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NUVEEN
Investments
Nuveen Growth
and Income Funds
PROSPECTUS OCTOBER 27, 2000
Portfolios of quality securities offering long-term growth and current income
potential.
[PHOTOS APPEARS HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/ 1
Growth and Income Stock Fund
European Value Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment
Strategy
Risks
Fees, Charges
and Expenses
Shareholder
Instructions
Performance and
Current Portfolio
Information
Table of Contents
Section 1 The Funds
This section provides you with an overview of the funds including investment
objectives, expenses, portfolio holdings and historical performance
information.
Introduction 1
Nuveen Growth and Income Stock Fund 2
Nuveen European Value Fund 4
Nuveen Balanced Stock and Bond Fund 6
Nuveen Balanced Municipal and Stock Fund 8
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Funds 10
What Types of Securities We Invest In 11
How We Select Investments 13
How the Portfolio Manager Has Performed 15
What the Risks Are 16
How We Manage Risk 18
Section 3 How You Can Buy and Sell Shares
This section provides the information you need to move money into or out of
your account.
What Share Classes We Offer 21
How to Reduce Your Sales Charge 22
How to Buy Shares 23
Systematic Investing 23
Systematic Withdrawal 24
Special Services 24
How to Sell Shares 25
Section 4 General Information
This section summarizes the funds' distribution policies and other general
fund information.
Dividends, Distributions and Taxes 27
Distribution and Service Plans 28
Net Asset Value 29
Fund Service Providers 29
Section 5 Financial Highlights
This section provides the funds' financial performance since inception.
Nuveen Growth and Income Stock Fund 30
Nuveen European Value Fund 31
Nuveen Balanced Stock and Bond Fund 32
Nuveen Balanced Municipal and Stock Fund 33
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October 27, 2000
Section 1 The Funds
Nuveen Growth and Income Stock Fund
Nuveen European Value Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
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Introduction
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This prospectus is intended to provide important information to help you
evaluate whether one of the Nuveen Growth and Income Funds listed above may be
right for you. Please read it carefully before investing and keep it for future
reference.
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NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Section 1 The Funds 1
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Nuveen Growth and Income Stock Fund
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Fund Overview
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Investment Objective
The investment objective of the fund is to provide over time a superior total
return from a diversified portfolio consisting primarily of equity securities of
domestic companies with market capitalization of at least $500 million.
How the Fund Pursues Its Objective
The fund purchases primarily stocks of established, well-known domestic
companies. These companies tend to pay regular dividends that may provide a
source of income. We concentrate on stocks we believe are selling for less than
their intrinsic worth, trying to identify those with a catalyst - for example, a
management change or an improved industry outlook - that will unlock the stock's
unrecognized value. We generally buy only 40 to 50 stocks, which we believe have
at least 20% price appreciation potential over the next 18 months.
The fund may invest up to 35% of its assets in cash equivalents in order to
reduce volatility and preserve capital.
What are the Risks of Investing in the Fund?
The fund exposes you to market risk. Market risk is the risk that stocks will
decline in response to such factors as adverse company news or industry
developments or a general economic decline. The fund's potential investment in
foreign stocks also presents additional risk. Foreign risk is the risk that
foreign stocks will be more volatile than U.S. stocks due to such factors as
adverse economic, currency, political or regulatory changes in a country. In
addition, the fund's value-oriented investment style may not be successful. As
with any mutual fund investment, loss of money is a risk of investing.
Is this Fund Right for You?
This fund may be right for you if you are seeking:
. long-term growth potential from a value-driven strategy;
. to moderate the risks associated with stock investing;
. to focus on established, well-known companies;
. to meet long-term financial goals.
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation, including the possibility
of sharp price declines;
. investing to meet short-term financial goals.
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How the Fund Has Performed
--------------------------------------------------------------------------------
Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The chart and table below illustrate annual fund returns for each of
the past three years as well as annualized fund and index returns for the one-
year and since inception periods ended December 31, 1999. This information is
intended to help you assess the variability of fund returns (and consequently,
the potential rewards and risks of a fund investment). The information also
shows how the fund's performance compares with the returns of broad measures of
market performance and an index of funds with similar investment objectives.
Total Returns/1/
[BAR CHARTS APPEARS HERE]
Class A Annual Returns
27.5 - 1997
9.89 - 1998
14.6 - 1999
From January 1, 1997 through December 31, 1999, the fund's highest and lowest
calendar quarter returns were 15.54% and -16.64%, respectively, for the quarters
ended 6/30/97 and 9/30/98. The bar chart and highest/lowest quarterly returns do
not reflect sales charges, which would reduce returns, while the average annual
return table does reflect sales charges. See "How the Portfolio Manager Has
Performed" for additional performance information. The fund's and the portfolio
manager's past performance are not necessarily an indication of how the fund
will perform in the future.
Average Annual Total Returns for
the Periods Ended December 31, 1999
Inception
Class 1 Year (August 7, 1996)
Class A 8.07% 17.37%
Class B 9.86% 17.98%
Class C 13.88% 18.52%
Class R 14.89% 19.75%
S&P 500 Index/1/ 21.04% 29.63%
S&P/Barra Value Index/1/ 12.72% 21.58%
Lipper Peer Group/1/ 11.86% 19.58%
2 Section 1 The Funds
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What are the Costs of Investing?
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
Share Class A B C R/3/
Maximum Sales Charge Imposed
on Purchases 5.75%/4/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/5/ None/4/ 5%/6/ 1%/7/ None
Annual Fund Operating Expenses/8/
Paid From Fund Assets
Share Class A B C R
Management Fees .82% .82% .82% .82%
12b-1 Distribution and Service Fees .25% 1.00% 1.00% -%
Other Expenses .27% .27% .29% .28%
Total Operating Expenses 1.34% 2.09% 2.11% 1.10%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 704 $ 606 $ 214 $ 112 $ 704 $ 212 $ 214 $ 112
3 Years $ 975 $ 969 $ 661 $ 350 $ 975 $ 655 $ 661 $ 350
5 Years $ 1,267 $ 1,236 $1,134 $ 606 $ 1,267 $ 1,124 $1,134 $ 606
10 Years $ 2,095 $ 2,229 $2,441 $ 1,340 $ 2,095 $ 2,229 $2,441 $ 1,340
</TABLE>
1. The Class A year-to-date return on net asset value as of 9/30/00 was 1.94%.
Peer Group returns reflect the performance of the Lipper Large Cap Value Fund
Index, an index that represents the average annualized returns of the 30
largest funds in the Lipper Large Cap Value Fund Category. Peer Group returns
assume reinvestment of dividends and do not reflect any applicable sales
charges. The S&P 500 Index is an unmanaged index generally considered
representative of the U.S. stock market. The S&P/Barra Value Index consists
of the "value" half of the S&P 500 Index. In this capitalization-weighted
index, firms have higher book-to-price ratios and are generally slower
growing firms with less potential for returns but lower volatility (relative
to the "growth" half). The S&P 500 Index and S&P/Barra Value Index returns
assume reinvestment of dividends, but do not include any brokerage
commissions, sales charges or other fees.
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How the Fund Is Invested (as of 6/30/00)
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Portfolio Allocation Actual Target
Equity 95% 90%
Cash Equivalents 5% 10%
Stock Portfolio Statistics
Beta .85
Average Market Capitalization (Stocks) $62 billion
Average P/E 17.4
Top 10 Stock Holdings/9/
Philips Electronics NV 4.5%
Bell Atlantic Corporation 3.3%
Ford Motor Company 3.2%
General Motors Corporation 3.0%
AT&T Corp. 3.0%
Texaco Inc. 3.0%
Citigroup Inc. 2.9%
International Business Machines Corporation 2.9%
Exxon Mobil Corporation 2.9%
The News Corporation Limited Sponsored ADR 2.8%
2. As a percent of offering price unless otherwise noted. Authorized dealers and
other firms may charge additional fees for shareholder transactions or for
advisory services. Please see their materials for details.
3. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
4. Reduced Class A sales charges apply to purchases of $50,000 or more. Certain
Class A purchases at net asset value of $1 million or more may bear a
contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. Class B shares redeemed within six years of purchase are subject to a CDSC of
5% during the first year, 4% during the second and third years, 3% during the
fourth, 2% during the fifth and 1% during the sixth year.
7. Class C shares redeemed within one year of purchase are subject to a 1% CDSC.
8. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers Conduct
Rules. The adviser, pursuant to a contractual agreement, waived fees and
reimbursed expenses from the fund's inception through July 31, 1998 and from
August 1, 1998 through July 31, 2000, in order to prevent Total Operating
Expenses (excluding any distribution or service fees and extraordinary
expenses) from exceeding .95% and 1.05%, respectively, of the average daily
net assets of any class of fund shares. The Total Operating Expenses provided
in the table do not reflect such fee waiver and expense reimbursement.
9. As a percentage of the fund's stock holdings. Holdings will vary.
Section 1 The Funds 3
<PAGE>
Nuveen European Value Fund
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Fund Overview
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Investment Objective
The investment objective of the fund is to provide over time a superior total
return (income plus capital appreciation) with moderated risk.
How the Fund Pursues Its Objective
The fund purchases primarily stocks of established, well-known European
companies with at least $1 billion in market capitalization. We concentrate on
stocks we believe are selling for less than their intrinsic worth, and try to
identify those companies with a catalyst--for example, a management change or an
improved industry outlook--that will unlock the stock's unrecognized value. We
generally buy only those 20 to 30 stocks, which we believe have at least 20%
price appreciation potential over the next 18 months.
Under normal market conditions, we will invest at least 65% of the fund's total
assets in European equity securities, predominantly U.S.-traded ADRs, and we may
invest up to 35% of the fund's assets in cash equivalents and short-term
fixed-income securities in order to reduce volatility and preserve capital.
What are the Risks of Investing in the Fund?
The fund exposes you to market and foreign risk. Market risk is the risk that
stocks will decline in response to such factors as adverse company news or
industry developments or a general economic decline. Foreign risk is the risk
that foreign stocks will be more volatile than U.S. stocks due to such factors
as adverse economic, currency, political or regulatory changes in a country. The
fund's focus on European Union stocks makes the fund more susceptible to any
single European issue. In addition, the fund's value-oriented investment style
may not be successful. As with any mutual fund investment, loss of money is a
risk of investing.
Is This Fund Right For You?
This fund may be right for you if you seek to:
. invest in European equity securities;
. diversify an all U.S. portfolio.
You should not invest in this fund if you are:
. unwilling to accept foreign investment risk, including
potential sharp price declines;
. investing to meet short-term goals.
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How the Fund Has Performed
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Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The chart and table below illustrate the annual fund returns for the
calendar year ended December 31, 1999 as well as annualized fund and index
returns for the one-year and since inception periods ended December 31, 1999.
This information gives some indication of the risks of an investment in the fund
by comparing the fund's performance with a broad measure of market performance.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Return
26.0 - 1999
From January 1, 1999 through December 31, 1999, the fund's highest and lowest
calendar quarter returns were 20.30% and 0.20%, respectively, for the quarters
ended 12/31/99 and 9/30/99. The bar chart and highest/lowest quarterly returns
do not reflect sales charges, which would reduce returns, while the average
annual return table does reflect sales charges. The fund's past performance is
not necessarily an indication of how the fund will perform in the future.
Average Annual Total Returns for
the Periods Ended December 31, 1999
Class Inception
1 Year (May 29, 1998)
Class A 18.71% 9.05%
Class B 21.10% 10.02%
Class C 25.16% 12.38%
Class R 26.33% 13.49%
MSCI Europe IX GD/1/ 16.23% 11.97%
4 Section 1 The Funds
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What are the Costs of Investing?
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
Share Class A B C R/3/
Maximum Sales Charge Imposed
on Purchases 5.75%/4/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/5/ None/4/ 5%/6/ 1%/7/ None
Annual Fund Operating Expenses/8/
Paid From Fund Assets
Share Class A B C R
Management Fees .95% .95% .95% .95%
12b-1 Distribution and Service Fees .25% 1.00% 1.00% -%
Other Expenses 2.16% 2.22% 2.27% 2.27%
Total Operating Expenses* 3.36% 4.17% 4.22% 3.22%
* The Total Operating Expenses provided in the table above do not reflect a
voluntary commitment by the fund's investment adviser to waive fees and
reimburse expenses in order to prevent Total Operating Expenses (excluding
any 12b-1 distribution and service fees and extraordinary expenses) from
exceeding 1.30% of the average daily net assets of any class of fund
shares. This expense limitation may be modified at any time. Such expense
limitation would have reduced the actual operating expenses for the most
recent fiscal year to the levels provided below.
After Expense Reimbursements A B C R
Expense Reimbursements (1.81%) (1.87%) (1.92%) (1.92%)
Total Operating Expense-Net 1.55% 2.30% 2.30% 1.30%
The following example is intended to help you compare the cost of investing in
the fund with the costs of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual returns and costs may be higher or lower.
Redemption No Redemption
Share Class A B C R A B C R
1 Year $ 894 $ 804 $ 424 $ 325 $ 894 $ 419 $ 424 $ 325
3 Years $1,549 $1,562 $1,281 $ 992 $1,549 $1,267 $1,281 $ 992
5 Years $2,225 $2,230 $2,152 $1,683 $2,225 $2,129 $2,152 $1,683
10 Years $4,014 $4,179 $4,388 $3,522 $4,014 $4,179 $4,388 $3,522
--------------------------------------------------------------------------------
How the Fund Is Invested (as of 6/30/00)
--------------------------------------------------------------------------------
Portfolio Allocation Actual Target
Equity 100% 90%
Cash Equivalents -% 10%
Stock Portfolio Statistics
Average Market Capitalization (Stocks) $66 billion
Average P/E 29.0
Top 10 Stock Holdings/9/
Philips Electronics NV 8.3%
Zurich Allied AG Sponsored ADR 8.3%
Diageo plc Sponsored ADR 7.3%
Bass plc Sponsored ADR 5.1%
The News Corporation Limited Sponsored ADR 5.0%
ING Groep NV Sponsored ADR 4.6%
Shell Transport & Trading Company ADR 4.6%
Nordic Baltic Holdings AB FDR 4.5%
Siemens AG Unsponsored ADR 4.5%
Investor AB 4.5%
1. The Class A year-to-date return on net asset value as of 9/30/00 was
-9.37%. The table also reflects the performance of the MSCI Europe Index.
The MSCI Europe Index is an unmanaged index comprised of a
capitalization-weighted sampling of the companies listed on the stock
exchanges of 14 European countries. Index returns assume reinvestment of
dividends, but do not include any brokerage commissions, sales charges, or
other fees.
2. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
3. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
4. Reduced Class A sales charges apply to purchases of $50,000 or more.
Certain Class A purchases at net asset value of $1 million or more may bear
a contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth, and 1% during the sixth year.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
8. Long-term holders of Class B and C shares may pay more in Rule 12b-1 fees
and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
9. As a percentage of the fund's stock holdings. Holdings will vary.
Section 1 The Funds 5
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Nuveen Balanced Stock and Bond Fund
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Fund Overview
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Investment Objective
The investment objective of the fund is to provide over time an attractive total
return from a diversified portfolio of equity securities, taxable fixed-income
securities and cash equivalents by emphasizing capital appreciation in favorable
markets and capital preservation in adverse markets.
How the Fund Pursues Its Objective
The fund purchases a diversified portfolio of stocks primarily of established,
well-known domestic companies. We concentrate on stocks we believe are selling
for less than their intrinsic worth, trying to identify those with a
catalyst--for example, a management change or an improved industry outlook--that
will unlock the stock's unrecognized value. We generally buy only 40 to 50
stocks, which we believe have at least 20% price appreciation potential over the
next 18 months.
We seek reduced risk, capital preservation potential and current income by
balancing our stock investments with bonds. The bonds we purchase are primarily
U.S. Treasury bonds with maturities from one to 15 years, but from time to time
we may also purchase investment-grade corporate bonds if market conditions
warrant.
What are the Risks of Investing in the Fund?
The fund exposes you to market risk, interest rate risk and credit risk. Market
risk is the risk that stocks will decline in response to such factors as adverse
company news or industry developments or a general economic decline. Interest
rate risk is the risk that interest rates will rise, causing bond prices and the
fund's value to fall. Credit risk is the risk that a bond issuer will default or
be unable to pay principal and interest to the fund; lower rated bonds generally
carry greater credit risk. The fund's potential investment in foreign stocks
also presents additional risk. Foreign risk is the risk that foreign stocks will
be more volatile than U.S. stocks due to such factors as adverse economic,
currency, political or regulatory changes in a country. In addition, the fund's
value-oriented investment style may not be successful. As with any mutual fund
investment, loss of money is a risk of investing.
Is this Fund Right for You?
This fund may be a suitable investment for you if you are seeking:
. long-term growth potential from a value-driven strategy;
. a substantial measure of downside protection;
. the convenience of a balanced portfolio in a single investment;
. to focus on established, well-known companies;
. to meet long-term financial goals.
You should not invest in this fund if you are:
. unwilling to accept share price fluctuation;
. investing to meet short-term financial goals.
--------------------------------------------------------------------------------
How the Fund Has Performed
--------------------------------------------------------------------------------
Nuveen has selected Institutional Capital Corporation to manage the fund's
portfolio. The chart and table below illustrate annual fund returns for each of
the past three years as well as annualized fund and index returns for the
one-year and since inception periods ended December 31, 1999. This information
is intended to help you assess the variability of fund returns (and
consequently, the potential rewards and risks of a fund investment). The
information also shows how the fund's performance compares with the returns of
broad measures of market performance and an index of funds with similar
investment objectives.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
17.4 - 1997
11.2 - 1998
8.7 - 1999
From January 1, 1997 through December 31, 1999, the fund's highest and lowest
calendar quarter returns were 10.21% and -8.51%, respectively, for the quarters
ended 12/31/98 and 9/30/98. The bar chart and highest/lowest quarterly returns
do not reflect sales charges, which would reduce returns, while the average
annual return table does reflect sales charges. See "How the Portfolio Manager
Has Performed" for additional performance information. The fund's and the
portfolio manager's past performance are not necessarily an indication of how
the fund will perform in the future.
Average Annual Total Returns for
the Periods Ended December 31, 1999
-----------------------------------
Class Inception
1 Year (August 7, 1996)
--------------------------------------------------------------------------------
Class A 2.42% 12.03%
Class B 3.87% 12.51%
Class C 7.92% 13.18%
Class R 8.95% 14.28%
S&P 500 Index/1/ 21.04% 29.63%
S&P/Barra Value Index/1/ 12.72% 21.58%
Lipper Peer Group/1/ 8.98% 16.26%
Lehman Brothers Intermediate
Treasury Index/1/ 0.40% 6.06%
Market Benchmark Index/1/ 7.84% 15.52%
6 Section 1 The Funds
<PAGE>
--------------------------------------------------------------------------------
What are the Costs of Investing?
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
Share Class A B C R/3/
Maximum Sales Charge Imposed
on Purchases 5.75%/4/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/5/ None/4/ 5%/6/ 1%/7/ None
Annual Fund Operating Expenses/8/
Paid From Fund Assets
Share Class A B C R
Management Fees .75% .75% .75% .75%
12b-1 Distribution and Service Fees .25% 1.00% 1.00% -%
Other Expenses .38% .38% .38% .38%
Total Operating Expenses* 1.38% 2.13% 2.13% 1.13%
* The Total Operating Expenses provided in the table above do not reflect a
voluntary commitment by the fund's investment adviser to waive fees and
reimburse expenses in order to prevent Total Operating Expenses (excluding
any 12b-1 distribution and service fees and extraordinary expenses) from
exceeding 1.00% of the average daily net assets of any class of fund
shares. This expense limitation may be modified at any time. Such expense
limitation would have reduced the actual operating expenses for the most
recent fiscal year to the levels provided below. From the fund's inception
through July 31, 1998 and from August 1, 1998 through July 31, 2000, the
investment adviser waived fees and reimbursed expenses in order to prevent
Total Operating Expenses (excluding any distribution or service fees and
extraordinary expenses) from exceeding .85% and .95%, respectively, of the
average daily net assets of any class of fund shares.
After Expense Reimbursements A B C R
Expense Reimbursements (.13%) (.13%) (.13%) (.13%)
Total Operating Expense-Net 1.25% 2.00% 2.00% 1.00%
The following example is intended to help you compare the cost of investing in
the fund with the costs of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual returns and costs may be higher or lower.
Redemption No Redemption
Share Class A B C R A B C R
1 Year $ 707 $ 610 $ 216 $ 115 $ 707 $ 216 $ 216 $ 115
3 Years $ 987 $ 981 $ 667 $ 359 $ 987 $ 667 $ 667 $ 359
5 Years $1,287 $1,256 $1,144 $ 622 $1,287 $1,144 $1,144 $ 622
10 Years $2,137 $2,271 $2,462 $1,375 $2,137 $2,271 $2,462 $1,375
--------------------------------------------------------------------------------
How the Fund Is Invested (as of 6/30/00)
--------------------------------------------------------------------------------
Portfolio Allocation Actual Target
Equity 60% 55%
U.S. Government Obligations 39% 40%
Cash Equivalents 1% 5%
Portfolio Statistics
Average Market Capitalization (Stocks) $63 billion
Average P/E 17.5
Average Duration (Bonds) 5.12
Average Effective Maturity (Bonds) 7.52 years
Top 5 Stock Holdings/9/
Philips Electronics NV 4.7%
Bell Atlantic Corporation 3.4%
Ford Motor Company 3.2%
Citigroup Inc. 3.1%
AT&T Corp. 3.0%
1. The Class A year-to-date return on net asset value as of 9/30/00 was 3.72%.
Peer Group returns reflect the performance of the Lipper Balanced Fund
Index, an index that represents the average annualized returns of the 30
largest funds in the Lipper Balanced Category. Returns assume reinvestment
of dividends and do not reflect any applicable sales charges. The S&P 500
Index is an unmanaged index generally considered representative of the U.S.
stock market. The S&P/Barra Value Index consists of the "value" half of the
S&P 500 Index. In this capitalization-weighted index, firms have higher
book-to-price ratios and are generally slower growing firms with less
potential for returns but with lower volatility (relative to the "growth"
half). The Lehman Brothers Intermediate Treasury Index includes treasury
securities with maturities ranging from 1 to 10 years. The index returns
assume reinvestment of dividends, but do not include any brokerage
commissions, sales charges, or other fees. The Market Benchmark Index is
comprised of a 60% weighting in the S&P/Barra Value Index and 40% in the
Lehman Brothers Intermediate Treasury Index.
2. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
3. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
4. Reduced Class A sales charges apply to purchases of $50,000 or more.
Certain Class A purchases at net asset value of $1 million or more may bear
a contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
8. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
9. As a percentage of the fund's stock holdings. Holdings will vary.
Section 1 The Funds 7
<PAGE>
Nuveen Balanced Municipal and Stock Fund
--------------------------------------------------------------------------------
Fund Overview
--------------------------------------------------------------------------------
Investment Objective
The investment objective of the fund is to provide over time an attractive
after-tax total return through a combination of federally tax-exempt income and
capital appreciation with capital preservation in adverse markets.
How the Fund Pursues Its Objective
The fund invests the majority of its assets in investment-grade quality
municipal bonds. We concentrate on municipal bonds with favorable
characteristics we believe are not yet recognized by the market, trying to
identify those higher-yielding and undervalued bonds with intermediate
characteristics that we believe offer the best balance of current tax-free
income and capital preservation potential.
We invest the balance of fund assets primarily in established, well-known
domestic companies. We concentrate on stocks we believe are selling for less
than their intrinsic worth, trying to identify those with a catalyst-for
example, a management change or an improved industry outlook-that will unlock
the stock's unrecognized value. We generally buy only 40 to 50 stocks, which we
believe have at least 20% price appreciation potential over the next 18 months.
What are the Risks of Investing in the Fund?
The fund exposes you to market risk, interest rate risk and credit risk. Market
risk is the risk that stocks will decline in response to such factors as adverse
company news or industry developments or a general economic decline. Interest
rate risk is the risk that interest rates will rise, causing bond prices and the
fund's value to fall. Credit risk is the risk that a bond issuer will default or
be unable to pay principal and interest to the fund; lower rated bonds generally
carry greater credit risk. The fund's potential investment in foreign stocks
also presents additional risk. Foreign risk is the risk that foreign stocks will
be more volatile than U.S. stocks due to such factors as adverse economic,
currency, political or regulatory changes in a country. In addition, the fund's
value-oriented investment style may not be successful. As with any mutual fund
investment, loss of money is a risk of investing.
Is this Fund Right for You?
This fund may be a suitable investment for you if you are seeking:
. attractive after-tax returns from a value-driven strategy;
. a substantial measure of downside protection;
. the convenience of a balanced portfolio in a single investment;
. to reduce the taxes on your investment return;
. to meet long-term financial goals.
. You should not invest in this fund if you are:
. investing in a tax deferred account;
. unwilling to accept share price fluctuation;
. investing to meet short-term financial goals.
--------------------------------------------------------------------------------
How the Fund Has Performed
--------------------------------------------------------------------------------
Nuveen Institutional Advisory Corp. manages the municipal investments of the
fund and has selected Institutional Capital Corporation to manage the fund's
equity portfolio. The chart and table below illustrate annual fund returns for
each of the past three years as well as annualized fund and index returns for
the one-year and since inception periods ended December 31, 1999. This
information is intended to help you assess the variability of fund returns (and
consequently, the potential rewards and risks of a fund investment). The
information also shows how the fund's performance compares with the returns of
broad measures of market performance and an index of funds with similar
investment objectives.
Total Returns/1/
[BAR CHART APPEARS HERE]
Class A Annual Returns
1997 16.3
1998 8.3
1999 4.6
From January 1, 1997 through December 31, 1999, the fund's highest and lowest
calendar quarter returns were 7.74% and -6.09%, respectively, for the quarters
ended 6/30/97 and 9/30/98. The bar chart and highest/lowest quarterly returns do
not reflect sales charges, which would reduce returns, while the average annual
return table does reflect sales charges. The fund's past performance is not
necessarily an indication of how the fund will perform in the future.
Average Annual Total Returns for
the Periods Ended December 31, 1999
Class Inception
1 Year (August 7, 1996)
Class A -1.37% 8.96%
Class B -0.10% 9.38%
Class C 3.87% 10.06%
Class R 4.92% 11.17%
S&P 500 Index/1/ 21.04% 29.63%
S&P/Barra Value Index/1/ 12.72% 21.58%
Lipper Peer Group/1/ 8.98% 16.26%
Lehman Brothers 10-Year
Municipal Bond Index/1/ -1.25% 5.53%
Market Benchmark Index/1/ 4.37% 12.06%
8 Section 1 The Funds
<PAGE>
--------------------------------------------------------------------------------
What are the Costs of Investing?
--------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/2/
Paid Directly From Your Investment
Share Class A B C R/3/
Maximum Sales Charge Imposed
on Purchases 5.75%/4/ None None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
Exchange Fees None None None None
Deferred Sales Charge/5/ None/4/ 5%/6/ 1%/7/ None
Annual Fund Operating Expenses/8/
Paid From Fund Assets
Share Class A B C R
Management Fees .75% .75% .75% .75%
12b-1 Distribution and Service Fees .25% 1.00% 1.00% -%
Other Expenses .26% .26% .26% .26%
Total Operating Expenses* 1.26% 2.01% 2.01% 1.01%
* The Total Operating Expenses provided in the table above do not reflect a
voluntary commitment by the fund's investment adviser to waive fees and
reimburse expenses in order to prevent Total Operating Expenses (excluding
any 12b-1 distribution and service fees and extraordinary expenses) from
exceeding 1.00% of the average daily net assets of any class of fund
shares. This expense limitation may be modified at any time. Such expense
limitation would have reduced the actual operating expenses for the most
recent fiscal year to the levels provided below. From the fund's inception
through July 31, 1998 and from August 1, 1998 through July 31, 2000, the
investment adviser waived fees and reimbursed expenses in order to prevent
Total Operating Expenses (excluding any distribution or service fees and
extraordinary expenses) from exceeding .85% and .95%, respectively, of the
average daily net assets of any class of fund shares.
After Expense Reimbursements A B C R
Expense Reimbursements (.01%) (.01%) (.01%) (.01%)
Total Operating Expense-Net 1.25% 2.00% 2.00% 1.00%
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time period indicated and then either
redeem or do not redeem your shares at the end of a period. The example assumes
that your investment has a 5% return each year and that the fund's operating
expenses remain the same. Your actual returns and costs may be higher or
lower.
<TABLE>
<CAPTION>
Redemption No Redemption
Share Class A B C R A B C R
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 696 $ 598 $ 204 $ 103 $ 696 $ 204 $ 204 $ 103
3 Years $ 952 $ 945 $ 630 $ 322 $ 952 $ 630 $ 630 $ 322
5 Years $1,227 $1,195 $1,083 $ 558 $1,227 $1,083 $1,083 $ 558
10 Years $2,010 $2,144 $2,338 $1,236 $2,010 $2,144 $2,338 $1,236
</TABLE>
--------------------------------------------------------------------------------
How the Fund Is Invested (as of 6/30/00)
--------------------------------------------------------------------------------
Portfolio Allocation Actual Target
Municipal Bonds 61% 60%
Equity 39% 35%
Cash Equivalents - 5%
Portfolio Statistics
Average Market Capitalization (Stocks) $63 billion
Average P/E 17.4
Average Duration (Bonds) 6.41
Average Effective Maturity (Bonds) 9.41 years
Top 5 Stock Holdings/9/
Philips Electronics NV 4.6%
Bell Atlantic Corporation 3.3%
General Motors Corporation 3.1%
Ford Motor Company 3.1%
AT&T Corp. 3.1%
Credit Quality (Bonds)/10/
AAA/U.S. Guaranteed 34.8%
AA 7.2%
A 17.4%
BBB 20.9%
NR 19.7%
1. The Class A year-to-date return on net asset value as of 9/30/00 was 2.93%.
Peer Group returns reflect the performance of the Lipper Balanced Fund
Index, an index that represents the average annualized returns of the 30
largest funds in the Lipper Balanced Category. Returns assume reinvestment
of dividends and do not reflect any applicable sales charges. The S&P 500
Index is an unmanaged index generally considered representative of the U.S.
stock market. The S&P/Barra Value Index consists of the "value" half of the
S&P 500 Index. In this capitalization-weighted index, firms have higher
book-to-price ratios and are generally slower growing firms with less
potential for returns but lower volatility (relative to the "growth" half).
The Lehman Brothers 10-Year Municipal Bond Index includes municipal bonds
with maturities ranging from 8 to 12 years. The index returns assume
reinvestment of dividends, but do not include any brokerage commissions,
sales charges or other fees. The Market Benchmark Index is comprised of a
40% weighting in the S&P/Barra Value Index and 60% in the Lehman Brothers
10-Year Municipal Bond Index.
2. As a percent of offering price unless otherwise noted. Authorized dealers
and other firms may charge additional fees for shareholder transactions or
for advisory services. Please see their materials for details.
3. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
4. Reduced Class A sales charges apply to purchases of $50,000 or more.
Certain Class A purchases at net asset value of $1 million or more may bear
a contingent deferred sales charge (CDSC) if redeemed within 18 months of
purchase. See "How You Can Buy and Sell Shares."
5. As a percentage of lesser of purchase price or redemption proceeds.
6. Class B shares redeemed within six years of purchase are subject to a CDSC
of 5% during the first year, 4% during the second and third years, 3%
during the fourth, 2% during the fifth and 1% during the sixth year.
7. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
8. Long-term holders of Class B and Class C shares may pay more in Rule 12b-1
fees and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
9. As a percentage of the fund's stock holdings. Holdings will vary.
10. As a percentage of the fund's bond holdings. Holdings will vary.
Section 1 The Funds 9
<PAGE>
Section 2 How We Manage Your Money
To help you understand the funds better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
--------------------------------------------------------------------------------
Who Manages the Funds
--------------------------------------------------------------------------------
Nuveen Institutional Advisory Corp. ("NIAC"), the funds' investment adviser,
together with its advisory affiliate, Nuveen Advisory Corp., offer premier
advisory and investment management services to a broad range of mutual fund
clients. In the Nuveen family, these advisers are commonly referred to as Nuveen
Investment Management or NIM. NIAC has overall responsibility for management of
the funds. NIAC oversees the management of the funds' portfolios, manages the
funds' business affairs and provides certain clerical, bookkeeping and other
administrative services. The NIM advisers are located at 333 West Wacker Drive,
Chicago, IL 60606.
The NIM advisers are wholly-owned subsidiaries of Nuveen Investments ("Nuveen").
Founded in 1898, Nuveen has been synonymous with investments that withstand the
test of time. Today, we provide managed assets and structured investment
products and services to help financial advisors serve the wealth management
needs of individuals and families. Nuveen manages or oversees $71 billion in
assets.
NIAC has selected Institutional Capital Corporation ("Institutional Capital"),
225 West Wacker Drive, Chicago, IL 60606, as subadviser to manage the investment
portfolios of the Growth and Income Stock Fund, European Value Fund and the
Balanced Stock and Bond Fund, and the equity investments of the Balanced
Municipal and Stock Fund. Institutional Capital is an institutional investment
management firm with over 30 years of experience and approximately $13 billion
in assets under management. Institutional Capital's investment management
strategy and operating policies are set through a team approach, with all its
investment professionals contributing. Institutional Capital currently maintains
a staff of 15 investment professionals. Mr. Robert H. Lyon, President, owns
shares representing 51% of its voting rights. In addition, The John Nuveen
Company owns preferred shares of Institutional Capital, which are convertible in
2002 into a 20% common stock interest.
NIAC manages the municipal investments of the Balanced Municipal and Stock Fund.
NIAC is responsible for the execution of specific investment strategies and the
day-to-day operations of the fund as they relate to the municipal investments.
NIAC manages the fund using a team of analysts and portfolio managers that focus
on a specific group of funds. Thomas C. Spalding provides daily oversight for
and execution of the fund's
10 Section 2 How We Manage Your Money
<PAGE>
municipal investment activities. Mr. Spalding has been a vice president of NIAC
since 1990 and manager of the fund's municipal investments since February 1999.
He is also a vice president of Nuveen Advisory Corp. and a Chartered Financial
Analyst. Mr. Spalding currently manages investments for eight Nuveen-sponsored
investment companies.
For providing these services, NIAC is paid an annual fund management fee
according to the following schedule:
<TABLE>
<CAPTION>
Average Daily Growth and European Value Balanced Stock Balanced Municipal
Net Assets Income Stock Fund Fund and Bond Fund and Stock Fund
<S> <C> <C> <C> <C>
For the first $125 million .8500 of 1% .9500 of 1% .7500 of 1% .7500 of 1%
For the next $125 million .8375 of 1% .9375 of 1% .7375 of 1% .7375 of 1%
For the next $250 million .8250 of 1% .9250 of 1% .7250 of 1% .7250 of 1%
For the next $500 million .8125 of 1% .9125 of 1% .7125 of 1% .7125 of 1%
For the next $1 billion .8000 of 1% .9000 of 1% .7000 of 1% .7000 of 1%
For net assets over $2 billion .7750 of 1% .8750 of 1% .6750 of 1% .6750 of 1%
</TABLE>
For the most recent fiscal year, the funds paid NIAC the following management
fees (as a percentage of average net assets):
Growth and Income Stock Fund .79%
European Value Fund 0%
Balanced Stock and Bond Fund .58%
Balanced Municipal and Stock Fund .70%
Out of the fund management fee, NIAC pays a portfolio management fee to
Institutional Capital. Each fund pays for its own operating expenses such as
custodial, transfer agent, accounting and legal fees; brokerage commissions;
distribution and service fees; and extraordinary expenses.
--------------------------------------------------------------------------------
What Types of Securities We Invest In
--------------------------------------------------------------------------------
Each fund's investment objective may not be changed without shareholder
approval. The funds' investment policies may be changed by the Board of Trustees
without shareholder approval unless otherwise noted in this prospectus or the
Statement of Additional Information.
Equity Securities
Each Fund invests in equity securities. Eligible equity securities include
common stocks; preferred stocks; warrants to purchase common stocks or preferred
stocks; securities convertible into common or preferred stocks, such as
convertible bonds and debentures; dollar-denominated securities of foreign
companies (limited to 25% of net assets for the Growth and Income Stock Fund,
Balanced Stock and Bond Fund, and the Balanced Municipal and Stock Fund) and
other securities with equity characteristics. In addition, the European Value
Fund may invest in foreign securities denominated in foreign currencies. Any
convertible bonds and debentures must be rated investment grade (one of the four
highest ratings by Moody's Investors Service, Standard & Poor's, Duff & Phelps
or Fitch IBCA, Inc.) when purchased.
Section 2 How We Manage Your Money 11
<PAGE>
European Investments
The European Value Fund invests primarily in a diversified portfolio of stocks
of established, well-known companies with at least $1 billion in market
capitalization that are domiciled or have their principal activities in Europe.
The domicile or the location of the principal activities of a company will be
the country (1) under whose laws the company is organized, (2) in which the
principal trading market for the equity securities issued by the company is
located, or (3) in which the company has over half its assets or derives half
its revenues.
The European Value Fund may invest in a variety of European securities,
including American Depositary Receipts (ADRs) and other types of depositary
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 (see "What the Risks
Are-Foreign investment risk").
Taxable Bonds
The Balanced Stock and Bond Fund invests the fixed income portion of its
portfolio in taxable bonds. Eligible taxable bonds are U.S. Treasury and other
investment-grade bonds with maturities of one to 15 years. We focus on U.S.
Treasury securities but may purchase other bonds from time to time if market
conditions warrant. Investment-grade securities are those rated in the four
highest categories by Moody's Investors Service, Standard & Poor's, Duff &
Phelps or Fitch IBCA, Inc. when purchased.
Municipal Obligations
The Balanced Municipal and Stock Fund invests the fixed income portion of its
portfolio in municipal bonds. States, local governments and municipalities issue
municipal bonds to raise money for various public purposes such as building
public facilities, refinancing outstanding obligations and financing general
operating expenses. Municipal bonds pay income that is exempt from regular
federal income tax but may be subject to the federal alternative minimum tax. A
municipality may issue general obligation bonds which are secured by its taxing
power, or it may issue revenue bonds that are payable from the revenues of a
particular project or a special excise tax.
The Balanced Municipal and Stock Fund may purchase municipal bonds that
represent lease obligations. These carry special risks because the issuer of the
bonds may not be obligated to appropriate money annually to make payments under
the lease. In order to reduce this risk, the fund will only purchase these bonds
where the issuer has a strong incentive to continue making appropriations until
maturity.
The Balanced Municipal and Stock Fund will purchase only quality municipal bonds
that are either rated investment grade (AAA/Aaa to BBB/Baa) by independent
rating agencies at the time of purchase or are non-rated but judged to be
investment grade by the fund's investment adviser. We will not invest more than
20% of the fund's municipal investments in this type of unrated municipal
obligation. These policies can only be changed by shareholder vote.
12 Section 2 How We Manage Your Money
<PAGE>
The Balanced Municipal and Stock Fund will invest at least 80% of its municipal
assets in investment-grade quality municipal bonds with effective remaining
maturities of no more than 15 years. This policy will not limit the stated or
nominal maturities of the municipal bonds in which the fund invests. The
effective remaining maturity of a municipal bond may be shorter than its stated
maturity for a variety of reasons, including the bond's call features, its
stated or expected payment schedule or other terms or conditions that may cause
the bond to have the risk of price fluctuations of an otherwise comparable but
shorter-term bond.
Short-Term Investments
The funds may invest in short-term investments including U.S. government
securities, quality commercial paper or similar fixed-income securities with
remaining maturities of one year or less. The Balanced Municipal and Stock Fund
intends to invest in taxable short-term investments only in the event that
suitable tax-exempt short-term investments are not available at reasonable
prices and yields. For more information on eligible short-term investments, see
the Statement of Additional Information.
Delayed Delivery Transactions
The funds may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. These transactions involve an element of risk
because the value of the security to be purchased may decline to a level below
its purchase price before the settlement date.
--------------------------------------------------------------------------------
How We Select Investments
--------------------------------------------------------------------------------
We adhere to disciplined, value-driven investment strategies whose aim is to
provide consistent, attractive performance over time with moderated risk. We
emphasize quality securities carefully chosen through in-depth research and
follow those securities closely over time to assess whether they continue to
meet our purchase rationale.
Equity Securities
Institutional Capital selects for the Growth and Income Stock Fund, Balanced
Stock and Bond Fund and Balanced Municipal and Stock Fund stocks from a universe
of approximately 450 large and midsize companies with at least $500 million in
market capitalization. Proprietary quantitative valuation models determine which
of these stocks currently appear to be selling for less than their intrinsic
worth. Based on a qualitative assessment of each company's prospects,
Institutional Capital then looks for a catalyst that Institutional Capital
believes will unlock the stock's unrecognized value. A catalyst may be as simple
as a management change or as complex as a fundamentally improved industry
outlook. Institutional Capital generally buys only 40 to 50 stocks, which it
believes have at least 20% price appreciation potential over the next 18 months
for the equity portion of each of such funds' investment portfolio.
European Investments
Institutional Capital selects stocks for the European Value Fund from the
universe of large- and mid-size European companies. Proprietary quantitative
valuation models determine which of these stocks currently appear to be selling
for less than their intrinsic worth. These models
Section 2 How We Manage Your Money 13
<PAGE>
consider certain factors including a stock's price-to-earnings ratio, earnings
stability and cash flow. Based on a qualitative assessment of each company's
prospects, Institutional Capital then looks for a catalyst that it believes will
unlock the stock's unrecognized value. A catalyst may be as simple as a
management change or a new product launch, or as complex as a fundamentally
improved industry outlook. Generally, Institutional Capital chooses only 20 to
30 stocks which it believes have at least 20% price appreciation potential over
the next 18 months.
Taxable Fixed-Income Securities
Institutional Capital selects taxable fixed-income securities for the Balanced
Stock and Bond Fund based on its general outlook for the fixed-income markets as
well as a detailed analysis of expected yield curve changes. Institutional
Capital uses proprietary quantitative models and qualitative assessments of
top-down economic and market factors to develop an outlook on interest rates.
Institutional Capital then analyzes the current shape of the yield curve as well
as expected changes under different scenarios. Institutional Capital selects the
specific mix of maturities that offer the best balance of current income and
capital preservation potential in light of current and expected market
conditions.
Municipal Obligations for the Balanced Municipal and Stock Fund
NIAC selects municipal bonds for the Balanced Municipal and Stock Fund based
upon its assessment of a bond's relative value in terms of current yield, price,
credit quality and future prospects. NIAC is supported by Nuveen's award-winning
team of specialized research analysts who review municipal securities available
for purchase, monitor the continued creditworthiness of the fund's municipal
investments, and analyze economic, political and demographic trends affecting
the municipal markets. We utilize these resources to identify municipal bonds
with favorable characteristics we believe are not yet recognized by the market.
We then select those higher-yielding and undervalued municipal bonds that we
believe represent the most attractive values.
Portfolio Turnover
A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of a fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The funds anticipate that they may engage in active
trading in equity securities. The equity portfolio turnover rate for the Growth
and Income Stock Fund, Balanced Stock and Bond Fund and the Balanced Municipal
and Stock Fund will generally be between 100% and 200%. The equity portfolio
turnover rate for the European Value Fund may exceed 200%. The Balanced
Municipal and Stock Fund expects annual municipal portfolio turnover to be
significantly less than 75%. The Balanced Stock and Bond Fund anticipates that
its annual bond portfolio turnover rate will generally not exceed 75%. A
turnover rate of 100% would occur, for example, if the fund sold and replaced
securities valued at 100% of its net assets within one year. Active trading
would result in the payment by the fund of increased brokerage costs and could
result in the payment by shareholders of increased taxes on realized investment
gains. Accordingly, active trading may adversely affect the funds' performance.
14 Section 2 How We Manage Your Money
<PAGE>
--------------------------------------------------------------------------------
How the Portfolio Manager Has Performed
--------------------------------------------------------------------------------
The charts and tables below illustrate the historical performance of the
portfolio manager's investment strategy for the Growth and Income Stock Fund and
the Balanced Stock and Bond Fund. The chart and table for the Growth and Income
Stock Fund presents the performance of Institutional Capital's Discretionary
Equity Composite, which represents all its individually managed accounts
(totalling $3.5 billion) that have substantially the same investment objectives
and policies as the Growth and Income Stock Fund. The chart and table for the
Balanced Stock and Bond Fund presents the performance of Institutional Capital's
Balanced Composite, which represents all its individually managed accounts
(totalling $224 million) that have substantially the same investment objectives
and policies as the Balanced Stock and Bond Fund. Of course, past performance is
no indication of future results, and the charts and tables represent performance
of managed accounts and not the performance of the funds.
Institutional Capital's Discretionary Equity Composite
Growth of a $10,000 Investment 1/1/76-6/30/00
[MOUNTAIN CHART APPEARS HERE]
S&P 500 Index $388,351
S&P/Barra Value Index $362,300
Lipper Large Cap Value Index $336,765
Institutional Capital's Discretionary Equity Composite $297,769
CPI $31,028
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NGIS S&P 500 S&P Barra/Value Lipper Large Cap Value Index CPI
------- ------- --------------- ---------------------------- ------
1Q76 9,425 10,000 10,000 10,000 10,000
2Q76 10,641 11,773 12,216 12,107 10,228
2Q77 11,121 11,841 13,621 12,924 10,931
2Q78 11,469 11,860 13,508 13,611 11,742
2Q79 12,754 13,481 15,882 15,502 13,023
2Q80 14,551 15,813 18,446 17,849 14,887
2Q81 17,022 19,073 21,797 22,269 16,313
2Q82 17,265 16,875 19,566 20,562 17,474
2Q83 25,012 27,202 31,043 31,951 17,924
2Q84 23,254 25,936 31,798 30,955 18,681
2Q85 29,516 33,965 42,334 40,736 19,379
2Q86 39,145 46,123 55,713 55,180 19,714
2Q87 50,269 57,722 70,923 66,046 20,447
2Q88 52,662 53,736 68,787 63,027 21,251
2Q89 61,839 64,782 83,783 74,330 22,348
2Q90 70,725 75,460 89,952 83,560 23,393
2Q91 79,661 81,043 95,192 89,197 24,493
2Q92 90,770 91,906 108,191 101,812 25,251
2Q93 103,553 104,440 128,191 118,698 26,007
2Q94 108,983 105,908 132,158 122,317 26,652
2Q95 138,585 133,522 160,318 149,135 27,465
2Q96 168,639 168,250 200,059 183,559 28,222
2Q97 229,406 226,638 261,866 239,302 28,870
2Q98 280,986 294,961 327,638 295,797 29,355
2Q99 311,977 362,146 381,824 344,977 29,932
2Q00 297,769 388,351 362,300 336,765 31,028
</TABLE>
Institutional Capital's Discretionary Equity Composite Returns
Average Annual Total Returns
----------------------------
1-Year 5-Year 10-Year 20-Year
------ ------ ------- -------
On Offer -10.05% 15.15% 14.78% 15.95%
On NAV -4.56% 16.53% 15.46% 16.29%
The managed accounts reflected above are not subject to all of the same
investment restrictions, investment inflows and outflows, and distribution
requirements as the fund, which affect fund performance. We assumed that an
investor paid a maximum Class A sales charge of 5.75% and we deducted from the
Composite's gross-of-fee returns the Class A gross operating expenses of 1.34%
for the fund's most recent fiscal year. This chart would be different for a
Class B, C or R investment because of their different sales charges and
operating expenses. The Lipper Large Cap Value Index represents the average
annualized returns of the 30 largest funds in the Lipper Large Cap Value Fund
Category. The S&P 500 Index is an unmanaged index generally considered
representative of the U.S. stock market. The S&P/Barra Value Index consists of
the "value" half of the S&P 500 Index. In this capitalization-weighted index,
firms have higher book-to-price ratios and are generally slower growing firms
with less potential for returns but lower volatility (relative to the "growth"
half). Index returns assume reinvestment of all dividends but do not include any
brokerage commissions, sales charges or other fees. This chart does not
represent past or future performance of the fund.
Section 2 How We Manage Your Money 15
<PAGE>
Institutional Capital's Balanced Composite
Growth of a $10,000 Investment 7/1/79-6/30/00
[MOUNTAIN CHART APPEARS HERE]
S&P 500 Index $288,075
S&P/Barra Value Index $228,113
Institutional Capital's Balanced Composite $157,032
Lipper Balanced Fund Index $144,524
CPI $23,825
<TABLE>
<CAPTION>
S&P/Barra Lipper
NBSB S&P 500 Value Balanced CPI
---------- --------- ---------- -------- ------
<S> <C> <C> <C>
2Q79 9,425 10,000 10,000 10,000 10,000
2Q80 10,764 11,730 11,614 11,248 11,431
2Q81 12,076 14,149 13,724 12,866 12,526
2Q82 12,578 12,518 12,319 12,681 13,418
2Q83 17,908 20,178 19,546 19,319 13,763
2Q84 16,702 19,239 20,020 18,270 14,344
2Q85 21,197 25,195 26,665 24,292 14,881
2Q86 28,101 34,213 35,078 32,288 15,137
2Q87 35,717 42,818 44,655 37,483 15,700
2Q88 37,479 39,861 43,310 36,399 16,318
2Q89 43,160 48,055 52,752 41,573 17,160
2Q90 49,212 55,976 56,636 45,639 17,962
2Q91 55,392 60,117 59,935 49,777 18,807
2Q92 63,211 68,175 68,120 56,802 19,389
2Q93 71,822 77,472 80,712 64,963 19,969
2Q94 73,554 78,561 83,210 65,490 20,465
2Q95 88,053 99,045 100,940 75,650 21,090
2Q96 100,635 124,806 125,962 86,869 21,670
2Q97 124,080 168,118 164,878 104,786 22,168
2Q98 145,130 218,799 206,289 124,081 22,541
2Q99 158,835 268,637 240,406 138,383 22,983
2Q00 157,032 288,075 228,113 144,524 23,825
</TABLE>
Institutional Capital's Balanced Composite Returns
Average Annual Total Returns
1-Year 5-Year 10-Year 20-Year
On Offer -6.75% 10.97% 11.66% 14.02%
On NAV -1.06% 12.29% 12.32% 14.36%
The managed accounts reflected above are not subject to all of the same
investment restrictions, investment inflows and outflows, and distribution
requirements as the fund, which affect fund performance. We assumed that an
investor paid a maximum Class A sales charge of 5.75% and we deducted from the
Composite's gross-of-fee returns the Class A gross operating expenses of 1.20%
for the fund's most recent fiscal year. This chart would be different for a
Class B, C or R investment because of their different sales charges and
operating expenses. The Lipper Balanced Fund Index represents the average
annualized returns of the 30 largest funds in the Lipper Balanced Fund Category.
The S&P 500 Index is an unmanaged index generally considered representative of
the U.S. stock market. The S&P/Barra Value Index consists of the "value" half of
the S&P 500 Index. In this capitalization-weighted index, firms have higher
book-to-price ratios and are generally slower growing firms with less potential
for returns but lower volatility (relative to the "growth" half). Index returns
assume reinvestment of all dividends but do not include any brokerage
commissions, sales charges or other fees. This chart does not represent past or
future performance of the fund.
--------------------------------------------------------------------------------
What the Risks Are
--------------------------------------------------------------------------------
Risk is inherent in all investing. Investing in a mutual fund - even the most
conservative - involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. In addition, the funds' value-oriented investment style may not be
successful in realizing the funds' investment objectives. Therefore, before
investing you should consider carefully the following risks that you assume when
you invest in these funds. Because of these and other risks, you should consider
an investment in these funds to be a long-term investment.
Market risk: As mutual funds investing all or a portion of their assets in
stocks, the funds are subject to market risk. Market risk is the risk that a
particular stock, an industry, or stocks in general may fall in value. The value
of your investment in a fund will go up and down with the prices of the
securities in which the fund invests. The prices of stocks change in response to
many factors, including the historical and prospective earnings of the issuer,
the value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
16 Section 2 How We Manage Your Money
<PAGE>
Foreign investment risk: Securities of foreign issuers (which are limited to 25%
of net assets for the Growth and Income Stock Fund, Balanced Stock and Bond Fund
and the Balanced Municipal and Stock Fund) present risks beyond those of
domestic securities. The prices of foreign securities can be more volatile than
U.S. stocks due to such factors as political or economic instability, less
publicly available information, exchange rate changes, relatively low market
liquidity and the potential lack of strict financial and accounting controls and
standards.
The European Value Fund is focused in the stocks of European Union companies. As
a result, the European Value Fund is more susceptible to any single economic,
political or regulatory occurence affecting the European Union, is less
diversified and is subject to more market risk. In addition, the introduction of
a single European currency, the euro, presents additional risks.
Interest rate risk: Because the Balanced Stock and Bond Fund and the Balanced
Municipal and Stock Fund also invest in bonds, the funds are subject to interest
rate risk. Interest rate risk is the risk that the value of a fund's portfolio
will decline because of rising market interest rates (bond prices move in the
opposite direction of interest rates). The longer the average maturity
(duration) of a fund's portfolio, the greater its interest rate risk.
Income risk: The Balanced Stock and Bond Fund's and the Balanced Municipal and
Stock Fund's investment in bonds exposes the funds to income risk. Income risk
is the risk that the income from the Balanced Stock and Bond Fund and the
Balanced Municipal and Stock Fund will decline because of falling market
interest rates. This can result when funds invest the proceeds from new share
sales, or from matured or called bonds, at market interest rates that are below
a portfolio's current earnings rate.
Credit risk: The Balanced Stock and Bond Fund's and the Balanced Municipal and
Stock Fund's investment in bonds also exposes them to credit risk. Credit risk
is the risk that an issuer of a bond is unable to meet its obligation to make
interest and principal payments due to changing financial or market conditions.
Generally, lower rated bonds provide higher current income but are considered to
carry greater credit risk than higher rated bonds.
Inflation risk: Like all mutual funds, the funds are subject to inflation risk.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of a fund's assets can decline as can the value
of a fund's distributions.
Correlation risk: Although the prices of equity and fixed-income securities
often rise and fall at different times so that a fall in the price of one is
offset by a rise in the price of the other, in a down market the prices of these
securities can also fall in tandem. Because the Balanced Stock and Bond Fund and
the Balanced Municipal and Stock Fund invest in stocks and bonds, they are
subject to correlation risk.
In addition, with regard to the European Value Fund, the U.S. and European
equity markets often rise and fall at different times or by different amounts
due to economic or other developments particular to a
Section 2 How We Manage Your Money 17
<PAGE>
given country or region. This phenomenon would tend to lower the overall price
volatility of a portfolio that included both U.S. and European stocks.
Sometimes, however, global trends will cause the U.S. and European markets to
move in the same direction, reducing or eliminating the risk reduction benefit
of international investing.
--------------------------------------------------------------------------------
How We Manage Risk
--------------------------------------------------------------------------------
Time-tested risk management strategies including broad portfolio
diversification, a rigorous sell discipline and defined portfolio allocation
ranges are utilized to help protect your capital during periods of market
uncertainty or weakness. The Balanced Stock and Bond Fund and the Balanced
Municipal and Stock Fund also invest in quality bonds whose steady income and
relative price stability can help reduce volatility and stabilize returns in
down markets. While these strategies are utilized to control or reduce risk,
there is no assurance that they will succeed.
Portfolio Allocation Targets and Ranges
Each fund follows a disciplined asset allocation methodology that keeps your
portfolio mix within a defined range over time as market conditions change. The
funds have established the following allocation targets and operating ranges for
each asset class:
<TABLE>
<CAPTION>
Growth and Income European Balanced Stock Balanced Municipal
Stock Fund Value Fund and Bond Fund and Stock Fund
---------- ---------- ------------- --------------
Target Range Target Range Target Range Target Range
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stocks 90% 65-100% 90% 65-100% 55% 40-70% 35% 30-50%
Bonds - - - - 40% 25-55% 60% 50-70%
Cash Equivalents 10% 0-35% 10% 0-35% 5% 0-20% 5% 0-10%
</TABLE>
A fund's Board of Trustees may change the target investment mix and operating
ranges for each asset class without shareholder approval. The Balanced Municipal
and Stock Fund will not set the minimum allowable allocation for municipal bonds
below 50%.
Emphasis on American Depositary Receipts (ADRs)
The European Value Fund buys equity securities of European companies primarily
in the form of sponsored ADRs that are traded in U.S. securities markets.
Sponsored and exchange-traded ADRs must comply with U.S. Generally Accepted
Accounting Principles and the reporting and disclosure requirements of the
Securities and Exchange Commission. Furthermore, such ADRs settle within three
days through the U.S. clearance system and are not subject to risks caused by
the complicated and varied settlement standards that exist for many foreign
securities exchanges or to currency risk during a transaction's settlement
period.
Investment Limitations
The funds have adopted certain investment limitations (based on total assets)
that cannot be changed without shareholder approval and are designed to limit
your investment risk and maintain portfolio diversification. Each fund may not
have more than:
. 5% in securities of any one issuer, or 10% of the voting securities of that
issuer (except for U.S. government securities or for 25% of the fund's
total assets);
. 25% in any one industry (except U.S. government securities and, in the case
of the Balanced Municipal and Stock Fund, municipal securities backed by
governmental users). For example, as of June 30, 2000, the funds were
invested in the following sectors which may comprise multiple industries
(as a percentage of the funds' stock holdings):
18 Section 2 How We Manage Your Money
<PAGE>
Growth and Income European
----------------- --------
Stock Fund Value Fund
---------- ----------
Consumer Cyclicals 20.3% Financials 26.4%
Financials 17.7% Consumer Staples 16.8%
Utilities 14.9% Utilities 14.0%
Technology 11.3% Consumer Cyclicals 13.2%
Healthcare 11.0% Energy 9.1%
Energy 8.9% Capital Goods 8.5%
Consumer Staples 6.0% Basic Materials 6.9%
Basic Materials 5.4% Healthcare 4.4%
Capital Goods 4.4% Technology 0.7%
Transportation 0.1%
Balanced Stock and Balanced Municipal
------------------ ------------------
Bond Fund and Stock Fund
--------- --------------
Consumer Cyclicals 20.1% Consumer Cyclicals 20.2%
Financials 16.9% Financials 16.7%
Utilities 15.1% Utilities 15.0%
Healthcare 11.5% Healthcare 11.6%
Technology 11.4% Technology 11.3%
Energy 9.2% Energy 9.1%
Consumer Staples 6.0% Consumer Staples 6.1%
Basic Materials 5.5% Basic Materials 5.5%
Capital Goods 4.2% Capital Goods 4.4%
Transportation 0.1% Transportation 0.1%
Please see the Statement of Additional Information for a more detailed
discussion of investment limitations.
Hedging and Other Defensive Investment Strategies
Each fund may invest up to 100% of its assets in cash, cash equivalents and
short-term investments as a temporary defensive measure in response to adverse
market conditions, or to keep cash on hand fully invested. During these periods,
the proportion of a fund's assets invested in an asset category may fall outside
its allowable range, and the fund may not achieve its investment objective.
Although these are not principal investment strategies, we may use various
investment techniques designed to hedge against changes in the values of
securities a fund owns or expects to purchase, to limit the risk of price
fluctuations, to preserve capital or to hedge against interest rate changes.
These hedging strategies include using financial futures contracts, options on
financial futures, or stock index options. To protect against foreign currency
exchange rate risk, the European Value Fund may enter into foreign currency
hedging transactions, including forward currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures contracts.
These strategies may reduce fund returns and will benefit the funds largely to
the extent we are able to use them successfully. A fund could lose money on
futures transactions or an option can expire worthless.
The Growth and Income Stock Fund's, Balanced Stock and Bond Fund's, and the
Balanced Municipal and Stock Fund's approach to equity investing may also
provide a measure of protection in adverse markets. The funds focus on stocks
primarily of established, well-known companies which generally have been better
positioned to weather adverse markets than smaller, less established companies.
The funds purchase stocks with low valuations, measured by their relative
price-to-earnings ratio. The prices of
Section 2 How We Manage Your Money 19
<PAGE>
these types of stocks have often fallen less than more fully valued stocks
during market downturns. In addition, the Growth and Income Stock Fund
frequently invests a small portion of its portfolio in cash equivalents which
can provide a measure of added stability during adverse market conditions. For
the Balanced Stock and Bond Fund and the Balanced Municipal and Stock Fund, the
funds' allocation to bonds and cash equivalents can also provide a measure of
added stability during adverse market conditions.
Portfolio Manager Performance in Down Markets
Over the past 20 years, there have been four periods in which the S&P 500
declined by approximately 10% or more over at least a three-month time period.
For the Growth and Income Stock Fund and Balanced Stock and Bond Fund, portfolio
manager performance is represented by the applicable fund's Class A returns on
net asset value for the third quarter 1998 and by Institutional Capital's
Discretionary Equity Composite and Balanced Composite, respectively, for all
prior periods. In three out of four of these periods, Institutional Capital's
investment strategies provided superior capital protection when compared with
the overall market and the applicable Lipper Fund peer group. In the third
quarter 1998, however, these strategies did not provide superior relative
protection. Of course, past performance does not guarantee future results, and
Composite performance does not represent actual fund results. Please see the
discussion under "How the Portfolio Manager Has Performed" for a detailed
discussion of portfolio manager composite returns and the index returns to which
they are compared.
Portfolio Manager Down-Market Performance
[BAR CHART APPEARS HERE]
Institutional Capital's Discretionary Equity Composite
2Q81-2Q82 4Q87 3Q90
Institutional Capital
Discretionary Equity
Composite 0.91% -10.10% -7.82%
Lipper Large Cap
Value Index -7.52% -19.55% -13.41%
S&P 500 Index -13.47% -22.63% -13.78%
Growth and Income Stock Fund
3Q98
Growth and Income
Stock Fund -16.64%
Lipper Large Cap
Value Index -11.07%
S&P 500 Index -9.92%
[BAR CHART APPEARS HERE]
2Q81-2Q82 4Q87 3Q90
Institutional Capital's 3.71% -9.33% -6.81%
Balanced Composite
Lipper Balanced
Fund Index -0.67% -13.26% -8.09%
S&P 500 Index -13.47% -22.63% -13.78%
Balanced Stock and Bond Fund
3Q98
Balanced Stock
and Bond Fund -8.51%
Lipper Balanced
Fund Index -5.79%
S&P 500 Index -9.92%
20 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer four classes of fund shares, each with a different combination of sales
charges, fees, eligibility requirements and other features. Your financial
advisor can help you determine which class is best for you. We offer a number of
features for your convenience. Please see the Statement of Additional
Information for further details.
--------------------------------------------------------------------------------
What Share Classes We Offer
--------------------------------------------------------------------------------
Class A Shares
You can buy Class A shares at the offering price, which is the net asset value
per share plus an up-front sales charge. You may qualify for a reduced sales
charge, or the sales charge may be waived, as described in "How to Reduce Your
Sales Charge." Class A shares are also subject to an annual service fee of .25%
of your fund's average daily assets which compensates your financial advisor for
providing ongoing service to you. Nuveen retains the up-front sales charge and
the service fee on accounts with no authorized dealer of record. The up-front
Class A sales charge for the funds is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over -/1/ - -/1/
</TABLE>
/1/ You can buy $1 million or more of Class A shares at net asset value without
an up-front sales charge. Nuveen pays authorized dealers a commission equal to
the sum of 1% of the first $2.5 million, plus 0.50% of the next $2.5 million,
plus 0.25% of any amount over $5 million. Unless the authorized dealer waived
the commission, you may be assessed a contingent deferred sales charge ("CDSC")
of 1% if you redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or your redemption proceeds. You
do not pay a CDSC on any Class A shares you purchase by reinvesting dividends.
Class B Shares
You can buy Class B shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of 1% of your fund's average daily assets. The annual .25% service
fee compensates your financial advisor for providing ongoing service to you.
Nuveen retains the service fee on accounts with no authorized dealer of record.
The annual .75% distribution fee compensates Nuveen for paying your financial
advisor a 4% up-front sales commission, which includes an advance of the first
year's service fee. If you sell your shares within six years of purchase, you
will normally pay a CDSC as shown in the schedule below. The CDSC is based on
your purchase or sale price, whichever is lower. You do not pay a CDSC on any
Class B shares you purchase by reinvesting dividends.
Section 3 How You Can Buy and Sell Shares 21
<PAGE>
Class B shares automatically convert to Class A shares eight years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay an annual service fee on any converted Class B
shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6 Over 6
CDSC 5% 4% 4% 3% 2% 1% None
Class C Shares
You can buy Class C shares at the offering price, which is the net asset value
per share without any up-front sales charge so that the full amount of your
purchase is invested in the fund. However, you will pay annual distribution and
service fees of 1% of your fund's average daily assets. The annual .25% service
fee compensates your financial advisor for providing ongoing service to you.
Nuveen retains the service fee on accounts with no authorized dealer of record.
The annual .75% distribution fee reimburses Nuveen for paying your financial
advisor an ongoing sales commission. Nuveen advances the first year's service
and distribution fees. If you sell your shares within 12 months of purchase, you
will normally pay a 1% CDSC based on your purchase or sale price, whichever is
lower. You do not pay a CDSC on any Class C shares you purchase by reinvesting
dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances at the net
asset value on the day of purchase. In order to qualify, you must be eligible
under one of the programs described in "How to Reduce Your Sales Charge" (below)
or meet certain other purchase size criteria. Class R shares are not subject to
sales charges or ongoing service or distribution fees. Class R shares have lower
ongoing expenses than the other classes.
--------------------------------------------------------------------------------
How to Reduce Your Sales Charge
--------------------------------------------------------------------------------
We offer a number of ways to reduce or eliminate the up-front sales charge on
Class A shares or to qualify to purchase Class R shares.
Class A Sales Charge Reductions
. Rights of accumulation
. Letter of intent
. Group purchase
Class A Sales Charge Waivers
. Nuveen Defined Portfolio or Exchange-Traded Fund reinvestment
. Retirement plans
. Certain employees and directors of Nuveen or employees of authorized
dealers
. Bank trust departments
Class R Eligibility
. Certain employees and directors of Nuveen or employees of authorized
dealers
. Bank trust departments
In addition, Class A shares at net asset value and Class R shares may be
purchased through registered investment advisors, certified financial planners
and registered broker-dealers who charge asset-based or
22 Section 3 How You Can Buy and Sell Shares
<PAGE>
comprehensive "wrap" fees for their services. Please refer to the Statement of
Additional Information for detailed program descriptions and eligibility
requirements. Additional information is available from your financial advisor or
by calling (800) 257-8787. Your financial advisor can also help you prepare any
necessary application forms. You or your financial advisor must notify Nuveen at
the time of each purchase if you are eligible for any of these programs. The
funds may modify or discontinue these programs at any time.
--------------------------------------------------------------------------------
How to Buy Shares
--------------------------------------------------------------------------------
Fund shares may be purchased on any business day, which is any day the New
York Stock Exchange is open for business and normally ends at 4 p.m. New York
time. Generally, the Exchange is closed on weekends and national holidays. The
share price you pay will depend on when Nuveen receives your order. Orders
received before the close of trading on a business day will receive that day's
closing share price, otherwise you will receive the next business day's price.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all
the details for you, including opening a new account. Financial advisors can
also help you review your financial needs and formulate long-term investment
goals and objectives. In addition, financial advisors generally can help you
develop a customized financial plan, select investments and monitor and review
your portfolio on an ongoing basis to help assure your investments continue to
meet your needs as circumstances change. Financial advisors are paid for ongoing
investment advice and services either from fund sales charges and fees or by
charging you a separate fee in lieu of a sales charge. If you do not have a
financial advisor, call (800) 257-8787 and Nuveen can refer you to one in your
area.
By Mail
You may open an account and buy shares by mail by completing the enclosed
application and mailing it along with your check to: Nuveen Investor Services,
P.O. Box 5186, Bowling Green Station, New York, NY 10274-5186. No third party
checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($1,000 for a Traditional/Roth IRA
account; $500 for an Education IRA account; $50 through systematic investment
plan accounts) and may be lower for accounts opened through certain fee-based
programs. Subsequent investments must be in amounts of $50 or more. The funds
reserve the right to reject purchase orders and to waive or increase the minimum
investment requirements.
--------------------------------------------------------------------------------
Systematic Investing
--------------------------------------------------------------------------------
Systematic investing allows you to make regular investments through automatic
deductions from your bank account, directly from your paycheck or from
exchanging shares from another mutual fund account (simply complete the
appropriate application). The minimum automatic deduction is $50 per month.
There is no charge to participate in each fund's systematic invesment plan. You
can stop the deductions at any time by notifying your fund in writing. To do
this, simply complete the appropriate
Section 3 How You Can Buy and Sell Shares 23
<PAGE>
section of the account application form or submit an Account Update Form.
From Your Bank Account
You can make systematic investments of $50 or more per month by authorizing us
to draw preauthorized checks on your bank account.
From Your Paycheck
With your employer's consent, you can make systematic investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct monies from your paycheck.
Systematic Exchanging
You can make systematic investments by authorizing Nuveen to exchange shares
from one Nuveen mutual fund account into another identically registered Nuveen
account of the same share class.
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time and does not assure that you will profit.
--------------------------------------------------------------------------------
Systematic Withdrawal
--------------------------------------------------------------------------------
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services-Fund Direct" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in a fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
--------------------------------------------------------------------------------
Special Services
--------------------------------------------------------------------------------
To help make your investing with us easy and efficient, we offer you the
following services at no extra cost.
Exchanging Shares
You may exchange fund shares into an identically registered account at any time
for an appropriate class of another Nuveen mutual fund available in your state.
Your exchange must meet the minimum purchase requirements of the fund into which
you are exchanging. You may have to pay a sales charge when exchanging shares
that you purchased without a sales charge for shares that are sold with a sales
charge. Please consult the Statement of Additional Information for details.
24 Section 3 How You Can Buy and Sell Shares
<PAGE>
The exchange privilege is not intended to allow you to use a fund for short-term
trading. Because excessive exchanges may interfere with portfolio management,
raise fund operating expenses or otherwise have an adverse effect on other
shareholders, each fund reserves the right to revise or suspend the exchange
privilege, limit the amount or number of exchanges, or reject any exchange.
The funds may change or cancel their exchange policy at any time upon 60 days'
notice. Because an exchange is treated for tax purposes as a purchase and sale,
and any gain may be subject to tax, you should consult your tax advisor about
the tax consequences of exchanging your shares.
Fund Direct/SM/
The Fund Direct Program allows you to link your fund account to your bank
account, transfer money electronically between these accounts and perform a
variety of account transactions, including purchasing shares by telephone and
investing through a systematic investment plan. You may also have dividends,
distributions, redemption payments or systematic withdrawal plan payments sent
directly to your bank account. Your financial advisor can help you complete the
forms for these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
--------------------------------------------------------------------------------
How to Sell Shares
--------------------------------------------------------------------------------
You may sell (redeem) your shares on any business day. You will receive the
share price next determined after Nuveen has received your properly completed
redemption request. Your redemption request must be received before the close of
trading for you to receive that day's price. If you are selling shares purchased
recently with a check, you will not receive your redemption proceeds until your
check has cleared. This may take up to ten business days from your purchase
date. While the funds do not charge a redemption fee, you may be assessed a
CDSC, if applicable. When you redeem Class A, Class B, or Class C shares subject
to a CDSC, each fund will first redeem any shares that are not subject to a
CDSC, and then redeem the shares you have owned for the longest period of time,
unless you ask the fund to redeem your shares in a different order. No CDSC is
imposed on shares you buy through the reinvestment of dividends and capital
gains. The holding period is calculated on a monthly basis and begins on the
first day of the month in which you buy shares. When you redeem shares subject
to a CDSC, the CDSC is calculated on the lower of your purchase price or
redemption proceeds, deducted from your redemption proceeds, and paid to Nuveen.
The CDSC may be waived under certain special circumstances as described in the
Statement of Additional Information.
Section 3 How You Can Buy and Sell Shares 25
<PAGE>
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and procedures to
confirm the identity of callers, it will not be liable for losses resulting from
following telephone instructions it reasonably believes to be genuine. Also, you
should verify your trade confirmations immediately upon receipt.
An Important Note About Involuntary Redemption
From time to time, the funds may establish minimum account size requirements.
The funds reserve the right to liquidate your account upon 30 days' written
notice if the value of your account falls below an established minimum. The
funds presently have set a minimum balance of $100 unless you have an active
Nuveen Defined Portfolio reinvestment account. You will not be assessed a CDSC
on an involuntary redemption.
Through Your Financial Advisor
You may sell your shares through your financial advisor who can prepare the
necessary documentation. Your financial advisor may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by calling (800) 257-8787. Telephone redemptions are not available if you
own shares in certificate form and may not exceed $50,000. Checks will only be
issued to you as the shareholder of record and mailed to your address of record.
If you have established Fund Direct privileges, you may have redemption proceeds
transferred electronically to your bank account. We will normally mail your
check the next business day.
By Mail
You can sell your shares at any time by sending a written request to the
appropriate fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the following
information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds paid (if
other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other than the
address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no event more
than seven days after we receive your request. If you purchased your shares by
check, your redemption proceeds will not be mailed until your check has cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by a fund. A
notary public cannot provide a signature guarantee.
Redemptions In-Kind
The funds generally pay redemption proceeds in cash. Under unusual conditions
that make cash payment unwise and for the protection of existing shareholders,
the funds may pay all or a portion of your redemption proceeds in securities or
other fund assets. Although it is unlikely that your shares would be redeemed
in-kind, you would probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that sale.
26 Section 3 How You Can Buy and Sell Shares
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the funds, this
section includes important details about how the funds make distributions to
shareholders. We discuss some other fund policies, as well.
--------------------------------------------------------------------------------
Dividends, Distributions and Taxes
--------------------------------------------------------------------------------
Payment and Reinvestment Options
The funds automatically reinvest your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial advisor or
call Nuveen at (800) 257-8787.
Foreign Income Tax Considerations
Investment income that the funds receive from their foreign investments may be
subject to foreign income taxes, which generally will reduce fund distributions.
However, the U.S. has entered into tax treaties with many foreign countries that
may entitle you to certain tax benefits.
Taxes and Tax Reporting
The funds will make distributions that may be taxed as ordinary income or
capital gains (which may be taxable at different rates, depending on the length
of time a fund holds its assets). Dividends from a fund's long-term capital
gains are taxable as capital gains, while dividends from short-term capital
gains and net investment income are generally taxable as ordinary income.
Because the Balanced Municipal and Stock Fund invests in municipal bonds,
certain dividends you receive will be exempt from regular federal income tax.
All or a portion of these dividends, however, may be subject to state and local
taxes or to the federal alternative minimum tax (AMT). The tax you pay on a
given capital gains distribution depends generally on how long the fund has held
the portfolio securities it sold. It does not depend on how long you have owned
your fund shares. Dividends generally do not qualify for a dividends received
deduction if you are a corporate shareholder.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains, including any percentage of your fund
dividends attributable to municipal obligations, that you were paid during the
prior year. If you hold your investment at the firm where you purchased your
fund shares, you will receive the statement from that firm. If you hold your
shares directly at the fund, Nuveen will send you the statement. The tax status
of your dividends is the same whether you reinvest your dividends or elect to
receive them in cash. The sale of shares in your account may produce a gain or
loss, and is a taxable event. For tax purposes, an exchange is generally same as
a sale.
Please note that if you do not furnish your fund with your correct Social
Security number or employer identification number, federal law requires
Section 4 General Information 27
<PAGE>
the fund to withhold federal income tax from your distributions and redemption
proceeds, currently at a rate of 31%.
Please consult the Statement of Additional Information and your tax advisor for
more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable dividend is
commonly known as "buying the dividend." The entire dividend may be taxable to
you even though a portion of the dividend effectively represents a return of
your purchase price. Similarly, if you sell or exchange fund shares shortly
before the record date for a tax-exempt dividend, a portion of the price you
receive may be treated as a taxable capital gain even though it reflects
tax-free income earned but not yet distributed by the fund.
Distribution Schedule
<TABLE>
<CAPTION>
Tax-Free Dividends Taxable Dividends Capital Gains
<S> <C> <C> <C>
Growth and Income Stock Fund None Annually Annually
European Value Fund None Annually Annually
Balanced Stock and Bond Fund None Quarterly Annually
Balanced Municipal and Stock Fund Monthly Annually Annually
</TABLE>
--------------------------------------------------------------------------------
Distribution and Service Plans
--------------------------------------------------------------------------------
Nuveen serves as the selling agent and distributor of the funds' shares. In this
capacity, Nuveen manages the offering of the funds' shares and is responsible
for all sales and promotional activities. In order to reimburse Nuveen for its
costs in connection with these activities, including compensation paid to
authorized dealers, each fund has adopted a distribution and service plan in
accordance with Rule 12b-1 under the Investment Company Act of 1940. (See "How
You Can Buy and Sell Shares" for a description of the distribution and service
fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to authorized dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate authorized dealers, including
Nuveen, for providing ongoing account services to shareholders. These services
may include establishing and maintaining shareholder accounts, answering
shareholder inquiries, and providing other personal services to shareholders.
These fees also compensate Nuveen for other expenses, including printing and
distributing prospectuses to persons other than shareholders, and preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of a fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Nuveen periodically undertakes sales promotion programs with authorized dealers
and may pay them the full applicable sales charge as a commission. In addition,
Nuveen may provide support at its own expense to authorized dealers in
connection with sales meetings, seminars,
28 Section 4 General Information
<PAGE>
prospecting seminars and other events at which Nuveen presents its products and
services. Under certain circumstances, Nuveen also will share with authorized
dealers up to half the costs of advertising that features the products and
services of both parties. The Statement of Additional Information contains
further information about these programs.
--------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. New
York time) on each day the New York Stock Exchange is open for business. Net
asset value is calculated for each class of each fund by taking the value of the
class' total assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the funds' Board of Trustees or
its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. Common stocks and other equity securities are valued at the
last sales price that day. Common stocks and other equity securities not listed
on a national securities exchange or Nasdaq are valued at the most recent bid
prices. The prices of fixed-income securities are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available (which is usually the case for municipal bonds), the pricing
service establishes fair value based on prices of comparable securities. In
addition, if it is determined that market prices for a security are unavailable
or inappropriate, the Board of Trustees of the funds, or its designee, may
establish a fair value for the security. See the Statement of Additional
Information for details.
--------------------------------------------------------------------------------
Fund Service Providers
--------------------------------------------------------------------------------
The custodian of the assets of the funds is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the funds. The funds' transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder accounts.
Section 4 General Information 29
<PAGE>
Section 5 Financial Highlights
The financial highlights table is intended to help you understand a fund's
financial performance for the period of the fund's operations. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned on an
investment in a fund (assuming reinvestment of all dividends and distributions).
This information has been audited by Arthur Andersen LLP, whose report, along
with the funds' financial statements, are included in the Statement of
Additional Information and annual report, which are available upon request.
--------------------------------------------------------------------------------
Nuveen Growth and Income Stock Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
--------------------------------------- ----------------------------------
Net
Realized
and
Year Beginning Net Unrealized Net
Ended Net Asset Investment Investment Investment Capital
June 30, Value Income Gain (Loss) Total Income Gains Total
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $27.07 $.22 $(1.62) $(1.40) $(.25) $(1.07) $(1.32)
1999 26.50 .19 2.64 2.83 (.04) (2.22) (2.26)
1998 24.01 .26 4.55 4.81 (.25) (2.07) (2.32)
1997(c)** 17.96 .30 6.18 6.48 (.20) (.23) (.43)
Class B (8/96)
2000 26.87 .03 (1.60) (1.57) (.06) (1.07) (1.13)
1999 26.47 .01 2.61 2.62 - (2.22) (2.22)
1998 24.00 .10 4.51 4.61 (.07) (2.07) (2.14)
1997(c)** 17.97 .21 6.13 6.34 (.08) (.23) (.31)
Class C (8/96)
2000 26.84 .03 (1.61) (1.58) (.06) (1.07) (1.13)
1999 26.43 .01 2.62 2.63 - (2.22) (2.22)
1998 23.98 .10 4.49 4.59 (.07) (2.07) (2.14)
1997(c)** 17.97 .21 6.11 6.32 (.08) (.23) (.31)
Class R (8/96)
2000 27.14 .28 (1.62) (1.34) (.32) (1.07) (1.39)
1999 26.52 .24 2.67 2.91 (.07) (2.22) (2.29)
1998 24.02 .32 4.56 4.88 (.31) (2.07) (2.38)
1997(c)** 17.96 .30 6.24 6.54 (.25) (.23) (.48)
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Ending Expenses Income
Net Net to Average to Average Portfolio
Asset Total Assets Net Net Turnover
Value Return(a) (000) Assets(b) Assets(b) Rate
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $24.35 (5.33)% $669,651 1.30% .85% 155%
1999 27.07 12.37 793,546 1.24 .76 134
1998 26.50 21.59 790,063 1.20 1.04 131
1997(c)** 24.01 36.30 616,209 1.20* 1.53* 110
Class B (8/96)
2000 24.17 (5.97) 93,275 2.06 .11 155
1999 26.87 11.52 95,174 1.99 .03 134
1998 26.47 20.70 71,909 1.95 .38 131
1997(c)** 24.00 35.37 10,664 1.95* 1.03* 110
Class C (8/96)
2000 24.13 (5.97) 55,303 2.07 .09 155
1999 26.84 11.58 41,071 1.98 .04 134
1998 26.43 20.63 21,426 1.95 .39 131
1997(c)** 23.98 35.26 3,630 1.95* 1.04* 110
Class R (8/96)
2000 24.41 (5.13) 17,604 1.06 1.09 155
1999 27.14 12.71 16,904 .99 1.00 134
1998 26.52 21.91 18,335 .95 1.26 131
1997(c)** 24.02 36.65 15,647 .95* 1.56* 110
-----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** All per share amounts reflect a December 18, 1996, stock split of 1.113830,
1.112700, 1.112700 and 1.113806 shares, respectively, for each share of
Class A, B, C and R.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.30%, 2.05%, 2.05% and 1.05% for classes A,B, C,
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are .86%, .12%, .10% and 1.10% for classes A, B, C and R,
respectively.
(c) From commencement of class operations as noted.
30 Section 5 Financial Highlights
<PAGE>
--------------------------------------------------------------------------------
Nuveen European Value Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
--------------------------------------- ----------------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset
June 30, Value Income Gain (Loss) Total Income Gains Total Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/98)
2000 $20.17 $.18 $3.28 $3.46 $(.18) $(.11) $(.29) $23.34
1999 19.86 .22 .10 .32 (.01) - (.01) 20.17
1998 (c) 20.00 .02 (.14) (.12) (.02) - (.02) 19.86
Class B (5/98)
2000 20.04 .01 3.26 3.27 (.03) (.11) (.14) 23.17
1999 19.87 .04 .13 .17 - - - 20.04
1998 (c) 20.00 .03 (.15) (.12) (.01) - (.01) 19.87
Class C (5/98)
2000 20.04 .01 3.25 3.26 (.03) (.11) (.14) 23.16
1999 19.87 .07 .10 .17 - - - 20.04
1998 (c) 20.00 .01 (.13) (.12) (.01) - (.01) 19.87
Class R (5/98)
2000 20.21 .24 3.29 3.53 (.24) (.11) (.35) 23.39
1999 19.87 .23 .13 .36 (.02) - (.02) 20.21
1998 (c) 20.00 .03 (.13) (.10) (.03) - (.03) 19.87
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Total Assets Net Net Turnover
Return(a) (000) Assets(b) Assets(b) Rate
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (5/98)
2000 $17.22% $3,373 1.56% .80% 281%
1999 1.63 3,277 1.55 1.15 230
1998 (c) (.59) 102 1.55* 1.33* 5
Class B (5/98)
2000 16.34 3,518 2.31 .03 281
1999 .86 3,130 2.30 .19 230
1998 (c) (.60) 335 2.30* 1.59* 5
Class C (5/98)
2000 16.29 868 2.31 .05 281
1999 .86 711 2.30 .34 230
1998 (c) (.60) 42 2.30* .60* 5
Class R (5/98)
2000 17.44 5,395 1.31 1.06 281
1999 1.86 4,135 1.30 1.20 230
1998 (c) (.52) 3,240 1.30* 1.75* 5
-----------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement by the investment adviser, where applicable.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.55%, 2.30%, 2.30% and 1.30% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are .81%, .04%, .06% and 1.07% for classes A, B, C and R,
respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 31
<PAGE>
--------------------------------------------------------------------------------
Nuveen Balanced Stock and Bond Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
--------------------------------------- ----------------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset
June 30, Value Income Gain (Loss) Total Income Gains Total Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $27.18 $.69 $(1.02) $(.33) $(.70) $(.95) $(1.65) $25.20
1999 26.39 .58 1.93 2.51 (.57) (1.15) (1.72) 27.18
1998 23.84 .77 3.11 3.88 (.76) (.57) (1.33) 26.39
1997 (c) 20.00 .70 3.66 4.36 (.42) (.10) (.52) 23.84
Class B (8/96)
2000 27.18 .50 (1.02) (.52) (.51) (.95) (1.46) 25.20
1999 26.39 .39 1.93 2.32 (.38) (1.15) (1.53) 27.18
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39
1997 (c) 20.00 .46 3.75 4.21 (.27) (.10) (.37) 23.84
Class C (8/96)
2000 27.19 .50 (1.02) (.52) (.51) (.95) (1.46) 25.21
1999 26.39 .40 1.93 2.33 (.38) (1.15) (1.53) 27.19
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39
1997 (c) 20.00 .53 3.68 4.21 (.27) (.10) (.37) 23.84
Class R (8/96)
2000 27.18 .76 (1.03) (.27) (.77) (.95) (1.72) 25.19
1999 26.39 .65 1.93 2.58 (.64) (1.15) (1.79) 27.18
1998 23.84 .83 3.11 3.94 (.82) (.57) (1.39) 26.39
1997 (c) 20.00 .61 3.80 4.41 (.47) (.10) (.57) 23.84
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Total Assets Net Net Turnover
Return(a) (000) Assets(b) Assets(b) Rate
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (8/96)
2000 (1.23)% $52,470 1.21% 2.66% 81%
1999 10.21 67,512 1.19 2.27 96
1998 16.71 69,614 1.10 3.06 86
1997 (c) 22.04 56,686 1.10* 3.39* 52
Class B (8/96)
2000 (1.97) 11,200 1.96 1.92 81
1999 9.39 12,856 1.94 1.54 96
1998 15.86 10,356 1.85 2.32 86
1997 (c) 21.26 646 1.85* 2.23* 52
Class C (8/96)
2000 (1.93) 6,620 1.96 1.93 81
1999 9.39 7,142 1.94 1.54 96
1998 15.86 4,142 1.85 2.31 86
1997 (c) 21.26 980 1.85* 2.53* 52
Class R (8/96)
2000 (1.02) 4,625 .96 2.91 81
1999 10.48 4,445 .94 2.53 96
1998 16.99 3,413 .85 3.32 86
1997 (c) 22.31 6,052 .85* 3.12* 52
------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.20%, 1.95%, 1.95% and .95% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 2.67%, 1.93%, 1.93% and 2.92% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
32 Section 5 Financial Highlights
<PAGE>
--------------------------------------------------------------------------------
Nuveen Balanced Municipal and Stock Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
(Inception
Date)
Investment Operations Less Distributions
--------------------------------------- ----------------------------------
Net
Realized
and Ending
Year Beginning Net Unrealized Net Net
Ended Net Asset Investment Investment Investment Capital Asset
June 30, Value Income Gain (Loss) Total Income Gains Total Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $25.45 $.74 $(.96) $(.22) $(.81) $(.11) $(.92) $24.31
1999 25.46 .62 .70 1.32 (.65) (.68) (1.33) 25.45
1998 23.11 .67 2.66 3.33 (.61) (.37) (.98) 25.46
1997 (c) 20.00 .56 3.02 3.58 (.42) (.05) (.47) 23.11
Class B (8/96)
2000 25.65 .57 (.97) (.40) (.44) (.11) (.55) 24.70
1999 25.53 .46 .68 1.14 (.34) (.68) (1.02) 25.65
1998 23.11 .49 2.67 3.16 (.37) (.37) (.74) 25.53
1997 (c) 20.00 .40 3.04 3.44 (.28) (.05) (.33) 23.11
Class C (8/96)
2000 25.63 .57 (.97) (.40) (.44) (.11) (.55) 24.68
1999 25.51 .45 .69 1.14 (.34) (.68) (1.02) 25.63
1998 23.10 .49 2.66 3.15 (.37) (.37) (.74) 25.51
1997 (c) 20.00 .40 3.03 3.43 (.28) (.05) (.33) 23.10
Class R (8/96)
2000 25.33 .80 (.96) (.16) (.93) (.11) (1.04) 24.13
1999 25.39 .68 .71 1.39 (.77) (.68) (1.45) 25.33
1998 23.11 .72 2.66 3.38 (.73) (.37) (1.10) 25.39
1997 (c) 20.00 .61 3.03 3.64 (.48) (.05) (.53) 23.11
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Total Assets Net Net Turnover
Return(a) (000) Assets(b) Assets(b) Rate
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (8/96)
2000 (.83)% $ 93,400 1.21% 3.01% 53%
1999 5.49 123,917 1.19 2.52 52
1998 14.71 117,005 1.10 2.73 87
1997 (c) 18.05 79,952 1.10* 2.79* 32
Class B (8/96)
2000 (1.57) 45,779 1.96 2.26 53
1999 4.71 52,718 1.94 1.83 52
1998 13.91 32,384 1.85 1.96 87
1997 (c) 17.32 2,051 1.85* 1.99* 32
Class C (8/96)
2000 (1.57) 14,837 1.96 2.27 53
1999 4.71 20,498 1.94 1.80 52
1998 13.87 14,908 1.85 1.97 87
1997 (c) 17.27 1,559 1.85* 1.97* 32
Class R (8/96)
2000 (.64) 1,111 .96 3.26 53
1999 5.81 1,182 .94 2.76 52
1998 14.94 1,353 .85 2.99 87
1997 (c) 18.38 6,963 .85* 3.16* 32
----------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
When custodian fee credits are applied, the Ratios of Expenses to Average
Net Assets for 2000 are 1.20%, 1.95%, 1.95% and .95% for classes A, B, C
and R, respectively, and the Ratios of Net Investment Income to Average Net
Assets for 2000 are 3.02%, 2.27%, 2.28% and 3.26% for classes A, B, C and
R, respectively.
(c) From commencement of class operations as noted.
Section 5 Financial Highlights 33
<PAGE>
NUVEEN
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
International Growth Fund
Innovation Fund
Nuveen Rittenhouse Growth Fund
Growth and Income
Growth and Income Stock Fund
European Value Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Income
Income Fund
Floating Rate Fund/1/
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/2/ Maryland Ohio
Colorado Massachusetts/2/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/2/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you, including the
codes of ethics adopted by the funds, Nuveen and NIAC. The Statement of
Additional Information ("SAI"), incorporated by reference into this prospectus,
contains detailed information on the policies and operation of the funds
included in this prospectus. Additional information about the funds' investments
is available in the funds' annual and semi-annual reports to shareholders. In
the funds' annual reports, you will find a discussion of the market conditions
and investment strategies that significantly affected the funds' performance
during their last fiscal year. Call Nuveen at (800) 257-8787 to request a free
copy of any of these materials or other fund information; or ask your financial
advisor for copies.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request fund information by sending
an e-mail request to [email protected] or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549. The funds'
Investment Company file number is 811-07619.
1. This is a continuously-offered closed-end interval fund. As such,
redemptions are only available during quarterly repurchase periods. See
fund prospectus for additional information.
2. Long-term and insured long-term portfolios.
<PAGE>
Statement of Additional Information
October 27, 2000
Nuveen Investment Trust
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN GROWTH AND INCOME STOCK FUND
NUVEEN EUROPEAN VALUE FUND
NUVEEN BALANCED STOCK AND BOND FUND
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained without charge from certain securities representatives, banks and
other financial institutions that have entered into sales agreements with
Nuveen Investments ("Nuveen"), or from a Fund, by written request to the appli-
cable Fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station,
New York, NY 10274-5186, or by calling 800-257-8787. This Statement of Addi-
tional Information relates to, and should be read in conjunction with, the Pro-
spectus for the Funds. The Prospectus for the Funds is dated October 27, 2000.
<TABLE>
<S> <C>
Table of Contents Page
------------------------------------------------------------------------------
General Information B-2
------------------------------------------------------------------------------
Investment Policies and Restrictions B-2
------------------------------------------------------------------------------
Investment Policies and Techniques B-5
------------------------------------------------------------------------------
Management B-27
------------------------------------------------------------------------------
Fund Manager and Sub-Adviser B-34
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Portfolio Transactions B-36
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Net Asset Value B-38
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Tax Matters B-40
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Performance Information B-47
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Additional Information on the Purchase and Redemption of Fund Shares and
Shareholder Programs B-56
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Distribution and Service Plans B-69
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Independent Public Accountants, Custodian and Transfer Agent B-71
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Financial Statements B-71
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General Trust Information B-71
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Appendix A--Ratings of Investments A-1
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</TABLE>
The audited financial statements for each Fund's most recent fiscal year appear
in the Funds' Annual Reports, which are incorporated herein by reference. The
Annual Reports accompany this Statement of Additional Information.
<PAGE>
GENERAL INFORMATION
Nuveen Growth and Income Stock Fund ("Growth/Income Fund"), Nuveen European
Value Fund ("European Value Fund"), Nuveen Balanced Stock and Bond Fund
("Stock/Bond Fund") and Nuveen Balanced Municipal and Stock Fund ("Muni/Stock
Fund") (individually a "Fund" and collectively the "Funds") are series of the
Nuveen Investment Trust (the "Trust"), an open-end diversified management se-
ries investment company organized as a Massachusetts business trust on May 6,
1996. Each series of the Trust represents shares of beneficial interest in a
separate portfolio of securities and other assets, with its own objectives and
policies. Currently, four series of the Trust are authorized and outstanding.
Certain matters under the Investment Company Act of 1940, which must be submit-
ted to a vote of the holders of the outstanding voting securities of a series
company, shall not be deemed to have been effectively acted upon unless ap-
proved by the holders of a majority of the outstanding voting securities of
each series affected by such matter.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Restrictions
The investment objective and certain fundamental investment policies of each
Fund are described in the Prospectus for that Fund. A Fund, as a fundamental
policy, may not, without the approval of the holders of a majority of the
shares of the Fund:
(1) With respect to 75% of its total assets, purchase the securities of any is-
suer (except securities issued or guaranteed by the United States government or
any agency or instrumentality thereof) if, as a result, (i) more than 5% of the
Fund's total assets would be invested in securities of that issuer, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that is-
suer.
(2) Borrow money, except that the Fund may (i) borrow money from banks for tem-
porary or emergency purposes (but not for leverage or the purchase of invest-
ments) and (ii) engage in other transactions permissible under the Investment
Company Act of 1940 that may involve a borrowing (such as obtaining such short-
term credits as are necessary for the clearance of transactions, engaging in
delayed- delivery transactions, or purchasing certain futures and options),
provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed), less the
Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the extent
that the Fund may be deemed to be an underwriter within the meaning of the Se-
curities Act of 1933 in connection with the purchase and sale of portfolio se-
curities.
(4) Make loans to other persons, except through (i) the purchase of debt secu-
rities permissible under the Fund's investment policies, (ii) repurchase agree-
ments, or (iii) the lending of portfolio securities, provided that no such loan
of portfolio securities may be made by the Fund if, as a result, the aggregate
of such loans would exceed 33 1/3% of the value of the Fund's total assets.
B-2
<PAGE>
(5) Purchase or sell physical commodities unless acquired as a result of own-
ership of securities or other instruments (but this shall not prevent the Fund
from purchasing or selling options, futures contracts, or other derivative in-
struments, or from investing in securities or other instruments backed by
physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prohibit the Fund from
purchasing or selling securities or other instruments backed by real estate or
of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment Company
Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of the
Fund's total assets would be invested in the securities of issuers whose prin-
cipal business activities are in the same industry (except that this restric-
tion shall not be applicable to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof and, in the case of the
Muni/Stock Fund to Municipal Obligations, other than those Municipal Obliga-
tions backed only by the assets and revenues of non-governmental users).
The foregoing restrictions and limitations will apply only at the time of pur-
chase of securities, and the percentage limitations will not be considered vi-
olated unless an excess or deficiency occurs or exists immediately after and
as a result of an acquisition of securities, unless otherwise indicated.
For the purpose of applying the limitation set forth in restriction (1) above
to Municipal Obligations an issuer shall be deemed the sole issuer of a secu-
rity when its assets and revenues are separate from other governmental enti-
ties and its securities are backed only by its assets and revenues. Similarly,
in the case of a non-governmental user, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed only by the
assets and revenues of the non-governmental user, then such non-governmental
user would be deemed to be the sole issuer. Where a security is also backed by
the enforceable obligation of a superior or unrelated governmental or other
entity (other than a bond insurer), it shall also be included in the computa-
tion of securities owned that are issued by such governmental or other entity.
Where a security is guaranteed by a governmental entity or some other facili-
ty, such as a bank guarantee or letter of credit, such a guarantee or letter
of credit would be considered a separate security and would be treated as an
issue of such government, other entity or bank. When a Municipal Obligation is
insured by bond insurance, it shall not be considered a security that is is-
sued or guaranteed by the insurer; instead, the issuer of such Municipal Obli-
gation will be determined in accordance with the principles set forth above.
The foregoing restrictions do not limit the percentage of the assets of the
Muni/Stock Fund that may be invested in Municipal Obligations insured by any
given insurer.
The foregoing fundamental investment policies, together with the investment
objective of each of the Growth/Income Fund, the European Value Fund, the
Stock/Bond Fund and the Muni/Stock Fund, and certain other policies specifi-
cally identified in the prospectus, cannot be changed without approval by
holders of a "majority of the Fund's outstanding voting shares." As defined in
the Investment Company Act of 1940, this means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if the holders of more than 50% of the
Fund's shares are present or represented by proxy, or (ii) more than 50% of
the Fund's shares, whichever is less.
B-3
<PAGE>
In addition to the foregoing fundamental investment policies, each Fund is also
subject to the following non-fundamental restrictions and policies, which may
be changed by the Board of Trustees. A Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain se-
curities equivalent in kind and amount to the securities sold short at no added
cost, and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to constitute
selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such short-
term credits as are necessary for the clearance of transactions; and provided
that margin deposits in connection with futures contracts, options on futures
contracts, or other derivative instruments shall not constitute purchasing se-
curities on margin.
(3) Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and then
such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of the
Fund's total assets at the time of the borrowing or investment.
(4) Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions there-
of) if, as a result, more than 5% of its net assets would be invested in the
securities of issuers that, including predecessors or unconditional guarantors,
have a record of less than three years of continuous operation. This policy
does not apply to the European Value Fund or to securities of pooled investment
vehicles or mortgage or asset-backed securities.
(5) Purchase securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and applicable state law.
(6) Enter into futures contracts or related options if more than 30% of the
Fund's net assets would be represented by futures contracts or more than 5% of
the Fund's net assets would be committed to initial margin deposits and premi-
ums on futures contracts and related options.
(7) Invest in direct interests in oil, gas or other mineral exploration pro-
grams or leases; however, the Fund may invest in the securities of issuers that
engage in these activities.
(8) Purchase securities when borrowings exceed 5% of its total assets. If due
to market fluctuations or other reasons, the value of the Fund's assets falls
below 300% of its borrowings, the Fund will reduce its borrowings within 3
business days. To do this, the Fund may have to sell a portion of its invest-
ments at a time when it may be disadvantageous to do so.
(9) Invest in illiquid securities if, as a result of such investment, more than
15% of the Fund's net assets would be invested in illiquid securities.
B-4
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds' investment
objectives, policies, and techniques that are described in the Prospectus for
each Fund.
Investment in Municipal Obligations
Portfolio Investments
Except to the extent the Muni/Stock Fund invests in temporary investments as
described below, all of the Muni/Stock Fund's investments in Municipal Obliga-
tions will be comprised of tax-exempt Municipal Obligations that are either (1)
rated, at the time of purchase, within the four highest grades (Baa or BBB or
better) by Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's
Ratings Group ("S&P") or (2) unrated but which, in the opinion of Nuveen Insti-
tutional Advisory Corp. ("NIAC"), have credit characteristics equivalent to,
and will be of comparable quality to, Municipal Obligations so rated; provided,
however, that not more than 20% of the Muni/Stock Fund's investments in Munici-
pal Obligations, may be in such unrated bonds. The foregoing policies are fun-
damental policies of the Muni/Stock Fund. Municipal Securities rated Baa or BBB
are considered "investment grade" securities; Municipal Securities rated Baa
are considered medium grade obligations which lack outstanding investment char-
acteristics and in fact have speculative characteristics as well, while Munici-
pal Securities rated BBB are regarded as having an adequate capacity to pay
principal and interest. Municipal Securities rated AAA in which the Fund may
invest may have been so rated on the basis of the existence of insurance guar-
anteeing the timely payment, when due, of all principal and interest. A general
description of Moody's and S&P's ratings is set forth in Appendix A hereto. The
ratings of Moody's and S&P represent their opinions as to the quality of the
Municipal Securities they rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different yields
while obligations of the same maturity and coupon with different ratings may
have the same yield.
The foregoing policies as to rating of investments in securities will apply
only at the time of the purchase of a security, and the Fund will not be re-
quired to dispose of securities in the event Moody's or S&P downgrades its as-
sessment of the credit characteristics of a particular issuer.
The municipal portfolio manager of the Muni/Stock Fund pursues a value oriented
approach for selecting municipal securities by seeking to identify underrated
or undervalued Municipal Obligations. Underrated Municipal Obligations are
those whose ratings do not, in NIAC's opinion, reflect their true value. Such
Municipal Obligations may be underrated because of the time that has elapsed
since their rating was assigned or reviewed, or because of positive factors
that may not have been fully taken into account by rating agencies, or for
other similar reasons. Municipal Obligations that are undervalued or that rep-
resent undervalued municipal market sectors are Municipal Obligations that, in
NIAC's opinion, are worth more than the value assigned to them in the market-
place. Municipal Obligations of particular types or purposes (e.g., hospital
bonds, industrial revenue bonds or bonds issued by a particular municipal issu-
er) may be undervalued because there is a temporary excess of supply in that
market sector, or because of a general decline in the market price of Municipal
Obligations of the market sector for
B-5
<PAGE>
reasons that do not apply to the particular Municipal Obligations that are con-
sidered undervalued. The Muni/Stock Fund's investment in underrated or under-
valued Municipal Obligations will be based on NIAC's belief that their prices
should ultimately reflect their true value.
The Muni/Stock Fund has not established any limit on the percentage of its
portfolio of investments that may be invested in Municipal Obligations subject
to the alternative minimum tax provisions of Federal tax law. Consequently, a
substantial portion of the current income produced by the Fund may be
includable in alternative minimum taxable income. Special considerations apply
to corporate investors. See "Tax Matters."
Also included within the general category of Municipal Obligations described in
the Muni/Stock Fund Prospectus are participations in lease obligations or in-
stallment purchase contract obligations (hereinafter collectively called "Mu-
nicipal Lease Obligations") of municipal authorities or entities. Although a
Municipal Lease Obligation does not constitute a general obligation of the mu-
nicipality for which the municipality's taxing power is pledged, a Municipal
Lease Obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payments due under the Municipal Lease Obliga-
tion. However, certain Municipal Lease Obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In the case of a "non-appropriation" lease, the
Fund's ability to recover under the lease in the event of non-appropriation or
default will be limited solely to the repossession of the leased property,
without recourse to the general credit of the lessee, and disposition or re-
leasing of the property might prove difficult. The Muni/Stock Fund will seek to
minimize these risks by not investing more than 20% of the assets allocated to
investments in Municipal Obligations in Municipal Lease Obligations that con-
tain "non-appropriation" clauses, and by only investing in those "non-appropri-
ation" Municipal Lease Obligations where (1) the nature of the leased equipment
or property is such that its ownership or use is essential to a governmental
function of the municipality, (2) appropriate covenants will be obtained from
the municipal obligor prohibiting the substitution or purchase of similar
equipment if lease payments are not appropriated, (3) the lease obligor has
maintained good market acceptability in the past, and (4) the investment is of
a size that will be attractive to institutional investors.
During temporary defensive periods (e.g., times when, in NIAC's opinion, the
ability of the Muni/Stock Fund to meet its long-term investment objectives and
preserve the asset value of a Fund may be adversely affected by significant ad-
verse market, economic, political, or other circumstances), and in order to
keep cash on hand fully invested, the Fund may invest any percentage of its as-
sets in temporary investments. Temporary investments may be either tax-exempt
or taxable. To the extent the Muni/Stock Fund invests in taxable temporary in-
vestments, the Fund will not at such times be in a position to achieve that
portion of its investment objective of seeking income exempt from federal in-
come tax. For further information, see "Cash Equivalents and Short-Term Invest-
ments" below.
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the obliga-
tions of such issuers may become subject to the laws enacted in the future by
B-6
<PAGE>
Congress, state legislatures or referenda extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
Municipal Obligations may be materially affected.
Cash Equivalents and Short-Term Investments
Short-Term Taxable Fixed Income Securities
The Growth/Income Fund and the European Value Fund may invest up to 35% of
their total assets, and for temporary defensive purposes or to keep cash on
hand fully invested up to 100% of their total assets, in cash equivalents and
short-term taxable fixed income securities from issuers having a long-term rat-
ing of at least A or higher by S&P, Moody's or Fitch, or A- or higher by Duff &
Phelps, Inc. ("D&P") (and for the European Value Fund only, any other securi-
ties determined by the portfolio manager to be of comparable quality) and hav-
ing a maturity of one year or less. The Stock/Bond Fund may invest up to 20% of
its total assets, and for temporary defensive purposes or to keep cash on hand
fully invested up to 100% of its total assets, in cash equivalents and short-
term taxable fixed income securities from issuers having a long-term rating of
at least A or higher by S&P, Moody's or Fitch, or A- or higher by D&P and hav-
ing a maturity of one year or less. The Muni/Stock Fund may invest up to 10% of
its total assets, and for temporary defensive purposes or to keep cash on hand
fully invested up to 100% of its total assets in cash equivalents and short-
term taxable fixed income securities, although the Fund intends to invest in
taxable temporary investments only in the event that suitable tax-exempt tempo-
rary investments are not available at reasonable prices and yields. Short-term
taxable fixed income securities are defined to include, without limitation, the
following:
(1) Each Fund may invest in U.S. government securities, including bills, notes
and bonds differing as to maturity and rates of interest, which are either is-
sued or guaranteed by the U.S. Treasury or by U.S. government agencies or in-
strumentalities. U.S. government agency securities include securities issued by
(a) the Federal Housing Administration, Farmers Home Administration, Export-Im-
port Bank of the United States, Small Business Administration, and the Govern-
ment National Mortgage Association, whose securities are supported by the full
faith and credit of the United States; (b) the Federal Home Loan Banks, Federal
Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities
are supported by the right of the agency to borrow from the U.S. Treasury; (c)
the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain obliga-
tions of the agency or instrumentality; and (d) the Student Loan Marketing As-
sociation, whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored agen-
cies or instrumentalities, no assurance can be given that it always will do so
since it is not so obligated by law. The U.S. government, its agencies, and in-
strumentalities do not guarantee the market value of their securities, and con-
sequently, the value of such securities may fluctuate. The Muni/Stock Fund may
only invest in government securities with maturities of less than one year or
that have a variable or floating rate of interest. In addition, the European
Value Fund may invest in sovereign debt obligations of foreign countries. A
sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of
B-7
<PAGE>
factors, including its cash flow situation, the extent of its foreign reserves,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole, the
sovereign debtor's policy toward principal international lenders and the polit-
ical constraints to which it may be subject.
(2) Each Fund may invest in certificates of deposit issued against funds depos-
ited in a bank or savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and are normally ne-
gotiable. If such certificates of deposit are non-negotiable, they will be con-
sidered illiquid securities and be subject to the Fund's 15% restriction on in-
vestments in illiquid securities. Pursuant to the certificate of deposit, the
issuer agrees to pay the amount deposited plus interest to the bearer of the
certificate on the date specified thereon. Under current FDIC regulations, the
maximum insurance payable as to any one certificate of deposit is $100,000;
therefore, certificates of deposit purchased by the Fund may not be fully in-
sured. The Muni/Stock Fund may only invest in certificates of deposit issued by
U.S. banks with at least $1 billion in assets.
(3) The Growth/Income Fund, European Value Fund and the Stock/Bond Fund may in-
vest in bankers' acceptances which are short-term credit instruments used to
finance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
asset or it may be sold in the secondary market at the going rate of interest
for a specific maturity.
(4) Each Fund may invest in repurchase agreements which involve purchases of
debt securities. In such an action, at the time the Fund purchases the securi-
ty, it simultaneously agrees to resell and redeliver the security to the sell-
er, who also simultaneously agrees to buy back the security at a fixed price
and time. This assures a predetermined yield for a Fund during its holding pe-
riod since the resale price is always greater than the purchase price and re-
flects an agreed-upon market rate. Such actions afford an opportunity for the
Fund to invest temporarily available cash. A Fund may enter into repurchase
agreements only with respect to obligations of the U.S. government, its agen-
cies or instrumentalities; certificates of deposit; or bankers acceptances in
which the Fund may invest. Repurchase agreements may be considered loans to the
seller, collateralized by the underlying securities. The risk to a Fund is lim-
ited to the ability of the seller to pay the agreed-upon sum on the repurchase
date; in the event of default, the repurchase agreement provides that the af-
fected Fund is entitled to sell the underlying collateral. If the value of the
collateral declines after the agreement is entered into, however, and if the
seller defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss of
both principal and interest. The portfolio manager monitors the value of the
collateral at the time the action is entered into and at all times during the
term of the repurchase agreement. The portfolio manager does so in an effort to
determine that the value of the collateral always equals or exceeds the agreed-
upon repurchase price to be paid to a Fund. If the seller were to be subject to
a federal bankruptcy proceeding, the ability of a Fund to liquidate the collat-
eral could be delayed or impaired because of certain provisions of the bank-
ruptcy laws.
B-8
<PAGE>
(5) The Growth/Income Fund and the European Value Fund may invest in bank time
deposits, which are monies kept on deposit with banks or savings and loan asso-
ciations for a stated period of time at a fixed rate of interest. There may be
penalties for the early withdrawal of such time deposits, in which case the
yields of these investments will be reduced.
(6) Each Fund may invest in commercial paper, which are short-term unsecured
promissory notes, including variable rate master demand notes issued by corpo-
rations to finance their current operations. Master demand notes are direct
lending arrangements between the Fund and a corporation. There is no secondary
market for the notes. However, they are redeemable by the Fund at any time. The
portfolio manager will consider the financial condition of the corporation
(e.g., earning power, cash flow, and other liquidity ratios) and will continu-
ously monitor the corporation's ability to meet all of its financial obliga-
tions, because the Fund's liquidity might be impaired if the corporation were
unable to pay principal and interest on demand. The Growth/Income Fund and the
Stock/Bond Fund may only invest in commercial paper rated A-1 or better by S&P,
Prime-1 or higher by Moody's, Duff 2 or higher by D&P or Fitch 2 or higher by
Fitch. The European Value Fund may only invest in commercial paper rated A-2 or
better by S&P, Prime-2 or higher by Moody's, Duff 2 or higher by D&P or Fitch 2
or higher by Fitch, or unrated commercial paper which is, in the opinion of the
portfolio manager, of comparable quality. The Muni/Stock Fund may only invest
in commercial paper, corporate notes, corporate bonds or corporate debentures
that are rated within the highest grade by Moody's or S&P and which mature
within one year of the date of purchase or carry a variable or floating rate of
interest.
Short-Term Tax-Exempt Fixed Income Securities
The Muni/Stock Fund may invest up to 10% of its total assets and during certain
temporary periods, in order to keep cash on hand fully invested or as a defen-
sive measure in response to prevailing market conditions, up to 100% of its to-
tal assets as "temporary investments" in cash equivalent and short-term fixed
income securities that are either taxable or tax-exempt. The short-term taxable
fixed income securities are described above. Short-term tax-exempt fixed income
securities are securities that are exempt from regular federal income tax and
mature within three years or less from the date of issuance. Short-term tax-ex-
empt fixed income securities are defined to include, without limitation, the
following:
Bond Anticipation Notes (BANs) are usually general obligations of state and lo-
cal governmental issuers which are sold to obtain interim financing for pro-
jects that will eventually be funded through the sale of long-term debt obliga-
tions or bonds. The ability of an issuer to meet its obligations on its BANs is
primarily dependent on the issuer's access to the long-term municipal bond mar-
ket and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to fi-
nance the current operations of such governments. Repayment is generally to be
derived from specific future tax revenues. Tax anticipation notes are usually
general obligations of the issuer. A weakness in an issuer's capacity to raise
taxes due to, among other things, a decline in its tax base or a rise in delin-
quencies, could adversely affect the issuer's ability to meet its obligations
on outstanding TANs.
Revenue Anticipation Notes (RANs) are issued by governments or governmental
bodies with the expectation that future revenues from a designated source will
be used to repay the notes. In general, they
B-9
<PAGE>
also constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of govern-
ment, could adversely affect an issuer's ability to meet its obligations on
outstanding RANs. In addition, the possibility that the revenues would, when
received, be used to meet other obligations could affect the ability of the is-
suer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for spe-
cific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those
described above to commercial banks as evidence of borrowings. The purposes for
which the notes are issued are varied but they are frequently issued to meet
short-term working capital or capital-project needs. These notes may have risks
similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represents very short-term
unsecured, negotiable promissory notes, issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available there-
from. Maturities of municipal paper generally will be shorter than the maturi-
ties of TANs, BANs or RANs. There is a limited secondary market for issues of
municipal paper.
Certain Municipal Obligations may carry variable or floating rates of interest
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indices, such as a bank prime rate or a tax-exempt money market
index.
While the various types of notes described above as a group represent the major
portion of the tax-exempt note market, other types of notes are occasionally
available in the marketplace and the Muni/Stock Fund may invest in such other
types of notes to the extent permitted under its investment objective, policies
and limitations. Such notes may be issued for different purposes and may be se-
cured differently from those mentioned above.
Equity Securities
Under normal market conditions, the Growth/Income Fund, Stock/Bond Fund and
Muni/Stock Fund will invest the assets allocated to equity investments primar-
ily in equity securities of domestic companies with market capitalizations of
at least $500 million ("Equity Securities"). Equity Securities include, but are
not limited to, common stocks, preferred stocks, warrants to purchase common
stocks or preferred stocks, securities convertible into common or preferred
stocks, such as convertible bonds and debentures, and other securities with eq-
uity characteristics. The Growth/Income Fund, under normal market conditions,
will invest at least 65% of its total assets in Equity Securities which do not
include warrants or rights to purchase common stock. Through its investment
strategy the Growth/Income Fund seeks to provide higher returns over time than
the S&P 500 with an equal or lower level of risk.
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<PAGE>
Convertible bonds and debentures must be rated Baa or higher by Moody's or BBB
or higher by S&P, D&P or Fitch. Bonds rated Baa or BBB, although considered in-
vestment grade, have speculative characteristics and may be subject to greater
fluctuations in value than higher-rated bonds.
In addition, the Growth/Income Fund, Stock/Bond Fund and Muni/Stock Fund may
invest in dollar-denominated equity securities of foreign issuers, including
American Depository Receipts ("ADRs") as described in "Foreign Securities" be-
low.
Foreign Securities
The European Value Fund may invest up to 100% of its net assets in foreign se-
curities. The Growth/Income Fund, Stock/Bond Fund and Muni/Stock Fund may in-
vest up to 25% of its net assets in foreign securities denominated in U.S. dol-
lars. Investments in securities of foreign issuers involve risks in addition to
the usual risks inherent in domestic investments, including currency risks. The
value of a foreign security in U.S. dollars tends to decrease when the value of
the U.S. dollar rises against the foreign currency in which the security is de-
nominated and tends to increase when the value of the U.S. dollar falls against
such currency.
Foreign securities are affected by the fact that in many countries there is
less publicly available information about issuers than is available in the re-
ports and ratings published about companies in the U.S. and companies may not
be subject to uniform accounting, auditing and financial reporting standards.
Other risks inherent in foreign investments include expropriation; confiscatory
taxation; withholding taxes on dividends and interest; less extensive regula-
tion of foreign brokers, securities markets and issuers; diplomatic develop-
ments; and political or social instability. Foreign economies may differ favor-
ably or unfavorably from the U.S. economy in various respects, and many foreign
securities are less liquid and their prices tend to be more volatile than com-
parable U.S. securities. From time to time, foreign securities may be difficult
to liquidate rapidly without adverse price effects.
Indirect Foreign Investment--Depositary Receipts. Eligible foreign securities
include American Depository Receipts ("ADRs"). ADRs are receipts typically is-
sued by a U.S. bank or trust company evidencing ownership of the underlying
foreign security and denominated in U.S. dollars. ADRs do not eliminate all the
risk inherent in investing in foreign issuers, such as changes in foreign cur-
rency exchange rates. However, by investing in ADRs rather than directly in
foreign issuers' stock, the Funds avoid currency risks during the settlement
period. Some ADRs may not be sponsored by the issuer.
In addition to ADRs, the European Value Fund may invest in foreign securities
by purchasing other depositary receipts, including European Depository Receipts
("EDRs"), or Global Depositary Receipts ("GDRs"), or other securities repre-
senting indirect ownership interests in the securities of foreign issuers. Gen-
erally, EDRs and GDRs are in bearer form and may be denominated in non-U.S.
currencies and are designed for use in European and other markets. For purposes
of a European Value Fund's investment policies, ADRs, EDRs, and GDRs are deemed
to have the same classification as the underlying securities they represent,
except that ADRs, EDRs, and GDRs shall be treated as indirect foreign
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investments. Thus, an ADR, EDR, or GDR representing ownership of common stock
will be treated as common stock. ADRs, EDRs, and GDRs do not eliminate all of
the risks associated with directly investing in the securities of foreign is-
suers.
Other types of depositary receipts include American Depositary Shares
("ADSs"), Global Depositary Certificates ("GDCs"), and International Deposi-
tary Receipts ("IDRs"). ADSs are shares issued under a deposit agreement rep-
resenting the underlying ordinary shares that trade in the issuer's home mar-
ket. An ADR, described above, is a certificate that represents a number of
ADSs. GDCs and IDRs are typically issued by a foreign bank or trust company,
although they may sometimes also be issued by a
U.S. bank or trust company. GDCs and IDRs are depositary receipts that evi-
dence ownership of underlying securities issued by either a foreign or a U.S.
corporation.
Depositary receipts may be available through "sponsored" or "unsponsored" fa-
cilities. A sponsored facility is established jointly by a depositary and the
issuer of the security underlying the receipt. An unsponsored facility may be
established by a depositary without participation by the issuer of the secu-
rity underlying the receipt. There are greater risks associated with holding
unsponsored depositary receipts. For example, if a Fund holds an unsponsored
depositary receipt, it will generally bear all of the costs of establishing
the unsponsored facility. In addition, the depositary of an unsponsored facil-
ity frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securi-
ties.
Direct Foreign Investments. The European Value Fund may also invest directly
in the securities of foreign issuers regardless of whether they are U.S. dol-
lar denominated. In considering whether to invest in the securities of a for-
eign company, the portfolio manager considers such factors as the characteris-
tics of the particular company, differences between economic trends, and the
performance of securities markets within the U.S. and those within other coun-
tries. The portfolio manager also considers factors relating to the general
economic, governmental, and social conditions of the country or countries
where the company is located.
The European Value Fund may purchase debt obligations issued or guaranteed by
governments (including states, provinces or municipalities) of countries other
than the United States, or by their agencies, authorities, or instrumentali-
ties. The European Value Fund also may purchase debt obligations issued or
guaranteed by supranational entities organized or supported by several na-
tional governments, such as the International Bank for Reconstruction and De-
velopment (the "World Bank"), the Inter-American Development Bank, the Asian
Development Bank, and the European Investment Bank. In addition, the European
Value Fund may purchase debt obligations of foreign corporations or financial
institutions, such as Yankee bonds (dollar-denominated bonds sold in the
United States by non-U.S. issuers), Samurai bonds (yen-denominated bonds sold
in Japan by non-Japanese issuers), and Euro bonds (bonds not issued in the
country (and possibly not the currency of the country) of the issuer).
The European Value Fund's investments will be allocated among securities de-
nominated in the currencies of a number of foreign countries and, within each
such country, among different types of debt securities. The percentage of as-
sets invested in securities of a particular country or denominated in a
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particular currency will vary in accordance with the portfolio manager's as-
sessment of the country's gross domestic product, purchasing power parity and
market capitalization and the relationship of a country's currency to the
United States dollar. Fundamental economic strength, credit quality and inter-
est rate trends will be the principal factors considered by the portfolio man-
ager in determining whether to increase or decrease the emphasis placed upon a
particular type of security within the European Value Fund.
Securities transactions conducted outside the U.S. may not be regulated as rig-
orously as in the U.S., may not involve a clearing mechanism and related guar-
antees, and are subject to the risk of governmental actions affecting trading
in, or the prices of, foreign securities, currencies and other instruments. The
value of such positions also could be adversely affected by (i) other complex
foreign political, legal and economic factors, (ii) lesser availability than in
the U.S. of data on which to make trading decisions, (iii) delays in a Fund's
ability to act upon economic events occurring in foreign markets during non-
business hours in the U.S., (iv) the imposition of different exercise and set-
tlement terms and procedures and the margin requirements than in the U.S., and
(v) lower trading volume and liquidity.
The European Value Fund may invest in Eurodollar convertibles. Eurodollar
convertibles are fixed-income securities of a foreign issuer that are issued in
U.S. dollars outside the U.S. and are convertible into or exchangeable for
specified equity securities.
Special Risks Associated with the Introduction of the Euro. The introduction of
a single currency, the euro, on January 1, 1999 for participating European na-
tions in the European Economic and Monetary Union presents unique uncertainties
for European securities in the markets in which they trade and with respect to
the operation of the European Value Fund that invests in securities denominated
in European currencies and other European securities. The introduction of the
euro will result in the redenomination of European debt and equity securities
over a period of time. Uncertainties raised by the introduction of the euro in-
clude the creation of suitable clearing and settlement payment systems for the
new currency, the valuation and legal treatment of outstanding financial con-
tracts after January 1, 1999 that refer to existing currencies rather than the
euro, and adverse accounting or tax consequences that may arise from the tran-
sition to the euro. These or other factors could cause market disruptions and
could adversely affect the value of securities and foreign currencies held by
the European Value Fund.
Currency Risks. To the extent that the European Value Fund invests in securi-
ties that are denominated in a currency other than U.S. dollars, the European
Value 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 relative to a
foreign currency, the European Value Fund's investment in securities denomi-
nated in that currency will lose value because its currency is worth fewer U.S.
dollars. On the other hand, when the value of the U.S. dollar falls relative to
a foreign currency, the European Value Fund's investments denominated in that
currency will tend to increase in value because that currency is worth more
U.S. dollars. The exchange rates between the U.S. dollar and foreign currencies
depend upon such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation, and
other economic and political conditions. Although the European Value Fund val-
ues its assets daily in U.S. dollars, the European Value Fund may not convert
its holdings of foreign currencies to U.S. dollars daily. The Fund
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may incur conversion costs when it converts its holdings to another currency.
Foreign exchange dealers may realize a profit on the difference between the
price at which the European Value Fund buys and sells currencies. The European
Value Fund will engage in foreign currency exchange transactions in connection
with its portfolio investments. The European Value Fund will conduct its for-
eign currency exchange transactions either on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign contracts.
Hedging Strategies
General Description of Hedging Strategies
Each Fund may engage in hedging activities. NIAC or Institutional Capital Cor-
poration ("ICAP") may cause a Fund to utilize a variety of financial instru-
ments, including options, futures contracts (sometimes referred to as
"futures"), forward contracts and options on futures contracts to attempt to
hedge the Fund's holdings.
Hedging or derivative instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that the
Fund owns or intends to acquire. Such instruments may also be used to "lock-in"
realized but unrecognized gains in the value of portfolio securities. Hedging
instruments on stock indices, in contrast, generally are used to hedge against
price movements in broad equity market sectors in which the Fund has invested
or expects to invest. Hedging strategies, if successful, can reduce the risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce the opportunity for gain by offsetting the positive effect of favorable
price movements in the hedged investments. A Fund may also use derivative in-
struments to manage the risks of its assets. Risk management strategies in-
clude, but are not limited to, facilitating the sale of Fund securities, manag-
ing the effective maturity or duration of debt obligations that a Fund holds,
establishing a position in the derivatives markets as a substitute for buying
or selling certain securities or creating or altering exposure to certain asset
classes, such as debt and foreign securities. The use of derivative instruments
may provide a less expensive, more expedient, or more specifically focused way
for a Fund to invest than would "traditional" securities (i.e., stocks or
bonds). The use of hedging instruments is subject to applicable regulations of
the Securities and Exchange Commission (the "SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission (the "CFTC") and various state regulatory authorities. In addition,
the Fund's ability to use hedging instruments will be limited by tax considera-
tions.
General Limitations on Futures and Options Transactions
The Trust has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for a Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations. A Fund will not enter into futures and
options transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of a Fund's total assets. In addition, a
Fund will not
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enter into futures contracts and options transactions if more than 30% of its
net assets would be committed to such instruments.
The foregoing limitations are not fundamental policies of a Fund and may be
changed without shareholder approval as regulatory agencies permit. Various ex-
changes and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to in-
crease the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
Each Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered invest-
ment companies and, if the guidelines so require, will set aside cash, U.S.
government securities, high grade liquid debt securities and/or other liquid
assets permitted by the SEC and CFTC in a segregated custodial account in the
amount prescribed. Securities held in a segregated account cannot be sold while
the futures or options position is outstanding, unless replaced with other per-
missible assets, and will be marked-to-market daily.
Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If a Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned securi-
ties in order to satisfy its obligation under the option to deliver such secu-
rities. If a Fund is unable to effect a closing sale transaction with respect
to options on securities that it has purchased, it would have to exercise the
option in order to realize any profit and would incur transaction costs upon
the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Funds.
Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Funds. Expiration of a call option written by a Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
If a Fund writes options, or purchases puts that are subject to the loss defer-
ral rules of Section 1092 of the Internal Revenue Code of 1986, as amended (the
"Code"), any losses on such options transactions, to the extent they do not ex-
ceed the unrecognized gains on the securities covering the options, may be sub-
ject to deferral until the securities covering the options have been sold.
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<PAGE>
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Funds will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition, cer-
tain of such positions must be marked-to-market as of the last business day of
the year, and gain or loss must be recognized for federal income tax purposes
in accordance with the 60%/40% rule discussed above even though the position
has not been terminated. A "nonequity option" includes an option with respect
to any group of stocks or a stock index if there is in effect a designation by
the CFTC of a contract market for a contract based on such group of stocks or
indexes. For example, options involving stock indexes such as the S&P 500 Index
would be "nonequity options" within the meaning of Code Section 1256.
Stock Index Options
Each Fund may (i) purchase stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions, and/or (iii) write cov-
ered options on stock indexes for hedging purposes. Stock index options are put
options and call options on various stock indexes. In most respects, they are
identical to listed options on common stocks. The primary difference between
stock options and index options occurs when index options are exercised. In the
case of stock options, the underlying security, common stock, is delivered.
However, upon the exercise of an index option, settlement does not occur by de-
livery of the securities comprising the index. The option holder who exercises
the index option receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the option. This amount
of cash is equal to the difference between the closing price of the stock index
and the exercise price of the option expressed in dollars times a specified
multiple.
A stock index fluctuates with changes in the market values of the stock in-
cluded in the index. For example, some stock index options are based on a broad
market index, such as the Standard & Poor's 500 or the Value Line Composite In-
dex or a narrower market index, such as the Standard & Poor's 100. Indexes may
also be based on an industry or market segment, such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indexes
are currently traded on the following exchanges: the Chicago Board of Options
Exchange, the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
A Fund's use of stock index options is subject to certain risks. Successful use
by the Funds of options on stock indexes will be subject to the ability of ICAP
or NIAC to correctly predict movements in the directions of the stock market.
This requires different skills and techniques than predicting changes in the
prices of individual securities. In addition, a Fund's ability to effectively
hedge all or a portion of the securities in its portfolio, in anticipation of
or during a market decline through transactions in put options on stock index-
es, depends on the degree to which price movements in the underlying index cor-
relate with the price movements of the securities held by a Fund. Inasmuch as a
Fund's securities will not duplicate the components of an index, the correla-
tion will not be perfect. Consequently, each Fund will bear the risk that the
prices of its securities being hedged will not move in the same amount as the
prices of its put options on the stock indexes. It is also possible that there
may be a negative correlation between the index and a Fund's securities which
would result in a loss on both such securities and the options on stock indexes
acquired by the Fund.
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<PAGE>
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The purchase of stock index
options involves the risk that the premium and transaction costs paid by a Fund
in purchasing an option will be lost as a result of unanticipated movements in
prices of the securities comprising the stock index on which the option is
based. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Fund.
Futures Contracts
Each Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge against
movements in the equity markets, in order to establish more definitely the ef-
fective return on securities held or intended to be acquired by the Funds or
for other purposes permissible under the CEA. Each Fund's hedging may include
sales of Futures as an offset against the effect of expected declines in stock
prices and purchases of Futures as an offset against the effect of expected in-
creases in stock prices. The Funds will not enter into Futures Contracts which
are prohibited under the CEA and will, to the extent required by regulatory au-
thorities, enter only into Futures Contracts that are traded on national
futures exchanges and are standardized as to maturity date and underlying fi-
nancial instrument. The principal interest rate Futures exchanges in the United
States are the Board of Trade of the City of Chicago and the Chicago Mercantile
Exchange. Futures exchanges and trading are regulated under the CEA by the
CFTC.
An interest rate futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific financial instru-
ment (e.g., a debt security) or currency for a specified price at a designated
date, time and place. An index Futures Contract is an agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to
the difference between the value of the index at the close of the last trading
day of the contract and the price at which the index Futures Contract was orig-
inally written. Transaction costs are incurred when a Futures Contract is
bought or sold and margin deposits must be maintained. A Futures Contract may
be satisfied by delivery or purchase, as the case may be, of the instrument or
by payment of the change in the cash value of the index. More commonly, Futures
Contracts are closed out prior to delivery by entering into an offsetting
transaction in a matching Futures Contract. Although the value of an index
might be a function of the value of certain specified securities, no physical
delivery of those securities is made. If the offsetting purchase price is less
than the original sale price, a gain will be realized; if it is more, a loss
will be realized. Conversely, if the offsetting sale price is more than the
original purchase price, a gain will be realized; if it is less, a loss will be
realized. The transaction costs must also be included in these calculations.
There can be no assurance, however, that a Fund will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a par-
ticular time. If a Fund is not able to enter into an offsetting transaction,
the Fund will continue to be required to maintain the margin deposits on the
Futures Contract.
Margin is the amount of funds that must be deposited by each Fund with its cus-
todian in a segregated account in the name of the futures commission merchant
in order to initiate Futures trading and to
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maintain the Fund's open positions in Futures Contracts. A margin deposit is
intended to ensure a Fund's performance of the Futures Contract. The margin re-
quired for a particular Futures Contract is set by the exchange on which the
Futures Contract is traded and may be significantly modified from time to time
by the exchange during the term of the Futures Contract. Futures Contracts are
customarily purchased and sold on margins that may range upward from less than
5% of the value of the Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if
the value of a position increases because of favorable price changes in the
Futures Contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Fund. In computing daily net asset value,
each Fund will mark to market the current value of its open Futures Contracts.
The Funds expect to earn interest income on their margin deposits.
Because of the low margin deposits required, Futures trading involves an ex-
tremely high degree of leverage. As a result, a relatively small price movement
in a Futures Contract may result in immediate and substantial loss, as well as
gain, to the investor. For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a subsequent 10% decrease
in the value of the Futures Contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the Futures Contract were closed out. Thus, a pur-
chase or sale of a Futures Contract may result in losses in excess of the
amount initially invested in the Futures Contract. However, a Fund would pre-
sumably have sustained comparable losses if, instead of the Futures Contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The day limit estab-
lishes the maximum amount that the price of a Futures Contract may vary either
up or down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular type of Futures
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of Futures positions and sub-
jecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a Futures position. The Fund would continue to be required
to meet margin requirements until the position is closed, possibly resulting in
a decline in the Fund's net asset value. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes, in-
cluding, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
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Options on Futures
Each Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate
an existing position. A futures option gives the holder the right, in return
of the premium paid, to assume a long position (call) or short position (put)
in a Futures Contract at a specified exercise price prior to the expiration of
the option. Upon exercise of a call option, the holder acquires a long posi-
tion in the Futures Contract and the writer is assigned the opposite short po-
sition. In the case of a put option, the opposite is true. Prior to exercise
or expiration, a futures option may be closed out by an offsetting purchase or
sale of a futures option of the same series.
Each Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which a Fund uses put and call options on se-
curities or indexes. The purchase of put options on Futures Contracts is anal-
ogous to the purchase of puts on securities or indexes so as to hedge a Fund's
securities holdings against the risk of declining market prices. The writing
of a call option or the purchasing of a put option on a Futures Contract con-
stitutes a partial hedge against declining prices of the securities which are
deliverable upon exercise of the Futures Contract. If the futures price at ex-
piration of a written call option is below the exercise price, a Fund will re-
tain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's holdings of securi-
ties. If the futures price when the option is exercised is above the exercise
price, however, a Fund will incur a loss, which may be offset, in whole or in
part, by the increase in the value of the securities held by the Fund that
were being hedged. Writing a put option or purchasing a call option on a
Futures Contract serves as a partial hedge against an increase in the value of
the securities a Fund intends to acquire.
As with investments in Futures Contracts, each Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts
written by it. Such margin deposits will vary depending on the nature of the
underlying Futures Contract (and the related initial margin requirements), the
current market value of the option, and other futures positions held by the
Fund. A Fund will set aside in a segregated account at the Fund's custodian
liquid assets, such as cash, U.S. government securities or other high grade
liquid debt obligations equal in value to the amount due on the underlying ob-
ligation. Such segregated assets will be marked-to-market daily, and addi-
tional assets will be placed in the segregated account whenever the total
value of the segregated account falls below the amount due on the underlying
obligation.
The risks associated with the use of options on Futures Contracts include the
risk that a Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. A
Fund's successful use of options on Futures Contracts depends on NIAC's or
ICAP's ability to correctly predict the movement in prices of Futures Con-
tracts and the underlying instruments, which may prove to be incorrect. In ad-
dition, there may be imperfect correlation between the instruments being
hedged and the Futures Contract subject to the option. For additional informa-
tion, see "Futures Contracts." Certain characteristics of the futures market
might increase the risk that movements in the prices of futures contracts or
options on futures contracts might not correlate perfectly with movements in
the prices of the investments being hedged. For example, all participants in
the futures and options on futures contracts markets are subject to daily
variation margin calls and might be compelled to liquidate futures or options
on futures contracts positions whose prices are moving unfavorably to avoid
being subject to further calls. These liquidations could increase the price
volatility of the
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<PAGE>
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because of initial margin de-
posit requirements in futures markets, there might be increased participation
by speculators in the futures markets. This participation also might cause tem-
porary price distortions. In addition, activities of large traders in both the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies might result in temporary price distortions.
Federal Income Tax Treatment of Futures Contracts
For federal income tax purposes, each Fund is required to recognize as income
for each taxable year its net unrealized gains and losses on Futures Contracts
as of the end of the year, as well as gains and losses actually realized during
the year. Except for transactions in Futures Contracts that are classified as
part of a "mixed straddle" under Code Section 1256, any gain or loss recognized
with respect to a Futures Contract is considered to be 60% long-term capital
gain or loss and 40% short-term capital gain or loss, without regard to the
holding period of the Futures Contract. Under certain circumstances, the recog-
nition of losses may be required to be deferred to a later taxable year.
If a Fund enters into Futures Contracts with respect to property the same as,
or substantially identical to, assets held by the Fund, the timing of recogni-
tion of gain or loss, or the characterization of such gain or loss as long-term
capital gain, short-term capital gain or ordinary income could be affected.
Each Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on Futures transactions. Such dis-
tributions will be combined with distributions of capital gains realized on a
Fund's other investments and shareholders will be advised of the nature of the
payments.
Risks and Special Considerations Concerning Derivatives
The use of derivative instruments involves certain general risks and considera-
tions as described below. The specific risks pertaining to certain types of de-
rivative instruments are described herein.
(1) Market Risk. Market risk is the risk that the value of the underlying as-
sets may go up or down. Adverse movements in the value of an underlying asset
can expose the Fund to losses. Market risk is the primary risk associated with
derivative transactions. Derivative instruments may include elements of lever-
age and, accordingly, fluctuations in the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of deriv-
ative instruments depends upon a variety of factors, particularly the portfolio
manager's ability to predict movements of the securities, currencies, and com-
modities markets, which may require different skills than predicting changes in
the prices of individual securities. There can be no assurance that any partic-
ular strategy adopted will succeed. A decision to engage in a derivative trans-
action will reflect the portfolio manager's judgment that the derivative trans-
action will provide value to the applicable Fund and its shareholders and is
consistent with the Fund's objectives, investment limitations, and operating
policies. In making such a judgment, the portfolio manager will analyze the
benefits and risks of the derivative transactions and weigh them in the context
of the Fund's overall investments and investment objective.
B-20
<PAGE>
(2) Credit Risk. Credit risk is the risk that a loss may be sustained as a re-
sult of the failure of a counterpart to comply with the terms of a derivative
instrument. The counterparty risk for exchange-traded derivatives is generally
less than for privately-negotiated or OTC derivatives, since generally a
clearing agency, which is the issuer or counterparty to each exchange-traded
instrument, provides a guarantee of performance. For privately-negotiated in-
struments, there is no similar clearing agency guarantee. In all transactions,
a Fund will bear the risk that the counterparty will default, and this could
result in a loss of the expected benefit of the derivative transactions and
possibly other losses to the Fund. A Fund will enter into transactions in de-
rivative instruments only with counterparties that their respective portfolio
manager reasonably believes are capable of performing under the contract.
(3) Correlation Risk. Correlation risk is the risk that there might be an im-
perfect correlation, or even no correlation, between price movements of a de-
rivative instrument and price movements of investments being hedged. When a
derivative transaction is used to completely hedge another position, changes
in the market value of the combined position (the derivative instrument plus
the position being hedged) result from an imperfect correlation between the
price movements of the two instruments. With a perfect hedge, the value of the
combined position remains unchanged with any change in the price of the under-
lying asset. With an imperfect hedge, the value of the derivative instrument
and its hedge are not perfectly correlated. For example, if the value of a de-
rivative instrument used in a short hedge (such as writing a call option, buy-
ing a put option or selling a futures contract) increased by less than the de-
cline in value of the hedged investments, the hedge would not be perfectly
correlated. This might occur due to factors unrelated to the value of the in-
vestments being hedged, such as speculative or other pressures on the markets
in which these instruments are traded. The effectiveness of hedges using in-
struments on indices will depend, in part, on the degree of correlation be-
tween price movements in the index and the price movements in the investments
being hedged.
(4) Liquidity Risk. Liquidity risk is the risk that a derivative instrument
cannot be sold, closed out, or replaced quickly at or very close to its funda-
mental value. Generally, exchange contracts are very liquid because the ex-
change clearinghouse is the counterparty of every contract. OTC transactions
are less liquid than exchange-traded derivatives since they often can only be
closed out with the other party to the transaction. A Fund might be required
by applicable regulatory requirements to maintain assets as "cover," maintain
segregated accounts, and/or make margin payments when it takes positions in
derivative instruments involving obligations to third parties (i.e., instru-
ments other than purchase options). If a Fund is unable to close out its posi-
tions in such instruments, it might be required to continue to maintain such
assets or accounts or make such payments until the position expires, matures,
or is closed out. These requirements might impair a Fund's ability to sell a
security or make an investment at a time when it would otherwise be favorable
to do so, or require that the Fund sell a portfolio security at a disadvanta-
geous time. A Fund's ability to sell or close out a position in an instrument
prior to expiration or maturity depends upon the existence of a liquid second-
ary market or, in the absence of such a market, the ability and willingness of
the counterparty to enter into a transaction closing out the position. Due to
liquidity risk, there is no assurance that any derivatives position can be
sold or closed out at a time and price that is favorable to a Fund.
(5) Legal Risk. Legal risk is the risk of loss caused by the unenforceability
of a party's obligations under the derivative. While a party seeking price
certainty agrees to surrender the potential upside in ex-
B-21
<PAGE>
change for downside protection, the party taking the risk is looking for a pos-
itive payoff. Despite this voluntary assumption of risk, a counterparty that
has lost money in a derivative transaction may try to avoid payment by exploit-
ing various legal uncertainties about certain derivative products.
(6) Systemic or "Interconnection" Risk. Systemic or interconnection risk is the
risk that a disruption in the financial markets will cause difficulties for all
market participants. In other words, a disruption in one market will spill over
into other markets, perhaps creating a chain reaction. Much of the OTC deriva-
tives market takes place among the OTC dealers themselves, thus creating a
large interconnected web of financial obligations. This interconnectedness
raises the possibility that a default by one large dealer could create losses
for other dealers and destabilize the entire market for OTC derivative instru-
ments.
Foreign Hedging Instruments
Foreign Currency Transactions. The European Value Fund may engage in foreign
currency forward contracts, options, and futures transactions. The European
Value Fund will enter into foreign currency transactions for hedging and other
permissible risk management purposes only. Foreign currency futures and options
contracts are traded in the U.S. on regulated exchanges such as the Chicago
Mercantile Exchange, the Mid-America Commodities Exchange, and the Philadelphia
Stock Exchange. If the European Value Fund invests in a currency futures or op-
tions contract, it must make a margin deposit to secure performance of such
contract. With respect to investments in currency futures contracts, the Euro-
pean Value Fund may also be required to make a variation margin deposit because
the value of futures contracts fluctuates from purchase to maturity. In addi-
tion, the European Value Fund may segregate assets to cover its futures con-
tracts obligations.
Forward Foreign Currency Exchange Contracts. The European Value Fund may enter
into forward currency exchange contracts. Forward foreign currency exchange
contracts may limit potential gains that could result from a positive change in
such currency relationships. The portfolio manager believes that it is impor-
tant to have the flexibility to enter into forward foreign currency exchange
contracts whenever it determines that it is in the European Value Fund's best
interest to do so. The European Value Fund will not speculate in foreign cur-
rency exchange.
The European Value Fund will not enter into forward currency exchange contracts
or maintain a net exposure in such contracts that it would be obligated to de-
liver an amount of foreign currency in excess of the value of its portfolio se-
curities or other assets denominated in that currency or, in the case of a
"cross-hedge," denominated in a currency or currencies that the portfolio man-
ager believes will tend to be closely correlated with that currency with regard
to price movements. Generally, the European Value Fund will not enter into a
forward foreign currency exchange contract with a term longer than one year.
Foreign Currency Options. A foreign currency option provides the option buyer
with the right to buy or sell a stated amount of foreign currency at the exer-
cise price on a specified date or during the option period. The owner of a call
option has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation, to sell the
currency. When the option is exercised, the seller (i.e., writer) of the option
is obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position during the
option period at any time prior to expiration.
B-22
<PAGE>
A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on a foreign currency generally
rises in value if the underlying currency depreciates in value. Although pur-
chasing a foreign currency option can protect the European Value Fund against
an adverse movement in the value of a foreign currency, the option will not
limit the movement in the value of such currency. For example, if the European
Value Fund held securities denominated in a foreign currency that was appreci-
ating and had purchased a foreign currency put to hedge against a decline in
the value of the currency, the European Value Fund would not have to exercise
its put option. Likewise, if the European Value Fund entered into a contract to
purchase a security denominated in foreign currency and, in conjunction with
that purchase, purchased a foreign currency call option to hedge against a rise
in value of the currency, and if the value of the currency instead depreciated
between the date of purchase and the settlement date, the European Value Fund
would not have to exercise its call. Instead, the European Value Fund could ac-
quire in the spot market the amount of foreign currency needed for settlement.
Special Risks Associated with Foreign Currency Options. Buyers and sellers of
foreign currency options are subject to the same risks that apply to options
generally. In addition, there are certain risks associated with foreign cur-
rency options. The markets in foreign currency options are relatively new, and
the European Value Fund's ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. Although
the European Value Fund will not purchase or write such options unless and un-
til, in the opinion of the portfolio manager, the market for them has developed
sufficiently to ensure that the risks in connection with such options are not
greater than the risks in connection with the underlying currency, there can be
no assurance that a liquid secondary market will exist for a particular option
at any specific time.
In addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally. The value of a
foreign currency option depends upon the value of the underlying currency rela-
tive to the U. S. dollar. As a result, the price of the option position may
vary with changes in the value of either or both currencies and may have no re-
lationship to the investment merits of a foreign security. Because foreign cur-
rency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the under-
lying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign curren-
cies or any regulatory requirements that quotations available through dealers
or other market sources be firm or revised on a timely basis. Available quota-
tion information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the ex-
tent that the U. S. options markets are closed while the markets for the under-
lying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets
until they reopen.
Foreign Currency Futures Transactions. By using foreign currency futures con-
tracts and options on such contracts, the Fund may be able to achieve many of
the same objectives as it would through the use of
B-23
<PAGE>
forward foreign currency exchange contracts. The European Value Fund may be
able to achieve these objectives possibly more effectively and at a lower cost
by using futures transactions instead of forward foreign currency exchange con-
tracts.
Special Risks Associated with Foreign Currency Futures Contracts and Related
Options. Buyers and sellers of foreign currency futures contacts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on currencies, as de-
scribed above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the European
Value Fund will not purchase or write options on foreign currency futures con-
tracts unless and until, in the opinion of its portfolio manager, the market
for such options has developed sufficiently that the risks in connection with
such options are not greater than the risks in connection with transactions in
the underlying foreign currency futures contracts. Compared to the purchase or
sale of foreign currency futures contracts, the purchase of call or put options
on futures contracts involves less potential risk to the European Value Fund
because the maximum amount at risk is the premium paid for the option (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss, such as when
there is no movement in the price of the underlying currency or futures con-
tract.
Other Investment Policies and Techniques
Illiquid Securities
Each Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction, illiquid securities in-
clude, but are not limited to, restricted securities (securities the disposi-
tion of which is restricted under the federal securities laws), securities that
may only be resold pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), but that are deemed to be illiquid; and repur-
chase agreements with maturities in excess of seven days. However, a Fund will
not acquire illiquid securities if, as a result, such securities would comprise
more than 15% of the value of the Fund's net assets. The Board of Trustees or
its delegate has the ultimate authority to determine, to the extent permissible
under the federal securities laws, which securities are liquid or illiquid for
purposes of this 15% limitation. The Board of Trustees has delegated to ICAP
the day-to-day determination of the illiquidity of any equity or taxable fixed-
income security held by a Fund and to NIAC as to any municipal security, al-
though it has retained oversight and ultimate responsibility for such determi-
nations. Although no definitive liquidity criteria are used, the Board of
Trustees has directed ICAP and NIAC to look to such factors as (i) the nature
of the market for a security (including the institutional private resale mar-
ket; the frequency of trades and quotes for the security; the number of dealers
willing to purchase or sell the security; and the amount of time normally
needed to dispose of the security and the method of soliciting offers and the
mechanics of transfer), (ii) the terms of certain securities or other instru-
ments allowing for the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand instruments), and (iii) other
permissible relevant factors.
B-24
<PAGE>
Restricted securities may be sold only in privately negotiated transactions or
in a public offering with respect to which a registration statement is in ef-
fect under the Securities Act. Where registration is required, a Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective registration state-
ment. If, during such a period, adverse market conditions were to develop, a
Fund might obtain a less favorable price than that which prevailed when it de-
cided to sell. Illiquid securities will be priced at a fair value as determined
in good faith by the Board of Trustees or its delegate. If, through the appre-
ciation of illiquid securities or the depreciation of liquid securities, a Fund
should be in a position where more than 15% of the value of its net assets are
invested in illiquid securities, including restricted securities which are not
readily marketable, the affected Fund will take such steps as is deemed advis-
able, if any, to protect liquidity.
Short Sales Against the Box
When ICAP or NIAC, as applicable, believes that the price of a particular secu-
rity held by a Fund may decline, it may make "short sales against the box" to
hedge the unrealized gain on such security. Selling short against the box in-
volves selling a security which a Fund owns for delivery at a specified date in
the future. The Funds will limit their transactions in short sales against the
box to 5% of their net assets. In addition, a Fund will limit its transactions
such that the value of the securities of any issuer in which it is short will
not exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of any class of the issuer. If, for example, a Fund bought 100
shares of ABC at $40 per share in January and the price appreciates to $50 in
March, the Fund might "sell short" the 100 shares at $50 for delivery the fol-
lowing July. Thereafter, if the price of the stock declines to $45, it will re-
alize the full $1,000 gain rather than the $500 gain it would have received had
it sold the stock in the market. On the other hand, if the price appreciates to
$55 per share, the Fund would be required to sell at $50 and thus receive a
$1,000 gain rather than the $1,500 gain it would have received had it sold the
stock in the market. A Fund may also be required to pay a premium for short
sales which would partially offset any gain.
Warrants
Each Fund may invest in warrants if, after giving effect thereto, not more than
5% of its net assets will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5%, not more than 2% of its
assets at the time of purchase may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. Investing in
warrants is purely speculative in that they have no voting rights, pay no divi-
dends, and have no rights with respect to the assets of the corporation issuing
them. Warrants basically are options to purchase equity securities at a spe-
cific price for a specific period of time. They do not represent ownership of
the securities but only the right to buy them. Warrants are issued by the is-
suer of the security, which may be purchased on their exercise. The prices of
warrants do not necessarily parallel the prices of the underlying securities.
Delayed-Delivery Transactions
Each Fund may from time to time purchase securities on a "when-issued" or other
delayed-delivery basis. The price of securities purchased on a when-issued ba-
sis is fixed at the time the commitment to purchase is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within 45 days of the purchase. During the period between the pur-
chase and
B-25
<PAGE>
settlement, no payment is made by a Fund to the issuer and no interest is ac-
crued on debt securities or dividend income is earned on equity securities.
Forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. This risk is in addition to
the risk of decline in value of the Fund's other assets. While when-issued se-
curities may be sold prior to the settlement date, the Funds intend to purchase
such securities with the purpose of actually acquiring them. At the time a Fund
makes the commitment to purchase a security on a when-issued basis, it will
record the transaction and reflect the value of the security in determining its
net asset value. The Funds do not believe that net asset value will be ad-
versely affected by purchases of securities on a when-issued basis.
Each Fund will maintain cash, U.S. government securities and high grade liquid
debt securities equal in value to commitments for when-issued securities. Such
segregated securities either will mature or, if necessary, be sold on or before
the settlement date. When the time comes to pay for when-issued securities,
each Fund will meet its obligations from then available cash flow, sale of the
securities held in the separate account (described above) sale of other securi-
ties or, although it would not normally expect to do so, from the sale of the
when-issued securities themselves (which may have a market value greater or
less than each Fund's payment obligation).
Unseasoned Companies
Each Fund, other than the European Value Fund, may not invest more than 5% of
its net assets in unseasoned issuers. While smaller companies generally have
potential for rapid growth, they often involve higher risks because they lack
the management experience, financial resources, product diversification, and
competitive strengths of larger corporations. Also, in many instances, the se-
curities of smaller companies are traded only over-the-counter or on regional
securities exchanges, and the frequency and volume of their trading is substan-
tially less than is typical of larger companies. Therefore, the securities of
smaller companies may be subject to wider price fluctuations. When making large
sales, a Fund may have to sell portfolio holdings of small companies at dis-
counts from quoted prices or may have to make a series of smaller sales over an
extended period of time due to the trading volume in smaller company securi-
ties.
Lending of Portfolio Securities
Each Fund may lend its portfolio securities, up to 33 1/3% of its total assets,
to broker-dealers or institutional investors. The loans will be secured contin-
uously by collateral at least equal to the value of the securities lent by
"marking to market" daily. A Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer of the securities lent and will
retain the right to call, upon notice, the lent securities. A Fund may also re-
ceive interest on the investment of the collateral or a fee from the borrower
as compensation for the loan. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only
to firms deemed by the portfolio manager to be of good standing.
B-26
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed for the Funds under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is six, one of whom
is an "interested person" (as the term "interested person" is defined in the
Investment Company Act of 1940) and five of whom are "disinterested persons."
The names and business addresses of the trustees and officers of the Trust and
their principal occupations and other affiliations during the past five years
are set forth below, with those trustees who are "interested persons" of the
Trust indicated by an asterisk.
<TABLE>
-------------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 3/28/49 Chairman, President Chairman (since July
333 West Wacker Drive and Trustee 1996) and Director,
Chicago, IL 60606 formerly Executive Vice
President, of The John
Nuveen Company (from
March 1992 to July 1996)
and of Nuveen
Investments; Director
and Chairman (since July
1996), formerly
Executive Vice President
(from May 1994 to July
1996) of Nuveen
Institutional Advisory
Corp. and Nuveen
Advisory Corp.; Chairman
and Director (since
January 1997) of Nuveen
Asset Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation; Chairman
and Director of
Rittenhouse Financial
Services Inc. (since
1999); Chief Executive
Officer (since September
1999) of Nuveen Senior
Loan Asset Management
Inc.
-------------------------------------------------------------------------------------
James E. Bacon 2/27/31 Trustee Business consultant;
114 W. 47th St. retired; formerly
New York, NY 10036 Director of Lone Star
Industries (1992-1999).
-------------------------------------------------------------------------------------
Jack B. Evans 10/22/48 Trustee President, The Hall-
115 Third Street, S.E. Perrine Foundation, a
Cedar Rapids, IA 52401 private philanthropic
corporation (since
1996); formerly
President and Chief
Operating Officer, SCI
Financial Group, Inc., a
regional financial
services firm.
-------------------------------------------------------------------------------------
William L. Kissick 7/29/32 Trustee Professor, School of
University of Pennsylvania Medicine and the Wharton
3615 Chestnut Street School of Management and
Philadelphia, PA 19104 former Chairman, Leonard
Davis Institute of
Health Economics,
University of
Pennsylvania.
-------------------------------------------------------------------------------------
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice
412 W. Franklin President in charge of
Wheaton, IL 60187 Municipal Underwriting
and Dealer Sales at The
Northern Trust Company.
-------------------------------------------------------------------------------------
Sheila W. Wellington 2/24/32 Trustee President (since 1993)
250 Park Avenue of Catalyst (a not-for-
New York, NY 10003 profit organization
focusing on women's
leadership development
in business and the
professions).
-------------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Senior Vice President Senior Vice President
333 West Wacker Drive and Assistant Secretary (since May 1999),
Chicago, IL 60606 formerly Vice President,
and General Counsel
(since September 1997)
and Secretary (since May
1998) of The John Nuveen
Company and Nuveen
Investments; Vice
President (since
September 1997) and
Secretary (since May
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; Senior Vice
President and Secretary
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.;
prior thereto, Partner
in the law firm of
Kirkland & Ellis.
</TABLE>
--------------------------------------------------------------------------------
B-27
<PAGE>
<TABLE>
------------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
------------------------------------------------------------------------------------
<C> <C> <C> <S>
Peter H. D'Arrigo 11/28/67 Vice President Vice President of Nuveen
333 West Wacker Drive and Treasurer Investments (January
Chicago, IL 60606 1999); prior thereto,
Assistant Vice President
(January 1997);
formerly, Associate of
Nuveen Investments;
Chartered Financial
Analyst; Vice President
and Treasurer (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.
------------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager
(since September 1991)
of Flagship Financial.
------------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of Nuveen
333 West Wacker Drive Investments; Vice
Chicago, IL 60606 President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
------------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995),
Chartered Financial
Analyst.
------------------------------------------------------------------------------------
Stephen D. Foy 5/31/54 Vice President and Vice President of Nuveen
333 West Wacker Drive Controller Investments; Certified
Chicago, IL 60606 Public Accountant; Vice
President (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.;
Certified Public
Accountant.
------------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
------------------------------------------------------------------------------------
Richard A Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago, IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial.
------------------------------------------------------------------------------------
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago, IL 60606
------------------------------------------------------------------------------------
David J. Lamb 3/22/63 Vice President (since 2000) Vice President (since
333 West Wacker Drive March 2000) of Nuveen
Chicago, IL 60606 Investments, previously
Assistant Vice President
(since January 1999),
prior thereto, Associate
of Nuveen Investments;
Certified Public
Accountant.
------------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President,
333 West Wacker Drive Assistant Secretary Assistant Secretary and
Chicago, IL 60606 Assistant General
Counsel of Nuveen
Investments; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; Vice
President and Assistant
Secretary (since January
1997) of Nuveen Asset
Management, Inc.;
Assistant Secretary of
The John Nuveen Company;
Vice President and
Assistant Secretary
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.
------------------------------------------------------------------------------------
Edward F. Neild, IV 7/7/65 Vice President Vice President (since
333 West Wacker Drive September 1996),
Chicago, IL 60606 previously Assistant
Vice President (since
December 1993) of Nuveen
Advisory Corp.,
Portfolio Manager prior
thereto; Vice President
(since September 1996),
previously Assistant
Vice President (since
May 1995) of Nuveen
Institutional Advisory
Corp., Portfolio Manager
prior thereto; Chartered
Financial Analyst.
------------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since
333 West Wacker Drive September 1997 of Nuveen
Chicago, IL 60606 Advisory Corp.),
previously Assistant
Vice President (since
September 1996 of Nuveen
Advisory Corp.),
Portfolio Manager prior
thereto; Chartered
Financial Analyst.
</TABLE>
--------------------------------------------------------------------------------
B-28
<PAGE>
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------
<C> <C> <C> <S>
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory
Corp.; Chartered Financial
Analyst.
-------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel, previously
Assistant General Counsel
of Nuveen Investments; Vice
President and Assistant
Secretary of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp.; Assistant Secretary
of The John Nuveen Company;
Vice President and
Assistant Secretary (since
September 1999) of Nuveen
Senior Loan Asset
Management Inc.; Chartered
Financial Analyst.
-------------------------------------------------------------------------------
</TABLE>
Thomas E. Leafstrand and Timothy R. Schwertfeger serve as members of the Exec-
utive Committee of the Board of Trustees. The Executive Committee, which meets
between regular meetings of the Board of Trustees, is authorized to exercise
all of the powers of the Board of Trustees.
The trustees of the Trust are trustees of thirteen open-end and closed-end
funds advised by NIAC and two funds advised by Nuveen Senior Loan Asset Man-
agement Inc. None of the independent trustees has ever been a director, offi-
cer, or employee of, or a consultant to, NIAC, Nuveen or their affiliates.
Mr. Schwertfeger is a director or trustee, as the case may be, of 91 Nuveen
open-end funds and closed-end funds advised by Nuveen Advisory Corp.
The following table sets forth compensation paid by the Trust to each of the
trustees who are not designated "interested persons" during the Trust's fiscal
year ended June 30, 2000 and the total compensation that the Nuveen Funds paid
to such trustees during that one year period. The Trust has no retirement or
pension plans. The officers and trustees affiliated with Nuveen serve without
any compensation from the Trust.
<TABLE>
<CAPTION>
Aggregate Deferred Total Compensation
Compensation Compensation from Trust and
from the Payable from Fund Complex Paid
Name of Trustee Trust(1) the Trust(2) to Trustees(3)
--------------- ------------ ------------ ------------------
<S> <C> <C> <C>
James E. Bacon............. $8,442 $ 7,648 $46,000
Jack B. Evans.............. $7,999 $ 8,068 $46,000
William L. Kissick......... $9,181 $ 7,008 $46,000
Thomas E. Leafstrand....... $8,722 $ 9,582 $49,600
Sheila W. Wellington....... $ 166 $16,136 $46,000
</TABLE>
--------
(1) The compensation paid to the independent trustees for the fiscal year
ended June 30, 2000 for services to the Trust.
(2) Pursuant to a deferred compensation agreement with the Trust, deferred
amounts are treated as though an equivalent dollar amount has been in-
vested in shares of one or more eligible Nuveen Funds. The amounts pro-
vided are the total deferred fees (including the return from the assumed
investment in the eligible Nuveen Funds) payable from the Trust.
(3) Based on the compensation paid to the independent trustees for the fiscal
year ended June 30, 2000 for services to the thirteen open-end and closed-
end funds advised by NIAC.
Each trustee who is not affiliated with NIAC or ICAP receives a $35,000 annual
retainer for serving as a director or trustee of all funds for which NIAC
serves as investment adviser or manager and a $1,000 fee per day plus expenses
for attendance at all meetings held on a day on which a regularly scheduled
Board
B-29
<PAGE>
meeting is held, a $500 fee per day plus expenses for attendance in person or a
$500 fee per day plus expenses for attendance by telephone at a meeting held on
a day on which no regular Board meeting is held, a $100 fee per day plus ex-
penses for attendance in person or by telephone at a meeting of the Executive
Committee held solely to declare dividends, and a $200 fee per day plus ex-
penses for attendance in person or by telephone at a meeting of the Dividend
Committee. The annual retainer, fees and expenses are allocated among the funds
for which NIAC serves as investment adviser or manager on the basis of relative
net asset sizes. The Trust requires no employees other than its officers, all
of whom are compensated by NIAC or Nuveen.
The John Nuveen Company ("JNC") maintains its charitable contributions programs
to encourage the active support and involvement of individuals in the civic ac-
tivities of their community. These programs include a matching contributions
program and a direct contributions program.
The independent trustees of the funds managed by the NIAC are eligible to par-
ticipate in the charitable contributions program of JNC. Under the matching
program, JNC will match the personal contributions of a trustee to Section
501(c)(3) organizations up to an aggregate maximum amount of $10,000 during any
calendar year. Under its direct (non-matching) program, JNC makes contributions
to qualifying Section 501(c)(3) organizations, as approved by the Corporate
Contributions Committee of JNC. The independent trustees are also eligible to
submit proposals to the committee requesting that contributions be made under
this program to Section 501(c)(3) organizations identified by the trustees, in
an aggregate amount not to exceed $5,000 during any calendar year. Any contri-
bution made by JNC under the direct program is made solely at the discretion of
the Corporate Contributions Committee.
As of October 4, 2000, the officers and trustees of each Fund, in the aggre-
gate, own less than 1% of the shares of the Fund.
The following table sets forth the percentage ownership of each person, who, as
of October 4, 2000, owns of record, or is known by the Trust to own of record
or beneficially 5% or more of any class of a Fund's shares.
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
---------------------- ------------------------- ----------
<S> <C> <C>
Nuveen Growth and Income Stock
Fund American Express Trust Co. 37.30%
Class R Shares............... UA Jul 01 89
FBD Amer Exp. Trust Ret. Ser. Pl.
c/o Nancy Jendro
PO Box 534
Minneapolis, MN 55440-0534
Class A Shares............... Merrill Lynch, Pierce, Fenner & Smith 20.18%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
</TABLE>
B-30
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
---------------------- ------------------------- ----------
<S> <C> <C>
Class B Shares............... Merrill Lynch, Pierce, Fenner & Smith 33.98%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class C Shares............... Merrill Lynch, Pierce, Fenner & Smith 43.68%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Nuveen Balanced Stock and Bond
Fund Northern Trust Co. Trust 68.58%
Class R Shares............... John Nuveen Scholarship Plan
c/o Diane Day
P.O. Box 92956
Chicago, IL 60675-2956
American Express Trust Co. 8.19%
Amer Exp. Trust Ret. Ser. Pl.
c/o Nancy Jendro
P.O. Box 534
Minneapolis, MN 55440-0534
Class A Shares............... Merrill Lynch, Pierce, Fenner & Smith 23.15%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class B Shares............... Merrill Lynch, Pierce, Fenner & Smith 38.65%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Class C Shares............... Merrill Lynch, Pierce, Fenner & Smith 65.33%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
</TABLE>
B-31
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
---------------------- ------------------------- ----------
<S> <C> <C>
Nuveen Balanced Municipal and
Stock Fund Geraldine P. Warren 22.63%
Class R Shares............... 22 Sherwood Ln.
Colts Neck, NJ 07722-1128
Merrill Lynch, Pierce, Fenner & Smith 12.49%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl. 3
Jacksonville, FL 32246-6484
Leonard Pearl 9.71%
and Joan D. Pearl
JT Wros
707 Mix Ave. Apt. 24
Hamden, CT 06514-2208
Class A Shares............... Merrill Lynch, Pierce, Fenner & Smith 19.25%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Class B Shares............... Merrill Lynch, Pierce, Fenner & Smith 39.65%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Class C Shares............... Merrill Lynch, Pierce, Fenner & Smith 40.18%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246-6484
Nuveen European Value Fund
Class R Shares............... Nuveen Institutional Advisory Corp. 64.42%
Attn: Joy Tyburk
333 W. Wacker Dr. Floor 33
Chicago, IL 60606-1220
American Express Finl. Adv. Inc. 16.55%
c/o Pat Brown
50534 AXP Financial Center
Minneapolis, MN 55474
</TABLE>
B-32
<PAGE>
<TABLE>
<CAPTION>
Percentage
of Record
Name of Fund and Class Name and Address of Owner Ownership
---------------------- ------------------------- ----------
<S> <C> <C>
Class A Shares................ Merrill Lynch, Pierce, Fenner & Smith 22.22%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Douglas D. Brendle 7.53%
P.O. Box 5008
Winston-Salem, NC 27113-5008
Class B Shares................ Merrill Lynch, Pierce, Fenner & Smith 30.20%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
Mark Kardonski 7.34%
15223 Fisher Island Drive
Fisher Island, FL 33109
Class C Shares................ Merrill Lynch, Pierce, Fenner & Smith 52.18%
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
</TABLE>
B-33
<PAGE>
FUND MANAGER AND SUB-ADVISER
Fund Manager
NIAC acts as the manager of each Fund, with responsibility for the overall man-
agement of each Fund. NIAC is a Delaware Corporation and its address is 333
West Wacker Drive, Chicago, Illinois 60606. For the Growth/Income Fund, Euro-
pean Value Fund and the Stock/Bond Fund, NIAC has entered into a Sub-Advisory
Agreement with ICAP under which ICAP, subject to NIAC's supervision, manages
each Fund's investment portfolio. For the Muni/Stock Fund, NIAC has entered
into a Sub-Advisory Agreement with ICAP under which ICAP, subject to NIAC's su-
pervision, manages the Fund's equity investments. NIAC is also responsible for
managing the Funds' business affairs and providing day-to-day administrative
services to the Funds. For additional information regarding the management
services performed by NIAC and ICAP, see "Who Manages the Funds" in the Pro-
spectus.
NIAC is a wholly-owned subsidiary of Nuveen, 333 West Wacker Drive, Chicago,
Illinois 60606, which is also the principal underwriter of the Funds' shares.
Nuveen is sponsor of the Nuveen Defined Portfolios, registered unit investment
trusts, and is the principal underwriter for the Nuveen Mutual Funds, and has
served as co-managing underwriter for the shares of the Nuveen Exchange-Traded
Funds. Over 1,300,000 individuals have invested to date in Nuveen's funds and
defined portfolios. Founded in 1898, Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota, and is princi-
pally engaged in providing property-liability insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, each of the
Funds has agreed to pay an annual management fee at rates set forth in the Pro-
spectus under "Who Manages the Fund." In addition, NIAC agreed to waive all or
a portion of its management fee or reimburse certain expenses of the Stock/Bond
Fund and the Muni/Stock Fund for the period August 7, 1996 (inception) through
July 31, 1998 and for the period August 1, 1998 through July 31, 2000 in order
to prevent total operating expenses (excluding distribution or service fees,
and extraordinary expenses) from exceeding .85% and .95%, respectively, and for
the Growth/Income Fund, .95% and 1.05%, respectively, of the average daily net
asset value of any class of shares of the Funds. In addition, NIAC agreed to
waive all or a portion of its management fee or reimburse certain expenses of
the European Value Fund for the period May 29, 1998 (inception) through July
31, 2000 in order to prevent total operating expenses (excluding distribution
or service fees, and extraordinary expenses) from exceeding 1.30% of the aver-
age daily net asset value of any class of shares of the Fund. The Prospectus
includes current expense waivers and expense reimbursements for the Funds. The
following table sets forth the management fees (net of expenses reimbursements)
paid by the Funds and the fees waived and expenses reimbursed by NIAC for the
three most recent fiscal years.
<TABLE>
<CAPTION>
Amount of Management Fees (Net
of Expense Reimbursements by Amount of Fees Waived and
NIAC) Expenses Reimbursed by NIAC
--------------------------------- -----------------------------
7/1/97- 7/1/98- 7/1/99- 7/1/97- 7/1/98- 7/1/99-
6/30/98 6/30/99 6/30/00 6/30/98 6/30/99 6/30/00
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nuveen Growth and Income
Stock Fund............. $5,206,320 $6,563,959 $7,101,230 $1,252,775 $347,366 $291,021
Nuveen European Value
Fund................... $ 0* $ 6,233 $ 0 $ 34,256* $ 86,754 $234,652
Nuveen Balanced Stock
and Bond Fund.......... $ 289,843 $ 505,439 $ 491,753 $ 296,989 $144,674 $140,646
Nuveen Balanced
Municipal and Stock
Fund................... $ 619,733 $1,303,718 $1,223,969 $ 323,541 $ 70,901 $101,801
</TABLE>
--------
*For the period from May 29, 1998 (inception) through the fiscal year ended
June 30, 1998.
B-34
<PAGE>
In addition to the management fee, each Fund also pays a portion of the Nuveen
Investment Trust's general administrative expenses allocated in proportion to
the net assets of each fund. All fees and expenses are accrued daily and de-
ducted before payment of dividends to investors.
The Funds, the other Nuveen funds, NIAC, and other related entities have
adopted a code of ethics which essentially prohibits all Nuveen fund manage-
ment personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take ad-
vantage of a Fund's anticipated or actual portfolio transactions, and is de-
signed to assure that the interests of Fund shareholders are placed before the
interests of Nuveen personnel in connection with personal investment transac-
tions.
Sub-Adviser
ICAP was founded in 1970 and is located at 225 West Wacker Drive, Suite 2400,
Chicago, IL 60606. Under the Sub-Advisory Agreement for each Fund, ICAP is
compensated by NIAC for its investment advisory services with respect to all
or a portion of each Fund's assets. Under a Sub-Advisory Agreement with NIAC,
ICAP manages the investment portfolios of the Growth/Income Fund, European
Value Fund, and the Stock/Bond Fund, and the equity portion of the Muni/Stock
Fund's investment portfolio.
Out of the fund management fee, NIAC pays ICAP a portfolio management fee
based on the average daily market value of all the Nuveen-sponsored investment
products for which it serves as the portfolio manager. NIAC pays Institutional
Capital separate portfolio management fees for the equity and fixed-income
portions of the funds' assets, if applicable, according to the following
schedule:
<TABLE>
<CAPTION>
Assets of All the Nuveen-
Sponsored
Investment Products Managed by Equity Portfolio Fixed-Income Portfolio
ICAP Management Fee Management Fee
------------------------------ ---------------- ----------------------
<S> <C> <C>
For the first $500 million..... .35% of 1% .20% of 1%
For the next $500 million...... .30% of 1% .15% of 1%
For assets over $1 billion..... .25% of 1% .12% of 1%
</TABLE>
The equity and fixed-income portfolio management fees are each paid on a spec-
ified proportion of fund net assets. The specified proportions for the equity
portfolio management fees are currently 100%, 100%, 55% and 35%, respectively,
for the Growth and Income Stock Fund, European Value Balanced Stock and Bond
Fund and Balanced Municipal and Stock Fund. The specified proportion for the
fixed-income portfolio management fee is currently 45% for the Balanced Stock
and Bond Fund. In addition, for the European Value Fund, NIAC has agreed to
pay Institutional Capital a supplemental management fee until assets in the
aggregate in this fund and another European fund subadvised by Institutional
Capital reach $50 million. When this level is reached, the aggregate amount of
the supplemental fee paid by NIAC will be credited back to NIAC through a tem-
porary reduction in fees.
ICAP's investment management strategy and operating policies are set through a
team approach, with all ICAP investment professionals contributing. ICAP cur-
rently maintains a staff of 15 investment professionals. Each of the invest-
ment officers and other professionals of ICAP has developed an expertise in at
least one functional investment area, including equity research, strategy,
fixed income analysis, quantitative research, technical research and trading.
A key element in the decision-making process is a formal investment committee
meeting generally held several times a week and attended by all professionals.
B-35
<PAGE>
These meetings also provide for the ongoing review of ICAP's investment posi-
tions. Pertinent information from outside sources is shared and incorporated
into the investment outlook. The investment strategy, asset sectors, and indi-
vidual security holdings are reviewed to verify their continued appropriate-
ness. Investment recommendations are presented to the committee for decisions.
With regard to Fund assets subject to the Sub-Advisory Agreement, ICAP provides
continuous advice and recommendations concerning the Fund's investments, and is
responsible for selecting the broker/ dealers who execute the portfolio trans-
actions. ICAP also serves as investment adviser to the ICAP Funds, Inc. and to
pension and profit-sharing plans, and other institutional and private invest-
ors. ICAP has approximately $13 billion under management. Mr. Robert H. Lyon,
President of ICAP, owns shares representing 51% of the voting rights of ICAP.
The following table sets forth the fees paid by NIAC to ICAP for its services
for the three most recent fiscal years.
<TABLE>
<CAPTION>
Amount Paid by NIAC to ICAP
---------------------------------
7/1/97- 7/1/98- 7/1/99-
6/30/98 6/30/99 6/30/00
---------- ---------- ----------
<S> <C> <C> <C>
Nuveen Growth and Income Stock Fund........... $2,569,309 $2,725,923 $2,908,541
Nuveen European Value Fund.................... $ 1,137* $ 44,602 $ 57,223
Nuveen Balanced Stock and Bond Fund........... $ 144,823 $ 233,276 $ 226,568
Nuveen Balanced Municipal and Stock Fund...... $ 211,925 $ 210,040 $ 201,706
</TABLE>
--------
* For the period May 29, 1998 (inception) through the fiscal year ended June
30, 1998.
PORTFOLIO TRANSACTIONS
NIAC (with respect to transactions in Municipal Obligations) and ICAP (with re-
spect to other transactions) are responsible for decisions to buy and sell se-
curities for the Funds and for the placement of the Funds' securities business,
the negotiation of the commissions to be paid on brokered transactions, the
prices for principal trades in securities, and the allocation of portfolio bro-
kerage and principal business. It is the policy of both NIAC and ICAP to seek
the best execution at the best security price available with respect to each
transaction, and with respect to brokered transactions, in light of the overall
quality of brokerage and research services provided to the respective adviser
and its advisees. The best price to the Funds means the best net price without
regard to the mix between purchase or sale price and commission, if any. Pur-
chases may be made from underwriters, dealers, and, on occasion, the issuers.
Commissions will be paid on the Funds' futures and options transactions, if
any. The purchase price of portfolio securities purchased from an underwriter
or dealer may include underwriting commissions and dealer spreads. The Funds
may pay mark-ups on principal transactions. In selecting broker-dealers and in
negotiating commissions, the portfolio manager considers, among other things,
the firm's reliability, the quality of its execution services on a continuing
basis and its financial condition. Brokerage will not be allocated based on the
sale of a Fund's shares. NIAC expects that all transactions in Municipal Obli-
gations will be effected on a principal (as opposed to an agency) basis and,
accordingly, does not expect to pay any brokerage commissions on such transac-
tions.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay
a broker or dealer who supplies brokerage and research services a commission
for effecting a transaction in excess of the amount of commission another bro-
ker or dealer would have charged for effecting the transaction. Brokerage and
research services include (a) furnishing advice as to the value of securities,
the advisability of investing, purchasing or
B-36
<PAGE>
selling securities, and the availability of securities or purchasers or sell-
ers of securities; (b) furnishing analyses and reports concerning issuers, in-
dustries, securities, economic factors and trends, portfolio strategy, and the
performance of accounts; and (c) effecting securities transactions and per-
forming functions incidental thereto (such as clearance, settlement, and cus-
tody).
In light of the above, in selecting brokers, the portfolio manager considers
investment and market information and other research, such as economic, secu-
rities and performance measurement research, provided by such brokers, and the
quality and reliability of brokerage services, including execution capability,
performance, and financial responsibility. Accordingly, the commissions
charged by any such broker may be greater than the amount another firm might
charge if the portfolio manager determines in good faith that the amount of
such commissions is reasonable in relation to the value of the research infor-
mation and brokerage services provided by such broker to NIAC or ICAP or the
Funds. NIAC and ICAP believes that the research information received in this
manner provides the Funds with benefits by supplementing the research other-
wise available to the Funds. The Management Agreement and the Sub-Advisory
Agreement provide that such higher commissions will not be paid by the Funds
unless the applicable adviser determines in good faith that the amount is rea-
sonable in relation to the services provided. The investment advisory fees
paid by the Funds to NIAC under the Management Agreement or the subadvisory
fees paid by NIAC to ICAP under the Sub-Advisory Agreement are not reduced as
a result of receipt by either NIAC or ICAP of research services.
NIAC and ICAP each place portfolio transactions for other advisory accounts
managed by them. Research services furnished by firms through which the Funds
effect their securities transactions may be used by NIAC and/or ICAP in ser-
vicing all of its accounts; not all of such services may be used by NIAC
and/or ICAP in connection with the Funds. NIAC and ICAP believe it is not pos-
sible to measure separately the benefits from research services to each of the
accounts (including the Funds) managed by them. Because the volume and nature
of the trading activities of the accounts are not uniform, the amount of com-
missions in excess of those charged by another broker paid by each account for
brokerage and research services will vary. However, NIAC and ICAP believe such
costs to the Funds will not be disproportionate to the benefits received by
the Funds on a continuing basis. NIAC and ICAP seek to allocate portfolio
transactions equitably whenever concurrent decisions are made to purchase or
sell securities by the Funds and another advisory account. In some cases, this
procedure could have an adverse effect on the price or the amount of securi-
ties available to the Funds. In making such allocations between the Fund and
other advisory accounts, the main factors considered by NIAC and ICAP are the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment and
the size of investment commitments generally held.
The following table sets forth the aggregate amount of brokerage commissions
paid by the Funds for the three most recent fiscal years.
<TABLE>
<CAPTION>
Aggregate Amount of
Brokerage Commissions
---------------------------------
7/1/97- 7/1/98- 7/1/99-
6/30/98 6/30/99 6/30/00
---------- ---------- ----------
<S> <C> <C> <C>
Nuveen Growth and Income Stock Fund........... $1,234,546 $1,521,387 $1,540,874
Nuveen European Value Fund.................... $ 1,098* $ 34,442 $ 54,748
Nuveen Balanced Stock and Bond Fund........... $ 74,793 $ 94,262 $ 84,000
Nuveen Balanced Municipal and Stock Fund...... $ 96,716 $ 125,054 $ 118,415
</TABLE>
--------
*For the period May 29, 1998 (inception) through the fiscal year ended June
30, 1998.
B-37
<PAGE>
The differences between brokerage commissions paid by the European Value Fund
in the 1998 fiscal year, and the 1999 and 2000 fiscal years, was due, in part,
to an increase in portfolio activity, and that the Fund did not operate for a
full year during its first fiscal year. During the fiscal year ended June 30,
1999, the Growth/Income Fund, Stock/Bond Fund, Muni/Stock Fund and European
Value Fund paid to brokers as commissions in return for research services
$972,867, $52,534, $57,360, and $79,157, respectively, and the aggregate
amount of those transactions per Fund on which such commissions were paid
were, $1,093,456,188, $63,205,444, $63,040,433, and $87,095,791, respectively.
The Funds have acquired during the fiscal year ended June 30, 2000 the securi-
ties of their regular brokers or dealers as defined in rule 10b-1 under the
Investment Company Act of 1940 or of the parents of the brokers or dealers.
The following table sets forth those brokers or dealers and states the value
of the Funds' aggregate holdings of the securities of each issuer as of close
of the fiscal year ended June 30, 2000:
<TABLE>
<S> <C> <C> <C>
Aggregate Fund
Holdings of Broker/Dealer
or Parent
Fund Broker/Dealer Issuer (as of June 30, 2000)
---- ------------- ------ -------------------------
Nuveen Growth and Income Stock Fund Salomon Smith Barney Inc. Citigroup Inc. $ 23,025,261
Nuveen European Value Fund ABN Amro ABN Amro $ 550,200
Deutsche Bank Deutsche Bank $ 0
Nuveen Balanced Stock and Bond Fund Salomon Smith Barney Inc. Citigroup Inc. $ 1,365,386
Nuveen Balanced Municipal and Stock Salomon Smith Barney Inc. Citigroup Inc. $ 1,796,173
</TABLE>
Under the Investment Company Act of 1940, a Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the terms of a security pur-
chased by the Fund, the amount of securities that may be purchased in any one
issue and the assets of the Fund that may be invested in a particular issue.
In addition, purchases of securities made pursuant to the terms of the Rule
must be approved at least quarterly by the Board of Trustees, including a ma-
jority of the trustees who are not interested persons of the Trust.
NET ASSET VALUE
Each Fund's net asset value per share is determined separately for each class
of the applicable Fund's shares as of the close of trading (normally 4:00 p.m.
eastern time) on each day the New York Stock Exchange (the "Exchange") is open
for business. The Exchange is not open for trading on New Year's Day, Washing-
ton's Birthday, Martin Luther King's Birthday, Good Friday, Memorial Day, In-
dependence Day, Labor Day, Thanksgiving Day and Christmas Day. A Fund's net
asset value may not be calculated on days during which the Fund receives no
orders to purchase shares and no shares are tendered for redemption. Net asset
value per share of a class of a Fund is calculated by taking the value of the
pro rata portion of the Fund's total assets attributable to that class, in-
cluding interest or dividends accrued but not yet collected, less all liabili-
ties attributable to that class (including the class's pro rata portion of the
Fund's liability) and dividing
B-38
<PAGE>
by the total number of shares of that class outstanding. The result, rounded
to the nearest cent, is the net asset value per share of that class. In deter-
mining net asset value, expenses are accrued and applied daily and securities
and other assets for which market quotations are available are valued at mar-
ket value. Common stocks and other equity-type securities are valued at the
last sales price on the securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a securities exchange or
Nasdaq for which there were no transactions on a given day or securities not
listed on a securities exchange or Nasdaq are valued at the most recent bid
prices. Fixed-income securities are valued by a pricing service that values
portfolio securities at the mean between the quoted bid and asked prices or
the yield equivalent when quotations are readily available. Securities for
which quotations are not readily available (which are expected to constitute a
majority of the fixed-income securities held by a Fund) are valued at fair
value as determined by the pricing service using methods that include consid-
eration of the following: yields or prices of securities or bonds of compara-
ble quality, type of issue, coupon, maturity and rating; indications as to
value from securities dealers; and general market conditions. The pricing
service may employ electronic data processing techniques and/or a matrix sys-
tem to determine valuations. Debt securities having remaining maturities of 60
days or less when purchased are valued by the amortized cost method when the
Board of Trustees determines that the fair market value of such securities is
their amortized cost. Under this method of valuation, a security is initially
valued at its acquisition cost, and thereafter amortization of any discount or
premium is assumed each day, regardless of the impact of fluctuating interest
rates on the market value of the security.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Board of Trustees or its dele-
gate at fair value. These securities generally include but are not limited to,
restricted securities (securities which may not be publicly sold without reg-
istration under the Securities Act of 1933) for which a pricing service is un-
able to provide a market price; securities whose trading has been formally
suspended; debt securities that have gone into default and for which there is
no current market quotation; a security whose market price is not available
from a pre-established pricing source; a security with respect to which an
event has occurred that is likely to materially affect the value of the secu-
rity after the market has closed but before the calculation of fund NAV (as
may be the case in foreign markets on which the security is primarily traded)
or make it difficult or impossible to obtain a reliable market quotation; and,
a security whose price, as provided by the pricing service, does not reflect
the security's "fair value." As a general principal, the current "fair value"
of an issue of securities would appear to be the amount which the owner might
reasonably expect to receive for them upon their current sale. A variety of
factors may be considered in determining the fair value of such securities.
Regardless of the method employed to value a particular security, all valua-
tions are subject to review by a Fund's Board of Trustees or its delegate who
may determine the appropriate value of a security whenever the value as calcu-
lated is significantly different from the previous day's calculated value.
If a Fund holds securities that are primarily listed on foreign exchanges, the
net asset value of the Fund's shares may change on days when shareholders will
not be able to purchase or redeem the Fund's shares.
B-39
<PAGE>
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice
of Chapman and Cutler, counsel to the Trust.
Each of the Funds intends to qualify under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code") for tax treatment as a regulated invest-
ment company. In order to qualify as a regulated investment company, a Fund (i)
must elect to be treated as a regulated investment company and (ii) for each
taxable year thereafter must satisfy certain requirements relating to the
source of its income, diversification of its assets, and distributions of its
income to shareholders. First, a Fund must derive at least 90% of its annual
gross income (including tax-exempt interest) from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities, foreign currencies or other income (including but not lim-
ited to gains from options, futures, or forward contracts) derived with respect
to its business of investing in such stock, securities or currencies (the "90%
gross income test"). Second, the Fund must diversify its holdings so that, at
the close of each quarter of its taxable year, (i) at least 50% of the value of
its total assets is comprised of cash, cash items, United States Government se-
curities, securities of other regulated investment companies and other securi-
ties limited in respect of any one issuer to an amount not greater in value
than 5% of the value of the Fund's total assets and to not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of the Fund's total assets is invested in the securities of any one is-
suer (other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by a Fund and
engaged in the same, similar or related trades or businesses.
As a regulated investment company, a Fund will not be subject to federal income
tax in any taxable year for which it distributes at least 90% of the sum of (i)
its "investment company taxable income" (without regard to its net capital
gain, i.e., the excess of its net long-term capital gain over its short-term
capital loss) and (ii) its net tax-exempt interest (the excess of its gross
tax-exempt interest income over certain disallowed deductions). In addition, to
the extent a Fund timely distributes to shareholders at least 98% of its tax-
able income (including any net capital gain), it will not be subject to the 4%
excise tax on certain undistributed income of "regulated investment companies."
Each Fund intends to make timely distributions in compliance with these re-
quirements and consequently it is anticipated that they generally will not be
required to pay the excise tax. A Fund may retain for investment its net capi-
tal gain. However, if a Fund retains any net capital gain or any investment
company taxable income, it will be subject to federal income tax at regular
corporate rates on the amount retained. If a Fund retains any net capital gain,
such Fund may designate the retained amount as undistributed capital gains in a
notice to its shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their shares of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by such Fund against their federal income tax liabilities if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of a Fund will be
increased by an amount equal to the difference between the amount of such
includable gains and the tax deemed paid by such shareholder in respect of such
shares. Each Fund
B-40
<PAGE>
intends to distribute at least annually to its shareholders all or substan-
tially all of its investment company taxable income, net tax-exempt interest
and net capital gain.
Treasury regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain, to elect (unless it has
made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or
any net foreign currency loss incurred after October 31 as if they had been in-
curred in the succeeding year.
If any of the Funds engage in hedging transactions involving financial futures
and options, these transactions will be subject to special tax rules, the ef-
fect of which may be to accelerate income to a Fund, defer a Fund's losses,
cause adjustments in the holding periods of a Fund's securities, convert long-
term capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Prior to purchasing shares in one of the Funds, the impact of dividends or dis-
tributions which are expected to be or have been declared, but not paid, should
be carefully considered. Any dividend or distribution declared shortly after a
purchase of such shares prior to the record date will have the effect of reduc-
ing the per share net asset value by the per share amount of the dividend or
distribution and will be subject to federal income tax to the extent it is a
distribution of ordinary income or capital gain.
In any taxable year of a Fund, distributions from the Fund, other than distri-
butions which are designated as capital gains dividends (or exempt interest
dividends, in the case of Muni/Stock Fund), will to the extent of the earnings
and profits on such Fund, constitute dividends for Federal income tax purposes
which are taxable as ordinary income to shareholders. To the extent that dis-
tributions to a shareholder in any year exceed the Fund's current and accumu-
lated earnings and profits, they will be treated as a return of capital and
will reduce the shareholder's basis in his or her shares and, to the extent
that they exceed his or her basis, will be treated as gain from the sale of
such shares as discussed below. Distributions of the Fund's net capital gain
which are properly designated as capital gain dividends by the Fund will be
taxable to the shareholders as long-term capital gain, regardless of the length
of time the shares have been held by a shareholder. Distributions will be taxed
in the manner described (i.e., as ordinary income, long-term capital gain, re-
turn of capital or exempt-interest dividends) even if reinvested in additional
shares of a Fund.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by each Fund (and received
by the shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of a Fund normally will result in cap-
ital gain or loss to the shareholders. Generally, a shareholder's gain or loss
will be long-term gain or loss if the shares have been held for more than one
year. Present law taxes both long- and short-term capital gains of corporations
at the rates applicable to ordinary income. The Internal Revenue Service Re-
structuring and Reform Act of
B-41
<PAGE>
1998 (the "1998 Tax Act") provides that for taxpayers other than corporations,
net capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property (with
certain exclusions) is subject to a maximum marginal stated tax rate of 20%
(10% in the case of certain taxpayers in the lowest tax bracket). However,
capital gain realized from assets held more than one year that is considered
unrecaptured Section 1250 gain is taxed at a maximum marginal stated tax rate
of 25%. Capital gain or loss is long-term if the holding period for the asset
is more than one year, and is short-term if the holding period for the asset
is one year or less. The date on which a share is acquired (i.e., the "trade
date") is excluded for purposes of determining the holding period of the
share. Capital gains realized from assets held for one year or less are taxed
at the same rates as ordinary income. Note that if a sale of shares held for
less than six months results in a loss, the loss will be treated as a long-
term capital loss to the extent of any capital gain distribution made with re-
spect to such shares during the period those shares are held by the sharehold-
er.
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered "con-
version transactions" effective for transactions entered into after April 30,
1993. Shareholders and prospective investors should consult with their tax ad-
visers regarding the potential effect of this provision on their investment in
shares of a Fund.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by a Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of a Fund
are held by fewer than 500 persons, additional taxable income may be realized
by the individual (and other non-corporate) shareholders in excess of the dis-
tributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of a Fund or another fund are subsequently acquired without payment of
a sales load or with the payment of a reduced sales load pursuant to the rein-
vestment or exchange privilege. Any disregarded portion of such load will re-
sult in an increase in the shareholder's tax basis in the shares subsequently
acquired. Moreover, losses recognized by a shareholder on the redemption or
exchange of shares of a Fund held for six months or less are disallowed to the
extent of any distribution of exempt-interest dividends received with respect
to such shares and, if not disallowed, such losses are treated as long-term
capital losses to the extent of any distributions of long-term capital gains
made with respect to such shares. In addition, no loss will be allowed on the
redemption or exchange of shares of a Fund if the shareholder purchases other
shares of such Fund (whether through reinvestment of distributions or other-
wise) or the shareholder acquires or enters into a contract or option to ac-
quire securities that are substantially identical to shares of a Fund within a
period of 61 days beginning 30 days before and ending 30 days after such re-
demption or exchange. If disallowed, the loss will be reflected in an adjust-
ment to the basis of the shares acquired.
If in any year a Fund should fail to qualify under Subchapter M for tax treat-
ment as a regulated investment company, the Fund would incur a regular corpo-
rate federal income tax upon its income for
B-42
<PAGE>
that year (other than interest income from Municipal Obligations), and distri-
butions to its shareholders would be taxable to shareholders as ordinary divi-
dend income for federal income tax purposes to the extent of the Fund's avail-
able earnings and profits.
The Funds are required in certain circumstances to withhold 31% of taxable div-
idends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Funds their correct taxpayer identification number
(in the case of individuals, their social security number) and certain certifi-
cations, or who are otherwise subject to backup withholding.
A Shareholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from the Fund which constitute dividends for Federal income tax
purposes (other than dividends which a Fund designates as capital gain divi-
dends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from a Fund that
are designated by the Fund as capital gain dividends should not be subject to
United States Federal income taxes, including withholding taxes, if all of the
following conditions are met: (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor of a trade or business
within the United States, (ii) the foreign investor (if an individual) is not
present in the United States for 183 days or more during his or her taxable
year, and (iii) the foreign investor provides all certification which may be
required of his status (foreign investors may contact the Fund to obtain a Form
W-8-BEN which must be filed with such Fund and refiled every three calendar
years thereafter). Foreign investors should consult their tax advisors with re-
spect to United States tax consequences of ownership of Shares. Units in a Fund
and Fund distributions may also be subject to state and local taxation and
Shareholders should consult their tax advisors in this regard.
Generally, Fund dividends are not eligible for the 70% dividends-received de-
duction for corporations. However, a corporate shareholder (other than corpo-
rate shareholders, such as "S" corporations, which are not eligible for the de-
duction because of their special characteristics and other than for purposes of
special taxes such as the accumulated earnings tax and the personal holding
corporation tax) may be entitled to a 70% dividends received deduction with re-
spect to any portion of such shareholder's ordinary income dividends which are
attributable to dividends received by a Fund on certain Equity Securities. A
Fund will designate the portion of any taxable dividend which is eligible for
this deduction. However, a corporate shareholder should be aware that Sections
246 and 246A of the Code impose additional limitations on the eligibility of
dividends for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Shares of a Fund) must generally be held
at least 46 days (as determined under, and during the period specified in, Sec-
tion 246(c) of the Code). Regulations have been issued which address special
rules that must be considered in determining whether the 46 day holding re-
quirement is met. Moreover, the allowable percentage of the deduction will gen-
erally be reduced from 70% if a corporate shareholder owns Shares of a Fund the
financing of which is directly attributable to indebtedness incurred by such
corporation. To the extent dividends received by a Fund are attributable to
foreign corporations, a corporate shareholder will not be entitled to the divi-
dends received deduction with respect to its share of such foreign dividends
since the dividends received deduction is generally available only with respect
to dividends paid by domestic corporations. It should be noted that payments to
a Fund of dividends on Equity Securities that are attributable
B-43
<PAGE>
to foreign corporations may be subject to foreign withholding taxes. Corporate
shareholders should consult with their tax advisers with respect to the limita-
tions on, and possible modifications to, the dividends received deduction.
A Fund may elect to pass through to the shareholders the foreign income and
similar taxes paid by the Fund in order to enable such shareholders to take a
credit (or deduction) for foreign income taxes paid by the Fund. If such an
election is made, shareholders of the Fund, because they are deemed to own a
pro rata portion of the foreign securities held by the Fund, must include in
their gross income, for federal income tax purposes, both their portion of div-
idends received by the Fund and also their portion of the amount which the Fund
deems to be the shareholders' portion of foreign income taxes paid with respect
to, or withheld from, dividends, interest or other income of the Fund from its
foreign investments. Shareholders may then subtract from their federal income
tax the amount of such taxes withheld, or else treat such foreign taxes as de-
ductions from gross income; however, as in the case of investors receiving in-
come directly from foreign sources, the above described tax credit or deduction
is subject to certain limitations. The 1997 Act imposes a required holding pe-
riod for such credits. Shareholders should consult their tax advisers regarding
this election and its consequences to them.
Foreign currency gains and losses realized by the Fund in connection with cer-
tain transactions that involve foreign currency-denominated debt securities,
certain foreign currency options, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and
losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. For example, if the Fund
sold a foreign stock or bond and part of the gain or loss on the sale was at-
tributable to an increase or decrease in the value of a foreign currency, then
the currency gain or loss may be treated as ordinary income or loss. If such
transactions result in higher net ordinary income, the dividends paid by the
Fund will be increased; if such transactions result in lower net ordinary in-
come, a portion of dividends paid could be classified as a return of capital.
The Fund may qualify for and make an election permitted under the "pass
through" provisions of Section 853 of the Internal Revenue Code, which allows a
regulated investment company to elect to have its foreign tax credit taken by
its shareholders instead of on its own tax return. To be eligible for this
credit, more than 50% of the value of the Fund's total assets at the close of
its taxable year must consist of stock or other securities in foreign corpora-
tions, and the Fund must meet certain other requirements.
If the Fund makes this election, it may not take any foreign tax credit and may
not take a deduction for foreign taxes paid. However, the Fund is allowed to
include the amount of foreign taxes paid in a taxable year in its dividends
paid deduction. Each shareholder would then include in his gross income, and
treat as paid by him, his proportionate share of the foreign taxes paid by the
Fund.
If the U.S. government were to impose any restrictions, through taxation or
other means, on foreign investments by U.S. investors such as those to be made
through the Fund, the Board of Trustees of the Fund will promptly review the
policies of the Fund to determine whether significant changes in its invest-
ments are appropriate.
B-44
<PAGE>
Nuveen Balanced Municipal and Stock Fund Tax Matters
In addition to the matters discussed above, the Muni/Stock Fund intends to
qualify to pay "exempt-interest" dividends as defined under the Code. Under the
Code, at the close of each quarter of its taxable year, if at least 50% of the
value of the Fund's total assets consists of obligations described in Code Sec-
tion 103(a)) ("Municipal Securities"), the Fund shall be qualified to pay ex-
empt-interest dividends to its shareholders. Exempt-interest dividends are div-
idends or any part thereof (other than a capital gain dividend) paid by the
Fund which are attributable to interest on Municipal Securities (net of ex-
penses and any bond premium amortization with respect to Municipal Securities)
to the extent such interest is excludible from gross income under Section 103
of the Code and are so designated by the Fund. Exempt-interest dividends will
be excluded from gross income of the owners of the shares for federal income
tax purposes, except in the case of certain substantial users as described be-
low. Such exempt-interest dividends may be taken into account in determining
the federal alternative minimum tax, as described below. Insurance proceeds re-
ceived by the Muni/Stock Fund under any insurance policies in respect of sched-
uled interest payments on defaulted Municipal Securities, as described herein,
may be taken into account in determining the amount of exempt-interest divi-
dends provided that, at the time such policies are purchased, the amounts paid
for such policies are reasonable, customary and consistent with the reasonable
expectation that the respective issuer of the Municipal Securities, rather than
the insurer, will pay debt service on the Municipal Securities; in the case of
non-appropriation by a political subdivision, however, there can be no assur-
ance that payments made by the insurer representing interest on such "non-ap-
propriation" Municipal Lease Obligations may be taken into account in determin-
ing the amount of exempt-interest dividends. All taxpayers are required to re-
port to the Internal Revenue Service on their tax returns the amount of tax-ex-
empt interest earned during the year, including exempt interest dividends from
a Fund.
If the Fund purchases a Municipal Security at a market discount, any gain real-
ized by the Fund upon sale or redemption of the Municipal Security will be
treated as taxable interest income to the extent such gain does not exceed the
market discount, and any gain realized in excess of the market discount gener-
ally will be treated as capital gain. The Fund will be required by the Code to
allocate its respective expenses proportionately between their tax-exempt in-
come and taxable income (excluding net realized long-term capital gains). Dis-
tributions to shareholders by the Fund of net income received, if any, from
taxable dividends, market discount on Municipal Securities treated as interest
and net short-term capital gains, if any, realized by the Fund will be taxable
to shareholders as ordinary income. Distributions of net realized long-term
capital gains, if any, are taxable as long-term capital gains, as discussed
above.
In general, market discount is the amount (if any) by which the stated redemp-
tion price at maturity exceeds the Fund's purchase price (except to the extent
that such difference, if any, is attributable to original issue discount not
yet accrued), subject to a statutory de minimis rule. Accretion of market dis-
count is taxable as ordinary income. Market discount that accretes while the
Fund holds a Municipal Security would be recognized as ordinary income by the
Fund when principal payments are received on the Municipal Security, upon sale
or at redemption (including early redemption) or at the Fund's election, as
such market discount accrues. Market discount income recognized by the Fund
will result in taxable dividends to the shareholders.
For purposes of computing the alternative minimum tax for individuals and cor-
porations and the Superfund tax for corporations, interest on certain private
activity bonds (which includes most industrial
B-45
<PAGE>
and housing bonds) issued on or after August 8, 1986 is included as a prefer-
ence item. The Fund will annually supply its shareholders with a report indi-
cating the percentage of the Fund's income attributable to Municipal Securities
that is treated as a tax preference item for purposes of the federal alterna-
tive minimum tax. Moreover, for corporations, the alternative minimum taxable
income is increased by 75% of the difference between an alternative measure of
income ("adjusted current earnings") and the amount otherwise determined to be
the alternative minimum taxable income. Interest on all Municipal Securities,
and therefore all exempt-interest dividends received from the Fund, are in-
cluded in calculating adjusted current earnings. Under current Code provisions,
the Superfund Tax does not apply to tax years beginning on or after January 1,
1996. Legislative proposals have been made that would reinstate the Superfund
Tax.
Individuals whose "modified income" exceeds a base amount will be subject to
federal income tax on up to one-half of their social security benefits. Modi-
fied income currently includes adjusted gross income, one-half of social secu-
rity benefits and tax-exempt interest, including exempt-interest dividends from
the Fund. In addition, individuals whose modified income exceeds certain base
amounts are required to include in gross income up to 85% of their social secu-
rity benefits.
The interest on private activity bonds in most instances is not federally tax-
exempt to a person who is a "substantial user" of a facility financed by such
bonds or a "related person" of such "substantial user." As a result, the Fund
may not be an appropriate investment for shareholders who are considered either
a "substantial user" or a "related person" within the meaning of the Code. In
general, a "substantial user" of a facility includes a "non-exempt person who
regularly uses a part of such facility in his trade or business." "Related per-
sons" are in general defined to include persons among whom there exists a rela-
tionship, either by family or business, which would result in a disallowance of
losses in transactions among them under various provisions of the Code (or if
they are members of the same controlled group of corporations under the Code),
including a partnership and each of its partners (and their spouses and minor
children), an S corporation and each of its shareholders (and their spouses and
minor children) and various combinations of these relationships. The foregoing
is not a complete statement of all of the provisions of the Code relating to
the definitions of "substantial user" and "related person." For additional in-
formation, investors should consult their tax advisers before investing in the
Fund.
The Code provides that interest on indebtedness incurred or continued to pur-
chase or carry shares of a fund that distributes exempt-interest dividends is
not deductible for Federal income tax purposes. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of purchas-
ing or carrying particular assets, the purchase or ownership of shares may be
considered to have been made with borrowed funds even though such funds are not
directly traceable to the purchase or ownership of shares.
General
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
federal income taxation of the Funds and their shareholders and relates only to
the federal income tax status of a Fund and to the tax treatment of distribu-
tions by a Fund to United States shareholders. For complete provisions, refer-
ence should be
B-46
<PAGE>
made to the pertinent Code sections and Treasury Regulations. The Code and
Treasury Regulations are subject to change by legislative or administrative ac-
tion, and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult their own tax advisers for more detailed
information concerning the federal taxation of the Funds and the income tax
consequences to their shareholders, as well as with respect to foreign, state
and local tax consequences of ownership of Fund shares.
Nuveen Balanced Municipal and Stock Fund Distributions
The Muni/Stock Fund will pay monthly tax-exempt income dividends to sharehold-
ers at a level rate that reflects the past and projected net tax-exempt income
of the Fund and that results, over time, in the distribution of substantially
all of the Fund's net tax-exempt income. To maintain a more stable monthly dis-
tribution, the Fund may from time to time distribute less than the entire
amount of net tax-exempt income earned in a particular period. This undistrib-
uted net tax-exempt income would be available to supplement future distribu-
tions, which might otherwise have been reduced by a decrease in the Fund's
monthly net income due to fluctuations in investment income or expenses. As a
result, the tax-exempt income distributions paid by the Fund for any particular
monthly period may be more or less than the amount of net tax-exempt income ac-
tually earned by the Fund during such period. Undistributed net tax-exempt in-
come is included in the Fund's net asset value and, correspondingly, distribu-
tions from previously undistributed net tax-exempt income are deducted from the
Fund's net asset value. It is not expected that this dividend policy will im-
pact the management of the Fund's portfolio.
PERFORMANCE INFORMATION
Each Fund may quote its yield, distribution rate, beta, average annual total
return or cumulative total return in reports to shareholders, sales literature
and advertisements each of which will be calculated separately for each class
of shares.
In accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission ("SEC"), yield is computed by dividing the net invest-
ment income per share earned during the specified one month or 30-day period by
the maximum offering price per share on the last day of the period, according
to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of the
period. In the case of Class A shares, the maximum offering price includes the
current maximum front-end sales charge of 5.75%.
B-47
<PAGE>
In computing yield, the Funds follow certain standardized accounting practices
specified by SEC rules. These practices are not necessarily consistent with
those that the Funds use to prepare their annual and interim financial state-
ments in conformity with generally accepted accounting principles. Thus, yield
may not equal the income paid to shareholders or the income reported in a
Fund's financial statements.
<TABLE>
<CAPTION>
Yield (As of June 30, 2000)
-------------------------------
Class A Class B Class C Class R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Growth and Income
Stock Fund............. 0.26% -- -- 0.53%
Nuveen European Value
Fund................... 0.89% 0.19% 0.19% 1.19%
Nuveen Balanced Stock
and Bond Fund.......... 2.32% 1.69% 1.69% 2.72%
Nuveen Balanced Munici-
pal and Stock Fund..... 2.81% 2.23% 2.23% 3.23%
</TABLE>
The Funds may from time to time in their advertising and sales materials report
a quotation of their current distribution rate. The distribution rate repre-
sents a measure of dividends distributed for a specified period. The distribu-
tion rate is computed by taking the most recent dividend per share, multiplying
it as needed to annualize it, and dividing by the appropriate price per share
(e.g., net asset value for purchases to be made without a load such as rein-
vestments from Nuveen Defined Portfolios, or the maximum public offering
price). The distribution rate differs from yield and total return and therefore
is not intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a Fund may be paying out more than it is
earning and because it may not include the effect of amortization of bond pre-
miums to the extent such premiums arise after the bonds were purchased.
The distribution rates as of the period quoted, based on the maximum public of-
fering price then in effect for the Funds, and assuming the imposition of the
maximum sales charge for Class A Shares of 5.75% were as follows:
<TABLE>
<CAPTION>
Distribution Rates
(as of June 30, 2000)
-------------------------------
Class A Class B Class C Class R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Growth and Income Stock Fund............. 0.99% 0.27% 0.27% 1.31%
Nuveen European Value Fund...................... 0.75% 0.14% 0.14% 1.01%
Nuveen Balanced Stock and Bond Fund............. 2.47% 1.85% 1.85% 2.88%
Nuveen Balanced Municipal and Stock Fund........ 2.44% 1.82% 1.82% 2.83%
</TABLE>
A Fund may from time to time in its advertising and sales literature quote its
beta. Beta is a standardized measure of a security's risk (variability of re-
turns) relative to the overall market, i.e. the proportion of the variation in
the security's returns that can be explained by the variation in the return of
the overall market. For example, a security with a beta of 0.85 is expected to
have returns that are 85% as variable as overall market returns. Conversely, a
security with a beta of 1.25 is expected to have returns that are 125% as
varaible as overall market returns. The beta of the overall market is by defi-
nition 1.00.
B-48
<PAGE>
The formula for beta is given by:
Beta = S A * B / C
where
A = (Xi - X), i=1,..., N
B = (Yi - Y), i=1,..., N
C = S (Xi - X)/2/, i=1,..., N
Xi = Security Return in period i
Yi = Market Return in period i
X = Average of all observations Xi
Y = Average of all observations Yi
N = Number of observations in the measurement period
The beta for the Growth/Income Fund on June 30, 1998, 1999 and 2000 was 0.77,
1.00 and .85%, respectively. The beta equals the weighted average of the betas
for each stock in the Fund's investment portfolio. The beta for each stock in
the Fund's portfolio was calculated based on weekly returns for the periods
ended June 30, 1998, 1999 and 2000 and using the S&P 500 Index as the market
benchmark.
All total return figures assume the reinvestment of all dividends and measure
the net investment income generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the underlying investments in a
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over
the specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Average annual total return and cumulative total return are based
upon the historical results of a Fund and are not necessarily representative
of the future performance of a Fund.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation as-
sumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the "redeem-
able value" of that investment at the end of the period. The cumulative total
return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains distributions by a Fund have been reinvested at net
asset value on the reinvest-
B-49
<PAGE>
ment dates during the period. Cumulative total return may also be shown as the
increased dollar value of the hypothetical investment over the period. Cumula-
tive total return calculations that do not include the effect of the sales
charge would be reduced if such charge were included. Average annual and cumu-
lative total returns may also be presented in advertising and sales literature
without the inclusion of sales charges.
From time to time, each Fund may compare its risk-adjusted performance with
other investments that may provide different levels of risk and return. For ex-
ample, a Fund may compare its risk level, as measured by the variability of its
periodic returns, or its risk-adjusted total return, with those of other funds
or groups of funds. Risk-adjusted total return would be calculated by adjusting
each investment's total return to account for the risk level of the investment.
The risk level for a class of shares of a Fund, and any of the other invest-
ments used for comparison, would be evaluated by measuring the variability of
the investment's return, as indicated by the standard deviation of the invest-
ment's monthly returns over a specified measurement period (e.g., two years).
An investment with a higher standard deviation of monthly returns would indi-
cate that a fund had greater price variability, and therefore greater risk,
than an investment with a lower standard deviation.
The risk-adjusted total return for a class of shares of a Fund and for other
investments over a specified period would be evaluated by dividing (a) the re-
mainder of the investment's annualized two-year total return, minus the
annualized total return of an investment in Treasury bill securities (essen-
tially a risk-free return) over that period, by (b) the standard deviation of
the investment's monthly returns for the period. This ratio is sometimes re-
ferred to as the "Sharpe measure" of return. An investment with a higher Sharpe
measure would be regarded as producing a higher return for the amount of risk
assumed during the measurement period than an investment with a lower Sharpe
measure.
Class A Shares of each Fund are sold at net asset value plus a current maximum
sales charge of 5.75% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Returns
and net asset value of each class of shares of the Funds will fluctuate. Fac-
tors affecting the performance of the Funds include general market conditions,
operating expenses and investment management. Any additional fees charged by a
securities representative or other financial services firm would reduce returns
described in this section. Shares of the Funds are redeemable at net asset val-
ue, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and sales
literature, a Fund may also compare its performance or the performance of its
portfolio manager with that of, or reflect the performance of: (1) the Consumer
Price Index; (2) equity mutual funds or mutual fund indexes as reported by
Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar"),
Wiesenberger Investment Companies Service ("Wiesenberger") and CDA Investment
Technologies, Inc. ("CDA") or similar independent services which monitor the
performance of mutual funds, or other industry or financial publications such
as Barron's, Changing Times, Forbes and Money Magazine; and/or (3) the S&P 500
Index, the S&P/Barra Value Index, the Lehman Aggregate Bond Index, or unmanaged
indices reported by Lehman Brothers. Performance comparisons by these indexes,
services or publications may rank mutual funds over different periods of time
by means of aggregate, average, year-by-year, or other
B-50
<PAGE>
types of total return and performance figures. Any given performance quotation
or performance comparison should not be considered as representative of the
performance of the Funds for any future period. In addition, the European Value
Fund may also present economic statistics obtained from governmental agencies
or industry or financial publications comparing Europe or countries participat-
ing in European Monetary Union to the U.S. Additionally, the Fund may discuss
certain economic and financial trends existing in Europe in order to illustrate
the general investment opportunities there. The Fund may present historical
performance of certain European countries, as reported by Morgan Stanley Capi-
tal International, or other independent data providers, as a way to show the
opportunities provided by European countries. The Fund may also show the his-
torical performance of certain European equity market indicies to compare
against other international equity market indices and to show how maintaining
investments in both European stocks and U.S. stocks may moderate risk. This
data is obtained from independent services such as Morgan Stanley Capital In-
ternational and Ibbotson Associates, Inc.
There are differences and similarities between the investments which the Funds
may purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include the effect of any sales charges.
Each Fund may also from time to time in its advertising and sales literature
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank certifi-
cates of deposit (CDs) or money market funds or indices that represent these
types of investments. U.S. Government bonds are long-term investments backed by
the full faith and credit of the U.S. Government. Bank CDs are generally short-
term, FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term in-
vestments with stable net asset values, fluctuating yields and special features
enhancing liquidity.
Nuveen Growth and Income Stock Fund
The Fund commenced operations on August 7, 1996. The table below represents the
investment returns for the specified periods on the Fund's Class A, Class B,
Class C and Class R shares. The total return figures for Class A shares are
shown both with and without the effect of the maximum sales charge. The total
return figures for the Class B shares include the effect of the applicable Con-
tingent Deferred Sales Charge ("CDSC").
<TABLE>
<CAPTION>
Nuveen Growth and Income Stock Fund
--------------------------------------------------------------------
Average Annual Total
Return Cumulative
-------------------- ------------
8/7/96 8/7/96
7/1/99- (inception)- (inception)-
6/30/00 6/30/00 6/30/00
------- ------------ ------------
<S> <C> <C> <C> <C>
Class ANAV........................ -5.33% 15.67% 76.29%
Class APOP........................ -10.77% 13.92% 66.16%
Class B........................... -9.57% 14.30% 68.34%
Class C........................... -5.97% 14.79% 71.17%
Class R........................... -5.13% 15.97% 78.12%
</TABLE>
B-51
<PAGE>
The table below presents annual investment returns for the ICAP Discretionary
Equity Composite between December 31, 1990 and December 31, 1999 and the return
for the first half of 2000. The ICAP Discretionary Equity Composite represents
the composite performance of the 38 managed accounts totalling approximately
$3.2 billion for which ICAP serves as investment adviser and that have the same
investment objectives and policies as the Fund.
<TABLE>
<CAPTION>
Annual Total Returns for the Year Ending December 31,
------------------------------------------------------------------------------
1/1/00-
6/30/00 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Discretionary
Equity Composite
(Gross)................ (2.54)% 15.91 11.20% 29.60% 26.44% 38.16% 1.95% 16.58% 7.38% 33.63% 1.47%
ICAP Discretionary
Equity Composite (Net). (3.20)% 14.42% 9.74% 27.98% 24.84% 36.46% 0.60% 15.09% 5.97% 31.97% 0.12%
S&P 500................. (0.42)% 21.04% 28.58% 33.36% 22.96% 37.58% 1.32% 10.08% 7.62% 30.47% (3.10)%
S&P/Barra Value Index... (4.07)% 12.72% 14.68% 29.99% 21.99% 37.00% (0.63)% 18.60% 10.53% 22.56% (6.85)%
Lipper Large Cap Value
Index.................. (1.99)% 10.78% 18.24% 28.47% 21.07% 33.24% 0.18% 13.27% 8.65% 30.62% (4.05)%
</TABLE>
Nuveen Balanced Stock and Bond Fund
The Fund commenced operations on August 7, 1996. The table below represents the
investment returns for the specified periods on the Fund's Class A, Class B,
Class C and Class R shares. The total return figures for Class A shares are
shown both with and without the effect of the maximum sales charge. The total
return figures for the Class B shares include the effect of the applicable
CDSC.
<TABLE>
<CAPTION>
Nuveen Balanced Stock and Bond Fund
---------------------------------------------------------------------------
Average Annual Total
Return Cumulative
-------------------- ------------
8/7/96 8/7/96
7/1/99- (inception)- (inception)-
6/30/00 6/30/00 6/30/00
------- ------------ ------------ ---
<S> <C> <C> <C> <C>
Class ANAV.......................... -1.23% 11.91% 55.02%
Class APOP.......................... -6.92% 10.22% 46.11%
Class B............................. -5.67% 10.52% 47.65%
Class C............................. -1.93% 11.10% 50.70%
Class R............................. -1.02% 12.17% 56.45%
</TABLE>
B-52
<PAGE>
The table below presents annual investment returns for the ICAP Balanced Com-
posite between December 31, 1990 and December 31, 1999 and the return for the
first half of 2000. The ICAP Balanced Composite represents the composite per-
formance of the six managed accounts totalling approximately $264 million for
which ICAP serves as investment adviser and that have the same investment ob-
jectives and policies as the Fund.
<TABLE>
<CAPTION>
Annual Total Returns for the Year Ending December 31,
---------------------------------------------------------------------------------
1/1/00-
6/30/00 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ICAP Balanced Composite
(Gross)................ 0.31% 8.96% 12.55% 19.68% 17.52% 29.09% 0.21% 13.81% 7.34% 31.04% 2.69%
ICAP Balanced Composite
(Net).................. (0.29)% 7.68% 11.24% 18.31% 16.17% 27.64% (0.99)% 12.50% 6.08% 29.58% 1.47%
Balance Fund Market
Benchmark Index........ (0.87)% 7.84% 13.00% 20.82% 14.59% 27.56% 0.01% 10.85% 6.27% 13.30% (3.85)%
Lipper Balanced Index... 1.74% 8.98% 15.09% 20.31% 13.01% 24.88% (2.04)% 11.94% 7.47% 25.84% 0.65%
</TABLE>
The gross performance results of the ICAP Discretionary Equity Composite and
the ICAP Balanced Composite reflect the investment performance of the respec-
tive composites before deduction of any investment advisory fees or other ex-
penses. The net performance results of the ICAP Discretionary Equity Composite
and the ICAP Balanced Composite reflect the deduction of the annual operating
expenses for the most recent fiscal year (without waivers or reimbursements)
for Class A shares of the Growth/Income Fund and the Stock/Bond Fund, respec-
tively, as summarized in the Prospectus and may be compared to the performance
of the indices referenced below. The performance information above of the ICAP
Discretionary Equity Composite and ICAP Balanced Composite reflects the past
performance achieved by ICAP's managed accounts and does not reflect past per-
formance of the Funds and should not be interpreted as indicative of future
performance of a Fund. Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500") is a widely recognized, unmanaged index of common stock prices. The
S&P/Barra Value Index consists of the "value" half of the S&P 500 Index. In
this capitalization weighted index, firms have higher book-to-price ratios and
are generally slower growing firms with less potential for returns but lower
volatility (relative to the "growth" half). S&P 500 and the S&P/Barra Value re-
turns assume reinvestment of all dividends paid by the stocks included in the
index, but do not include brokerage commissions or other fees an investor would
incur by investing in the portfolio of stocks comprising the index. The Lipper
Large Cap Value Index represents the composite returns of the 30 largest funds
comprising the Lipper Large Cap Value Objective and assumes reinvestment of all
fund dividends and distributions. The Balanced Fund Market Benchmark Index rep-
resents the investment performance of an unmanaged index comprised 60% of the
S&P/Barra Value and 40% of the Lehman Brothers Intermediate Treasury Index (the
"Lehman Index"). The Lehman Index is an unmanaged index of all public obliga-
tions of the U.S. Treasury, U.S. Government agencies, quasi-federal corpora-
tions and corporate debt guaranteed by the U.S. Government with maturities be-
tween one and ten years and an outstanding par value of at least $100 million.
The Lipper Balanced Index represents the composite returns of the 30 largest
funds comprising the Lipper Balanced Objective and assumes reinvestment of all
fund dividends and distributions.
B-53
<PAGE>
Nuveen Balanced Municipal and Stock Fund
The Fund commenced investment operations on August 7, 1996. The table below
represents the investment returns for the periods specified on the Fund's Class
A, Class B, Class C and Class R shares. The total return figures for Class A
shares are shown both with and without the effect of the maximum sales charge.
The total return figures for the Class B shares include the effect of the ap-
plicable CDSC.
<TABLE>
<CAPTION>
Nuveen Balanced Municipal and Stock Fund
---------------------------------------------------------------------------
Average Annual Total
Return Cumulative
-------------------- ------------
8/7/96 8/7/96
7/1/99- (inception)- (inception)-
6/30/00 6/30/00 6/30/00
------- ------------ ------------
<S> <C> <C> <C>
Class ANAV.............................. -0.83% 9.35% 41.67%
Class APOP.............................. -6.52% 7.70% 33.52%
Class B................................. -5.42% 7.95% 34.73%
Class C................................. -1.57% 8.54% 37.62%
Class R................................. -0.64% 9.63% 43.05%
</TABLE>
Nuveen European Value Fund
The Fund commenced operations on May 29, 1998. The table below represents the
investment returns for the specified periods on the Fund's Class A, Class B,
Class C and Class R shares. The total return figures for Class A shares are
shown both with and without the effect of the maximum sales charge. The total
return figures for the Class B shares include the effect of the applicable
CDSC.
<TABLE>
<CAPTION>
Nuveen European Value Fund
---------------------------------------------------------------------------
Average Annual Total
Return Cumulative
-------------------- ------------
5/29/98 5/29/98
7/1/99- (inception)- (inception)-
6/30/00 6/30/00 6/30/00
------- ------------ ------------
<S> <C> <C> <C>
Class ANAV.............................. 17.22% 8.43% 18.43%
Class APOP.............................. 10.48% 5.40% 11.62%
Class B................................. 12.34% 5.86% 12.63%
Class C................................. 16.29% 7.62% 16.58%
Class R................................. 17.44% 8.68% 19.00%
</TABLE>
Total returns reflect past performance and are not predictive of future re-
sults.
After-tax Performance of Balanced Portfolios
Nuveen has examined the historical after-tax performance of various balanced
portfolios, combining stocks with either municipal bonds, corporate bonds, or
Treasury bonds. The after-tax risk return trade-offs for various allocations
were derived by tracking the performance of hypothetical portfolios over the
1978-1997 period. All investment income produced by the portfolio is reinvest-
ed, along with the after-tax proceeds from an assumed 20% annualized turnover
rate. The allocations between the two assets were allowed to roam within a 5%
band around their target before rebalancing. Taxes were computed on the portfo-
lio level (realized losses offset gains) and at historical tax rates assuming
each year's tax rate applicable to a single investor who earned $100,000 in
1997 dollars. All portfolios were liquidated at
B-54
<PAGE>
period end and the existing tax liability was paid. The asset class returns
were represented by the following indices:
Municipal Bonds--
Lehman Brothers Long Municipal Index (Prior to 1980
municipals were based on a synthetic index created by Nuveen
based on the Bond Buyer 20 Index and other market data pub-
lished by The Bond Buyer, using Lehman's methodology.)
Total returns reflect past performance and are not predictive of future re-
sults.
Treasury Bonds--Lehman Brothers Long Treasury Index
Corporate Bonds--
Lehman Brothers Long Corporate Index
S&P 500 Stocks--Ibbotson Associates Large Company Stock Index
The average annual after-tax returns for these various balanced portfolios for
the 1978-1997 period were as follows:
<TABLE>
<CAPTION>
Equity Municipal Corporate Treasury
Portion Mixes Mixes Mixes
------------------------------------------------------------------------------------
<S> <C> <C> <C>
100% 12.51% 12.51% 12.51%
80 11.77 11.30 11.29
60 11.02 10.07 10.06
40 10.27 8.73 8.69
20 9.33 7.39 7.34
0 8.42 5.95 5.91
</TABLE>
Over the 1978-1997 time period, balanced portfolios combining municipals and
equities provided superior after-tax returns and lower levels of risk (measured
by variability of periodic returns) than Treasury and corporate blends having
similar maturities, under the assumptions described above.
The addition of 20% municipals to an otherwise all-equity portfolio would have
sacrificed only 74 basis points in annual after-tax return, while reducing risk
by a seventh. Conversely, in comparison to an all-municipal bond portfolio, a
balanced portfolio of 60% municipals and 40% equities offered 185 basis points
in additional annual-tax return with virtually no more risk.
B-55
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND
REDEMPTION OF FUND SHARES AND SHAREHOLDER PROGRAMS
As described in the Prospectuses, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and pref-
erences.
Each class of shares of a Fund represents an interest in the same portfolio of
investments. Each class of shares is identical in all respects except that each
class bears its own class expenses, including distribution and administration
expenses, and each class has exclusive voting rights with respect to any dis-
tribution or service plan applicable to its shares. As a result of the differ-
ences in the expenses borne by each class of shares, net income per share, div-
idends per share and net asset value per share will vary among a Fund's classes
of shares. There are no conversion, preemptive or other subscription rights,
except that Class B shares automatically convert into Class A shares as de-
scribed below.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include distri-
bution and service fees.
The expenses to be borne by specific classes of shares may include (i) transfer
agency fees attributable to a specific class of shares, (ii) printing and post-
age expenses related to preparing and distributing materials such as share-
holder reports, prospectuses and proxy statements to current shareholders of a
specific class of shares, (iii) Securities and Exchange Commission ("SEC") and
state securities registration fees incurred by a specific class of shares, (iv)
the expense of administrative personnel and services required to support the
shareholders of a specific class of shares, (v) litigation or other legal ex-
penses relating to a specific class of shares, (vi) directors' fees or expenses
incurred as a result of issues relating to a specific class of shares, (vii)
accounting expenses relating to a specific class of shares and (viii) any addi-
tional incremental expenses subsequently identified and determined to be prop-
erly allocated to one or more classes of shares.
B-56
<PAGE>
Class A Shares
You may purchase Class A Shares at a public offering price equal to the appli-
cable net asset value per share plus an up-front sales charge imposed at the
time of purchase as set forth in the Prospectus. You may qualify for a reduced
sales charge, or the sales charge may be waived in its entirety, as described
below. Class A Shares are also subject to an annual service fee of .25%. See
"Distribution and Service Plans." Set forth below is an example of the method
of computing the offering price of the Class A shares of each of the Funds. The
example assumes a purchase on June 30, 2000 of Class A shares from a Fund ag-
gregating less than $50,000 subject to the schedule of sales charges set forth
in the Prospectus at a price based upon the net asset value of the Class A
shares.
<TABLE>
<CAPTION>
Growth/Income European Value Stock/Bond Muni/Stock
Fund Fund Fund Fund
------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value per
share.................. $ 24.35 $ 23.34 $ 25.20 $ 24.31
Per Share Sales Charge--
5.75% of public
offering price (6.12%,
6.08%, 6.11% and 6.09%,
respectively, of net
asset value per
share)................. $ 1.49 $ 1.42 $ 1.54 $ 1.48
---------- ------- --------- ---------
Per Share Offering Price
to the Public.......... $ 25.84 $ 24.76 $ 26.74 $ 25.79
Shares Outstanding (as
of June 30, 2000)...... 27,505,938 144,470 2,082,169 3,841,415
</TABLE>
Each Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
Certain commercial banks may make Class A Shares of the Funds available to
their customers on an agency basis. Pursuant to the agreements between Nuveen
and these banks, some or all of the sales charge paid by a bank customer in
connection with a purchase of Class A Shares may be retained by or paid to the
bank. Certain banks and other financial institutions may be required to regis-
ter as securities dealers in certain states.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares and Class R
Share Purchase Availability
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A Shares of
any Fund if the amount of your purchase, when added to the value that day of
all of your prior purchases of shares of any Fund or of another Nuveen Mutual
Fund or Nuveen exchange-traded fund, or units of a Nuveen Defined Portfolio, on
which an up-front sales charge or ongoing distribution fee is imposed, or is
normally imposed, falls within the amounts stated in the Class A sales charges
and commissions table in "How You Can
B-57
<PAGE>
Buy and Sell Shares" in the Funds' Prospectus. You or your financial advisor
must notify Nuveen or the Fund's transfer agent of any cumulative discount
whenever you plan to purchase Class A Shares of a Fund that you wish to qualify
for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A Shares of
any Fund if you plan to purchase Class A Shares of Nuveen Mutual Funds over the
next 13 months and the total amount of your purchases would, if purchased at
one time, qualify you for one of the reduced sales charges shown in the Class A
sales charges and commissions table in "How You Can Buy and Sell Shares " in
the Fund's Prospectus. In order to take advantage of this option, you must com-
plete the applicable section of the Application Form or sign and deliver either
to an Authorized Dealer or to the Fund's transfer agent a written Letter of In-
tent that contains the same information and representations contained in the
Application Form. A Letter of Intent states that you intend, but are not obli-
gated, to purchase over the next 13 months a stated total amount of Class A
shares that would qualify you for a reduced sales charge shown above. You may
count shares of a Nuveen Mutual Fund that you already own on which you paid an
up-front sales charge or an ongoing distribution fee and any Class B and Class
C Shares of a Nuveen Mutual Fund that you purchase over the next 13 months to-
wards completion of your investment program, but you will receive a reduced
sales charge only on new Class A Shares you purchase with a sales charge over
the 13 months. You cannot count towards completion of your investment program
Class A Shares that you purchase without a sales charge through investment of
distributions from a Nuveen Mutual Fund, a Nuveen Exchange-Traded Fund or a
Nuveen Defined Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class
A Shares of a Fund following execution of the Letter of Intent will be at least
5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases, less redemptions, exceed the amount specified in your Letter
of Intent and thereby qualify for a lower sales charge than the sales charge
specified in your Letter of Intent, you will receive this lower sales charge
retroactively, and the difference between it and the higher sales charge paid
will be used to purchase additional Class A Shares on your behalf. If the total
purchases, less redemptions, are less than the amount specified, you must pay
Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial advisor, Nuveen will redeem an ap-
propriate number of your escrowed Class A Shares to meet the required payment.
By establishing a Letter of Intent, you irrevocably appoint Nuveen as attorney
to give instructions to redeem any or all of your escrowed shares, with full
power of substitution in the premises.
You or your financial advisor must notify Nuveen or the Funds' transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
B-58
<PAGE>
Reinvestment of Nuveen Defined Portfolio Distributions
You may purchase Class A Shares without an up-front sales charge by reinvest-
ment of distributions from any of the various defined portfolios sponsored by
Nuveen. There is no initial or subsequent minimum investment requirement for
such reinvestment purchases.
Group Purchase Programs
If you are a member of a qualified group, you may purchase Class A Shares of
any Fund or of another Nuveen Mutual Fund at the reduced sales charge applica-
ble to the group's purchases taken as a whole. A "qualified group" is one
which has previously been in existence, has a purpose other than investment,
has ten or more participating members, has agreed to include Fund sales publi-
cations in mailings to members and has agreed to comply with certain adminis-
trative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
Shares of any particular Fund or portfolio for each participant in the program
is $50 per share class per Fund, provided that the group initially invests at
least $3,000 in the Fund and the minimum monthly investment in Class A Shares
of any particular Fund or portfolio by each participant is $50. No certificate
will be issued for any participant's account. All dividends and other distri-
butions by a Fund will be reinvested in additional Class A Shares of the same
Fund. No participant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each partici-
pant must fill out the appropriate application materials, which the group ad-
ministrator may obtain from the group's financial advisor, by calling Nuveen
toll-free at 800-257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds Subject to Merger
or Closure
You may also purchase Class A Shares at net asset value without a sales charge
if the purchase takes place through an Authorized Dealer and represents the
reinvestment of the proceeds of the redemption of shares of one or more regis-
tered investment companies not affiliated with Nuveen that are subject to
merger or closure. You must provide appropriate documentation that the redemp-
tion occurred not more than one year prior to the reinvestment of the proceeds
in Class A Shares, and that you either paid an up-front sales charge or were
subject to a contingent deferred sales charge in respect of the redemption of
such shares of such other investment company.
Elimination of Sales Charge on Class A Shares
Class A Shares of a Fund may be purchased at net asset value without a sales
charge by the following categories of investors:
. investors purchasing $1,000,000 or more; Nuveen may pay Authorized Deal-
ers on Class A sales of $1.0 million and above up to an additional 0.25%
of the purchase amount;
. officers, trustees and former trustees of the Nuveen Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
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. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices; and
. with respect to the Growth/Income, Stock/Bond Fund and European Value
Fund, any eligible employer-sponsored qualified defined contribution re-
tirement plan. Eligible plans are those with at least 25 employees and
which either (a) make an initial purchase of one or more Nuveen mutual
funds aggregating $500,000 or more; or (b) execute a Letter of Intent to
purchase in the aggregate $500,000 or more of fund shares. Nuveen will
pay Authorized Dealers a sales commission on such purchases equal to 1%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus
0.25% of any amount purchased over $5.0 million.
Also, investors will be able to buy Class A shares at net asset value by using
the proceeds of sales of Nuveen Exchange-Traded fund shares or the
termination/maturity proceeds from Nuveen Defined Portfolios. You must provide
Nuveen appropriate documentation that the fund sale or Defined Portfolio
termination/maturity occurred not more than one year prior to reinvestment. In
addition, investors also may buy Class A shares at net asset value without a
sales charge by directing their monthly dividends from Nuveen Exchange-Traded
funds.
For investors that purchased Class A Shares at net asset value because they
purchased such shares through an eligible employer-sponsored qualified defined
contribution plan or because the purchase amount equaled or exceeded $1 mil-
lion and the Authorized Dealer did not waive the sales commission, a contin-
gent deferred sales charge of 1.00% will be assessed on redemptions within 18
months of purchase.
Any Class A Shares purchased pursuant to a special sales charge waiver must be
acquired for investment purposes and on the condition that they will not be
transferred or resold except through redemption by a Fund. You or your finan-
cial advisor must notify Nuveen or the Fund's transfer agent whenever you make
a purchase of Class A Shares of any Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of a Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment com-
pany. All purchases under the special sales charge waivers will be subject to
minimum purchase requirements as established by each Fund.
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In determining the amount of your purchases of Class A Shares of any Fund that
may qualify for a reduced sales charge, the following purchases may be com-
bined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their immedi-
ate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons-and daughters-in-law, siblings, a sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
Class R Share Purchase Eligibility
Class R Shares are available for purchases of $10 million or more and for pur-
chases using dividends and capital gains distributions on Class R Shares. Class
R Shares also are available for the following categories of investors and pen-
sion, profit-sharing, 401(k), IRA or other similar plans maintained by or for
the benefit of such persons:
. officers, trustees and former trustees of the Trust or any Nuveen-spon-
sored registered investment company and their immediate family members
or trustees/directors of any fund sponsored by Nuveen, any parent com-
pany of Nuveen and subsidiaries thereof and their immediate family mem-
bers;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. officers, directors or bona fide employees of any investment advisory
partner of Nuveen that provides sub-advisory services for a Nuveen prod-
uct, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices; and
. any shares purchased by investors falling within any of the first five
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by a Fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their distri-
butions from such defined portfolios in Class R Shares, if, before September 6,
1994, such purchasers had elected to reinvest distributions in Nuveen Fund
shares (before June 13, 1995 for Nuveen Municipal Bond Fund shares). Sharehold-
ers may exchange their Class R Shares of any Nuveen Fund into Class R Shares of
any other Nuveen Fund. You may also exchange Class R Shares of the Fund for
Class A Shares without a sales
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charge if the current net asset value of your Class R Shares is at least $3,000
(or you already own Class A Shares).
The reduced sales charge programs may be modified or discontinued by the Funds
at any time. To encourage their participation, the Funds waives the sales
charge on Class A Shares and offers Class R Shares to trustees and officers of
the Trust and other affiliated persons of the Trust and Nuveen as noted above.
If you are eligible to purchase either Class R Shares or Class A Shares without
a sales charge at net asset value, you should be aware of the differences be-
tween these two classes of shares. Class A Shares are subject to an annual
service fee to compensate Authorized Dealers for providing you with ongoing ac-
count services. Class R Shares are not subject to a distribution or service fee
and, consequently, holders of Class R Shares may not receive the sale types or
levels of services from Authorized Dealers. In choosing between Class A Shares
and Class R Shares, you should weigh the benefits of the services to be pro-
vided by Authorized Dealers against the annual service fee imposed upon the
Class A Shares.
For more information about the purchase of Class A Shares or the reduced sales
charge program, or to obtain the required application forms, call Nuveen In-
vestor Services toll-free at (800) 257-8787.
Class B Shares
You may purchase Class B Shares at a public offering price equal to the appli-
cable net asset value per share without any up-front sales charge. Since Class
B Shares are sold without an initial sales charge, the full amount of your pur-
chase payment will be invested in Class B Shares. Class B Shares are subject to
an annual distribution fee to compensate Nuveen for its costs in connection
with the sale of Class B shares, and are also subject to an annual service fee
to compensate Authorized Dealers for providing you with ongoing financial ad-
vice and other account services.
You may be subject to a CDSC if you redeem your Class B shares prior to the end
of the sixth year after purchase. See "Reduction or Elimination of Contingent
Deferred Sales Charge" below. Nuveen compensates Authorized Dealers for sales
of Class B Shares at the time of sale at the rate of 4.00% of the amount of
Class B Shares purchased, which represents a sales commission of 3.75% plus an
advance on the first year's annual service fee of .25%.
Class B Shares acquired through the reinvestment of dividends are not subject
to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares' cost
or net asset value at the time of redemption.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For
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this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any conver-
sion of Class B Shares into Class A Shares will be subject to the continuing
availability of an opinion of counsel or a private letter ruling from the In-
ternal Revenue Service to the effect that the conversion of shares would not
constitute a taxable event under federal income tax law. Conversion of Class B
Shares into Class A Shares might be suspended if such an opinion or ruling were
no longer available.
Class C Shares
You may purchase Class C Shares at a public offering price equal to the appli-
cable net asset value per share without any up-front sales charge. Class C
Shares are subject to an annual distribution fee of .75% to compensate Nuveen
for paying your financial advisor an ongoing sales commission. Class C Shares
are also subject to an annual service fee of .25% to compensate Authorized
Dealers for providing you with on-going financial advice and other account
services. Nuveen compensates Authorized Dealers for sales of Class C Shares at
the time of the sale at a rate of 1% of the amount of Class C Shares purchased,
which represents an advance of the first year's distribution fee of .75% plus
an advance on the first year's annual service fee of .25%. See "Distribution
and Service Plans."
Redemptions of Class C Shares within 12 months of purchase may be subject to a
CDSC of 1% of the lower of the purchase price or redemption proceeds. Because
Class C Shares do not convert to Class A Shares and continue to pay an annual
distribution fee indefinitely, Class C Shares should normally not be purchased
by an investor who expects to hold shares for significantly longer than eight
years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any CDSC. How-
ever, in the case of Class A Shares purchased at net asset value because the
purchase amount equaled or exceeded $1 million or pursuant to an eligible em-
ployer-sponsored defined contribution plan described above, where the Autho-
rized Dealer did not waive the sales commission, a CDSC of 1% is imposed on any
redemption within 18 months of purchase. In the case of Class B Shares redeemed
within six years of purchase, a CDSC is imposed, beginning at 5% for redemp-
tions within the first year, declining to 4% for redemptions within years two
and three, and declining by 1% each year thereafter until disappearing after
the sixth year. Class C Shares are redeemed at net asset value, without any
CDSC, except that a CDSC of 1% is imposed upon redemption of Class C Shares
that are redeemed within 12 months of purchase.
In determining whether a CDSC is payable, a Fund will first redeem shares not
subject to any charge or that represent an increase in the value of a Fund ac-
count due to capital appreciation, and then will
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redeem shares held for the longest period, unless the shareholder specifies an-
other order. No CDSC is charged on shares purchased as a result of automatic
reinvestment of dividends or capital gains paid. In addition, no CDSC will be
charged on exchanges of shares into another Nuveen Mutual Fund or Nuveen money
market fund. The holding period is calculated on a monthly basis and begins the
first day of the month in which the order for investment is received. The CDSC
is calculated based on the lower of the redeemed shares' cost or net asset
value at the time of the redemption and is deducted from the redemption pro-
ceeds. Nuveen receives the amount of any CDSC shareholders pay. If Class A,
Class B or Class C shares subject to a CDSC are exchanged for shares of a
Nuveen money market fund, the CDSC would be imposed on the subsequent redemp-
tion of those money market fund shares, and the period during which the share-
holder holds the money market fund shares would be counted in determining the
remaining duration of the CDSC. A Fund may elect not to so count the period
during which the shareholder held the money market fund shares, in which event
the amount of any applicable CDSC would be reduced in accordance with applica-
ble SEC rules by the amount of any 12b-1 plan payments to which those money
market funds shares may be subject.
The CDSC may be waived or reduced under the following circumstances: (i) in the
event of total disability (as evidenced by a determination by the federal So-
cial Security Administration) of the shareholder (including a registered joint
owner) occurring after the purchase of the shares being redeemed; (ii) in the
event of the death of the shareholder (including a registered joint owner);
(iii) for redemptions made pursuant to a systematic withdrawal plan, up to 1%
monthly, 3% quarterly, 6% semiannually or 12% annually of an account's net as-
set value depending on the frequency of the plan as designated by the share-
holder; (iv) involuntary redemptions caused by operation of law; (v) redemp-
tions in connection with a payment of account or plan fees; (vi) redemptions in
connection with the exercise of a reinstatement privilege whereby the proceeds
of a redemption of a Fund's shares subject to a sales charge are reinvested in
shares of certain Funds within a specified number of days; (vii) redemptions in
connection with the exercise of a Fund's right to redeem all shares in an ac-
count that does not maintain a certain minimum balance or that the applicable
board has determined may have material adverse consequences to the shareholders
of a Fund; (viii) in whole or in part for redemptions of shares by shareholders
with accounts in excess of specified breakpoints that correspond to the break-
points under which the up-front sales charge on Class A Shares is reduced pur-
suant to Rule 22d-1 under the Act; (ix) redemptions of shares purchased under
circumstances or by a category of investors for which Class A Shares could be
purchased at net asset value without a sales charge; and (x) redemptions of
Class A, Class B or Class C Shares if the proceeds are transferred to an ac-
count managed by another Nuveen Adviser and the adviser refunds the advanced
service and distribution fees to Nuveen. If a Fund waives or reduces the CDSC,
such waiver or reduction would be uniformly applied to all Fund shares in the
particular category. In waiving or reducing a CDSC, the Funds will comply with
the requirements of Rule 22d-1 of the Investment Company Act of 1940, as amend-
ed.
In addition, the CDSC will be waived in connection with the following redemp-
tions of shares held by an employer-sponsored qualified defined contribution
retirement plan: (i) partial or complete redemptions in connection with a dis-
tribution without penalty under Section 72(t) of the Internal Revenue Code
("Code") from a retirement plan: (a) upon attaining age 59 1/2, (b) as part of
a series of substantially equal periodic payments, or (c) upon separation from
service and attaining age 55; (ii) partial or complete redemptions in connec-
tion with a qualifying loan or hardship withdrawal; (iii) complete redemptions
in connection with termination of employment, plan termination or transfer to
another employer's
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plan or IRA; and (iv) redemptions resulting from the return of an excess con-
tribution. The CDSC will also be waived in connection with the following re-
demptions of shares held in an IRA account: (i) for redemptions made pursuant
to an IRA systematic withdrawal based on the shareholder's life expectancy in-
cluding, but not limited to, substantially equal periodic payments described in
Code Section 72(t)(A)(iv) prior to age 59 1/2; and (ii) for redemptions to sat-
isfy required minimum distributions after age 70 1/2 from an IRA account (with
the maximum amount subject to this waiver being based only upon the sharehold-
er's Nuveen IRA accounts).
Shareholder Programs
Exchange Privilege
You may exchange shares of a class of any of the Funds for shares of the same
class of any other Nuveen Mutual Fund with reciprocal exchange privileges, at
net asset value without a sales charge, by sending a written request to the ap-
plicable Fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Sta-
tion, New York, NY 10274-5186. Similarly, Class A, Class B, Class C and Class R
Shares of other Nuveen Mutual Funds may be exchanged for the same class of
shares of a Fund at net asset value without a sales charge. Exchanges of shares
from any Nuveen money market fund will be made into Class A Shares, Class B
Shares, Class C Shares or Class R Shares (if eligible) of a Fund at the public
offering price. If, however, a sales charge has previously been paid on the in-
vestment represented by the exchanged shares (i.e., the shares to be exchanged
were originally issued in exchange for shares on which a sales charge was
paid), the exchange of shares from a Nuveen money market fund will be made into
shares of a Fund at net asset value. All shares may be exchanged for shares of
any Nuveen money market fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time
of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on
when you purchased your original shares and the CDSC schedule of the fund from
which you exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment require-
ment of the Nuveen Mutual Fund being purchased. For federal income tax purpos-
es, any exchange constitutes a sale and purchase of shares and may result in
capital gain or loss. Before making any exchange, you should obtain the Pro-
spectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If
the registration of the account for the Fund you are purchasing is not exactly
the same as that of the fund account from which the exchange is made, written
instructions from all holders of the account from which the exchange is being
made must be received, with signatures guaranteed by a member of an approved
Medallion Guarantee Program or in such other manner as may be acceptable to the
Fund. You may also exchange shares by telephone if you authorize telephone ex-
changes by checking the applicable box on the Application Form or by calling
Nuveen Investor Services toll-free at 800-257-8787 to obtain an authorization
form. The exchange privilege may be modified or discontinued by a Fund at any
time.
The exchange privilege is not intended to permit a Fund to be used as a vehicle
for short-term trading. Excessive exchange activity may interfere with portfo-
lio management, raise expenses, and otherwise have
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an adverse effect on all shareholders. In order to limit excessive exchange ac-
tivity and in other circumstances where Fund management believes doing so would
be in the best interest of the Fund, each Fund reserves the right to revise or
terminate the exchange privilege, or limit the amount or number of exchanges or
reject any exchange. Shareholders would be notified of any such action to the
extent required by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of a Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up
to one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement privi-
lege can be exercised only once for any redemption, and reinvestment will be
made at the net asset value next calculated after reinstatement of the appro-
priate class of Fund shares. If you reinstate shares that were subject to a
CDSC, your holding period as of the redemption date also will be reinstated for
purposes of calculating a CDSC and the CDSC paid at redemption will be refund-
ed. The federal income tax consequences of any capital gain realized on a re-
demption will not be affected by reinstatement, but a capital loss may be dis-
allowed in whole or in part depending on the timing, the amount of the rein-
vestment and the fund from which the redemption occurred.
Suspension of Right of Redemption
Each Fund may suspend the right of redemption of Fund shares or delay payment
more than seven days (a) during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that trading of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for any other periods that the Securities and Exchange Com-
mission by order may permit for protection of Fund shareholders.
Redemption In Kind
The Funds have reserved the right to redeem in kind (that is, to pay redemption
requests in cash and portfolio securities, or wholly in portfolio securities),
although the Funds have no present intention to redeem in kind. The Funds vol-
untarily have committed to pay in cash all requests for redemption by any
shareholder, limited as to each shareholder during any ninety-day period to the
lesser of $250,000 or 1% of the net asset value of a Fund at the beginning of
the ninety-day period.
General Matters
The Funds may encourage registered representatives and their firms to help ap-
portion their assets among bonds, stocks and cash, and may seek to participate
in programs that recommend a portion of their assets be invested in equity se-
curities, equity and debt securities, or equity and municipal securities.
Upon notice to all Authorized Dealers, Nuveen may reallow to Authorized Dealers
electing to participate up to the full applicable Class A Share up-front sales
charge during periods and for transactions specified in the notice. The
reallowances made during these periods may be based upon attainment of minimum
sales levels.
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In addition to the types of compensation to dealers to promote sales of Fund
shares that are described in the Funds' Prospectus, Nuveen may from time to
time make additional reallowances only to certain authorized dealers who sell
or are expected to sell certain minimum amounts of shares of the Nuveen Mutual
Funds and Nuveen Defined Portfolios during specified time periods. Promotional
support may include providing sales literature to and holding informational or
educational programs for the benefit of such Authorized Dealers' representa-
tives, seminars for the public, and advertising and sales campaigns. Nuveen may
reimburse a participating Authorized Dealer for up to one-half of specified me-
dia costs incurred in the placement of advertisements which jointly feature the
Authorized Dealer and Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of its financial advisors who
have sold Nuveen Fund shares and Nuveen Defined Portfolios units during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Funds, and will not change the price an investor pays for
shares or the amount that a Fund will receive from such a sale. The staff of
the Securities and Exchange Commission takes the position that dealers who re-
ceive 90% or more of the applicable sales charge may be deemed underwriters un-
der the Securities Act of 1933, as amended.
To help advisors and investors better understand and more efficiently use the
Funds to reach their investment goals, the Funds may advertise and create spe-
cific investment programs and systems. For example, this may include informa-
tion on how to use the Funds to accumulate assets for future education needs or
periodic payments such as insurance premiums. The Funds may produce software,
electronic information sites, or additional sales literature to promote the ad-
vantages of using the Funds to meet these and other specific investor needs.
The Funds have authorized one or more brokers to accept on their behalf pur-
chase and redemption orders. Such brokers are authorized to designate other in-
termediaries to accept purchase and redemption orders on the Fund's behalf. The
Funds will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee accepts the
order. Customer orders received by such broker (or their designee) will be
priced at the Funds' net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized bro-
ker (or their designee) before the close of regular trading on the New York
Stock Exchange will receive that day's share price; orders accepted after the
close of trading will receive the next business day's share price.
Exchanges of shares of a Fund for shares of a Nuveen money market fund may be
made on days when both funds calculate a net asset value and make shares avail-
able for public purchase. Shares of the Nuveen money market funds may be pur-
chased on days on which the Federal Reserve Bank of Boston is normally open for
business. In addition to the holidays observed by the Fund, the Nuveen money
market funds observe and will not make fund shares available for purchase on
the following holidays: Columbus Day and Veterans Day.
In addition, you may exchange Class R Shares of any Fund for Class A Shares of
the same Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of that
Fund.
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Shares will be registered in the name of the investor or the investor's finan-
cial advisor. A change in registration or transfer of shares held in the name
of a financial advisor may only be made by an order in good form from the fi-
nancial advisor acting on the investor's behalf.
For more information on the procedure for purchasing shares of a Fund and on
the special purchase programs available thereunder, see "How to Buy Shares"
and "Systematic Investing" in the Funds' Prospectus.
If you choose to invest in a Fund, an account will be opened and maintained
for you by Chase Global, the Funds' shareholder services agent. Share certifi-
cates will be issued to you only upon written request to Nuveen Investor Serv-
ices, and no certificates will be issued for fractional shares. Each Fund re-
serves the right to reject any purchase order and to waive or increase minimum
investment requirements. A change in registration or transfer of shares held
in the name of your financial advisor's firm can only be made by an order in
good form from the financial advisor acting on your behalf.
A fee of 1% of the current market value of any shares represented by a certif-
icate will be charged if the certificate is lost, stolen, or destroyed. The
fee is paid to Seaboard Surety Company for insurance of the lost, stolen, or
destroyed certificate.
Authorized Dealers are encouraged to open single master accounts. However,
some Authorized Dealers may wish to use Chase Global's sub-accounting system
to minimize their internal recordkeeping requirements. An Authorized Dealer or
other investor requesting shareholder servicing or accounting other than the
master account or sub-accounting service offered by Chase Global will be re-
quired to enter into a separate agreement with another agent for these serv-
ices for a fee that will depend upon the level of services to be provided.
The Shares are offered continuously. However, subject to the rules and regula-
tions of the Securities and Exchange Commission, each Fund reserves the right
to suspend the continuous offering of it shares at any time, but no suspension
shall affect your right of redemption.
Nuveen serves as the principal underwriter of the shares of the Funds pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement,
the Trust appointed Nuveen to be its agent for the distribution of the Funds'
shares on a continuous offering basis. Nuveen sells shares to or through bro-
kers, dealers, banks or other qualified financial intermediaries (collectively
referred to as "Dealers"), or others, in a manner consistent with the then ef-
fective registration statement of the Trust. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Funds' shares, including printing and dis-
tributing of prospectuses and statements of additional information to other
than existing shareholders, the printing and distributing of sales literature,
advertising and payment of compensation and giving of concessions to dealers.
Nuveen receives for its services the excess, if any, of the sales price of a
Fund's shares less the net asset value of those shares, and reallows a major-
ity or all of such amounts to the Dealers who sold the shares; Nuveen may act
as such a Dealer. Nuveen also receives compensation pursuant to a distribution
plan adopted by the Trust pursuant to Rule 12b-1 and described herein under
"Distribution and Service Plans." Nuveen receives any CDSCs imposed on redemp-
tions of Shares, but any amounts as to which a reinstatement privilege is not
exercised are set off against and reduce amounts otherwise payable to Nuveen
pursuant to the distribution plan.
B-68
<PAGE>
The following table sets forth the aggregate amount of underwriting commissions
with respect to the sale of Fund shares, the amount thereof retained by Nuveen
and the compensation on redemptions and repurchases received by Nuveen for each
of the Funds for the three most recent fiscal years. All figures are to the
nearest thousand.
<TABLE>
<CAPTION>
Amount of Compensation
Amount of Underwriting Amount Retained by on Redemptions and
Commissions Nuveen Repurchases
------------------------ ----------------------- -----------------------
7/1/97- 7/1/98- 7/1/99- 7/1/97- 7/1/98- 7/1/99- 7/1/97- 7/1/98- 7/1/99-
6/30/98 6/30/99 6/30/00 6/30/98 6/30/99 6/30/00 6/30/98 6/30/99 6/30/00
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nuveen Growth and Income
Stock Fund............. $4,489 $1,865 $503 $185 $113 $ 35 $522 $300 $ 496
Nuveen European Value
Fund................... $ 2* $ 166 $ 10 $-- * $ 22 $ 1 $-- * $ 15 $ 22
Nuveen Balanced Stock
and Bond Fund.......... $ 507 $ 238 $ 39 $ 27 $ 17 $ 5 $ 67 $ 98 $ 83
Nuveen Balanced
Municipal and Stock
Fund................... $1,746 $ 777 $107 $ 97 $ 52 $ 11 $ 66 $129 $ 322
</TABLE>
* For the period from May 29, 1998 (inception) through the fiscal year ended
June 30, 1998.
DISTRIBUTION AND SERVICE PLANS
Each Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the In-
vestment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will all be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B Shares and Class C Shares under each
Fund's Plan will be payable to reimburse Nuveen for services and expenses in-
curred in connection with the distribution of Class B and Class C Shares, re-
spectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Fund, expenses of pre-
paring, printing and distributing advertising and sales literature and reports
to shareholders used in connection with the sale of Class B and Class C Shares,
certain other expenses associated with the distribution of Class B and Class C
Shares, and any distribution-related expenses that may be authorized from time
to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C Shares
under each Fund's Plan will be payable to Authorized Dealers in connection with
the provision of ongoing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering share-
holder inquiries and providing other personal services to shareholders.
Each Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan as applicable to Class A Shares.
Each Fund may spend up to .75 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a distribution fee which con-
stitutes an asset-based sales charge whose purpose is the same as an up-front
sales charge and
B-69
<PAGE>
up to .25 of 1% per year of the average daily net assets of each of the Class B
Shares and Class C Shares as a service fee under the Plan as applicable to such
classes.
During the fiscal year ended June 30, 2000, the Growth/ Income Fund, the
Stock/Bond Fund, the Muni/Stock Fund and the European Value Fund paid 12b-1
fees pursuant to their respective 12b-1 Plan in the amounts set forth in the
table below. For this period, substantially all of the 12b-1 service fees on
Class A Shares were paid out as compensation to Authorized Dealers for provid-
ing services to shareholders relating to their investments. 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 distribu-
tion 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
Nuveen. After the first year following a purchase, 12b-1 service fees on Class
B Shares and 12b-1 service and distribution fees on Class C Shares are paid to
Authorized Dealers.
<TABLE>
<CAPTION>
12b-1 Fees
Incurred by
each Fund for
the fiscal
year ended
June 30, 2000
-------------
<S> <C>
Nuveen Growth and Income Stock Fund
Class A......................................................... $1,828,952
Class B......................................................... $ 976,408
Class C......................................................... $ 495,577
----------
Total......................................................... $3,300,937
Nuveen European Value Fund
Class A......................................................... $ 9,004
Class B......................................................... $ 33,748
Class C......................................................... $ 7,732
----------
Total......................................................... $ 50,484
Nuveen Balanced Stock and Bond Fund
Class A......................................................... $ 149,250
Class B......................................................... $ 126,605
Class C......................................................... $ 74,073
----------
Total......................................................... $ 349,928
Nuveen Balanced Municipal and Stock Fund
Class A......................................................... $ 271,396
Class B......................................................... $ 495,015
Class C......................................................... $ 184,605
----------
Total......................................................... $ 951,016
</TABLE>
Under each Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested Trustees who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
trustees who vote to
B-70
<PAGE>
approve such continuance conclude, in the exercise of reasonable business judg-
ment and in light of their fiduciary duties under applicable law, that there is
a reasonable likelihood that the Plan will benefit the
Fund and its shareholders. The Plan may not be amended to increase materially
the cost which a class of shares may bear under the Plan without the approval
of the shareholders of the affected class, and any other material amendments of
the Plan must be approved by the non-interested trustees by a vote cast in per-
son at a meeting called for the purpose of considering such amendments. During
the continuance of the Plan, the selection and nomination of the non-interested
trustees of the Trust will be committed to the discretion of the non-interested
trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS, CUSTODIAN AND TRANSFER AGENT
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 have been selected as auditors for the Trust. In addi-
tion to audit services, Arthur Andersen LLP will provide consultation and as-
sistance on accounting, internal control, tax and related matters. The finan-
cial statements accompanying this Statement of Additional Information have been
audited by Arthur Andersen LLP as indicated in their report with respect there-
to, and are included in reliance upon the authority of said firm as experts in
giving said report.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
The Funds' transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
FINANCIAL STATEMENTS
The audited financial statements for each Fund's most recent fiscal year appear
in the respective Fund's Annual Report and each is incorporated herein by ref-
erence. The Annual Reports accompany this Statement of Additional Information.
GENERAL TRUST INFORMATION
Each Fund is a series of the Trust. The Trust is an open-end management invest-
ment company under the Investment Company Act of 1940. The Trust was organized
as a Massachusetts business trust on May 6, 1996. The Board of Trustees of the
Trust is authorized to issue an unlimited number of shares in one or more se-
ries or "Funds," which may be divided into classes of shares. Currently, there
are four series authorized and outstanding, each of which is divided into four
classes of shares designated as Class A Shares, Class B Shares, Class C Shares
and Class R Shares. Each class of shares represents an interest in the same
portfolio of investments of a Fund. Each class of shares has equal rights as to
voting, redemption, dividends and liquidation, except that each bears different
class expenses, including different distribution and service fees, and each has
exclusive voting rights with respect to any distribution or service plan appli-
cable to its shares. There are no conversion, preemptive or other subscription
rights, except that Class B Shares automatically convert into Class A Shares,
as described herein. The
B-71
<PAGE>
Board of Trustees of the Trust has the right to establish additional series and
classes of shares in the future, to change those series or classes and to de-
termine the preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of share-
holders. Shareholders owning more than 10% of the outstanding shares of a Fund
have the right to call a special meeting to remove Trustees or for any other
purpose.
Under Massachusetts law applicable to Massachusetts business trusts, sharehold-
ers of such a trust may, under certain circumstances, be held personally liable
as partners for its obligations. However, the Declaration of Trust of the Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or
the Trustees. The Funds' Declaration of Trust further provides for indemnifica-
tion out of the assets and property of the Trust for all losses and expenses of
any shareholder held personally liable for the obligations of the Trust. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which both inadequate insurance ex-
isted and the Trust or Fund itself was unable to meet its obligations. The
Trust believes the likelihood of the occurrence of these circumstances is re-
mote.
B-72
<PAGE>
APPENDIX A--RATINGS OF INVESTMENTS
Standard & Poor's Ratings Group--A brief description of the applicable Standard
& Poor's Ratings Group ("S&P") rating symbols and their meanings (as published
by S&P) follows:
Issue Credit Ratings
A S&P issue credit rating is a current opinion of the creditworthiness of an
obligor with respect to a specific financial obligation. This assessment may
take into consideration the creditworthiness of guarantors, insurers, or other
forms of credit enhancement on the obligation.
The issue credit rating is not a recommendation to purchase, sell, or hold a
financial obligation, inasmuch as it does not comment as to market price or
suitability for a particular investor.
Issue credit ratings are based on current information furnished by the obligors
or obtained by S&P from other sources it considers reliable. S&P does not per-
form an audit in connection with any rating and may, on occasion, rely on unau-
dited financial information. Credit ratings may be changed, suspended, or with-
drawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term ratings
are generally assigned to those obligations considered short-term in the rele-
vant market. In the U.S., for example, that means obligations with an original
maturity of no more than 365 days--including commercial paper. Short-term rat-
ings are also used to indicate the creditworthiness of an obligor with respect
to put features on long-term obligations. The result is a dual rating, in which
the short-term rating addresses the put feature, in addition to the usual long-
term rating. Medium-term notes are assigned long-term ratings.
Long-term issue credit ratings
Issue credit ratings are based, in varying degrees, on the following considera-
tions:
1. Likelihood of default--capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms
of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
AAA
An obligation rated "AAA' has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation
is extremely strong.
AA
An obligation rated "AA' differs from the highest rated obligation
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
<PAGE>
A An obligation rated "A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obli-
gations in higher rated categories. However, the obligor's capacity to
meet its financial commitment on the obligation is still strong.
BBB An obligation rated "BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
Obligations rated "BB', "B', "CCC', "CC' and "C' are regarded as having sig-
nificant speculative characteristics. "BB' indicates the least degree of spec-
ulation and "C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large un-
certainties or major exposures to adverse conditions.
BB An obligation rated "BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated "B' is more vulnerable to nonpayment than obliga-
tions rated "BB', but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, finan-
cial, or economic conditions will likely impair the obligor's capacity
or willingness to meet its financial commitment on the obligation.
CCC An obligation rated "CCC' is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic condi-
tions to meet its financial commitment on the obligation. In the event
of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to its financial commitment on the ob-
ligation.
CC An obligation rated "CC' is currently highly vulnerable to nonpayment.
C A subordinated debt or preferred stock obligation rated "C' is CUR-
RENTLY HIGHLY VULNERABLE to nonpayment. The "C' rating may be used to
cover a situation where a bankruptcy petition has been filed or simi-
lar action taken, but payments on this obligation are being continued.
A "C' also will be assigned to a preferred stock issue in arrears on
dividends or sinking fund payments, but that is currently paying.
D
An obligation rated "D' is in payment default. The "D' rating category
is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P be-
lieves that such payments will be made during such grace period. The
"D' rating also will be used upon the filing of a bankruptcy petition
or the taking of a similar action if payments on an obligation are
jeopardized.
Plus (+) or Minus (-): The ratings from "AA' to "CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR
Indicates no rating has been requested, that there is insufficient in-
formation on which to base a rating, or that S&P does not rate a par-
ticular type of obligation as a matter of policy.
A-2
<PAGE>
Short-Term Issue Credit Ratings
A-1 A short-term obligation rated "A-1' is rated in the highest category
by S&P. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's ca-
pacity to meet its financial commitment on these obligations is ex-
tremely strong.
A-2 A short-term obligation rated "A-2' is somewhat more susceptible to
the adverse effects of changes in circumstances and economic condi-
tions than obligations in higher rating categories. However, the obli-
gor's capacity to meet its financial commitment on the obligation is
satisfactory.
A-3 A short-term obligation rated "A-3' exhibits adequate protection pa-
rameters. However, adverse economic conditions or changing circum-
stances are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
B A short-term obligation rated "B' is regarded as having significant
speculative characteristics. The obligor currently has the capacity to
meet its financial commitment on the obligation; however, it faces ma-
jor ongoing uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
C A short-term obligation rated "C' is currently vulnerable to nonpay-
ment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the ob-
ligation.
D A short-term obligation rated "D' is in payment default. The "D' rat-
ing category is used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired, un-
less S&P believes that such payments will be made during such grace
period. The "D' rating also will be used upon the filing of a bank-
ruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as pub-
lished by Moody's) follows:
Long Term Debt
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally re-
ferred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks ap-
pear somewhat larger than in Aaa securities.
A-3
<PAGE>
A Bonds which are rated A possess may favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Moody's bond rating symbols may contain numerical modifiers of a ge-
neric rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking, and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristi-
cally unreliable over any great length of time. Such bonds lack out-
standing investment characteristics and in fact have speculative char-
acteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protec-
tion of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desir-
able investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and is-
sues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Con(...)
Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
Note:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the sym-
bols Aa1, A1, Baa1, Ba1, and B1.
A-4
<PAGE>
Municipal Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquid-
ity support or demonstrated broad based access to the market
for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins or protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security ele-
ments are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection com-
monly regarded as required of an investment security is pres-
ent and although not distinctly or predominantly speculative,
there is specific risk.
Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior ca-
pacity for repayment of senior short-term promissory obligations. Prime-1 re-
payment capacity will often be evidenced by many of the following characteris-
tics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong capac-
ity for repayment of senior short-term promissory obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial lever-
age. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
A-5
<PAGE>
Fitch IBCA, Inc. and Duff & Phelps Credit Rating Co.--A brief description of
the applicable Fitch IBCA, Inc. ("Fitch") ratings symbols and meanings (as
published by Fitch) follows:
Long-Term Credit Ratings
Fitch credit ratings are an opinion on the ability of an entity or of a secu-
rities issue to meet financial commitments, such as interest, preferred divi-
dends, or repayment of principal, on a timely basis. Fitch credit ratings ap-
ply to a variety of entities and issues, including but not limited to sover-
eigns, governments, structured financings, and corporations; debt,
preferred/preference stock, bank loans, and counterparties; as well as the
claims-paying ability of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood of get-
ting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment-grade"
ratings (international long-term "AAA' "BBB' categories; short-term "F1' "F3')
indicate a relatively low probability of default, while those in the "specula-
tive" or "non-investment grade" categories (international long-term "BB' "D';
short-term "B' "D') either signal a higher probability of default or that a
default has already occurred. Ratings imply no specific prediction of default
probability. However, for example, it is relevant to note that over the long
term, defaults on "AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for "BBB' rated bonds was 0.35%,
and for "B' rated bonds, 3.0%.
Entities or issues carrying the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect
small differences in the degrees of credit risk.
Fitch credit and other ratings are not recommendations to buy, sell, or hold
any security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt na-
ture or taxability of any payments of any security. The ratings are based on
information obtained from issuers, other obligors, underwriters, their ex-
perts, and other sources Fitch believes to be reliable. Fitch does not audit
or verify the truth or accuracy of such information. Ratings may be changed or
withdrawn as a result of changes in, or the unavailability of, information or
for other reasons.
Fitch program ratings relate only to standard issues made under the program
concerned; it should not be assumed that these ratings apply to every issue
made under the program. In particular, in the case of non-standard issues,
i.e. those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applica-
ble program rating.
Credit ratings do not directly address any risk other than credit risk. In
particular, these ratings do not deal with the risk of loss due to changes in
market interest rates and other market considerations.
A-6
<PAGE>
Investment Grade
AAA Highest credit quality. "AAA' ratings denote the lowest expecta-
tion of credit risk. They are assigned only in case of exception-
ally strong capacity for timely payment of financial commitments.
This capacity is highly unlikely to be adversely affected by fore-
seeable events.
AA Very high credit quality. "AA' ratings denote a very low expecta-
tion of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not signifi-
cantly vulnerable to foreseeable events.
A High credit quality. "A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial commit-
ments is considered strong. This capacity may, nevertheless, be
more vulnerable to changes in circumstances or in economic condi-
tions than is the case for higher ratings.
BBB Good credit quality. "BBB' ratings indicate that there is cur-
rently a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered adequate, but ad-
verse changes in circumstances and in economic conditions are more
likely to impair this capacity. This is the lowest investment-
grade category.
Speculative Grade
BB Speculative. "BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse eco-
nomic change over time; however, business or financial alterna-
tives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. "B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for contin-
ued payment is contingent upon a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A "CC' rating indi-
cates that default of some kind appears probable. "C' ratings sig-
nal imminent default.
DDD DD, D
Default. The ratings of obligations in this category are based on
their prospects for achieving partial or full recovery in a reor-
ganization or liquidation of the obligor. While expected recovery
values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD' obli-
gations have the highest potential for recovery, around 90%-100%
of outstanding amounts and accrued interest. "DD' indicates poten-
tial recoveries in the range of 50%-90%, and "D' the lowest recov-
ery potential, i.e., below 50%.
A-7
<PAGE>
Entities rated in this category have defaulted on some or all of their obliga-
tions. Entities rated "DDD' have the highest prospect for resumption of perfor-
mance or continued operation with or without a formal reorganization process.
Entities rated "DD' and "D' are generally undergoing a formal reorganization or
liquidation process; those rated "DD' are likely to satisfy a higher portion of
their outstanding obligations, while entities rated 'D' have a poor prospect
for repaying all obligations.
Notes:
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the "AAA' long-term rating
category, or to categories below "CCC'.
"NR' indicates that Fitch does not rate the issuer or issue in question.
"Withdrawn': A rating is withdrawn when Fitch deems the amount of information
available to be inadequate for rating purposes, or when an obligation matures,
is called, or refinanced.
Rating Watch: Ratings are placed on Rating Watch to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.
Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most obliga-
tions, or up to three years for US public finance securities, and thus places
greater emphasis on the liquidity necesssary to meet financial commitments in a
timely manner.
F1 Highest credit quality. Indicates the Best capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
B
Speculative. Minimal capacity for timely payment of financial com-
mitments, plus vulnerability to near-term adverse changes in fi-
nancial and economic conditions.
C
High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.
D
Default. Denotes actual or imminent payment default.
A-8
<PAGE>
Notes:
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to Short-term ratings other than
"F1'.
"NR' indicates that Fitch does not rate the issuer or issue in question.
"Withdrawn': A rating is withdrawn when Fitch deems the amount of information
available to be inadequate for rating purposes, or when an obligation matures,
is called, or refinanced.
Rating Watch: Ratings are placed on Rating Watch to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.
A-9
<PAGE>
EAI-ICAP 10-00
<PAGE>
Nuveen Investments
--------------------------------------------------------------------------------
Growth and
Income Funds
----------------------------------------------------
ANNUAL REPORT JUNE 30, 2000
--------------------------------------------------------------------------------
Four different balanced funds for investors seeking the right mixture of current
income, growth potential and preservation of capital.
--------------------------------------------------------------------------------
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
[PHOTOS APPEAR HERE]
Nuveen Growth and Income Stock Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen European Value Fund
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Growth and Income Stock Fund
7 Nuveen Balanced Municipal and Stock Fund
11 Nuveen Balanced Stock and Bond Fund
16 Nuveen European Value Fund
20 Portfolio of Investments
33 Statement of Net Assets
34 Statement of Operations
35 Statement of Changes in Net Assets
37 Notes to Financial Statements
44 Financial Highlights
48 Report of Independent Public Accountants
49 Fund Information
<PAGE>
DEAR
Shareholder,
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
"At Nuveen Investments, we think of family wealth management as the map to help
you reach your financial, and your life's, destinations."
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions you
and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
Annual Report page 1
<PAGE>
"We believe the potential presence of inflation and price swings in the markets
reinforce the importance of working with an advisor, staying focused on the
long-term and adhering to your financial plan."
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their dreams of a lifetime. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
August 18, 2000
Annual Report page 2
<PAGE>
NUVEEN GROWTH AND INCOME STOCK FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen Growth and Income Stock Fund features portfolio management by
Institutional Capital Corporation (ICAP), which specializes in large
capitalization equities. The market environment during the fund's fiscal year
ended June 30, 2000, displayed volatility levels not seen in years. To help you
understand the fund's performance during this period, we spoke with Rob Lyon,
president and chief investment officer of ICAP, the subadvisor of the fund.
Q The technology stock fever of 1999 culminated in a stunning correction in
the technology-heavy Nasdaq in the first half of 2000, accompanied by losses in
other stock indices. Meanwhile, the Federal Reserve (the Fed) continued to raise
interest rates in an effort to put the brakes on economic growth and stymie
inflation. What do you think was the psychological effect on investors, and how
did the fund react to these changing conditions?
ROB There was a marked difference in sentiment between the second half of 1999
and the first half of 2000. Those invested in the market learned an important
lesson -- company earnings do matter, even in the so-called "new economy."
Baseless stock price run-ups of profitless companies cannot continue
unchecked for long periods -- there is simply nothing to stand on. Although both
new economy and old economy stocks declined from their highs in the market rout
of 2000, the technology stocks of the new economy were punished more severely.
The S&P 500 Index,* generally made up of "old economy" stocks, was down 0.42% in
the first six months of the year, compared with the tech-heavy Nasdaq Composite
Index,* which was down 2.54% for the same period.
Within this volatile setting, the fund reported a total return of -5.33%
for the year ended June 30, 2000, compared to the Lipper Large-Cap Value Index,
which reported a total return of -2.38%/1/ and the S&P/Barra Value Index's
-5.11%/2/ for the same time period.
Q During short periods throughout the fiscal year, value stocks strongly
outperformed growth stocks. But the market ultimately gyrated back to growth
stocks, which outdistanced value for the year. What happened?
ROB Value stocks showed definite promise during the fund's fiscal year. The
wide variances in sector performance, the result of the Fed's interest rate
policy, were mostly to blame for the inability of value stocks to consistently
stay in favor.
As the Fed raised interest rates, value stocks returned to favor. However,
the perceived slowdown in the economy -- the result of the Fed's moves
-- brought growth stocks back from their precipitous decline.
For the fund's fiscal year, technology stocks dwarfed performance in
traditionally value-oriented sectors such as consumer cyclicals and basic
materials. I point to the tech-heavy Nasdaq Composite Index's gain of 47.96% for
the 12 months of the fund's
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's subadvisor for value investing, Institutional Capital Corporation
(ICAP), is a highly successful institutional money manager with nearly 30 years
of experience. These professionals specialize in finding undervalued midsize and
large company stocks that are poised for significant growth.
This disciplined, research-oriented approach is the key investment strategy for
Nuveen Growth and Income Stock Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the funds fiscal year ended June 30, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
*The S&P 500 Index is an unmanaged index generally considered representative of
the U.S. stock market. The Nasdaq Composite Index is an unmanaged index that
measures the more than 5,000 companies listed on the Nasdaq Stock Market, Inc.
Indices are not available for direct investment.
/1/The Lipper Index return represent the average annualized total return of the
30 largest funds in the Lipper Large-Cap Value Funds category for the year
ended June 30, 2000. The returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
/2/The S&P/Barra Value Index consists of the "value" half of the S&P 500 Index.
In this capitalization-weighted index, firms have higher book-to-price
ratios and are generally slower growing firms with less potential for
appreciation but lower volatility (relative to the "growth" half). The index
is not available for direct investment.
Annual Report page 3
<PAGE>
fiscal year, compared to the S&P/Barra Value Index (which is heavily weighted in
consumer cyclicals and basic materials), which reported a -5.11% return for the
period.
Remember that the market has been very concentrated: a large proportion of
the returns -- and losses -- of the S&P 500 has been due to select technology
stocks in the index.
Despite the challenges of the last year, we remain confident that the
fund's focus on strong companies with a catalyst unrecognized by the general
market (that may trigger a rise in the stocks' prices) is a careful means of
unlocking potential price appreciation. This investment process does not lock
the fund out of the new economy.
Q It would seem that finding technology stocks -- the essence of this new
economy -- to add to the portfolio would be a challenge for a value manager. It
is an extremely expensive sector by most measures, even after accounting for the
recent correction. How do you identify technology stocks for this fund?
ROB The fund's value approach does exclude many overpriced technology stocks
from the fund. But there are many names even in this expensive sector that fit
well within the premise of the fund. Not every technology name is a high-flying
Internet startup.
First, we found a number of attractively priced companies that have
profited from the infrastructure needs of the new economy. Examples include
Motorola, IBM and Vodafone.
Second, even within out-of-favor so-called old economy sectors, we
discovered attractive companies using new technologies to significantly enhance
their operations. In fact, this turned out to be one of the themes we followed
for the fund over the last year. Companies capitalizing on the emergence of new
applications for phone and cable equipment are perfect examples.
There were also companies with embedded new economy businesses that we
believed would be very highly valued if they were stand-alone entities. Some
examples of companies that fit that profile were News Corp. -- a media company
that owns British Sky Broadcasting, a leader in satellite and cable operations
-- and General Motors, which owns a controlling stake in Hughes Electronics.
With the valuation disparities between new economy and old economy stocks,
we think this theme has been an opportune way for the fund to participate in the
new economy without buying in at extremely high prices.
"We found a number of attractively priced companies that have profited from the
infrastructure needs of the new economy. Examples include Motorola, IBM and
Vodafone."
NUVEEN GROWTH AND INCOME STOCK FUND
Top Ten Stock Holdings
----------------------------------------------------
Philips Electronics NV 4.5%
----------------------------------------------------
Bell Atlantic Corporation 3.3%
----------------------------------------------------
Ford Motor Company 3.2%
----------------------------------------------------
General Motors Corporation 3.0%
----------------------------------------------------
AT&T Corp. 3.0%
----------------------------------------------------
Texaco Inc. 3.0%
----------------------------------------------------
Citigroup Inc. 2.9%
----------------------------------------------------
International Business Machines Corporation 2.9%
----------------------------------------------------
Exxon Mobil Corporation 2.9%
----------------------------------------------------
The News Corporation Limited Sponsored ADR 2.8%
----------------------------------------------------
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Annual Report page 4
<PAGE>
Q Were there any other themes you followed during the year?
ROB We continued to follow our financial restructurings theme, which worked
very well. Companies like MetLife, one of the largest life insurance companies
in the U.S., fit this criterion. MetLife is the leading provider of group
insurance and employee benefits in the U.S., and serves the group life
insurance needs of 86 of the Fortune 100 companies.
The company went public on April 4th and exemplifies a classic financial
restructuring play as it improved profitability from expense reductions.
Philips Electronics continued to play out as a strong restructuring story
and was the fund's largest holding at fiscal year-end.
We discontinued the global revival theme as the worldwide expansion showed
signs of slowing in the near term, the result of the Fed's and other world
central banks' interest rate increases. Portfolio strategy now reflects the view
that constraints on the economy and the markets should make individual stock
selection, rather than sector weighting, the key to performance.
Q What other sectors were noteworthy?
ROB The fund benefited from its energy holdings, particularly oil, which had
gone from $12.50 per barrel to well over $30, then back down to the high $20s in
the last year. We reduced exposure to the energy sector, including holdings in
Conoco, USX-Marathon Group, Exxon Mobil and Texaco as oil prices peaked.
Healthcare also made an impressive comeback. The technology roller coaster
drove investors to seek sectors with strong, steady earnings, and healthcare
was a major beneficiary. Pharmacia Corp. and Abbott Laboratories were
beneficiaries as the sector heartily outperformed even technology in the first
half of 2000. The fund, at June 30, 2000, held 10.4% of its portfolio in
healthcare stocks.
Q With the possibility of more Fed interest rate hikes and market volatility,
what is your outlook for the fund for the coming months?
ROB The volatility we've seen in the markets, and the wild swings in
performance from one sector to another, should continue to provide opportunities
to buy and sell positions using the fund's disciplined value approach.
The market correction and retrenchment was a good thing, in our opinion. We
think the market will be able to refocus on cyclical and value-oriented stocks,
and we will continue to concentrate on those that are selling at reasonable
prices and that exhibit a catalyst for a turnaround.
We expect the combination of solid economic growth and continued upward
pressure on wages and inflation ultimately will prompt some further tightening
policy by the Fed over the balance of the year.
We believe that this is a much better scenario than trying to spur growth
in a recession. Company earnings reports continued to impress and beat Wall
Street's expectations, and business has been robust across many sectors. This
should be a flourishing environment for the fund going into the next fiscal
period.
"The volatility we've seen in the markets, and the wild swings in
performance from one sector to another, should continue to provide opportunities
to buy and sell positions using the fund's disciplined value approach."
NUVEEN GROWTH AND INCOME STOCK FUND
<TABLE>
<CAPTION>
Top Five Sectors
-----------------------------------------
<S> <C>
Consumer Cyclicals 19.2%
-----------------------------------------
Financials 16.7%
-----------------------------------------
Utilities 14.1%
-----------------------------------------
Consumer Staples 10.9%
-----------------------------------------
Technology 10.7%
-----------------------------------------
</TABLE>
As a percentage of total portfolio holdings as of June 30, 2000. Holdings are
subject to change
Annual Report page 5
<PAGE>
NUVEEN GROWTH AND INCOME STOCK FUND
Fund Spotlight as of June 30, 2000
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $24.35 $24.17 $24.13 $24.41
------------------------------------------------------------------
Fund Symbol NNGAX NNGBX NNGCX N/A
------------------------------------------------------------------
CUSIP 67064Y503 67064Y602 67064Y701 67064Y800
------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
------------------------------------------------------------------
</TABLE>
Total Returns as of 6/30/00 (Annualized)+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
<S> <C> <C> <C> <C> <C> <C>
1-Year -5.33% -10.77% -5.97% -9.57% -5.97% -5.13%
---------------------------------------------------------------------------------
3-Year 8.96% 6.83% 8.17% 7.31% 8.17% 9.24%
---------------------------------------------------------------------------------
Since inception 15.67% 13.92% 14.82% 14.30% 14.79% 15.97%
---------------------------------------------------------------------------------
</TABLE>
+Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines periodically to 0% over the following six years. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year, which is not reflected in the total return
figures.
Index Comparison [_]
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Growth Nuveen Growth S&P S&P/Barra
and Income Stock and Income Stock 500 Value
Fund (Offer) Fund (NAV) Index Index
<S> <C> <C> <C> <C>
8/1996 $ 9,425 $10,000 $10,000 $10,000
6/1997 $12,834 $13,617 $13,799 $13,299
6/1998 $15,603 $16,555 $17,959 $16,638
6/1999 $17,535 $18,605 $22,047 $19,390
6/2000 $16,602 $17,615 $23,644 $18,398
</TABLE>
----- Nuveen Growth and Income Stock Fund (Offer) $16,602
----- Nuveen Growth and Income Stock Fund (NAV) $17,615
----- S&P 500 Index $23,644
----- S&P/Barra Value Index $18,398
[_] The Index comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen fund compared with the Standard and Poor's 500
Index and the S&P/Barra Value Index. The S&P 500 Index is an unmanaged index
generally considered representative of the U.S. stock market and is not
available to direct investment. The S&P/Barra Value Index consists of the
"value" half of the S&P 500 Index. In this capitalization-weighted index,
firms have higher book-to-price ratios and are generally slower growing
firms with less potential for returns but lower volatility (relative to the
"growth" half). Index returns reflect total returns and assume reinvestment
of dividends but do not include any initial or ongoing expenses. The Nuveen
fund returns depicted in the chart effect the initial maximum sales charge
applicable to Class A shares (5.75%) and all ongoing fund expenses.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Total Net Assets $835.8 million
-----------------------------------------
Beta 0.85
-----------------------------------------
Average Market
Capitalization (stocks) $62 billion
-----------------------------------------
Average P/E 17.4
-----------------------------------------
Number of Stocks 52
-----------------------------------------
Expense Ratio* 1.30%
-----------------------------------------
</TABLE>
*For Class A shares after credit/reimbursement.
Portfolio Allocations
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Equity............. 95%
Cash Equivalents... 5%
</TABLE>
Returns reflect a voluntary expense limitation by the fund's investment advisor,
which may be modified or discontinued at anytime without notice.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Beta A measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: more than $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and change in net asset
value.
Annual Report page 6
<PAGE>
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
From the Portfolio Manager's Perspective
Nuveen Balanced Municipal and Stock Fund features portfolio management by two
teams of experts -- one specializing in municipal bonds and the other in large
capitalization equities. To help you understand the fund's performance during
the fiscal year ended June 30, 2000, we spoke with Tom Spalding of Nuveen
Investment Management (NIM), who manages the municipal portion of the portfolio,
and Rob Lyon, president and chief investment officer of Institutional Capital
Corporation (ICAP), managing the equity portion.
Q|During the fund's fiscal year, the combination of the Federal Reserve's rate
increases and the rise and fall of technology stocks took a toll on both the
equity and fixed-income markets. The equity markets saw volatility not
experienced in years, while the fixed-income markets saw yields rise and fall.
What effect do you think this had on investors?
ROB|Uncertainty reigned supreme after the Fed's first rate hikes in 1999 began
to take effect in early 2000. Although investors came to expect rate increases
so long as economic strength persisted, they may have underestimated the
magnitude and effect on the markets, both equity and fixed.
Between the second half of 1999 and the first half of 2000, the
difference in sentiment in both the stock and bond markets was very apparent.
Stock market investors learned an important lesson -- that earnings do
matter, even in the so-called "new economy." Baseless stock price run-ups of
profitless companies cannot continue unchecked for long periods -- there is
simply nothing to stand on.
Although both new economy and old economy stocks declined from their
highs in the market rout of 2000, the technology stocks of the new economy were
punished more severely. The S&P 500 Index/1/, generally made up of "old economy"
stocks, was down just 0.42% in the first six months of the year, compared with
the tech-heavy Nasdaq Composite Index,/1/ which was down 2.46% for the same
period.
Municipal bonds also recovered nicely in the first part of 2000 after a
disappointing 1999, as investors once again looked to them as an alternative to
stocks.
Q|How did the fund perform in this environment?
ROB|Although the economic environment tended to favor aggressively positioned
portfolios focused on "new economy" companies, the more conservatively
positioned Balanced Municipal and Stock Fund weathered the market's extreme
volatility.
For the fiscal year ended June 30, 2000, the fund reported a total
return of -0.83%. At June 30, the fund was invested 61% in municipal bonds and
39% in stocks. (For more information, see the Fund Spotlight on page 10.)
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's subadvisor for value investing, Institutional Capital Corporation
(ICAP), is a highly successful institutional money manager with nearly 30 years
of experience. These professionals specialize in finding undervalued midsize
and large company stocks that are poised for significant growth.
This disciplined, research-oriented approach is a key investment strategy for
Nuveen Balanced Municipal and Stock Fund.
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
Top Five Stock Holdings
Philips Electronics NV 4.6%
---------------------------------------------------
Bell Atlantic Corporation 3.3%
---------------------------------------------------
General Motors Corporation 3.1%
---------------------------------------------------
Ford Motor Company 3.1%
---------------------------------------------------
AT&T Corp. 3.1%
---------------------------------------------------
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fund's fiscal year ended June 30, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
/1/ The S&P 500 Index is an unmanaged index generally considered representative
of the U.S. stock market. The Nasdaq Composite Index is an unmanaged index
that measures the more than 5,000 companies listed on the Nasdaq Stock
Market, Inc. Indices are not available for direct investment.
Annual Report page 7
<PAGE>
Q| Periodically throughout the fiscal year, value stocks strongly outperformed
growth stocks. But the market ultimately gyrated back to growth stocks, which
outdistanced value for the year. What happened?
ROB| Value stocks looked promising during the period. However, the wide
variances in sector performance, resulting from the Fed's interest rate policy,
were mostly to blame for the inability of value stocks to stay in favor
consistently. As the Fed raised interest rates, value stocks returned to favor.
The perceived economic slowdown, however, a result of the Fed's moves, brought
growth stocks back from their precipitous decline.
For the year, technology stocks dwarfed performance in traditionally
value-oriented sectors such as consumer cyclicals and basic materials. I point
to the tech-heavy Nasdaq Composite Index's gain of 47.96% for the 12 months of
the fund's fiscal year, compared to the S&P/Barra Value Index/2/ (which is
heavily weighted in consumer cyclicals and basic materials), which reported a
-5.11% return for the period.
Remember that the market has been very concentrated: A large proportion
of the returns -- and losses -- of the S&P 500 have been due to select
technology stocks in the index.
Despite the challenges of the last year, we remain confident that the
fund's focus on strong companies with a catalyst unrecognized by the general
marketplace (that may trigger a rise in the stocks' prices) is a less volatile
means of unlocking price appreciation potential. Keep in mind that this does
not lock the fund out of the new economy.
Q| It would seem that finding technology stocks -- the essence of this new
economy -- to add to the portfolio would be a challenge for a value manager. It
is an extremely expensive sector by most measures, even after accounting for the
recent correction. How do you identify technology stocks for this fund?
ROB| The fund's value approach does exclude many overpriced technology stocks
from the fund. But many names even in this expensive sector fit well within the
premise of the fund. Not every technology name is a high-flying Internet
startup.
First, we found a number of attractively priced companies that have
profited from the infrastructure needs of the new economy. Examples include
Motorola, IBM, and Vodafone.
Second, even within out-of-favor old economy sectors, we discovered
attractive companies using new technologies to significantly enhance their
operations. In fact, this turned out to be one of the themes we followed for the
fund over the last year. Companies capitalizing on the emergence of new
applications for phone and cable equipment are perfect examples.
There were also companies with embedded new economy businesses that we
believed would be very highly valued if they were stand-alone entities. Some
examples were News Corp. -- a media company that owns British Sky Broadcasting,
a leader in satellite and cable operations -- and General Motors, which owns a
controlling stake in Hughes Electronics.
With the valuation disparities between new economy and old economy
stocks, we think this theme has been an opportune way for the fund to
participate in the new economy without buying in at extremely high prices.
"We found a number of attractively priced companies that have profited from the
infrastructure needs of the new economy. Examples include Motorola, IBM, and
Vodafone."
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
Top Five Sectors
Consumer Cyclicals 20.2%
----------------------------------------------------
Financials 16.7%
----------------------------------------------------
Utilities 15.0%
----------------------------------------------------
Healthcare 11.6%
----------------------------------------------------
Technology 11.3%
----------------------------------------------------
2 The S&P/Barra Value Index consists of the "value" half of the S&P 500 Index.
In this capitalization-weighted index, firms have higher book-to-price ratios
and are generally slower growing firms with less potential for returns but
lower volatility (relative to the "growth" half). The index is not available
for direct investment.
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Annual Report page 8
<PAGE>
"Portfolio strategy
now reflects the view
that constraints on
the economy and the
markets should make
individual stock
selection, rather than
sector weighting, the
key to performance."
Q Were there any other themes you followed during the year?
ROB We continued to follow our financial restructurings theme, which worked
very well. Companies like MetLife, one of the largest life insurance companies
in the U.S., fit this criterion. MetLife is the leading provider of group
insurance and employee benefits in the U.S., and serves the group life
insurance needs of 86 of the Fortune 100 companies. The company went public on
April 4th and exemplifies a classic financial restructuring play as it improved
profitability from expense reductions.
Philips Electronics continued to play out as a strong restructuring story,
and it was the fund's largest equity holding at fiscal year-end.
We discontinued the global revival theme as the worldwide expansion showed
signs of slowing in the near term, the result of the Fed's and other world
central banks' interest rate increases. Portfolio strategy now reflects the view
that constraints on the economy and the markets should make individual stock
selection, rather than sector weighting, the key to performance.
Q We now turn to Tom Spalding to discuss the municipal portion of the
portfolio. What effect have higher interest rates had on the fund's municipal
holdings?
TOM Although the municipal portion of the portfolio suffered at times in the
wake of higher interest rates, we continued our focus on intermediate-term
bonds, which helped hold up the municipal portion of the fund. The rebound in
municipals helped enhance the fund's performance.
The supply of new bonds was down sharply over the year. Higher rates,
coupled with the robust economy and generally healthy cash flows of governments
and municipalities, limited issuance. Since that somewhat limited the number of
new purchase choices for the fund, we maintained a steady position in the
municipal bond portion of the portfolio.
We maintained approximately the same credit quality breakdown throughout
the period, with between 34% and 40% in AAA/U.S. Guaranteed bonds (35% at
June 30, 2000) and between 38% and 42% in BBB and non-rated bonds combined
(41% at June 30, 2000).
When we made trades, we looked for opportunities to improve the fund's call
protection. That provides a measure of protection against having to surrender a
high-yielding bond to the issuer before maturity.
Q With the possibility of more Fed interest rate hikes and market volatility,
what is your outlook for the fund for the coming months?
ROB Looking forward, the volatility in the markets, and wild swings in
performance from one sector to another, should continue to provide opportunities
to buy and sell positions using the fund's disciplined value approach.
The Fed's vigilance in its fight against inflation should eventually
translate into lower long-term interest rates, although we expect the
combination of solid economic growth and continued upward pressure on wages and
inflation ultimately will prompt some further tightening policy by the Fed over
the balance of the year. We believe that this is a much better scenario than
trying to spur growth in a recession.
Company earnings reports continued to impress and beat Wall Street's
expectations, and business has been robust across many sectors. Continued
volatility in the stock market may increase demand for municipal bonds as
investors seek alternatives. This should be a flourishing environment for the
fund going into the next fiscal period.
Annual Report page 9
<PAGE>
NUVEEN BALANCED MUNICIPAL AND STOCK FUND
Fund Spotlight as of June 30, 2000
Terms To Know
The following are a few terms used throughout this report.
Beta A measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Duration Duration is an indicator of a portfolio's sensitivity to interest
rates.
Market capitalization Also referred to as market cap, market capitalization is a
measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: more than $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and change in net asset
value.
Quick Facts
A Shares B Shares C Shares R Shares
NAV $24.31 $24.70 $24.68 $24.13
--------------------------------------------------------------------------------
Fund Symbol NBMSX NMNBX N/A N/A
--------------------------------------------------------------------------------
CUSIP 67064Y883 67064Y875 67064Y867 67064Y859
--------------------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
--------------------------------------------------------------------------------
Total Returns as of 6/30/00 (Annualized)+
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -0.83% -6.52% -1.57% -5.42% -1.57% -0.64%
--------------------------------------------------------------------------------
3-Year 6.27% 4.19% 5.49% 4.59% 5.48% 6.51%
--------------------------------------------------------------------------------
Since Inception 9.35% 7.70% 8.56% 7.95% 8.54% 9.63%
--------------------------------------------------------------------------------
+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. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year, which is not reflected in the total return figures.
Yields
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC
30-Day SEC Yield 2.98% 2.81% 2.23% 2.23% 3.23%
--------------------------------------------------------------------------------
Distribution Rate* 2.59% 2.44% 1.82% 1.82% 2.83%
--------------------------------------------------------------------------------
*The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
Index Comparison[_]
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Lehman
Nuveen Balanced Nuveen Balanced S&P Brothers
Municipal and Municipal and 500 10-Year
Stock Fund (Offer) Stock Fund (NAV) Index Municipal Index
<S> <C> <C> <C> <C>
8/1996 $ 9,425 $10,000 $10,000 $10,000
6/1997 $11,177 $11,858 $13,799 $10,730
6/1998 $12,821 $13,603 $17,959 $11,640
6/1999 $13,525 $14,350 $22,047 $11,907
6/2000 $13,413 $14,231 $23,644 $12,440
</TABLE>
Nuveen Balanced Municipal and Stock Fund (Offer) $13,413
Nuveen Balanced Municipal and Stock Fund (NAV) $14,231
S&P 500 Index $23,644
Lehman Brothers 10-Year Municipal Index $12,440
[ ] The Index Comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen Fund compared with the Standard and Poor's 500
Index and the Lehman Brothers 10-Year Municipal Bond Index. The indexes do
not reflect any initial or ongoing expenses and are not available for
direct investment. The Nuveen fund returns depicted in the chart reflect
the initial maximum sales charge applicable to A shares (5.75%) and all
ongoing fund expenses.
Portfolio Statistics
Total Net Assets $155.1 million
-----------------------------------------------
Beta 0.40
-----------------------------------------------
Average Market
Capitalization (stocks) $63 billion
-----------------------------------------------
Average P/E 17.4
-----------------------------------------------
Number of Stocks 50
-----------------------------------------------
Average Duration (bonds) 6.41
-----------------------------------------------
Expense Ratio* 1.20%
-----------------------------------------------
*For Class A shares after credit/reimbursement.
Portfolio Allocation
[PIE CHART APPEARS HERE]
Bonds...............61%
Equity..............39%
Returns reflect a voluntary expense limitation by the fund's investment advisor,
which may be modified or discontinued at any time without notice.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
ANNUAL REPORT page 10
<PAGE>
NUVEEN BALANCED STOCK AND BOND FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen Balanced Stock and Bond Fund features portfolio management by
Institutional Capital Corporation (ICAP), which specializes in large
capitalization equities. To help you understand the fund's performance during
the fiscal year ended June 30, 2000, we spoke with Rob Lyon, president and chief
investment officer of ICAP, the subadvisor of the fund.
Q During the fund's fiscal year, the combination of the Federal Reserve's
rate increases and the rise and fall of technology stocks took a toll on both
the equity and fixed-income markets. The equity markets saw volatility not
experienced in years, while the fixed-income markets saw yields going up and
then down. How did investors react?
ROB There was a marked difference in sentiment in both the stock and bond
markets between the second half of 1999 and the first half of 2000. It became
obvious going into 2000 that having an all-weather portfolio was important.
While the broader equity market bounced around, the fixed-income markets
rebounded from one of the worst years on record. For the first time in a long
time, diversification was key to performance.
Those in the stock market learned an important lesson -- company earnings
do matter, even in the so-called "new economy." Baseless stock price run-ups of
profitless companies cannot continue unchecked for long periods -- there is
simply nothing to stand on. As such, although both new economy and old economy
stocks declined from their highs in the market rout of 2000, the technology
stocks of the new economy were punished more severely. The S&P 500 Index,
generally made up of "old economy" stocks, was down 0.42% in the first six
months of the year, compared with the tech-heavy Nasdaq Composite Index,1 which
was down 2.46% for the same period.
Q At June 30, 2000, the fund was invested 60% in equities, 39% in U.S.
government bonds and notes and about 1% in cash equivalents. With this
allocation and the dramatic economic environment, how did the fund fare?
ROB The fund's focus on intermediate-term fixed income securities helped temper
interest rate sensitivity; at the same time, its focus on value stocks
contributed to its loss. For the fiscal year ended June 30, 2000, the fund
reported a -1.23% total return.
Although the fund underperformed the 4.43% gain for the Lipper Balanced
Fund Index/2/ (which includes funds that invest in growth stocks), it is
interesting to compare it to the S&P/Barra Value Index3, which returned -5.11%
for the same time period. These two comparative indices show the stark
difference between value and growth stocks for the period.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's subadvisor for value investing, Institutional Capital Corporation
(ICAP), is a highly successful institutional money manager with nearly 30 years
of experience. These professionals specialize in finding undervalued midsize and
large company stocks that are poised for significant growth.
This disciplined, research-oriented approach is a key investment strategy for
Nuveen Balanced Stock and Bond Fund.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fund's fiscal year ended June 30, 2000. The views expressed reflect
those of the portfolio management team and are subject to change at any time,
based on market and other conditions.
/1/ The S&P 500 Index is an unmanaged index generally considered representative
of the U.S. stock market. The Nasdaq Composite Index is an unmanaged index that
measures the more than 5,000 companies listed on the Nasdaq Stock Market, Inc.
Indices are not available for direct investment.
/2/ The Lipper Index return represents the average annualized total return of
the 30 largest funds in the Lipper Balanced Fund Index for the year ended June
30, 2000. The returns assume reinvestment of dividends and do not reflect any
applicable sales charges.
/3/ The S&P/Barra Value Index consists of the "value" half of the S&P 500
Index. In this capitalization-weighted index, firms have higher book-to-price
ratios and are generally slower growing firms with less potential for
appreciation but lower volatility (relative to the "growth" half). The index is
not available for direct investment.
Annual Report page 11
<PAGE>
Q During short periods throughout the fiscal year, value stocks strongly
outperformed growth stocks. But the market ultimately gyrated back to growth
stocks, which outdistanced value for the year. What happened?
ROB Value stocks looked promising during the period. The wide variance in
sector performance, resulting from the Fed's interest rate policy, was mostly to
blame for the inability of value stocks to consistently stay in favor, however.
As the Fed raised interest rates, value stocks returned to favor. The perceived
slowdown in the economy -- a result of the Fed's moves -- brought growth stocks
back from their precipitous decline.
For the year, technology stocks dwarfed performance in traditionally value-
oriented sectors such as consumer cyclicals and basic materials. I point to the
tech-heavy Nasdaq Composite Index's gain of 47.96% for the 12 months of the
fund's fiscal year, compared to the S&P/Barra Value Index (which is heavily
weighted in consumer cyclicals and basic materials), which reported a -5.11%
return for the period.
Also remember that the market has been very concentrated: a large
proportion of the returns -- and losses -- of the S&P 500 has been due to select
technology stocks in the index.
Despite the challenges of the last year, we remain confident that the
fund's focus on strong companies with a catalyst unrecognized by the general
marketplace (that may trigger a rise in the stocks' prices) is a careful means
of unlocking potential price appreciation. This investment process does not lock
the fund out of the new economy.
Q It would seem that finding technology stocks -- the essence of this new
economy -- to add to the portfolio would be a challenge for a value manager. It
is an extremely expensive sector by most measures, even after accounting for the
recent correction. How do you identify technology stocks for this fund?
ROB The fund's value approach excludes many overpriced technology stocks. But
there are many stocks even in this expensive sector that fit well within the
premise of the fund. Not every technology name is a high-flying Internet
startup.
First, we found a number of attractively priced companies that have
profited from the infrastructure needs of the new economy. Examples include
Motorola, IBM and Vodafone.
Second, even within out-of-favor old economy sectors, we discovered
attractive companies using new technologies to significantly enhance their
operations. In fact, this turned out to be one of the themes we followed for the
fund over the last year. Companies capitalizing on the emergence of new
applications for phone and cable equipment are perfect examples.
There were also companies with embedded new economy businesses that we
believed would be very highly valued if they were stand-alone entities. Some
examples of companies that fit that profile were News Corp. -- a media company
that owns British Sky Broadcasting, a leader in satellite and cable operations
-- and General Motors, which owns a controlling stake in Hughes Electronics.
With the valuation disparities between new economy and old economy stocks,
we think this theme has been an opportune way for the fund to participate in the
new economy without buying in at extremely high prices.
"We remain confident that the
fund's focus on strong companies with a
catalyst unrecognized by the general
marketplace (that may trigger a raise in
the stocks' prices) is a careful means of
unlocking potential price appreciation."
Annual Report page 12
<PAGE>
NUVEEN BALANCED STOCK AND BOND FUND
Top Five Stock Holdings
Philips Electronics NV 4.7%
---------------------------------------
Bell Atlantic Corporation 3.4%
---------------------------------------
Ford Motor Company 3.2%
---------------------------------------
Citigroup Inc. 3.1%
---------------------------------------
AT&T Corp. 3.0%
---------------------------------------
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Q Were there any other themes you followed during the year?
ROB We continued to follow our financial restructurings theme, which worked
very well. Companies like MetLife, one of the largest life insurance companies
in the U.S., fit this criterion. MetLife is the leading provider of group
insurance and employee benefits in the U.S., and serves the group life insurance
needs of 86 of the Fortune 100 companies. The company went public on April 4th
and exemplifies a classic financial restructuring play as it improved
profitability from expense reductions.
Philips Electronics continued to play out as a strong restructuring story
and was the fund's largest equity holding at fiscal year-end.
We discontinued the global revival theme as the worldwide expansion showed
signs of slowing in the near term, the result of the Fed's and other world
central banks' interest rate increases.
Portfolio strategy now reflects the view that constraints on the economy
and the markets should make individual stock selection, rather than sector
weighting, the key to performance.
On the bond side of the portfolio, as I mentioned, we primarily continued
our focus on intermediate-term securities.
NUVEEN BALANCED STOCK AND BOND FUND
Top Five Sectors
Consumer Cyclicals 20.1%
-----------------------------
Financials 16.9%
-----------------------------
Utilities 15.1%
-----------------------------
Healthcare 11.5%
-----------------------------
Technology 11.4%
-----------------------------
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Q What other sectors were noteworthy?
ROB The fund benefited from its energy holdings, particularly oil, which had
gone from $12.50 per barrel to well over $30, then back down to the high $20s in
the last year. We reduced exposure to the energy sector, including holdings in
Conoco, USX-Marathon Group, Exxon Mobil and Texaco as oil prices peaked.
Healthcare also made an impressive comeback. The technology roller coaster
drove investors to seek sectors with strong, steady earnings, and healthcare was
a major beneficiary. Pharmacia Corp. and Abbott Laboratories were beneficiaries
as the sector heartily outperformed even technology in the first half of 2000.
Q With the possibility of more Fed interest rate hikes and market volatility,
what is your outlook for the fund for the coming months?
ROB The volatility we've seen in the markets, and the wild swings in
performance from one sector to another, should continue to provide opportunities
to buy and sell positions using the fund's disciplined value approach.
"The technology roller coaster drove
investors to seek sectors with strong,
steady earnings, and healthcare was a
major beneficiary."
Annual Report page 13
<PAGE>
"We think the market will be able to refocus
on cyclical and value-oriented stocks,
and we will continue to concentrate on those
that are selling at reasonable prices and
that exhibit a catalyst for a turnaround."
The market correction and retrenchment was a good thing, in our opinion. We
think the market will be able to refocus on cyclical and value-oriented stocks,
and we will continue to concentrate on those that are selling at reasonable
prices and that exhibit a catalyst for a turnaround.
For the fixed-income portion of the portfolio, we plan to continue to
focus on intermediate term bonds to try to keep the portfolio well-positioned in
light of the heightened market volatility.
We expect the combination of solid economic growth and continued upward
pressure on wages and inflation ultimately will prompt some further tightening
policy by the Fed over the balance of the year. We believe that this is a much
better scenario than trying to spur growth in a recession. Company earnings
reports continued to impress and beat Wall Street's expectations, and business
has been robust across many sectors. This should be a flourishing environment
for the fund going into the next fiscal period.
Annual Report page 14
<PAGE>
NUVEEN BALANCED STOCK AND BOND FUND
Fund Spotlight as of June 30, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Quick Facts
--------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $25.20 $25.20 $25.21 $25.19
--------------------------------------------------------------------------------
Fund Symbol NNSAX N/A N/A N/A
--------------------------------------------------------------------------------
CUSIP 67064Y107 67064Y206 67064Y305 67064Y404
--------------------------------------------------------------------------------
Inception Date 8/96 8/96 8/96 8/96
--------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Total Returns as of 6/30/00 (Annualized)+
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C> <C> <C>
NAV Offer w/o CDSC w/CDSC NAV NAV
1-Year -1.23% -6.92% -1.97% -5.67% -1.93% -1.02%
--------------------------------------------------------------------------------
3-Year 8.30% 6.19% 7.50% 6.63% 7.52% 8.55%
--------------------------------------------------------------------------------
Since Inception 11.91% 10.22% 11.09% 10.52% 11.10% 12.17%
--------------------------------------------------------------------------------
</TABLE>
+Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares have a
CDSC that begins at 5% for redemptions during the first year after purchase and
declines periodically to 0% over the following six years. Class B shares convert
to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year, which is not reflected in the total return figures.
--------------------------------------------------------------------------------
Yields
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C> <C>
NAV Offer w/o CDSC
30-Day SEC Yield 2.46% 2.32% 1.69% 1.69% 2.72%
--------------------------------------------------------------------------------
Distribution Rate* 2.62% 2.47% 1.85% 1.85% 2.88%
--------------------------------------------------------------------------------
</TABLE>
*The distribution rate differs from yield and total return and therefore is not
intended to be a complete measure of performance. Distribution rate may
sometimes differ from yield because a fund may be paying out more or less than
it is earning and because it may not include the effect of amortization of bond
premiums to the extent such premiums arise after the bonds were purchased.
Index Comparison[_]
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen Balanced Nuveen Balanced S&P Lehman Brothers
Stock and Bond Stock and Bond 500 Intermediate
Fund (Offer) Fund (NAV) Index Treasury Index
<S> <C> <C> <C> <C>
8/1996 $ 9,712 $10,305 $10,562 $10,128
6/1997 $12,186 $12,929 $14,896 $10,841
6/1998 $13,219 $14,025 $17,768 $11,581
6/1999 $14,472 $15,355 $21,359 $12,064
6/2000 $14,733 $15,632 $23,644 $12,608
</TABLE>
Nuveen Balanced Stock and Bond Fund (Offer) $14,733
Nuveen Balanced Stock and Bond Fund (NAV) $15,632
S&P 500 Index $23,644
Lehman Brothers Intermediate Treasury Index $12,608
[_]The Index comparison shows the change in value of a $10,000 investment in
Class A shares of the Nuveen fund compared with the Standard and Poor's 500
Index and the Lehman Brothers Intermediate Treasury Index. The indexes do not
reflect any initial or ongoing expenses and are not available for direct
investment. The Nuveen fund returns depicted in the chart reflect the initial
maximum sales charge applicable to Class A shares (5.75%) and all ongoing
fund expenses.
<TABLE>
<CAPTION>
-------------------------------------
Portfolio Statistics
-------------------------------------
<S> <C>
Total Net Assets $74.9 million
-------------------------------------
Beta 0.56
-------------------------------------
Average Market
Capitalization (stocks) $63 billion
-------------------------------------
Average P/E 17.5
-------------------------------------
Number of Stocks 50
-------------------------------------
Average Duration (bonds) 5.12
-------------------------------------
Expense Ratio* 1.20%
-------------------------------------
</TABLE>
*For Class A shares after credit/reimbursement
-------------------------------------
Portfolio Allocation
-------------------------------------
[PIE CHART APPEARS HERE]
Equity..........................60%
U.S. Government Obligations.....39%
Cash Equivalents................ 1%
Returns reflect a voluntary expense limitation by the fund's investment advisor,
which may be modified or discontinued at any time without notice.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
--------------------------------------------------------------------------------
Terms To Know
--------------------------------------------------------------------------------
The following are a few terms used throughout this report.
Beta A measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: more than $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share.
A high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and change in net asset
value.
ANNUAL REPORT page 15
<PAGE>
NUVEEN EUROPEAN VALUE FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within its specific
areas of expertise. Nuveen has chosen them for their rigorously disciplined
investment approaches and their consistent long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's subadvisor for value investing, Institutional Capital Corporation
(ICAP), is a highly successful institutional money manager with nearly 30 years
of experience. These professionals specialize in finding undervalued midsize and
large company stocks that are poised for significant growth.
This disciplined, research-oriented approach is the key investment strategy for
Nuveen European Value Fund.
Nuveen European Value Fund features portfolio management by Institutional
Capital Corporation (ICAP), which specializes in large capitalization equities.
To help you understand the fund's performance during this period, we spoke with
Rob Lyon, president and chief in vestment officer of ICAP, the subadvisor of the
fund.
Q The European equity markets gave investors hope as they improved during the
first three quarters of the fund's fiscal year, but backtracked along with the
U.S. equity markets the last quarter (for the fiscal year ended June 30, 2000).
What effect did the macroeconomy have on the European Value Fund?
ROB The fund reported a 17.22% total return for the fiscal year ended June 30,
2000. Comparatively, the Lipper European Index/1/ returned 32.33% and the MSCI
Europe IX GD/2/ returned 15.42%. The discrepancy between these two indices'
returns can help explain our fund's underperformance to Lipper. The Lipper index
is made up of the 30 largest funds in the category, which has tended to be
heavily skewed toward growth-oriented international funds, which outperformed
value for the period. The MSCI index, on the other hand, is a broad-based index
that includes both growth- and value-oriented funds.
Q What happened in the international markets during the past 12 months?
ROB What we saw in world markets during the fund's fiscal period was a healthy
recovery from the Asian financial crisis of 1997 and 1998, with a boost from
interest rate cuts from central banks around the world. European stock prices
reached all-time highs in August 1999 before declining again in September.
The main culprit for the decline was the August 24, 1999, interest rate
increase by the U.S. Federal Reserve, which was closely watched by world
markets. Four more rate increases would follow during the fund's fiscal year, in
the Fed's attempt to curtail growth domestically and stymie threats of
inflation.
In the last few months of 1999, European stock prices rose alone with their
U.S. counterparts and the markets seemed to shrug off concerns about the affect
of Y2K on the economy.
As we entered the first quarter of 2000, European equity markets continued
on the road to improvement, mirroring U.S. markets with technology, media and
telecommunications stocks leading the way.
Those industries--technology, media and telecommunications--turned around
to hurt investors in the final three months of the fund's fiscal year, ending
the period on a down note. However, during this brief period, European value
stocks tended to fair better than their growth counterparts as the European
Central Bank raised interest rates a larger-than-expected half point in June to
slow economic growth. As a result, the euro, which has been struggling this
year, gained strength relative to the dollar.
Performance figures are quoted for Class A shares at net asset value.
Comments cover the fund's fiscal year ended June 30, 20 00. The views expressed
reflect those of the portfolio management team and are subject to change at any
time, based on market and other conditions.
1 The Lipper Index returns represent the average annualized total return of the
30 largest funds in the Lipper European Equity Fund category for the year
ended June 30, 2000. The returns assume reinvestment of dividends and do not
reflect any applicable sales charges.
2 The MSCI Europe Index is an unmanaged index comprised of a capitalization-
weighted sampling of the companies listed on the stock exchanges of 14
European countries. It is not available for direct investment.
ANNUAL REPORT page 16
<PAGE>
Q Where did you find opportunities during the year?
ROB For much of the period, mergers and acquisition activity was stepped up in
Europe, providing us many opportunities for the fund. For one, the fund owned
Vivendi, a French conglomerate with particularly strong businesses in wireless
telephone and internet access services, along with stakes in multimedia and
publishing ventures.
The company agreed to acquire Seagram in June to create a fully integrated
global media and communications company for the wired and wireless world. We
sold the stock on the good news.
The fund benefited from its energy holdings--Royal Dutch Petroleum and
Shell Transport & Trading in particular--as oil went from $12.50 per barrel to
well over $30, then back down to the high $20s in the last year.
We also continued to focus on corporate restructurings, which significantly
contributed to performance. Philips Electronics, our top-holding, continued to
see positive returns as its cost-cutting initiatives and a more focused
corporate strategy seemingly has come to fruition.
Another top-holding, Vodafone, benefited from higher stock prices as its
acquisition strategy has been rewarded by the market. With its successful bid
for Mannesman, we believe the company is well on its way to becoming the
preeminent wireless communications company.
Q It would seem that finding technology stocks--the essence of the new
economy--to add to the portfolio would be a challenge for a value manager. It is
an extremely expensive sector by most measures, even after accounting for the
recent correction. How do you identify technology stocks for this fund?
ROB The fund's value approach does exclude many overpriced technology stocks as
potential holdings in the fund. But there are many names even in this expensive
sector that fit well within the premise of the fund. Not every technology name
is a high-flying Internet startup.
First, we found a number of attractively priced companies that have
profited from the infrastructure needs of the new economy. Vodafone is one
example.
Second, even within out-of-favor so-called old economy sectors, we
discovered attractive companies using new technologies to significantly enhance
their operations. In fact, this turned out to be one of the themes we followed
for the fund over the last year. Companies capitalizing on the emergence of new
applications for phone and cable equipment are perfect examples.
There were also companies with embedded new economy businesses that we
believed would be very highly valued if they were stand-alone entities. An
example of such a company was News Corp. -- a media company that owns British
Sky Broadcasting, a leader in satellite and cable.
NUVEEN EUROPEAN VALUE FUND
<TABLE>
<CAPTION>
----------------------------------------------------
Top Ten Stock Holdings
----------------------------------------------------
<S> <C>
Philips Electronics NV 8.3%
----------------------------------------------------
Zurich Allied AG Sponsored ADR 8.3%
----------------------------------------------------
Diageo plc Sponsored ADR 7.3%
----------------------------------------------------
Bass plc Sponsored ADR 5.1%
----------------------------------------------------
The News Corporation Limited - Sponsored ADR 5.0%
----------------------------------------------------
ING Groep NV Sponsored ADR 4.6%
----------------------------------------------------
Shell Transport & Trading Company ADR 4.6%
----------------------------------------------------
Nordic Baltic Holdings AB FDR 4.5%
----------------------------------------------------
Siemens AG Unsponsored ADR 4.5%
----------------------------------------------------
Investor AB 4.5%
----------------------------------------------------
</TABLE>
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change. The fund's investments in foreign stocks present additional
risks, including currency risk. In addition, investing in securities of
developing countries involves risks greater than, or in addition to, investing
in foreign developed countries.
"We also continued to focus on corporate restructurings, which significantly
contributed to performance. Philips Electronics, our top-holding, continued to
see positive returns as its cost-cutting initiatives and a more focused
corporate strategy seemingly has had come to fruition."
ANNUAL REPORT page 17
<PAGE>
"We remain favorably disposed toward those companies likely to benefit from a
stronger global economy."
Q What are your plans for the fund in the coming fiscal year?
ROB Despite the challenges of the last year, we remain confident that the
fund's focus on strong companies with a catalyst unrecognized by the general
marketplace (that may trigger a rise in the stocks' prices) is a careful means
of unlocking potential price appreciation. This investment process does not
lock the fund out of the new economy.
With the valuation disparities between new economy and old economy stocks,
we think this theme has been an opportune way for the fund to participate in the
new economy without buying in at extremely high prices.
The level of the stock market and the first stirrings of stress in
inflation and interest rates suggest taking a cautious approach. We have begun
implementing a more cautious strategy, by taking profits in the biggest winners
to date, trying to reduce the risk parameters (price/earnings ratios, for
example) and by seeking companies whose stock prices are not as far advanced.
We remain favorably disposed toward those companies likely to benefit from
a stronger global economy. We will continue to watch emerging markets and
consider adding to our holdings if the recovery continues on its current path.
NUVEEN EUROPEAN VALUE FUND
<TABLE>
<CAPTION>
--------------------------------------------
Top Five Sectors
--------------------------------------------
<S> <C>
Financials 26.4%
--------------------------------------------
Consumer Staples 16.8%
--------------------------------------------
Utilities 14.0%
--------------------------------------------
Consumer Cyclicals 13.2%
--------------------------------------------
Energy 9.1%
--------------------------------------------
</TABLE>
As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
ANNUAL REPORT page 18
<PAGE>
NUVEEN EUROPEAN VALUE FUND
Fund Spotlight as of June 30, 2000
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $23.34 $23.17 $23.16 $23.39
--------------------------------------------------------------------------
Fund Symbol N/A N/A N/A N/A
--------------------------------------------------------------------------
CUSIP 67064Y842 67064Y834 67064Y826 67064Y818
--------------------------------------------------------------------------
Inception Date 5/98 5/98 5/98 5/98
--------------------------------------------------------------------------
</TABLE>
Total Returns as of 6/30/00+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer w/o CDSC w/CDSC w/o CDSC w/CDSC NAV
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
1-Year* 17.22% 10.48% 16.34% 12.34% 16.29% 16.29% 17.44%
----------------------------------------------------------------------------
Since Inception* 8.43% 5.40% 7.64% 5.86% 7.62% 7.62% 8.68%
----------------------------------------------------------------------------
YTD -2.75% -8.32% -3.14% -7.98% -3.18% -4.15% -2.70%
----------------------------------------------------------------------------
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A Shares have a 5.75% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines peridoically to 0% over the following six years. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year, which is not reflected in total return figures.
* Annualized
Index Comparison [_]
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
Nuveen European Nuveen European MSCI
Value Fund Value Fund Europe
(Offer) (NAV) IX GD
<S> <C> <C> <C>
5/1998 $ 9,425 $10,000 $10,000
6/1998 $ 9,369 $ 9,941 $10,112
6/1999 $ 9,520 $10,101 $10,057
6/2000 $11,161 $11,842 $11,606
</TABLE>
Nuveen European Value Fund (Offer) $11,161
Nuveen European Value Fund (NAV) $11,842
MSCI Europe IX GD $11,606
[_] The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen Fund compared with the MSCI Europe Index.
The MSCI Europe Index is an unmanaged index comprised of a capitalization-
weighted sampling of the companies listed on the stock exchanges of 14
European countries. Index returns reflect total returns and assume
reinvestment of dividends but do not include any initial or ongoing
expenses and are not available for direct investment. The Nuveen fund
returns depicted in the chart reflect the initial maximum sales charge
applicable to Class A shares (5.75%) and all ongoing fund expenses.
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Total Net Assets $13.2 million
---------------------------------------------------
Beta 0.85
---------------------------------------------------
Average Market Capitalization (stocks) $66 billion
---------------------------------------------------
Average P/E 29.0
---------------------------------------------------
Number of Stocks 22
---------------------------------------------------
Expense Ratio* 1.55%
---------------------------------------------------
</TABLE>
*For Class A shares after credit/reimbursement.
Returns reflect a voluntary expense limitation by the fund's investment advisor
which may be modified or discontinued at any time without notice.
The fund's investments in foreign stocks present additional risks, including
currency risk. In addition, investing in securities of developing countries
involves risks greater than, or in addition to, investing in foreign developed
countries.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Allocation
[PIE CHART APPEARS HERE]
Equity 100%
Country Allocation*
<TABLE>
<CAPTION>
<S> <C>
Netherlands 24.8%
-----------------------------
United Kingdom 23.9%
-----------------------------
Sweden 8.4%
-----------------------------
Switzerland 8.3%
-----------------------------
United States 5.2%
-----------------------------
Australia 5.0%
-----------------------------
Finland 4.5%
-----------------------------
Germany 4.5%
-----------------------------
Canada 4.4%
-----------------------------
Portugal 4.1%
-----------------------------
Ireland 3.8%
-----------------------------
France 3.1%
-----------------------------
</TABLE>
*As a percentage of total stock holdings as of June 30, 2000. Holdings are
subject to change.
Terms To Know
The following are a few terms used throughout this report.
Beta A measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market Capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped into these main categories:
Large cap: over $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share.
A high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios)
Total Return Total return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and change in net asset
value.
Annual Report page 19
<PAGE>
Portfolio of Investments
Nuveen Growth and Income Stock Fund
June 30, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
-------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 93.1%
Basic Materials - 5.2%
387,400 Alcan Aluminum Ltd. $12,009,400
357,650 Union Carbide Corporation 17,703,675
322,900 Weyerhaeuser Company 13,884,700
-------------------------------------------------------------------------------
Capital Goods - 4.2%
293,400 General Dynamics Corporation 15,330,150
422,650 Tyco International Ltd. 20,023,044
-------------------------------------------------------------------------------
Consumer Cyclicals - 16.8%
379,450 Federated Department Stores, Inc. # 12,806,438
586,600 Ford Motor Company 25,223,800
414,702 General Motors Corporation 24,078,635
181,500 Knight-Ridder, Inc. 9,653,531
758,708 Philips Electronics NV 36,038,630
204,300 R. H. Donnelley Corporation # 3,958,313
214,100 TRW Inc. 9,286,588
314,500 Target Corporation 18,241,000
76,805 Visteon Corporation 931,264
-------------------------------------------------------------------------------
Consumer Staples - 5.7%
320,700 Kimberly-Clark Corporation 18,400,163
51,150 Newell Rubbermaid Inc. 1,317,113
332,050 The Seagram Company Ltd. 19,258,900
306,850 Tricon Global Restaurants, Inc. # 8,668,513
-------------------------------------------------------------------------------
Energy - 8.6%
579,900 Conoco Inc. 14,243,794
291,900 Exxon Mobil Corporation 22,914,150
448,800 Texaco Inc. 23,898,600
421,850 USX-Marathon Group 10,572,616
-------------------------------------------------------------------------------
Financials - 17.0%
179,750 Aetna Inc. 11,537,703
348,750 The Allstate Corporation 7,759,688
820,150 Associates First Capital Corporation 18,299,597
382,162 Citigroup Inc. 23,025,261
354,350 Fannie Mae 18,492,641
375,200 Household International, Inc. 15,594,250
872,750 MetLife, Inc. # 18,382,297
97,700 Providian Financial Corporation 8,793,000
504,100 Wells Fargo & Company 19,533,875
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Healthcare - 10.5%
438,550 Abbott Laboratories $ 19,542,884
430,500 Becton, Dickinson and Company 12,349,969
368,000 Biomet, Inc. 14,145,000
381,200 Bristol-Myers Squibb Company 22,204,900
378,801 Pharmacia Corporation 19,579,277
----------------------------------------------------------------------------------------------------------------------------------
Technology - 10.8%
378,950 Computer Associates International, Inc. 19,397,503
385,400 Electronic Data Systems Corporation 15,897,750
137,900 Gateway, Inc. # 7,825,825
209,250 International Business Machines Corporation 22,925,953
42,650 Lucent Technologies Inc. 2,527,013
748,546 Motorola, Inc. 21,754,618
----------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.1%
49,150 Burlington Northern Santa Fe Corporation 1,127,378
----------------------------------------------------------------------------------------------------------------------------------
Utilities - 14.2%
760,075 AT&T Corp. 24,037,372
519,850 Bell Atlantic Corporation # 26,414,878
76,350 Cable & Wireless plc Sponsored ADR 3,822,272
548,100 Edison International 11,236,050
266,050 FPL Group, Inc. 13,169,475
250,250 US West, Inc. 21,458,934
449,650 Vodafone Group plc Sponsored ADR 18,632,370
7,200 WorldCom, Inc. # 330,300
----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $754,635,034) 778,241,050
-------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 2.7%
Consumer Cyclicals - 2.7%
468,400 The News Corporation Limited Sponsored ADR 22,249,000
----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $8,147,162) 22,249,000
-------------------------------------------------------------------------------------------------------------------
Principal Market
Amount (000) Description Value
----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.3%
$ 27,000 The Coca-Cola Company, Commercial Paper, effective yield of 6.664%, 7/27/00 26,873,640
17,500 Sara Lee Corporation, Commercial Paper, effective yield of 6.648%, 7/06/00 17,484,299
----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $44,357,939) 44,357,939
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $807,140,135) - 101.1% 844,847,989
-------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (1.1)% (9,014,578)
-------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $835,833,411
===================================================================================================================
# Non-income producing.
See accompanying notes to financial statements.
</TABLE>
21
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund
June 30, 2000
Market
Shares Description Value
-------------------------------------------------------------------------------
COMMON STOCKS - 38.2%
Basic Materials - 2.2%
30,250 Alcan Aluminum Ltd. $ 937,750
27,200 Union Carbide Corporation 1,346,400
25,400 Weyerhaeuser Company 1,092,200
-------------------------------------------------------------------------------
Capital Goods - 1.7%
22,400 General Dynamics Corporation 1,170,400
31,700 Tyco International Ltd. 1,501,788
-------------------------------------------------------------------------------
Consumer Cyclicals - 6.8%
28,800 Federated Department Stores, Inc. # 972,000
44,550 Ford Motor Company 1,915,650
33,061 General Motors Corporation 1,919,604
14,050 Knight-Ridder, Inc. 747,284
59,402 Philips Electronics NV 2,821,595
16,200 TRW Inc. 702,675
24,400 Target Corporation 1,415,200
5,833 Visteon Corporation 70,726
-------------------------------------------------------------------------------
Consumer Staples - 2.4%
25,050 Kimberly-Clark Corporation 1,437,244
3,900 Newell Rubbermaid Inc. 100,425
26,350 The Seagram Company Ltd. 1,528,300
23,200 Tricon Global Restaurants, Inc. # 655,400
-------------------------------------------------------------------------------
Energy - 3.5%
44,350 Conoco Inc. 1,089,347
22,900 Exxon Mobil Corporation 1,797,650
32,900 Texaco Inc. 1,751,925
33,400 USX-Marathon Group 837,088
-------------------------------------------------------------------------------
Financials - 6.6%
13,800 Aetna Inc. 885,788
26,600 The Allstate Corporation 591,850
62,300 Associates First Capital Corporation 1,390,069
29,812 Citigroup Inc. 1,796,173
27,600 Fannie Mae 1,440,375
28,250 Household International, Inc. 1,174,141
64,300 MetLife, Inc. # 1,354,319
40,000 Wells Fargo & Company 1,550,000
-------------------------------------------------------------------------------
22
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Healthcare - 4.6%
34,200 Abbott Laboratories $ 1,524,038
33,150 Becton, Dickinson and Company 950,991
28,900 Biomet, Inc. 1,110,844
32,200 Bristol-Myers Squibb Company 1,875,650
31,251 Pharmacia Corporation 1,615,286
-----------------------------------------------------------------------------------------------------------------------------------
Technology - 4.4%
27,650 Computer Associates International, Inc. 1,415,334
29,700 Electronic Data Systems Corporation 1,225,125
10,250 Gateway, Inc. # 581,688
16,600 International Business Machines Corporation 1,818,738
3,300 Lucent Technologies Inc. 195,525
56,788 Motorola, Inc. 1,650,401
-----------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.1%
3,550 Burlington Northern Santa Fe Corporation 81,428
-----------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.9%
59,860 AT&T Corp. 1,893,073
39,800 Bell Atlantic Corporation # 2,022,338
6,300 Cable & Wireless plc Sponsored ADR 315,394
42,200 Edison International 865,100
20,100 FPL Group, Inc. 994,950
18,900 US West, Inc. 1,620,675
34,400 Vodafone Group plc Sponsored ADR 1,425,450
600 WorldCom, Inc. # 27,525
-----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (cost $55,403,616) 59,202,919
--------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.1%
Consumer Cyclicals - 1.1%
36,600 The News Corporation Limited Sponsored ADR 1,738,500
-----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $638,823) 1,738,500
--------------------------------------------------------------------------------------------------------------------
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 60.2%
Alabama - 0.3%
$ 455 Alabama Water Pollution Control Authority, Revolving Fund Loan Bonds, 8/05 at 100 AAA $ 487,605
Series 1994A, 6.625%, 8/15/08
-----------------------------------------------------------------------------------------------------------------------------------
California - 3.9%
2,500 City of Escondido, California Multifamily Housing Revenue 7/05 at 101 1/2 AAA 2,517,700
Refunding Bonds, Series 1997B (Morning View Terrace Apartments),
5.400%, 1/01/27 (Mandatory put 7/01/07)
735 Northern California Power Agency, Public Power Revenue No Opt. Call A- 757,903
Refunding Bonds, Geothermal Project No. 3, 1993 Series A,
5.650%, 7/01/07
</TABLE>
23
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund (continued)
June 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount (000) Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California (continued)
$ 250 County of Orange, California, Refunding Recovery Bonds, 1995 Series No Opt. Call AAA $ 274,378
A, 6.000%, 6/01/10
1,495 Palmdale Civic Authority (Civic Center Refinancing), 1997 Series A, 7/07 at 102 AAA 1,529,250
5.375%, 7/01/12
1,000 County of San Diego, California, Certificates of Participation, The 9/09 at 101 Baa3 1,004,590
Burnham Institute, 5.700%, 9/01/11
-----------------------------------------------------------------------------------------------------------------------------------
Colorado - 2.7%
2,000 City and County of Denver, Colorado, Airport System Revenue Bonds, 11/06 at 102 AAA 2,074,160
Series 1996B, 5.625%, 11/15/08 (Alternative Minimum Tax)
1,000 City and County of Denver, Colorado, Airport Special Facilities 1/09 at 101 AAA 1,040,700
Revenue Bonds (Rental Car Projects), Series 1999A, 6.000%, 1/01/13
(Alternative Minimum Tax)
2,000 Metropolitan Football Stadium District (Colorado), Sales Tax Revenue No Opt. Call AAA 1,061,920
Bonds, Series 1999A, 0.000%, 1/01/12
-----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 4.4%
1,075 Connecticut Housing Finance Authority, Housing Mortgage Finance 5/06 at 102 AA 1,080,321
Program Bonds, 1996 Series B, Subseries B-2, 5.750%, 11/15/08
(Alternative Minimum Tax)
1,000 State of Connecticut Health and Educational Facilities Authority, No Opt. Call BBB 948,540
Revenue Bonds, Hospital for Special Care Issue, Series B, 5.125%,
7/01/07
1,485 Connecticut Development Authority, First Mortgage Gross Revenue 12/06 at 103 BBB+ 1,369,393
Health Care Project Refunding Bonds, Series 1998A (The Elim Park
Baptist Home, Inc. Project), 4.875%, 12/01/07
3,500 West Haven Housing Authority (Connecticut), Multifamily Housing 1/01 at 100 N/R 3,503,080
Revenue Bonds, Series 1998B (Meadows Landing Apartments), 6.000%,
1/01/02 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.4%
500 District of Columbia, General Obligation Refunding Bonds, Series No Opt. Call AAA 548,675
A-1, 6.500%, 6/01/10
-----------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.6%
2,000 Development Authority of Fulton County (Georgia), Special Facilities 5/08 at 101 BBB- 1,822,260
Revenue Bonds (Delta Air Lines, Inc. Project), Series 1998, 5.300%,
5/01/13 (Alternative Minimum Tax)
650 Georgia Housing and Finance Authority, Single Family Mortgage Bonds, 6/06 at 102 AAA 652,984
1996 Series A, 5.875%, 12/01/19 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
Idaho - 0.8%
1,185 Idaho Housing and Finance Association, Single Family Mortgage Bonds, 1/07 at 102 A1 1,188,911
1997 Series D-2, 5.950%, 7/01/09 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
Illinois - 5.4%
1,075 Village of Bolingbrook, Will and DuPage Counties, Illinois, No Opt. Call AAA 1,234,423
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 0.000%, 12/01/09 No Opt. Call AAA 687,221
2,360 0.000%, 12/01/10 No Opt. Call AAA 1,353,177
Illinois Development Finance Authority, Economic Development Revenue
Bonds, Series 1998 (The Latin School of Chicago Project):
270 5.200%, 8/01/11 8/08 at 100 Baa2 251,643
200 5.250%, 8/01/12 8/08 at 100 Baa2 184,956
580 5.300%, 8/01/13 8/08 at 100 Baa2 531,982
2,160 Illinois Health Facilities Authority, Revenue Bonds, Series 1985 7/04 at 102 N/R*** 2,372,674
(St. Elizabeth's Hospital of Chicago, Inc.), 7.250%, 7/01/05
(Pre-refunded to 7/01/04)
1,500 Illinois Health Facilities Authority, Revenue Bonds, Series 1993 11/03 at 102 A 1,499,310
(OSF Healthcare System), 6.000%, 11/15/10
235 Illinois Health Facilities Authority, FHA-Insured Mortgage Revenue 2/06 at 102 AAA 239,007
Bonds, Series 1996 (Sinai Health System), 5.500%, 2/15/09
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana - 0.9%
$ 1,470 Indiana Housing Finance Authority, Single Family Mortgage Revenue 7/08 at 101 Aaa $1,410,524
Bonds, 1998 Series C-3, 5.300%, 7/01/13 (Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.7%
Parish School Board of the Parish of Jefferson, State of Louisiana,
Sales Tax School Bonds, Refunding Series 1998:
1,045 0.000%, 3/01/08 No Opt. Call AAA 698,603
2,175 0.000%, 9/01/08 No Opt. Call AAA 1,416,360
1,000 0.000%, 3/01/10 No Opt. Call AAA 598,490
-----------------------------------------------------------------------------------------------------------------------------------
Maine - 0.2%
255 Town of Winslow, Maine (Crowe Rope Industries Project), 1997 Series 3/07 at 102 Aaa 266,625
A, General Obligation Tax Increment Financing Bonds, 6.000%, 3/01/11
(Alternative Minimum Tax)
-----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 4.7%
Massachusetts Development Finance Agency, Resource Recovery Revenue
Bonds (Ogden Haverhill Project), Series 1998B:
1,720 5.100%, 12/01/12 (Alternative Minimum Tax) 12/08 at 102 BBB 1,501,268
1,885 5.200%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,638,819
250 Massachusetts Health and Educational Facilities Authority, Revenue 7/06 at 102 AAA 264,368
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 5.450%, 12/01/12 (Alternative Minimum Tax) 12/08 at 102 BBB 1,371,270
1,825 5.500%, 12/01/13 (Alternative Minimum Tax) 12/08 at 102 BBB 1,657,812
835 Massachusetts Turnpike Authority, Western Turnpike Revenue Bonds, 7/00 at 100 AAA 835,000
1997 Series A, 5.550%, 1/01/17
-----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 1.1%
Jones County, Mississippi, Hospital Revenue Refunding Bonds (South
Central Regional Medical Center Project), Series 1997:
1,285 5.350%, 12/01/10 12/07 at 100 BBB+ 1,182,264
500 5.400%, 12/01/11 12/07 at 100 BBB+ 455,925
-----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 6.1%
9,921 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan No Opt. Call N/R 9,513,211
Utility District Project), Series 1997B, 5.700%, 7/01/08
-----------------------------------------------------------------------------------------------------------------------------------
Nevada - 1.3%
1,770 Nevada Housing Division, Single Family Mortgage Bonds, 1997 Series 4/07 at 102 Aa3 1,724,228
A-1 Mezzanine Bonds, 6.000%, 4/01/15 (Alternative Minimum Tax)
250 Airport Authority of Washoe County, Reno, Nevada, Airport Revenue 7/03 at 102 AAA 257,573
Refunding Bonds, Series 1993B, 5.875%, 7/01/11
-----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 1.8%
1,450 New Hampshire Higher Educational and Health Facilities Authority, 1/07 at 102 BBB- 1,428,366
Revenue Bonds, Series 1997 (New Hampshire College), 6.200%, 1/01/12
1,300 State of New Hampshire, Turnpike System Revenue Bonds, 1992 Series, 4/02 at 102 AAA 1,341,392
6.000%, 4/01/13
-----------------------------------------------------------------------------------------------------------------------------------
New York - 10.0%
2,000 The City University of New York, Certificates of Participation, The No Opt. Call A 2,095,140
State of New York (John Jay College of Criminal Justice Project
Refunding), 6.000%, 8/15/06
5,000 Erie County Industrial Development Agency, Solid Waste Disposal 12/10 at 103 N/R 5,211,750
Facility Revenue Bonds (1998 CanFibre of Lackawanna Project),
8.875%, 12/01/13 (Alternative Minimum Tax)
500 Metropolitan Transportation Authority, Transit Facilities Service No Opt. Call A 517,895
Contract Bonds, Series O, 5.750%, 7/01/07
</TABLE>
25
<PAGE>
Portfolio of Investments
Nuveen Balanced Municipal and Stock Fund (continued)
June 30, 2000
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York (continued)
$ 250 The City of New York, General Obligation Bonds, Fiscal 1997 11/06 at 101 1/2 A- $ 259,820
Series D, Tax Exempt Bonds, 5.875%, 11/01/11
500 The City of New York, General Obligation Bonds, Fiscal 1997 4/07 at 101 A- 527,150
Series I, 6.000%, 4/15/09
1,000 The City of New York, General Obligation Bonds, Fiscal 1998 8/07 at 101 A- 1,018,920
Series D, 5.500%, 8/01/10
Dormitory Authority of the State of New York, Revenue Bonds,
City University Issue, Series U:
160 6.375%, 7/01/08 (Pre-refunded to 7/01/02) 7/02 at 102 Baa1*** 168,186
115 6.375%, 7/01/08 7/02 at 102 Baa1 119,837
2,000 New York State Thruway Authority, Local Highway and Bridge 4/06 at 102 A 2,057,440
Service Contract Bonds, Series 1996, 5.625%, 4/01/07
285 New York State Urban Development Corporation, State Facilities No Opt. Call A 301,499
Revenue Bonds, 1995 Refunding Series, 6.250%, 4/01/06
1,700 New York State Urban Development Corporation, Project Revenue 1/03 at 102 A 1,748,943
Bonds (Cornell Center for Theory and Simulation in Science
and Engineering Grant), Series 1993, 5.900%, 1/01/07
1,430 New York State Urban Development Corporation, Empire State No Opt. Call A 1,540,053
Development Corporation, Youth Facilities Revenue Bonds,
Series 1997, 6.500%, 4/01/07
-----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 1.7%
2,045 North Carolina Municipal Power Agency Number 1, Catawba Electric
Revenue Bonds, Series 1980, 10.500%, 1/01/10 No Opt. Call AAA 2,589,768
-----------------------------------------------------------------------------------------------------------------------------------
Ohio - 3.3%
1,750 City of Dayton, Ohio, Special Facilities Revenue Refunding Bonds, 1988 No Opt. Call BBB 1,756,195
Series C (Emery Air Freight Corporation and Emery Worldwide
Airlines, Inc. - Guarantors), 6.050%, 10/01/09
1,500 County of Lorain, Ohio, Health Care Facilities Revenue Refunding Bonds, 2/08 at 101 BBB 1,349,325
Series 1998A (Kendal at Oberlin), 5.375%, 2/01/12
1,875 Ohio Building Authority, State Facilities Refunding Bonds (Toledo 4/03 at 100 AAA 2,082,900
Government Office Building), 1982 Series A, 10.125%, 10/01/06
(Pre-refunded to 4/01/03)
-----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
1,000 Oklahoma Industries Authority, Health System Revenue Refunding Bonds No Opt. Call AAA 1,052,830
(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%
1,065 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue
Bonds, Series 1996-50A, 5.350%, 10/01/08 4/06 at 102 AA+ 1,068,589
-----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 1.2%
1,760 City of Providence, Rhode Island, General Obligation Bonds, 1997 7/07 at 101 AAA 1,870,933
Series A, 6.000%, 7/15/09
-----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 1.7%
2,700 The Industrial Development Board of the City of Cookeville, 10/03 at 102 A 2,712,474
Tennessee, Hospital Refunding Revenue Bonds, Series 1993 (Cookeville
General Hospital Project), 5.750%, 10/01/10
-----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.8%
3,000 Abilene Higher Education Authority, Inc. (Texas), Student Loan Revenue 11/08 at 100 Aa3 2,804,850
Bonds, Subordinate Series 1998B (Subordinate Lien Fixed Rate Term
Bonds), 5.050%, 7/01/13 (Alternative Minimum Tax)
City of Austin, Texas, Water, Sewer and Electric Refunding Revenue Bonds,
Series 1982:
10 14.000%, 11/15/01 No Opt. Call A*** 10,804
85 14.000%, 11/15/01 No Opt. Call A 91,557
250 City of San Antonio, Texas, Airport System Improvement Revenue Bonds, 7/06 at 101 AAA 257,684
Series 1996, 5.700%, 7/01/09 (Alternative Minimum Tax)
180 Texas Department of Housing and Community Affairs, Single Family 9/06 at 102 AAA 183,030
Mortgage Revenue Bonds, 1996 Series E, 5.750%, 3/01/10
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 1,000 Tyler Health Facilities Development Corporation (Texas), Hospital 7/02 at 100 Baa2 $921,940
Revenue Bonds (Mother Frances Hospital Regional HealthCare Center
Project), Series 1997A, 5.500%, 7/01/09
------------------------------------------------------------------------------------------------------------------------------------
Utah -- 0.2%
500 Tooele County, Hazardous Waste Disposal Revenue Bonds (Laidlaw 8/05 at 102 N/R 145,230
Inc./USPCI Clive PJ), Series 1995, 6.750%, 8/01/10
(Alternative Minimum Tax)
200 State Board of Regents of Utah, Student Loan Revenue Bonds, 1995 Series 11/05 at 102 AAA 208,340
N Bonds, 6.000%, 5/01/08 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
Washington -- 0.6%
30 Washington State Housing Finance Commission, Single Family Mortgage 1/04 at 102 AAA 30,170
Revenue Bonds (Mortgage-Backed Securities Program), Series 1995A,
6.650%, 7/01/16 (Alternative Minimum Tax)
55 Washington Public Power Supply System, Nuclear Project No. 2, Revenue No Opt. Call Aaa 57,560
Bonds, Series 1981A, 14.375% 7/01/01
800 Washington Public Power Supply System, Project No. 3, Refunding Revenue 7/06 at 102 AAA 829,360
Bonds, Series 1996-A, 5.700%, 7/01/09
-----------------------------------------------------------------------------------------------------------------------------------
$ 97,521 Total Municipal Bonds (cost $95,451,247) 93,369,033
===========------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $151,493,686) - 99.5% 154,310,452
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.5% 817,010
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 155,127,462
====================================================================================================================
</TABLE>
# Non-income producing.
* Optional Call Provisions (not covered by the report of independent public
accountants): Dates (month and year) and prices of the earliest optional
call or redemption. There may be other call provisions at varying prices at
later dates.
** Ratings (not covered by the report of independent public accountants):
Using the higher of Standard & Poor's or Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient U.S.
Government or U.S. Government agency securities which ensures the timely
payment of principal and interest. Securities are normally considered to be
equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
27
<PAGE>
Portfolio of Investments
Nuveen Balanced Stock and Bond Fund
June 30, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
-----------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 57.9%
Basic Materials - 3.3%
21,500 Alcan Aluminum Ltd. $ 666,500
19,900 Union Carbide Corporation 985,050
18,300 Weyerhaeuser Company 786,900
-----------------------------------------------------------------------
Capital Goods - 2.5%
14,700 General Dynamics Corporation 768,075
23,600 Tyco International Ltd. 1,118,050
-----------------------------------------------------------------------
Consumer Cyclicals - 10.3%
21,350 Federated Department Stores, Inc. # 720,563
33,400 Ford Motor Company 1,436,200
23,170 General Motors Corporation 1,345,308
10,200 Knight-Ridder, Inc. 542,513
43,938 Philips Electronics NV 2,087,055
11,850 TRW Inc. 513,994
17,400 Target Corporation 1,009,200
4,373 Visteon Corporation 53,024
-----------------------------------------------------------------------
Consumer Staples - 3.6%
17,600 Kimberly-Clark Corporation 1,009,800
2,800 Newell Rubbermaid Inc. 72,100
19,550 The Seagram Company Ltd. 1,133,900
16,800 Tricon Global Restaurants, Inc. # 474,600
-----------------------------------------------------------------------
Energy - 5.4%
32,850 Conoco Inc. 806,878
16,650 Exxon Mobil Corporation 1,307,025
24,700 Texaco Inc. 1,315,275
24,400 USX-Marathon Group 611,525
-----------------------------------------------------------------------
Financials - 10.1%
10,200 Aetna Inc. 654,713
19,500 The Allstate Corporation 433,875
45,700 Associates First Capital Corporation 1,019,681
22,662 Citigroup Inc. 1,365,386
20,050 Fannie Mae 1,046,359
20,500 Household International, Inc. 852,031
48,100 MetLife, Inc. # 1,013,106
29,600 Wells Fargo & Company 1,147,000
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
-------------------------------------------------------------------------------
<C> <S> <C>
Healthcare -- 6.8%
25,800 Abbott Laboratories $ 1,149,713
24,550 Becton, Dickinson and Company 704,278
20,700 Biomet, Inc. 795,656
22,600 Bristol-Myers Squibb Company 1,316,450
22,166 Pharmacia Corporation 1,145,705
-------------------------------------------------------------------------------
Technology -- 6.8%
20,850 Computer Associates International, Inc. 1,067,259
21,800 Electronic Data Systems Corporation 899,250
7,700 Gateway, Inc. # 436,975
12,300 International Business Machines Corporation 1,347,619
2,500 Lucent Technologies Inc. 148,125
41,412 Motorola, Inc. 1,203,536
-------------------------------------------------------------------------------
Transportation -- 0.1%
2,700 Burlington Northern Santa Fe Corporation 61,931
-------------------------------------------------------------------------------
Utilities -- 9.0%
42,891 AT&T Corp. 1,356,428
29,800 Bell Atlantic Corporation # 1,514,213
4,750 Cable & Wireless plc Sponsored ADR 237,797
31,100 Edison International 637,550
14,900 FPL Group, Inc. 737,550
13,950 US West, Inc. 1,196,213
25,200 Vodafone Group plc Sponsored ADR 1,044,225
400 WorldCom, Inc. # 18,350
-------------------------------------------------------------------------------
Total Common Stocks (cost $40,888,619) 43,314,509
---------------------------------------------------------------------
PREFERRED STOCKS -- 1.7%
Consumer Cyclicals -- 1.7%
26,800 The News Corporation Limited Sponsored ADR 1,273,000
-------------------------------------------------------------------------------
Total Preferred Stocks (cost $466,980) 1,273,000
---------------------------------------------------------------------
</TABLE>
29
<PAGE>
Portfolio of Investments
Nuveen Balanced Stock and Bond Fund (continued)
June 30, 2000
<TABLE>
<CAPTION>
Principal Market
Amount (000) Description Value
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 38.9%
U. S. Treasury Notes - 30.6%
$ 3,075 7.500%, 5/15/02 $ 3,131,697
7,275 7.875%, 11/15/04 7,700,136
4,530 6.500%, 5/15/05 4,579,549
7,310 7.000%, 7/15/06 7,572,707
----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds - 8.3%
3,725 7.250%, 5/15/16 4,098,666
2,135 6.000%, 2/15/26 2,086,962
----------------------------------------------------------------------------------------------------------------------------
Total U.S. Government and Agency Obligations - (cost $29,569,645) 29,169,717
-------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.2%
900 Federal Home Loan Mortgage Corporation, Discount Note, effective yield of 6.645%, 7/03/00 899,672
----------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $899,672) 899,672
-------------------------------------------------------------------------------------------------------
Total Investments (cost $71,824,916) - 99.7% 74,656,898
-------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.3% 257,667
-------------------------------------------------------------------------------------------------------
Net Assets - 100% $74,914,565
=======================================================================================================
</TABLE>
# Non-income producing.
See accompanying notes to financial statements.
30
<PAGE>
Portfolio of Investments
Nuveen European Value Fund
June 30, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 89.2%
Basic Materials - 6.5%
26,750 Jefferson Smurfit Group plc Sponsored ADR $ 471,469
18,300 Pechiney SA Sponsored ADR 379,725
----------------------------------------------------------------------------
Capital Goods - 7.9%
29,000 SKF AB Sponsored ADR 482,125
3,700 Siemens AG Unsponsored ADR 558,618
----------------------------------------------------------------------------
Consumer Cyclicals - 7.8%
21,500 Philips Electronics NV 1,021,250
----------------------------------------------------------------------------
Consumer Staples - 15.7%
54,100 Bass plc Sponsored ADR 625,531
25,500 Diageo plc Sponsored ADR 906,844
9,400 The Seagram Company Ltd. 545,200
----------------------------------------------------------------------------
Energy - 8.5%
9,000 Royal Dutch Petroleum Company 554,063
11,300 Shell Transport & Trading Company ADR 564,294
----------------------------------------------------------------------------
Financials - 24.7%
22,400 ABN AMRO Holding NV Sponsored ADR 550,200
8,450 ING Groep NV Sponsored ADR 570,375
40,800 Investor AB 557,226
76,986 Nordic Baltic Holding AB FDR 559,457
10,300 Zurich Allied AG Sponsored ADR 1,021,087
----------------------------------------------------------------------------
Healthcare - 4.2%
10,600 Pharmacia Corporation 547,888
----------------------------------------------------------------------------
Technology - 0.7%
7,500 Infonet Services Corporation # 89,531
----------------------------------------------------------------------------
Utilities - 13.2%
7,200 Cable & Wireless plc Sponsored ADR 360,450
45,300 Portugal Telecom SA Sponsored ADR 509,627
8,200 KPN NV Sponsored ADR 368,493
11,900 Vodafone Group plc Sponsored ADR 493,111
----------------------------------------------------------------------------
Total Common Stocks (cost $10,823,078) 11,736,564
-----------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen European Value Fund (continued)
June 30, 2000
Market
Shares Description Value
---------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS -- 4.7%
Consumer Cyclicals -- 4.7%
12,900 The News Corporation Limited Sponsored ADR $ 612,750
---------------------------------------------------------------------------------------------------
Total Preferred Stocks (cost $531,284) 612,750
----------------------------------------------------------------------------------
Total Investments (cost $11,354,362) -- 93.9% 12,349,314
----------------------------------------------------------------------------------
Other Assets Less Liabilities -- 6.1% 804,412
----------------------------------------------------------------------------------
Net Assets -- 100% $13,153,726
==================================================================================
</TABLE>
Country Allocation (as a percentage of the fund's net assets)
-------------------------------------------------------------
Netherlands 23.3%
-------------------------------------------------------------
United Kingdom 22.4%
-------------------------------------------------------------
Sweden 7.9%
-------------------------------------------------------------
Switzerland 7.8%
-------------------------------------------------------------
United States 4.8%
-------------------------------------------------------------
Australia 4.7%
-------------------------------------------------------------
Finland 4.3%
-------------------------------------------------------------
Germany 4.2%
-------------------------------------------------------------
Canada 4.1%
-------------------------------------------------------------
Portugal 3.9%
-------------------------------------------------------------
Ireland 3.6%
-------------------------------------------------------------
France 2.9%
-------------------------------------------------------------
# Non-income producing.
See accompanying notes to financial statements.
32
<PAGE>
Statement of Net Assets
June 30, 2000
<TABLE>
<CAPTION>
Growth and Municipal and Stock and European
Income Stock Bond Value
Assets
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities, at market value $ 844,847,989 $ 154,310,452 $ 74,656,898 $ 12,349,314
Cash 1,771,922 -- 159,200 477,529
Receivables:
Dividends and interest 1,165,948 1,669,841 531,555 36,043
Fund manager -- -- -- 72,647
Investments sold 5,722,565 880,172 890,898 161,091
Shares sold 386,910 319,233 88,481 35,474
Deferred organization costs 43,478 45,807 46,593 76,129
Other assets 94,248 19,318 11,484 8,137
----------------------------------------------------------------------------------------------------------------------
Total assets 854,033,060 157,244,823 76,385,109 13,216,364
----------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 469,308 -- --
Payables:
Investments purchased 13,747,624 1,035,455 658,719 --
Shares redeemed 3,254,075 178,467 230,284 15,167
Accrued expenses:
Management fees 550,596 81,810 25,846 --
12b-1 distribution and service fees 268,267 70,067 26,476 4,321
Other 379,087 103,148 69,547 43,150
Dividends payable -- 179,106 459,672 --
----------------------------------------------------------------------------------------------------------------------
Total liabilities 18,199,649 2,117,361 1,470,544 62,638
----------------------------------------------------------------------------------------------------------------------
Net assets $ 835,833,411 $ 155,127,462 $ 74,914,565 $ 13,153,726
----------------------------------------------------------------------------------------------------------------------
Class A Shares
Net assets $ 669,651,194 $ 93,399,986 $ 52,469,567 $ 3,372,633
Shares outstanding 27,505,938 3,841,415 2,082,169 144,470
Net asset value and redemption price per share $ 24.35 $ 24.31 $ 25.20 $ 23.34
Offering price per share (net asset value per
share plus
maximum sales charge of 5.75% of offering price) $ 25.84 $ 25.79 $ 26.74 $ 24.76
----------------------------------------------------------------------------------------------------------------------
Class B Shares
Net assets $ 93,275,189 $ 45,779,431 $ 11,199,824 $ 3,517,995
Shares outstanding 3,859,745 1,853,543 444,430 151,853
Net asset value, offering and redemption price
per share $ 24.17 $ 24.70 $ 25.20 $ 23.17
----------------------------------------------------------------------------------------------------------------------
Class C Shares
Net assets $ 55,303,256 $ 14,836,671 $ 6,620,067 $ 867,843
Shares outstanding 2,291,421 601,223 262,582 37,468
Net asset value, offering and redemption price
per share $ 24.13 $ 24.68 $ 25.21 $ 23.16
----------------------------------------------------------------------------------------------------------------------
Class R Shares
Net assets $ 17,603,772 $ 1,111,374 $ 4,625,107 $ 5,395,255
Shares outstanding 721,301 46,063 183,593 230,637
Net asset value, offering and redemption price
per share $ 24.41 $ 24.13 $ 25.19 $ 23.39
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
Statement of Operations
Year Ended June 30, 2000
<TABLE>
<CAPTION>
Growth and Municipal and Stock and European
Income Stock Bond Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Dividends $ 15,519,931 $ 1,317,355 $ 926,561 $ 296,530
Interest 3,838,056 6,172,356 2,338,888 --
----------------------------------------------------------------------------------------------------------------------------------
Total investment income 19,357,987 7,489,711 3,265,449 296,530
----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees 7,392,251 1,325,770 632,399 119,488
12b-1 service fees - Class A 1,828,952 271,396 149,250 9,004
12b-1 distribution and service fees - Class B 976,408 495,015 126,605 33,748
12b-1 distribution and service fees - Class C 495,577 184,605 74,073 7,732
Shareholders' servicing agent fees and expenses 1,589,920 179,375 94,806 27,332
Custodian's fees and expenses 167,755 76,953 70,850 41,557
Trustees' fees and expenses 82,633 20,680 12,374 1,282
Professional fees 56,559 3,489 10,167 4,266
Shareholders' reports - printing and mailing expenses 336,399 112,810 67,935 114,231
Federal and state registration fees 40,847 30,527 17,242 49,846
Amortization of deferred organization costs 36,099 36,099 36,099 32,087
Other expenses 51,472 12,986 7,273 9,188
----------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 13,054,872 2,749,705 1,299,073 449,761
Custodian fee credit (53,115) (9,245) (7,461) (1,117)
Expense reimbursement (291,021) (101,801) (140,646) (234,652)
----------------------------------------------------------------------------------------------------------------------------------
Net expenses 12,710,736 2,638,659 1,150,966 213,992
----------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,647,251 4,851,052 2,114,483 82,538
----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain from investment transactions 78,196,283 6,680,397 5,523,658 1,836,797
Net change in unrealized appreciation or depreciation of investments (134,957,559) (13,985,582) (8,995,519) (32,334)
----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) from investments (56,761,276) (7,305,185) (3,471,861) 1,804,463
----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $ (50,114,025) $ (2,454,133) $(1,357,378) $1,887,001
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
34
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Growth and Income Municipal and Stock
-------------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended
6/30/00 6/30/99 6/30/00 6/30/99
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 6,647,251 $ 5,707,431 $ 4,851,052 $ 4,217,852
Net realized gain (loss) from investment transactions 78,196,283 31,610,896 6,680,397 392,403
Net change in unrealized appreciation or depreciation of investments (134,957,559) 59,442,442 (13,985,582) 5,824,556
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (50,114,025) 96,760,769 (2,454,133) 10,434,811
---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (7,504,717) (1,233,736) (3,577,517) (3,165,304)
Class B (245,079) (2,076) (869,308) (611,994)
Class C (126,515) (4,846) (326,338) (242,322)
Class R (222,288) (45,702) (42,783) (43,038)
From accumulated net realized gains from investment transactions:
Class A (30,549,212) (64,233,341) (496,300) (3,293,468)
Class B (4,159,620) (6,427,129) (222,282) (1,225,114)
Class C (2,042,685) (2,186,424) (87,759) (486,028)
Class R (709,668) (1,233,763) (4,836) (38,192)
---------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (45,559,784) (75,367,017) (5,627,123) (9,105,460)
---------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 101,938,343 105,953,619 19,407,372 52,403,705
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 28,852,919 49,322,552 3,291,735 5,420,959
---------------------------------------------------------------------------------------------------------------------------------
130,791,262 155,276,171 22,699,107 57,824,664
Cost of shares redeemed (145,978,842) (131,707,460) (57,805,189) (26,489,470)
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in assets from Fund share transactions (15,187,580) 23,568,711 (35,106,082) 31,335,194
---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (110,861,389) 44,962,463 (43,187,338) 32,664,545
Net assets at the beginning of year 946,694,800 901,732,337 198,314,800 165,650,255
---------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 835,833,411 $ 946,694,800 $155,127,462 $198,314,800
=================================================================================================================================
Balance of undistributed net investment income at the end of year $ 3,074,307 $ 4,525,655 $ 640,382 $ 605,276
=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
Stock and Bond European Value
-------------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended
6/30/00 6/30/99 6/30/00 6/30/99
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,114,483 $ 1,862,915 $ 82,538 $ 82,661
Net realized gain (loss) from investment transactions 5,523,658 2,685,999 1,836,797 (834,511)
Net change in unrealized appreciation or depreciation of investments (8,995,519) 4,176,532 (32,334) 1,037,490
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (1,357,378) 8,725,446 1,887,001 285,640
-----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
From undistributed net investment income:
Class A (1,568,157) (1,491,505) (30,095) (1,314)
Class B (245,431) (170,929) (5,021) --
Class C (143,080) (93,642) (1,092) --
Class R (137,173) (98,001) (49,434) (4,385)
From accumulated net realized gains from investment transactions:
Class A (2,146,376) (2,988,949) (17,974) --
Class B (477,311) (473,062) (16,300) --
Class C (278,764) (232,637) (3,569) --
Class R (162,756) (161,189) (22,473) --
-----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,159,048) (5,709,914) (145,958) (5,699)
-----------------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 10,886,010 17,356,264 2,541,787 9,930,964
Net proceeds from shares issued to shareholders due to reinvestment of
distributions 3,505,664 4,127,472 69,293 2,735
-----------------------------------------------------------------------------------------------------------------------------------
14,391,674 21,483,736 2,611,080 9,933,699
Cost of shares redeemed (24,915,310) (20,069,879) (2,452,341) (2,678,059)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in assets from Fund share transactions (10,523,636) 1,413,857 158,739 7,255,640
-----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (17,040,062) 4,429,389 1,899,782 7,535,581
Net assets at the beginning of year 91,954,627 87,525,238 11,253,944 3,718,363
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at the end of year $ 74,914,565 $ 91,954,627 $13,153,726 $11,253,944
===================================================================================================================================
Balance of undistributed net investment income at the end of year $ 34,259 $ 13,617 $ 73,516 $ 76,620
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Investment Trust (the "Trust") is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. The
Trust comprises the Nuveen Growth and Income Stock Fund ("Growth and Income"),
the Nuveen Balanced Municipal and Stock Fund ("Municipal and Stock"), the Nuveen
Balanced Stock and Bond Fund ("Stock and Bond") and the Nuveen European Value
Fund ("European Value") (collectively, the "Funds"). The Trust was organized as
a Massachusetts business trust in 1996.
Growth and Income 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 in vestments in order to preserve
capital or to enhance returns or as a temporary defensive measure.
Municipal and Stock 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.
Stock and Bond 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.
European Value 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
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the securities exchange on which such securities are primarily traded;
however, securities traded on a securities exchange for which there are no
transactions on a given day or securities not listed on a securities exchange
are valued at the most recent bid prices. The prices of fixed-income securities
are provided by a pricing service and based on the mean between the bid and
asked price. When price quotes are not readily available (which is usually the
case for municipal bonds), the pricing service establishes fair market value
based on prices of comparable securities. Temporary investments in securities
that have variable rate and demand features qualifying them as short-term
securities 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 Funds have instructed the
custodian to segregate assets in a separate account with a current value at
least equal to the amount of their when-issued and delayed delivery purchase
commitments. At June 30, 2000, there were no such outstanding purchase
commitments in any of the Funds.
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 and in the case of Municipal and Stock, amortization of premiums.
37
<PAGE>
Notes to Financial Statements (continued)
Dividends and Distributions to Shareholders
Net ordinary taxable income is declared and distributed to shareholders annually
for Growth and Income, Municipal and Stock, and European Value and quarterly
for Stock and Bond. Tax-exempt net investment income is declared and distributed
to shareholders monthly for Municipal and Stock. Net realized capital gains, if
any, for the Funds 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 accounting principles generally accepted in the United
States. 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 Funds intend 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. In addition, Municipal and
Stock 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 made by the Funds are subject to federal taxation.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge
but incur annual 12b-1 distribution and service fees. An investor purchasing
Class B Shares agrees to pay a CDSC of up to 5% depending upon the length of
time the shares are held by the investor (CDSC is reduced to 0% at the end of
six years). Class B Shares convert to Class A Shares eight years after
purchase. Class C Shares are sold without a sales charge but incur annual 12b-1
distribution and service fees. An investor purchasing Class C Shares agrees to
pay a CDSC of 1% if Class C Shares are redeemed within one year of purchase.
Class R Shares are not subject to any sales charge or 12b-1 distribution or
service fees. Class R Shares are available for purchase only under limited
circumstances.
Derivative Financial Instruments
The Funds may invest in options, forward and futures contracts, which are
sometimes referred to as derivative transactions. Although the Funds are
authorized to invest in such financial instruments, and may do so in the future,
they did not make any such investments during the fiscal year ended June 30,
2000.
Expense Allocation
Expenses of each 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.
Deferred Organization Costs
Each 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 August 7, 1996 for Growth and Income, Municipal and Stock, and
Stock and Bond and May 29, 1998, for European Value. 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 European Value 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
de nominated 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
European Value 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, options and futures contracts. The Fund will enter into foreign
currency transactions for hedging and other permissible risk management purposes
only. If the Fund
38
<PAGE>
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 European Value'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 June 30, 2000, there were no open
foreign currency forward, options or futures contracts.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Growth and Income
--------------------------------------------------------------
Year Ended 6/30/00 Year Ended 6/30/99
----------------------------- ------------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,761,871 $ 44,811,297 2,108,966 $ 51,032,462
Class B 967,092 24,522,740 1,164,391 28,993,639
Class C 1,135,150 28,507,655 901,784 22,488,408
Class R 161,754 4,096,651 139,756 3,439,110
Shares issued to shareholders due to
reinvestment of distributions:
Class A 962,657 24,267,663 1,881,914 42,862,233
Class B 105,666 2,637,854 184,034 4,158,678
Class C 42,467 1,058,472 43,891 990,959
Class R 35,163 888,930 57,417 1,310,682
-------------------------------------------------------------------------------------------------------
5,171,820 130,791,262 6,482,153 155,276,171
-------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (4,534,195) (114,268,646) (4,484,770) (107,597,350)
Class B (754,744) (18,838,768) (523,515) (12,739,469)
Class C (416,410) (10,390,237) (226,134) (5,392,875)
Class R (98,505) (2,481,191) (265,612) (5,977,766)
-------------------------------------------------------------------------------------------------------
(5,803,854) (145,978,842) (5,500,031) (131,707,460)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) (632,034) $ (15,187,580) 982,122 $ 23,568,711
=======================================================================================================
</TABLE>
39
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Municipal and Stock
--------------------------------------------------------------------
Year Ended 6/30/00 Year Ended 6/30/99
------------------------------- -------------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 404,996 $ 9,963,144 801,383 $ 19,758,610
Class B 248,954 6,223,578 950,013 23,509,766
Class C 117,947 2,957,347 361,871 9,025,013
Class R 10,768 263,303 4,472 110,316
Shares issued to shareholders due to
reinvestment of distributions:
Class A 104,555 2,584,344 166,972 4,085,713
Class B 19,984 503,090 38,607 947,489
Class C 6,904 172,438 13,468 330,353
Class R 1,298 31,863 2,354 57,404
----------------------------------------------------------------------------------------------------------
915,406 22,699,107 2,339,140 57,824,664
----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,537,171) (37,787,854) (695,219) (17,146,719)
Class B (470,498) (11,702,549) (202,066) (5,046,935)
Class C (323,269) (8,007,667) (160,113) (3,961,328)
Class R (12,681) (307,119) (13,418) (334,488)
----------------------------------------------------------------------------------------------------------
(2,343,619) (57,805,189) (1,070,816) (26,489,470)
----------------------------------------------------------------------------------------------------------
Net increase (decrease) (1,428,213) $(35,106,082) 1,268,324 $ 31,335,194
==========================================================================================================
Stock and Bond
--------------------------------------------------------------------
Year Ended 6/30/00 Year Ended 6/30/99
------------------------------- -------------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------
Shares sold:
Class A 208,394 $ 5,424,708 249,981 $ 6,320,839
Class B 92,046 2,420,178 224,425 5,686,636
Class C 91,257 2,385,624 180,324 4,627,668
Class R 25,474 655,500 28,167 721,121
Shares issued to shareholders due to
reinvestment of distributions:
Class A 104,968 2,725,992 136,296 3,414,330
Class B 14,345 371,683 14,507 362,620
Class C 5,005 129,615 4,175 104,710
Class R 10,719 278,374 9,825 245,812
----------------------------------------------------------------------------------------------------------
552,208 14,391,674 847,700 21,483,736
----------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (714,987) (18,543,074) (540,472) (13,837,529)
Class B (134,944) (3,482,397) (158,426) (4,121,472)
Class C (96,385) (2,477,972) (78,718) (2,018,644)
Class R (16,156) (411,867) (3,791) (92,234)
----------------------------------------------------------------------------------------------------------
(962,472) (24,915,310) (781,407) (20,069,879)
----------------------------------------------------------------------------------------------------------
Net increase (decrease) (410,264) $(10,523,636) 66,293 $ 1,413,857
==========================================================================================================
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
European Value
----------------------------------------------------
Year Ended 6/30/00 Year Ended 6/30/99
---------------------- ------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 43,145 $ 963,730 194,861 $ 3,715,826
Class B 24,436 554,536 186,211 3,593,989
Class C 7,549 171,403 47,596 931,339
Class R 36,974 852,118 86,684 1,689,810
Shares issued to shareholders due to reinvestment of distributions:
Class A 1,478 34,370 69 1,043
Class B 562 12,755 5 104
Class C 77 1,748 -- --
Class R 875 20,420 98 1,588
----------------------------------------------------------------------------------------------------------------------------
115,096 2,611,080 515,524 9,933,699
----------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (62,628) (1,406,509) (37,589) (672,167)
Class B (29,349) (659,593) (46,856) (907,051)
Class C (5,642) (120,771) (14,227) (253,272)
Class R (11,818) (265,468) (45,249) (845,569)
----------------------------------------------------------------------------------------------------------------------------
(109,437) (2,452,341) (143,921) (2,678,059)
----------------------------------------------------------------------------------------------------------------------------
Net increase 5,659 $ 158,739 371,603 $ 7,255,640
============================================================================================================================
</TABLE>
3. Distributions to Shareholders
Municipal and Stock declared a dividend distribution from its tax-exempt net
investment income which was paid on August 1, 2000, to shareholders of record
on July 7, 2000, as follows:
Municipal
and Stock
-------------------------------------------------------------------------------
Dividend per share:
Class A $.0525
Class B .0375
Class C .0375
Class R .0570
===============================================================================
4. Securities Transactions
Purchases and sales (including maturities) of investment securities, U.S.
Government and agency obligations and short-term investments for the fiscal
year ended June 30, 2000, were as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investment securities $1,282,574,823 $ 92,925,305 $ 62,383,302 $33,580,117
U.S. Government and agency obligations 1,502,936,385 -- 94,574,010 --
Short-term investments 2,900,439,510 6,300,000 243,047,551 --
Sales and maturities:
Investment securities 1,322,646,817 124,656,227 69,965,915 34,122,674
U.S. Government and agency obligations 1,503,300,000 -- 99,414,550
Short-term investments 2,915,338,508 9,800,000 244,900,000 --
===================================================================================================================
</TABLE>
At June 30, 2000, the identified cost of investments owned for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
Growth and Municipal and Stock and European
Income Stock Bond Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 813,763,413 $ 151,939,748 $ 72,123,149 $ 11,478,750
===================================================================================================================
</TABLE>
41
<PAGE>
Notes to Financial Statements (continued)
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at June 30, 2000, were as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $ 90,507,579 $ 9,681,722 $ 6,154,545 $ 1,374,141
depreciation (59,423,003) (7,311,018) (3,620,796) (503,577)
--------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation $ 31,084,576 $ 2,370,704 $ 2,533,749 $ 870,564
================================================================================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Funds' investment management agreement with Nuveen Institutional
Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, the Funds pay an annual management fee, payable monthly, which is based
upon the average daily net assets of the Funds as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the first $125 million .8500 of 1% .7500 of 1% .7500 of 1% .9500 of 1%
For the next $125 million .8375 of 1 .7375 of 1 .7375 of 1 .9375 of 1
For the next $250 million .8250 of 1 .7250 of 1 .7250 of 1 .9250 of 1
For the next $500 million .8125 of 1 .7125 of 1 .7125 of 1 .9125 of 1
For the next $1 billion .8000 of 1 .7000 of 1 .7000 of 1 .9000 of 1
For net assets over $2 billion .7750 of 1 .6750 of 1 .6750 of 1 .8750 of 1
==============================================================================================================================
</TABLE>
The Adviser had agreed to waive fees and reimburse expenses through July 31,
2000, 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 assets of Growth and Income, .95% of the average daily
net assets of Municipal and Stock, and Stock and Bond, and 1.30% of the average
daily net as sets of European Value. Effective August 1, 2000, the Adviser
agreed to waive fees and reimburse expenses through July 31, 2001, in order to
prevent total operating expenses (excluding 12b-1 distribution or service fees
and extaordinary expenses) from exceeding 1.05% of the average daily net assets
of Municipal and Stock, and Stock and Bond, and 1.30% of the average daily net
assets of European Value.
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 investment portfolio of Growth and Income, Stock and Bond, and
European Value, as well as the equity portion of Municipal and Stock's
investment portfolio. ICAP is compensated for its services from the management
fee paid to the Adviser. The Trust 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 Trust from the Adviser. During
the fiscal year ended June 30, 2000, 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 as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales charges collected $503,316 $107,219 $39,388 $10,165
Paid to authorized dealers 467,843 96,116 34,784 8,998
==============================================================================================================================
</TABLE>
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the fiscal year ended June 30, 2000, the Distributor compensated
authorized dealers directly with commission advances at the time of purchase as
follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commission advances $1,077,638 $243,493 $93,830 $11,390
==============================================================================================================================
</TABLE>
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 collected on Class B Shares, and all 12b-1 service
and distribution fees collected on Class C Shares during the first year
following a purchase are retained by the Distributor. During the fiscal year
ended June 30, 2000, the Distributor retained such 12b-1 fees as follows:
42
<PAGE>
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12b-1 fees retained $ 1,052,780 $ 445,593 $ 135,408 $ 29,457
==============================================================================================================================
</TABLE>
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 CDSC on share redemptions during the
fiscal year ended June 30, 2000, as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDSC retained $ 495,956 $ 321,856 $ 82,771 $ 21,794
==============================================================================================================================
</TABLE>
At June 30, 2000, The John Nuveen Company owned 145,000 shares of European Value
Class R.
7. Composition of Net Assets
At June 30, 2000, the Funds had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital paid-in $ 723,915,215 $ 145,559,312 $ 67,054,777 $ 11,138,557
Balance of undistributed net investment income 3,074,307 640,382 34,259 73,516
Accumulated net realized gain from investment transactions 71,136,035 6,111,002 4,993,547 946,944
Net unrealized appreciation of investments 37,707,854 2,816,766 2,831,982 994,709
------------------------------------------------------------------------------------------------------------------------------
Net assets $ 835,833,411 $ 155,127,462 $ 74,914,565 $ 13,153,726
==============================================================================================================================
</TABLE>
8. Investment Composition
At June 30, 2000, the revenue sources expressed as a percent of total
investments were as follows:
<TABLE>
<CAPTION>
Growth and Municipal Stock and European
Income and Stock Bond Value
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic Materials 7% 3% 4% 7%
Capital Goods 4 2 3 8
Consumer Cyclicals 19 8 12 13
Consumer Staples 11 2 4 17
Education and Civic Organizations - 6 - -
Energy 7 3 5 9
Financials 17 7 10 26
Health Care 10 10 7 5
Housing/Multifamily - 4 - -
Housing/Single Family - 5 - -
Tax Obligation/General - 4 - -
Tax Obligation/Limited - 8 - -
Technology 11 4 7 1
Transportation - 6 - -
U.S. Guaranteed - 6 39 -
Utilities 14 20 9 14
Other - 2 - -
-----------------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100%
=============================================================================================================================
</TABLE>
30% of the municipal bonds owned by Municipal and Stock 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 any of the Funds' shares.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
43
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------------- ---------------------------
Growth and Income
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 (Loss) Total Income Gains Total Value Return (a)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $27.07 $.22 $(1.62) $(1.40) $(.25) $(1.07) $(1.32) $24.35 (5.33)%
1999 26.50 .19 2.64 2.83 (.04) (2.22) (2.26) 27.07 12.37
1998 24.01 .26 4.55 4.81 (.25) (2.07) (2.32) 26.50 21.59
1997 (d)** 17.96 .30 6.18 6.48 (.20) (.23) (.43) 24.01 36.30
Class B (8/96)
2000 26.87 .03 (1.60) (1.57) (.06) (1.07) (1.13) 24.17 (5.97)
1999 26.47 .01 2.61 2.62 -- (2.22) (2.22) 26.87 11.52
1998 24.00 .10 4.51 4.61 (.07) (2.07) (2.14) 26.47 20.70
1997 (d)** 17.97 .21 6.13 6.34 (.08) (.23) (.31) 24.00 35.37
Class C (8/96)
2000 26.84 .03 (1.61) (1.58) (.06) (1.07) (1.13) 24.13 (5.97)
1999 26.43 .01 2.62 2.63 -- (2.22) (2.22) 26.84 11.58
1998 23.98 .10 4.49 4.59 (.07) (2.07) (2.14) 26.43 20.63
1997 (d)** 17.97 .21 6.11 6.32 (.08) (.23) (.31) 23.98 35.26
Class R (8/96)
2000 27.14 .28 (1.62) (1.34) (.32) (1.07) (1.39) 24.41 (5.13)
1999 26.52 .24 2.67 2.91 (.07) (2.22) (2.29) 27.14 12.71
1998 24.02 .32 4.56 4.88 (.31) (2.07) (2.38) 26.52 21.91
1997 (d)** 17.96 .30 6.24 6.54 (.25) (.23) (.48) 24.02 36.65
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
------------------ ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $ 669,651 1.34% .82% 1.30% .85% 1.30% .86% 155%
1999 793,546 1.28 .72 1.24 .76 1.24 .76 134
1998 790,063 1.36 .88 1.20 1.04 1.20 1.04 131
1997 (d)** 616,209 1.28* 1.45* 1.20* 1.53* 1.20* 1.53* 110
Class B (8/96)
2000 93,275 2.09 .08 2.06 .11 2.05 .12 155
1999 95,174 2.03 (.01) 1.99 .03 1.99 .03 134
1998 71,909 2.11 .22 1.95 .38 1.95 .38 131
1997 (d)** 10,664 2.03* .95* 1.95* 1.03* 1.95* 1.03* 110
Class C (8/96)
2000 55,303 2.11 .06 2.07 .09 2.05 .10 155
1999 41,071 2.02 .01 1.98 .04 1.98 .04 134
1998 21,426 2.11 .23 1.95 .39 1.95 .39 131
1997 (d)** 3,630 2.03* .96* 1.95* 1.04* 1.95* 1.04* 110
Class R (8/96)
2000 17,604 1.10 1.06 1.06 1.09 1.05 1.10 155
1999 16,904 1.03 .96 .99 1.00 .99 1.00 134
1998 18,335 1.11 1.10 .95 1.26 .95 1.26 131
1997 (d)** 15,647 1.47* 1.04* .95* 1.56* .95* 1.56* 110
===============================================================================================================
</TABLE>
* Annualized.
** All per share amounts reflect a December 18, 1996, stock split of 1.113830,
1.112700, 1.112700 and 1.113806 shares, respectively, for each share of
Class A, B, C and R.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
44
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ------------------------------
Municipal and Stock Net
Realized/
Unrealized Ending
Beginning Net Investment Net Net
Year Ended Net Asset Investment Gain Investment Capital Asset Total
June 30, Value Income (Loss) Total Income Gains Total Value Return (a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $25.45 $.74 $ (.96) $(.22) $(.81) $(.11) $ (.92) $24.31 (.83)%
1999 25.46 .62 .70 1.32 (.65) (.68) (1.33) 25.45 5.49
1998 23.11 .67 2.66 3.33 (.61) (.37) (.98) 25.46 14.71
1997 (d) 20.00 .56 3.02 3.58 (.42) (.05) (.47) 23.11 18.05
Class B (8/96)
2000 25.65 .57 (.97) (.40) (.44) (.11) (.55) 24.70 (1.57)
1999 25.53 .46 .68 1.14 (.34) (.68) (1.02) 25.65 4.71
1998 23.11 .49 2.67 3.16 (.37) (.37) (.74) 25.53 13.91
1997 (d) 20.00 .40 3.04 3.44 (.28) (.05) (.33) 23.11 17.32
Class C (8/96)
2000 25.63 .57 (.97) (.40) (.44) (.11) (.55) 24.68 (1.57)
1999 25.51 .45 .69 1.14 (.34) (.68) (1.02) 25.63 4.71
1998 23.10 .49 2.66 3.15 (.37) (.37) (.74) 25.51 13.87
1997 (d) 20.00 .40 3.03 3.43 (.28) (.05) (.33) 23.10 17.27
Class R (8/96)
2000 25.33 .80 (.96) (.16) (.93) (.11) (1.04) 24.13 (.64)
1999 25.39 .68 .71 1.39 (.77) (.68) (1.45) 25.33 5.81
1998 23.11 .72 2.66 3.38 (.73) (.37) (1.10) 25.39 14.94
1997 (d) 20.00 .61 3.03 3.64 (.48) (.05) (.53) 23.11 18.38
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------------- ----------------------- -----------------------
Municipal and Stock Ratio Ratio Ratio
of Net of Net of Net
Ending Ratio of Investment Ratio of Investment Ratio of Investment
Net Expenses Income Expenses Income Expenses Income Portfolio
Year Ended Assets to Average to Average to Average to Average to Average to Average Turnover
June 30, (000) Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets Rate
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $ 93,400 1.26% 2.95% 1.21% 3.01% 1.20% 3.02% 53%
1999 123,917 1.23 2.49 1.19 2.52 1.19 2.52 52
1998 117,005 1.36 2.47 1.10 2.73 1.10 2.73 87
1997 (d) 79,952 1.58* 2.31* 1.10* 2.79* 1.10* 2.79* 32
Class B (8/96)
2000 45,779 2.01 2.20 1.96 2.26 1.95 2.27 53
1999 52,718 1.98 1.80 1.94 1.83 1.94 1.83 52
1998 32,384 2.10 1.71 1.85 1.96 1.85 1.96 87
1997 (d) 2,051 2.22* 1.62* 1.85* 1.99* 1.85* 1.99* 32
Class C (8/96)
2000 14,837 2.01 2.21 1.96 2.27 1.95 2.28 53
1999 20,498 1.98 1.76 1.94 1.80 1.94 1.80 52
1998 14,908 2.11 1.71 1.85 1.97 1.85 1.97 87
1997 (d) 1,559 2.29* 1.53* 1.85* 1.97* 1.85* 1.97* 32
Class R (8/96)
2000 1,111 1.01 3.20 .96 3.26 .95 3.26 53
1999 1,182 .98 2.72 .94 2.76 .94 2.77 52
1998 1,353 1.11 2.73 .85 2.99 .85 2.99 87
1997 (d) 6,963 2.05* 1.96* .85* 3.16* .85* 3.16* 32
=========================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
45
<PAGE>
Financial Highlights (continued)
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------- -------------------------
Stock and Bond
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 (Loss) Total Income Gains Total Value Return (a)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $ 27.18 $.69 $(1.02) $(.33) $(.70) $ (.95) $(1.65) $25.20 (1.23)%
1999 26.39 .58 1.93 2.51 (.57) (1.15) (1.72) 27.18 10.21
1998 23.84 .77 3.11 3.88 (.76) (.57) (1.33) 26.39 16.71
1997 (d) 20.00 .70 3.66 4.36 (.42) (.10) (.52) 23.84 22.04
Class B (8/96)
2000 27.18 .50 (1.02) (.52) (.51) (.95) (1.46) 25.20 (1.97)
1999 26.39 .39 1.93 2.32 (.38) (1.15) (1.53) 27.18 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (d) 20.00 .46 3.75 4.21 (.27) (.10) (.37) 23.84 21.26
Class C (8/96)
2000 27.19 .50 (1.02) (.52) (.51) (.95) (1.46) 25.21 (1.93)
1999 26.39 .40 1.93 2.33 (.38) (1.15) (1.53) 27.19 9.39
1998 23.84 .59 3.10 3.69 (.57) (.57) (1.14) 26.39 15.86
1997 (d) 20.00 .53 3.68 4.21 (.27) (.10) (.37) 23.84 21.26
Class R (8/96)
2000 27.18 .76 (1.03) (.27) (.77) (.95) (1.72) 25.19 (1.02)
1999 26.39 .65 1.93 2.58 (.64) (1.15) (1.79) 27.18 10.48
1998 23.84 .83 3.11 3.94 (.82) (.57) (1.39) 26.39 16.99
1997 (d) 20.00 .61 3.80 4.41 (.47) (.10) (.57) 23.84 22.31
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------- ------------------ ------------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (8/96)
2000 $52,470 1.38% 2.50% 1.21% 2.66% 1.20% 2.67% 81%
1999 67,512 1.36 2.10 1.19 2.27 1.19 2.27 96
1998 69,614 1.48 2.68 1.10 3.06 1.10 3.06 86
1997 (d) 56,686 1.71* 2.78* 1.10* 3.39* 1.10* 3.39* 52
Class B (8/96)
2000 11,200 2.13 1.76 1.96 1.92 1.95 1.93 81
1999 12,856 2.11 1.38 1.94 1.54 1.94 1.54 96
1998 10,356 2.24 1.93 1.85 2.32 1.85 2.32 86
1997 (d) 646 2.49* 1.59* 1.85* 2.23* 1.85* 2.23* 52
Class C (8/96)
2000 6,620 2.13 1.76 1.96 1.93 1.95 1.93 81
1999 7,142 2.10 1.38 1.94 1.54 1.94 1.55 96
1998 4,142 2.24 1.92 1.85 2.31 1.85 2.31 86
1997 (d) 980 2.31* 2.07* 1.85* 2.53* 1.85* 2.53* 52
Class R (8/96)
2000 4,625 1.13 2.74 .96 2.91 .95 2.92 81
1999 4,445 1.11 2.37 .94 2.53 .94 2.53 96
1998 3,413 1.23 2.94 .85 3.32 .85 3.32 86
1997 (d) 6,052 2.29* 1.68* .85* 3.12* .85* 3.12* 52
============================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where
applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
46
<PAGE>
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ------------------------------
European Value Net
Realized/
Unrealized Ending
Beginning Net Investment Net Net
Year Ended Net Asset Investment Gain Investment Capital Asset Total
June 30, Value Income (Loss) Total Income Gains Total Value Return (a)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/98)
2000 $20.17 $.18 $3.28 $3.46 $(.18) $(.11) $(.29) $23.34 17.22%
1999 19.86 .22 .10 .32 (.01) -- (.01) 20.17 1.63
1998 (d) 20.00 .02 (.14) (.12) (.02) -- (.02) 19.86 (.59)
Class B (5/98)
2000 20.04 .01 3.26 3.27 (.03) (.11) (.14) 23.17 16.34
1999 19.87 .04 .13 .17 -- -- -- 20.04 .86
1998 (d) 20.00 .03 (.15) (.12) (.01) -- (.01) 19.87 (.60)
Class C (5/98)
2000 20.04 .01 3.25 3.26 (.03) (.11) (.14) 23.16 16.29
1999 19.87 .07 .10 .17 -- -- -- 20.04 .86
1998 (d) 20.00 .01 (.13) (.12) (.01) -- (.01) 19.87 (.60)
Class R (5/98)
2000 20.21 .24 3.29 3.53 (.24) (.11) (.35) 23.39 17.44
1999 19.87 .23 .13 .36 (.02) -- (.02) 20.21 1.86
1998 (d) 20.00 .03 (.13) (.10) (.03) -- (.03) 19.87 (.52)
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
----------------------- ----------------------- -----------------------
Municipal and Stock Ratio Ratio Ratio
of Net of Net of Net
Ending Ratio of Investment Ratio of Investment Ratio of Investment
Net Expenses Income Expenses Income Expenses Income Portfolio
Year Ended Assets to Average to Average to Average to Average to Average to Average Turnover
June 30, (000) Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets Rate
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (5/98)
2000 $3,373 3.36% (1.00)% 1.56% .80% 1.55% .81% 281%
1999 3,277 2.44 .26 1.55 1.15 1.55 1.15 230
1998 (d) 102 14.82* (11.94)* 1.55* 1.33* 1.55* 1.33* 5
Class B (5/98)
2000 3,518 4.17 (1.83) 2.31 .03 2.30 .04 281
1999 3,130 3.17 (.68) 2.30 .19 2.30 .19 230
1998 (d) 335 14.56* (10.67)* 2.30* 1.59* 2.30* 1.59* 5
Class C (5/98)
2000 868 4.22 (1.86) 2.31 .05 2.30 .06 281
1999 711 3.20 (.56) 2.30 .34 2.30 .35 230
1998 (d) 42 15.88* (12.98)* 2.30* .60* 2.30* .60* 5
Class R (5/98)
2000 5,395 3.22 (.85) 1.31 1.06 1.30 1.07 281
1999 4,135 2.20 .30 1.30 1.20 1.30 1.20 230
1998 (d) 3,240 15.04* (11.99)* 1.30* 1.75* 1.30* 1.75* 5
=========================================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
47
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Investment Trust:
We have audited the accompanying statement of net assets of Nuveen Investment
Trust (comprising the Nuveen Growth and Income Stock Fund, Nuveen Balanced
Municipal and Stock Fund, Nuveen Balanced Stock and Bond Fund and Nuveen
European Value Fund (the "Funds")) (a Massachusetts business trust), including
the portfolio of investments, as of June 30, 2000, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years then ended and the financial highlights for the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 2000, by correspondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from
brokers, and when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of each of the
respective funds constituting the Nuveen Investment Trust as of June 30, 2000,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years then ended, and the financial highlights
for the periods indicated thereon in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 23, 2000
48
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Transfer Agent and Shareholder Services
Chase Global Funds Services Co.
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Chapman & Cutler
Chicago, IL.
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
49
<PAGE>
Serving
Investors
For Generations
--------------------------------------------------------------------------------
A 100-Year Tradition of Quality Investments
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
Nuveen Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
