<PAGE>
[NUVEEN LOGO]
Mutual Funds
December 31, 1998
Semiannual Report
For investors seeking
long-term growth potential
and attractive value.
[PHOTO APPEARS HERE]
Growth
and Income
Stock Fund
<PAGE>
Highlights
As of December 31, 1998
For Class A shares
Annualized Fund Returns/1/
[BAR CHART APPEARS HERE]
One Year Class A (NAV) 9.89%
One Year Class A (Offer) 3.59%
Since Inception - 8/96 Class A (NAV) 21.48%
Since Inception - 8/96 Class A (Offer) 18.51%
With its focus on long-term growth and a measure of downside protection, the
fund provided attractive total returns for the one-year period and since its
inception.
Portfolio Allocation
[PIE CHART APPEARS HERE]
Stocks 94%
Cash 6%
True to its investment objective, the fund remained almost completely invested
in stocks, allowing it to capitalize on stock appreciation opportunities.
Portfolio Manager's 20-Year Record of Positive Returns/2/
[BAR CHART APPEARS HERE]
1979 11.56%
1980 24.53%
1981 3.14%
1982 25.45%
1983 14.43%
1984 1.73%
1985 32.78%
1986 14.64%
1987 27.50%
1988 7.99%
1989 31.93%
1990 0.16%
1991 32.02%
1992 6.01%
1993 15.13%
1994 0.64%
1995 36.51%
1996 24.89%
1997 28.03%
1998 9.89%
The portfolio manager, Institutional Capital Corporation, boasts an excellent
long-term track record through a variety of market conditions, with positive
returns for each of the past 20 years.
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
5 Performance Overview
6 Portfolio of Investments
8 Statement of Net Assets
9 Statement of Operations
10 Statement of Changes in Net Assets
11 Notes to Financial Statements
14 Financial Highlights
16 Building Better Portfolios with Nuveen
17 Fund Information
1 Please see the Performance Overview on page five for more information.
2 This chart reflects the performance of the Institutional Capital
Discretionary Equity Composite, which includes all assets (approximately
$4.79 billion as of 12/31/98) that have substantially the same investment
objective and policies as the Nuveen Growth and Income Stock Fund. The
composite's accounts may experience different investment inflows and outflows
than the fund, and are not subject to all of the restrictions of the
Investment Company Act of 1940 and the Internal Revenue Code that apply to
the fund, which could adversely affect fund performance. Investment returns
reflect composite gross-of-fee returns, adjusted for the fund's Class A
annual net operating expenses of 1.30%, but not the up-front sales charge.
Class B, C, or R investment results would differ due to differing sales
charges and operating expenses. This chart does not represent actual fund
past performance or predict future fund performance.
<PAGE>
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
Dear Shareholder
I'm pleased to report that over the past 12 months, the Nuveen Growth and Income
Stock Fund has continued to perform well in pursuit of its primary objective:
providing you with a superior total return from a diversified portfolio
consisting primarily of equity securities of domestic companies with market
capitalization of at least $500 million. The fund generated strong returns
during a very volatile market.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. To avert a potential domestic credit crunch and bring some
stability to global markets, the Federal Reserve moved to ease short-term
interest rates for the first time in almost three years. Between the end of
September and mid-November, three successive cuts brought the federal funds rate
to 4.75%.
Despite the uncertainty in foreign markets, U.S. equities enjoyed another banner
year. The Dow Jones Industrial Average recorded an increase for the eighth
consecutive time, and the S&P 500 posted a total return of almost 29%. This
increase is even more impressive in light of the S&P 500's decline of almost
20% over the summer. In the coming months, we will continue to watch several key
factors affecting the economy's future, including corporate earnings reports,
wage and employment statistics, the strength of the U.S. dollar, events in
international markets, and any further interest rate indications from the
Federal Reserve.
Nuveen's Premier Advisers
As a further enhancement to our management capabilities, Nuveen has assembled a
strong core of Premier Advisers/SM/, portfolio managers with specialized
expertise in a particular investment style or asset class and time-tested
investment strategies that seek consistent, long-term performance. As Nuveen's
Premier Adviser for value investing, Institutional Capital Corporation is a
highly successful institutional money manager with close to 30 years of
experience. Over that time, they have specialized in finding undervalued
1
<PAGE>
"An appropriately
diversified port-
folio . . . can help
cushion your
portfolio against
volatility and
enhance your
overall total
return potential."
midsize and large company stocks that are poised for significant growth.
This disciplined, research-oriented approach has paid off for investors and is
still the key investment strategy of the Nuveen Growth and Income Stock Fund.
They start by looking for stocks whose intrinsic worth is greater than their
current market price, according to the beliefs of our portfolio managers. Then,
they search for a catalyst, such as a management change, a new product, or an
improved industry outlook, that may help trigger a rise in each stock's price.
Generally, the fund only purchases stocks that the managers believe have the
potential to generate 15-25% returns over an 18-month period.
Considering the market volatility of 1998, we believe that investors will
continue to find diversification to be an increasingly important strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk, and tax management strategies -
can help cushion your portfolio against volatility and enhance your overall
total return potential.
Nuveen also offers balanced and European funds, featuring portfolio management
by Institutional Capital, plus growth, income, and tax-free funds, managed by
other Premier Advisers in those categories. For more information about Nuveen
Mutual Funds, including charges and expenses, contact your financial adviser
for a prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
collection of mutual funds can help you establish a diversified portfolio
designed to build and sustain long-term financial security. We are grateful for
the confidence you have placed in us, and we intend to continue earning your
trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 1999
2
<PAGE>
Nuveen Growth and Income Stock Fund
Portfolio Manager's Comments
Investors found 1998 to be a very challenging year, and many expect volatile,
yet growing markets in 1999. To gain a clearer perspective on recent events and
the future of the Nuveen Growth and Income Stock Fund, we talked with Rob Lyon,
President and Chief Investment Officer of Institutional Capital Corporation,
Nuveen's Premier Adviser/SM/ for Value Investing, and portfolio manager of the
fund. Here are the highlights of that conversation.
What is your assessment of last year's stock market results?
The equity market turned in another strong performance in 1998, setting a number
of records in the process. The S&P 500 generated a total return of 28.6% for the
year, its fourth consecutive year of increases over 20% and the first such
string of increases since the 1870s. The Dow Jones Industrial Average has now
risen for each of the last eight years, and 16 of the last 17. Due to this
strong performance over the last 17 years, the S&P 500 has produced an
annualized total return of almost 18%, the highest total return on record for
that index.
The market's performance, though solid, was also marked by volatility last year.
The S&P 500 declined almost 20% during the summer, only to eventually rebound
and reach record highs four months later. Never before had the index recovered
so quickly from a decline of this magnitude. Historically, the market has needed
about four years to recover.
Equity market performance was also notable in 1998 for its concentration of
return in a relatively small group of large-capitalization, growth-oriented
issues. The top five contributors to the S&P 500 in 1998 were Microsoft, General
Electric, Wal-Mart, Lucent Technologies and Cisco. These five stocks showed a
median return of nearly 115% while the return for the other 495 stocks in the
S&P 500 was only about 7%.
At year-end, the market hovered near record highs despite the continuing
financial instability in Asia and Russia as well as the impeachment of President
Clinton.
How did the economic landscape affect financial market performance last year?
The economy continued to support the market's advance in 1998, growing at about
4%, even in the face of slowed foreign trade. While the economy is not likely
headed for recession, there are signs that growth will moderate in 1999: U.S.
exports continue to be affected by financial market turmoil; spending on capital
expenditures should subside; and housing growth should slow. Even though the
economy's pace could taper off in the coming months, there are adjustments
taking place that could lessen the economic slowdown anticipated in 1999, such
as foreign central banks moving aggressively to reduce interest rates, higher
government spending in the U.S. due to the current budget surplus, and initial
signs of stability in Asia.
What role did the Federal Reserve play in the stock market's strong performance?
The Federal Reserve played an important role in the strength of the economy and
the financial markets in 1998, lowering short-term interest rates three times in
the last half of the year. These actions helped to stave off further declines in
stock prices and set the stage for the unprecedented market recovery to new
highs. With slowing growth expected this year, further reductions may lie ahead.
How did the Nuveen Growth and Income Stock Fund perform in 1998?
The Nuveen Growth and Income Stock Fund Class A shares generated a 9.89% total
return on net asset value for 1998. This compares to a 13.58% total return for
the Lipper Growth and Income Fund Index, and a 28.58% total return for the S&P
500.
See your fund's performance overview in this report, on page 5, for more
information.
Much of the fund's relative underperformance for the year can be attributed to
its value investing approach. When the financial crisis in Asia first became
apparent in the fall of 1997, equity performance shifted sharply in favor of the
largest, growth-oriented stocks. While growth stocks have now outperformed value
stocks for five years in a row, the differential in 1998 was the largest on
record. This concentrated rise in growth stocks over the last eighteen months
made it difficult for value-oriented funds like the Nuveen Growth and Income
Stock Fund to keep up with indexes like the S&P 500 that include both growth and
value equities.
However, the prospects for value-oriented stocks look much better if there is an
easing monetary policy. If the Fed lowers interest rates further, we expect that
investors would become more comfortable with the outlook for the economy, which
should spur a move back towards value.
3
<PAGE>
What investment strategies were employed in managing the Nuveen Growth and
Income Stock Fund? In addition, what are some of the holdings you've identified
as being particularly attractive?
Throughout 1998, and over the last six months in particular, the fund's
strategic investment themes revolved around two areas. The primary strategic
focus throughout 1998 remained searching for companies undergoing a corporate
restructuring. We generally looked for companies that had franchises or
significant asset bases that were underutilized or underappreciated and had the
most potential for favorably enhancing the fund's performance. Committed
management can release considerable value in those situations. The second area
was an emphasis on stocks of companies whose business is primarily domestic in
nature, reflecting our view that even with some economic slowdown, the U.S. will
remain one of the world's best growth areas in 1999.
Stocks purchased in the last six months with more of a domestic characteristic
include: TCI Group (an AT&T merger partner), SBC Communications Inc., Dayton
Hudson Corporation, Circuit City Stores, Hartford Financial Services Group,
Inc., Monsanto Company, Gannett Co., Inc., and United States Filter Corporation.
The stocks listed here were as of December 31, 1998 and given that the portfolio
is actively managed, they may change.
We believe a good example of the restructuring theme, and a large holding
(approximately 4%) in the portfolio, is Waste Management, Inc. This company was
formed last year when the minnow, USA Waste, swallowed the whale, the old Waste
Management, keeping the name of Waste Management, Inc. (WMI). WMI is now the
world's largest solid waste company with expected revenues of over $13 billion.
The new company has a very aggressive and competent management team. There are
significant cost-cutting opportunities, from ceasing the operations of the
poorly run old Waste Management to integrating the businesses of the two
companies. In spite of projected double-digit earnings growth following the
boost in 1999 from cost-cutting, WMI is selling at an attractive price to
earnings multiple of under 15 times its share price. We feel this is an
undervalued stock that has the potential to go up in price.
Other examples of stocks we found to be attractive, as of December 31, 1998,
include: BankAmerica Corporation, Bell Atlantic Corporation, Dun & Bradstreet
Corporation, Hoechst AG Sponsored ADR, and News Corporation Limited Sponsored
ADR. Again, since this portfolio is actively managed, the stocks listed here may
change. We continue to believe that this restructuring theme will provide strong
upside potential, particularly as the market returns to value-driven stocks,
given the volatility of the past year.
In this time of rising valuations, is the portfolio management team still able
to find attractive value opportunities?
Yes. We believe that the valuations of the portfolio holdings are quite
attractive on an absolute basis, as well as relative to the S&P 500. Based on
1999 estimates, the earnings level for the Nuveen Growth and Income Stock Fund's
portfolio is projected to be 18 times its share price (this is often called the
price/earnings ratio), compared to that of the S&P 500, which is close to 28
times. Basically, the difference in the two price to earnings ratios underlies
the importance of how we select the stocks that go into the fund: we look for
stocks that we believe are trading at prices lower than their intrinsic worth
and also have a catalyst to unlock the stock's unrecognized value. While the
current frenzy in Internet-related stocks seems to make valuation comparisons
irrelevant, we continue to believe that our focus of searching for undervalued
securities will prove to be as rewarding in the future as it has in the past.
4
<PAGE>
Nuveen Growth and Income Stock Fund
Performance Overview
As of December 31, 1998
Top Ten Stock Holdings/1/
TCI Group Class A 4.2%
............................................
Hoechst AG Sponsored ADR 3.9%
............................................
Waste Management, Inc. 3.9%
............................................
BankAmerica Corporation 3.8%
............................................
Philip Morris Companies Inc. 3.7%
............................................
News Corporation Limited Sponsored ADR 3.6%
............................................
Bell Atlantic Corporation 3.6%
............................................
Royal Philips Electronics N.V. 3.4%
............................................
General Motors Corporation 3.4%
............................................
American Home Products Corporation 3.3%
- --------------------------------------------
Stock Diversification
[PIE CHART APPEARS HERE]
Transportation 4%
Consumer Cyclicals 21%
Financials 16%
Capital Goods 5%
Consumer Staples 8%
Health Care 15%
Basic Materials 7%
Technology 10%
Communication Services 10%
Energy 4%
Fund Highlights
Share Price A B C R
- -------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
...................................................................
Net Asset Value $23.18 $23.09 $23.06 $23.21
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Total Net Assets ($000) $825,903
...................................................................
Fund Beta 1.00
...................................................................
Average Market Capitalization of Stocks in Portfolio $42 billion
...................................................................
Average P/E of Stocks in Portfolio 17.4
...................................................................
Number of Stocks in Portfolio 48
...................................................................
Expense Ratio (A Shares after reimbursement) 1.30%
- -------------------------------------------------------------------
Annualized Total Return/2/
Share Class A (On NAV) A (On Offer) B C R
- -------------------------------------------------------------------
One-Year 9.89% 3.59% 9.11% 9.03% 10.24%
...................................................................
Since Inception 21.48% 18.51% 20.58% 20.50% 21.83%
- -------------------------------------------------------------------
1 The companies listed above represent their respective percentages as of
12/31/98. Over time, the fund's holdings and their percentages will vary as
the prices of the stocks vary.
2 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 return figures.
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Growth and Income Stock Fund
December 31, 1998
<TABLE>
<CAPTION>
Market
Shares Description Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 90.0%
Basic Materials - 6.9%
515,300 Akzo Nobel N.V. Sponsored ADR $22,995,263
329,485 IMC Global Inc 7,042,742
351,300 Monsanto Company 16,686,750
353,250 UPM-Kymmene Oyj Corporation Sponsored ADR 9,906,896
- --------------------------------------------------------------------------------------------------
Capital Goods - 4.4%
275,500 United States Filter Corporation# 6,302,063
648,750 Waste Management, Inc 30,247,969
- --------------------------------------------------------------------------------------------------
Communications Services - 9.7%
521,600 Bell Atlantic Corporation 27,644,800
370,900 SBC Communications Inc 19,889,513
582,300 TCI Group Class A# 32,208,469
- --------------------------------------------------------------------------------------------------
Consumer Cyclicals - 16.5%
212,600 Circuit City Stores 10,616,713
432,500 Dayton Hudson Corporation 23,463,125
328,900 Dun & Bradstreet Corporation 10,380,906
490,250 Federated Department Stores, Inc.# 21,356,516
201,150 Gannet Co., Inc 12,974,175
362,900 General Motors Corporation 25,970,031
228,300 Hasbro, Inc 8,247,338
780,600 Host Marriot Corporation 10,782,038
54,300 Masco Corporation 1,561,125
184,580 R.H. Donnelley Corporation 2,687,946
217,000 Royal Caribbean Cruises Ltd 8,029,000
- --------------------------------------------------------------------------------------------------
Consumer Staples - 7.9%
304,100 Fort James Corporation 12,164,000
537,300 Philip Morris Companies Inc 28,745,550
357,300 Seagram Company Ltd 13,577,400
204,600 Service Corporation International 7,787,588
129,600 TCI Ventures Group Class A# 3,053,700
- --------------------------------------------------------------------------------------------------
Energy - 3.6%
262,860 Elf Aquitaine SA Sponsored ADR 14,884,448
326,000 Schlumberger Limited 15,036,750
- --------------------------------------------------------------------------------------------------
Financials - 14.8%
501,200 Allstate Corporation 19,358,850
492,350 BankAmerica Corporation 29,602,544
220,450 CIGNA Corporation 17,043,541
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financials (continued)
450,825 Citigroup Inc $22,315,838
78,060 Crestline Capital Corporation# 1,141,628
221,150 Hartford Financial Services Group, Inc. 12,135,606
530,700 Household International, Inc. 21,028,988
- ------------------------------------------------------------------------------------------------------------------------------
Health Care - 13.6%
446,700 American Home Products Corporation 25,154,794
298,200 Baxter International Inc. 19,177,988
160,400 Bristol-Myers Squibb Company 21,463,525
738,900 Hoechst AG Sponsored ADR 30,294,900
350,700 Humana Inc.# 6,246,844
397,550 Tenet Healthcare Corporation# 10,435,688
- ------------------------------------------------------------------------------------------------------------------------------
Technology - 9.0%
117,700 Computer Associates International, Inc. 5,016,963
518,700 First Data Corporation 16,436,305
206,300 Newbridge Networks Corporation# 6,266,362
406,350 Northern Telecom Limited 20,368,293
384,600 Royal Philips Electronics N.V. 26,032,612
- ------------------------------------------------------------------------------------------------------------------------------
Transportation - 3.6%
217,050 AMR Corporation# 12,887,342
497,400 Burlington Northern Santa Fe Corporation 16,787,250
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks - (cost $646,267,787) 743,438,675
--------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 3.4%
1,131,550 News Corporation Limited Sponsored ADR 27,935,140
- ------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks - (cost $20,611,739) 27,935,140
--------------------------------------------------------------------------------------------------------------
Principal Market
Amount Description Value
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.1%
$ 10,000,000 Coca-Cola Company, Commercial Paper, effective yield of 5.13%, 1/21/99 9,971,610
25,000,000 Hersey Foods Corporation, Commercial Paper, effective yield of, 5.21%, 1/11/99 24,964,304
15,200,000 Sara Lee Corporation, Commercial Paper, effective yield of, 5.28%, 1/04/99 15,193,540
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments - (cost $50,129,456) 50,129,454
--------------------------------------------------------------------------------------------------------------
Total Investments - (cost $717,008,982) - 99.5% 821,503,269
--------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 4,400,096
--------------------------------------------------------------------------------------------------------------
Net Assets - 100% $825,903,365
==============================================================================================================
</TABLE>
# Non-income producing.
See accompanying notes to financial statements.
7
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Assets
<S> <C>
Investment securities, at market value (cost $717,008,982) (note 1) $821,503,269
Cash 764,517
Receivables:
Dividends 1,740,635
Investments sold 5,329,991
Shares sold 391,233
Deferred organization costs (note 1) 97,428
Other assets 11,003
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 829,838,076
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 1,567,031
Shares redeemed 840,445
Accrued expenses:
Management fees (note 4) 510,189
12b-1 distribution and service fees (notes 1 and 4) 223,893
Other 793,153
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 3,934,711
- ---------------------------------------------------------------------------------------------------------------------------
Net assets (note 5) $825,903,365
===========================================================================================================================
Class A Shares (note 1)
Net assets $714,885,119
Shares outstanding 30,846,607
Net asset value and redemption price per share $ 23.18
Offering price per share (net asset value per share plus maximum sales charge of 5.25% of offering price)* $ 24.46
===========================================================================================================================
Class B Shares (note 1)
Net assets $ 72,523,755
Shares outstanding 3,140,353
Net asset value, offering and redemption price per share $ 23.09
===========================================================================================================================
Class C Shares (note 1)
Net assets $ 24,524,354
Shares outstanding 1,063,543
Net asset value, offering and redemption price per share $ 23.06
===========================================================================================================================
Class R Shares (note 1)
Net assets $ 13,970,137
Shares outstanding 601,966
Net asset value, offering and redemption price per share $ 23.21
===========================================================================================================================
</TABLE>
* Effective January 11, 1999, the maximum sales charge on Class A Shares was
increased from 5.25% to 5.75%. The offering price on Class A Shares at the
5.75% maximum sales charge on December 31, 1998, would have been $24.59 per
share.
See accompanying notes to financial statements.
8
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------
Investment Income (note 1)
Dividends $ 5,222,127
Interest 2,388,647
- -----------------------------------------------------------------------------------------------------
Total investment income 7,610,774
- -----------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 3,363,798
12b-1 service fees - Class A (notes 1 and 4) 885,410
12b-1 distribution and service fees - Class B (notes 1 and 4) 341,673
12b-1 distribution and service fees - Class C (notes 1 and 4) 112,640
Shareholders' servicing agent fees and expenses 680,869
Custodian's fees and expenses 60,196
Trustees' fees and expenses (note 4) 60,227
Professional fees 28,533
Shareholders' reports - printing and mailing expenses 228,799
Federal and state registration fees 48,079
Amortization of deferred organization costs (note 1) 18,148
Other expenses 53,001
- -----------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 5,881,373
Expense reimbursement (note 4) (345,454)
- -----------------------------------------------------------------------------------------------------
Net expenses 5,535,919
- -----------------------------------------------------------------------------------------------------
Net investment income 2,074,855
- -----------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 3) (31,434,473)
Net change in unrealized appreciation or depreciation of investments (8,728,686)
- -----------------------------------------------------------------------------------------------------
Net gain (loss) from investments (40,163,159)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(38,088,304)
=====================================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
12/31/98 6/30/98
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 2,074,855 $ 7,784,661
Net realized gain (loss) from investment transactions (notes 1 and 3) (31,434,473) 110,057,991
Net change in unrealized appreciation or depreciation of investments (8,728,686) 33,508,467
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (38,088,304) 151,351,119
- -------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,193,065) (7,296,320)
Class B -- (174,471)
Class C -- (50,306)
Class R (44,836) (207,438)
From accumulated net realized gains from investment transactions:
Class A (64,231,991) (55,954,562)
Class B (6,425,000) (3,039,218)
Class C (2,189,844) (762,373)
Class R (1,233,821) (1,266,493)
- -------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (75,318,557) (68,751,181)
- -------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 50,084,271 171,997,447
Net proceeds from shares issued to shareholders due to reinvestment of distributions 49,301,979 55,521,813
- -------------------------------------------------------------------------------------------------------------------------
99,386,250 227,519,260
- -------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (61,808,361) (54,536,779)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 37,577,889 172,982,481
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (75,828,972) 255,582,419
Net assets at the beginning of period 901,732,337 646,149,918
- -------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $825,903,365 $901,732,337
=========================================================================================================================
Balance of undistributed net investment income at end of period $ 941,538 $ 104,584
=========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Growth and Income Stock Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those related to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests primarily in a diversified portfolio of large- and mid-cap
equities of domestic companies as a source of capital growth. In addition to
investments in equity securities, the Fund may invest in cash equivalents and
short-term fixed income investments in order to preserve capital or to enhance
returns or as a temporary defensive measure.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values when such values are
believed to more accurately reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
December 31, 1998, 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.
11
<PAGE>
Notes to Financial Statements (Unaudited)
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures 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 six months ended December 31, 1998.
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.
<TABLE>
<CAPTION>
2. Fund Shares
Transactions in Fund shares were as follows:
Six Months Ended 12/31/98 Year Ended 6/30/98
--------------------------------------------- --------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,239,292 $ 28,827,335 3,567,835 $ 89,575,723
Class B 516,601 12,262,842 2,261,218 56,728,012
Class C 320,087 7,574,873 697,568 17,510,818
Class R 58,383 1,419,221 325,380 8,184,894
Shares issued to shareholders
due to reinvestment of distributions:
Class A 1,881,132 42,843,744 2,217,304 50,837,734
Class B 184,000 4,157,861 119,470 2,714,481
Class C 43,897 991,101 30,815 699,886
Class R 57,359 1,309,273 55,208 1,269,712
- ------------------------------------------------------------------------------------------------------------------------------------
4,300,751 99,386,250 9,274,798 227,519,260
- ------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (2,083,312) (48,085,987) (1,640,986) (41,459,146)
Class B (277,069) (6,665,897) (108,267) (2,735,040)
Class C (111,114) (2,566,947) (69,070) (1,753,632)
Class R (205,104) (4,489,530) (340,624) (8,588,961)
- ------------------------------------------------------------------------------------------------------------------------------------
(2,676,599) (61,808,361) (2,158,947) (54,536,779)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,624,152 $ 37,577,889 7,115,851 $ 172,982,481
====================================================================================================================================
</TABLE>
12
<PAGE>
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the six months ended
December 31, 1998, were as follows:
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Purchases:
Investment securities $ 535,607,834
U.S. government obligations 1,161,780,090
Short-term investments 2,403,186,592
Sales:
Investment securities 548,792,997
U.S. government obligations 1,162,000,000
Short-term investments 2,426,447,590
===============================================================================
</TABLE>
At December 31, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $104,494,287 of which $114,819,138
related to appreciated securities and $10,324,851 related to depreciated
securities.
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- -------------------------------------------------------------------------------
<S> <C>
For the first $125 million .8500 of 1%
For the next $125 million .8375 of 1
For the next $250 million .8250 of 1
For the next $500 million .8125 of 1
For the next $1 billion .8000 of 1
For net assets over $2 billion .7750 of 1
===============================================================================
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding .95% of
the average daily net asset value of any class of Fund shares. Effective August
1, 1998, the Adviser has agreed to waive fees and reimburse expenses through
July 31, 1999, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding 1.05% of
the average daily net asset value of any class of Fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays no compensation
directly to 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 six months ended December 31, 1998, John Nuveen & Co. Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers. The Distributor also
received 12b-1 service fees on Class A Shares, substantially all of which were
paid to compensate authorized dealers for providing services to shareholders
relating to their investments.
During the six months ended December 31, 1998, the Distributor compensated
authorized dealers directly with approximately $452,800 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1998, the Distributor retained approximately $402,700 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 $150,400
of CDSC on share redemptions during the six months ended December 31, 1998.
5. Composition of Net Assets
At December 31, 1998, 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 $753,016,955
Balance of undistributed net investment income 941,538
Accumulated net realized gain (loss) from investment transactions (32,549,415)
Net unrealized appreciation of investments 104,494,287
- ----------------------------------------------------------------------------------
Net assets $825,903,365
==================================================================================
</TABLE>
13
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
CLASS (Inception Date)
Investment Operations Less Distributors
------------------------------- -----------------------------
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 Gain Total Value Return(b)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 (d) $ 26.50 $ .07 $(1.13) $(1.06) $(.04) $(2.22) $(2.26) $23.18 (3.78)%
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 (d) 26.47 (.02) (1.14) (1.16) ---- (2.22) (2.22) 23.09 (4.13)
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 (d) 26.43 (.02) (1.13) (1.15) ---- (2.22) (2.22) 23.06 (4.14)
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 (d) 26.52 .10 (1.12) (1.02) (.07) (2.22) (2.29) 23.21 (3.62)
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>
- --------------------------------------------------------------------------------
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
<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
Ending Net Assets Net Assets Net Assets Net Assets
Net Before Before After After 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 (d) $714,885 1.37%* .50%* 1.28%* .59%* 73%
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 (d) 72,524 2.12* (.24)* 2.03* (.15)* 73
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 (d) 24,524 2.12* (.22)* 2.03* (.13)* 73
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 (d) 13,970 1.11* .75* 1.03* .83* 73
1998 18,335 1.11 1.10 .95 1.26 110
1997 (c)** 15,647 1.47* 1.04* .95* 1.56* 131
- -------------------------------------------------------------------------------
</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 waiver of certain management fees or reimbursement of expenses by
Nuveen Institutional Advisory Corp.
(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.
(d) For the six months ended December 31, 1998.
14
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
15
<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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
16
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN,SR.,APPEARS HERE]
John Nuveen, Sr.
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 focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income 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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
ESA-GI-12-98
<PAGE>
NUVEEN
Mutual Funds
December 31, 1998
Semiannual Report
For investors seeking
long-term growth potential
with a measure of
downside protection.
[PHOTO APPEARS HERE]
Balanced
Stock and
Bond Fund
<PAGE>
Highlights
As of December 31, 1998
For Class A shares
Annualized Fund Returns/1/
[BAR CHART APPEARS HERE]
Class A (NAV) Class A (Offer)
One Year 11.18% 4.80%
Since Inception 16.29% 13.45%
Attractive Long-Term Performance/2/
[BAR CHART APPEARS HERE]
Class A (NAV) Class A (Offer)
One Year 11.24% 4.84%
Five Year 14.08% 12.74%
Ten Year 14.67% 13.99%
Portfolio Allocation
[PIE CHART APPEARS HERE]
Stocks 64%
U.S. Government Obligations 35%
Cash 1%
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
5 Performance Overview
6 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 Building Better Portfolios with Nuveen
17 Fund Information
1 Please see the Performance Overview on page five for more information.
2 This chart reflects the performance of the Institutional Capital Composite,
which includes all assets (approximately $850 million as of 12/31/98) that
have substantially the same Investment objective and policies as the Nuveen
Balanced Stock and Bond Fund. The Composite's accounts may experience
different investment inflows and outflows than the fund are not subject to all
of the restrictions of the Investment Company Act of 1940 and the Internal
Revenue Code that apply to the fund, which could adversely affect fund
performance. Investment returns reflect Composite gross-of-fee returns,
adjusted for the fund's Class A annual net operating expenses of 1.20%, but
not the up-front sales charge. Class B, C or R investment results would differ
due to differing sales charges and operating expenses. This chart does not
represent actual fund past performance or predict future fund performance.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to report that over the past 12 months, the Nuveen Balanced Stock
and Bond Fund continued to perform well in pursuit of its primary objective:
providing you with 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. This fund generated strong returns during a very volatile
market.
In addition, the fund remains well-positioned to take advantage of future market
opportunities while employing an investment strategy that historically has
performed well and has moderated the impact of severe market downturns.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. To avert a potential domestic credit crunch and bring some
stability to global markets, the Federal Reserve moved to ease short-term
interest rates for the first time in almost three years. Between the end of
September and mid-November, three successive cuts brought the federal funds rate
to 4.75%.
Despite the uncertainty in some foreign markets, U.S. equities enjoyed another
banner year. The Dow Jones Industrial Average recorded an increase for the
eighth consecutive time, and the S&P 500 posted a total return of almost 29%.
This increase is even more impressive in light of the S&P 500's decline of
almost 20% over the summer. In the coming months, we will continue to watch
several key factors affecting the economy's future, including corporate earnings
reports, wage and employment statistics, the strength of the U.S. dollar, events
in international markets, and any further interest rate indications from the
Federal Reserve.
Nuveen's Premier Advisers
As a further enhancement to our management capabilities, Nuveen has assembled a
strong core of Premier Advisers(SM), portfolio managers with specialized
expertise in a particular investment style or asset class and time-tested
investment strategies that seek consistent, long-term performance. As Nuveen's
Premier Adviser for value investing and portfolio manager of the Nuveen Balanced
Stock and Bond Fund, Institutional Capital Corporation is a highly successful
institutional money manager with close to 30 years of experience. Over that
time, they have specialized in finding undervalued midsize and large company
stocks that are poised for significant growth.
1
<PAGE>
"An appropriately diversified portfolio...can help cushion your portfolio
against volatility and enhance your overall total return potential."
This disciplined, research-oriented approach has paid off for investors and is
still the key investment strategy of the Nuveen Balanced Stock and Bond Fund.
Generally, the fund only purchases stocks that the managers believe have the
potential to generate 15-25% returns over an 18-month period. They seek reduced
risk, capital preservation potential, and current income by balancing our stock
investments with bonds.
Considering the market volatility of 1998, we believe that investors will
continue to find diversification to be an increasingly important strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of invest ments, levels of risk, and tax management strategies -
can help cushion your portfolio against volatility and enhance your overall
total return potential.
Nuveen also offers other equity and European funds, featuring portfolio
management by Institutional Capital, plus growth, income, and tax-free funds,
managed by other Premier Advisers specializing in those asset categories. For
more information about Nuveen Mutual Funds, including charges and expenses,
contact your financial adviser for a prospectus, or call Nuveen at (800) 621-
7227. Please read the prospectus carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
collection of mutual funds can help you establish a diversified portfolio
designed to build and sustain long-term financial security. We are grateful for
the confidence you have placed in us, and we intend to continue earning your
trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 1999
2
<PAGE>
Nuveen Balanced Stock and Bond Fund
Portfolio Manager's Comments
Investors found 1998 to be a very challenging year, and many expect volatile,
yet growing markets in 1999. To gain a clearer perspective on recent events and
the future of the Nuveen Balanced Stock and Bond Fund, we talked with Rob Lyon,
President and Chief Investment Officer of Institutional Capital Corporation,
Nuveen's Premier Adviser for value investing, and portfolio manager of the fund.
Here are the highlights of that conversation:
What is your assessment of the financial markets last year?
The equity market turned in another strong performance in 1998, setting a number
of records in the process. The S&P 500 generated a total return of 28.6% for the
year, its fourth consecutive year of increases over 20% and the first such
string of increases since the 1870s. The Dow Jones Industrial Average has now
risen for each of the last eight years, and 16 of the last 17 years. Due to this
strong performance over the last 17 years, the S&P 500 has produced an
annualized total return of almost 18%, the highest total return on record for
that index.
The fixed-income market also posted solid results. Bond prices rose
substantially, as the yield on the 30-year U.S. Treasury declined to 5.09% by
year-end from 5.92% at the beginning of the year. Intermediate-term bonds also
did exceptionally well, with the yield on the five-year U.S. Treasury Note
sinking to 4.54% from 5.70% over the course of the year.
What was notable about the stock market's performance in 1998?
The market's performance, though solid, was also marked by volatility last year.
The S&P 500 declined almost 20% during the summer, only to eventually rebound
and reach record highs four months later. Never before had the index recovered
so quickly from a decline of this magnitude. Historically, the market has needed
about four years to recover.
Equity market performance was also notable in 1998 for its concentration of
return in a relatively small group of large-capitalization, growth-oriented
issues. The top 5 contributors to the total return of the S&P 500 in 1998 were
Microsoft, General Electric, Wal-Mart, Lucent Technologies and Cisco. These five
stocks showed a median return of nearly 115% while the return for the other 495
stocks in the S&P 500 was only about 7%.
At year-end, the market hovered near record highs despite the continuing
financial instability in Asia and Russia as well as the impeachment of President
Clinton.
The economy continued to support the market's advance in 1998, growing at about
4%, even in the face of slowed foreign trade. While the economy is not likely
headed for recession, there are signs that growth will moderate in 1999: U.S.
exports continue to be affected by financial market turmoil; spending on capital
expenditures should moderate; and housing growth should slow. Even though the
economy's pace could taper off in the coming months, there are adjustments
taking place that could lessen the economic slowdown anticipated in 1999, such
as foreign central banks moving aggressively to reduce interest rates, higher
government spending in the U.S. due to the current budget surplus, and initial
signs of stability in Asia.
In the bond market, while interest rates trended lower since the beginning of
the year, Asia's financial turmoil caused the Federal Reserve to lower short-
term interest rates three times during the last half of 1998, bringing the
federal funds rate to 4.75%. The low interest rate environment stimulated the
fixed-income market as investors searched for quality investments. In addition,
the financial problems in Russia caused a "flight to quality," where investors
gravitated towards the safety of U. S. Treasury securities, which drove prices
higher and yields lower.
How did the Nuveen Balanced Stock and Bond Fund perform in 1998?
The Nuveen Balanced Stock and Bond Fund generated a total return on Class A
shares at net asset value of 11.18% for the 12 months ended December 31, 1998.
This compares to a 13.50% total return for the Lipper Balanced Fund Category
average.
See your fund's performance overview in this report, on page five, for more
information.
Much of the fund's relative underperformance for the year can be attributed to
its value investing approach. When the financial crisis in Asia first became
apparent in the fall of 1997, equity performance shifted sharply in favor of
the largest, growth-oriented stocks. While growth stocks have now outperformed
value stocks for five years in a row, the differential in 1998 was the largest
on record.
The prospects for value-oriented stocks look much better if there is an easing
monetary policy. If the Fed lowers interest rates further, we expect that
investors would become more comfortable with the outlook for the economy, which
should spur a move back towards value.
The fund's fixed-income portfolio, which consisted of intermediate-term U.S.
Treasury securities, was beneficial for a couple of reasons. First, the fixed-
income allocation stabilized fund returns during the market turmoil that
occurred in the third quarter. Second, the decline in interest rates resulted in
price gains for
3
<PAGE>
bonds, particularly holdings in the intermediate segment of the yield curve.
What investment strategies were employed in managing the Nuveen Balanced Stock
and Bond Fund? In addition, what are some of the holdings you've identified as
being particularly attractive?
Throughout 1998, and over the last six months in particular, there has been a
lot of emphasis placed in two areas while searching for the most attractive
value opportunities to include in the equity portfolio of the fund. The primary
strategic focus throughout 1998 remained searching for companies undergoing a
corporate restructuring. We generally looked for companies that had franchises
or significant asset bases that were underutilized or underappreciated and had
the most potential for favorably enhancing the fund's performance. Committed
management can release considerable value in those situations. The second area
was looking for stocks of companies whose business is primarily domestic in
nature, reflecting our view that even with some economic slowdown, the U.S. will
remain one of the world's best growth areas in 1999.
Stocks purchased in the last six months with more of a domestic characteristic
include: TCI Group (an AT&T merger partner), SBC Communications Inc., Dayton
Hudson Corporation, Circuit City Stores, Hartford Financial Services Group,
Inc., Monsanto Company, Gannett Co., Inc., and United States Filter Corporation.
The stocks listed here were as of December 31, 1998 and given that the portfolio
is actively managed, they may change.
We believe a good example of the restructuring theme, and a large holding in the
portfolio, is Waste Management, Inc. This company was formed last year when the
minnow, USA Waste, swallowed the whale, the old Waste Management, keeping the
name of Waste Management, Inc. (WMI). WMI is now the world's largest solid waste
company with expected revenues of over $13 billion. The new company has a very
aggressive and competent management team. There are significant cost-cutting
opportunities, from ceasing the operations of the poorly run old Waste
Management to integrating the businesses of the two companies. In spite of
projected double-digit earnings growth following the boost in 1999 from cost-
cutting, WMI is selling at an attractive price to earnings multiple of under 15
times its share price. We feel this is an undervalued stock that has the
potential to go up in price.
Other examples of stocks we found to be attractive, as of December 31, 1998,
included: BankAmerica Corporation, Bell Atlantic Corporation, Dun & Bradstreet
Corporation, Hoechst AG Sponsored ADR, and News Corporation Limited Sponsored
ADR. Again, since this portfolio is actively managed, the stocks listed here may
change. We continue to believe that adding quality stocks to this portfolio will
provide strong upside potential, particularly if the market returns to value-
driven stocks, given the volatility of the past year.
In the fixed-income portfolio, the team continued to concentrate on U.S.
Treasury issues in the intermediate segment of the yield curve. 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.
In this time of rising valuations, is the portfolio management team still able
to find attractive value opportunities?
Yes. We believe it is important to emphasize that the valuations of the
portfolio holdings are quite attractive on an absolute basis, as well as
relative to the S&P 500. Based on 1999 estimates, the earnings level for the
Nuveen Balanced Stock and Bond Fund's portfolio is projected to be 18 times its
share price (this is often called the price/earnings ratio), compared to that of
the S&P 500, which is close to 28 times. The difference in the two price to
earnings ratios underlies the importance of how we select the stocks that go
into the fund: we look for stocks that we believe are trading at prices lower
than their intrinsic worth and also have a catalyst to unlock the stock's
unrecognized value. While the current frenzy in Internet-related stocks seems to
make valuation comparisons irrelevant, we continue to believe that our focus of
searching for undervalued securities will prove to be as rewarding in the future
as it has in the past.
We also believe that interest rates are likely to continue trending lower in
1999, and that if the economy experiences a slowdown, the Fed may continue to
reduce short-term rates. These conditions would make the Fund's fixed-income
portfolio attractive in terms of total return as well as risk reduction. The
portfolio management team will continue focusing on issues in the intermediate
segment of the yield curve because of their attractive risk-reward
characteristics.
4
<PAGE>
Nuveen Balanced Stock and Bond Fund
Performance Overview
As of December 31, 1998
<TABLE>
<CAPTION>
Top Ten Stock Holdings/1/
<S> <C>
BankAmerica Corporation 4.29%
.........................................................
TCI Group Class A 3.91%
.........................................................
Household International, Inc. 3.87%
.........................................................
Philip Morris Companies Inc. 3.62%
.........................................................
News Corporation Limited Sponsored ADR 3.51%
.........................................................
Waste Management Inc. 3.46%
.........................................................
American Home Products Corporation 3.35%
.........................................................
Hoechst AG Sponsored ADR 3.33%
.........................................................
Bell Atlantic Corporation 3.33%
.........................................................
General Motors Corporation 3.15%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Stock Diversification
[PIE CHART APPEARS HERE]
<S> <C>
Transportation 4%
Energy 4%
Consumer Cyclicals 21%
Communications Services 10%
Basic Materials 7%
Financials 17%
Technology 11%
Consumer Staples 8%
Health Care 14%
Capital Goods 4%
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fund Highlights
Share Price A B C R
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 8/96 8/96 8/96 8/96
......................................................................................................
Net Asset Value $25.18 $25.18 $25.18 $ 25.18
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Total Net Assets ($000) $88,213
......................................................................................................
Fixed Income Average Duration 6.26
......................................................................................................
Average Market Capitalization of Stocks $42 billion
......................................................................................................
Average P/E of Stocks (trailing 12 months) 17.4
......................................................................................................
Number of Stocks 49
......................................................................................................
Expense Ratio (A Shares) (After Reimbursement) 1.20%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annualized Total Return/2/
A (On NAV) A (On Offer) B C R
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year 11.18% 4.80% 10.37% 10.37% 11.41%
......................................................................................................
Since Inception 16.29% 13.45% 15.45% 15.45% 16.57%
- ------------------------------------------------------------------------------------------------------
</TABLE>
1 The companies listed above represent their respective percentages as of
12/31/98. Over time, the fund's holdings and their percentages will vary as
the prices of the stocks vary.
2 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 return figures.
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Stock and Bond Fund
December 31, 1998
<TABLE>
<CAPTION>
Market
Shares Description Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 61.4%
Basic Materials - 4.4%
36,100 Akzo Nobel N.V. Sponsored ADR $ 1,610,963
21,598 IMC Global Inc. 461,657
25,100 Monsanto Company 1,192,250
21,250 UPM-Kymmene Oyj Corporation Sponsored ADR 595,956
- ---------------------------------------------------------------------------------------------
Capital Goods - 2.7%
19,500 United States Filter Corporation# 446,063
41,600 Waste Management Inc. 1,939,600
- ---------------------------------------------------------------------------------------------
Communication Services - 6.1%
35,200 Bell Atlantic Corporation 1,865,600
24,000 SBC Communications Inc. 1,286,999
39,700 TCI Group Class A# 2,195,906
- ---------------------------------------------------------------------------------------------
Consumer Cyclicals - 11.0%
14,000 Circuit City Stores 699,125
31,300 Dayton Hudson Corporation 1,698,025
23,900 Dun & Bradstreet Corporation 754,344
36,600 Federated Department Stores, Inc.# 1,594,388
14,300 Gannet Co., Inc. 922,350
24,700 General Motors Corporation 1,767,594
16,800 Hasbro, Inc. 606,900
59,000 Host Marriot Corporation 814,938
4,200 Masco Corporation 120,750
7,920 R.H. Donnelley Corporation 115,335
17,500 Royal Caribbean Cruises Ltd. 647,500
- ---------------------------------------------------------------------------------------------
Consumer Staples - 4.8%
15,400 Kimberly-Clark Corporation 839,300
38,000 Philip Morris Companies Inc. 2,033,000
14,100 Seagram Company Ltd. 535,800
15,100 Service Corporation International 574,744
9,400 TCI Ventures Group Class A# 221,488
- ---------------------------------------------------------------------------------------------
Energy - 2.9%
27,520 Elf Aquitaine SA Sponsored ADR 1,558,320
20,800 Schlumberger Limited 959,400
- ---------------------------------------------------------------------------------------------
Financials - 10.8%
34,900 Allstate Corporation 1,348,013
40,000 BankAmerica Corporation 2,405,000
15,250 CIGNA Corporation 1,179,016
30,175 Citigroup Inc. 1,493,663
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financials (continued)
5,900 Crestline Capital Corporation# $ 86,288
15,350 Hartford Financial Services Group, Inc 842,331
54,800 Household International, Inc 2,171,450
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care--9.2%
33,350 American Home Products Corporation 1,878,022
21,250 Baxter International Inc 1,366,641
11,850 Bristol-Myers Squibb Company 1,585,678
45,600 Hoechst AG Sponsored ADR 1,869,600
24,700 Humana Inc.# 439,969
36,450 Tenet Healthcare Corporation# 956,813
- -----------------------------------------------------------------------------------------------------------------------------------
Technology--7.2% .
8,400 Computer Associates International, Inc 358,050
36,800 First Data Corporation 1,166,100
6,800 International Business Machines Corporation 1,256,300
15,000 Newbridge Networks Corporation# 455,625
28,900 Northern Telecom Limited 1,448,613
25,050 Royal Philips Electronics N.V 1,695,572
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation--2.3% .
14,700 AMR Corporation# 872,813
35,450 Burlington Northern Santa Fe Corporation 1,196,438
- -----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks--(cost $47,054,449) 54,130,290
- -----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--2.2%
79,700 News Corporation Limited Sponsored ADR 1,967,593
- -----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks--(cost $1,467,206) 1,967,593
- -----------------------------------------------------------------------------------------------------------------------------------
Principal Market
Amount Description Value
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations--34.3%
U.S. Treasury Notes:
$ 4,065,000 7.500%, 5/15/02 $ 4,413,065
2,630,000 7.875%, 11/15/04 3,046,691
3,780,000 6.500%, 5/15/05 4,142,645
10,685,000 7.000%, 7/15/06 12,167,543
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
3,175,000 7.250%, 5/16/16 3,851,671
2,385,000 6.000%, 2/15/26 2,602,630
- -----------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Obligations--(cost $28,124,185) 30,224,245
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Stock and Bond Fund (continued)
December 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount Description Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS--1.1%
$ 1,000,000 Sara Lee Corporation, Commercial Paper, effective yield of, 5.28%, 1/04/99 $ 999,575
- -----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments--(cost $999,575) 999,575
-------------------------------------------------------------------------------------------------------------------
Total Investments--(cost $77,645,415)--99.0% 87,321,703
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities--1.0% 891,340
-------------------------------------------------------------------------------------------------------------------
Net Assets--100% $88,213,043
===================================================================================================================
</TABLE>
# Non-income producing.
See accompanying notes to financial statements.
8
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1998
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $77,645,415) (note 1) $87,321,703
Cash 124,480
Receivables:
Dividends and interest 652,750
Investments sold 169,557
Shares sold 254,180
Deferred organization costs (note 1) 100,543
Other assets 389
- -------------------------------------------------------------------------------------------------------------------------
Total assets 88,623,602
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 108,129
Shares redeemed 133,025
Accrued expenses:
Management fees (note 4) 42,730
12b-1 distribution and service fees (notes 1 and 4) 27,815
Other 98,860
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 410,559
- -------------------------------------------------------------------------------------------------------------------------
Net assets (note 5) $88,213,043
=========================================================================================================================
Class A Shares (note 1)
Net assets $67,761,334
Shares outstanding 2,691,290
Net asset value and redemption price per share $ 25.18
Offering price per share (net asset value per share plus maximum sales charge of 5.25% of offering price)* $ 26.58
=========================================================================================================================
Class B Shares (note 1)
Net assets $11,105,937
Shares outstanding 441,121
Net asset value, offering and redemption price per share $ 25.18
=========================================================================================================================
Class C Shares (note 1)
Net assets $ 5,648,458
Shares outstanding 224,323
Net asset value, offering and redemption price per share $ 25.18
=========================================================================================================================
Class R Shares (note 1)
Net assets $ 3,697,314
Shares outstanding 146,850
Net asset value, offering and redemption price per share $ 25.18
=========================================================================================================================
</TABLE>
* Effective January 11, 1999, the maximum sales charge on Class A Shares was
increased from 5.25% to 5.75%. The offering price on Class A Shares at the
5.75% maximum sales charge on December 31, 1998, would have been $26.72 per
share.
See accompanying notes to financial statements.
9
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended December 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 375,317
Interest 1,031,500
- -------------------------------------------------------------------------------------
Total investment income 1,406,817
- -------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 316,480
12b-1 service fees - Class A (notes 1 and 4) 82,906
12b-1 distribution and service fees - Class B (notes 1 and 4) 48,535
12b-1 distribution and service fees - Class C (notes 1 and 4) 24,449
Shareholders' servicing agent fees and expenses 45,673
Custodian's fees and expenses 29,799
Trustees' fees and expenses (note 4) 8,264
Professional fees 6,328
Shareholders' reports - printing and mailing expenses 22,886
Federal and state registration fees 39,017
Amortization of deferred organization costs (note 1) 18,148
Other expenses 4,015
- -------------------------------------------------------------------------------------
Total expenses before expense reimbursement 646,500
Expense reimbursement (note 4) (97,165)
- -------------------------------------------------------------------------------------
Net expenses 549,335
- -------------------------------------------------------------------------------------
Net investment income 857,482
- -------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 3) (2,094,148)
Net change in unrealized appreciation or depreciation of investments 2,025,320
- -------------------------------------------------------------------------------------
Net gain (loss) from investments (68,828)
- -------------------------------------------------------------------------------------
Net increase in net assets from operations $ 788,654
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
12/31/98 6/30/98
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 857,482 $ 2,347,199
Net realized gain (loss) from investment transactions
(notes 1 and 3) (2,094,148) 4,988,412
Net change in unrealized appreciation or depreciation of investments 2,025,320 4,596,358
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 788,654 11,931,969
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (650,340) (1,955,711)
Class B (62,087) (165,258)
Class C (31,815) (64,225)
Class R (39,487) (175,931)
From accumulated net realized gains from investment transactions:
Class A (2,986,151) (1,410,980)
Class B (472,690) (120,791)
Class C (236,478) (50,758)
Class R (160,518) (204,679)
- -------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (4,639,566) (4,148,333)
- -------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 10,145,944 28,460,346
Net proceeds from shares issued to shareholders due to reinvestment of distributions 3,772,370 3,182,983
- -------------------------------------------------------------------------------------------------------------------
13,918,314 31,643,329
- -------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (9,379,597) (16,266,187)
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 4,538,717 15,377,142
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets 687,805 23,160,778
Net assets at the beginning of period 87,525,238 64,364,460
- -------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $88,213,043 $ 87,525,238
===================================================================================================================
Balance of undistributed net investment income at end of period $ 78,532 $ 4,779
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Balanced Stock and Bond Fund (the "Fund") is a series of the Nuveen
Investment Trust (the "Trust") which was organized as a Massachusetts business
trust in 1996. The Trust (and each series within the Trust) is an open-end
diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those relating to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests in a mix of equities, taxable bonds and cash equivalents for
capital growth, capital preservation and current income. During temporary
defensive periods, the Fund may invest any percentage of its assets in temporary
investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values when such values are
believed to more accurately reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
December 31, 1998, 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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended December 31, 1998.
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.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended 12/31/98 Year Ended 6/30/98
----------------------------- ------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 167,968 $ 4,137,993 519,941 $ 13,025,786
Class B 135,060 3,341,503 372,091 9,257,698
Class C 95,015 2,382,387 124,310 3,141,845
Class R 11,242 284,061 120,833 3,035,017
Shares issued to shareholders due to reinvestment of distributions:
Class A 124,889 3,122,968 116,290 2,853,684
Class B 13,391 334,128 6,908 169,109
Class C 3,860 96,653 1,846 45,583
Class R 8,760 218,621 4,668 114,607
- ------------------------------------------------------------------------------------------------
560,185 13,918,314 1,266,887 31,643,329
- ------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (239,556) (5,930,818) (376,287) (9,460,805)
Class B (99,807) (2,607,515) (13,633) (346,082)
Class C (31,476) (782,411) (10,327) (264,621)
Class R (2,507) (58,853) (249,979) (6,194,679)
- ------------------------------------------------------------------------------------------------
(373,346) (9,379,597) (650,226) (16,266,187)
- ------------------------------------------------------------------------------------------------
Net increase 186,839 $ 4,538,717 616,661 $ 15,377,142
================================================================================================
</TABLE>
13
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
3. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
government obligations and short-term investments for the six months ended
December 31, 1998, were as follows:
- --------------------------------------------------------------------------------
Purchases:
Investment securities $ 39,727,489
U.S. government obligations 87,779,201
Short-term investments 130,471,012
Sales:
Investment securities 32,490,662
U.S. government obligations 93,124,176
Short-term investments 131,400,000
================================================================================
At December 31, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $9,676,288 of which $10,596,088 related
to appreciated securities and $919,800 related to depreciated securities.
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net asset value of the Fund as follows:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
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 the net assets over $2 billion .6750 of 1
================================================================================
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding .85% of
the average daily net asset value of any class of Fund shares. Effective August
1, 1998, the Adviser has agreed to waive fees and reimburse expenses through
July 31, 1999, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding .95% of
the average daily net asset value of any class of Fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays no compensation
directly to 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 six months ended December 31, 1998, John Nuveen & Co. Incorporated
(the "Distributor") collected sales charges on purchases of Class A Shares, the
majority of which were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the six months ended December 31, 1998, the Distributor compensated
authorized dealers directly with approximately $130,400 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1998, the Distributor retained approximately $63,900 in such
12b-1 fees. The remaining 12b-1 fees charged to the Fund were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments. The Distributor also collected and retained approximately $18,000
of CDSC on share redemptions during the six months ended December 31, 1998.
5. Composition of Net Assets
At December 31, 1998, the Fund had an unlimited number of $.01 par value per
share common stock authorized. Net assets consisted of:
- --------------------------------------------------------------------------------
Capital paid-in $80,703,416
Balance of undistributed net investment income 78,532
Accumulated net realized gain (loss) from investment transactions (2,245,193)
Net unrealized appreciation of investments 9,676,288
- --------------------------------------------------------------------------------
Net assets $88,213,043
================================================================================
14
<PAGE>
Financial Highlights (Unaudited)
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 Gain Total Value Return (b)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 (d) $26.39 $.27 $(.08) $ .19 $(.25) $(1.15) $(1.40) $25.18 .84%
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 (d) 26.39 .18 (.09) .09 (.15) (1.15) (1.30) 25.18 .47
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 (d) 26.39 .18 (.09) .09 (.15) (1.15) (1.30) 25.18 .46
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 (d) 26.39 .30 (.08) .22 (.28) (1.15) (1.43) 25.18 .96
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>
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 Before After After Portfolio
Assets Reimburse- Reimburse- Reimburse- Reimburse- Turnover
(000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 (d) $67,761 1.41%* 1.92%* 1.18%* 2.15%* 55%
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 (d) 11,106 2.16* 1.18* 1.93* 1.41* 55
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 (d) 5,648 2.16* 1.18* 1.93* 1.41* 55
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 (d) 3,697 1.16* 2.17* .93* 2.40* 55
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 waiver of certain management fees or reimbursement of expenses by
Nuveen Institutional Advisory Corp.
(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.
(d) For the six months ended December 31, 1998.
15
<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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
16
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
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 focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income 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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
<PAGE>
NUVEEN
Mutual Funds
December 31, 1998
Semiannual Report
For investors seeking attractive after-tax returns through tax-free income and
long-term growth of capital.
[PHOTO APPEARS HERE]
Balanced
Municipal
and
Stock Fund
<PAGE>
Highlights
As of December 31, 1998
For Class A shares
Annualized Fund Returns/1/
[BAR CHART APPEARS HERE]
Class A (NAV) Class A (Offer)
One-Year 8.33% 2.11%
Since Inception 13.58% 10.81%
Monthly Tax-Free Dividend History
[BAR CHART APPEARS HERE]
January 0.04550 July 0.04350
February 0.04550 August 0.04350
March 0.04550 September 0.04350
April 0.04550 October 0.04350
May 0.04550 November 0.04350
June 0.04550 December 0.04350
Portfolio Allocation
[PIE CHART APPEARS HERE]
Municipal Bonds 65%
Stocks 35%
Bond Buyer 40 Yield
[Line Graph Appears Here]
Top Five Stock Holdings
TCI Group Class A 4.1% Philip Morris Companies Inc. 3.8%
............................................................................
BankAmerica Corporation 3.8% News Corporation Limited Sponsored ADR 3.6%
............................................................................
Waste Management Inc. 3.8%
- ----------------------------------------------------------------------------
Contents
1 Dear Shareholder
3 Portfolio Manager's Comments
5 Performance Overview
6 Portfolio of Investments
12 Statement of Net Assets
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Notes to Financial Statements
19 Financial Highlights
20 Building Better Portfolios with Nuveen
21 Fund Information
/1/ Please see the Performance Overview on page five for more information.
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes
a lifetime
to build.
Once achieved,
it should be
preserved.
I'm pleased to report that over the past 12 months, the Nuveen Balanced
Municipal and Stock Fund continued to perform well in pursuit of its primary
objective: providing you with an attractive after-tax total return through a
combination of federally tax-exempt income, capital appreciation, and capital
preservation in adverse markets. Even in today's lower interest rate
environment, the fund remains well-positioned to continue providing attractive
tax-free income.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. To avert a potential domestic credit crunch and bring some
stability to global markets, the Federal Reserve moved to ease short-term
interest rates for the first time in almost three years. Between the end of
September and mid-November, three successive cuts brought the federal funds rate
to 4.75%.
Rising bond prices drove yields on 30-year Treasuries to historic lows. With
yields on long Treasury bonds pushing below 5% at times, the yield on the Bond
Buyer Revenue Bond Index, an unmanaged index of long-term municipal revenue
bonds, fell just 15 basis points--from 5.41% to 5.26%--compared with the 82-
point drop in Treasury yields over the past 12 months. As of December 31, 1998,
the ratio of long-term municipal yields to 30-year Treasury yields stood at
more than 103%, compared with the more typical range of 86-87%. Over the past
few months, this ratio has reached as high as 104%. For investors, this means
that quality long-term municipal bonds currently offer approximately the same
yield as Treasury bonds with comparable maturities--even before the tax
advantages of municipal bonds are taken into account. On an after-tax basis in
today's market, municipal bonds present an exceptionally attractive investment
option relative to Treasuries.
Despite the uncertainty in some foreign markets, U.S. equities enjoyed another
banner year. The Dow Jones Industrial Average recorded an increase for the
eighth consecutive time, and the S&P 500 posted a total return of almost 29%.
This increase is even more impressive in light of the S&P 500's decline of
almost 20% over the summer. In the coming months, we will continue to watch
several key factors affecting the economy's future, including corporate earnings
reports, wage and employment statistics, the strength of the U.S. dollar, events
in international markets, and any further interest rate indications from the
Federal Reserve.
Nuveen's Premier Advisers
As a further enhancement to our management capabilities, Nuveen has assembled a
strong core of Premier Advisers/SM/, portfolio managers with specialized
expertise in a particular investment style or asset class and
1
<PAGE>
"An appropriately diversified portfolio . . . can help cushion against
volatility and enhance your overall total return potential."
time-tested investment strategies that seek consistent, long-term performance.
Nuveen Investment Advisory Services, the Premier Adviser for income investing,
manages the municipal bond portion of the portfolio. As one of the largest and
most experienced municipal bond managers in the country, Nuveen draws upon the
systems, market knowledge, and investing skills the firm has developed through
its 100 years of day-to-day participation in this complex market. They invest
the majority of the Fund's assets in investment-grade municipal bonds with
favorable characteristics that they believe offer the best balance of current
tax-free income and capital preservation potential. The stock portion of the
Fund's portfolio is managed by Institutional Capital Corporation, Nuveen's
Premier Adviser for value investing. A highly successful institutional money
manager with close to 30 years of experience, Institutional Capital specializes
in finding undervalued midsized and large company stocks that are poised for
significant growth. Generally, the managers only purchase stocks that they
believe have the potential to generate 15-25% returns over an 18-month period.
The disciplined, research-oriented approach of Nuveen and Institutional Capital
has paid off for investors and is still the key investment strategy of the
Nuveen Balanced Municipal and Stock Fund.
Considering the market volatility of 1998, we believe that investors will
continue to find diversification to be an increasingly important strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk, and tax management strategies -
can help cushion your portfolio against volatility and enhance your overall
total return potential.
Nuveen also offers other equity and European funds, featuring portfolio
management by Institutional Capital, plus growth, income, and tax-free funds,
managed by other Premier Advisers specializing in those asset categories. For
more information about Nuveen Mutual Funds, including charges and expenses,
contact your financial adviser for a prospectus, or call Nuveen at (800) 621-
7227. Please read the prospectus carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
collection of mutual funds can help you establish a diversified portfolio
designed to build and sustain long-term financial security. We are grateful for
the confidence you have placed in us, and we intend to continue earning your
trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 1999
2
<PAGE>
Nuveen Balanced Municipal and Stock Fund
Portfolio Manager's Comments
Investors found 1998 to be a very challenging year, and many expect volatile,
yet growing markets in 1999. To gain a clearer perspective on recent events and
the future of the Nuveen Balanced Municipal and Stock Fund, we talked to
portfolio managers at both Institutional Capital Corporation and Nuveen,
managers of the fund's equity and municipal portfolios, respectively. Here are
the highlights of that discussion:
What are your assessments of the financial markets and their economic
performances from last year?
The fixed-income market posted solid results. Bond prices rose substantially, as
the yield on the 30-year U.S. Treasury declined to 5.10% by year-end, down from
5.92% at the beginning of the year. The demand that led to this dramatic
Treasury bond rally did not affect the municipal bond market to the same
extent; the yield on the Bond Buyer Revenue Bond Index, which is an index of
long-term municipal revenue bonds, fell from 5.41% to 5.26% during the year. In
the municipal market, low interest rates and the strong economy combined to
generate high levels of new issuance and a dramatic increase in the refinancing
of existing bonds. In 1998, there was $284 billion of municipal issuance, up
29% over 1997. In terms of total municipal issuance, 1998 ranked as the second
largest year on record, next to 1993's $292 billion. Interest rates in the
municipal market were volatile over the past year. Most of the fluctuation was
triggered by the Federal Reserve's reduction of the Federal Funds rate in the
third and fourth quarters of 1998, which made stocks more attractive relative
to bonds.
Towards the end of the year, municipal bonds offered approximately the same
yields as taxable U.S. Treasuries, before the tax advantage of municipals was
taken into account, which increased the demand for municipal bonds. On an
after-tax basis in today's market, municipal bonds present an exceptionally
attractive option relative to Treasuries.
The equity market turned in another strong performance in 1998, setting a number
of records in the process. The S&P 500 generated a total return of 28.6% for
the year, its fourth consecutive year of increases over 20% and the first such
string of increases since the 1870s. The Dow Jones Industrial Average has now
risen for each of the last eight years, and 16 of the last 17 years. Due to this
strong performance over the last 17 years, the S&P 500 has produced an
annualized total return of almost 18%, the highest total return on record for
that index. The market's performance, though solid, was also marked by
volatility last year. The S&P 500 declined almost 20% during the summer, only
to eventually rebound and reach record highs four months later.
Equity market performance was also notable in 1998 for its concentration of
return in a relatively small group of large-capitalization, growth-oriented
issues. The top five contributors to the S&P 500's total return in 1998 were
Microsoft, General Electric, Wal-Mart, Lucent Technologies, and Cisco. These
five stocks showed a median return of nearly 115% while the return for the other
495 stocks in the S&P 500 was only about 7%.
At year-end, the stock market hovered near record highs despite the continuing
financial instability in Asia and Russia as well as the impeachment of President
Clinton.
The economy continued to support the market's advance in 1998, growing at about
4%, even in the face of slowed foreign trade. While the economy is not likely
headed for recession, there are signs that growth will slow in 1999: U.S.
exports will continue to be affected by financial market turmoil; spending on
capital expenditures should moderate; and housing growth should slow. Even
though the economy's pace should taper off in the coming months, there are
adjustments taking place that could lessen the economic slowdown anticipated in
1999, such as foreign central banks moving aggressively to reduce interest
rates, higher government spending in the U.S. due to the current budget surplus,
and initial signs of stability in Asia.
What role did the Federal Reserve play in the financial markets' strong
performance?
The Federal Reserve played an important role in the strength of the economy and
the financial markets in 1998, lowering short-term interest rates three times in
the last half of the year. These actions helped to stave off further declines in
stock prices and set the stage for the unprecedented market recovery to new
highs.
The decline in long-term interest rates was also aided by the Federal Reserve's
reduction of the Fed Funds rate. While interest rates had been trending lower
3
<PAGE>
through much of the year, the Fed's move to lower short-term rates served to
provide stability to both the U.S. Treasury and municipal markets.
How did the Nuveen Balanced Municipal and Stock Fund perform in 1998?
The Nuveen Balanced Municipal and Stock Fund generated a total return on Class A
shares at net asset value of 8.33% for the 12 months ended December 31, 1998.
This compares to a 13.50% total return for the Lipper Balanced Fund Category
average, which does not take into account the performance of municipal bonds.
The Lipper Balanced Fund Category uses only the averages of balanced funds that
contain stocks and either U.S. Treasuries or, in some cases, corporate bonds.
Given that Treasuries outperformed municipals, the difference in total return
for the fund and the index is easier to understand.
See your fund's performance overview in this report, on page five, for more
information.
In addition, the Fund's value-oriented equity portfolio also affected the
overall performance of the fund. When the financial crisis in Asia first became
apparent in the fall of 1997, equity performance shifted sharply in favor of the
largest, growth-oriented stocks. While growth stocks have now outperformed
value stocks for five years in a row, the differential in 1998 was the largest
on record.
The prospects for value-oriented stocks look much better if there is an easing
monetary policy. If the Fed lowers interest rates further, we expect that
investors would become more comfortable with the outlook for the economy, which
should spur a move back towards value-oriented stocks.
What investment strategies were employed in managing the Nuveen Balanced
Municipal and Stock Fund? In addition, what are some of the holdings you've
identified as being particularly attractive?
The municipal portfolio management team focused primarily on searching the new
issue market for attractive bonds in the ten- to fifteen-year maturity range.
Another area of interest was the secondary market. For example, housing sector
issues appeared attractive due to record low interest rates. In addition, the
team continued to focus on diversifying municipal holdings geographically.
Significant municipal holdings in the fund which the portfolio management team
believed were particularly attractive included: New York City General Obligation
Bonds; District of Colombia Series B Insured General Obligation Bonds; New
Hampshire State Turnpike System Revenue Bonds; Erie County, NY, Industrial
Development Agency Revenue Bonds; Denver Airport Bonds; and Nevada Housing
Division Bonds.
In the equity portfolio, the Fund's strategic investment themes revolved around
two areas. The primary strategic focus throughout 1998 remained searching for
companies undergoing a corporate restructuring. We generally looked for
companies that had franchises or significant asset bases that were underutilized
or underappreciated and had the most potential for favorably enhancing the
fund's performance. Committed management can release considerable value in those
situations. The second focus was looking for stocks of companies whose business
is primarily domestic in nature, reflecting our view that even if there is some
economic slowdown, the U.S. will remain one of the world's best growth areas in
1999.
Stocks purchased in the last six months with more of a domestic focus include:
TCI Group (an AT&T merger partner), SBC Communications Inc., Dayton Hudson
Corporation, Circuit City Stores, Hartford Financial Services Group, Inc.,
Monsanto Company, Gannett Co., Inc., and United States Filter Corporation. The
stocks listed here were as of December 31, 1998, and given that the portfolio is
actively managed, they may change.
In this time of rising valuations, is the portfolio management team still able
to find attractive value opportunities?
Yes. In the municipal portfolio, we continue to find attractive opportunities in
the ten to fifteen-year maturity range. The portfolio management team is also
seeking attractive issues in the BBB credit range that meet Nuveen's rigorous
standards.
We believe it is important to emphasize that the valuations of the equity
portfolio holdings are quite attractive on an absolute basis, as well as
relative to the S&P 500. Based on 1999 estimates, the earnings level for the
Nuveen Balanced Municipal and Stock Fund's equity portfolio is projected to be
18 times its share price (this is often called the price to earnings ratio),
compared to that of the S&P 500, which is close to 28 times. The difference in
the two price to earnings ratios underlies the importance of how we select the
stocks that go into the fund: we look for stocks that we believe are trading at
prices lower than their intrinsic worth and also have a catalyst to unlock the
stock's unre cognized value. While the current frenzy in Internet-related stocks
seems to make valuation comparisons irrelevant, we continue to believe that our
focus of searching for undervalued securities will prove as rewarding in the
future as it has in the past.
4
<PAGE>
Nuveen Balanced Municipal and Stock Fund
Performance Overview
As of December 31, 1998
<TABLE>
<CAPTION>
Top Five Stock Holdings/1/
<S> <C>
TCI Group Class A 4.1%
..............................................
BankAmerica Corporation 3.8%
..............................................
Waste Management Inc. 3.8%
..............................................
Philip Morris Companies Inc. 3.8%
..............................................
News Corporation Limited Sponsored ADR 3.6%
- ----------------------------------------------
Stock Diversification
[PIE CHART APPEARS HERE]
Energy 4%
Transportation 4%
Communications Services 10%
Basic Materials 7%
Technology 12%
Healthcare 14%
Capital Goods 5%
Consumer Staples 8%
Financials 15%
Consumer Cyclicals 21%
- ----------------------------------------------
</TABLE>
Monthly Tax-Free Dividend History
[BAR CHART APPEARS HERE]
January 0.04550 July 0.04350
February 0.04550 August 0.04350
March 0.04550 September 0.04350
April 0.04550 October 0.04350
May 0.04550 November 0.04350
June 0.04550 December 0.04350
Fund Highlights
<TABLE>
<CAPTION>
Share Price A B C R
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 8/96 8/96 8/96 8/96
..............................................................................
Net Asset Value $24.43 $24.62 $24.61 $24.31
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Net Assets ($000) $188,696
..............................................................................
Fixed Income Average Duration 6.82
..............................................................................
Average Market Capitalization of Stocks in Portfolio $42 billion
..............................................................................
Average P/E of Stocks (trailing 12 months) 17.4
..............................................................................
Number of Stocks 49
..............................................................................
Expense Ratio (A Shares after reimbursement) 1.20%
- ------------------------------------------------------------------------------
Annualized Total Return/2/
A (On NAV) A (On Offer) B C R
- ------------------------------------------------------------------------------
One-Year 8.33% 2.11% 7.54% 7.55% 8.62%
..............................................................................
Since Inception/2/ 13.58% 10.81% 12.77% 12.75% 13.88%
- ------------------------------------------------------------------------------
</TABLE>
1 The companies listed above represent their respective percentages as of
12/31/98. Over time, the fund's holdings and their percentages will vary as
the prices of the stocks vary.
2 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 return figures.
5
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Municipal and Stock Fund
December 31, 1998
<TABLE>
<CAPTION>
Market
Shares Description Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 34.5%
Basic Materials - 2.5%
45,400 Akzo Nobel N.V. Sponsored ADR $ 2,025,975
25,699 IMC Global Inc. 549,316
31,500 Monsanto Company 1,496,250
25,650 UPM-Kymmene Oyj Corporation Sponsored ADR 719,354
- ---------------------------------------------------------------------------------------------
Capital Goods - 1.7%
25,400 United States Filter Corporation# 581,025
54,950 Waste Management Inc. 2,562,044
- ---------------------------------------------------------------------------------------------
Communication Services - 3.7%
43,700 Bell Atlantic Corporation 2,316,100
34,900 SBC Communications Inc. 1,871,513
50,400 TCI Group Class A# 2,787,750
- ---------------------------------------------------------------------------------------------
Consumer Cyclicals - 6.2%
15,300 Circuit City Stores 764,044
37,900 Dayton Hudson Corporation 2,056,075
28,850 Dun & Bradstreet Corporation 910,578
42,800 Federated Department Stores, Inc.# 1,864,475
17,400 Gannett Co., Inc. 1,122,300
29,950 General Motors Corporation 2,143,297
21,175 Hasbro, Inc. 764,947
66,050 Host Marriot Corporation 912,316
6,000 Masco Corporation 172,500
12,070 R.H. Donnelley Corporation 175,769
21,100 Royal Caribbean Cruises Ltd. 780,700
- ---------------------------------------------------------------------------------------------
Consumer Staples - 2.8%
19,100 Kimberly-Clark Corporation 1,040,950
47,400 Philip Morris Companies Inc. 2,535,900
21,600 Seagram Company Ltd. 820,800
18,100 Service Corporation International 688,931
12,300 TCI Ventures Group Class A# 289,819
- ---------------------------------------------------------------------------------------------
Energy - 1.3%
22,540 Elf Aquitaine SA Sponsored ADR 1,276,328
27,400 Schlumberger Limited 1,263,825
- ---------------------------------------------------------------------------------------------
Financials - 5.6%
43,100 Allstate Corporation 1,664,738
43,200 BankAmerica Corporation 2,597,400
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financials (continued)
19,400 CIGNA Corporation $ 1,499,863
35,375 Citigroup Inc. 1,751,063
6,605 Crestline Capital Corporation# 96,598
21,650 Hartford Financial Services Group, Inc. 1,188,044
44,850 Household International, Inc. 1,777,181
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care - 5.1%
39,000 American Home Products Corporation 2,196,188
24,250 Baxter International Inc. 1,559,578
14,200 Bristol-Myers Squibb Company 1,900,138
59,000 Hoechst AG Sponsored ADR 2,419,000
30,000 Humana Inc.# 534,375
35,500 Tenet Healthcare Corporation# 931,875
- -----------------------------------------------------------------------------------------------------------------------------------
Technology - 4.2%
10,200 Computer Associates International, Inc. 434,775
46,900 First Data Corporation 1,486,144
8,500 International Business Machines Corporation 1,570,375
18,300 Newbridge Networks Corporation# 555,863
35,500 Northern Telecom Limited 1,779,438
30,650 Royal Philips Electronics N.V. 2,074,622
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.4%
19,450 AMR Corporation# 1,154,844
43,150 Burlington Northern Santa Fe Corporation 1,456,313
- -----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks - (cost $56,535,934) 65,121,296
--------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.3%
99,600 News Corporation Limited Sponsored ADR 2,458,875
- -----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks - (cost $1,846,437) 2,458,875
--------------------------------------------------------------------------------------------------------------------
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 65.5%
Alabama - 0.3%
$ 455,000 Alabama Water Pollution Control Authority, Revolving Fund 8/05 at 100 AAA $ 514,901
Loan Bonds, Series 1994, 6.625%, 8/15/08
- -----------------------------------------------------------------------------------------------------------------------------------
California - 3.3%
2,500,000 Escondido Multifamily Housing Revenue Refunding (Morning 7/05 at 101 1/2 AAA 2,648,050
View Terrace Apartments-FNMA), Series 1997B, 5.400%, 1/01/27
1,525,000 Northern California Power Agency, Public Power Revenue No Opt. Call A- 1,680,083
Refunding Bonds, Geothermal Project No. 3, 1993 Series A,
5.650%, 7/01/07
250,000 County of Orange, California, Refunding Recovery Bonds, No Opt. Call AAA 288,040
1995 Series A, 6.000%, 6/01/10
1,495,000 Palmdale Civic Authority, 1997 Revenue Bonds, Series A 7/07 at 102 AAA 1,595,763
(Civic Center Refinancing), 5.375%, 7/01/12
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado - 1.2%
2,000,000 City and County of Denver, Colorado, Airport System Revenue 11/06 at 102 AAA 2,195,160
Bonds, Series 1996 B, 5.625%, 11/15/08 (Alternative Minimum Tax)
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Municipal and Stock Fund (continued)
December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
Conneticut - 3.8%
$ 1,075,000 Connecticut Housing Finance Authority, Housing Mortgage 5/06 at 102 AA $ 1,144,187
Finance Program Bonds, 1996 Series B, Subseries
B-2, 5.750%, 11/15/08 (Alternative Minimum Tax)
1,000,000 State of Connecticut Health and Educational Facilities No Opt. Call BB 1,039,090
Authority, Revenue Bonds, Hospital for Special Care
Issue, Series B, 5.125%, 7/01/07
1,485,000 Connecticut Development Authority, First Mortgage Gross 12/06 at 103 BBB+ 1,492,187
Revenue Health Care 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 1/01 at 100 N/R 3,565,240
Housing Revenue Bonds, Series 1998B (Meadows Landing
Apartments), 6.000%, 1/01/02 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
District of Columbia--2.4%
3,500,000 District of Columbia, General Obligation Bonds, Series No Opt. Call AAA 3,970,469
1998B, 6.000%, 6/01/11
500,000 District of Columbia, General Obligation Refunding Bonds, No Opt. Call AAA 588,109
Series A-1, 6.500%, 6/01/10
- ----------------------------------------------------------------------------------------------------------------------------------
Georgia--1.6%
2,000,000 Development Authority of Fulton County (Georgia), Special 5/08 at 101 BBB- 2,030,520
Facilities Revenue Bonds (Delta Air Lines, Inc. Project),
Series 1998, 5.300%, 5/01/13 (Alternative Minimum Tax)
895,000 Georgia Housing and Finance Authority, Single Family 6/06 at 102 AAA 937,316
Mortgage Bonds, 1996 Series A, 5.875%, 12/01/19
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Idaho--1.6%
1,425,000 Idaho Housing and Finance Association, Single Family 1/07 at 102 A1 1,522,427
Mortgage Bonds, 1997 Series D, 5.950%, 7/01/09
(Alternative Minimum Tax)
1,500,000 Idaho Housing and Finance Association, Single Family 7/07 at 101 1/2 A1 1,574,955
Mortgage Bonds, 1997 Series F, 5.700%, 7/01/10
(Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Illinois--5.8%
1,075,000 Village of Bolingbrook, Will and DuPage Counties, No Opt. Call AAA 1,330,904
Illinois, Residential 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 695,176
2,360,000 0.000%, 12/01/10 No Opt. Call AAA 1,372,600
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 273,097
200,000 5.250%, 8/01/12 8/08 at 100 Baa2 202,062
580,000 5.300%, 8/01/13 8/08 at 100 Baa2 585,527
2,160,000 Illinois Health Facilities Authority, Revenue 7/04 at 102 N/R*** 2,538,842
Bonds, Series 1985 (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 11/03 at 102 A+ 1,636,005
Bonds, Series 1993 (OSF Healthcare System),
6.000%, 11/15/10
250,000 Illinois Health Facilities Authority, FHA 2/06 at 102 AAA 270,248
Insured Mortgage Revenue Bonds, Series
1996 (Sinai Health System), 5.500%,
2/15/09
1,200,000 Illinois Health Facilities Authority, 10/07 at 102 AAA 1,314,336
Revenue Bonds, Series 1997A (Highland
Park Hospial Project), 5.700%, 10/01/10
700,000 Kankakee School District No. 111, Kankakee 1/06 at 100 AAA 743,148
County, Illinois, General Obligation
School Bonds, Series 1996, 5.500%,
1/01/12
- ----------------------------------------------------------------------------------------------------------------------------------
Indiana--0.8%
1,530,000 Indiana Housing Finance Authority, Single 7/08 at 101 Aaa 1,553,715
Family Mortgage Revenue Bonds, 1998
Series C-3, 5.300%, 7/01/13 (Alternative
Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Kentucky--1.3%
2,500,000 County of Boone, Kentucky, Mortgage Revenue 6/99 at 100 N/R 2,503,275
Bonds, Series 1998A (Normandy Green
Apartments Project), 5.200%, 6/20/38
(Alternative Minimum Tax)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Louisiana--1.5%
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 $ 704,361
2,175,000 0.000%, 9/01/08 No Opt. Call AAA 1,434,826
1,000,000 0.000%, 3/01/10 No Opt. Call AAA 606,410
- ----------------------------------------------------------------------------------------------------------------------------------
Maine--0.2%
255,000 Town of Winslow, Maine (Crowe Rope Industries Project), 3/07 at 102 Aaa 283,555
1997 Series A, General Obligation Tax Increment Financing Bonds,
6.000%, 3/01/11 (Alternative Minimum Tax)
- ----------------------------------------------------------------------------------------------------------------------------------
Massachusetts--4.9%
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 1,708,923
1,885,000 5.200%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,876,216
250,000 Massachusetts Health and Educational Facilities Authority, 7/06 at 102 AAA 278,688
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 1,537,620
1,825,000 5.500%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,865,771
1,835,000 Massachusetts Turnpike Authority, Western Turnpike Revenue 7/99 at 100 AAA 1,860,231
Bonds, 1997 Series A, 5.550%, 1/01/17
- ----------------------------------------------------------------------------------------------------------------------------------
Michigan--1.2%
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 1,092,250
1,010,000 5.500%, 5/01/12 (Pre-refunded to 5/01/07) 5/07 at 100 AAA 1,110,253
- ----------------------------------------------------------------------------------------------------------------------------------
Mississippi--1.0%
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+ 1,331,003
500,000 5.400%, 12/01/11 12/07 at 100 BBB+ 517,610
- ----------------------------------------------------------------------------------------------------------------------------------
Nebraska--5.3%
9,921,273 Energy America (Nebraska), Natural Gas Revenue Note No Opt. Call N/R 10,086,363
(Metropolitan Utility District Project),
Series 1997B, 5.700%, 7/01/08
- ----------------------------------------------------------------------------------------------------------------------------------
Nevada--1.4%
2,215,000 Nevada Housing Division, Single Family Mortgage Bonds, 1997 4/07 at 102 Aa3 2,327,256
Series A-1 Mezzanine Bonds, 6.000%, 4/01/15 (Alternative Minimum Tax)
250,000 Airport Authority of Washoe County, Reno, Nevada, Airport 7/03 at 102 AAA 272,233
Revenue Refunding Bonds, Series 1993B, 5.875%, 7/01/11
- ----------------------------------------------------------------------------------------------------------------------------------
New Hampshire--2.5%
1,450,000 New Hampshire Higher Educational and Health Facilities 1/07 at 102 BBB- 1,527,851
Authority, Revenue Bonds, Series 1997
(New Hampshire College), 6.200%, 1/01/12
3,000,000 State of New Hampshire, Turnpike System Revenue Bonds, 1992 4/02 at 102 AAA 3,234,930
Series, 6.000%, 4/01/13
- ----------------------------------------------------------------------------------------------------------------------------------
New York--11.4%
2,000,000 Certificates of Participation, The State of New York, The No Opt. Call BBB+ 2,213,940
City 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 429,576
925,000 4.950%, 6/01/10 6/08 at 101 A 947,681
860,000 5.050%, 6/01/11 6/08 at 101 A 881,586
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen Balanced Municipal and Stock Fund (continued)
December 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New York (continued)
$ 5,000,000 Erie County (New York), Industrial Development Agency, 12/10 at 103 N/R $ 5,007,950
Solid Waste Disposal Facility Revenue
Bonds (1998 CanFibre of Lackawanna Project), 8.875%,
12/01/13 (Alternative Minimum Tax) (WI)
500,000 Metropolitan Transportation Authority, Transit Facilities No Opt. Call BBB+ 553,225
Service 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- 275,758
Series D, Tax Exempt Bonds,
5.875%, 11/01/11
500,000 The City of New York, General Obligation Bonds, Fiscal 1997 4/07 at 101 A- 561,175
Series I, 6.000%, 4/15/09
4,000,000 The City of New York, General Obligation Bonds, Fiscal 1998 8/07 at 101 A- 4,326,880
Series D, 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*** 176,328
115,000 6.375%, 7/01/08 7/02 at 102 Baa1 125,249
2,000,000 New York State Thruway Authority, Local Highway and Bridge 4/06 at 102 BBB+ 2,193,920
Service Contract Bonds, Series 1996,
5.625%, 4/01/07
285,000 New York State Urban Development Corporation, State No Opt. Call BBB+ 321,360
Facilities Revenue Bonds, 1995 Refunding
Series, 6.250%, 4/01/06
1,700,000 New York State Urban Development Corporation, Project 1/03 at 102 BBB+ 1,820,836
Revenue Bonds (Cornell Center for Theory
and Simulation in Science and Engineering Grant), Series
1993, 5.900%, 1/01/07
1,430,000 New York State Urban Development Corporation, Empire State No Opt. Call BBB+ 1,651,822
Development Corporation, Youth
Facilities Revenue Bonds, Series 1997, 6.500%, 4/01/07
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 1.5%
2,045,000 North Carolina Municipal Power Agency Number 1, Catawba No Opt. Call AAA 2,807,110
Electric Revenue Bonds, Series 1980,
10.500%, 1/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio - 3.1%
1,750,000 City of Dayton, Ohio, Special Facilities Revenue Refunding No Opt. Call BBB 1,890,630
Bonds, 1988 Series C (Emery Air Freight
Corporation and Emery Worldwide Airlines, Inc.-Guarantors)
(Non-AMT) 6.050%, 10/01/09
1,500,000 County of Lorain, Ohio, Health Care Facilities Revenue 2/08 at 101 BBB 1,523,850
Refunding Bonds, Series 1998A (Kendal at
Oberlin), 5.375%, 2/01/12
2,065,000 Ohio Building Authority, State Facilities Refunding Bonds 4/03 at 100 AAA 2,478,929
(Toledo Government Office Building), 1982
Series A, 10.125%, 10/01/06 (Pre-refunded to 4/01/03)
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.6%
1,000,000 Oklahoma Industries Authority, Health System Revenue No Opt. Call AAA 1,121,570
Refunding Bonds (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 - 0.7%
1,345,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 4/06 at 102 AA+ 1,404,436
Revenue Bonds, Series 1996-50A,
5.350%, 10/01/08
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 1.1%
1,760,000 City of Providence, Rhode Island, General Obligation Bonds, 7/07 at 101 AAA 1,985,491
1997 Series A, 6.000%, 7/15/09
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.5%
2,700,000 The Industrial Development Board of the City of Cookeville, 10/03 at 102 A 2,900,826
Tennessee, Hospital Refunding Revenue
Bonds, Series 1993, (Cookeville General Hospital Project),
5.750%, 10/01/10
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.5%
3,000,000 Abilene Higher Education Authority, Inc. (Texas), Student 11/08 at 100 Aa3 2,999,070
Loan Revenue Bonds, Subordinate Series
1998B (Subordinate Lien Fixed Rate Term Bonds), 5.050%,
7/01/13 (Alternative Minimum Tax)
170,000 City of Austin, Texas, Water, Sewer and Electric Refunding No Opt. Call A2 196,855
Revenue Bonds, Series 1982,
14.000%, 11/15/01
250,000 City of San Antonio, Texas, Airport System Improvement 7/06 at 101 AAA 272,408
Revenue Bonds, Series 1996,
5.700%, 7/01/09 (Alternative Minimum Tax)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Texas (continued)
$ 215,000 Texas Department of Housing and Community Affairs, Single 9/06 at 102 AAA $ 229,007
Family Mortgage Revenue Bonds, 1996 Series E, 5.750%, 3/01/10
1,000,000 Tyler Health Facilities Development Corporation (Texas), 7/02 at 100 Baa2 1,015,809
Hospital Revenue Bonds (Mother Frances Hospital Regional
HealthCare Center Project), Series 1997A, 5.500%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Utah - 0.4%
500,000 Tooele County, Hazardous Waste Disposal Revenue Bonds 8/05 at 102 BBB+ 548,169
(Laidlaw Inc./USPCI 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 11/05 at 102 AAA 218,989
Revenue Bonds, 1995 Series N Bonds, 6,000%, 5/01/08
(Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.1%
2,000,000 Industrial Development Authority of Arlington County, 7/08 at 101 AAA 2,101,999
Virginia, Resource Recovery Revenue Bonds
(Alexandria/Arlington Waste-to-Energy Facility), Series
1998B, Ogden Martin Systems of Alexandria/Arlington,
Inc. Project, 5.375%, 1/01/13 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Washington - 1.5%
1,060,000 Tahoma School District No. 409, King County, Washington, No Opt. Call Aaa 1,217,239
Unlimited Tax General Obligation
Improvement and Refunding Bonds, 1997, 6.000%, 12/01/09
630,000 Washington State Housing Finance Commission, Single-Family 1/04 at 102 AAA 664,372
Mortgage Revenue Bonds (Mortgage Backed Securities Program),
Series 1995A, 6.650%, 7/01/16 (Alternative Minimum Tax)
145,000 Washington Public Power Supply System, Nuclear Project No. No Opt. Call Aa1 160,887
2 Revenue Bonds, Series 1981A, 14.375%, 7/01/01
800,000 Washington Public Power Supply System, Project No. 3, 7/06 at 102 AAA 876,935
Refunding Revenue Bonds, Series 1996-A, 5.700%, 7/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
$118,961,273 Total Municipal Investments - (cost $118,298,946) 123,563,649
============-----------------------------------------------------------------------------------------------------------------------
Total Investments - (cost $176,681,317) - 101.3% 191,143,820
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.3)% (2,448,077)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 188,695,743
===================================================================================================================================
</TABLE>
# Non-income producing.
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
government or U.S. government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
(WI) Security purchased on a when-issued basis (note 1).
See accompanying notes to financial statements.
11
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $176,681,317) (note 1) $191,143,820
Cash 435,012
Receivables:
Dividends 157,626
Interest 1,856,596
Investments sold 545,999
Shares sold 596,779
Deferred organization costs (note 1) 99,758
Other assets 2,359
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 194,837,949
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 5,181,924
Shares redeemed 673,043
Accrued expenses:
Management fees (note 5) 109,380
12b-1 distribution and service fees (notes 1 and 5) 79,306
Other 98,553
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,142,206
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 6) $188,695,743
====================================================================================================================================
Class A Shares (note 1)
Net assets $122,485,187
Shares outstanding 5,014,113
Net asset value and redemption price per share $ 24.43
Offering price per share (net asset value per share plus maximum sales charge of 5.25% of offering price)* $ 25.78
====================================================================================================================================
Class B Shares (note 1)
Net assets $ 46,942,629
Shares outstanding 1,906,390
Net asset value, offering and redemption price per share $ 24.62
====================================================================================================================================
Class C Shares (note 1)
Net assets $ 17,850,639
Shares outstanding 725,356
Net asset value, offering and redemption price per share $ 24.61
====================================================================================================================================
Class R Shares (note 1)
Net assets $ 1,417,288
Shares outstanding 58,299
Net asset value, offering and redemption price per share $ 24.31
====================================================================================================================================
</TABLE>
*Effective January 11, 1999, the maximum sales charge on Class A Shares was
increased from 5.25% to 5.75%. The offering price on Class A Shares at the 5.75%
maximum sales charge on December 31, 1998, would have been $25.92 per share.
12 See accompanying notes to financial statements.
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended December 31, 1998
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 481,429
Interest 2,421,616
- ----------------------------------------------------------------------------------------------------
Total investment income 2,903,045
- ----------------------------------------------------------------------------------------------------
Expenses
Management fees (note 5) 655,612
12b-1 service fees -- Class A (notes 1 and 5) 146,914
12b-1 distribution and service fees -- Class B (notes 1 and 5) 200,421
12b-1 distribution and service fees -- Class C (notes 1 and 5) 83,391
Shareholders' servicing agent fees and expenses 58,374
Custodian's fees and expenses 37,657
Trustees' fees and expenses (note 5) 5,650
Professional fees 7,875
Shareholders' reports -- printing and mailing expenses 43,918
Federal and state registration fees 40,061
Amortization of deferred organization costs (note 1) 18,148
Other expenses 3,215
- ----------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,301,236
Expense reimbursement (note 5) (50,558)
- ----------------------------------------------------------------------------------------------------
Net expenses 1,250,678
- ----------------------------------------------------------------------------------------------------
Net investment income 1,652,367
- ----------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 4) (4,406,256)
Net change in unrealized appreciation or depreciation of investments 3,484,712
- ----------------------------------------------------------------------------------------------------
Net gain (loss) from investments (921,544)
- ----------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 730,823
====================================================================================================
</TABLE>
13 See accompanying notes to financial statements.
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
12/31/98 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 1,652,367 $ 3,281,813
Net realized gain (loss) from investment transactions (notes 1 and 4) (4,406,256) 6,299,554
Net change in unrealized appreciation or depreciation of investments 3,484,712 7,014,341
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 730,823 16,595,708
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,870,934) (2,448,814)
Class B (272,793) (222,804)
Class C (113,925) (104,232)
Class R (27,021) (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 (7,327,475) (4,796,536)
- ------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 35,683,754 75,343,559
Net proceeds from shares issued to shareholders due to reinvestment of distributions 4,581,008 3,428,628
- ------------------------------------------------------------------------------------------------------------------------------
40,264,762 78,772,187
- ------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (10,622,622) (15,446,129)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 29,642,140 63,326,058
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 23,045,488 75,125,230
Net assets at the beginning of period 165,650,255 90,525,025
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $ 188,695,743 $ 165,650,255
==============================================================================================================================
Balance of undistributed (over-distributed) net investment income at end of period $ (182,224) $ 450,082
==============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen Balanced Municipal and Stock Fund (the "Fund") is a series of the
Nuveen Investment Trust (the "Trust") which was organized as a Massachusetts
business trust in 1996. The Trust (and each series within the Trust) is an open-
end diversified management investment company registered under the Investment
Company Act of 1940. Prior to commencement of operations on August 7, 1996, the
Trust had no operations other than those related to organizational matters and
the initial capital contribution of $100,080 (of which $33,360 was allocated to
the Fund) by Nuveen Institutional Advisory Corp. (the "Adviser"), a wholly owned
subsidiary of The John Nuveen Company, for the issuance of shares on July 29,
1996.
The Fund invests in a mix of equities and tax-exempt securities for capital
growth, capital preservation and current tax-exempt income. During temporary
defensive periods, the Fund may invest any percentage of its assets in temporary
investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a national securities
exchange or Nasdaq for which there are no transactions on a given day or
securities not listed on a national securities exchange or Nasdaq are valued at
the most recent bid prices. The prices of municipal bonds in the Fund's
investment portfolio are provided by a pricing service approved by the Fund's
Board of Trustees. When price quotes are not readily available (which is usually
the case for municipal securities), the pricing service establishes fair market
value based on yields or prices of municipal bonds of comparable quality, type
of issue, coupon, maturity and rating, indications of value from securities
dealers and general market conditions. Temporary investments in securities that
have variable rate and demand features qualifying them as short-term securities
and/or securities having remaining maturities of 60 days or less when
purchased, are valued at amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
December 31, 1998, the Fund had an outstanding when-issued purchase commitment
of $5,040,677.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premiums and accretion of discounts on long-term debt securities when required
for federal income tax purposes.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared and distributed to shareholders
monthly. Net ordinary taxable income and net realized capital gains from
investment transactions, if any, are declared and distributed to shareholders
not less frequently than annually. Furthermore, capital gains are distributed
only to the extent they exceed available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from transactions, where
applicable.
Federal Income Taxes
The Fund intends to distribute all of its net investment income and capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal tax provision is required. In addition, the
Fund intends to satisfy conditions which will enable interest from municipal
obligations, which is exempt from regular federal income tax when received by
the Fund, to qualify as exempt-interest dividends when distributed to
shareholders of the Fund. Net realized capital gains and ordinary income
distributions are subject to federal taxation.
15
<PAGE>
Notes to Financial Statements (Unaudited) (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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures transactions, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended December 31, 1998.
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.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
12/31/98 6/30/98
-------------------------- --------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 573,976 $ 14,088,339 1,308,803 $ 31,922,378
Class B 656,610 16,130,888 1,193,459 29,265,901
Class C 217,938 5,372,345 524,249 12,864,555
Class R 3,739 92,182 53,309 1,290,725
Shares issued to shareholders due to reinvestment of distributions:
Class A 140,986 3,435,846 125,058 3,001,186
Class B 33,122 809,221 10,810 261,191
Class C 11,777 287,748 5,838 140,308
Class R 1,983 48,193 1,074 25,943
- -----------------------------------------------------------------------------------------------------------------------------------
1,640,131 40,264,762 3,222,600 78,772,187
- -----------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (296,748) (7,187,076) (297,703) (7,230,838)
Class B (51,891) (1,259,246) (24,476) (597,282)
Class C (88,774) (2,159,517) (13,171) (326,708)
Class R (693) (16,783) (302,461) (7,291,301)
- -----------------------------------------------------------------------------------------------------------------------------------
(438,106) (10,622,622) (637,811) (15,446,129)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,202,025 $ 29,642,140 2,584,789 $ 63,326,058
===================================================================================================================================
</TABLE>
16
<PAGE>
3. Distributions to Shareholders
The Fund declared a dividend distribution from its tax-exempt net investment
income which was paid on February 1, 1999, to shareholders of record on January
8, 1999, as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dividend per share:
<S> <C>
Class A $ .0435
Class B .0285
Class C .0285
Class R .0485
================================================================================
</TABLE>
4. Securities Transactions
Purchases and sales (including maturities) of investments in common and
preferred stocks, municipal bonds and temporary investments for the six months
ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------
Purchases:
Common and preferred stocks $ 51,998,862
Municipal bonds 33,532,353
Temporary investments 15,100,000
Sales:
Common and preferred stocks 49,891,738
Municipal bonds 3,738,344
Temporary investments 19,800,000
================================================================================
</TABLE>
At December 31, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $14,462,503 of which $15,487,900 related
to appreciated securities and $1,025,397 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 asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .7500 of 1%
For the next $125 million .7375 of 1
For the next $250 million .7250 of 1
For the next $500 million .7125 of 1
For the next $1 billion .7000 of 1
For net assets over $2 billion .6750 of 1
================================================================================
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1998, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding .85% of
the average daily net asset value of any class of Fund shares. Effective August
1, 1998, the Adviser has agreed to waive fees and reimburse expenses through
July 31, 1999, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding .95% of
the average daily net asset value of any class of Fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company 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.
17
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
During the six months ended December 31, 1998, John Nuveen & Co. Incorporated
(the "Distributor"), a wholly owned subsidiary of The John Nuveen Company,
collected sales charges on purchases of Class A Shares, the majority of which
were paid out as concessions to authorized dealers. The Distributor also
received 12b-1 service fees on Class A Shares, substantially all of which were
paid to compensate authorized dealers for providing services to shareholders
relating to their investments.
During the six months ended December 31, 1998, the Distributor compensated
authorized dealers directly with approximately $665,300 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees on Class B Shares, and
all 12b-1 service and distribution fees on Class C Shares during the first year
following a purchase are retained by the Distributor. During the six months
ended December 31, 1998, the Distributor retained approximately $261,100 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 $30,600
of CDSC on share redemptions during the six months ended December 31, 1998.
6. Composition of Net Assets
At December 31, 1998, the Fund had an unlimited number of $.01 par value per
share common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 178,972,339
Balance of undistributed (over-distributed) net investment income (182,224)
Accumulated net realized gain (loss) from investment transactions (4,556,875)
Net unrealized appreciation of investments 14,462,503
- ----------------------------------------------------------------------------------------
Net assets $ 188,695,743
========================================================================================
</TABLE>
7. Investment Composition
At December 31, 1998, the revenue sources by municipal purpose, expressed as a
percent of total municipal investments, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Education and Civic Organizations 7%
Health Care 9
Housing/Multifamily 7
Housing/Single Family 9
Tax Obligation/General 13
Tax Obligation/Limited 11
Transportation 10
U.S. Guaranteed 10
Utilities 21
Other 3
- --------------------------------------------------------------------------------
100%
================================================================================
</TABLE>
35% of the long-term and intermediate-term municipal investments owned by the
Fund are either covered by insurance issued by several private insurers or are
backed by an escrow or trust containing U.S. government or U.S. government
agency securities, either of which ensure the timely payment of principal and
interest in the event of default. Such insurance or escrow, however, does not
guarantee the market value of the municipal securities or the value of the
Fund's shares.
For additional information regarding each investment security, refer to the
Portfolio of Investments of the Fund.
18
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
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 Gain Total Value Return (b)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
1999 (d) $ 25.46 $ .26 $ (.22) $ .04 $ (.39) $ (.68) $ (1.07) $ 24.43 .21%
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 (d) 25.53 .17 (.23) (.06) (.17) (.68) (.85) 24.62 (.17)
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 (d) 25.51 .17 (.22) (.05) (.17) (.68) (.85) 24.61 (.13)
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 (d) 25.39 .29 (.21) .08 (.48) (.68) (1.16) 24.31 .38
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
- -----------------------------------------------------------------------------------------------------------------------------------
Class (Inception Date)
<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 Before After After 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 (d) $ 122,485 1.24%* 2.05%* 1.18%* 2.11%* 31%
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 (d) 46,943 1.99* 1.35* 1.93* 1.41* 31
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 (d) 17,851 1.99* 1.32* 1.93* 1.38* 31
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 (d) 1,417 .99* 2.30* .93* 2.36* 31
1998 1,353 1.11 2.73 .85 2.99 87
1997 (c) 6,963 2.05* 1.96* .85* 3.16* 32
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses by Nuveen Institutional Advisory Corp.
(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.
(d) For the six months ended December 31, 1998.
</TABLE>
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
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/(R)/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
20
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Anthony T. Dean
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Robert H. Lyon
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
21
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
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 focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income 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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
ESA-MS-12-98
<PAGE>
NUVEEN
Mutual Funds
December 31, 1998
Semiannual Report
For investors seeking long-term growth potential and international
diversification.
[PHOTO APPEARS HERE]
European
Value Fund
<PAGE>
Dear Shareholder
[Photo Of Timothy R. Schwertfeger Appears Here]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I would like to take the opportunity to report on the performance of the Nuveen
European Value Fund since its inception last May. The fund's objective is to
provide you with an attractive total return with moderated risk by investing in
established, well-known European companies.
It was a difficult period for most European investments since your fund's
inception last summer. The financial turmoil in Asia affected economies around
the world and had an adverse effect on the performance of most European
economies. In spite of this bumpy start, the Fund remains positioned to
capitalize on the fundamental trends and structural changes occurring in Europe,
such as: low interest rates, corporate restructuring, the privatization of some
of Europe's most prominent businesses, and the continual development of Eastern
Europe. These factors, along with the portfolio management experience of
Institutional Capital Corporation (ICAP), point favorably to the potential for
better fund performance in the near future, given the right market conditions.
ICAP, Nuveen's Premier Adviser(SM) for value investing, has developed a unique,
team-oriented stock selection process that seeks to identify stocks of
established, well-known European companies offering exceptional relative value
and attractive appreciation potential. The team of investment professionals
analyzes stocks from a universe of large and midsize European companies, using
proprietary quantitative valuation models to determine which of these stocks
appears to be undervalued in today's market. Based on a rigorous assessment of
each company's prospects, they then look for a catalyst that could be the key
to unlocking hidden value and triggering price appreciation. This catalyst may
be as simple as an anticipated change in management or as complex as a
fundamentally improved industry outlook. ICAP's team monitors each security
thoroughly, quantifying an upside target price and a downside risk price, even
before a stock is purchased. Once in the portfolio, all of the stocks undergo
careful scrutiny. Using selling techniques that are just as vigorous as their
buying process, ICAP has the flexibility and incentive to replace a stock when
it reaches its target price, its prospects change, or another stock offers
greater opportunity. This disciplined, research-oriented approach is the key
investment strategy of the Nuveen European Value Fund.
The Value Added by Nuveen's Premier Advisers(SM)
Nuveen has assembled a team of highly experienced investment
2
<PAGE>
" An appropriately diversified portfolio . . . can help cushion your investments
against volatility and enhance your overall total return potential."
managers, each overseeing portfolios within their specific areas of expertise.
In addition to Institutional Capital, Nuveen Premier Advisers also include
Rittenhouse Financial Services for growth investing and Nuveen Investment
Advisory Services for income investing. Each of these managers shares their
detailed knowledge of their investment style or asset class, their time-tested
investment strategies, and their focus on long-term performance.
Diversification: A Key Element to a Better Portfolio
Considering the market volatility of the past year, we believe that investors
will continue to find diversification to be an important strategy in the months
ahead. An appropriately diversified portfolio - one that balances different
asset classes and investment styles - can help cushion your investments against
volatility and enhance your overall total return potential.
Many of you have invested in the Nuveen European Value Fund because of its
value-investing orientation and Institutional Capital's strong track record.
This same disciplined approach is also available in three other Nuveen funds
managed by ICAP: the Nuveen Growth and Income Stock Fund, the Nuveen Balanced
Stock and Bond Fund, and the Nuveen Balanced Municipal and Stock Fund. We
encourage you to talk with your financial adviser about how these and other
Nuveen funds, including growth, income, and a wide array of tax-free income
funds, can help round out your portfolio and meet your particular needs.
If you would like additional information on these other Nuveen funds, contact
your financial adviser for a prospectus. You may also request a prospectus from
Nuveen by calling (800) 752-8700. Please read the prospectus carefully before
you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
collection of mutual funds can help you establish a diversified portfolio
designed to build and sustain long-term financial security. We are grateful for
the confidence you have placed in us and are dedicated to maintaining that
trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
February 15, 1999
3
<PAGE>
Nuveen European Value Fund
Portfolio Manager's Commentary
Investors found 1998 to be a very challenging year, and many expect volatile,
yet growing markets in 1999. To gain a clearer perspective on recent events and
the future of the Nuveen European Value Fund, we talked with Rob Lyon, President
and Chief Investment Officer of Institutional Capital Corporation, Nuveen's
Premier Adviser(SM) for Value Investing.
What is your assessment of Europe's equity market performance last year?
Like their U.S. counterpart, European markets posted another year of solid
results. For the year, the Morgan Stanley Capital International (MSCI) Europe
Index was up 28.9%. Among individual countries, Italy and Belgium were the
region's best performers, each advancing more than 40% for the year. Spain and
France also generated solid returns, gaining more than 30%.
The first half of the year was kinder to European markets than the second half.
For the first six months of 1998, the MSCI Europe Index had advanced almost
27%. However, in August, the index fell by more than 12%, as turmoil in Russian
financial markets affected economies around the world. As interest rate cuts
swept across Europe, in preparation for the region's unified currency, prices
rebounded sharply in the fourth quarter, gaining more than 18%. Last year's
advance was the sixth in a row for European stocks, and by far the largest in
the 1990's.
What was notable about the stock market's performance last year?
As in the U.S., European stock market performance was marked by volatility last
year. After declining more than 14% during the summer, prices rebounded and
approached record highs by the end of the year. Contributing to this volatility
was the continued economic weakness in Asia and the collapse in August of the
Russian financial markets. In addition, concerns arose that the crisis would
next erupt in Latin America.
In another similarity to the U.S. market, large-capitalization European stocks
performed significantly better than small-cap stocks. Investors sought out the
largest companies in Europe for a couple of reasons: first, as a potential "safe
haven" in volatile markets; and second, in the belief that large-cap stocks
stand to benefit more from unification. Smaller companies will most likely have
a more difficult time surviving as competition increases.
Another notable aspect of the strong European equity market performance last
year was the advent of the European Monetary Union (EMU). Unification holds
great promise for the countries involved, as governments have had to become more
fiscally disciplined to maintain low deficits and inflation, prompting a
decline in interest rates. Additionally, this backdrop of declining interest
rates and increased competition resulting from EMU means European merger and
acquisition activity should continue at a robust pace, with international deals
becoming more frequent.
How did the Nuveen European Value Fund perform in 1998?
The Nuveen European Value Fund had a total return of -3.33% on Class A shares at
net asset value since its inception on May 29, 1998. This compares to a -2.30%
total return for the Lipper European Region Fund Index.
Much of the fund's relative underperformance for the year can be attributed to
its value investing approach. When the financial crisis in Asia first became
apparent in the fall of 1997, equity performance shifted sharply in favor of the
largest, growth-oriented stocks. While growth stocks have now outperformed
value stocks for five years in a row, the differential in 1998 was the largest
on record. This concentrated rise in growth stocks over the last eighteen
months made it difficult for value-oriented funds like the Nuveen European Value
Fund to keep up with indexes like the MSCI Europe index that include both growth
and value equities.
The prospects for value-oriented stocks should begin to improve as the benefits
from the previous Fed reductions in the fourth quarter of 1998 begin to take
effect.
What investment strategies were employed in managing the Nuveen European Value
Fund? In addition, what are some of the holdings you've identified as being
particularly attractive?
Since the fund's inception, and especially over the last several months, the
portfolio management team has placed much emphasis on two areas in searching
for the most attractive value opportunities. First, the primary strategic theme
was a focus on companies undergoing a corporate restructuring. We generally
looked for companies that had franchises or significant asset bases that were
underutilized or underappreciated and had the most potential for favorably
enhancing the fund's performance. Committed management can release considerable
value in those situations. The second area of emphasis was on companies with
little exposure to the trouble spots of the world, such as Asia and Latin
America, reflecting our view that Europe and the U.S. will remain two of the
world's best growth areas in 1999.
Examples of stocks we found to be attractive, as of December 31, 1998, included:
Hoechst AG Sponsored ADR, Royal Philips Electronics N.V. and AXA Sponsored ADR.
Since this portfolio is actively managed, the stocks listed here may change. We
continue to believe that adding quality stocks will provide strong upside
potential, particularly if the market returns to value-driven opportunities,
given the volatility of the past year.
4
<PAGE>
In this time of rising valuations, is the portfolio management team still able
to find attractive value opportunities?
Yes. We believe it is important to emphasize that the valuations of the
portfolio holdings are quite attractive on an absolute basis, as well as
relative to the broader market. Based on fiscal year 1999 estimates, the share
price of the average holding in the Nuveen European Value Fund is 18 times its
projected earnings level. This low price to earnings ratio underlies the
importance of how we select stocks that go into the fund: we look for stocks
that we believe are trading at prices lower than their intrinsic worth and also
have a catalyst to unlock the stock's unrecognized value. While the current
frenzy in Internet-related stocks seems to make valuation comparisons
irrelevant, we continue to believe that our focus of searching for undervalued
securities will prove as rewarding in the future as it has in the past, although
past performance is not indicative of future returns.
5
<PAGE>
Nuveen European Value Fund
Performance Overview
As of December 31, 1998
A European Country has been the Top Performing
Market in 10 of the Last 15 Years.
1997
[FLAG APPEARS HERE]
Portugal
1996
[FLAG APPEARS HERE]
Spain
1995
[FLAG APPEARS HERE]
Switzerland
1994
[FLAG APPEARS HERE]
Finland
1990
[FLAG APPEARS HERE]
United Kingdom
1989
[FLAG APPEARS HERE]
Austria
1988
[FLAG APPEARS HERE]
Belgium
1986
[FLAG APPEARS HERE]
Spain
1985
[FLAG APPEARS HERE]
Austria
1983
[FLAG APPEARS HERE]
Norway
Source: Morgan Stanley Capital International
<TABLE>
<CAPTION>
Total Return/1/
A B B C R MSCI-
(On NAV) (On Offer) Europe
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception -33.33% -8.89% -3.75% -3.80% -3.18% 2.90%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund Highlights
Share Class A B C R
- --------------------------------------------------------------------------------
Net Asset Value $19.30 $19.24 $19.23 $19.31
Inception Date 5/98
Total Net Assets ($000) $10,574
Average Market Capitalization $38 Billion
Average P/E (trailing 12 months) 16
Number of Stocks 24
Expense Ratio* 1.30%
- ---------------------------------------------------------------------------------
Top Ten Stock Holdings
Akzo Nobel N.V. 6.6%
Hoechst AG Sponsored ADR 6.4%
Royal Philips Electronics N.V. 5.5%
Novartis AG Sponsored ADR 5.2%
Daimler-Chrysler AG 4.7%
ING Groep N.V. Sponsored ADR 4.6%
Telecom Italia SpA Sponsored ADR 4.5%
Axa Sponsored ADR 4.4%
Diageo plc Sponsored ADR 4.4%
Endesa S.A. Sponsored ADR 4.3%
Country Allocation
UK 24%
Netherlands 20%
Germany 15%
France 17%
Switzerland 10%
Spain 4%
Italy 4%
Finland 3%
Ireland 3%
- -----------------------------------------------------------------------------------------
* For Class A shares after reimbursement.
/1/ 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 decline 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
return figures.
</TABLE>
6
<PAGE>
Portfolio of Investments (Unaudited)
Nuveen European Value Fund
December 31, 1998
<TABLE>
<CAPTION>
Shares Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 97.5%
Basic Materials -- 16.1%
15,350 Akzo Nobel N.V. $ 684,994
9,800 BOC Group plc Sponsored ADR 267,050
8,300 Rhone-Poulenc Ltd. 417,075
12,000 UPM-Kymmene Oyj Corporation Sponsored ADR 336,540
- --------------------------------------------------------------------------------
Capital Spending -- 3.4%
17,900 Tomkins plc Sponsored ADR 358,000
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 11.8%
20,900 Granada Group plc 369,421
6,400 WPP Group plc 395,200
5,072 Daimler-Chrysler AG 487,229
- --------------------------------------------------------------------------------
Consumer Staples -- 4.3%
9,800 Diageo plc Sponsored ADR 453,250
- --------------------------------------------------------------------------------
Energy -- 3.9%
7,250 Elf Aquitaine SA Sponsored ADR 410,531
- --------------------------------------------------------------------------------
Financials -- 18.4%
2,500 Allied Irish Banks plc Sponsored ADR 275,938
6,300 Axa Sponsored ADR 455,175
7,700 ING Groep N.V. Sponsored ADR 478,844
1,450 UBS AG 446,317
6,800 Royal & Sun Alliance Insurance Group plc ADR 289,000
- --------------------------------------------------------------------------------
Health Care -- 11.4%
16,200 Hoechst AG Sponsored ADR 664,200
5,500 Novartis AG Sponsored ADR 540,598
- --------------------------------------------------------------------------------
Technology -- 5.4%
8,450 Royal Philips Electronics N.V. 571,959
- --------------------------------------------------------------------------------
Transportation -- 6.4%
12,000 KLM Royal Dutch Airlines Sponsored ADR 360,000
13,200 Peninsular and Oriental Sponsored ADR 311,865
- --------------------------------------------------------------------------------
Utilities -- 16.4%
16,600 Endesa S.A. Sponsored ADR 448,200
6,850 RWE AG Sponsored ADR 375,296
5,350 Telecom Italia SpA Sponsored ADR 465,449
8,600 Vivendi Sponsored ADR 446,472
- --------------------------------------------------------------------------------
Total Investments -- (cost $9,151,676) -- 97.5% 10,308,603
------------------------------------------------------------------
Other Assets Less Liabilities -- 2.5% 265,481
------------------------------------------------------------------
Net Assets -- 100% $10,574,084
==================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Statement of Net Assets (Unaudited)
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
<S> <C>
Assets
Investment securities, at market value (cost $9,151,676) (note 1) $10,308,603
Cash 209,809
Receivables:
Dividends 8,489
Shares sold 85,339
Deferred organization costs (note 1) 141,239
Other assets 6,521
- ----------------------------------------------------------------------------------
Total assets 10,760,000
- ----------------------------------------------------------------------------------
Liabilities
Payable for shares redeemed 36,807
Accrued expenses:
Management fees (note 4) 3,354
12b-1 distribution and service fees (notes 1 and 4) 3,845
Other 141,910
- ----------------------------------------------------------------------------------
Total liabilities 185,916
- ----------------------------------------------------------------------------------
Net assets (note 5) $10,574,084
==================================================================================
Class A Shares (note 1)
Net assets $ 2,814,416
Shares outstanding 145,839
Net asset value and redemption price per share $ 19.30
Offering price per share (net asset value per share plus
maximum sales charge of 5.75% of offering price) $ 20.48
==================================================================================
Class B Shares (note 1)
Net assets $ 3,420,139
Shares outstanding 177,775
Net asset value, offering and redemption price per share $ 19.24
==================================================================================
Class C Shares (note 1)
Net assets $ 639,985
Shares outstanding 33,281
Net asset value, offering and redemption price per share $ 19.23
==================================================================================
Class R Shares (note 1)
Net assets $ 3,699,544
Shares outstanding 191,543
Net asset value, offering and redemption price per share $ 19.31
==================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Statement of Operations (Unaudited)
Six Months Ended December 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income (note 1)
Dividends $ 55,257
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 40,844
12b-1 service fees -- Class A (notes 1 and 4) 2,554
12b-1 distribution and service fees -- Class B (notes 1 and 4) 12,505
12b-1 distribution and service fees -- Class C (notes 1 and 4) 2,565
Shareholders' servicing agent fees and expenses 411
Custodian's fees and expenses 18,545
Trustees' fees and expenses (note 4) 488
Professional fees 7,814
Federal and state registration fees 1,194
Amortization of deferred organization costs (note 1) 16,131
Other expenses 343
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 103,394
Expense reimbursement (note 4) (29,879)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 73,515
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (18,258)
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions (notes 1 and 3) (1,331,753)
Net change in unrealized appreciation or depreciation of investments 1,167,372
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (164,381)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (182,639)
===================================================================================================================================
Statement of Changes in Net Assets (Unaudited)
May 29, 1998
Six Months Ended (commencement of operations)
12/31/98 through June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ (18,258) $ 4,334
Net realized gain (loss) from investment transactions (notes 1 and 3) (1,331,753) (1,619)
Net change in unrealized appreciation or depreciation of investments 1,167,372 (10,446)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (182,639) (7,731)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Class A (1,323) (106)
Class B -- (179)
Class C -- (22)
Class R (4,392) (4,369)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,715) (4,676)
- -----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 8,199,438 3,730,770
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 2,741 --
- -----------------------------------------------------------------------------------------------------------------------------------
8,202,179 3,730,770
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,158,104) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in assets from Fund share transactions 7,044,075 3,730,770
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 6,855,721 3,718,363
Net assets at the beginning of period 3,718,363 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $10,574,084 $ 3,718,363
===================================================================================================================================
Distributions in excess of net investment income at end of period $ (24,315) $ (342)
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Notes to Financial Statements (Unaudited)
1. General Information and Significant Accounting Policies
The Nuveen European Value 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 May 29, 1998, the Fund had no
operations other than those related to organizational matters.
The Fund invests primarily in a diversified portfolio of stocks of established,
well-known European companies with at least $1 billion in market capitalization
and seeks to provide over time a superior total return with moderated risk. In
addition to investments in equity securities, the Fund may invest in cash
equivalents and short-term investments as a temporary defensive measure.
The Fund may invest in a variety of European securities, including American
Depository Receipts ("ADRs") and other types of depository receipts; equity
securities of European companies that may or may not be publicly traded in the
U.S.; Eurodollar convertibles; fixed-income securities of European companies
that may or may not be publicly traded in the U.S.; and debt obligations issued
or guaranteed by European governments, their agencies, authorities or
instrumentalities. All foreign investments involve certain risks in addition to
those associated with U.S. 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 securities are valued at the last sales price
that day. Securities not listed on a national securities exchange or Nasdaq are
valued at the most recent bid prices. When price quotes are not readily
available, the pricing service establishes fair market value based on prices
of comparable securities.
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 its when-issued and delayed delivery purchase commitments. At
December 31, 1998, 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.
10
<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 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class
B Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchase under limited circumstances.
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 six months ended December 31, 1998.
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.
Organizational Expenses
The Fund's costs incurred in connection with its organization and initial
registration of shares was deferred and is being amortized over a 60-month
period beginning May 29, 1998 (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.
Foreign Currency Translations
To the extent that the Fund invests in securities that are denominated in a
currency other than U.S. dollars, the Fund will be subject to currency risk,
which is the risk that an increase in the U.S. dollar relative to the foreign
currency will reduce returns or portfolio value. Generally, when the U.S.
dollar rises in value against a foreign currency, the Fund's investment in
securities denominated in that currency will lose value because its currency is
worth fewer U.S. dollars; the opposite effect occurs if U.S. dollars fall in
relative value. Investments and other assets and liabilities denominated in
foreign currencies are converted into U.S. dollars on a spot (i.e. cash) basis
at the spot rate prevailing in the foreign currency exchange market at the time
of valuation. Purchases and sales of investments and dividend income
denominated in foreign currencies are translated into U.S. dollars on the
respective dates of such transactions. The gains or losses on investments
resulting from changes in foreign exchange rates are included with net realized
and unrealized gain (loss) on investments.
Foreign Currency Transactions
The Fund may engage in foreign currency exchange transactions in connection with
its portfolio investments and assets and liabilities denominated in foreign
currencies. The Fund may engage in foreign currency forward contracts, options
and futures transactions. The Fund will enter into foreign currency transactions
for hedging and other permissible risk management purposes only. If the Fund
invests in a currency futures or options contract, it must make a margin deposit
to secure performance of such contract. With respect to investments in currency
futures contracts, the Fund may also be required to make a variation margin
deposit because the value of futures contracts fluctuates daily. In addition,
the Fund may segregate assets to cover its futures contracts obligations.
The objective of the Fund's foreign currency hedging transactions is to reduce
the risk that the U.S. dollar value of the Fund's foreign currency denominated
securities and other assets and liabilities will decline in value due to changes
in foreign currency exchange rates. All foreign currency forward contracts,
options and futures transactions are "marked-to-market" daily at the applicable
market rates and any resulting unrealized gains or losses are recorded in the
Fund's financial statements. The Fund records realized gains and losses at the
time the forward contract is offset by entering into a closing transaction or
extinguished by delivery of the currency. The contractual amounts of forward
foreign currency exchange contracts does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered. As of December 31, 1998, there were no open foreign currency forward
contracts, options and futures transactions.
11
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
May 29, 1998
(commencement of operations)
Six Months Ended 12/31/98 through June 30, 1998
------------------------- ----------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 165,324 $ 3,132,766 5,134 $ 101,463
Class B 165,236 3,179,209 16,844 333,000
Class C 41,307 809,594 2,115 42,015
Class R 55,626 1,077,869 163,073 3,254,292
Shares issued to shareholders
due to reinvestment of distributions:
Class A 69 1,043 -- --
Class B 5 104 -- --
Class C -- -- -- --
Class R 99 1,594 -- --
- ----------------------------------------------------------------------------------------------
427,666 8,202,179 187,166 3,730,770
- ----------------------------------------------------------------------------------------------
Shares redeemed:
Class A (24,688) (414,962) -- --
Class B (4,310) (74,872) -- --
Class C (10,141) (173,902) -- --
Class R (27,255) (494,368) -- --
- ----------------------------------------------------------------------------------------------
(66,394) (1,158,104) -- --
- ----------------------------------------------------------------------------------------------
Net increase 361,272 $ 7,044,075 187,166 $3,730,770
==============================================================================================
</TABLE>
3. Securities Transactions
Purchases and sales (including maturities) of investment securities and short-
term investments for the six months ended December 31, 1998, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Purchases:
Investment securities $17,764,843
Short-term investments 599,912
Sales:
Investment securities 10,380,371
Short-term investments 600,000
================================================================================
</TABLE>
At December 31, 1998, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $1,156,927 of which $1,274,553 related to
appreciated securities and $117,626 related to depreciated securities.
At June 30, 1998, the Fund's last fiscal year end, the Fund had an unused
capital loss carryforward of $1,619 available for federal income tax purposes
to be applied against future capital gains, if any. If not applied, the
carryforward will expire in the year 2006.
12
<PAGE>
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with Nuveen Institutional
Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, the Fund pays an annual management fee, payable monthly, which is based
upon the average daily net asset value of the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .9500 of 1%
For the next $125 million .9375 of 1
For the next $250 million .9250 of 1
For the next $500 million .9125 of 1
For the next $1 billion .9000 of 1
For net assets over $2 billion .8750 of 1
================================================================================
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1999, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding 1.30% of
the average daily net asset value of any class of Fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Institutional Capital Corporation ("ICAP"),
of which The John Nuveen Company holds a minority interest, under which ICAP
manages the Fund's investment portfolio. ICAP is compensated for its services
from the management fee paid to the Adviser. The Fund pays no compensation
directly to 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 six months ended December 31, 1998, the Distributor collected sales
charges on purchases of Class A Shares, the majority of which were paid out as
concessions to authorized dealers. The Distributor also received 12b-1 service
fees on Class A Shares, substantially all of which were paid to compensate
authorized dealers for providing services to shareholders relating to their
investments.
During the six months ended December 31, 1998, the Distributor compensated
authorized dealers directly with approximately $140,900 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 six months
ended December 31, 1998, the Distributor retained approximately $15,100 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 in-
vestments. The Distributor also collected and retained approximately $800 of
CDSC on share redemptions during the six months ended December 31, 1998.
5. Composition of Net Assets
At December 31, 1998, the Fund had an unlimited number of $.01 par value per
share common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Capital paid-in $ 10,774,844
Balance of undistributed (over-distributed) net investment income (24,315)
Accumulated net realized gain (loss) from investment transactions (1,333,372)
Net unrealized appreciation of investments 1,156,927
- --------------------------------------------------------------------------------
Net assets $ 10,574,084
================================================================================
</TABLE>
13
<PAGE>
Financial Highlights (Unaudited)
Selected data for a share outstanding throughout each period is as follows:
Class (Inception Date)
<TABLE>
<CAPTION>
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 Gain Total Value Return (b)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/98)
1999 (d) $ 19.86 $ (.03) $ (.52) $ (.55) $ (.01) $-- $ (.01) $ 19.30 (2.76)%
1998 (c) 20.00 .02 (.14) (.12) (.02) -- (.02) 19.86 (.59)
Class B (5/98)
1999 (d) 19.87 (.09) (.54) (.63) -- -- -- 19.24 (3.17)
1998 (c) 20.00 .03 (.15) (.12) (.01) -- (.01) 19.87 (.60)
Class C (5/98)
1999 (d) 19.87 (.08) (.56) (.64) -- -- -- 19.23 (3.22)
1998 (c) 20.00 .01 (.13) (.12) (.01) -- (.01) 19.87 (.60)
Class R (5/98)
1999 (d) 19.87 -- (.54) (.54) (.02) -- (.02) 19.31 (2.68)
1998 (c) 20.00 .03 (.13) (.10) (.03) -- (.03) 19.87 (.52)
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 Before After After 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 (5/98)
1999 (d) $ 2,814 2.21%* (.94)%* 1.55%* (.28)%* 133%
1998 (c) 102 14.82* (11.94)* 1.55* 1.33* 5
Class B (5/98)
1999 (d) 3,420 2.96* (1.68)* 2.30* (1.02)* 133
1998 (c) 335 14.56* (10.67)* 2.30* 1.59* 5
Class C (5/98)
1999 (d) 640 2.97* (1.61)* 2.30* (.94)* 133
1998 (c) 42 15.88* (12.98)* 2.30* .60* 5
Class R (5/98)
1999 (d) 3,700 2.04* (.75)* 1.30* (.01)* 133
1998 (c) 3,240 15.04* (11.99)* 1.30* 1.75* 5
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses by
Nuveen Institutional Advisory Corp.
(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.
(d) For the six months ended December 31, 1998.
14
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
Anthony T. Dean
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
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Chapman & Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
15
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR., APPEARS HERE]
John Nuveen, Sr.
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 focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, income, and tax-free income 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.
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
ESA-EV-12-98
