<PAGE>
NUVEEN
Growth and Income
Mutual Funds
December 31, 1997
Semiannual Report
For investors seeking
superior returns
with moderated risk.
[PHOTO APPEARS HERE]
Growth
and Income
Stock Fund
<PAGE>
Nuveen Growth and Income Stock Fund
Highlights
As of December 31, 1997
A Solid 1st Full Year for the Fund...
Attractive Fund Returns
Annualized Total Returns
[BAR CHART APPEARS HERE]
One Year Since Inception
Class A (NAV) 27.48% 30.49%
Class A (Offer) 20.78% 25.57%
Lipper Growth & Income Index 26.96% 28.98%
Superior Down Market Protection
Asian Financial Crisis 10/7-10/27/97
[BAR CHART APPEARS HERE]
Class A (NAV) -8.42
Lipper Growth
& Income Index -8.79%
...Builds on the Sub-Adviser's
Strong Long-Term Record
Consistent Performance
Annualized Total Returns
[BAR CHART APPEARS HERE]
1 Year 5 Year 10 Year
Manager Composite (NAV) 28.15% 20.51% 17.69%
Manager Composite (Offer) 21.42% 19.21% 17.06%
Lipper Growth & Income Index 26.96% 18.06% 16.03%
Less impact from Down Markets
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Inflation Oil Crises '87 Crash Gulf War
1/77-3/78 4/81-6/82 10/87-12/87 7/90-9/90
<S> <C> <C> <C> <C>
Manager Composite (NAV] -1.67% 0.91% -10.10% - 7.82%
Lipper Growth & Income Index -6.78% -9.35% -19.86% -13.45%
</TABLE>
Contents
1 Dear Shareholder
3 Disciplined Stock Selection
Makes the Difference
4 Report from the
Fund's Equity Adviser
6 Performance Overview
7 Portfolio of Investments
9 Statement of Net Assets
10 Statement of Operations
11 Statement of Changes
in Net Assets
12 Notes to
Financial Statements
17 Financial Highlights
20 Building Better
Portfolios with Nuveen
21 Fund Information
* The 1-, 5-, and 10-year annualized total return and down market performance
in the bottom two charts represents the gross-of-fee performance of the
Discretionary Equity Composite of the fund's sub-adviser, Institutional
Capital Corporation (ICAP), adjusted for the annual operating expenses of
the Class A shares of the fund. The performance of the ICAP Discretionary
Equity Composite does not represent actual performance of the fund, but
rather the composite performance of individual accounts using substantially
the same investment objectives and practices as the fund. The Lipper Growth
& Income Index represents the average returns with dividends reinvested of
the 30 largest funds in the category. There were 547, 215 and 127 funds in
the Lipper Growth & Income Objective category for the 1-, 5-, and 10-year
periods, respectively. Both the ICAP Discretionary Equity Composite
performance and the fund's performance represent past performance and may
not be indicative of the fund's future performance.
<PAGE>
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
Dear Shareholder
Just 14 months ago, we introduced a very special equity fund designed to allow
investors to participate in the growth potential of equity investments with less
risk and price volatility than the overall market.
Today, looking back over that fund's first full calendar year of operation --
January 1 through December 31, 1997 -- I am proud to report to you that the
Nuveen Growth and Income Stock Fund and its risk-sensitive strategy have
fulfilled that initial promise.
Helping Risk-Sensitive Investors
Pursue Long-Term Growth
In many ways, 1997 -- which saw both strength and volatility in the markets --
was a textbook case of how successful that kind of disciplined, risk-resistant
equity strategy can be. During 1997's turbulent market, the fund outperformed
its peers while also providing superior capital protection during the October
downturn precipitated by the Asia crisis.
As of year end, Class A shareholders in the Nuveen Growth and Income Stock Fund
enjoyed a one-year return of 27.48%, compared with the 26.96% average generated
by the Lipper Growth and Income Fund Index for the same period. The numbers
posted by the fund since its inception are equally impressive, with the fund
turning in a 30.49% annualized lifetime return as of December 31, 1997, versus
the 28.98% return for the Lipper index.
The message is compelling: Risk-sensitive investors do not have to forego the
growth that's essential to the long-term success of any diversified investment
plan. In fact, by combining a portfolio of high-quality stocks that we believe
are undervalued by the market with time-tested risk management techniques, the
Nuveen Growth and Income Stock Fund not only allows you to participate in the
growth potential of the stock market, it gives you valuable downside protection
in periods of uncertainty.
1
<PAGE>
"Nuveen Growth
and Income
Stock Fund
hasn't been
around
for long,
yet it has a
compelling record
behind it."
- Morningstar, Inc.
A Core Holding for
Today and Tomorrow
With the Nuveen Growth and Income Stock Fund, we set out to create an equity
investment managed with Nuveen values, one that combines strong, consistent
performance potential over time with a focus on protecting the wealth you've
worked hard to achieve.
We believe we have succeeded. And we're not alone. Morningstar, Inc. concluded
in a recent analysis, "Nuveen Growth and Income Stock Fund hasn't been around
for long, yet it has a compelling record behind it."
We hope that you and your financial adviser are happy with the initial
performance of your fund. Your adviser can also introduce you to a number of
other Nuveen products and services designed to round out your portfolio of core
investments, including the Nuveen Rittenhouse Growth Fund, which was introduced
in January. This new fund invests in blue-chip companies with a history of
consistent earnings and dividend growth and, coupled with the fund's low-
turnover portfolio management strategy, provides a tax-efficient way for
investors to build and sustain wealth. We encourage you to talk with your
financial adviser to see if the Nuveen Rittenhouse Growth Fund -- along with our
variety of equity, balanced and fixed-income investments -- may be right for
you.
On behalf of everyone at Nuveen, thank you for your continued confidence in us
and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 12, 1998
2
<PAGE>
Disciplined Stock Selection
Makes the Difference
Institutional Capital, the sub-adviser selected by Nuveen, selects stocks from a
universe of approximately 450 large and midsize companies, using proprietary
quantitative valuation models to determine which of these stocks appear to be
undervalued in today's market. Based on a rigorous assessment of each company's
prospects, the portfolio manager then looks for a "catalyst" that could be the
key to improving the undervalued stock's price. A catalyst may be as simple as
an anticipated management change or as complex as a fundamentally improved
industry outlook.
Once selected, the stocks are monitored closely and replaced if they reach their
target value, fail to meet expectations or become less attractive relative to
other portfolio candidates.
An example of how this process works to investors' advantage is illustrated by a
recent purchase and sale of Allstate Insurance, the nation's second largest
writer of personal insurance.
The stock was first purchased for the Nuveen Growth and Income Stock Fund on
August 7, 1996 at around $46 per share. The "catalysts" perceived by the
investment team were a reduction in overall risk exposure and management's focus
on controlling expenses.
Allstate became one of the fund's top 10 holdings for much of 1997.
As these catalysts took hold and the market recognized Allstate's underlying
value, the position was sold at roughly $83 per share -- a gain of approximately
80% on the first purchase price.
Allstate Insurance: A Case Study in Your Fund Manager's Stock Selection
[GRAPH CHART APPEARS HERE]
January First purchased Named one of Rated one of the
1996 for Nuveen Funds Smart Money's most admired
$46 per share Five Best for '97 U.S. companies
Opens first office Nuveen exits
in China $83 per share
October 1997
This was a particularly rewarding investment by the fund, and not all of the
fund's investments have or will be successful.
3
<PAGE>
Report from the
Fund's Equity Adviser
Institutional Capital
talks about the
financial markets and
offers insights into
factors that affected
the performance
of the fund over the
past year.
The Year In Review
The U.S. equity market enjoyed a banner year in 1997, resulting from a favorable
economic environment of solid growth, low inflation and declining interest
rates.
Reflecting the strength of the markets, the benchmark Standard & Poor's 500
index posted a healthy 33% gain for the year. Combined with the double-digit
returns of 1995 and 1996, 1997's gains capped the stock market's best three-year
period in more than 70 years.
The year was not without volatility, however. In the first quarter, the Federal
Open Market Committee's decision to raise short-term interest rates resulted in
a sharp decline in stock prices. But the market quickly rebounded in the second
quarter, with all of the major indexes going on to establish new record highs.
In October, the fallout from the Asian financial crisis caused the stock market
to suffer its first "correction" of more than 10% since 1990. Once again,
however, the market proved resilient, retracing its losses and ending the year
on a strong note.
During the year, large capitalization stocks continued to dominate returns, as
investors favored non-cyclical issues, especially after the decline in October.
Among industry sectors, financials were the strongest, benefiting from declining
interest rates, and technology stocks, which did well in 1996, underperformed
the market in 1997.
1997 Fund Performance
The Nuveen Growth and Income Stock Fund registered strong gains in 1997,
comparing favorably to benchmarks reflecting the fund's growth and income
objective as well as its value-oriented investment style.
Aiding fund performance throughout the year was a strict adherence to the fund's
disciplined investment approach. In 1997, the fund's primary focus was on
companies undergoing a corporate restructuring as well as those enjoying pricing
advantages due to supply and demand conditions. An emphasis on these themes
enabled the fund to fully participate in the market's rise to record highs in
the first half of the year.
4
<PAGE>
"The fund's emphasis on high-quality, large-cap value stocks, as well as an
increased cash allocation, enabled the fund to protect investor capital during
the October correction better than the overall market or growth and income funds
in general."
Further contributing to the fund's performance in 1997 were its risk management
strategies. These strategies proved valuable during the highly volatile second
half of the year. The fund's emphasis on high-quality, large-cap value stocks,
as well as an increased cash allocation, enabled the fund to protect investor
capital during the October correction better than the overall market or growth
and income funds in general.
Economic Developments and Outlook
The economy in 1997 proved stronger and more resilient than many forecasts had
predicted. Real growth was the strongest in 10 years, and inflation came in
lower than in any year in the last three decades.
Looking forward, however, there are signs that the economic outlook may be less
bright in 1998. Though it's still too early to predict how the financial
instability in Asia will play out, we expect growth in the region to slow
sharply.
The turmoil in Asia and its impact on the U.S economy is difficult to gauge at
this time. Here at home, the fund's investment team expects economic growth to
moderate somewhat from last year's pace. During the first half of the year,
growth may be sluggish due to inventory buildups and a slowdown in international
trade.
By the second half, the slowdown in production is expected to moderate which,
combined with the impact of lower bond rates, should result in stronger growth.
The outlook for inflation in 1998 is promising. Price increases are expected to
remain under 2% as a result of lower prices on Asian imports and a strong
dollar. Increasing wage pressures remain one of the few negatives on the
inflation front.
Federal Reserve policy has remained unchanged since last March, and with the
dual benefits of moderate economic growth and low inflation, odds are that the
Fed is likely to view stable policy as the most prudent course of action.
Fund Outlook
In the months ahead, the fund will continue its emphasis on companies that we
believe are candidates for corporate restructuring, as well as those enjoying
pricing flexibility due to supply and demand conditions. At the same time, we
will explore the unique and timely opportunities facing companies that may
benefit from the Asian financial crisis.
Given the current market and economic backdrop, and the fund's fundamental
emphasis on value, we believe the Nuveen Growth and Income Stock Fund is well
positioned for the coming year.
5
<PAGE>
Nuveen Growth and Income Stock Fund
Performance Overview
As of December 31, 1997
- --------------------------------------------
Industry Diversification
- --------------------------------------------
[PIE Chart Appears Here]
Retail 2%
Consumer Staples 14%
Capital Spending 13%
Financial 11%
Health Care 11%
Technology 11%
Basic Industries 10%
Consumer Services 10%
Energy 8%
Transportation 6%
Consumer Durables 4%
- --------------------------------------------
- --------------------------------------------
Portfolio Allocation
- --------------------------------------------
[PIE Chart Appears Here]
Stocks 91%
Cash 9%
- --------------------------------------------
- --------------------------------------------
Growth of $10,000 Invested on 8/7/96/1/
- ---------------------------------------
[Mountain Chart Appears Here]
August 1996 9475
December 1997 13752
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Fund Highlights
- --------------------------------------------------------------------
Share Class A B C R
<S> <C> <C> <C> <C>
CUSIP 67064Y503 67064Y602 67064Y701 67064Y800
..........................................................................................
Inception Date 8/96 8/96 8/96 8/96
..........................................................................................
Net Asset Value (NAV) $23.35 $23.32 $23.30 $23.36
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Fund Net Assets (millions) $752.7
..........................................................................................
Beta 0.90
..........................................................................................
Average Market Capitalization $27 billion
..........................................................................................
Average P/E (trailing 12 mos.) 17.2
..........................................................................................
Number of Stocks 44
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Annualized Total Return/2/
- ------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
<S> <C> <C> <C> <C> <C>
1-Year 27.48% 20.78% 26.45% 26.36% 27.83%
..........................................................................................
Since Inception 30.49% 25.55% 29.50% 29.42% 30.83%
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Top 10 Holdings
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phillip Morris 3.70% American Home Products 3.29%
..........................................................................................
General Motors 3.66% Philips Electronics NV AD 3.16%
..........................................................................................
DuPont 3.57% Northrop Grumman Corp 3.05%
..........................................................................................
Loews Corp 3.48% News Corp Ltd. ADR 3.03%
..........................................................................................
Nationsbank Corp 3.33% Citicorp 2.94%
- ------------------------------------------------------------------------------------------
</TABLE>
/1/Returns assume reinvestment of all dividends and capital gains and an
investment at the maximum offer price (including sales charge). Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than the original cost. Returns reflect reimbursement
of expenses by the adviser. The performance data quoted represents past
performance, which is not indicative of future results.
/2/Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.25% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years. Class
B shares convert to Class A shares after eight years. Class C shares have a
1% CDSC for redemptions within one year. Class B and Class C returns do not
reflect imposition of the CDSC.
6
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Growth and Income Stock Fund
<TABLE>
<CAPTION>
Market
Shares Description Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 86.8%
Basic Industries - 9.0%
151,400 Akzo Nobel N.V. Sponsored ADR $13,152,875
142,100 Boise Cascade Corporation 4,298,525
441,700 E.I. du Pont de Nemours and Company Ltd. 26,529,606
211,600 IMC Global Inc. 6,929,900
275,300 Reynolds Metals Company 16,518,000
- -------------------------------------------------------------------------------------------------------
Capital Equipment/Technology - 9.2%
257,400 First Data Corporation 7,528,950
180,600 International Business Machines Corporation 18,883,988
145,800 LSI Logic Corporation # 2,879,550
294,350 Motorola, Inc. 16,796,347
388,200 Philips Electronic N.V. 23,486,100
- -------------------------------------------------------------------------------------------------------
Capital Spending - 11.0%
341,220 Boeing Company 16,697,475
271,600 Case Corporation 16,414,825
141,400 B.F. Goodrich Company 5,859,263
196,650 Northrop Grumman Corporation 22,614,750
28,601 Raytheon Company - Class A 1,410,379
394,500 Raytheon Company - Class B 19,922,250
- -------------------------------------------------------------------------------------------------------
Consumer Durables - 3.6%
448,500 General Motors Corporation 27,190,313
- -------------------------------------------------------------------------------------------------------
Consumer Services - 8.9%
612,500 Dun & Bradstreet Corporation 18,949,219
672,000 Host Marriott Corp. # 13,188,000
625,924 Peninsular and Oriental Steam Navigation Company 14,305,242
711,400 U.S. West Media Group # 20,541,675
- -------------------------------------------------------------------------------------------------------
Consumer Staples - 12.5%
561,000 Archer-Daniels-Midland Company 12,166,688
381,200 Diageo PLC Sponsored ADR 14,437,950
444,600 Hasbro, Inc. 14,004,900
243,350 Loews Corporation 25,825,519
606,100 Philip Morris Companies Inc. 27,463,906
- -------------------------------------------------------------------------------------------------------
Energy - 6.8%
168,500 Ashland Inc. $ 9,046,344
190,560 Elf Acquitaine SA Sponsored ADR 11,171,580
430,800 Union Pacific Resources Group Inc. 10,446,900
530,350 Unocal Corporation 20,584,209
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Growth and Income Stock Fund - continued
<TABLE>
<CAPTION>
Market
Shares Description Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - continued
Financials - 9.2%
119,600 Banc One Corporation 6,495,775
172,400 Citicorp 21,797,825
406,850 NationsBank Corporation 24,741,566
47,150 Wells Fargo & Company 16,004,478
- ---------------------------------------------------------------------------------------------------------------------
Health Care - 9.3%
319,050 American Home Products Corporation 24,407,325
28,000 Baxter International Inc. 1,412,250
498,000 Hoechst AG Sponsored ADR 17,461,125
334,415 Rhone-Poulenc SA-Sponsored ADR 14,839,666
366,400 Tenet Healthcare Corporation # 12,137,000
- ---------------------------------------------------------------------------------------------------------------------
Retail - 1.8%
320,600 Federated Department Stores, Inc.# 13,805,838
- ---------------------------------------------------------------------------------------------------------------------
Transportation - 5.5%
51,550 AMR Corporation # 6,624,174
172,000 Burlington Northern Santa Fe 15,985,250
694,600 Canadian Pacific, Ltd. 18,927,848
- ---------------------------------------------------------------------------------------------------------------------
Total Common Stocks - (cost $598,348,070) 653,885,348
- ---------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 3.0%
1,133,250 News Corporation Limited Sponsored ADR 22,523,343
- ---------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks - (cost $20,187,488) 22,523,343
- ---------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Description Value
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 8.8%
33,000,000 AT&T Corporation, Commercial Paper, effective yield of 5.90%, 1/27/98 32,863,435
20,000,000 Coca Cola Company, Commercial Paper, effective yield of 5.84%, 1/08/98 19,977,911
13,300,000 Xerox Credit Corporation, Commercial Paper, effective yield of 6.65%, 1/02/98 13,297,599
- ---------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments - (cost $66,138,945) 66,138,945
----------------------------------------------------------------------------------------------
Total Investments - (cost $684,674,503) - 98.6% 742,547,636
----------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 10,168,254
----------------------------------------------------------------------------------------------
Net Assets - 100% $752,715,890
==============================================================================================
# Non-income producing.
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $684,674,503) (note 1) $742,547,636
Cash 112,770
Receivables:
Dividends 585,095
Investments sold 11,340,568
Shares sold 2,513,162
Deferred organization costs (note 1) 134,622
Other assets 12,254
- -----------------------------------------------------------------------------------------------------
Total assets 757,246,107
- -----------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 1,017,053
Shares redeemed 1,382,629
Accrued expenses:
Management fees (note 4) 386,189
12b-1 distribution and service fees (notes 1 and 4) 174,341
Other 114,781
Dividends payable 1,455,224
- -----------------------------------------------------------------------------------------------------
Total liabilities 4,530,217
- -----------------------------------------------------------------------------------------------------
Net assets (note 5) $752,715,890
=====================================================================================================
Class A Shares (note 1)
Net assets $683,921,765
Shares outstanding 29,290,154
Net asset value and redemption price per share $ 23.35
Offering price per share (net asset value per share plus maximum sales
charge of 5.25% of offering price) $ 24.64
=====================================================================================================
Class B Shares (note 1)
Net assets $ 42,402,368
Shares outstanding 1,818,316
Net asset value, offering and redemption price per share $ 23.32
=====================================================================================================
Class C Shares (note 1)
Net assets $ 10,622,923
Shares outstanding 455,992
Net asset value, offering and redemption price per share $ 23.30
=====================================================================================================
Class R Shares (note 1)
Net assets $ 15,768,834
Shares outstanding 675,014
Net asset value, offering and redemption price per share $ 23.36
=====================================================================================================
</TABLE>
9 See accompanying notes to financial statements.
<PAGE>
Statement of Operations (Unaudited)
Six months ended December 31, 1997
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $4,680,097
Interest 2,202,852
-------------------------------------------------------------------------------------------
Total Investment Income $6,882,949
-------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 2,997,062
12b-1 service fees - Class A (notes 1 and 4) 841,746
12b-1 distribution and service fees - Class B (notes 1 and 4) 136,418
12b-1 distribution and service fees - Class C (notes 1 and 4) 35,924
Shareholders' servicing agent fees and expenses 574,039
Custodian's fees and expenses 63,263
Trustees' fees and expenses (note 4) 33,222
Professional fees 21,719
Shareholders' reports - printing and mailing expenses 197,903
Federal and state registration fees 100,672
Amortization of deferred organization costs (note 1) 18,148
Other expenses 13,033
------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 5,033,149
Expense reimbursement (note 4) (579,271)
------------------------------------------------------------------------------------------
Net expenses 4,453,878
------------------------------------------------------------------------------------------
Net investment income 2,429,071
------------------------------------------------------------------------------------------
Realized and Unrealized Gain (loss) from Investments
Net realized gain from investment transactions (notes 1 and 3) 61,182,583
Net change in unrealized appreciation or depreciation of investments (21,841,374)
------------------------------------------------------------------------------------------
Net gain from investments 39,341,209
------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 41,770,280
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six months ended 8/7/96 to
12/31/97 6/30/97
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,429,071 $ 4,552,258
Net realized gain from investment transactions
(notes 1 and 3) 61,182,583 23,971,540
Net change in unrealized appreciation or depreciation
of investments (21,841,374) 79,714,507
-----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 41,770,280 108,238,305
-----------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (2,388,265) (4,326,777)
Class B (2,168) (33,641)
Class C (545) (11,701)
Class R (73,234) (131,681)
From accumulated net realized gains from investment transactions:
Class A (55,954,561) (96)
Class B (3,039,217) (96)
Class C (762,373) (96)
Class R (1,266,493) (57,187)
-----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (63,486,856) (4,561,275)
-----------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 98,021,637 560,742,869
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 52,905,817 1,085,746
-----------------------------------------------------------------------------------------------------
150,927,454 561,828,615
-----------------------------------------------------------------------------------------------------
Cost of shares redeemed (22,644,906) (19,389,087)
-----------------------------------------------------------------------------------------------------
Net increase in net assets
from Fund share transactions 128,282,548 542,439,528
-----------------------------------------------------------------------------------------------------
Net increase in net assets 106,565,972 646,116,558
Net assets at the beginning of period 646,149,918 33,360
-----------------------------------------------------------------------------------------------------
Net assets at the end of period $752,715,890 $646,149,918
=====================================================================================================
Balance of undistributed net investment
income at end of period $ 13,317 $ 48,458
=====================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Notes to Financial Statements (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") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. 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.
The Fund invests 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 generally
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 exchange
or Nasdaq for which there are 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. 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 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.
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 have extended settlement periods. 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 the when-issued and delayed delivery purchase commitments. At
December 31, 1997, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income is declared and distributed to shareholders quarterly. Net
realized capital gains from investment transactions, if any, are declared and
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryforwards.
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 transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and
12
<PAGE>
service fees. An investor purchasing Class B Shares agrees to pay a CDSC of up
to 5% depending upon the length of time the shares are held by the investor
(CDSC is reduced to 0% at the end of six years). Class B Shares convert to Class
A Shares eight years after purchase. Class C Shares are sold without a sales
charge but incur annual 12b-1 distribution and service fees. An investor
purchasing Class C Shares agrees to pay a CDSC of 1% if Class C Shares are
redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or 12b-1 distribution or service fees. Class R Shares are available
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended December 31, 1997.
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, which presently only
includes 12b-1 distribution and service fees, 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.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization 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 unamortized organization costs as of the date of redemption.
13
<PAGE>
Notes to Financial Statements (Unaudited) - continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 12/31/97 8/7/96 to 6/30/97
------------------------------------------------------
Shares Amount Shares* Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,127,557 $ 53,452,635 26,506,586 $534,047,616
Class B 1,301,686 32,578,975 451,781 10,154,679
Class C 286,656 7,183,785 156,621 3,451,741
Class R 190,091 4,806,242 655,095 13,088,833
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 2,122,583 48,411,017 51,079 1,069,544
Class B 115,904 2,622,214 38 787
Class C 29,839 674,647 10 201
Class R 52,435 1,197,939 726 15,214
- ---------------------------------------------------------------------------------------
6,226,751 150,927,454 27,821,936 561,828,615
- ---------------------------------------------------------------------------------------
Shares redeemed:
Class A (625,328) (15,611,033) (892,740) (18,980,846)
Class B (43,674) (1,076,951) (7,836) (182,828)
Class C (11,863) (293,580) (5,688) (119,188)
Class R (218,876) (5,663,342) (4,874) (106,225)
- ---------------------------------------------------------------------------------------
(899,741) (22,644,906) (911,138) (19,389,087)
- ---------------------------------------------------------------------------------------
Net increase 5,327,010 $128,282,548 26,910,798 $542,439,528
=======================================================================================
</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.
14
<PAGE>
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the six months ended
December 31, 1997, were as follows:
<TABLE>
<CAPTION>
------------------------------------------------
Purchases:
<S> <C>
Investment securities $ 759,614,757
U.S. government obligations --
Short-term investments 2,389,125,153
Sales:
Common and preferred stocks 699,848,739
U.S. government obligations --
Short-term investments 2,392,097,606
------------------------------------------------
</TABLE>
At December 31, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $57,873,133 of which $70,608,935 related
to appreciated securities and $12,735,802 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 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 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 net assets over $2 billion .7750 of 1
------------------------------------------------
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution 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 Fund pays 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.
During the six months ended December 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $2,712,105 of which
approximately $2,587,625 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
15
<PAGE>
Notes to Financial Statements (Unaudited) - continued
During the six months ended December 31, 1997, the Distributor compensated
authorized dealers directly with approximately $1,397,800 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1997, the Distributor retained approximately $172,300 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $206,700
of CDSC on share redemptions during the six months ended December 31, 1997.
5. Composition of Net Assets
At December 31, 1997, the Fund had an unlimited number of $.01 par value per
share common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
---------------------------------------------------------------------------
Capital paid-in $670,739,125
Balance of undistributed net investment income 13,317
Accumulated net realized gain from investment transactions 24,090,315
Net unrealized appreciation of investments 57,873,133
---------------------------------------------------------------------------
Net assets $752,715,890
===========================================================================
</TABLE>
16
<PAGE>
Financial Highlights
17
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
--------------------------- -------------------------
Net
Net realized and Net Total
asset unrealized Dividends asset return
value Net gain (loss) from net Distributions value on net
Year ended beginning investment from investment from capital end of asset
June 30, of period income(b) investments income gains period value(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1998 (e) $24.01 $.09 $1.41 $(.09) $(2.07) $23.35 6.46%
1997 (d)** 17.96 .30 6.18 (.20) (.23) 24.01 36.30
Class B (8/96)
1998 (e) 24.00 -- 1.39 -- (2.07) 23.32 6.05
1997 (d)** 17.97 .21 6.13 (.08) (.23) 24.00 35.37
Class C (8/96)
1998 (e) 23.98 -- 1.39 -- (2.07) 23.30 6.06
1997 (d)** 17.97 .21 6.11 (.08) (.23) 23.98 35.26
Class R (8/96)
1998 (e) 24.02 .12 1.41 (.12) (2.07) 23.36 6.58
1997 (d)** 17.96 .30 6.24 (.25) (.23) 24.02 36.65
============================================================================================================
</TABLE>
* Annualized.
** 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.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of expenses
by Nuveen Institutional Advisory Corp.
(c) Average Commission rate paid on equity portfolio transactions.
Commissions paid are included in the cost of the securities.
(d) From commencement of class operations as noted.
(e) For the six months ended December 31, 1997.
18
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- ----------------------------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio Average
end of period reimburse- reimburse- reimburse- reimburse- turnover commission
(in thousands) ment ment ment (b) ment (b) rate rate paid(c)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 683,922 1.36%* .54%* 1.20%* .70%* 110% $.0326
616,209 1.28* 1.45* 1.20* 1.53* 110 .0322
42,402 2.12* (.20)* 1.95* (.03)* 110 .0326
10,664 2.03* .95* 1.95* 1.03* 110 .0322
10,623 2.11* (.20)* 1.95* (.04)* 110 .0326
3,630 2.03* .96* 1.95* 1.04* 110 .0322
15,769 1.11* .78* .95* .94* 110 .0326
15,647 1.47* 1.04* .95* 1.56* 110 .0322
========================================================================================================
</TABLE>
19
<PAGE>
Nuveen Family
of Mutual Funds
Nuveen offers a variety
of funds designed
to help you reach
your financial goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth and
Income
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Building Better Portfolios with Nuveen
Reducing the impact of taxes and moderating risk are important goals for many
risk-sensitive investors seeking to build better portfolios. For these
investors, a tax-efficient, risk-resistant investment portfolio often forms the
foundation of a carefully-crafted financial plan for building and sustaining
wealth. Nuveen is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of premier
advisers, including Nuveen Advisory Corp., Institutional Capital Corp. and
Rittenhouse Financial Services. Our equity, balanced and income funds seek
to provide consistent performance, time-tested strategies to reduce risk and
experienced, professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more. A range of actively managed growth, balanced and municipal income-
oriented portfolios are available, all based upon a disciplined investment
philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios
of investment-grade quality municipal bonds. The fund shares are listed
and traded on the New York and American stock exchanges. Exchange-
traded funds provide the investment convenience, price visibility and
liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA-rated investment with an
attractive tax-free yield for the cash reserves portion of an investment
portfolio. MuniPreferred shares are backed 2-to-1 by the long-term portfolios of
Nuveen dual-class exchange-traded funds and are available for national
as well as a wide variety of state-specific portfolios.
20
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional
Advisory Corporation
333 West Wacker Drive
Chicago, IL 60606
Fund Sub-adviser
Institutional Capital Corporation
225 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public
Accountants
Arthur Anderson LLP
Chicago, IL
21
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898 Nuveen
OUR SECOND CENTURY 1998
helping investors sustain the wealth of a lifetime.
John Nuveen, Sr.
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
ESA-GI 12-97
<PAGE>
NUVEEN
Growth and Income
Mutual Funds
December 31, 1997
Semiannual Report
For investors seeking
attractive after-tax returns
from long-term growth of
capital and tax-free income.
[PHOTO APPEARS HERE]
Balanced
Municipal and
Stock Fund
<PAGE>
Nuveen Balanced Municipal and Stock Fund
Highlights
As of December 31, 1997
Contents
1 Dear Shareholder
3 Report from your
Fund's Manager
5 Performance Overview
6 Portfolio of Investments
13 Statement of Net Assets
14 Statement of Operations
15 Statement of Changes
in Net Assets
16 Notes to
Financial Statements
21 Financial Highlights
24 Building Better
Portfolios with Nuveen
25 Fund Information
A Solid 1st Full Year for the Fund...
Attractive Annualized Fund Total Return (Class A Shares)
[BAR CHART APPEARS HERE]
One Year Since Inception
16.31% 17.47%
10.22% 13.05%
[_] NAV
[_] Offer
...and Well Positioned
for the Future
Portfolio Composition
[PIE CHART APPEARS HERE]
Municipal Bonds 60%
Stocks 40%
Municipal Bond Credit Quality
[PIE CHART APPEARS HERE]
AAA 50%
AA 8%
A 9%
BBB 33%
Top 5 Stock Holdings
Phillip Morris 1.64%
General Motors 1.58%
Philips Electronics 1.58%
NationsBank Corp 1.50%
American Home Products 1.49%
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
Dear Shareholder
Just 10 months ago, we introduced an innovative balanced mutual fund that
combines the growth potential of stocks with the tax-free income of municipal
bonds.
Today, looking back over that fund's first full calendar year of operation --
January 1 through December 31, 1997 -- I am proud to report to you that the
Nuveen Balanced Municipal and Stock Fund and its risk-sensitive strategy for
growth and income have fulfilled that initial promise.
Investing for Growth of
Capital and Tax-Free Income
In many ways, 1997 -- which saw both strength and volatility in the markets --
focused renewed attention on the need for diversification and appropriate asset
allocation. While stocks played an important role in helping investors achieve
growth, volatility in the equity markets provided a vivid illustration of the
steadying effect that fixed-income investments can add to a well-balanced
portfolio. At year's end, Class A shareholders in the Nuveen Balanced Municipal
and Stock Fund enjoyed a one-year return of 16.31%, and since inception, the
fund has turned in a 17.47% return.
The message is compelling: Risk-sensitive investors do not have to forego the
growth that's essential to the long-term success of any diversified investment
plan. In fact, by combining a portfolio of high-quality stocks that we believe
are undervalued by the market with the dependable tax-free income of municipal
bonds, time-tested risk management techniques, the Nuveen Balanced Municipal and
Stock Fund not only allows you to participate in the growth potential of the
stock market, it helps you preserve your lifestyle against the effects of
inflation.
A Core Holding for
Today and Tomorrow
With the Nuveen Balanced Municipal and Stock Fund, we set out to create an
investment managed with Nuveen values, one that combined strong, consistent
performance potential over time with a focus on protecting the wealth you've
worked hard to achieve. The fund invests the majority of its assets in quality
municipal bonds with intermediate effective maturities. Nuveen brings a century
of experience to the search for attractively priced bonds it believes
1
<PAGE>
The message is
compelling:
Risk-sensitive
investors do not
have to forego
the growth that's
essential to the
long-term
success of any
diversified
investment plan.
offer the best balance of tax-free income and total return. The fund's equity
portfolio manager invests the remaining assets in stocks of established, well-
known companies, which historically have been less volatile than small company
stocks. We believe this investment focus, paired with a team-oriented,
disciplined approach, can help generate more consistent, predictable long-term
performance.
We hope that you and your financial adviser are happy with the initial
performance of your fund. Your adviser can also introduce you to a number of
other Nuveen products and services designed to round out your portfolio of core
investments, including the Nuveen Rittenhouse Growth Fund, which was introduced
in January. We encourage you to talk to your financial adviser to see if the
Nuveen Rittenhouse Growth Fund -- along with our variety of equity, balanced and
fixed-income investments -- may be right for you.
On behalf of everyone at Nuveen, thank you for your continued confidence in us
and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 12, 1998
2
<PAGE>
Report from Your Fund's Manager
The Year In Review
The U.S. equity and municipal bond markets enjoyed a banner year in 1997,
resulting from a favorable economic environment of solid growth, low inflation
and declining interest rates. The municipal market was characterized by large
supply and low interest rate levels, and municipal bonds remained very
attractive compared with other fixed-income investments, with yields
approximately 90% of Treasury yields.
Reflecting the strength of the markets, the benchmark Standard & Poor's 500
index posted a healthy 33% gain for the year. Combined with the double-digit
returns of 1995 and 1996, 1997's gains capped the stock market's best three-year
period in more than 70 years. In unison, the bond markets posted significant
gains due mainly to the minimal inflation rate. Between January 1997 and
December 1997, the yield on 10-year Lehman Brothers Municipal Bond index (which
is a benchmark for the municipal component of this fund) dropped from 5.09% to
4.56%.
The year was not without volatility, however. In the first quarter, the Federal
Open Market Committee's decision to raise short-term interest rates resulted in
a sharp decline in stock prices. But the market quickly rebounded in the second
quarter, with all of the major indexes going on to establish new record highs.
In October, the fallout from the Asian financial crisis caused the stock market
to suffer its first "correction" of more than 10% since 1990. Once again,
however, the market proved resilient, retracing its losses and ending the year
on a strong note.
During the year, large capitalization stocks continued to dominate returns, as
investors favored non-cyclical issues, especially after the decline in October.
Among industry sectors, financials were the strongest, benefiting from declining
interest rates, and technology stocks, which did well in 1996, underperformed
the market in 1997.
1997 Fund Performance
The Nuveen Balanced Municipal and Stock Fund registered solid gains in 1997,
benefiting from the advances in both the equity and municipal markets.
Aiding fund performance throughout the year was a strict adherence to the fund's
disciplined investment approach. In 1997, the primary focus in the fund's equity
portfolio was on companies undergoing a corporate restructuring as well as those
enjoy-
3
<PAGE>
ing pricing advantages due to supply and demand conditions. In the municipal
bond portfolio, the fund's manager continued to emphasize long-intermediate-term
bonds with 10- to 15-year maturities while searching for opportunities to add
incremental yield to the portfolio.
Further contributing to the fund's performance in 1997 were its risk management
strategies. These strategies proved valuable during the highly volatile second
half of the year. The fund's emphasis on high-quality, large-cap value stocks,
as well as intermediate municipals, enabled the fund to protect investor capital
during the October correction better than the overall market or balanced funds
in general.
Economic Developments and
Outlook
The economy in 1997 proved stronger and more resilient than many forecasts had
predicted. Real growth was the strongest in 10 years, and inflation came in
lower than in any year in the last three decades.
Looking forward, however, there are signs that the economic outlook may be less
bright in 1998. We expect that both equity and bond returns will be constrained
due to a number of factors, including sluggish profit growth, increased
competition from imports, and higher wage costs.
The turmoil in Asia and its impact on the U.S. economy is difficult to gauge at
this time. Here at home, the fund's investment team expects economic growth to
moderate somewhat from last year's pace. During the first half of the year,
growth may be sluggish due to inventory buildups and a slowdown in international
trade. By the second half, the slow down in production is expected to moderate,
which, combined with the impact of low interest rates should result in stronger
growth.
The outlook for inflation in 1998 is promising. Price increases should remain
under 2% as a result of lower prices on Asian imports and a strong dollar.
Increasing wage pressures remain one of the few negatives on the inflation
front.
Federal Reserve policy has remained unchanged since last March, and with the
dual benefits of moderate economic growth and low inflation, odds are that the
Fed is likely to view stable policy as the most prudent course of action.
Fund Outlook
In the months ahead, the fund's equity portfolio will continue to have an
emphasis on companies that we believe are candidates for corporate
restructuring, as well as those enjoying pricing flexibility due to supply and
demand conditions. At the same time, we will explore the unique and timely
opportunities facing companies that may benefit from the Asian financial crisis.
In the fixed-income portfolio, long-intermediate-term municipal bonds will
remain the primary focus.
Given the current market and economic backdrop, and the fund's fundamental
emphasis on value, we believe the Nuveen Balanced Municipal and Stock Fund is
well positioned for the coming year.
"The Nuveen
Balanced
Municipal and
Stock Fund reg-
istered solid
gains in 1997,
benefiting from
the advances in
both the equity
and municipal
markets."
4
<PAGE>
Nuveen Balanced Municipal and Stock Fund
Performance Overview
As of December 31, 1997
[PIE CHART APPEARS HERE]
Stock Diversification
Energy 8%
Health Care 11%
Financial 11%
Transportation 7%
Basic Industries 10%
Consumer Staples 14%
Technology 11%
Capital Spending 13%
Consumer Durables 4%
Consumer Services 9%
Retail 2%
- ----------------------------------
Growth of $10,000 on 8/7/96/1/
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
August, 1996 $ 9,475.00
December, 1997 $11,869.50
</TABLE>
<TABLE>
<CAPTION>
Fund Highlights
<S> <C> <C> <C> <C>
Share Class A B C R
CUSIP 67064Y883 67064Y875 67064Y867 67064Y859
Inception Date 8/96 8/96 8/96 8/96
Net Asset Value (NAV) $23.81 $23.87 $23.86 $23.75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Net Assets (millions) $125.4
Beta 6.9
Average Market Capitalization (Stocks) 27 billion
Average P/E of Stocks (trailing 12 mos.) 17.2
Number of Stocks 44
- --------------------------------------------------------------------------------
Annualized Total Return/2/
Share Class A(NAV) A(Offer) B C R
1-Year 16.31% 10.22% 15.53% 15.48% 16.68%
Since Inception 17.47% 13.05% 16.65% 16.62% 17.79%
- --------------------------------------------------------------------------------
Tax-Free Yields
Share Class A(NAV) A(Offer) B C R
Distribution Rate 3.24% 3.07% 1.53% 1.53% 6.14%
SEC 30-Day Yield 2.55% 2.42% 1.80% 1.80% 2.81%
- --------------------------------------------------------------------------------
</TABLE>
1 Returns assume reinvestment of all dividends and capital gains and an
investment at the maximum offer price (including sales charge). Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than the original cost. Returns reflect reimbursement of
expenses by the adviser. The performance data quoted represents past
performance, which is not indicative of future results.
2 Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.25% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years. Class
B shares convert to Class A shares after eight years. Class C shares have a
1% CDSC for redemptions within one year. Class B and Class C returns do not
reflect imposition of the CDSC.
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Municipal and Stock Fund
<TABLE>
<CAPTION>
Market
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 38.3%
Basic Industries -- 3.7%
11,100 Akzo Nobel N.V. Sponsored ADR $ 964,313
10,600 Boise Cascade Corporation 320,650
28,500 E.I. du Pont de Nemours and Company Ltd. 1,711,781
15,900 IMC Global Inc. 520,725
18,750 Reynolds Metals Company 1,125,000
- --------------------------------------------------------------------------------
Capital Equipment/Technology -- 4.2%
18,400 First Data Corporation 538,200
13,450 International Business Machines Corporation 1,406,366
13,000 LSI Logic Corporation 256,750
20,750 Motorola, Inc. 1,184,047
32,000 Philips Electronic N.V. 1,936,000
- --------------------------------------------------------------------------------
Capital Spending -- 4.9%
27,250 Boeing Company 1,333,547
19,800 Case Corporation 1,196,663
9,300 B.F. Goodrich Company 385,369
13,450 Northrop Grumman Corporation 1,546,750
2,038 Raytheon Company -- Class A 100,475
29,750 Raytheon Company -- Class B 1,502,375
- --------------------------------------------------------------------------------
Consumer Durables -- 1.5%
31,950 General Motors Corporation 1,936,969
- --------------------------------------------------------------------------------
Consumer Services -- 3.6%
40,450 Dun & Bradstreet Corporation 1,251,422
45,350 Host Marriott Corp.+ 889,994
45,266 Peninsular and Oriental Steam Navigation Company 1,034,536
47,050 U.S. West Media Group+ 1,358,569
- --------------------------------------------------------------------------------
Consumer Staples -- 5.4%
38,000 Archer-Daniels-Midland Company 824,125
31,900 Diageo PLC Sponsored ADR 1,208,213
28,375 Hasbro, Inc. 893,813
17,150 Loews Corporation 1,820,044
44,500 Philip Morris Companies Inc. 2,016,406
- --------------------------------------------------------------------------------
Energy -- 2.9%
12,300 Ashland Inc. 660,356
14,540 Elf Acquitaine SA Sponsored ADR 852,408
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Energy -- continued
30,700 Union Pacific Resources Group Inc. $ 744,475
36,200 Unocal Corporation 1,405,013
- --------------------------------------------------------------------------------
Financials -- 4.5%
10,050 Banc One Corporation 545,841
12,550 Citicorp 1,586,791
30,350 NationsBank Corporation 1,845,659
4,800 Wells Fargo & Company 1,629,300
- --------------------------------------------------------------------------------
Health Care -- 4.4%
24,000 American Home Products Corporation 1,836,000
1,500 Baxter International Inc. 75,656
34,600 Hoechst AG Sponsored ADR 1,213,163
31,301 Rhone-Poulenc SA-Sponsored ADR 1,388,982
28,600 Tenet Healthcare Corporation+ 947,374
- --------------------------------------------------------------------------------
Retail -- 0.7%
20,550 Federated Department Stores, Inc.+ 884,933
- --------------------------------------------------------------------------------
Transportation -- 2.5%
3,850 AMR Corporation+ 494,724
12,950 Burlington Northern Santa Fe 1,203,540
51,300 Canadian Pacific, Ltd. 1,397,924
- --------------------------------------------------------------------------------
Total Common Stocks -- (cost $45,260,603) 47,975,241
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.3%
84,100 News Corporation Limited Sponsored ADR 1,671,488
- --------------------------------------------------------------------------------
Total Preferred Stocks -- (cost $1,503,574) 1,671,488
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited) - continued
Nuveen Balanced Municipal and Stock Fund
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 56.9%
Alabama - 0.4%
$480,000 Alabama Water Pollution Control Authority, Revolving Fund Loan 8/05 at 100 Aaa $ 543,648
Bonds, Series 1994, 6.625%, 8/15/08
- ----------------------------------------------------------------------------------------------------------------------------------
California - 3.6%
2,500,000 Escondido Multifamily Housing Revenue Refunding (Morning View 7/05 at 101 1/2 AAA 2,623,500
Terrace Apartments), FNMA Series 1997B, 5.400%, 1/01/27
(Mandatory put 7/01/07)
250,000 County of Orange, California, Refunding Recovery Bonds, 1995 No Opt Call Aaa 284,750
Series A, 6.000%, 6/01/10
1,495,000 Palmdale Civic Authority, 1997 Revenue Bonds, Series A (Civic 7/07 at 102 Aaa 1,563,561
Center Refinancing) 5.375%, 7/01/12
- ----------------------------------------------------------------------------------------------------------------------------------
Colorado - 1.7%
2,000,000 City and County of Denver, Colorado, Airport System Revenue 11/06 at 102 Aaa 2,165,720
Bonds, Series 1996 B, 5.625%, 11/15/08 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.8%
1,000,000 State of Connecticut Health and Educational Facilities No Opt. Call BBB 1,002,980
Authority Revenue Bonds, Hospital for Special Care Issue,
Series B, 5.125%, 7/01/07
- ----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.5%
500,000 District of Columbia General Obligation Refunding Bonds, No Opt. Call Aaa 581,090
Series A-1, 6.500%, 6/01/10
- ----------------------------------------------------------------------------------------------------------------------------------
Georgia - 0.8%
910,000 Georgia Housing and Finance Authority, Single Family Mortgage 6/06 at 102 AA+ 945,809
Bonds, 1996 Series A, 5.875%, 12/01/19 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Idaho - 1.9%
750,000 Idaho Housing and Finance Association, Single Family Mortgage 1/07 at 102 A1 775,080
Bonds, 1997 Series D, 5.950%, 7/01/09 (Alternative Minimum Tax)
1,535,000 Idaho Housing and Finance Association, Single Family Mortgage Bonds 7/07 at 101 1/2 A1 1,575,401
1997 Series F, 5.700%, 7/01/10 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Illinois - 7.8%
2,160,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1985 7/04 at 102 BBB*** 2,539,987
(St. Elizabeth's Hospital of Chicago, Inc.), 7.250%, 7/01/05
(Pre-refunded to 7/01/04)
1,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 A1 1,579,575
(OSF Healthcare System), 6.000%, 11/15/10
250,000 Illinois Health Facilities Authority, FHA Insured Mortgage Revenue 2/06 at 102 Aaa 265,720
Bonds, Series 1996 (Sinai Health System), 5.500%, 2/15/09
1,200,000 Illinois Health Facilities Authority Revenue Bonds, Series 1997A 10/07 at 102 Aaa 1,288,104
(Highland Park Hospital Project), 5.700%, 10/01/10
</TABLE>
- -----
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois -- continued
$ 2,000,000 City of Chicago, Chicago-O'Hare International Airport Special Facility 5/99 at 103 Baa2 $ 2,152,240
Revenue Bonds (United Air Lines, Inc. Project), Series 1988A, 8.400%,
5/01/18 (Alternative Minimum Tax)
1,000,000 Cook County School District 99 (Cicero), General Obligation School No Opt. Call Aaa 1,242,290
Bonds, Series 1997, 8.500%, 12/01/04
700,000 Kankakee School District No. 111, Kankakee County, Illinois, General 1/06 at 100 Aaa 728,462
Obligation School Bonds, Series 1996, 5.500%, 1/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Maine -- 1.1%
1,000,000 Maine Educational Loan Marketing Corporation, Student Loan Revenue No Opt. Call Aaa 1,044,570
Bonds, Series A-4, 5.750%, 11/01/01 (Alternative Minimum Tax)
255,000 Town of Winslow, Maine (Crowe Rope Industries Project), 1997 Series 3/07 at 102 Aaa 279,064
A, General Obligation Tax Increment Financing Bonds, 6.000%, 3/01/11
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts -- 1.8%
2,000,000 Massachusetts Turnpike Authority Western Turnpike Revenue Bonds, 1/99 at 100 Aaa 2,029,900
Series 1997A, 5.550%, 1/01/17
250,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/06 at 102 A-*** 274,870
Bonds, Melrose-Wakefield Healthcare Corp. Issue, Series C, 5.700%,
7/01/08 (Pre-refunded to 7/01/06)
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan -- 3.3%
2,000,000 City of Detroit, Local Development Finance Authority, Tax Increment 5/07 at 102 A 2,050,700
Refunding Bonds, 1997 Series A (Senior Bonds - Credit Enhanced),
5.200%, 5/01/10
Essexville-Hampton Public Schools, County of Bay, State of Michigan,
1997 School Building and Site Bonds (General Obligation-Unlimited Tax):
1,000,000 5.400%, 5/01/11 5/07 at 100 Aaa 1,046,560
1,010,000 5.500%, 5/01/12 5/07 at 100 Aaa 1,063,156
- ------------------------------------------------------------------------------------------------------------------------------------
Mississippi -- 1.4%
Jones County, Mississippi, Hospital Revenue Refunding Bonds (South
Central Regional Medical Center Project), Series 1997:
1,285,000 5.350%, 12/01/10 12/07 at 100 BBB+ 1,302,463
500,000 5.400%, 12/01/11 12/07 at 100 BBB+ 506,625
- ------------------------------------------------------------------------------------------------------------------------------------
Nevada -- 2.1%
2,250,000 Nevada Housing Division Single Family Mortgage Bonds, 1997 Series A-1 4/07 at 102 Aa3 2,335,568
Mezzanine Bonds, 6.000%, 4/01/15 (Alternative Minimum Tax)
250,000 Airport Authority of Washoe County, Reno, Nevada, Airport Revenue 7/03 at 102 Aaa 267,463
Refunding Bonds, Series 1993B, 5.875%, 7/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire -- 3.0%
500,000 New Hampshire Higher Educational and Health Facilities Authority, 1/07 at 102 BBB- 532,000
Revenue Bonds, Series 1997 (New Hampshire College), 6.200%, 1/01/12
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited) -- continued
Nuveen Balanced Municipal and Stock Fund
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
New Hampshire -- continued
<S> <C> <C> <C> <C>
$3,000,000 State of New Hampshire, Turnpike System Revenue Bonds, 1992 Series, 4/02 at 102 Aaa $3,186,900
6.000%, 4/01/13
- ------------------------------------------------------------------------------------------------------------------------------------
New York -- 11.0%
275,000 Dormitory Authority of the State of New York, Revenue Bonds, City University 7/02 at 102 Baa1*** 303,199
Issue, Series U, 6.375%, 7/01/08 (Pre-refunded to 7/01/02)
1,430,000 Empire State Development Corporation, New York State Urban Development No Opt. Call Baa1 1,613,154
Corporation, Revenue Bonds (Youth Facilities), 6.500%, 4/01/07
2,000,000 New York State Thruway Authority, Local Highway and Bridge Service Contract 4/06 at 102 Baa1 2,126,520
Bonds, Series 1996, 5.625%, 4/01/07
1,700,000 New York State Urban Development Corporation, Project Revenue Bonds 1/03 at 102 Baa1 1,801,779
(Cornell Center for Theory and Simulation in Science and Engineering Grant),
Series 1993, 5.900%, 1/01/07
285,000 New York State, Urban Development Corporation, State Facilities Revenue No Opt. Call Baa1 314,486
Bonds, 1995 Refunding Series, 6.250%, 4/01/06
2,000,000 Certificates of Participation, The State of New York, The City University of New No Opt. Call Baa1 2,175,060
York (John Jay College of Criminal Justice Project Refunding), 6.000%, 8/15/06
500,000 Metropolitan Transportation Authority, Transit Facilities Service Contract Bonds, No Opt. Call Baa1 537,085
Series O, 5.750%, 7/01/07
250,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series D, 11/06 at 101 1/2 Baa1 265,633
Tax Exempt Bonds, 5.875%, 11/01/11
500,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series I, 4/07 at 101 Baa1 541,460
6.000%, 4/15/09
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series D, 8/07 at 101 Baa1 4,142,000
5.500%, 8/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma -- 2.0%
1,150,000 Oklahoma Industries Authority Health System Revenue Bonds, Series 1995C No Opt. Call Aaa 1,351,262
(Baptist Medical Center of Oklahoma Obligation Group), 7.000%, 8/15/06
1,000,000 Oklahoma Industries Authority, Health System Revenue Refunding Bonds No Opt. Call Aaa 1,111,420
(Obligated Group consisting of INTEGRIS Baptist Medical Center, Inc.,
INTEGRIS South Oklahoma City Hospital Corporation and INTEGRIS Rural
Health, Inc.), Series 1995D, 6.000, 8/15/07
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island -- 1.8%
200,000 Rhode Island Clean Water Protection Finance Agency, Water Pollution Control No Opt. Call Aaa 249,270
Revolving Fund Revenue Bonds, Series 1993 A (Pooled Loan Issue),
9.200%, 10/01/03
1,760,000 City of Providence, Rhode Island, General Obligation Bonds, 1997 Series A, 7/07 at 102 Aaa 1,960,622
6.000%, 7/15/09
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina -- 4.7%
3,000,000 Charleston County, South Carolina, Resource Recovery Refunding Revenue No Opt. Call Aaa 3,072,030
Bonds (Foster Wheeler Charleston Resource Recovery, Inc. Project),
Series 1997, 5.100%, 1/01/08 (Alternative Minimum Tax)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Provisional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina - continued
<C> <S> <C> <C> <C>
$2,825,000 Lexington County Health Services District, Inc. Hospital Revenue Refunding 11/08 at 102 Aaa $2,822,853
and Improvement Bonds, Series 1997, 5.000%, 11/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
Texas - 1.4%
235,000 Texas Department of Housing and Community Affairs, Single Family Mortgage 9/06 at 102 Aaa 247,725
Revenue Bonds, 1996 Series E, 5.750%, 3/01/10
215,000 City of Austin, Texas, Water, Sewer and Electric Refunding Revenue Bonds, No Opt. Call A 260,094
Series 1982, 14.000%, 11/15/01
250,000 City of San Antonio, Texas, Airport Systems Improvement Revenue Bonds, 7/06 at 101 Aaa 269,620
Series 1996, 5.700%, 7/01/09 (Alternative Minimum Tax)
1,000,000 Tyler Health Facilities Development Corporation, Hospital Revenue Bonds 7/02 at 100 Baa 1,008,510
(Mother Frances Hospital Regional Health Care Center Project),
Series 1997 A, 5.500%, 7/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 0.6%
200,000 State Board of Regents of the State of Utah, Student Loan Revenue Bonds, 11/05 at 102 Aaa 218,880
1995 Series N Bonds, 6.000%, 5/01/08 (Alternative Minimum Tax)
500,000 Tooele County, Hazardous Waste Disposal Revenue Bonds (Laidlaw Inc/USPCI 8/05 at 102 BBB+ 547,475
Clive PJ), Series 1995, 6.750%, 8/01/10 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 5.2%
2,500,000 Washington Public Power Supply System, Nuclear Project 1 Refunding Revenue 7/07 at 102 Aa1 2,492,400
Bonds, Series 1997B (Bonneville Administration), 5.125%, 7/01/12
200,000 Washington Public Power Supply System, Nuclear Project No. 2 Revenue Bonds, No Opt. Call Aa1 237,454
Series 1981A, 14.375%, 7/01/01
800,000 Washington Public Power Supply System, Project No. 3, Refunding Revenue 7/06 at 102 Aaa 867,568
Bonds, Series 1996-A, 5.700%, 7/01/09
1,005,000 Washington State Housing Finance Commission, Single-Family Mortgage 1/04 at 102 AAA 1,056,044
Revenue Bonds (Mortgage Backed Securities Program), Series 1995A,
6.650%, 7/01/16 (Alternative Minimum Tax)
650,000 Public Utility District No. 1 of Benton County, Washington, Electric Revenue and 11/07 at 100 Aaa 695,708
Acquisition Bonds, Series 1997, 5.450%, 11/01/08
1,060,000 Tahoma School District No. 409, King County, Washington, Unlimited Tax No Opt. Call Aaa 1,203,799
General Obligation Improvement and Refunding Bonds, 1997, 6.000%, 12/01/09
- ------------------------------------------------------------------------------------------------------------------------------------
$ 67,020,000 Total Municipal Investments - (cost $68,239,278) 71,270,866
============------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments (Unaudited) -- continued
Nuveen Balanced Municipal and Stock Fund
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES (cost $2,000,000) -- 1.6%
$2,000,000 Lake Charles Harbor & Terminal District Conoco Inc. Project, Series 1984, A-1+ $ 2,000,000
==========
Variable Rate Demand Bonds, 5.000%, 11/01/11++
------------------------------------------------------------------------------------------------------------
Total Municipal Bond Investments -- (cost $70,239,278) 73,270,866
------------------------------------------------------------------------------------------------------------
Total Investments -- (cost $117,003,455) -- 98.1% 122,917,595
------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.9% 2,508,779
------------------------------------------------------------------------------------------------------------
Net Assets -- 100% $125,426,374
============================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices
of the earliest optional call or redemption. There may be
other call provisions at varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's
rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities, which ensures the timely payment of principal
and interest. Securities are normally considered to be
equivalent to AAA rated securities.
+ Non-income producing.
++ The security has a maturity of more than one year, but has
variable rate and demand features which qualify it as a
short-term security. The rate disclosed is that currently
in effect. This rate changes periodically based on market
conditions or a specified market index.
See accompanying notes to financial statements.
12
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Assets
<S> <C>
Investment securities, at market value
(cost $117,003,455) (note 1) $122,917,595
Cash 112,799
Receivables:
Dividends 43,673
Interest 1,167,654
Investments sold 983,943
Shares sold 745,377
Deferred organization costs (note 1) 131,877
Other assets 1,725
- ----------------------------------------------------------------------------------------------
Total assets 126,104,643
- ----------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 207,896
Share redeemed 68,883
Accrued expenses:
Management fees (note 5) 51,111
12b-1 distribution and service fees (notes 1 and 5) 36,841
Other 14,778
Dividends payable 298,760
- ----------------------------------------------------------------------------------------------
Total liabilities 678,269
- ----------------------------------------------------------------------------------------------
Net assets (note 6) $125,426,374
==============================================================================================
Class A Shares (note 1)
Net assets $ 96,189,303
Shares outstanding 4,039,956
Net asset value and redemption price per share $ 23.81
Offering price per share (net asset value per share plus maximum sales
charge of 5.25% of offering price) $ 25.13
==============================================================================================
Class B Shares (note 1)
Net assets $ 14,426,834
Shares outstanding 604,418
Net asset value, offering and redemption price per share $ 23.87
==============================================================================================
Class C Shares (note 1)
Net assets $ 6,815,204
Shares outstanding 285,669
Net asset value, offering and redemption price per share $ 23.86
==============================================================================================
Class R Shares (note 1)
Net assets $ 7,995,033
Shares outstanding 336,634
Net asset value, offering and redemption price per share $ 23.75
==============================================================================================
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Statement of Operations (Unaudited)
Six months ended December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Investment Income (note 1)
<S> <C>
Dividends $ 309,108
Interest 1,747,167
- ----------------------------------------------------------------------------------------------
Total investment income 2,056,275
- ----------------------------------------------------------------------------------------------
Expenses
Management fees (note 5) 411,329
12b-1 service fees -- Class A (notes 1 and 5) 112,259
12b-1 distribution and service fees -- Class B (notes 1 and 5) 40,422
12b-1 distribution and service fees -- Class C (notes 1 and 5) 20,498
Shareholders' servicing agent fees and expenses 44,095
Custodian's fees and expenses 44,299
Trustees' fees and expenses (note 5) 3,007
Professional fees 14,345
Shareholders' reports -- printing and mailing expenses 10,559
Federal and state registration fees 63,097
Amortization of deferred organization costs (note 1) 18,148
Other expenses 1,310
- ----------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 783,368
Expense reimbursement (note 5) (144,016)
- ----------------------------------------------------------------------------------------------
Net expenses 639,352
- ----------------------------------------------------------------------------------------------
Net investment income 1,416,923
- ----------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 2,590,015
Net change in unrealized appreciation or depreciation of investments 1,950,690
- ----------------------------------------------------------------------------------------------
Net gain from investments 4,540,705
- ----------------------------------------------------------------------------------------------
Net increase in net assets from operations $5,957,628
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited)
Six months ended 8/7/96 to
12/31/97 6/30/97
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,416,923 $ 550,380
Net realized gain from investment transactions
(notes 1 and 4) 2,590,015 457,166
Net change in unrealized appreciation or depreciation
of investments 1,950,690 3,963,451
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 5,957,628 4,970,997
- -----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,271,745) (291,349)
Class B (59,992) (714)
Class C (30,507) (485)
Class R (137,173) (141,518)
From accumulated net realized gains from
investment transactions:
Class A (1,444,497) (22)
Class B (193,480) (22)
Class C (90,253) (22)
Class R (120,260) (15,983)
- -----------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (3,347,907) (450,115)
- -----------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 33,610,145 86,716,680
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 2,471,071 105,920
- -----------------------------------------------------------------------------------------------------------------
36,081,216 86,822,600
- -----------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (3,789,588) (851,817)
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share
transactions 32,291,628 85,970,783
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets 34,901,349 90,491,665
Net assets at the beginning of period 90,525,025 33,360
- -----------------------------------------------------------------------------------------------------------------
Net assets at the end of period $125,426,374 $90,525,025
- -----------------------------------------------------------------------------------------------------------------
Balance of undistributed net investment income at end of period $ 33,820 $ 116,314
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
- -----
15
<PAGE>
Notes to Financial Statements (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") which was organized as a Massachusetts
business trust in 1996. The Trust (and each series within the Trust) is an open-
end diversified management investment company registered under the Investment
Company Act of 1940. 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.
The Fund invests in a conservative mix of equities and tax-exempt securities for
capital growth, capital preservation and current tax-exempt 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 generally
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 exchange
or Nasdaq for which there are 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. The prices of municipal bonds in the Fund's investment portfolio are
provided by a pricing service approved by the Fund's Board of Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities and/or securities
having remaining maturities of 60 days or less when purchased, are valued at
amortized cost, which approximates market value.
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 have extended settlement periods. 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 the when-issued and delayed delivery purchase commitments. At
December 31, 1997, the Fund had no such purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts on long-term debt securities when required
for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared and distributed to shareholders
monthly. Net ordinary taxable income and net realized capital gains from
investment transactions, if any, are declared and distributed to shareholders
not less frequently than annually. Furthermore, capital gains are distributed
only to the extent they exceed available capital loss carryforwards.
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 transactions, where
applicable.
Federal Income Taxes
The Fund intends to distribute all of its net investment income and capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal tax provision is required. In addition, the
Fund intends to satisfy conditions which will enable interest from Municipal
Obligations, which is exempt from regular federal income tax when received by
the Fund, to qualify as exempt-interest dividends when distributed to
Shareholders of the Fund. Net realized capital gains and ordinary income
distributions are subject to federal taxation.
- -----
16
<PAGE>
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net assets value without an up-front sales charge
but may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a contingent deferred sales charge ("CDSC") of up to 5%
depending upon the length of time the shares are held by the investor (CDSC is
reduced to 0% at the end of six years). Class B Shares convert to Class A Shares
eight years after purchase. Class C Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class C
Shares agrees to pay a CDSC of 1% if Class C Shares are redeemed within one year
of purchase. Class R Shares are not subject to any sales charge or 12b-1
distribution or service fees. Class R Shares are available for purchases of over
$1 million and in other limited circumstances.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization 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 unamortized organization costs as of the date of redemption.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended December 31, 1997.
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, which presently only
includes 12b-1 distribution and service fees, 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.
- ------
17
<PAGE>
Notes to Financial Statements (Unaudited) - continued
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six months ended 12/31/97 8/7/96 to 6/30/97
-----------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 633,974 $15,179,367 3,490,947 $77,077,576
Class B 520,018 12,460,573 89,676 2,064,529
Class C 214,656 5,128,098 67,179 1,548,508
Class R 35,237 842,107 300,930 6,026,067
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 92,615 2,193,810 4,721 105,890
Class B 6,912 163,324 -- --
Class C 4,156 98,088 -- --
Class R 668 15,849 1 30
- --------------------------------------------------------------------------------------------------------
1,508,236 36,081,216 3,953,454 86,822,600
- --------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (146,374) (3,488,940) (36,344) (818,648)
Class B (11,268) (270,598) (1,337) (30,923)
Class C (642) (15,293) (97) (2,246)
Class R (619) (14,757) -- --
- --------------------------------------------------------------------------------------------------------
(158,903) (3,789,588) (37,778) (851,817)
- --------------------------------------------------------------------------------------------------------
Net increase 1,349,333 $32,291,628 3,915,676 $85,970,783
========================================================================================================
</TABLE>
3. Distributions to Shareholders
On January 9, 1998, the Fund declared a dividend distribution from its tax-
exempt net investment income which was paid on February 2, 1998, to shareholders
of record on January 9, 1998, as follows:
4. Securities Transactions
Purchases and sales (including maturities) of investments in common and
preferred stocks, municipal bonds and temporary investments for the six months
ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
<S> <C>
---------------------------------------------
Purchases:
Common and preferred stocks $44,668,323
Municipal bonds 29,251,752
Temporary investments 12,500,000
Sales:
Common and preferred stocks 29,789,257
Municipal bonds 15,315,076
Temporary investments 15,100,000
=============================================
</TABLE>
At December 31, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $5,914,140 of which $7,010,666 related to
appreciated securities and $1,096,526 related to depreciated securities.
-------
18
<PAGE>
5. 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 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 net assets over $2 billion .6750 of 1
--------------------------------------------------------
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution 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 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 investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays 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.
During the six months ended December 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $862,300 of which
approximately $812,700 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended December 31, 1997, the Distributor compensated
authorized dealers directly with approximately $555,800 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1997, the Distributor retained approximately $60,900 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $22,400
of CDSC on share redemptions during the six months ended December 31, 1997.
6. Composition of Net Assets
At December 31, 1997, the Fund had an unlimited number of $.01 par value per
share common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------
Capital paid-in $118,295,769
Balance of undistributed net investment income 33,820
Accumulated net realized gain from investment transactions 1,182,645
Net unrealized appreciation of investments 5,914,140
--------------------------------------------------------------------------
Net assets $125,426,374
--------------------------------------------------------------------------
</TABLE>
-----
19
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
7. Investment Composition
The Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At December 31, 1997, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
municipal investments, were as follows:
<TABLE>
<S> <C>
-----------------------------------------------------------------
Revenue Bonds:
Health Care Facilities 17%
Transportation 15
Housing Facilities 14
Educational Facilities 6
Utilities 6
Lease Rental Facilities 6
Other 10
General Obligation Bonds 21
Escrowed 5
-----------------------------------------------------------------
100%
-----------------------------------------------------------------
</TABLE>
48% of the long-term and intermediate municipal investments owned by the Fund
are either covered by insurance issued by several private insurers or are backed
by an escrow or trust containing U.S. Government or U.S. Government agency
securities, either 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 the Fund's shares.
All of the temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks of other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of the Fund.
------
20
<PAGE>
Financial Highlights
----
21
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each period is as
follows:
Class (Inception date) Operating performance Less distributions
--------------------------- ------------------------
Net
Net realized and Net Total
asset unrealized Dividends asset return
value Net gain (loss) from net Distributions value on net
Year ended beginning investment from investment from capital end of asset
June 30, of period income (b) investments income gains period value
(a)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1998 (e) $23.11 $.32 $1.09 $(.34) $(.37) $23.81 6.11%
1997 (d) 20.00 .56 3.02 (.42) (.05) 23.11 18.05
Class B (8/96)
1998 (e) 23.11 .23 1.09 (.19) (.37) 23.87 5.73
1997 (d) 20.00 .40 3.04 (.28) (.05) 23.11 17.32
Class C (8/96)
1998 (e) 23.10 .23 1.09 (.19) (.37) 23.86 5.74
1997 (d) 20.00 .40 3.03 (.28) (.05) 23.10 17.27
Class R (8/96)
1998 (e) 23.11 .35 1.08 (.42) (.37) 23.75 6.22
1997 (d) 20.00 .61 3.03 (.48) (.05) 23.11 18.38
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses by Nuveen Institutional Advisory Corp.
(c) Average commission rate paid on equity portfolio transactions.
Commissions paid are included in the cost of the
securities.
(d) From commencement of class operations as noted.
(e) For the six months ended December 31, 1997.
22
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental data
- -----------------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio Average
end of period reimburse- reimburse- reimburse- reimburse- turnover commission
(in thousands) ment ment ment (b) ment (b) rate rate paid (c)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 96,189 1.36%* 2.39%* 1.10%* 2.65%* 42% $ .0303
79,952 1.58* 2.31* 1.10* 2.79* 32 .0244
14,427 2.12* 1.62* 1.85* 1.89* 42 .0303
2,051 2.22* 1.62* 1.85* 1.99* 32 .0244
6,815 2.12* 1.62* 1.85* 1.89* 42 .0303
1,559 2.29* 1.53* 1.85* 1.97* 32 .0244
7,995 1.11* 2.64* .85* 2.90* 42 .0303
6,963 2.05* 1.96* .85* 3.16* 32 .0244
- -----------------------------------------------------------------------------------------------
</TABLE>
- -----
23
<PAGE>
Nuveen Family
of Mutual Funds
Nuveen offers a variety
of funds designed
to help you reach
your financial goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth
and Income
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal and
Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Building Better Portfolios with Nuveen
Reducing the impact of taxes and moderating risk are important goals for many
risk-sensitive investors seeking to build better portfolios. For these
investors, a tax-efficient, risk-resistant investment portfolio often forms the
foundation of a carefully-crafted financial plan for building and sustaining
wealth. Nuveen is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of premier
advisers, including Nuveen Advisory Corp., Institutional Capital Corp. and
Rittenhouse Financial Services. Our equity, balanced and income funds seek to
provide consistent performance, time-tested strategies to reduce risk and
experienced, professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more. A range of actively managed growth, balanced and municipal income-
oriented portfolios are available, all based upon a disciplined investment
philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/r/
Nuveen MuniPreferred offers investors a AAA-rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
- -----
24
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Fund Subadviser
Institutional Capital Corporation
225 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public
Accountants
Arthur Anderson LLP
Chicago, IL
- -----
25
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.
John Nuveen & Co, Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
ESA-MS 12-97
<PAGE>
NUVEEN
Growth and Income
Mutual Funds
December 31, 1997
Semiannual Report
For investors seeking
long-term growth
with a measure of
downside protection.
[PHOTO APPEARS HERE]
Balanced
Stock and
Bond Fund
<PAGE>
Nuveen Balanced Stock and Bond Fund
Highlights
As of December 31, 1997
Contents
1 Dear Shareholder
3 Report from your
Fund's Adviser
5 Performance Overview
6 Portfolio of Investments
8 Statement of Net Assets
9 Statement of Operations
10 Statement of Changes
in Net Assets
11 Notes to
Financial Statements
14 Financial Highlights
16 Building Better
Portfolios with Nuveen
17 Fund Information
* The 1-, 5-, and 10-year annualized total return and down market performance
in the bottom two charts represents the gross-of-fee performance of the
Balanced Composite of the fund's sub-adviser, Institutional Capital
Corporation (ICAP), adjusted for the annual operating expenses of the Class
A shares of the fund. The performance of the ICAP Balanced Composite does
not represent actual performance of the fund, but rather the composite
performance of individual accounts using substantially the same investment
objectives and practices as the fund. The Lipper Balanced Index represents
the average returns with dividends reinvested of the 30 largest funds in
the Lipper Balanced category. Both the manager Balanced Composite
performance and the fund's performance represent past performance and may
not be indicative of the fund's future performance.
A Solid 1st Full Year for the Fund...
Attractive Fund Returns
Annualized Total Returns
[BAR CHART APPEAR HERE]
One Year Since Inception
11.23% 15.55%
17.39% 20.07%
[_] Class A (offer)
[_] Class A (NAV)
Superior Down Market Protection
Asian Financial Crisis 10/7-10/27/97
[BAR CHART APPEAR HERE]
[_] Nuveen Balanced [_] Lipper Growth
Stock and Bond Fund & Income Index
-4.47% -6.02%
...Builds on the Sub-Adviser's
Strong Long-Term Record
Consistent Performance
20% Annualized Total Returns
[BAR CHART APPEAR HERE]
1 Year 5 Year 10 Year
12.20% 13.22% 14.66%
[_] Manager
Balanced Composite
Less Impact from Down Markets
[BAR CHART APPEAR HERE]
<TABLE>
<CAPTION>
Inflation Oil Crisis '87 Crash Gulf War
<S> <C> <C> <C>
1/77-3/78 4/81-6/82 10/87-12/87 7/90-9/90
- -1.67% 0.91% -10.10% -7.82%
- -6.78% -9.35% -19.86% -13.45%
</TABLE>
[_] Manager Composite
[_] Lipper Balanced Index
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
Dear Shareholder
Just 10 months ago, we introduced a very special balanced fund designed to allow
investors to participate in the growth potential of equity investments with a
measure of downside protection.
Today, looking back over that fund's first full calendar year of operation --
January 1 through December 31, 1997 -- I am proud to report to you that the
Nuveen Balanced Stock and Bond Fund and its risk-sensitive strategy have
fulfilled that initial promise.
Helping Risk-Averse Investors
Pursue Long-Term Growth
In many ways, 1997 -- which saw strength and volatility in both the stock and
bond markets -- was a textbook case of how successful a disciplined, risk-
resistant balanced investment strategy can be in generating long-term growth. At
year's end, Class A shareholders in the Nuveen Balanced Stock and Bond Fund
enjoyed a one-year return of 17.39%, and since inception, the fund has turned in
an annualized return of 20.07%.
The message is compelling: Risk-sensitive investors do not have to forego the
growth that's essential to the long-term success of any diversified investment
plan. In fact, by combining a portfolio of high-quality stocks that we believe
are undervalued by the market with the relative price stability of U.S. Treasury
securities, the Nuveen Balanced Stock and Bond Fund not only allows you to
participate in the growth potential of the stock market, it gives you valuable
downside protection in periods of uncertainty.
A Core Holding for
Today and Tomorrow
The Nuveen Balanced Stock and Bond Fund is managed with the same set of values
found in all Nuveen investments. A key goal of this process is to combine
strong, consistent performance potential over time with a focus on protecting
the wealth you've worked hard to achieve.
1
<PAGE>
"The message is
compelling:
Risk-sensitive
investors do not
have to forego
the growth that's
essential to the
long-term
success of any
diversified
investment plan."
We hope that you and your financial adviser are happy with the initial
performance of your fund. Your adviser can also introduce you to a number of
other Nuveen products and services designed to round out your portfolio of core
investments, including the Nuveen Rittenhouse Growth Fund, which was introduced
in January. This new fund invests in blue-chip companies with a history of
consistent earnings and dividend growth and, coupled with the fund's low-
turnover portfolio management strategy, provides a tax-efficient way for
investors to build and sustain wealth. We encourage you to talk with your
financial adviser to see if the Nuveen Rittenhouse Growth Fund -- along with our
variety of equity, balanced and fixed-income investments -- may be right for
you.
On behalf of everyone at Nuveen, thank you for your continued confidence in us
and our family of investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 12, 1998
2
<PAGE>
Report from Your Fund's Adviser
Institutional Capital talks about the financial markets and offers insights into
factors that affected the performance of the fund over the past year.
Reflecting the strength of the markets, the benchmark Standard & Poor's 500
index posted a healthy 33% gain for the year. Combined with the double-digit
returns of 1995 and 1996, 1997's gains capped the stock market's best three-year
period in more than 70 years. The bond markets also posted significant gains,
due mainly to the continued strength of the U.S. economy and minimal inflation.
Between January 1997 and December 1997, the yield on 30-year Treasury bonds
dropped from 6.64% to 5.92%.
The year was not without volatility, however. In the first quarter, the Federal
Open Market Committee's decision to raise short-term interest rates resulted in
a sharp decline in stock prices. But the market quickly rebounded in the second
quarter, with all of the major indexes going on to establish new record highs.
In October, the fallout from the Asian financial crisis caused the stock market
to suffer its first "correction" of more than 10% since 1990. Once again,
however, the market proved resilient, retracing its losses and ending the year
on a strong note.
During the year, large capitalization stocks continued to dominate returns, as
investors favored non-cyclical issues, especially after the decline in October.
Among industry sectors, financials were the strongest, benefiting from declining
interest rates. Technology stocks, which did well in 1996, underperformed the
market in 1997.
1997 Fund Performance
The Nuveen Balanced Stock and Bond Fund registered strong gains in 1997,
benefiting from the advances in both the equity and fixed-income markets.
Aiding fund performance throughout the year was a strict adherence to the fund's
disciplined investment approach. In 1997, the primary focus in the fund's equity
portfolio was on companies undergoing a corporate restructuring as well as those
enjoying pricing advantages due to supply and demand conditions. In the fixed-
income portfolio, the fund's investment team continued to emphasize
intermediate-term U.S. Treasury securities, which provided significant
risk/reward benefits in an environment in which the yield curve became flatter.
- -----
3
<PAGE>
"The Nuveen Balanced Stock and Bond Fund registered strong gains in 1997,
benefiting from the advances in both the equity and fixed-income markets."
Further contributing to the fund's performance in 1997 were its risk management
strategies. These strategies proved valuable during the highly volatile second
half of the year. The fund's emphasis on high-quality, large-cap value stocks,
as well as intermediate Treasuries, enabled the fund to protect investor capital
during the October correction better than the stock market or balanced funds in
general.
Economic Developments and Outlook
The economy in 1997 proved stronger and more resilient than many forecasts had
predicted. Real growth was the strongest in 10 years, and inflation came in
lower than in any year in the last three decades.
Looking forward, however, there are signs that the economic outlook may be less
bright in 1998. Though it's still too early to predict how the financial
instability in Asia will play out, we expect growth in the region to slow
sharply.
The turmoil in Asia and its impact on the U.S. economy is difficult to gauge at
this time. Here at home, the fund's investment team expects economic growth to
moderate somewhat from last year's pace. During the first half of the year,
growth may be sluggish due to inventory buildups and a slowdown in international
trade. By the second half, the slow down in production is expected to moderate
which, combined with the impact of lower bond yields should result in stronger
growth.
The outlook for inflation in 1998 is promising. Price increases should remain
under 2% as a result of lower prices on Asian imports and a strong dollar.
Increasing wage pressures remain one of the few negatives on the inflation
front.
Federal Reserve policy has remained unchanged since last March, and with the
dual benefits of moderate economic growth and low inflation, odds are that the
Fed is likely to view stable policy as the most prudent course of action.
Fund Outlook
In the months ahead, the fund's equity portfolio will continue to emphasize
companies that we believe are candidates for corporate restructuring, as well as
those enjoying pricing flexibility due to supply and demand conditions. At the
same time, we will explore the unique and timely opportunities facing companies
that may benefit from the Asian financial crisis. In the fixed-income portfolio,
intermediate-term U.S. Treasurys will remain the primary focus. Overall, the
allocation between equities and fixed-income securities will be closely
monitored and altered as opportunities arise.
Given the current market and economic backdrop, and the fund's fundamental
emphasis on value, we believe the Nuveen Balanced Stock and Bond Fund is well
positioned for the coming year.
4
<PAGE>
Nuveen Balanced Stock and Bond Fund
Performance Overview
As of December 31, 1997
<TABLE>
<CAPTION>
Top 5 Stock Holdings
- -------------------------------------
<S> <C>
Phillip Morris 2.20%
General Motors 2.18%
DuPont 2.13%
Loews Corp 2.00%
Nationsbank Corp 1.98%
- -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Portfolio Allocation
[PIE CHART APPEARS HERE]
- -------------------------------------
<S> <C>
Stock 54%
Cash 2%
Bonds 44%
- -------------------------------------
</TABLE>
Growth of $10,000 Invested on 8/7/96/1/
- -------------------------------------
12/31/97 = $12,242 [MOUNTAIN CHART APPEARS HERE]
August 1996 $ 9,475
December 1997 $12,242
<TABLE>
<CAPTION>
Fund Highlights
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share Class A B C R
CUSIP 67064Y107 67064Y206 67064Y305 67064Y404
Inception Date 8/96 8/96 8/96 8/96
Net Asset Value (NAV) $24.30 $24.30 $24.30 $24.31
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total Net Assets (millions) $ 81.7
Beta 5.00
Average Market Capitalization (stocks) $27 billion
Average P/E of Stocks (trailing 12 mos.) 17.4%
Number of Stocks 44
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Class A(NAV) A(Offer) B C R
1-Year 17.39% 11.23% 16.58% 16.59% 17.72%
Since Inception 20.07% 15.55% 19.21% 19.21% 20.40%
- --------------------------------------------------------------------------------------------------------
Yield
- --------------------------------------------------------------------------------------------------------
Share Class A(NAV) A(Offer) B C R
Distribution Rate 2.93% 2.78% 2.17% 2.17% 3.19%
SEC 30-Day Yield 2.55% 2.42% 1.80% 1.80% 2.81%
- --------------------------------------------------------------------------------------------------------
</TABLE>
1 Returns assume reinvestment of all dividends and capital gains and an
investment at the maximum offer price (including sales charge). Investment
return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than the original cost. Returns reflect reimbursement of
expenses by the adviser. The performance data quoted represents past
performance, which is not indicative of future results.
2 Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.25% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines periodically to 0% over the following six years. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year. Class B and Class C returns do not reflect
imposition of the CDSC.
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Stock and Bond Fund
<TABLE>
<CAPTION>
Market
Shares Description Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 50.5%
Basic Industries - 5.1%
9,550 Akzo Nobel N.V. Sponsored ADR $ 829,656
9,000 Boise Cascade Corporation 272,250
27,900 E.I. du Pont de Nemours and Company Ltd. 1,675,744
13,300 IMC Global Inc. 435,575
15,600 Reynolds Metals Company 936,000
- ---------------------------------------------------------------------------------------------
Capital Equipment/Technology - 5.4%
16,100 First Data Corporation 470,925
11,550 International Business Machines Corporation 1,207,697
12,900 LSI Logic Corporation # 254,775
17,200 Motorola, Inc. 981,475
24,450 Philips Electronic N.V. 1,479,225
- ---------------------------------------------------------------------------------------------
Capital Spending - 6.2%
23,650 Boeing Company 1,157,372
17,150 Case Corporation 1,036,503
8,100 B.F. Goodrich Company 335,644
11,350 Northrop Grumman Corporation 1,305,250
1,808 Raytheon Company - Class A 89,152
24,750 Raytheon Company - Class B 1,249,875
- ---------------------------------------------------------------------------------------------
Consumer Durables - 2.1%
28,350 General Motors Corporation 1,718,719
- ---------------------------------------------------------------------------------------------
Consumer Services - 4.8%
32,900 Dun & Bradstreet Corporation 1,017,844
41,800 Host Marriott Corp. # 820,325
39,451 Peninsular and Oriental Steam Navigation Company 901,637
40,900 U.S. West Media Group # 1,180,988
- ---------------------------------------------------------------------------------------------
Consumer Staples - 7.2%
32,700 Archer-Daniels-Midland Company 709,181
24,800 Diageo PLC Sponsored ADR 939,300
28,100 Hasbro, Inc. 885,150
14,850 Loews Corporation 1,575,956
38,300 Philip Morris Companies Inc. 1,735,469
- ---------------------------------------------------------------------------------------------
Energy - 4.0%
10,700 Ashland Inc. 574,456
12,670 Elf Acquitaine SA Sponsored ADR 742,779
26,600 Union Pacific Resources Group Inc. 645,050
33,500 Unocal Corporation 1,300,219
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
Financials -- 5.5%
8,200 Banc One Corporation $ 445,363
10,900 Citicorp 1,378,169
25,650 NationsBank Corporation 1,559,841
3,275 Wells Fargo & Company 1,111,658
- ------------------------------------------------------------------------------------------------------------
Health Care -- 5.6%
18,800 American Home Products Corporation 1,438,200
1,800 Baxter International Inc. 90,788
31,100 Hoechst AG Sponsored ADR 1,090,444
25,762 Rhone-Poulenc SA-Sponsored ADR 1,143,189
25,200 Tenet Healthcare Corporation # 834,750
- ------------------------------------------------------------------------------------------------------------
Retail -- 1.2%
22,300 Federated Department Stores, Inc. # 960,294
- ------------------------------------------------------------------------------------------------------------
Transportation -- 3.4%
3,300 AMR Corporation # 424,050
12,100 Burlington Northern Santa Fe 1,124,544
44,000 Canadian Pacific, Ltd. 1,199,000
- ------------------------------------------------------------------------------------------------------------
Total Common Stocks -- (cost $38,983,467) 41,264,481
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 1.7%
71,000 News Corporation Limited Sponsored ADR 1,411,125
- ------------------------------------------------------------------------------------------------------------
Total Preferred Stocks -- (cost $1,273,973) 1,411,125
- ------------------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES -- 42.1%
810,000 7.125%, 10/15/98 819,113
1,935,000 6.375%, 7/15/99 1,955,559
3,290,000 8.500%, 2/15/00 3,473,006
4,530,000 7.500%, 5/15/02 4,837,193
2,885,000 5.750%, 5/15/03 2,887,706
2,890,000 7.875%, 11/15/04 3,230,479
2,990,000 6.500%, 5/15/05 3,117,074
11,170,000 7.000%, 7/15/06 12,060,114
1,745,000 7.250%, 5/05/16 1,986,572
- ------------------------------------------------------------------------------------------------------------
Total U.S. Treasury Notes -- (cost $33,207,091) 34,366,816
- ------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.1%
1,700,000 Xerox Credit Corporation, Commercial Paper, effective yield of 6.65%, 1/02/98 1,699,693
- ------------------------------------------------------------------------------------------------------------
Total Commercial Paper -- (cost $1,699,693) 1,699,693
--------------------------------------------------------------------------------------------
Total Investments -- (cost $75,164,224) -- 96.4% 78,742,115
--------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 3.6% 2,917,887
--------------------------------------------------------------------------------------------
Net Assets -- 100% $81,660,002
============================================================================================
# Non-income producing.
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------
Assets
Investment securities, at market value
(cost $75,164,224) (note 1) $78,742,115
Cash 180,057
Receivables:
Dividends and interest 750,843
Shares sold 1,986,445
Investments sold 583,261
Deferred organization costs (note 1) 131,707
Other assets 1,800
- -------------------------------------------------------------------------------------------
Total assets 82,376,228
- -------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 94,866
Shares redeemed 797
Accrued expenses:
Management fees (note 4) 24,004
12b-1 distribution and service fees (notes 1 and 4) 19,852
Other 2,625
Dividends payable 574,082
- -------------------------------------------------------------------------------------------
Total liabilities 716,226
- -------------------------------------------------------------------------------------------
Net assets (note 5) $81,660,002
===========================================================================================
Class A Shares (note 1)
Net assets $63,935,048
Shares outstanding 2,630,995
Net asset value and redemption price per share $ 24.30
Offering price per share (net asset value per share plus maximum sales
charge of 5.25% of offering price) $ 25.65
===========================================================================================
Class B Shares (note 1)
Net assets $ 6,512,518
Shares outstanding 267,959
Net asset value, offering and redemption price per share $ 24.30
===========================================================================================
Class C Shares (note 1)
Net assets $ 2,332,259
Shares outstanding 95,967
Net asset value, offering and redemption price per share $ 24.30
===========================================================================================
Class R Shares (note 1)
Net assets $ 8,880,177
Shares outstanding 365,343
Net asset value, offering and redemption price per share $ 24.31
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Statement of Operations (Unaudited)
Six months ended December 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 254,742
Interest 1,241,326
- ------------------------------------------------------------------------------------------
Total investment income 1,496,068
- ------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 274,085
12b-1 service fees -- Class A (notes 1 and 4) 75,660
12b-1 distribution and service fees -- Class B (notes 1 and 4) 19,106
12b-1 distribution and service fees -- Class C (notes 1 and 4) 7,884
Shareholders' servicing agent fees and expenses 37,518
Custodian's fees and expenses 39,567
Trustees' fees and expenses (note 4) 2,190
Professional fees 10,487
Shareholders' reports -- printing and mailing expenses 10,093
Federal and state registration fees 46,921
Amortization of deferred organization costs (notes 1) 18,148
Other expenses 816
- ------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 542,475
Expense reimbursement (note 4) (129,196)
- ------------------------------------------------------------------------------------------
Net expenses 413,279
- ------------------------------------------------------------------------------------------
Net investment income 1,082,789
- ------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 3) 2,281,551
Net change in unrealized appreciation or depreciation of investments 523,281
- ------------------------------------------------------------------------------------------
Net gain from investments 2,804,832
- ------------------------------------------------------------------------------------------
Net increase in net assets from operations $3,887,621
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six months ended
12/31/97 8/7/96 to 6/30/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,082,789 $ 461,143
Net realized gain from investment transactions
(notes 1 and 3) 2,281,551 529,537
Net change in unrealized appreciation or depreciation
of investments 523,281 3,054,610
- ----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 3,887,621 4,045,290
- ----------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (904,832) (320,023)
Class B (55,453) (2,239)
Class C (19,622) (3,396)
Class R (121,280) (116,780)
From accumulated net realized gains from investment
transactions:
Class A (1,410,980) (43)
Class B (120,791) (43)
Class C (50,758) (43)
Class R (204,679) (25,820)
- ----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,888,395) (468,387)
- ----------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 18,222,137 62,071,093
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 2,530,855 15,990
- ----------------------------------------------------------------------------------------------------
20,752,992 62,087,083
- ----------------------------------------------------------------------------------------------------
Cost of shares redeemed (4,456,676) (1,332,886)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 16,296,316 60,754,197
- ----------------------------------------------------------------------------------------------------
Net increase in net assets 17,295,542 64,331,100
Net assets at the beginning of period 64,364,460 33,360
- ----------------------------------------------------------------------------------------------------
Net assets at the end of period $81,660,002 $64,364,460
====================================================================================================
Balance of undistributed net investment income at end of period $ 307 $ 18,705
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Notes to Financial Statements (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") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those relating 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.
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 generally
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 exchange
or Nasdaq for which there are 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. 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 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.
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 have extended settlement periods. 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 the when-issued and delayed delivery purchase commitments. At
December 31, 1997, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income is declared and distributed to shareholders quarterly. Net
realized capital gains from investment transactions, if any, are declared and
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryforwards.
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 transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by
11
<PAGE>
Notes to Financial Statements (Unaudited) -- continued
the investor (CDSC is reduced to 0% at the end of six years). Class B Shares
convert to Class A Shares eight years after purchase. Class C Shares are sold
without a sales charge but incur annual 12b-1 distribution and service fees. An
investor purchasing Class C Shares agrees to pay a CDSC of 1% if Class C Shares
are redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or 12b-1 distribution or service fees. Class R Shares are available
for purchases of over $1 million and in other limited circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended December 31, 1997.
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, which presently only
includes 12b-1 distribution and service fees, 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.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization 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 unamortized organization costs as of the date of redemption.
<TABLE>
2. Fund Shares
Transactions in Fund shares were as follows:
Six months ended 12/31/97 8/7/96 to 6/30/97
-------------------------------------------------
Shares Amount Shares* Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 334,085 $8,234,822 2,433,860 $55,396,538
Class B 239,749 5,877,651 26,837 638,169
Class C 55,736 1,386,244 40,678 949,886
Class R 108,676 2,723,420 253,630 5,086,500
Shares issued to shareholders
due to reinvestment
of distributions:
Class A 94,201 2,284,924 723 15,981
Class B 5,373 129,591 - -
Class C 1,179 28,446 - -
Class R 3,641 87,894 - 9
- -------------------------------------------------------------------------------------------------
842,640 20,752,992 2,755,728 62,087,083
- -------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (175,336) (4,283,558) (56,955) (1,324,519)
Class B (4,274) (104,242) (143) (3,405)
Class C (2,043) (48,981) - (11)
Class R (807) (19,895) (214) (4,951)
- -------------------------------------------------------------------------------------------------
(182,460) (4,456,676) (57,312) (1,332,886)
- -------------------------------------------------------------------------------------------------
Net increase 660,180 $16,296,316 2,698,416 $60,754,197
=================================================================================================
</TABLE>
12
<PAGE>
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the six months ended
December 31, 1997, were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
<S> <C>
Purchases:
Investment securities $ 60,305,286
U.S. government obligations 8,088,452
Short-term investments 172,941,952
Sales:
Investment securities 47,445,950
U.S. government obligations 6,145,177
Short-term investments 176,195,731
==========================================================================
</TABLE>
At December 31, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $3,577,891 of which $4,481,849 related to
appreciated securities and $903,958 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 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 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 net assets over $2 billion .6750 of 1
==========================================================================
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution 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 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 Fund pays 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.
During the six months ended December 31, 1997, the Distributor collected sales
charges on purchases of Class A Shares of approximately $274,100 of which
approximately $259,400 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended December 31, 1997, the Distributor compensated
authorized dealers directly with approximately $247,000 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1997, the Distributor retained approximately $27,000 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $22,100
of CDSC on share redemptions during the six months ended December 31, 1997.
5. Composition of Net Assets
At December 31, 1997, the Fund had unlimited $.01 par value per share common
stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------
Capital paid-in $77,083,873
Balance of undistributed net investment income 307
Accumulated net realized gain from investment transactions 997,931
Net unrealized appreciation of investments 3,577,891
--------------------------------------------------------------------------
Net assets $81,660,002
==========================================================================
</TABLE>
13
<PAGE>
Financial Highlights (Unaudited)
Selected data for a common share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Class (Inception date) Operating performance Less distributions
------------------------ -----------------------------
Net
Net realized and Net Total
asset unrealized Dividends asset return
value Net gain (loss) from net Distributions value on net
Year ended beginning investment from investment from capital end of asset
June 30, of period income (b) investments income gains period value (a)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1998 (e) $23.84 $.37 $1.02 $(.36) $(.57) $24.30 5.84%
1997 (d) 20.00 .70 3.66 (.42) (.10) 23.84 22.04
Class B (8/96)
1998 (e) 23.84 .28 1.02 (.27) (.57) 24.30 5.46
1997 (d) 20.00 .46 3.75 (.27) (.10) 23.84 21.26
Class C (8/96)
1998 (e) 23.84 .28 1.02 (.27) (.57) 24.30 5.46
1997 (d) 20.00 .53 3.68 (.27) (.10) 23.84 21.26
Class R (8/96)
1998 (e) 23.84 .40 1.03 (.39) (.57) 24.31 6.01
1997 (d) 20.00 .61 3.80 (.47) (.10) 23.84 22.31
======================================================================================================================
</TABLE>
*Annualized.
(a) Total returns are calculated on net asset value without any sales
charge and are not annualized.
(b) After waiver of certain management fees or reimbursement of
expenses by Nuveen Institutional Advisory Corp.
(c) Average commission rate paid on equity portfolio transactions.
Commissions paid are included in the cost of the securities.
(d) From commencement of class operations as noted.
(e) For the six months ended December 31, 1997.
14
<PAGE>
<TABLE>
<CAPTION>
Ratio/supplemental data
- ---------------------------------------------------------------------------------------
Ratio Ratio
of net of net
Ratio of investment Ratio of investment
expenses income to expenses income to
to average average to average average
net assets net assets net assets net assets
Net assets before before after after Portfolio Average
end of period reimburse- reimburse- reimburse- reimburse- turnover commission
(in thousands) ment ment ment (b) ment (b) rate rate paid(c)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
$63,935 1.45%* 2.64%* 1.10%* 2.99%* 78% $.0306
56,686 1.71* 2.78* 1.10* 3.39* 52 .0244
6,513 2.21* 1.87* 1.86* 2.22* 78 .0306
646 2.49* 1.59* 1.85* 2.23* 52 .0244
2,332 2.21* 1.87* 1.85* 2.23* 78 .0306
980 2.31* 2.07* 1.85* 2.53* 52 .0244
8,880 1.21* 2.89* .85* 3.25* 78 .0306
6,052 2.29* 1.68* .85* 3.12* 52 .0244
=========================================================================================================
</TABLE>
15
<PAGE>
Nuveen Family
of Mutual Funds
Nuveen offers a variety
of funds designed
to help you reach
your financial goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth
and Income
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited Term
State Funds
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Building Better Portfolios with Nuveen
Reducing the impact of taxes and moderating risk are important goals for many
risk-sensitive investors seeking to build better portfolios. For these
investors, a tax-efficient, risk-resistant investment portfolio often forms the
foundation of a carefully-crafted financial plan for building and sustaining
wealth. Nuveen is committed to providing investors and their financial advisers
with a range of products and investment tools to help build better portfolios.
Mutual Funds
Nuveen Mutual Funds offer investors access to the Nuveen family of premier
advisers, including Nuveen Advisory Corp., Institutional Capital Corp. and
Rittenhouse Financial Services. Our equity, balanced and income funds seek to
provide consistent performance, time-tested strategies to reduce risk and
experienced, professional management.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more. A range of actively managed growth, balanced and municipal income-
oriented portfolios are available, all based upon a disciplined investment
philosophy.
Unit Trusts
Nuveen Unit Trusts are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA-rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
16
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Fund Sub-adviser
Institutional Capital Corporation
225 West Wacker Drive
Chicago, IL 60606
Custodian
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
Transfer Agent,
Shareholder Services and
Dividend Disbursing Agent
Shareholder Services, Inc.
P.O. Box 5330
Denver, CO 80217-5330
(800) 621-7227
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Serving Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time -- with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 621-7227 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898
NUVEEN 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
ESA-SB 12-97
