<PAGE>
As filed with the Securities and Exchange Commission on or about October 28,
1999
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- --------------------------------------------------------------------------------
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. [_]
---
[X]
Post-Effective Amendment No. 17
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Registration No. 811-07619
[X]
Amendment No. 19
----------------
Nuveen Investment Trust
(Exact Name of Registrant as Specified in Declaration of Trust)
333 West Wacker Drive, Chicago, 60606
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copies to:
Gifford R. Zimmerman--Vice President Eric F. Fess
and Chapman and Cutler
Secretary 111 W. Monroe
333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[X]immediately upon filing pursuant to [_]on (date) pursuant to paragraph
paragraph (b) (a)(1)
[_]on (date) pursuant to paragraph (b) [_]75 days after filing pursuant to
[_]60 days after filing pursuant to paragraph (a)(2)
paragraph (a)(1) [_]on (date) pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
[_]This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 17
This Post-Effective Amendment to the Registration Statement comprises the fol-
lowing papers and contents:
The Facing Sheet
Part A--Prospectus for the Nuveen Growth and Income Stock
Fund; Prospectus for the Nuveen Balanced Stock and Bond
Fund and the Nuveen Balanced Municipal and Stock Fund.
Part B--Statement of Additional Information for the Nuveen
Growth and Income Stock Fund, Nuveen Balanced Stock and
Bond Fund and Nuveen Balanced Municipal and Stock Fund--
copies of the Annual Reports to Shareholders of the Funds
(the Financial Statements from which are incorporated by
reference into the Statement of Additional Information)
Part C--Other Information
Signatures
Index to Exhibits
Exhibits
The Nuveen European Value Fund is not affected by and therefore not included in
this Post-Effective Amendment No. 17.
<PAGE>
October 28, 1999 Prospectus
NUVEEN
Mutual Funds
Nuveen Growth and Income Stock Fund
[PHOTO APPEARS HERE]
A portfolio of quality companies for investors seeking long-term growth
potential and attractive value.
Featuring Portfolio Management By Institutional Capital Corporation
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
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
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, portfolio holdings and historical performance information.
<TABLE>
<S> <C>
Introduction 1
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Nuveen Growth and Income Stock Fund 2
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</TABLE>
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
<TABLE>
<S> <C>
Who Manages the Fund 4
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What Securities We Invest In 5
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How We Select Investments 6
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How the Portfolio Manager Has Performed 6
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What the Risks Are 7
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How We Manage Risk 8
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</TABLE>
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of your
account.
<TABLE>
<S> <C>
What Share Classes We Offer 10
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How to Reduce Your Sales Charge 11
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How to Buy Shares 12
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Systematic Investing 13
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Systematic Withdrawal 13
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Special Services 14
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How to Sell Shares 15
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</TABLE>
Section 4 General Information
This section summarizes the fund's distribution policies and other general fund
information.
<TABLE>
<S> <C>
Dividends, Distributions and Taxes 17
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Distribution and Service Plan 18
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Net Asset Value 19
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Fund Service Providers 19
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Year 2000 19
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</TABLE>
Section 5 Financial Highlights
This section provides the fund's financial performance since inception.
<TABLE>
<S> <C>
Nuveen Growth and Income Stock Fund 20
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</TABLE>
<PAGE>
October 28, 1999
Section 1 The Fund
Nuveen Growth and Income Stock Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the fund may be right for you. Please read it carefully before
investing and keep it for future reference.
Capital Growth with a Measure of Protection
Individuals who plan to rely on their investments for financial security are
often concerned about maintaining a comfortable standard of living. For these
investors, a growth and income mutual fund is often an appropriate investment.
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.
For those investors seeking long-term growth potential and a measure of
protection, the Nuveen Growth and Income Stock Fund offers a balance of long-
term growth, current income and capital preservation potential. The fund focuses
on stocks of established well-known companies and seeks to protect capital in
uncertain markets through time-tested risk management strategies.
-------------------------------------------------------------------------
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Section 1 The Fund 1
<PAGE>
Nuveen Growth and Income Stock Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide over time a superior total
return from a diversified portfolio consisting primarily of equity securities of
domestic companies with market capitalization of at least $500 million.
How the Fund Pursues Its Objective
The fund purchases primarily stocks of established, well-known domestic
companies. These companies tend to pay regular dividends that may provide a
source of income. 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 40 to 50 stocks, which we
believe have 15% to 25% price appreciation potential over the next 18
months.
The fund may invest up to 35% of its assets in cash equivalents in order to
reduce volatility and preserve capital.
What are the Risks of Investing in the Fund?
The principal risk of investing in the fund is market risk. Market risk is the
risk that a particular stock in the fund, or stocks in general, may fall in
value. The fund's investments in foreign stock present additional risk including
currency risk. As with any mutual fund investment, loss of money is a risk of
investing.
Is this Fund Right for You?
This fund may be a suitable investment for you if you are seeking:
. long-term growth potential from a value-driven strategy;
. to moderate the risks associated with stock investing;
. to focus on established, well-known companies;
. to meet long-term financial goals.
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation, including the possibility of
sharp price declines;
. investing to meet short-term financial goals.
How the Fund Has Performed
Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The chart and table below illustrate annual fund and index returns
for the periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns (and consequently, the potential
rewards and risks of a fund investment).
Total Returns/1/
[Bar chart appears here]
Class A Annual Return
30%
27.5
25%
20%
15%
10% 9.89
5%
0%
- -5% 1997 1998
From its inception on August 7, 1996 through December 31, 1998, the fund's
highest and lowest quarterly returns were 15.54% and -16.64%, respectively, for
the quarters ending 6/30/97 and 9/30/98. The bar chart and highest/lowest
quarterly returns do not reflect sales charges, which would reduce returns,
while the average annual return table does. See "How the Portfolio Manager Has
Performed" for additional performance information. The fund's and the portfolio
manager's past performance are not necessarily an indication of how the fund
will perform in the future.
<TABLE>
<CAPTION>
Average Annual
Total Returns for
the Periods Ending
December 31, 1998
--------------------
Class 1 Year Inception
- -----------------------------------------------------
<S> <C> <C>
Class A 3.59% 19.03%
- -----------------------------------------------------
Class B 5.15% 19.85%
- -----------------------------------------------------
Class C 9.03% 21.11%
- -----------------------------------------------------
Class R 10.24% 22.43%
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S&P 500/1/ 28.58% 33.55%
- -----------------------------------------------------
Lipper Peer Group/1/ 13.58% 23.09%
- -----------------------------------------------------
</TABLE>
2 Section 1 The Fund
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Share Class A B C R/3/
- ----------------------------------------------------------------
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/5/ None/4/ 5%/6/ 1%/7/ None
- ----------------------------------------------------------------
</TABLE>
Annual Fund Operating Expenses/8/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .82% .82% .82% .82%
- -------------------------------------------------------------------
12b-1 Distribution and Service Fees .25% 1.00% 1.00% --%
- -------------------------------------------------------------------
Other Expenses .21% .21% .20% .21%
- -------------------------------------------------------------------
Total Operating Expenses-Gross 1.28% 2.03% 2.02% 1.03%
- -------------------------------------------------------------------
Expense Waiver/Reimbursements (.04%) (.04%) (.04%) (.04%)
- -------------------------------------------------------------------
Total Operating Expenses-Net 1.24% 1.99% 1.98% .99%
- -------------------------------------------------------------------
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 698 $ 600 $ 205 $ 105 $ 698 $ 206 $ 205 $ 105
- -----------------------------------------------------------------------------
3 Years $ 958 $ 951 $ 634 $ 328 $ 958 $ 637 $ 634 $ 328
- -----------------------------------------------------------------------------
5 Years $1,237 $1,205 $1,088 $ 569 $1,237 $1,093 $1,088 $ 569
- -----------------------------------------------------------------------------
10 Years $2,031 $2,166 $2,348 $1,259 $2,031 $2,166 $2,348 $1,259
- -----------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested (as of 6/30/99)
<TABLE>
<CAPTION>
Portfolio Allocation/9/ Actual Target
<S> <C> <C>
Equity 94% 90%
- ----------------------------------------------------------
Cash Equivalents 6% 10%
- ----------------------------------------------------------
Stock Portfolio Statistics
Beta 1.00
- ----------------------------------------------------------
Average Market Capitalization (Stocks) 57 billion
- ----------------------------------------------------------
Average P/E 25.9
- ----------------------------------------------------------
Top 10 Stock Holdings/9/
General Motors Corporation 5.0%
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Philips Electronics N.V. 4.4%
- ----------------------------------------------------------
Bell Atlantic Corporation 4.2%
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News Corporation Limited Sponsored ADR 4.0%
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Hoechst AG Sponsored ADR 3.9%
- ----------------------------------------------------------
Bank of America Corporation 3.9%
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Citigroup Inc. 3.7%
- ----------------------------------------------------------
Waste Management, Inc./10/ 3.7%
- ----------------------------------------------------------
Philip Morris Companies Inc. 3.6%
- ----------------------------------------------------------
Bristol-Myers Squibb Company 3.4%
- ----------------------------------------------------------
</TABLE>
1. The year-to-date return as of 9/30/99 was 5.61%. Peer Group returns reflect
the performance of the Lipper Growth and Income Fund Index, an index that
represents the average annualized returns of the 30 largest funds in the
Lipper Growth and Income Fund Category. Returns assume reinvestment of
dividends and do not reflect any applicable sales charges. The S&P 500
returns assume reinvestment of dividends, but do not include any brokerage
commissions, sales charges or other fees.
2. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
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. Reduced Class A sales charges apply to purchases of $50,000 or more. Certain
Class A purchases at net asset value of $1 million or more may bear a
contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. 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.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
8. 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. The adviser, pursuant to a contractual agreement, will waive
fees and reimburse expenses through July 31, 2000 in order to prevent Total
Operating Expenses (excluding any distribution or service fees and
extraordinary expenses) from exceeding 1.05% of the average daily net assets
of any class of fund shares.
9. Holdings will vary.
10. Shortly after the close of the fund's fiscal year, its position in Waste
Management, Inc. was sold.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the fund's assets are managed, 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"), the fund's investment adviser,
together with its advisory affiliate, Nuveen Advisory Corp., offer premier
advisory and investment management services to a broad range of mutual fund
clients. In the Nuveen family, these advisers are commonly referred to as Nuveen
Investment Advisory Services or NIAS. NIAC 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 certain clerical, bookkeeping
and other administrative services. The NIAS advisers are located at 333 West
Wacker Drive, Chicago, IL 60606.
The NIAS advisers are wholly-owned subsidiaries of John Nuveen &Co. Incorporated
("Nuveen"). Founded in 1898, Nuveen has been synonymous with investments that
withstand the test of time. Today we offer a broad range of quality investments
designed for individuals seeking to build and sustain wealth. Nuveen 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 and
its affiliates have more than $55 billion in assets under management.
NIAC has selected Institutional Capital Corporation ("Institutional Capital"),
225 West Wacker Drive, Chicago, IL 60606, as subadviser to manage the investment
portfolio of the fund. Institutional Capital is an institutional investment
management firm with over 29 years of experience and approximately $12 billion
in assets under management. 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 13 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.
4 Section 2 How We Manage Your Money
<PAGE>
For providing these services, NIAC is paid an annual fund management fee
according to the following schedule:
<TABLE>
<CAPTION>
<S> <C>
Average Daily Fund
Net Assets Fee
For the first $125 million .8500 of 1%
- -------------------------------------------------
For the next $125 million .8375 of 1%
- -------------------------------------------------
For the next $250 million .8250 of 1%
- -------------------------------------------------
For the next $500 million .8125 of 1%
- -------------------------------------------------
For the next $1 billion .8000 of 1%
- -------------------------------------------------
For net assets over $2 billion .7750 of 1%
- -------------------------------------------------
</TABLE>
For the most recent fiscal year, the fund paid NIAC management fees of .82% of
average net assets.
Out of the fund management fee, NIAC pays a portfolio management fee to
Institutional Capital. The fund pays for its own operating expenses such as
custodial, transfer agent, accounting and legal fees; brokerage commissions;
distribution and service fees; and extraordinary expenses.
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.
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; dollar-
denominated securities of foreign companies (limited to 25% of net assets) 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 IBCA, Inc.)
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. For more information on short-term
investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The fund 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. These transactions involve an element of risk
because the value of the security to be purchased may decline before the
settlement date.
Section 2 How We Manage Your Money 5
<PAGE>
How We Select Investments
We adhere to disciplined, value-driven investment strategies 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 a universe of approximately 450 large
and midsize companies with at least $500 million in market capitalization.
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. We generally buy only 40 to 50 stocks, which we believe have a 15% to
25% price appreciation potential over the next 18 months.
Portfolio Turnover
The fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The fund anticipates that it may engage in active
trading in equity securities and that its annual portfolio turnover rate will
generally be between 100% and 150%. A turnover rate of 100% would occur, for
example, if the fund sold and replaced securities valued at 100% of its net
assets within one year. Active trading 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.
How the Portfolio Manager Has Performed
The chart and table below illustrate the historical performance of the portfolio
manager's investment strategy for the fund. They present the performance of
Institutional Capital's Discretionary Equity Composite, which represents all its
individually managed accounts (totalling $4.2 billion) that have substantially
the same investment objectives and policies as the fund. Of course, past
performance is no indication of future results, and the chart and table
represent performance of managed accounts and not actual fund performance.
6 Section 2 How We Manage Your Money
<PAGE>
Growth of a $10,000 Investment 6/74-6/99
[Mountain Chart Appears Here]
Lipper Growth
NGIS S&P 500 & Income Index CPI
---- ------- -------------- ---
2Q74.... 9425 10000 10000 10000
2Q79.... 15142 15154 17656 14744
2Q84.... 27687 29156 34668 21149
2Q89.... 73841 72824 82086 25301
2Q94.... 130515 119055 130051 30174
2Q99.... 374684 407102 338765 33809
Portfolio Manager Composite Returns
<TABLE>
<CAPTION>
Average Annual Total Returns
1-Year 5-Year 10-Year 20-Year 25-Year
<S> <C> <C> <C> <C> <C>
On Offer 4.71% 22.03% 16.94% 17.05% 15.60%
On NAV 11.09% 23.48% 17.64% 17.40% 15.87%
</TABLE>
The managed accounts reflected above are not subject to all of the same
investment restrictions, investment inflows and outflows, and distribution
requirements as the fund, which may affect fund performance. We assumed that an
investor paid a maximum Class A sales charge of 5.75% and we deducted from the
Composite's gross-of-fee returns the Class A gross operating expenses of 1.28%
for the fund's most recent fiscal year. This chart would be different for a
Class B, C or R investment because of their different sales charges and
operating expenses. The Lipper Growth and Income Index represents the average
annualized returns of the 30 largest funds in the Lipper Growth and Income Fund
Category. Index returns assume reinvestment of all dividends but do not include
any brokerage commissions, sales charges or other fees. This chart does not
represent past or future performance of the fund.
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 this fund. Because of these
and other risks, you should consider an investment in this fund to be a long-
term investment.
Market risk: As a mutual fund investing its assets in stocks, the fund is
subject to market risk. Market risk is the risk that a particular stock, an
industry, or stocks in general may fall in value.
Inflation risk: Like all mutual funds, the fund is subject to inflation risk.
Inflation risk is 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 value of the fund's assets can decline as can the value
of the fund's distributions.
Foreign investment risk: Securities of foreign issuers (which are limited to 25%
of net assets) present risks beyond those of domestic securities. Such risks
include political or economic instability, less publicly available information
and currency risk. Foreign securities may also have more volatile prices and may
be less liquid than domestic securities.
Section 2 How We Manage Your Money 7
<PAGE>
How We Manage Risk
We use time-tested risk management strategies designed to help protect your
capital during periods of market uncertainty or weakness: broad 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.
Portfolio Allocation Target and 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 has established the following allocation target and operating ranges for
each asset class:
<TABLE>
<CAPTION>
Target Range
<S> <C> <C>
Stocks 90% 65-100%
- -------------------------------------------------------
Cash Equivalents 10% 0-35%
- -------------------------------------------------------
</TABLE>
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);
. 25% in any one industry (except U.S. government securities). For example, as
of June 30, 1999, the fund was invested in the following industries (as a
percentage of the fund's stock holdings):
<TABLE>
<CAPTION>
<S> <C>
Consumer Cyclicals..........22.7%
Financials..................15.3%
Technology..................15.2%
Communications..............11.2%
Health Care................. 9.6%
Consumer Staples............ 8.4%
Basic Materials............. 5.9%
Capital Goods............... 5.6%
Transportation.............. 3.8%
Energy...................... 2.3%
</TABLE>
Please see the Statement of Additional Information for a more detailed
discussion of investment limitations.
Hedging and Other Defensive Investment Strategies
The fund may invest up to 100% of its 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, and the fund may not achieve its investment objective.
8 Section 2 How We Manage Your Money
<PAGE>
We may also use various investment strategies designed to hedge against changes
in the values of securities the fund owns or expects to purchase or to hedge
against interest rate changes. These hedging strategies include using financial
futures contracts, options on financial futures, or stock index options. 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.
The fund's investment approach may also provide a measure of protection in
adverse markets. The fund focuses primarily on stocks of established, well-known
companies which generally have been better positioned to weather adverse markets
than smaller, less established companies. The fund purchases stocks with low
valuations, measured by their relative price-to-earnings ratio. The prices of
these types of stocks have often fallen less than more fully valued stocks
during market downturns. The fund also frequently invests a small portion of its
portfolio in cash equivalents which can provide a measure of added stability
during adverse market conditions.
Portfolio Manager Performance in Down Markets
Over the past 25 years, there have been six periods in which the S&P 500
declined by 10% or more. In five out of six of these periods, Institutional
Capital's investment strategies provided superior capital protection when
compared with the overall market and the Lipper Growth and Income Fund peer
group. In the third quarter 1998, however, these strategies did not provide
superior relative protection. Performance is represented by fund Class A returns
on net asset value for the third quarter 1998 and by Institutional Capital's
Discretionary Equity Composite for prior periods. Of course, past performance
does not guarantee future results, and the Composite performance does not
represent actual fund results. Please see the discussion under "How the
Portfolio Manager Has Performed" for a detailed discussion of portfolio manager
composite returns and the index returns to which they are compared.
Portfolio Manager Down-Market Performance
[Bar Chart Appears Here]
Growth and Income Fund Investment Strategy
<TABLE>
<CAPTION>
Institutional Capital Composite Fund
1Q73-3Q74 1Q77-1Q78 2Q81-2Q82 4Q87 3Q90 3Q98
<S> <C> <C> <C> <C> <C> <C>
Portfolio Manager -21.72% -1.66% 0.91% -10.10% -7.82%
Discretionary
Equity
Composite
Growth and -16.64%
Income Fund
Lipper -38.64% -6.78% -9.35% -19.86% -13.45% -12.74%
G&I Fund Index
S&P 500 -42.64% -11.76% -13.47% -22.63% -13.78% -9.92%
</TABLE>
Section 2 How We Manage Your Money 9
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer 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.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the 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%
of the fund's average daily net assets which compensates your financial adviser
for providing ongoing service to you. Nuveen retains the up-front sales charge
and the service fee on accounts with no authorized dealer of record. The up-
front Class A sales charge for the fund 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
<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/ -- 1.00%/1/
- ---------------------------------------------------------------------------------------------------------
</TABLE>
/1/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 a commission equal to
the sum of 1% of the first $2.5 million, plus 0.50% of the next $2.5 million,
plus 0.25% of any amount over $5 million. Unless the authorized dealer waived
the commission, you may be assessed a contingent deferred sales charge ("CDSC")
of 1% if you redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or your redemption proceeds. You
do not pay a CDSC on any Class A shares you purchase by reinvesting dividends.
Class B Shares
You can buy Class B shares at the offering price, which is the 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 the fund's average daily net assets. The annual .25%
service fee compensates your financial adviser for providing ongoing service to
you. Nuveen retains the service and distribution fees on accounts with no
authorized dealer of record. The annual .75% distribution fee compensates Nuveen
for paying your financial adviser a 4% up-front sales commission, which includes
an advance of the first year's service fee. If you sell your shares within six
years of purchase, you will normally have to pay a CDSC as shown in the schedule
below.
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
The CDSC is based on your purchase or sale price, whichever is lower. 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.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
.............................................................................
Class C Shares
You can buy Class C shares at the offering price, which is the 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 the fund's average daily net assets. The annual .25%
service fee compensates your financial adviser for providing ongoing service to
you. Nuveen retains the service and distribution fees on accounts with no
authorized dealer of record. 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 will normally have to pay a 1% CDSC based on your
purchase or sale price, whichever is lower. You do not pay a CDSC on any Class C
shares you purchase by reinvesting dividends.
Class R Shares
You may purchase Class R Shares only under limited circumstances at the 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 the other classes.
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.
Class A Sales Charge Reductions
. Rights of accumulation
. Letter of intent
. Group purchase
Class A Sales Charge Waivers
. Nuveen Defined Portfolio
or Exchange-Traded
Fund reinvestment
. Retirement plans
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
Class R Eligibility
. Certain employees and directors of Nuveen or employees of authorized dealers
. Bank trust departments
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
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) 257-
8787. 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
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally, the Exchange is closed on weekends and national holidays. 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.
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 for ongoing
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 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 Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($1,000 for a Traditional/Roth IRA
account; $500 for an Education IRA account; $50 through systematic investment
plan accounts and may be lower for accounts opened through certain fee-based
programs). Subsequent investments must be in amounts of $50 or more. The fund
reserves the right to reject purchase orders and to waive or increase the
minimum investment requirements.
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
Systematic Investing
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) 257-
8787. 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
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 "Special Services--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.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
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 at any time
for an appropriate 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 have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
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, the fund reserves the right to revise
or suspend the exchange privilege, limit the amount or number of exchanges, or
reject any exchange. The fund may change or cancel its exchange policy at any
time upon 60 days' notice. Because an exchange is treated for tax purposes as a
purchase and sale, and any gain may be subject to tax, you should consult your
tax adviser about the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts and perform a
variety of account transactions, including purchasing 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) 257-8787 for copies of
the necessary forms.
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.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
An Important Note About Telephone Transactions. Although Nuveen Investor
Services has certain safeguards and procedures to confirm the identity of
callers, it will not be liable for losses resulting from following telephone
instructions it reasonably believes to be genuine. Also, you should verify your
trade confirmations immediately upon receipt.
How to Sell Shares
You may sell (redeem) your shares on any business day. 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. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. 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 calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Mail
You can sell your shares at any time by sending a written request to the fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. 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);
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
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 Defined Portfolio reinvestment account.
You will not be assessed a CDSC on an involuntary redemption.
. 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. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
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.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the fund may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
16 Section 3 How You Can Buy and Sell Shares
<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.
Dividends, Distributions and Taxes
The fund pays income dividends and any capital gains once a year in
December.
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) 257-8787.
Taxes and Tax Reporting
The fund's distributions are taxed as ordinary income or capital gains (which
may be taxable at different rates depending on the length of time the fund holds
its assets). 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 you pay on a given
capital gains distribution depends generally on how long the fund has held the
portfolio securities it sold. It does not depend on how long you have owned your
fund shares. Dividends generally do not qualify for a dividends received
deduction if you are a corporate shareholder.
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. If
you hold your investment at the firm where you purchased your fund shares, you
will receive the statement from that firm. If you hold your shares directly at
the fund, Nuveen will send you the statement. The tax status of your dividends
is the same whether you reinvest your dividends or elect to receive them in
cash. The sale of shares in your account may produce a gain or loss, and is a
taxable event. For tax purposes, an exchange is the same as a sale.
Please note that if you do not furnish the fund with your correct Social
Security number or employer identification number, federal law requires the fund
to withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
Section 4 General Information 17
<PAGE>
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.
Distribution and Service Plan
Nuveen 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 in
accordance with Rule 12b-1 under the Investment Company Act of 1940. (See "How
You Can Buy and Sell Shares" 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, Class B, and Class C shares to compensate authorized dealers, including
Nuveen, for providing ongoing 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 preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of the fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
18 Section 4 General Information
<PAGE>
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class by taking the 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. Common stocks and other equity securities not listed
on a national securities exchange or Nasdaq are valued at the most recent bid
prices. The prices of fixed-income securities are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available, the pricing service establishes fair market value based on
prices of comparable securities.
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, Chase Global Funds Services Company,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186, performs
bookkeeping, data processing and administrative services for the maintenance of
shareholder accounts.
Year 2000
The fund's service providers 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. Nuveen is working with the fund's service providers
to adapt their systems to address this "Year 2000" issue. Nuveen and the fund
expect that the necessary work will be completed on a timely basis, although
there can be no assurance of this.
Section 4 General Information 19
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate that an
investor would have earned on an investment in the fund (assuming reinvestment
of all dividends and distributions). This information has been audited by Arthur
Andersen LLP, whose report, along with the fund's financial statements, are
included in the Statement of Additional Information and annual report, which are
available upon request.
Nuveen Growth and Income Stock Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
June 30, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $26.50 $.19 $2.64 $2.83 $(.04) $(2.22) $(2.26) $27.07 12.37%
1998 24.01 .26 4.55 4.81 (.25) (2.07) (2.32) 26.50 21.59
1997(c)** 17.96 .30 6.18 6.48 (.20) (.23) (.43) 24.01 36.30
Class B (8/96)
1999 26.47 .01 2.61 2.62 -- (2.22) (2.22) 26.87 11.52
1998 24.00 .10 4.51 4.61 (.07) (2.07) (2.14) 26.47 20.70
1997(c)** 17.97 .21 6.13 6.34 (.08) (.23) (.31) 24.00 35.37
Class C (8/96)
1999 26.43 .01 2.62 2.63 -- (2.22) (2.22) 26.84 11.58
1998 23.98 .10 4.49 4.59 (.07) (2.07) (2.14) 26.43 20.63
1997(c)** 17.97 .21 6.11 6.32 (.08) (.23) (.31) 23.98 35.26
Class R (8/96)
1999 26.52 .24 2.67 2.91 (.07) (2.22) (2.29) 27.14 12.71
1998 24.02 .32 4.56 4.88 (.31) (2.07) (2.38) 26.52 21.91
1997(c)** 17.96 .30 6.24 6.54 (.25) (.23) (.48) 24.02 36.65
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------
Ratio of
Ratio of Investment
Expenses Income
to Average to Average
Net Net
Ending Assets Assets
Net After Credit/ After Credit/ Portfolio
Assets Reimburse- Reimburse- Turnover
(000) ment (a) ment (a) Rate
<C> <C> <C> <C>
- -----------------------------------------------------------
$793,546 1.24% .76% 134%
790,063 1.20 1.04 131
616,209 1.20* 1.53* 110
95,174 1.99 .03 134
71,909 1.95 .38 131
10,664 1.95* 1.03* 110
41,071 1.98 .04 134
21,426 1.95 .39 131
3,630 1.95* 1.04* 110
16,904 .99 1.00 134
18,335 .95 1.26 131
15,647 .95* 1.56* 110
- -----------------------------------------------------------
</TABLE>
* Annualized.
** All per share amounts reflect a December 18, 1996, stock split of 1.113830,
1.112700, 1.112700 and 1.113806 shares, respectively, for each share of
Class A, B, C and R.
(a) After custodian fee credit and expense reimbursement, where
applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
20 Section 5 Financial Highlights
<PAGE>
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
Nuveen Mutual Funds
Nuveen offers a variety of mutual 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
Dividend and Growth Fund
Taxable Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
<TABLE>
<CAPTION>
<S> <C> <C>
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
</TABLE>
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information ("SAI"), incorporated by reference into this prospectus,
contains detailed information on the fund's policies and operation. Additional
information about the fund's investments is available in the fund's annual and
semi-annual reports to shareholders. In the fund's annual report, you will find
a discussion of the market conditions and investment strategies that
significantly affected the fund's performance during its last fiscal year. Call
Nuveen at (800) 257-8787 to request a free copy of any of these materials or for
other fund information; or ask your financial advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington D.C. 20549. The fund's
Investment Company file number is 811-07619.
1. Long-term and insured long-term portfolios. EPR-G&I-NA 10-99
<PAGE>
October 28, 1999 Prospectus
Nuveen
Mutual Funds
Nuveen Balanced Funds
[Photo appears here]
Portfolios of quality stocks and bonds offering a balance of long-term growth,
current income and capital preservation potential.
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Featuring Portfolio Management By Institutional Capital Corporation and
Nuveen Institutional Advisory Corp.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
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
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, portfolio holdings and historical performance information.
<TABLE>
<CAPTION>
<S> <C>
Introduction 1
...............................................................................
Nuveen Balanced Stock and Bond Fund 2
...............................................................................
Nuveen Balanced Municipal and Stock Fund 4
...............................................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 6
...............................................................................
What Securities We Invest In 7
...............................................................................
How We Select Investments 9
...............................................................................
How the Portfolio Manager Has Performed 10
...............................................................................
What the Risks Are 11
...............................................................................
How We Manage Risk 12
...............................................................................
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out
of your account.
What Share Classes We Offer 14
...............................................................................
How to Reduce Your Sales Charge 15
...............................................................................
How to Buy Shares 16
...............................................................................
Systematic Investing 16
...............................................................................
Systematic Withdrawal 17
...............................................................................
Special Services 17
...............................................................................
How to Sell Shares 18
...............................................................................
Section 4 General Information
This section summarizes the funds' distribution policies and other
general fund information.
Dividends, Distributions and Taxes 20
...............................................................................
Distribution and Service Plans 21
...............................................................................
Net Asset Value 22
...............................................................................
Fund Service Providers 22
...............................................................................
Year 2000 22
...............................................................................
Section 5 Financial Highlights
This section provides the funds' financial performance since inception.
Nuveen Balanced Stock and Bond Fund 23
...............................................................................
Nuveen Balanced Municipal and Stock Fund 24
...............................................................................
</TABLE>
<PAGE>
October 28, 1999
Section 1 The Funds
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Balanced Mutual Funds listed above may be
right for you. Please read it carefully before investing and keep it for future
reference.
Building Capital While Moderating Risk
Individuals who plan to rely on their investments for financial security are
often concerned about maintaining a comfortable standard of living. For these
investors, a balanced mutual fund is often an appropriate investment. Balanced
funds generally invest in stocks, that offer attractive long-term growth
potential and pay regular dividend income, and in bonds. By investing in bonds,
these funds can provide additional current income and may also reduce overall
portfolio volatility and stabilize returns during unfavorable markets. As a
result, balanced mutual funds can offer investors the balance of long-term
growth, current income and capital preservation potential they are seeking to
help them maintain their lifestyle over time.
For those who seek suitable balanced funds for their portfolios, Nuveen offers
the Nuveen Balanced Stock and Bond Fund and the Nuveen Balanced Municipal and
Stock Fund, each with a different balance of long-term growth, current income
and capital preservation potential.
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Section 1 The Funds 1
<PAGE>
Nuveen Balanced Stock and Bond Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide over time an attractive total
return from a diversified portfolio of equity securities, taxable fixed-income
securities and cash equivalents by emphasizing capital appreciation in favorable
markets and capital preservation in adverse markets.
How the Fund Pursues Its Objective
The fund purchases a diversified portfolio of stocks primarily of established,
well-known domestic companies. 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 40 to 50 stocks,
which we believe have 15% to 25% price appreciation potential over the next 18
months.
We seek reduced risk, capital preservation potential and current income by
balancing our stock investments with bonds. The bonds we purchase are primarily
U.S. Treasury bonds with maturities from one to 15 years, but from time to time
we may also purchase investment-grade corporate bonds if market conditions
warrant.
What are the Risks of Investing in the Fund?
An investment in the fund is subject to market risk, interest rate risk and
credit risk. Market risk is the risk that a particular stock in the fund, or
stocks in general, may fall in value. Interest rate risk is the risk that
interest rates will rise, causing bond prices and the fund's value to fall.
Credit risk is the risk that a bond issuer will default or be unable to pay
principal and interest to the fund; lower rated bonds generally carry greater
credit risk. The fund's investments in foreign stock present additional risk
including currency risk. As with any mutual fund investment, loss of money is a
risk of investing.
Is this Fund Right for You?
This fund may be a suitable investment for you if you are seeking:
. long-term growth potential from a value-driven strategy;
. a substantial measure of downside protection;
. the convenience of a balanced portfolio in a single investment;
. to focus on established, well-known companies;
. to meet long-term financial goals.
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation;
. investing to meet short-term financial goals.
How the Fund Has Performed
Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The chart and table below illustrate annual fund and index returns
for the periods ending December 31, 1998. This information is intended to help
you assess the variability of fund returns (and consequently, the potential
rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
From its inception on August 7, 1996 through December 31, 1998, the fund's
highest and lowest quarterly returns were 10.21% and -8.51%, respectively, for
the quarters ending 12/31/98 and 9/30/98. The bar chart and highest/lowest
quarterly returns do not reflect sales charges, which would reduce returns,
while the average annual return table does. See "How the Portfolio Manager Has
Performed" for additional performance information. The fund's and the portfolio
manager's past performance are not necessarily an indication of how the fund
will perform in the future.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
....................................
Class 1 Year Inception
- ------------------------------------------------------------------------------
<S> <C> <C>
Class A 4.80% 14.28%
..............................................................................
Class B 6.37% 14.95%
..............................................................................
Class C 10.37% 16.37%
..............................................................................
Class R 11.41% 17.51%
- ------------------------------------------------------------------------------
S&P 500/1/ 28.58% 33.55%
..............................................................................
Lipper Peer Group/1/ 15.09% 19.56%
..............................................................................
LB Int. Treasury Index/1/ 8.62% 8.59%
..............................................................................
Market Benchmark/1/ 20.97% 23.44%
..............................................................................
</TABLE>
2 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay
if you buy and hold shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A 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/5/ None/4/ 5%/6/ 1%/7/ None
.................................................................
</TABLE>
Annual Fund Operating Expenses/8/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .75% .75% .75% .75%
..................................................................................
12b-1 Distribution and Service Fees .25% 1.00% 1.00% --%
..................................................................................
Other Expenses .36% .36% .35% .36%
- ----------------------------------------------------------------------------------
Total Operating Expenses-Gross 1.36% 2.11% 2.10% 1.11%
..................................................................................
Expense Waiver/Reimbursements (.17%) (.17%) (.16%) (.17%)
- ----------------------------------------------------------------------------------
Total Operating Expenses-Net 1.19% 1.94% 1.94% .94%
..................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 706 $ 608 $ 213 $ 113 $ 706 $ 214 $ 213 $ 113
..............................................................................
3 Years $ 981 $ 975 $ 658 $ 353 $ 981 $ 661 $ 658 $ 353
..............................................................................
5 Years $1,277 $1,246 $1,129 $ 612 $1,277 $1,134 $1,129 $ 612
..............................................................................
10 Years $2,116 $2,250 $2,431 $1,352 $2,116 $2,250 $2,431 $1,352
- ------------------------------------------------------------------------------
</TABLE>
How the Fund Is Invested as of 6/30/99
<TABLE>
<CAPTION>
Portfolio Allocation Actual Target
<S> <C> <C>
Equity 60% 55%
...............................................................
U.S. Treasury Bonds/Notes 38% 40%
...............................................................
Cash Equivalents 2% 5%
...............................................................
Portfolio Statistics
Average Market Capitalization (Stocks) $57 billion
...............................................................
Average P/E 25.9
...............................................................
Average Duration (Bonds) 5.67
...............................................................
Average Effective Maturity (Bonds) 8.47 years
...............................................................
Top 5 Stock Holdings/9/
General Motors Corporation 5.2%
...............................................................
Philips Electronics N.V. 4.2%
...............................................................
News Corporation Limited Sponsored ADR 4.2%
...............................................................
Bank of America Corporation 4.1%
...............................................................
Philip Morris Companies Inc. 3.7%
...............................................................
Credit Quality (Bonds)
...............................................................
U.S. Treasury Bonds/Notes 100%
</TABLE>
1. The year-to-date return as of 9/30/99 was 3.15%. Peer Group returns reflect
the performance of the Lipper Balanced Fund Index, an index that represents
the average annualized returns of the 30 largest funds in the Lipper Balanced
Category. Returns assume reinvestment of dividends and do not reflect any
applicable sales charges. The table also reflects the performance of the
Standard & Poor's 500 Index, Lehman Brothers Intermediate Treasury Index and
a Market Benchmark Index. The index returns assume reinvestment of dividends,
but do not include any brokerage commissions, sales charges, or other fees.
The Market Benchmark Index is comprised of a 60% weighting in the S&P 500
Index and 40% in the Lehman Brothers Intermediate Treasury Index.
2. As a percent of offering price unless otherwise noted. Authorized dealers and
other firms may charge additional fees for shareholder transactions or for
advisory services. Please see their materials for details.
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. Reduced Class A sales charges apply to purchases of $50,000 or more. Certain
Class A purchases at net asset value of $1 million or more may bear a
contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. 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.
7. Class C shares redeemed within one year of purchase are subject to a 1% CDSC.
8. 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. The adviser, pursuant to a contractual agreement, will waive fees and
reimburse expenses through July 31, 2000 in order to prevent Total Operating
Expenses (excluding any distribution or service fees and extraordinary
expenses) from exceeding .95% of the average daily net assets of any class of
fund shares.
9. As a percentage of the fund's stock holdings. Holdings will vary.
Section 1 The Funds 3
<PAGE>
Nuveen Balanced Municipal and Stock Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide over time an attractive
after-tax total return through a combination of federally tax-exempt income and
capital appreciation with capital preservation in adverse markets.
How the Fund Pursues Its Objective
The fund invests the majority of its assets in investment-grade quality
municipal bonds. We concentrate on municipal bonds with favorable
characteristics we believe are not yet recognized by the market, trying to
identify those higher-yielding and undervalued bonds with intermediate
characteristics that we believe offer the best balance of current tax-free
income and capital preservation potential.
We invest the balance of fund assets primarily in established, well-known
domestic companies. 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 40 to 50 stocks, which we
believe have 15% to 25% price appreciation potential over the next 18 months.
What are the Risks of Investing in the Fund?
An investment in the fund is subject to market risk, interest rate risk and
credit risk. Market risk is the risk that a particular stock in the fund, or
stocks in general, may fall in value. Interest rate risk is the risk that
interest rates will rise, causing bond prices and the fund's value to fall.
Credit risk is the risk that a bond issuer will default or be unable to pay
principal and interest to the fund; lower rated bonds generally carry greater
credit risk. The fund's investments in foreign stock present additional risk
including currency risk. As with any mutual fund investment, loss of money is a
risk of investing.
Is this Fund Right for You?
This fund may be a suitable investment for you if you are seeking:
. attractive after-tax returns from a value-driven strategy;
. a substantial measure of downside protection;
. the convenience of a balanced portfolio in a single investment;
. to reduce the taxes on your investment return;
. to meet long-term financial goals.
You should not invest in this fund if you are:
. investing in a tax deferred account;
. unwilling to accept share price fluctuation;
. investing to meet short-term financial goals.
How the Fund Has Performed
Nuveen Institutional Advisory Corp. manages the municipal investments of the
fund and has selected Institutional Capital Corporation to manage the fund's
equity portfolio. The chart and table below illustrate annual fund and index
returns for the periods ending December 31, 1998. This information is intended
to help you assess the variability of fund returns (and consequently, the
potential rewards and risks of a fund investment).
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
20%
16.3
15%
10%
8.3
5%
0%
1997 1998
From its inception on August 7, 1996 through December 31, 1998, the fund's
highest and lowest quarterly returns were 7.74% and -6.09%, respectively, for
the quarters ending 6/30/97 and 9/30/98. The bar chart and highest/lowest
quarterly returns do not reflect sales charges, which would reduce returns,
while the average annual return table does. The fund's past performance is not
necessarily an indication of how the fund will perform in the future.
<TABLE>
<CAPTION>
Average Annual Total Returns for
the Periods Ending December 31, 1998
....................................
Class 1 Year Inception
- ----------------------------------------------------------
<S> <C> <C>
Class A 2.11% 11.35%
..........................................................
Class B 3.54% 11.93%
..........................................................
Class C 7.55% 13.38%
..........................................................
Class R 8.62% 14.49%
- ----------------------------------------------------------
S&P 500/1/ 28.58% 33.55%
..........................................................
Lipper Peer Group/1/ 15.09% 19.56%
..........................................................
LB 10-Year Muni Index/1/ 6.76% 8.59%
..........................................................
Market Benchmark/1/ 15.76% 18.41%
..........................................................
</TABLE>
4 Section 1 The Funds
<PAGE>
What are the Costs of Investing?
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
<TABLE>
<CAPTION>
Share Class A 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/5/ None/4/ 5%/6/ 1%/7/ None
.............................................................................
</TABLE>
Annual Fund Operating Expenses/8/
Paid From Fund Assets
<TABLE>
<CAPTION>
Share Class A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees .75% .75% .75% .75%
..............................................................................
12b-1 Distribution and Service Fees .25% 1.00% 1.00% --%
..............................................................................
Other Expenses .23% .23% .23% .23%
- ------------------------------------------------------------------------------
Total Operating Expenses-Gross 1.23% 1.98% 1.98% .98%
..............................................................................
Expense Waiver/Reimbursements (.04%) (.04%) (.04%) (.04%)
- ------------------------------------------------------------------------------
Total Operating Expenses-Net 1.19% 1.94% 1.94% .94%
..............................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 693 $ 595 $ 201 $ 100 $ 693 $ 201 $ 201 $ 100
.............................................................................
3 Years $ 943 $ 937 $ 621 $ 312 $ 943 $ 621 $ 621 $ 312
.............................................................................
5 Years $1,212 $1,180 $1,068 $ 542 $1,212 $1,068 $1,068 $ 542
.............................................................................
10 Years $1,978 $2,113 $2,306 $1,201 $1,978 $2,113 $2,306 $1,201
.............................................................................
</TABLE>
How the Fund Is Invested (as of 6/30/99)
<TABLE>
<CAPTION>
Portfolio Allocation Actual Target
<S> <C> <C>
Municipal Bonds 59% 60%
..........................................................
Equity 39% 35%
..........................................................
Cash Equivalents 2% 5%
..........................................................
Portfolio Statistics
Average Market Capitalization (Stocks) 57 billion
..........................................................
Average P/E 25.9
..........................................................
Average Duration (Bonds) 6.68
..........................................................
Average Effective Maturity (Bonds) 10.39 years
..........................................................
Top 5 Stock Holdings/9/
General Motors Corporation 5.1%
..........................................................
Philips Electronics N.V. 4.3%
..........................................................
Bell Atlantic Corporation 4.1%
..........................................................
News Corporation Limited Sponsored ADR 3.9%
..........................................................
Bank of America Corporation 3.9%
..........................................................
Credit Quality (Bonds)/10/
..........................................................
AAA 38.0%
..........................................................
AA 6.5%
..........................................................
A 13.0%
..........................................................
BBB/NR 42.5%
..........................................................
</TABLE>
1. The year-to-date return as of 9/30/99 was 1.01%. Peer Group returns reflect
the performance of the Lipper Balanced Fund Index, an index that represents
the average annualized returns of the 30 largest funds in the Lipper
Balanced Category. Returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
The table also reflects the performance of the Standard & Poor's 500 Index,
Lehman Brothers 10-Year Municipal Bond Index and a Market Benchmark Index.
The index returns assume reinvestment of dividends, but do not include any
brokerage commissions, sales charges or other fees. The Market Benchmark
Index is comprised of a 40% weighting in the S&P 500 Index and 60% in the
Lehman Brothers 10-Year Municipal Bond Index.
2. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
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. Reduced Class A sales charges apply to purchases of $50,000 or more. Certain
Class A purchases at net asset value of $1 million or more may bear a
contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. 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.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
8. 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. The adviser, pursuant to a contractual agreement, will waive
fees and reimburse expenses through July 31, 2000 in order to prevent Total
Operating Expenses (excluding any distribution or service fees and
extraordinary expenses) from exceeding .95% of the average daily net assets
of any class of fund shares.
9. As a percentage of the fund's stock holdings. Holdings will vary.
10. As a percentage of the fund's bond holdings. Holdings will vary.
Section 1 The Funds 5
<PAGE>
Section 2 How We Manage Your Money
To help you understand how the funds' assets are managed, 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 Funds
Nuveen Institutional Advisory Corp. ("NIAC"), the funds' investment adviser,
together with its advisory affiliate, Nuveen Advisory Corp., offer premier
advisory and investment management services to a broad range of mutual fund
clients. In the Nuveen family, these advisers are commonly referred to as Nuveen
Investment Advisory Services or NIAS. NIAC has overall responsibility for
management of the funds. NIAC oversees the management of the funds' portfolios,
manages the funds' business affairs and provides certain clerical, bookkeeping
and other administrative services. The NIAS advisers are located at 333 West
Wacker Drive, Chicago, IL 60606.
The NIAS advisers are wholly-owned subsidiaries of John Nuveen & Co.
Incorporated ("Nuveen"). Founded in 1898, Nuveen has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. Nuveen is the sponsor and principal underwriter of the funds' shares and
has sponsored or underwritten more than $60 billion of investment company
securities. Nuveen and its affiliates have more than $55 billion in assets under
management.
NIAC has selected Institutional Capital Corporation ("Institutional Capital"),
225 West Wacker Drive, Chicago, IL 60606, as subadviser to manage the investment
portfolios of the Balanced Stock and Bond Fund, and the equity investments of
the Balanced Municipal and Stock Fund. Institutional Capital is an institutional
investment management firm with over 29 years of experience and approximately
$12 billion in assets under management. 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 13 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.
NIAC manages the municipal investments of the Balanced Municipal and Stock Fund.
NIAC is responsible for the execution of specific investment strategies and the
day-to-day operations of the fund as they relate to the municipal investments.
NIAC manages the fund using a team of analysts and portfolio managers that focus
on a specific group of funds. Thomas C. Spalding provides daily oversight for
and execution of the fund's
6 Section 2 How We Manage Your Money
<PAGE>
municipal investment activities. Mr. Spalding has been a vice president of NIAC
since 1990 and manager of the fund's municipal investments since February 1999.
He is also a vice president of Nuveen Advisory Corp. and a Chartered Financial
Analyst. Mr. Spalding currently manages investments for six Nuveen-sponsored
investment companies.
For providing these services, NIAC is paid an annual fund management fee
according to the following schedule:
<TABLE>
<CAPTION>
Average Daily Balanced Stock Balanced Municipal
Net Assets and Bond Fund and Stock Fund
<S> <C> <C>
For the first $125 million .7500 of 1% .7500 of 1%
...............................................................................
For the next $125 million .7375 of 1% .7375 of 1%
...............................................................................
For the next $250 million .7250 of 1% .7250 of 1%
...............................................................................
For the next $500 million .7125 of 1% .7125 of 1%
...............................................................................
For the next $1 billion .7000 of 1% .7000 of 1%
...............................................................................
For net assets over $2 billion .6750 of 1% .6750 of 1%
...............................................................................
</TABLE>
For the most recent fiscal year, the funds paid NIAC the following management
fees (as a percentage of average net assets):
Balanced Stock and Bond Fund .75%
...............................................................................
Balanced Municipal and Stock Fund .75%
...............................................................................
Out of the fund management fee, NIAC pays a portfolio management fee to
Institutional Capital. Each fund pays for its own operating expenses such as
custodial, transfer agent, accounting and legal fees; brokerage commissions;
distribution and service fees; and extraordinary expenses.
What Securities We Invest In
Each 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.
Equity Securities
Both the Balanced Stock and Bond Fund and Balanced Municipal and Stock Fund
invest in 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; dollar-denominated securities of foreign companies
(limited to 25% of net assets) 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 IBCA, Inc.) when purchased.
Taxable Bonds
The Balanced Stock and Bond Fund invests the fixed income portion of its
portfolio in taxable bonds. Eligible taxable bonds are U.S. Treasury and other
investment-grade bonds with maturities of one to 15 years. We focus on U.S.
Treasury securities but may purchase other bonds from time to time if market
conditions warrant. Investment-grade securities are those
Section 2 How We Manage Your Money 7
<PAGE>
rated in the four highest categories by Moody's Investors Service, Standard &
Poor's, Duff & Phelps or Fitch IBCA, Inc. when purchased.
Municipal Obligations
The Balanced Municipal and Stock Fund invests the fixed income portion of its
portfolio in municipal bonds. States, local governments and municipalities issue
municipal bonds to raise money for various public purposes such as building
public facilities, refinancing outstanding obligations and financing general
operating expenses. Municipal bonds pay income that is exempt from regular
federal income tax but may be subject to the federal alternative minimum tax. A
municipality may issue general obligation bonds which are secured by its taxing
power, or it may issue revenue bonds that are payable from the revenues of a
particular project or a special excise tax.
The Balanced Municipal and Stock Fund may purchase municipal bonds that
represent lease obligations. These carry special risks because the issuer of the
bonds may not be obligated to appropriate money annually to make payments under
the lease. In order to reduce this risk, the fund will only purchase these bonds
where the issuer has a strong incentive to continue making appropriations until
maturity.
The Balanced Municipal and Stock Fund will purchase only quality municipal bonds
that are either rated investment grade (AAA/Aaa to BBB/Baa) by independent
rating agencies at the time of purchase or are non-rated but judged to be
investment grade by the fund's investment adviser. We will not invest more than
20% of the fund's municipal investments in this type of unrated municipal
obligation. These policies can only be changed by shareholder vote.
The Balanced Municipal and Stock Fund will invest at least 80% of its municipal
assets in investment-grade quality municipal bonds with effective remaining
maturities of no more than 15 years. This policy will not limit the stated or
nominal maturities of the municipal bonds in which the fund invests. The
effective remaining maturity of a municipal bond may be shorter than its stated
maturity for a variety of reasons, including the bond's call features, its
stated or expected payment schedule or other terms or conditions that may cause
the bond to have the risk of price fluctuations of an otherwise comparable but
shorter-term bond.
Short-Term Investments
The funds 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. The Balanced Municipal and Stock Fund
intends to invest in taxable short-term investments only in the event that
suitable tax-exempt short-term investments are not available at reasonable
prices and yields. For more information on short-term investments, see the
Statement of Additional Information.
Delayed Delivery Transactions
The funds 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. These transactions involve an element of risk
because the value of the security to be purchased may decline before the
settlement date.
8 Section 2 How We Manage Your Money
<PAGE>
How We Select Investments
We adhere to disciplined, value-driven investment strategies 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.
Equity Securities
Institutional Capital selects stocks from a universe of approximately 450 large
and midsize companies with at least $500 million in market capitalization.
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. We generally buy only 40 to 50 stocks, which we believe have a 15% to
25% price appreciation potential over the next 18 months for the equity portion
of each fund's investment portfolio.
Taxable Fixed-Income Securities
Institutional Capital selects taxable fixed-income securities for the Balanced
Stock and Bond Fund based on its general outlook for the fixed-income markets as
well as a detailed analysis of expected yield curve changes. Weuse proprietary
quantitative models and qualitative assessment of top-down economic and market
factors to develop an outlook on interest rates. We then analyze the current
shape of the yield curve as well as expected changes under different scenarios.
We select the specific mix of maturities that offer the best balance of current
income and capital preservation potential in light of current and expected
market conditions.
Municipal Obligations for the Balanced Municipal and Stock Fund
NIAC selects municipal bonds for the Balanced Municipal and Stock Fund based
upon its assessment of a bond's relative value in terms of current yield, price,
credit quality and future prospects. NIAC is supported by Nuveen's award-winning
team of specialized research analysts who review municipal securities available
for purchase, monitor the continued creditworthiness of the fund's municipal
investments, and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify municipal bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds that we
believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds anticipate that they may engage in active
trading in equity securities. The funds anticipate that their annual equity
portfolio turnover rate will generally be between 100% and 150%.
Section 2 How We Manage Your Money 9
<PAGE>
The Balanced Municipal and Stock Fund expects annual municipal portfolio
turnover to be significantly less than 75%. The Balanced Stock and Bond Fund
anticipates that its annual bond portfolio turnover rate will generally not
exceed 75%. 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. Active
trading 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.
How the Portfolio Manager Has Performed
The chart and table below illustrate the historical performance of the portfolio
manager's investment strategy for the Nuveen Balanced Stock and Bond Fund. They
present the performance of Institutional Capital's Balanced Composite, which
represents all its individually managed accounts (totalling $362 million) that
have substantially the same investment objectives and policies as the fund. Of
course, past performance is no indication of future results, and the chart and
table represent performance of managed accounts and not actual fund performance.
Growth of a $10,000 Investment 6/79-6/99
[MOUNTAIN CHART APPEARS HERE]
S&P 500 Lipper Balanced CPI NBSB
------- --------------- --- ----
6/79..... 10,000 10,000 10,000 9,425
6/84..... 19,239 18,270 14,344 16,581
6/89..... 48,055 41,573 17,160 42,540
6/94..... 78,561 65,490 20,465 71,969
6/99..... 268,637 138,383 22,931 154,294
Portfolio Manager Composite Returns
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Average Annual Total Returns
1-Year 5-Year 10-Year 20-Year
On Offer 3.00% 15.11% 13.08% 14.66%
On NAV 9.28% 16.48% 13.75% 16.67%
</TABLE>
The managed accounts reflected above are not subject to all of the same
investment restrictions, investment inflows and outflows, and distribution
requirements as the fund, which may affect fund performance. We assumed that an
investor paid a maximum Class A sales charge of 5.75% and we deducted from the
Composite's gross-of-fee returns the Class A gross operating expenses of 1.36%
for the fund's most recent fiscal year. This chart would be different for a
Class B, C or R investment because of their different sales charges and
operating expenses. The Lipper Balanced Fund Index represents the average
annualized returns of the 30 largest funds in the Lipper Balanced Category.
Index returns assume reinvestment of all dividends but do not include any
brokerage commissions, sales charges or other fees. This chart does not
represent past or future performance of the fund.
10 Section 2 How We Manage Your Money
<PAGE>
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 these funds. Because of these
and other risks, you should consider an investment in these funds to be a long-
term investment.
Market risk: As mutual funds investing a portion of their assets in stocks, the
funds are subject to market risk. Market risk is the risk that a particular
stock, an industry, or stocks in general may fall in value.
Interest rate risk: Because the funds also invest in bonds, the funds are
subject to interest rate risk. Interest rate risk is the risk that the value of
a fund's portfolio will decline because of rising market interest rates (bond
prices move in the opposite direction of interest rates). The longer the average
maturity (duration) of a fund's portfolio, the greater its interest rate risk.
Income risk: The funds' investment in bonds exposes the funds to income risk.
Income risk is the risk that the income from a fund's portfolio will decline
because of falling market interest rates. This can result when the fund invests
the proceeds from new share sales, or from matured or called bonds, at market
interest rates that are below a portfolio's current earnings rate.
Credit risk: The funds' investment in bonds also exposes the funds to credit
risk. Credit risk is the risk that an issuer of a bond is unable to meet its
obligation to make interest and principal payments due to changing financial or
market conditions. Generally, lower rated bonds provide higher current income
but are considered to carry greater credit risk than higher rated bonds. Year
2000 issues may affect the ability of issuers to meet their payment obligations
to their bond holders, and may adversely affect their credit ratings.
Inflation risk: Like all mutual funds, the funds are subject to inflation risk.
Inflation risk is 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 value of the funds' assets can decline as can the value
of the funds' distributions.
Correlation risk: Although the prices of equity and fixed-income securities
often rise and fall at different times so that a fall in the price of one is
offset by a rise in the price of the other, in a down market the prices of these
securities can also fall in tandem. Because the funds invest in stocks and
bonds, the funds are subject to correlation risk.
Foreign investment risk: Securities of foreign issuers (which are limited to 25%
of net assets) present risks beyond those of domestic securities. Such risks
include political or economic instability, less publicly available information
and currency risk. Foreign securities may also have more volatile prices and may
be less liquid than domestic securities.
Section 2 How We Manage Your Money 11
<PAGE>
How We Manage Risk
We use time-tested risk management strategies designed to help protect your
capital during periods of market uncertainty or weakness: broad portfolio
diversification, a rigorous sell discipline and defined portfolio allocation
ranges. The funds also invest in quality bonds whose steady income and relative
price stability can help reduce volatility and stabilize returns in down
markets. While we use these strategies to control or reduce risk, there is no
assurance that we will succeed.
Portfolio Allocation Targets and Ranges
Each fund follows a disciplined asset allocation methodology that keeps your
portfolio mix within a defined range over time as market conditions change. The
funds have established the following allocation targets and operating ranges for
each asset class:
<TABLE>
<CAPTION>
Balanced Stock and Bond Fund Balanced Municipal and Stock Fund
Target Range Target Range
<S> <C> <C> <C> <C>
Stocks 55% 40-70% 35% 30-50%
Bonds 40% 25-55% 60% 50-70%
Cash Equivalents 5% 0-20% 5% 0-10%
</TABLE>
A fund's Board of Trustees may change the target investment mix and operating
ranges for each asset class without shareholder approval. The Balanced Municipal
and Stock Fund will not set the minimum allowable allocation for municipal bonds
below 50%.
Investment Limitations
The funds have 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. Each 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);
. 25% in any one industry (except U.S. government securities and, in the case
of the Balanced Municipal and Stock Fund, municipal securities backed by
governmental users). For example, as of June 30, 1999, the funds were
invested in the following industries (as a percentage of the funds' stock
holdings):
<TABLE>
<CAPTION>
<S> <C>
Balanced Stock and Balanced Municipal
Bond Fund and Stock Fund
Consumer Cyclicals 23.5% Consumer Cyclicals 23.3%
Financials 15.8% Financials 15.7%
Technology 15.4% Technology 15.6%
Communications 10.4% Communications 11.1%
Health Care 9.1% Health Care 9.2%
Consumer Staples 8.7% Consumer Staples 8.6%
Capital Goods 5.8% Capital Goods 5.9%
Basic Materials 5.7% Basic Materials 5.8%
Energy 3.3% Energy 2.5%
Transportation 2.3% Transportation 2.3%
</TABLE>
12 Section 2 How We Manage Your Money
<PAGE>
Please see the Statement of Additional Information for a more detailed
discussion of investment limitations.
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% of its 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 a fund's assets invested in an asset category may fall outside its
allowable range, and the fund may not achieve its investment objective.
We may also use various investment strategies designed to hedge against changes
in the values of securities a fund owns or expects to purchase or to hedge
against interest rate changes. These hedging strategies include using financial
futures contracts, options on financial futures, or stock index options. The
ability of a fund to benefit from options and futures is largely dependent on
our ability to use such strategies successfully. A fund could lose money on
futures transactions or an option can expire worthless.
The funds' approach to equity investing may also provide a measure of protection
in adverse markets. The funds focus on stocks primarily of established, well-
known companies which generally have been better positioned to weather adverse
markets than smaller, less established companies. The funds purchase stocks with
low valuations, measured by their relative price-to-earnings ratio. The prices
of these types of stocks have often fallen less than more fully valued stocks
during market downturns. The funds' allocation to bonds and cash equivalents can
also provide a measure of added stability during adverse market conditions.
Portfolio Manager Performance in Down Markets
Over the past 20 years, there have been four periods in which the S&P 500
declined by 10% or more. Portfolio manager performance is represented by fund
Class A returns on net asset value for the third quarter 1998 and by
Institutional Capital's Balanced Composite for prior periods. Of course, past
performance does not guarantee future results, and Composite performance does
not represent actual fund results. Please see the discussion under "How the
Portfolio Manager Has Performed" for a detailed discussion of portfolio manager
composite returns and the index returns to which they are compared.
Portfolio Manager Down-Market Performance
[BAR CHART APPEARS HERE]
Balanced Stock and Bond Fund Investment Strategy
<TABLE>
<CAPTION>
Institutional Capital Composite Fund
2Q81-2Q82 4Q87 3Q90 3Q98
<S> <C> <C> <C> <C>
Portfolio Manager 3.71% -9.33% -6.81%
Balanced
Composite
Balanced Stock -8.51%
and Bond fund
Liper Balanced -0.67% -13.26% -8.09% -5.79%
Fund Index
S&P 500 -13.47% -22.63% -13.78% -9.92%
</TABLE>
Section 2 How We Manage Your Money 13
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer 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.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the 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%
of your fund's average daily net assets which compensates your financial adviser
for providing ongoing service to you. Nuveen retains the up-front sales charge
and the service fee on accounts with no authorized dealer of record. The up-
front Class A sales charge for the funds 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
<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/ -- 1.00%/1/
- -------------------------------------------------------------------------------------------------------
</TABLE>
/1/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 a commission equal to
the sum of 1% of the first $2.5 million, plus 0.50% of the next $2.5 million,
plus 0.25% of any amount over $5 million. Unless the authorized dealer waived
the commission, you may be assessed a contingent deferred sales charge ("CDSC")
of 1% if you redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or your redemption proceeds. You
do not pay a CDSC on any Class A shares you purchase by reinvesting
dividends.
Class B Shares
You can buy Class B shares at the offering price, which is the 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 your fund's average daily net assets. The annual .25%
service fee compensates your financial adviser for providing ongoing service to
you. Nuveen retains the service and distribution fees on accounts with no
authorized dealer of record. The annual .75% distribution fee compensates Nuveen
for paying your financial adviser a 4% up-front sales commission, which includes
an advance of the first year's service fee. If you sell your shares within six
years of purchase, you will normally have to pay a CDSC as shown in the schedule
below. The CDSC is based on your purchase or sale price, whichever is lower. You
do not pay a CDSC on any Class B shares you purchase by reinvesting
dividends.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
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.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
- --------------------------------------------------
Class C Shares
You can buy Class C shares at the offering price, which is the 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 your fund's average daily net assets. The annual .25%
service fee compensates your financial adviser for providing ongoing service to
you. Nuveen retains the service and distribution fees on accounts with no
authorized dealer of record. 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 will normally have to pay a 1% CDSC based on your
purchase or sale price, whichever is lower. You do not pay a CDSC on any Class C
shares you purchase by reinvesting dividends.
Class R Shares
You may purchase Class R Shares only under limited circumstances, at the 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 the other classes.
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>
<S> <C> <C>
Class A Sales Charge Class A Sales Charge Waivers Class R Eligibility
Reductions . Nuveen Defined Portfolio . Certain employees and
. Rights of accumulation or Exchange-Traded Fund directors of Nuveen
. Letter of intent reinvestment or employees of authorized
. Group purchase . Retirement plans dealers
. Certain employees and . Bank trust departments
directors of Nuveen or
employees of 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
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
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) 257-8787. 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
funds may modify or discontinue these programs at any time.
How to Buy Shares
Fund shares may be purchased on any business day, which is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York time.
Generally the Exchange is closed on weekends and national holidays. 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.
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 for ongoing
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial adviser, call (800) 257-8787 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 Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($1,000 for a Traditional/Roth IRA
account; $500 for an Education IRA account; $50 through systematic investment
plan accounts and may be lower for accounts opened through certain fee-based
programs). Subsequent investments must be in amounts of $50 or more. The funds
reserve the right to reject purchase orders and to waive or increase the minimum
investment requirements.
Systematic Investing
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) 257-8787. Systematic investing may also make you eligible for reduced
sales charges.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
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
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 "Special Services--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 a 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 at any time
for an appropriate 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 have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
Section 3 How You Can Buy and Sell Shares 17
<PAGE>
The exchange privilege is not intended to allow you to use a 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.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax adviser about
the tax consequences of exchanging your shares.
Fund Direct(SM)
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts and perform a
variety of account transactions, including purchasing 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) 257-8787 for copies of
the necessary forms.
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.
How to Sell Shares
You may sell (redeem) your shares on any business day. 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. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the funds do 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.
18 Section 3 How You Can Buy and Sell Shares
<PAGE>
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account. You will not be assessed a CDSC
on an involuntary redemption.
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 calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. 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. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
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 a fund. A
notary public cannot provide a signature guarantee.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the funds may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
Section 3 How You Can Buy and Sell Shares 19
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the
funds, this section includes important details about how the funds
make distributions to shareholders. We discuss some other fund
policies, as well.
Dividends, Distributions and Taxes
Payment and Reinvestment Options
The funds automatically reinvest 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) 257-8787.
Taxes and Tax Reporting
The funds will make distributions that may be taxed as ordinary income or
capital gains (which may be taxable at different rates, depending on the length
of time a fund holds its assets). Dividends from a 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.
Because the Balanced Municipal and Stock Fund invests in municipal bonds,
certain dividends you receive will be exempt from regular federal income tax.
All or a portion of these dividends, however, may be subject to state and local
taxes or to the federal alternative minimum tax (AMT). The tax you pay on a
given capital gains distribution depends generally on how long the fund has held
the portfolio securities it sold. It does not depend on how long you have owned
your fund shares. Dividends generally do not qualify for a dividends received
deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. If you hold your investment at the firm where you purchased your
fund shares, you will receive the statement from that firm. If you hold your
shares directly at the fund, Nuveen will send you the statement. The tax status
of your dividends is the same whether you reinvest your dividends or elect to
receive them in cash. The sale of shares in your account may produce a gain or
loss, and is a taxable event. For tax purposes, an exchange is the same as a
sale.
Please note that if you do not furnish your fund with your correct Social
Security number or employer identification number, federal law requires the fund
to withhold federal income tax from your distributions and redemption proceeds,
currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax adviser for
more information about taxes.
20 Section 4 General Information
<PAGE>
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. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects tax-
free income earned but not yet distributed by the fund.
Distribution Schedule
<TABLE>
<CAPTION>
Tax-Free Dividends Taxable Dividends Capital Gains
<S> <C> <C> <C>
Balanced Stock and Bond Fund None Quarterly December
- ------------------------------------------------------------------------------------------
Balanced Municipal and Stock Fund Monthly December December
- ------------------------------------------------------------------------------------------
</TABLE>
Distribution and Service Plans
Nuveen serves as the selling agent and distributor of the funds' shares. In this
capacity, Nuveen manages the offering of the funds' 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, each fund has adopted a distribution and service plan in
accordance with Rule 12b-1 under the Investment Company Act of 1940. (See "How
You Can Buy and Sell Shares" 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, Class B, and Class C shares to compensate authorized dealers, including
Nuveen, for providing ongoing 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 preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of a fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars, prospecting seminars and other events
at which Nuveen presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties. The
Statement of Additional Information contains further information about these
programs.
Section 4 General Information 21
<PAGE>
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class by taking the 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 funds' 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. Common stocks and other equity securities not listed
on a national securities exchange or Nasdaq are valued at the most recent bid
prices. The prices of fixed-income securities are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal bonds), the pricing
service establishes fair market value based on prices of comparable securities.
Fund Service Providers
The custodian of the assets of the funds is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the funds. The funds' transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder accounts.
Year 2000
The funds' service providers rely on computer systems to manage the funds'
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. Nuveen is working with the funds' service providers
to adapt their systems to address this "Year 2000" issue. Nuveen and the funds
expect that the necessary work will be completed on a timely basis, although
there can be no assurance of this.
Year 2000 issues may affect the ability of issuers to meet their interest and
principal payment obligations to their bond holders, and may adversely affect
the bond's credit ratings and values. Municipal issuers may have greater Year
2000 risks than other issuers. NIAC is requesting information from municipal
issuers so that NIAC can take the issuers' Year 2000 readiness, if made
available, into account in making investment decisions.
22 Section 4 General Information
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a funds'
financial performance. Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate that an
investor would have earned on an investment in a fund (assuming reinvestment of
all dividends and distributions). This information has been audited by Arthur
Andersen LLP, whose report, along with the funds' financial statements, are
included in the Statement of Additional Information and annual report, which are
available upon request.
<TABLE>
<CAPTION>
Nuveen Balanced Stock and Bond Fund
Investment Operations Less Distributions
--------------------- ----------------------------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Assets Total
June 30, Value Income(a) Gain (Loss) Total Income Gains Total Value Return (b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $26.39 $.58 $1.93 $2.51 $(.57) $(1.15) $(1.72) $27.18 10.21%
1998 23.84 .77 3.11 3.88 (.76) (.57) (1.33) 26.39 16.71
1997 (c) 20.00 .70 3.66 4.36 (.42) (.10) (.52) 23.84 22.04
Class B (8/96)
1999 26.39 .39 1.93 2.32 (.38) (1.15) (1.53) 27.18 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (c) 20.00 .46 3.75 4.21 (.27) (.10) (.37) 23.84 21.26
Class C (8/96)
1999 26.39 .40 1.93 2.33 (.38) (1.15) (1.53) 27.19 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (c) 20.00 .53 3.68 4.21 (.27) (.10) (.37) 23.84 21.26
Class R (8/96)
1999 26.39 .65 1.93 2.58 (.64) (1.15) (1.79) 27.18 10.48
1998 23.84 .83 3.11 3.94 (.82) (.57) (1.39) 26.39 16.99
1997 (c) 20.00 .61 3.80 4.41 (.47) (.10) (.57) 23.84 22.31
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------
Ratio of
Ratio of Investment
Expenses Income
to Average to Averge
Ending Net Net
Year Net Assets Assets Portfolio
Ended Assets After Credit After Credit Turnover
June 30, (000) Reimbursement (a) Reimbursement (a) Rate
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (8/96)
1999 $67,512 1.19% 2.27% 96%
1998 69,614 1.10 3.06 86
1997 (c) 56,686 1.10* 3.39* 52
Class B (8/96)
1999 12,856 1.94 1.54 96
1998 10,356 1.85 2.32 86
1997 (c) 646 1.85* 2.23* 52
Class C (8/96)
1999 7,142 1.94 1.55 96
1998 4,142 1.85 2.31 86
1997 (c) 980 1.85* 2.53* 52
Class R (8/96)
1999 4,445 .94 2.53 96
1998 3,413 .85 3.32 86
1997 (c) 6,052 .85* 3.12* 52
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 23
<PAGE>
Nuveen Balanced Municipal and Stock Fund
<TABLE>
<CAPTION>
Investment Operations Less Distributions
--------------------------------- -----------------------------
Class
(Inception
Date)
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset Total
June 30, Value Income(a) Gain (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $25.46 $.62 $ .70 $1.32 $(.65) $(.68) $(1.33) $25.45 5.49%
1998 23.11 .67 2.66 3.33 (.61) (.37) (.98) 25.46 14.71
1997 (c) 20.00 .56 3.02 3.58 (.42) (.05) (.47) 23.11 18.05
Class B (8/96)
1999 25.53 .46 .68 1.14 (.34) (.68) (1.02) 25.65 4.71
1998 23.11 .49 2.67 3.16 (.37) (.37) (.74) 25.53 13.91
1997 (c) 20.00 .40 3.04 3.44 (.28) (.05) (.33) 23.11 17.32
Class C (8/96)
1999 25.51 .45 .69 1.14 (.34) (.68) (1.02) 25.63 4.71
1998 23.10 .49 2.66 3.15 (.37) (.37) (.74) 25.51 13.87
1997 (c) 20.00 .40 3.03 3.43 (.28) (.05) (.33) 23.10 17.27
Class R (8/96)
1999 25.39 .68 .71 1.39 (.77) (.68) (1.45) 25.33 5.81
1998 23.11 .72 2.66 3.38 (.73) (.37) (1.10) 25.39 14.94
1997 (c) 20.00 .61 3.03 3.64 (.48) (.05) (.53) 23.11 18.38
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------
Ratio of
Ratio of Investment
Expenses Income
to Average to Average
Net Net
Ending Assets Assets
Net After Credit/ After Credit/ Portfolio
Asset Reimburse- Reimburse- Turnover
(000) ment (a) ment (a) Rate
<C> <C> <C> <C>
- -----------------------------------------------------------
$123,917 1.19% 2.52% 52%
117,005 1.10 2.73 87
79,952 1.10* 2.79* 32
52,718 1.94 1.83 52
32,384 1.85 1.96 87
2,051 1.85* 1.99* 32
20,498 1.94 1.80 52
14,908 1.85 1.97 87
1,559 1.85* 1.97* 32
1,182 .94 2.77 52
1,353 .85 2.99 87
6,963 .85* 3.16* 32
- -----------------------------------------------------------
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
24 Section 5 Financial Highlights
<PAGE>
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
Nuveen Mutual Funds
Nuveen offers a variety of mutual 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
Dividend and Growth Fund
Taxable Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information ("SAI"), incorporated by reference into this prospectus,
contains detailed information on the funds' policies and operation. Additional
information about the funds' investments is available in the funds' annual and
semi-annual reports to shareholders. In the funds' annual reports, you will find
a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.
Call Nuveen at (800) 257-8787 to request a free copy of any of these materials
or for other fund information; or ask your financial advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington D.C. 20549. The funds'
Investment Company file number is 811-07619.
1. Long-term and insured long-term portfolios. EPR-BAL-NA 10-99
<PAGE>
Statement of Additional Information
October 28, 1999
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN GROWTH AND INCOME STOCK FUND
NUVEEN BALANCED STOCK AND BOND FUND
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained without charge from certain securities representatives, banks and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated, or from a Fund, by written request to the Fund, c/o
Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186, or by calling 800-257-8787. This Statement of Additional Informa-
tion relates to, and should be read in conjunction with, the Prospectus for a
Fund. The Prospectuses for the Funds are dated October 28, 1999.
<TABLE>
<S> <C>
Table of Contents Page
- ------------------------------------------------------------------------------
General Information B-2
- ------------------------------------------------------------------------------
Investment Policies and Restrictions B-2
- ------------------------------------------------------------------------------
Investment Policies and Techniques B-5
- ------------------------------------------------------------------------------
Management B-22
- ------------------------------------------------------------------------------
Fund Manager and Portfolio Manager B-28
- ------------------------------------------------------------------------------
Portfolio Transactions B-30
- ------------------------------------------------------------------------------
Net Asset Value B-31
- ------------------------------------------------------------------------------
Tax Matters B-32
- ------------------------------------------------------------------------------
Performance Information B-39
- ------------------------------------------------------------------------------
Additional Information on the Purchase and Redemption of Fund Shares and
Shareholder Programs B-46
- ------------------------------------------------------------------------------
Distribution and Service Plans B-63
- ------------------------------------------------------------------------------
Independent Public Accountants and Custodian B-65
- ------------------------------------------------------------------------------
Financial Statements B-65
- ------------------------------------------------------------------------------
General Trust Information B-65
- ------------------------------------------------------------------------------
Appendix A--Ratings of Investments A-1
- ------------------------------------------------------------------------------
</TABLE>
The audited financial statements for each Fund's most recent fiscal year appear
in the Funds' Annual Reports, each of which is incorporated herein by refer-
ence. The Annual Reports accompany this Statement of Additional Information.
<PAGE>
GENERAL INFORMATION
Nuveen Growth and Income Stock Fund ("Growth/Income Fund"), Nuveen Balanced
Stock and Bond Fund ("Stock/Bond Fund") and Nuveen Balanced Municipal and Stock
Fund ("Muni/Stock Fund") (individually a "Fund" and collectively the "Funds")
are series of the Nuveen Investment Trust (the "Trust"), an open-end diversi-
fied management series investment company organized as a Massachusetts business
trust on May 6, 1996. 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 submit-
ted to a vote of the holders of the outstanding voting securities of a series
company shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding voting securities of each se-
ries affected by such matter.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Restrictions
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus for that Fund. A Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of the Fund:
(1) With respect to 75% of its total assets, purchase the securities of any is-
suer (except securities issued or guaranteed by the United States government or
any agency or instrumentality thereof) if, as a result, (i) more than 5% of the
Fund's total assets would be invested in securities of that issuer, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that is-
suer.
(2) Borrow money, except that the Fund may (i) borrow money from banks for tem-
porary or emergency purposes (but not for leverage or the purchase of invest-
ments) and (ii) engage in other transactions permissible under the Investment
Company Act of 1940 that may involve a borrowing (such as, investing in When-
Issued Securities or certain futures and options), provided that the combina-
tion of (i) and (ii) shall not exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed), less the Fund's liabilities (other than
borrowings).
(3) Act as an underwriter of another issuer's securities, except to the extent
that the Fund may be deemed to be an underwriter within the meaning of the Se-
curities Act of 1933 in connection with the purchase and sale of portfolio se-
curities.
(4) Make loans to other persons, except through (i) the purchase of debt secu-
rities permissible under the Fund's investment policies, (ii) repurchase agree-
ments, or (iii) the lending of portfolio securities, 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.
B-2
<PAGE>
(5) Purchase or sell physical commodities unless acquired as a result of own-
ership of securities or other instruments (but this shall not prevent the Fund
from purchasing or selling options, futures contracts, or other derivative in-
struments, or from investing in securities or other instruments backed by
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 prin-
cipal business activities are in the same industry (except that this restric-
tion shall not be applicable to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof and, in the case of the
Muni/Stock Fund to Municipal Obligations, other than those Municipal Obliga-
tions backed only by the assets and revenues of non-governmental users).
If a percentage restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the invest-
ment or the total assets will not constitute a violation of that restriction.
For the purpose of applying the limitation set forth in restriction (1) above
to Municipal Obligations an issuer shall be deemed the sole issuer of a secu-
rity when its assets and revenues are separate from other governmental enti-
ties and its securities are backed only by its assets and revenues. Similarly,
in the case of a non-governmental user, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed only by the
assets and revenues of the non-governmental user, then such non-governmental
user would be deemed to be the sole issuer. Where a security is also backed by
the enforceable obligation of a superior or unrelated governmental or other
entity (other than a bond insurer), it shall also be included in the computa-
tion of securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facili-
ty, such as a bank guarantee or letter of credit, such a guarantee or letter
of credit would be considered a separate security and would be treated as an
issue of such government, other entity or bank. When a Municipal Obligation is
insured by bond insurance, it shall not be considered a security that is is-
sued or guaranteed by the insurer; instead, the issuer of such Municipal Obli-
gation will be determined in accordance with the principles set forth above.
The foregoing restrictions do not limit the percentage of the assets of the
Muni/Stock Fund that may be invested in Municipal Obligations insured by any
given insurer.
The foregoing fundamental investment policies, together with the investment
objective of each of the Growth/Income Fund, the Stock/Bond Fund and the
Muni/Stock Fund, and certain other policies specifically identified in the
prospectus, cannot be changed without approval by holders of a "majority of
the Fund's outstanding voting shares." As defined in the Investment Company
Act of 1940, this means the vote of (i) 67% or more of the Fund's shares pres-
ent 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.
B-3
<PAGE>
In addition to the foregoing fundamental investment policies, each Fund is also
subject to the following non-fundamental restrictions and policies, which may
be changed by the Board of Trustees. A Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain se-
curities equivalent in kind and amount to the securities sold short at no added
cost, and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to constitute
selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such short-
term credits as are necessary for the clearance of transactions; and provided
that margin deposits in connection with futures contracts, options on futures
contracts, or other derivative instruments shall not constitute purchasing se-
curities on margin.
(3) Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and then
such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of the
Fund's total assets at the time of the borrowing or investment.
(4) Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions there-
of) if, as a result, more than 5% of its net assets would be invested in the
securities of issuers that, including predecessors or unconditional guarantors,
have a record of less than three years of continuous operation. This policy
does not apply to securities of pooled investment vehicles or mortgage or as-
set-backed securities.
(5) Purchase securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and applicable state law.
(6) Enter into futures contracts or related options if more than 30% of the
Fund's net assets would be represented by futures contracts or more than 5% of
the Fund's net assets would be committed to initial margin deposits and premi-
ums on futures contracts and related options.
(7) Invest in direct interests in oil, gas or other mineral exploration pro-
grams or leases; however, the Fund may invest in the securities of issuers that
engage in these activities.
(8) Purchase securities when borrowings exceed 5% of its total assets. If due
to market fluctuations or other reasons, the value of the Fund's assets falls
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so.
(9) Each Fund may not invest in illiquid securities if, as a result of such in-
vestment, more than 15% of the Fund's net assets would be invested in illiquid
securities.
B-4
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds' investment
objectives, policies, and techniques that are described in the Prospectus for
each Fund.
Investment in Municipal Obligations
Portfolio Investments
Except to the extent the Muni/Stock Fund invests in temporary investments as
described below, all of the Muni/Stock Fund's investments in Municipal Obliga-
tions will be comprised of tax-exempt Municipal Obligations that are either (1)
rated, at the time of purchase, within the four highest grades (Baa or BBB or
better) by Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's
Ratings Group ("S&P") or (2) unrated but which, in the opinion of the NIAC,
have credit characteristics equivalent to, and will be of comparable quality
to, Municipal Obligations so rated; provided, however, that not more than 20%
of the Muni/Stock Fund's investments in Municipal Obligations, may be in such
unrated bonds. The foregoing policies are fundamental policies of the
Muni/Stock Fund. Municipal Securities rated Baa or BBB are considered "invest-
ment grade" securities; Municipal Securities rated Baa are considered medium
grade obligations which lack outstanding investment characteristics and in fact
have speculative characteristics as well, while Municipal Securities rated BBB
are regarded as having an adequate capacity to pay principal and interest. Mu-
nicipal Securities rated AAA in which the Fund may invest may have been so
rated on the basis of the existence of insurance guaranteeing the timely pay-
ment, when due, of all principal and interest. A general description of Moody's
and S&P's ratings is set forth in Appendix A hereto. The ratings of Moody's and
S&P represent their opinions as to the quality of the Municipal Securities they
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Municipal Securities with the same
maturity, coupon and rating may have different yields while obligations of the
same maturity and coupon with different ratings may have the same yield.
The foregoing policies as to rating of investments in securities will apply
only at the time of the purchase of a security, and the Fund will not be re-
quired to dispose of securities in the event Moody's or S&P downgrades its as-
sessment of the credit characteristics of a particular issuer.
The municipal portfolio manager of the Muni/Stock Fund pursues a value oriented
approach for selecting municipal securities by seeking to identify underrated
or undervalued Municipal Obligations. Underrated Municipal Obligations are
those whose ratings do not, in Nuveen Institutional Advisory Corp.'s ("NIAC")
opinion, reflect their true value. Such Municipal Obligations may be underrated
because of the time that has elapsed since their rating was assigned or re-
viewed, or because of positive factors that may not have been fully taken into
account by rating agencies, or for other similar reasons. Municipal Obligations
that are undervalued or that represent undervalued municipal market sectors are
Municipal Obligations that, in NIAC's opinion, are worth more than the value
assigned to them in the marketplace. Municipal Obligations of particular types
or purposes (e.g., hospital bonds, industrial revenue bonds or bonds issued by
a particular municipal issuer) may be undervalued because there is a temporary
excess of supply in that market sector, or because of a general decline in the
market price of Municipal
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Obligations of the market sector for reasons that do not apply to the particu-
lar Municipal Obligations that are considered undervalued. The Muni/Stock
Fund's investment in underrated or undervalued Municipal Obligations will be
based on NIAC's belief that their prices should ultimately reflect their true
value.
The Muni/Stock Fund has not established any limit on the percentage of its
portfolio of investments that may be invested in Municipal Obligations subject
to the alternative minimum tax provisions of Federal tax law. Consequently, a
substantial portion of the current income produced by the Fund may be
includable in alternative minimum taxable income. Special considerations apply
to corporate investors. See "Tax Matters."
Also included within the general category of Municipal Obligations described
in the Muni/Stock Fund Prospectus are participations in lease obligations or
installment purchase contract obligations (hereinafter collectively called
"Municipal Lease Obligations") of municipal authorities or entities. Although
a Municipal Lease Obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged, a Municipal
Lease Obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the Municipal Lease Obliga-
tion. However, certain Municipal Lease Obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In the case of a "non-appropriation" lease,
the Fund's ability to recover under the lease in the event of non-appropria-
tion or default will be limited solely to the repossession of the leased prop-
erty, without recourse to the general credit of the lessee, and disposition or
releasing of the property might prove difficult. The Muni/Stock Fund will seek
to minimize these risks by not investing more than 20% of the assets allocated
to investments in Municipal Obligations in Municipal Lease Obligations that
contain "non-appropriation" clauses, and by only investing in those "non-ap-
propriation" Municipal Lease Obligations where (1) the nature of the leased
equipment or property is such that its ownership or use is essential to a gov-
ernmental function of the municipality, (2) appropriate covenants will be ob-
tained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (3) the lease obli-
gor has maintained good market acceptability in the past, and (4) the invest-
ment is of a size that will be attractive to institutional investors.
During temporary defensive periods (e.g., times when, in NIAC's opinion, the
ability of a Fund to meet its long-term investment objectives and preserve the
asset value of a Fund may be adversely affected by significant adverse market,
economic, political, or other circumstances), and in order to keep cash on
hand fully invested, a Fund may invest any percentage of its assets in tempo-
rary investments. Temporary investments may be either tax-exempt or taxable.
To the extent the Muni/Stock Fund invests in taxable temporary investments,
the Fund will not at such times be in a position to achieve that portion of
its investment objective of seeking income exempt from federal income tax. For
further information, see "Short-Term Investments" below.
Obligations of issuers of Municipal Securities are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the obliga-
tions of such issuers may become subject to the laws enacted in the future by
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Congress, state legislatures or referenda extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
Municipal Obligations may be materially affected.
Cash Equivalents and Short-Term Investments
Short-Term Taxable Fixed Income Securities
The Growth/Income Fund may invest up to 35% of its total assets, and for tempo-
rary 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 secu-
rities 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") and having a
maturity of one year or less. The Stock/Bond Fund may invest up to 20% 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 D&P and hav-
ing a maturity of one year or less. The Muni/Stock Fund may invest up to 10% 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, although the Fund intends to invest in
taxable temporary investments only in the event that suitable tax-exempt tempo-
rary investments are not available at reasonable prices and yields. Short-term
taxable fixed income securities are defined to include, without limitation, the
following:
(1) Each Fund may invest in U.S. government securities, including bills, notes
and bonds differing as to maturity and rates of interest, which are either is-
sued or guaranteed by the U.S. Treasury or by U.S. government agencies or in-
strumentalities. U.S. government agency securities include securities issued by
(a) the Federal Housing Administration, Farmers Home Administration, Export-Im-
port Bank of the United States, Small Business Administration, and the Govern-
ment National Mortgage Association, whose securities are supported by the full
faith and credit of the United States; (b) the Federal Home Loan Banks, Federal
Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities
are supported by the right of the agency to borrow from the U.S. Treasury; (c)
the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain obliga-
tions of the agency or instrumentality; and (d) the Student Loan Marketing As-
sociation, whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored agen-
cies 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 in-
strumentalities do not guarantee the market value of their securities, and con-
sequently, the value of such securities may fluctuate. The Muni/Stock Fund may
only invest in government securities with maturities of less than one year or
that have a variable or floating rate of interest.
(2) Each Fund may invest in certificates of deposit issued against funds depos-
ited in a bank or savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and
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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. The Muni/Stock Fund may only invest in certificates of de-
posit issued by U.S. banks with at least $1 billion in assets.
(3) The Growth/Income Fund and the Stock/Bond Fund may invest in bankers' ac-
ceptances 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, uncondi-
tionally 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 spe-
cific maturity.
(4) Each Fund may invest in repurchase agreements which involve purchases of
debt securities. In such an action, at the time the Fund purchases the securi-
ty, it simultaneously agrees to resell and redeliver the security to the sell-
er, who also simultaneously agrees to buy back the security at a fixed price
and time. This assures a predetermined yield for a Fund during its holding pe-
riod since the resale price is always greater than the purchase price and re-
flects an agreed-upon market rate. Such actions afford an opportunity for the
Fund to invest temporarily available cash. A Fund may enter into repurchase
agreements only with respect to obligations of the U.S. government, its agen-
cies 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 a Fund is lim-
ited 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 af-
fected 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 a Fund. If the seller were to be subject to
a federal bankruptcy proceeding, the ability of a Fund to liquidate the collat-
eral could be delayed or impaired because of certain provisions of the bank-
ruptcy laws.
(5) The Growth/Income 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 with-
drawal of such time deposits, in which case the yields of these investments
will be reduced.
(6) Each Fund may invest in commercial paper, which are short-term unsecured
promissory notes, including variable rate master demand notes issued by corpo-
rations to finance their current operations. Master demand notes are direct
lending arrangements between the Fund and a corporation. There is no
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<PAGE>
secondary market for the notes. However, they are redeemable by the Fund at any
time. The portfolio manager will consider the financial condition of the corpo-
ration (e.g., earning power, cash flow, and other liquidity ratios) and will
continuously monitor the corporation's ability to meet all of its financial ob-
ligations, because the Fund's liquidity might be impaired if the corporation
were unable to pay principal and interest on demand. The Growth/Income Fund and
the Stock/Bond Fund may only invest in commercial paper rated A-1 or better by
S&P, Prime-1 or higher by Moody's, Duff 2 or higher by D&P or Fitch 2 or higher
by Fitch. The Muni/Stock Fund may only invest in commercial paper, corporate
notes, corporate bonds or corporate debentures that are rated within the high-
est grade by Moody's or S&P and which mature within one year of the date of
purchase or carry a variable or floating rate of interest.
Short-Term Tax-Exempt Fixed Income Securities
The Muni/Stock Fund may invest up to 10% of its total assets and during certain
temporary periods, in order to keep cash on hand fully invested or as a defen-
sive measure in response to prevailing market conditions, up to 100% of its to-
tal assets as "temporary investments" in cash equivalent and short-term fixed
income securities that are either taxable or tax-exempt. The short-term taxable
fixed income securities are described above. Short-term tax-exempt fixed income
securities are securities that are exempt from regular federal income tax and
mature within three years or less from the date of issuance. Short-term tax-ex-
empt fixed income securities are defined to include, without limitation, the
following:
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. Tax anticipation notes are usually
general obligations of the issuer. A weakness in an issuer's capacity to raise
taxes due to, among other things, a decline in its tax base or a rise in delin-
quencies, could adversely affect the issuer's ability to meet its obligations
on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they also constitute general obliga-
tions of the issuer. A decline in the receipt of projected revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and in-
terest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those
described above to commercial banks as evidence of borrowings. The purposes for
which the notes are issued are varied but they are frequently issued to meet
short-term working capital or capital-project needs. These notes may have risks
similar to the risks associated with TANs and RANs.
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<PAGE>
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available there-
from. Maturities of municipal paper generally will be shorter than the maturi-
ties of TANs, BANs or RANs. There is a limited secondary market for issues of
municipal paper.
Certain Municipal Obligations may carry variable or floating rates of interest
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indices, such as a bank prime rate or a tax-exempt money mar-
ket index.
While the various types of notes described above as a group represent the ma-
jor portion of the tax-exempt note market, other types of notes are occasion-
ally available in the marketplace and the Muni/Stock Fund may invest in such
other types of notes to the extent permitted under its investment objective,
policies and limitations. Such notes may be issued for different purposes and
may be secured differently from those mentioned above.
Equity Securities
Under normal market conditions, the Funds will invest the assets allocated to
equity investments primarily in equity securities of domestic companies with
market capitalizations of at least $500 million ("Equity Securities"). Equity
Securities include, but are not limited to, 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. The Growth/Income Fund, under
normal market conditions, will invest at least 65% of its total assets in Eq-
uity Securities which do not include warrants or rights to purchase common
stock. Through its investment strategy the Growth/Income Fund seeks to provide
higher returns over time than the S&P 500 with an equal or lower level of
risk.
Convertible bonds and debentures must be rated Baa or higher by Moody's or BBB
or higher by S&P, D&P or Fitch. Bonds rated Baa or BBB, although considered
investment grade, have speculative characteristics and may be subject to
greater fluctuations in value than higher-rated bonds.
In addition, the Funds may invest in dollar-denominated equity securities of
foreign issuers, including American Depository Receipts ("ADRs") as described
in "Foreign Securities" below.
Hedging Strategies
General Description of Hedging Strategies
Each Fund may engage in hedging activities. NIAC or Institutional Capital Cor-
poration ("ICAP") may cause a Fund to utilize a variety of financial instru-
ments, including options, futures contracts (sometimes referred to as
"futures"), forward contracts and options on futures contracts to attempt to
hedge the Fund's holdings.
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<PAGE>
Hedging or derivative 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. Such instruments may also be used to "lock-in"
realized but unrecognized gains in the value of portfolio securities. 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. Hedging strategies, if successful, can reduce the risk of
loss by wholly and partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging strategies
can also reduce the opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. A Fund may also use deriv-
ative instruments to manage the risks of its assets. Risk management strategies
include, but are not limited to, facilitating the sale of Fund securities, man-
aging the effective maturity or duration of debt obligations that the Fund
holds, establishing a position in the derivatives markets as a substitute for
buying or selling certain securities or creating or altering exposure to cer-
tain asset classes, such as debt and foreign securities. The use of derivative
instruments may provide a less expensive, more expedient, or more specifically
focused way for a Portfolio to invest than would "traditional" securities
(i.e., stocks or bonds). The use of hedging instruments is subject to applica-
ble regulations of the Securities and Exchange Commission (the "SEC"), the sev-
eral options and futures exchanges upon which they are traded, the Commodity
Futures Trading Commission (the "CFTC") and various state regulatory authori-
ties. In addition, the Fund's ability to use hedging instruments will be lim-
ited by tax considerations.
General Limitations on Futures and Options Transactions
The Trust has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for a Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations. A 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 a Fund's total assets. In addition, a
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 a Fund and may be
changed without shareholder approval as regulatory agencies permit. Various ex-
changes and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to in-
crease the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
Each Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered invest-
ment companies and, if the guidelines so require, will set aside cash, U.S.
government securities, high grade liquid debt securities and/or other liquid
assets permitted by the SEC and CFTC in a segregated custodial account in the
amount prescribed. Securities held in a segregated account cannot be sold while
the futures or options position is outstanding, unless replaced with other per-
missible assets, and will be marked-to-market daily.
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<PAGE>
Stock Index Options
Each Fund may (i) purchase stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions, and/or (iii) write cov-
ered options on stock indexes for hedging purposes. Stock index options are put
options and call options on various stock indexes. In most respects, they are
identical to listed options on common stocks. The primary difference between
stock options and index options occurs when index options are exercised. In the
case of stock options, the underlying security, common stock, is delivered.
However, upon the exercise of an index option, settlement does not occur by de-
livery of the securities comprising the index. The option holder who exercises
the index option receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to the difference between the closing price of the stock index
and the exercise price of the option expressed in dollars times a specified
multiple.
A stock index fluctuates with changes in the market values of the stock in-
cluded in the index. For example, some stock index options are based on a broad
market index, such as the Standard & Poor's 500 or the Value Line Composite In-
dex or a narrower market index, such as the Standard & Poor's 100. Indexes may
also be based on an industry or market segment, such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indexes
are currently traded on the following exchanges: the Chicago Board of Options
Exchange, the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
A Fund's use of stock index options is subject to certain risks. Successful use
by the Funds of options on stock indexes will be subject to the ability of ICAP
to correctly predict movements in the directions of the stock market. This re-
quires different skills and techniques than predicting changes in the prices of
individual securities. In addition, a Fund's ability to effectively hedge all
or a portion of the securities in its portfolio, in anticipation of or during a
market decline through transactions in put options on stock indexes, depends on
the degree to which price movements in the underlying index correlate with the
price movements of the securities held by a Fund. Inasmuch as a Fund's securi-
ties will not duplicate the components of an index, the correlation will not be
perfect. Consequently, each Fund will bear the risk that the prices of its se-
curities being hedged will not move in the same amount as the prices of its put
options on the stock indexes. It is also possible that there may be a negative
correlation between the index and a Fund's securities which would result in a
loss on both such securities and the options on stock indexes acquired by the
Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of stock index
options involves the risk that the premium and transaction costs paid by a Fund
in purchasing an option will be lost as a result of unanticipated movements in
prices of the securities comprising the stock index on which the option is
based. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Fund.
B-12
<PAGE>
Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If a Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned securi-
ties in order to satisfy its obligation under the option to deliver such secu-
rities. If a Fund is unable to effect a closing sale transaction with respect
to options on securities that it has purchased, it would have to exercise the
option in order to realize any profit and would incur transaction costs upon
the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Funds.
Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Funds. Expiration of a call option written by a Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
If a Fund writes options, or purchases puts that are subject to the loss defer-
ral rules of Section 1092 of the Internal Revenue Code of 1986, as amended (the
"Code"), any losses on such options transactions, to the extent they do not ex-
ceed the unrecognized gains on the securities covering the options, may be sub-
ject to deferral until the securities covering the options have been sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Funds will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition, cer-
tain of 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
Each Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge against
movements in the equity markets, in order to establish more definitely the ef-
fective return on securities held or intended to be acquired by the Funds or
for other purposes permissible under the CEA. Each Fund's hedging may include
sales of Futures as an offset against the effect of expected declines in stock
prices and purchases of Futures as an offset against the effect of expected in-
creases in stock prices. The Funds will not enter into Futures Contracts which
are
B-13
<PAGE>
prohibited under the CEA and will, to the extent required by regulatory author-
ities, enter only into Futures Contracts that are traded on national futures
exchanges and are standardized as to maturity date and underlying financial in-
strument. The principal interest rate Futures exchanges in the United States
are the Board of Trade of the City of Chicago and the Chicago Mercantile Ex-
change. Futures exchanges and trading are regulated under the CEA by the CFTC.
An interest rate futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial instru-
ment (e.g., a debt security) or currency for a specified price at a designated
date, time and place. 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 orig-
inally 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 Funds will be able to enter into
an offsetting transaction with respect to a particular Futures Contract at a
particular time. If the Funds are not able to enter into an offsetting transac-
tion, the Funds will continue to be required to maintain the margin deposits on
the Futures Contract.
Margin is the amount of funds that must be deposited by each Fund with its cus-
todian in a segregated account in the name of the futures commission merchant
in order to initiate Futures trading and to maintain the Fund's open positions
in Futures Contracts. A margin deposit is intended to ensure the Fund's perfor-
mance of the Futures Contract. The margin required for a particular Futures
Contract is set by the exchange on which the Futures Contract is traded and may
be significantly modified from time to time by the exchange during the term of
the Futures Contract. Futures Contracts are customarily purchased and sold on
margins that may range upward from less than 5% of the value of the Futures
Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if
the value of a position increases because of favorable price changes in the
Futures Contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Fund. In computing daily net asset value,
each Fund will mark to market the current value of its open Futures Contracts.
The Funds expect to earn interest income on their margin deposits.
Because of the low margin deposits required, Futures trading involves an ex-
tremely high degree of leverage. As a result, a relatively small price movement
in a Futures Contract may result in immediate
B-14
<PAGE>
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 mar-
gin, a subsequent 10% decrease in the value of the Futures Contract would re-
sult in a total loss of the margin deposit, before any deduction for the trans-
action 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. How-
ever, a 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 estab-
lishes the maximum amount that the price of a Futures Contract may vary either
up or down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular type of Futures
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of Futures positions and sub-
jecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Funds seek to close out a Futures position. The Funds would continue to be re-
quired to meet margin requirements until the position is closed, possibly re-
sulting in a decline in the Funds' net asset value. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active second-
ary market will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes, in-
cluding, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
Options on Futures
Each Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate
an existing position. A futures option gives the holder the right, in return of
the premium paid, to assume a long position (call) or short position (put) in a
Futures Contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the Futures Contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or expira-
tion, a futures option may be closed out by an offsetting purchase or sale of a
futures option of the same series.
The Funds may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Funds use put and call options on se-
curities or indexes. The purchase of put options on Futures Contracts is analo-
gous to the purchase of puts on securities or indexes so as to hedge the Funds'
securities holdings against the risk of declining market prices. The writing of
a call option or the purchasing of a put option on a Futures Contract consti-
tutes a partial hedge against declining prices of the securities which
B-15
<PAGE>
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 securi-
ties. If the futures price when the option is exercised is above the exercise
price, however, the Fund will incur a loss, which may be offset, in whole or in
part, by the increase in the value of the securities held by the Fund that were
being hedged. Writing a put option or purchasing a call option on a Futures
Contract serves as a partial hedge against an increase in the value of the se-
curities the Fund intends to acquire.
As with investments in Futures Contracts, each Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts writ-
ten by it. Such margin deposits will vary depending on the nature of the under-
lying Futures Contract (and the related initial margin requirements), the cur-
rent market value of the option, and other futures positions held by the Fund.
The Funds will set aside in a segregated account at the Funds' custodian liquid
assets, such as cash, U.S. government securities or other high grade liquid
debt obligations equal in value to the amount due on the underlying obligation.
Such segregated assets will be marked-to-market daily, and additional assets
will be placed in the segregated account whenever the total value of the segre-
gated account falls below the amount due on the underlying obligation.
The risks associated with the use of options on Futures Contracts include the
risk that a Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Funds' successful use of options on Futures Contracts depends on ICAP's ability
to correctly predict the movement in prices of Futures Contracts and the under-
lying instruments, which may prove to be incorrect. In addition, there may be
imperfect correlation between the instruments being hedged and the Futures Con-
tract subject to the option. For additional information, see "Futures Con-
tracts." Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures con-
tracts might not correlate perfectly with movements in the prices of the in-
vestments being hedged. For example, all participants in the futures and op-
tions on futures contracts markets are subject to daily variation margin calls
and might be compelled to liquidate futures or options on futures contracts po-
sitions whose prices are moving unfavorably to avoid being subject to further
calls. These liquidations could increase the price volatility of the instru-
ments and distort the normal price relationship between the futures or options
and the investments being hedged. Also, because of initial margin deposit re-
quirements in markets, there might be increased participation by speculators in
the futures markets. This participation also might cause temporary price dis-
tortions. In addition, activities of large traders in both the futures and se-
curities markets involving arbitrage, "program trading," and other investment
strategies might result in temporary price distortions.
Federal Income Tax Treatment of Futures Contracts
For federal income tax purposes, each Fund is required to recognize as income
for each taxable year its net unrealized gains and losses on Futures Contracts
as of the end of the year, as well as gains and losses 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.
B-16
<PAGE>
Sales of Futures Contracts that are intended to hedge against a change in the
value of securities held by a Fund may affect the holding period of such secu-
rities and, consequently, the nature of the gain or loss on such securities
upon disposition.
The Funds will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Funds' fiscal year) on Futures transactions. Such dis-
tributions will be combined with distributions of capital gains realized on the
Funds' other investments and shareholders will be advised of the nature of the
payments.
Risks and Special Considerations Concerning Derivatives
The use of derivative instruments involves certain general risks and considera-
tions as described below. The specific risks pertaining to certain types of de-
rivative instruments are described in the sections that follow.
(1) Market Risk. Market risk is the risk that the value of the underlying as-
sets may go up or down. Adverse movements in the value of an underlying asset
can expose the Fund to losses. Market risk is the primary risk associated with
derivative transactions. Derivative instruments may include elements of lever-
age and, accordingly, fluctuations in the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of deriv-
ative instruments depends upon a variety of factors, particularly the portfolio
manager's ability to predict movements of the securities, currencies, and com-
modities markets, which may require different skills than predicting changes in
the prices of individual securities. There can be no assurance that any partic-
ular strategy adopted will succeed. A decision to engage in a derivative trans-
action will reflect the portfolio manager's judgment that the derivative trans-
action will provide value to the Fund and its shareholders and is consistent
with the Fund's objectives, investment limitations, and operating policies. In
making such a judgment, the portfolio manager will analyze the benefits and
risks of the derivative transactions and weigh them in the context of the
Fund's overall investments and investment objective.
(2) Credit Risk. Credit risk is the risk that a loss may be sustained as a re-
sult of the failure of a counterpart to comply with the terms of a derivative
instrument. The counterparty risk for exchange-traded derivatives is generally
less than for privately-negotiated or OTC derivatives, since generally a clear-
ing agency, which is the issuer or counterparty to each exchange-traded instru-
ment, provides a guarantee of performance. For privately-negotiated instru-
ments, there is no similar clearing agency guarantee. In all transactions, the
Fund will bear the risk that the counterparty will default, and this could re-
sult in a loss of the expected benefit of the derivative transactions and pos-
sibly other losses to the Fund. The Fund will enter into transactions in deriv-
ative instruments only within counterparties that their respective portfolio
manager reasonably believes are capable of performing under the contract.
(3) Correlation Risk. Correlation risk is the risk that there might be an im-
perfect correlation, or even no correlation, between price movements of a de-
rivative instrument and price movements of investments being hedged. When a de-
rivative transaction is used to completely hedge another position, changes in
the market value of the combined position (the derivative instrument plus the
position being hedged) result from an imperfect correlation between the price
movements of the two instruments. With a perfect hedge, the value of the com-
bined position remains unchanged with any change in the price of
B-17
<PAGE>
the underlying asset. With an imperfect hedge, the value of the derivative in-
strument and its hedge are not perfectly correlated. For example, if the value
of a derivative instrument used in a short hedge (such as writing a call op-
tion, buying a put option or selling a futures contract) increased by less
than the decline in value of the hedged investments, the hedge would not be
perfectly correlated. This might occur due to factors unrelated to the value
of the investments being hedged, such as speculative or other pressures on the
markets in which these instruments are traded. The effectiveness of hedges us-
ing instruments on indices will depend, in part, on the degree of correlation
between price movements in the index and the price movements in the invest-
ments being hedged.
(4) Liquidity Risk. Liquidity risk is the risk that a derivative instrument
cannot be sold, closed out, or replaced quickly at or very close to its funda-
mental value. Generally, exchange contracts are very liquid because the ex-
change clearinghouse is the counterparty of every contract. OTC transactions
are less liquid than exchange-traded derivatives since they often can only be
closed out with the other party to the transaction. The Fund might be required
by applicable regulatory requirements to maintain assets as "cover," maintain
segregated accounts, and/or make margin payments when it takes positions in
derivative instruments involving obligations to third parties (i.e., instru-
ments other than purchase options). If the Fund is unable to close out its po-
sitions in such instruments, it might be required to continue to maintain such
assets or accounts or make such payments until the position expires, matures,
or is closed out. These requirements might impair a Fund's ability to sell a
security or make an investment at a time when it would otherwise be favorable
to do so, or require that the Fund sell a portfolio security at a disadvanta-
geous time. The Fund's ability to sell or close out a position in an instru-
ment prior to expiration or maturity depends upon the existence of a liquid
secondary market or, in the absence of such a market, the ability and willing-
ness of the counterparty to enter into a transaction closing out the position.
Due to liquidity risk, there is no assurance that any derivatives position can
be sold or closed out at a time and price that is favorable to a Fund.
(5) Legal Risk. Legal risk is the risk of loss caused by the unenforceability
of a party's obligations under the derivative. While a party seeking price
certainty agrees to surrender the potential upside in exchange for downside
protection, the party taking the risk is looking for a positive payoff. De-
spite this voluntary assumption of risk, a counterparty that has lost money in
a derivative transaction may try to avoid payment by exploiting various legal
uncertainties about certain derivative products.
(6) Systemic or "Interconnection" Risk. Systemic or interconnection risk is
the risk that a disruption in the financial markets will cause difficulties
for all market participants. In other words, a disruption in one market will
spill over into other markets, perhaps creating a chain reaction. Much of the
OTC derivatives market takes place among the OTC dealers themselves, thus cre-
ating a large interconnected web of financial obligations. This
interconnectedness raises the possibility that a default by one large dealer
could create losses for other dealers and destabilize the entire market for
OTC derivative instruments.
B-18
<PAGE>
Other Investment Policies and Techniques
Illiquid Securities
Each Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction, illiquid securities in-
clude, but are not limited to, restricted securities (securities the disposi-
tion 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 ICAP the day-to-day determination of the illiquidity of any
equity or taxable fixed-income security and to NIAC as to any municipal secu-
rity, although it has retained oversight and ultimate responsibility for such
determinations. Although no definitive liquidity criteria are used, the Board
of Trustees has directed ICAP and NIAC to look to such factors as (i) the na-
ture 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 nor-
mally needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer), (ii) the terms of certain securities or other in-
struments 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 ef-
fect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a 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 pre-
vailed 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 re-
stricted securities which are not readily marketable, the affected Fund will
take such steps as is deemed advisable, if any, to protect liquidity.
Short Sales Against the Box
When ICAP believes that the price of a particular security held by a Fund may
decline, it may make "short sales against the box" to hedge the unrealized
gain on such security. Selling short against the box involves selling a secu-
rity which a Fund owns for delivery at a specified date in the future. The
Funds will limit their transactions in short sales against the box to 5% of
their net assets. In addition, a 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, a 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
B-19
<PAGE>
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. A Fund may
also be required to pay a premium for short sales which would partially offset
any gain.
Warrants
Each Fund may invest in warrants if, after giving effect thereto, not more than
5% of its net assets will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5%, not more than 2% of its
assets at the time of purchase may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. Investing in
warrants is purely speculative in that they have no voting rights, pay no divi-
dends, and have no rights with respect to the assets of the corporation issuing
them. Warrants basically are options to purchase equity securities at a spe-
cific price for a specific period of time. They do not represent ownership of
the securities but only the right to buy them. Warrants are issued by the is-
suer of the security, which may be purchased on their exercise. The prices of
warrants do not necessarily parallel the prices of the underlying securities.
When-Issued Securities
Each Fund may from time to time purchase securities on a "when-issued" or other
delayed-delivery basis. The price of securities purchased on a when-issued ba-
sis 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 pur-
chase and settlement, no payment is made by a Fund to the issuer and no inter-
est is accrued on debt securities or dividend income is earned on equity secu-
rities. Forward commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, which risk is in addi-
tion to the risk of decline in value of the Fund's other assets. While when-is-
sued securities may be sold prior to the settlement date, the Funds intend to
purchase such securities with the purpose of actually acquiring them. At the
time a Fund makes the commitment to purchase a security on a when-issued basis,
it will record the transaction and reflect the value of the security in deter-
mining its net asset value. The Funds do not believe that net asset value will
be adversely affected by purchases of securities on a when-issued basis.
Each Fund will maintain cash, U.S. government securities and high grade liquid
debt securities equal in value to commitments for when-issued securities. Such
segregated securities either will mature or, if necessary, be sold on or before
the settlement date. When the time comes to pay for when-issued securities,
each Fund will meet its obligations from then available cash flow, sale of the
securities held in the separate account (described above) sale of other securi-
ties or, although it would not normally expect to do so, from the sale of the
when-issued securities themselves (which may have a market value greater or
less than each Fund's payment obligation).
Unseasoned Companies
Each Fund may not invest more than 5% of its net assets in unseasoned issuers.
While smaller companies generally have potential for rapid growth, they often
involve higher risks because they lack the management experience, financial re-
sources, product diversification, and competitive strengths of larger
B-20
<PAGE>
corporations. Also, in many instances, the securities of smaller companies are
traded only over-the-counter or on regional securities exchanges, and the fre-
quency and volume of their trading is substantially less than is typical of
larger companies. Therefore, the securities of smaller companies may be subject
to wider price fluctuations. When making large sales, the Fund may have to sell
portfolio holdings of small companies at discounts from quoted prices or may
have to make a series of smaller sales over an extended period of time due to
the trading volume in smaller company securities.
Foreign Securities
Each Fund may invest up to 25% of its net assets in foreign securities denomi-
nated in U.S. dollars. Investments in securities of foreign issuers involve
risks in addition to the usual risks inherent in domestic investments, includ-
ing currency risks. The value of a foreign security in U.S. dollars tends to
decrease when the value of the U.S. dollar rises against the foreign currency
in which the security is denominated and tends to increase when the value of
the U.S. dollar falls against such currency.
Foreign securities are affected by the fact that in many countries there is
less publicly available information about issuers than is available in the re-
ports and ratings published about companies in the U.S. and companies may not
be subject to uniform accounting, auditing and financial reporting standards.
Other risks inherent in foreign investments include expropriation; confiscatory
taxation; withholding taxes on dividends and interest; less extensive regula-
tion of foreign brokers, securities markets and issuers; diplomatic develop-
ments; and political or social instability. Foreign economies may differ favor-
ably or unfavorably from the U.S. economy in various respects, and many foreign
securities are less liquid and their prices tend to be more volatile than com-
parable U.S. securities. From time to time, foreign securities may be difficult
to liquidate rapidly without adverse price effects.
Foreign securities include American Depository Receipts ("ADRs"). ADRs are re-
ceipts typically issued by a U.S. bank or trust company evidencing ownership of
the underlying foreign security and denominated in U.S. dollars. ADRs do not
eliminate all the risk inherent in investing in foreign issuers, such as
changes in foreign currency exchange rates. However, by investing in ADRs
rather than directly in foreign issuers' stock, the Fund avoids currency risks
during the settlement period. Some ADRs may not be sponsored by the issuer.
Lending of Portfolio Securities
Each 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 contin-
uously by collateral at least equal to the value of the securities lent by
"marking to market" daily. A 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. A Fund may also re-
ceive 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
Under normal market conditions, the Muni/Stock Fund expect annual bond portfo-
lio turnover to be significantly less than 75% and the Stock/Bond Fund antici-
pates that its annual bond portfolio turnover
B-21
<PAGE>
rate will generally not exceed 75%. However, the rate of municipal turnover
will not be a limiting factor if it is desirable for the Muni/Stock Fund to
sell or purchase Municipal Obligations.
Each Fund anticipates that its annual equity portfolio turnover rate will be
between 100% and 150% under normal market conditions. A turnover rate of 100%
would occur, for example, if a Fund sold and replaced securities valued at 100%
of its net assets within one year. In the event a 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. In addition to the foregoing, the
Muni/Stock Fund may be required to purchase or sell Municipal Obligations and
Equity Securities pursuant to a required reallocation of assets and the antici-
pated portfolio turnover rates set forth above are made without regard to such
a reallocation of assets.
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed for the Fund under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is seven, two of
whom are "interested persons" (as the term "interested persons" is defined in
the Investment Company Act of 1940) and five of whom are "disinterested per-
sons." 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 per-
sons" of the Trust indicated by an asterisk.
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
- -------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 3/28/49 Chairman, President and Trustee Chairman (since July
333 West Wacker Drive 1996) and Director,
Chicago, IL 60606 formerly Executive Vice
President, of The John
Nuveen Company (from
March 1992 to July 1996)
and of John Nuveen & Co.
Incorporated; Director
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; Chairman
and Director of
Rittenhouse Financial
Services Inc. (since
1999); Chief Executive
Officer (since September
1999) of Nuveen Senior
Loan Asset Management
Inc.
- -------------------------------------------------------------------------------------------
Robert H. Lyon* 3/5/50 Trustee President and a Director
225 West Wacker Drive of the ICAP Funds Inc.
Chicago, IL 60606 (since its inception in
December 1994);
President, Chief
Investment Officer, and
a Director of
Institutional Capital.
- -------------------------------------------------------------------------------------------
James E. Bacon 2/27/31 Trustee Business consultant;
114 W. 47th St. retired.
New York, NY 10036
- -------------------------------------------------------------------------------------------
Jack B. Evans 10/22/48 Trustee President, The Hall-
115 Third Street, S.E. Perrine Foundation, a
Cedar Rapids, IA 52401 private philanthropic
corporation (since
1996); formerly
President and Chief
Operating Officer, SCI
Financial Group, Inc., a
regional financial
services firm.
</TABLE>
- --------------------------------------------------------------------------------
B-22
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------
<CAPTION>
Position and Principal Occupations
Name and Address Age Offices with Trust During Past Five Years
- -------------------------------------------------------------------------------------
<C> <C> <C> <S>
William L. Kissick 7/29/32 Trustee Professor, School of
University of Pennsylvania Medicine and the Wharton
224 NEB/2L School of Management and
Philadelphia, PA 19104 Chairman, Leonard Davis
Institute of Health
Economics, University of
Pennsylvania.
- -------------------------------------------------------------------------------------
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice
412 W. Franklin President in charge of
Wheaton, IL 60187 Municipal Underwriting
and Dealer Sales at The
Northern Trust Company.
- -------------------------------------------------------------------------------------
Sheila W. Wellington 2/24/32 Trustee President (since 1993)
250 Park Avenue of Catalyst (a not-for-
New York, NY 10003 profit organization
focusing on women's
leadership development
in business and the
professions).
- -------------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Senior Vice President Senior Vice President
333 West Wacker Drive and Assistant Secretary (since May 1999),
Chicago, IL 60606 formerly Vice President,
and General Counsel
(since September 1997)
and Secretary (since May
1998) of The John Nuveen
Company and John Nuveen
& Co. Incorporated; Vice
President (since
September 1997) and
Secretary (since July
1999) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; prior thereto,
Partner in the law firm
of Kirkland & Ellis;
Senior Vice President
and Secretary (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.
- -------------------------------------------------------------------------------------
Peter H. D'Arrigo 11/28/67 Vice President Vice President of John
333 West Wacker Drive and Treasurer Nuveen & Co.
Chicago, IL 60606 Incorporated, (January
1999); prior thereto,
Assistant Vice President
(January 1997);
formerly, Associate of
John Nuveen & Co.
Incorporated; Chartered
Financial Analyst; Vice
President and Treasurer
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.
- -------------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager
(since September 1991)
of Flagship Financial.
- -------------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
- -------------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995),
Chartered Financial
Analyst.
- -------------------------------------------------------------------------------------
Stephen D. Foy 5/31/54 Vice President and Vice President of John
333 West Wacker Drive Controller Nuveen & Co.
Chicago, IL 60606 Incorporated; Certified
Public Accountant; Vice
President (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.
- -------------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
- -------------------------------------------------------------------------------------
Richard A Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial.
- -------------------------------------------------------------------------------------
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
- -------------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President,
333 West Wacker Drive Assistant Secretary Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of John Nuveen &
Co. Incorporated; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp; Vice
President and Assistant
Secretary of Nuveen
Institutional Advisory
Corp.; Assistant
Secretary of The John
Nuveen Company and
(since January 1997)
Nuveen Asset Management;
Vice President and
Assistant Secretary
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.
</TABLE>
- --------------------------------------------------------------------------------
B-23
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Position and Principal Occupations
Name and Address Age Offices with Trust During Past Five Years
- -------------------------------------------------------------------------------
<C> <C> <C> <S>
Edward F. Neild, IV 7/7/65 Vice President Vice President (since
333 West Wacker Drive September 1996), previously
Chicago, IL 60606 Assistant Vice President
(since December 1993) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto; Vice President
(since September 1996),
previously Assistant Vice
President (since May 1995)
of Nuveen Institutional
Advisory Corp., Portfolio
Manager prior thereto;
Chartered Financial
Analyst.
- -------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since
333 West Wacker Drive September 1997 of Nuveen
Chicago, IL 60606 Advisory Corp.), previously
Assistant Vice President
(since September 1996 of
Nuveen Advisory Corp.),
Portfolio Manager prior
thereto; Chartered
Financial Analyst.
- -------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory
Corp.; Chartered Financial
Analyst.
- -------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel, previously
Assistant General Counsel
of John Nuveen & Co.
Incorporated; Vice
President (since May 1993)
and Assistant Secretary of
Nuveen Advisory Corp. and
Nuveen Institutional
Advisory Corp.; Assistant
Secretary of The John
Nuveen Company; Vice
President and Assistant
Secretary (since September
1999) of Nuveen Senior Loan
Asset Management Inc.;
Chartered Financial
Analyst.
</TABLE>
- -------------------------------------------------------------------------------
Thomas E. Leafstrand and Timothy R. Schwertfeger serve as members of the Exec-
utive 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.
The trustees of the Trust (other than Mr. Lyon) are trustees of eleven open-
end and closed-end funds advised by NIAC. Mr. Lyon is also a director of ICAP
and ICAP Funds, Inc. None of the independent trustees has ever been a direc-
tor, officer, or employee of, or a consultant to, NIAC, Nuveen or their affil-
iates.
Mr. Schwertfeger is a director or trustee, as the case may be, of 89 Nuveen
open-end funds and closed-end funds advised by Nuveen Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees who are not designated "interested persons" during the Trust's fiscal
year ended June 30, 1999 and the total compensation that the Nuveen Funds paid
to such trustees during that one year period. The Trust has no retirement or
pension plans. The officers and trustees affiliated with Nuveen serve without
any compensation from the Trust.
<TABLE>
<CAPTION>
Total
Compensation
from Trust
Aggregate and Fund Deferred
Compensation Complex Compensation
from the Paid to Payable from
Name of Trustee Funds(2) Trustees(3) the Trust(1)
--------------- ------------ ------------ ------------
<S> <C> <C> <C>
James E. Bacon(1)................ $13,669 $31,250 $1,764
Jack B. Evans(1)................. $ 3,415 $ 9,750 $1,708
William L. Kissick(1)............ $13,669 $31,250 $1,588
Thomas E. Leafstrand(1).......... $14,602 $33,750 $1,813
Sheila W. Wellington(1).......... $13,669 $31,250 $3,415
</TABLE>
- --------
(1)Pursuant to a deferred compensation agreement with the Trust, deferred
amounts are treated as though an equivalent dollar amount has been invested
in shares of one or more eligible Nuveen Funds. The amounts provided are
the total deferred fees (including the return from the assumed investment
in the eligible Nuveen Funds) payable from the Trust.
B-24
<PAGE>
(2)The compensation paid to the independent trustees for the twelve months
ended June 30, 1999 for services to the Trust.
(3)Based on the compensation paid to the independent trustees for the twelve
months ended June 30, 1999 for services to the eleven open-end and closed-
end funds advised by NIAC.
Each trustee who is not affiliated with NIAC or ICAP receives a $35,000 annual
retainer for serving as a director or trustee of all funds for which NIAC
serves as investment adviser or manager and a $1,000 fee per day plus expenses
for attendance at all meetings held on a day on which a regularly scheduled
Board meeting is held, a $500 fee per day plus expenses for attendance in per-
son or a $500 fee per day plus expenses for attendance by telephone at a meet-
ing held on a day on which no regular Board meeting is held and a $100 fee per
day plus expenses for attendance in person or by telephone at a meeting of the
Executive Committee held solely to declare dividends. The annual retainer, fees
and expenses are allocated among the funds for which NIAC serves as investment
adviser or manager on the basis of relative net asset sizes. The Trust requires
no employees other than its officers, all of whom are compensated by NIAC or
Nuveen.
As of October 6, 1999, the officers and directors of each Fund, in the aggre-
gate, own less than 1% of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who, as
of October 6, 1999, owns of record, or is known by Registrant to own of record
or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
- ---------------------- ------------------------- ----------
<S> <C> <C>
Nuveen Growth and Income Stock
Fund American Express Trust Co. 39.62%
Class R Shares............... UA Jul 01 89
FBD Amer Exp. Trust Ret. Ser. Pl.
c/o Nancy Jendro
PO Box 534
Minneapolis, MN 55440-0534
Class A Shares............... Merrill Lynch, Pierce, Fenner & Smith 21.10%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class B Shares............... Merrill Lynch, Pierce, Fenner & Smith 34.42%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class C Shares............... Merrill Lynch, Pierce, Fenner & Smith 48.37%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
</TABLE>
B-25
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
- ---------------------- ------------------------- ----------
<S> <C> <C>
Nuveen Balanced Stock and Bond
Fund Northern Trust Co. Trust 68.58%
Class R Shares............... John Nuveen Scholarship Plan
c/o Diane Day
P.O. Box 92956
Chicago, IL 60675-2956
American Express Trust Co. 7.98%
Amer Exp. Trust Ret. Ser. Pl.
c/o Nancy Jendro
P.O. Box 534
Minneapolis, MN 55440-0534
Class A Shares............... Merrill Lynch, Pierce, Fenner & Smith 22.17%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class B Shares............... Merrill Lynch, Pierce, Fenner & Smith 43.67%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class C Shares............... Merrill Lynch, Pierce, Fenner & Smith 65.33%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Nuveen Balanced Municipal and
Stock Fund Katherine Angers & B. Ronald Angers 14.97%
Class R Shares............... Arthur Angers & Leonard Angers
JT TEN WROS
113 Gullott Dr.
Schenectady, NY 12306-4317
Karen M. Bergan 16.49%
2109 Northwestern Ave.
Ames, IA 50010-4524
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
- ---------------------- ------------------------- ----------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith 23.29%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl. 3
Jacksonville, FL 32246-6484
Leonard Pearl 7.15%
and Joan D. Pearl
JT Wros
707 Mix Ave. Apt. 24
Hamden, CT 06514-2208
Geraldine P. Warren 22.39%
22 Sherwood Ln.
Colts Neck, NJ 07722-1128
Class A Shares................ Merrill Lynch, Pierce, Fenner & Smith 25.36%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Class B Shares................ Merrill Lynch, Pierce, Fenner & Smith 41.83%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Class C Shares................ Merrill Lynch, Pierce, Fenner & Smith 46.69%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
</TABLE>
B-27
<PAGE>
FUND MANAGER AND PORTFOLIO MANAGER
Fund Manager
NIAC acts as the manager of each Fund, with responsibility for the overall man-
agement of each Fund. Its address is 333 West Wacker Drive, Chicago, Illinois
60606. For the Growth/Income Fund and the Stock/Bond Fund, NIAC has entered
into a Sub-Advisory Agreement with ICAP under which ICAP, subject to NIAC's su-
pervision, manages the Fund's investment portfolio. For the Muni/Stock Fund,
NIAC has entered into a Sub-Advisory Agreement with ICAP under which ICAP, sub-
ject to NIAC's supervision, manages the Fund's equity investments. 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 ICAP, see "Who Manages the Funds" in
the Prospectus.
NIAC is a wholly-owned subsidiary of Nuveen, which is also the principal under-
writer of the Funds' shares. Nuveen is sponsor of the Nuveen Defined Portfo-
lios, 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 1,300,000 individuals have in-
vested to date in Nuveen's funds and defined portfolios. Founded in 1898,
Nuveen is a subsidiary of The John Nuveen Company which, in turn, is approxi-
mately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is lo-
cated in St. Paul, Minnesota, and is principally engaged in providing property-
liability insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, each of the
Funds has agreed to pay an annual management fee at rates set forth in the Pro-
spectus under "Management Fees." In addition, NIAC agreed to waive all or a
portion of its management fee or reimburse certain expenses of the Stock/Bond
Fund and the Muni/Stock Fund for the fiscal years ended July 31, 1997, July 31,
1998, July 31, 1999 and July 31, 2000 in order to prevent total operating ex-
penses (excluding distribution or service fees, and extraordinary expenses)
from exceeding .85%, .85%, .95% and .95%, respectively, and .95%, .95%, 1.05%
and 1.05%, respectively, for the Growth/Income Fund, of the average daily net
asset value of any class of shares of the Funds. The following table sets forth
the management fees (net of expenses reimbursements) paid by the Funds and the
fees waived and expenses reimbursed by the Funds for the three most recent fis-
cal years.
<TABLE>
<CAPTION>
Amount of Management Fees (Net Amount of Fees Waived and
of Expense Reimbursements) Expenses Reimbursed
-------------------------------- -----------------------------
8/7/96- 7/1/97- 7/1/98- 8/7/96- 7/1/97- 7/1/98-
6/30/97 6/30/98 6/30/99 6/30/97 6/30/98 6/30/99
---------- ---------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Growth and Income
Stock Fund............. $2,202,100 $5,206,320 $6,563,959 $ 283,295 $1,252,775 $347,366
Nuveen Balanced Stock
and Bond Fund.......... $ 0 $ 289,843 $ 505,439 $ 125,664 $ 296,989 $144,674
Nuveen Balanced
Municipal and Stock
Fund................... $ 10,679 $ 619,733 $1,303,718 $ 131,924 $ 323,541 $ 70,901
</TABLE>
In addition to the management fee, each Fund also pays a portion of the Nuveen
Investment Trust's general administrative expenses allocated in proportion to
the net assets of each fund. All fees and expenses are accrued daily and de-
ducted before payment of dividends to investors.
Sub-Adviser
ICAP was founded in 1970 and is located at 225 West Wacker Drive, Suite 2400,
Chicago, IL 60606. Under the Sub-Advisory Agreement for each Fund, ICAP is com-
pensated by NIAC for its investment
B-28
<PAGE>
advisory services with respect to all or a portion of each Fund's assets. Un-
der a Sub-Advisory Agreement with NIAC, ICAP manages the investment portfolios
of the Growth/Income Fund and the Stock/Bond Fund, and the equity portion of
the Muni/Stock Fund's investment portfolio.
Out of the fund management fee, NIAC pays ICAP 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. NIAC pays Institutional
Capital separate portfolio management fees for the equity and fixed-income
portions of the funds' assets, if applicable, according to the following
schedule:
<TABLE>
<CAPTION>
Assets of All the Nuveen-
Sponsored
Investment Products Managed by Equity Portfolio Fixed-Income Portfolio
Institutional Capital Management Fee Management Fee
------------------------------ ---------------- ----------------------
<S> <C> <C>
For the first $500 million..... .35% of 1% .20% of 1%
For the next $500 million...... .30% of 1% .15% of 1%
For assets over $1 billion..... .25% of 1% .12% of 1%
</TABLE>
The equity and fixed-income portfolio management fees are each paid on a spec-
ified proportion of fund net assets. The specified proportions for the equity
portfolio management fees are currently 100%, 55% and 35%, respectively, for
the Growth and Income Stock Fund, Balanced Stock and Bond Fund and Balanced
Municipal and Stock Fund. The specified proportion for the fixed-income port-
folio management fee is currently 45% for the Balanced Stock and Bond Fund.
ICAP's investment management strategy and operating policies are set through a
team approach, with all ICAP investment professionals contributing. ICAP cur-
rently maintains a staff of 13 investment professionals. Each of the invest-
ment officers and other professionals of ICAP 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 several times a week and attended by all professionals.
These meetings also provide for the ongoing review of ICAP's investment posi-
tions. Pertinent information from outside sources is shared and incorporated
into the investment outlook. The investment strategy, asset sectors, and indi-
vidual security holdings are reviewed to verify their continued appropriate-
ness. Investment recommendations are presented to the committee for decisions.
With regard to Fund assets subject to the Sub-Advisory Agreement, ICAP pro-
vides continuous advice and recommendations concerning the Fund's investments,
and is responsible for selecting the broker/ dealers who execute the portfolio
transactions. ICAP also serves as investment adviser to the ICAP Funds, Inc.
and to pension and profit-sharing plans, and other institutional and private
investors. ICAP has approximately $12 billion under management. Mr. Robert H.
Lyon, President of ICAP, owns shares representing 51% of the voting rights of
ICAP. The following table sets forth the fees paid by NIAC to ICAP for its
services for the three most recent fiscal years.
<TABLE>
<CAPTION>
Amount Paid by NIAC to ICAP
--------------------------------
8/7/96- 7/1/97- 7/1/98-
6/30/97 6/30/98 6/30/99
---------- ---------- ----------
<S> <C> <C> <C>
Nuveen Growth and Income Stock Fund............ $1,020,894 $2,569,309 $2,725,923
Nuveen Balanced Stock and Bond Fund............ $ 33,128 $ 144,823 $ 233,276
Nuveen Balanced Municipal and Stock Fund....... $ 19,194 $ 211,925 $ 210,040
</TABLE>
B-29
<PAGE>
PORTFOLIO TRANSACTIONS
NIAC (with respect to transactions in Municipal Obligations) and ICAP (with
respect to other transactions) are responsible for decisions to buy and sell
securities for the Funds and for the placement of the Funds' securities busi-
ness, 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 both NIAC and ICAP to
seek the best execution at the best security price available with respect to
each transaction, and with respect to brokered transactions, in light of the
overall quality of brokerage and research services provided to the respective
adviser and its advisees. The best price to the Funds means the best net price
without regard to the mix between purchase or sale price and commission, if
any. Purchases may be made from underwriters, dealers, and, on occasion, the
issuers. Commissions will be paid on the Funds' futures and options transac-
tions, if any. The purchase price of portfolio securities purchased from an
underwriter or dealer may include underwriting commissions and dealer spreads.
The Funds may pay mark-ups on principal transactions. In selecting broker-
dealers and in negotiating commissions, the portfolio manager considers, among
other things, the firm's reliability, the quality of its execution services on
a continuing basis and its financial condition. Brokerage will not be allo-
cated based on the sale of a Fund's shares. NIAC expects that all transactions
in Municipal Obligations will be effected on a principal (as opposed to an
agency) basis and, accordingly, does not expect to pay any brokerage commis-
sions on such transactions.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay
a broker or dealer who supplies brokerage and research services a commission
for effecting a transaction in excess of the amount of commission another bro-
ker or dealer would have charged for effecting the transaction. Brokerage and
research services include (a) furnishing advice as to the value of securities,
the advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b) fur-
nishing analyses and reports concerning issuers, industries, securities, eco-
nomic factors and trends, portfolio strategy, and the performance of accounts;
and (c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement, and custody).
In light of the above, in selecting brokers, ICAP considers investment and
market information and other research, such as economic, securities and per-
formance measurement research, provided by such brokers, and the quality and
reliability of brokerage services, including execution capability, perfor-
mance, and financial responsibility. Accordingly, the commissions charged by
any such broker may be greater than the amount another firm might charge if
ICAP determines in good faith that the amount of such commissions is reason-
able in relation to the value of the research information and brokerage serv-
ices provided by such broker to ICAP or the Funds. ICAP believes that the re-
search information received in this manner provides the Funds with benefits by
supplementing the research otherwise available to the Funds. The Management
Agreement and the Sub-Advisory Agreement provide that such higher commissions
will not be paid by the Funds unless the applicable adviser determines in good
faith that the amount is reasonable in relation to the services provided. The
investment advisory fees paid by the Funds to NIAC under the Management Agree-
ment or the subadvisory fees paid by NIAC to ICAP under the Sub-Advisory
Agreement are not reduced as a result of receipt by either NIAC or ICAP of re-
search services.
B-30
<PAGE>
NIAC and ICAP each place portfolio transactions for other advisory accounts
managed by them. Research services furnished by firms through which the Funds
effect their securities transactions may be used by NIAC and/or ICAP in servic-
ing all of its accounts; not all of such services may be used by NIAC and/or
ICAP in connection with the Funds. NIAC and ICAP believe it is not possible to
measure separately the benefits from research services to each of the accounts
(including the Funds) managed by them. Because the volume and nature of the
trading activities of the accounts are not uniform, the amount of commissions
in excess of those charged by another broker paid by each account for brokerage
and research services will vary. However, NIAC and ICAP believe such costs to
the Funds will not be disproportionate to the benefits received by the Funds on
a continuing basis. NIAC and ICAP seek to allocate portfolio transactions equi-
tably whenever concurrent decisions are made to purchase or sell securities by
the Funds 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 Funds. In making such allocations between the Fund and other advisory ac-
counts, the main factors considered by NIAC and ICAP are the respective invest-
ment objectives, the relative size of portfolio holdings of the same or compa-
rable securities, the availability of cash for investment and the size of in-
vestment commitments generally held.
The following table sets forth the aggregate amount of brokerage commissions
paid by the Funds for the three most recent fiscal years.
<TABLE>
<CAPTION>
Aggregate Amount of
Brokerage Commissions
------------------------------
8/7/96- 7/1/97- 7/1/98-
6/30/97 6/30/98 6/30/99
-------- ---------- ----------
<S> <C> <C> <C>
Nuveen Growth and Income Stock Fund.............. $724,508 $1,234,546 $1,521,387
Nuveen Balanced Stock and Bond Fund.............. $ 17,863 $ 74,793 $ 94,262
Nuveen Balanced Municipal and Stock Fund......... $ 19,614 $ 96,716 $ 125,054
</TABLE>
The differences between brokerage commissions paid by the Funds in the 1997
fiscal year, and the 1998 and 1999 fiscal years, was due, in part, to an in-
crease in portfolio activity, and that the Funds did not operate for a full
year during the 1997 fiscal year. During the fiscal year ended June 30, 1999,
the Growth/Income Fund, Stock/Bond Fund and Muni/Stock Fund paid to brokers as
commissions in return for research services $1,026,401, $61,959, and $84,850,
respectively, and the aggregate amount of those transactions per Fund on which
such commissions were paid was, $6,281,373,551, $432,680,771 and $98,292,884,
respectively.
Under the Investment Company Act of 1940, a Fund may not purchase portfolio se-
curities from any underwriting syndicate of which Nuveen is a member except un-
der certain limited conditions set forth in Rule 10f-3. The Rule sets forth re-
quirements relating to, among other things, the terms of a security purchased
by the Fund, the amount of securities that may be purchased in any one issue
and the assets of the Fund that may be invested in a particular issue. In addi-
tion, purchases of securities made pursuant to the terms of the Rule must be
approved at least quarterly by the Board of Trustees, including a majority of
the trustees who are not interested persons of the Trust.
NET ASSET VALUE
Each Fund's net asset value per share is determined separately for each class
of those 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
B-31
<PAGE>
"Exchange") is open for business. The Exchange is not open for trading on New
Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of
a class of shares of a Fund will be computed by dividing the value of the
Fund's assets attributable to the class, less the liabilities attributable to
the class, by the number of shares of the class outstanding. A 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 a Fund's total assets, including inter-
est or dividends accrued but not yet collected, less all liabilities, and di-
viding 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 na-
tional 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. Fixed-income securities are valued by a pricing service that values
portfolio securities at the mean between the quoted bid and asked prices or the
yield equivalent when quotations are readily available. Securities for which
quotations are not readily available (which are expected to constitute a major-
ity of the fixed-income securities held by a Fund) are valued at fair value as
determined by the pricing service using methods that include consideration of
the following: yields or prices of bonds 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 se-
curities having remaining maturities of 60 days or less when purchased are val-
ued 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, regard-
less of the impact of fluctuating interest rates on the market value of the se-
curity. Regardless of the method employed to value a particular security, all
valuations are subject to review by a 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 Prospectuses, each of the Funds intends to qualify under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") for
tax treatment as a regulated investment company. In order to qualify as a regu-
lated investment company, a Fund (i) must elect to be treated as a regulated
investment company and (ii) for each taxable year thereafter must satisfy cer-
tain 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
B-32
<PAGE>
interest) from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities, foreign cur-
rencies or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of invest-
ing in such stock, securities or currencies (the "90% gross income test"). Sec-
ond, the Fund must diversify its holdings so that, at the close of each quarter
of its taxable year, (i) at least 50% of the value of its total assets is com-
prised of cash, cash items, United States Government securities, securities of
other regulated investment companies and other securities limited in respect of
any one issuer to an amount not greater in value than 5% of the value of the
Fund's total assets and to not more than 10% of the outstanding voting securi-
ties of such issuer, and (ii) not more than 25% of the value of the Fund's to-
tal assets is invested in the securities of any one issuer (other than United
States Government securities and securities of other regulated investment com-
panies) or two or more issuers controlled by a Fund and engaged in the same,
similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal income
tax in any taxable year for which it distributes at least 90% of the sum of (i)
its "investment company taxable income" (without regard to its net capital
gain, i.e., the excess of its net long-term capital gain over its short-term
capital loss) and (ii) its net tax-exempt interest (the excess of its gross
tax-exempt interest income over certain disallowed deductions). In addition, to
the extent the Fund timely distributes to shareholders at least 98% of its tax-
able income (including any net capital gain), it will not be subject to the 4%
excise tax on certain undistributed income of "regulated investment companies."
The Fund intends to make timely distributions in compliance with these require-
ments and consequently it is anticipated that they generally will not be re-
quired to pay the excise tax. A Fund may retain for investment its net capital
gain. However, if the Fund retains any net capital gain or any investment com-
pany taxable income, it will be subject to federal income tax at regular corpo-
rate rates on the amount retained. If the Fund retains any net capital gain,
such Fund may designate the retained amount as undistributed capital gains in a
notice to its shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their shares of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by such Fund against their federal income tax liabilities if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of the Fund will
be increased by an amount equal to the difference between the amount of such
includable gains and the tax deemed paid by such shareholder in respect of such
shares. Each Fund intends to distribute at least annually to its shareholders
all or substantially all of its investment company taxable income, net tax-ex-
empt 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 in-
curred in the succeeding year.
If any of the Funds engage in hedging transactions involving financial futures
and options, these transactions will be subject to special tax rules, the ef-
fect of which may be to accelerate income to a Fund, defer a Fund's losses,
cause adjustments in the holding periods of a Fund's securities, convert long-
term
B-33
<PAGE>
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Prior to purchasing shares in one of the Funds, the impact of dividends or dis-
tributions 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 reduc-
ing 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 a Fund, distributions from the Fund, other than distri-
butions which are designated as capital gains dividends (or exempt interest
dividends, in the case of Muni/Stock Fund), will to the extent of the earnings
and profits on such Fund, constitute dividends for Federal income tax purposes
which are taxable as ordinary income to shareholders. To the extent that dis-
tributions to a shareholder in any year exceed the Fund's current and accumu-
lated 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. 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, re-
turn of capital or exempt-interest dividends) even if reinvested in additional
shares of a Fund.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by each Fund (and received
by the shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of a Fund normally will result in cap-
ital 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. The Internal Revenue Service Re-
structuring and Reform Act of 1998 (the "1998 Tax Act") provides that for tax-
payers other than corporations, net capital gain (which is defined as net long-
term capital gain over net short-term capital loss for the taxable year) real-
ized from property (with certain exclusions) is subject to a maximum marginal
stated tax rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for the asset
is more than one year, and is short-term if the holding period for the asset is
one year or less. 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.
Capital gains realized from assets held for one year or less are taxed at the
same rates as ordinary income. Note that if a sale of shares held for less than
six months results in a loss, the loss will be treated as a long-term capital
loss to the extent of any capital gain distribution made with respect to such
shares during the period those shares are held by the shareholder.
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered "con-
version transactions" effective for transactions entered into after April 30,
1993. Shareholders and prospective investors should consult with their tax ad-
visers regarding the potential effect of this provision on their investment in
shares of a Fund.
B-34
<PAGE>
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of the Fund
are held by fewer than 500 persons, additional taxable income may be realized
by the individual (and other non-corporate) shareholders in excess of the dis-
tributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of a Fund or another fund are subsequently acquired without payment of
a sales load or with the payment of a reduced sales load pursuant to the rein-
vestment or exchange privilege. Any disregarded portion of such load will re-
sult in an increase in the shareholder's tax basis in the shares subsequently
acquired. Moreover, losses recognized by a shareholder on the redemption or
exchange of shares of a Fund held for six months or less are disallowed to the
extent of any distribution of exempt-interest dividends received with respect
to such shares and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distributions of long-term capital gains
made with respect to such shares. In addition, no loss will be allowed on the
redemption or exchange of shares of a Fund if the shareholder purchases other
shares of such Fund (whether through reinvestment of distributions or other-
wise) or the shareholder acquires or enters into a contract or option to ac-
quire securities that are substantially identical to shares of a Fund within a
period of 61 days beginning 30 days before and ending 30 days after such re-
demption or exchange. If disallowed, the loss will be reflected in an adjust-
ment to the basis of the shares acquired.
If in any year a Fund should fail to qualify under Subchapter M for tax treat-
ment as a regulated investment company, the Fund would incur a regular corpo-
rate federal income tax upon its income for that year (other than interest in-
come from Municipal Obligations), and distributions to its shareholders would
be taxable to shareholders as ordinary dividend income for federal income tax
purposes to the extent of the Fund's available earnings and profits.
The Funds are required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Funds their correct taxpayer identification num-
ber (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
A Shareholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from the Fund which constitute dividends for Federal income tax
purposes (other than dividends which the Fund designates as capital gain divi-
dends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from the Fund
that are designated by the Fund as capital gain dividends should not be sub-
ject to United States Federal income taxes, including withholding taxes, if
all of the following conditions are met: (i) the capital gain dividend is not
effectively connected with the conduct by the foreign investor of a trade or
business within the United States, (ii) the foreign investor (if an individu-
al) is not present in the United States for 183 days or more during his or her
taxable year, and (iii) the foreign investor provides all certification which
may be required of his status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Fund and refiled every three
calendar years
B-35
<PAGE>
thereafter). Foreign investors should consult their tax advisors with respect
to United States tax consequences of ownership of Shares. Units in the Fund
and Fund distributions may also be subject to state and local taxation and
Shareholders should consult their tax advisors in this regard.
A corporate shareholder may be entitled to a 70% dividends received deduction
with respect to any portion of such shareholder's ordinary income dividends
which are attributable to dividends received by a Fund on certain Equity Secu-
rities (other than corporate shareholders, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding corporation tax). A Fund will designate the portion
of any taxable dividend which is eligible for this deduction. However, a cor-
porate shareholder should be aware that Sections 246 and 246A of the Code im-
pose additional limitations on the eligibility of dividends for the 70% divi-
dends received deduction. These limitations include a requirement that stock
(and therefore Shares of a Fund) must generally be held at least 46 days (as
determined under, and during the period specified in, Section 246(c) of the
Code). Regulations have been issued which address special rules that must be
considered in determining whether the 46 day holding requirement is met. More-
over, the allowable percentage of the deduction will generally be reduced from
70% if a corporate shareholder owns Shares of the Fund the financing of which
is directly attributable to indebtedness incurred by such corporation. It
should be noted that various legislative proposals that would affect the divi-
dends received deduction have been introduced. To the extent dividends re-
ceived by a Fund are attributable to foreign corporations, a corporate share-
holder will not be entitled to the dividends received deduction with respect
to its share of such foreign dividends since the dividends received deduction
is generally available only with respect to dividends paid by domestic corpo-
rations. It should be noted that payments to a Fund of dividends on Equity Se-
curities that are attributable to foreign corporations may be subject to for-
eign withholding taxes. Corporate shareholders should consult with their tax
advisers with respect to the limitations on, and possible modifications to,
the dividends received deduction.
The Fund may elect to pass through to the Shareholders the foreign income and
similar taxes paid by the Fund in order to enable such Shareholders to take a
credit (or deduction) for foreign income taxes paid by the Fund. If such an
election is made, Shareholders of the Fund, because they are deemed to own a
pro rata portion of the foreign securities held by the Fund, must include in
their gross income, for federal income tax purposes, both their portion of
dividends received by the Fund and also their portion of the amount which the
Fund deems to be the Shareholders' portion of foreign income taxes paid with
respect to, or withheld from, dividends, interest or other income of the Fund
from its foreign investments. Shareholders may then subtract from their fed-
eral income tax the amount of such taxes withheld, or else treat such foreign
taxes as deductions from gross income; however, as in the case of investors
receiving income directly from foreign sources, the above described tax credit
or deduction is subject to certain limitations. The 1997 Act imposes a re-
quired holding period for such credits. Shareholders should consult their tax
advisers regarding this election and its consequences to them.
Nuveen Balanced Municipal and Stock Fund Tax Matters
In addition to the matters discussed above, the Muni/Stock Fund intends to
qualify to pay "exempt-interest" dividends as defined under the Code. Under
the Code, at the close of each quarter of its taxable year, if at least 50% of
the value of the Fund's total assets consists of obligations described in Code
Section 103(a)) ("Municipal Securities"), the Fund shall be qualified to pay
exempt-interest dividends to its Shareholders. Exempt-interest dividends are
dividends or any part thereof (other than a capital gain dividend) paid by the
Fund which are attributable to interest on Municipal Securities (net of ex-
penses and any bond premium amortization with respect to Municipal Securities)
to the extent such interest is
B-36
<PAGE>
excludible from gross income under Section 103 of the Code and are so desig-
nated by the Fund. Exempt-interest dividends will be excluded from gross income
of the owners of the shares for federal income tax purposes, except in the case
of certain substantial users as described below. Such exempt-interest dividends
may be taken into account in determining the federal alternative minimum tax,
as described below. Insurance proceeds received by the Muni/Stock Fund under
any insurance policies in respect of scheduled interest payments on defaulted
Municipal Securities, as described herein, may be taken into account in deter-
mining the amount of exempt-interest dividends provided that, at the time such
policies are purchased, the amounts paid for such policies are reasonable, cus-
tomary and consistent with the reasonable expectation that the respective is-
suer of the Municipal Securities, rather than the insurer, will pay debt serv-
ice on the Municipal Securities; in the case of non-appropriation by a politi-
cal subdivision, however, there can be no assurance that payments made by the
insurer representing interest on such "non-appropriation" Municipal Lease Obli-
gations may be taken into account in determining the amount of exempt-interest
dividends. All taxpayers are required to report to the Internal Revenue Service
on their tax returns the amount of tax-exempt interest earned during the year,
including exempt interest dividends from a Fund.
If the Fund purchases a Municipal Security at a market discount, any gain real-
ized by the Fund upon sale or redemption of the Municipal Security will be
treated as taxable interest income to the extent such gain does not exceed the
market discount, and any gain realized in excess of the market discount gener-
ally will be treated as capital gain. The Fund will be required by the Code to
allocate its respective expenses proportionately between their tax-exempt in-
come and taxable income (excluding net realized long-term capital gains). Dis-
tributions to shareholders by the Fund of net income received, if any, from
taxable dividends, market discount on Municipal Securities treated as interest
and net short-term capital gains, if any, realized by the Fund will be taxable
to shareholders as ordinary income. Distributions of net realized long-term
capital gains, if any, are taxable as long-term capital gains, as discussed
above.
In general, market discount is the amount (if any) by which the stated redemp-
tion price at maturity exceeds the Fund's purchase price (except to the extent
that such difference, if any, is attributable to original issue discount not
yet accrued), subject to a statutory de minimis rule. Accretion of market dis-
count is taxable as ordinary income. Market discount that accretes while the
Fund holds a Municipal Security would be recognized as ordinary income by the
Fund when principal payments are received on the Municipal Security, upon sale
or at redemption (including early redemption) or at the Fund's election, as
such market discount accrues. Market discount income recognized by the Fund
will result in taxable dividends to the shareholders.
For purposes of computing the alternative minimum tax for individuals and cor-
porations and the Superfund tax for corporations, interest on certain private
activity bonds (which includes most industrial and housing bonds) issued on or
after August 8, 1986 is included as a preference item. The Fund will annually
supply its shareholders with a report indicating the percentage of the Fund's
income attributable to Municipal Securities that is treated as a tax preference
item for purposes of the federal alternative minimum tax. Moreover, for corpo-
rations, the alternative minimum taxable income is increased by 75% of the dif-
ference between an alternative measure of income ("adjusted current earnings")
and the amount otherwise determined to be the alternative minimum taxable in-
come. Interest on all Municipal Securities, and therefore all exempt-interest
dividends received from the Fund, are included in calculating adjusted current
earnings.
Individuals whose "modified income" exceeds a base amount will be subject to
federal income tax on up to one-half of their social security benefits. Modi-
fied income currently includes adjusted gross income,
B-37
<PAGE>
one-half of social security benefits and tax-exempt interest, including exempt-
interest dividends from the Fund. In addition, individuals whose modified in-
come exceeds certain base amounts are required to include in gross income up to
85% of their social security benefits.
The interest on private activity bonds in most instances is not federally tax-
exempt to a person who is a "substantial user" of a facility financed by such
bonds or a "related person" of such "substantial user." As a result, the Fund
may not be an appropriate investment for shareholders who are considered either
a "substantial user" or a "related person" within the meaning of the Code. In
general, a "substantial user" of a facility includes a "non-exempt person who
regularly uses a part of such facility in his trade or business." "Related per-
sons" are in general defined to include persons among whom there exists a rela-
tionship, either by family or business, which would result in a disallowance of
losses in transactions among them under various provisions of the Code (or if
they are members of the same controlled group of corporations under the Code),
including a partnership and each of its partners (and their spouses and minor
children), an S corporation and each of its shareholders (and their spouses and
minor children) and various combinations of these relationships. The foregoing
is not a complete statement of all of the provisions of the Code relating to
the definitions of "substantial user" and "related person." For additional in-
formation, investors should consult their tax advisers before investing in the
Fund.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of a fund that distributes exempt-interest dividends is
not deductible for Federal income tax purposes. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of purchas-
ing or carrying particular assets, the purchase or ownership of shares may be
considered to have been made with borrowed funds even though such funds are not
directly traceable to the purchase or ownership of shares.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
federal income taxation of the Funds and their shareholders and relates only to
the federal income tax status of a Fund and to the tax treatment of distribu-
tions by a Fund to United States shareholders. For complete provisions, refer-
ence should be made to the pertinent Code sections and Treasury Regulations.
The Code and Treasury Regulations are subject to change by legislative or ad-
ministrative action, and any such change may be retroactive with respect to
Fund transactions. Shareholders are advised to consult their own tax advisers
for more detailed information concerning the federal taxation of the Funds and
the income tax consequences to their shareholders, as well as with respect to
foreign, state and local tax consequences of ownership of Fund shares.
Nuveen Balanced Municipal and Stock Fund Distributions
The Muni/Stock Fund will pay monthly tax-exempt income dividends to sharehold-
ers at a level rate that reflects the past and projected net tax-exempt income
of the Fund and that results, over time, in the distribution of substantially
all of the Fund's net tax-exempt income. To maintain a more stable monthly dis-
tribution, the Fund may from time to time distribute less than the entire
amount of net tax-exempt income earned in a particular period. This undistrib-
uted net tax-exempt income would be available to supplement future distribu-
tions, which might otherwise have been reduced by a decrease in the Fund's
monthly net income due to fluctuations in investment income or expenses. As a
result, the tax-exempt income distributions paid by the Fund for any particular
monthly period may be more or less than the amount of net tax-exempt income ac-
tually earned by the Fund during such period. Undistributed net tax-exempt in-
come is included in the Fund's net asset value and, correspondingly, distribu-
tions from previously undistributed net tax-exempt income are deducted from the
Fund's net asset value. It is not expected that this dividend policy will im-
pact the management of the Fund's portfolio.
B-38
<PAGE>
PERFORMANCE INFORMATION
Each 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 invest-
ment 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:
Yield=2[(a-b +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 5.75%.
In computing yield, the Funds follow certain standardized accounting practices
specified by SEC rules. These practices are not necessarily consistent with
those that the Funds use to prepare their annual and interim financial state-
ments in conformity with generally accepted accounting principles. Thus, yield
may not equal the income paid to shareholders or the income reported in a
Fund's financial statements.
<TABLE>
<CAPTION>
Yield (As of June 30, 1999)
-------------------------------
Class A Class B Class C Class R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Growth and Income Stock Fund.............. .43% -- % -- % .69%
Balanced Stock and Bond Fund.............. 1.94% 1.32% 1.32% 2.31%
Balanced Municipal and Stock Fund......... 2.38% 1.79% 1.79% 2.78%
</TABLE>
The Funds may from time to time in their advertising and sales materials report
a quotation of their current distribution rate. The distribution rate repre-
sents 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 rein-
vestments from Nuveen Defined Portfolios, 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 a Fund may be paying out more than it is
earning and because it may not include the effect of amortization of bond pre-
miums to the extent such premiums arise after the bonds were purchased.
B-39
<PAGE>
The distribution rates as of the period quoted, based on the maximum public of-
fering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 5.25% for 1997 and 1998 and 5.75%
for 1999, were as follows:
<TABLE>
<CAPTION>
Distribution Rates (as of June 30)
-----------------------------------------------------------------------
Class A Class B Class C Class R
----------------- ----------------- ----------------- -----------------
1997 1998 1999 1997 1998 1999 1997 1998 1999 1997 1998 1999
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Stock
Fund................... 1.82% 1.05% N/A 1.22% 0.37% N/A 1.22% 0.37% N/A 2.15% 1.36% N/A
Balanced Stock and Bond
Fund................... 1.98% 2.80% 2.34% 1.37% 2.20% 1.74% 1.37% 2.20% 1.74% 2.33% 3.20% 2.73%
Balanced Municipal and
Stock Fund............. 2.24% 2.03% 1.93% 1.66% 1.41% 1.31% 1.66% 1.41% 1.31% 2.60% 2.39% 2.30%
</TABLE>
A 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 re-
turns) 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 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
varaible as overall market returns. The beta of the overall market is by defi-
nition 1.00.
The formula for beta is given by:
Beta = S A * B / C
where
A = (Xi - X), i=1,..., N
B = (Yi - Y), i=1,..., N
C = S (Xi - X)/2/, i=1,..., N
Xi = Security Return in period i
Yi = Market Return in period i
X = Average of all observations Xi
Y = Average of all observations Yi
N = Number of observations in the measurement period
The beta for the Growth/Income Fund on June 30, 1997,1998 and 1999 was 0.89,
0.77 and 1.00, respectively. The beta equals the weighted average of the betas
for each stock in the Fund's investment portfolio. The beta for each stock in
the Fund's portfolio was calculated based on weekly returns for the periods
ended June 30, 1997, 1998 and 1999 and using the S&P 500 Index as the market
benchmark.
B-40
<PAGE>
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 a
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 a Fund and are not necessarily representative
of the future performance of a 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 as-
sumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the "redeem-
able value" of that investment at the end of the period. The cumulative total
return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains distributions by a Fund have been reinvested at net
asset value on the reinvestment dates during the period. Cumulative total re-
turn may also be shown as the increased dollar value of the hypothetical in-
vestment over the period. Cumulative total return calculations that do not in-
clude the effect of the sales charge would be reduced if such charge were in-
cluded. 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, each Fund may compare its risk-adjusted performance with
other investments that may provide different levels of risk and return. For
example, a Fund may compare its risk level, as measured by the variability of
its periodic returns, or its risk-adjusted total return, with those of other
funds or groups of funds. Risk-adjusted total return would be calculated by
adjusting each investment's total return to account for the risk level of the
investment.
The risk level for a class of shares of a Fund, and any of the other invest-
ments used for comparison, would be evaluated by measuring the variability of
the investment's return, as indicated by the standard deviation of the invest-
ment's monthly returns over a specified measurement period (e.g., two years).
An investment with a higher standard deviation of monthly returns would indi-
cate that a fund had greater price variability, and therefore greater risk,
than an investment with a lower standard deviation.
B-41
<PAGE>
The risk-adjusted total return for a class of shares of a Fund and for other
investments over a specified period would be evaluated by dividing (a) the re-
mainder of the investment's annualized two-year total return, minus the
annualized total return of an investment in Treasury bill securities (essen-
tially a risk-free return) over that period, by (b) the standard deviation of
the investment's monthly returns for the period. This ratio is sometimes re-
ferred to as the "Sharpe measure" of return. An investment with a higher
Sharpe measure would be regarded as producing a higher return for the amount
of risk assumed during the measurement period than an investment with a lower
Sharpe measure.
Class A Shares of each Fund are sold at net asset value plus a current maximum
sales charge of 5.25% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Re-
turns and net asset value of each class of shares of the Funds will fluctuate.
Factors affecting the performance of the Funds include general market condi-
tions, operating expenses and investment management. Any additional fees
charged by a securities representative or other financial services firm would
reduce returns described in this section. Shares of the Funds are redeemable
at net asset value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and sales
literature, a Fund may also compare its performance or the performance of its
portfolio manager with that of, or reflect the performance of: (1) the Con-
sumer Price Index; (2) equity mutual funds or mutual fund indexes as reported
by Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc. ("Morning-
star"), Wiesenberger Investment Companies Service ("Wiesenberger") and CDA In-
vestment Technologies, Inc. ("CDA") or similar independent services which mon-
itor the performance of mutual funds, or other industry or financial publica-
tions such as Barron's, Changing Times, Forbes and Money Magazine; and/or (3)
the S&P 500 Index or unmanaged indices reported by Lehman Brothers. Perfor-
mance 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 per-
formance quotation or performance comparison should not be considered as rep-
resentative of the performance of the Funds for any future period.
There are differences and similarities between the investments which the Funds
may purchase and the investments measured by the indexes and reporting serv-
ices which are described herein. The Consumer Price Index is generally consid-
ered to be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA
are widely recognized mutual fund reporting services whose performance calcu-
lations are based upon changes in net asset value with all dividends rein-
vested and which do not include the effect of any sales charges.
Each 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 certifi-
cates 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.
B-42
<PAGE>
Nuveen Growth and Income Stock Fund
The Fund commenced operations on August 7, 1996. The table below represents the
investment returns for the specified periods on the Fund's Class A, Class B,
Class C and Class R shares. The total return figures for Class A shares are
shown both with and without the effect of the maximum sales charge. The total
return figures for the Class B shares include the effect of the applicable Con-
tingent Deferred Sales Charge ("CDSC").
<TABLE>
<CAPTION>
Nuveen Growth and Income Stock Fund
-----------------------------------------------
Average Annual Total Return Cumulative
--------------------------- -----------
8/7/96 8/7/96
7/1/97- 7/1/98- (inception) (inception)
6/30/98 6/30/99 -6/30/99 -6/30/99
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Class ANAV 21.59% 12.37% 23.97% 86.22%
Class APOP 15.21% 5.90% 21.46% 75.56%
Class B 16.70% 7.52% 22.10% 78.21%
Class C 20.63% 11.58% 23.00% 82.05%
Class R 21.91% 12.71% 24.32% 87.75%
</TABLE>
The table below presents annual investment returns for the ICAP Discretionary
Equity Composite between December 31, 1987 and December 31, 1998 and the return
for the first half of 1999. The ICAP Discretionary Equity Composite represents
the composite performance of the 45 managed accounts totalling approximately
$4.2 billion for which ICAP serves as investment adviser and that have the same
investment objectives and policies as the Fund.
<TABLE>
<CAPTION>
1/1/99- Annual Total Returns for the Year Ending December 31,
6/30/99 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Discretionary
Equity Composite
(Gross).............. 16.76% 11.20% 29.60% 26.44% 38.16% 1.95% 16.58% 7.38% 33.63% 1.47% 33.54% 9.37% 29.08%
ICAP Discretionary
Equity Composite
(Net)................ 16.07% 9.81% 28.05% 24.92% 36.53% 0.66% 15.15% 6.03% 32.05% 0.18% 31.95% 8.01% 27.53%
S&P 500............... 12.39% 28.58% 33.36% 22.96% 37.43% 1.31% 9.99% 7.67% 30.55% (3.17)% 31.49% 16.81% 5.23%
Lipper Growth and In-
come
Index................ 11.59% 13.58% 26.87% 20.69% 31.17% (0.41)% 14.62% 9.64% 27.75% (5.99)% 23.74% 18.35% 2.63%
</TABLE>
B-43
<PAGE>
Nuveen Balanced Stock and Bond Fund
The Fund commenced operations on August 7, 1996. The table below represents the
investment returns for the specified periods on the Fund's Class A, Class B,
Class C and Class R shares. The total return figures for Class A shares are
shown both with and without the effect of the maximum sales charge. The total
return figures for the Class B shares include the effect of the applicable
CDSC.
<TABLE>
<CAPTION>
Nuveen Balanced Stock and Bond Fund
---------------------------------------------------------------------------
Average Annual Total Return Cumulative
--------------------------- -----------
8/7/96 8/7/96
7/1/97- 7/1/98- (inception) (inception)
6/30/98 6/30/99 -6/30/99 -6/30/99
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Class ANAV........................ 16.71% 10.21% 16.86% 56.96%
Class APOP........................ 10.58% 3.87% 14.49% 47.97%
Class B........................... 11.86% 5.39% 14.95% 49.67%
Class C........................... 15.86% 9.39% 16.00% 53.67%
Class R........................... 16.99% 10.48% 17.14% 58.07%
</TABLE>
The table below presents annual investment returns for the ICAP Balanced Com-
posite between December 31, 1987 and December 31, 1998 and the return for the
first half of 1999. The ICAP Balanced Composite represents the composite per-
formance of the seven managed accounts totalling approximately $362 million for
which ICAP serves as investment adviser and that have the same investment ob-
jectives and policies as the Fund.
<TABLE>
<CAPTION>
1/1/99- Annual Total Returns for the Year Ending December 31,
6/30/99 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Balanced
Composite (Gross).. 9.21% 12.55% 19.68% 17.52% 29.09% 0.21% 13.81% 7.34% 31.04% 2.69% 31.14% 8.57% 27.52%
ICAP Balanced
Composite (Net).... 8.50% 11.07% 18.13% 16.00% 27.45% (1.15)% 12.32% 5.91% 29.39% 1.30% 29.48% 7.13% 25.89%
Balanced Fund Index. 7.10% 20.97% 22.76% 15.13% 27.85% (0.18)% 9.36% 7.41% 23.98% 2.04% 23.95% 12.43% 5.97%
Lipper Balanced
Index.............. 6.17% 15.09% 20.31% 13.01% 24.88% (2.04)% 11.94% 7.47% 25.84% 0.65% 19.70% 11.18% 4.15%
</TABLE>
The gross performance results of the ICAP Discretionary Equity Composite and
the ICAP Balanced Composite reflect the investment performance of the respec-
tive composites before deduction of any investment advisory fees or other ex-
penses. The net performance results of the ICAP Discretionary Equity Composite
and the ICAP Balanced Composite reflect the deduction of the annual operating
expenses for the most recent fiscal year (without waivers or reimbursements)
for Class A shares of the Growth/Income Fund and the Stock/Bond Fund, respec-
tively, as summarized in the What are the Costs of Investing? section of the
respective Fund's Prospectus and may be compared to the performance of the in-
dices referenced below. The performance information above of the ICAP Discre-
tionary Equity Composite and ICAP Balanced Composite should not be interpreted
as indicative of future performance of a fund. Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500") is a widely recognized, unmanaged index of
common stock prices. S&P 500 returns assume reinvestment of all dividends paid
by the stocks included in the index, but do not include brokerage commissions
or other fees an investor would incur by investing in the portfolio of stocks
comprising the index. The Lipper Growth and Income
B-44
<PAGE>
Index represents the composite returns of the 30 largest funds comprising the
Lipper Growth and Income Objective and assumes reinvestment of all fund divi-
dends and distributions. The Balanced Fund Index represents the investment per-
formance of an unmanaged index comprised 60% of the S&P 500 and 40% of the Leh-
man Brothers Intermediate Treasury Index (the "Lehman Index"). The Lehman Index
is an unmanaged index of all public obligations of the U.S. Treasury, U.S. Gov-
ernment agencies, quasi-federal corporations and corporate debt guaranteed by
the U.S. Government with maturities between one and ten years and an outstand-
ing par value of at least $100 million. The Lipper Balanced Index represents
the composite returns of the 30 largest funds comprising the Lipper Balanced
Objective and assumes reinvestment of all fund dividends and distributions.
Nuveen Balanced Municipal and Stock Fund
The Fund commenced investment operations on August 7, 1996. The table below
represents the investment returns for the periods specified on the Fund's Class
A, Class B, Class C and Class R shares. The total return figures for Class A
shares are shown both with and without the effect of the maximum sales charge.
The total return figures for the Class B shares include the effect of the ap-
plicable CDSC.
<TABLE>
<CAPTION>
Nuveen Balanced Municipal and Stock Fund
----------------------------------------------------------------------------
Average Annual Total Return Cumulative
---------------------------- -----------
8/7/96 8/7/96
7/1/97- 7/1/98- (inception) (inception)
6/30/98 6/30/99 -6/30/99 -6/30/99
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Class ANAV........................ 14.71% 5.49% 13.12% 42.85%
Class APOP........................ 8.69% (.56)% 10.82% 34.68%
Class B........................... 9.91% .71% 11.19% 35.92%
Class C........................... 13.87% 4.71% 12.28% 39.82%
Class R........................... 14.94% 5.81% 13.42% 43.97%
</TABLE>
Total returns reflect past performance and are not predictive of future re-
sults.
After-tax Performance of Balanced Portfolios
Nuveen has examined the historical after-tax performance of various balanced
portfolios, combining stocks with either municipal bonds, corporate bonds, or
Treasury bonds. The after-tax risk return trade-offs for various allocations
were derived by tracking the performance of hypothetical portfolios over the
1978-1997 period. All investment income produced by the portfolio is reinvest-
ed, along with the after-tax proceeds from an assumed 20% annualized turnover
rate. The allocations between the two assets were allowed to roam within a 5%
band around their target before rebalancing. Taxes were computed on the portfo-
lio level (realized losses offset gains) and at historical tax rates assuming
each year's tax rate applicable to a single investor who earned $100,000 in
1997 dollars. All portfolios were liquidated at
B-45
<PAGE>
period end and the existing tax liability was paid. The asset class returns
were represented by the following indices:
Municipal Bonds--
Lehman Brothers Long Municipal Index (Prior to 1980
municipals were based on a synthetic index created by Nuveen
based on the Bond Buyer 20 Index and other market data pub-
lished by The Bond Buyer, using Lehman's methodology.)
Treasury Bonds--Lehman Brothers Long Treasury Index
Corporate Bonds--
Lehman Brothers Long Corporate Index
S&P 500 Stocks--Ibbotson Associates Large Company Stock Index
The average annual after-tax returns for these various balanced portfolios for
the 1978-1997 period were as follows:
<TABLE>
<CAPTION>
Equity Municipal Corporate Treasury
Portion Mixes Mixes Mixes
------------------------------------------------------------------------------------
<S> <C> <C> <C>
100% 12.51% 12.51% 12.51%
80 11.77 11.30 11.29
60 11.02 10.07 10.06
40 10.27 8.73 8.69
20 9.33 7.39 7.34
0 8.42 5.95 5.91
</TABLE>
Over the 1978-1997 time period, balanced portfolios combining municipals and
equities provided superior after-tax returns and lower levels of risk (measured
by variability of periodic returns) than Treasury and corporate blends having
similar maturities, under the assumptions described above.
The addition of 20% municipals to an otherwise all-equity portfolio would have
sacrificed only 74 basis points in annual after-tax return, while reducing risk
by a seventh. Conversely, in comparison to an all-municipal bond portfolio, a
balanced portfolio of 60% municipals and 40% equities offered 185 basis points
in additional annual-tax return with virtually no more risk.
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES AND SHAREHOLDER PROGRAMS
As described in the Prospectuses, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and pref-
erences.
Each class of shares of a Fund represents an interest in the same portfolio of
investments. Each class of shares is identical in all respects except that each
class bears its own class expenses, including distribution and administration
expenses, and each class has exclusive voting rights with respect to any dis-
tribution or service plan applicable to its shares. As a result of the differ-
ences in the expenses borne by each class of shares, net income per share, div-
idends per share and net asset value per share will vary among a
B-46
<PAGE>
Fund's classes of shares. There are no conversion, preemptive or other sub-
scription rights, except that Class B shares automatically convert into Class A
shares as described below.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include distri-
bution and service fees.
The 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 post-
age expenses related to preparing and distributing materials such as share-
holder 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 ex-
penses 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 addi-
tional incremental expenses subsequently identified and determined to be prop-
erly allocated to one or more classes of shares.
Class A Shares
You may purchase Class A Shares at a public offering price equal to the appli-
cable net asset value per share plus an up-front sales charge imposed at the
time of purchase as set forth 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 computing the offering price of the Class A shares of each of the Funds. The
example assumes a purchase on June 30, 1999 of Class A shares from a Fund ag-
gregating 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>
<CAPTION>
Growth/Income Stock/Bond Muni/Stock
Fund Fund Fund
------------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value per share............ $ 27.07 $ 27.18 $ 25.45
Per Share Sales Charge--5.75% of
public offering price (6.10%, 6.11%
and 6.09%, respectively, of net
asset value per share).............. $ 1.65 $ 1.66 $ 1.55
----------- ---------- ----------
Per Share Offering Price to the
Public.............................. $ 28.72 $ 28.84 $ 27.00
Shares Outstanding (as of June 30,
1999)............................... 29,315,605 2,483,794 4,869,035
</TABLE>
Each 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.
B-47
<PAGE>
Certain commercial banks may make Class A Shares of the Funds 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 regis-
ter 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
any Fund if the amount of your purchase, when added to the value that day of
all of your prior purchases of shares of any Fund or of another Nuveen Mutual
Fund or Nuveen exchange-traded fund, or units of a Nuveen Defined Portfolio, 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 Fund's Prospec-
tus. 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 a Fund that you wish to qualify for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A Shares of
any Fund if you plan to purchase Class A Shares of Nuveen 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
Fund's 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 invest-
ment program Class A Shares that you purchase without a sales charge through
investment of distributions from a Nuveen Mutual Fund or a Nuveen Defined Port-
folio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class
A Shares of a Fund following execution of the Letter of Intent will be at least
5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases,
B-48
<PAGE>
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 estab-
lishing 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 Defined Portfolio Distributions
You may purchase Class A Shares without an up-front sales charge by reinvest-
ment of distributions from any of the various defined portfolios 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
any Fund or of another Nuveen Mutual Fund at the reduced sales charge applica-
ble 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 publi-
cations in mailings to members and has agreed to comply with certain adminis-
trative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
Shares of any particular Fund or portfolio for each participant in the program
is $50, provided that the group initially invests at least $3,000 in the Fund
and the minimum monthly investment in Class A Shares of any particular Fund or
portfolio by each participant is $50. No certificate will be issued for any
participant's account. All dividends and other distributions by a Fund will be
reinvested in additional Class A Shares of the same Fund. No participant may
utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each partici-
pant must fill out application materials, which the group administrator may
obtain from the group's financial adviser, by calling Nuveen toll-free at 800-
257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds Subject to Merger
or Closure
You may also purchase Class A Shares at net asset value without a sales charge
if the purchase takes place through an Authorized Dealer and represents the
reinvestment of the proceeds of the redemption of shares of one or more regis-
tered investment companies not affiliated with Nuveen that are subject to
merger or closure. You must provide appropriate documentation that the redemp-
tion occurred not more
B-49
<PAGE>
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 a 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; Nuveen may pay Authorized Deal-
ers on Class A sales of $1.0 million and above up to an additional 0.25%
of the purchase amount;
. officers, trustees and former trustees of the Nuveen Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. officers, directors or bona fide employees of any investment advisory
partner of Nuveen that provides sub-advisory services for a Nuveen prod-
uct, 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 transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices; and
. with respect to the Growth/Income and the Stock/Bond Fund, any eligible
employer-sponsored qualified defined contribution retirement plan. Eli-
gible plans are those with at least 25 employees and which either (a)
make an initial purchase of one or more Nuveen mutual funds aggregating
$500,000 or more; or (b) execute a Letter of Intent to purchase in the
aggregate $500,000 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 investors that purchased Class A Shares at net asset value because they
purchased such shares through an eligible employer-sponsored qualified defined
contribution plan or because the purchase amount equaled or exceeded $1 mil-
lion and the Authorized Dealer did not waive the sales commission, a contin-
gent deferred sales charge of 1.00% will be assessed on redemptions within 18
months of purchase.
B-50
<PAGE>
Any Class A Shares purchased pursuant to a special sales charge waiver must be
acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by the Funds. You or your fi-
nancial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of any Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment com-
pany. All purchases under the special sales charge waivers will be subject to
minimum purchase requirements as established by the Funds.
In determining the amount of your purchases of Class A Shares of any Fund that
may qualify for a reduced sales charge, the following purchases may be com-
bined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their immedi-
ate 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 $10 million or more and for pur-
chases using dividends and capital gains distributions on Class R Shares. Class
R Shares also are available for the following categories of investors and pen-
sion, profit-sharing, 401(k), IRA or other similar plans maintained by or for
the benefit of such persons:
. officers, trustees and former trustees of the Trust or any Nuveen-spon-
sored registered investment company and their immediate family members
or trustees/directors of any fund sponsored by Nuveen, any parent com-
pany of Nuveen and subsidiaries thereof and their immediate family mem-
bers;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. officers, directors or bona fide employees of any investment advisory
partner of Nuveen that provides sub-advisory services for a Nuveen prod-
uct, 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 transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
B-51
<PAGE>
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices;
. 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 a Fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their distri-
butions from such defined portfolios 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). Sharehold-
ers 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 Funds
at any time. To encourage their participation, the Fund waives the sales charge
on Class A Shares and offers Class R Shares to trustees and officers of the
Trust and other affiliated persons of the Trust and Nuveen as noted above.
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 be-
tween these two classes of shares. Class A Shares are subject to an annual
service fee to compensate Authorized Dealers for providing you with ongoing ac-
count 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 pro-
vided by Authorized Dealers against the annual service fee imposed upon the
Class A Shares.
For more information about the purchase of Class A Shares or reduced sales
charge program, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
Class B Shares
You may purchase Class B Shares at a public offering price equal to the appli-
cable 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 pur-
chase 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 ad-
vice 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
B-52
<PAGE>
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.
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 conver-
sion 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 In-
ternal 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 appli-
cable 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 its costs in connection with the sale of Class C Shares. Class C Shares are
also subject to an annual service fee of .25% to compensate Authorized Dealers
for providing you with 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 a sales commission of .75% plus an advance on the first year's an-
nual 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.
B-53
<PAGE>
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any CDSC. How-
ever, in the case of Class A Shares purchased at net asset value because the
purchase amount equaled or exceeded $1 million or pursuant to an eligible em-
ployer-sponsored defined contribution plan described above, where the Autho-
rized 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 redemp-
tions 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, a Fund will first redeem shares not
subject to any charge, or that represent an increase in the value of a Fund ac-
count due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. 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, Class B or Class C shares sub-
ject 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
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 So-
cial 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%
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 a Fund's shares subject to a sales
charge are reinvested in shares of certain Funds within a specified number of
days; (vii) redemptions in connection with the exercise of a Fund's right to
redeem all shares in an account that does not maintain a certain minimum bal-
ance or that the applicable board has determined may have material adverse con-
sequences to the shareholders of such Funds; and (viii) redemptions of Class B
or Class C Shares if the proceeds are transferred to an account managed by an-
other Nuveen Adviser and the adviser refunds the advanced service and distribu-
tion fees to Nuveen.
B-54
<PAGE>
In addition, the CDSC will be waived in connection with the following redemp-
tions of shares held by an employer-sponsored qualified defined contribution
retirement plan: (i) partial or complete redemptions in connection with a dis-
tribution 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 connec-
tion 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 redemp-
tions to satisfy required minimum distributions after age 70 from an IRA ac-
count (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 any of the Funds 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 Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New
York, NY 10274-5186. 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 a
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 a 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
a Fund at net asset value. All shares may be exchanged for shares of any Nuveen
money market fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time
of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on
when you purchased your original shares and the CDSC schedule of the fund from
which you exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment require-
ment of the Nuveen Mutual Fund being purchased. For federal income tax purpos-
es, any exchange constitutes a sale and purchase of shares and may result in
capital gain or loss. Before making any exchange, you should obtain the Pro-
spectus 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
B-55
<PAGE>
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 800-257-8787 to ob-
tain an authorization form. The exchange privilege may be modified or discon-
tinued by a Fund at any time.
The exchange privilege is not intended to permit a Fund to be used as a vehicle
for short-term trading. Excessive exchange activity may interfere with portfo-
lio management, raise expenses, and otherwise have an adverse effect on all
shareholders. In order to limit excessive exchange activity and in other cir-
cumstances where Fund management believes doing so would be in the best inter-
est of the Fund, each Fund reserves the right to revise or terminate the ex-
change privilege, or limit the amount or number of exchanges or reject any ex-
change. Shareholders would be notified of any such action to the extent re-
quired by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of a Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up
to one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement privi-
lege can be exercised only once for any redemption, and reinvestment will be
made at the net asset value next calculated after reinstatement of the appro-
priate class of Fund shares. If you reinstate shares that were subject to a
CDSC, your holding period as of the redemption date also will be reinstated for
purposes of calculating a CDSC and the CDSC paid at redemption will be refund-
ed. The federal income tax consequences of any capital gain realized on a re-
demption will not be affected by reinstatement, but a capital loss may be dis-
allowed in whole or in part depending on the timing, the amount of the rein-
vestment and the fund from which the redemption occurred.
Redemption In Kind
The Funds have reserved the right to redeem in kind (that is, to pay redemption
requests in cash and portfolio securities, or wholly in portfolio securities),
although the Funds have no present intention to redeem in kind. The Funds vol-
untarily have committed to pay in cash all requests for redemption by any
shareholder, limited as to each shareholder during any ninety-day period to the
lesser of $250,000 or 1% of the net asset value of a Fund at the beginning of
the ninety-day period.
General Matters
The Funds may encourage registered representatives and their firms to help ap-
portion their assets among bonds, stocks and cash, and may seek to participate
in programs that recommend a portion of their assets be invested in equity se-
curities, equity and debt securities, or equity and municipal securities.
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.
B-56
<PAGE>
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the Fund's 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 Defined Portfolios 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' representa-
tives, seminars for the public, and advertising and sales campaigns. Nuveen may
reimburse a participating Authorized Dealer for up to one-half of specified me-
dia costs incurred in the placement of advertisements which jointly feature the
Authorized Dealer and Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of its financial advisers who
have sold Nuveen Fund shares and Nuveen Defined Portfolios units during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amount that a Fund will receive from such a sale. The staff of
the Securities and Exchange Commission takes the position that dealers who re-
ceive 90% or more of the applicable sales charge may be deemed underwriters un-
der the Securities Act of 1933, as amended.
To help advisers and investors better understand and more efficiently use the
Funds to reach their investment goals, the Funds may advertise and create spe-
cific investment programs and systems. For example, this may include informa-
tion on how to use the Funds to accumulate assets for future education needs or
periodic payments such as insurance premiums. The Funds may produce software,
electronic information sites, or additional sales literature to promote the ad-
vantages of using the Funds to meet these and other specific investor needs.
The Funds have authorized one or more brokers to accept on their behalf pur-
chase and redemption orders. Such brokers are authorized to designate other in-
termediaries to accept purchase and redemption orders on the Fund's behalf. The
Funds will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee accepts the
order. Customer orders received by such broker (or their designee) will be
priced at the Funds' net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized bro-
ker (or their designee) before the close of regular trading on the New York
Stock Exchange will receive that day's share price; orders accepted after the
close of trading will receive the next business day's share price.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares avail-
able for public purchase. Shares of the Nuveen money market funds may be pur-
chased 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 funds observe and will not make fund shares available for purchase on
the following holidays: Martin Luther King's Birthday, Columbus Day and Veter-
ans Day.
B-57
<PAGE>
In addition, you may exchange Class R Shares of any Fund for Class A Shares of
the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
Shares will be registered in the name of the investor or the investor's finan-
cial adviser. A change in registration or transfer of shares held in the name
of a financial adviser may only be made by an order in good form from the fi-
nancial adviser acting on the investor's behalf.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Shares"
and "Systematic Investing" in the Fund's Prospectus.
If you choose to invest in a Fund, an account will be opened and maintained
for you by Chase Global, the Funds' shareholder services agent. Share certifi-
cates will be issued to you only upon written request to Nuveen Investor Serv-
ices, and no certificates will be issued for fractional shares. Each Fund re-
serves 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.
A fee of 1% of the current market value of any shares represented by a certif-
icate will be charged if the certificate is lost, stolen, or destroyed. The
fee is paid to Seaboard Surety Company for insurance of the lost, stolen, or
destroyed certificate.
Authorized Dealers are encouraged to open single master accounts. However,
some Authorized Dealers may wish to use Chase Global'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 Chase Global will be re-
quired to enter into a separate agreement with another agent for these serv-
ices 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 regula-
tions of the Securities and Exchange Commission, each 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 Funds pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement,
the Trust appointed Nuveen to be its agent for the distribution of the Funds'
shares on a continuous offering basis. Nuveen sells shares to or through bro-
kers, dealers, banks or other qualified financial intermediaries (collectively
referred to as "Dealers"), or others, in a manner consistent with the then ef-
fective registration statement of the Trust. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Funds' shares, including printing and dis-
tributing 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
B-58
<PAGE>
services the excess, if any, of the sales price of a Fund's shares less the net
asset value of those shares, and reallows a majority or all of such amounts to
the Dealers who sold the shares; Nuveen may act as such a Dealer. Nuveen also
receives compensation pursuant to a distribution plan adopted by the Trust pur-
suant 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 distri-
bution plan.
The following table sets forth the aggregate amount of underwriting commissions
with respect to the sale of Fund shares, the amount thereof retained by Nuveen
and the compensation on redemptions and repurchases received by Nuveen for each
of the Funds for the three most recent fiscal years. All figures are to the
nearest thousand.
<TABLE>
<CAPTION>
Amount of Compensation
Amount of Underwriting Amount Retained by on Redemptions and
Commissions Nuveen Repurchases
----------------------- ----------------------- -----------------------
8/7/96- 7/1/97- 7/1/98- 8/7/96- 7/1/97- 7/1/98- 8/7/96- 7/1/97- 7/1/98-
6/30/97 6/30/98 6/30/99 6/30/97 6/30/98 6/30/99 6/30/97 6/30/98 6/30/99
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nuveen Growth and Income
Stock Fund............. $679 $4,489 $1,865 $-- $185 $113 $206 $522 $300
Nuveen Balanced Stock
and Bond Fund.......... $ 27 $ 507 $ 238 $ 1 $ 27 $ 17 $ 2 $ 67 $ 98
Nuveen Balanced Munici-
pal and Stock Fund..... $ 55 $1,746 $ 777 $ 9 $ 97 $ 52 $ 17 $ 66 $129
</TABLE>
DISTRIBUTION AND SERVICE PLANS
Each Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the In-
vestment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will all be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B Shares and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses in-
curred in connection with the distribution of Class B and Class C Shares, re-
spectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of pre-
paring, printing and distributing advertising and sales literature and reports
to shareholders used in connection with the sale of Class B and Class C Shares,
certain other expenses associated with the distribution of Class B and Class C
Shares, and any distribution-related expenses that may be authorized from time
to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C Shares
under each Fund's Plan will be payable to Authorized Dealers in connection with
the provision of ongoing account services to
B-59
<PAGE>
shareholders. These services may include establishing and maintaining share-
holder accounts, answering shareholder inquiries and providing other personal
services to shareholders.
Each Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan as applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a distribution fee which con-
stitutes 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.
During the last fiscal year ended June 30, 1999, the Growth/ Income Fund, the
Stock/Bond Fund and the Muni/Stock Fund paid 12b-1 fees pursuant to their re-
spective 12b-1 Plan in the amounts set forth in the table below. For this peri-
od, substantially all of the 12b-1 service fees on Class A Shares were paid out
as compensation to Authorized Dealers for providing services to shareholders
relating to their investments. To compensate for commissions advanced to Autho-
rized Dealers, all 12b-1 service fees collected on Class B Shares during the
first year following a purchase, all 12b-1 distribution fees on Class B Shares,
and all 12b-1 service and distribution fees on Class C Shares during the first
year following a purchase are retained by the Distributor.
<TABLE>
<CAPTION>
12b-1 Fees
Paid by
each Fund
for the
fiscal
year ended
June 30,
1999
----------
<S> <C>
Nuveen Growth and Income Stock Fund
Class A........................................................... $1,808,231
Class B........................................................... $ 730,747
Class C........................................................... $ 255,849
----------
Total........................................................... $2,794,827
Nuveen Balanced Stock and Bond Fund
Class A........................................................... $ 166,640
Class B........................................................... $ 106,921
Class C........................................................... $ 55,428
----------
Total........................................................... $ 328,989
Nuveen Balanced Municipal and Stock Fund
Class A........................................................... $ 300,341
Class B........................................................... $ 449,751
Class C........................................................... $ 178,061
----------
Total........................................................... $ 928,153
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be
B-60
<PAGE>
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 vot-
ing on the Plan. The Plan may be continued only if the trustees who vote to ap-
prove such continuance conclude, in the exercise of reasonable business judg-
ment 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 sharehold-
ers. 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 ap-
proved 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 addi-
tion to audit services, Arthur Andersen LLP will provide consultation and as-
sistance on accounting, internal control, tax and related matters. The finan-
cial statements included in this Statement of Additional Information have been
audited by Arthur Andersen LLP as indicated in their report with respect there-
to, and are included in reliance upon the authority of said firm as experts in
giving said report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year appear
in the respective Fund's Annual Report and each is incorporated herein by ref-
erence. The Annual Reports accompany this Statement of Additional Information.
GENERAL TRUST INFORMATION
Each Fund is a series of the Trust. The Trust is an open-end diversified man-
agement 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 "Funds," which may be divided into classes of shares.
Currently, there are four series authorized and outstanding, each of which is
divided into four classes of shares designated as Class A Shares, Class B
Shares, Class C Shares and Class R Shares. Each class of shares 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 distri-
bution or service plan applicable to its shares. There are no conversion, pre-
emptive or other subscription
B-61
<PAGE>
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 estab-
lish additional series and classes of shares in the future, to change those se-
ries or classes and to determine the preferences, voting powers, rights and
privileges thereof.
The Trust is not required and does not intend to hold annual meetings of share-
holders. Shareholders owning more than 10% of the outstanding shares of a 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, sharehold-
ers 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 Funds' Declaration of Trust further provides for indemnifica-
tion 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 ex-
isted and the Trust or Fund itself was unable to meet its obligations. The
Trust believes the likelihood of the occurrence of these circumstances is re-
mote.
B-62
<PAGE>
APPENDIX A--RATINGS OF INVESTMENTS
Standard & Poor's Ratings Group--A brief description of the applicable Standard
& Poor's Ratings Group ("S&P") rating symbols and their meanings (as published
by S&P) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the cred-
itworthiness of an obligor with respect to a specific obligation. This assess-
ment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a partic-
ular investor.
The ratings are based on current information furnished by the issuer or ob-
tained by S&P from other sources it considers reliable. S&P does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited fi-
nancial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated "AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated "AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small de-
gree.
A
Debt rated "A' has a strong capacity to pay interest and repay princi-
pal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB
Debt rated "BBB' is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate pro-
tection parameters, adverse economic conditions or changing circum-
stances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated
categories.
<PAGE>
Speculative Grade Rating
Debt rated "BB', "B', "CCC', "CC' and "C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB' indicates the least degree of speculation and "C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse con-
ditions.
BB Debt rated "BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and princi-
pal payments. The "BB' rating category is also used for debt subordi-
nated to senior debt that is assigned an actual or implied "BBB-' rat-
ing.
B Debt rated "B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.
The "B' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB' or "BB-' rating.
CCC Debt rated "CCC' has a currently identifiable vulnerability to de-
fault, and is dependent upon favorable business, financial, and eco-
nomic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B' or "B-' rating.
CC The rating "CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC' debt rating.
C The rating "C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-' debt rating. The
"C' rating may be used to cover a situation where a bankruptcy peti-
tion has been filed, but debt service payments are continued.
CI The rating "CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
"D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA' to "CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
comple-
A-2
<PAGE>
tion of the project, makes no comment on the likelihood of, or the risk of de-
fault upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L The letter "L' indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit col-
lateral is federally insured by the Federal Savings & Loan Insurance
Corp. or the Federal Deposit Insurance Corp.* and interest is ade-
quately collateralized. In the case of certificates of deposit the
letter "L' indicates that the deposit, combined with other deposits
being held in the same right and capacity will be honored for princi-
pal and accrued pre-default interest up to the federal insurance lim-
its within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution,
upon maturity.
NR Indicates no rating has been requested, that there is insufficient in-
formation on which to base a rating, or that S&P does not rate a par-
ticular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rat-
ing. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some vulnera-
bility to adverse financial and economic changes over the term of the
notes.
SP-3
Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security in-
asmuch as it does not comment as to market price or suitability for a particu-
lar investor. The ratings are based on current information furnished to S&P by
the issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended,
or withdrawn as a result of changes in or unavailability of such information or
based on other circumstances.
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flow.
A-3
<PAGE>
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satis-
factory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a secu-
rity inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on occa-
sion, rely on unaudited financial information. The ratings may be changed, sus-
pended, or withdrawn as a result of changes in or unavailability of such infor-
mation or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as pub-
lished by Moody's) follows:
Long Term Debt
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally re-
ferred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated
A-4
<PAGE>
lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A Bonds which are rated A possess may favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Moody's bond rating symbols may contain numerical modifiers of a ge-
neric rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking, and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristi-
cally unrealiable over any great length of time. Such bonds lack out-
standing investment characteristics and in fact have speculative char-
acteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protec-
tion of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desir-
able investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and is-
sues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Con( . . . )
Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
Note:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the sym-
bols Aa1, A1, Baa1, Ba1, and B1.
A-5
<PAGE>
Municipal Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquid-
ity support or demonstrated broadbased access to the market
for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins or protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security ele-
ments are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection com-
monly regarded as required of an investment security is pres-
ent and although not distinctly or predominantly speculative,
there is specific risk.
Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior ca-
pacity for repayment of senior short-term promissory obligations. Prime-1 re-
payment capacity will often be evidenced by many of the following characteris-
tics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong capac-
ity for repayment of senior short-term promissory obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial lever-
age. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
A-6
<PAGE>
Duff & Phelps, Inc.--A brief description of the applicable Duff & Phelps, Inc.
("D&P") ratings symbols and their meanings (as published by D&P) follows:
Long Term Debt
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition, gov-
ernment action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by sev-
eral factors including relative weightings of the different security classes in
the capital structure, the overall credit strength of the issuer, and the na-
ture of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if nec- essary). Ratings of "BBB-' and higher fall within the defi-
nition of investment grade securities, as defined by bank and insurance super-
visory authorities. Structured finance issues, including real estate, asset-
backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings) ad-
dresses the likelihood that aggregate principal and interest will equal or ex-
ceed the rated amount under appropriate stress conditions.
Rating ScaleDefinition
- --------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
- --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is mod-
AA est, but may vary slightly from time to time because of economic
AA- conditions.
- --------------------------------------------------------------------------------
A+
A
A-
Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
- --------------------------------------------------------------------------------
BBB+
BBB
BBB-
Below average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during
economic cycles.
- --------------------------------------------------------------------------------
A-7
<PAGE>
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
- -------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
- -------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substan-
tial with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
- -------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet scheduled prin-
cipal and/or interest payments.
DP Preferred stock with dividend arrearages.
- -------------------------------------------------------------------------------
Short-Term Debt Ratings
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with matu-
rities of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers accept-
ances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from opera-
tions, but also access to alternative sources of funds including trade credit,
bank lines, and the capital markets. An important consideration is the level
of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term ratings
is the refinement of the traditional "1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist within
that tier. As a consequence, Duff & Phelps Credit Rating has incorporated gra-
dations of "1+' (one plus) and "1-' (one minus) to assist investors in recog-
nizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements, spe-
cifically capital computation guidelines. These ratings meet Department of La-
bor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for in-
surance company investment portfolios.
A-8
<PAGE>
Rating Scale:
Definition
High Grade
D-1+ Highest certainty of timely payment. Short-term liquidity, includ-
ing internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are ex-
cellent and supported by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
Non-investment Grade
D-4 Speculative investment characteristics. Liquidity is not suffi-
cient to insured against disruption in debt service. Operating
factors and market access may be subject to a high degree of vari-
ation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest pay-
ments.
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long Term Debt
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a spe-
cific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective finan-
cial condition and operating performance of the issuer and any guarantor, as
well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by in-
surance policies or financial guaranties unless otherwise indicated.
A-9
<PAGE>
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small differ-
ences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Rat-
ings do not comment on the adequacy of market price, the suitability of any se-
curity for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information. Rat-
ings may be changed, suspended, or withdrawn as a result of changes in, or the
unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay inter-
est and repay principal, which is unlikely to be affected by reasona-
bly foreseeable events.
AA Bonds considered to be investment grade and of very high credit quali-
ty. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA'. Because
bonds rated in the "AAA' and "AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of the
issuers is generally rated "F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is consid-
ered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds and, therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in determin-
ing the credit risk associated with a particular security. The ratings ("BB' to
"C') represent Fitch's assessment of the likelihood of timely payment of prin-
cipal and interest in accordance with the terms of obligation for bond issues
not in default. For defaulted bonds, the rating ("DDD' to "D') is an assessment
of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective finan-
cial condition and operating performance of the issuer and any guarantor, as
well as the economic and political environment that might affect the issuer's
future financial strength.
A-10
<PAGE>
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories cannot fully reflect the differ-
ences in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay inter-
est and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identi-
fied which could assist the obligor in satisfying its debt service re-
quirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of con-
tinued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and eco-
nomic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not reme-
died, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
and Dultimate recovery value in liquidation or reorganization of the obli-
gor. "DDD' represents the highest potential for recovery of these
bonds, and "D' represents the lowest potential for recovery.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on de-
mand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
Exceptionally Strong Credit Quality Issues assigned this rating are
regarded as having the strongest degree of assurance for timely pay-
ment.
F-1
Very Strong Credit Quality Issues assigned this rating reflect an as-
surance of timely payment only slightly less in degree than issues
rated "F-1+'.
F-2
Good Credit Quality Issues assigned this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not
as great as for issues assigned "F-1+' and "F-1' ratings.
F-3
Fair Credit Quality Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is ade-
quate; however, near-term adverse changes could cause these securities
to be rated below investment grade.
A-11
<PAGE>
F-S Weak Credit Quality Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic con-
ditions.
D Default Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
A-12
<PAGE>
EAI-GI-SB-MS 10-98
<PAGE>
June 30, 1999 Annual Report
[NUVEEN LOGO APPEARS HERE]
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Growth and Income Stock Fund
For investors seeking long-term growth and potential and attractive value.
[PHOTO APPEARS HERE]
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser(SM) for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Fund Spotlight
7 Portfolio of Investments
10 Statement of Net Assets
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Notes to Financial Statements
17 Financial Highlights
19 Report of Independent Public Accountants
20 Building a Better Portfolio
21 Fund Information
<PAGE>
DEAR
Shareholder
At this writing, we're more than halfway through 1999. The much-talked-about
millennium (Y2K) looms, which really puts the concept of time in front of us
all. We think: "Where did the time go?"
We think about how old, 25 years ago, we thought we would be when the calendar
turned January 1, 2000. (And we realize, now, it is really not that old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000. Most likely, one of your millennium goals was financial. Whether it
was to fully fund your retirement accounts or set up trusts for your
grandchildren, the fact you're working with a financial adviser and reading this
report are positive signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. Testing should be completed by
the end of September.
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to help our industry make a smooth
transition to the Y2K. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
With our systems in place and ready to handle Y2K, we look forward to
helping you achieve your financial goals in the new millennium.
Your Fund's Fiscal Year. I want to briefly report on the economic environment
in which your investment in Nuveen Growth and Income Stock Fund performed. Read
for a more in-depth interview with a representative from the portfolio
management team for your fund, describing how that team of investment and
research professionals directed the portfolio during its fiscal year, July 1,
1998, through June 30, 1999.
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
"All efforts to
safeguard critical
systems are right
on schedule
at Nuveen."
ANNUAL REPORT page 1
<PAGE>
Over the past 12 months, the U.S. economy has continued to be characterized by
robust growth, generally low interest rates, and unemployment levels that remain
among the lowest in three decades.
Concerns, however, about the continued persistent pace of the economy's
expansion have tested the new paradigm that holds that improvements in
productivity enable us to have both economic growth and low inflation at the
same time. With investors and the various markets watching -- and reacting to --
every announcement concerning economic statistics, volatility has increased,
especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that
was widely expected to keep economic growth from becoming overly
robust;
. evidence of accelerating prices, most obvious in the sudden spike in
the April 1999 Consumer Price Index, contributed to the reemergence of
the specter of inflation, accompanied by predictions of higher
interest rates.
In an effort to pre-empt this inflation threat, the Federal Reserve moved
to raise the federal funds rate by a quarter-point -- to 5.0% -- at the end of
June. The upward adjustment to this rate, which represents the amount banks
charge one another on overnight loans, marks the first increase since March 1997
and stands in sharp contrast to the three reductions made last fall.
Despite the minimal increase and the Fed's announcement that it would shift
to a neutral bias concerning future interest rate action, uncertainty about the
board's next move -- which was not diminished by Chairman Greenspan's
Congressional testimony in late July -- continues.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, contact your financial
adviser for a prospectus, call Nuveen at (800) 621-7227, or download one from
our Web site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to maintaining
that reputation and finding the best ways to serve your evolving investment
needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 16, 1999
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
ANNUAL REPORT page 2
<PAGE>
From the Portfolio Manager's Perspective
Value stocks are making a comeback after being out of favor for several years.
For those who never doubted the benefits of value investing, such as the
managers of Nuveen Growth and Income Stock Fund, the resurgence comes as no
surprise. Brandon Thomas, director of equity funds at Nuveen, speaks with Rob
Lyon, president and chief investment officer of Institutional Capital
Corporation (ICAP), Nuveen's Premier Adviser/sm/ for value investing and the
subadviser of the fund, about strategies ICAP used in managing the fund during
its fiscal year ended June 30, 1999.
BRANDON Value investing at Nuveen and ICAP means seeking out stocks of
established, well-known companies the portfolio management team believes offer
unrecognized value with a "catalyst" that may trigger a rise in the stocks'
prices. In the past few years, growth stocks, which generally have higher
earnings growth rates than value stocks, have been among the market's best
performers, as the economy has grown modestly and investors sought out companies
with consistent earnings. In fact, growth stocks have outperformed value stocks
in each of the past five years, through 1998.
But, during the first part of 1999, we've seen value stocks make a
comeback. To what do you attribute the change?
ROB It's not unusual to see the comeback given the economic conditions that
are surfacing. Since October 1998, there have been more than 100 interest rate
cuts made by foreign central banks. That results in stronger industrial
production throughout the world, which is likely to lead to more positive
earnings for many companies. With more companies participating in an
accelerating economy, investor confidence shifts and value stocks, as well as
emerging market issues, are once again attractive to investors.
BRANDON Isn't it extraordinary for a shift of this magnitude from growth to
value to take place without our economy having been in a recession?
ROB Yes, it would be. But while the United States avoided a recession, much of
the world was in a terrible one. It's coming out of it now, and a broad range of
companies are benefiting from the turnaround.
BRANDON That seems to be reflected in some of the investment strategies you've
employed in the fund. Let's first review the fund's performance during its
fiscal year. For the one-year period ended June 30, 1999, the fund returned
12.37%, behind
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. They have been chosen by Nuveen for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for value investing, Institutional Capital
Corporation, is a highly successful institutional money manager with nearly 30
years of experience. They specialize in finding undervalued midsize and large
company stocks that are poised for significant growth.
This disciplined, research-oriented approach is the key investment strategy for
Nuveen Growth and Income Stock Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fund's fiscal year ended June 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
its Lipper Growth and Income Fund Index/1/ benchmark, which returned 13.56%. I
would like to point out two other figures, however. Since its inception in
August 1996, the fund returned 23.97%, outperforming the same benchmark, which
returned 22.70%. Also, since value's resurgence at the beginning of 1999, at the
midpoint of the fiscal period we are talking about, the fund has returned
16.78%, compared to Lipper's return of 11.59% (year-to-date).
What strategies did the portfolio team employ during the year to achieve
these numbers?
ROB As value investors, we took a hard look at companies that suffered during
the Asian financial crisis, which dominated the economic landscape last year.
Then we identified individual candidates that met our quantitative criteria --
where earnings were already starting to stabilize or improve, where there would
be a significant benefit from the world's economic improvement, and where we
computed there could be potential for 20% appreciation.
BRANDON What companies met those criteria?
ROB One of the fund's strongest performers in the first half of this year was
Motorola. Our analysts determined that its line of cellular phones was much
improved and that its upside potential in Asia was substantial. Motorola is a
good example of a company that should benefit from the economic improvement
underway throughout the world, particularly in non-Japan Asia.
Also, Northwest Airlines Inc., which is highly dependent upon Asian
traffic, exhibited many of the characteristics we seek. Here is a company that
is down by about 50% from where it was a year ago, but where the earnings are
rapidly improving.
Top Ten Stock Holdings/2/
General Motors Corporation 5.0%
----------------------------------------------
Philips Electronics N.V. 4.4%
----------------------------------------------
Bell Atlantic Corporation 4.2%
----------------------------------------------
News Corporation Limited Sponsored ADR 4.0%
----------------------------------------------
Hoechst AG Sponsored ADR 3.9%
----------------------------------------------
Bank of America Corporation 3.9%
----------------------------------------------
Citigroup Inc. 3.7%
----------------------------------------------
Waste Management, Inc./3/ 3.7%
----------------------------------------------
Philip Morris Companies Inc. 3.6%
----------------------------------------------
Bristol-Myers Squibb Company 3.4%
----------------------------------------------
The companies listed represent their respective percentage as of 6/30/99. Over
time, the fund's holdings and their percentages will vary as the prices of the
stocks vary.
BRANDON In addition to focusing on firms that would benefit from the economic
turnaround in Asia and the rest of the world, what other strategies were in
place during the year?
ROB Corporate restructurings continued to be another central theme guiding our
investment choices.
Philips Electronics, N.V., one of the fund's largest holdings, is
performing well as its cost-cutting initiatives and divestitures continued to
create a more focused corporate strategy. Many people don't realize that Philips
is one of the world's
/1/ The Lipper Peer Group returns reflect the performance of the Lipper Growth
and Income Fund Index, a managed index that represents the average returns
of the 30 largest funds in the Lipper Growth and Income category. The
returns assume reinvestment of dividends but do not include any initial or
ongoing expenses.
/2/ As a percentage of total stock holdings.
/3/ Shortly after the close of the fund's fiscal year, its position in Waste
Management was sold.
ANNUAL REPORT page 4
<PAGE>
leading semiconductor manufacturers and is the No. 1 producer of light bulbs.
And as part of its strategy to refocus on its core consumer electronics
business, the company sold off its Polygram Records division to Seagram for $12
billion and is now using the proceeds to buy back its own stock. That's just one
example of what's going right in the Netherlands-based company.
International Business Machines Corp. (IBM) also advanced sharply as the
company's efforts to become a leading electronic commerce and internet
consultant are beginning to show signs of success.
BRANDON Along with Motorola and IBM, Nortel Networks Corp., another
technology stock, has been a good performer. Are you a proponent of
technology stocks?
ROB We believe the Internet is a catalyst for change in the world economy.
While valuations of pure Internet stocks are outside of our idea of "value," we
try to keep abreast of the companies supplying the hardware to support Internet
users. When we can buy a leader in that field at attractive, value prices, we
will.
Nortel is an excellent example that shows real promise. It's a solid No. 2
company in one of the fastest growing industries in the world.
Equity Diversification
[Pie Chart Appears Here]
Consumer Cyclicals 22.7%
Financials 15.3%
Technology 15.2%
Communications 11.2%
Health Care 9.6%
Consumer Staples 8.4%
Basic Materials 5.9%
Capital Goods 5.6%
Transportation 3.8%
Energy 2.3%
Portfolio composition is as of 6/30/99 and is subject to change. Composition is
based on the fund's U.S. stocks and any American Depositary Receipts in its
portfolio.
BRANDON What is your outlook for the fund, especially in light of the recent
talk about inflation?
ROB We are confident the portfolio is positioned well, with its low relative
valuation, including its low price-to-earnings ratio, whether the market
continues its advance or levels off a bit.
The U.S. economy is very strong. The reason for the domestic October and
November rate cuts made by the Federal Reserve -- global economic uncertainty --
is behind us. We have had one rate increase by the Fed so far this year, and
there may be more, but we think the implications for the stock market are
neutral.
We think an interest rate hike is simply a confirmation that the economy is
exhibiting strong growth, which is usually favorable for cyclical, economically
sensitive value stocks.
Basically, we believe small increases in interest rates just confirm that
the earnings power of the value stocks is coming back.
There's no shortage of value out there, so we will continue to do our
homework to identify and add those companies to the portfolio that we believe
give the fund's shareholders the best opportunity for continued strong
performance.
"As value investors, we took a hard look at companies that suffered during the
Asian financial crisis . . . Then we identified individual candidates that met
our quantitative criteria."
ANNUAL REPORT page 5
<PAGE>
Fund Spotlight as of June 30, 1999
Terms To Know
The following are a few terms used throughout this report.
Beta Beta is a measure of a fund's volatility compared to the market's. A fund
with a beta of 1.20 is approximately 20% more volatile than the market, while a
fund with a beta of 0.80 is approximately 20% less volatile than the market.
Market capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: more than $5 billion in
market capitalization
Mid cap: between $1 billion
and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and share price.
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
NAV $27.07 $26.87 $26.84 $27.14
- -----------------------------------------------------------------
Fund Symbol NNGAX NNGBX NNGCX NNGRX
- -----------------------------------------------------------------
CUSIP 67064Y503 67064Y602 67064Y701 67064Y800
- -----------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
- -----------------------------------------------------------------
</TABLE>
Portfolio Allocation
[PIE CHART APPEARS HERE]
Equity.......94%
Cash
Equivalents.. 6%
Total Returns/1/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
YTD 16.78% 10.09% 16.32% 16.39% 16.93%
- ---------------------------------------------------------
1-Year 12.37% 5.90% 11.52% 11.58% 12.71%
- ---------------------------------------------------------
Since
Inception* 23.97% 21.46% 23.04% 23.00% 24.32%
- ---------------------------------------------------------
SEC 30-Day
Yield 0.45% 0.43% 0.00% 0.00% 0.69%
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines periodically to 0% over the following six years, which is not
reflected in the return figures. Class B shares convert to Class A shares
after eight years. Class C shares have a 1% CDSC for redemptions within one
year, which is not reflected in the total return figures.
* Annualized.
Portfolio Statistics
<TABLE>
<CAPTION>
Total Net Assets $946.7 million
- -----------------------------------------
<S> <C>
Beta 1.00
- -----------------------------------------
Average Market
Capitalization (Stocks) 57 billion
- -----------------------------------------
Average P/E 25.9
- -----------------------------------------
Number of Stocks 42
- -----------------------------------------
Expense Ratio* 1.24%
- -----------------------------------------
</TABLE>
* A shares after reimbursement
Index Comparison*
[LINE CHART APPEARS HERE]
Nuveen Growth and Income Stock Fund (NAV) $18,603
Nuveen Growth and Income Stock Fund (Offer) $17,534
S&P 500 $22,058
Lipper Growth and Income Fund Index $18,107
<TABLE>
<CAPTION>
Nuveen Growth Nuveen Growth Lipper Growth
and Income and Income & Income
Stock Fund (NAV) Stock Fund (Offer) S&P 500 Fund Index
---------------- ------------------ ------- -------------
<S> <C> <C> <C> <C>
8/96 10000 9425 10000 10000
6/97 13616 12833 13803 13055
6/98 16555 15603 17968 15945
6/99 18603 17534 22058 18107
</TABLE>
* The Index comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen fund compared with the Standard and Poor's 500
Index and the Lipper Growth and Income Fund Index. The Lipper Growth and Income
Fund Index represents the average returns of the 30 largest funds in the Lipper
Growth and Income Fund category. Index returns reflect total returns and assume
reinvestment of dividends but do not include any initial or ongoing expenses.
The Nuveen fund returns depicted in the chart reflect the initial maximum sales
charge applicable to Class A shares (5.75%) and all ongoing fund expenses.
Effective January 11, 1999, the maximum sales charge on Class A Shares was
increased from 5.25% to 5.75%.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 6
<PAGE>
Portfolio of Investments
Nuveen Growth and Income Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
Market
Shares Description Value
- ----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 91.0%
Basic Materials -- 5.7%
463,500 Akzo Nobel N.V. Sponsored ADR $ 19,640,813
435,100 Monsanto Company 17,159,258
241,200 Weyerhauser Company 16,582,500
- ----------------------------------------------------------------------
Capital Goods -- 5.3%
182,800 Tyco International Ltd. 17,320,300
611,150 Waste Management, Inc. 32,849,313
- ----------------------------------------------------------------------
Communications Services -- 10.6%
479,675 AT&T Corp. 26,771,860
347,200 Ameritech Corporation 25,519,200
571,300 Bell Atlantic Corporation 37,348,737
179,800 U.S. West, Inc. 10,563,249
- ----------------------------------------------------------------------
Consumer Cyclicals -- 17.7%
272,900 Dana Corporation 12,570,456
396,200 Dayton Hudson Corporation 25,753,000
398,300 Dun & Bradstreet Corporation 14,114,756
430,250 Federated Department Stores, Inc.# 22,776,359
95,700 Ford Motor Company 5,401,069
261,050 Gannet Co., Inc. 18,632,444
450,200 General Motors Corporation 29,713,200
274,450 General Motors Corporation -- Class H# 15,437,813
495,200 R.H. Donnelley Corporation# 9,687,350
250,900 TRW Inc. 13,768,138
- ----------------------------------------------------------------------
Consumer Staples -- 8.0%
295,650 BestFoods 14,634,675
335,000 Fort James Corporation 12,688,125
273,900 Kimberly-Clark Corporation 15,612,300
814,300 Philip Morris Companies Inc. 32,724,681
- ----------------------------------------------------------------------
Energy -- 2.2%
281,560 Elf Aquitaine SA Sponsored ADR 20,712,258
- ----------------------------------------------------------------------
Financials -- 14.4%
472,000 Bank of America Corporation 34,603,500
162,800 CIGNA Corporation 14,489,200
701,962 Citigroup Inc. 33,343,195
189,650 Hartford Financial Services Group, Inc. 11,058,966
</TABLE>
- -----
7
<PAGE>
Portfolio of Investments (continued)
Nuveen Balanced Municipal and Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
Market
Shares Description Value
- ----------------------------------------------------------------------
<C> <S> <C>
Financials -- continued
565,100 Household International, Inc. $ 26,771,613
497,600 U.S. Bancorp 16,918,400
- ----------------------------------------------------------------------
Health Care -- 9.1%
337,250 Baxter International Inc. 20,445,781
429,500 Bristol-Myers Squibb Company 30,252,906
769,000 Hoechst AG Sponsored ADR 35,374,000
- ----------------------------------------------------------------------
Technology -- 14.4%
229,500 Computer Associates International, Inc. 12,622,500
160,850 International Business Machines Corporation 20,789,863
219,032 Motorola, Inc. 20,753,282
213,500 Nortel Networks Corporation 18,534,469
388,552 Philips Electronics N.V. 39,195,183
419,450 Xerox Corporation 24,773,766
- ----------------------------------------------------------------------
Transportation -- 3.6%
161,150 AMR Corporation# 10,998,488
699,300 Northwest Airlines Corporation# 22,727,250
- ----------------------------------------------------------------------
Total Common Stock -- (cost $701,347,868) 861,634,216
------------------------------------------------------------
PREFERRED STOCKS -- 3.8%
Consumer Cyclicals -- 3.8%
1,130,450 News Corporation Limited Sponsored ADR 35,679,826
- ----------------------------------------------------------------------
Total Preferred Stock -- (cost $23,300,759) 35,679,826
------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS -- 5.9%
$25,000,000 Coca-Cola Company, Commercial Paper, effective yield of 5.15%, 8/02/99 $ 24,891,777
25,000,000 Procter & Gamble, Commercial Paper, effective yield of 5.73%, 7/01/99 25,000,000
5,900,000 Wal-Mart Stores, Inc., Commercial Paper, effective yield of 5.73%, 7/01/99 5,900,000
- ------------------------------------------------------------------------------------------------------------------
$55,900,000 Total Short-Term Investments -- (cost $55,791,777) 55,791,777
- ------------------------------------------------------------------------------------------------------------------
Total Investments -- (cost $780,440,404) 100.7% 953,105,819
----------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.7)% (6,111,019)
----------------------------------------------------------------------------------------------------
Net Assets -- 100% $946,694,800
====================================================================================================
</TABLE>
# Non-income producing.
9
See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets
Nuveen Growth and Income Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities, at market value (cost $780,440,404) (note 1) $953,105,819
Cash 400,327
Receivables:
Dividends and interest 1,689,053
Shares sold 4,190,404
Deferred organization costs (note 1) 79,576
Other assets 340,165
- --------------------------------------------------------------------------------------------------------------------------
Total assets 959,805,344
- --------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 10,651,585
Shares redeemed 1,237,732
Accrued expenses:
Management fees (note 4) 619,038
12b-1 distribution and service fees (notes 1 and 4) 258,662
Other 339,405
Dividends payable 4,122
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,110,544
- --------------------------------------------------------------------------------------------------------------------------
Net assets (note 5) $946,694,800
==========================================================================================================================
Class A Shares (note 1)
Net assets $793,545,705
Shares outstanding 29,315,605
Net asset value and redemption price per share $ 27.07
Offering price per share (net asset value per share plus maximum sales charge of 5.75% of offering price)* $ 28.72
==========================================================================================================================
Class B Shares (note 1)
Net assets $ 95,174,122
Shares outstanding 3,541,731
Net asset value, offering and redemption price per share $ 26.87
==========================================================================================================================
Class C Shares (note 1)
Net assets $ 41,071,190
Shares outstanding 1,530,214
Net asset value, offering and redemption price per share $ 26.84
==========================================================================================================================
Class R Shares (note 1)
Net assets $ 16,903,783
Shares outstanding 622,889
Net asset value, offering and redemption price per share $ 27.14
==========================================================================================================================
</TABLE>
*Effective January 11, 1999, the maximum sales charge on Class A Shares was
increased from 5.25% to 5.75%.
- -----
10
See accompanying notes to financial statements.
<PAGE>
Statement of Operations
Nuveen Growth and Income Stock Fund
Year Ended June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------
Investment Income (note 1)
Dividends $13,175,620
Interest 3,616,746
- -----------------------------------------------------------------------------------
Total investment income 16,792,366
- -----------------------------------------------------------------------------------
Expenses
Management fees (note 4) 6,911,325
12b-1 service fees - Class A (notes 1 and 4) 1,808,231
12b-1 distribution and service fees - Class B (notes 1 and 4) 730,747
12b-1 distribution and service fees - Class C (notes 1 and 4) 255,849
Shareholders' servicing agent fees and expenses 968,116
Custodian's fees and expenses 123,236
Trustees' fees and expenses (note 4) 90,468
Professional fees 59,225
Shareholders' reports - printing and mailing expenses 319,498
Federal and state registration fees 73,347
Amortization of deferred organization costs (note 1) 36,000
Other expenses 63,116
- -----------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 11,439,158
Custodian fee credit (note 1) (6,857)
Expense reimbursement (note 4) (347,366)
- -----------------------------------------------------------------------------------
Net expenses 11,084,935
- -----------------------------------------------------------------------------------
Net investment income 5,707,431
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 3) 31,610,896
Net change in unrealized appreciation or depreciation of investments 59,442,442
- -----------------------------------------------------------------------------------
Net gain from investments 91,053,338
- -----------------------------------------------------------------------------------
Net increase in net assets from operations $96,760,769
===================================================================================
</TABLE>
- -----
11
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/99 6/30/98
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 5,707,431 $ 7,784,661
Net realized gain from investment transactions (notes 1 and 3) 31,610,896 110,057,991
Net change in unrealized appreciation or depreciation of investments 59,442,442 33,508,467
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 96,760,769 151,351,119
- --------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,233,736) (7,296,320)
Class B (2,076) (174,471)
Class C (4,846) (50,306)
Class R (45,702) (207,438)
From accumulated net realized gains from investment transactions:
Class A (64,233,341) (55,954,562)
Class B (6,427,129) (3,039,218)
Class C (2,186,424) (762,373)
Class R (1,233,763) (1,266,493)
- --------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (75,367,017) (68,751,181)
- --------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 105,953,619 171,997,447
Net proceeds from shares issued to shareholders due to reinvestment of distributions 49,322,552 55,521,813
- --------------------------------------------------------------------------------------------------------------------
155,276,171 227,519,260
Cost of shares redeemed (131,707,460) (54,536,779)
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 23,568,711 172,982,481
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets 44,962,463 255,582,419
Net assets at the beginning of year 901,732,337 646,149,918
- --------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 946,694,800 $901,732,337
====================================================================================================================
Balance of undistributed net investment income at the end of year $ 4,525,655 $ 104,584
====================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Growth and Income Stock Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those related to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests primarily in a diversified portfolio of large- and mid-cap
equities of domestic companies as a source of capital growth. In addition to
investments in equity securities, the Fund may invest in cash equivalents and
short-term fixed income investments in order to preserve capital or to enhance
returns or as a temporary defensive measure.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values when such values are
believed to more accurately reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the delayed delivery purchase commitments. At June 30, 1999, the
Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income and net realized capital gains from investment
transactions, if any, are declared and distributed to shareholders annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
- -----
13
<PAGE>
Notes to Financial Statements (continued)
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a contingent deferred sales charge ("CDSC") if redeemed within
18 months of purchase. Class B Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of shareholders.
Derivative Financial Instruments
The Fund may invest in options and futures contracts, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the fiscal year ended June 30, 1999.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization and initial registration of shares was deferred and is being
amortized over a 60-month period beginning August 7, 1996 (commencement of
operations). If any of the initial shares of the Fund are redeemed during this
period, the proceeds of the redemption will be reduced by the pro-rata share of
the unamortized organization costs as of the date of redemption.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on the Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
- -----
14
<PAGE>
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended 6/30/99 Year Ended 6/30/98
---------------------- -----------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 2,108,966 $ 51,032,462 3,567,835 $ 89,573,723
Class B 1,164,391 28,993,639 2,261,218 56,728,012
Class C 901,784 22,488,408 697,568 17,510,818
Class R 139,756 3,439,110 325,380 8,184,894
Shares issued to shareholders
due to reinvestment of distributions:
Class A 1,881,914 42,862,233 2,217,304 50,837,734
Class B 184,034 4,158,678 119,470 2,714,481
Class C 43,891 990,959 30,815 699,886
Class R 57,417 1,310,682 55,208 1,269,712
- -----------------------------------------------------------------------------------------------
6,482,153 155,276,171 9,274,798 227,519,260
- -----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,484,770) (107,597,350) (1,640,986) (41,459,146)
Class B (523,515) (12,739,469) (108,267) (2,735,040)
Class C (226,134) (5,392,875) (69,070) (1,753,632)
Class R (265,612) (5,977,766) (340,624) (8,588,961)
- -----------------------------------------------------------------------------------------------
(5,500,031) (131,707,460) (2,158,947) (54,536,779)
- -----------------------------------------------------------------------------------------------
Net increase 982,122 $ 23,568,711 7,115,851 $172,982,481
===============================================================================================
</TABLE>
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the fiscal year ended June
30, 1999, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Purchases:
<S> <C>
Investment securities $1,043,257,403
U.S. government obligations 1,424,340,844
Short-term investments 4,372,894,683
Sales:
Investment securities 1,061,709,999
U.S. government obligations 1,424,600,000
Short-term investments 4,391,691,047
===============================================================================================
</TABLE>
At June 30, 1999, the identified cost of investments owned for federal income
tax purposes was $787,500,652. Net unrealized appreciation for federal income
tax purposes aggregated $165,605,167 of which $175,513,869 related to
appreciated securities and $9,908,702 related to depreciated securities.
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -----------------------------------------------------------------------------------------------
<S> <C>
For the first $125 million .8500 of 1%
For the next $125 million .8375 of 1
For the next $250 million .8250 of 1
For the next $500 million .8125 of 1
For the next $1 billion .8000 of 1
For net assets over $2 billion .7750 of 1
</TABLE>
The Adviser had agreed to waive fees and reimburse expenses in order to prevent
total operating expenses (excluding any 12b-1 distribution or service fees and
extraordinary expenses) from exceeding .95% of the average daily net asset value
of any class of Fund shares through July 31, 1998, and 1.05% from August 1, 1998
through July 31, 2000.
- -----
15
<PAGE>
Notes to Financial Statements (continued)
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays no compensation
directly to those of its Trustees who are affiliated with the Adviser or to its
officers, all of whom receive remuneration for their services to the Fund from
the Adviser.
During the fiscal year ended June 30, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $1,865,400, of
which approximately $1,752,800 were paid out as concessions to authorized
dealers. The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended June 30, 1999, the Distributor compensated
authorized dealers directly with approximately $1,247,800 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the fiscal year
ended June 30, 1999, the Distributor retained approximately $802,900 of such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $299,500
of CDSC on share redemptions during the fiscal year ended June 30, 1999.
5. Composition of Net Assets
At June 30, 1999, the Fund had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
- ---------------------------------------------------------------------------
<S> <C>
Capital paid-in $739,007,776
Balance of undistributed net investment income 4,525,655
Accumulated net realized gain from investment transactions 30,495,954
Net unrealized appreciation of investments 172,665,415
- ---------------------------------------------------------------------------
Net assets $946,694,800
===========================================================================
</TABLE>
- -----
16
<PAGE>
Financial Highlights
- -----
17
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ----------------------------
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
June 30, Value Income(a) (Loss) Total Income Gains Total Value Return(b)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $26.50 $.19 $2.64 $2.83 $(.04) $(2.22) $(2.26) $27.07 12.37%
1998 24.01 .26 4.55 4.81 (.25) (2.07) (2.32) 26.50 21.59
1997(c)** 17.96 .30 6.18 6.48 (.20) (.23) (.43) 24.01 36.30
Class B (8/96)
1999 26.47 .01 2.61 2.62 -- (2.22) (2.22) 26.87 11.52
1998 24.00 .10 4.51 4.61 (.07) (2.07) (2.14) 26.47 20.70
1997(c)** 17.97 .21 6.13 6.34 (.08) (.23) (.31) 24.00 35.37
Class C (8/96)
1999 26.43 .01 2.62 2.63 -- (2.22) (2.22) 26.84 11.58
1998 23.98 .10 4.49 4.59 (.07) (2.07) (2.14) 26.43 20.63
1997(c)** 17.97 .21 6.11 6.32 (.08) (.23) (.31) 23.98 35.26
Class R (8/96)
1999 26.52 .24 2.67 2.91 (.07) (2.22) (2.29) 27.14 12.71
1998 24.02 .32 4.56 4.88 (.31) (2.07) (2.38) 26.52 21.91
1997(c)** 17.96 .30 6.24 6.54 (.25) (.23) (.48) 24.02 36.65
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Credit/ Before Credit/ After Credit/ After Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
June 30, (000) ment ment ment(a) ment(a) Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $793,546 1.28% .72% 1.24% .76% 134%
1998 790,063 1.36 .88 1.20 1.04 131
1997(c)** 616,209 1.28* 1.45* 1.20* 1.53* 110
Class B (8/96)
1999 95,174 2.03 (.01) 1.99 .03 134
1998 71,909 2.11 .22 1.95 .38 131
1997(c)** 10,664 2.03* .95* 1.95* 1.03* 110
Class C (8/96)
1999 41,071 2.02 -- 1.98 .04 134
1998 21,426 2.11 .23 1.95 .39 131
1997(c)** 3,630 2.03* .96* 1.95* 1.04* 110
Class R (8/96)
1999 16,904 1.03 .96 .99 1.00 134
1998 18,335 1.11 1.10 .95 1.26 131
1997(c)** 15,647 1.47* 1.04* .95* 1.56* 110
=================================================================================================================
</TABLE>
* Annualized.
** All per share amounts reflect a December 18, 1996, stock split of 1.113830,
1.112700, 1.112700 and 1.113806 shares, respectively, for each share of
Class A, B, C and R.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 4).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
- -----
18
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of Nuveen Growth and Income Stock Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Growth and Income Stock Fund (one of the
portfolios constituting the Nuveen Investment Trust (a Massachusetts business
trust)), as of June 30, 1999, and the related statement of operations, the
statements of changes in net assets and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Growth and Income Stock Fund as of June 30, 1999, the results of its operations,
the changes in its net assets and its financial highlights for the periods
indicated thereon, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 20, 1999
- -----
19
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers(SM) including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
- -----
20
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
Chase Global Funds Services Co.
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Chapman & Cutler
Chicago, IL.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
- -----
21
<PAGE>
[NUVEEN LOGO APPEARS HERE]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
EAN-GI-6-99
<PAGE>
June 30, 1999 Annual Report
NUVEEN
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Balanced Municipal and Stock Fund
For investors seeking
tax-free income and
growth of capital.
[PHOTO APPEARS HERE]
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
7 Fund Spotlight
8 Portfolio of Investments
14 Statement of Net Assets
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Notes to Financial Statements
21 Financial Highlights
23 Report of Independent Public
Accountants
24 Building a Better Portfolio
25 Fund Information
<PAGE>
DEAR
Shareholder
At this writing, we're more than halfway through 1999. The much-talked-about
millennium (Y2K) looms, which really puts the concept of time in front of us
all. We think: "Where did the time go?"
We think about how old, 25 years ago, we thought we would be when the calendar
turned January 1, 2000. (And we realize, now, it is really not that old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000. Most likely, one of your millennium goals was financial. Whether it
was to fully fund your retirement accounts or set up trusts for your
grandchildren, the fact you're working with a financial adviser and reading this
report are positive signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. Testing should be completed by
the end of September.
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to help our industry make a smooth
transition into the year 2000. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
With our systems in place and ready to handle Y2K, we look forward to
helping you achieve your financial goals in the new millennium.
Your Fund's Fiscal Year. I want to briefly report on the economic environment in
which your investment in Nuveen Balanced Municipal and Stock Fund performed.
Read on for an in-depth interview with representatives from the portfolio
management team for your fund, describing how that team of investment and
research professionals directed the portfolio during its fiscal year, July 1,
1998, through June 30, 1999.
Over the past 12 months, the U.S. economy has continued to be characterized
by robust growth, generally low interest rates, and unemployment levels that
remain among the lowest in three decades.
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
"All efforts to
safeguard critical
systems are right
on schedule
at Nuveen."
ANNUAL REPORT page 1
<PAGE>
2
Concerns, however, about the pace of the economy's expansion have tested
the new paradigm that holds that improvements in productivity enable us to have
both economic growth and low inflation at the same time. With investors and the
various markets watching -- and reacting to -- every announcement concerning
economic statistics, volatility has increased, especially in the equity markets.
We have entered a different economic environment from that of 12 months
ago. This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that was
widely expected to keep economic growth from becoming overly robust;
. evidence of accelerating prices, most obvious in the sudden spike in the
April 1999 Consumer Price Index, contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest
rates.
In an effort to pre-empt this inflation threat, the Federal Reserve moved
to raise the federal funds rate by a quarter-point -- to 5.0% -- at the end of
June. The upward adjustment to this rate, which represents the amount banks
charge one another on overnight loans, marks the first increase since March 1997
and stands in sharp contrast to the three reductions made last fall.
At the end of June 1999, the ratio between long-term municipal yields and
30-year Treasury yields stood at 94%, compared with the historical average of
86% over the period 1986-1999. For investors, this meant that quality long-term
municipal bonds offered yields comparable to those of long Treasury bonds --even
before the tax advantages of municipals were taken into account. On an after-tax
basis, municipal bonds continued to present an exceptionally attractive
investment option relative to Treasurys.
In the coming months, we expect to see a healthy supply of new municipal
bonds, although total volume is expected to drop from the near-record levels of
1998. This is due to the dramatic decrease in the refunding of existing bonds in
the wake of higher interest rates compared to last June.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen investment, contact your financial
adviser for a prospectus, call Nuveen at (800) 621-7227, or download one from
our Web site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to
maintaining that reputation and finding the best ways to serve your evolving
investment needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 16, 1999
"Your financial
adviser can serve
as a valuable
resource in helping
you determine if
adjustments are
needed in your
current asset
allocation plan."
ANNUAL REPORT page 2
<PAGE>
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Nuveen Balanced Municipal and Stock Fund features portfolio management by two
teams of experts -- one specializing in municipal bonds and the other in large
capitalization equities. The two Premier Advisers/sm/ managing the fund are
Nuveen Institutional Advisory Corp (NIAC), which manages the municipal portion
of the portfolio, and Institutional Capital Corporation (ICAP), managing the
equity portion. To help you understand the fund's performance during its fiscal
year ended June 30, 1999, Brandon Thomas, director of equity funds at Nuveen,
spoke with Tom Spalding of NIAC, and Rob Lyon, president and chief investment
officer of ICAP.
BRANDON Equity value investing at Nuveen and ICAP means seeking out stocks of
established, well-known companies the portfolio management team believes offer
unrecognized value with a "catalyst" that may trigger a rise in the stocks'
prices. In the past few years, growth stocks, which generally have higher
earnings growth rates than value stocks, have been among the market's best
performers, as the economy has grown modestly and investors sought out companies
with consistent earnings. In fact, these stocks have outperformed value stocks
in each of the past five years, through 1998.
But, during the first part of 1999, we've seen value stocks make a
comeback. To what do you attribute the change?
ROB It's not unusual to see the comeback given the economic conditions that are
surfacing. Since October 1998, there have been more than 100 interest rate cuts
made by foreign central banks. That has resulted in stronger industrial
production throughout the world, which is likely to lead to more positive
earnings for many companies. With more companies participating in an
accelerating economy, investor confidence then shifts, and value stocks, as well
as emerging market issues, are once again attractive to investors.
BRANDON Isn't it extraordinary for a shift of this magnitude from growth to
value to take place without our economy having been in a recession?
ROB Yes, it generally would be. But while the United States avoided a recession,
much of the world was in a terrible one. It's coming out of it now, and a broad
range of companies are benefiting from the turnaround.
BRANDON Let's review the fund's performance during its fiscal year. For the one-
year period ended June 30, 1999, the fund returned 5.49%. Since the fund's
inception in August 1996, it has gained 13.12%. The fund, at June 30, was 59%
invested in municipal bonds, 39% invested in stocks and about 2% invested in
cash equivalents.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Adviserssm -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. They have been chosen by Nuveen for their rigorously disciplined
investment approaches and their consistent long-term performance.
Nuveen's Premier Advisersm for value investing, Institutional Capital
Corporation, is a highly successful institutional money manager with nearly 30
years of experience. They specialize in finding undervalued midsize and large
company stocks that are poised for significant growth.
Nuveen Institutional Advisory Corp., is the Premier Advisersm for income
investing. Averaging 10 years of investment experience, the team members offer a
commitment to exhaustive research, an active, value-oriented investment style
and the presence and trading leverage of a market leader.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fund's fiscal year ended June 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
We believe investors and their financial advisers will continue to find
that balanced funds combining municipals and equities, such as this one, provide
a number of key benefits that are sometimes difficult to find in other balanced
funds. These benefits include growth potential afforded by equities, a monthly
tax-free dividend and moderated risk resulting from asset class diversification.
What strategies did your team employ in the equity portfolio during the
year?
ROB As value investors, we took a hard look at companies that suffered during
the Asian financial crisis, which dominated the economic landscape last year.
Then we identified individual candidates that met our quantitative criteria --
where earnings were already starting to stabilize or improve, where there would
be a significant benefit from the world's economic improvement, and where we
determined there could be potential for 20% appreciation.
I'd like to point out this is a shift from six months ago when we focused
on the stocks of companies whose business is primarily domestic in nature. The
reason for the change is the same as the shift in the market from growth to
value. In August and September of 1998, we were concerned with a global economic
slowdown and believed the U.S. would be a safe haven. Now that those concerns
have dissipated, we believe there's considerable value in multinational
companies, in addition to domestic firms.
BRANDON What companies met those criteria?
ROB One of the fund's strongest performers in the first half of this year was
Motorola, Inc. Our analysts determined that its line of cellular phones was much
improved and that its upside potential in non-Japan Asia was substantial.
Motorola, a leader in global communications and major investor in emerging
technologies, is a good example of a company that should benefit from the
economic improvement underway throughout the world, particularly in Asia.
Top Five Stock Holdings
General Motors Corporation 5.1%
- --------------------------------------------
Philips Electronics N.V. 4.3%
- --------------------------------------------
Bell Atlantic Corporation 4.1%
- -------------------------------------------
News Corporation Limited Sponsored ADR 3.9%
- --------------------------------------------
Bank of America Corporation 3.9%
- --------------------------------------------
The companies listed represent their respective percentage as a percentage of
total stock holdings as of 6/30/99. Over time, the fund's holdings and their
percentages will vary.
BRANDON In addition to focusing on firms that would benefit from the economic
turnaround in Asia and the rest of the world, what other strategies were in
place during the year?
ROB Corporate restructurings continued to be another central theme guiding our
investment choices.
Philips Electronics N.V., one of the fund's largest holdings, is performing
well as its cost-cutting initiatives and divestitures continued to create a more
focused corporate strategy. Many people don't realize that Philips is one of the
world's leading semiconductor manufacturers and is the No. 1 producer of light
bulbs. And as part of its refocusing on its
ANNUAL REPORT page 4
<PAGE>
core consumer electronics business, the company sold its Polygram Records
division to Seagram for $12 billion and is now using the proceeds to buy back
its own stock. That's just one example of what the Netherlands-based company is
doing right.
BRANDON We turn to Tom Spalding to discuss the municipal portion of the
portfolio. Throughout 1998, municipal bonds represented a reasonably insulated
haven in an otherwise turbulent market, with lower volatility relative to
Treasury bonds and other fixed-income investments.
How did the global economic crises of 1998, the three U.S. rate cuts last
fall and the Federal Funds rate hike on June 30, 1999, affect your management of
this portion of the fund's portfolio?
TOM Since the inception of the fund, our strategy in managing the municipal
portion has been to focus on bonds with intermediate maturities. During the last
six months of 1998 and the first three months of this year, these bonds enjoyed
solid price gains with the decline in interest rates and were instrumental in
moderating the fund's volatility in last summer's stock market decline.
With the acceleration in economic activity throughout the second quarter of
1999, however, bond prices fell and bond yields rose. Again, concentrating on
intermediate-term maturity municipals provided the portfolio with some downside
protection, as intermediates tend not to be as affected by interest rate
movements.
There was a second way we were able to take advantage of the rise in
interest rates in the second quarter of this year. As rates rose we were able to
demonstrate the effectiveness of a balanced portfolio by realizing losses in the
fixed-income portfolio in order to offset realized gains in the equity
portfolio. These equity gains resulted from the stock market's advance of the
past few years. By offsetting gains with losses, taxable distributions were kept
as low as possible.
Equity Diversification
[PIE CHART APPEARS HERE]
Consumer Cyclical.....23.3%
Financials............15.7%
Technology............15.6%
Communications........11.1%
Health Care............9.2%
Consumer Staples.......8.6%
Capital Goods..........5.9%
Basic Materials........5.8%
Energy.................2.5%
Transportation.........2.3%
Portfolio composition is subject to change. Composition is based on the fund's
U.S. stocks and American Depositary Receipts as of 6/30/99.
BRANDON What are some examples of bonds purchased during the year?
TOM The municipal portion of the portfolio had minimal turnover during the year,
but we did add an issue which we believe is particularly attractive, a
Southgate, Michigan Community School District bond.
In the first half of the fiscal year, we also focused on diversifying the
fund's municipal holdings geographically. Added during that period were New York
City General Obligation Bonds, District of Columbia General Obligation Bonds, as
well as Denver Airport Bonds and Nevada Housing Division Bonds.
"As value investors,
we took a hard look
at companies that
suffered during the
Asian financial
crisis ... Then we
identified individual
candidates that met
our quantitative
criteria."
ANNUAL REPORT page 5
<PAGE>
BRANDON What is your outlook for the fund, especially in light of the recent
concerns about inflation?
TOM In terms of the fixed-income portfolio, we believe the fund's holdings are
well-positioned. Even if the Fed raises rates again, the intermediate-term
nature of the portfolio should serve to help protect against an overall decline
in bond prices. And should bond prices rally and rates decline, the portfolio
should participate in the advance.
We'll continue to seek to diversify the portfolio geographically, and add
only those bonds that represent attractive value.
We'll also continue to seek opportunities to manage capital gains
distributions by working closely with the equity portfolio managers to realize
losses where appropriate. Tax losses can benefit shareholders when they are used
to offset capital gains.
ROB We are confident that the fund's equity portfolio is also positioned well,
with its low relative valuation, including its low price-to-earnings ratio,
whether the market continues its advance or levels off a bit.
The U.S. economy is very strong. The reason for the interest rate cuts made
by the Federal Reserve last fall -- global economic uncertainty -- is behind us.
We have had one rate increase by the Fed so far this year, and there may be
more, but we think the implications for the stock market are neutral.
We think an interest rate hike is simply a confirmation that the economy is
exhibiting strong growth, which is usually favorable for cyclical, economically
sensitive value stocks.
Basically, we believe small increases in interest rates just confirm that
the earnings power of the value stocks are coming back.
There's no shortage of value opportunities out there, so we will continue
to do our homework to identify and add those companies to the portfolio that we
believe give the fund's shareholders the best opportunity for continued strong
performance.
ANNUAL REPORT page 6
<PAGE>
Fund Spotlight as of June 30, 1999
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $25.45 $25.65 $25.63 $25.33
- ---------------------------------------------------------------------------
Fund Symbol NBMSX NMNBX NBMCX N/A
- ---------------------------------------------------------------------------
CUSIP 67064Y883 67064Y875 67064Y867 67064Y859
- ---------------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns+
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
YTD 5.26% -0.79% 4.89% 4.85% 5.42%
- -----------------------------------------------------------------------
1-Year 5.49% -0.56% 4.71% 4.71% 5.81%
- -----------------------------------------------------------------------
Since
Inception* 13.12% 10.82% 12.31% 12.28% 13.42%
- -----------------------------------------------------------------------
Tax-Exempt
Distribution
Rate 2.05% 1.93% 1.31% 1.31% 2.30%
- -----------------------------------------------------------------------
SEC 30-Day
Yield 2.53% 2.38% 1.79% 1.79% 2.78%
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years,
which is not reflected in the return figures. Class B shares convert to
Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year, which is not reflected in the total return
figures.
* Annualized
Portfolio Allocation
[PIE CHART APPEARS HERE]
Municipal
Bonds..........59%
Equity.........39%
Cash
Equivalents.....2%
Portfolio Statistics
Total Net Assets $198.3 million
- ------------------------------------------
Fixed Income
Average Duration 6.68
- ------------------------------------------
Average Market
Capitalization (Stocks) $57 billion
- ------------------------------------------
Average P/E 25.9
- ------------------------------------------
Number of Stocks 42
- ------------------------------------------
Expense Ratio* 1.19%
- ------------------------------------------
* For Class A shares after reimbursement
Terms To Know
The following are a few terms used throughout this report.
Duration Duration is an indicator of a portfolio's sensitivity to interest
rates.
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and share price.
Index Comparison(*)
[LINE CHART APPEARS HERE]
Nuveen Balanced Nuveen Balanced Lehman Brothers
Municipal and Municipal & 10-Year
Stock Fund (NAV) Stock Fund (Offer) S&P 500 Municipal Index
---------------- ------------------ ------- ---------------
8/96 10000 9425 10000 10000
6/97 11859 11177 13803 10730
6/98 13603 12821 17968 11640
6/99 14350 13525 22058 11907
Nuveen Balanced Municipal and Stock Fund (NAV) $14,350
Nuveen Balanced Municipal and Stock Fund (Offer) $13,525
S&P 500 $22,058
Lehman Brothers 10-Year Municipal Index $11,907
* The Index Comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen Fund compared with the Standard and Poor's 500
Index and the Lehman Brothers 10-Year Municipal Bond Index. The indexes do not
reflect any initial or ongoing expenses. The Nuveen fund returns depicted in the
chart reflect the initial maximum sales charge applicable to A shares (5.75%)
and all ongoing fund expenses.
Effective January 11, 1999, the maximum sales charge on Class A shares increased
to 5.75% from 5.25%.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 7
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
Market
Shares Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 37.0%
Basic Materials - 2.2%
38,700 Akzo Nobel N.V. Sponsored ADR $ 1,639,913
39,000 Monsanto Company 1,538,063
39,650 UPM-Kymmene Oyj Corporation Sponsored ADR 1,246,497
- --------------------------------------------------------------------------------
Capital Goods - 2.3%
16,850 Tyco International Ltd. 1,596,538
53,750 Waste Management, Inc. 2,889,063
- --------------------------------------------------------------------------------
Communication Services - 4.3%
37,660 AT&T Corp. 2,101,899
31,650 Ameritech Corporation 2,326,275
47,500 Bell Atlantic Corporation 3,105,313
15,300 U.S. West, Inc. 898,875
- --------------------------------------------------------------------------------
Consumer Cyclicals - 7.5%
23,300 Dana Corporation 1,073,256
34,950 Dayton Hudson Corporation 2,271,750
35,950 Dun & Bradstreet Corporation 1,273,978
37,600 Federated Department Stores, Inc.# 1,990,450
8,200 Ford Motor Company 462,788
23,400 Gannett Co., Inc. 1,670,175
39,450 General Motors Corporation 2,603,700
23,100 General Motors Corporation - Class H# 1,299,375
21,300 TRW Inc. 1,168,838
22,700 Royal Caribbean Cruises Ltd. 993,125
- --------------------------------------------------------------------------------
Consumer Staples - 3.3%
26,450 BestFoods 1,309,275
28,200 Fort James Corporation 1,068,075
24,050 Kimberly-Clark Corporation 1,370,850
70,100 Philip Morris Companies Inc. 2,817,144
- --------------------------------------------------------------------------------
Energy - 1.0%
26,040 Elf Aquitaine SA Sponsored ADR 1,915,568
- --------------------------------------------------------------------------------
Financials - 6.1%
40,550 Bank of America Corporation 2,972,822
15,700 CIGNA Corporation 1,397,300
56,112 Citigroup Inc. 2,665,320
21,900 Hartford Financial Services Group, Inc. 1,277,044
47,450 Household International, Inc. 2,247,944
42,700 U.S. Bancorp 1,451,800
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Health Care - 3.5%
30,450 Baxter International Inc. $ 1,846,031
33,150 Bristol-Myers Squibb Company 2,335,003
61,500 Hoechst AG Sponsored ADR 2,829,000
- --------------------------------------------------------------------------------
Technology - 5.9%
19,600 Computer Associates International, Inc. 1,078,000
14,200 International Business Machines Corporation 1,835,350
18,896 Motorola, Inc. 1,790,396
18,950 Nortel Networks Corporation 1,645,097
32,238 Philips Electronics N.V. 3,252,008
38,750 Xerox Corporation 2,288,672
- --------------------------------------------------------------------------------
Transportation - 0.9%
14,050 AMR Corporation# 958,913
24,900 Northwest Airlines Corporation# 809,250
- --------------------------------------------------------------------------------
Total Common Stocks - (cost $58,769,216) 73,310,733
-----------------------------------------------------------------------
PREFERRED STOCKS - 1.5%
Consumer Cyclical - 1.5%
95,200 News Corporation Limited Sponsored ADR 3,004,750
- --------------------------------------------------------------------------------
Total Preferred Stocks - (cost $1,921,627) 3,004,750
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 58.9%
Alabama - 0.2%
$ 455,000 Alabama Water Pollution Control Authority, Revolving Fund Loan Bonds, 8/05 at 100 AAA $ 492,938
Series 1994, 6.625%, 8/15/08
- ------------------------------------------------------------------------------------------------------------------------------------
California - 2.6%
2,500,000 City of Escondido, California, Multifamily Housing Revenue Refunding Bonds, /05 at 101 1/2 AAA 2,603,150
Series 1997B (Morning View Terrace Apartments), 5.400%, 1/01/27 (Mandatory
put 7/01/07)
735,000 Northern California Power Agency, Public Power Revenue Refunding Bonds, No Opt. Call A- 769,302
Geothermal Project No. 3, 1993 Series A, 5.650%, 7/01/07
250,000 County of Orange, California, Refunding Recovery Bonds, 1995 Series A, 6.000%, No Opt. Call AAA 273,140
6/01/10
1,495,000 Palmdale Civic Authority (Civic Center Refinancing), 1997 Series A, 5.375%, 7/07 at 102 AAA 1,522,792
7/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado - 1.0%
2,000,000 City and County of Denver, Colorado, Airport System Revenue Bonds, Series 11/06 at 102 AAA 2,075,080
1996 B, 5.625%, 11/15/08 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 3.6%
1,075,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program Bonds, 5/06 at 102 AA 1,120,806
1996 Series B, Subseries B-2, 5.750%, 11/15/08 (Alternative Minimum Tax)
1,000,000 State of Connecticut Health and Educational Facilities Authority, Hospital for No Opt. Call BBB 996,110
Special Care Issue, Series B, 5.125%, 7/01/07
1,485,000 Connecticut Development Authority, First Mortgage Gross Revenue Health Care 12/06 at 103 BBB+ 1,445,959
Project Refunding Bonds, Series 1998A (The Elim Park Baptist Home, Inc.
Project), 4.875%, 12/01/07
3,500,000 West Haven Housing Authority (Connecticut), Multifamily Housing Revenue Bonds, 1/01 at 100 N/R 3,538,010
Series 1998B (Meadows Landing Apartments), 6.000%, 1/01/02 (Alternative
Minimum Tax)
</TABLE>
9
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund (continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
District of Columbia -- 2.2%
$3,500,000 District of Columbia, General Obligation Bonds, Series 1998B, 6.000%, 6/01/11 No Opt. Call AAA $3,744,650
500,000 District of Columbia, General Obligation Refunding Bonds, Series A-1, 6.500%, No Opt. Call AAA 555,668
6/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.4%
2,000,000 Development Authority of Fulton County (Georgia), Special Facilities Revenue 5/08 at 101 BBB- 1,960,500
Bonds (Delta Air Lines, Inc. Project), Series 1998, 5.300%, 5/01/13
(Alternative Minimum Tax)
805,000 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 1996 6/06 at 102 AAA 828,184
Series A, 5.875%, 12/01/19 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Idaho - 1.5%
1,350,000 Idaho Housing and Finance Association, Single Family Mortgage Bonds, 1997 1/07 at 102 A1 1,413,828
Series D, 5.950%, 7/01/09 (Alternative Minimum Tax)
1,425,000 Idaho Housing and Finance Association, Single Family Mortgage Bonds, 1997 7/07 at 101 1/2 A1 1,466,582
Series F, 5.700%, 7/01/10 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois - 5.3%
1,075,000 Village of Bolingbrook, Will and DuPage Counties, Illinois, Residential No Opt. Call AAA 1,263,512
Mortgage Revenue Bonds, Series 1979, 7.500%, 8/01/10
Community High School District Number 219, Cook County, Illinois (Niles
Township), General Obligation Limited Tax School Bonds, Series 1998:
1,130,000 0.000%, 12/01/09 No Opt. Call AAA 662,553
2,360,000 0.000%, 12/01/10 No Opt. Call AAA 1,302,980
Illinois Development Finance Authority, Economic Development Revenue Bonds,
Series 1998 (The Latin School of Chicago Project):
270,000 5.200%, 8/01/11 8/08 at 100 Baa2 259,678
200,000 5.250%, 8/01/12 8/08 at 100 Baa2 191,946
580,000 5.300%, 8/01/13 8/08 at 100 Baa2 556,841
2,160,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1985 7/04 at 102 N/R*** 2,443,997
(St. Elizabeths Hospital of Chicago, Inc.), 7.250%, 7/01/05
(Pre-refunded to 7/01/04)
1,500,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 (OSF 11/03 at 102 A 1,551,150
Healthcare System), 6.000%, 11/15/10
245,000 Illinois Health Facilities Authority, FHA Insured Mortgage Revenue Bonds, 2/06 at 102 AAA 251,495
Series 1996 (Sinai Health System), 5.500%, 2/15/09
1,200,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1997A (Highland 10/07 at 102 AAA 1,249,728
Park Hospital Project), 5.700%, 10/01/10
700,000 Kankakee School District No. 111, Kankakee County, Illinois, General Obligation 1/06 at 100 AAA 711,655
School Bonds, Series 1996, 5.500%, 1/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana - 0.8%
1,525,000 Indiana Housing Finance Authority, Single Family Mortgage Revenue Bonds, 7/08 at 101 Aaa 1,517,543
1998 Series C-3, 5.300%, 7/01/13 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky - 1.3%
2,500,000 County of Boone, Kentucky, Mortgage Revenue Bonds (Normandy Green Apartments 12/99 at 100 N/R 2,510,500
Project), Series 1998A, 5.200%, 6/20/38 (Alternative Minimum Tax)
(Mandatory put 12/20/99)
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.3%
Parish School Board of the Parish of Jefferson, State of Louisiana, Sales Tax
School Bonds, Refunding Series 1998:
1,045,000 0.000%, 3/01/08 No Opt. Call AAA 675,885
2,175,000 0.000%, 9/01/08 No Opt. Call AAA 1,371,838
1,000,000 0.000%, 3/01/10 No Opt. Call AAA 575,870
- ------------------------------------------------------------------------------------------------------------------------------------
Maine - 0.1%
255,000 Town of Winslow, Maine (Crowe Rope Industries Project), General Obligation 3/07 at 102 Aaa 268,941
Tax Increment Financing Bonds, 1997 Series A, 6.000%, 3/01/11 (Alternative
Minimum Tax)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Massachusetts - 4.3%
Massachusetts Development Finance Agency, Resource Recovery Revenue
Bonds (Ogden Haverhill Project), Series 1998B:
$ 1,720,000 5.100%, 12/01/12 (Alternative Minimum Tax) 12/08 at 102 BBB $1,624,024
1,885,000 5.200%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,785,981
250,000 Massachusetts Health and Educational Facilities Authority, 7/06 at 102 AAA 268,773
Revenue Bonds, Melrose-Wakefield Healthcare Corp. Issue, Series C,
5.700%, 7/01/08 (Pre-refunded to 7/01/06)
Massachusetts Industrial Finance Agency, Resource Recovery Revenue
Refunding Bonds (Ogden Haverhill Project), Series 1998A:
1,500,000 5.450%, 12/01/12 (Alternative Minimum Tax) 12/08 at 102 BBB 1,465,080
1,825,000 5.500%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,782,332
1,835,000 Massachusetts Turnpike Authority, Western Turnpike Revenue Bonds, 7/99 at 100 AAA 1,844,175
1997 Series A, 5.550%, 1/01/17
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 1.6%
Essexville-Hampton Public Schools, County of Bay, State of Michigan,
1997 School Building and Site Bonds (General Obligation - Unlimited Tax):
1,000,000 5.400%, 5/01/11 (Pre-refunded to 5/01/07) 5/07 at 100 AAA 1,044,380
1,010,000 5.500%, 5/01/12 (Pre-refunded to 5/01/07) 5/07 at 100 AAA 1,061,369
1,000,000 Southgate Community School District, County of Wayne, State of 5/09 at 100 AAA 1,042,240
Michigan, 1999 School Building and Site Bonds (General Obligation -
Unlimited Tax), 5.750%, 5/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.9%
Jones County, Mississippi, Hospital Revenue Refunding Bonds (South
Central Regional Medical Center Project), Series 1997:
1,285,000 5.350%, 12/01/10 12/07 at 100 BBB+ 1,283,741
500,000 5.400%, 12/01/11 12/07 at 100 BBB+ 497,965
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 5.0%
9,921,273 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan No Opt. Call N/R 9,851,824
Utility District Project), Series 1997B, 5.700%, 7/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada - 1.3%
2,200,000 Nevada Housing Division, Single Family Mortgage Bonds, 1997 4/07 at 102 Aa3 2,266,880
Series A-1 Mezzanine Bonds, 6.000%, 4/01/15 (Alternative Minimum Tax)
250,000 Airport Authority of Washoe County, Reno, Nevada, Airport Revenue 7/03 at 102 AAA 263,075
Refunding Bonds, Series 1993B, 5.875%, 7/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 2.3%
1,450,000 New Hampshire Higher Educational and Health Facilities Authority 1/07 at 102 BBB- 1,473,389
(New Hampshire College), Series 1997, 6.200%, 1/01/12
3,000,000 State of New Hampshire, Turnpike System Revenue Bonds, 1992 4/02 at 102 AAA 3,158,130
Series, 6.000%, 4/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
New York - 10.5%
2,000,000 Certificates of Participation, The State of New York, The City No Opt. Call BBB+ 2,120,360
University of New York (John Jay College of Criminal Justice
Project Refunding), 6.000%, 8/15/06
Dutchess County Water and Wastewater Authority (New York), Service
Agreement Revenue Bonds, 1998 Series One:
420,000 4.850%, 6/01/09 6/08 at 101 A 405,766
925,000 4.950%, 6/01/10 6/08 at 101 A 894,882
860,000 5.050%, 6/01/11 6/08 at 101 A 833,392
5,000,000 Erie County (New York), Industrial Development Agency, Solid 12/10 at 103 N/R 5,257,950
Waste Disposal Facility Revenue Bonds (1998 CanFibre of
Lackawanna Project), 8.875%, 12/01/13 (Alternative Minimum Tax)
500,000 Metropolitan Transportation Authority, Transit Facilities Service No Opt. Call BBB+ 522,305
Contract Bonds, Series O, 5.750%, 7/01/07
250,000 The City of New York, General Obligation Bonds, Fiscal 1997 11/06 at 101 1/2 A- 262,053
Series D, Tax Exempt Bonds, 5.875%, 11/01/11
</TABLE>
11
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund (continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 500,000 The City of New York, General Obligation Bonds, Fiscal 1997 Series I, 4/07 at 101 A- $ 530,810
6.000%, 4/15/09
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 Series D, 8/07 at 101 A- 4,094,640
5.500%, 8/01/10
Dormitory Authority of the State of New York, Revenue Bonds, City
University Issue, Series U:
160,000 6.375%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 102 Baa1*** 172,099
115,000 6.375%, 7/01/08 7/02 at 102 Baa1 122,337
2,000,000 New York State Thruway Authority, Local Highway and Bridge Service 4/06 at 102 BBB+ 2,072,200
Contract Bonds, Series 1996, 5.625%, 4/01/07
285,000 New York State, Urban Development Corporation, State Facilities No Opt. Call BBB+ 305,936
Revenue Bonds, 1995 Refunding Series, 6.250%, 4/01/06
1,700,000 New York State Urban Development Corporation, Project Revenue Bonds 1/03 at 102 BBB+ 1,769,904
(Cornell Center for Theory and Simulation in Science and Engineering
Grant), Series 1993, 5.900%, 1/01/07
1,430,000 New York State Development Corporation, New York Urban Development No Opt. Call BBB+ 1,560,087
Corporation, Youth Facilities Revenue Bonds, Series 1997, 6.500%, 4/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 1.4%
2,045,000 North Carolina Municipal Power Agency Number 1, Catawba Electric No Opt. Call AAA 2,677,375
Revenue Bonds, Series 1980, 10.500%, 1/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio - 2.9%
1,750,000 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 1988 No Opt. Call BBB 1,823,098
Series C (Emery Air Freight Corporation and Emery Worldwide Airlines,
Inc - Guarantors), 6.050%, 10/01/09
1,500,000 County of Lorain, Ohio, Health Care Facilities Revenue Refunding Bonds, 2/08 at 101 BBB 1,467,615
Series 1998A (Kendal at Oberlin), 5.375%, 2/01/12
2,065,000 Ohio Building Authority, State Facilities Refunding Bonds (Toledo 4/03 at 100 AAA 2,389,102
Government Office Building), 1982 Series A, 10.125%, 10/01/06
(Pre-refunded to 4/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.5%
1,000,000 Oklahoma Industries Authority, Health System Revenue Refunding Bonds No Opt. Call AAA 1,068,440
(Obligated Group consisting of INTEGRIS Baptist Medical Center, Inc.,
INTEGRIS South Oklahoma City Hospital Corporation and INTEGRIS Rural
Health, Inc.) Series 1995D, 6.000%, 8/15/07
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 0.6%
1,250,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 1,282,125
Bonds, Series 1996-50A, 5.350%, 10/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.9%
1,760,000 City of Providence, Rhode Island, General Obligation Bonds, 1997 7/07 at 101 AAA 1,882,936
Series A, 6.000%, 7/15/09
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.4%
2,700,000 The Industrial Development Board of the City of Cookeville, 10/03 at 102 A 2,782,512
Tennessee, Hospital Refunding Revenue Bonds (Cookeville General
Hospital Project), Series 1993, 5.750%, 10/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.3%
3,000,000 Abilene Higher Education Authority, Inc., Texas, Student Loan 11/08 at 100 Aa3 2,874,150
Revenue Bonds (Subordinate Lien Fixed Rate Term Bonds), Series 1998B,
5.050%, 7/01/13 (Alternative Minimum Tax)
150,000 City of Austin, Texas, Water, Sewer and Electric Refunding Revenue No Opt. Call A2 169,400
Bonds, Series 1982, 14.000%, 11/15/01
250,000 City of San Antonio, Texas, Airport System Improvement Revenue Bonds, 7/06 at 101 AAA 259,824
Series 1996, 5.700%, 7/01/09 (Alternative Minimum Tax)
205,000 Texas Department of Housing and Community Affairs, Single Family 9/06 at 102 AAA 213,806
Mortgage Revenue Bonds, 1996 Series E, 5.750%, 3/01/10
1,000,000 Tyler Health Facilities Development Corporation, Texas, Hospital 7/02 at 100 Baa2 990,009
Revenue Bonds (Mother Frances Hospital Regional HealthCare Center
Project), Series 1997A, 5.500%, 7/01/09
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utah - 0.4%
$ 500,000 Tooele County, Hazardous Waste Disposal Revenue Bonds (Laidlaw Inc./USPCI 8/05 at 102 BBB $ 532,104
Clive PJ), Series 1995, 6.750%, 8/01/10 (Alternative Minimum Tax)
200,000 State Board of Regents of the State of Utah, Student Loan Revenue Bonds, 11/05 at 102 AAA 208,907
1995 Series N Bonds, 6.000%, 5/01/08 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Washington - 1.3%
1,060,000 Tacoma School District No. 409, King County, Washington, Unlimited Tax No Opt. Call Aaa 1,147,460
General Obligation Improvement and Refunding Bonds, 1997, 6.000%, 12/01/09
380,000 Washington State Housing Finance Commission, Single-Family Mortgage 1/04 at 102 AAA 394,918
Revenue Bonds (Mortgage Backed Securities Program), Series 1995A, 6.650%,
7/01/16 (Alternative Minimum Tax)
115,000 Washington Public Power Supply System, Nuclear Project No. 2 Revenue Bonds, No Opt. Call Aaa 126,538
Series 1981A, 14.375%, 7/01/01
800,000 Washington Public Power Supply System, Project No. 3, Refunding Revenue 7/06 at 102 AAA 836,359
Bonds, Series 1996-A, 5.700%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$116,501,273 Total Municipal Bonds - (cost $115,759,860) 116,937,568
============-----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.8%
$ 700,000 Michigan State Strategic Fund Pollution Control (Consumers Power Company), P-1 700,000
Variable Rate Demand Bonds, 3.400%, 4/15/18+
2,800,000 Ohio Air Quality Development Authority, State of Ohio, Air Quality A-1+ 2,800,000
Development Revenue Refunding Bonds (The Cincinnati Gas and Electric
Company Project), 1995 Series A, Variable Rate Demand Bonds, 3.350%,
9/01/30+
- -----------------------------------------------------------------------------------------------------------------------------------
$ 3,500,000 Total Short-Term Investments - (cost $3,500,000) 3,500,000
============-----------------------------------------------------------------------------------------------------------------------
Total Investments - (cost $179,950,703) - 99.2% 196,753,051
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.8% 1,561,749
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $198,314,800
====================================================================================================================
</TABLE>
# Non-income producing.
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants): Using
the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
+ Security has a maturity of more than one year, but has variable rate and
demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based
on market conditions or a specified market index.
See accompanying notes to financial statements.
13
<PAGE>
Statement of Net Assets
Nuveen Balanced Municipal and Stock Fund
June 30, 1999
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $179,950,703) (note 1) $196,753,051
Cash 347,100
Receivables:
Dividends 154,174
Interest 1,831,566
Investments sold 435,000
Shares sold 309,307
Deferred organization costs (note 1) 81,906
Other assets 32,470
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 199,944,574
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 880,159
Shares redeemed 235,547
Accrued expenses:
Management fees (note 5) 116,348
12b-1 distribution and service fees (notes 1 and 5) 84,822
Other 139,872
Dividends Payable 173,026
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,629,774
- ---------------------------------------------------------------------------------------------------------------------------
Net assets (note 6) $198,314,800
===========================================================================================================================
Class A Shares (note 1)
Net assets $123,916,875
Shares outstanding 4,869,035
Net asset value and redemption price per share $ 25.45
Offering price per share (net asset value per share plus maximum sales charge of 5.75% of offering price)* $ 27.00
===========================================================================================================================
Class B Shares (note 1)
Net assets $ 52,717,888
Shares outstanding 2,055,103
Net asset value, offering and redemption price per share $ 25.65
===========================================================================================================================
Class C Shares (note 1)
Net assets $ 20,497,875
Shares outstanding 799,641
Net asset value, offering and redemption price per share $ 25.63
===========================================================================================================================
Class R Shares (note 1)
Net assets $ 1,182,162
Shares outstanding 46,678
Net asset value, offering and redemption price per share $ 25.33
===========================================================================================================================
*Effective January 11, 1999, the maximum sales charge on Class A Shares was increased from 5.25% to 5.75%.
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Statement of Operations
Nuveen Balanced Municipal and Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 1,159,303
Interest 5,722,334
- ------------------------------------------------------------------------------------
Total investment income 6,881,637
- ------------------------------------------------------------------------------------
Expenses
Management fees (note 5) 1,374,619
12b-1 service fees - Class A (notes 1 and 5) 300,341
12b-1 distribution and service fees - Class B (notes 1 and 5) 449,751
12b-1 distribution and service fees - Class C (notes 1 and 5) 178,061
Shareholders' servicing agent fees and expenses 112,431
Custodian's fees and expenses 85,512
Trustees' fees and expenses (note 5) 15,090
Professional fees 36,929
Shareholders' reports - printing and mailing expenses 70,784
Federal and state registration fees 66,452
Amortization of deferred organization costs (note 1) 36,000
Other expenses 9,167
- ------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 2,735,137
Custodian fee credit (note 1) (451)
Expense reimbursement (note 5) (70,901)
- ------------------------------------------------------------------------------------
Net expenses 2,663,785
- ------------------------------------------------------------------------------------
Net investment income 4,217,852
- ------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 392,403
Net change in unrealized appreciation or depreciation of investments 5,824,556
- ------------------------------------------------------------------------------------
Net gain from investments 6,216,959
- ------------------------------------------------------------------------------------
Net increase in net assets from operations $10,434,811
====================================================================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Changes in Net Assets
Nuveen Balanced Municipal and Stock Fund
June 30, 1999
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/99 6/30/98
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 4,217,852 $ 3,281,813
Net realized gain from investment transactions (notes 1 and 4) 392,403 6,299,554
Net change in unrealized appreciation or depreciation of investments 5,824,556 7,014,341
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 10,434,811 16,595,708
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (3,165,304) (2,448,814)
Class B (611,994) (222,804)
Class C (242,322) (104,232)
Class R (43,038) (172,195)
From accumulated net realized gains from investment transactions:
Class A (3,293,468) (1,444,498)
Class B (1,225,114) (193,480)
Class C (486,028) (90,253)
Class R (38,192) (120,260)
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (9,105,460) (4,796,536)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 52,403,705 75,343,559
Net proceeds from shares issued to shareholders due to reinvestment of distributions 5,420,959 3,428,628
- -------------------------------------------------------------------------------------------------------------------
57,824,664 78,772,187
Cost of shares redeemed (26,489,470) (15,446,129)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 31,335,194 63,326,058
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 32,664,545 75,125,230
Net assets at the beginning of year 165,650,255 90,525,025
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $198,314,800 $165,650,255
===================================================================================================================
Balance of undistributed net investment income at the end of year $ 605,276 $ 450,082
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Balanced Municipal and Stock Fund (the "Fund") is a series of the
Nuveen Investment Trust (the "Trust") which was organized as a Massachusetts
business trust in 1996. The Trust (and each series within the Trust) is an open-
end diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those related to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests in a mix of equities and tax-exempt securities for capital
growth, capital preservation and current tax-exempt income. During temporary
defensive periods, the Fund may invest any percentage of its assets in temporary
investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. The prices of municipal bonds in the Fund's investment portfolio are
provided by a pricing service approved by the Fund's Board of Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities and/or securities
having remaining maturities of 60 days or less when purchased, are valued at
amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At June
30, 1999, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts on long-term debt securities when required
for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared and distributed to shareholders
monthly. Net ordinary taxable income and net realized capital gains from
investment transactions, if any, are declared and distributed to shareholders
not less frequently than annually. Furthermore, capital gains are distributed
only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from transactions, where
applicable.
Federal Income Taxes
The Fund intends to distribute all of its net investment income and capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal tax provision is required. In addition, the
Fund intends to satisfy conditions which will enable interest from municipal
obligations, which is exempt from regular federal income tax when received by
the Fund, to qualify as exempt-interest dividends when distributed to
shareholders of the Fund. All monthly tax-exempt dividends paid during the
fiscal year ended June 30, 1999, have been designated Exempt Interest Dividends.
Net realized capital gains and ordinary income distributions are subject to
federal taxation.
17
<PAGE>
Notes to Financial Statements (continued)
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a contingent deferred sales charge ("CDSC") if redeemed within
18 months of purchase. Class B Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of shareholders.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the fiscal year ended June 30, 1999.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization and initial registration of shares was deferred and is being
amortized over a 60-month period beginning August 7, 1996 (commencement of
operations). If any of the initial shares of the Fund are redeemed during this
period, the proceeds of the redemption will be reduced by the pro-rata share of
the unamortized organization costs as of the date of redemption.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on the Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/99 6/30/98
----------------------------- --------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 801,383 $ 19,758,610 1,308,803 $ 31,922,378
Class B 950,013 23,509,766 1,193,459 29,265,901
Class C 361,871 9,025,013 524,249 12,864,555
Class R 4,472 110,316 53,309 1,290,725
Shares issued to shareholders due to reinvestment of distributions:
Class A 166,972 4,085,713 125,058 3,001,186
Class B 38,607 947,489 10,810 261,191
Class C 13,468 330,353 5,838 140,308
Class R 2,354 57,404 1,074 25,943
- -------------------------------------------------------------------------------------------------------------------------------
2,339,140 57,824,664 3,222,600 78,772,187
- -------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (695,219) (17,146,719) (297,703) (7,230,838)
Class B (202,066) (5,046,935) (24,476) (597,282)
Class C (160,113) (3,961,328) (13,171) (326,708)
Class R (13,418) (334,488) (302,461) (7,291,301)
- -------------------------------------------------------------------------------------------------------------------------------
(1,070,816) (26,489,470) (637,811) (15,446,129)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase 1,268,324 $ 31,335,194 2,584,789 $ 63,326,058
===================================================================================================================================
</TABLE>
18
<PAGE>
3. Distributions to Shareholders
The Fund declared a dividend distribution from its tax-exempt net investment
income which was paid on August 2, 1999, to shareholders of record on July 9,
1999, as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $.0435
Class B .0280
Class C .0280
Class R .0485
- -------------------------------------------------------------------------------
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in common and
preferred stocks, municipal bonds and short-term investments for the fiscal year
ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Purchases:
<S> <C>
Common and preferred stocks $86,498,287
Municipal bonds 34,594,163
Short-term investments 25,100,000
Sales:
Common and preferred stocks 86,831,762
Municipal bonds 7,358,280
Short-term investments 26,300,000
- -------------------------------------------------------------------------------
</TABLE>
At June 30, 1999, the identified cost of investments owned for federal income
tax purposes was $180,519,915. Net unrealized appreciation for federal income
tax purposes aggregated $16,233,136 of which $18,153,115 related to appreciated
securities and $1,919,979 related to depreciated securities.
5. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -------------------------------------------------------------------------------
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1
For the next $250 million .7250 of 1
For the next $500 million .7125 of 1
For the next $1 billion .7000 of 1
For net assets over $2 billion .6750 of 1
- -------------------------------------------------------------------------------
</TABLE>
The Adviser had agreed to waive fees and reimburse expenses, in order to prevent
total operating expenses (excluding any 12b-1 distribution or service fees and
extraordinary expenses) from exceeding .85% of the average daily net asset value
of any class of Fund shares through July 31, 1998, and .95% from August 1, 1998
through July 31, 2000.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company owns a minority interest, under which ICAP
manages the Fund's equity portion of the investment portfolio. ICAP is
compensated for its services from the management fee paid to the Adviser. The
Fund pays no compensation directly to those of its Trustees who are affiliated
with the Adviser or to its officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
19
<PAGE>
Notes to Financial Statements (continued)
During the fiscal year ended June 30, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $776,900, of which
approximately $725,200 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the fiscal year ended June 30, 1999, the Distributor compensated
authorized dealers directly with approximately $1,018,900 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the fiscal year
ended June 30, 1999, the Distributor retained approximately $537,200 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $129,400
of CDSC on share redemptions during the fiscal year ended June 30, 1999.
6. Composition of Net Assets
At June 30, 1999, the Fund had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
- ----------------------------------------------------------------------------------
<S> <C>
Capital paid-in $180,665,392
Balance of undistributed net investment income 605,276
Accumulated net realized gain (loss) from investment transactions 241,784
Net unrealized appreciation of investments 16,802,348
- ----------------------------------------------------------------------------------
Net assets $198,314,800
==================================================================================
</TABLE>
7. Investment Composition
At June 30, 1999, the revenue sources by municipal purpose, expressed as a
percent of total municipal bonds, were as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Education and Civic Organizations 7%
Health Care 9
Housing/Multifamily 7
Housing/Single Family 9
Tax Obligation/General 14
Tax Obligation/Limited 11
Transportation 10
U.S. Guaranteed 10
Utilities 20
Other 3
- --------------------------------------------------------------------------------
100%
================================================================================
</TABLE>
33% of the municipal bonds owned by the Fund are either covered by insurance
issued by several private insurers or are backed by an escrow or trust
containing U.S. government or U.S. government agency securities, either of which
ensure the timely payment of principal and interest in the event of default.
Such insurance or escrow, however, does not guarantee the market value of the
municipal securities or the value of the Fund's shares.
For additional information regarding each investment security, refer to the
Portfolio of Investments of the Fund.
20
<PAGE>
Financial Highlights
- -----
21
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------------- -------------------------------
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
June 30, Value Income (a) (Loss) Total Income Gains Total Value Return(b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $25.46 $.62 $ .70 $1.32 $(.65) $(.68) $(1.33) $25.45 5.49%
1998 23.11 .67 2.66 3.33 (.61) (.37) (.98) 25.46 14.71
1997 (c) 20.00 .56 3.02 3.58 (.42) (.05) (.47) 23.11 18.05
Class B (8/96)
1999 25.53 .46 .68 1.14 (.34) (.68) (1.02) 25.65 4.71
1998 23.11 .49 2.67 3.16 (.37) (.37) (.74) 25.53 13.91
1997 (c) 20.00 .40 3.04 3.44 (.28) (.05) (.33) 23.11 17.32
Class C (8/96)
1999 25.51 .45 .69 1.14 (.34) (.68) (1.02) 25.63 4.71
1998 23.10 .49 2.66 3.15 (.37) (.37) (.74) 25.51 13.87
1997 (c) 20.00 .40 3.03 3.43 (.28) (.05) (.33) 23.10 17.27
Class R (8/96)
1999 25.39 .68 .71 1.39 (.77) (.68) (1.45) 25.33 5.81
1998 23.11 .72 2.66 3.38 (.73) (.37) (1.10) 25.39 14.94
1997 (c) 20.00 .61 3.03 3.64 (.48) (.05) (.53) 23.11 18.38
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Ending Before Before After After
Net Credit/ Credit/ Credit/ Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
June 30, (000) ment ment ment (a) ment (a) Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $123,917 1.23% 2.48% 1.19% 2.52% 52%
1998 117,005 1.36 2.47 1.10 2.73 87
1997 (c) 79,952 1.58* 2.31* 1.10* 2.79* 32
Class B (8/96)
1999 52,718 1.98 1.79 1.94 1.83 52
1998 32,384 2.10 1.71 1.85 1.96 87
1997 (c) 2,051 2.22* 1.62* 1.85* 1.99* 32
Class C (8/96)
1999 20,498 1.98 1.76 1.94 1.80 52
1998 14,908 2.11 1.71 1.85 1.97 87
1997 (c) 1,559 2.29* 1.53* 1.85* 1.97* 32
Class R (8/96)
1999 1,182 .98 2.73 .94 2.77 52
1998 1,353 1.11 2.73 .85 2.99 87
1997 (c) 6,963 2.05* 1.96* .85* 3.16* 32
==========================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 5).
(b) Total returns are calculated on net asset value without any sales charge and
are not annualized.
(c) From commencement of class operations as noted.
22
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Balanced Municipal and Stock Fund:
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Balanced Municipal and Stock Fund (one of
the portfolios constituting the Nuveen Investment Trust (a Massachusetts
business trust)), as of June 30, 1999, the related statement of operations for
the year then ended, and the statements of changes in net assets and the
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Balanced Municipal and Stock Fund as of June 30, 1999, and the results of its
operations for the year then ended, and the changes in its net assets and its
financial highlights for the periods indicated thereon, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 20, 1999
- -----
23
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety
of funds designed to
help you reach
your financial goals.
Growth
Nuveen Rittenhouse
Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Dividend and
Growth Fund
Income
Income Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
quality municipal bonds. The fund shares are listed and traded on the New York
and American stock exchanges. Exchange-traded funds provide the investment
convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
- -----
24
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Funds Services Co.
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Chapman & Cutler
Chicago, IL.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
- -----
25
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
EAN-MS-6-99
<PAGE>
June 30, 1999 Annual Report
Nuveen
Mutual Funds
Extraordinary Talent. Masterful Performance.
Nuveen Balanced Stock and Bond Fund
[PHOTO APPEARS HERE]
For investors seeking
long-term growth potential
with a measure of downside
protection.
Featuring Portfolio Management By Nuveen Investment Advisory Services
A Premier Adviser/SM/ for Income Investing
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective
6 Fund Spotlight
7 Portfolio of Investments
9 Statement of Net Assets
10 Statement of Operations
11 Statement of Changes in Net Assets
12 Notes to Financial Statements
15 Financial Highlights
16 Report of Independent Public
Accountants
17 Fund Information
<PAGE>
DEAR
Shareholder
At this writing, we're more than halfway through 1999. The much-talked-about
millennium (Y2K) looms, which really puts the concept
of time in front of us all. We think: "Where did the time go?"
We think about how old, 25 years ago, we thought we would be when
the calendar turned January 1, 2000. (And we realize, now, it is really not that
old at all.)
We think about all the things we thought we would have accomplished before 1999
became 2000. Most likely, one of your millennium goals was financial. Whether it
was to fully fund your retirement accounts or set up trusts for your
grandchildren, the fact you're working with a financial adviser and reading this
report are positive signs that you're well on your way to achieving your goal.
I'm pleased to report we're meeting our goals, too. In addition to the goals we
have established for each mutual fund we manage, we have had to set goals in
preparation for the millennium.
All efforts to safeguard critical systems are right on schedule at Nuveen.
It's a goal we set more than 10 years ago. Nuveen's trading, fund management and
pricing -- systems that affect you and your investments -- have been updated or
replaced to be able to deal accurately with Y2K.
We continue to work closely with our service providers, transfer agent,
custodian and trustee to monitor the readiness of their systems, as well as
address any remaining internal systems issues. Testing should be completed by
the end of September.
The Securities and Exchange Commission (SEC), which oversees the securities
industry, is also taking significant steps to help our industry make a smooth
transition to the Y2K. First, the SEC is requiring all public companies,
investment advisers, investment companies and municipal securities issuers to
disclose their ability to comply with the Y2K issue.
In addition, the SEC mandated that tests be conducted on various financial
systems to test the ability of exchanges and broker/dealer firms to handle
transactions effectively. We participated successfully in those tests.
With our systems in place and ready to handle Y2K, we look forward to
helping you achieve your financial goals in the new millennium.
Your Fund's Fiscal Year. I want to briefly report on the economic environment in
which your investment in Nuveen Balanced Stock and Bond Fund performed. Read on
for a more in-depth interview with a representative from the portfolio
management team for your fund, describing how that team of investment and
research professionals directed the portfolio during its fiscal year, July 1,
1998, through June 30, 1999.
[Photo of Timothy R. Schwertfeger
appears here]
Timothy R. Schwertfeger
Chairman of the Board
"All efforts to safeguard critical systems are right on schedule at Nuveen."
ANNUAL REPORT page 1
<PAGE>
"Your financial adviser can serve as a valuable resource in helping you
determine if adjustments are needed in your current asset allocation plan."
Over the past 12 months, the U.S. economy has continued to be characterized
by robust growth, generally low interest rates, and unemployment levels that
remain among the lowest in three decades.
Concerns, however, about the pace of the economy's expansion have tested the
new paradigm that holds that improvements in productivity enable us to have both
economic growth and low inflation at the same time. With investors and the
various markets watching -- and reacting to -- every announcement concerning
economic statistics, volatility has increased, especially in the equity markets.
We have entered a different economic environment from that of 12 months ago.
This shift has occurred in response to two factors:
. the Asian financial crisis of 1998 did not produce the slowdown that was
widely expected to keep economic growth from becoming overly robust;
. evidence of accelerating prices, most obvious in the sudden spike in the
April 1999 Consumer Price Index, contributed to the reemergence of the
specter of inflation, accompanied by predictions of higher interest rates.
In an effort to pre-empt this inflation threat, the Federal Reserve moved to
raise the federal funds rate by a quarter-point -- to 5.0% -- at the end of
June. The upward adjustment to this rate, which represents the amount banks
charge one another on overnight loans, marks the first increase since March 1997
and stands in sharp contrast to the three reductions made last fall.
Despite the minimal increase and the Fed's announcement that it would shift
to a neutral bias concerning future interest rate action, uncertainty about the
board's next move -- which was not diminished by Chairman Greenspan's
Congressional testimony in late July -- continues.
Keeping the Balance. The increased volatility in the markets highlights the
importance of maintaining balance in your investment portfolio. With a properly
balanced portfolio of equities, bonds and cash, your assets are better
positioned to weather the markets' ups and downs. A balanced portfolio can also
help you increase your opportunities for capital growth while reducing risk.
Your financial adviser can serve as a valuable resource in helping you determine
if adjustments are needed in your current asset allocation plan.
For more information on any Nuveen fund, contact your financial adviser for a
prospectus, call Nuveen at (800) 621-7227, or download one from our Web site at
www.nuveen.com. Please read the prospectus carefully before you invest or send
money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. As we look ahead to a new millennium, we are committed to maintaining
that reputation and finding the best ways to serve your evolving investment
needs. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 16, 1999
ANNUAL REPORT page 2
<PAGE>
From the Portfolio Manager's Perspective
- --------------------------------------------------------------------------------
Value stocks are making a comeback after being out of favor for several years.
For those who never doubted the benefits of value investing, such as the
managers of Nuveen Balanced Stock and Bond Fund, the resurgence comes as no
surprise. Brandon Thomas, director of equity funds at Nuveen, spoke with Rob
Lyon, president and chief investment officer of Institutional Capital
Corporation (ICAP), Nuveen's Premier Adviser/sm/ for value investing and the
subadviser of the fund, about strategies ICAP used in managing the fund during
its fiscal year ended June 30, 1999.
BRANDON | Value investing at Nuveen and ICAP means seeking out stocks of
established, well-known companies the portfolio management team believes offer
unrecognized value with a "catalyst" that may trigger a rise in the stocks'
prices. In the past few years, growth stocks, which generally have higher
earnings growth rates than value stocks, have been among the market's best
performers, as the economy has grown modestly and investors sought out companies
with consistent earnings. In fact, growth stocks have outperformed value stocks
in each of the past five years, through 1998.
But, during the first part of 1999, we've seen value stocks make a comeback.
To what do you attribute the change?
ROB | It's not unusual to see the comeback given the economic conditions that
are surfacing. Since October 1998, there have been more than 100 interest rate
cuts made by foreign central banks. That results in stronger industrial
production throughout the world, which is likely to lead to more positive
earnings for many companies. With more companies participating in an
accelerating economy, investor confidence has shifted and value stocks, as well
as emerging market issues, are once again attractive to investors.
BRANDON | Isn't it extraordinary for a shift of this magnitude from growth to
value to take place without our economy having been in a recession?
ROB | Yes, generally it would be. But while the United States avoided a
recession, much of the world was in a terrible one. It's coming out of it now,
and a broad range of companies are benefiting from the turnaround.
BRANDON | That seems to be reflected in some of the investment strategies you've
employed in the fund, which is 60% invested in stocks, as of June 30, 1999, 38%
in Treasury notes and 2% in cash equivalents. Let's first review the fund's
performance during its fiscal year. For the one-year period ended June 30, 1999,
the fund returned
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. We call them Premier Advisers/sm/ -- a select group
of asset management firms who direct the investment activities of the Nuveen
Mutual Funds. They have been chosen by Nuveen for their rigorously disciplined
investment approaches and their focus on consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it be blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's Premier Adviser/sm/ for value investing, Institutional Capital
Corporation, is a highly successful institutional money manager with nearly 30
years of experience. They specialize in finding undervalued midsize and large
company stocks that are poised for significant growth.
This disciplined, research-oriented approach is the key investment strategy for
Nuveen Balanced Stock and Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fund's fiscal year ended June 30, 1999. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
10.21%, slightly behind the Lipper Balanced Fund Index/1/ benchmark, which
returned 11.54%. While we always stress long-term investing, I would like to
point out the fund's performance year-to-date, which reflects the shift to value
stocks. Our fund returned 9.29%, compared to the Lipper index of 6.17% for the
same period ended June 30, 1999. Since the fund's inception in August 1996, the
fund has gained 16.86% versus its Lipper peer group's return of 17.53%.
What strategies did the portfolio team employ during the year to achieve
these numbers?
ROB | As value investors, we took a hard look at companies that suffered during
the Asian financial crisis, which dominated the economic landscape last year.
Then we identified individual candidates that met our quantitative criteria --
where earnings were already starting to stabilize or improve, where there would
likely be a significant benefit from the world's economic improvement, and where
we determined there could be potential for 20% appreciation.
This is a shift from six months ago when we focused on the stocks of
companies whose business is primarily domestic in nature. The reason for the
change is the same as the shift in the market from growth to value. In August
and September of 1998, we were concerned with a global economic slowdown and
believed the U.S. would be a safe haven. Now that those concerns have
dissipated, we believe there's considerable value in multinational companies, in
addition to domestic firms.
BRANDON | What companies met those criteria?
ROB | One of the fund's strongest performers in the first half of this year was
Motorola. Our analysts determined that its line of cellular phones was much
improved and that its upside potential in Asia was substantial. Motorola, a
leader in global telecommunications and major investor in emerging technologies,
is a good example of a company that should benefit from the economic improvement
underway throughout the world, particularly in non-Japan Asia.
Top Ten Stock Holdings/2/
General Motors Corporation 5.2%
------------------------------------------------
Philips Electronics N.V. 4.2%
------------------------------------------------
News Corporation Limited Sponsored ADR 4.2%
------------------------------------------------
Bank of America Corporation 4.1%
------------------------------------------------
Philip Morris Companies Inc. 3.7%
------------------------------------------------
Waste Management, Inc./3/ 3.7%
------------------------------------------------
Bell Atlantic Corporation 3.7%
------------------------------------------------
Hoechst AG Sponsored ADR 3.5%
------------------------------------------------
Citigroup Inc. 3.4%
------------------------------------------------
Elf Acquitaine SA Sponsored ADR 3.3%
------------------------------------------------
The companies listed represent their respective percentage as of 6/30/99. Over
time, the fund's holdings and their percentages will vary as the prices of the
stocks vary.
BRANDON | What other strategies were in place during the year?
ROB | Corporate restructurings continued to be another central theme this year.
Philips Electronics N.V., one of the fund's largest holdings, is performing
well as its cost-cutting initiatives and divestitures continued to create a more
focused corporate strategy. Many people don't realize that Philips is one of the
world's leading semiconductor manufacturers and is the No. 1 producer of light
bulbs. And as part of its strategy to refocus on its core consumer electronics
business, the company sold its Polygram Records division to Seagram for $12
billion and is now using the proceeds
/1/The Lipper Peer Group returns reflect the performance of the Lipper Balanced
Fund Index, a managed index that represents the average returns of the 30
largest funds in the Lipper Balanced Fund category. The returns assume
reinvestment of dividends but do not include any initial or ongoing expenses.
/2/As a percentage of stock holdings.
/3/Shortly after the close of the fund's fiscal year, its position in Waste
Management was sold.
ANNUAL REPORT page 4
<PAGE>
to buy back its own stock. That's just one example of what we believe the
Netherlands-based company is doing right.
Additionally, General Motors advanced sharply on increased sales resulting
in part from its vigorous restructuring efforts. The company's new streamlined
organization should allow it to respond to customer needs and to leverage
economies of scale.
BRANDON | What about the fixed-income part of the portfolio? How did the global
economic crises of 1998, the three U.S. rate cuts last fall and the subsequent
rate hike on June 30th affect your management of this portion of the fund's
portfolio?
ROB U.S. | Treasurys were a bright spot last year in the portfolio, as their
value swelled when investors worldwide looked to these safe investment vehicles
as the place to invest when the rest of the world's economies weren't so
certain.
We concentrated on U.S. Treasury issues in the intermediate segment of the
yield curve. During the last six months of 1998 and the first three months of
this year, these bonds enjoyed solid price gains with the decline in interest
rates and were instrumental in moderating the fund's volatility in last summer's
stock market decline.
With the acceleration in economic activity throughout the second quarter of
1999, however, bond prices fell and bond yields rose. Again, concentrating on
the intermediate-term maturity Treasurys provided the portfolio with some
downside protection.
Equity Diversification
[PIE CHART APPEARS HERE]
Consumer Cyclicals.. 23.5%
Financials.......... 15.8%
Technology.......... 15.4%
Communications...... 10.4%
Health Care......... 9.1%
Consumer Staples.... 8.7%
Capital Goods....... 5.8%
Basic Materials..... 5.7%
Energy.............. 3.3%
Transportation...... 2.3%
Portfolio composition is as of 6/30/99 and is subject to change. Composition is
based on the fund's U.S. common and preferred stocks and American Depositary
Receipts.
BRANDON | What is your outlook for the fund, especially in light of the recent
talk about inflation?
ROB | We are confident the portfolio is positioned well, with its low relative
valuation, including its low price-to-earnings ratio, whether the market
continues its advance or levels off a bit.
The U.S. economy is very strong. The reason for the interest rate cuts made
by the Federal Reserve last fall -- global economic uncertainty -- is behind us.
We have had one rate increase by the Fed so far this year, and there may be
more, but we think the implications for the stock market are neutral.
We think an interest rate hike is simply a confirmation that the economy is
exhibiting strong growth, which is usually favorable for cyclical, economically
sensitive value stocks.
Basically, we believe small increases in interest rates just confirm that the
earnings power of the value stocks is coming back.
There's no shortage of value opportunities out there, so we will continue to
do our homework to identify and add those companies to the portfolio that we
believe provide the fund the best opportunity for continued strong performance.
"As value investors, we took a hard look at companies that suffered during
the Asian financial crisis...Then we identified individual candidates that met
our quantitative criteria."
ANNUAL REPORT page 5
<PAGE>
Fund Spotlight as of June 30, 1999
Terms To Know
The following are a few terms used throughout this report.
Market capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: more than $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and share price.
Yield Curve The yield curve describes the relationship between the yield on a
given type of debt and the maturity of that debt.
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $27.18 $27.18 $27.19 $27.18
- ------------------------------------------------------------------------------
Fund Symbol NNSAX NNSBX N/A N/A
- ------------------------------------------------------------------------------
CUSIP 67064Y107 67064Y206 67064Y305 67064Y404
- ------------------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
- ------------------------------------------------------------------------------
</TABLE>
Portfolio Allocation
[Pie Chart Appears Here]
Equity ................ 60%
U.S. Treasury Notes ... 38%
Cash Equivalents ...... 2%
Total Returns+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV NAV NAV
<S> <C> <C> <C> <C> <C>
YTD 9.29% 2.99% 8.88% 8.88% 9.42%
- ------------------------------------------------------------------------------
1-Year 10.21% 3.87% 9.39% 9.39% 10.48%
- ------------------------------------------------------------------------------
Since Inception* 16.86% 14.49% 16.00% 16.00% 17.14%
- ------------------------------------------------------------------------------
SEC 30-Day Yield 2.06% 1.94% 1.32% 1.32% 2.31%
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years, which
is not reflected in the return figures. Class B shares convert to Class A
shares after eight years. Class C shares have a 1% CDSC for redemptions
within one year, which is not reflected in the total return figures.
* Annualized
Portfolio Statistics
Total Net Assets $92.0 million
Fixed Income Average Duration 5.67
Average Market Capitalization (Stocks) $57 billion
Average P/E 25.9
Number of Stocks 42
Expense Ratio* 1.19%
* For A shares after reimbursement
Growth of $10,000 Investment+ (Invested on 8/31/96)
[Line Chart Appears Here]
Nuveen Balanced Nuveen Balanced
Stock & Bond Stock & Bond
Fund (NAV) Fund (Offer)
--------------- ---------------
8/96 10000 10000
6/97 12309 11601
6/98 14365 13539
6/99 15830 14920
Nuveen Balanced Stock and Bond Fund (NAV) $15,830
Nuveen Balanced Stock and Bond Fund (Offer) $14,920
S&P 500 $22,058
Lehman Brothers Intermediate Treasury Index $12,053
+ The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Standard and Poor's 500
Index and the Lehman Brothers Intermediate Treasury Index. The indexes do not
reflect any initial or ongoing expenses. The Nuveen fund returns depicted in
the chart reflect the initial maximum sales charge applicable to Class A
shares (5.75%) and all ongoing fund expenses.
Effective January 11, 1999, the maximum sales charge on Class A Shares increased
to 5.75% from 5.25%.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than original cost. Performance of classes will
differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 6
<PAGE>
Portfolio of Investments
Nuveen Balanced Stock and Bond Fund
June 30, 1999
<TABLE>
<CAPTION>
Market
Shares Description Value
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 57.3%
Basic Materials -- 3.4%
28,500 Akzo Nobel N.V. Sponsored ADR $ 1,207,688
27,000 Monsanto Company 1,064,813
27,450 UPM-Kymmene Oyj Corporation Sponsored ADR 862,959
- -------------------------------------------------------------------------------
Capital Goods -- 3.4%
12,050 Tyco International Ltd. 1,141,738
37,600 Waste Management, Inc. 2,021,000
- -------------------------------------------------------------------------------
Communications Services -- 6.2%
27,191 AT&T Corp. 1,517,598
21,000 Ameritech Corporation 1,543,500
30,900 Bell Atlantic Corporation 2,020,082
11,000 U.S. West, Inc. 646,250
- -------------------------------------------------------------------------------
Consumer Cyclicals -- 11.7%
16,900 Dana Corporation 778,456
24,700 Dayton Hudson Corporation 1,605,500
25,200 Dun & Bradstreet Corporation 893,025
29,100 Federated Department Stores, Inc.# 1,540,481
5,900 Ford Motor Company 332,981
16,200 Gannet Co., Inc. 1,156,275
28,150 General Motors Corporation 1,857,900
18,200 General Motors Corporation -- Class H# 1,023,750
14,200 TRW Inc. 779,225
16,300 Royal Caribbean Cruises Ltd. 713,125
- -------------------------------------------------------------------------------
Consumer Staples -- 5.2%
19,350 BestFoods 957,825
22,300 Fort James Corporation 844,613
16,850 Kimberly-Clark Corporation 960,450
50,300 Philip Morris Companies Inc. 2,021,431
- -------------------------------------------------------------------------------
Energy -- 2.0%
24,670 Elf Aquitaine SA Sponsored ADR 1,814,787
- -------------------------------------------------------------------------------
Financials -- 9.4%
30,850 Bank of America Corporation 2,261,691
11,450 CIGNA Corporation 1,019,050
39,312 Citigroup Inc. 1,867,320
14,600 Hartford Financial Services Group, Inc. 851,363
34,000 Household International, Inc. 1,610,750
31,100 U.S. Bancorp 1,057,400
</TABLE>
7
<PAGE>
Portfolio of Investments
Nuveen Balanced Stock and Bond Fund (continued)
June 30, 1999
<TABLE>
<CAPTION>
Market
Shares Description Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health Care -- 5.4%
20,700 Baxter International Inc. $ 1,254,938
25,600 Bristol-Myers Squibb Company 1,803,200
41,900 Hoechst AG Sponsored ADR 1,927,400
- ----------------------------------------------------------------------------------------------------------------------
Technology -- 9.2%
14,600 Computer Associates International, Inc. 803,000
10,100 International Business Machines Corporation 1,305,425
13,904 Motorola, Inc. 1,317,404
13,000 Nortel Networks Corporation 1,128,563
23,072 Philips Electronics N.V. 2,327,388
27,050 Xerox Corporation 1,597,641
- ----------------------------------------------------------------------------------------------------------------------
Transportation -- 1.4%
10,350 AMR Corporation# 706,388
17,400 Northwest Airlines Corporation# 565,500
- ----------------------------------------------------------------------------------------------------------------------
Total Common Stock - (cost $41,660,571) 52,709,873
-------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 2.5%
Consumer Cyclicals -- 2.5%
72,600 News Corporation Limited Sponsored ADR 2,291,438
- ----------------------------------------------------------------------------------------------------------------------
Total Preferred Stock -- (cost $1,390,625) 2,291,438
------------------------------------------------------------------------------------------------------
Principal Market
Amount Description Value
- ----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 38.6%
U.S. Treasury Notes:
$4,310,000 7.500%, 5/15/02 $ 4,518,768
7,375,000 7.875%, 11/15/04 8,052,578
3,780,000 6.500%, 5/15/05 3,895,763
10,285,000 7.000%, 7/15/06 10,895,672
- ----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5,325,000 7.250%, 5/15/16 5,844,188
2,385,000 6.000%, 2/15/26 2,319,413
- -----------------------------------------------------------------------------------------------------------------------
Total U.S. Government Obligations -- (cost $35,648,997) 35,526,382
-------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.0%
$1,800,000 Wal Mart Stores, Inc., Commercial Paper, effective yield of 5.73%, 7/01/99 $ 1,800,000
- ----------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments -- (cost $1,800,000) 1,800,000
-------------------------------------------------------------------------------------------------------
Total Investments -- (cost $80,500,193) -- 100.4% 92,327,693
-------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4)% (373,066)
-------------------------------------------------------------------------------------------------------
Net Assets -- 100% $91,954,627
=======================================================================================================
</TABLE>
# Non-income producing.
---------
8
See accompanying notes to financial statements.
<PAGE>
Statement of Net Assets
Nuveen Balanced Stock and Bond Fund
June 30, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $80,500,193) (note 1) $92,327,693
Cash 203,606
Receivables:
Dividends and interest 698,142
Shares sold 158,013
Deferred organization costs (note 1) 82,691
Other assets 25,878
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 93,496,023
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 749,183
Shares redeemed 55,113
Accrued expenses:
Management fees (note 4) 47,988
12b-1 distribution and service fees (notes 1 and 4) 29,821
Other 124,808
Dividends payable 534,483
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,541,396
- -----------------------------------------------------------------------------------------------------------------------------
Net assets (note 5) $91,954,627
=============================================================================================================================
Class A Shares (note 1)
Net assets $67,512,011
Shares outstanding 2,483,794
Net asset value and redemption price per share $ 27.18
Offering price per share (net asset value per share plus maximum sales charge of 5.75% of offering price)* $ 28.84
=============================================================================================================================
Class B Shares (note 1)
Net assets $12,855,890
Shares outstanding 472,983
Net asset value, offering and redemption price per share $ 27.18
=============================================================================================================================
Class C Shares (note 1)
Net assets $ 7,141,658
Shares outstanding 262,705
Net asset value, offering and redemption price per share $ 27.19
=============================================================================================================================
Class R Shares (note 1)
Net assets $ 4,445,068
Shares outstanding 163,556
Net asset value, offering and redemption price per share $ 27.18
=============================================================================================================================
* Effective January 11, 1999, the maximum sales charge on Class A Shares was increased from 5.25% to 5.75%.
</TABLE>
9
See accpanying notes to financial statements.
<PAGE>
Statement of Operations
Nuveen Balanced Stock and Bond Fund
Year Ended June 30, 1999
<TABLE>
- -----------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 935,682
Interest 2,072,266
- -----------------------------------------------------------------------------------
Total investment income 3,007,948
- -----------------------------------------------------------------------------------
Expenses
Management fees (note 4) 650,113
12b-1 service fees -- Class A (notes 1 and 4) 166,640
12b-1 distribution and service fees -- Class B (notes 1 and 4) 106,921
12b-1 distribution and service fees -- Class C (notes 1 and 4) 55,428
Shareholders' servicing agent fees and expenses 76,664
Custodian's fees and expenses 58,661
Trustees' fees and expenses (note 4) 11,076
Professional fees 15,196
Shareholders' reports -- printing and mailing expenses 47,119
Federal and state registration fees 61,287
Amortization of deferred organization costs (note 1) 36,000
Other expenses 7,007
- -----------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,292,112
Custodian fee credit (note 1) (2,405)
Expense reimbursement (note 4) (144,674)
- -----------------------------------------------------------------------------------
Net expenses 1,145,033
- -----------------------------------------------------------------------------------
Net investment income 1,862,915
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 3) 2,685,999
Net change in unrealized appreciation or depreciation of investments 4,176,532
- -----------------------------------------------------------------------------------
Net gain from investments 6,862,531
- -----------------------------------------------------------------------------------
Net increase in net assets from operations $8,725,446
===================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Statement of Changes in Net Assets
Nuveen Balanced Stock and Bond Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
6/30/99 6/30/98
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,862,915 $ 2,347,199
Net realized gain from investment transactions (notes 1 and 3) 2,685,999 4,988,412
Net change in unrealized appreciation or depreciation of investments 4,176,532 4,596,358
- ----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 8,725,446 11,931,969
- ----------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,491,505) (1,955,711)
Class B (170,929) (165,258)
Class C (93,642) (64,225)
Class R (98,001) (175,931)
From accumulated net realized gains from investment transactions:
Class A (2,988,949) (1,410,980)
Class B (473,062) (120,791)
Class C (232,637) (50,758)
Class R (161,189) (204,679)
- ----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,709,914) (4,148,333)
- ----------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 17,356,264 28,460,346
Net proceeds from shares issued to shareholders
due to reinvestment of distributions 4,127,472 3,182,983
- ----------------------------------------------------------------------------------------------------
21,483,736 31,643,329
Cost of shares redeemed (20,069,879) (16,266,187)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 1,413,857 15,377,142
- ----------------------------------------------------------------------------------------------------
Net increase in net assets 4,429,389 23,160,778
Net assets at the beginning of year 87,525,238 64,364,460
- ----------------------------------------------------------------------------------------------------
Net assets at the end of year $ 91,954,627 $ 87,525,238
====================================================================================================
Balance of undistributed net investment income at the end of year $ 13,617 $ 4,779
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Balanced Stock and Bond Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those relating to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests in a mix of equities, taxable bonds and cash equivalents for
capital growth, capital preservation and current income. During temporary
defensive periods, the Fund may invest any percentage of its assets in temporary
investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values when such values are
believed to more accurately reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the delayed delivery purchase commitments. At June 30, 1999, the
Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income is declared and distributed to shareholders quarterly. Net
realized capital gains from investment transactions, if any, are declared and
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
12
<PAGE>
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a contingent deferred sales charge ("CDSC") if redeemed within
18 months of purchase. Class B Shares are sold without a sales charge but incur
annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances, or by specified classes
of shareholders.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the fiscal year ended June 30, 1999.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization and initial registration of shares was deferred and is being
amortized over a 60-month period beginning August 7, 1996 (commencement of
operations). If any of the initial shares of the Fund are redeemed during this
period, the proceeds of the redemption will be reduced by the pro-rata share of
the unamortized organization costs as of the date of redemption.
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby the custodian fees
and expenses are reduced by credits earned on the Fund's cash on deposit with
the bank. Such deposit arrangements are an alternative to overnight investments.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended 6/30/99 Year Ended 6/30/98
------------------------ -------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 249,981 $ 6,320,839 519,941 $ 13,025,786
Class B 224,425 5,686,636 372,091 9,257,698
Class C 180,324 4,627,668 124,310 3,141,845
Class R 28,167 721,121 120,833 3,035,017
Shares issued to shareholders due to
reinvestment of distributions:
Class A 136,296 3,414,330 116,290 2,853,684
Class B 14,507 362,620 6,908 169,109
Class C 4,175 104,710 1,846 45,583
Class R 9,825 245,812 4,668 114,607
- ---------------------------------------------------------------------------------------------
847,700 21,483,736 1,266,887 31,643,329
- ---------------------------------------------------------------------------------------------
Shares redeemed:
Class A (540,472) (13,837,529) (376,287) (9,460,805)
Class B (158,426) (4,121,472) (13,633) (346,082)
Class C (78,718) (2,018,644) (10,327) (264,621)
Class R (3,791) (92,234) (249,979) (6,194,679)
- ---------------------------------------------------------------------------------------------
(781,407) (20,069,879) (650,226) (16,266,187)
- ---------------------------------------------------------------------------------------------
Net increase 66,293 $ 1,413,857 616,661 $ 15,377,142
=============================================================================================
</TABLE>
13
<PAGE>
Notes to Financial Statements (continued)
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the fiscal year ended June
30, 1999, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------
Purchases:
Investment securities $ 65,980,339
U.S. government obligations 116,842,117
Short-term investments 286,790,044
Sales:
Investment securities 68,977,761
U.S. government obligations 112,084,410
Short-term investments 289,550,000
============================================
</TABLE>
At June 30, 1999, the identified cost of investments owned for federal income
tax purposes was $80,945,858. Net unrealized appreciation for federal income tax
purposes aggregated $11,381,835 of which $12,556,815 related to appreciated
securities and $1,174,980 related to depreciated securities.
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net assets of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets Management Fee
- -------------------------------------------------
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1
For the next $250 million .7250 of 1
For the next $500 million .7125 of 1
For the next $1 billion .7000 of 1
For net assets over $2 billion .6750 of 1
=================================================
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses in order to prevent
total operating expenses (excluding any 12b-1 distribution or service fees and
extraordinary expenses) from exceeding .85% of the average daily net asset value
of any class of Fund shares through July 31, 1998 and .95% from August 1, 1998
through July 31, 2000.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays no compensation
directly to those of its Trustees who are affiliated with the Adviser or to its
officers, all of whom receive remuneration for their services to the Fund from
the Adviser.
During the fiscal year ended June 30, 1999, John Nuveen & Co. Incorporated (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $238,200, of which
approximately $221,300, were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the fiscal year ended June 30, 1999, the Distributor compensated
authorized dealers directly with approximately $245,000 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the fiscal year
ended June 30, 1999, the Distributor retained approximately $133,500 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $98,100
of CDSC on share redemptions during the fiscal year ended June 30, 1999.
5. Composition of Net Assets
At June 30, 1999, the Fund had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
Capital paid-in $77,578,556
Balance of undistributed net investment income 13,617
Accumulated net realized gain from investment transactions 2,534,954
Net unrealized appreciation of investments 11,827,500
- --------------------------------------------------------------------------
Net assets $91,954,627
==========================================================================
</TABLE>
- -----
14
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
---------------------------- ---------------------------
Net
Realized/
Unrealized
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
June 30, Value Income (a) (Loss) Total Income Gains Total Value Return (b)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $26.39 $.5 8 $1.93 $2.51 $(.57) $(1.15) $(1.72) $27.18 10.21%
1998 23.84 .77 3.11 3.88 (.76) (.57) (1.33) 26.39 16.71
1997 (c) 20.00 .70 3.66 4.36 (.42) (.10) (.52) 23.84 22.04
Class B (8/96)
1999 26.39 .39 1.93 2.32 (.38) (1.15) (1.53) 27.18 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (c) 20.00 .46 3.75 4.21 (.27) (.10) (.37) 23.84 21.26
Class C (8/96)
1999 26.39 .40 1.93 2.33 (.38) (1.15) (1.53) 27.19 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (c) 20.00 .53 3.68 4.21 (.27) (.10) (.37) 23.84 21.26
Class R (8/96)
1999 26.39 .65 1.93 2.58 (.64) (1.15) (1.79) 27.18 10.48
1998 23.84 .83 3.11 3.94 (.82) (.57) (1.39) 26.39 16.99
1997 (c) 20.00 .61 3.80 4.41 (.47) (.10) (.57) 23.84 22.31
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
---------------------------------------------------------------------------
Ratio Ratio
of Net of net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Ending Before Before After After
Net Credit/ Credit/ Credit/ Credit/ Portfolio
Year Ended Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
June 30, (000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 $67,512 1.36% 2.10% 1.19% 2.27% 96%
1998 69,614 1.48 2.68 1.10 3.06 86
1997 (c) 56,686 1.71* 2.78* 1.10* 3.39* 52
Class B (8/96)
1999 12,856 2.11 1.37 1.94 1.54 96
1998 10,356 2.24 1.93 1.85 2.32 86
1997 (c) 646 2.49* 1.59* 1.85* 2.23* 52
Class C (8/96)
1999 7,142 2.10 1.39 1.94 1.55 96
1998 4,142 2.24 1.92 1.85 2.31 86
1997 (c) 980 2.31* 2.07* 1.85* 2.53* 52
Class R (8/96)
1999 4,445 1.11 2.36 .94 2.53 96
1998 3,413 1.23 2.94 .85 3.32 86
1997 (c) 6,052 2.29* 1.68* .85* 3.12* 52
========================================================================================================
</TABLE>
* Annualized.
(a) After custodian fee credit and expense reimbursement, where applicable
(notes 1 and 4).
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
15
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Balanced Stock and Bond Fund:
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Balanced Stock and Bond Fund (one of the
portfolios constituting the Nuveen Investment Trust (a Massachusetts business
trust)), as of June 30, 1999, and the related statement of operations, the
statements of changes in net assets and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out alternative auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Balanced Stock and Bond Fund as of June 30, 1999, and the results of its
operations, the changes in its net assets and its financial highlights for the
periods indicated thereon, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 20, 1999
16
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
Chase Global Funds Services Co.
P.O. Box 5186
New York, NY 10274
(800) 257-8787
Legal Counsel
Chapman & Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
SERVING
Investors for Generations
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to
disciplined long-term investment strategies whose aim is to provide consistent,
competitive performance over time -- with moderated risk. We emphasize quality
securities carefully chosen through in-depth research, and we follow those
securities closely over time to ensure that they continue to meet our exacting
standards.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our growth,
growth and income, income, and tax-free funds, along with our defined portfolios
and private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
[Logo of Nuveen appears here]
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
PART C--OTHER INFORMATION
Item 23: Exhibits:
<TABLE>
<C> <S> <C>
(a)(1). Declaration of Trust of Registrant.(1)
(a)(2). 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)
(a)(3). Certificate for the Establishment and Designation of Series for
the Nuveen European Value Fund, dated May 27, 1998.(10)
(b)(1). By-Laws of Registrant.(1)
(b)(2). Amendment to By-Laws of Registrant.(15)
(c). Specimen certificate of Shares of each Fund.(3)
(d)(1). 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)
(d)(2). 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)
(d)(3). Renewal of Investment Management Agreement dated May 22,
1999.(15)
(d)(4). Form of Amended Schedule A to Management Agreement between
Registrant and Nuveen Institutional Advisory Corp.(10)
(d)(5). Form of Amended Schedule A to Sub-Advisory Agreement between
Nuveen Institutional Advisory Corp. and Institutional Capital
Corporation.(10)
(d)(6). Form of Amended Schedule B to Management Agreement between
Registrant and Nuveen Institutional Advisory Corp.(10)
(d)(7). Form of Addendum to Investment Sub-Advisory Agreement between
Nuveen Institutional Advisory Corp. and Institutional Capital
Corporation.(10)
(e)(1). Distribution Agreement between Registrant and John Nuveen & Co.
Incorporated dated August 1, 1998.(11)
(e)(2). Renewal of Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated dated July 30, 1999.(15)
(e)(3). Dealer Management Agreement dated October 22, 1996.(4)
(f). Not applicable.
(g)(1). Custodian Agreement between Registrant and The Chase Manhattan
Bank.(7)
(g)(2). Global Custody Agreement between Registrant and The Chase
Manhattan Bank dated July 21, 1998.(13)
(h)(1). Form of Subscription Agency Agreement between Registrant and
The Chase Manhattan Bank.(4)
(h)(2). Transfer Agency Agreement between Registrant and Chase Global
Funds Services Company.(11)
(i)(1). Opinion and consent of Chapman and Cutler, dated July 30,
1996.(3)
(i)(2). Opinion and consent of Bingham, Dana & Gould, dated July 30,
1996.(3)
(i)(3). Opinion and consent of Vedder, Price, Kaufman & Kammholz, dated
May 28, 1998.(10)
(i)(4). Opinion and consent of Bingham Dana LLP dated May 28, 1998.(10)
(i)(5). Opinion and consent of Chapman and Cutler, dated October 28,
1999.(15)
(j). Consent of Independent Public Accountants.(15)
(k). Not applicable.
(l). Subscription Agreement with Nuveen Institutional Advisory
Corp.(7)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
(m)(1). 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)
(m)(2). Amendment to Plan of Distribution and Service Pursuant to Rule 12b-
1.(11)
(n). Not applicable
(o). Multi-Class Plan.(4)
(z)(1). 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)
(z)(2). Code of Ethic and Reporting Requirements.(7)
(z)(3). Original Power of Attorney for Jack B. Evans, Trustee, authorizing,
among others, Alan G. Berkshire, Larry W. Martin and Gifford R.
Zimmerman to execute the Registration Statement.(14)
</TABLE>
- --------
(1) Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant.
(2) Incorporated by reference to the pre-effective amendment no. 1 filed on
Form N-1A for Registrant.
(3) Incorporated by reference to the pre-effective amendment no. 2 filed on
Form N-1A for Registrant.
(4) Incorporated by reference to the post-effective amendment no. 1 filed on
Form N-1A for Registrant.
(5) Incorporated by reference to the post-effective amendment no. 2 filed on
Form N-1A for Registrant.
(6) 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) Incorporated by reference to the post-effective amendment no. 12 filed on
Form N-1A for Registrant.
(11) Incorporated by reference to the post-effective amendment no. 13 filed on
Form N-1A for Registrant.
(12) Incorporated by reference to the post-effective amendment no. 14 filed on
Form N-1A for Registrant.
(13) Incorporated by reference to the post-effective amendment no. 15 filed on
Form N-1A for Registrant.
(14) Incorporated by reference to the post-effective amendment no. 16 filed on
Form N-1A for Registrant.
(15) Filed herewith.
Item 24: Persons Controlled by or under Common Control with Fund.
Not applicable.
Item 25: Indemnification
Section 4 of Article XII of Registrant's Declaration of Trust provides as fol-
lows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust 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 per-
mitted 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 negli-
gence or reckless disregard of the duties involved in the conduct of his
office;
(b) with respect to any matter as to which he shall have been finally adju-
dicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
II-2
<PAGE>
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a pay-
ment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office by the court or other body approving the settlement or other
disposition or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in of-
fice act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by poli-
cies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall con-
tinue as to a person who has ceased to be such a Covered Person and shall inure
to the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or oth-
erwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written 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 ul-
timately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee, any-
one who has been exempted from being an Interested Person by any rule, regula-
tion or order of the Commission), and (y) against whom none of such actions,
suits or other proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal, admin-
istrative or other, including appeals), actual or threatened; and the word "li-
ability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other lia-
bilities.
----------------
The trustees and officers of the Registrant are covered by Investment Trust Er-
rors and Omission policies in the aggregate amount of $20,000,000 (with a maxi-
mum deductible of $500,000) against liability and expenses of claims of wrong-
ful acts arising out of their position with the Registrant, except for matters
which involved willful acts, bad faith, gross negligence and willful disregard
of duty (i.e., where the insured did not act in good faith for a purpose he or
she reasonably believed to be in the best interest of Registrant or where he or
she shall have had reasonable cause to believe this conduct was unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and Ex-
change Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indem-
nification against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by an officer or trustee or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such officer, trustee or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
Item 26: 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 man-
agement 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 of-
ficers or Trustees of the Registrant have 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 Informa-
tion. 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
--------------------------- ---------------------------------------
<C> <S>
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.
Michael S. Davern, Vice President............. Vice President of Nuveen Advisory Corp. (since
January 1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial
Richard A. Huber, Vice President.............. Vice President of Nuveen Advisory Corp. (since
January 1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial
Thomas C. Spalding, Vice President............ Vice President of Nuveen Advisory Corp.
Margaret E. Wilson, Vice President and Con- Vice President and Controller of The John Nuveen
troller...................................... Company, John Nuveen & Co. Incorporated and
Nuveen Advisory Corp.
</TABLE>
(b) Institutional Capital Corporation (Institutional Capital) acts as invest-
ment adviser to the ICAP Funds, Inc. and as sub-investment adviser to the Reg-
istrant. 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 direc-
tor, 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,
Positions and Offices with Vocation, or
Name Institutional Capital Employment During Past Two Years
- ---- ------------------------------------- ------------------------------------
<S> <C> <C>
Pamela H. Conroy........ Senior Vice President and Director Vice President, Treasurer, and a
Director of the ICAP Funds, Inc.
(since its inception in December
1994).
Donald D. Niemann....... Executive Vice President and Director Vice President and Secretary of ICAP
Funds, Inc. (since its inception in
December 1994) and a Director (since
July 1995).
Gary S. Maurer.......... Executive Vice President and Director Director of ICAP Funds, Inc. (since
its inception in December 1994).
Barbara C. Schanmier.... Senior Vice President and Director Director of ICAP Funds, Inc. (since
its inception in December 1994).
</TABLE>
II-4
<PAGE>
Item 27: Principal Underwriters
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Mu-
nicipal Trust, Nuveen Money Market Trust, Nuveen Municipal Money Market Fund,
Inc., Nuveen Taxable Funds Inc., Nuveen Investment Trust II, III and IV 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 invest-
ment trusts. Nuveen has also served or is serving as co-managing underwriter
to the following closed-end management type investment companies: Nuveen Mu-
nicipal 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., Nuveen
New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Mu-
nicipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen
New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania In-
vestment 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 Munici-
pal 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 Munic-
ipal Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc.,
Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income Munici-
pal 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 In-
sured 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 Pre-
mium 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 Munic-
ipal Fund 2, Nuveen Select Tax-Free Income Portfolio, Nuveen Select Tax-Free
Income Portfolio 2, Nuveen Insured California Select Tax-Free Income Portfo-
lio, Nuveen Insured New York Select Tax-Free Income Portfolio, Nuveen Select
Tax-Free Income Portfolio 3, Nuveen Dividend Advantage Municipal Fund, Nuveen
California Dividend Advantage Municipal Fund and Nuveen New York Dividend Ad-
vantage Municipal Fund.
(b)
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ----------------------------------------------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman of the Board, Chairman and Trustee
333 West Wacker Drive Chief Executive Officer,
Chicago, IL 60606 and Director
John P. Amboian President and Director None
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ----------------------------------------------------------------------------------
<S> <C> <C>
Alan G. Berkshire Vice President Vice President and
333 West Wacker Drive and Secretary Assistant Secretary
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
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President 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
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President None
333 West Wacker Drive and Corporate
Chicago, IL 60606 Controller
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
Item 28: Location of Accounts and Records
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago, Illinois
60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not main-
tained by Nuveen Institutional Advisory Corp., or Chase Global Funds Services
Company.
Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108, main-
tains all the required records in its capacity as transfer, dividend paying,
and shareholder service agent for the Registrant.
II-6
<PAGE>
Item 29: Management Services
Not applicable.
Item 30: Undertakings
(a)Not applicable.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement under Rule 485(b) under the
Securities Act and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Chicago, and
State of Illinois, on the 28th day of October, 1999.
NUVEEN INVESTMENT TRUST
/s/ Gifford R. Zimmerman
______________________________________
Gifford R. Zimmerman
Vice President
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment 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> <C>
/s/ Stephen D. Foy Vice President and October 28, 1999
________________________________ Controller (Principal
Stephen D. Foy Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman,
President and Trustee
Robert H. Lyon Trustee
Thomas E. Leafstrand Trustee
By /s/ Gifford R. Zimmerman
James E. Bacon Trustee ------------------------
Gifford R. Zimmerman
Jack B. Evans Trustee Attorney-in-Fact
William L. Kissick Trustee
Sheila W. Wellington Trustee October 28, 1999
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 trustees of Registrant on whose behalf this
Registration Statement is filed, has been executed and filed with the
Securities and Exchange Commission.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Exhibit Numbered Page
------- ------- -------------
<C> <S> <C>
(b)(2) Amendment to By-Laws of Registrant.
(d)(3) Renewal of Investment Management Agreement dated May
22, 1999.
(e)(2) Renewal of Distribution Agreement between Registrant
and John Nuveen & Co. Incorporated.
(i)(5) Opinion and consent of Chapman and Cutler, dated
October 28, 1999.
(j) Consent of Independent Public Accountants.
</TABLE>
<PAGE>
Exhibit (b)(2)
Amendment to By-Laws
of
NUVEEN INVESTMENT TRUST
The By-Laws of Nuveen Investment Trust, a Massachusetts business trust, (the
"Fund") have been amended by unanimous vote of the Board of Trustees at a
meeting duly called, convened and held on November 13, 1998, to read as follows:
WHEREAS, the Fund's By-Laws permit shareholders to cast a vote at any
regular or special meeting of shareholders either in person or by proxy;
and
WHEREAS, such proxies are currently returned to the Fund by means of the
United States Postal Service or by overnight courier; and
WHEREAS, the Board now deems it beneficial to include the submission of
proxies by telephonic and electronic means.
NOW, THEREFORE, BE IT RESOLVED, that Section 2.7 of the Fund's By-Laws be
amended to include the following at the end of such section:
The placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions (including, without limitation,
instructions transmitted over the Internet) obtained pursuant to procedures
which are reasonably designed to verify that such instructions have been
authorized by such Shareholder, shall constitute execution of such proxy by
or on behalf of such Shareholder.
<PAGE>
Exhibit (d)(3)
NUVEEN INVESTMENT TRUST
-----------------------
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
------------------------------------------
This Agreement made this 22nd day of May, 1999 by and between Nuveen Investment
Trust, a Massachusetts business trust (the "Fund"), and Nuveen Institutional
Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Management Agreement (the "Agreement") pursuant to which the Adviser furnishes
investment advisory and management services and certain other services to the
Fund; and
WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing
the Agreement, have approved the Agreement and its continuance until August 1,
2000 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement, the parties hereto do hereby approve the continuance of the Agreement
in effect until August 1, 2000 and do ratify and confirm the Agreement in all
respects.
NUVEEN INVESTMENT TRUST
By: /s/ Gifford R. Zimmerman
----------------------------
Vice President
ATTEST:
By: /s/ Larry W. Martin
----------------------------
Assistant Secretary
NUVEEN INSTITUTIONAL
ADVISORY CORP.
By: /s/ Thomas C. Spalding
----------------------------
Vice President
ATTEST:
By: /s/ Larry W. Martin
----------------------------
Assistant Secretary
<PAGE>
Exhibit (e)(2)
Renewal of Distribution Agreement
---------------------------------
This Agreement made this 30th day of July, 1999 by and between Nuveen Investment
Trust, a Massachusetts business trust (the "Fund"), and John Nuveen & Co.
Incorporated, a Delaware corporation (the "Underwriter");
WHEREAS, the parties hereto are the contracting parties under that certain
Distribution Agreement (the "Agreement") pursuant to which the Underwriter acts
as agent for the distribution of shares of the Fund; and
WHEREAS, the Agreement terminates August 1, 1999 unless continued in the manner
required by the Investment Company Act of 1940;
WHEREAS, the Board of Directors of the Fund, at a meeting called for the purpose
of reviewing the Agreement has approved the Agreement and its continuance
until August 1, 2000 in the manner required by the Investment Company Act of
1940;
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement, the parties hereto do hereby continue the Agreement in effect until
August 1, 2000 and ratify and confirm the Agreement in all respects.
NUVEEN INVESTMENT TRUST
By: /s/ Gifford R. Zimmerman
----------------------------
Vice President
ATTEST:
By: /s/ Karen L. Healy
----------------------------
Assistant Secretary
JOHN NUVEEN & CO. INCORPORATED
By: /s/ Larry W. Martin
----------------------------
Vice President
ATTEST:
By: /s/ Nicholas Dalmaso
----------------------------
Assistant Secretary
<PAGE>
Exhibit(i)(5)
Chapman and Cutler Opinion
October 28, 1999
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606-1286
Re: Nuveen Investment Trust
-----------------------
Gentlemen:
We have served as counsel for the Nuveen Investment Trust (the "Fund"),
which proposes to offer and sell shares of various classes of its series, the
Nuveen Growth and Income Stock Fund, Nuveen Balanced Municipal and Stock Fund,
Nuveen Balanced Stock and Bond Fund and Nuveen European Value Fund
(collectively, the "Shares") in the manner and on the terms set forth in Post-
Effective Amendments No. 17 and 18 to its Registration Statement on Form N-1A to
be filed on or about October 28, 1999 (the "Amendments") with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
the Securities Act of 1933, as amended.
In connection therewith, we have examined such pertinent records and
documents and matters of law, including the opinions of Bingham, Dana & Gould
LLP upon which we have relied as they relate to the laws of the Commonwealth of
Massachusetts, as we have deemed necessary in order to enable us to express the
opinion hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
The Shares of the Fund may be legally and validly issued from time to
time in accordance with the Fund's Declaration of Trust dated May 6, 1996,
the Fund's By-Laws, the Fund's Certificates for the Establishment and
Designation of Series and/or Classes, and subject to compliance with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and applicable state laws regulating the sale of securities and
the receipt by the Fund of a purchase price of not less than the net asset
value per share and such Shares, when so issued and sold, will be legally
issued and outstanding, fully paid and non-assessable, except that, as set
forth in the Amendments, shareholders of the Fund may under certain
circumstances be held personally liable for its obligations.
<PAGE>
Nuveen Investment Trust
October 28, 1999
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-03715) relating to the Shares referred to
above, to the use of our name and to the reference to our firm in said
Registration Statement.
Respectfully submitted,
Chapman and Cutler
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated August 20, 1999, and to all references to our Firm included in or made a
part of this registration statement of Nuveen Investment Trust (comprised of the
Nuveen Growth and Income Stock Fund, Nuveen Banance Stock and Bond and Nuveen
Balanced Municipal and Stock Fund).
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 25, 1999
