<PAGE>
NUVEEN
Mutual Funds
July 31, 1998
Annual Report
A blue chip portfolio for investors seeking a tax-efficient way to build and
sustain wealth.
Featuring portfolio management by Rittenhouse Financial Services, Nuveen's
Premier Adviser/SM/ for growth investing.
Nuveen
Rittenhouse
Growth Fund
[PHOTO APPEARS HERE]
<PAGE>
Contents
1 Dear Shareholder
3 Report from the Portfolio Managers
4 Performance Overview
5 Report of Independent Public Accountants
6 Portfolio of Investments
8 Statement of Net Assets
9 Statement of Operations
10 Statement of Changes in Net Assets
11 Notes to Financial Statements
14 Financial Highlights
16 Building Better Portfolios with Nuveen
17 Fund Information
Highlights
As of July 31, 1998
For Class A shares
Attractive Fund Returns/1/
[BAR CHART APPEARS HERE]
Year-to-Date (NAV) 13.75%
Year-to-Date (Offer) 7.77%
Relative Market Capitalization
[BAR CHART APPEARS HERE]
Average Market Cap of Fund Holdings $89 billion
Average Market Cap Morningstar Peer Group/2/ $31 billion
With its focus on long-term growth, the fund provided attractive total returns
for the first seven months of the year.
Reflecting a preference for large, well-known companies, the average market
capitalization of the fund's holding is significantly greater than that of its
peer group.
<TABLE>
<CAPTION>
Top Ten Holdings/3/
<S> <C> <C> <C>
General Electric Company 5.48% Pfizer Inc. 4.76%
- -------------------------------------------------------------------------------
American International Group, Inc. 4.99% Proctor & Gamble Company 4.40%
- -------------------------------------------------------------------------------
Colgate Palmolive Company 4.86% Coca Cola Co. 4.32%
- -------------------------------------------------------------------------------
Schering-Plough Corporation 4.80% Automatic Data Processing 4.31%
- -------------------------------------------------------------------------------
Johnson & Johnson 4.77% Home Depot, Inc. 4.08%
- -------------------------------------------------------------------------------
</TABLE>
The fund's investment strategy leads to the selection of blue chip companies and
household names, as is reflected in the fund's top 10 holdings.
1 See the Performance Overview on page four for more information.
2 Represents the average market capitalization of the 337 mutual funds in the
Morningstar Large Growth category as of 7/31/98.
3 The companies listed above represent their respective percentages of total
market value as of 7/31/98. Over time, the fund's holdings and their
percentages will vary.
<PAGE>
Last night, while you were sleeping, the companies in the Nuveen Rittenhouse
Growth Fund were hard at work.
In the last 24 hours, Colgate oral care products were used by 600 million
people. Coca-Cola served one billion soft drinks. Merck spent $5 million
researching new drugs. Disney entertained more than 150 million people. General
Electric brightened more than 60 million homes. And Gillette razors were used by
550 million people.
Disciplined Stock Selection Process Leads to Companies You Know
The Nuveen Rittenhouse Growth Fund employs a disciplined stock selection process
that leads the fund's managers to select companies that are household names and
global leaders in their industries.
This disciplined stock selection process has led to attractive returns for
investors through a variety of market conditions. The portfolio managers focus
on three key areas:
[PHOTO APPEARS HERE AND ON THE FOLLOWING PAGE]
This photograph represents the fund's holdings as of a recent point in time. The
fund's holdings will change over time.
<PAGE>
.choosing quality stocks that lead to more stability for the portfolio
.seeking growth potential over the long-term
.employing a tax-efficient management approach.
Building a Well-Balanced Portfolio
The fund's disciplined approach to stock selection and portfolio management is a
key reason for making the Nuveen Rittenhouse Growth Fund a core holding in the
equity portion of your investment portfolio. The fund can play an important role
in the efforts of you and your financial adviser to build a well-balanced,
tax-efficient investment portfolio.
[PHOTO APPEARS HERE]
<PAGE>
Dear Shareholder
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
We are pleased to present the first annual report for the Nuveen Rittenhouse
Growth Fund - a blue chip portfolio for investors seeking long-term growth
through tax-efficient investing. I'm pleased to report that the fund has
successfully met its objective of helping investors participate in the growth
potential of the stock market while providing the measure of protection that can
be found in the stocks of large, well-known companies. This long-term investment
strategy can be especially comforting in a volatile market like the one we have
experienced in recent months.
A Strong Market for Growth Stocks
Over the past year, the markets have endured periods of instability, largely due
to aftershocks from the Asian financial crisis. This recent market turbulence
and economic uncertainty have led many investors to choose the growth-oriented
blue chip companies that can offer a measure of stability in a volatile market.
As a result, growth stocks have tended to outperform value stocks by significant
margins over the past several months. Given the recent investment climate, the
Nuveen Rittenhouse Growth Fund's growth investing approach has led to strong
performance for the fund in its first seven months.
Selection Process is the Key
In addition to its growth investing style, the fund's sector and stock selection
process provides added peace of mind for investors. This process, which is
described in the inside front cover of this report, leads the fund managers to
select the sectors that they believe will perform well, and then to purchase the
stocks of companies with strong brands, healthy earnings growth and quality
management - household names like Colgate, General Electric and Coca-Cola.
Another important element in the selection process is the market capitalization
of the companies considered for the portfolio, which is a measure of the value
of all outstanding shares of the company's stock. The Nuveen Rittenhouse Growth
Fund selects companies with above-average market capitalizations for the added
stability and liquidity offered by those stocks. As you can see on the opposite
page, the fund's average market capitalization of $89 billion far exceeds the
average of the fund's peer group.
The key strategy for the Nuveen Rittenhouse Growth Fund - and for most
1
<PAGE>
"As Nuveen's Premier Adviser/SM/ for growth investing, Rittenhouse Financial
Services has a long-standing history of strong investment performance through a
variety of market conditions."
Nuveen investors -- is to continually focus on long-term goals. Market dips and
downturns are inevitable. Managing through them means focusing on long-term
objectives and maintaining a diversified investment strategy. Your fund
manager's disciplined buy-and-hold investment approach helps moderate the impact
of market downturns and also the impact of taxes. By purchasing stocks for the
long-term and keeping turnover low, the fund seeks to minimize the impact of
taxes -- which can make a big difference in overall investment returns.
The Value of Experience
As Nuveen's Premier Adviser/SM/ for growth investing, Rittenhouse Financial
Services has a long-standing history of strong investment performance through a
variety of market conditions. With more than 18 years of experience and
approximately $10 billion in assets under management, Rittenhouse has developed
an expertise in selecting those large-cap, well-known companies that the fund
managers believe will perform well in the long-term.
Nuveen recognizes the value of experience and has assembled a collection of
experienced, trusted investment managers -- our Premier Advisers -- that can
provide the investments you need to help build and sustain the wealth of a
lifetime. In addition to Rittenhouse, our Premier Advisers include Institutional
Capital Corporation for value investing and Nuveen Advisory Corporation for tax-
free income investing.
Nuveen's Commitment
Nuveen is committed to providing quality investments that are managed by
experienced professionals dedicated to helping investors reach their financial
goals. As a result, we offer a growing selection of stock and bond investments
to meet the needs of our shareholders. If you'd like more information on
Nuveen's Growth & Income, Balanced or Tax-Free* Income funds, please contact
your financial adviser for a prospectus containing all charges and expenses, or
call (800) 257-8787. Please read it carefully before you invest.
On behalf of Nuveen and our Premier Advisers, I thank you for your confidence in
us and look forward to reporting to you about the fund's first full year in six
months.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 15, 1998
* Municipal income may be subject to state and local taxes, as well as the
federal alternative minimum tax. Capital gains will also be subject to federal
income taxation.
2
<PAGE>
Nuveen Rittenhouse Growth Fund
Report from the Portfolio Managers
The Rittenhouse portfolio management team talks about the financial markets and
factors that affected fund performance.
"The market conditions for the fund's large-cap growth style were quite
favorable, as investors gravitated toward the stocks of large companies with
well-known brands."
The Market in Review
When the Nuveen Rittenhouse Growth Fund was introduced on December 31, 1997,
market fundamentals were quite positive. The economy was growing at a moderate
pace, inflation remained subdued and interest rates were trending lower. After a
somewhat sluggish start to 1998, stocks continued to gain ground -- shrugging
off potentially problematic events such as the fallout from the Asian financial
crisis, a showdown with Iraq, and the ongoing events in Washington -- posting
solid gains for the first quarter.
The beginning of the second quarter brought further gains in equity prices, as
the yield on the 30-year Treasury bond dropped to record lows. The market
suffered through bouts of volatility as investors became concerned that the
Federal Reserve would raise interest rates as a result of strong first quarter
economic growth, making stock selection vitally important. During May and June,
the stock market was essentially flat, digesting the strong gains posted in the
first four months of the year.
Blue chip growth stocks continued to lead the market though the fund's first
seven months, as investors sought large capitalization companies exhibiting
consistent earnings growth and strong brands. Industry sectors that performed
particularly well were consumer staples, financial services and health care --
each of which has significant representation in the fund's portfolio.
Fund Performance
Against this backdrop of economic uncertainty and market volatility, the Nuveen
Rittenhouse Growth Fund performed well. From the beginning of the year through
July 31, 1998, the fund generated a total return of 13.75% on net asset value
for Class A shares. The market conditions for the fund's large-cap growth style
were quite favorable, as investors gravitated toward the stocks of large
companies with well-known brands and the ability to generate consistent and
sustainable earnings growth. Pharmaceutical holdings, including Schering-Plough,
Pfizer, Merck and Abbott Labs, made significant contributions to the fund's
strong performance. Drug stocks turned in solid performance due to promising new
products in the research pipeline and investor demand for high-quality, blue
chip issues.
Although the market performed well through the fund's fiscal year-end of July
31, several events have recently had an adverse impact on the performance of the
stock market and the fund. Economic and financial problems in Asia intensified
after having stabilized in the first half of the year. Japan and Hong Kong have
now entered recessions, and the situations in harder-hit countries such as Korea
and Indonesia are deteriorating. In addition, the Russian political and economic
crises have triggered a great deal of unrest in world markets, causing major
stock indices by the end of August to decline by more than 15% since their peaks
in mid-July. Also, falling commodity prices have generated fears of further
instability in the economies of developing countries that may continue to impact
European and U.S. markets. Given these circumstances and a slowing domestic
economy, pressure is mounting for the Fed to reduce interest rates. A drop in
rates could spur economic growth and improve the outlook for corporate profits,
providing support to the shaky equity market.
Outlook for the Future
Looking ahead, the stock market is likely to remain volatile over the coming
months as the international economic situation continues to come into focus and
the current domestic political situation is resolved. We believe the fund is
well-positioned for this market environment. We will continue to focus on high-
quality companies with strong brands that demonstrate consistent earnings
growth. This time-tested strategy seeks to help moderate portfolio volatility
and enable the fund to participate fully in any market gains.
3
<PAGE>
Nuveen Rittenhouse Growth Fund
Performance Overview
As of July 31, 1998
<TABLE>
<CAPTION>
Top Ten Holdings
<S> <C>
General Electric Company 5.48%
.........................................
American International Group, Inc. 4.99%
.........................................
Colgate Palmolive Company 4.86%
.........................................
Schering-Plough Corporation 4.80%
.........................................
Johnson & Johnson 4.77%
.........................................
Pfizer Inc. 4.76%
.........................................
Procter & Gamble Company 4.40%
.........................................
Coca Cola Company 4.32%
.........................................
Automatic Data Processing 4.31%
.........................................
Home Depot Inc. 4.08%
- -----------------------------------------
</TABLE>
Industry Diversification
[PIE CHART APPEARS HERE]
Technology 12%
Capital Goods 7%
Financial 19%
Consumer Cyclicals 6%
Health Care 24%
Energy 4%
Consumer Staples 28%
Portfolio Allocation
[PIE CHART APPEARS HERE]
Cash 3%
Stocks 97%
The fund is actively managed, and its holdings, diversification, and allocation
will vary over time.
<TABLE>
<CAPTION>
Fund Highlights
Share Price A B C R
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception Date 12/97 12/97 12/97 12/97
..........................................................................
Net Asset Value $22.75 $22.66 $22.67 $22.79
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Total Net Assets ($000) $205,840
..........................................................................
Beta of Portfolio 1.20
..........................................................................
Average Market Capitalization of Stocks in Portfolio $89 billion
..........................................................................
Average P/E of Stocks in Portfolio 29
..........................................................................
Number of Stocks in Portfolio 29
..........................................................................
Expected Turnover Rate 20%
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns/1/
Share Class A (On NAV) A (On Offer) B C R
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year-to-Date 13.75% 7.77% 13.30% 13.35% 13.95%
</TABLE>
<TABLE>
<CAPTION>
Index Comparison/2/
[LINE GRAPH APPEARS HERE]
Nuveen Rittenhouse Nuveen Rittenhouse
Growth Fund (NAV) Growth Fund (Offer) S&P 500
<S> <C> <C> <C>
12/97 10000 9475 10000
01/98 10220 9683 10111
02/98 10810 10242 10840
03/98 11185 10598 11395
04/98 11305 10712 11510
05/98 11085 10503 11312
06/98 11595 10986 11771
07/98 11375 10777 11647
S&P 500 $11,647
Nuveen Rittenhouse Growth Fund (NAV) $11,375
Nuveen Rittenhouse Growth Fund (Offer) $10,777
Past performance is not predictive of future results.
</TABLE>
1 Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.25% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years, which
is not reflected in the return figures. Class B shares convert to Class A
shares after eight years. Class C shares have a 1% CDSC for redemptions
within one year, which is not reflected in the return figures.
2 The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund compared with the Standard and Poor's 500
Index, which does not reflect any initial or ongoing expenses. The Nuveen
fund return depicted in the chart reflects the initial maximum sales charge
applicable to Class A shares (5.25%) and all ongoing fund expenses.
4
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of Nuveen Rittenhouse Growth Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Rittenhouse Growth Fund (one of the
portfolios constituting the Nuveen Investment Trust II (a Massachusetts business
trust)), as of July 31, 1998, and the related statement of operations, the
statement of changes in net assets and the financial highlights for the period
indicated thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of July 31, 1998, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Rittenhouse Growth Fund as of July 31, 1998, the results of its operations, the
change in its net assets and its financial highlights for the period indicated
thereon in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 17, 1998
5
<PAGE>
Portfolio of Investments
Nuveen Rittenhouse Growth Fund
July 31, 1998
<TABLE>
<CAPTION>
Shares Description Market Value
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 96.6%
Capital Goods -- 7.2%
60,000 Emerson Electric Co. $ 3,566,250
126,000 General Electric Company 11,262,865
- -----------------------------------------------------------------------------
Consumer Cyclicals -- 5.7%
200,000 The Home Depot, Inc. 8,380,300
55,000 Wal-Mart Stores, Inc. 3,471,875
- -----------------------------------------------------------------------------
Consumer Staples -- 27.1%
88,000 Bestfoods 4,895,000
110,000 The Coca-Cola Company 8,875,625
108,000 Colgate-Palmolive Company 9,983,250
158,000 Gillette Company 8,276,495
201,000 PepsiCo Inc. 7,801,053
114,000 The Procter & Gamble Company 9,050,430
201,000 The Walt Disney Company 6,921,938
- -----------------------------------------------------------------------------
Energy -- 3.6%
62,000 Royal Dutch Petroleum Company 3,162,000
70,000 Schlumberger Limited 4,239,375
- -----------------------------------------------------------------------------
Financials -- 18.2%
68,000 American International Group, Inc. 10,255,250
127,000 Federal Home Loan Mortgage Corporation 6,002,745
118,000 Federal National Mortgage Association 7,321,055
66,000 NationsBank Corporation 5,263,500
144,000 Norwest Corporation 5,175,000
51,000 State Street Corporation 3,534,938
- -----------------------------------------------------------------------------
Health Care -- 22.9%
120,000 Abbott Laboratories 4,992,488
127,000 Johnson & Johnson 9,812,620
80,000 Medtronic, Inc. 4,955,000
63,000 Merck & Co., Inc. 7,768,687
89,000 Pfizer Inc. 9,793,120
102,000 Schering-Plough Corporation 9,868,870
- -----------------------------------------------------------------------------
Technology -- 11.9%
131,000 Automatic Data Processing, Inc. 8,867,062
120,000 First Data Corporation 3,472,500
122,000 Hewlett-Packard Company 6,771,000
63,000 Intel Corporation 5,319,562
- -----------------------------------------------------------------------------
Total Common Stocks -- (cost $192,322,841) 199,059,853
-----------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount Description Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.2%
$ 6,501,000 Swiss Bank Repurchase Agreement, 5.560%, 8/03/98 $ 6,501,000
- -----------------------------------------------------------------------------------------------
Total Short-Term Investments - (cost $6,501,000) 6,501,000
---------------------------------------------------------------------------
Total Investments - (cost $198,823,841) - 99.8% 205,560,853
---------------------------------------------------------------------------
Other Assets Less Liabilities - 0.2% 278,902
---------------------------------------------------------------------------
Net Assets - 100% $ 205,839,755
---------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Statement of Net Assets
July 31, 1998
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Assets
Investment securities, at market value (cost $198,823,841) (note 1) $205,560,853
Cash 8,231
Receivables:
Dividends and Interest 134,242
Shares sold 5,226,197
Deferred organization costs (note 1) 155,220
Other assets 70
- -------------------------------------------------------------------------------------------------------------------------
Total assets 211,084,813
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 4,568,700
Shares redeemed 180,017
Accrued expenses:
Management fees (note 4) 130,683
12b-1 distribution and service fees (notes 1 and 4) 109,501
Other 256,157
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,245,058
- -------------------------------------------------------------------------------------------------------------------------
Net assets (note 5) $205,839,755
=========================================================================================================================
Class A Shares (note 1)
Net assets $ 43,092,047
Shares outstanding 1,894,035
Net asset value and redemption price per share $ 22.75
Offering price per share (net asset value per share plus maximum sales charge of 5.25% of offering price) $ 24.01
=========================================================================================================================
Class B Shares (note 1)
Net assets $ 81,823,055
Shares outstanding 3,611,253
Net asset value, offering and redemption price per share $ 22.66
=========================================================================================================================
Class C Shares (note 1)
Net assets $ 43,260,176
Shares outstanding 1,908,048
Net asset value, offering and redemption price per share $ 22.67
=========================================================================================================================
Class R Shares (note 1)
Net assets $ 37,664,477
Shares outstanding 1,652,328
Net asset value, offering and redemption price per share $ 22.79
=========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Statement of Operations
For the period December 31, 1997 (commencement of operations)
through July 31, 1998
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1)
Dividends $ 669,337
Interest 176,693
- -------------------------------------------------------------------------------------------------------------------------
Total investment income 846,030
- -------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 4) 564,452
12b-1 service fees -- Class A (notes 1 and 4) 32,240
12b-1 distribution and service fees -- Class B (notes 1 and 4) 229,464
12b-1 distribution and service fees -- Class C (notes 1 and 4) 114,323
Shareholders' servicing agent fees and expenses 45,715
Custodian's fees and expenses 26,582
Trustees' fees and expenses (note 4) 2,528
Professional fees 15,542
Shareholders' reports -- printing and mailing expenses 28,456
Federal and state registration fees 69,401
Amortization of deferred organization costs (note 1) 20,780
Other expenses 7,732
- -------------------------------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement 1,157,215
Expense reimbursement (note 4) (48,782)
- -------------------------------------------------------------------------------------------------------------------------
Net expenses 1,108,433
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (262,403)
- -------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 3) 779,703
Net change in unrealized appreciation or depreciation of investments 6,737,012
- -------------------------------------------------------------------------------------------------------------------------
Net gain from investments 7,516,715
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $7,254,312
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets
For the period December 31, 1997 (commencement of operations)
through July 31, 1998
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Operations
Net investment income (loss) $ (262,403)
Net realized gain from investment transactions (notes 1 and 3) 779,703
Net change in unrealized appreciation or depreciation of investments 6,737,012
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 7,254,312
- -------------------------------------------------------------------------------------------------------------------------
Fund Share Transactions (note 2)
Net proceeds from sale of shares 203,076,665
Cost of shares redeemed (4,591,222)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 198,485,443
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 205,739,755
Net assets at the beginning of period 100,000
- -------------------------------------------------------------------------------------------------------------------------
Net assets at the end of period $205,839,755
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) at end of period $ --
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Rittenhouse Growth Fund (the "Fund") is a series of the Nuveen
Investment Trust II (the "Trust") which was organized as a Massachusetts
business trust in 1997. The Trust is an open-end diversified management
investment company registered under the Investment Company Act of 1940. Prior to
commencement of operations on December 31, 1997, the Trust had no operations
other than those related to organizational matters and the initial capital
contribution of $100,000 by Nuveen Institutional Advisory Corp. (the "Adviser"),
a wholly owned subsidiary of The John Nuveen Company, for the issuance of shares
on November 12, 1997.
The Fund invests in a diversified portfolio consisting primarily of equity
securities traded in U.S. securities markets of large capitalization companies
that have a history of consistent earnings and dividend growth ("blue chip
companies").
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a national securities exchange
or Nasdaq for which there are no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are valued at the most recent
bid prices. Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values when such values are
believed to more accurately reflect the fair market value of such securities;
otherwise, actual sale or bid prices are used. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Trustees. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the Board of Trustees determines that the fair market
value of such securities is their amortized cost.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Fund has instructed the custodian to
segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At July
31, 1998, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income is declared and distributed to shareholders quarterly. Net
realized capital gains from investment transactions, if any, are declared and
distributed to shareholders not less frequently than annually. Furthermore,
capital gains are distributed only to the extent they exceed available capital
loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. Accordingly,
temporary over-distributions as a result of these differences may occur and will
be classified as either distributions in excess of net investment income and/or
distributions in excess of net realized gains from investment transactions,
where applicable.
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a 1% contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available for purchases of over $1 million and in other limited
circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures contracts, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the period December 31, 1997 (commencement of
operations) through July 31, 1998.
11
<PAGE>
Notes to Financial Statements (continued)
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization and initial registration of shares was deferred and is being
amortized over a 60-month period beginning December 31, 1997 (commencement of
operations). If any of the initial shares of the Fund are redeemed during this
period, the proceeds of the redemption will be reduced by the pro-rata share of
the unamortized organization costs as of the date of redemption.
2. Fund Shares
Transactions in Fund shares for the period December 31, 1997 (commencement of
operations) through July 31, 1998, were as follows:
<TABLE>
<CAPTION>
Shares Amount
<S> <C> <C>
- ------------------------------------------------------------------------------
Shares sold:
Class A 1,988,648 $ 44,029,027
Class B 3,666,978 81,559,486
Class C 1,946,440 43,544,923
Class R 1,661,302 33,943,229
- ------------------------------------------------------------------------------
9,263,368 203,076,665
- ------------------------------------------------------------------------------
Shares redeemed:
Class A (95,863) (2,146,252)
Class B (56,975) (1,322,737)
Class C (39,642) (891,049)
Class R (10,224) (231,184)
- ------------------------------------------------------------------------------
(202,704) (4,591,222)
- ------------------------------------------------------------------------------
Net increase 9,060,664 $ 198,485,443
- ------------------------------------------------------------------------------
</TABLE>
3. Securities Transactions
Purchases and sales (including maturities) of common stocks, U.S. government and
U.S. government agency obligations and short-term investments for the period
December 31,1997 (commencement of operations) through July 31, 1998, were as
follows:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------
Purchases:
Common stocks $ 196,792,158
U.S. government and U.S. government agency obligations 99,797
Short-term investments 796,977,147
Sales:
Common stocks 5,249,157
U.S. government and U.S. government agency obligations 99,710
Short-term investments 790,476,147
- ------------------------------------------------------------------------------
</TABLE>
At July 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes.
Net unrealized appreciation aggregated $6,737,012 of which $11,839,114 related
to appreciated securities and $5,102,102 related to depreciated securities.
12
<PAGE>
4. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with the Adviser, the Fund pays
an annual management fee, payable monthly, which is based upon the average daily
net asset value of the Fund as follows:
<TABLE>
<CAPTION>
<S> <C>
Average Daily Net Asset Value Management Fee
- -------------------------------------------------------------------------------
For the first $125 million .8500 of 1%
For the next $125 million .8375 of 1
For the next $250 million .8250 of 1
For the next $500 million .8125 of 1
For the next $1 billion .8000 of 1
For net assets over $2 billion .7875 of 1
- -------------------------------------------------------------------------------
</TABLE>
The Adviser has agreed to waive fees and reimburse expenses through July 31,
1999, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding 1.10% of
the average daily net asset value of any class of Fund shares.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Rittenhouse Financial Services, Inc.
("Rittenhouse"), a wholly owned subsidiary of the John Nuveen Company, under
which Rittenhouse manages the Fund's investment portfolio. Rittenhouse is
compensated for its services from the management fee paid to the Adviser. The
Fund pays no compensation directly to those of its Trustees who are affiliated
with the Adviser or to its officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
During the period December 31, 1997 (commencement of operations) through July
31, 1998, John Nuveen & Co. Incorporated (the "Distributor"), a wholly owned
subsidiary of The John Nuveen Company, collected sales charges on purchases of
Class A Shares of approximately $1,617,000 of which approximately $1,562,200
were paid out as concessions to authorized dealers. The Distributor also
received 12b-1 service fees on Class A Shares, substantially all of which were
paid to compensate authorized dealers for providing services to shareholders
relating to their investments.
During the period December 31, 1997 (commencement of operations) through July
31, 1998, the Distributor compensated authorized dealers directly with
approximately $3,605,000 in commission advances at the time of purchase. To
compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase, all
12b-1 distribution fees on Class B Shares, and all 12b-1 service and
distribution fees on Class C Shares during the first year following a purchase
are retained by the Distributor. During the period ended July 31, 1998, the
Distributor retained approximately $343,700 of such 12b-1 fees. The remaining
12b-1 fees charged to the Fund were paid to compensate authorized dealers for
providing services to shareholders relating to their investments. The
Distributor also collected and retained approximately $32,100 of CDSC on share
redemptions during the period ended July 31, 1998.
5. Composition of Net Assets
At July 31, 1998, the Fund had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
Capital paid-in $ 198,323,040
Undistributed net investment income (loss) --
Accumulated net realized gain from investment transactions 779,703
Net unrealized appreciation of investments 6,737,012
- -------------------------------------------------------------------------------
Net assets $ 205,839,755
- -------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout the period
December 31, 1997 through July 31, 1998 is as follows:
<TABLE>
<CAPTION>
Class (Inception Date) Investment Operations Less Distributions
--------------------------------- ------------------------------
Net
Beginning Net Realized/ Ending
Net Investment Unrealized Net Net
Year Ended Assets Income Investment Investment Capital Asset Total
July 31, Value (Loss) (a) Gain (Loss) Total Income Gain Total Value Rate (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/97)
1998 (c) $20.00 $(.01) $2.76 $2.75 $-- $-- $-- $22.75 13.75%
Class B (12/97)
1998 (c) 20.00 (.11) 2.77 2.66 -- -- -- 22.66 13.30
Class C (12/97)
1998 (c) 20.00 (.11) 2.78 2.67 -- -- -- 22.67 13.35
Class R (12/97)
1998 (c) 20.00 .03 2.76 2.79 -- -- -- 22.79 13.95
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Expenses Income Expenses Income to
to Average to Average to Average Average
Net Assets Net Assets Net Assets Net Assets
Before Before After After Portfolio
Ending Net Reimburse- Reimburse- Reimburse- Reimburse- Turnover
Assets (000) ment ment ment (a) ment (a) Rate
- --------------------------------------------------------------------------------- * Annualized.
<S> <C> <C> <C> <C> <C> (a) After waiver of certain management fees or
$43,092 1.42%* (.16)%* 1.35%* (.09)%* 4% reimbursement of expenses by Nuveen
81,823 2.17* (.91)* 2.10* (.84)* 4 Institutional Advisory Corp.
43,260 2.17* (.91)* 2.10* (.84)* 4 (b) Total returns are calculated on net asset
37,664 1.19* .11* 1.10* .20* 4 value without any sales charge and are not
- --------------------------------------------------------------------------------- annualized.
(c) From commencement of class operations as
noted.
</TABLE>
15
<PAGE>
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio -- one that balances
different types of investments, levels of risk and tax management -- can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers/SM/ including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred/R/
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
16
<PAGE>
Fund Information
Board of Trustees
James F. Bacon
Anthony T. Dean
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Rittenhouse Financial Services, Inc.
Two Radnor Corporate Center
Suite 400
Radnor, PA 19087-4570
Transfer Agent and
Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
17
<PAGE>
Serving Investors for Generations
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time. We emphasize quality securities carefully chosen through
in-depth research, and we follow those securities closely over time to ensure
that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
NUVEEN 1898-1998
Our Second Century helping investors sustain the wealth of a lifetime./SM/
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
