (81,150)
----------
Net expenses................................................... 224,720
----------
Net investment income......................................... 431,261
----------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 3)... 212,760
Net change in unrealized appreciation or depreciation of invest-
ments........................................................... 4,844,290
----------
Net gain from investments..................................... 5,057,050
----------
Net increase in net assets from operations......................... $5,488,311
==========
</TABLE>
See accompanying notes to financial statements.
B-59
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
OPERATIONS
Net investment income.......................................... $ 431,261
Net realized gain from investment transactions (notes 1 and 3). 212,760
Net change in unrealized appreciation or depreciation of in-
vestments..................................................... 4,844,290
------------
Net increase in net assets from operations................. 5,488,311
------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income....................... (13,696)
From accumulated net realized gains from investment transac-
tions......................................................... (57,475)
------------
Decrease in net assets from distributions to shareholders.. (71,171)
------------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares............................... 483,529,637
Cost of shares redeemed........................................ (5,145,801)
------------
Net increase in net assets derived from fund share transac-
tions..................................................... 478,383,836
------------
Net increase in net assets................................. 483,800,976
Net assets at the beginning of period............................ 33,360
------------
Net assets at the end of period.................................. $483,834,336
============
Balance of undistributed net investment income at end of period.. $ 417,565
============
</TABLE>
See accompanying notes to financial statements.
B-60
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEMIANNUAL REPORT
(UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Growth and Income Stock Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust"). The Trust (and each series within the Trust) is
an open-end diversified management investment company registered under the In-
vestment Company Act of 1940. The Trust was organized as a Massachusetts busi-
ness trust on May 6, 1996. Prior to commencement of operations on August 7,
1996, the Trust had no operations other than those related to organizational
matters and the initial capital contribution of $100,080 (of which $33,360 was
allocated to the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"),
a wholly owned subsidiary of The John Nuveen Company, for the issuance of
shares on July 29, 1996. On August 7, 1996, The John Nuveen Company made an ad-
ditional investment of approximately $5 million in the Fund for the purposes of
establishing an initial investment portfolio. During the Fund's initial offer-
ing period of its shares to investors, November 6, 1996 through January 31,
1997, Class A Shares were only available for purchase on a privileged load-
waived basis (without an up front sales charge) by existing investors in the
investment products sponsored and distributed by The John Nuveen Company and by
Flagship Resources, Inc., also a sponsor and distributor of investment products
which was acquired by The John Nuveen Company on January 31, 1997. The Fund in-
vests primarily in a diversified portfolio of large- and mid-cap equities of
domestic companies as a source of capital growth. In addition to investments in
equity securities, the Fund may invest in cash equivalents and short-term fixed
income investments in order to preserve capital or to enhance returns or as a
temporary defensive measure.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with gener-
ally accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a national securities ex-
change or Nasdaq for which there were no transactions on a given day or securi-
ties not listed on a national securities exchange or Nasdaq are valued at the
most recent bid prices. Debt securities are valued by a pricing service that
utilizes electronic data processing techniques to determine values when such
values are believed to more accurately reflect the fair market value of such
securities; otherwise, actual sale or bid prices are used. Any securities or
other assets for which market quotations are not readily available are valued
at fair value as determined in good faith by the Board of Trustees. Debt secu-
rities having remaining maturities of 60 days or less when purchased are valued
by the amortized cost method when the Board of Trustees determines that the
fair market value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued
B-61
<PAGE>
or delayed delivery basis may be settled a month or more after the transaction
date. Any securities so purchased are subject to market fluctuation during this
period. The Fund has instructed the custodian to segregate assets in a separate
account with a current value at least equal to the amount of its purchase com-
mitments. At December 31, 1996, the Fund had no such purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is deter-
mined on the basis of interest accrued adjusted for accretion of discounts.
Dividends and Distributions to Shareholders
Net investment income is distributed to shareholders quarterly. Net realized
capital gains from investment transactions, if any, are distributed to share-
holders not less frequently than annually. Furthermore, capital gains are dis-
tributed only to the extent they exceed available capital loss carryovers.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of distribu-
tions are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. Accordingly, tempo-
rary over-distributions as a result of these differences may occur and will be
classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to operate as a Regulated Investment Company under Subchapter
M of the Internal Revenue Code, and therefore will not be liable for federal
income taxes.
Deferred Organizational Costs
The Fund's share of costs incurred by the Trust in connection with its organi-
zation and initial registration of shares was deferred and is being amortized
over a 60-month period beginning August 7, 1996 (commencement of operations).
If any of the initial shares of the Fund are redeemed during this period, the
proceeds of the redemption will be reduced by the pro-rata share of the unamor-
tized organization costs as of the date of redemption.
Derivative Financial Instruments
The Fund may engage in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to in-
vest in such financial instruments, and may do so in the future, it did not
make any such investments during the period August 7, 1996 (commencement of op-
erations) through December 31, 1996.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares are recorded to the
specific class.
B-62
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
2. FUND SHARES
Transactions in Fund shares for the period August 7,1996 (commencement of oper-
ations) through December 31, 1996, were as follows:
<TABLE>
<CAPTION>
SHARES* AMOUNT
- - --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold:
Class A............................................. 23,821,203 $476,498,017
Class B............................................. 47 --
Class C............................................. 47 --
Class R............................................. 379,424 7,031,620
---------- ------------
24,200,721 483,529,637
---------- ------------
Shares redeemed:
Class A............................................. (253,716) (5,145,801)
Class B............................................. -- --
Class C............................................. -- --
Class R............................................. -- --
---------- ------------
(253,716) (5,145,801)
---------- ------------
Net increase......................................... 23,947,005 $478,383,836
========== ============
</TABLE>
*Shares sold reflect a December 18, 1996, stock split of 1.113830, 1.112700,
1.112700 and 1.113806 shares, respectively, for each share of Class A, B, C and
R.
3. SECURITIES TRANSACTIONS
Purchases and sales (inluding maturities) of investments in common and pre-
ferred stocks and temporary investments for the period August 7, 1996 (com-
mencement of operations) through December 31, 1996, were as follows:
<TABLE>
<S> <C>
Purchases
Common and preferred stocks...................................... $428,249,019
Temporary investments............................................ 318,969,182
Sales
Common and preferred stocks...................................... 2,360,370
Temporary investments............................................ 251,852,740
============
</TABLE>
B-63
<PAGE>
At December 31, 1996, the identified cost of investments owned for federal in-
come tax purposes was the same as the cost for financial reporting purposes.
The net unrealized appreciation aggregated $4,844,290, of which $7,305,589 re-
lated to appreciated securities and $2,461,299 related to depreciated securi-
ties.
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, which is based upon the average
daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- - --------------------------------------------------------------------------------
<S> <C>
For the first $125,000,000....................................... .8500 of 1%
For the next $125,000,000........................................ .8375 of 1
For the next $250,000,000........................................ .8250 of 1
For the next $500,000,000........................................ .8125 of 1
For the next $1,000,000,000...................................... .8000 of 1
For net assets over $2,000,000,000............................... .7750 of 1
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1997, in order to prevent total operating expenses (excluding any 12b-1 distri-
bution or service fees and extraordinary expenses) from exceeding .95% of the
average daily net asset value of any class of fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Funds pay no compensation di-
rectly to its trustees who are affiliated with the Adviser or to its officers,
all of whom receive remuneration for their services to the Fund from the Advis-
er.
For the period ended August 7, 1996 (commencement of operations) through Decem-
ber 31, 1996, The John Nuveen Company received approximately $104,000 of con-
tingent deferred sales charges on fund share redemptions.
B-64
<PAGE>
5. FLEXIBLE PURCHASE OPTIONS
The Fund has adopted Flexible Purchase Options that offer four alternative
classes of Fund shares (Classes A, B, C and R), each with a different combina-
tion of sales charges, ongoing fees, eligibility requirements and other fea-
tures. A summary of the four classes of Fund shares is as follows:
<TABLE>
<CAPTION>
CONTINGENT
UP- DEFERRED ANNUAL
FRONT SALES ANNUAL 12B-1 12B-1
SALES CHARGE DISTRIBUTION SERVICE
CHARGE ("CDSC") FEE FEE
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A................................ 5.25%(1) None(2) None .25%
Class B................................ None 5.00%(3) .75%(4) .25%
Class C................................ None 1.00%(5) .75% .25%
Class R................................ None None None None
- - ----------------------------------------------------------------------------------
</TABLE>
(1) Maximum up-front sales charge, which is reduced for purchases of $50,000 or
more. Up-Front sales charge may be reduced or waived for certain purchases (see
note 1 of the Notes to Financial Statements).
(2) Certain Class A purchases at net asset value of $1 million or more may be
subject to a 1% CDSC if redeemed within 18 months of purchase.
(3) CDSC in the first year. CDSC gradually declines to 0% after six years.
(4) Class B Shares convert to Class A Shares after eight years.
(5) CDSC is applicable to shares redeemed within 12 months of purchase.
B-65
<PAGE>
6. COMPOSITION OF NET ASSETS
At December 31, 1996, the Fund had common stock authorized of $.01 par value
per share. The composition of net assets as well as the number of authorized
shares is as follows:
<TABLE>
<S> <C>
Capital paid-in................................................... $478,417,196
Balance of undistributed net investment income.................... 417,565
Accumulated net realized gain from investment transactions........ 155,285
Net unrealized appreciation of investments........................ 4,844,290
------------
Net assets..................................................... $483,834,336
============
Authorized Shares:
Class A......................................................... Unlimited
Class B......................................................... Unlimited
Class C......................................................... Unlimited
Class R......................................................... Unlimited
============
</TABLE>
B-66
<PAGE>
FINANCIAL HIGHLIGHTS
SEMIANNUAL REPORT
(UNAUDITED)
Selected data for a common share outstanding August 7, 1996 (commencement of
operations) through December 31, 1996, is as follows.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ---------------------------
NET
NET REALIZED AND
ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVEST- GAIN (LOSS) FROM NET DISTRIBUTIONS
BEGINNING MENT FROM INVEST- INVESTMENT FROM CAPITAL
OF PERIOD INCOME## MENTS INCOME GAINS
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
8/7/96 to 12/31/96***. $20.000 $ .087 $.378 $ (.035) $ (.230)
CLASS B
8/7/96 to 12/31/96***. 20.000 (.001) .431 -- (.230)
CLASS C
8/7/96 to 12/31/96***. 20.000 (.001) .431 -- (.230)
CLASS R
8/7/96 to 12/31/96***. 20.000 .082 .403 (.055) (.230)
- - ------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Annual commission rate paid on equity portfolio transactions. Commissions
paid are included in the cost of the securities.
*** All per share amounts reflect a December 18, 1996, stock split of 1.113830,
1.112700, 1.112700 and 1.113806 shares, respectively, for each share of Class
A, B, C and R.
# Total Return on Net Asset Value is the combination of reinvested dividend in-
come, reinvested capital gains distributions, if any, and changes in stock
price per share. Total return shown for Class A Shares does not include the ef-
fect of applicable front-end sales charges. The total returns shown for Class B
Shares and Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or con-
tingent deferred sales charges.
## Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 4).
B-67
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
RATIO OF RATIO OF
NET NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
NET TOTAL TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ASSET RETURN NET ASSETS NET ASSETS NET ASSETS NET ASSETS AVERAGE
VALUE ON NET NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO COMMISSION
END OF ASSET END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE
PERIOD VALUE # (IN THOUSANDS) MENT MENT MENT## MENT## RATE PAID**
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$20.200 13.83% $476,142 1.46%* 2.14%* 1.20%* 2.40%* 3% $.0227
20.200 13.53 9 3.67* (1.73)* 1.95* (.01)* 3 .0227
20.200 13.53 9 3.67* (1.73)* 1.95* (.01)* 3 .0227
20.200 13.93 7,674 2.63* (.64)* .95* 1.04* 3 .0227
- - -------------------------------------------------------------------------------------------------
</TABLE>
B-68
<PAGE>
NUVEEN BALANCED STOCK AND BOND FUND
SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--61.2%
AUTOMOTIVE--1.9%
1,850 General Motors Corporation............................... $ 103,138
- - --------------------------------------------------------------------------------
BANKS--6.0%
1,800 Banc One Corporation..................................... 77,400
2,500 C S Holding Group Sponsored ADR.......................... 64,003
850 Citicorp................................................. 87,550
350 Wells Fargo & Company.................................... 94,413
- - --------------------------------------------------------------------------------
CHEMICALS--4.4%
1,250 Dow Chemical Company..................................... 97,969
950 E.I. du Pont de Nemours and Co., Ltd..................... 89,656
950 W.R. Grace............................................... 49,163
- - --------------------------------------------------------------------------------
COMMUNICATIONS--1.1%
1,000 Motorola, Inc............................................ 61,375
- - --------------------------------------------------------------------------------
COMPUTER SYSTEMS--1.8%
650 International Business Machines Corporation.............. 98,150
- - --------------------------------------------------------------------------------
DEFENSE--4.8%
1,050 Boeing Company........................................... 111,694
900 Northrop Grumman Corporation............................. 74,475
1,550 Raytheon Company......................................... 74,594
- - --------------------------------------------------------------------------------
ELECTRONICS--0.5%
1,200 General Instrument Corporation........................... 25,950
- - --------------------------------------------------------------------------------
ENTERTAINMENT--4.0%
2,200 Host Marriott Corp. ..................................... 35,200
1,600 ITT Corporation+......................................... 69,400
2,800 Philips Electronic N.V................................... 112,000
- - --------------------------------------------------------------------------------
FINANCIAL SERVICES--1.5%
1,733 Travelers Group, Incorporated ........................... 78,635
- - --------------------------------------------------------------------------------
FOOD, TOBACCO, BEVERAGE--1.6%
900 Loews Corporation........................................ 84,825
- - --------------------------------------------------------------------------------
</TABLE>
B-69
<PAGE>
<TABLE>
<CAPTION>
SHARES DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE--2.0%
850 Aetna Inc................................................ $ 68,000
1,900 Tenet Healthcare Corporation+............................ 41,562
- - --------------------------------------------------------------------------------
INSURANCE--1.9%
1,800 Allstate Corporation..................................... 104,175
- - --------------------------------------------------------------------------------
MEDIA--1.9%
2,100 Dun & Bradstreet Corporation............................. 49,875
1,500 E.W. Scripps Company..................................... 52,500
- - --------------------------------------------------------------------------------
METALS--0.5%
1,200 Allegheny Teledyne Inc................................... 27,600
- - --------------------------------------------------------------------------------
PHARMACEUTICALS--7.0%
1,350 American Home Products Corporation....................... 79,144
850 Bristol-Myers Squibb Company............................. 92,437
2,239 Novartis AG Sponsored ADR................................ 127,814
2,300 Rhone-Poulenc SA ADR..................................... 77,913
- - --------------------------------------------------------------------------------
OIL--3.9%
1,300 Amoco Corporation........................................ 104,650
2,350 Elf Acquitaine ADR....................................... 106,337
- - --------------------------------------------------------------------------------
RETAIL--2.9%
2,400 Federated Department Stores, Inc.+ ...................... 81,900
3,400 Wal-Mart Stores, Inc..................................... 77,775
- - --------------------------------------------------------------------------------
SERVICES/MISCELLANEOUS--2.1%
2,250 Peninsular and Oriental Steam Navigation Company......... 45,435
2,150 WMX Technologies, Inc. .................................. 70,144
- - --------------------------------------------------------------------------------
TELEPHONE--5.3%
2,200 MCI Communications Corporation........................... 71,912
2,100 NYNEX Corporation........................................ 101,062
3,200 Pacific Telesis Group.................................... 117,600
- - --------------------------------------------------------------------------------
TOYS--1.1%
900 Hasbro, Inc.............................................. 34,987
800 Mattel, Inc.............................................. 22,200
- - --------------------------------------------------------------------------------
TRANSPORTATION--5.0%
750 AMR Corporation+......................................... 66,094
1,100 Burlington Northern Santa Fe............................. 95,012
1,900 Union Pacific Corporation................................ 114,238
- - --------------------------------------------------------------------------------
Total Common Stocks--(cost $3,026,978)................... 3,319,956
- - --------------------------------------------------------------------------------
PREFERRED STOCKS--1.1%
1,000 Nokia Corp. Preferred ADS................................ 57,625
- - --------------------------------------------------------------------------------
Total Preferred Stocks--(cost $36,438)................... 57,625
- - --------------------------------------------------------------------------------
</TABLE>
B-70
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTIONS MARKET VALUE
- - --------------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY NOTES--37.1%
110,000 7.125%, 10/15/98....................................... $ 112,200
60,000 6.375%, 7/15/99........................................ 60,562
225,000 8.500%, 2/15/00........................................ 240,258
175,000 7.500%, 5/15/02........................................ 185,062
445,000 5.750%, 8/15/03........................................ 431,650
400,000 7.875%, 11/15/04....................................... 436,500
540,000 6.500%, 5/15/05........................................ 543,882
- - --------------------------------------------------------------------------------
Total U.S. Treasury Notes--(cost $2,004,271)........... 2,010,114
- - --------------------------------------------------------------------------------
Total Investments (cost $5,067,687)--99.4%............. 5,387,695
- - --------------------------------------------------------------------------------
Other Assets Less Liabilities--0.6%.................... 34,228
- - --------------------------------------------------------------------------------
Net Assets--100.0%..................................... $5,421,923
- - --------------------------------------------------------------------------------
</TABLE>
+Non-income producing.
See accompanying notes to financial statements.
B-71
<PAGE>
STATEMENT OF NET ASSETS
SEMIANNUAL REPORT
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities, at market value (cost $5,067,687) (note 1). $5,387,695
Cash.............................................................. 17,510
Dividends and interest receivable................................. 35,687
Deferred organization costs (note 1).............................. 165,995
Other assets...................................................... 9,387
----------
Total assets.................................................. 5,616,274
----------
LIABILITIES
Accrued expenses:
Management fees (note 4)........................................ 3,489
Other........................................................... 190,862
----------
Total liabilities............................................. 194,351
----------
Net assets (note 6)................................................. $5,421,923
==========
Class A Shares (note 1)
Net assets.......................................................... $ 9,043
----------
Shares outstanding.................................................. 417
----------
Net asset value and redemption price per share...................... $ 21.69
----------
Offering price per share (net asset value per share plus maximum
sales charge of 5.25% of offering price)........................... $ 22.89
==========
Class B Shares (note 1)
Net assets.......................................................... $ 9,042
----------
Shares outstanding.................................................. 417
----------
Net asset value, offering and redemption price per share............ $ 21.68
==========
Class C Shares (note 1)
Net assets.......................................................... $ 9,042
----------
Shares outstanding.................................................. 417
----------
Net asset value, offering and redemption price per share............ $ 21.68
==========
Class R Shares (note 1)
Net assets.......................................................... $5,394,796
----------
Shares outstanding.................................................. 248,749
----------
Net asset value, offering and redemption price per share............ $ 21.69
==========
</TABLE>
See accompanying notes to financial statements.
B-72
<PAGE>
STATEMENT OF OPERATIONS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME (NOTE 1)
Dividends.......................................................... $ 20,634
Interest........................................................... 55,214
--------
Total investment income.......................................... 75,848
--------
Expenses:
Management fees (note 4)........................................... 15,294
12b-1 distribution and service fees (note 5)....................... 77
Shareholders' servicing agent fees and expenses.................... 25
Custodian's fees and expenses...................................... 18,011
Trustees' fees and expenses (note 4)............................... 778
Professional fees.................................................. 7,393
Shareholders' reports--printing and mailing expenses............... 10
Federal and state registration fees................................ 758
Amortization of deferred organization costs (note 1)............... 14,005
--------
Total expenses before expense reimbursement ..................... 56,351
Expense reimbursement from investment adviser (note 4)............. (38,942)
--------
Net expenses .................................................... 17,409
--------
Net investment income........................................... 58,439
--------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 3)..... 126,476
Net change in unrealized appreciation or depreciation of invest-
ments............................................................. 320,008
--------
Net gain from investments....................................... 446,484
--------
Net increase in net assets from operations........................... $504,923
========
</TABLE>
See accompanying notes to financial statements.
B-73
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
OPERATIONS
Net investment income............................................ $ 58,439
Net realized gain from investment transactions (notes 1 and 3)... 126,476
Net change in unrealized appreciation or depreciation of invest-
ments........................................................... 320,008
----------
Net increase in net assets from operations................... 504,923
----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income......................... (57,051)
From accumulated net realized gains from investment transactions. (25,949)
----------
Decrease in net assets from distributions to shareholders.... (83,000)
----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares................................. 4,966,640
----------
Net increase in net assets derived from fund share transac-
tions....................................................... 4,966,640
----------
Net increase in net assets................................... 5,388,563
Net assets at the beginning of period.............................. 33,360
----------
Net assets at the end of period.................................... $5,421,923
==========
Balance of undistributed net investment income at end of period.... $ 1,388
==========
</TABLE>
See accompanying notes to financial statements.
B-74
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEMIANNUAL REPORT
(UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Balanced Stock and Bond Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust"). The Trust is an open-end diversified management
investment company registered under the Investment Company Act of 1940. The
Trust was organized as a Massachusetts business trust on May 6, 1996. Prior to
commencement of operations on August 7, 1996, the Trust had no operations other
than those related to organizational matters and the initial capital contribu-
tion of $100,080 (of which $33,360 was allocated to the Fund) by Nuveen Insti-
tutional Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John
Nuveen Company, for the issuance of shares on July 29, 1996. On August 7, 1996,
The John Nuveen Company made an additional investment of approximately $5 mil-
lion in the Fund for the purposes of establishing an initial investment portfo-
lio. The Fund invests in a conservative mix of equities, taxable bonds and cash
equivalents for capital growth, capital preservation and current income. During
temporary defensive periods, the Fund may invest any percentage of its assets
in temporary investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with gener-
ally accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a national securities ex-
change or Nasdaq for which there were no transactions on a given day or securi-
ties not listed on a national securities exchange or Nasdaq are valued at the
most recent bid prices. Debt securities are valued by a pricing service that
utilizes electronic data processing techniques to determine values when such
values are believed to more accurately reflect the fair market value of such
securities; otherwise, actual sale or bid prices are used. Any securities or
other assets for which market quotations are not readily available are valued
at fair value as determined in good faith by the Board of Trustees. Debt secu-
rities having remaining maturities of 60 days or less when purchased are valued
by the amortized cost method when the Board of Trustees determines that the
fair market value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Fund has
instructed the custodian to segregate assets in a separate account with a cur-
rent value at least equal to the amount of its purchase commitments. At Decem-
ber 31, 1996, the Fund had no outstanding purchase commitments.
B-75
<PAGE>
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is deter-
mined on the basis of interest accrued adjusted for accretion of discounts.
Dividends and Distributions to Shareholders
Net investment income is distributed to shareholders quarterly. Net realized
capital gains from investment transactions, if any, are distributed to share-
holders not less frequently than annually. Furthermore, capital gains are dis-
tributed only to the extent they exceed available capital loss carryovers.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of distribu-
tions are determined in accordance with federal income tax regulations, which
may differ from generally accepted accounting principles. Accordingly, tempo-
rary over-distributions as a result of these differences may occur and will be
classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to operate as a Regulated Investment Company under Subchapter
M of the Internal Revenue Code, and therefore will not be liable for federal
income taxes.
Deferred Organizational Costs
The Fund's share of costs incurred by the Trust in connection with its organi-
zation and initial registration of shares was deferred and is being amortized
over a 60-month period beginning August 7, 1996 (commencement of operations).
If any of the initial shares of the Fund are redeemed during this period, the
proceeds of the redemption will be reduced by the pro-rata share of the unamor-
tized organization costs as of the date of redemption.
Derivative Financial Instruments
The Fund may engage in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to in-
vest in such financial instruments, and may do so in the future, it did not
make any such investments during the period August 7, 1996 (commencement of op-
erations) through December 31, 1996.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares are recorded to the
specific class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
B-76
<PAGE>
2. FUND SHARES
The only share transactions in the Fund for the period August 7, 1996 (com-
mencement of operations) through December 31, 1996, were 248,332 shares sold
in Class R for $4,966,640 to the Adviser.
3. SECURITIES TRANSACTIONS
Purchases of investment securities equaled $6,882,021 and sales (including ma-
turities) of investment securities equaled $1,941,547 for the period August 7,
1996 (commencement of operations) through December 31, 1996.
At December 31, 1996, the identified cost of investments owned for federal in-
come tax purposes was the same as the cost for financial reporting purposes.
The net unrealized appreciation aggregated $320,008, of which $352,970 related
to appreciated securities and $32,962 related to depreciated securities.
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, which is based upon the aver-
age daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- - --------------------------------------------------------------------------------
<S> <C>
For the first $125,000,000....................................... .7500 of 1%
For the next $125,000,000........................................ .7375 of 1
For the next $250,000,000........................................ .7250 of 1
For the next $500,000,000........................................ .7125 of 1
For the next $1,000,000,000...................................... .7000 of 1
For net assets over $2,000,000,000............................... .6750 of 1
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1997, in order to prevent total operating expenses (excluding any 12b-1 dis-
tribution or service fees and extraordinary expenses) from exceeding .85% of
the average daily net asset value of any class of fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has en-
tered into a Sub-Advisory Agreement with Institutional Capital Corporation
("ICAP"), of which The John Nuveen Company holds a minority interest, under
which ICAP manages the Fund's investment portfolio. ICAP is compensated for
its services from the management fee paid to the Adviser. The Funds pay no
compensation directly to its trustees who are affiliated with the Adviser or
to its officers, all of whom receive remuneration for their services to the
Fund from the Adviser.
B-77
<PAGE>
5. FLEXIBLE PURCHASE OPTIONS
The Fund has adopted Flexible Purchase Options that offer four alternative
classes of Fund shares (Classes A, B, C and R), each with a different combina-
tion of sales charges, ongoing fees, eligibility requirements and other fea-
tures. A summary of the four classes of Fund shares is as follows:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED ANNUAL
UP-FRONT SALES ANNUAL 12B-1 12B-1
SALES CHARGE DISTRIBUTION SERVICE
CHARGE ("CDSC") FEE FEE
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A............................... 5.25%(1) None(2) None .25%
Class B............................... None 5.00%(3) .75%(4) .25%
Class C............................... None 1.00%(5) .75% .25%
Class R............................... None None None None
- - ----------------------------------------------------------------------------------
</TABLE>
(1) Maximum up-front sales charge, which is reduced for purchases of $50,000 or
more. Up-Front sales charge may be reduced or waived for certain purchases.
(2) Certain Class A purchases at net asset value of $1 million or more may be
subject to a 1% CDSC if redeemed within 18 months of purchase.
(3) CDSC in the first year. CDSC gradually declines to 0% after six years.
(4) Class B Shares convert to Class A Shares after eight years.
(5) CDSC is applicable to shares redeemed within 12 months of purchase.
6. COMPOSITION OF NET ASSETS
At December 31, 1996, the Fund had common stock authorized of $.01 par value
per share. The composition of net assets as well as the number of authorized
shares is as follows:
<TABLE>
<S> <C>
Capital paid-in..................................................... $5,000,000
Balance of undistributed net investment income...................... 1,388
Accumulated net realized gain from investment transactions.......... 100,527
Net unrealized appreciation of investments.......................... 320,008
----------
Net assets....................................................... $5,421,923
==========
Authorized Shares:
Class A........................................................... Unlimited
Class B........................................................... Unlimited
Class C........................................................... Unlimited
Class R........................................................... Unlimited
==========
</TABLE>
B-78
<PAGE>
FINANCIAL HIGHLIGHTS
SEMIANNUAL REPORT
(UNAUDITED)
Selected data for a common share outstanding August 7, 1996 (commencement of
operations) through December 31, 1996, is as follows.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ---------------------------
NET
NET REALIZED AND
ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVEST- GAIN (LOSS) FROM NET DISTRIBUTIONS
BEGINNING MENT FROM INVEST- INVESTMENT FROM CAPITAL
OF PERIOD INCOME## MENTS INCOME GAINS
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
8/7/96 to 12/31/96.... $20.000 $.214 $1.789 $ (.209) $ (.104)
CLASS B
8/7/96 to 12/31/96.... 20.000 .153 1.780 (.149) (.104)
CLASS C
8/7/96 to 12/31/96.... 20.000 .153 1.780 (.149) (.104)
CLASS R
8/7/96 to 12/31/96.... 20.000 .234 1.789 (.229) (.104)
- - ------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Average commission rate paid on equity portfolio transactions. Commission is
included in the cost of security.
# Total Return on Net Asset Value is the combination of reinvested dividend in-
come, reinvested capital gains distributions, if any, and changes in stock
price per share. Total return shown for Class A Shares does not include the ef-
fect of applicable front-end sales charges. The total returns shown for Class B
Shares and Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or con-
tingent deferred sales charges.
## Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 4).
B-79
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
RATIO OF RATIO OF
NET NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
NET TOTAL TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ASSET RETURN NET ASSETS NET ASSETS NET ASSETS NET ASSETS AVERAGE
VALUE ON NET NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO COMMISSION
END OF ASSET END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE
PERIOD VALUE # (IN THOUSANDS) MENT MENT MENT## MENT## RATE PAID**
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$21.690 10.15% $ 9 3.01%* .71%* 1.10%* 2.62%* 38% $.0275
21.680 9.76 9 3.76* (.03)* 1.85* 1.88* 38 .0275
21.680 9.76 9 3.76* (.03)* 1.85* 1.88* 38 .0275
21.690 10.26 5,395 2.76* .96* .85* 2.87* 38 .0275
- - -------------------------------------------------------------------------------------------------
</TABLE>
B-80
<PAGE>
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
SEMIANNUAL REPORT
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Shares Descriptions Market Value
- - --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--37.0%
AUTOMOTIVE--1.2%
1,350 General Motors Corporation................................ $ 75,263
- - --------------------------------------------------------------------------------
BANKS--3.6%
1,300 Banc One Corporation...................................... 55,900
1,800 C S Holding Group Sponsored ADR........................... 46,082
600 Citicorp.................................................. 61,800
250 Wells Fargo & Company..................................... 67,438
- - --------------------------------------------------------------------------------
CHEMICALS--2.5%
850 Dow Chemical Company...................................... 66,619
650 E.I. du Pont de Nemours and Co., Ltd...................... 61,344
650 W.R. Grace................................................ 33,638
- - --------------------------------------------------------------------------------
COMMUNICATIONS--0.7%
750 Motorola, Inc............................................. 46,031
- - --------------------------------------------------------------------------------
COMPUTER SYSTEMS--0.9%
400 International Business Machines Corporation............... 60,400
- - --------------------------------------------------------------------------------
DEFENSE--2.9%
750 Boeing Company............................................ 79,781
600 Northrop Grumman Corporation.............................. 49,650
1,100 Raytheon Company.......................................... 52,937
- - --------------------------------------------------------------------------------
ELECTRONICS--0.3%
800 General Instrument Corporation............................ 17,300
- - --------------------------------------------------------------------------------
ENTERTAINMENT--2.5%
1,900 Host Marriott Corp........................................ 30,400
1,150 ITT Corporation+.......................................... 49,881
2,000 Philips Electronic N.V.................................... 80,000
- - --------------------------------------------------------------------------------
FINANCIAL SERVICES--0.9%
1,200 Travelers Group, Incorporated............................. 54,450
- - --------------------------------------------------------------------------------
FOOD, TOBACCO, BEVERAGE--0.8%
550 Loews Corporation......................................... 51,837
- - --------------------------------------------------------------------------------
</TABLE>
B-81
<PAGE>
<TABLE>
<CAPTION>
Shares Descriptions Market Value
- - --------------------------------------------------------------------------------
<C> <S> <C>
HEALTH CARE--1.3%
600 Aetna Inc................................................. $ 48,000
1,700 Tenet Healthcare Corporation+............................. 37,187
- - --------------------------------------------------------------------------------
INSURANCE--1.1%
1,200 Allstate Corporation...................................... 69,450
- - --------------------------------------------------------------------------------
MEDIA--1.8%
1,500 Dun & Bradstreet Corporation.............................. 35,625
1,100 New York Times Co. Class A................................ 41,800
1,150 E.W. Scripps Company...................................... 40,250
- - --------------------------------------------------------------------------------
METALS--0.3%
900 Allegheny Teledyne Inc.................................... 20,700
- - --------------------------------------------------------------------------------
PHARMACEUTICALS--4.4%
1,000 American Home Products Corporation........................ 58,625
650 Bristol-Myers Squibb Company.............................. 70,687
1,493 Novartis AG Sponsored ADR................................. 85,229
1,800 Rhone-Poulenc SA ADR...................................... 60,975
- - --------------------------------------------------------------------------------
OIL--2.3%
900 Amoco Corporation......................................... 72,450
1,700 Elf Acquitaine ADR........................................ 76,925
- - --------------------------------------------------------------------------------
RETAIL--1.7%
1,600 Federated Department Stores, Inc.+........................ 54,600
2,450 Wal-Mart Stores, Inc...................................... 56,044
- - --------------------------------------------------------------------------------
SERVICES/MISCELLANEOUS--1.3%
1,750 Peninsular and Oriental Steam Navigation Company.......... 35,338
1,550 WMX Technologies, Inc..................................... 50,569
- - --------------------------------------------------------------------------------
TELEPHONE--3.3%
1,600 MCI Communications Corporation............................ 52,300
1,550 NYNEX Corporation......................................... 74,594
2,300 Pacific Telesis Group..................................... 84,525
- - --------------------------------------------------------------------------------
TOYS--0.6%
600 Hasbro, Inc............................................... 23,325
500 Mattel, Inc............................................... 13,875
- - --------------------------------------------------------------------------------
TRANSPORTATION--2.6%
350 AMR Corporation+.......................................... 30,844
700 Burlington Northern Santa Fe.............................. 60,462
1,200 Union Pacific Corporation................................. 72,150
- - --------------------------------------------------------------------------------
Total Common Stock Investments--(cost $2,153,658)......... 2,367,280
- - --------------------------------------------------------------------------------
PREFERRED STOCKS--0.7%
750 Nokia Corp. Preferred ADS................................. 43,219
- - --------------------------------------------------------------------------------
Total Preferred Stocks--(cost $27,329).................... 43,219
- - --------------------------------------------------------------------------------
</TABLE>
B-82
<PAGE>
<TABLE>
<CAPTION>
Principal Opt. Call Market
Amount Descriptions Ratings * Provisions ** Value
- - -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS--60.9%
CALIFORNIA--4.2%
$ 250,000 County of Orange, California,
Refunding Recovery Bonds,
1995 Series A., 6.000%
6/01/10...................... Aaa No Opt. Call $ 268,008
- - -------------------------------------------------------------------------------
ILLINOIS--8.2%
250,000 Illinois Health Facilities
Authority, FHA Insured
Mortgage Revenue Bonds,
Series 1996 (Sinai Health
System)., 5.500%, 2/15/09.... Aaa 2/06 at 102 253,305
250,000 Public Building Commission of
Kane County, Kane County,
Illinois, Community College
Facilities Revenue Refunding
Bonds, Series 1996 (Waubonsee
Community College District
No. 516)., 6.000%, 12/01/04.. Aaa No Opt. Call 269,725
- - -------------------------------------------------------------------------------
INDIANA--4.0%
250,000 Whitko Middle School Builing
Corporation, First Mortgage
Refunding Bonds, Series
1996., 5.875%, 7/15/12....... Aaa 1/07 at 102 258,390
- - -------------------------------------------------------------------------------
MASSACHUSETTS--3.9%
250,000 Massachusetts Health and
Educational Facilities
Authority, Revenue Bonds,
Melrose-Wakefield Healthcare
Corp. Issue, Series C.,
5.700%, 7/01/08.............. A- 7/06 at 102 251,678
- - -------------------------------------------------------------------------------
NEVADA--4.0%
250,000 Airport Authority of Washoe
County, Reno, Nevada, Airport
Revenue Refunding Bonds,
Series 1993B., 5.875%,
7/01/11...................... Aaa 7/03 at 102 256,640
- - -------------------------------------------------------------------------------
NEW YORK--17.1%
275,000 Dormitory Authority of the
State of New York, Revenue
Bonds, City University Issue,
Series U., 6.375%, 7/01/08... Baa1 7/02 at 102 287,139
250,000 New York State Finance
Agency, Housing Project
Mortgage Revenue Bonds, 1996
Series A Refunding., 5.875%
11/01/10..................... Aaa 5/06 at 102 256,110
285,000 New York State Urban
Development Corporation,
State Facilities Revenue
Bonds, 1995 Refunding
Series., 6.250%, 4/01/06..... Baa1 No Opt. Call 300,940
250,000 The City of New York, General
Obligations Bonds, Fiscal
1997 Series D, Tax Exempt
Bonds., 5.875%, 11/01/11..... Baa1 11/06 at 101.5 248,145
- - -------------------------------------------------------------------------------
RHODE ISLAND--3.9%
200,000 Rhode Island Clean Water
Protection Finance Agency,
Water Pollution Control
Revolving Fund Revenue Bonds,
Series 1993 A (Pooled Loan
Issue)., 9.200%, 10/01/03.... Aaa No Opt. Call 252,112
- - -------------------------------------------------------------------------------
</TABLE>
B-83
<PAGE>
<TABLE>
<CAPTION>
Opt. Call
Principal Provisions
Amount Descriptions Ratings * ** Market Value
- - -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS--12.3%
$250,000 Texas Department of Housing
and Community Affairs, Single
Family Mortgage Revenue
Bonds, 1996 Series E.,
5.750%, 3/01/10.............. Aaa 9/06 at 102 $ 252,305
215,000 City of Austin, Texas, Water,
Sewer and Electric Refunding
Revenue Bonds, Series 1982.,
14.000% 11/15/01............. A No Opt. Call 276,310
250,000 City of San Antonio, Texas,
Airport System Improvement
Revenue Bonds, Series 1996.,
5.700% 7/01/09 (Alternative
Minimum Tax)................. Aaa 7/06 at 101 257,660
- - -------------------------------------------------------------------------------
UTAH--3.3%
200,000 State Board of Regents of the
State of Utah, Student Loan
Revenue Bonds, 1995 Series N
Bonds., 6.000%, 5/01/08
(Alternative Minimum Tax).... Aaa 11/05 at 102 208,228
- - -------------------------------------------------------------------------------
Total Municipal Bond
Investments--
(cost $3,839,333)............ 3,896,695
- - -------------------------------------------------------------------------------
Total Investments--(cost
$6,020,320)--98.6%........... 6,307,194
- - -------------------------------------------------------------------------------
Other Assets Less
Liabilities--1.4%............ 89,691
- - -------------------------------------------------------------------------------
Net Assets--100%............. $6,396,885
- - -------------------------------------------------------------------------------
</TABLE>
Summary of Ratings for Municipal Bond Investments:
<TABLE>
<CAPTION>
STANDARD & NUMBER OF MARKET MARKET
POOR'S MOODY'S SECURITIES VALUE PERCENT
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa 10 $2,532,483 65%
A,A- A,A2,A3 2 527,988 14
BBB+,BBB,BBB- Baa1,Baa,Baa2,Baa3 3 836,224 21
- - ------------------------------------------------------------------------------------
Total 15 $3,896,695 100%
- - ------------------------------------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS:
+Non-income producing.
*Ratings: Using the higher of Standard & Poor's or Moody's rating.
**Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption.
See accompanying notes to financial statements.
B-84
<PAGE>
STATEMENT OF NET ASSETS
SEMIANNUAL REPORT
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Assets
Investment securities, at market value (cost $6,020,320) (note 1). $6,307,194
Cash.............................................................. 38,992
Dividends and interest receivable................................. 70,491
Deferred organization costs (note 1).............................. 165,995
Other assets...................................................... 9,411
----------
Total assets.................................................. 6,592,083
----------
Liabilities
Accrued expenses:
Management fees (note 4)........................................ 4,079
Other........................................................... 191,119
----------
Total liabilities............................................. 195,198
----------
Net assets (note 6)............................................. $6,396,885
==========
Class A Shares (note 1)
Net assets.......................................................... $ 8,897
----------
Shares outstanding.................................................. 417
----------
Net asset value and redemption price per share...................... $ 21.34
----------
Offering price per share (net asset value per share plus maximum
sales charge of 5.25% of offering price)........................... $ 22.52
==========
Class B Shares (note 1)
Net assets.......................................................... $ 8,894
----------
Shares outstanding.................................................. 417
----------
Net asset value, offering and redemption price per share............ $ 21.33
==========
Class C Shares (note 1)
Net assets.......................................................... $ 8,894
----------
Shares outstanding.................................................. 417
----------
Net asset value, offering and redemption price per share............ $ 21.33
==========
Class R Shares (note 1)
Net assets.......................................................... $6,370,200
----------
Shares outstanding.................................................. 298,749
----------
Net asset value, offering and redemption price per share............ $ 21.32
==========
</TABLE>
See accompanying notes to financial statements.
B-85
<PAGE>
STATEMENT OF OPERATIONS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME (note 1)
Dividends.......................................................... $ 15,226
Interest........................................................... 83,785
--------
Total investment income.......................................... 99,011
--------
Expenses:
Management fees (note 4)........................................... 18,135
12b-1 distribution and service fees (note 5)....................... 77
Shareholders' servicing agent fees and expenses.................... 25
Custodian's fees and expenses...................................... 18,485
Trustees' fees and expenses (note 4)............................... 778
Professional fees.................................................. 7,393
Shareholders' reports--printing and mailing expenses............... 11
Federal and state registration fees................................ 910
Amortization of deferred organization costs (note 1)............... 14,005
--------
Total expenses before expense reimbursement...................... 59,819
Expense reimbursement from investment adviser (note 4)............. (39,190)
--------
Net expenses..................................................... 20,629
--------
Net investment income........................................... 78,382
--------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 3)..... 101,441
Net change in unrealized appreciation or depreciation of invest-
ments............................................................. 286,874
--------
Net gain from investments....................................... 388,315
--------
Net increase in net assets from operations........................... $466,697
========
</TABLE>
See accompanying notes to financial statements.
B-86
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SEMIANNUAL REPORT
FOR THE PERIOD AUGUST 7, 1996 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1996
(UNAUDITED)
<TABLE>
<S> <C>
OPERATIONS
Net investment income............................................ $ 78,382
Net realized gain from investment transactions (notes 1 and 3)... 101,441
Net change in unrealized appreciation or depreciation of invest-
ments........................................................... 286,874
----------
Net increase in net assets from operations................... 466,697
----------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income......................... (53,761)
From accumulated net realized gains from investment transactions. (16,050)
----------
Decrease in net assets from distributions to shareholders.... (69,811)
----------
FUND SHARE TRANSACTIONS (note 2)
Net proceeds from sale of shares................................. 5,966,639
----------
Net increase in net assets derived from fund share transac-
tions....................................................... 5,966,639
----------
Net increase in net assets................................... 6,363,525
Net assets at the beginning of period.............................. 33,360
----------
Net assets at the end of period.................................... $6,396,885
==========
Balance of undistributed net investment income at end of period.... $ 24,621
==========
</TABLE>
See accompanying notes to financial statements.
B-87
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEMIANNUAL REPORT
(UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Nuveen Balanced Municipal and Stock Fund (the "Fund") is a series of the
Nuveen Investment Trust (the "Trust"). The Trust is an open-end diversified
management investment company registered under the Investment Company Act of
1940. The Trust was organized as a Massachusetts business trust on May 6, 1996.
Prior to commencement of operations on August 7, 1996, the Trust had no opera-
tions other than those related to organizational matters and the initial capi-
tal contribution of $100,080 (of which $33,360 was allocated to the Fund) by
Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned subsidiary
of The John Nuveen Company, for the issuance of shares on July 29, 1996. On Au-
gust 7, 1996, The John Nuveen Company made an additional investment of approxi-
mately $6 million in the Fund for the purposes of establishing an initial in-
vestment portfolio. The Fund invests in a conservative mix of equities and tax-
exempt securities for capital growth, capital preservation and current tax-ex-
empt income. During temporary defensive periods, the Fund may invest any per-
centage of its assets in temporary investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with gener-
ally accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a national securities ex-
change or Nasdaq for which there were no transactions on a given day or securi-
ties not listed on a national securities exchange or Nasdaq are valued at the
most recent bid prices. Municipal obligations are valued by a pricing service
that values portfolio securities at the mean between the quoted bid and asked
prices or the yield equivalent when quotations are readily available. Securi-
ties for which quotations are not readily available (which are expected to con-
stitute a majority of the municipal obligations held by the Fund) are valued at
fair value as determined by the pricing service using methods that include con-
sideration of the following: yields or prices of municipal bond of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from securities dealers; and general market conditions. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the amor-
tized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the transaction date. Any securities so
purchased are subject to market fluctuation during this period. The Fund has
instructed the custodian to segregate assets in a separate account with a cur-
rent value at least equal to the amount of its purchase commitments. At Decem-
ber 31, 1996, the Fund had no outstanding purchase commitments.
B-88
<PAGE>
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is deter-
mined on the basis of interest accrued, adjusted for amortization of premiums
and accretion of discounts on long-term debt securities when required for fed-
eral income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is distributed to shareholders monthly. Net
ordinary taxable income and net realized capital gains from investment transac-
tions, if any, are distributed to shareholders annually. Furthermore, capital
gains are distributed only to the extent they exceed available capital loss
carryovers.
Any distributions to shareholders of net investment income and net realized
capital gains 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 generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and
will be classified as either distributions in excess of net investment income
and/or distributions in excess of net realized gains from investment transac-
tions, where applicable.
Federal Income Taxes
The Fund intends to operate as a Regulated Investment Company under Subchapter
M of the Internal Revenue Code, and therefore will not be liable for federal
income taxes. In addition, the Fund intends to satisfy conditions which will
enable interest from Municipal Obligations, which is exempt from federal income
tax when received by the Fund, to qualify as exempt-interest dividends when
distributed to the Shareholders of the Fund.
Deferred Organizational Costs
The Fund's share of costs incurred by the Trust in connection with its organi-
zation and initial registration of shares was deferred and is being amortized
over a 60-month period beginning August 7, 1996 (commencement of operations).
If any of the initial shares of the Fund are redeemed during this period, the
proceeds of the redemption will be reduced by the pro-rata share of the unamor-
tized organization costs as of the date of redemption.
Derivative Financial Instruments
The Fund may engage in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to in-
vest in such financial instruments, and may do so in the future, it did not
make any such investments during the period August 7, 1996 (commencement of op-
erations) through December 31, 1996.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares are recorded to the
specific class.
B-89
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period.
2. FUND SHARES
The only share transactions in the Fund for the period August 7, 1996 (com-
mencement of operations) through December 31, 1996, were 298,332 shares sold
in Class R for $5,966,639 to the Adviser.
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investment securities and tempo-
rary investments for the period August 7, 1996 (commencement of operations)
through December 31, 1996, were as follows:
<TABLE>
<S> <C>
Purchases
Investment securities.............................................. $7,777,840
Temporary investments.............................................. 3,200,000
Sales
Investment securities.............................................. 1,851,816
Temporary investments.............................................. 3,200,000
==========
</TABLE>
At December 31, 1996, the identified cost of investments owned for federal in-
come tax purposes was the same as the cost for financial reporting purposes.
The net unrealized appreciation aggregated $286,874, of which $312,226 related
to appreciated securities and $25,352 related to depreciated securities.
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreement with the Adviser, the Fund
pays an annual management fee, payable monthly, which is based upon the aver-
age daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
- - --------------------------------------------------------------------------------
<S> <C>
For the first $125,000,000....................................... .7500 of 1%
For the next $125,000,000........................................ .7375 of 1
For the next $250,000,000........................................ .7250 of 1
For the next $500,000,000........................................ .7125 of 1
For the next $1,000,000,000...................................... .7000 of 1
For net assets over $2,000,000,000............................... .6750 of 1
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1997, in order to prevent total operating expenses (excluding any 12b-1 dis-
tribution or service fees and extraordinary expenses) from exceeding .85% of
the average daily net asset value of any class of fund shares.
B-90
<PAGE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company owns a minority interest, under which ICAP
manages the Fund's equity investment portfolio. ICAP is compensated for its
services from the management fee paid to the Adviser. The Funds pay no compen-
sation directly to its trustees who are affiliated with the Adviser or to its
officers, all of whom receive remuneration for their services to the Fund from
the Adviser.
5. FLEXIBLE PURCHASE OPTIONS
The Fund has adopted Flexible Purchase Options that offer four alternative
classes of Fund shares (Classes A, B, C and R), each with a different combina-
tion of sales charges, ongoing fees, eligibility requirements and other fea-
tures. A summary of the four classes of Fund shares is as follows:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED ANNUAL
UP-FRONT SALES ANNUAL 12B-1 12B-1
SALES CHARGE DISTRIBUTION SERVICE
CHARGE ("CDSC") FEE FEE
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A............................... 5.25%(1) None(2) None .25%
Class B............................... None 5.00%(3) .75%(4) .25%
Class C............................... None 1.00%(5) .75% .25%
Class R............................... None None None None
- - ----------------------------------------------------------------------------------
</TABLE>
(1) Maximum up-front sales charge, which is reduced for purchases of $50,000 or
more. Up-Front sales charge may be reduced or waived for certain purchases.
(2) Certain Class A purchases at net asset value of $1 million or more may be
subject to a 1% CDSC if redeemed within 18 months of purchase.
(3) CDSC in the first year. CDSC gradually declines to 0% after six years.
(4) Class B Shares convert to Class A Shares after eight years.
(5) CDSC is applicable to shares redeemed within 12 months of purchase.
B-91
<PAGE>
6. COMPOSITION OF NET ASSETS
At December 31, 1996, the Fund had common stock authorized of $.01 par value
per share. The composition of net assets as well as the number of authorized
shares is as follows:
<TABLE>
<S> <C>
Capital paid-in..................................................... $5,999,999
Balance of undistributed net investment income...................... 24,621
Accumulated net realized gain from investment transactions.......... 85,391
Net unrealized appreciation of investments.......................... 286,874
----------
Net assets....................................................... $6,396,885
==========
Authorized Shares:
Class A........................................................... Unlimited
Class B........................................................... Unlimited
Class C........................................................... Unlimited
Class R........................................................... Unlimited
==========
</TABLE>
7. MUNICIPAL INVESTMENT COMPOSITION
The Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At December 31, 1996, the revenue sources by munic-
ipal purpose for these investments, expressed as a percent of total invest-
ments, were as follows:
<TABLE>
<S> <C>
Revenue Bonds:
General Obligation Bonds................................................. 20%
Lease Rental Facilities.................................................. 15
Transportation........................................................... 13
Housing Facilities....................................................... 13
Health Care Facilities................................................... 13
Educational Facilities................................................... 13
Electric Utilities....................................................... 7
Water/Sewer Facilities................................................... 6
---
100%
===
</TABLE>
65% of the municipal investments owned by the Fund are either covered by insur-
ance issued by several private insurers or are backed by an escrow or trust
containing U.S. Government or U.S. Government agency securities, both of which
ensure the timely payment of principal and interest in the event of default.
Such insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of any of the Fund's shares.
For additional information regarding each investment security, refer to the
Portfolio of Investments of the Fund.
B-92
<PAGE>
FINANCIAL HIGHLIGHTS
SEMIANNUAL REPORT
(UNAUDITED)
Selected data for a common share outstanding August 7, 1996 (commencement of
operations) through December 31, 1996, is as follows.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE LESS DISTRIBUTIONS
--------------------- ---------------------------
NET
NET REALIZED AND
ASSET NET UNREALIZED DISTRIBUTIONS
VALUE INVEST- GAIN (LOSS) FROM NET DISTRIBUTIONS
BEGINNING MENT FROM INVEST- INVESTMENT FROM CAPITAL
OF PERIOD INCOME## MENTS INCOME GAINS
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A
8/7/96 to 12/31/96.... $20.000 $.242 $1.281 $ (.129) $ (.054)
CLASS B
8/7/96 to 12/31/96.... 20.000 .180 1.294 (.090) (.054)
CLASS C
8/7/96 to 12/31/96.... 20.000 .180 1.294 (.090) (.054)
CLASS R
8/7/96 to 12/31/96.... 20.000 .262 1.253 (.141) (.054)
- - ------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Average commission rate paid on equity portfolio transactions. Commission is
included in the cost of security.
# Total Return on Net Asset Value is the combination of reinvested dividend in-
come, reinvested capital gains distributions, if any, and changes in stock
price per share. Total return shown for Class A Shares does not include the ef-
fect of applicable front-end sales charges. The total returns shown for Class B
Shares and Class C Shares do not include the effect of applicable contingent
deferred sales charges. Class R Shares are not subject to any front-end or con-
tingent deferred sales charges.
## Reflects the waiver of certain management fees and reimbursement of certain
other expenses by the Adviser (note 4).
B-93
<PAGE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
RATIO OF RATIO OF
NET NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
NET TOTAL TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ASSET RETURN NET ASSETS NET ASSETS NET ASSETS NET ASSETS AVERAGE
VALUE ON NET NET ASSETS BEFORE BEFORE AFTER AFTER PORTFOLIO COMMISSION
END OF ASSET END OF PERIOD REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE
PERIOD VALUE # (IN THOUSANDS) MENT MENT MENT## MENT## RATE PAID**
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$21.340 7.72% $ 9 2.72%* 1.39%* 1.10%* 3.01%* 30% $.0273
21.330 7.38 9 3.47* .62* 1.85* 2.24* 30 .0273
21.330 7.38 9 3.47* .62* 1.85* 2.24* 30 .0273
21.320 7.78 6,370 2.47* 1.62* .85* 3.24* 30 .0273
- - -------------------------------------------------------------------------------------------------
</TABLE>
B-94
<PAGE>
APPENDIX A--RATINGS OF INVESTMENTS
STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable Standard
& Poor's Ratings Group ("S&P") rating symbols and their meanings (as published
by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of the cred-
itworthiness of an obligor with respect to a specific obligation. This assess-
ment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a partic-
ular investor.
The ratings are based on current information furnished by the issuer or ob-
tained by S&P from other sources it considers reliable. S&P does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited fi-
nancial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA Debt rated "AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small de-
gree.
A Debt rated "A' has a strong capacity to pay interest and repay princi-
pal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB
Debt rated "BBB' is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate pro-
tection parameters, adverse economic conditions or changing circum-
stances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated
categories.
<PAGE>
SPECULATIVE GRADE RATING
Debt rated "BB', "B', "CCC', "CC' and "C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB' indicates the least degree of speculation and "C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse con-
ditions.
BB Debt rated "BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and princi-
pal payments. The "BB' rating category is also used for debt subordi-
nated to senior debt that is assigned an actual or implied "BBB-' rat-
ing.
B Debt rated "B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.
The "B' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB' or "BB-' rating.
CCC Debt rated "CCC' has a currently identifiable vulnerability to de-
fault, and is dependent upon favorable business, financial, and eco-
nomic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B' or "B-' rating.
CC The rating "CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC' debt rating.
C The rating "C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-' debt rating. The
"C' rating may be used to cover a situation where a bankruptcy peti-
tion has been filed, but debt service payments are continued.
CI The rating "CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
"D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA' to "CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
comple-
A-2
<PAGE>
tion of the project, makes no comment on the likelihood of, or the risk of de-
fault upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L The letter "L' indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit col-
lateral is federally insured by the Federal Savings & Loan Insurance
Corp. or the Federal Deposit Insurance Corp.* and interest is ade-
quately collateralized. In the case of certificates of deposit the
letter "L' indicates that the deposit, combined with other deposits
being held in the same right and capacity will be honored for princi-
pal and accrued pre-default interest up to the federal insurance lim-
its within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution,
upon maturity.
NR Indicates no rating has been requested, that there is insufficient in-
formation on which to base a rating, or that S&P does not rate a par-
ticular type of obligation as a matter of policy.
MUNICIPAL NOTES
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rat-
ing. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
NOTE RATING SYMBOLS ARE AS FOLLOWS:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some vulnera-
bility to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security in-
asmuch as it does not comment as to market price or suitability for a particu-
lar investor. The ratings are based on current information furnished to S&P by
the issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended,
or withdrawn as a result of changes in or unavailability of such information or
based on other circumstances.
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flow.
A-3
<PAGE>
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satis-
factory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a secu-
rity inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on occa-
sion, rely on unaudited financial information. The ratings may be changed, sus-
pended, or withdrawn as a result of changes in or unavailability of such infor-
mation or based on other circumstances.
MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as pub-
lished by Moody's) follows:
LONG TERM DEBT
AAA Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally re-
ferred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated
A-4
<PAGE>
lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A Bonds which are rated A possess may favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Moody's bond rating symbols may contain numerical modifiers of a ge-
neric rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking, and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
BAA Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristi-
cally unrealiable over any great length of time. Such bonds lack out-
standing investment characteristics and in fact have speculative char-
acteristics as well.
BA Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protec-
tion of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desir-
able investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
CAA Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and is-
sues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
CON( . . . )
Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
NOTE:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the sym-
bols Aa1, A1, Baa1, Ba1, and B1.
A-5
<PAGE>
MUNICIPAL SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquid-
ity support or demonstrated broadbased access to the market
for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins or protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security ele-
ments are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection com-
monly regarded as required of an investment security is pres-
ent and although not distinctly or predominantly speculative,
there is specific risk.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions) have a superior ca-
pacity for repayment of senior short-term promissory obligations. Prime-1 re-
payment capacity will often be evidenced by many of the following characteris-
tics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong capac-
ity for repayment of senior short-term promissory obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial lever-
age. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating categories.
A-6
<PAGE>
DUFF & PHELPS, INC.--A brief description of the applicable Duff & Phelps, Inc.
("D&P") ratings symbols and their meanings (as published by D&P) follows:
LONG TERM DEBT
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition, gov-
ernment action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by sev-
eral factors including relative weightings of the different security classes in
the capital structure, the overall credit strength of the issuer, and the na-
ture of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if nec- essary). Ratings of "BBB-' and higher fall within the defi-
nition of investment grade securities, as defined by bank and insurance super-
visory authorities. Structured finance issues, including real estate, asset-
backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings) ad-
dresses the likelihood that aggregate principal and interest will equal or ex-
ceed the rated amount under appropriate stress conditions.
RATING SCALEDEFINITION
- - --------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
- - --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is mod-
AA est, but may vary slightly from time to time because of economic
AA- conditions.
- - --------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-
- - --------------------------------------------------------------------------------
BBB+
BBB
BBB-
Below average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during
economic cycles.
- - --------------------------------------------------------------------------------
A-7
<PAGE>
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
- - -------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
- - -------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substan-
tial with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
- - -------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet scheduled prin-
cipal and/or interest payments.
DP Preferred stock with dividend arrearages.
- - -------------------------------------------------------------------------------
SHORT-TERM DEBT RATINGS
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with matu-
rities of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers accept-
ances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from opera-
tions, but also access to alternative sources of funds including trade credit,
bank lines, and the capital markets. An important consideration is the level
of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term ratings
is the refinement of the traditional "1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist within
that tier. As a consequence, Duff & Phelps Credit Rating has incorporated gra-
dations of "1+' (one plus) and "1-' (one minus) to assist investors in recog-
nizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements, spe-
cifically capital computation guidelines. These ratings meet Department of La-
bor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for in-
surance company investment portfolios.
A-8
<PAGE>
RATING SCALE:
DEFINITION
HIGH GRADE
D-1+ Highest certainty of timely payment. Short-term liquidity, includ-
ing internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are ex-
cellent and supported by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
GOOD GRADE
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good.
Risk factors are small.
SATISFACTORY GRADE
D-3 Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
NON-INVESTMENT GRADE
D-4 Speculative investment characteristics. Liquidity is not suffi-
cient to insured against disruption in debt service. Operating
factors and market access may be subject to a high degree of vari-
ation.
DEFAULT
D-5 Issuer failed to meet scheduled principal and/or interest pay-
ments.
FITCH INVESTORS SERVICE, INC.--A brief description of the applicable Fitch In-
vestors Service, Inc. ("Fitch") ratings symbols and meanings (as published by
Fitch) follows:
LONG TERM DEBT
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a spe-
cific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective finan-
cial condition and operating performance of the issuer and any guarantor, as
well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by in-
surance policies or financial guaranties unless otherwise indicated.
A-9
<PAGE>
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small differ-
ences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Rat-
ings do not comment on the adequacy of market price, the suitability of any se-
curity for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information. Rat-
ings may be changed, suspended, or withdrawn as a result of changes in, or the
unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay inter-
est and repay principal, which is unlikely to be affected by reasona-
bly foreseeable events.
AA Bonds considered to be investment grade and of very high credit quali-
ty. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA'. Because
bonds rated in the "AAA' and "AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of the
issuers is generally rated "F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is consid-
ered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds and, therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in determin-
ing the credit risk associated with a particular security. The ratings ("BB' to
"C') represent Fitch's assessment of the likelihood of timely payment of prin-
cipal and interest in accordance with the terms of obligation for bond issues
not in default. For defaulted bonds, the rating ("DDD' to "D') is an assessment
of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective finan-
cial condition and operating performance of the issuer and any guarantor, as
well as the economic and political environment that might affect the issuer's
future financial strength.
A-10
<PAGE>
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories cannot fully reflect the differ-
ences in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay inter-
est and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identi-
fied which could assist the obligor in satisfying its debt service re-
quirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of con-
tinued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and eco-
nomic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not reme-
died, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
AND Dultimate recovery value in liquidation or reorganization of the obli-
gor. "DDD' represents the highest potential for recovery of these
bonds, and "D' represents the lowest potential for recovery.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on de-
mand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ EXCEPTIONALLY STRONG CREDIT QUALITY Issues assigned this rating are
regarded as having the strongest degree of assurance for timely pay-
ment.
F-1 VERY STRONG CREDIT QUALITY Issues assigned this rating reflect an as-
surance of timely payment only slightly less in degree than issues
rated "F-1+'.
F-2
GOOD CREDIT QUALITY Issues assigned this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not
as great as for issues assigned "F-1+' and "F-1' ratings.
F-3
FAIR CREDIT QUALITY Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is ade-
quate; however, near-term adverse changes could cause these securities
to be rated below investment grade.
A-11
<PAGE>
F-S WEAK CREDIT QUALITY Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic con-
ditions.
D DEFAULT Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
A-12
<PAGE>
PART C--OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements:
1. Nuveen Balanced California Municipal and Stock Fund
Included in the Prospectus:
Not Applicable
Included in the Statement of Additional Information:
Not Applicable
2. Nuveen Growth and Income Stock Fund, Nuveen Balanced Stock and Bond Fund
and Nuveen Balanced Municipal and Stock Fund:
Included in the Prospectus:
Not Applicable
Included in the Statement of Additional Information:
Statement of Net Assets, July 29, 1996, for each of the Nuveen Growth
and Income Stock Fund, Nuveen Balanced Stock and Bond Fund and Nuveen
Balanced Municipal and Stock Fund
Report of Independent Public Accountants dated July 29, 1996
Portfolio of Investments (December 31, 1996), Statement of Net Assets
(December 31, 1996), Statement of Operations (from August 7, 1996
through December 31, 1996), Statement of Changes in Net Assets (for the
period August 7, 1996 to December 31, 1996), Notes to Financial State-
ments, and Financial Highlights for each of the Nuveen Growth and In-
come Stock Fund, Nuveen Balanced Stock and Bond Fund and Nuveen Bal-
anced Municipal and Stock Fund.
(b) Exhibits
<TABLE>
<CAPTION>
<C> <S> <C>
1(a). Declaration of Trust of Registrant./1/
1(b). Certificate for the Establishment and Designation of
Series and Classes for the Nuveen Growth and Income Stock
Fund, the Nuveen Balanced Stock and Bond Fund, and Nuveen
Balanced Municipal and Stock Fund, dated
June 20, 1996./3/
1(c). Certificate for the Established and Designation of Series
for the Nuveen Balanced California Municipal and Stock
Fund, dated July 23, 1997./6/
2. By-Laws of Registrant./1/
3. Not applicable.
4. Specimen certificate of Shares of each Fund./3/
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
5(a). Form of Management Agreement between Registrant and Nuveen
Institutional Advisory Corp. on behalf of Nuveen Growth
and Income Stock Fund, Nuveen Balanced Stock and Bond
Fund, and Nuveen Balanced Municipal and Stock Fund./2/
5(b). Form of Management Agreement between Registrant and Nuveen
Institutional Advisory Corp. on behalf of Nuveen Balanced
California Municipal and Stock Fund./6/
5(c). Form of Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp and Institutional Capital
Corporation on behalf of Nuveen Growth and Income Stock
Fund, Nuveen Balanced Stock and Bond Fund, and Nuveen
Balanced Municipal and Stock Fund./2/
5(d). Form of Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp. and Institutional Capital
Corp. on behalf of Nuveen Balanced California Municipal
and Stock Fund./6/
6(a). Form of Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated./3/
6(b). Dealer Management Agreement dated October 22, 1996./4/
7. Not applicable.
8. Form of Custodian Agreement between Registrant and Chase
Manhattan Bank./3/
8(a). Form of Subscription Agency Agreement between Registrant
and The Chase Manhattan Bank./4/
9(a). Not applicable.
10(a). Opinion and consent of Chapman and Cutler, dated July 30,
1996./3/
10(b). Opinion and consent of Bingham, Dana & Gould, dated July
30, 1996./3/
10(c). Opinion and Consent of Chapman and Cutler, dated August
15, 1997./6/
10(d). Opinion and Consent of Bingham, Dana & Gould, dated August
14, 1997./6/
<CAPTION>
<C> <S> <C>
11. Consent of Independent Public Accountants./6/
12. Not applicable.
13. Subscription Agreement with Nuveen Institutional Advisory
Corp./3/
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule 12b-1
for the Class A Shares, Class B Shares and Class C Shares
of each Fund./3/
16. Not applicable.
17. Financial Data Schedule./5/
18. Multi-Class Plan./4/
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
99(a). Original Powers of Attorney for Messrs. Schwertfeger,
Dean, Leafstrand, Bacon, Kissick, Lyon, and Ms.
Wellington, Trustees, authorizing, among others, Larry W.
Martin and Gifford R. Zimmerman to execute the
Registration Statement./6/
</TABLE>
- - --------
/1/Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant.
/2/Incorporated by reference to the pre-effective amendment no. 1 filed on Form
N-1A for Registrant.
/3/Incorporated by reference to the pre-effective amendment no. 2 filed on Form
N-1A for Registrant.
/4/Incorporated by reference to the post-effective amendment no. 1 filed on
Form N-1A for Registrant.
/5/Incorporated by reference to the post-effective amendment no. 2 on Form N-1A
for Registrant.
/6/Filed herewith.
ITEM 25: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26: NUMBER OF HOLDERS OF SECURITIES
At August 13, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SERIES RECORD HOLDERS
--------------- --------------
<S> <C>
Nuveen Growth and Income Stock Fund
Class A.................................................. 39,103
Class B.................................................. 3,794
Class C.................................................. 2,054
Class R.................................................. 2,840
Nuveen Balanced Stock and Bond Fund........................
Class A.................................................. 4,816
Class B.................................................. 2,625
Class C.................................................. 2,532
Class R.................................................. 2,524
Nuveen Balanced Municipal and Stock Fund...................
Class A.................................................. 4,928
Class B.................................................. 2,771
Class C.................................................. 2,674
Class R.................................................. 2,516
</TABLE>
ITEM 27: INDEMNIFICATION
Section 4 of Article XII of Registrant's Declaration of Trust provides as fol-
lows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust
C-3
<PAGE>
as directors, trustees, officers, employees or agents of another organization
in which the Trust has an interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person"), shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim, ac-
tion, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been such a Trustee, director, officer, em-
ployee or agent and against amounts paid or incurred by him in settlement
thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross negli-
gence or reckless disregard of the duties involved in the conduct of his
office;
(b) with respect to any matter as to which he shall have been finally adju-
dicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a pay-
ment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by poli-
cies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall con-
tinue as to a person who has ceased to be such a Covered Person and shall inure
to the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or oth-
erwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written
C-4
<PAGE>
opinion shall determine, based upon a review of the readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, any-
one who has been exempted from being an Interested Person by any rule, regula-
tion or order of the Commission), and (y) against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal, admin-
istrative or other, including appeals), actual or threatened; and the word "li-
ability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other lia-
bilities.
-----------------
The trustees and officers of the Registrant are covered by Investment Trust Er-
rors and Omission policies in the aggregate amount of $20,000,000 (with a maxi-
mum deductible of $500,000) against liability and expenses of claims of wrong-
ful acts arising out of their position with the Registrant, except for matters
which involved willful acts, bad faith, gross negligence and willful disregard
of duty (i.e., where the insured did not act in good faith for a purpose he or
she reasonably believed to be in the best interest of Registrant or where he or
she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and Ex-
change Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indem-
nification against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by an officer or trustee or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such officer, trustee or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Nuveen Institutional Advisory Corp. serves as investment adviser or manager
to the following closed-end management type investment companies: Nuveen Select
Tax-Free Income Portfolio; Nuveen Select Tax-Free Income Portfolio 2; Nuveen
Insured California Select Tax-Free Income Portfolio; Nuveen Insured New York
Select Tax-Free Income Portfolio; Nuveen Select Tax-Free Income Portfolio 3 and
the Registrant, an open-end management type investment company. The principal
business address for all of these investment companies is 333 West Wacker
Drive, Chicago, Illinois 60606. In addition, Nuveen Institutional Advisory
Corp. serves as investment adviser to separately managed accounts.
C-5
<PAGE>
For a description of other business, profession, vocation or employment of a
substantial nature in which any director or officer of the investment adviser
has engaged during the last two years for his account or in the capacity of di-
rector, officer, employee, partner or trustee, see the descriptions under "Man-
agement" in the Statement of Additional Information.
(b) Institutional Capital Corporation (ICAP) acts as investment adviser to the
ICAP Funds, Inc. and as sub-investment adviser to the Registrant. In addition,
ICAP serves as investment adviser to separately managed accounts.
The following is a listing of each director and officer of ICAP. The principal
business address for each person is 225 W. Wacker Drive, Chicago, IL 60606.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH ICAP WITH REGISTRANT
---- --------------------- ---------------------
<S> <C> <C>
Robert H. Lyon........ President, Chief Investment Trustee
Officer and Director
Pamela H. Conroy...... Senior Vice President None
Donald D. Niemann..... Executive Vice President and None
Director
Gary S. Maurer........ Executive Vice President and None
Director
Barbara A. Chiesa..... Vice President and Director None
</TABLE>
ITEM 29: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., and the Registrant. Nuveen also
acts as depositor and principal underwriter of the Nuveen Tax-Free Unit Trust,
and the Nuveen Unit Trust, registered unit investment trusts. Nuveen has also
served or is serving as co-managing underwriter to the following closed-end
management type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen
California Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund,
Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund,
Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen California Perfor-
mance Plus Municipal Fund, Inc., Nuveen New York Performance Plus Municipal
Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Op-
portunity Fund, Inc., Nuveen California Municipal Market Opportunity Fund,
Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California Invest-
ment Quality Municipal Fund, Inc., Nuveen New York Investment Quality Municipal
Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Invest-
ment Quality Municipal Fund, Nuveen New Jersey Investment Quality Municipal
Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Se-
lect Quality Municipal Fund, Inc.,
C-6
<PAGE>
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc.,
Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen
Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal
Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York
Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund,
Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund 2, Inc., Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen
Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund,
Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan
Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured Cali-
fornia Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium In-
come Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income Mu-
nicipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen Connecti-
cut Premium Income Municipal Fund, Nuveen Georgia Premium Income Municipal
Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North Carolina Pre-
mium Income Municipal Fund, Nuveen California Premium Income Municipal Fund,
Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select Tax-Free Income
Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen Insured California
Select Tax-Free Income Portfolio, Nuveen Insured New York Select Tax-Free In-
come Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- - -------------------------------------------------------------------------------
Anthony T. Dean President, Chief Operating Chairman and Trustee
333 West Wacker Drive Officer and Director
Chicago, IL 60606
Timothy R. Schwertfeger Chairman of the Board, President and Trustee
333 West Wacker Drive Chief Executive Officer,
Chicago, IL 60606 and Director
John P. Amboian Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-7
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- - ----------------------------------------------------------------------------------
Richard P. Davis Vice President None
One South Main Street
Dayton, OH 45402
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President and Vice President and
333 West Wacker Drive Assistant Secretary Assistant Secretary
Chicago, IL 60606
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
O. Walter Renfftlen Vice President Vice President and
333 West Wacker Drive and Controller Controller
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-8
<PAGE>
<TABLE>
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- - -----------------------------------------------------------------------------------
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
ITEM 30: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago, Illinois
60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not main-
tained by Nuveen Advisory Corp., or Shareholder Services, Inc.
Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado 80217-5330, main-
tains all the required records in its capacity as transfer, dividend paying,
and shareholder service agent for the Registrant.
ITEM 31: MANAGEMENT SERVICES
Not applicable.
ITEM 32: UNDERTAKINGS
(a) Not applicable.
(b) The Registant undertakes to file a post-effective amendment to its regis-
tration statement, using financial statements of Nuveen Balanced California
Municipal and Stock Fund which need not be certified, within four to six
months from the effective date of the first post-effective amendment to
Registrant 1933 Act registration statement that includes a prospectus re-
lating to Nuveen Balanced California Municipal and Stock Fund.
C-9
<PAGE>
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Share-
holders upon request and without charge.
(d) The Registrant agrees to call a meeting of shareholders for the purpose of
voting upon the question of the removal of any trustee or trustees when re-
quested to do so in writing by the record holders of at least 10% of the
Registrant's outstanding shares and to assist the shareholders in communi-
cations with other Shareholders as required by Section 16(c) of the Act.
C-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS POST-EFFECTIVE AMEND-
MENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UN-
DERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF IL-
LINOIS, ON THE 14TH DAY OF AUGUST, 1997.
NUVEEN INVESTMENT TRUST
/s/ Gifford R. Zimmerman
---------------------------------------
Gifford R. Zimmerman, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-EFFECTIVE
AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PER-
SONS IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. Walter Renfftlen
- - -------------------------------
O. Walter Renfftlen Vice President and August 14, 1997
Controller (Principal
Financial and
Accounting Officer)
Timothy R. Schwertfeger President and Trustee
Robert H. Lyon Trustee
Thomas E. Leafstrand Trustee
James E. Bacon Trustee
William L. Kissick Trustee
Sheila W. Wellington Trustee
Anthony T. Dean Chairman and Trustee
(Principal Executive
Officer)
</TABLE>
By /s/ Gifford R. Zimmerman
-------------------------
Gifford R. Zimmerman
Attorney-in-Fact
August 14, 1997
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, LARRY W. MARTIN AND
GIFFORD R. ZIMMERMAN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR EACH OF THE OFFICERS AND TRUSTEES OF REGISTRANT ON WHOSE BEHALF
THIS REGISTRATION STATEMENT IS FILED, HAS BEEN EXECUTED AND FILED WITH THE SE-
CURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
(b) Exhibits
<C> <S> <C>
1(a). Declaration of Trust of Registrant./1/
1(b). Certificate for the Establishment and Designation of
Series and Classes for the Nuveen Growth and Income
Stock Fund, the Nuveen Balanced Stock and Bond Fund,
and Nuveen Balanced Municipal and Stock Fund, dated
June 20, 1996./3/
1(c). Certificate for the Establishment and Designation of
Series for the Nuveen
Balanced California Municipal and Stock Fund, dated
July 23, 1997./6/
2. By-Laws of Registrant./1/
3. Not applicable.
4. Specimen certificate of Shares of each Fund./3/
5(a). Form of Management Agreement between Registrant and
Nuveen Institutional Advisory Corp. on behalf of
Nuveen Growth and Income Stock Fund, Nuveen Balanced
Stock and Bond Fund, and Nuveen Balanced Municipal
and Stock Fund./2/
5(b). Form of Management Agreement between Registrant and
Nuveen Institutional Advisory Corp. on behalf of
Nuveen Balanced California Municipal and Stock
Fund./6/
5(c). Form of Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp. and Institutional
Capital Corporation on behalf of Nuveen Growth and
Income Stock Fund, Nuveen Balanced Stock and Bond
Fund, and Nuveen Balanced Municipal and Stock
Fund./2/
5(d). Form of Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp. and Institutional
Capital Corp. on behalf of Nuveen Balanced California
Municipal and Stock Fund./6/
6(a). Form of Distribution Agreement between Registrant and
John Nuveen & Co. Incorporated./3/
6(b). Dealer Management Agreement dated October 22,
1996./4/
7. Not applicable.
8. Form of Custodian Agreement between Registrant and
Chase Manhattan Bank./3/
8(a). Form of Subscription Agency Agreement between
Registrant and The Chase Manhattan Bank./4/
9(a). Not applicable.
10(a). Opinion and consent of Chapman and Cutler, dated July
30, 1996./3/
10(b). Opinion and consent of Bingham, Dana & Gould, dated
July 30, 1996./3/
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
10(c). Opinion and consent of Chapman and Cutler, dated
August 15, 1997./6/
10(d). Opinion and consent of Bingham, Dana & Gould, dated
August 14, 1997./6/
11. Consent of Independent Public Accountants./6/
12. Not applicable.
13. Subscription Agreement with Nuveen Institutional
Advisory Corp./3/
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule
12b-1 for the Class A Shares, Class B Shares and
Class C Shares of each Fund./3/
16. Not applicable.
17. Financial Data Schedule./5/
18. Multi-Class Plan./4/
99(a). Original Powers of Attorney for Messrs. Schwertfeger,
Dean, Leafstrand, Bacon, Lyon, Kissick and Ms.
Wellington, Trustees, authorizing, among others,
Larry W. Martin and Gifford R. Zimmerman to execute
the Registration Statement./6/
</TABLE>
- - --------
/1/Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant.
/2/Incorporated by reference to the pre-effective amendment no. 1 filed on Form
N-1A for Registrant.
/3/Incorporated by reference to the pre-effective amendment no. 2 filed on Form
N-1A for Registrant.
/4/Incorporated by reference to the post-effective amendment no. 1 filed on
Form N-1A for Registrant.
/5/Incorporated by reference to the post-effective amendment no. 2 filed on
Form N-1A for Registrant.
/6/Filed herewith.
<PAGE>
EXHIBIT (b)(1)(c)
Nuveen Investment Trust
Establishment and Designation of Series of Shares
of Beneficial Interest
Whereas, pursuant to Section 2 of Article IV of the Declaration of Trust
dated May 6, 1996 (the "Declaration"), of Nuveen Investment Trust, a
Massachusetts business trust (the "Trust"), the Trustees of the Trust, on
June 20, 1996, established and designated certain series of Shares (as defined
in the Declaration) of the Trust by the execution of an instrument establishing
and designating such series and setting forth the special and relative rights of
such series;
Whereas, the Trustees of the Trust now desire to establish and designate an
additional series of Shares;
Now Therefore, the Trustee of the Trust, this 23rd day of July 1997, hereby
establish and designate the following series of Shares (the "Fund") to have the
special and relative rights described below.
1. The following Fund is established and designated:
Nuveen Balanced California Municipal and Stock Fund
2. The Fund shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of the Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shareholders of that Fund may vote in accordance with the
Declaration, shall represent a pro rata beneficial interest in the assets
allocated or belonging to such Fund, and shall be entitled to receive its pro
rata share of the net assets of such Fund upon liquidation of such Fund, all as
provided in Article IV, Sections 2 and 5 of the Declaration. The proceeds of the
sale of Shares of such Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to such Fund, unless
otherwise required by law.
3. Share holders of the Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to such Fund as provided in Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended or any successor rules, and by the Declaration.
4. The assets and liabilities of the Trust shall be allocated among
each Fund as set forth in Article IV, Section 5 of the Declaration.
<PAGE>
5. The designation of the Fund hereby shall not impair the power of the
Trustees from time to time to designate additional series of Shares of the
Trust.
6. Subject to the applicable provisions of the 1940 Act and the
provisions of Article IV, Sections 2 and 5 of the Declaration, the Trustees
shall have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of each Fund now or hereafter created, or
to otherwise change the special relative rights of the Fund designated hereby
without any action or consent of the Shareholders.
In Witness Whereof, the undersigned, being a majority of the Trustee(s) of
the Trust, have executed this instrument as of the 23rd day of July, 1997.
/s/ Anthony T. Dean /s/ Timothy R. Schwertfeger
- - ----------------------------------- ------------------------------
Anthony T. Dean, Timothy R. Schwertfeger,
as Trustee as Trustee
333 W. Wacker Drive 333 W. Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ James E. Bacon
- - ----------------------------------- ------------------------------
James E. Bacon, William L. Kissick,
as Trustee as Trustee
333 W. Wacker Drive 333 W. Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Thomas E. Leafstrand /s/ Robert H. Lyon
- - ----------------------------------- -------------------------------
Thomas E. Leafstrand, Robert H. Lyon,
as Trustee as Trustee
333 W. Wacker Drive 333 W. Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/ Sheila W. Wellington
- - -----------------------------------
Sheila W. Wellington,
as Trustee
333 W. Wacker Drive
Chicago, Illinois 60606
-2-
<PAGE>
State of Illinois )
) SS.
County of Cook )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Designation of Series and who acknowledged the same to be his/her free
act and deed, before me this 23rd day of July, 1997.
/s/ Karen L. Healy
-----------------------------------------
Notary Public
My Commission Expires: 12/30/99
-3-
<PAGE>
EXHIBIT (b)5(b)
Management Agreement
Between
Nuveen Investment Trust
and
Nuveen Institutional Advisory Corp.
Nuveen Investment Trust, a Massachusetts business trust registered under
the Investment Company Act of 1940 ("1940 Act") as an open-end diversified
management series investment company ("Trust"), hereby appoints Nuveen
Institutional Advisory Corp., a Delaware corporation registered under the
Investment Advisers Act of 1940 as an investment adviser, of Chicago, Illinois
("Manager"), to furnish investment advisory and management services and certain
administrative services with respect to the portion of its assets represented by
the shares of beneficial interest issued in each series listed in Schedule A
hereto, as such schedule may be amended from time to time (each such series
hereinafter referred to as "Fund"). Trust and Manager hereby agree that:
1. Investment Management Services. Manager shall manage the
investment operations of Trust and each Fund, subject to the terms of this
Agreement and to the supervision and control of Trust's Board of Trustees
("Trustees"). Manager agrees to perform, or arrange for the performance of,
the following services with respect to each Fund:
(a) to obtain and evaluate such information relating to
economies, industries, businesses, securities and commodities markets,
and individual securities, commodities and indices as it may deem
necessary or useful in discharging its responsibilities hereunder;
(b) to formulate and maintain a continuous investment program
in a manner consistent with and subject to (i) Trust's agreement and
declaration of trust and by-laws; (ii) the Fund's investment
objectives, policies, and restrictions as set forth in written
documents furnished by the Trust to Manager; (iii) all securities,
commodities, and tax laws and regulations applicable to the Fund and
Trust; and (iv) any other written limits or directions furnished by
the Trustees to Manager;
<PAGE>
(c) unless otherwise directed by the Trustees, to determine
from time to time securities, commodities, interests or other
investments to be purchased, sold, retained or lent by the Fund, and
to implement those decisions, including the selection of entities with
or through which such purchases, sales or loans are to be effected;
(d) to use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under subchapter M of
the Internal Revenue Code of 1986, as amended;
(e) to make recommendations as to the manner in which voting
rights, rights to consent to Trust or Fund action, and any other
rights pertaining to Trust or the Fund shall be exercised;
(f) to make available to Trust promptly upon request all of
the Fund's records and ledgers and any reports or information
reasonably requested by the Trust; and
(g) to the extent required by law, to furnish to regulatory
authorities any information or reports relating to the services
provided pursuant to this Agreement.
Except as otherwise instructed from time to time by the Trustees, with
respect to execution of transactions for Trust on behalf of a Fund, Manager
shall place, or arrange for the placement of, all orders for purchases,
sales, or loans with issuers, brokers, dealers or other counterparts or
agents selected by Manager. In connection with the selection of all such
parties for the placement of all such orders, Manager shall attempt to
obtain most favorable execution and price, but may nevertheless in its sole
discretion as a secondary factor, purchase and sell portfolio securities
from and to brokers and dealers who provide Manager with statistical,
research and other information, analysis, advice, and similar services. In
recognition of such services or brokerage services provided by a broker or
dealer, Manager is hereby authorized to pay such broker or dealer a
commission or spread in excess of that which might be charged by another
broker or dealer for the same transaction if the Manager determines in good
faith that the commission or spread is reasonable in relation to the value
of the services so provided.
Trust hereby authorizes any entity or person associated with Manager
that is a member of a national securities exchange to effect any
transaction on the exchange for the account of a Fund to the extent
permitted by and in accordance with Section 11(a) of the Securities
Exchange Act or 1934 and Rule 11a2-2(T) thereunder. Trust hereby
-2-
<PAGE>
consents to the retention by such entity or person of compensation for such
transactions in accordance with Rule11a-2-2(T)(a)(iv).
Manager may, where it deems to be advisable, aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for Trust or one or more Funds in order to obtain best execution
or lower brokerage commissions. In such event, Manager shall allocate the
shares so purchased or sold, as well as the expenses incurred in the
transaction, in a manner it considers to be equitable and fair and
consistent with its fiduciary obligations to Trust, the Funds, and
Manager's other customers.
Manager shall for all purposes be deemed to be an independent
contractor and not an agent of Trust and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent Trust in
any way.
2. Administrative Services. Subject to the terms of this Agreement
and to the supervision and control of the Trustees, Manager shall provide
to the Trust facilities, equipment, statistical and research data,
clerical, accounting and bookkeeping services, internal auditing and legal
services, and personnel to carry out all management services required for
operation of the business and affairs of the Funds other than those
services to be performed by the Trust's Distributor pursuant to the
Distribution Agreement, those services to be performed by the Trust's
Custodian pursuant to the Custody Agreement, those services to be performed
by the Trust's Transfer Agent pursuant to the Transfer Agency Agreement,
those services to be provided by the Trust's Custodian pursuant to the
Accounting Agreement and those services normally performed by the Trust's
counsel and auditors.
3. Use of Affiliated Companies and Subcontractors. In connection
with the services to be provided by Manager under this Agreement, Manager
may, to the extent it deems appropriate, and subject to compliance with the
requirements of applicable laws and regulations, make use of (i) its
affiliated companies and their directors, trustees, officers, and employees
and (ii) subcontractors selected by Manager, provided that Manager shall
supervise and remain fully responsible for the services of all such third
parties in accordance with and to the extent provided by this Agreement.
All costs and expenses associated with services provided by any such third
parties shall be borne by Manager or such parties.
4. Expenses Borne by Trust. Except to the extent expressly assumed
by Manager herein or under a separate agreement between Trust and Manager
and except to the extent required by law to be paid by Manager, Manager
shall not be obligated to pay
-3-
<PAGE>
any costs or expenses incidental to the organization, operations or
business of the Trust. Without limitation, such costs and expenses shall
include but not be limited to:
(a) all charges of depositories, custodians and other agencies
for the safekeeping and servicing of its cash, securities, and other
property;
(b) all charges for equipment or services used for obtaining
price quotations or for communication between Manager or Trust and the
custodian, transfer agent or any other agent selected by Trust;
(c) all charges for and accounting services provided to Trust
by Manager, or any other provider of such services;
(d) all charges for services of Trust's independent auditors
and for services to Trust by legal counsel;
(e) all compensation of Trustees, other than those affiliated
with Manager, all expenses incurred in connection with their services
to Trust, and all expenses of meetings of the Trustees or committees
thereof;
(f) all expenses incidental to holding meetings of holders of
units of interest in the Trust ("Shareholders"), including printing
and of supplying each record-date Shareholder with notice and proxy
solicitation material, and all other proxy solicitation expense;
(g) all expenses of printing of annual or more frequent
revisions of Trust prospectus(es) and of supplying each then-existing
Shareholder with a copy of a revised prospectus;
(h) all expenses related to preparing and transmitting
certificates representing Trust shares;
(i) all expenses of bond and insurance coverage required by
law or deemed advisable by the Board of Trustees;
(j) all brokers' commissions and other normal charges incident
to the purchase, sale, or lending of portfolio securities;
-4-
<PAGE>
(k) all taxes and governmental fees payable to Federal, state
or other governmental agencies, domestic or foreign, including all
stamp or other transfer taxes;
(l) all expenses of registering and maintaining the
registration of Trust under the 1940 Act and, to the extent no
exemption is available, expenses of registering Trust's shares under
the 1933 Act, of qualifying and maintaining qualification of Trust and
of Trust's shares for sale under securities laws of various states or
other jurisdictions and of registration and qualification of Trust
under all other laws applicable to Trust or its business activities;
(m) all interest on indebtedness, if any, incurred by Trust
or a Fund; and
(n) all fees, dues and other expenses incurred by Trust in
connection with membership of Trust in any trade association or other
investment company organization.
5. Allocation of Expenses Borne by Trust. Any expenses borne by
Trust that are attributable solely to the organization, operation or
business of a Fund shall be paid solely out of Fund assets. Any expense
borne by Trust which is not solely attributable to a Fund, nor solely to
any other series of shares of Trust, shall be apportioned in such manner as
Manager determines is fair and appropriate, or as otherwise specified by
the Board of Trustees.
6. Expenses Borne by Manager. Manager at its own expense shall
furnish all executive and other personnel, office space, and office
facilities required to render the investment management and administrative
services set forth in this Agreement.
In the event that Manager pays or assumes any expenses of Trust or a
Fund not required to be paid or assumed by Manager under this Agreement,
Manager shall not be obligated hereby to pay or assume the same or similar
expense in the future; provided that nothing contained herein shall be
deemed to relieve Manager of any obligation to Trust or a Fund under any
separate agreement or arrangement between the parties.
7. Management Fee. For the services rendered, facilities provided,
and charges assumed and paid by Manager hereunder, Trust shall pay to
Manager out of the assets of each Fund fees at the annual rate for such
Fund as set forth in Schedule to this Agreement. For each Fund, the
management fee shall accrue on each calendar day, and shall be payable
monthly on the first business day of the next succeeding calendar month.
-5-
<PAGE>
The daily fee accrual shall be computed by multiplying the fraction of one
divided by the number of days in the calendar year by the applicable annual
rate of fee, and multiplying this product by the net assets of the Fund,
determined in the manner established by the Board of Trustees, as of the
close of business on the last preceding business day on which the Fund's
net asset value was determined.
8. State Expense Limitation. If for any fiscal year of a Fund, its
aggregate operating expenses ("Aggregate Operating Expenses") exceed the
applicable percentage expense limit imposed under the securities law and
regulations of any state in which Shares of the Fund are qualified for sale
(the "State Expense Limit"), the Manager shall pay such Fund the amount of
such excess. For purposes of this State Expense Limit, Aggregate Operating
Expenses shall (a) include (i) any fees or expenses reimbursements payable
to Manager pursuant to this Agreement and (ii) to the extent the Fund
invests all or a portion of its assets in another investment company
registered under the 1940 Act, the pro rata portion of that company's
operating expenses allocated to the Fund, and (iii) any compensation
payable to Manager pursuant to any separate agreement relating to the
Fund's administration, but (b) exclude any interest, taxes, brokerage
commissions, and other normal charges incident to the purchase, sale or
loan of securities, commodity interests or other investments held by the
Fund, litigation and indemnification expense, and other extraordinary
expenses not incurred in the ordinary course of business. Except as
otherwise agreed to by the parties or unless otherwise required by the law
or regulation of any state, any reimbursement by Manager to a Fund under
this section shall not exceed the management fee payable to Manager by the
Fund under this Agreement.
Any payment to a Fund by Manager hereunder shall be made monthly, by
annualizing the Aggregate Operating Expenses for each month as of the last
day of the month. An adjustment for payments made during any fiscal year of
the Fund shall be made on or before the last day of the first month
following such fiscal year of the Fund if the Annual Operating Expenses for
such fiscal year (i) do not exceed the State Expense Limitation or (ii) for
such fiscal year there is no applicable State Expense Limit.
9. Retention of Sub-Adviser. Subject to obtaining the initial and
periodic approvals required under Section 15 of the 1940 Act, Manager may
retain one or more sub-advisers at Manager's own cost and expense for the
purpose of furnishing one or more of the services described in Section1
hereof with respect to Trust or one or more Funds. Retention of a sub-
adviser shall in no way reduce the responsibilities or obligations of
Manager under this Agreement, and Manager shall be responsible to Trust and
its Funds for all acts or omissions of any sub-adviser in connection with
the performance or Manager's duties hereunder.
-6-
<PAGE>
10. Non-Exclusivity. The services of Manager to Trust hereunder are
not to be deemed exclusive and Manager shall be free to render similar
services to others.
11. Standard of Care. The Manager shall not be liable for any loss
sustained by reason of the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon
the investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been selected with due care
and in good faith, except loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Manager in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
12. Amendment. This Agreement may not be amended as to Trust or any
Fund without the affirmative votes (a) of a majority of the Board of
Trustees, including a majority of those Trustees who are not "interested
persons" of Trust or of Manager, voting in person at a meeting called for
the purpose of voting on such approval, and (b)of a "majority of the
outstanding shares" of Trust or, with respect to any amendment affecting an
individual Fund, a "majority of the outstanding shares" of that Fund. The
terms "interested persons" and "vote of a majority of the outstanding
shares" shall be construed in accordance with their respective definitions
in the 1940 Act and, with respect to the latter term, in accordance with
Rule18f-2 under the 1940 Act.
13. Effective Date and Termination. This Agreement shall become
effective as to any Fund as of the effective date for that Fund specified
in Schedule hereto. This Agreement may be terminated at any time, without
payment of any penalty, as to any Fund by the Board of Trustees of Trust,
or by a vote of a majority of the outstanding shares of that fund, upon at
least sixty (60) days' written notice to Manager. This Agreement may be
terminated by Manager at any time upon at least sixty (60) days' written
notice to Trust. This Agreement shall terminate automatically in the event
of its "assignment" (as defined in the 1940 Act). Unless terminated as
hereinbefore provided, this Agreement shall continue in effect with respect
to any Fund until the end of the initial term applicable to that Fund
specified in Schedule and thereafter from year to year only so long as
such continuance is specifically approved with respect to that Fund at
least annually (a) by a majority of those Trustees who are not interested
persons of Trust or of Manager, voting in person at a meeting called for
the purpose of voting on such approval, and (b)by either the Board of
Trustees of Trust or by a "vote of a majority of the outstanding shares" of
the Fund.
14. Ownership of Records; Interparty Reporting. All records
required to be maintained and preserved by Trust pursuant to the provisions
of rules or regulations of
-7-
<PAGE>
the Securities and Exchange Commission under Section 31(a) of the 1940 Act
or other applicable laws or regulations which are maintained and preserved
by Manager on behalf of Trust and any other records the parties mutually
agree shall be maintained by Manager on behalf of Trust are the property of
Trust and shall be surrendered by Manager promptly on request by Trust;
provided that Manager may at its own expense make and retain copies of any
such records.
Trust shall furnish or otherwise make available to Manager such
copies of the financial statements, proxy statements, reports, and other
information relating to the business and affairs of each Shareholder in a
Fund as Manager may, at any time or from time to time, reasonably require
in order to discharge its obligations under this Agreement.
Manager shall prepare and furnish to Trust as to each Fund
statistical data and other information in such form and at such intervals
as Trust may reasonably request.
15. Non-Liability of Trustees and Shareholders. Any obligation of
Trust hereunder shall be binding only upon the assets of Trust (or the
applicable Fund thereof) and shall not be binding upon any Trustee,
officer, employee, agent or Shareholder of Trust. Neither the authorization
of any action by the Trustees or Shareholders of Trust nor the execution of
this Agreement on behalf of Trust shall impose any liability upon any
Trustee or any Shareholder.
16. Use of Manager's Name. Trust may use the name "Nuveen
Investment Trust" and the Fund names listed in Schedule or any other name
derived from the name "Nuveen" only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
business of Manager as investment adviser. At such time as this Agreement
or any extension, renewal or amendment hereof, or such other similar
agreement shall no longer be in effect, Trust will cease to use any name
derived from the name "Nuveen" or otherwise connected with Manager, or with
any organization which shall have succeeded to Manager's business as
investment adviser.
17. References and Headings. In this Agreement and in any such
amendment, references to this Agreement and all expressions such as
"herein", "hereof", and "hereunder" shall be deemed to refer to this
Agreement as amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction, or effect
-8-
<PAGE>
of this Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
Dated: July 29, 1996
Nuveen Investment Trust
Attest BY /s/ James J. Wesolowski
-----------------------
/s/ GIFFORD R. ZIMMERMAN
- - ------------------------
Nuveen Institutional Advisory Corp.
Attest By /s/ THOMAS C. SPALDING
----------------------
/s/ LARRY W. MARTIN
- - -------------------
-9-
<PAGE>
Nuveen Investment Trust
Management Agreement
Schedule A
The Funds of the Trust currently subject to this Agreement and the
effective date of each are as follows:
<TABLE>
<CAPTION>
Fund Effective Date
<S> <C>
Nuveen Growth and Income Stock Fund July 29, 1996
Nuveen Balanced Stock and Bond Fund July 29, 1996
Nuveen Balanced Municipal and Stock Fund July 29, 1996
Nuveen Balanced (State) Municipal and Stock Fund(s) -------------
</TABLE>
Amended: July 23, 1997
<PAGE>
Nuveen Investment Trust
Management Agreement
Schedule B
Compensation pursuant to Section 7 of this Agreement shall be calculated
with respect to each Fund in accordance with the following schedule applicable
to the average daily net assets of the Fund:
Nuveen Growth and Income Stock Fund
<TABLE>
<CAPTION>
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .8500 of 1%
For the next $125 million .8375 of 1%
For the next $250 million .8250 of 1%
For the next $500 million .8125 of 1%
For the next $1 billion .8000 of 1%
For assets over $2 billion .7750 of 1%
</TABLE>
Nuveen Balanced Stock and Bond Fund
<TABLE>
<CAPTION>
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
</TABLE>
Nuveen Balanced Municipal and Stock Fund
Nuveen Balanced (State) Municipal and Stock Fund(s)
<TABLE>
<CAPTION>
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
</TABLE>
Amended: July 23, 1997
<PAGE>
EXHIBIT (b)(5)(d)
Investment Sub-Advisory Agreement
Agreement made this 16th day of May, by and between Nuveen Institutional
Advisory Corp., a Delaware corporation and registered investment adviser
("Manager"), and Institutional Capital Corporation, a Delaware corporation and
registered investment adviser ("Sub-Adviser").
Whereas, Manager expects to be the investment manager for the Nuveen
Investment Trust (the "Fund"), an open-end diversified, management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"), currently consisting of three separate series or portfolios including the
Nuveen Growth and Income Stock Fund, the Nuveen Balanced Stock and Bond Fund and
the Nuveen Balanced Municipal and Stock Fund (the "Initial Portfolios"); and
Whereas, Manager desires to retain Sub-Adviser as its agent to furnish
investment advisory services for the Initial Portfolios, upon the terms and
conditions hereafter set forth;
Now, Therefore, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. Manager hereby appoints Sub-Adviser to provide
certain sub-investment advisory services to the Initial Portfolios for the
period and on the terms set forth in this Agreement. Sub-Adviser accepts
such appointments and agrees to furnish the services herein set forth for
the compensation herein provided.
2. Additional Portfolios. In the event that the Fund establishes one
or more portfolios other than the Initial Portfolios, with respect to which
the Manager desires to engage the Sub-Adviser to render investment advisory
services hereunder, the Manager shall notify the Sub-Adviser of such
desire. If the Sub-Adviser is willing to render such services, it shall
notify the Manager in writing whereupon such portfolio or portfolios shall
become a Portfolio or Portfolios hereunder.
<PAGE>
3. Services to be Performed. Subject always to the supervision of
Funds's Board of Trustees and the Manager, Sub-Adviser will furnish an
investment program in respect of, make investment decisions for, and place
all orders for the purchase and sale of securities for, the assets
designated in Schedule A hereto, as such schedule may be amended from time
to time, of the Initial Portfolios and other Portfolios hereunder, all on
behalf of such Portfolios. In the performance of its duties, Sub-Adviser
will satisfy its fiduciary duties to the Fund (as set forth in Section7,
below), and will monitor the Portfolios' investments, and will comply with
the provisions of Fund's Declaration of Trust and By-laws, as amended from
time to time, and the stated investment objectives, policies and
restrictions of the Portfolios. Manager will provide Sub-Adviser with
current copies of the Fund's Declaration of Trust, By-laws, prospectus and
any amendments thereto, and any objectives, policies or limitations not
appearing therein as they may be relevant to Sub-Adviser's performance
under this Agreement. Sub-Adviser and Manager will each make its officers
and employees available to the other from time to time at reasonable times
to review investment policies of the Portfolios and to consult with each
other regarding the investment affairs of the Portfolios. Sub-Adviser will
report to the Board of Trustees and to Manager with respect to the
implementation of such program.
Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform to all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and in addition
will conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to its
investment advisory activities;
-2-
<PAGE>
(c) Sub-Adviser is authorized to select the brokers or dealers that
will execute the purchases and sales of portfolio securities for the
Portfolios and is directed to use its best efforts to obtain best
execution, which includes most favorable net results and execution of the
Fund's orders, taking into account all appropriate factors, including
price, dealer spread or commission, size and difficulty of the transaction
and research or other services provided. It is understood that the Sub-
Adviser will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Fund or in respect of any Portfolio, or be in breach
of any obligation owing to the Fund or in respect of any Portfolio under
this Agreement, or otherwise, solely by reason of its having caused the
Fund to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Fund in excess of
the amount of commission another member of an exchange, broker or dealer
would have charged if the Sub-Adviser determined in good faith that the
commission paid was reasonable in relation to the brokerage or research
services provided by such member, broker or dealer, viewed in terms of that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to its accounts, including the Fund, as to which it exercises
investment discretion. In addition, if in the judgment of the Sub-Adviser,
the Fund would be benefited by supplemental services, the Sub-Adviser is
authorized to pay spreads or commissions to brokers or dealers furnishing
such services in excess of spreads or commissions which another broker or
dealer may charge for the same transaction, provided that the Sub-Adviser
determined in good faith that the commission or spread paid was reasonable
in relation to the services provided. The Sub-Adviser will properly
communicate to the officers and trustees of the Fund such information
relating to transactions for any Portfolio as they may reasonably request.
In no instance will portfolio securities be purchased from or sold to the
Manager, Sub-Adviser or any affiliated person of either the Fund, Manager,
or Sub-Adviser, except as may be permitted under the 1940 Act;
-3-
<PAGE>
(d) will report regularly to Manager and to the Board of Trustees
and will make appropriate persons available for the purpose of reviewing
with representatives of Manager and the Board of Trustees on a regular
basis at reasonable times the management of the Portfolios, including,
without limitation, review of the general investment strategies of the
Portfolios, the performance of the Portfolios in relation to standard
industry indices, interest rate considerations and general conditions
affecting the marketplace and will provide various other reports from time
to time as reasonably requested by Manager; and
(e) will prepare such books and records with respect to the
Portfolios' securities transactions as requested by the Manager and will
furnish Manager and Fund's Board of Trustees such periodic and special
reports as the Board or Manager may reasonably request.
4. Expenses. During the term of this Agreement, Sub-Adviser will
pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commission, if any) purchased for the Fund.
5. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, Manager will pay the Sub-Adviser, and
the Sub-Adviser agrees to accept as full compensation therefor, at the end
of each calendar month, an equity or fixed income portfolio management fee
on the specified proportion of each Portfolio's average daily net asset
value set forth in Schedule A hereto, as such schedule may be amended from
time to time, at an annual rate as set forth below, which rate is
determined by reference to the average daily market value of the equity and
fixed income assets, respectively, of all Nuveen-sponsored investment
products for which Institutional Capital serves as portfolio manager,
applying the same proportions as set forth in Schedule A.
Equity Assets of Nuveen-Sponsored
-4-
<PAGE>
Investment Products Managed by Equity Management
Institutional Capital Fee
For the first $500 million .35 of 1%
For the next $500 million .30 of 1%
For assets over $1 billion .25 of 1%
Fixed-Income Assets of Nuveen-Sponsored
Investment Products Managed by Fixed Income
Institutional Capital Management Fee
For the first $500 million .20 of 1%
For the next $500 million .15 of 1%
For assets over $1 billion .12 of 1%
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month and year,
respectively.
6. Services to Others. Manager understands, and has advised Fund's
Board of Trustees, that Sub-Adviser now acts, or may in the future act, as
an investment adviser to fiduciary and other managed accounts, and as
investment adviser or sub-investment adviser to other investment companies,
provided that the Sub-Adviser conforms to the provisions of the Joint
Business Initiative Agreement, and further provided that whenever the Fund
and one or more other investment advisory clients of Sub-Adviser have
available funds for investment, investments suitable and appropriate for
each will be allocated in a manner believed by Sub-Adviser to be equitable
to each. Manager recognizes, and has advised Fund's Board of Trustees,
that in some cases this procedure may adversely affect the size of the
position that a Portfolio may obtain in a particular security. It is
further agreed that, on occasions when the Sub-Adviser deems the purchase
or sale of a security to be in the best interests of the Fund as well as
other accounts, it may, to
-5-
<PAGE>
the extent permitted by applicable law, but will not be obligated to,
aggregate the securities to be so sold or purchased for the Fund with those
to be sold or purchased for other accounts in order to obtain favorable
execution and lower brokerage commissions. In addition, Manager
understands, and has advised Fund's Board of Trustees, that the persons
employed by Sub-Adviser to assist in Sub-Adviser's duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement will be deemed to limit or restrict the right
of Sub-Adviser or any of its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature. It is also agreed that the Sub-Adviser may use any supplemental
research obtained for the benefit of the Fund in providing investment
advice to its other investment advisory accounts or for managing its own
accounts.
7. Limitation of Liability. Manager will not take any action
against Sub-Adviser to hold Sub-Adviser liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
performance of Sub-AdviserOs duties under this Agreement, except for a loss
resulting from Sub-AdviserOs willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
8. Cross-Indemnification. Each party to this Agreement
("Indemnitor") shall indemnify and hold the other party and its officers,
directors, employees, representatives, agents, and affiliates
(collectively, "Indemnitee") harmless as follows:
a. Duty to Indemnify. Each Indemnitee shall be indemnified
against any and all losses, liabilities, damages, expenses and other
costs (including, without limitation, Indemnitee's own attorney's and
paralegal's fees and other litigation expenses) suffered or incurred
by Indemnitee arising out of or in connection
-6-
<PAGE>
with any breach or violation of this Agreement, federal or state
statutes, rules or regulations, exchange or self-regulatory agency
rules and regulations, or common law that is attributable in whole
or, to the extent responsible, in part to Indemnitor's actions or
the actions of any person whom Indemnitor may supervise or control,
in any civil, criminal, administrative, arbitration, mediation or
other proceeding.
b. Notice of Claims. An Indemnitee asserting an indemnity claim
shall promptly notify Indemnitor in writing of the amount and nature
of the claim. Upon receipt of an indemnity claim, the Indemnitor
shall, within 30 days, fulfill any part of its obligation then due
under this Section or give Indemnitee a written explanation for its
denial of the claim. If any indemnity claim is not denied,
Indemnitor shall continue to fulfill its indemnity obligations as
and when they come due. The Indemnitee shall be entitled at its
expense to participate in the defense of any claim, lawsuit, or
proceedings. No claim asserted by a third party for which
indemnification from Indemnitor is sought shall be settled without
first obtaining the written consent of Indemnitor, which consent
shall not be unreasonably withheld.
9. Term; Termination; Amendment. This Agreement shall become
effective with respect to the Initial Portfolios on the same date as the
Management Agreement between the Fund and the Manager becomes effective;
provided that it has been approved by a vote of a majority of the
outstanding voting securities of each Portfolio in accordance with the
requirements of the 1940 Act and shall remain in full force for a period
ending two (2) years from such date unless sooner terminated as hereinafter
provided. This Agreement shall continue in force from year to year
thereafter with respect to each Portfolio, but only as long as such
continuance is specifically approved for each Portfolio at least annually
in the manner required by the 1940 Act and the rules and regulations
thereunder; provided, however,
-7-
<PAGE>
that if the continuation of this Agreement is not approved for a Portfolio,
the Sub-Adviser may continue to serve in such capacity for such Portfolio
in the manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any
penalty by the Manager on sixty (60) days' written notice to the Sub-
Adviser. This Agreement may also be terminated by the Fund with respect to
any Portfolio by action of the Board of Trustees or by a vote of a majority
of the outstanding voting securities of such Portfolio on sixty (60) days'
written notice to the Sub-Adviser by the Fund.
This Agreement may be terminated with respect to any Portfolio at any
time without the payment of any penalty by the Manager, the Board of
Trustees or by vote of a majority of the outstanding voting securities of
such Portfolio in the event that it shall have been established by a court
of competent jurisdiction that the Sub-Adviser or any officer or director
of the Sub-Adviser has taken any action which results in a breach of the
covenants of the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940 Act and
the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Sub-
Adviser to receive payments on any unpaid balance of the compensation
described in Section 5 earned prior to such termination.
This Agreement shall automatically terminate in the event the
Investment Management Agreement between the Manager and the Fund is
terminated, assigned or not renewed.
-8-
<PAGE>
10. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at
such address as such other party may designate for the receipt of such
notice.
11. Limitations on Liability. All parties hereto are expressly put
on notice of the Fund's Agreement and Declaration of Trust and all
amendments thereto, all of which are on file with the Secretary of
Massachusetts, and the limitation of shareholder and trustee liability
contained therein. The obligations of the Fund entered in the name or on
behalf thereof by any of the Trustees, representatives or agents are made
not individually but only in such capacities and are not binding upon any
of the Trustees, officers, or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund, and persons dealing
with the Fund must look solely to the assets of the Fund and those assets
belonging to the subject Portfolio, for the enforcement of any claims.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be
affected thereby. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
13. Applicable Law. This Agreement shall be construed in
accordance with applicable federal law and (except as to Section 11 hereof
which shall be construed in accordance with the laws of Massachusetts) the
laws of the State of Illinois.
-9-
<PAGE>
In Witness Whereof, the Manager and the Sub-Adviser have caused this
Agreement to be executed as of the day and year first above written.
Nuveen Institutional Advisory
Corp., a Delaware
corporation
By: /s/ Timothy Schwertfeger
--------------------------------
Title: Executive Vice President
--------------------------
Attest:
/s/ James J. Wesolowski
- - -------------------------------
Title: Secretary
-----------------------------
Institutional Capital Corporation,
a Delaware corporation
By: /s/ Robert H. Lyon
--------------------------------
Title: President
---------------------------
Attest:
/s/ John W. Boyd
- - -------------------------------
Title: Secretary
-----------------------------
-10-
<PAGE>
Investment Sub-Advisory Agreement
Schedule A
<TABLE>
<CAPTION>
Nuveen Growth and Income Stock Fund
- - -----------------------------------
<S> <C>
Assets for which Services are to be rendered pursuant to Section 3: All
Proportions applied under fee schedule pursuant to Section 5: 100% of all assets under Equity
Management Fee
Nuveen Balanced Stock and Bond Fund
- - -----------------------------------
Assets for which Services are to be rendered pursuant to Section 3: All
Proportions applied under fee schedule pursuant to Section 5: The percentage of the Target Investment mix
allocated by the Board of Directors from time
to time to Equity Securities under Equity
Management Fee
All remaining assets under Fixed Income
Management Fee
Nuveen Balanced Municipal Stock Fund
- - ------------------------------------
Nuveen Balanced California Municipal and Stock Fund
- - ---------------------------------------------------
Assets for which Services are to be rendered pursuant to Section 3: All Equity Securities
Proportions applied under fee schedule pursuant to Section 5: 40% of all assets under Equity Management Fee
</TABLE>
Amended: , 1997
<PAGE>
EXHIBIT (b)10(c)
Chapman and Cutler
111 West Monroe
Chicago, IL 60603
August 15, 1997
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606-1286
Re: Nuveen Investment Trust
-------------------------------
Gentlemen:
We have served as counsel for the Nuveen Investment Trust (the "Fund"),
which proposes to offer and sell shares of various classes of a new series
designated the Nuveen Balanced California Municipal and Stock Fund
(collectively, the "Shares") in the manner and on the terms set forth in its
Post-Effective Amendment No. 3 to its Registration Statement filed with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended.
In connection therewith, we have examined such pertinent records and
documents and matters of law, including the opinions of Bingham, Dana & Gould
LLP upon which we have relied as they relate to the laws of the Commonwealth of
Massachusetts, as we have deemed necessary in order to enable us to express the
opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
The shares of the Fund which are currently being registered by the
Post-Effective Amendment No. 3 to its Registration Statement referred to
above may be legally and validly issued from time to time in accordance
with the Fund's Declaration of Trust dated May 6, 1996, the Fund's By-Laws,
the Fund's Certificate for the Establishment and Designation of Series,
dated July 23, 1997, and subject to compliance with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and
applicable state laws regulating the sale of securities and the receipt by
the Fund of a purchase price of not less than the net asset value per share
and such Shares, when so sold, will be legally issued and outstanding,
fully paid and non-assessable, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain
circumstances be held personally liable for its obligations.
<PAGE>
Nuveen Investment Trust
August 15, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-03715) relating to the Shares referred to
above, to the use of our name and to the reference to our firm and said
Registration Statement.
Very truly yours,
Chapman and Cutler
<PAGE>
Exhibit (b)10(d)
August 14, 1997
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606-1286
Re: Registration Statement on Form N-1A under the Securities Act of 1933
--------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special Massachusetts counsel to Nuveen Investment Trust
(the "Fund") on behalf of its series Nuveen Balanced California Municipal and
Stock Fund in connection with the Fund's Post-Effective Amendment Number 3 to be
filed on or about August 14, 1997 (the "Amendment") to its Registration
Statement on Form N-1A (as proposed to be amended, the "Registration Statement")
with respect to certain of its Class A Common Shares, par value $.01 per share
(the "Class A Shares"), Class B Common Shares, par value $.01 per share (the
"Class B Shares"), Class C Common Shares, par value $.01 per share (the "Class C
Shares") and Class R Common Shares, par value $.01 per share (the "Class R
Shares", such Class A Shares, Class B Shares, Class C Shares and Class R Shares
referred to collectively herein as the "Shares"). You have requested that we
deliver this opinion to you in connection with the Fund's filing of such
Amendment.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate dated as of a recent date of the Secretary of the
Commonwealth of Massachusetts as to the existence of the Fund;
(b) a copy, certified by the Secretary of the Commonwealth of
Massachusetts, of the Fund's Declaration of Trust dated May 6, 1996;
<PAGE>
Nuveen Investment Trust
August 14, 1997
Page 2
(c) a copy of the Fund's Certificate for the Establishment and
Designation of Classes designating the Class A Shares, Class B Shares,
Class C Shares and Class R Shares, as executed by the Trustees of the Fund
and filed with Secretary of the Commonwealth of Massachusetts (the
"Designation of Classes");
(d) a copy of the Fund's Certificate for the Establishment and
Designation of Series designating Nuveen Balanced California Municipal and
Stock Fund, as executed by the Trustees of the Fund and filed with the
Secretary of the Commonwealth of Massachusetts (the "Designation of
Series");
(e) a Certificate executed by an appropriate officer of the Fund,
certifying as to, and attaching copies of, the Fund's Declaration of Trust,
Designation of Classes, Designation of Series, By-Laws, and certain
resolutions adopted by the Trustees of the Fund;
(f) a printer's proof dated as of August 14, 1997 of the
Amendment.
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (f) above.
This opinion is based entirely on our review of the documents listed above
and such investigation of law as we have deemed necessary or appropriate. We
have made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents.
This opinion is limited solely to the internal substantive laws of the
Commonwealth of Massachusetts as applied by courts located in such Commonwealth,
except that we express no opinion as to any Massachusetts securities law.
<PAGE>
Nuveen Investment Trust
August 14, 1997
Page 3
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
1. The Fund is duly organized and existing under the Fund's Declaration
of Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Fund's
Declaration of Trust, Designation of Classes, Designation of Series and By-Laws
and for the consideration described in the Registration Statement, will be
legally issued, fully paid and non-assessable, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain circumstances
be held personally liable for its obligations.
We hereby consent to the reference to our name in the Registration
Statement under the heading "Legal Opinions" and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
BINGHAM, DANA & GOULD LLP
<PAGE>
Exhibit (b)11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated July 29, 1996, and to all references to our firm included in or made a
part of this registration statement on Form N-1A of Nuveen Investment Trust,
comprising the Nuveen Growth and Income Stock Fund, Nuveen Balanced Stock and
Bond Fund and Nuveen Balanced Municipal and Stock Fund.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 14, 1997
<PAGE>
EXHIBIT (b)(99)(a)
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ Timothy R. Schwertfeger
---------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - --------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - --------------------------------
/s/ Karen L. Healy
--------------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ Robert H. Lyon
-------------------
Robert H. Lyon
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - ----------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - ----------------------------------
/s/ Karen L. Healy
-------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ Thomas E. Leafstrand
--------------------------
Thomas E. Leafstrand
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - ---------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - ---------------------------------
/s/ Karen L. Healy
-------------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ James E. Bacon
-------------------
James E. Bacon
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - --------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - --------------------------------
/s/ Karen L. Healy
-------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ William L. Kissick
-----------------------
William L. Kissick
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - ----------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - ----------------------------------
/s/ Karen L. Healy
-------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ Sheila W. Wellington
-------------------------
Sheila W. Wellington
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - --------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - --------------------------------
/s/ Karen L. Healy
-------------------------
My Commission Expires: 12/30/99
<PAGE>
NUVEEN INVESTMENT TRUST
________________
POWER OF ATTORNEY
_________________
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER. ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN AND ERIC F.
FESS, and each of them (with full power to each of them to act alone) his true
and lawful attorney-in-fact and agent, for him on his behalf and in his name,
place and stead, in any and all capacities, to sign, execute and affix his seal
thereto and file one or more Registration Statements on Form N-1A, under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, including any amendment or amendments thereto, with all exhibits, and
any and all other documents required to be filed with any regulatory authority,
federal or state, without limitation, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 23rd of July, 1997.
/s/ Anthony T. Dean
-------------------------
Anthony T. Dean
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 23rd of July, 1997, personally appeared before me, a Notary Public in
and for said County and State, the person named above who is known to me to be
the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
- - --------------------------------
"OFFICIAL SEAL"
KAREN L. HEALY
Notary Public, State of Illinois
My Commission Expires 12/30/99
- - --------------------------------
/s/ Karen L. Healy
-------------------------
My Commission Expires: 12/30/99
