<PAGE>
As filed with the Securities and Exchange Commission on or about May 28, 1998
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Registration No. 333-03715
Pre-Effective Amendment No. _____ [_]
Post-Effective Amendment No. 11 [x]
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REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Registration No. 811-07619
Amendment No. 13 [x]
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Nuveen Investment Trust
(Exact Name of Registrant as Specified in Declaration of Trust)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copies to:
Gifford R. Zimmerman-Vice President and Cathy G. O'Kelly
Assistant Secretary Vedder, Price, Kaufman & Kammholz
333 West Wacker Drive 222 N. LaSalle Street
Chicago, Illinois 60606 Chicago, Illinois 60601
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to [_] on (date) pursuant to
paragraph (b) paragraph (a)(1)
[X] on June 14, 1998 pursuant to [_] 75 days after filing pursuant
paragraph (b) to paragraph (a)(2)
[_] 60 days after filing pursuant to [_] on (date) pursuant to
paragraph (a)(1) paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 11
This Post-Effective Amendment to the Registration Statement comprises the
following papers and contents:
The Facing Sheet
Part A--Prospectus for the Nuveen European Value Fund
Part B--Statement of Additional Information for the Nuveen
European Value Fund
Part C--Other Information
Signatures
Index to Exhibits
Exhibits
The prospectus and Statement of Additional Information for the Nuveen Growth and
Income Stock Fund, the Nuveen Balanced Stock and Bond Fund, and the Nuveen
Balanced Municipal and Stock Fund are not affected by and therefore not included
in this Post-Effective Amendment No. 11.
<PAGE>
NUVEEN INVESTMENT TRUST
---------------
CROSS REFERENCE SHEET
Part A--Prospectus
<TABLE>
<CAPTION>
Item in Part A of Form N-1A Prospectus Location
- --------------------------- -------------------
<S> <C>
1 Cover Page Cover Page
2 Synopsis Summary of Fund Expenses
3 Condensed Financial Information Not Applicable
4 General Description of Registrant The Fund: European Value Fund; How We Select Investments;
What Securities We Invest In; What the Risks Are; How We
Manage Risk; Organization of the Fund
5 Management of the Fund Who Manages the Fund; Management Fees;
Organization of the Fund
5A Management's Discussion of Fund Performance Not Applicable
6 Capital Stock and Other Securities Cover Page; How to Choose a Share Class;
Distributions and Taxes; Organization of the Fund
7 Purchase of Securities Being Offered Who Manages the Fund; How to Choose a Share Class;
How to Reduce Your Sales Charges; How to Buy
Shares; Distribution and Service Plans; Net Asset
Value
8 Redemption or Repurchase Summary of Fund Expenses; How to Sell Shares
9 Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
Part B--Statement of Additional Information
<TABLE>
<CAPTION>
Item in Part B of Form N-1A Location in Statement of Additional Information
- --------------------------- -----------------------------------------------
<S> <C>
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History Not Applicable
13 Investment Objectives and Policies Investment Policies and Restrictions; Investment
Policies and Techniques
14 Management of the Fund Management
15 Control Persons and Principal Holders of Securities Management
16 Investment Advisory and Other Services Trust Manager and Fund Manager; Distribution and
Service Plans; Independent Public Accountants and
Custodian
17 Brokerage Allocation and Other Practices Portfolio Transactions
18 Capital Stock and Other Securities Tax Matters; Additional Information on the Purchase
and Redemption of Fund Shares and Shareholder
Programs; See "Organization of the Fund," Cover
Page, "How to Choose a Share Class" and "How to
Sell Shares" in the Prospectus
19 Purchase, Redemption and Pricing of Securities Additional Information on the Purchase and
Redemption of Fund Shares and Shareholder Programs;
Distribution and Service Plans; Net Asset Value
20 Tax Status Tax Matters
21 Underwriters Additional Information on the Purchase and
Redemption of Fund Shares and Shareholder Programs;
See "Who Manages the Fund" in the Prospectus
22 Calculation of Performance Data Not Applicable
23 Financial Statements Not Applicable
</TABLE>
<PAGE>
NUVEEN
Nuveen European Value Fund
Prospectus May 29, 1998
For investors seeking superior returns with moderated risk from an international
investment strategy.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 THE FUND.............................................................................. 2
This section provides you with an overview of the fund including its investment
objective, portfolio holdings, and historical performance information.
Summary of Fund Expenses......................................................................... 2
How The Portfolio Manager Has Performed.......................................................... 3
Investment Objective............................................................................. 4
How the Fund Pursues Its Objective............................................................... 4
Is This Fund Right For You?...................................................................... 5
SECTION 2 HOW WE MANAGE YOUR MONEY.............................................................. 5
This section gives you a detailed discussion of our investment and risk management strategies.
Who Manages the Fund............................................................................. 5
What Securities We Invest In..................................................................... 5
How We Select Investments........................................................................ 6
What the Risks Are............................................................................... 6
How We Manage Risk............................................................................... 7
Management Fees.................................................................................. 8
SECTION 3 HOW YOU CAN BUY AND SELL SHARES....................................................... 9
This section provides the information you need to move money into or out of your account.
How to Choose a Share Class...................................................................... 9
How to Reduce Your Sales Charge.................................................................. 11
How to Buy Shares................................................................................ 11
Systematic Investing............................................................................. 12
Systematic Withdrawal Plan....................................................................... 12
Special Services................................................................................. 12
How to Sell Shares............................................................................... 13
SECTION 4 GENERAL INFORMATION................................................................... 14
This section summarizes the fund's distribution policies and other general fund information.
Distribution and Taxes........................................................................... 14
Distribution and Service Plans................................................................... 14
Net Asset Value.................................................................................. 15
Organization of the Fund......................................................................... 15
Fund Service Providers........................................................................... 15
</TABLE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges and Expenses
Shareholder Instructions
Performance and Current Portfolio Information
<PAGE>
PROSPECTUS MAY 29, 1998
NUVEEN EUROPEAN VALUE FUND
INVESTMENT OPPORTUNITIES IN THE NEW EUROPE
Europe's Economic and Monetary Union (EMU) is a significant economic event that
is expected to create a new international business environment. Many analysts
believe EMU will revolutionize financial markets and provide enhanced investment
opportunities by reducing currency risk, fostering lower interest rates, and
increasing cross-border trading, competition, corporate mergers and
restructurings.
The Nuveen European Value Fund seeks to provide a superior total return
with moderated risk by investing in a diversified portfolio consisting primarily
of American Depository Receipts (ADRs) of established, well-known European
companies. The portfolio manager concentrates on stocks that are selling for
less than their intrinsic worth, trying to identify those with a catalyst--for
example, a management change or an improved industry outlook--that will unlock
the stock's unrecognized value.
The Fund's portfolio manager is Institutional Capital Corporation, a
conservative, research-driven investment manager that invests for value.
Institutional Capital has over 28 years of investment management experience and
approximately $12 billion in assets under management.
DIVERSIFICATION IS A KEY TO BUILDING A BETTER PORTFOLIO
A diversified portfolio that includes several different asset classes can serve
to significantly reduce your overall investment risk. Particularly if your
investment portfolio presently includes mostly U.S. stocks and bonds,
diversifying your portfolio to include international stocks can enable you to
pursue attractive returns while substantially reducing your investment risk over
the long term. The Nuveen European Value Fund, with its diversified portfolio of
established, well-known European companies, may be an appropriate way for you to
add international stocks, with their risk reduction and return benefits, to your
portfolio.
GROWTH AND INCOME FUNDS IN A WELL-BALANCED PORTFOLIO
Many investors find that mutual funds with a growth and income focus, such as
the Nuveen European Value Fund, can provide a balance of long-term growth
potential to help build wealth over time, complemented by current income to help
reduce price fluctuation. Growth and income funds generally invest in stocks of
established, well-known companies that offer attractive long-term growth
potential but also pay regular dividend income. Some growth and income funds
also invest a portion of their assets in fixed-income securities. This strategy
can provide additional current income and may also reduce overall portfolio
volatility and stabilize returns during unfavorable markets. You should consider
Nuveen's growth and income funds, each of which seek attractive returns and
moderated risk, for the core of your investment portfolio. Because the Nuveen
European Value Fund is subject to the risks of foreign securities and limits its
investments to one region of the world, the fund should be used as part of a
diversified, well-balanced portfolio.
SERVING INVESTORS FOR GENERATIONS
Since 1898, John Nuveen & Co. Incorporated has specialized in investments
designed for people who plan to rely on their portfolios as a principal source
of their ongoing financial security. Today we offer a range of equity and
fixed-income mutual funds, each with a wide range of share class purchase
options, designed to suit the unique circumstances and financial planning needs
of mature investors. More than 1.3 million investors have entrusted Nuveen to
help them invest prudently to build and sustain wealth.
This prospectus contains information you should know before you invest in the
Nuveen European Value Fund. Please keep it for future reference. You can
find more detailed information about the Nuveen Investment Trust and the fund in
the current Statement of Additional Information (SAI) which has been filed
electronically with the Securities and Exchange Commission and is legally a part
of this prospectus. The Commission maintains a Web site (http://www.sec.gov)
where you can obtain all information about the fund filed electronically with
the Commission.
If you have questions about investing in the fund, or if you want a free copy of
the Statement of Additional Information, write to the Nuveen Mutual Funds, 333
West Wacker Drive, Chicago, IL 60606, or call Nuveen toll-free at (800)621-
7227.
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission, nor has the Securities
and Exchange Commission passed on the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
NOT FDIC-INSURED
May lose value.
No bank guarantee.
<PAGE>
SECTION 1
THE FUND
Your personal investment circumstances, along with the advice of your personal
financial adviser, will determine whether you should consider an investment in
the European Value Fund. This section provides you with an overview of the fund
that can help you evaluate whether it might be appropriate for your needs.
Summary of Fund Expenses
The following tables will help you understand all the expenses and fees you
would bear directly or indirectly as a fund shareholder. The percentages shown
are estimated for the current fiscal year. Actual fees and expenses may be
greater or less than those shown. An example of how the expenses work follows
these tables.
Shareholder Transaction Expenses/1/
<TABLE>
<CAPTION>
Share Class A/2/ B C R/3/
- -----------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases.... 5.75%/4/ None None None
Maximum Sales Charge Imposed on Reinvested
Dividends.................................. None None None None
Exchange Fees................................ None None None None
Deferred Sales Charge/4/..................... None/6/ 5%/7/ 1%/8/ None
</TABLE>
- ----------------------
1. Authorized Dealers and other firms may charge additional fees for
shareholder transactions or for advisory services. Please see their
materials for details.
2. Between July 1, 1998 and September 30, 1998, Nuveen will reallow the entire
Class A sales charge as a sales commission to Authorized Dealers who agree
to jointly develop marketing and promotional support programs in connection
with the introduction of the fund.
3. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
4. As a percent of offering price. Reduced sales charges apply to purchases
of $50,000 or more. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. Certain Class A purchases at net asset value of $1 million or more may be
subject to a contingent deferred sales charge (CDSC) if redeemed within 18
months of purchase. See "How You Can Buy and Sell Shares."
7. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth, and 1% during the sixth year.
8. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
2
<PAGE>
Annual Fund Operating Expenses/1/
<TABLE>
<CAPTION>
Share Class A B C R
- ----------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Management Fees........................ 0.95% 0.95% 0.95% 0.95%
Rule 12b-1 Fees/2/..................... 0.25 1.00 1.00 --
Other.................................. 0.80 0.80 0.80 0.80
----- ----- ----- -----
Total (Gross)..................... 2.00% 2.75% 2.75% 1.75%
Waivers/Reimbursements/3/......... (0.45) (0.45) (0.45) (0.45)
----- ----- ----- -----
Total (Net) 1.55% 2.30% 2.30% 1.30%
</TABLE>
1. As a percent of average daily net assets.
2. Class A, Class B and Class C shares are subject to an annual service fee of
.25% of the average daily net assets to compensate Authorized Dealers for
continuing account services. In addition, Class B and Class C shares are
subject to annual distribution fees of .75% of the average daily net assets
to reimburse Nuveen for costs in connection with the sale of fund shares.
Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
3. The fund manager has voluntarily agreed to waive fees and reimburse
expenses through July 31, 1999 in order to prevent total expenses
(excluding any distribution or service fees and extraordinary expenses) on
an annualized basis from exceeding 1.30% of the average daily net asset
value of each class of shares. If the fund manager modifies this waiver,
your expenses could increase.
Example
The following example illustrates the ongoing expenses on a hypothetical $1,000
investment based on the Annual Fund Operating Expenses shown previously, an
annual total return of 5% and reinvestment of all dividends. This example also
assumes that the fund's annual operating expenses remain constant throughout a
holding period. This example does not represent actual past or future fund
expenses, which may be greater or less than those assumed. Moreover, the fund's
actual rate of return may be greater or less than the hypothetical 5% return
assumed.
<TABLE>
<CAPTION>
Holding Period 1 year 3 years
-------------- ------ -------
<S> <C> <C>
Class A............................. $72 $104
Class B/1/.......................... $63 $103
Class C/2/.......................... $23 $ 72
Class R............................. $13 $ 41
</TABLE>
1. Assumes that the shareholder redeemed at the end of each holding period and
the contingent deferred sales charge was applied as follows: 1 year (4%),
and 3 years (3%). If instead the shareholder had redeemed prior to the end
of each holding period, the expenses would have been as follows: 1 year $72
and 3 years $113.
2. Assumes that the shareholder redeemed at the end of the first year and the
contingent deferred sales charge was not applicable for any of the periods
shown. If instead the shareholder had redeemed before the end of the first
year, the expenses in the first year would have been $33.
How The Portfolio Manager Has Performed
Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The portfolio manager is an institutional investment management firm
with more than 27 years of experience and over $12 billion in assets under
management. For more information, see "Who Manages the Fund" on page 5.
3
<PAGE>
Growth of a $10,000 Investment 1/97-3/98
[GRAPH APPEARS HERE]
Growth of $10,000 Investment
1/97 - 3/98
<TABLE>
<CAPTION>
Portfolio Manager Lipper European
Composite Fund Index
--------- ----------
<S> <C> <C>
Dec-96 $ 9,425.00 $10,000.00
Jan-97 $ 9,664.71 $10,099.00
Feb-97 $ 9,896.02 $10,250.49
Mar-97 $10,028.95 $10,490.35
Apr-97 $10,345.20 $10,357.12
May-97 $10,762.46 $10,767.26
Jun-97 $11,373.05 $11,274.40
Jul-97 $11,869.29 $11,604.74
Aug-97 $11,460.20 $11,037.27
Sep-97 $12,542.42 $12,030.62
Oct-97 $12,196.67 $11,527.74
Nov-97 $12,193.42 $11,614.20
Dec-97 $12,119.44 $11,888.29
Jan-98 $12,529.48 $12,331.72
Feb-98 $13,452.07 $13,347.86
Mar-98 $14,618.81 $14,358.29
</TABLE>
Portfolio Manager Composite Returns
<TABLE>
<CAPTION>
Average Annual Total Returns (as of 3/31/98)
-----------------------------------------------
Since Composite Inception
1-Year (12/31/96)
------ -------------------------------
<S> <C> <C>
On Offer..................... 21.19% 35.50%
On NAV....................... 28.59% 42.07%
Lipper European Fund Index... 24.19% 33.54%
MSCI Europe Index............ 18.88% 37.97%
</TABLE>
The chart and table above present the performance of Institutional Capital's
Euro Composite, which includes all assets (comprising a single account totaling
approximately $26.3 million as of March 31, 1998) that have substantially the
same investment objectives and policies as the fund. The assets included in the
Euro Composite are not subject to Investment Company Act of 1940 and Internal
Revenue Code restrictions applicable to the fund, such as diversification and
distribution requirements. In addition, the Euro Composite may be subject to
different investment inflows and outflows. These differences may adversely
affect fund performance. The Composite performance shown is based upon an
initial investment of $10,000, with the deduction of the maximum Class A sales
charge of 5.75% (resulting in a $9,425.00 invested amount). We assumed an
investment in Class A shares because this class has the highest maximum initial
sales charge. The Composite's gross-of-fees return is reduced by the estimated
Class A gross operating expenses for the fund's first full fiscal year (without
reimbursement) of 2.00%. The chart would be different for a Class B, C, or R
investment because of their different sales charges and operating expenses. The
Lipper European Fund Index is a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper European Region Fund
category. The Lipper Index is based on changes in net asset value of the mutual
funds included in the index with all dividends reinvested and with no
adjustments for sales charges. The MSCI Europe Index is an unmanaged index
comprised of the companies listed on the stock exchanges of 14 European
countries. The index includes companies that replicate the industry composition
of each local market and represent a capitalization weighted sampling of large,
medium and small capitalization companies. MSCI Europe Index returns assume
reinvestment of all dividends paid by the stocks included in the index net of
foreign withholding taxes, but do not include brokerage commissions or other
fees that an investor would incur by purchasing the stocks that comprise the
index. The above chart and table do not represent past or future performance of
the fund.
Investment Objective
The Nuveen European Value Fund seeks to provide over time a superior total
return (income plus capital appreciation) with moderated risk. The fund may not
realize its objective.
How the Fund Pursues Its Objective
The portfolio manager invests primarily in a diversified portfolio of stocks of
established, well-known companies with at least $1 billion in market
capitalization that are domiciled or have their principal activities in Europe.
The domicile or the location of the principal activities of a company will be
the country (1) under whose laws the company is organized, (2) in which the
principal trading market for the equity securities issued by the company is
located, or (3) in which the company has over half its assets or derives half
its revenues. We concentrate on stocks we believe are selling for less than
their intrinsic worth, trying to identify those with a catalyst--for example, a
management change or an improved industry outlook--that will unlock the stock's
unrecognized value. We generally buy only those 20 to 30 stocks with a 15% to
25% price appreciation potential over the next 18 months.
4
<PAGE>
Our target investment mix is 90% European equity securities and 10% cash
equivalents. Under normal market conditions, we will invest at least 65% of the
fund's total assets in European equity securities, predominantly U.S.-traded
ADRs, and we may invest up to 35% of the fund's assets in cash equivalents and
short-term fixed-income securities in order to reduce volatility and preserve
capital. For a more detailed discussion of our investment strategy, please see
"How We Manage Your Money" beginning on page 5.
Is This Fund Right For You?
This fund may be an appropriate investment if you are:
. seeking to invest in European equity securities;
. want to pursue the high potential returns of foreign stocks using a
value-oriented investment strategy;
. want to diversify your otherwise U.S.- oriented equity portfolio.
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation, including the
possibility of sharp price declines;
. unwilling to accept the risks of foreign investment;
. investing to meet short-term financial goals.
SECTION 2
HOW WE MANAGE YOUR MONEY
To help you understand the fund better, this section includes a detailed
discussion of our investment and risk management strategies. For a more
complete discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Fund
Nuveen Institutional Advisory Corp. (NIAC), 333 West Wacker Drive, Chicago, IL
60606, has overall responsibility for management of the fund. NIAC oversees the
management of the fund's portfolio, manages the fund's business affairs and
provides day-to-day administrative services. The fund's Board of Trustees has
general supervisory responsibility for the fund and supervises NIAC's duties.
NIAC is a wholly owned subsidiary of John Nuveen & Co. Incorporated (Nuveen),
which is the sponsor and principal underwriter of the fund's shares and has
sponsored or underwritten more than $60 billion of investment company
securities. Nuveen is a subsidiary of The John Nuveen Company, which is
approximately 78% owned by The St. Paul Companies, Inc. St. Paul is located in
St. Paul, MN, and is principally engaged in providing property-liability
insurance through subsidiaries. NIAC has selected Institutional Capital
Corporation, 225 West Wacker Drive, Chicago, IL 60606, as subadviser to manage
the fund's investment portfolio. Institutional Capital's investment management
strategy and operating policies are set through a team approach, with all its
investment professionals contributing. Institutional Capital currently
maintains a staff of 12 investment professionals. Mr. Robert H. Lyon, president,
owns shares representing 51% of its voting rights. In addition, The John Nuveen
Company owns preferred shares of Institutional Capital, which are convertible
after several years into a 20% common stock interest.
What Securities We Invest In
The fund's investment objective may not be changed without shareholder approval.
The following investment policies may be changed by the Board of Trustees
without shareholder approval unless otherwise noted in this prospectus or the
Statement of Additional Information. For more information about the securities
that we invest in, see the Statement of Additional Information.
5
<PAGE>
Foreign Investments
The fund may invest in a variety of foreign securities, including American
Depositary Receipts (ADRs) and other types of depositary receipts; equity
securities of foreign companies that may or may not be publicly traded in the
U.S.; Eurodollar convertibles; fixed-income securities of foreign companies
that may or may not be publicly traded in the U.S.; and debt obligations issued
or guaranteed by foreign governments, their agencies, authorities or
instrumentalities. All foreign investments involve certain risks in addition to
those associated with U.S. investments (see "What the Risks Are--Foreign
investment risk" on page 7).
Equity Securities
Eligible equity securities include common stocks; preferred stocks; warrants to
purchase common stocks or preferred stocks; securities convertible into common
or preferred stocks, such as convertible bonds and debentures; and other
securities with equity characteristics. Any convertible bonds and debentures
must be rated investment grade (one of the four highest ratings by Moody's
Investors Service, Standard & Poor's, Duff & Phelps or Fitch Investors Service)
when purchased.
Short-Term Investments
The fund may invest in short-term investments including U.S. government
securities, quality commercial paper or similar fixed-income securities with
remaining maturities of one year or less.
Delayed Delivery Transactions
We may buy or sell securities on a when-issued or delayed-delivery basis, paying
for or taking delivery of the securities at a later date, normally within 15 to
45 days of the trade. Such transactions involve an element of risk because the
value of the security to be purchased may decline, and no income would be
received, before the settlement date.
How We Select Investments
We adhere to a disciplined, value-driven investment strategy whose aim is to
provide consistent, attractive performance over time with moderated risk. We
emphasize quality securities carefully chosen through in-depth research and
follow those securities closely over time to assess whether they continue to
meet our purchase rationale.
Institutional Capital selects stocks from the universe of large- and mid-size
European companies. Proprietary quantitative valuation models determine which
of these stocks currently appear to be selling for less than their intrinsic
worth. Based on a qualitative assessment of each company's prospects, we then
look for a catalyst that we believe will unlock the stock's unrecognized value.
A catalyst may be as simple as a management change or as complex as a
fundamentally improved industry outlook. Generally, we choose only the 20 to 30
most attractive stocks with a 15% to 25% price appreciation potential over the
next 18 months.
The fund anticipates that its annual portfolio turnover rate will be between
100% and 150% under normal market conditions, and will generally not exceed
200%. A turnover rate of 100% would occur, for example, if the fund sold and
replaced securities valued at 100% of its net assets within one year. Funds with
higher turnover rates generally pay higher brokerage commissions, and their
shareholders may pay higher taxes on realized investment gains.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund--even the most
conservative--involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in the fund. Because of these
and other risks, you should consider an investment in this fund to be a long-
term investment that will provide the best results when held over a number of
years.
6
<PAGE>
Market risk: the risk that the market value of a stock may change rapidly and
unpredictably, causing a security to be worth less than its original price. The
equity markets tend to have periods of generally rising prices and periods of
generally falling prices.
Foreign investment risk: There are certain risks associated with foreign
investing in addition to the usual risks inherent in U.S. investing. Such risks
include political or economic instability, difficulty in predicting
international trade patterns, lack of publicly available information about
foreign companies, changes in foreign currency exchange rates, and the
possibility of adverse changes in investment or exchange control regulations.
For a more detailed discussion of the risks associated with foreign investing,
see the Statement of Additional Information.
Correlation risk: The U.S. and European equity markets often rise and fall at
different times or by different amounts due to economic or other developments
particular to a given country. This phenomenon would tend to lower the overall
price volatility of a portfolio that included both U.S. and European stocks.
Sometimes, however, global trends will cause the U.S. and European markets to
move in the same direction, reducing or eliminating the risk reduction benefit
of international investing.
Inflation risk: the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the "real" (or "inflation adjusted") value of the fund's
assets can decline as can the real value of the fund's distributions.
How We Manage Risk
We use time-tested risk management strategies designed to help protect your
capital during periods of market uncertainty or weakness: portfolio
diversification, a rigorous sell discipline and defined portfolio allocation
ranges. While we use these strategies to control or reduce risk, there is no
assurance that we will succeed.
Emphasis on American Depositary Receipts (ADRs)
The fund buys equity securities of European companies primarily in the form of
sponsored ADRs that are traded in U.S. securities markets. Sponsored and
exchange-traded ADRs must comply with U.S. Generally Accepted Accounting
Principles and the reporting and disclosure requirements of the Securities and
Exchange Commission. Furthermore, such ADRs settle within three days through the
U.S. clearance system and are not subject to risks caused by the complicated and
varied settlement standards that exist for many foreign securities exchanges or
to currency risk during a transaction's settlement period.
Portfolio Allocation Ranges
The fund follows a disciplined asset allocation methodology that keeps your
portfolio mix within a defined range over time as market conditions change. The
fund will invest between 65% and 100% of its assets in stocks and between 0% and
35% of its assets in cash equivalents. The fund's Board of Trustees may change
the target investment mix and operating ranges for each asset class without
shareholder approval.
Investment Limitations
The fund has adopted certain investment limitations (based on total assets) that
cannot be changed without shareholder approval and are designed to limit your
investment risk and maintain portfolio diversification. The fund may not have
more than:
. 5% in securities in any one issuer, or 10% of the voting securities of
that issuer (except for U.S. government securities or for 25% of the
fund's total assets);
. 33 1/3% in borrowing;
. 33 1/3% in loans of its portfolio securities;
. 25% in any one industry (except U.S. government securities).
In addition, the fund has adopted certain other investment limitations
that may be changed by the fund's Board of Trustees without
shareholder approval. The fund may not have more than:
. 5% of its net assets in warrants, non-investment grade
fixed-income securities and short sales against the box;
. 30% of its net assets in futures contracts;
. 5% of its net assets in initial margin deposits and premiums on
futures contracts;
7
<PAGE>
. 15% of its net assets in illiquid securities.
Please see the Statement of Additional Information for a more detailed
discussion of investment limitations.
Hedging and Other Defensive Investment Strategies
We may invest up to 100% of the fund's assets in cash equivalents and short-term
investments as a temporary defensive measure in response to adverse market
conditions, or to keep cash on hand fully invested. During these periods, the
proportion of the fund's assets invested in an asset category may fall outside
its allowable range.
We may also use various investment strategies designed to limit the risk of
price fluctuations and to preserve capital. These hedging strategies include
using financial futures contracts, options on financial futures, or stock index
options. To protect against foreign currency exchange rate risk, the fund may
enter into foreign currency hedging transactions, including forward foreign
currency exchange contracts, foreign currency futures contracts and options on
foreign currency futures contracts. The ability of the fund to benefit from
options and futures is largely dependent on our ability to use such strategies
successfully. The fund could lose money on futures transactions or an option
can expire worthless.
Management Fees
Fund Management Fee
For the fund management services and facilities furnished by NIAC, the fund has
agreed to pay an annual fund management fee according to the following schedule,
calculated as a percentage of average daily net assets:
<TABLE>
<CAPTION>
Average Daily
Net Asset Value Portfolio Management Fee
<S> <C>
For the first $125 million .9500 of 1%
For the next $125 million .9375 of 1%
For the next $250 million .9250 of 1%
For the next $500 million .9125 of 1%
For the next $1 billion .9000 of 1%
For assets over $2 billion .8750 of 1%
</TABLE>
The fund manager has voluntarily agreed to waive fees and reimburse expenses
through July 31, 1999 to prevent total expenses (excluding any distribution or
service fees and extraordinary expenses) on an annualized basis from exceeding
1.30% of the average daily net asset value of each class of shares.
8
<PAGE>
Portfolio Management Fee
Out of the fund management fee, NIAC pays Institutional Capital a portfolio
management fee based on the average daily market value of all the Nuveen-
sponsored investment products for which it serves as the portfolio manager,
according to the following base schedule:
<TABLE>
<CAPTION>
Assets of All the Nuveen-sponsored
Investment Products Managed by
Institutional Capital Portfolio Management Fee
<S> <C>
For the first $500 million .35 of 1%
For the next $500 million .30 of 1%
For assets over $1 billion .25 of 1%
</TABLE>
In addition, NIAC has agreed to pay Institutional Capital a supplemental
management fee until assets in the aggregate in this fund and another European
fund subadvised by Institutional Capital reach $50 million. When this level is
reached, the aggregate amount of the supplemental fee paid by NIAC will be
credited back to NIAC through a temporary reduction in fees.
The fund pays for its own operating expenses such as custodial, transfer agent,
accounting and legal fees; interest charges; brokerage commissions; daily
securities pricing; distribution and service fees; organizational expenses;
extraordinary expenses and any other expenses that are not covered under any
advisory or sub-advisory agreements. The fund also pays a portion of the Nuveen
Investment Trust's general administrative expenses allocated in proportion to
its net assets. All fees and expenses are accrued daily and deducted before
payment of dividends to investors.
SECTION 3
HOW YOU CAN BUY AND SELL SHARES
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you. We
offer a number of features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon
redemption;
. the amount of any distribution or service fees that you may incur
while you own the shares;
. whether you will be reinvesting income or capital gain distributions
in additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see the Summary
of Fund Expenses on page 2.
9
<PAGE>
Class A Shares
You can buy Class A shares at net asset value per share plus an up-front sales
charge. You may qualify for a reduced sales charge, or the sales charge may be
waived, as described in "How to Reduce Your Sales Charge." Class A shares are
also subject to an annual service fee of .25% which compensates your financial
adviser for providing ongoing service to you. The up-front Class A sales charge
is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price/1/
- ------------------ --------------------- -------------------- ---------------------
<S> <C> <C> <C>
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.50% 4.71% 4.00%
$100,000 but less than $250,000...... 3.75% 3.90% 3.25%
$250,000 but less than $500,000...... 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000.... 2.00% 2.04% 1.75%
$1,000,000 and over.................. -- -- 1.00%/2/
</TABLE>
1. Between July 1, 1998 and September 30, 1998, Nuveen will reallow the entire
Class A sales charge as a sales commission to Authorized Dealers who agree to
jointly develop marketing and promotional support programs in connection with
the introduction of the fund.
2. You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays Authorized Dealers of record on these
share purchases a sales commission of 1.00% of the first $2.5 million, plus
.50% of the next $2.5 million, plus .25% of the amount over $5.0 million. If
you redeem your shares within 18 months of purchase, you may have to pay a
CDSC of 1% of either your purchase price or your redemption proceeds,
whichever is lower. You do not have to pay this CDSC if your financial
adviser has made arrangements with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at net asset value per share without any up-front
sales charge so that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1% of average
daily net assets. The annual .25% service fee compensates your financial adviser
for providing ongoing service to you. The annual .75% distribution fee
compensates Nuveen for paying your financial adviser a 3.75% up-front sales
commission. Nuveen also advances the first year's service fee. If you sell your
shares within six years of purchase, you will have to pay a CDSC based on either
your purchase price or what you sell your shares for, whichever amount is lower,
according to the following schedule. You do not pay a CDSC on any Class B shares
you purchase by reinvesting dividends.
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class
B shares.
<TABLE>
<CAPTION>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
- -------------------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
CDSC.................. 5% 4% 4% 3% 2% 1%
</TABLE>
Class C Shares
You can buy Class C shares at net asset value per share without any up-front
sales charge so that the full amount of your purchase is invested in the fund.
However, you will pay annual distribution and service fees of 1%. The annual
.25% service fee compensates your financial adviser for providing ongoing
service to you. The annual .75% distribution fee reimburses Nuveen for paying
your financial adviser an ongoing sales commission. Nuveen advances the first
year's service and distribution fees. If you sell your shares within 12 months
of purchase, you may have to pay a 1% CDSC based on either your purchase price
or what you sell your shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R Shares at their net asset
value on the day of purchase. In order to qualify, you must be eligible under
one of the programs described in "How to Reduce Your Sales Charge" (below) or
meet certain other purchase size criteria. Class R Shares are not subject to
sales charges or ongoing service or distribution fees. Class R shares have
lower ongoing expenses than Class A shares.
10
<PAGE>
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
<TABLE>
<CAPTION>
Class A Sales Charge Reductions Class A Sales Charge Waivers Class R Eligibility
- -------------------------------- ---------------------------- -------------------
<S> <C> <C>
. Rights of accumulation . Nuveen Unit Trust reinvestment . Certain employees of Nuveen or
authorized dealers
. Letter of intent . Purchases using redemptions
from unrelated funds . Bank trust departments
. Group purchase
. Retirement plans
. Certain employees of Nuveen
or authorized dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional
Information for detailed program descriptions and eligibility requirements.
Additional information is available from your financial adviser or by calling
(800) 621-7227. Your financial adviser can also help you prepare any necessary
application forms. You or your financial adviser must notify Nuveen at the time
of each purchase if you are eligible for any of these programs. The fund may
modify or discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per fund share class ($1,000 for a
traditional/Roth IRA account; $500 for an Education IRA account) and make
additional investments at any time with as little as $50. There is no minimum
if you are reinvesting Nuveen unit trust distributions. The share price you pay
will depend on when Nuveen receives your order. Orders received before the
close of trading on a business day will receive that day's closing share price,
otherwise you will receive the next business day's price. A business day is any
day the New York Stock Exchange is open for business and usually ends at 4 p.m.
New York time when the Exchange closes.
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop
a customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from
fund sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 621-7227 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Mutual Funds, c/o
Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330.
11
<PAGE>
Systematic Investing
Once you have established a fund account, systematic investing allows you to
make regular investments through automatic deductions from your bank account
(simply complete the appropriate section of the account application form) or
directly from your paycheck. To invest directly from your paycheck, contact
your financial adviser or call Nuveen at (800) 621-7227. Systematic investing
may also make you eligible for reduced sales charges.
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time, and does not assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Systematic Withdrawal Plan
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to
receive payments monthly, quarterly, semi-annually, or annually, and may choose
to receive a check, have the monies transferred directly into your bank account
(see "Fund Direct" below), paid to a third party, or sent payable to you at an
address other than your address of record. You must complete the appropriate
section of the account application or Account Update Form to participate in the
fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
Special Services
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account for the
same class of another Nuveen mutual fund available in your state. Your exchange
must meet the minimum purchase requirements of the fund into which you are
exchanging. You may not exchange Class B shares for shares of a Nuveen money
market fund. Because an exchange is treated for tax purposes as a concurrent
sale and purchase, you should consult your tax adviser about the tax
consequences of any contemplated exchange.
The exchange privilege is not intended to allow you to use the fund for short-
term trading. Because excessive exchanges may interfere with portfolio
management, raise fund operating expenses or otherwise have an adverse effect on
other shareholders, each fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Fund Direct
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and investing through a
Systematic Investment Plan. You may also have dividends, distributions,
redemption payments or Systematic Withdrawal Plan payments sent directly to your
bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 621-7227 for copies of the necessary forms.
12
<PAGE>
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the fund does not charge a redemption fee, you
may be assessed a CDSC, if applicable.
When you redeem Class A, Class B, or Class C shares subject to a CDSC, the fund
will first redeem any shares that are not subject to a CDSC or that represent an
increase in the value of your fund account due to capital appreciation, and then
redeem the shares you have owned for the longest period of time, unless you ask
the fund to redeem your shares in a different order. No CDSC is imposed on
shares you buy through the reinvestment of dividends and capital gains. The
holding period is calculated on a monthly basis and begins on the first day of
the month in which you buy shares. When you redeem shares subject to a CDSC,
the CDSC is calculated on the lower of your purchase price or redemption
proceeds, deducted from your redemption proceeds, and paid to Nuveen. The CDSC
may be waived under certain special circumstances as described in the Statement
of Additional Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone up to $50,000. You may not redeem by telephone shares held
in certificate form. Checks will be issued only to the shareholder of record and
mailed to the address of record. If you have established electronic funds
transfer privileges, you may have redemption proceeds transferred electronically
to your bank account. We will normally mail your check the next business day.
Nuveen and Shareholder Services, Inc., the fund's transfer agent, will
be liable for losses resulting from unauthorized telephone redemptions only if
they do not follow reasonable procedures designed to verify the identity of the
caller. You should immediately verify your trade confirmations when you receive
them.
By Mail
You can sell your shares at any time by sending a written request to the Nuveen
European Value Fund, c/o Shareholder Services, Inc., P.O. Box 5330, Denver, CO
80217-5330. Your request must include the following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid
(if other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other
than the address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. Guaranteed signatures are
required if you are redeeming more than $50,000, you want the check payable to
someone other than the shareholder of record or you want the check sent to
another address (or the address of record has been changed within the last 60
days). Signature guarantees must be obtained from a bank, brokerage firm or
other financial intermediary that is a member of an approved Medallion Guarantee
Program or that is otherwise approved by the fund. A notary public cannot
provide a signature guarantee.
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements.
The fund reserves the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
fund presently has set a minimum balance of $100 unless you have an active
Nuveen unit trust reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
13
<PAGE>
SECTION 4
GENERAL INFORMATION
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
Distribution and Taxes
The fund intends to operate as a "Regulated Investment Company" under Subchapter
M of the Internal Revenue Code, and therefore will not be liable for federal
income taxes to the extent its earnings are distributed on a timely basis.
Dividends from the fund's long-term capital gains are taxable as capital gains,
while dividends from short-term capital gains and net investment income are
generally taxable as ordinary income. The tax status of your dividends from the
fund is not affected by whether you reinvest your dividends or receive them in
cash. Tax laws are subject to change, so we urge you to consult your tax
adviser about your particular tax situation and how it might be affected by
current tax law.
Foreign Income Tax Considerations
Investment income that the fund receives from its foreign investments may be
subject to foreign income taxes, which generally will reduce the fund's
distributions. However, the U.S. has entered into tax treaties with many
foreign countries that may entitle you to certain tax benefits.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 621-7227.
Tax Reporting
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year.
You will receive this statement from the firm where you purchased your fund
shares if you hold your investment in street name. Nuveen will send you this
statement if you hold your shares in registered form.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. The fund usually distributes taxable dividends quarterly
and capital gains, if any, each December.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires us to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
Distribution and Service Plans
John Nuveen and Co. Incorporated serves as the selling agent and distributor of
the fund's shares. In this capacity, Nuveen manages the offering of the fund's
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, the fund has adopted a distribution and
service plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" on page 9 for a description of the distribution
and service fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to Authorized Dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A,
14
<PAGE>
Class B and Class C shares to compensate Authorized Dealers, including Nuveen,
for providing account services to shareholders. These services may include
establishing and maintaining shareholder accounts, answering shareholder
inquiries and providing other personal services to shareholders. These fees also
compensate Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders and the expenses of preparing,
printing and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares.
Net Asset Value
The fund's net asset value per share is determined as of the close of trading
(normally 4:00 p.m. eastern time) on each day the New York Stock Exchange is
open for business. Net asset value is calculated for each class by taking the
fair value of the class' total assets, including interest or dividends accrued
but not yet collected, less all liabilities, and dividing by the total number of
shares outstanding. The result, rounded to the nearest cent, is the net asset
value per share. All valuations are subject to review by the fund's Board of
Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. Common stocks and other equity securities are valued at the
last sales price that day. Securities not listed on a national securities
exchange or Nasdaq are valued at the most recent bid prices. When price quotes
are not readily available, the pricing service establishes fair market value
based on prices of comparable securities.
Organization of the Fund
The fund is a series of the Nuveen Investment Trust, an open-end diversified
management investment company under the Investment Company Act of 1940. The
other series of the trust are offered under a separate prospectus. The trust was
organized as a Massachusetts business trust on May 6, 1996. The trust is
authorized to issue an unlimited number of shares in one or more series or
"funds," which may be divided into classes of shares. Each fund is divided into
four classes of shares designated as Class A, Class B, Class C and Class R. Each
class of shares represents an interest in the same portfolio of investments of
the fund, and each class of shares has equal rights as to voting, redemption,
dividends and liquidation. Each class, however, bears different expenses,
including different distribution and service fees, and each has exclusive voting
rights with respect to its distribution or service plan, if any. These
differences will cause net income per share, dividends per share and net asset
value per share to vary among classes. The Board of Trustees of the trust has
the right to establish additional series and classes of shares in the future, to
change those series or classes, and to determine the preferences, voting powers,
rights and privileges for each.
The trust is not required and does not intend to hold annual meetings of
shareholders. Shareholders owning more than 10% of the outstanding shares of the
fund have the right to call a special meeting to remove trustees or for any
other purpose.
Fund Service Providers
The custodian of the assets of the fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend
paying agent, Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
performs bookkeeping, data processing and administrative services for the
maintenance of shareholder accounts. Effective on or about July 15, 1998, Chase
Global Fund Services Company, 73 Tremont Street, Boston, MA 02108, will perform
the services currently provided by SSI.
NIAC, Institutional Capital, SSI and Chase rely on computer systems to manage
the fund's investments, process shareholder transactions and provide shareholder
account maintenance. Because of the way computers historically have stored
dates, some of these systems currently may not be able to correctly process
activity occurring in the year 2000. NIAC is working with the trust's service
providers to adapt their systems to address this "year 2000 issue." NIAC and the
trust expect, but there can be no absolute assurance, that the necessary work
will be completed on a timely basis.
15
<PAGE>
[intentionally left blank]
16
<PAGE>
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Municipal Bond Funds
Long-Term
Insured Long-Term
Intermediate-Term
Limited-Term
State Municipal Bond Funds
Alabama
Arizona
California/1/
Colorado
Connecticut
Florida/2/
Georgia
Kansas
Kentucky/3/
Louisiana
Maryland
Massachusetts/1/
Michigan
Missouri
New Jersey/2/
New Mexico
New York/1/
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
1. Long-term and insured long-term portfolios.
2. Long-term and intermediate-term portfolios
3. Long-term and limited-term portfolios.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 621-7227
www.nuveen.com
<PAGE>
Statement of Additional Information
May 29, 1998
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN EUROPEAN VALUE FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained from certain securities representatives, banks and other financial
institutions that have entered into sales agreements with John Nuveen & Co.
Incorporated, or from the Fund, c/o John Nuveen & Co. Incorporated, 333 West
Wacker Drive, Chicago, Illinois 60606 or by calling 800-621-7227. This
Statement of Additional Information relates to, and should be read in
conjunction with, the Prospectus for the Fund. The Prospectus for the Fund is
dated May 29, 1998.
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
General Information B-1
Investment Policies and Restrictions B-2
Investment Policies and Techniques B-3
Management B-14
Trust Manager and Fund Manager B-17
Portfolio Transactions B-18
Net Asset Value B-19
Tax Matters B-19
Performance Information B-23
Additional Information on the Purchase And Redemption of Fund Shares and Shareholder Programs B-26
Distribution and Service Plans B-38
Independent Public Accountants and Custodian B-38
General Trust Information B-39
Appendix A--Ratings of Investments A-1
</TABLE>
GENERAL INFORMATION
The Nuveen European Value Fund (the "Fund") is a series of the Nuveen Investment
Trust (the "Trust"), an open-end diversified management series investment
company. Each series of the Trust represents shares of beneficial interest in a
separate portfolio of securities and other assets, with its own objectives and
policies. Currently, four series of the Trust are authorized and outstanding.
Certain matters under the Investment Company Act of 1940 which must be submitted
to a vote of the holders of the outstanding voting securities of a series
company shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding voting securities of each series
affected by such matter.
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Investment Restrictions
The investment objective and certain fundamental investment policies of the Fund
are described in the Prospectus for the Fund. The Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the shares
of the Fund:
(1) With respect to 75% of its total assets, purchase the securities of any
issuer (except securities issued or guaranteed by the United States government
or any agency or instrumentality thereof) if, as a result, (i) more than 5% of
the Fund's total assets would be invested in securities of that issuer, or (ii)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.
(2) Borrow money, except that the Fund may (i) borrow money from banks for
temporary or emergency purposes (but not for leverage or the purchase of
investments) and (ii) engage in other transactions permissible under the
Investment Company Act of 1940 that may involve a borrowing (such as obtaining
such short-term credits as are necessary for the clearance of transactions,
engaging in delayed-delivery transactions, or purchasing certain futures and
options), provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of the Fund's total assets (including the amount borrowed), less
the Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the extent
that the Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of portfolio
securities.
(4) Make loans to other persons, except through (i) the purchase of debt
securities permissible under the Fund's investment policies, (ii) repurchase
agreements, or (iii) the lending of portfolio securities, provided that no such
loan of portfolio securities may be made by the Fund if, as a result, the
aggregate of such loans would exceed 33 1/3% of the value of the Fund's total
assets.
(5) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from purchasing or selling options, futures contracts, or other derivative
instruments, or from investing in securities or other instruments backed by
physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prohibit the Fund from
purchasing or selling securities or other instruments backed by real estate or
of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment Company
Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers whose
principal business activities are in the same industry (except that this
restriction shall not be applicable to securities issued or guaranteed by the
U.S. government or any agency or instrumentality thereof).
If a percentage restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the investment
or the total assets will not constitute a violation of that restriction.
The foregoing fundamental investment policies, together with the investment
objective of the Fund and certain other policies specifically identified in the
Prospectus, cannot be changed without approval by holders of a "majority of the
Fund's outstanding voting shares." As defined in the Investment Company Act of
1940, this means the vote of (i) 67% or more of the Fund's shares present at a
meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy, or (ii) more than 50% of the Fund's shares, whichever is
less.
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In addition to the foregoing fundamental investment policies, the Fund is also
subject to the following non-fundamental restrictions and policies, which may be
changed by the Board of Trustees. The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short at no
added cost, and provided that transactions in options, futures contracts,
options on futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such short
term credits as are necessary for the clearance of transactions; and provided
that margin deposits in connection with futures contracts, options on futures
contracts, or other derivative instruments shall not constitute purchasing
securities on margin.
(3) Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and then
such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of the Fund's
total assets at the time of the borrowing or investment.
(4) Purchase securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and applicable state law.
(5) Enter into futures contracts or related options if more than 30% of the
Fund's net assets would be represented by futures contracts or more than 5% of
the Fund's net assets would be committed to initial margin deposits and premiums
on futures contracts and related options.
(6) Invest in direct interests in oil, gas or other mineral exploration
programs or leases; however, the Fund may invest in the securities of issuers
that engage in these activities.
(7) Purchase securities when borrowings exceed 5% of its total assets. If due
to market fluctuations or other reasons, the value of the Fund's assets falls
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its
investments at a time when it may be disadvantageous to do so.
(8) Invest in illiquid securities if, as a result of such investment, more than
15% of the Fund's net assets would be invested in illiquid securities.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's investment
objective, policies, and techniques that are described in the Prospectus for the
Fund.
Cash Equivalents and Short-Term Investments
Short-Term Taxable Fixed Income Securities
The Fund may invest up to 35% of its total assets, and for temporary defensive
purposes or to keep cash on hand fully invested up to 100% of its total assets,
in cash equivalents and short-term taxable fixed income securities from issuers
having a long-term rating of at least A or higher by S&P, Moody's or Fitch, or
A- or higher by Duff & Phelps, Inc. ("D&P"), or determined by the portfolio
manager to be of comparable quality, and having a maturity of one year or less.
Short-term taxable fixed income securities are defined to include, without
limitation, the following:
(1) The Fund may invest in U.S. government securities, including bills, notes
and bonds differing as to maturity and rates of interest, which are either
issued or guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities issued
by (a) the Federal Housing Administration, Farmers Home Administration, Export-
Import Bank of the United States, Small Business Administration, and the
Government National Mortgage Association, whose securities are supported by the
full faith and credit of the United
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States; (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and
the Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury; (c) the Federal National Mortgage
Association, whose securities are supported by the discretionary authority of
the U.S. government to purchase certain obligations of the agency or
instrumentality; and (d) the Student Loan Marketing Association, whose
securities are supported only by its credit. While the U.S. government provides
financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it always will do so since it
is not so obligated by law. The U.S. government, its agencies, and
instrumentalities do not guarantee the market value of their securities, and
consequently, the value of such securities may fluctuate. In addition, the Fund
may invest in sovereign debt obligations of foreign countries. A sovereign
debtor's willingness or ability to repay principal and interest in a timely
manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which it may be
subject.
(2) The Fund may invest in certificates of deposit issued against funds
deposited in a bank or savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and are normally
negotiable. If such certificates of deposit are non-negotiable, they will be
considered illiquid securities and be subject to the Fund's 15% restriction on
investments in illiquid securities. Pursuant to the certificate of deposit, the
issuer agrees to pay the amount deposited plus interest to the bearer of the
certificate on the date specified thereon. Under current FDIC regulations, the
maximum insurance payable as to any one certificate of deposit is $100,000;
therefore, certificates of deposit purchased by the Fund may not be fully
insured.
(3) The Fund may invest in bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions. Generally, an acceptance is
a time draft drawn on a bank by an exporter or an importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then "accepted" by
a bank that, in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the
going rate of interest for a specific maturity.
(4) The Fund may invest in repurchase agreements, which involve purchases of
debt securities. In such an action, at the time the Fund purchases the security,
it simultaneously agrees to resell and redeliver the security to the seller, who
also simultaneously agrees to buy back the security at a fixed price and time.
This assures a predetermined yield for the Fund during its holding period since
the resale price is always greater than the purchase price and reflects an
agreed-upon market rate. Such actions afford an opportunity for the Fund to
invest temporarily available cash. The Fund may enter into repurchase agreements
only with respect to obligations of the U.S. government, its agencies or
instrumentalities; certificates of deposit; or bankers' acceptances in which the
Fund may invest. Repurchase agreements may be considered loans to the seller,
collateralized by the underlying securities. The risk to the Fund is limited to
the ability of the seller to pay the agreed-upon sum on the repurchase date; in
the event of default, the repurchase agreement provides that the affected Fund
is entitled to sell the underlying collateral. If the value of the collateral
declines after the agreement is entered into, however, and if the seller
defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The portfolio manager monitors the value of the
collateral at the time the action is entered into and at all times during the
term of the repurchase agreement. The portfolio manager does so in an effort to
determine that the value of the collateral always equals or exceeds the agreed-
upon repurchase price to be paid to the Fund. If the seller were to be subject
to a federal bankruptcy proceeding, the ability of the Fund to liquidate the
collateral could be delayed or impaired because of certain provisions of the
bankruptcy laws.
(5) The Fund may invest in bank time deposits, which are monies kept on deposit
with banks or savings and loan associations for a stated period of time at a
fixed rate of interest. There may be penalties for the early withdrawal of such
time deposits, in which case the yields of these investments will be reduced.
(6) The Fund may invest in commercial paper, which are short-term unsecured
promissory notes, including variable rate master demand notes issued by
corporations to finance their current operations. Master demand notes are direct
lending arrangements between the Fund and a corporation. There is no secondary
market for the notes. However, they
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are redeemable by the Fund at any time. The portfolio manager will consider the
financial condition of the corporation (e.g., earning power, cash flow, and
other liquidity ratios) and will continuously monitor the corporation's ability
to meet all of its financial obligations, because the Fund's liquidity might be
impaired if the corporation were unable to pay principal and interest on demand.
The Fund may only invest in commercial paper rated A-2 or better by S&P, Prime-2
or higher by Moody's, Duff 2 or higher by D&P or Fitch 2 or higher by Fitch, or
unrated commercial paper which is, in the opinion of the Fund manager, of
comparable quality.
Foreign Investments
Indirect Foreign Investment--Depositary Receipts. The Fund may invest in
foreign securities by purchasing depositary receipts, including American
Depositary Receipts ("ADRs"), European Depository Receipts ("EDRs"), or Global
Depositary Receipts ("GDRs"), or other securities representing indirect
ownership interests in the securities of foreign issuers. Generally, ADRs, in
registered form, are denominated in U.S. dollars and are designed for use in the
U.S. securities markets, while EDRs and GDRs, in bearer form, may be denominated
in other currencies and are designed for use in European and other markets. For
purposes of the Fund's investment policies, ADRs, EDRs, and GDRs are deemed to
have the same classification as the underlying securities they represent, except
that ADRs, EDRs, and GDRs shall be treated as indirect foreign investments.
Thus, an ADR, EDR, or GDR representing ownership of common stock will be treated
as common stock. ADRs, EDRs, and GDRs do not eliminate all of the risks
associated with directly investing in the securities of foreign issuers.
Other types of depositary receipts include American Depositary Shares ("ADSs"),
Global Depositary Certificates ("GDCs"), and International Depositary Receipts
("IDRs"). ADSs are shares issued under a deposit agreement representing the
underlying ordinary shares that trade in the issuer's home market. An ADR,
described above, is a certificate that represents a number of ADSs. GDCs and
IDRs are typically issued by a foreign bank or trust company, although they may
sometimes also be issued by a U.S. bank or trust company. GDCs and IDRs are
depositary receipts that evidence ownership of underlying securities issued by
either a foreign or a U.S. corporation.
Depositary receipts may be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by a depositary and the
issuer of the security underlying the receipt. An unsponsored facility may be
established by a depositary without participation by the issuer of the security
underlying the receipt. There are greater risks associated with holding
unsponsored depositary receipts. For example, if the Fund holds an unsponsored
depositary receipt, it will generally bear all of the costs of establishing the
unsponsored facility. In addition, the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
Direct Foreign Investments. The Fund may invest directly in the securities of
foreign issuers. In considering whether to invest in the securities of a
foreign company, the Fund manager considers such factors as the characteristics
of the particular company, differences between economic trends, and the
performance of securities markets within the U.S. and those within other
countries. The Fund manager also considers factors relating to the general
economic, governmental, and social conditions of the country or countries where
the company is located.
The Fund may purchase debt obligations issued or guaranteed by governments
(including states, provinces or municipalities) of countries other than the
United States, or by their agencies, authorities, or instrumentalities. The
Fund also may purchase debt obligations issued or guaranteed by supranational
entities organized or supported by several national governments, such as the
International Bank for Reconstruction and Development (the "World Bank"), the
Inter-American Development Bank, the Asian Development Bank, and the European
Investment Bank. In addition, the Fund may purchase debt obligations of foreign
corporations or financial institutions, such as Yankee bonds (dollar-denominated
bonds sold in the United States by non-U.S. issuers), Samurai bonds (yen-
denominated bonds sold in Japan by non-Japanese issuers), and Euro bonds (bonds
not issued in the country (and possibly not the currency of the country) of the
issuer).
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The Fund's investments will be allocated among securities denominated in the
currencies of a number of foreign countries and, within each such country, among
different types of debt securities. The percentage of assets invested in
securities of a particular country or denominated in a particular currency will
vary in accordance with the Fund manager's assessment of the country's gross
domestic product, purchasing power parity and market capitalization and the
relationship of a country's currency to the United States dollar. Fundamental
economic strength, credit quality and interest rate trends will be the principal
factors considered by the Fund manager in determining whether to increase or
decrease the emphasis placed upon a particular type of security within the Fund.
Securities transactions conducted outside the U.S. may not be regulated as
rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions, (iii)
delays in the Fund's ability to act upon economic events occurring in foreign
markets during non-business hours in the U.S., (iv) the imposition of different
exercise and settlement terms and procedures and the margin requirements than in
the U.S., and (v) lower trading volume and liquidity.
The Fund may invest in Eurodollar convertibles. Eurodollar convertibles are
fixed-income securities of a foreign issuer that are issued in U.S. dollars
outside the U.S. and are convertible into or exchangeable for specified equity
securities.
Foreign Currency Transactions. The Fund may engage in foreign currency forward
contracts, options, and futures transactions. The Fund will enter into foreign
currency transactions for hedging and other permissible risk management purposes
only. Foreign currency futures and options contracts are traded in the U.S. on
regulated exchanges such as the Chicago Mercantile Exchange, the Mid-America
Commodities Exchange, and the Philadelphia Stock Exchange. If the Fund invests
in a currency futures or options contract, it must make a margin deposit to
secure performance of such contract. With respect to investments in currency
futures contracts, the Fund may also be required to make a variation margin
deposit because the value of futures contracts fluctuates from purchase to
maturity. In addition, the Fund may segregate assets to cover its futures
contracts obligations.
(1) Currency Risks. The exchange rates between the U. S. dollar and foreign
currencies depend upon such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental intervention,
speculation, and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund may not convert its holdings
of foreign currencies to U.S. dollars daily. The Fund may incur conversion costs
when it converts its holdings to another currency. Foreign exchange dealers may
realize a profit on the difference between the price at which the Fund buys and
sells currencies. The Fund will engage in foreign currency exchange transactions
in connection with its portfolio investments. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign contracts.
(2) Forward Foreign Currency Exchange Contracts. The Fund may enter into
forward currency exchange contracts. Forward foreign currency exchange contracts
may limit potential gains that could result from a positive change in such
currency relationships. The Fund manager believes that it is important to have
the flexibility to enter into forward foreign currency exchange contracts
whenever it determines that it is in the Fund's best interest to do so. The Fund
will not speculate in foreign currency exchange.
The Fund will not enter into forward currency exchange contracts or maintain a
net exposure in such contracts that it would be obligated to deliver an amount
of foreign currency in excess of the value of its portfolio securities or other
assets denominated in that currency or, in the case of a "cross-hedge,"
denominated in a currency or currencies that the Fund manager believes will tend
to be closely correlated with that currency with regard to price movements.
Generally, the Fund will not enter into a forward foreign currency exchange
contract with a term longer than one year.
(3) Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price on a specified date or during the option period. The owner of a
call option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right,
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but not the obligation, to sell the currency. When the option is exercised, the
seller (i.e., writer) of the option is obligated to fulfill the terms of the
sold option. However, either the seller or the buyer may, in the secondary
market, close its position during the option period at any time prior to
expiration.
A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on a foreign currency generally
rises in value if the underlying currency depreciates in value. Although
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, the option will not limit the
movement in the value of such currency. For example, if the Fund held
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the Fund would not have to exercise its put option. Likewise, if the
Fund entered into a contract to purchase a security denominated in foreign
currency and, in conjunction with that purchase, purchased a foreign currency
call option to hedge against a rise in value of the currency, and if the value
of the currency instead depreciated between the date of purchase and the
settlement date, the Fund would not have to exercise its call. Instead, the
Fund could acquire in the spot market the amount of foreign currency needed for
settlement.
(4) Special Risks Associated with Foreign Currency Options. Buyers and sellers
of foreign currency options are subject to the same risks that apply to options
generally. In addition, there are certain risks associated with foreign currency
options. The markets in foreign currency options are relatively new, and the
Fund's ability to establish and close out positions on such options is subject
to the maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the Fund
manager, the market for them has developed sufficiently to ensure that the risks
in connection with such options are not greater than the risks in connection
with the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally. The value of a
foreign currency option depends upon the value of the underlying currency
relative to the U. S. dollar. As a result, the price of the option position may
vary with changes in the value of either or both currencies and may have no
relationship to the investment merits of a foreign security. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To the extent that
the U. S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets until
they reopen.
(5) Foreign Currency Futures Transactions. By using foreign currency futures
contracts and options on such contracts, the Fund may be able to achieve many of
the same objectives as it would through the use of forward foreign currency
exchange contracts. The Fund may be able to achieve these objectives possibly
more effectively and at a lower cost by using futures transactions instead of
forward foreign currency exchange contracts.
(6) Special Risks Associated with Foreign Currency Futures Contracts and
Related Options. Buyers and sellers of foreign currency futures contacts are
subject to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
currencies, as described above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the
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maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the opinion of its Fund manager, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying foreign
currency futures contracts. Compared to the purchase or sale of foreign
currency futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the option (plus transaction costs). However,
there may be circumstances when the purchase of a call or put option on a
futures contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.
Hedging Strategies
General Description of Hedging Strategies
The Fund may engage in hedging activities. NIAC or Institutional Capital
Corporation ("Institutional Capital") may cause the Fund to utilize a variety of
financial instruments, including options, futures contracts (sometimes referred
to as "futures") and options on futures contracts to attempt to hedge the Fund's
holdings.
Hedging instruments on securities generally are used to hedge against price
movements in one or more particular securities positions that the Fund owns or
intends to acquire. Hedging instruments on stock indices, in contrast,
generally are used to hedge against price movements in broad equity market
sectors in which the Fund has invested or expects to invest. The use of hedging
instruments is subject to applicable regulations of the Securities and Exchange
Commission (the "SEC"), the several options and futures exchanges upon which
they are traded, the Commodity Futures Trading Commission (the "CFTC") and
various state regulatory authorities. In addition, the Fund's ability to use
hedging instruments will be limited by tax considerations.
General Limitations on Futures and Options Transactions
The Trust has filed a notice of eligibility for exclusion from the definition of
the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for the Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations. The Fund will not enter into futures
and options transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of the Fund's total assets. In addition,
the Fund will not enter into futures contracts and options transactions if more
than 30% of its net assets would be committed to such instruments.
The foregoing limitations are not fundamental policies of the Fund and may be
changed without shareholder approval as regulatory agencies permit. Various
exchanges and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to
increase the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
The Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered
investment companies and, if the guidelines so require, will set aside cash,
U.S. government securities, high grade liquid debt securities and/or other
liquid assets permitted by the SEC and CFTC in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures or options position is outstanding, unless replaced with other
permissible assets, and will be marked-to-market daily.
Stock Index Options
The Fund may (i) purchase stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions, and/or (iii) write
covered options on stock indexes for hedging purposes. Stock index options are
put options and call options on various stock indexes. In most respects, they
are identical to listed options on common stocks. The primary difference
between stock options and index options occurs when index options are exercised.
In the case of
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stock options, the underlying security, common stock, is delivered. However,
upon the exercise of an index option, settlement does not occur by delivery of
the securities comprising the index. The option holder who exercises the index
option receives an amount of cash if the closing level of the stock index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to the difference between the closing price of the stock index and the
exercise price of the option expressed in dollars times a specified multiple.
A stock index fluctuates with changes in the market values of the stock included
in the index. For example, some stock index options are based on a broad market
index, such as the Standard & Poor's 500 or the Value Line Composite Index or a
narrower market index, such as the Standard & Poor's 100. Indexes may also be
based on an industry or market segment, such as the AMEX Oil and Gas Index or
the Computer and Business Equipment Index. Options on stock indexes are
currently traded on the following exchanges: the Chicago Board of Options
Exchange, the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
The Fund's use of stock index options is subject to certain risks. Successful
use by the Fund of options on stock indexes will be subject to the ability of
Institutional Capital to correctly predict movements in the direction of the
stock market. This requires different skills and techniques than predicting
changes in the prices of individual securities. In addition, the Fund's ability
to effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements of the securities held by
the Fund. Inasmuch as the Fund's securities will not duplicate the components
of an index, the correlation will not be perfect. Consequently, the Fund will
bear the risk that the prices of its securities being hedged will not move in
the same amount as the prices of its put options on the stock indexes. It is
also possible that there may be a negative correlation between the index and the
Fund's securities which would result in a loss on both such securities and the
options on stock indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of stock index
options involves the risk that the premium and transaction costs paid by the
Fund in purchasing an option will be lost as a result of unanticipated movements
in prices of the securities comprising the stock index on which the option is
based.
Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange or elsewhere may exist. If the Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned
securities in order to satisfy its obligation under the option to deliver such
securities. If the Fund is unable to effect a closing sale transaction with
respect to options on securities that it has purchased, it would have to
exercise the option in order to realize any profit and would incur transaction
costs upon the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Fund.
Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Fund. Expiration of a call option written by the Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
B-9
<PAGE>
If the Fund writes options, or purchases puts that are subject to the loss
deferral rules of Section 1092 of the Internal Revenue Code of 1986, as amended
(the "Code"), any losses on such options transactions, to the extent they do not
exceed the unrecognized gains on the securities covering the options, may be
subject to deferral until the securities covering the options have been sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Fund will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition, such
positions must be marked-to-market as of the last business day of the year, and
gain or loss must be recognized for federal income tax purposes in accordance
with the 60%/40% rule discussed above even though the position has not been
terminated. A "nonequity option" includes an option with respect to any group
of stocks or a stock index if there is in effect a designation by the CFTC of a
contract market for a contract based on such group of stocks or indexes. For
example, options involving stock indexes such as the S&P 500 Index would be
"nonequity options" within the meaning of Code Section 1256.
Futures Contracts
The Fund may enter into futures contracts (hereinafter referred to as "Futures"
or "Futures Contracts"), including index Futures as a hedge against movements in
the equity markets, in order to establish more definitely the effective return
on securities held or intended to be acquired by the Fund or for other purposes
permissible under the CEA. The Fund's hedging may include sales of Futures as
an offset against the effect of expected declines in stock prices and purchases
of Futures as an offset against the effect of expected increases in stock
prices. The Fund will not enter into Futures Contracts which are prohibited
under the CEA and will, to the extent required by regulatory authorities, enter
only into Futures Contracts that are traded on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal interest rate Futures exchanges in the United States are the Board of
Trade of the City of Chicago and the Chicago Mercantile Exchange. Futures
exchanges and trading are regulated under the CEA by the CFTC.
An index Futures Contract is an agreement pursuant to which the parties agree to
take or make delivery of an amount of cash equal to the difference between the
value of the index at the close of the last trading day of the contract and the
price at which the index Futures Contract was originally written. Transaction
costs are incurred when a Futures Contract is bought or sold and margin deposits
must be maintained. A Futures Contract may be satisfied by delivery or
purchase, as the case may be, of the instrument or by payment of the change in
the cash value of the index. More commonly, Futures Contracts are closed out
prior to delivery by entering into an offsetting transaction in a matching
Futures Contract. Although the value of an index might be a function of the
value of certain specified securities, no physical delivery of those securities
is made. If the offsetting purchase price is less than the original sale price,
a gain will be realized; if it is more, a loss will be realized. Conversely, if
the offsetting sale price is more than the original purchase price, a gain will
be realized; if it is less, a loss will be realized. The transaction costs must
also be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect
to a particular Futures Contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue to be required
to maintain the margin deposits on the Futures Contract.
Margin is the amount of funds that must be deposited by the Fund with its
custodian in a segregated account in the name of the futures commission merchant
in order to initiate Futures trading and to maintain the Fund's open positions
in Futures Contracts. A margin deposit is intended to ensure the Fund's
performance of the Futures Contract. The margin required for a particular
Futures Contract is set by the exchange on which the Futures Contract is traded
and may be significantly modified from time to time by the exchange during the
term of the Futures Contract. Futures Contracts are customarily purchased and
sold on margins that may range upward from less than 5% of the value of the
Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if
the value of a position increases because of favorable price changes in the
Futures Contract so that the margin deposit exceeds the required margin, the
broker
B-10
<PAGE>
will pay the excess to the Fund. In computing daily net asset value, the Fund
will mark to market the current value of its open Futures Contracts. The Fund
expects to earn interest income on its margin deposits.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount initially invested in the Futures Contract. However, the Fund would
presumably have sustained comparable losses if, instead of the Futures Contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The day limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Futures Contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of Futures positions
and subjecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a Futures position. The Fund would continue to be
required to meet margin requirements until the position is closed, possibly
resulting in a decline in the Fund's net asset value. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes,
including, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
Options on Futures
The Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate an
existing position. A futures option gives the holder the right, in return of
the premium paid, to assume a long position (call) or short position (put) in a
Futures Contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the Futures Contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or expiration,
a futures option may be closed out by an offsetting purchase or sale of a
futures option of the same series.
The Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Fund uses put and call options on
securities or indexes. The purchase of put options on Futures Contracts is
analogous to the purchase of puts on securities or indexes so as to hedge the
Fund's securities holdings against the risk of declining market prices. The
writing of a call option or the purchasing of a put option on a Futures Contract
constitutes a partial hedge against declining prices of the securities which are
deliverable upon exercise of the Futures Contract. If the futures price at
expiration of a written call option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's holdings of securities.
If the futures price when the option is exercised is above the exercise price,
however, the Fund will incur a loss, which may be offset, in whole or in part,
by the increase in the value of the securities held by the Fund that were being
hedged. Writing a put option or purchasing a call option on a Futures Contract
serves as a partial hedge against an increase in the value of the securities the
Fund intends to acquire.
B-11
<PAGE>
As with investments in Futures Contracts, the Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts
written by it. Such margin deposits will vary depending on the nature of the
underlying Futures Contract (and the related initial margin requirements), the
current market value of the option, and other futures positions held by the
Fund. The Fund will set aside in a segregated account at the Fund's custodian
liquid assets, such as cash, U.S. government securities or other high grade
liquid debt obligations equal in value to the amount due on the underlying
obligation. Such segregated assets will be marked-to-market daily, and
additional assets will be placed in the segregated account whenever the total
value of the segregated account falls below the amount due on the underlying
obligation.
The risks associated with the use of options on Futures Contracts include the
risk that the Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on Futures Contracts depends on Institutional
Capital's ability to correctly predict the movement in prices of Futures
Contracts and the underlying instruments, which may prove to be incorrect. In
addition, there may be imperfect correlation between the instruments being
hedged and the Futures Contract subject to the option. For additional
information, see "Futures Contracts."
Federal Income Tax Treatment of Futures Contracts
For federal income tax purposes, the Fund is required to recognize as income for
each taxable year its net unrealized gains and losses on Futures Contracts as of
the end of the year, as well as gains and losses actually realized during the
year. Except for transactions in Futures Contracts that are classified as part
of a "mixed straddle" under Code Section 1256, any gain or loss recognized with
respect to a Futures Contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the Futures Contract. In the case of a Futures transaction not
classified as a "mixed straddle," the recognition of losses may be required to
be deferred to a later taxable year.
Sales of Futures Contracts that are intended to hedge against a change in the
value of securities held by the Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
The Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized gains
at the end of the Fund's fiscal year) on Futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Fund's other investments and shareholders will be advised of the nature of
the payments.
Other Investment Policies and Techniques
Delayed-Delivery Transactions
The Fund may from time to time purchase securities on a "when-issued" or other
delayed-delivery basis. The price of securities purchased in such transactions
is fixed at the time the commitment to purchase is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within 45 days of the purchase. During the period between the
purchase and settlement, no payment is made by the Fund to the issuer and no
interest is accrued on debt securities or dividend income is earned on equity
securities. Delayed-delivery commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in value of the Fund's other assets.
While securities purchased in delayed-delivery transactions may be sold prior to
the settlement date, the Fund intends to purchase such securities with the
purpose of actually acquiring them. At the time the Fund makes the commitment
to purchase a security in a delayed-delivery transaction, it will record the
transaction and reflect the value of the security in determining its net asset
value. The Fund does not believe that net asset value will be adversely
affected by purchases of securities in delayed-delivery transactions.
The Fund will maintain in a segregated account cash, U.S. government securities,
and high grade liquid debt securities equal in value to commitments for delayed-
delivery securities. Such segregated securities will mature or, if necessary, be
sold on or before the settlement date. When the time comes to pay for delayed-
delivery securities, the Fund will meet its obligations from then-available cash
flow, sale of the securities held in the segregated account described above,
sale of
B-12
<PAGE>
other securities, or, although it would not normally expect to do so, from the
sale of the delayed-delivery securities themselves (which may have a market
value greater or less than the Fund's payment obligation).
Illiquid Securities
The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction, illiquid securities
include, but are not limited to, restricted securities (securities the
disposition of which is restricted under the federal securities laws),
securities that may only be resold pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), but that are deemed to be
illiquid; and repurchase agreements with maturities in excess of seven days.
However, the Fund will not acquire illiquid securities if, as a result, such
securities would comprise more than 15% of the value of the Fund's net assets.
The Board of Trustees or its delegate has the ultimate authority to determine,
to the extent permissible under the federal securities laws, which securities
are liquid or illiquid for purposes of this 15% limitation. The Board of
Trustees has delegated to Institutional Capital the day-to-day determination of
the illiquidity of any equity or taxable fixed-income security, although it has
retained oversight and ultimate responsibility for such determinations. Although
no definitive liquidity criteria are used, the Board of Trustees has directed
Institutional Capital and NIAC to look to such factors as (i) the nature of the
market for a security (including the institutional private resale market; the
frequency of trades and quotes for the security; the number of dealers willing
to purchase or sell the security; and the amount of time normally needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer), (ii) the terms of certain securities or other instruments allowing
for the disposition to a third party or the issuer thereof (e.g., certain
repurchase obligations and demand instruments), and (iii) other permissible
relevant factors.
Restricted securities may be sold only in privately negotiated transactions or
in a public offering with respect to which a registration statement is in effect
under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than that which prevailed when it decided to
sell. Illiquid securities will be priced at fair value as determined in good
faith by the Board of Trustees or its delegate. If, through the appreciation of
illiquid securities or the depreciation of liquid securities, the Fund should be
in a position where more than 15% of the value of its net assets are invested in
illiquid securities, including restricted securities which are not readily
marketable, the affected Fund will take such steps as is deemed advisable, if
any, to protect liquidity.
Short Sales Against the Box
When Institutional Capital believes that the price of a particular security held
by the Fund may decline, it may make "short sales against the box" to hedge the
unrealized gain on such security. Selling short against the box involves
selling a security which the Fund owns for delivery at a specified date in the
future. The Fund will limit its transactions in short sales against the box to
5% of its net assets. In addition, the Fund will limit its transactions such
that the value of the securities of any issuer in which it is short will not
exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of any class of the issuer. If, for example, the Fund bought 100
shares of ABC at $40 per share in January and the price appreciates to $50 in
March, the Fund might "sell short" the 100 shares at $50 for delivery the
following July. Thereafter, if the price of the stock declines to $45, it will
realize the full $1,000 gain rather than the $500 gain it would have received
had it sold the stock in the market. On the other hand, if the price
appreciates to $55 per share, the Fund would be required to sell at $50 and thus
receive a $1,000 gain rather than the $1,500 gain it would have received had it
sold the stock in the market. The Fund may also be required to pay a premium
for short sales which would partially offset any gain.
Warrants
The Fund may invest in warrants if, after giving effect thereto, not more than
5% of its net assets will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5%, not more than 2% of its
assets at the time of purchase may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. Investing in
warrants is purely speculative in that they have no voting rights, pay no
dividends, and have no rights with respect to the assets of the corporation
issuing them. Warrants basically are options to purchase equity securities at a
specific price for a specific period of time. They do not represent ownership
of the securities but
B-13
<PAGE>
only the right to buy them. Warrants are issued by the issuer of the security,
which may be purchased on their exercise. The prices of warrants do not
necessarily parallel the prices of the underlying securities.
Lending of Portfolio Securities
The Fund may lend its portfolio securities, up to 33 1/3% of its total assets,
to broker-dealers or institutional investors. The loans will be secured
continuously by collateral at least equal to the value of the securities lent by
"marking to market" daily. The Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer of the securities lent and will
retain the right to call, upon notice, the lent securities. The Fund may also
receive interest on the investment of the collateral or a fee from the borrower
as compensation for the loan. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only to
firms deemed by the portfolio manager to be of good standing.
Portfolio Turnover
The Fund anticipates that its annual portfolio turnover rate will be between
100% and 150% under normal market conditions, and generally will not exceed
200%. A turnover rate of 100% would occur, for example, if the Fund sold and
replaced securities valued at 100% of its net assets within one year. In the
event the Fund were to have a turnover rate of 100% or more in any year, it
would result in the payment by the Fund of increased brokerage costs and could
result in the payment by shareholders of increased taxes on realized investment
gains.
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is currently set at
seven, three of whom are "interested persons" (as the term "interested persons"
is defined in the Investment Company Act of 1940) and four of whom are
"disinterested persons." The names and business addresses of the trustees and
officers of the Trust and their principal occupations and other affiliations
during the past five years are set forth below, with those trustees who are
"interested persons" of the Trust indicated by an asterisk.
<TABLE>
<CAPTION>
Position and Principal Occupations
Name and Address Age Offices with Trust During Past Five Years
<S> <C> <C> <C>
Anthony T. Dean* 53 Chairman and Trustee President (since July 1996) and Director, formerly
333 West Wacker Drive Executive Vice President, of The John Nuveen Company
Chicago, IL 60606 (from March 1992 to July 1996) and of John Nuveen &
Co. Incorporated; Director and President (since
July 1996), formerly Executive Vice President (from
May 1994 to July 1996) of Nuveen Institutional
Advisory Corp. and Nuveen Advisory Corp.; President
and Director (since January 1997) of Nuveen Asset
Management, Inc.; Chairman and Director (since 1997)
of Rittenhouse Financial Services, Inc.
Timothy R. Schwertfeger* 49 President and Trustee Chairman (since July 1996) and Director, formerly
333 West Wacker Drive Executive Vice President, of The John Nuveen Company
Chicago, IL 60606 (from March 1992 to July 1996) and of John Nuveen &
Co. Incorporated; Director and Chairman (since
July 1996), formerly Executive Vice President (from
May 1994 to July 1996) of Nuveen Institutional
Advisory Corp and Nuveen Advisory Corp.; Chairman
and Director (since January 1997) of Nuveen Asset
Management, Inc.; Director (since 1996) of Institutional
Capital Corporation.
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
Position and Principal Occupations
Name and Address Age Offices with Trust During Past Five Years
<S> <C> <C> <C>
Robert H. Lyon* 48 Trustee President and a Director of the ICAP Funds, Inc. (since
225 West Wacker Drive its inception in December 1994); President, Chief
Chicago, IL 60606 Investment Officer, and a Director of Institutional
Capital.
James E. Bacon 67 Trustee Business consultant; retired.
114 W. 47th St.
New York, NY 10036
William L. Kissick 65 Trustee Professor, School of Medicine and the Wharton School
University of Pennsylvania of Management and Chairman, Leonard Davis Institute
224 NEB/2L of Health Economics, University of Pennsylvania.
Philadelphia, PA 19104
Thomas E. Leafstrand 66 Trustee Retired, previously Vice President in charge of
412 W. Franklin Municipal Underwriting and Dealer Sales at The
Wheaton, IL 60187 Northern Trust Company.
Sheila W. Wellington 66 Trustee President (since 1993) of Catalyst (a not-for-profit
250 Park Avenue organization focusing on women's leadership
New York, NY 10003 development in business and the professions).
Bruce P. Bedford 58 Executive Vice President Executive Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated, Nuveen Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory Corp. (since January 1997); prior
thereto, Chairman and CEO of Flagship Resources Inc.
and Flagship Financial Inc. and the Flagship funds.
Alan G. Berkshire 37 Vice President and Vice President and General Counsel (since September 1997)
333 West Wacker Drive Assistant Secretary and Secretary (since May 1998) of The John Nuveen Company,
Chicago, IL 60606 John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp., prior thereto,
Partner in the law firm of Kirkland & Ellis.
Lorna C. Ferguson 53 Vice President Vice President of John Nuveen & Co. Incorporated; Vice
333 West Wacker Drive President (since January 1998) of Nuveen Advisory
Chicago, IL 60606 Corp. and Nuveen Institutional Advisory Corp.
Kathleen M. Flanagan 51 Vice President Vice President of The John Nuveen Company and John Nuveen & Co.
333 West Wacker Drive Incorporated; Vice President (since June 1996) of
Chicago, IL 60606 Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.
Stephen D. Foy 44 Vice President and Vice President of John Nuveen & Co. Incorporated
333 West Wacker Drive Controller
Chicago, IL 60606
Larry W. Martin 46 Vice President and Vice President, Assistant Secretary and Assistant
333 West Wacker Drive Assistant Secretary General Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President (since May 1993) and Assistant Secretary
of Nuveen Advisory Corp; Vice President (since
May 1993) and Assistant Secretary of Nuveen
Institutional Advisory Corp.; Assistant Secretary of The
John Nuveen Company (since February 1993).
Stuart W. Rogers 42 Vice President Vice President of John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Position and Principal Occupations
Name and Address Age Offices with Trust During Past Five Years
<S> <C> <C> <C>
H. William Stabenow 63 Vice President and Vice President and Treasurer of The John Nuveen
333 West Wacker Drive Treasurer Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory Corp.
Ronald E. Toupin, Jr. 39 Vice President Vice President of Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
William S. Swanson 32 Vice President Vice President of John Nuveen & Co. Incorporated (since
333 West Wacker Drive October 1997), prior thereto, Assistant Vice President
Chicago, IL 60606 (since September 1996); formerly, Associate of
John Nuveen & Co. Incorporated
Gifford R. Zimmerman 41 Vice President and Vice President, Assistant Secretary and Associate
333 West Wacker Drive Secretary General Counsel, previously Assistant General Counsel
Chicago, IL 60606 of John Nuveen & Co. Incorporated; Vice President
(since May 1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since May 1993) and
Assistant Secretary of Nuveen Institutional Advisory
Corp.
</TABLE>
Anthony T. Dean, Thomas E. Leafstrand and Timothy R. Schwertfeger serve as
members of the Executive Committee of the Board of Trustees. The Executive
Committee, which meets between regular meetings of the Board of Trustees, is
authorized to exercise all of the powers of the Board of Trustees.
Mr. Dean and Mr. Schwertfeger are also directors or trustees, as the case may
be, of 94 Nuveen open-end funds and closed-end funds advised by Nuveen Advisory
Corp.
The other trustees of the Trust (other than Mr. Lyon) are also trustees of nine
open-end and closed-end funds advised by NIAC. Mr. Lyon is also a director of
Institutional Capital and ICAP Funds, Inc.
The following table sets forth compensation estimated to be paid by the Fund to
each of the trustees who are not designated "interested persons" during the
Trust's fiscal year ending June 30, 1998. The Trust has no retirement or
pension plans. The officers and trustees affiliate with Nuveen serve without
any compensation from the Trust.
<TABLE>
<CAPTION>
Total
Estimated Compensation
Aggregate From Fund and
Compensation Fund Complex
Name of Trustee from the Fund* Paid to Trustees**
--------------- -------------- ------------------
<S> <C> <C>
James E. Bacon................. $ 357 $ 30,000
William L. Kissick............. 357 29,000
Thomas E. Leafstrand........... 369 31,700
Sheila W. Wellington........... 357 29,000
Total...................... $1,440 $119,700
</TABLE>
* The Fund only recently commenced operations and has not yet completed its
first full fiscal year. The estimated compensation to be paid by the Fund to
independent trustees for the current fiscal year is a pro rata portion of the
total compensation to be paid by the Fund and the Fund Complex to the
independent trustees based upon the estimated relative net asset value of the
Fund as compared to the Fund Complex.
** Based on the compensation paid to the independent trustees for the twelve
months ended March 31, 1998 for services to nine open-end and closed-end
funds advised by NIAC.
Each trustee who is not affiliated with NIAC or Institutional Capital receives a
$20,000 annual retainer for serving as a director or trustee of all funds for
which NIAC serves as investment adviser or manager and a $1,000 fee per day plus
B-16
<PAGE>
expenses for attendance at all meetings held on a day on which a regularly
scheduled Board meeting is held, a $500 fee per day plus expenses for attendance
in person or a $500 fee per day plus expenses for attendance by telephone at a
meeting held on a day on which no regular Board meeting is held and a $100 fee
per day plus expenses for attendance in person or by telephone at a meeting of
the Executive Committee held solely to declare dividends. The annual retainer,
fees and expenses are allocated among the funds for which NIAC serves as
investment adviser or manager on the basis of relative net asset sizes. The
Trust requires no employees other than its officers, all of whom are compensated
by NIAC or Nuveen.
NIAC intends to invest $______ million in the fund subsequent to the effective
date of this prospectus. Therefore, NIAC will control the fund because it will
own 100% of the outstanding voting securities of the fund until other
shareholders invest in the fund. NIAC will be deemed to control the fund so long
as it owns more than 25% of the fund's voting securities.
TRUST MANAGER AND FUND MANAGER
Trust Manager
Nuveen Institutional Advisory Corp. ("NIAC") acts as the manager of the Trust,
with responsibility for the overall management of the Fund. Its address is 333
West Wacker Drive, Chicago, Illinois 60606. For the Fund, NIAC has entered into
a Sub-Advisory Agreement with Institutional Capital under which Institutional
Capital, subject to NIAC's supervision, manages the Fund's investment portfolio.
NIAC is also responsible for managing the Fund's business affairs and providing
day-to-day administrative services to the Fund. For additional information
regarding the management services performed by NIAC and Institutional Capital,
see "Who Manages the Fund" in the Prospectus.
NIAC is a wholly-owned subsidiary of Nuveen, which is also the principal
underwriter of the Fund's shares. Nuveen is sponsor of the Nuveen Tax-Free Unit
Trust and Nuveen Unit Trust, registered unit investment trusts, and is the
principal underwriter for the Nuveen Mutual Funds, and has served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1,000,000
individuals have invested to date in Nuveen's funds and trusts. Founded in 1898,
Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul
is located in St. Paul, Minnesota, and is principally engaged in providing
property-liability insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, the Fund has
agreed to pay an annual management fee at rates set forth in the Prospectus
under "Management Fees." In addition, NIAC has agreed to waive all or a portion
of its management fee or reimburse certain expenses of the Fund through July 31,
1999 to prevent total expenses (excluding any distribution or service fees and
extraordinary expenses) on an annualized basis from exceeding 1.30% of the
average daily net asset value of each class of shares.
Sub-Adviser (Fund Manager)
Institutional Capital Corporation ("Institutional Capital") was founded in 1970
and is located at 225 West Wacker Drive, Suite 2400, Chicago, IL 60606. Under
the Sub-Advisory Agreement for the Fund, Institutional Capital is compensated by
NIAC for its investment advisory services with respect to all or a portion of
the Fund's assets at the rates set forth in the Fund's Prospectus under
"Management Fees." Under a Sub-Advisory Agreement with NIAC, Institutional
Capital manages the investment portfolio of the Fund. Institutional Capital's
investment management strategy and operating policies are set through a team
approach, with all Institutional Capital investment professionals contributing.
Institutional Capital currently maintains a staff of 12 investment
professionals. Each of the investment officers and other professionals of
Institutional Capital has developed an expertise in at least one functional
investment area, including equity research, strategy, fixed income analysis,
quantitative research, technical research and trading. A key element in the
decision-making process is a formal investment committee meeting generally held
each business day and attended by all professionals. These meetings also
provide for the ongoing review of Institutional Capital's investment positions.
Pertinent information from outside sources is shared and incorporated into the
investment outlook. The investment strategy, asset sectors, and individual
security holdings are reviewed to verify their continued appropriateness.
Investment recommendations are presented to the committee for decisions.
B-17
<PAGE>
With regard to Fund assets subject to the Sub-Advisory Agreement, Institutional
Capital provides continuous advice and recommendations concerning the Fund's
investments, and is responsible for selecting the broker/dealers who execute the
portfolio transactions. Institutional Capital also serves as investment adviser
to the ICAP Funds, Inc. and to pension and profit-sharing plans, and other
institutional and private investors. As of December 31, 1997, Institutional
Capital had approximately $12 billion under management. Mr. Robert H. Lyon,
President of Institutional Capital, owns shares representing 51% of the voting
rights of Institutional Capital.
PORTFOLIO TRANSACTIONS
Institutional Capital is responsible for decisions to buy and sell securities
for the Fund and for the placement of the Fund's securities business, the
negotiation of the commissions to be paid on brokered transactions, the prices
for principal trades in securities, and the allocation of portfolio brokerage
and principal business. It is the policy of Institutional Capital to seek the
best execution at the best security price available with respect to each
transaction, and with respect to brokered transactions, in light of the overall
quality of brokerage and research services provided to the respective adviser
and its advisees. The best price to the Fund means the best net price without
regard to the mix between purchase or sale price and commission, if any.
Purchases may be made from underwriters, dealers, and, on occasion, the issuers.
Commissions will be paid on the Fund's futures and options transactions, if any.
The purchase price of portfolio securities purchased from an underwriter or
dealer may include underwriting commissions and dealer spreads. The Fund may
pay mark-ups on principal transactions. In selecting broker-dealers and in
negotiating commissions, the portfolio manager considers the firm's reliability,
the quality of its execution services on a continuing basis and its financial
condition. Brokerage will not be allocated based on the sale of the Fund's
shares.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay a
broker or dealer who supplies brokerage and research services a commission for
effecting a transaction in excess of the amount of commission another broker or
dealer would have charged for effecting the transaction. Brokerage and research
services include (a) furnishing advice as to the value of securities, the
advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).
In selecting brokers, Institutional Capital considers investment and market
information and other research, such as economic, securities and performance
measurement research, provided by such brokers, and the quality and reliability
of brokerage services, including execution capability, performance, and
financial responsibility. Accordingly, the commissions charged by any such
broker may be greater than the amount another firm might charge if Institutional
Capital determines in good faith that the amount of such commissions is
reasonable in relation to the value of the research information and brokerage
services provided by such broker to Institutional Capital or the Fund.
Institutional Capital believes that the research information received in this
manner provides the Fund with benefits by supplementing the research otherwise
available to the Fund. The Management Agreement and the Sub-Advisory Agreement
provide that such higher commissions will not be paid by the Fund unless the
applicable adviser determines in good faith that the amount is reasonable in
relation to the services provided. The investment advisory fees paid by the
Fund to NIAC under the Management Agreement or the subadvisory fees paid by NIAC
to Institutional Capital under the Sub-Advisory Agreement are not reduced as a
result of receipt by either NIAC or Institutional Capital of research services.
Institutional Capital places portfolio transactions for other advisory accounts
managed by it. Research services furnished by firms through which the Fund
effects its securities transactions may be used by Institutional Capital in
servicing all of its accounts; not all of such services may be used by
Institutional Capital in connection with the Fund. Institutional Capital
believes it is not possible to measure separately the benefits from research
services to each of the accounts (including the Fund) managed by it. Because
the volume and nature of the trading activities of the accounts are not uniform,
the amount of commissions in excess of those charged by another broker paid by
each account for brokerage and research services will vary. However,
Institutional Capital believes such costs to the Fund will not be
disproportionate to the benefits received by the Fund on a continuing basis.
Institutional Capital seeks to allocate
B-18
<PAGE>
portfolio transactions equitably whenever concurrent decisions are made to
purchase or sell securities by the Fund and another advisory account. In some
cases, this procedure could have an adverse effect on the price or the amount of
securities available to the Fund. In making such allocations between the Fund
and other advisory accounts, the main factors considered by Institutional
Capital are the respective investment objectives, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment and the size of investment commitments generally held.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the terms of a security purchased
by the Fund, the amount of securities that may be purchased in any one issue and
the assets of the Fund that may be invested in a particular issue. In addition,
purchases of securities made pursuant to the terms of the Rule must be approved
at least quarterly by the Board of Trustees, including a majority of the
trustees who are not interested persons of the Trust.
NET ASSET VALUE
The Fund's net asset value per share is determined separately for each class of
the Fund's shares as of the close of trading (normally 4:00 p.m. eastern time)
on each day the New York Stock Exchange (the "Exchange") is open for business.
The Exchange is not open for trading on New Year's Day, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of a class of shares of the Fund
will be computed by dividing the value of the Fund's assets attributable to the
class, less the liabilities attributable to the class, by the number of shares
of the class outstanding. The Fund's net asset value may not be calculated on
days during which the Fund receives no orders to purchase shares and no shares
are tendered for redemption. Net asset value is calculated by taking the fair
value of the Fund's total assets, including interest or dividends accrued but
not yet collected, less all liabilities, and dividing by the total number of
shares outstanding. The result, rounded to the nearest cent, is the net asset
value per share. In determining net asset value, expenses are accrued and
applied daily and securities and other assets for which market quotations are
available are valued at market value. Common stocks and other equity-type
securities are valued at the last sales price on the national securities
exchange or Nasdaq on which such securities are primarily traded; however,
securities traded on a national securities exchange or Nasdaq for which there
were no transactions on a given day or securities not listed on a national
securities exchange or Nasdaq are valued at the most recent bid prices.
Securities for which quotations are not readily available are valued at fair
value as determined by the pricing service using methods that include
consideration of the following: yields or prices of securities of comparable
quality, type of issue, coupon, maturity and rating; indications as to value
from securities dealers; and general market conditions. The pricing service may
employ electronic data processing techniques and/or a matrix system to determine
valuations. Debt securities having remaining maturities of 60 days or less when
purchased are valued by the amortized cost method when the Board of Trustees
determines that the fair market value of such securities is their amortized
cost. Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter amortization of any discount or premium is
assumed each day, regardless of the impact of fluctuating interest rates on the
market value of the security. Regardless of the method employed to value a
particular security, all valuations are subject to review by the Fund's Board of
Trustees or its delegate who may determine the appropriate value of a security
whenever the value as calculated is significantly different from the previous
day's calculated value.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Chapman and Cutler, counsel to the Trust.
As described in the Prospectus, the Fund intends to qualify under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code") for tax treatment
as a regulated investment company. In order to qualify as a regulated
investment company, the Fund (i) must elect to be treated as a regulated
investment company and (ii) for each taxable
B-19
<PAGE>
year thereafter must satisfy certain requirements relating to the source of its
income, diversification of its assets, and distributions of its income to
shareholders. First, the Fund must derive at least 90% of its annual gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities, foreign currencies or other income (including but not limited to
gains from options, futures, or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% gross
income test"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of the Fund's total assets is invested in the securities of any one
issuer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (without regard to its net
capital gain, i.e., the excess of its net long-term capital gain over its short-
term capital loss) and (ii) its net tax-exempt interest (the excess of its gross
tax-exempt interest income over certain disallowed deductions). In addition, to
the extent the Fund timely distributes to shareholders at least 98% of its
taxable income (including any net capital gain), it will not be subject to the
4% excise tax on certain undistributed income of "regulated investment
companies." The Fund intends to make timely distributions in compliance with
these requirements and consequently it is anticipated that they generally will
not be required to pay the excise tax. The Fund may retain for investment its
net capital gain. However, if the Fund retains any net capital gain or any
investment company taxable income, it will be subject to federal income tax at
regular corporate rates on the amount retained. If the Fund retains any net
capital gain, the Fund may designate the retained amount as undistributed
capital gains in a notice to its shareholders who, if subject to federal income
tax on long-term capital gains, (i) will be required to include in income for
federal income tax purposes, as long-term capital gain, their shares of such
undistributed amount, and (ii) will be entitled to credit their proportionate
shares of the tax paid by the Fund against their federal income tax liabilities
if any, and to claim refunds to the extent the credit exceeds such liabilities.
For federal income tax purposes, the tax basis of shares owned by a shareholder
of the Fund will be increased by an amount equal under current law to 65% of the
amount of undistributed net capital gains included in the shareholder's gross
income. The Fund intends to distribute at least annually to its shareholders
all or substantially all of its investment company taxable income, net tax-
exempt interest and net capital gain.
Treasury regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain, to elect (unless it has
made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or any
net foreign currency loss incurred after October 31 as if they had been incurred
in the succeeding year.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Prior to purchasing shares in the Fund, the impact of dividends or distributions
which are expected to be or have been declared, but not paid, should be
carefully considered. Any dividend or distribution declared shortly after a
purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution and will be subject to federal income tax to the extent it is a
distribution of ordinary income or capital gain.
In any taxable year of the Fund, distributions from the Fund, other than
distributions which are designated as capital gains dividends, will to the
extent of the earnings and profits on the Fund, constitute dividends for Federal
income tax purposes which are taxable as ordinary income to shareholders. To
the extent that distributions to a shareholder in any
B-20
<PAGE>
year exceed the Fund's current and accumulated earnings and profits, they will
be treated as a return of capital and will reduce the shareholder's basis in his
or her shares and, to the extent that they exceed his or her basis, will be
treated as gain from the sale of such shares as discussed below. It should be
noted that certain legislative proposals have been made which could affect the
calculation of basis for shareholders holding securities that are substantially
identical to the Fund's securities. Distributions of the Fund's net capital
gain which are properly designated as capital gain dividends by the Fund will be
taxable to the shareholders as long-term capital gain, regardless of the length
of time the shares have been held by a shareholder. Distributions will be taxed
in the manner described (i.e., as ordinary income, long-term capital gain,
return of capital or exempt-interest dividends) even if reinvested in additional
shares of the Fund.
Although dividends generally will be treated as distributed when paid, dividends
declared in October, November or December, payable to shareholders of record on
a specified date in one of those months and paid during the following January,
will be treated as having been distributed by the Fund (and received by the
shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of the Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For taxpayers other
than corporations, net capital gains (which are defined as net long-term capital
gain over net short-term capital loss for the taxable year) are subject to a
maximum marginal stated tax rate of either 28% or 20%, depending upon the
holding period of the capital assets. In particular, net capital gain,
excluding net gain from property held more than one year but not more than 18
months and gain on certain other assets, is subject to a maximum marginal stated
tax rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Net capital gain that is not taxed at the maximum marginal stated tax
rate of 20% (or 10%) as described in the preceding sentence, is generally
subject to a maximum marginal stated tax rate of 28%. The date on which a share
is acquired (i.e., the "trade date") is excluded for purposes of determining the
holding period of the share. It should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered
"conversion transactions" effective for transactions entered into after April
30, 1993. Shareholders and prospective investors should consult with their tax
advisers regarding the potential effect of this provision on their investment in
shares of the Fund.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of the Fund
are held by fewer than 500 persons, additional taxable income may be realized by
the individual (and other non-corporate) shareholders in excess of the
distributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of the Fund cannot be
taken into account for purposes of determining gain or loss on the redemption or
exchange of such shares within 90 days after their purchase to the extent shares
of the Fund or another fund are subsequently acquired without payment of a sales
load or with the payment of a reduced sales load pursuant to the reinvestment or
exchange privilege. Any disregarded portion of such load will result in an
increase in the shareholder's tax basis in the shares subsequently acquired.
Moreover, losses recognized by a shareholder on the redemption or exchange of
shares of the Fund held for six months or less are disallowed to the extent of
any distribution of exempt-interest dividends received with respect to such
shares and, if not disallowed, such losses are treated as long-term capital
losses to the extent of any distributions of long-term capital gains made with
respect to such shares. In addition, no loss will be allowed on the redemption
or exchange of shares of the Fund if the shareholder purchases other shares of
the Fund (whether through reinvestment of distributions or otherwise) or the
shareholder acquires or enters into a contract or option to acquire securities
that are substantially identical to shares of the Fund
B-21
<PAGE>
within a period of 61 days beginning 30 days before and ending 30 days after
such redemption or exchange. If disallowed, the loss will be reflected in an
adjustment to the basis of the shares acquired.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its shareholders would be taxable to shareholders as ordinary dividend income
for federal income tax purposes to the extent of the Fund's available earnings
and profits.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
Shareholders who are non-resident aliens are subject to U.S. withholding taxes
on ordinary income dividends at a rate of 30% or such lower rate as prescribed
by an applicable tax treaty.
A corporate shareholder may be entitled to a 70% dividends received deduction
with respect to any portion of such shareholder's ordinary income dividends
which are attributable to dividends received by the Fund on certain Equity
Securities (other than corporate shareholders, such as "S" corporations, which
are not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding corporation tax). The Fund will designate the portion
of any taxable dividend which is eligible for this deduction. However, a
corporate shareholder should be aware that Sections 246 and 246A of the Code
impose additional limitations on the eligibility of dividends for the 70%
dividends received deduction. These limitations include a requirement that
stock (and therefore Shares of the Fund) must generally be held at least 46 days
(as determined under, and during the period specified in, Section 246(c) of the
Code). Regulations have been issued which address special rules that must be
considered in determining whether the 46 day holding requirement is met.
Moreover, the allowable percentage of the deduction will generally be reduced
from 70% if a corporate shareholder owns Shares of the Fund the financing of
which is directly attributable to indebtedness incurred by such corporation. It
should be noted that various legislative proposals that would affect the
dividends received deduction have been introduced. To the extent dividends
received by the Fund are attributable to foreign corporations, a corporate
shareholder will not be entitled to the dividends received deduction with
respect to its share of such foreign dividends since the dividends received
deduction is generally available only with respect to dividends paid by domestic
corporations. It should be noted that payments to the Fund of dividends on
Equity Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes. Corporate shareholders should consult with their
tax advisers with respect to the limitations on, and possible modifications to,
the dividends received deduction.
Foreign exchange gains and losses realized by the Fund in connection with
certain transactions that involve foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. For example, if the Fund sold a
foreign stock or bond and part of the gain or loss on the sale was attributable
to an increase or decrease in the value of a foreign currency, then the currency
gain or loss may be treated as ordinary income or loss. If such transactions
result in higher net ordinary income, the dividends paid by the Fund will be
increased; if such transactions result in lower net ordinary income, a portion
of dividends paid could be classified as a return of capital.
The Fund may qualify for and make an election permitted under the "pass through"
provisions of Section 853 of the Internal Revenue Code, which allows a regulated
investment company to elect to have its foreign tax credit taken by its
shareholders instead of on its own tax return. To be eligible for this credit,
more than 50% of the value of the Fund's total assets at the close of its
taxable year must consist of stock of other securities in foreign corporations,
and the Fund must have distributed at least 90% of its taxable income.
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<PAGE>
If the Fund makes this election, it may not take any foreign tax credit and may
not take a deduction for foreign taxes paid. However, the Fund is allowed to
include the amount of foreign taxes paid in a taxable year in its dividends paid
deduction. Each shareholder would then include in his gross income, and treat
as paid by him, his proportionate share of the foreign taxes paid by the Fund.
If the U.S. government were to impose any restrictions, through taxation or
other means, on foreign investments by U.S. investors such as those to be made
through the Fund, the Board of Trustees of the Fund will promptly review the
policies of the Fund to determine whether significant changes in its investments
are appropriate.
Non-U.S. investors not engaged in a U.S. trade or business with which their
investment in the Fund is effectively connected will be subject to U.S. Federal
income tax treatment that is different from that described above and in the
Prospectus. Such investors may be subject to nonresident alien withholding tax
at the rate of 30% (or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends from the Fund and, unless an effective IRS Form W-
8 or authorized substitute for Form W-8 is on file, to 31% backup withholding on
certain other payments from the Fund. Non-U.S. investors should consult their
tax advisers regarding such treatment and the application of foreign taxes to an
investment in the Fund.
PERFORMANCE INFORMATION
The Fund may quote its yield, distribution rate, beta, average annual total
return or cumulative total return in reports to shareholders, sales literature
and advertisements each of which will be calculated separately for each class of
shares.
In accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission ("SEC"), yield is computed by dividing the net
investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b
Yield = 2[(--- +1)/6/-1]
cd
In the above formula, a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of the
period. In the case of Class A shares, the maximum offering price includes the
current maximum front-end sales charge of 5.25%.
In computing yield, the Fund follows certain standardized accounting practices
specified by SEC rules. These practices are not necessarily consistent with
those that the Fund uses to prepare its annual and interim financial statements
in conformity with generally accepted accounting principles. Thus, yield may
not equal the income paid to shareholders or the income reported in the Fund's
financial statements.
The Fund may from time to time in its advertising and sales materials report a
quotation of its current distribution rate. The distribution rate represents a
measure of dividends distributed for a specified period. Distribution rate is
computed by taking the most recent dividend per share, multiplying it as needed
to annualize it, and dividing by the appropriate price per share (e.g., net
asset value for purchases to be made without a load such as reinvestments from
Nuveen UITs, or the maximum public offering price). The distribution rate
differs from yield and total return and therefore is not intended to be a
complete measure of performance. Distribution rate may sometimes differ from
yield because the Fund may be paying out more than it is earning and because it
may not include the effect of amortization of bond premiums to the extent such
premiums arise after the bonds were purchased.
The Fund may from time to time in its advertising and sales literature quote its
beta. Beta is a standardized measure of a security's risk (variability of
returns) relative to the overall market, i.e., the proportion of the variation
in the security's returns that can be explained by the variation in the return
of the overall market. For example, a security with a beta of
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<PAGE>
0.85 is expected to have returns that are 85% as variable as overall market
returns. Conversely, a security with a beta of 1.25 is expected to have returns
that are 125% as variable as overall market returns. The beta of the overall
market is by definition 1.00.
The formula for beta is given by:
Beta = (Sigma)A*B/C
where
A = (X\\i\\ - X), i = 1,..., N
-
B = (Y\\i\\ - Y), i = 1,..., N
-
C = ((Sigma)(X\\i\\ - X)/2/,i=1,..., N
-
X\\i\\ = Security Return in period i
Y\\i\\ = Market Return in period i
X = Average of all observations X\\i\\
-
Y = Average of all observations Y\\i\\
-
= Number of observations in the measurement period
All total return figures assume the reinvestment of all dividends and measure
the net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in the
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over the
specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Average annual total return and cumulative total return are based upon
the historical results of the Fund and are not necessarily representative of the
future performance of the Fund.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted from
the result, which is then expressed as a percentage. The calculation assumes
that all income and capital gains distributions have been reinvested in Fund
shares at net asset value on the reinvestment dates during the period.
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains distributions by the Fund have been reinvested at net
asset value on the reinvestment dates during the period. Cumulative total
return may also be shown as the increased dollar value of the hypothetical
investment over the period. Cumulative total return calculations that do not
include the effect of the sales charge would be reduced if such charge were
included. Average annual and cumulative total returns may also be presented in
advertising and sales literature without the inclusion of sales charges.
From time to time, the Fund may compare its risk-adjusted performance with other
investments that may provide different levels of risk and return. For example,
the Fund may compare its risk level, as measured by the variability of its
periodic returns, or its risk-adjusted total return, with those of other funds
or groups of funds. Risk-adjusted total return would be calculated by adjusting
each investment's total return to account for the risk level of the investment.
The risk level for a class of shares of the Fund, and any of the other
investments used for comparison, would be evaluated by measuring the variability
of the investment's return, as indicated by the standard deviation of the
investment's
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<PAGE>
monthly returns over a specified measurement period (e.g., two years). An
investment with a higher standard deviation of monthly returns would indicate
that the Fund had greater price variability, and therefore greater risk, than an
investment with a lower standard deviation.
The risk-adjusted total return for a class of shares of the Fund and for other
investments over a specified period would be evaluated by dividing (a) the
remainder of the investment's annualized two-year total return, minus the
annualized total return of an investment in Treasury bill securities
(essentially a risk-free return) over that period, by (b) the standard deviation
of the investment's monthly returns for the period. This ratio is sometimes
referred to as the "Sharpe measure" of return. An investment with a higher
Sharpe measure would be regarded as producing a higher return for the amount of
risk assumed during the measurement period than an investment with a lower
Sharpe measure.
Class A Shares of the Fund are sold at net asset value plus a current maximum
sales charge of 5.75% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Returns
and net asset value of each class of shares of the Fund will fluctuate. Factors
affecting the performance of the Fund include general market conditions,
operating expenses and investment management. Any additional fees charged by a
securities representative or other financial services firm would reduce returns
described in this section. Shares of the Fund are redeemable at net asset value,
which may be more or less than original cost.
In reports and other communications to shareholders or in advertising and sales
literature, the Fund may also present economic statistics obtained from
governmental agencies or industry or financial publications comparing Europe or
other countries participating in European Monetary Union to the U.S.
Additionally, the Fund may discuss certain economic and financial trends
existing in Europe in order to illustrate the general investment opportunities
there. The Fund may present historical performance of certain European
countries, as reported by Morgan Stanley Capital International, or other
independent data providers, as a way to show the opportunities provided by
European countries. The Fund may also show the historical performance of certain
European equity market indices to compare against other international equity
market indices and to show how maintaining investments in both European stocks
and U.S. stocks may moderate risk. This data is obtained from independent
services such as Morgan Stanley Capital International and Ibbotson Associates,
Inc.
In reports or other communications to shareholders or in advertising and sales
literature, the Fund may also compare its performance or the performance of its
portfolio manager with that of, or reflect the performance of: (1) the Consumer
Price Index; (2) equity mutual funds or mutual fund indexes as reported by
Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar"),
Wiesenberger Investment Companies Service ("Wiesenberger") and CDA Investment
Technologies, Inc. ("CDA") or similar independent services which monitor the
performance of mutual funds, or other industry or financial publications such as
Barron's, Changing Times, Forbes and Money Magazine; and/or (3) the S&P 500
Index or other unmanaged indices reported by Lehman Brothers. Performance
comparisons by these indexes, services or publications may rank mutual funds
over different periods of time by means of aggregate, average, year-by-year, or
other types of total return and performance figures. Any given performance
quotation or performance comparison should not be considered as representative
of the performance of the Fund for any future period.
There are differences and similarities between the investments which the Fund
may purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which do
not include the effect of any sales charges.
The Fund may also from time to time in its advertising and sales literature
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds or indices that represent
these types of investments. U.S. Government bonds are long-term investments
backed by the full faith and credit of the U.S. Government. Bank CDs are
generally short-term, FDIC-insured investments, which pay fixed principal and
interest but are subject to fluctuating rollover rates. Money market funds are
short-term investments with stable net asset values, fluctuating yields and
special features enhancing liquidity.
The table below presents the annual investment returns for the Institutional
Capital Euro Composite for the one-year period ended on December 31, 1997 and
since inception. The Institutional Capital Euro Composite (comprising a single
account totaling approximately $26.3 million as of March 31, 1998) includes all
assets managed by Institutional Capital that have substantially the same
investment objectives and policies as the Fund.
ANNUAL TOTAL RETURNS FOR THE YEAR ENDING DECEMBER 31,
<TABLE>
<CAPTION>
1997 Since Composite Inception
- --------------------------------------------------------------------------------
<S> <C> <C>
Institutional Capital
European Composite
(Gross)....................... 31.13% 44.86%
Institutional Capital
European Composite
(Net)......................... 28.59% 42.07%
Lipper European
Fund Index.................... 24.19% 33.54%
MSCI Europe Index............... 18.88% 37.97%
</TABLE>
B-25
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES AND SHAREHOLDER PROGRAMS
As described in the Prospectus, the Fund provides you with alternative ways of
purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of the Fund represents an interest in the same portfolio of
investments. Each class of shares is identical in all respects except that each
class bears its own class expenses, including distribution and administration
expenses, and each class has exclusive voting rights with respect to any
distribution or service plan applicable to its shares. As a result of the
differences in the expenses borne by each class of shares, net income per share,
dividends per share and net asset value per share will vary among the Fund's
classes of shares. There are no conversion, preemptive or other subscription
rights, except that Class B shares automatically convert into Class A shares as
described in the Prospectus.
Shareholders of each class will share expenses proportionately for services that
are received equally by all shareholders. A particular class of shares will bear
only those expenses that are directly attributable to that class, where the type
or amount of services received by a class varies from one class to another. For
example, class-specific expenses generally will include distribution and service
fees.
The expenses to be borne by specific classes of shares may include (i) transfer
agency fees attributable to a specific class of shares, (ii) printing and
postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current shareholders
of a specific class of shares, (iii) Securities and Exchange Commission ("SEC")
and state securities registration fees incurred by a specific class of shares,
(iv) the expense of administrative personnel and services required to support
the shareholders of a specific class of shares, (v) litigation or other legal
expenses relating to a specific class of shares, (vi) directors' fees or
expenses incurred as a result of issues relating to a specific class of shares,
(vii) accounting expenses relating to a specific class of shares and (viii) any
additional incremental expenses subsequently identified and determined to be
properly allocated to one or more classes of shares.
Initial and Subsequent Purchases of Shares
You may buy Fund shares through Authorized Dealers or by calling or directing
your financial adviser to call Nuveen toll-free at 800-621-7227. You may pay
for your purchase by Federal Reserve draft or by check made payable to "Nuveen
European Value Fund, Class [A], [B], [C], [R]," delivered to the financial
adviser through whom the investment is to be made for forwarding to the Fund's
shareholder services agent, Shareholder Services, Inc. ("SSI"). When making your
initial investment, you must also furnish the information necessary to establish
your Fund account by completing and enclosing with your payment the application
form attached to the Prospectus (the "Application Form"). After your initial
investment, you may make subsequent purchases at any time by forwarding to your
financial adviser or SSI a check, in the amount of your purchase, made payable
to "Nuveen European Value Fund, Class [A], [B], [C], [R]," and indicating on the
check your account number. All payments need to be in U.S. dollars and should be
sent directly to SSI at its address listed on the back cover of the Prospectus.
A check drawn on a foreign bank or payable other than to the order of the Fund
generally will not be acceptable. You may also wire Federal Funds directly to
SSI, but you may be charged a fee for this. For instructions on how to make Fund
purchases by wire transfer, call Nuveen toll-free at 800-621-7227.
B-26
<PAGE>
Purchase Price
The price at which you purchase a class of Fund shares is based on the next
calculation of the net asset value for that share class after the order is
placed. The net asset value per share of each share class is determined as of
the close of trading (normally 4:00 p.m. Eastern Time) on each day the New York
Stock Exchange is open for business. See "Net Asset Value," for a description
of how net asset value is calculated.
Minimum Investment Requirements
The minimum initial investment is $3,000 per fund share class ($1,000 for an
Individual Retirement Account), and may be lower for accounts opened through
fee-based programs for which the program sponsor has established a single master
account with the fund's transfer agent and performs all sub-accounting services
related to that account. Additional purchases may be in amounts of $50 or more.
These minimums may be changed at any time by the Fund. There are exceptions to
these minimums for shareholders who qualify under reinvestment programs.
Systematic Investment Programs
The Fund offers you several opportunities to capture the benefits of "dollar
cost averaging" through systematic investment programs. In a regularly followed
dollar cost averaging program, you would purchase more shares when Fund share
prices are lower and fewer shares when Fund share prices are higher, so that the
average price paid for Fund shares is less than the average price of the Fund
shares over the same time period. Dollar cost averaging does not assure profits
or protect against losses in a steadily declining market. Since dollar cost
averaging involves continuous investment regardless of fluctuating price levels,
you should consider your financial ability to continue investing in declining as
well as rising markets before deciding to invest in this way. The Fund offers
two different types of systematic investment programs:
Systematic Investment Plan
Once you have established a Fund account, you may make regular investments in an
amount of $50 or more each month by authorizing SSI to draw preauthorized checks
on your bank account. There is no obligation to continue payments and you may
terminate your participation at any time at your discretion. No charge in
addition to the applicable sales charge is made in connection with this Plan,
and there is no cost to your Fund. To obtain an application form for the
Systematic Investment Plan, check the applicable box on the Application Form or
call Nuveen toll-free at 800-621-7227.
Payroll Direct Deposit Plan
Once you have established a Fund account, you may, with your employer's consent,
make regular investments in Fund shares of $25 or more per pay period (meeting
the monthly minimum of $50) by authorizing your employer to deduct this amount
automatically from your paycheck. There is no obligation to continue payments
and you may terminate your participation at any time at your discretion. No
charge in addition to the applicable sales charge is made for this Plan, and
there is no cost to your Fund. To obtain an application form for the Payroll
Direct Deposit Plan, check the applicable box on the Application Form or call
Nuveen toll-free at 800-621-7227.
Class A Shares
You may purchase Class A Shares at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. You may qualify for a
reduced sales charge, or the sales charge may be waived in its entirety, as
described below. Class A Shares are also subject to an annual service fee of
.25%. See "Distribution and Service Plans." Set forth below is an example of
the method of
B-27
<PAGE>
computing the offering price of the Class A shares of the Fund. The example
assumes a purchase on the date that the Fund commenced operations of Class
A shares from the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Prospectus at a price based upon the net asset
value of the Class A shares.
<TABLE>
<S> <C>
Net Asset Value per share................ $20.000
Per Share Sales Charge -- 5.75% of
public offering price (6.10% of
net asset value per share.......... 1.220
Per Share Offering Price to the Public... $21.220
</TABLE>
The Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
Certain commercial banks may make Class A Shares of the Fund available to their
customers on an agency basis. Pursuant to the agreements between Nuveen and
these banks, some or all of the sales charge paid by a bank customer in
connection with a purchase of Class A Shares may be retained by or paid to the
bank. Certain banks and other financial institutions may be required to
register as securities dealers in certain states.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares and Class R
Share Purchase Availability
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A Shares of
the Fund if the amount of your purchase, when added to the value that day of all
of your prior purchases of shares of the Fund or of another Nuveen Mutual Fund,
or units of a Nuveen unit trust, on which an up-front sales charge or ongoing
distribution fee is imposed, or is normally imposed, falls within the amounts
stated in the Class A sales charges and commissions table in "How to Choose a
Share Class" in the Prospectus. You or your financial adviser must notify
Nuveen or the Fund's transfer agent of any cumulative discount whenever you plan
to purchase Class A Shares of the Fund that you wish to qualify for a reduced
sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A Shares of
the Fund if you plan to purchase Class A Shares of Nuveen Mutual Funds over the
next 13 months and the total amount of your purchases would, if purchased at one
time, qualify you for one of the reduced sales charges shown in the Class A
sales charges and commissions table in "How to Choose a Share Class" in the
Prospectus. In order to take advantage of this option, you must complete the
applicable section of the Application Form or sign and deliver either to an
Authorized Dealer or to the Fund's transfer agent a written Letter of Intent in
a form acceptable to Nuveen. A Letter of Intent states that you intend, but are
not obligated, to purchase over the next 13 months a stated total amount of
Class A shares that would qualify you for a reduced sales charge shown above.
You may count shares of a Nuveen Mutual Fund that you already own on which you
paid an up-front sales charge or an ongoing distribution fee and any Class B and
Class C Shares of a Nuveen Mutual Fund that you purchase over the next 13 months
towards completion of your investment program, but you will receive a reduced
sales charge only on new Class A Shares you purchase with a sales charge over
the 13 months. You cannot count towards completion of your investment program
Class A Shares that you purchase without a sales charge through investment of
distributions from a Nuveen Mutual Fund or a Nuveen unit trust, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class
A Shares of the Fund following execution of the Letter of Intent will be at
least 5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
B-28
<PAGE>
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter of
Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required payment.
By establishing a Letter of Intent, you irrevocably appoint Nuveen as attorney
to give instructions to redeem any or all of your escrowed shares, with full
power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Unit Trust Distributions
You may purchase Class A Shares without an up-front sales charge by reinvestment
of distributions from any of the various unit trusts sponsored by Nuveen. There
is no initial or subsequent minimum investment requirement for such reinvestment
purchases.
Group Purchase Programs
If you are a member of a qualified group, you may purchase Class A Shares of the
Fund or of another Nuveen Mutual Fund at the reduced sales charge applicable to
the group's purchases taken as a whole. A "qualified group" is one which has
previously been in existence, has a purpose other than investment, has ten or
more participating members, has agreed to include Fund sales publications in
mailings to members and has agreed to comply with certain administrative
requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
Shares of the Fund or portfolio for each participant in the program is $3,000
and the minimum monthly investment in Class A Shares of the Fund or portfolio by
each participant is $50. No certificate will be issued for any participant's
account. All dividends and other distributions by the Fund will be reinvested
in additional Class A Shares of the Fund. No participant may utilize a
systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out application materials, which the group administrator
may obtain from the group's financial adviser, by calling Nuveen toll-free at
800-621-7227.
Reinvestment of Redemption Proceeds from Unaffiliated Funds
You may also purchase Class A Shares at net asset value without a sales charge
if the purchase takes place through an Authorized Dealer and represents the
reinvestment of the proceeds of the redemption of shares of one or more
registered investment companies not affiliated with Nuveen. You must provide
appropriate documentation that the redemption occurred not more than one year
prior to the reinvestment of the proceeds in Class A Shares, and that you either
paid an up-front sales charge or were subject to a contingent deferred sales
charge in respect of the redemption of such shares of such other investment
company.
Elimination of Sales Charge on Class A Shares
Class A Shares of the Fund may be purchased at net asset value without a sales
charge by the following categories of investors:
. investors purchasing $1,000,000 or more;
. officers, trustees and former trustees of the Trust;
B-29
<PAGE>
. bona fide, full-time and retired employees of Nuveen or Institutional
Capital, any parent company of Nuveen, and subsidiaries thereof, or
their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that
are held in a fiduciary, agency, advisory, custodial or similar
capacity;
. investors purchasing on a periodic fee, asset-based fee or no
transaction fee basis through a broker-dealer sponsored mutual fund
purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services; and
. any eligible employer-sponsored qualified defined contribution
retirement plan. Eligible plans are those with at least 200 employees
and which either (a) make an initial purchase of one or more Nuveen
mutual funds aggregating $1 million or more; or (b) execute a Letter
of Intent to purchase in the aggregate $1 million or more of fund
shares. Nuveen will pay Authorized Dealers a sales commission on such
purchases equal to 1% of the first $2.5 million, plus 0.50% of the
next $2.5 million, plus 0.25% of any amount purchased over $5.0
million. For this category of investors a contingent deferred sales
charge of 1% will be assessed on redemptions within 18 months of
purchase, unless waived.
Any Class A Shares purchased pursuant to a special sales charge waiver must be
acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Fund. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of the Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of the Fund may be issued at net asset value without a sales
charge in connection with the acquisition by the Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Fund.
In determining the amount of your purchases of Class A Shares of the Fund that
may qualify for a reduced sales charge, the following purchases may be combined:
(1) all purchases by a trustee or other fiduciary for a single trust, estate or
fiduciary account; (2) all purchases by individuals and their immediate family
members (i.e., their spouses, parents, children, grandparents, grandchildren,
parents-in-law, sons-and daughters-in-law, siblings, a sibling's spouse, and a
spouse's siblings); or (3) all purchases made through a group purchase program
as described above.
Class R Share Purchase Eligibility
Class R Shares are available for purchases of $1 million or more and for
purchases using dividends and capital gains distributions on Class R Shares.
Class R Shares also are available for the following categories of investors:
. officers, trustees and former trustees of the Trust and their immediate
family members or trustees/directors of any fund sponsored by Nuveen, any
parent company of Nuveen and subsidiaries thereof and their immediate
family members;
. bona fide, full-time and retired employees of Nuveen or Institutional
Capital, any parent company of Nuveen, and subsidiaries thereof, or their
immediate family members;
B-30
<PAGE>
. any person who, for at least 90 days, has been an officer, director or bona
fide employee of any Authorized Dealer, or their immediate family members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transaction
fee basis through a broker-dealer sponsored mutual fund purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their services.
Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on the
condition that they will not be transferred or resold except through redemption
by the Fund.
In addition, purchasers of Nuveen unit investment trusts may reinvest their
distributions from such unit investment trusts in Class R Shares, if, before
September 6, 1994, such purchasers had elected to reinvest distributions in
Nuveen Fund shares (before June 13, 1995 for Nuveen Municipal Bond Fund shares).
Shareholders may exchange their Class R Shares of any Nuveen Fund into Class R
Shares of any other Nuveen Fund. You may also exchange Class R Shares of the
Fund for Class A Shares without a sales charge if the current net asset value of
your Class R Shares is at least $3,000 (or you already own Class A Shares).
The reduced sales charge programs may be modified or discontinued by the Fund at
any time.
If you are eligible to purchase either Class R Shares or Class A Shares without
a sales charge at net asset value, you should be aware of the differences
between these two classes of shares. Class A Shares are subject to an annual
service fee to compensate Authorized Dealers for providing you with ongoing
account services. Class R Shares are not subject to a distribution or service
fee and, consequently, holders of Class R Shares may not receive the sale types
or levels of services from Authorized Dealers. In choosing between Class A
Shares and Class R Shares, you should weigh the benefits of the services to be
provided by Authorized Dealers against the annual service fee imposed upon the
Class A Shares.
Class B Shares
You may purchase Class B Shares at a public offering price equal to the
applicable net asset value per share without any up-front sales charge. Since
Class B Shares are sold without an initial sales charge, the full amount of your
purchase payment will be invested in Class B Shares. Class B Shares are subject
to an annual distribution fee to compensate Nuveen for its costs in connection
with the sale of Class B shares, and are also subject to an annual service fee
to compensate Authorized Dealers for providing you with ongoing financial advice
and other account services.
You may be subject to a CDSC if you redeem your Class B shares prior to the end
of the sixth year after purchase. See "Reduction or Elimination of Contingent
Deferred Sales Charge" below. Nuveen compensates Authorized Dealers for sales
of Class B Shares at the time of sale at the rate of 4.00% of the amount of
Class B Shares purchased, which represents a sales commission of 3.75% plus an
advance on the first year's annual service fee of .25%.
Class B Shares acquired through the reinvestment of dividends are not subject to
a CDSC. Any CDSC will be imposed on the lower of the redeemed shares' cost or
net asset value at the time of redemption.
B-31
<PAGE>
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling from
the Internal Revenue Service to the effect that the conversion of shares would
not constitute a taxable event under federal income tax law. Conversion of
Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
Class C Shares
You may purchase Class C Shares at a public offering price equal to the
applicable net asset value per share without any up-front sales charge. Class C
Shares are subject to an annual distribution fee of .75% to compensate Nuveen
for paying your financial adviser an ongoing sales commission. Class C Shares
are also subject to an annual service fee of .25% to compensate Authorized
Dealers for providing you with on-going financial advice and other account
services. Nuveen compensates Authorized Dealers for sales of Class C Shares at
the time of the sale at a rate of 1% of the amount of Class C Shares purchased,
which represents an advance of the first year's distribution fee of .75% plus an
advance on the first year's service fee of .25%. See "Distribution and Service
Plans."
Redemptions of Class C Shares within 12 months of purchase may be subject to a
CDSC of 1% of the lower of the purchase price or redemption proceeds. Because
Class C Shares do not convert to Class A Shares and continue to pay an annual
distribution fee indefinitely, Class C Shares should normally not be purchased
by an investor who expects to hold shares for significantly longer than eight
years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any CDSC.
However, in the case of Class A Shares purchased at net asset value because the
purchase amount equaled or exceeded $1 million where the Authorized Dealer did
not waive the sales commission, a CDSC of 1% is imposed on any redemption within
18 months of purchase. In the case of Class B Shares redeemed within six years
of purchase, a CDSC is imposed, beginning at 5% for redemptions within the first
year, declining to 4% for redemptions within years two and three, and declining
by 1% each year thereafter until disappearing after the sixth year. Class C
Shares are redeemed at net asset value, without any CDSC, except that a CDSC of
1% is imposed upon redemption of Class C Shares that are redeemed within 12
months of purchase.
In determining whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. You may not
exchange Class B Shares for shares of a Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month in
which the order for investment is received. The CDSC is calculated based on the
lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A or Class C shares subject to a
CDSC are exchanged for shares of a Nuveen money market fund, the CDSC would be
imposed on the subsequent redemption of those money market fund
B-32
<PAGE>
shares, and the period during which the shareholder holds the money market fund
shares would be counted in determining the remaining duration of the CDSC. The
Fund may elect not to so count the period during which the shareholder held the
money market fund shares, in which event the amount of any applicable CDSC would
be reduced in accordance with applicable SEC rules by the amount of any 12b-1
plan payments to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following circumstances: (i) in the
event of total disability (as evidenced by a determination by the federal Social
Security Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed; (ii) in the event of
the death of the shareholder (including a registered joint owner); (iii) for
redemptions made pursuant to a systematic withdrawal plan, up to 12% annually of
the current market value; (iv) involuntary redemptions caused by operation
of law; (v) redemptions in connection with a payment of account or plan fees;
(vi) redemptions in connection with the exercise of a reinstatement privilege
whereby the proceeds of a redemption of the Fund's shares subject to a sales
charge are reinvested in shares of certain Funds within a specified number of
days; and (vii) redemptions in connection with the exercise of the Fund's right
to redeem all shares in an account that does not maintain a certain minimum
balance or that the applicable board has determined may have material adverse
consequences to the shareholders of the Fund.
In addition, the CDSC will be waived in connection with the following
redemptions of shares held by an employer-sponsored qualified defined
contribution retirement plan: (i) partial or complete redemptions in connection
with a distribution without penalty under Section 72(t) of the Internal Revenue
Code ("Code") from a retirement plan: (a) upon attaining age 59 1/2, (b) as part
of a series of substantially equal periodic payments, or (c) upon separation
from service and attaining age 55; (ii) partial or complete redemptions in
connection with a qualifying loan or hardship withdrawal; (iii) complete
redemptions in connection with termination of employment, plan termination or
transfer to another employer's plan or IRA; and (iv) redemptions resulting from
the return of an excess contribution. The CDSC will also be waived in
connection with the following redemptions of shares held in an IRA account: (i)
for redemptions made pursuant to an IRA systematic withdrawal based on the
shareholder's life expectancy including, but not limited to, substantially equal
periodic payments described in Code Section 72(t)(A)(iv) prior to age 59; and
(ii) for redemptions to satisfy required minimum distributions after age 70 from
an IRA account (with the maximum amount subject to this waiver being based only
upon the shareholder's Nuveen IRA accounts).
Shareholder Programs
Exchange Privilege
You may exchange shares of a class of the Fund for shares of the same class of
any other Nuveen Mutual Fund with reciprocal exchange privileges, at net asset
value without a sales charge, by sending a written request to the Fund, c/o
Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330. Similarly,
Class A, Class B, Class C and Class R Shares of other Nuveen Mutual Funds may be
exchanged for the same class of shares of the Fund at net asset value without a
sales charge. Exchanges of shares from any Nuveen money market fund will be made
into Class A Shares, Class B Shares, Class C Shares or Class R Shares (if
eligible) of the Fund at the public offering price. If, however, a sales charge
has previously been paid on the investment represented by the exchanged shares
(i.e., the shares to be exchanged were originally issued in exchange for shares
on which a sales charge was paid), the exchange of shares from a Nuveen money
market fund will be made into shares of the Fund at net asset value. Class A
Shares, Class C Shares or Class R Shares may be exchanged for shares of any
Nuveen money market fund, but Class B Shares may not be exchanged for shares of
a Nuveen money market fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time of
the exchange. However, if you subsequently redeem the shares acquired through
the exchange, the redemption may be subject to a CDSC, depending on when you
purchased your original shares and the CDSC schedule of the fund from which you
exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment requirement
of the Nuveen Mutual Fund being purchased. For federal income tax purposes, any
exchange constitutes
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a sale and purchase of shares and may result in capital gain or loss. Before
making any exchange, you should obtain the Prospectus for the Nuveen Mutual Fund
you are purchasing and read it carefully. If the registration of the account
for the Fund you are purchasing is not exactly the same as that of the fund
account from which the exchange is made, written instructions from all holders
of the account from which the exchange is being made must be received, with
signatures guaranteed by a member of an approved Medallion Guarantee Program or
in such other manner as may be acceptable to the Fund. You may also exchange
shares by telephone if you authorize telephone exchanges by checking the
applicable box on the Application Form or by calling Nuveen toll-free at 800-
621-7227 to obtain an authorization form. The exchange privilege may be
modified or discontinued by the Fund at any time.
The exchange privilege is not intended to permit the Fund to be used as a
vehicle for short-term trading. Excessive exchange activity may interfere with
portfolio management, raise expenses, and otherwise have an adverse effect on
all shareholders. In order to limit excessive exchange activity and in other
circumstances where Fund management believes doing so would be in the best
interest of the Fund, the Fund reserves the right to revise or terminate the
exchange privilege, or limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to the extent
required by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of the Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up to
one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement
privilege can be exercised only once for any redemption, and reinvestment will
be made at the net asset value next calculated after reinstatement of the
appropriate class of Fund shares. If you reinstate shares that were subject to
a CDSC, your holding period as of the redemption date also will be reinstated
for purposes of calculating a CDSC. The federal income tax consequences of any
capital gain realized on a redemption will not be affected by reinstatement, but
a capital loss may be disallowed in whole or in part depending on the timing,
the amount of the reinvestment and the fund from which the redemption occurred.
Fund Direct
You can use Fund Direct to link your fund account to your account at a bank or
other financial institution. Fund Direct enables you to transfer money
electronically between these accounts and perform a variety of account
transactions. These include purchasing shares by telephone, investing through a
Systematic Investment Plan, and sending dividends, distributions, redemption
payments or Systematic Withdrawal Plan payments directly to your bank account.
Please refer to the Application Form for details, or call SSI at 800-621-7227
for more information.
Fund Direct privileges may be requested via an application you obtain by calling
800-621-7227. Fund Direct privileges will apply to each shareholder listed in
the registration on your account as well as to your Authorized Dealer
representative of record unless and until SSI receives written instructions
terminating or changing those privileges. After you establish Fund Direct for
your account, any change of bank account information must be made by signature-
guaranteed instructions to SSI signed by all shareholders who own the account.
Purchases may be made by telephone only after your account has been established.
To purchase shares in amounts up to $250,000 through a telephone representative,
call SSI at 800-621-7227. The purchase payment will be debited from your bank
account.
Redemption
You may redeem shares by sending a written request for redemption directly to
the Fund, c/o Shareholder Services, Inc., P.O. Box 5330, Denver, CO 80217-5330,
accompanied by duly endorsed certificates, if issued. Requests for redemption
and share certificates, if issued, must be signed by each shareholder and, if
the redemption proceeds exceed $50,000 or are payable other than to the
shareholder of record at the address of record (which address may not have
changed in the preceding 60 days), the signature must be guaranteed by a member
of an approved Medallion Guarantee Program or in such other manner as may be
acceptable to the Fund. You will receive payment based on the net asset value
per share next determined after receipt by the Fund of a properly executed
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redemption request in proper form. A check for the redemption proceeds will be
mailed to you within seven days after receipt of your redemption request. For
accounts registered in the name of a broker-dealer, payment will be forwarded
within three business days. However, if any shares to be redeemed were
purchased by check within 15 days prior to the date the redemption request is
received, the Fund will not mail the redemption proceeds until the check
received for the purchase of shares has cleared, which may take up to 15 days.
Telephone and Electronic Redemptions
If you have authorized telephone redemption and your account address has not
changed within the last 60 days, you can redeem shares that are held in non-
certificate form and that are worth $50,000 or less by calling Nuveen at 800-
621-7227. While you or anyone authorized by you may make telephone redemption
requests, redemption checks will be issued only in the name of the shareholder
of record and will be mailed to the address of record. If your telephone
request is received prior to 4:00 p.m. eastern time, the redemption check will
normally be mailed the next business day. For requests received after 4:00 p.m.
eastern time, the redemption will be effected at 4:00 p.m. eastern time the
following business day and the check will normally be mailed on the second
business day after the request.
If you have authorized electronic fund redemption or established Fund Direct
privileges, you can take advantage of the following expedited redemption
procedures to redeem shares held in non-certificate form that are worth at least
$1,000. You may make electronic fund redemption requests through a phone
representative or Fund Direct redemption requests by calling Nuveen at 800-621-
7227. If a redemption request is received by 4:00 p.m. eastern time, the
redemption will be made as of 4:00 p.m. that day. If the redemption request is
received after 4:00 p.m. eastern time, the redemption will be made as of 4:00
p.m. the following business day. Proceeds of electronic fund redemptions will
normally be wired on the second business day following the redemption, but may
be delayed one additional business day if the Federal Reserve Bank of Boston or
the Federal Reserve Bank of New York is closed on the day redemption proceeds
would ordinarily be wired. The Fund reserves the right to charge a fee for
electronic fund redemption. Proceeds of redemptions through Fund Direct will
normally be wired to your Fund Direct bank account on the second or third
business day after the redemption.
Before you may redeem shares electronically by phone or through Fund Direct, you
need to complete the telephone redemption authorization section of the
Application Form or the Fund Direct application form and return it to Nuveen or
SSI. If you did not authorize telephone redemption when you opened your
account, you may obtain a telephone redemption authorization form by writing the
Fund or by calling Nuveen toll-free at 800-621-7227. Proceeds from electronic
share redemptions will be transferred by Federal Reserve wire only to the
commercial bank account specified by the shareholder on the Application Form.
You need to send a written request to Nuveen or SSI in order to establish
multiple accounts, or to change the account or accounts designated to receive
redemption proceeds. These requests must be signed by each account owner with
signatures guaranteed by a member of an approved Medallion Guarantee Program or
in such other manner as may be acceptable to the Fund. Further documentation
may be required from corporations, executors, trustees or personal
representatives.
For the convenience of shareholders, the Fund has authorized Nuveen as its agent
to accept orders from financial advisers by wire or telephone for the redemption
of Fund shares. The redemption price is the first net asset value of the
appropriate share class determined following receipt of an order placed by the
financial adviser. The Fund makes payment for the redeemed shares to the
securities representatives who placed the order promptly upon presentation of
required documents with signatures guaranteed as described above. Neither the
Fund nor Nuveen charges any redemption fees other than any CDSC as described
above. However, your financial adviser may charge you for serving as agent in
the redemption of shares.
The Fund reserves the right to refuse telephone redemptions and, at its option,
may limit the timing, amount or frequency of these redemptions. Telephone
redemption procedures may be modified or terminated at any time, on 30 days'
notice, by the Fund. The Fund, SSI and Nuveen will not be liable for
following telephone instructions reasonably believed to be genuine. The Fund
employs procedures reasonably designed to confirm that telephone instructions
are genuine. These procedures include recording all telephone instructions and
requiring up to three forms of identification prior to acting upon a caller's
instructions. If the Fund does not follow reasonable procedures for protecting
shareholders against loss on telephone transactions, it may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
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Systematic Withdrawal Plan.
If you own Fund shares currently worth at least $10,000, you may establish a
Systematic Withdrawal Plan by completing an application form for the Plan. You
may obtain an application form by checking the applicable box on the Application
Form or by calling Nuveen toll-free at 800-621-7227.
The Plan permits you to request periodic withdrawals on a monthly, quarterly,
semi-annual or annual basis in an amount of $50 or more. Depending upon the
size of the withdrawals requested under the Plan and fluctuations in the net
asset value of Fund shares, these withdrawals may reduce or even exhaust your
account.
The purchase of Class A Shares, other than through reinvestment, while you are
participating in the Systematic Withdrawal Plan with respect to Class A Shares
will usually be disadvantageous because you will be paying a sales charge on any
Class A Shares you purchase at the same time you are redeeming shares.
Similarly, use of the Systematic Withdrawal Plan for Class B Shares held for
less than six years or Class C Shares held for less than 12 months may be
disadvantageous because the newly-purchased Class B or Class C Shares will be
subject to the CDSC.
Suspension of Right of Redemption
The Fund may suspend the right of redemption of Fund shares or delay payment
more than seven days (a) during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that trading of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for any other periods that the Securities and Exchange
Commission by order may permit for protection of Fund shareholders.
Involuntary Redemption
The Fund may, from time to time, establish a minimum total investment for Fund
shareholders, and the Fund reserves the right to redeem your shares if your
investment is less than the minimum after giving you at least 30 days' notice.
If any minimum total investment is established, and if your account is below the
minimum, you will be allowed 30 days following the notice in which to purchase
sufficient shares to meet the minimum. So long as the Fund continues to offer
shares at net asset value to holders of Nuveen Unit Trusts who are investing
their Nuveen Unit Trust distributions, no minimum total investment will be
established for those investors.
General Matters
The Fund may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to participate
in programs that recommend a portion of their assets be invested in equity
securities, equity and debt securities, or equity and municipal securities.
Upon notice to all Authorized Dealers, Nuveen may reallow to Authorized Dealers
electing to participate up to the full applicable Class A Share up-front sales
charge during periods and for transactions specified in the notice. The
reallowances made during these periods may be based upon attainment of minimum
sales levels.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the Prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are
expected to sell certain minimum amounts of shares of the Nuveen Mutual Funds
and Nuveen Unit Trusts during specified time periods. Promotional support may
include providing sales literature to and holding informational or educational
programs for the benefit of such Authorized Dealers' representatives, seminars
for the public, and advertising and sales campaigns. Nuveen may reimburse a
participating Authorized Dealer for up to one-half of specified media costs
incurred in the placement of advertisements which jointly feature the Authorized
Dealer and Nuveen Funds and Nuveen Unit Trusts.
Such reimbursement will be based on the number of its financial advisers who
have sold Nuveen Fund shares and Nuveen Unit Trust units during the prior
calendar year according to an established schedule. Any such support or
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reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Fund, and will not change the price an investor pays for
shares or the amount that the Fund will receive from such a sale. The staff of
the Securities and Exchange Commission takes the position that dealers who
receive 90% or more of the applicable sales charge may be deemed underwriters
under the Securities Act of 1933, as amended.
To help advisers and investors better understand and most efficiently use the
Fund to reach their investment goals, the Fund may advertise and create specific
investment programs and systems. For example, this may include information on
how to use the Fund to accumulate assets for future education needs or periodic
payments such as insurance premiums. The Fund may produce software, electronic
information sites, or additional sales literature to promote the advantages of
using the Fund to meet these and other specific investor needs.
Exchanges of shares of the Fund for shares of a Nuveen money market fund may be
made on days when both Fund calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market Fund may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market Fund observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans' Day.
In addition, you may exchange Class R Shares of the Fund for Class A Shares of
the Fund without a sales charge if the current net asset value of those Class R
Shares is at least $3,000 or you already own Class A Shares of the Fund.
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Fund's transfer agent. No share
certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of the Fund and on
the special purchase programs available thereunder, see "How to Buy Shares" and
"Systematic Investing" in the Prospectus.
If you choose to invest in the Fund, an account will be opened and maintained
for you by SSI, the Fund's shareholder services agent. Share certificates will
be issued to you only upon written request to SSI, and no certificates will be
issued for fractional shares. The Fund reserves the right to reject any purchase
order and to waive or increase minimum investment requirements. A change in
registration or transfer of shares held in the name of your financial adviser's
firm can only be made by an order in good form from the financial adviser acting
on your behalf.
Authorized Dealers are encouraged to open single master accounts. However, some
Authorized Dealers may wish to use SSI's sub-accounting system to minimize
their internal recordkeeping requirements. An Authorized Dealer or other
investor requesting shareholder servicing or accounting other than the master
account or sub-accounting service offered by SSI will be required to enter
into a separate agreement with another agent for these services for a fee that
will depend upon the level of services to be provided.
The Shares are offered continuously. However, subject to the rules and
regulations of the Securities and Exchange Commission, the Fund reserves the
right to suspend the continuous offering of it shares at any time, but no
suspension shall affect your right of redemption.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant to
a "best efforts" arrangement as provided by a distribution agreement with the
Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement, the
Trust appointed Nuveen to be its agent for the distribution of the Fund's shares
on a continuous offering basis. Nuveen sells shares to or through brokers,
dealers, banks or other qualified financial intermediaries (collectively
referred to as "Dealers"), or others, in a manner consistent with the then
effective registration statement of the Trust. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Fund's shares, including printing and
distributing of prospectuses and statements of additional information to other
than existing shareholders, the printing and distributing of sales literature,
advertising and payment of compensation and giving of concessions to dealers.
Nuveen receives for its services the excess, if any, of the sales price of the
Fund's
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shares less the net asset value of those shares, and reallows a majority or all
of such amounts to the Dealers who sold the shares; Nuveen may act as such a
Dealer. Nuveen also receives compensation pursuant to a distribution plan
adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plans." Nuveen receives any CDSCs imposed on
redemptions of Shares, but any amounts as to which a reinstatement privilege is
not exercised are set off against and reduce amounts otherwise payable to Nuveen
pursuant to the distribution plan.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will all be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B Shares and Class C Shares under the
Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of such Shares. These expenses
include payments to Authorized Dealers, including Nuveen, who are brokers of
record with respect to the Shares, as well as, without limitation, expenses of
printing and distributing prospectuses to persons other than shareholders of the
Fund, expenses of preparing, printing and distributing advertising and sales
literature and reports to shareholders used in connection with the sale of such
Shares, certain other expenses associated with the distribution of such Shares,
and any distribution-related expenses that may be authorized from time to time
by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C Shares
under the Fund's Plan will be payable to Authorized Dealers in connection with
the provision of ongoing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering shareholder
inquiries and providing other personal services to shareholders.
The Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan as applicable to Class A Shares.
The Fund may spend up to .75 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a distribution fee which
constitutes an asset-based sales charge whose purpose is the same as an up-front
sales charge and up to .25 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a service fee under the Plan as
applicable to such classes.
Under the Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested Trustees who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
trustees who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under
applicable law, that there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders. The Plan may not be amended to increase
materially the cost which a class of shares may bear under the Plan without the
approval of the shareholders of the affected class, and any other material
amendments of the Plan must be approved by the non-interested trustees by a vote
cast in person at a meeting called for the purpose of considering such
amendments. During the continuance of the Plan, the selection and nomination of
the non-interested trustees of the Trust will be committed to the discretion of
the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS AND CUSTODIAN
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 have been selected as auditors for the Trust. In
addition to audit services, Arthur Andersen LLP will provide consultation and
assistance on accounting, internal control, tax and related matters.
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The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
GENERAL TRUST INFORMATION
The Fund is a series of the Trust. The Trust is an open-end diversified
management investment company under the Investment Company Act of 1940. The
Trust was organized as a Massachusetts business trust on May 6, 1996. The Board
of Trustees of the Trust is authorized to issue an unlimited number of shares in
one or more series or "Fund," which may be divided into classes of shares.
Currently, there are four series authorized and outstanding, each of which is
divided into four classes of shares designated as Class A Shares, Class B
Shares, Class C Shares and Class R Shares. Each class of shares represents an
interest in the same portfolio of investments of the Fund. Each class of shares
has equal rights as to voting, redemption, dividends and liquidation, except
that each bears different class expenses, including different distribution and
service fees, and each has exclusive voting rights with respect to any
distribution or service plan applicable to its shares. There are no conversion,
preemptive or other subscription rights, except that Class B Shares
automatically convert into Class A Shares, as described herein. The Board of
Trustees of the Trust has the right to establish additional series and classes
of shares in the future, to change those series or classes and to determine the
preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of
shareholders. Shareholders owning more than 10% of the outstanding shares of
the Fund have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, the Declaration of
Trust of the Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Fund's Declaration of Trust further provides for
indemnification out of the assets and property of the Trust for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these
circumstances is remote.
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APPENDIX A--RATINGS OF INVESTMENTS
Standard & Poor's Ratings Group--A brief description of the applicable Standard
& Poor's Ratings Group ("S&P") rating symbols and their meanings (as published
by S&P) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Speculative Grade Rating
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
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BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BBB-' rating.
B Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
The 'CCC' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'B' or 'B-' rating.
CC The rating 'CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' debt rating.
C The rating 'C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project financed
by the debt being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise
judgment with respect to such likelihood and risk.
L The letter 'L' indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.* and interest is adequately collateralized.
In the case of certificates of deposit the letter 'L' indicates that the
deposit, combined with other deposits being held in the same right and
capacity will be honored for principal and accrued pre-default interest up
to the federal insurance limits within 30 days after closing of the insured
institution or, in the event that the deposit is assumed by a successor
insured institution, upon maturity.
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NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and cash
flow.
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
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C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
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more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.
Speculative Grade Rating
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BBB-' rating.
B Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The 'B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
The 'CCC' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied 'B' or 'B-' rating.
CC The rating 'CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' debt rating.
C The rating 'C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is being
paid.
D Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project financed
by the debt being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise
judgment with respect to such likelihood and risk.
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L The letter 'L' indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.* and interest is adequately collateralized.
In the case of certificates of deposit the letter 'L' indicates that the
deposit, combined with other deposits being held in the same right and
capacity will be honored for principal and accrued pre-default interest up
to the federal insurance limits within 30 days after closing of the insured
institution or, in the event that the deposit is assumed by a successor
insured institution, upon maturity.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and cash
flow.
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
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A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:
Long Term Debt
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess may favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking, and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
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Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Con(...) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1, and B1.
Municipal Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins or protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will often be evidenced by many of the following
characteristics:
--Leading market positions in well-established industries.
--High rates of return on Fund employed.
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--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of senior short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Duff & Phelps, Inc.--A brief description of the applicable Duff & Phelps, Inc.
("D&P") ratings symbols and their meanings (as published by D&P) follows:
Long Term Debt
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition,
government action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g., first
mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
dispersion among the various classes of securities is determined by several
factors including relative weightings of the different security classes in the
capital structure, the overall credit strength of the issuer, and the nature of
covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings)
addresses the likelihood that aggregate principal and interest will equal or
exceed the rated amount under appropriate stress conditions.
Rating Scale Definition
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury
debt.
AA+ High credit quality. Protection factors are strong. Risk is
AA modest, but may vary slightly from time to time because of
AA- economic conditions.
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A+ Protection factors are average but adequate. However, risk
AA factors are more variable and greater in periods of economic
AA- stress.
BBB+ Below average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability
BBB- in risk during economic cycles.
B+ Below investment grade but deemed likely to meet obligations
B when due. Present or prospective financial protection factors
B- fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently
within this category.
CCC Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.
Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal, interest
or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
Short-Term Debt Ratings
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of Fund including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term Fund on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term ratings
is the refinement of the traditional '1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps Credit Rating has incorporated gradations
of '1+' (one plus) and '1-' (one minus) to assist investors in recognizing those
differences.
These ratings are recognized by the SEC for broker-dealer requirements,
specifically capital computation guidelines. These ratings meet Department of
Labor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for
insurance company investment portfolios.
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Rating Scale Definition
High Grade
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of Fund, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1-- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets
is good. Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
Non-investment Grade
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insured against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
Fitch Investors Service, Inc.--A brief description of the applicable Fitch
Investors Service, Inc. ("Fitch") ratings symbols and meanings (as published by
Fitch) follows:
Long Term Debt
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a specific
debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
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Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'.
Because bonds rated in the 'AAA' and 'AA' categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of the issuers is generally rated 'F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is
higher than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings ('BB' to
'C') represent Fitch's assessment of the likelihood of timely payment of
principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories cannot fully reflect the differences
in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD
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and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. 'DDD' represents the highest potential for recovery of these
bonds, and 'D' represents the lowest potential for recovery.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ Exceptionally Strong Credit Quality Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 Very Strong Credit Quality Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated 'F-1+'.
F-2 Good Credit Quality Issues assigned this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not
as great as for issues assigned 'F-1+' and 'F-1' ratings.
F-3 Fair Credit Quality Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
A-13
<PAGE>
PART C--OTHER INFORMATION
Item 24: Financial Statements and Exhibits.
(a) Financial statements:
Included in the Prospectus:
Not applicable.
Included in the Statement of Additional Information:
Not applicable.
(b) Exhibits
1(a). Declaration of Trust of Registrant./1/
1(b). Certificate for the Establishment and Designation of
Series and Classes for the Nuveen Growth and Income Stock
Fund, the Nuveen Balanced Stock and Bond Fund, and Nuveen
Balanced Municipal and Stock Fund, dated
June 20, 1996./3/
1(c). Certificate for the Establishment and Designation of
Series for the Nuveen Balanced California Municipal and
Stock Fund, dated July 23, 1997./6/
1(d). Certificate for the Establishment and Designation of
Series for the Nuveen European Value Fund, dated May 27, 1998./10/
2. By-Laws of Registrant./1/
3. Not applicable.
4. Specimen certificate of Shares of each Fund./3/
5(a). Management Agreement between Registrant and Nuveen
Institutional Advisory Corp. on behalf of Nuveen Growth
and Income Stock Fund, Nuveen Balanced Stock and Bond
Fund, and Nuveen Balanced Municipal and Stock Fund./6/
5(b). Management Agreement between Registrant and Nuveen
Institutional Advisory Corp. on behalf of Nuveen Balanced
California Municipal and Stock Fund./6/
5(c). Sub-Advisory Agreement between Nuveen Institutional
Advisory Corp. and Institutional Capital Corporation on
behalf of Nuveen Growth and Income Stock Fund, Nuveen
Balanced Stock and Bond Fund, and Nuveen Balanced
Municipal and Stock Fund./6/
5(d). Form of Sub-Advisory Agreement between Nuveen
Institutional Advisory Corp. and Institutional Capital
Corp. on behalf of Nuveen Balanced California Municipal
and Stock Fund./6/
5(e). Renewal of Investment Management Agreement dated July 23,
1997./7/
5(f). Form of Amended Schedule A to Management Agreement between
Registrant and Nuveen Institutional Advisory Corp./10/
5(g). Form of Amended Schedule A to Sub-Advisory Agreement
between Nuveen Institutional Advisory Corp. and Institutional
Capital Corporation./10/
5(h). Form of Amended Schedule B to Management Agreement between
Registrant and Nuveen Institutional Advisory Corp./10/
5(i). Form of Addendum to Investment Sub-Advisory Agreement between
Nuveen Institutional Advisory Corp. and Institutional
Capital Corporation./10/
6(a). Distribution Agreement between Registrant and John Nuveen
& Co. Incorporated./7/
6(b). Dealer Management Agreement dated October 22, 1996./4/
7. Not applicable.
C-1
<PAGE>
8(a). Custodian Agreement between Registrant and Chase Manhattan
Bank./7/
8(b). Form of Subscription Agency Agreement between Registrant
and The Chase Manhattan Bank./4/
9. Transfer Agency Agreement between Registrant and
Shareholder Services, Inc./7/
10(a). Opinion and consent of Chapman and Cutler, dated July 30,
1996./3/
10(b). Opinion and consent of Bingham, Dana & Gould, dated July
30, 1996./3/
10(c). Opinion and consent of Vedder, Price, Kaufman & Kammholz, dated
May 28, 1998./10/
10(d). Opinion and consent of Bingham Dana LLP dated May 28, 1998./10/
11. Not applicable.
12. Not applicable.
13. Subscription Agreement with Nuveen Institutional Advisory
Corp./7/
14. Not applicable.
15. Plan of Distribution and Service Pursuant to Rule 12b-1
for the Class A Shares, Class B Shares and Class C Shares
of each Fund./3/
16. Not applicable.
17. Not Applicable.
18. Multi-Class Plan./4/
99(a). Original Powers of Attorney for Messrs. Schwertfeger,
Dean, Leafstrand, Bacon, Kissick, Lyon, and Ms.
Wellington, Trustees, authorizing, among others, Larry W.
Martin and Gifford R. Zimmerman to execute the
Registration Statement./6/
99(b). Code of Ethic and Reporting Requirements./7/
- --------------------------------------------------------------------------------
/1/ Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant.
/2/ Incorporated by reference to the pre-effective amendment no. 1 filed on Form
N-1A for Registrant.
/3/ Incorporated by reference to the pre-effective amendment no. 2 filed on Form
N-1A for Registrant.
/4/ Incorporated by reference to the post-effective amendment no. 1 filed on
Form N-1A for Registrant.
/5/ Incorporated by reference to the post-effective amendment no. 2 filed on
Form N-1A for Registrant.
/6/ Incorporated by reference to the post-effective amendment no. 3 filed on
Form N-1A for Registrant.
/7/ Incorporated by reference to the post-effective amendment no. 4 filed on
Form N-1A for Registrant.
/8/ Incorporated by reference to the post-effective amendment no. 5 filed on
Form N-1A for Registrant.
/9/ Incorporated by reference to the post-effective amendment no. 6 filed on
Form N-1A for Registrant.
/10/Filed herewith.
C-2
<PAGE>
Item 25: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26: Number of Holders of Securities
At May 28, 1998:
<TABLE>
<CAPTION>
Number of
Title of Series Record Holders
--------------- --------------
<S> <C>
Nuveen European Value Fund
Class A......................... 0
Class B......................... 0
Class C......................... 0
Class R......................... 0
</TABLE>
Item 27: Indemnification
Section 4 of Article XII of Registrant's Declaration of Trust provides as
follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been such a Trustee, director, officer, employee or agent and against amounts
paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
C-3
<PAGE>
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by policies
maintained by the Trust, shall be severable, shall not affect any other rights
to which any Covered Person may now or hereafter be entitled, shall continue as
to a person who has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person. Nothing
contained herein shall affect any rights to indemnification to which Trust
personnel other than Covered Persons may be entitled by contract or otherwise
under law.
Expenses of preparation and presentation of a defense to any claim, action, suit
or proceeding subject to a claim for indemnification under this Section 4 shall
be advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, anyone
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------------
The trustees and officers of the Registrant are covered by Investment Trust
Errors and Omission policies in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
C-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28: Business and Other Connections of Investment Adviser
(a) Nuveen Institutional Advisory Corp. ("NIAC") manages the Registrant and
serves as investment adviser or manager to other open-end and closed-end
management investment companies and to separately managed accounts. The
principal business address for all of these investment companies is 333
West Wacker Drive, Chicago, Illinois 60606.
A description of any other business, profession, vocation or employment of a
substantial nature in which the directors and officers of NIAC who serve as
officers or Trustees of the Registrant has engaged during the last two years for
his or her account or in the capacity of director, officer, employee, partner or
trustee appears under "Management" in the Statement of Additional Information.
Such information for the remaining senior officers of NIAC appears below:
<TABLE>
<CAPTION>
Other Business, Profession, Vocation or
Name and Position with NIAC Employment During Past Two Years
- --------------------------- --------------------------------
<S> <C>
John P. Amboian, Executive Vice President............. Executive Vice President and Secretary of The John
Nuveen Company; Executive Vice President of John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Asset Management, Inc. and
Executive Vice President and Director of Rittenhouse
Financial Services, Inc.
Jerome S. Contro, Vice President...................... Vice President of Nuveen Asset Management, Inc.
Clifton L. Fenton, Vice President..................... Vice President of John Nuveen & Co. Incorporated
Thomas C. Spalding, Vice President.................... Vice President of Nuveen Advisory Corp.
</TABLE>
C-5
<PAGE>
(b) Institutional Capital Corporation (Institutional Capital) acts as
investment adviser to the ICAP Funds, Inc. and as sub-investment adviser to the
Registrant. In addition, Institutional Capital serves as investment adviser to
separately managed accounts.
A description of any other business, profession, vocation, or employment of a
substantial nature in which Robert H. Lyon, President, Chief Investment Officer
and a Director of Institutional Capital, is or has been, at any time during the
last two fiscal years, engaged for his own account or in the capacity of
director, officer, employee, partner, or trustee appears under "Management" in
the Statement of Additional Information. Such information for the remaining
senior officers of Institutional Capital appears below. The principal business
address for each person is 225 West Wacker Drive, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
Other Business, Profession, Vocation, or
Positions and Offices with Employment
Name Institutional Capital During Past Two Years
- ---- --------------------- ---------------------
<S> <C> <C>
Pamela H. Conroy....... Senior Vice President and Vice President, Treasurer, and a Director
Director of the ICAP Funds, Inc. (since its
inception in December 1994).
Donald D. Niemann...... Executive Vice President and Vice President and Secretary of ICAP
Director Funds, Inc. (since its inception in
December 1994) and a Director (since July
1995).
Gary S. Maurer......... Executive Vice President and Director of ICAP Funds, Inc. (since its
Director inception in December 1994).
Barbara C. Schunmier... Senior Vice President and None.
Director
</TABLE>
Item 29: Principal Underwriters
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., Nuveen Investment Trust II, and the
Registrant. Nuveen also acts as depositor and principal underwriter of the
Nuveen Tax-Free Unit Trust and the Nuveen Unit Trust, registered unit investment
trusts. Nuveen has also served or is serving as co-managing underwriter to the
following closed-end management type investment companies: Nuveen Municipal
Value Fund, Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York
Municipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium
Income Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc.,
Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New York
Performance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc.,
Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc.,
C-6
<PAGE>
Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality
Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen
New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania
Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc.,
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen
Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio
Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund,
Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York Quality
Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal
Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc.,
Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income
Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ----------------------------------------------------------------------------
<S> <C> <C>
Anthony T. Dean President, Chief Operating Chairman and Trustee
333 West Wacker Drive Officer and Director
Chicago, IL 60606
Timothy R. Schwertfeger Chairman of the Board, President and Trustee
333 West Wacker Drive Chief Executive Officer,
Chicago, IL 60606 and Director
John P. Amboian Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ----------------------------------------------------------------------------
<S> <C> <C>
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Alan G. Berkshire Vice President Vice President and
333 West Wacker Drive and Secretary Assistant Secretary
Chicago, IL 60606
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Drive Controller
Chicago, IL 60606
Robert D. Freeland Vice President None
333 West Wacker Drive
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President Vice President
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President Vice President
333 West Wacker Drive and Assistant and Assistant
Chicago, IL 60606 Secretary Secretary
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ----------------------------------------------------------------------------
<S> <C> <C>
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
Item 30: Location of Accounts and Records
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago, Illinois
60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Institutional Advisory Corp., or Shareholder Services, Inc.
(on or about July 15, 1998, Chase Global Fund Services Company).
Shareholder Services, Inc., P.O. Box 5330, Denver, Colorado 80217-5330,
maintains all the required records in its capacity as transfer, dividend paying,
and shareholder service agent for the Registrant. On or about July 15, 1998,
such services will be performed, and all such required records will be
maintained, by Chase Global Fund Services Company, 73 Tremont Street, Boston, MA
02108.
Item 31: Management Services
Not applicable.
Item 32: Undertakings
(a) Not applicable.
(b) The Registrant undertakes to file for the Nuveen European Value Fund a
post-effective amendment, using financial statements which need not be
certified, within four to six months from the effective date of this Post-
Effective Amendment No. 11 to Registrant's 1933 Act Registration Statement.
(c) The Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest Annual Report to Shareholders
upon request and without charge.
(d) The Registrant agrees to call a meeting of shareholders for the purpose of
voting upon the question of the removal of any trustee or trustees when
requested to do so in writing by the record holders of at least 10% of the
Registrant's outstanding shares and to assist the shareholders in communications
with other Shareholders as required by Section 16(c) of the Act.
C-9
<PAGE>
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT NO. 11 TO THE
REGISTRATION STATEMENT UNDER RULE 485(b) UNDER THE SECURITIES ACT AND HAS DULY
CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 11 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF CHICAGO, AND STATE OF ILLINOIS, ON THE 28th DAY OF MAY, 1998.
NUVEEN INVESTMENT TRUST
/s/ Gifford R. Zimmerman
------------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 11 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Stephen D. Foy Vice President and May 28, 1998
- ------------------------------ Controller (Principal
Stephen D. Foy Financial and Accounting
Officer)
Timothy R. Schwertfeger President and Trustee
Robert H. Lyon Trustee
Thomas E. Leafstrand Trustee
James E. Bacon Trustee
By /s/ Gifford R. Zimmerman
William L. Kissick Trustee --------------------------
Gifford R. Zimmerman
Sheila W. Wellington Trustee Attorney-in-Fact
Anthony T. Dean Chairman and Trustee May 28, 1998
(Principal Executive
Officer)
</TABLE>
An original power of attorney authorizing, among others, Larry W. Martin and
Gifford R. Zimmerman to execute this Registration Statement, and Amendments
thereto, for each of the officers and trustees of Registrant on whose behalf
this Registration Statement is filed, has been executed and filed with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Exhibit Numbered Page
-------------- ------ -------------
<S> <C> <C>
1(d) Certificate for the Establishment and
Designation of Series for the Nuveen
European Value Fund, dated May 27, 1998
5(f) Form of Amended Schedule A to Management
Agreement between Registrant and Nuveen
Institutional Advisory Corp.
5(g) Form of Amended Schedule A to Sub-Advisory
Agreement between Nuveen Institutional Advisory
Corp. and Institutional Capital Corporation
5(h) Form of Amended Schedule B to Management
Agreement between Registrant and Nuveen Institutional
Advisory Corp.
5(i) Form of Addendum to Investment Sub-Advisory
Agreement between Nuveen Institutional Advisory
Corp. and Institutional Capital Corporation
10(c) Opinion and consent of Vedder, Price, Kaufman
& Kammholz, dated May 28, 1998
10(d) Opinion and consent of Bingham Dana LLP, dated
May 28, 1998
</TABLE>
<PAGE>
Exhibit 1(d)
NUVEEN INVESTMENT TRUST
ESTABLISHMENT AND DESIGNATION OF SERIES OF
SHARES OF BENEFICIAL INTEREST
WHEREAS, pursuant to Section 2 of Article IV of the Declaration of
Trust dated May 6, 1996 (the "Declaration"), of Nuveen Investment Trust, a
Massachusetts business trust (the "Trust"), the Trustees of the Trust, on June
20, 1996 and July 23, 1997 established and designated certain series of Shares
(as defined in the Declaration) of the Trust by the execution of instruments
establishing and designating such series and setting forth the special and
relative rights of such series;
WHEREAS, on March 17, 1998 the Trustees of the Trust established an
additional series of Shares by the execution of an Establishment and Designation
of Series of Shares of Beneficial Interest; said new series being entitled
Nuveen Select European Value Fund;
WHEREAS, the instrument establishing the new series has not yet been
filed with the Commonwealth of Massachusetts or the City of Boston;
WHEREAS, the Trustees of the Trust now desire to change the name of
the new series from Nuveen Select European Value Fund to Nuveen European Value
Fund;
NOW, THEREFORE, the Trustees of the Trust, this 16th day of May, 1998,
hereby establish and designate the following series of Shares (the "Fund") to
have the special and relative rights described below:
1. The following Fund is established and designated:
Nuveen European Value Fund
2. The Fund shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of each Fund shall be redeemable, shall be
entitled to one vote (or fraction thereof in respect of a fractional share) on
matters on which Shareholders of that Fund may vote in accordance with the
Declaration, shall represent a pro rata beneficial interest in the assets
allocated or belonging to such Fund, and shall be entitled to receive its pro
rata share of the net assets of such Fund upon liquidation of such Fund, all as
provided in Article IV, Sections 2 and 5 of the Declaration. The proceeds of the
sale of Shares of each Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to such Fund, unless
otherwise required by law.
3. Shareholders of each Fund shall vote either separately as a class
on any matter to the extent required by, and any matter shall be deemed to have
been effectively acted upon with respect to such Fund as provided in Rule 18f-2,
as from time to time in
<PAGE>
effect, under the Investment Company Act of 1940, as amended, or any successor
rules, and by the Declaration.
4. The assets and liabilities of the Trust shall be allocated among each
Fund and any other series of Shares that may be established from time to time as
set forth in Article IV, Section 5 of the Declaration.
5. The designation of each Fund hereby shall not impair the power of the
Trustees from time to time to designate additional series of Shares of the
Trust.
6. Subject to the applicable provisions of the 1940 Act and the
provisions of Article IV, Sections 2 and 5 of the Declaration, the Trustees
shall have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of each Fund now or hereafter created, or
to otherwise change the special relative rights of each Fund designated hereby
without any action or consent of the Shareholders.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned, being a majority of the Trustees of
the Trust, have executed this instrument as of this 16/th/ day of May, 1998.
/s/Anthony T. Dean /s/Timothy R. Schwertfeger
- ---------------------------------- -----------------------------------
Anthony T. Dean, as Trustee Timothy R. Schwertfeger, as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/James E. Bacon /s/William L. Kissick
- ---------------------------------- -----------------------------------
James E. Bacon, as Trustee William L. Kissick, as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/Thomas E. Leafstrand
- ---------------------------------- -----------------------------------
Thomas E. Leafstrand, as Trustee Robert H. Lyon, as Trustee
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
/s/Sheila W. Wellington
- ----------------------------------
Sheila W. Wellington, as Trustee
333 West Wacker Drive
Chicago, Illinois 60606
3
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named persons who are known to me to
be Trustees of the Trust whose names and signatures are affixed to the foregoing
Designation of Series and who acknowledged the same to be their free act and
deed, before me this 16/th/ day of May, 1998.
/s/Karen L. Healy
----------------------------------------
Notary Public
My Commission Expires: December 30, 1999
4
<PAGE>
Exhibit 5(f)
Nuveen Investment Trust
Management Agreement
Schedule A
The Funds of the Trust currently subject to this Agreement and the
effective date of each are as follows:
<TABLE>
<CAPTION>
Fund Effective Date
<S> <C>
Nuveen Growth and Income Stock Fund July 29, 1996
Nuveen Balanced Stock and Bond Fund July 29, 1996
Nuveen Balanced Municipal and Stock Fund July 29, 1996
Nuveen European Value Fund _____________
</TABLE>
Amended: May ___, 1998
<PAGE>
Exhibit 5(g)
Investment Sub-Advisory Agreement
Schedule A
<TABLE>
<CAPTION>
Nuveen Growth and Income Stock Fund
- -----------------------------------
<S> <C>
Assets for which Services are to be rendered pursuant to Section 3: All
Proportions applied under fee schedule pursuant to Section 5: 100% of all assets under Equity
Management Fee
Nuveen Balanced Stock and Bond Fund
- -----------------------------------
Assets for which Services are to be rendered pursuant to Section 3: All
Proportions applied under fee schedule pursuant to Section 5: The percentage of the Target Investment mix
allocated by the Fund Board of Directors from
time to time to Equity Securities under Equity
Management Fee
All remaining assets under Fixed Income
Management Fee
Nuveen Balanced Municipal Stock Fund
- ------------------------------------
Assets for which Services are to be rendered pursuant to Section 3: All Equity Securities
Proportions applied under fee schedule pursuant to Section 5: 40% of all assets under Equity Management Fee
Nuveen European Value Fund
- --------------------------
Assets for which Services are to be rendered pursuant to Section 3:
Proportions applied under fee schedule pursuant to Section 5:
</TABLE>
Amended: May _______, 1998
<PAGE>
Exhibit 5(h)
Nuveen Investment Trust
Management Agreement
Schedule B
Compensation pursuant to Section 7 of this Agreement shall be calculated
with respect to each Fund in accordance with the following schedule applicable
to the average daily net assets of the Fund:
<TABLE>
<CAPTION>
Nuveen Growth and Income Stock Fund
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .8500 of 1%
For the next $125 million .8375 of 1%
For the next $250 million .8250 of 1%
For the next $500 million .8125 of 1%
For the next $1 billion .8000 of 1%
For assets over $2 billion .7750 of 1%
<CAPTION>
Nuveen Balanced Stock and Bond Fund
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
<CAPTION>
Nuveen Balanced Municipal and Stock Fund
Nuveen Balanced (State) Municipal and Stock Fund(s)
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1%
For the next $250 million .7250 of 1%
For the next $500 million .7125 of 1%
For the next $1 billion .7000 of 1%
For assets over $2 billion .6750 of 1%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nuveen European Value Fund
Average Daily Net Asset Value Fund Management Fee
<S> <C>
For the first $125 million .9500 of 1%
For the next $125 million .9375 of 1%
For the next $250 million .9250 of 1%
For the next $500 million .9125 of 1%
For the next $1 billion .9000 of 1%
For assets over $2 billion .8750 of 1%
</TABLE>
Amended: May __, 1998
<PAGE>
Exhibit 5(i)
Form of Addendum to
Investment Sub-Advisory Agreement
ADDENDUM made this _____ day of May, 1998, to the Investment Sub-
Advisory Agreement (the "Agreement") dated May 16, 1996 by and between Nuveen
Institutional Advisory Corp., a Delaware corporation ("Manager"), and
Institutional Capital Corporation, a Delaware corporation ("Sub-Adviser").
WHEREAS, the Agreement provides, among other things, that sub-advisory
fees for all Initial Portfolios and all subsequently created portfolios for
which Sub-Adviser agrees with Manager to become sub-adviser shall be as set
forth in Section 5 of the Agreement; and
WHEREAS, the Manager desires to engage the Sub-Adviser to serve as
sub-adviser for certain newly created portfolios, and Sub-Adviser desires to
accept such engagement, with the modifications to the sub-advisory fee
arrangement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Effect on Agreement. All provisions of the Agreement not
specifically amended by this Addendum shall remain in full force and affect, and
shall apply to this Addendum as appropriate.
2. Defined Terms. All capitalized terms not otherwise defined in
this Addendum shall have the same meaning as set forth in the Agreement.
3. New Portfolios. Manager is the investment manager for the Nuveen
Tax-Deferred Investment Trust (the "T-D Trust"), an open-end series management
investment company registered or to be registered under the 1940 Act. Manager
desires to engage Sub-Adviser to serve as sub-adviser for three of the series of
the T-D Trust: the Balanced Portfolio, the Growth and Income Portfolio, and the
European Value Portfolio. Manager is also the investment manager for the Nuveen
European Value Fund, an open-end series management investment company registered
or to be registered under the 1940 Act (together with the European Value
Portfolio, the "European Funds").
4. Supplemental Fee. Manager and Sub-Adviser agree that, in addition
to the sub-advisory fee for each new Portfolio or Fund payable under the
Agreement ("Basic Fee"), Manager shall pay Sub-Adviser an additional amount in
respect of the Balanced Portfolio, the Growth and Income Portfolio and the
European Funds, as set forth in the table below (each, a "Supplemental Fee"),
for the period until the net assets of such Portfolio or such Funds, as the case
may be, first reaches the threshold amount set forth in the table. The Basic Fee
for purposes
<PAGE>
of this Addendum shall be calculated on a daily basis as the effective (blended)
rate calculated under the breakpoint schedules set forth in Section 5 of the
Agreement by reference to the average daily market value of the equity and
fixed-income assets, respectively, of all Nuveen-sponsored investment products
for which the Sub-Adviser serves as sub-adviser, including for all purposes the
assets of the new Portfolios and Funds.
<TABLE>
<CAPTION>
New Portfolio or Funds Threshold Amount Supplemental Fee
- ---------------------- ---------------- ----------------
<S> <C> <C>
Balanced Portfolio $ 50 million 0.10% of net assets
Growth and Income Portfolio $ 100 million 0.08% of net assets
European Funds $ 50 million 0.13% of net assets
</TABLE>
Once the net assets of the Balanced Portfolio, the Growth and Income Portfolio
or the European Funds reach the respective threshold amount set forth above on
any day, the sub-advisory fee for the Balanced Portfolio, the Growth and Income
Portfolio or the European Funds, as the case may be, shall thereafter be the
Basic Fee as calculated pursuant to the Agreement.
5. Recoupment by Manager of Supplemental Fee.
a. Beginning on the day after the net assets of the Balanced
Portfolio, the Growth and Income Portfolio or the European Funds, as the case
may be, reach the threshold amount set forth above, there shall be no further
obligation to pay the Supplemental Fee in respect of such Portfolio or Funds,
and the Sub-Adviser shall waive the sub-advisory fee payable thereafter in
respect of such Portfolio or Funds, determined as set forth in the Agreement,
and the Manager shall retain such amounts, for such period of time until the
amount of sub-advisory fees so waived shall equal the aggregate amount of the
Supplemental Fee previously paid hereunder by Manager to Sub-Adviser with
respect to such Portfolio or Funds. At the Manager's option, it may also elect
to recoup the aggregate amount of any Supplemental Fee it is entitled to recoup
hereunder with respect to such Portfolio or Funds by reducing the amounts
otherwise payable by Manager to Sub-Adviser under the Agreement in respect of
the Nuveen Growth and Income Fund. Once the Manager shall have recouped the
aggregate amount of the Supplemental Fee in respect of the Balanced Portfolio,
the Growth and Income Portfolio or the European Funds (as the case may be)
pursuant to this paragraph, the Manager shall resume paying Sub-Adviser the sub-
advisory fee payable under the Agreement in respect of such Portfolio or Funds.
b. If Sub-Adviser shall either resign or be terminated for
cause as sub-adviser for the Balanced Portfolio, the Growth and Income Portfolio
or one or both of the European Funds, Sub-Adviser agrees to pay to Manager the
amount of any unrecouped Supplemental Fee previously received in respect of such
Portfolios or Funds at the same time as it ceases to serve as sub-adviser.
c. If Sub-Adviser shall be terminated as sub-adviser for the
Balanced Portfolio, the Growth and Income Portfolio or one or both of the
European Funds other than for cause, Sub-Adviser shall be entitled to retain the
amount of any unrecouped Supplemental Fee.
2
<PAGE>
IN WITNESS WHEREOF, the Manager and the Sub-Adviser have caused this
Addendum to be executed as of the day and year first above written.
NUVEEN INSTITUTIONAL ADVISORY CORP.
By:
----------------------------------
ATTEST: Title:
-------------------------------
- -------------------------------
Title:
------------------------
INSTITUTIONAL CAPITAL CORPORATION
By:
----------------------------------
ATTEST: Title:
-------------------------------
- -------------------------------
Title:
------------------------
3
<PAGE>
Exhibit 10(c)
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60602
(312) 609-7500
Nuveen Investment Trust May 28, 1998
333 West Wacker Drive
Chicago, Illinois 60606-1286
Re: Nuveen Investment Trust
Post-Effective Amendment No. 11
to Registration Statement on Form N-1A
Nuveen European Value Fund
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form N-1A (as proposed
to be amended, the "Registration Statement") under the Securities Act of 1933
being filed by Nuveen Investment Trust (the "Fund") in connection with the
proposed public offering of an indefinite number of shares of beneficial
interest--Class A Common Shares, par value $.01 per share (the "Class A
Shares"), Class B Common Shares, par value $.01 per share (the "Class B
Shares"), Class C Common Shares, par value $.01 per share (the "Class C Shares")
and Class R Common Shares, par value $.01 per share (the "Class R Shares", such
Class A Shares, Class B Shares, Class C Shares and Class R Shares referred to
collectively herein as the "Shares"), as described in the Registration
Statement, in one new authorized series, Nuveen European Value Fund (the "New
Series").
We have examined such business trust records, certificates, and other
documents, and have made such other factual and legal investigations as we have
deemed necessary and appropriate for the purpose of this opinion. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to originals of
all documents submitted to us as certified copies or photocopies, and the
authenticity of the originals of such latter documents. Insofar as this opinion
pertains to matters governed by the laws of the Commonwealth of Massachusetts,
we are relying, with your consent, upon the opinion of Bingham Dana LLP dated
May 28, 1998, which opinion is satisfactory in substance and form to us.
Based upon the foregoing, it is our opinion:
(1) The Fund is a Massachusetts business trust duly organized and existing
under the laws of the Commonwealth of Massachusetts; and
(2) Upon the issuance of the Shares in accordance with the Fund's
Declaration of Trust, Designation of Classes, Designation of Series,
and By-laws, and the receipt by the New Series of a purchase price not
less than the net asset value per Share, the Shares will be legally
issued and outstanding, fully paid, and non-assessable, except that,
as set forth in the Registration Statement, shareholders of the New
Series may under certain circumstances be held personally liable for
its obligations.
We hereby consent to the filing of this opinion as Exhibit 10(c) to the
Registration Statement and to the reference to our name in the Registration
Statement under the heading "Legal Opinions."
Respectfully submitted,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
CAS
COK
<PAGE>
Exhibit 10(d)
BINGHAM DANA LLP
150 Federal Street
Boston, MA 02110-1726
May 28, 1998
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606-1286
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Re: Registration Statement on Form N-1A under the Securities Act
of 1933
Ladies and Gentlemen:
We have acted as special Massachusetts counsel to Nuveen Investment Trust (the
"Fund") on behalf of its series Nuveen European Value Fund in connection with
the Fund's Post-Effective Amendment to be filed on or about May 28, 1998 (the
"Amendment") to its Registration Statement on Form N-1A (as proposed to be
amended, the "Registration Statement") with respect to certain of its Class A
Common Shares, par value $.01 per share (the "Class A Shares"), Class B Common
Shares, par value $.01 per share (the "Class B Shares"), Class C Common Shares,
par value $.01 per share (the "Class C Shares") and Class R Common Shares, par
value $.01 per share (the "Class R Shares", such Class A Shares, Class B Shares,
Class C Shares and Class R Shares referred to collectively herein as the
"Shares"). You have requested that we deliver this opinion to you in connection
with the Fund's filing of such Amendment.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate dated as of a recent date of the Secretary of the
Commonwealth of Massachusetts as to the existence of the Fund;
<PAGE>
(b) a copy, certified by the Secretary of the Commonwealth of
Massachusetts, of the Fund's Declaration of Trust dated May 6, 1996;
(c) a copy of the Fund's Certificate for the Establishment and
Designation of Classes designating the Class A Shares, Class B Shares,
Class C Shares and Class R Shares, as executed by the Trustees of the Fund
and filed with Secretary of the Commonwealth of Massachusetts (the
"Designation of Classes");
(d) a copy of the Fund's Certificate for the Establishment and
Designation of Series designating Nuveen European Value Fund, as executed
by the Trustees of the Fund and filed with the Secretary of the
Commonwealth of Massachusetts (the "Designation of Series");
(e) a Certificate executed by an appropriate officer of the Fund,
certifying as to, and attaching copies of, the Fund's Declaration of Trust,
Designation of Classes, Designation of Series, By-Laws, and certain
resolutions adopted by the Trustees of the Fund;
(f) a printer's proof dated as of May 28, 1998 of the Amendment.
In such examination, we have assumed the genuineness of all signatures, the
conformity to the originals of all of the documents reviewed by us as copies,
the authenticity and completeness of all original documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (f) above.
This opinion is based entirely on our review of the documents listed above and
such investigation of law as we have deemed necessary or appropriate. We have
made no other review or investigation of any kind whatsoever, and we have
assumed, without independent inquiry, the accuracy of the information set forth
in such documents.
This opinion is limited solely to the internal substantive laws of the
Commonwealth of Massachusetts as applied by courts located in such Commonwealth,
except that we express no opinion as to any Massachusetts securities law.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that:
<PAGE>
1. The Fund is duly organized and existing under the Fund's Declaration of
Trust and the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares of beneficial interest commonly referred to
as a "Massachusetts business trust."
2. The Shares, when issued and sold in accordance with the Fund's
Declaration of Trust, Designation of Classes, Designation of Series and By-Laws
and for the consideration described in the Registration Statement, will be
legally issued, fully paid and non-assessable, except that, as set forth in the
Registration Statement, shareholders of the Fund may under certain circumstances
be held personally liable for its obligations.
We hereby consent to your reliance on this opinion in connection with your
opinion to the Trust with respect to the Shares, to the reference to our name in
the Registration Statement under the heading "Legal Opinions" and to the filing
of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Bingham Dana LLP
--------------------------
BINGHAM DANA LLP
