<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT NOVEMBER 25,
1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
Registration No. 333-33607
Pre-Effective Amendment No. [_]
---
[X]
Post-Effective Amendment No. 2
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Registration No. 811-8333
[X]
Amendment No. 3
----------------
NUVEEN INVESTMENT TRUST II
(Exact Name of Registrant as Specified in Declaration of Trust)
333 West Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 917-7700
Copies to:
Gifford R. Zimmerman--Vice President and Eric F. Fess
Secretary Chapman and Cutler
333 West Wacker Drive 111 W. Monroe
Chicago, Illinois 60606 Chicago, Illinois 60603
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[_]immediately upon filing pursuant to [_]on November 20, 1998 pursuant to
paragraph (b) paragraph (a)(1)
[X]on November 27, 1998 pursuant to [_]75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[_]60 days after filing pursuant to [_]on (date) pursuant to paragraph
paragraph (a)(1) (a)(2) of Rule 485.
If appropriate, check the following box:
[X]This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 2
This Post-Effective Amendment to the Registration Statement comprises the
following papers and contents:
The Facing Sheet
Cross-Reference Sheet
Part A--Prospectus for Nuveen Rittenhouse Growth Fund (the
"Fund")
Part B--Statement of Additional Information for the Fund--
copy of Annual Report to Shareholders of the Fund (the Fi-
nancial Statements from which are incorporated by reference
into the Statement of Additional Information)
Part C--Other Information
Signatures
Index to Exhibits
Exhibits
<PAGE>
[Nuveen LOGO APPEARS HERE]
Growth Funds
November 27, 1998
Prospectus
A blue chip portfolio for investors seeking long-term growth potential.
Nuveen Rittenhouse Growth Fund
[PHOTO APPEARS HERE]
Portfolio Management by Rittenhouse Financial Services, Inc., Nuveen's
Premier Adviser/sm/ for growth investing.
- ----------------------
NOT FDIC-INSURED
May lose value
No bank guarantee
- ----------------------
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
Investment Strategy
Risks
Fees, Charges and Expenses
Shareholder Instructions
Performance and Current Portfolio Information
Table of Contents
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives and portfolio holdings.
Introduction 1
................................................................................
Nuveen Rittenhouse Growth Fund 2
................................................................................
Section 2 How We Manage Your Money
This section gives you a detailed discussion of our investment and risk
management strategies.
Who Manages the Fund 4
................................................................................
Management Fees 5
................................................................................
What Securities We Invest In 5
................................................................................
How We Select Investments 5
................................................................................
How the Portfolio Manager Has Performed 7
................................................................................
What the Risks Are 7
................................................................................
How We Manage Risk 8
................................................................................
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.
How to Choose a Share Class 10
................................................................................
How to Reduce Your Sales Charge 12
................................................................................
How to Buy Shares 12
................................................................................
Systematic Investing 13
................................................................................
Systematic Withdrawal 14
................................................................................
Special Services 14
................................................................................
How to Sell Shares 15
................................................................................
Section 4 General Information
This section summarizes the fund's distribution policies and other general fund
information.
Distributions and Taxes 17
................................................................................
Distribution and Service Plan 18
................................................................................
Net Asset Value 19
................................................................................
Fund Service Providers 19
Section 5 Financial Highlights
This section provides the fund's financial performance since inception.
Nuveen Rittenhouse Growth Fund 20
................................................................................
<PAGE>
November 27, 1998
Section 1 The Fund
Nuveen Rittenhouse Growth Fund
Introduction
This prospectus is intended to provide important information to help you
evaluate whether the fund may be right for you. Please read it carefully before
investing and keep it for future reference.
Investing for Tax-Efficient, Long-Term Growth
For many investors, a carefully selected, well-balanced portfolio with the
potential for growth, income and preservation plays an important role in helping
to build and sustain wealth over time. Historically, stocks have offered
investors better long-term growth potential to outpace inflation than other
investments. Finding an investment strategy that you're comfortable with,
though, can be challenging. That's why many investors seeking long-term growth
potential turn to investments in established, well-known "blue chip" companies.
Now, investors can turn to the Nuveen Rittenhouse Growth Fund, a blue chip
portfolio for investors seeking long-term growth potential.
Section 1 The Fund 1
<PAGE>
Nuveen Rittenhouse Growth Fund
Fund Overview
Investment Objective
The fund seeks to provide long-term growth of capital by investing 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.
How the Fund Pursues Its Objective
The Fund ordinarily will invest at least 65% of its total assets in the equity
securities of blue chip companies--those large-capitalization companies with a
high financial strength rating and a history of consistent, predictable earnings
and dividend growth. Through fundamental analysis, Rittenhouse seeks to invest
in the 20-50 best companies that have a demonstrated leadership position and
offer the best mix of sustained growth opportunities at reasonable valuations.
What are the Risks of Investing in the Fund?
The principal risk of investing in the fund is market risk. Market risk is the
risk that a particular stock in the fund, or stocks in general, may fall in
value. If the fund invests in foreign stocks, such an investment will present
additional risk including currency risk. As with any mutual fund investment,
loss of money is a risk of investing.
Is this Fund Right for You?
This fund may be appropriate for you if you are seeking:
. a conservative growth stock fund as the core of a diversified investment
plan;
. to build and protect wealth over time through prudent capital management;
. 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.
Benefits of Blue Chips
Blue chip companies are large-capitalization, established companies, often
leaders in their industries, that can be distinguished from other companies by a
number of characteristics, among them:
. superior financial strength;
. experienced management;
. high liquidity;
. predictability of earnings and dividend growth.
A diversified portfolio of blue chip growth stocks offers the potential for
superior risk-adjusted performance over time compared with a portfolio of stocks
lacking these qualities.
In addition, blue chip companies often weather market downturns better than
smaller, less established companies. This is partly due to their financial
strength, which provides blue chip companies with the flexibility to respond
more effectively to difficult market or business conditions. Also, greater
earnings and dividend predictability can provide more stability to blue chips'
stock prices during times of increased market uncertainty.
2 Section 1 The Fund
2
<PAGE>
What are the Costs of Investing?
<TABLE>
<CAPTION>
Shareholder Transaction Expenses/1/
Paid Directly From Your Investment
<S> <C> <C> <C> <C>
Share Class A B C R/2/
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases 5.25%/3/ None None None
................................................................................
Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
................................................................................
Exchange Fees None None None None
................................................................................
Deferred Sales Charge/4/ None/3/ 5%/5/ 1%/6/ None
................................................................................
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses/7/
Paid From Fund Assets
<S> <C> <C> <C> <C>
Share Class A B C R
- --------------------------------------------------------------------------------
Management Fees .85% .85% .85% .85%
................................................................................
12b-1 Distribution and Service Fees .25% 1.00% 1.00% --%
................................................................................
Other Expenses .32% .32% .32% .34%
- --------------------------------------------------------------------------------
Total Operating Expenses-Gross 1.42% 2.17% 2.17% 1.19%
................................................................................
Expense Waiver/Reimbursements (.07%) (.07%) (.07%) (.09%)
- --------------------------------------------------------------------------------
Total Operating Expenses-Net 1.35% 2.10% 2.10% 1.10%
................................................................................
</TABLE>
The following example is intended to help you compare the cost of investing in
the fund with the cost of investing in other mutual funds. It assumes you invest
$10,000 in the fund for the time periods 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 $ 662 $ 613 $ 220 $ 121 $ 662 $ 220 $ 220 $ 121
...............................................................................................
3 Years $ 951 $ 993 $ 679 $ 378 $ 951 $ 679 $ 679 $ 378
...............................................................................................
5 Years $1,261 $1,276 $1,164 $ 654 $1,261 $1,164 $1,164 $ 654
...............................................................................................
10 Years $2,138 $2,313 $2,503 $1,443 $2,138 $2,313 $2,503 $1,443
...............................................................................................
</TABLE>
How the Fund Is Invested (as of 7/31/98)
Portfolio Allocation/8/
Stocks 97%
..............................................
Cash Equivalents 3%
..............................................
Stock Portfolio Statistics
Beta 1.20
..............................................
Average Market Capitalization $89 billion
..............................................
Average P/E 29
..............................................
Top 10 Stock Holdings/8/
General Electric Company 5.5%
..............................................
American International Group, Inc. 5.0%
..............................................
Colgate Palmolive Company 4.9%
..............................................
Schering-Plough Corporation 4.8%
..............................................
Johnson & Johnson 4.8%
..............................................
Pfizer Inc. 4.8%
..............................................
Procter & Gamble Company 4.4%
..............................................
Coca Cola Company 4.3%
..............................................
Automatic Data Processing 4.3%
..............................................
Home Depot Inc. 4.1%
..............................................
1. 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.
2. Class R shares may be purchased only under limited circumstances, or by
specified classes of investors. See "How You Can Buy and Sell Shares."
3. 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."
4. As a percentage of lesser of purchase price or redemption proceeds.
5. Class B shares redeemed within six years of purchase bear 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.
6. Class C shares redeemed within one year of purchase bear a 1% CDSC.
7. 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 investment adviser has agreed to waive fees and reimburse
expenses through July 31, 1999 in order to prevent Total Operating Expenses
(excluding any distribution or service fees and extraordinary expenses) from
exceeding 1.10% of the average daily net asset value of any class of fund
shares.
8. Holdings will vary.
Section 1 The Fund 3
<PAGE>
Section 2 How We Manage Your Money
To help you understand the fund better, this section includes a detailed
discussion of our investment and risk management strategies. For a more complete
discussion of these matters, please consult the Statement of Additional
Information.
Who Manages the Fund
Nuveen Institutional Advisory Corp. (NIAC), 333 West Wacker Drive, Chicago, IL
60606, has overall responsibility for management of the fund. NIAC oversees the
management of the fund's portfolio, manages the fund's business affairs and
provides certain clerical, bookkeeping and other administrative services. NIAC
is a wholly owned subsidiary of John Nuveen & Co. Incorporated (Nuveen). Founded
in 1898, Nuveen has been synonymous with investments that withstand the test of
time. Today we offer a broad range of quality investments designed for
individuals seeking to build and sustain wealth. Nuveen is the sponsor and
principal underwriter of the fund's shares and has sponsored or underwritten
more than $60 billion of investment company securities. Nuveen and its
affiliates have approximately $50 billion in assets under management.
NIAC has selected Rittenhouse Financial Services, Inc., Two Radnor Corporate
Center, Radnor, PA 19087-9570, as subadviser to manage the investment portfolio
of the fund. Rittenhouse, a wholly-owned subsidiary of The John Nuveen Company,
is an institutional investment management firm with over 19 years of experience
and approximately $11 billion in assets under management. Rittenhouse's
investment management strategy and operating policies are set through a team
approach, with all its investment professionals contributing. Rittenhouse
currently maintains a staff of 19 investment professionals. Each of the
Rittenhouse officers and investment professionals has developed an expertise in
at least one functional investment area, including equity research, strategy,
quantitative research, technical research, and trading. A key element in the
decision making process is a formal investment committee of all the investment
professionals that meets regularly to review all Rittenhouse investment
positions. Pertinent information from outside sources is shared and incorporated
into the investment outlook. The investment strategy, market sectors, and
individual security holdings are reviewed to verify their continued
appropriateness. Investment recommendations are presented to the committee for
decision.
4 Section 2 How We Manage Your Money
<PAGE>
Management Fees
For providing these services, NIAC is paid an annual fund management fee
according to the following schedule:
Average Daily Fund
Net Asset Value 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 assets over $2 billion .7750 of 1%
Out of the fund management fee, NIAC pays a portfolio management fee to
Rittenhouse. The fund pays for its own operating expenses such as custodial,
transfer agent, accounting and legal fees; brokerage commissions; distribution
and service fees; organizational expenses; and extraordinary expenses.
What Securities We Invest In
Equity Securities
Eligible equity securities include common stocks; preferred stocks; warrants to
purchase common stocks or preferred stocks; securities convertible into common
or preferred stocks, such as convertible bonds and debentures; equity securities
of foreign issuers traded in U.S. security markets or in American Depositary
Receipts ("ADRs") or other instruments denominated in U.S. dollars (limited to
15% of net assets) and other securities with equity characteristics. Convertible
bonds and debentures must be rated A or better by Moody's Investors Service,
Standard & Poor's, Duff & Phelps or Fitch IBCA, Inc. when purchased.
Short-Term Investments
The fund may invest in short-term investments including U.S. government
securities, quality commercial paper or similar fixed-income securities with
remaining maturities of one year or less. For more information on short-term
investments, see the Statement of Additional Information.
How We Select Investments
The fund will ordinarily invest at least 65% of its total assets in the equity
securities of blue chip companies. Blue chip companies are generally
characterized by their substantial capitalization, established history of
earnings and dividends, ready access to credit, industry leadership position and
superior management structure.
From the universe of all stocks traded in the U.S. securities markets,
Rittenhouse first identifies companies with an aggregate market capitalization
of at least $5 billion under current market conditions and with a financial
strength rating of A or better by Standard & Poor's or Value Line. Of those,
Rittenhouse selects companies with a history of
Section 2 How We Manage Your Money 5
<PAGE>
consistent earnings and dividend growth. Then Rittenhouse selects industries
with the most attractive potential based upon its evaluation of current market
conditions and long-term industry growth trends. Through fundamental analysis,
Rittenhouse seeks to invest in the 20-50 stocks within these industries that
have a demonstrated leadership position and offer the best mix of sustained
growth opportunities at reasonable valuations.
Certain of the fund's investment policies may result in reduced taxable
distributions and enhanced after-tax returns. Because the fund invests in stocks
with lower dividend yields, the fund expects to distribute little, if any,
taxable dividend income. The fund anticipates minimizing realized short-term and
long-term capital gains as a result of its low portfolio turnover rate and
generally long investment holding periods. Upon selling a stock, Rittenhouse
will seek to minimize realized gains by selling shares with the highest cost
basis first, and where consistent with the fund's investment objective,
offsetting gains with capital losses realized from the sale of other stocks in
the portfolio.
Portfolio Turnover
The fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio that is
sold and replaced with new securities during a year is known as the fund's
portfolio turnover rate. The fund anticipates that its annual portfolio turnover
rate will generally be between 20% and 30% under normal market conditions, and
will generally not exceed 50%. 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.
Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed-delivery basis,
paying for or taking delivery of the securities at a later date, normally within
15 to 45 days of the trade. Such transactions involve an element of risk because
the value of the security to be purchased may decline before the settlement
date.
The fund's investment objective may not be changed without shareholder approval.
The above investment policies can be changed by the Board of Trustees without
shareholder approval unless otherwise noted in this prospectus or the Statement
of Additional Information.
6 Section 2 How We Manage Your Money
<PAGE>
How the Portfolio Manager Has Performed
The chart and table below illustrate the historical performance of the portfolio
manager's investment strategy for the fund. They present the performance of
Rittenhouse's Blended Equity Composite, which represents all its individually
managed accounts (totalling $4.7 billion) that have substantially the same
investment objectives and policies as the fund. Of course, past performance is
no indication of future results, and the chart and table represent performance
of managed accounts and not actual fund performance.
Growth of a $10,000 Investment 1/83-6/98
[Mountain Chart Appears Here]
<TABLE>
<CAPTION>
Portfolio Manager Composite S&P 500 Lipper Growth Fund Index CPI
<S> <C> <C> <C> <C>
1/83 10,000 10,000 10,000 10,000
1/84 12,474 11,974 11,171 10,508
1/85 15,511 14,237 12,792 10,902
1/86 22,076 19,627 17,559 11,148
1/87 27,403 24,731 21,054 11,486
1/88 25,574 22,710 19,454 11,933
1/89 30,807 26,816 22,362 12,527
1/90 35,887 31,950 25,726 13,183
1/91 42,447 36,545 29,339 13,829
1/92 47,998 40,583 33,543 14,269
1/93 52,760 46,762 37,771 14,709
1/94 50,541 47,438 39,846 15,077
1/95 58,944 54,829 43,352 15,508
1/96 76,595 72,398 56,043 15,950
1/97 90,004 86,721 62,793 16,389
1/98 134,655 128,431 90,697 16,615
6/98 139,698 132,672 93,272 16,696
</TABLE>
Portfolio Manager Composite Returns
<TABLE>
<CAPTION>
Average Annual Total Returns
...................................................
Since Composite
1-Year 5-Year 10-Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
On Offer 22.59% 20.44% 17.19% 18.13%
...............................................................................
On NAV 29.39% 21.74% 17.82% 18.54%
...............................................................................
</TABLE>
The managed accounts reflected above are not subject to all of the same
investment restrictions, investment inflows and outflows, and distribution
requirements as the fund, which may affect fund performance. We assumed that an
investor paid a maximum Class A sales charge of 5.25% and we deducted from the
Composite's gross-of-fee returns the Class A gross operating expenses of 1.42%
for the fund's most recent fiscal year. The chart would be different for a Class
B, C or R investment because of their different sales charges and operating
expenses. The Composite's inception date is January 1, 1983. The Lipper Growth
Fund Index represents the average annualized returns of the 30 largest funds in
the Lipper Growth Fund Category. Index returns assume reinvestment of all
dividends but do not include any brokerage commissions, sales charges or other
fees. This chart does not represent past or future performance of the fund.
What the Risks Are
Risk is inherent in all investing. Investing in a mutual fund -- even the most
conservative -- involves risk, including the risk that you may receive little or
no return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in this fund. Because of these
and other risks, you should consider an investment in this fund to be a long-
term investment.
Section 2 How We Manage Your Money 7
<PAGE>
Market risk: As a mutual fund investing primarily in common stocks, the fund is
subject to market risk. Market risk is the risk that a particular stock, an
industry, or stocks in general may fall in value.
Inflation risk: Like all mutual funds, the fund is subject to inflation risk.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the value of the fund's assets can decline as can the value
of the fund's distributions.
Foreign investment risk: Securities issued by foreign companies or governments
(which are limited to 15% of net assets) present risks beyond those of
securities of U.S. issuers. Such risks include political or economic
instability, changes in foreign currency exchange rates, and less publicly
available information. Foreign securities may be less liquid and have more price
volatility than domestic stocks.
How We Manage Risk
We use time-tested risk management strategies designed to help protect your
capital during periods of market uncertainty or weakness: broad portfolio
diversification, investment limitations, hedging and other defensive investment
strategies. While we use these strategies to control or reduce risk, there is no
assurance that we will succeed.
A Focus on Blue Chips
The fund invests primarily in equity securities of blue-chip companies. Blue
chip companies are generally characterized by their substantial capitalization,
established history of earnings and dividends, ready access to credit, industry
leadership position and superior management structure. As a result, blue chip
companies have historically exhibited less risk and price volatility than
companies lacking these high quality characteristics. In addition, the large
market of publicly held shares for these companies and substantial trading
volume create a high degree of liquidity for their stocks.
Investment Limitations
The fund has adopted certain investment limitations (based on total assets) that
cannot be changed without shareholder approval and are designed to limit your
investment risk and maintain portfolio diversification. The fund may not have
more than:
. 5% in securities in any one issuer, or 10% of the voting securities of
that issuer (except for U.S. government securities or for 25% of the
fund's total assets);
. 25% in any one industry (except U.S. government securities). For
example, as of July 31, 1998, the fund was invested in the following
industries (as a percentage of the fund's stock holdings):
Diversified 13.51%
Drugs 13.28%
Household Products 9.24%
Beverages 8.12%
-----------------------------------------------
Electrical Equipment 7.11%
Banks 6.87%
Services (Data Processing) 6.07%
Retail 5.72%
-----------------------------------------------
Insurance (Multi-Line) 5.04%
Personal Care 4.02%
Oil & Gas 3.63%
Entertainment 3.40%
-----------------------------------------------
Computers (Hardware) 3.33%
Electronics (Semiconductors) 2.62%
Medical Products & Supplies 2.44%
Foods 2.41%
-----------------------------------------------
8 Section 2 How We Manage Your Money
<PAGE>
Please see the Statement of Additional Information for a more detailed
discussion of investment limitations.
Hedging and Other Defensive Investment Strategies
The fund may invest up to 100% of its assets in cash equivalents and short-term
investments as a temporary defensive measure in response to adverse market
conditions, or to keep cash on hand fully invested. During these periods, the
proportion of the fund's assets invested in an asset category may fall outside
its allowable range, and the fund may not achieve its investment objective.
We may also use various investment strategies designed to hedge against changes
in the values of securities the fund owns or expects to purchase or to hedge
against interest rate changes. These hedging strategies include using financial
futures contracts, options on financial futures, or stock index options. The
ability of the fund to benefit from options and futures is largely dependent on
our ability to use such strategies successfully. The fund could lose money on
futures transactions or an option can expire worthless. The fund will not enter
into futures and options transactions if the sum of the initial margin deposits
and premiums paid for unexpired options exceeds 5% of the fund's net assets. In
addition, the fund will not enter into futures contracts and options
transactions if more than 30% of its net assets would be committed to such
instruments.
Section 2 How We Manage Your Money 9
<PAGE>
Section 3 How You Can Buy and Sell Shares
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you. We
offer a number of features for your convenience. Please see the Statement of
Additional Information for further details.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. any current holdings of fund shares;
. how long you expect to hold the shares;
. the amount of any up-front sales charge;
. whether a contingent deferred sales charge (CDSC) would apply upon
redemption;
. the amount of any distribution or service fees that you may incur while
you own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
. whether you qualify for a sales charge waiver or reduction.
For a summary of the charges and expenses for each class, please see "What are
the Costs of Investing?".
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%
which compensates your financial adviser for providing ongoing service to you.
The up-front Class A sales charge is as follows:
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
<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 5.25% 5.54% 5.00%
..........................................................................................................
$50,000 but less than $100,000 4.25% 4.44% 4.00%
..........................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 3.25%
..........................................................................................................
$250,000 but less than $500,000 2.75% 2.83% 2.50%
..........................................................................................................
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
..........................................................................................................
$1,000,000 and over --* -- 1.00%*
..........................................................................................................
</TABLE>
*You can buy $1 million or more of Class A shares at net asset value without an
up-front sales charge. Nuveen pays Authorized Dealers of record on these share
purchases a sales commission of 1.00% of the first $2.5 million, plus .50% of
the next $2.5 million, plus .25% of the amount over $5.0 million. If you redeem
your shares within 18 months of purchase, you may have to pay a CDSC of 1% of
either your purchase price or your redemption proceeds, whichever is lower. You
do not have to pay this CDSC if your financial adviser has made arrangements
with Nuveen and agrees to waive the commission.
Class B Shares
You can buy Class B shares at 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 average
daily assets. The annual .25% service fee compensates your financial adviser for
providing ongoing service to you. The annual .75% distribution fee compensates
Nuveen for paying your financial adviser a 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 have to pay a CDSC based on either your
purchase price or what you sell your shares for, whichever amount is lower,
according to the following schedule. You do not pay a CDSC on any Class B shares
you purchase by reinvesting dividends.
<TABLE>
<CAPTION>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 4% 3% 2% 1%
..............................................................
</TABLE>
Class 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.
Class C Shares
You can buy Class C shares at 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%. The annual
.25% service fee compensates your financial adviser for providing ongoing
service to you. The annual .75% distribution fee reimburses Nuveen for paying
your financial adviser an ongoing sales commission. Nuveen advances the first
year's service and distribution fees. If you sell your shares within 12 months
of purchase, you may have to pay a 1% CDSC based on either your purchase price
or what you sell your shares for, whichever amount is lower.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
Class R Shares
Under limited circumstances, you may purchase Class R shares 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 reinvestment
. Purchases using redemptions from unrelated funds
. 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 advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. Please refer to the Statement of Additional Information
for detailed program descriptions and eligibility requirements. Additional
information is available from your financial adviser or by calling (800) 257-
8787. Your financial adviser can also help you prepare any necessary application
forms. You or your financial adviser must notify Nuveen at the time of each
purchase if you are eligible for any of these programs. The fund may modify or
discontinue these programs at any time.
How to Buy Shares
You may open an account with $3,000 per share class ($1,000 for a
Traditional/Roth IRA account; $500 for an Education IRA account; and $500 for
accounts opened through certain fee based programs) and make additional
investments at any time with as little as $50. There is no minimum if you are
reinvesting Nuveen Defined Portfolio distributions. The share price you pay will
depend on when Nuveen receives your order. Orders received before the close of
trading on a business day will receive that day's closing share price, otherwise
you will receive the next business day's price. A business day is any day the
New York Stock Exchange is open for business and normally ends at 4 p.m. New
York time.
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
Through a Financial Adviser
You may buy shares through your financial adviser, who can handle all the
details for you, including opening a new account. Financial advisers can also
help you review your financial needs and formulate long-term investment goals
and objectives. In addition, financial advisers generally can help you develop a
customized financial plan, select investments and monitor and review your
portfolio on an ongoing basis to help assure your investments continue to meet
your needs as circumstances change. Financial advisers are paid either from fund
sales charges and fees or by charging you a separate fee in lieu of a sales
charge for ongoing investment advice and services. If you do not have a
financial adviser, call (800) 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.
Systematic Investing
Once you have established a fund account, systematic investing allows you to
make regular investments through automatic deductions from your bank account
(simply complete the appropriate section of the account application form) or
directly from your pay check. To invest directly from your paycheck, contact
your financial adviser or call Nuveen at (800) 257-8787. Systematic investing
may also make you eligible for reduced sales charges.
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more shares when the price is low and fewer shares
when the price is high. As a result, the average share price you pay should be
less than the average share price of fund shares over the same period. To be
effective, dollar cost averaging requires that you invest over a long period of
time and does not assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request to have
$50 or more withdrawn automatically from your account. You may elect to receive
payments monthly, quarterly, semi-annually or annually, and may choose to
receive a check, have the monies transferred directly into your bank account
(see "Special Services--Fund Direct" below), paid to a third party or sent
payable to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account Update
Form to participate in the fund's systematic withdrawal plan.
You should not establish systematic withdrawals if you intend to make concurrent
purchases of Class A, B or C shares because you may unnecessarily pay a sales
charge or CDSC on these purchases.
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 the same class of another Nuveen mutual fund available in your state. Your
exchange must meet the minimum purchase requirements of the fund into which you
are exchanging. Because an exchange is treated for tax purposes as a concurrent
sale and purchase and any gain may be subject to tax, you should consult your
tax adviser about the tax consequences of any contemplated exchange.
The exchange privilege is not intended to allow you to use the fund for short-
term trading. Because excessive exchanges may interfere with portfolio
management, raise fund operating expenses or otherwise have an adverse effect on
other shareholders, the fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a CDSC, we
will refund your CDSC and reinstate your holding period. You may use this
reinstatement privilege only once for any redemption.
Fund Direct(SM)
You may link your fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares by telephone and investing through a
Systematic Investment Plan. You may also have dividends, distributions,
redemption payments or systematic withdrawals sent directly to your bank
account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
How to Sell Shares
You may use one of the following ways to sell (redeem) your shares on any day
the New York Stock Exchange is open. You will receive the share price next
determined after Nuveen has received your properly completed redemption request.
Your redemption request must be received before the close of trading for you to
receive that day's price. While the fund does not charge a redemption fee, you
may be assessed a CDSC, if applicable. When you redeem Class A, Class B, or
Class C shares subject to a CDSC, the fund will first redeem any shares that are
not subject to a CDSC or that represent an increase in the value of your fund
account due to capital appreciation, and then redeem the shares you have owned
for the longest period of time, unless you ask the fund to redeem your shares in
a different order. No CDSC is imposed on shares you buy through the reinvestment
of dividends and capital gains. The holding period is calculated on a monthly
basis and begins on the first day of the month in which you buy shares. When you
redeem shares subject to a CDSC, the CDSC is calculated on the lower of your
purchase price or redemption proceeds, deducted from your redemption proceeds,
and paid to Nuveen. The CDSC may be waived under certain special circumstances
as described in the Statement of Additional Information.
Through Your Financial Adviser
You may sell your shares through your financial adviser who can prepare the
necessary documentation. Your financial adviser may charge for this.
By Telephone
If you have authorized telephone redemption privileges, you can redeem your
shares by telephone. You may not redeem by telephone shares held in certificate
form. Checks will be issued only to the shareholder of record and mailed to the
address of record. If you have established electronic funds transfer privileges,
you may have redemption proceeds transferred electronically to your bank
account. We will normally mail your check the next business day. Nuveen and
Chase Global Funds Services Company, the fund's transfer agent, will be liable
for losses resulting from unauthorized telephone redemptions only if they do not
follow reasonable procedures designed to verify the identity of the caller. You
should immediately verify your trade confirmations when you receive them.
By Mail
You can sell your shares at any time by sending a written request to the 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);
An Important Note About Involuntary Redemption
From time to time, the fund may establish minimum account size requirements. The
fund reserves the right to liquidate your account upon 30 days' written notice
if the value of your account falls below an established minimum. The fund
presently has set a minimum balance of $100 unless you have an active Nuveen
Defined Portfolio reinvestment account. You will not be assessed a CDSC on an
involuntary redemption.
Section 3 How You Can Buy and Sell Shares 15
<PAGE>
. 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 is cleared.
Guaranteed signatures are required if you are redeeming more than $50,000, you
want the check payable to someone other than the shareholder of record or you
want the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be obtained from a
bank, brokerage firm or other financial intermediary that is a member of an
approved Medallion Guarantee Program or that is otherwise approved by the fund.
A notary public cannot provide a signature guarantee.
16 Section 3 How You Can Buy and Sell Shares
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund, this
section includes important details about how the fund makes distributions to
shareholders. We discuss some other fund policies, as well.
Distributions and Taxes
The fund pays dividends quarterly and any capital gains once a year in December.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen mutual fund. For further information, contact your financial adviser or
call Nuveen at (800) 257-8787.
Taxes and Tax Reporting
The fund intends to make distributions that may be taxed as ordinary income or
capital gains. Dividends from the fund's long-term capital gains are taxable as
capital gains, while dividends from short-term capital gains and net investment
income are generally taxable as ordinary income. The tax you pay on a given
capital gains distribution depends generally on how long the fund has held the
portfolio securities it sold. It does not depend on how long you have owned your
fund shares.
Early in each year, you will receive a statement detailing the amount and nature
of all dividends and capital gains that you were paid during the prior year. You
will receive this statement from the firm where you purchased your fund shares
if you hold your investment in street name. Nuveen will send you this statement
if you hold your shares in registered form. The tax status of your dividends
from the fund is not affected by whether you reinvest your dividends or receive
them in cash. The sale of shares in your account may produce a gain or loss, and
is a taxable event. For tax purposes, an exchange is the same as a sale.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
Please note that if you do not furnish us with your correct Social Security
number or employer identification number, federal law requires us to withhold
federal income tax from your distributions and redemption proceeds at a rate of
31%.
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.
Section 4 General Information 17
<PAGE>
Distribution and Service Plan
John Nuveen & Co. Incorporated serves as the selling agent and distributor of
the fund's shares. In this capacity, Nuveen manages the offering of the fund's
shares and is responsible for all sales and promotional activities. In order to
reimburse Nuveen for its costs in connection with these activities, including
compensation paid to authorized dealers, the fund has adopted a distribution and
service plan under Rule 12b-1 under the Investment Company Act of 1940. (See
"How to Choose a Share Class" 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 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, the expenses of preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of the fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
18 Section 4 General Information
<PAGE>
Net Asset Value
The price you pay for your shares is based on the fund's net asset value per
share which is determined as of the close of trading (normally 4:00 p.m. eastern
time) on each day the New York Stock Exchange is open for business. Net asset
value is calculated for each class by taking the fair value of the class' total
assets, including interest or dividends accrued but not yet collected, less all
liabilities, and dividing by the total number of shares outstanding. The result,
rounded to the nearest cent, is the net asset value per share. All valuations
are subject to review by the fund's Board of Trustees or its delegate.
In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are valued
at market value. Common stocks and other equity securities are valued at the
last sales price that day. Common stocks and other equity securities not listed
on a national securities exchange or Nasdaq are valued at the most recent bid
prices. The prices of fixed-income securities are provided by a pricing service
and based on the mean between the bid and asked price. When price quotes are not
readily available, the pricing service establishes fair market value based on
prices of comparable securities.
Fund Service Providers
The custodian of the assets of the fund is The Chase Manhattan Bank, 4 New York
Plaza, New York, NY 10004-2413. Chase also provides certain accounting services
to the fund. The fund's transfer, shareholder services and dividend paying
agent, Chase Global Funds Services Company, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186, performs bookkeeping, data processing and
administrative services for the maintenance of shareholder accounts.
NIAC and Chase Global Funds Services Company each rely on computer systems to
manage the fund's investments, process shareholder transactions and provide
shareholder account maintenance. Because of the way computers historically have
stored dates, some of these systems currently may not be able to correctly
process activity occurring in the year 2000. NIAC is working with the fund's
service providers to adapt their systems to address this "Year 2000" issue. NIAC
and the fund expect, but there can be no absolute assurance, that the necessary
work will be completed on a timely basis.
Section 4 General Information 19
<PAGE>
Section 5 Financial Highlights
The following table is intended to help you better understand the fund's past
performance. The table is excerpted from the fund's latest financial statements
audited by Arthur Andersen LLP. You may obtain the complete statements along
with the auditor's report by requesting from Nuveen a free copy of the fund's
latest annual shareholder report.
Nuveen Rittenhouse Growth Fund
Selected data for a share outstanding throughout each period is as follows:
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------- ----------------------------
Class
(Inception
Date)
Net
Realized
Net and Ending
Year Beginning Investment Unrealized Net Net
Ending Net Asset Income Investment Investment Capital Asset Total
July 31, Value (Loss)(a) Gain (Loss) Total Income Gain Total Value Return(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>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------
Ratio of Net
Ratio of Investment
Ending Expenses Income
Net to Average to Average Portfolio
Assets Net Net Turnover
(000) Assets(a) Assets(a) Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (12/97)
1998 (c) $43,092 1.35%* (.09)%* 4%
Class B (12/97)
1998 (c) 81,823 2.10* (.84)* 4
Class C (12/97)
1998 (c) 43,260 2.10* (.84)* 4
Class R (12/97)
1998 (c) 37,664 1.10* .20* 4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) After waiver of certain management fees or reimbursement of expenses by
Nuveen Institutional Advisory Corp.
(b) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(c) From commencement of class operations as noted.
20 Section 5 Financial Highlights
<PAGE>
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Taxable Income
Income Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky/2/ New York/1/
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on the fund's policies and operation. Shareholder
reports contain management's discussion of market conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or for other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington D.C. Call the SEC at (800) SEC-0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington D.C. 20549-6009. The fund's
Investment Company file number is 811-8333.
1. Long-term and insured long-term portfolios.
2. Long-term and limited-term portfolios.
EPR-RIT-NA 11-98
NUVEEN
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
<PAGE>
NOVEMBER 27, 1998
NUVEEN RITTENHOUSE GROWTH FUND
NUVEEN INVESTMENT TRUST II
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. A prospectus
may be obtained without charge from certain securities representatives, banks
and other financial institutions that have entered into sales agreements with
John Nuveen & Co. Incorporated, or from the Fund, by written request to the
Fund c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New
York, NY 10274-5186, or by calling 800-257-8787. This Statement of Additional
Information relates to, and should be read in conjunction with, the Prospectus
for the Fund dated November 27, 1998 and any supplements to that Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information....................................................... B-2
Investment Policies and Restrictions...................................... B-2
Investment Policies and Techniques........................................ B-3
Management................................................................ B-15
Fund Manager and Portfolio Manager........................................ B-19
Portfolio Transactions.................................................... B-20
Net Asset Value........................................................... B-21
Tax Matters............................................................... B-22
Performance Information................................................... B-25
Additional Information on the Purchase and Redemption of Fund Shares and
Shareholder Programs..................................................... B-30
Distribution and Service Plan............................................. B-45
Independent Public Accountants, Custodian and Transfer Agent.............. B-46
Financial Information..................................................... B-47
General Trust Information................................................. B-47
Appendix A--Ratings of Investments........................................ A-1
</TABLE>
The audited financial statements for the Fund's most recent fiscal year
appear in the Fund's Annual Report and are incorporated herein by reference.
The Annual Report accompanies this Statement of Additional Information.
<PAGE>
GENERAL INFORMATION
Nuveen Rittenhouse Growth Fund (the "Fund") is a series of Nuveen Investment
Trust II (the "Trust"), an open-end diversified management series investment
company organized as a Massachusetts business trust on June 27, 1997. 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, the Fund is the only series of the Trust authorized and outstanding.
Certain matters under the Investment Company Act of 1940 which must be
submitted to a vote of the holders of the outstanding voting securities of a
series company shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding voting securities of
each series affected by such matter.
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT RESTRICTIONS
The investment objective and certain fundamental investment policies of the
Fund are described in the Fund's Prospectus. The Fund, as a fundamental policy,
may not, without the approval of the holders of a majority of the shares of the
Fund:
(1) With respect to 75% of its total assets, purchase the securities of
any issuer (except securities issued or guaranteed by the United States
government or any agency or instrumentality thereof) if, as a result, (i)
more than 5% of the Fund's total assets would be invested in securities of
that issuer, or (ii) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.
(2) Borrow money, except that the Fund may (i) borrow money from banks
for temporary or emergency purposes (but not for leverage or the purchase
of investments) and (ii) make other investments or engage in other
transactions permissible under the Investment Company Act of 1940 that may
involve a borrowing, provided that the combination of (i) and (ii) shall
not exceed 33 1/3% of the value of the Fund's total assets (including the
amount borrowed), less the Fund's liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the meaning
of the Securities Act of 1933 in connection with the purchase and sale of
portfolio securities.
(4) Make loans to other persons, except through (i) the purchase of debt
securities permissible under the Fund's investment policies, (ii)
repurchase agreements, or (iii) the lending of portfolio securities,
provided that no such loan of portfolio securities may be made by the Fund
if, as a result, the aggregate of such loans would exceed 33 1/3% of the
value of the Fund's total assets.
(5) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options, futures contracts, or other
derivative instruments, or from investing in securities or other
instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prohibit the Fund
from purchasing or selling securities or other instruments backed by real
estate or of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment
Company Act of 1940.
B-2
<PAGE>
(8) Purchase the securities of any issuer if, as a result, 25% or more of
the Fund's total assets would be invested in the securities of issuers
whose principal business activities are in the same industry (except that
this restriction shall not be applicable to securities issued or guaranteed
by the U.S. government or any agency or instrumentality thereof).
Except for restriction (2), if a percentage restriction is adhered to at the
time of investment, a later increase in percentage resulting from a change in
market value of the investment or the total assets will not constitute a
violation of that restriction.
The foregoing fundamental investment policies, together with the investment
objective of the Fund, and certain other policies specifically identified in
the prospectus, cannot be changed without approval by holders of a "majority of
the Fund's outstanding voting shares." As defined in the Investment Company Act
of 1940, this means the vote of (i) 67% or more of the Fund's shares present at
a meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy, or (ii) more than 50% of the Fund's shares, whichever is
less.
In addition to the foregoing fundamental investment policies, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short at no added cost, and provided that transactions in options, futures
contracts, options on futures contracts, or other derivative instruments
are not deemed to constitute selling securities short.
(2) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts, options
on futures contracts, or other derivative instruments shall not constitute
purchasing securities on margin.
(3) Purchase securities of open-end or closed-end investment companies
except in compliance with the Investment Company Act of 1940.
(4) Enter into futures contracts or related options if more than 30% of
the Fund's net assets would be represented by such instruments or more than
5% of the Fund's net assets would be committed to initial margin deposits
and premiums on futures contracts and related options.
(5) Invest in direct interests in oil, gas or other mineral exploration
programs or leases; however, the Fund may invest in the securities of
issuers that engage in these activities.
(6) Purchase securities when borrowings exceed 5% of its total assets. If
due to market fluctuations or other reasons, the value of the Fund's assets
falls below 300% of its borrowings, the Fund will reduce its borrowings
within 3 business days. To do this, the Fund may have to sell a portion of
its investments at a time when it may be disadvantageous to do so.
(7) Invest in illiquid securities if, as a result of such investment,
more than 15% of the Fund's net assets would be invested in illiquid
securities.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's investment
objective, policies, and techniques that are described in the Prospectus.
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EQUITY SECURITIES
Under normal market conditions, the Fund invests primarily in equity
securities of blue chip companies ("Equity Securities"). Equity Securities
include common stocks; preferred stocks; warrants to purchase common stocks or
preferred stocks; securities convertible into common or preferred stocks, such
as convertible bonds and debentures; and other securities with equity
characteristics. The Fund expects to be substantially fully invested in Equity
Securities under normal market conditions, and will invest at least 65% of its
total assets in Equity Securities which do not include warrants or rights to
purchase common stock.
Convertible securities must be rated A or higher by Moody's Investors Service
("Moody's") or A or higher by Standard & Poor's ("S&P"), Duff & Phelps, Inc.
("D&P") or Fitch IBCA, Inc. ("Fitch"). A general description of ratings may be
found in the Statement of Additional Information.
In addition, the Fund may invest up to 15% of its net assets in equity
securities of foreign issuers, either directly in U.S. market-traded securities
of those issuers or indirectly through investments in American Depository
Receipts ("ADRs"), as described in "Foreign Securities" below.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Short-Term Taxable Fixed Income Securities
For temporary defensive purposes and to keep cash on hand fully invested, the
Fund may invest up to 100% of its total assets in cash equivalents and short-
term taxable fixed income securities. Short-term taxable fixed income
securities are defined to include, without limitation, the following:
(1) U.S. government securities, including bills, notes and bonds
differing as to maturity and rates of interest, which are either issued or
guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States;
(b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury; (c) the Federal National
Mortgage Association, whose securities are supported by the discretionary
authority of the U.S. government to purchase certain obligations of the
agency or instrumentality; and (d) the Student Loan Marketing Association,
whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always
will do so since it is not so obligated by law. The U.S. government, its
agencies, and instrumentalities do not guarantee the market value of their
securities, and consequently, the value of such securities may fluctuate.
(2) Certificates of Deposit issued against funds deposited in a bank or
savings and loan association. Such certificates are for a definite period
of time, earn a specified rate of return, and are normally negotiable. If
such certificates of deposit are non-negotiable, they will be considered
illiquid securities and be subject to the Fund's 15% restriction on
investments in illiquid securities. Pursuant to the certificate of deposit,
the issuer agrees to pay the amount deposited plus interest to the bearer
of the certificate on the dated specified thereon. Under current FDIC
regulations, the maximum insurance payable as to any one certificate of
deposit is $100,000; therefore, certificates of deposit purchased by the
Fund may not be fully insured.
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(3) 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) Repurchase agreements which involve purchases of debt securities. In
such an action, at the time the Fund purchases the security, it
simultaneously agrees to resell and redeliver the security to the seller,
who also simultaneously agrees to buy back the security at a fixed price
and time. This assures a predetermined yield for the Fund during its
holding period since the resale price is always greater than the purchase
price and reflects an agreed-upon market rate. Such actions afford an
opportunity for the Fund to invest temporarily available cash. The Fund may
enter into repurchase agreements only with respect to obligations of the
U.S. government, its agencies or instrumentalities; certificates of
deposit; or bankers acceptances in which the Fund may invest. Repurchase
agreements may be considered loans to the seller, collateralized by the
underlying securities. The risk to the Fund is limited to the ability of
the seller to pay the agreed-upon sum on the repurchase date; in the event
of default, the repurchase agreement provides that the affected Fund is
entitled to sell the underlying collateral. If the value of the collateral
declines after the agreement is entered into, however, and if the seller
defaults under a repurchase agreement when the value of the underlying
collateral is less than the repurchase price, the Fund could incur a loss
of both principal and interest. Rittenhouse Financial Services, Inc.
("Rittenhouse") 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. Rittenhouse does so in an effort to determine that the value of
the collateral always equals or exceeds the agreed-upon repurchase price to
be paid to the Fund. If the seller were to be subject to a federal
bankruptcy proceeding, the ability of a Fund to liquidate the collateral
could be delayed or impaired because of certain provisions of the
bankruptcy laws.
(5) Bank time deposits, which are monies kept on deposit with banks or
savings and loan associations for a stated period of time at a fixed rate
of interest. There may be penalties for the early withdrawal of such time
deposits, in which case the yields of these investments will be reduced.
(6) Commercial paper, which are short-term unsecured promissory notes,
including variable rate master demand notes issued by corporations to
finance their current operations. Master demand notes are direct lending
arrangements between the Fund and a corporation. There is no secondary
market for the notes. However, they are redeemable by the Fund at any time.
Rittenhouse will consider the financial condition of the corporation (e.g.,
earning power, cash flow, and other liquidity ratios) and will continuously
monitor the corporation's ability to meet all of its financial obligations,
because the Fund's liquidity might be impaired if the corporation were
unable to pay principal and interest on demand. Investments in commercial
paper will be limited to commercial paper rated in the two highest
categories by a major rating agency or unrated commercial paper which is,
in the opinion of Rittenhouse, of comparable quality.
HEDGING STRATEGIES
General Description of Hedging Strategies
The Fund may engage in hedging activities. Rittenhouse may cause the Fund to
utilize a variety of financial instruments, including options, forward
contracts, futures contracts (sometimes referred to as "futures") and options
on futures contracts to attempt to hedge the Fund's holdings.
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Hedging or derivative instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that the
Fund owns or intends to acquire. Such instruments may also be used to "lock-in"
realized but unrecognized gains in the value of portfolio securities. Hedging
instruments on stock indices, in contrast, generally are used to hedge against
price movements in broad equity market sectors in which the Fund has invested
or expects to invest. Hedging strategies, if successful, can reduce the risk of
loss by wholly and partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging strategies
can also reduce the opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. A Fund may also use
derivative instruments to manage the risks of its assets. Risk management
strategies include, but are not limited to, facilitating the sale of Fund
securities, 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 foreign securities. The use of derivative
instruments may provide a less expensive, more expedient, or more specifically
focused way for the 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
considerations.
General Limitations on Futures and Options Transactions
The Trust has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the CFTC and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act (the "CEA"), the notice
of eligibility for the Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations. The Fund will not enter into futures
and options transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of the Fund's net assets. In addition,
the Fund will not enter into futures contracts and options transactions if more
than 30% of its net assets would be committed to such instruments.
The foregoing limitations are not fundamental policies of the Fund and may be
changed without shareholder approval as regulatory agencies permit. Various
exchanges and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to
increase the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
The Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered
investment companies and, if the guidelines so require, will set aside assets
permitted by the SEC and CFTC in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or options position is outstanding, unless replaced with other
permissible assets, and will be marked-to-market daily.
Stock Index Options
The Fund may (i) purchase stock index options for any purpose, (ii) sell
stock index options in order to close out existing positions, and/or (iii)
write covered options on stock indexes for hedging purposes. Stock index
options are put options and call options on various stock indexes. In most
respects, they are identical to listed options on common stocks. The primary
difference between stock options and index options occurs when index options
are exercised. In the case of stock options, the underlying security, common
stock, is delivered. However, upon the exercise of an index option, settlement
does not occur by delivery of the securities comprising the index. The option
holder who exercises the index option receives an amount of cash if the
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closing level of the stock index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the stock index and the exercise price of the option expressed
in dollars times a specified multiple.
A stock index fluctuates with changes in the market values of the stock
included in the index. For example, some stock index options are based on a
broad market index, such as the Standard & Poor's 500 or the Value Line
Composite Index or a narrower market index, such as the Standard & Poor's 100.
Indexes may also be based on an industry or market segment, such as the AMEX
Oil and Gas Index or the Computer and Business Equipment Index. Options on
stock indexes are currently traded on the following exchanges: the Chicago
Board of Options Exchange, the New York Stock Exchange, the American Stock
Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.
The Fund's use of stock index options is subject to certain risks. Successful
use by the Fund of options on stock indexes will be subject to the ability of
Rittenhouse 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, the Fund's ability to
effectively hedge all or a portion of the securities in its portfolio, in
anticipation of or during a market decline through transactions in put options
on stock indexes, depends on the degree to which price movements in the
underlying index correlate with the price movements of the securities held by
the Fund. Inasmuch as the Fund's securities will not duplicate the components
of an index, the correlation will not be perfect. Consequently, the Fund will
bear the risk that the prices of its securities being hedged will not move in
the same amount as the prices of its put options on the stock indexes. It is
also possible that there may be a negative correlation between the index and
the Fund's securities which would result in a loss on both such securities and
the options on stock indexes acquired by the Fund.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the options markets. The purchase of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. The
purchase of stock index options involves the risk that the premium and
transaction costs paid by the Fund in purchasing an option will be lost as a
result of unanticipated movements in prices of the securities comprising the
stock index on which the option is based. Options transactions may result in
significantly higher transaction costs and portfolio turnover for the Fund.
Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If the Fund
is unable to close out a call option on securities that it has written before
the option is exercised, the Fund may be required to purchase the optioned
securities in order to satisfy its obligation under the option to deliver such
securities. If the Fund is unable to effect a closing sale transaction with
respect to options on securities that it has purchased, it would have to
exercise the option in order to realize any profit and would incur transaction
costs upon the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for the Fund.
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Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Fund. Expiration of a call option written by the Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
If the Fund writes options, or purchases puts that are subject to the loss
deferral rules of Section 1092 of the Internal Revenue Code of 1986, as amended
(the "Code"), any losses on such options transactions, to the extent they do
not exceed the unrecognized gains on the securities covering the options, may
be subject to deferral until the securities covering the options have been
sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, the Fund will treat any gain or loss arising from the lapse,
closing out or exercise of such positions as 60% long-term and 40% short-term
capital gain or loss as required by Section 1256 of the Code. In addition,
certain 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
Standard & Poor's 500 index would be "nonequity options" within the meaning of
Code Section 1256.
Futures Contracts
The Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge against
movements in the equity markets, in order to establish more definitely the
effective return on securities held or intended to be acquired by the Fund or
for other purposes permissible under the CEA. The Fund's hedging may include
sales of Futures as an offset against the effect of expected declines in stock
prices and purchases of Futures as an offset against the effect of expected
increases in stock prices. The Fund will not enter into Futures Contracts which
are prohibited under the CEA and will, to the extent required by regulatory
authorities, enter only into Futures Contracts that are traded on national
futures exchanges and are standardized as to maturity date and underlying
financial instrument. The principal
interest rate Futures exchanges in the United States are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the CEA by the CFTC.
An 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
instrument (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 originally written. Transaction costs are incurred when a Futures
Contract is bought or sold and margin deposits must be maintained. A Futures
Contract may be satisfied by delivery or purchase, as the case may be, of the
instrument or by payment of the change in the cash value of the index. More
commonly, Futures Contracts are closed out prior to delivery by entering into
an offsetting transaction in a matching Futures Contract. Although the value of
an index might be a function of the value of certain specified securities, no
physical delivery of those securities is made. If the offsetting purchase price
is less than the original sale price, a gain will be realized; if it is more, a
loss will be realized. Conversely, if the offsetting sale price is more than
the original purchase price, a gain will be realized; if it is less, a loss
will be realized. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the Futures Contract.
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Margin is the amount of funds that must be deposited by the Fund with its
custodian in a segregated account in the name of the futures commission
merchant in order to initiate Futures trading and to maintain the Fund's open
positions in Futures Contracts. A margin deposit is intended to ensure the
Fund's performance of the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures
Contract is traded and may be significantly modified from time to time by the
exchange during the term of the Futures Contract. Futures Contracts are
customarily purchased and sold on margins that may range upward from less than
5% of the value of the Futures Contract being traded.
If the price of an open Futures Contract changes (by increase in the case of
a sale or by decrease in the case of a purchase) so that the loss on the
Futures Contract reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an increase in the margin.
However, if the value of a position increases because of favorable price
changes in the Futures Contract so that the margin deposit exceeds the required
margin, the broker will pay the excess to the Fund. In computing daily net
asset value, the Fund will mark to market the current value of its open Futures
Contracts. The Fund expects to earn interest income on their margin deposits.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess
of the amount initially invested in the Futures Contract. However, the Fund
would presumably have sustained comparable losses if, instead of the Futures
Contract, it had invested in the underlying financial instrument and sold it
after the decline.
Most United States Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day. The day limit
establishes the maximum amount that the price of a Futures Contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
Futures Contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions. Futures Contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of Futures
positions and subjecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a Futures position. The Fund would continue to be
required to meet margin requirements until the position is closed, possibly
resulting in a decline in the Fund's net asset value. In addition, many of the
contracts discussed above are relatively new instruments without a significant
trading history. As a result, there can be no assurance that an active
secondary market will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes,
including, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
Options on Futures
The Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate
an existing position. A futures option gives the holder the
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right, in return of the premium paid, to assume a long position (call) or short
position (put) in a Futures Contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the Futures Contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. Prior to
exercise or expiration, a futures option may be closed out by an offsetting
purchase or sale of a futures option of the same series.
The Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Fund uses put and call options on
securities or indexes. The purchase of put options on Futures Contracts is
analogous to the purchase of puts on securities or indexes so as to hedge the
Fund's securities holdings against the risk of declining market prices. The
writing of a call option or the purchasing of a put option on a Futures
Contract constitutes a partial hedge against declining prices of the securities
which are deliverable upon exercise of the Futures Contract. If the futures
price at expiration of a written call option is below the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's holdings of
securities. If the futures price when the option is exercised is above the
exercise price, however, the Fund will incur a loss, which may be offset, in
whole or in part, by the increase in the value of the securities held by the
Fund that were being hedged. Writing a put option or purchasing a call option
on a Futures Contract serves as a partial hedge against an increase in the
value of the securities the Fund intends to acquire.
As with investments in Futures Contracts, the Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts
written by it. Such margin deposits will vary depending on the nature of the
underlying Futures Contract (and the related initial margin requirements), the
current market value of the option, and other futures positions held by the
Fund. The Funds will set aside in a segregated account at the Funds' custodian
assets equal in value to the amount due on the underlying obligation. Such
segregated assets will be marked to market daily, and additional assets will be
placed in the segregated account whenever the total value of the segregated
account falls below the amount due on the underlying obligation.
The risks associated with the use of options on Futures Contracts include the
risk that the Fund may close out its position as a writer of an option only if
a liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on Futures Contracts depends on Rittenhouse's
ability to correctly predict the movement in prices of Futures Contracts and
the underlying instruments, which may prove to be incorrect. In addition, there
may be imperfect correlation between the instruments being hedged and the
Futures Contract subject to the option. For additional information, see
"Futures Contracts." 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
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because of initial margin
deposit requirements in markets, there might be increased participation by
speculators in the futures markets. This participation also might cause
temporary 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, the Fund is required to recognize as income
for each taxable year its net unrealized gains and losses on Futures Contracts
as of the end of the year, as well as gains and losses actually realized during
the year. Except for transactions in Futures Contracts that are classified as
part of a "mixed
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straddle" under Code Section 1256, any gain or loss recognized with respect to
a Futures Contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding period of
the Futures Contract. In the case of a Futures transaction not classified as a
"mixed straddle," the recognition of losses may be required to be deferred to a
later taxable year.
Sales of Futures Contracts that are intended to hedge against a change in the
value of securities held by a Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
The Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on Futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Fund's other investments and shareholders will be advised of the nature of
the payments.
Risks and Special Considerations Concerning Derivatives
The use of derivative instruments involves certain general risks and
considerations as described below. The specific risks pertaining to certain
types of derivative instruments are described in the sections that follow.
(1) Market Risk. Market risk is the risk that the value of the underlying
assets 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
leverage and, accordingly, fluctuations in the value of the derivative
instrument in relation to the underlying asset may be magnified. The successful
use of derivative instruments depends upon a variety factors, particularly the
portfolio manager's ability to predict movements of the securities, currencies,
and commodities markets, which may require different skills than predicting
changes in the prices of individual securities. There can be no assurance that
any particular strategy adopted will succeed. A decision to engage in a
derivative transaction will reflect the portfolio manager's judgment that the
derivative transaction will provide value to the Fund and its shareholders and
is consistent with the Fund's objectives, investment limitations, and operating
policies. In making such a judgment, the portfolio manager will analyze the
benefits and risks of the derivative transactions and weigh them in the context
of the Fund's overall investments and investment objective.
(2) Credit Risk. Credit risk is the risk that a loss may be sustained as a
result 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
instruments, there is no similar clearing agency guarantee. In all
transactions, the 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. The Fund will enter into
transactions in derivative instruments only within counterparties that their
respective portfolio manager reasonably believes are capable of performing
under the contract.
(3) Correlation Risk. Correlation risk is the risk that there might be an
imperfect correlation, or even no correlation, between price movements of a
derivative 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
underlying 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 derivative instrument used in a short hedge (such as writing a call
option, buying a put option or selling a futures contract) increased by less
than the decline in value of the hedged investments, the hedge would not be
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perfectly correlated. This might occur due to factors unrelated to the value of
the investments being hedged, such as speculative or other pressures on the
markets in which these instruments are traded. The effectiveness of hedges
using instruments on indices will depend, in part, on the degree of correlation
between 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
fundamental value. Generally, exchange contracts are very liquid because the
exchange clearinghouse is the counterparty of every contract. OTC transactions
are less liquid than exchange-traded derivatives since they often can only be
closed out with the other party to the transaction. The Fund might be required
by applicable regulatory requirements to maintain assets as "cover," maintain
segregated accounts, and/or make margin payments when it takes positions in
derivative instruments involving obligations to third parties (i.e.,
instruments other than purchase options). If the Fund is unable to close out
its positions in such instruments, it might be required to continue to maintain
such assets or accounts to 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
disadvantageous time. The 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 secondary 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 exchange for downside
protection, the party taking the risk is looking for a positive payoff. Despite
this voluntary assumption of risk, a counterparty that has lost money in a
derivative transaction may try to avoid payment by exploiting various legal
uncertainties about certain derivative products.
(6) Systemic of "Interconnection" Risk. Systemic or interconnection risk is
the risk that a disruption in the financial markets will cause difficulties for
all market participants. In other words, a disruption in one market will spill
over into other markets, perhaps creating a chain reaction. Much of the OTC
derivatives market takes place among the OTC dealers themselves, thus 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
instruments.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Illiquid Securities
The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction, illiquid securities
include, but are not limited to, restricted securities (securities the
disposition of which is restricted under the federal securities laws),
securities that may only be resold pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), but that are deemed to be
illiquid; and repurchase agreements with maturities in excess of seven days.
However, the Fund will not acquire illiquid securities if, as a result, such
securities would comprise more than 15% of the value of the Fund's net assets.
The Board of Trustees or its delegate has the ultimate authority to determine,
to the extent permissible under the federal securities laws, which securities
are liquid or illiquid for purposes of this 15% limitation. The Board of
Trustees has delegated to Rittenhouse the day-to-day determination of the
illiquidity of any security held by the Fund, although it has retained
oversight and ultimate responsibility for such determinations. Although no
definitive liquidity criteria are used, the Board of Trustees has directed
Rittenhouse to look to such factors as (i) the nature of the market for a
security (including the institutional private resale market; the frequency of
trades
B-12
<PAGE>
and quotes for the security; the number of dealers willing to purchase or sell
the security; and the amount of time normally needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer), (ii)
the terms of certain securities or other instruments allowing for the
disposition to a third party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), and (iii) other permissible relevant
factors.
Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Fund might obtain a less favorable price than that which prevailed when it
decided to sell. Illiquid securities will be priced at a fair value as
determined in good faith by the Board of Trustees or its delegate. If, through
the appreciation of illiquid securities or the depreciation of liquid
securities, the Fund should be in a position where more than 15% of the value
of its net assets are invested in illiquid securities, including restricted
securities which are not readily marketable, the affected Fund will take such
steps as is deemed advisable, if any, to protect liquidity.
Short Sales Against the Box
When Rittenhouse believes that the price of a particular security held by the
Fund may decline, it may make "short sales against the box" to hedge the
unrealized gain on such security. Selling short against the box involves
selling a security which the Fund owns for delivery at a specified date in the
future. The Fund will limit its transactions in short sales against the box to
5% of its net assets. If, for example, the Fund bought 100 shares of ABC at $40
per share in January and the price appreciates to $50 in March, the Fund might
"sell short" the 100 shares at $50 for delivery the following July. Thereafter,
if the price of the stock declines to $45, it will realize the full $1,000 gain
rather than the $500 gain it would have received had it sold the stock in the
market. On the other hand, if the price appreciates to $55 per share, the Fund
would be required to sell at $50 and thus receive a $1,000 gain rather than the
$1,500 gain it would have received had it sold the stock in the market. The
Fund may also be required to pay a premium for short sales which would
partially offset any gain.
Warrants
The Fund may invest in warrants. Investing in warrants is purely speculative
in that they have no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. Warrants basically are
options to purchase equity securities at a specific price for a specific period
of time. They do not represent ownership of the securities but only the right
to buy them. Warrants are issued by the issuer of the security, which may be
purchased on their exercise. The prices of warrants do not necessarily parallel
the prices of the underlying securities. The Fund does not intend to invest
more than 5% of its net assets in warrants.
When-Issued Securities
The 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 basis is fixed at the time the commitment to purchase is made, but
delivery and payment for the securities take place at a later date. Normally,
the settlement date occurs within 45 days of the purchase. During the period
between the purchase and settlement, no payment is made by the Fund to the
issuer and no interest is accrued on debt securities or dividend income is
earned on equity securities. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the Fund's other
assets. While when-issued securities may be sold prior to the settlement date,
the Fund intends to purchase such securities with the purpose of actually
acquiring them. At the time the Fund makes the commitment to purchase a
B-13
<PAGE>
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 Fund does not
believe that net asset value will be adversely affected by purchases of
securities on a when-issued basis.
The Fund will segregate and maintain assets equal in value to commitments for
when-issued securities. When the time comes to pay for when-issued securities,
the Fund will meet its obligations from then available cash flow, sale of the
securities held in the segregated account, described above, sale of other
securities 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 the Fund's payment obligation).
Securities of Foreign Issuers
The Fund may invest up to 15% of its net assets in equity securities of
foreign issuers, either directly in equity securities of those issuers traded
in U.S. securities markets, or indirectly in American Depositary Receipts
("ADRs") or other instruments denominated in U.S. dollars that permit indirect
investment in foreign securities. ADRs are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying foreign security
and denominated in U.S. dollars. Neither U.S. exchange listing or Nasdaq
quotation nor ADRs eliminate all the risks inherent in investing in foreign
issuers, such as changes in foreign currency exchange rates. However, by
investing in securities of foreign issuers traded in U.S. securities markets
and ADRs, rather than directly in foreign issuers' stock traded in foreign
markets, the Fund avoids currency risks during the settlement period. The
foreign issuers in which the Fund invests are generally large-capitalization
companies having characteristics similar to those the Fund seeks in investments
in U.S. issuers and listed on U.S. exchanges.
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
denominated and tends to increase when the value of the U.S. dollar falls
against such currency.
Some ADRs may not be sponsored by the issuer. ADRs are affected by the fact
that in many countries there is less publicly available information about
issuers than is available in the reports 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 regulation of foreign brokers, securities markets
and issuers; diplomatic developments; and political or social instability.
Foreign economies may differ favorably 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 comparable U.S. securities. From time to time,
foreign securities may be difficult to liquidate rapidly without adverse price
effects.
Portfolio Turnover
The Fund anticipates that its annual portfolio turnover rate will be between
20% and 30% under normal market conditions, and will generally not exceed 50%.
B-14
<PAGE>
MANAGEMENT
The management of the Trust, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is six, two of whom
are "interested persons" (as the term "interested persons" is defined in the
Investment Company Act of 1940) and four of whom are "disinterested persons."
The names and business addresses of the trustees and officers of the Trust and
their principal occupations and other affiliations during the past five years
are set forth below, with those trustees who are "interested persons" of the
Trust indicated by an asterisk.
<TABLE>
<CAPTION>
POSITION AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
---------------- --- ------------------ ----------------------
<C> <C> <C> <S>
Anthony T. Dean* 53 Chairman President since July 1,
333 W. Wacker Drive and Trustee 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated,
Nuveen Advisory Corp.
and Nuveen
Institutional Advisory
Corp.; prior thereto,
Executive Vice
President and Director
of The John Nuveen
Company, John Nuveen &
Co. Incorporated,
Nuveen Advisory Corp.
and Nuveen
Institutional Advisory
Corp.; President and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Chairman and Director
(since 1997) of
Rittenhouse Financial
Services, Inc.
Timothy R. Schwertfeger* 49 President and Trustee Chairman since July 1,
333 W. Wacker Drive 1996 of The John Nuveen
Chicago, IL 60606 Company, John Nuveen &
Co. Incorporated,
Nuveen Advisory Corp.
and Nuveen
Institutional Advisory
Corp.; prior thereto
Executive Vice
President and Director
of The John Nuveen
Company, John Nuveen &
Co. Incorporated,
Nuveen Advisory Corp.
and Nuveen
Institutional Advisory
Corp.; Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996)
of Institutional
Capital Corporation.
James E. Bacon 67 Trustee Business consultant;
114 W. 4th Street Director of Lone Star
New York, NY 10036 Industries, Inc.
(cement); retired.
William L. Kissick 66 Trustee Professor, School of
University of Pennsylvania Medicine and the
224 NEB/2L Wharton School of
Philadelphia, PA 19104 Management and
Chairman, Leonard Davis
Institute of Health
Economics, University
of Pennsylvania.
Thomas E. Leafstrand 66 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 66 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 37 Vice President and Vice President and
333 West Wacker Drive Assistant Secretary General Counsel (since
Chicago, IL 60606 September 1997) and
Secretary (since May
1998) of The John
Nuveen Company, John
Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. and
Nuveen Institutional
Advisory Corp.; prior
thereto, Partner in the
law firm of Kirkland &
Ellis.
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
POSITION AND PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE OFFICES WITH TRUST DURING PAST FIVE YEARS
---------------- --- ------------------ ----------------------
<C> <C> <C> <S>
Lorna C. Ferguson 53 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated; Vice
Chicago, IL 60606 President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory Corp.
Stephen D. Foy 44 Vice President and Vice President of John Nuveen
333 West Wacker Drive Controller & Co. Incorporated.
Chicago, IL 60606
Larry W. Martin 47 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General Counsel of John
Nuveen & Co. Incorporated;
Vice President and Assistant
Secretary of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; Assistant Secretary
of The John Nuveen Company.
Edward F. Neild, IV 33 Vice President Vice President (since
333 West Wacker Drive September 1996), previously
Chicago, IL 60606 Assistant Vice President
(since December 1993) of
Nuveen Advisory Corp.,
Portfolio Manager prior
thereto; Vice President
(since September 1996),
previously Assistant Vice
President (since May 1995)
of Nuveen Institutional
Advisory Corp., Portfolio
Manager prior thereto;
Chartered Financial Analyst.
Stuart W. Rogers 42 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated.
Chicago, IL 60606
H. William Stabenow 64 Vice President and Vice President and Treasurer
333 West Wacker Drive Treasurer of The John Nuveen Company,
Chicago, IL 60606 John Nuveen & Co.
Incorporated, Nuveen
Advisory Corp. and Nuveen
Institutional Advisory Corp.
William S. Swanson 32 Vice President Vice President of John Nuveen
333 West Wacker Drive & Co. Incorporated (since
Chicago, IL 60606 October 1997), prior
thereto, Assistant Vice
President (since September
1996); formerly Associate of
John Nuveen & Co.
Incorporated; Chartered
Financial Analyst.
Gifford R. Zimmerman 42 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel, previously
Assistant General Counsel of
John Nuveen & Co.
Incorporated; Vice President
and Assistant Secretary of
Nuveen Advisory Corp. and
Nuveen Institutional
Advisory Corp.; Chartered
Financial Analyst.
</TABLE>
B-16
<PAGE>
Anthony T. Dean, Thomas E. Leafstrand and Timothy R. Schwertfeger serve as
members of the Executive Committee of the Board of Trustees. The Executive
Committee, which meets between regular meetings of the Board of Trustees, is
authorized to exercise all of the powers of the Board of Trustees.
The trustees of the Trust are trustees of eleven open-end and closed-end
funds advised by NIAC.
Mr. Dean and Mr. Schwertfeger are also directors or trustees, as the case may
be, of 89 Nuveen open-end funds and closed-end funds advised by Nuveen Advisory
Corp.
The following table sets forth compensation estimated to be paid by the Trust
to each of the trustees who are not designated "interested persons" during the
Trust's fiscal year ending July 31, 1999. The Trust has no retirement or
pension plans. The officers and trustees affiliated with Nuveen serve without
any compensation from the Trust.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM TRUST
AGGREGATE AND FUND
COMPENSATION COMPLEX
FROM THE PAID TO
NAME OF TRUSTEE TRUST* TRUSTEES**
--------------- ------------ ------------
<S> <C> <C>
James E. Bacon.................................. $ 2,735 $ 29,500
William L. Kissick.............................. $ 2,735 $ 29,500
Thomas E. Leafstrand............................ $ 2,911 $ 32,000
Sheila W. Wellington............................ $ 2,735 $ 29,500
------- --------
Total....................................... $11,116 $120,500
======= ========
</TABLE>
*The Fund only recently commenced operations and has not yet completed
its first full year. The estimated compensation to be paid by the Fund
to independent trustees for the current fiscal year is a pro rata
portion of the total compensation to be paid by the Fund and the Fund
Complex to the independent trustees based upon the estimated relative
net asset value of the Fund as compared to the Fund Complex.
**Based on the compensation paid to the independent trustees for the one
year period ended July 31, 1998 for services to the 10 open-end and
closed-end funds advised by NIAC.
Each trustee who is not affiliated with NIAC receives a $20,000 annual
retainer for serving as a director or trustee of all funds for which NIAC
serves as investment adviser or manager and a $1,000 fee per day plus expenses
for attendance at all meetings held on a day on which a regularly scheduled
Board meeting is held, a $500 fee per day plus expenses for attendance in
person or a $500 fee per day plus expenses for attendance by telephone at a
meeting held on a day which no regular Board meeting is held and a $100 fee per
day plus expenses for attendance in person or by telephone at a meeting of the
Executive Committee held solely to declare dividends. The annual retainer, fees
and expenses are allocated among the funds for which NIAC serves as investment
adviser or manager on the basis of relative net asset sizes. The Trust requires
no employees other than its officers, all of whom are compensated by NIAC or
Nuveen.
As of November 10, 1998, the officers and directors of the Fund, in the
aggregate, own less than 1% of the shares of the Fund.
B-17
<PAGE>
The following table sets forth the percentage ownership of each person, who,
as of November 10, 1998, owns of record, or is known by Registrant to own of
record or beneficially 5% or more of any class of the Fund's shares.
<TABLE>
<CAPTION>
PERCENTAGE
OF RECORD
NAME CLASS NAME AND ADDRESS OF OWNER OWNERSHIP
---------- ------------------------------------- ----------
<S> <C> <C>
Class R Shares........... George W. Connell 75.74
121 Cheswold Ln
Havenford Pa 190411801
American Express Trust Co 6.22
Amer Exp Trust Ret Ser Pl
U/A 07/01/89
c/o Nancy Jendro
PO Box 534
Minneapolis Mn 554400534
Class A Shares........... Merrill Lynch, Pierce, Fenner & Smith 37.77
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 47.27
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 58.86
For the benefit of its customers
Attn: Fund Administration
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484
</TABLE>
B-18
<PAGE>
FUND MANAGER AND PORTFOLIO MANAGER
Fund Manager. NIAC acts as the manager of the Fund, with responsibility for
the overall management of the Fund. Its address is 333 West Wacker Drive,
Chicago, Illinois 60606. NIAC has entered into a Sub-Advisory Agreement with
Rittenhouse under which Rittenhouse, subject to NIAC's supervision, manages the
Fund's investment portfolio. NIAC is also responsible for managing the Fund's
business affairs and providing day-to-day administrative services to the Fund.
NIAC is a wholly-owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), which is also the principal underwriter of the Fund's 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
principally engaged in providing property-liability insurance through
subsidiaries.
For the fund management services and facilities furnished by NIAC, the Fund
has agreed to pay an annual management fee at rates set forth in the Prospectus
under "Management Fees." All fees and expenses are accrued daily and deducted
before payment of dividends to investors. In addition to the fee paid to NIAC
and the distribution and service fees paid to Nuveen, the Fund is responsible
for its own expenses that are not covered under such agreements, including,
without limitation: custodial, transfer agent, accounting and legal fees;
interest charges; brokerage commissions; organizational expenses; and
extraordinary expenses. NIAC agreed to waive all or a portion of its management
fee or reimburse certain expenses of the Fund for the fiscal years ended July
31, 1998 and July 31, 1999 in order to prevent total annual operating expenses
(excluding distribution or service fees, and extraordinary expenses) from
exceeding 1.10% of the average daily net asset value of any class of shares of
the Fund. Accordingly, for the period from inception (December 31, 1997)
through the fiscal year ended July 31, 1998, the Fund paid management fees net
of expense reimbursements of $515,670. During this same period, NIAC waived
fees and reimbursed expenses of $48,782 to the Fund.
Sub-Adviser. Rittenhouse is an institutional investment management firm based
in Radnor, Pennsylvania with over 19 years of experience and approximately $12
billion in assets under management as of October 31, 1998. Rittenhouse is a
wholly-owned subsidiary of The John Nuveen Company. Under the Sub-Advisory
Agreement, Rittenhouse is compensated by NIAC for its investment advisory
services to the Fund.
Out of the fund management fee, NIAC pays Rittenhouse a portfolio management
fee based on the average daily market net asset value of the Fund at an annual
rate as set forth below:
<TABLE>
<CAPTION>
PORTFOLIO
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
----------------------------- --------------
<S> <C>
For the first $500 million................................. .35% of 1%
For assets over $500 million............................... .30% of 1%
</TABLE>
Rittenhouse provides continuous advice and recommendations concerning the
Fund's investments, and is responsible for selecting the broker-dealers who
execute the portfolio transactions. Rittenhouse also serves as investment
adviser to pension and profit-sharing plans, and other institutional and
private investors. For the period from inception (December 31, 1997) through
the fiscal year ended July 31, 1998, NIAC paid Rittenhouse for its services to
the Fund $233,038.
B-19
<PAGE>
PORTFOLIO TRANSACTIONS
Rittenhouse is responsible for decisions to buy and sell securities for the
Fund and for the placement of the Fund's securities business, the negotiation
of the commissions to be paid on brokered transactions, the prices for
principal trades in securities, and the allocation of portfolio brokerage and
principal business. It is the policy of Rittenhouse to seek the best execution
at the best security price available with respect to each transaction, and with
respect to brokered transactions, in light of the overall quality of brokerage
and research services provided to the respective adviser and its advisees. The
best price to the Fund means the best net price without regard to the mix
between purchase or sale price and commission, if any. Purchases may be made
from underwriters, dealers, and, on occasion, the issuers. Commissions will be
paid on the Fund's futures and options transactions, if any. The purchase price
of portfolio securities purchased from an underwriter or dealer may include
underwriting commissions and dealer spreads. The Fund may pay mark-ups on
principal transactions. In selecting broker-dealers and in negotiating
commissions, Rittenhouse 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 the Fund's
shares.
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services a
commission for effecting a transaction in excess of the amount of commission
another broker or dealer would have charged for effecting the transaction.
Brokerage and research services include (a) furnishing advice as to the value
of securities, the advisability of investing, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).
In light of the above, in selecting brokers, Rittenhouse considers investment
and market information and other research, such as economic, securities and
performance measurement research, provided by such brokers, and the quality and
reliability of brokerage services, including execution capability, performance,
and financial responsibility. Accordingly, the commissions charged by any such
broker may be greater than the amount another firm might charge if Rittenhouse
determines in good faith that the amount of such commissions is reasonable in
relation to the value of the research information and brokerage services
provided by such broker to Rittenhouse or the Fund. Rittenhouse believes that
the research information received in this manner provides the Fund with
benefits by supplementing the research otherwise available to the Fund. The
Management Agreement and the Sub-Advisory Agreement provide that such higher
commissions will not be paid by the Fund unless the applicable adviser
determines in good faith that the amount is reasonable in relation to the
services provided. The investment advisory fees paid by the Fund to NIAC under
the Management Agreement or the subadvisory fees paid by NIAC to Rittenhouse
under the Sub-Advisory Agreement are not reduced as a result of receipt by
either NIAC or Rittenhouse of research services.
Rittenhouse places each place portfolio transactions for other advisory
accounts managed by it. Research services furnished by firms through which the
Fund effects its securities transactions may be used by Rittenhouse in
servicing all of its accounts; not all of such services may be used by
Rittenhouse in connection with the Fund. Rittenhouse believes it is not
possible to measure separately the benefits from research services to each of
the accounts (including the Fund) managed by it. Because the volume and nature
of the trading activities of the accounts are not uniform, the amount of
commissions in excess of those charged by another broker paid by each account
for brokerage and research services will vary. However, Rittenhouse believes
such costs to the Fund will not be disproportionate to the benefits received by
the Fund on a continuing basis. Rittenhouse seeks to allocate portfolio
transactions equitably whenever concurrent decisions are made to purchase or
sell securities by the Fund and another advisory account. In some cases, this
procedure could have an adverse effect on the price or
B-20
<PAGE>
the amount of securities available to the Fund. In making such allocations
between the Fund and other advisory accounts, the main factors considered by
Rittenhouse 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.
For the period from inception (December 31, 1997) through the fiscal year
ended July 31, 1998, the Fund paid $170,160 in brokerage commissions. During
this same period, the Fund paid to brokers as commissions in return for
research services $170,160 and the aggregate amount of those transactions on
which such commissions were paid was $202,041,315.
Under the Investment Company Act of 1940, the Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the terms of a security purchased
by the Fund, the amount of securities that may be purchased in any one issue
and the assets of the Fund that may be invested in a particular issue. In
addition, purchases of securities made pursuant to the terms of the Rule must
be approved at least quarterly by the Board of Trustees, including a majority
of the trustees who are not interested persons of the Trust.
NET ASSET VALUE
The Fund's net asset value per share is determined separately for each class
as of the close of trading (normally 4:00 p.m. eastern time) on each day the
New York Stock Exchange is open for business. The Exchange is not open for
trading on New Year's Day, Washington's Birthday, Martin Luther King's
birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. The Fund's net asset value may not be calculated on days
during which the Fund receives no orders to purchase shares and no shares are
tendered for redemption. Net asset value per share of a class is calculated by
taking the fair value of the pro rata portion of the Fund's total assets
attributable to that class, including interest or dividends accrued but not yet
collected, less all liabilities attributable to the class (including the
class's pro rata portion of the Fund's liabilities), and dividing 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 determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are
valued at market value. Common stocks and other equity-type securities are
valued at the last sales price on the national securities exchange or Nasdaq on
which such securities are primarily traded; however, securities traded on a
national securities exchange or Nasdaq for which there were no transactions on
a given day or securities not listed on a national securities exchange or
Nasdaq are valued at the most recent bid prices. 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 are valued at fair value as determined by the pricing service using
methods that include consideration of the following: yields or prices of bonds
of comparable quality, type of issue, coupon, maturity and rating; indications
as to value from securities dealers; and general marker conditions. The pricing
service may employ electronic data processing techniques and/or a matrix system
to determine valuations. Debt securities having remaining maturities of 60 days
or less when purchased are valued by the amortized cost method when the Board
of Trustees determines that the fair market value of such securities is their
amortized cost. Under this method of valuation, a security is initially valued
at its acquisition cost, and thereafter amortization of any discount or premium
is assumed each day, regardless of the impact of fluctuating interest rates on
the market value of the security. Regardless of the method employed to value a
particular security, all valuations are subject to review by the Fund's Board
of Trustees or its delegate who may determine the appropriate value of a
security whenever the value as calculated is significantly different from the
previous day's calculated value.
B-21
<PAGE>
TAX MATTERS
The following discussion of federal income tax matters is based upon the
advice of Chapman and Cutler, counsel to the Trust.
As described in the Prospectus, the Fund intends to qualify under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code") for tax
treatment as a regulated investment company. In order to qualify as a regulated
investment company, the Fund (i) must elect to be treated as a regulated
investment company and (ii) for each taxable year thereafter must satisfy
certain requirements relating to the source of its income, diversification of
its assets, and distributions of its income to shareholders. First, the Fund
must derive at least 90% of its annual gross income (including tax-exempt
interest) from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities, foreign
currencies or other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "90% gross income test"). Second,
for its initial year the Fund must derive less than 30% of its annual gross
income from the sale or other disposition of any of the following which was
held for less than three months: stock, securities and certain options,
futures, or forward contracts (the "short-short test"). The Taxpayer Relief Act
of 1997 (the "1997 Act") has repealed the short-short test for taxable years
beginning after the date of its enactment. Third, the Fund must diversify its
holdings so that, at the close of each quarter of its taxable year, (i) at
least 50% of the value of its total assets is comprised of cash, cash items,
United States Government securities, securities of other regulated investment
companies and other securities limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the Fund's total assets and
to not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities of any one issuer (other than United States Government
securities and securities of other regulated investment companies) or two or
more issuers controlled by a Fund and engaged in the same, similar or related
trades or businesses.
As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (without regard to its net
capital gain, i.e., the excess of its net long-term capital gain over its
short-term capital loss) and (ii) its net tax-exempt interest (the excess of
its gross tax-exempt interest income over certain disallowed deductions). In
addition, to the extent the Fund timely distributes to shareholders at least
98% of its taxable income (including any net capital gain), it will not be
subject to the 4% excise tax on certain undistributed income of "regulated
investment companies." The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax. The Fund may retain for
investment its net capital gain (which consists of the excess of its net long-
term capital gain over its net short-term capital loss). However, if the Fund
retains any net capital gain or any investment company taxable income, it will
be subject to federal income tax at regular corporate rates on the amount
retained. If the Fund retains any net capital gain, the Fund may designate the
retained amount as undistributed capital gains in a notice to its shareholders
who, if subject to federal income tax on long-term capital gains, (i) will be
required to include in income for federal income tax purposes, as long-term
capital gain, their shares of such undistributed amount, and (ii) will be
entitled to credit their proportionate shares of the tax paid by the Fund
against their federal income tax liabilities if any, and to claim refunds to
the extent the credit exceeds such liabilities. For federal income tax
purposes, the tax basis of shares owned by a shareholder of the Fund will be
increased by an amount equal to the difference between the amount of such
includable gains and the tax deemed paid by such shareholders in respect of
such shares. The Fund intends to distribute at least annually to its
shareholders all or substantially all of its investment company taxable income
and net capital gain.
B-22
<PAGE>
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, to elect (unless it
has made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or
any net foreign currency loss incurred after October 31 as if they had been
incurred in the succeeding year.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
Prior to purchasing shares in the Fund, a prospective shareholder should
carefully consider the impact of dividends or distributions which are expected
to be or have been declared, but not paid. Any dividend or distribution
declared shortly after a purchase of such shares prior to the record date will
have the effect of reducing the per share net asset value by the per share
amount of the dividend or distribution and will be subject to federal income
tax to the extent it is a distribution of ordinary income or capital gain.
In any taxable year of the Fund, distributions from the Fund, other than
distributions which are designated as capital gains dividends, will to the
extent of the earnings and profits on the Fund constitute dividends for Federal
income tax purposes which are taxable as ordinary income to shareholders. To
the extent that distributions to a shareholder in any year exceed the Fund's
current and accumulated earnings and profits, they will be treated as a return
of capital and will reduce the shareholder's basis in his or her shares and, to
the extent that they exceed his or her basis, will be treated as gain from the
sale of such shares as discussed below. Distributions of the Fund's net capital
gain which are properly designated as capital gain dividends by the Fund will
be taxable to the shareholders as long-term capital gain, regardless of the
length of time the shares have been held by a shareholder. Distributions will
be taxed in the manner described (i.e., as ordinary income, long-term capital
gain, return of capital or exempt-interest dividends) even if reinvested in
additional shares of the Fund.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received
by the shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of the Fund normally will result in
capital gain or loss to the shareholders. Generally, a shareholder's gain or
loss will be long-term gain or loss if the shares have been held for more than
one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. The Internal Revenue
Service Restructuring and Reform Act of 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). 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.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Shareholders and prospective investors should consult
with their tax advisers regarding the potential effect of this provision on
their investment in shares of the Fund.
B-23
<PAGE>
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Fund as long as the shares
of the Fund are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the shares of the Fund
are held by fewer than 500 persons, additional taxable income may be realized
by the individual (and other non-corporate) shareholders in excess of the
distributions received from the Fund.
All or a portion of a sales load paid in purchasing shares of the Fund cannot
be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to
the extent shares of the Fund or another fund are subsequently acquired without
payment of a sales load or with the payment of a reduced sales load pursuant to
the reinvestment or exchange privilege. Any disregarded portion of such load
will result in an increase in the shareholder's tax basis in the shares
subsequently acquired. Moreover, losses recognized by a shareholder on the
redemption or exchange of shares of the Fund held for six months or less are
disallowed to the extent of any distribution of exempt-interest dividends
received with respect to such shares and, if not disallowed, such losses are
treated as long-term capital losses to the extent of any distributions of long-
term capital gains made with respect to such shares. In addition, no loss will
be allowed on the redemption or exchange of shares of the Fund if the
shareholder purchases other shares of the Fund (whether through reinvestment of
distributions or otherwise) or the shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such redemption or exchange. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares acquired.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions
to its shareholders would be taxable to shareholders as ordinary dividend
income for federal income tax purposes to the extent of the Fund's available
earnings and profits.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares
who have not furnished to the Fund their correct taxpayer identification number
(in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
Shareholders who are non-resident aliens are subject to U.S. withholding tax
on ordinary income dividends (and, in certain cases, capital gains dividends)
at a rate of 30% or such lower rate as prescribed by an applicable tax treaty.
A corporate shareholder may be entitled to a 70% dividends received deduction
with respect to any portion of such shareholder's ordinary income dividends
which are attributable to dividends received by the Fund on certain Equity
Securities. This rule does not apply to certain corporate shareholders, such as
"S" corporations, which are not eligible for the deduction because of their
special characteristics and also does not apply for purposes of special taxes
such as the accumulated earnings tax and the personal holding corporation tax.
The Fund will designate the portion of any taxable dividend which is eligible
for this deduction. However, a corporate shareholder should be aware that
Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Shares of the Fund)
must generally be held at least 46 days (as determined under, and during the
period specified in, Section 246(c) of the Code). Regulations have been issued
which address special rules that must be considered in determining whether the
46 day holding requirement is met. Moreover, the allowable percentage of the
deduction will generally be reduced from 70% if a corporate shareholder owns
B-24
<PAGE>
Shares of the Fund the financing of which is directly attributable to
indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. To the extent dividends received by the Fund are attributable
to foreign corporations, a corporate shareholder will not be entitled to the
dividends received deduction with respect to its share of such foreign
dividends since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations. It should be noted
that payments to the Fund of dividends on Equity Securities that are
attributable to foreign corporations may be subject to foreign withholding
taxes. Corporate shareholders should consult with their tax advisers with
respect to the limitations on, and possible modifications to, the dividends
received deduction.
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 Fund and its shareholders and relates only to
the federal income tax status of the Fund and to the tax treatment of
distributions by the Fund to United States shareholders. For complete
provisions, reference should be made to the pertinent Code sections and
Treasury Regulations. The Code and Treasury Regulations are subject to change
by legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Shareholders are advised to consult their
own tax advisers for more detailed information concerning the federal taxation
of the Fund and the income tax consequences to its shareholders, as well as
with respect to foreign, state and local tax consequences of ownership of Fund
shares.
PERFORMANCE INFORMATION
The Fund may quote its yield, distribution rate, beta, average annual total
return or cumulative total return in reports to shareholders, sales literature
and advertisements each of which will be calculated separately for each class
of shares.
In accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission ("SEC"), yield is computed by dividing the
net investment income per share earned during the specified one month or 30-day
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b
Yield=2[(--- +1)/6/-1]
cd
In the above formula, a = dividends and interest earned during the period; b
= expenses accrued for the period (net of reimbursements); c = the average
daily number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the last day
of the period. In the case of Class A shares, the maximum offering price
includes the current maximum front-end sales charge of 5.25%.
In computing yield, the Fund follows certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that the Fund uses to prepare its annual and interim
financial statements in conformity with generally accepted accounting
principles. Thus, yield may not equal the income paid to shareholders or the
income reported in the Fund's financial statements.
<TABLE>
<CAPTION>
YIELD (AS OF 7/31/98)
--------------------------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
1998 1998 1998 1998
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nuveen Rittenhouse
Growth Fund............ (.11)% (.89)% (.89)% .14%
</TABLE>
B-25
<PAGE>
The Fund may from time to time in its advertising and sales materials report
a quotation of its current distribution rate. The distribution rate represents
a measure of dividends distributed for a specified period. The distribution
rate is computed by taking the most recent dividend per share, multiplying it
as needed to annualize it, and dividing by the appropriate price per share
(e.g., net asset value for purchases to be made without a load such as
reinvestments from Nuveen 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. The distribution rates
as of the period quoted, based on the maximum public offering price then in
effect for the Fund, and assuming the imposition of the maximum sales charge
for Class A Shares of 5.25%, was as follows:
<TABLE>
<CAPTION>
DISTRIBUTION RATES (AS OF 7/31/98)
----------------------------------
CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
1998 1998 1998 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Nuveen Rittenhouse
Growth Fund............ 0.00% 0.00% 0.00% 0.00%
</TABLE>
The Fund may from time to time in its advertising and sales literature quote
its beta. Beta is a standardized measure of a security's risk (variability of
returns) relative to the overall market, i.e. the proportion of the variation
in the security's returns that can be explained by the variation in the return
of the overall market. For example, a security with a beta of 0.85 is expected
to have returns that are 85% as variable as overall market returns. Conversely,
a security with a beta of 1.25 is expected to have returns that are 125% as
variable as overall market returns. The beta of the overall market is by
definition 1.00.
The formula for beta is given by:
Beta = [EPSILON] A * B/C
where
A = (Xi - X), i = 1,..., N
B = (Yi - Y), i =1,..., N
C = [EPSILON] (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 Fund on July 31, 1998, was 1.20. 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 three-year period ended July 31, 1998 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 the
Fund over a specified period of time. Average annual total return figures are
annualized and therefore represent the average annual percentage change over
the specified period. Cumulative total return figures are not annualized and
represent the aggregate percentage or dollar value change over a stated period
of time. Average annual total return and cumulative total return are based upon
the historical results of the Fund and are not necessarily representative of
the future performance of the Fund.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical,
B-26
<PAGE>
$1,000 investment ("initial investment") in Fund shares on the first day of the
period, reducing the amount to reflect the maximum sales charge, and computing
the "redeemable value" of that investment at the end of the period. The
redeemable value is then divided by the initial investment, and this quotient
is taken to the Nth root (N representing the number of years in the period) and
1 is subtracted from the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains distributions have been
reinvested in Fund shares at net asset value on the reinvestment dates during
the period. Average annual and cumulative total returns may also be presented
in advertising and sale literature without the inclusion of sales charges.
Calculation of cumulative total return is not subject to a prescribed
formula. Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of the
period, deducting (in some cases) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Cumulative total return calculations
that do not include the effect of the sales charge would be reduced if such
charge were included.
From time to time, the Fund may compare its risk-adjusted performance with
other investments that may provide different levels of risk and return. For
example, the Fund may compare its risk level, as measured by the variability of
its periodic returns, or its RISK-ADJUSTED TOTAL RETURN, with those of other
funds or groups of funds. Risk-adjusted total return would be calculated by
adjusting each investment's total return to account for the risk level of the
investment.
The risk level for a class of shares of the Fund, and any of the other
investments used for comparison, would be evaluated by measuring the
variability of the investment's return, as indicated by the standard deviation
of the investment's monthly returns over a specified measurement period (e.g.,
two years). An investment with a higher standard deviation of monthly returns
would indicate 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 the Fund and for
other investments over a specified period would be evaluated by dividing (a)
the remainder of the investment's annualized two-year total return minus the
annualized total return of an investment in Treasury bill securities
(essentially a risk-free return) over that period, by (b) the standard
deviation of the investment's monthly returns for the period. This ratio is
sometimes referred to as the "Sharpe measure" of return. An investment with a
higher Sharpe measure would be regarded as producing a higher return for the
amount of risk assumed during the measurement period than an investment with a
lower Sharpe measure.
Class A Shares of the Fund are sold at net asset value plus a current maximum
sales charge of 5.25% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Returns
and net asset value of each class of shares of the Fund will fluctuate. Factors
affecting the performance of the Fund include general market conditions,
operating expenses and investment management. Any additional fees charged by a
securities representative or other financial services firm would reduce returns
described in this section. Shares of the Fund are redeemable at net asset
value, which may be more or less than original cost.
In reports or other communications to shareholders or in advertising and
sales literature, the Fund may also compare its performance or the performance
of its portfolio manager with that of, or reflect the performance of:
B-27
<PAGE>
(1) the Consumer Price Index; (2) equity mutual funds or mutual fund indexes as
reported by Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc.
("Morningstar"), Wiesenberger Investment Companies Service ("Wiesenberger") and
CDA Investment Technologies, Inc. ("CDA") or similar independent services which
monitor the performance of mutual funds, or other industry or financial
publications such as Barron's, Changing Times, Forbes and Money Magazine;
and/or (3) the S&P 500 Index or unmanaged indices reported by Lehman Brothers.
Performance comparisons by these indices services or publications may rank
mutual funds over different periods of time by means of aggregate, average,
year-by-year, or other types of total return and performance figures. Any given
performance quotation or performance comparison should not be considered as
representative of the performance of the Fund for any future period.
The Fund may also from time to time in its advertising and sales literature
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank
certificates of deposit (CDs) or money market funds or indices that represent
these types of investments. U.S. Government bonds are long-term investments
backed by the full faith and credit of the U.S. Government. Bank CDs are
generally short-term, FDIC-insured investments, which pay fixed principal and
interest but are subject to fluctuating rollover rates. Money market funds are
short-term investments with stable net asset values, fluctuating yields and
special features enhancing liquidity.
There are differences and similarities between the investments which the Fund
may purchase and the investments measured by the indices 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.
Nuveen Rittenhouse Growth Fund
The Fund commenced operations on December 31, 1997. 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 and Class C shares incude the effect
of the applicable Contingent Deferred Sales Charge ("CDSC").
<TABLE>
<CAPTION>
NUVEEN RITTENHOUSE GROWTH FUND
-----------------------------------------------------------------------
CUMULATIVE
-------------
12/31/97
(INCEPTION)--
JULY 31, 1998
-------------
<S> <C> <C>
Class ANAV.............................................. 13.75%
Class APOP.............................................. 7.77%
Class B+................................................ 9.30%
Class C++............................................... 13.35%
Class R................................................. 13.95%
</TABLE>
- --------
+The total return figures for Class B shares take into account a 5.00% CDSC.
++The total return figures for Class C shares take into account a 1.00% CDSC.
B-28
<PAGE>
Rittenhouse's Performance Record
The table below presents annual investment returns for the Rittenhouse
Blended Equity Composite between January 1, 1983 (inception) and December 31,
1997 and the return for the first half of 1998. The Rittenhouse Blended Equity
Composite represents the composite performance of the 9,437 managed accounts
totalling approximately $4.3 billion as of June 30, 1998 for which Rittenhouse
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,
1/1/98- -------------------------------------------------------------
6/30-/98 1997 1996 1995 1994 1993 1992 1991 1990 1989
-------- ------ ------ ------ ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rittenhouse (Gross)..... 18.44 38.06% 18.97% 38.66% 2.60% 2.87% 5.66% 35.22% 1.64% 33.84%
Rittenhouse (Net)....... 17.67 36.25% 17.36% 36.86% 1.16% 1.43% 4.18% 33.45% 0.20% 32.08%
S&P 500................. 17.71 33.36% 22.96% 37.59% 1.32% 10.08% 7.61% 30.47% -3.11% 31.69%
Lipper Growth Fund
Index.................. 15.57 28.05% 17.52% 32.65% -1.57% 11.97% 7.63% 36.32% -5.41% 27.46%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS FOR THE YEAR ENDING DECEMBER 31,
----------------------------------------------------------
1988 1987 1986 1985 1984 1983
--------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rittenhouse (Gross)..... 18.90% 4.98% 23.43% 38.89% 13.40% 28.48%
Rittenhouse (Net)....... 17.29% 3.50% 21.77% 37.07% 11.85% 26.77%
S&P 500................. 16.61% 5.25% 18.65% 31.71% 6.27% 22.56%
Lipper Growth Fund
Index.................. 14.13% 3.26% 15.59% 30.14% -3.59% 21.33%
</TABLE>
The gross performance results of the Rittenhouse Blended Equity Composite
reflect the investment performance of the composite before deduction of any
investment advisory fees or other expenses. The net performance results of the
Rittenhouse Blended Equity Composite reflect the deduction of the annual
operating expenses (without waiver or reimbursement) for Class A shares of the
Fund, as summarized in the What are the Costs of Investing? section of the
Prospectus. Composite returns for 1998 are unaudited and subject to change. The
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") is a widely-
recognized, unmanaged index of common stock prices. S&P 500 returns assume
reinvestment of all dividends paid by the stocks included in the index, but do
not include brokerage commissions or other fees an investor would incur by
investing in the portfolio of stocks comprising the index. The current Lipper
Growth Fund Index reflects the average returns with dividends reinvested of the
30 largest funds in the Lipper Growth Fund Objective. Of the 1,012 funds in the
Lipper Growth Fund Objective as of June 30, 1998, there were 884, 338 and 181
funds, respectively, with 1-, 5- and 10-year performance records, and 109 funds
with records extending from composite inception on January 1, 1983 through June
30, 1998. The returns of the Lipper Growth Fund Index do not include the effect
of any sales charges that an investor will incur by purchasing the funds in the
Lipper Growth Fund Objective directly. There can be no assurance that the
Fund's future performance will be comparable to that shown above.
THE INFORMATION SHOWN REFLECTS THE PAST PERFORMANCE ACHIEVED BY RITTENHOUSE
IN MANAGING ITS SEPARATE ACCOUNTS, AND DOES NOT REFLECT PAST PERFORMANCE OF THE
FUND. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
B-29
<PAGE>
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES AND
SHAREHOLDER PROGRAMS
As described in the Prospectus, the Fund provides you with alternative ways
of purchasing Fund shares based upon your individual investment needs and
preferences.
Each class of shares of the Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with
respect to any distribution or service plan applicable to its shares. As a
result of the differences in the expenses borne by each class of shares, net
income per share, dividends per share and net asset value per share will vary
among the Fund's classes of shares. There are no conversion, preemptive or
other subscription rights, except that Class B shares automatically convert
into Class A shares as described 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
distribution and service fees.
The expenses to be borne by specific classes of shares may include (i)
transfer agency fees attributable to a specific class of shares, (ii) printing
and postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current shareholders
of a specific class of shares, (iii) Securities and Exchange Commission ("SEC")
and state securities registration fees incurred by a specific class of shares,
(iv) the expense of administrative personnel and services required to support
the shareholders of a specific class of shares, (v) litigation or other legal
expenses relating to a specific class of shares, (vi) directors' fees or
expenses incurred as a result of issues relating to a specific class of shares,
(vii) accounting expenses relating to a specific class of shares and (viii) any
additional incremental expenses subsequently identified and determined to be
properly allocated to one or more classes of shares.
INITIAL AND SUBSEQUENT PURCHASES OF SHARES
You may buy Fund shares through Authorized Dealers or by calling or directing
your financial adviser to call Nuveen toll-free at 800-257-8787. You may pay
for your purchase by Federal Reserve draft or by check made payable to "[Your
Fund], Class [A], [B], [C], [R]," delivered to the financial adviser through
whom the investment is to be made for forwarding to Nuveen Investor Services.
When making your initial investment, you must also furnish the information
necessary to establish your Fund account by completing and enclosing with your
payment the application form attached to the Prospectus (the "Application
Form"). After your initial investment, you may make subsequent purchases at any
time by forwarding to your financial adviser or Nuveen Investor Services a
check, in the amount of your purchase, made payable to "[Your Fund], Class [A],
[B], [C], [R]," and indicating on the check your account number. All payments
need to be in U.S. dollars and should be sent directly to Nuveen Investor
Services at P.O. Box 5186, Bowling Green Station, New York, NY 10004-5186. A
check drawn on a foreign bank or payable other than to the order of your Fund
generally will not be acceptable. You may also wire Federal Funds directly to
Nuveen Investor Services, but you may be charged a fee for this. For
instructions on how to make Fund purchases by wire transfer, call Nuveen toll-
free at 800-257-8787.
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Purchase Price
The price at which you purchase a class of Fund shares is based on the next
calculation of the net asset value for that share class after the order is
placed. The net asset value per share of each share class is determined as of
the close of trading (normally 4:00 p.m. Eastern Time) on each day the New York
Stock Exchange is open for business. See "Net Asset Value," for a description
of how net asset value is calculated.
Minimum Investment Requirements
The minimum initial investment is $3,000 per share class ($1,000 for a
Traditional/Roth IRA Account; $500 for an Education IRA Account), and $500 for
accounts opened through fee-based programs for which the program sponsor has
established a single master account with the fund's transfer agent and performs
all sub-accounting services related to that account. Additional purchases may
be in amounts of $50 or more. These minimums may be changed at any time by a
Fund. There are exceptions to these minimums for shareholders who qualify under
reinvestment programs.
SYSTEMATIC INVESTMENT PROGRAMS
The Fund offers you several opportunities to capture the benefits of "dollar
cost averaging" through systematic investment programs. In a regularly followed
dollar cost averaging program, you would purchase more shares when Fund share
prices are lower and fewer shares when Fund share prices are higher, so that
the average price paid for Fund shares is less than the average price of the
Fund shares over the same time period. Dollar cost averaging does not assure
profits or protect against losses in a steadily declining market. Since dollar
cost averaging involves continuous investment regardless of fluctuating price
levels, you should consider your financial ability to continue investing in
declining as well as rising markets before deciding to invest in this way. Each
Fund offers two different types of systematic investment programs:
Systematic Investment Plan
Once you have established a Fund account, you may make regular investments in
an amount of $50 or more each month by authorizing Nuveen Investor Services to
draw preauthorized checks on your bank account. There is no obligation to
continue payments and you may terminate your participation at any time at your
discretion. No charge in addition to the applicable sales charge is made in
connection with this Plan, and there is no cost to the Fund. To obtain an
application form for the Systematic Investment Plan, check the applicable box
on the Application Form or call Nuveen toll-free at 800-257-8787.
Payroll Direct Deposit Plan
Once you have established a Fund account, you may, with your employer's
consent, make regular investments in Fund shares of $25 or more per pay period
(meeting the monthly minimum of $50) by authorizing your employer to deduct
this amount automatically from your paycheck. There is no obligation to
continue payments and you may terminate your participation at any time at your
discretion. No charge in addition to the applicable sales charge is made for
this Plan, and there is no cost to the Fund. To obtain an application form for
the Payroll Direct Deposit Plan, check the applicable box on the Application
Form or call Nuveen toll-free at 800-257-8787.
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CLASS A SHARES
You may purchase Class A Shares at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. You may qualify for a
reduced sales charge, or the sales charge may be waived in its entirety, as
described below. Class A Shares are also subject to an annual service fee of
.25%. See "Distribution and Service Plans." Set forth below is an example of
the method of computing the offering price of the Class A shares of each of the
Funds. The example assumes a purchase on July 31, 1998 of Class A shares from a
Fund aggregating less than $50,000 subject to the schedule of sales charges set
forth in the Prospectus at a price based upon the net asset value of the Class
A shares.
<TABLE>
<CAPTION>
NUVEEN
RITTENHOUSE
GROWTH FUND
-----------
<S> <C>
Net Asset Value per share.................................... $ 22.75
Per Share Sales Charge--5.25% of public offering price (5.54%
of net asset value per share)............................... $ 1.26
Per Share Offering Price to the Public....................... $ 24.01
Shares Outstanding (as of July 31, 1998)..................... 1,894,035
</TABLE>
The Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
Certain commercial banks may make Class A Shares of the 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
register as securities dealers in certain states.
REDUCTION OR ELIMINATION OF UP-FRONT SALES CHARGE ON CLASS A SHARES AND CLASS R
SHARE PURCHASE AVAILABILITY
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A Shares of
the Fund if the amount of your purchase, when added to the value that day of
all of your prior purchases of shares of the Fund or of another Nuveen Mutual
Fund or Nuveen exchange-traded fund, or units of a Nuveen Defined Portfolio, on
which an up-front sales charge or ongoing distribution fee is imposed, or is
normally imposed, falls within the amounts stated in the Class A sales charges
and commissions table in "How to Choose a Share Class" in the Fund's
Prospectus. You or your financial adviser must notify Nuveen or the Fund's
transfer agent of any cumulative discount whenever you plan to purchase Class A
Shares of the Fund that you wish to qualify for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A Shares of
the Fund if you plan to purchase Class A Shares of Nuveen Mutual Funds over the
next 13 months and the total amount of your purchases would, if purchased at
one time, qualify you for one of the reduced sales charges shown in the Class A
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sales charges and commissions table in "How to Choose a Share Class" in the
Fund's Prospectus. In order to take advantage of this option, you must complete
the applicable section of the Application Form or sign and deliver either to an
Authorized Dealer or to the Fund's transfer agent a written Letter of Intent in
a form acceptable to Nuveen. A Letter of Intent states that you intend, but are
not obligated, to purchase over the next 13 months a stated total amount of
Class A shares that would qualify you for a reduced sales charge shown above.
You may count shares of a Nuveen Mutual Fund that you already own on which you
paid an up-front sales charge or an ongoing distribution fee and any Class B
and Class C Shares of a Nuveen Mutual Fund that you purchase over the next 13
months towards completion of your investment program, but you will receive a
reduced sales charge only on new Class A Shares you purchase with a sales
charge over the 13 months. You cannot count towards completion of your
investment program Class A Shares that you purchase without a sales charge
through investment of distributions from a Nuveen Mutual 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 the Fund following execution of the Letter of Intent will be
at least 5% of the total amount of your intended purchases. You further agree
that shares representing 5% of the total amount of your intended purchases will
be held in escrow pending completion of these purchases. All dividends and
capital gains distributions on Class A Shares held in escrow will be credited
to your account. If total purchases, less redemptions, prior to the expiration
of the 13 month period equal or exceed the amount specified in your Letter of
Intent, the Class A Shares held in escrow will be transferred to your account.
If the total purchases, less redemptions, exceed the amount specified in your
Letter of Intent and thereby qualify for a lower sales charge than the sales
charge specified in your Letter of Intent, you will receive this lower sales
charge retroactively, and the difference between it and the higher sales charge
paid will be used to purchase additional Class A Shares on your behalf. If the
total purchases, less redemptions, are less than the amount specified, you must
pay Nuveen an amount equal to the difference between the amounts paid for these
purchases and the amounts which would have been paid if the higher sales charge
had been applied. If you do not pay the additional amount within 20 days after
written request by Nuveen or your financial adviser, Nuveen will redeem an
appropriate number of your escrowed Class A Shares to meet the required
payment. By establishing a Letter of Intent, you irrevocably appoint Nuveen as
attorney to give instructions to redeem any or all of your escrowed shares,
with full power of substitution in the premises.
You or your financial adviser must notify Nuveen or the Fund's transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Defined Portfolio Distributions
You may purchase Class A Shares without an up-front sales charge by
reinvestment 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
the Fund or of another Nuveen Mutual Fund at the reduced sales charge
applicable to the group's purchases taken as a whole. A "qualified group" is
one which has previously been in existence, has a purpose other than
investment, has ten or more participating members, has agreed to include Fund
sales publications in mailings to members and has agreed to comply with certain
administrative requirements relating to its group purchases.
Under any group purchase program, the minimum initial investment in Class A
Shares of the Fund or portfolio for each participant in the program is $3,000
and the minimum monthly investment in Class A Shares
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of the Fund or portfolio by each participant is $50. No certificate will be
issued for any participant's account. All dividends and other distributions by
the Fund will be reinvested in additional Class A Shares of the Fund. No
participant may utilize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each
participant must fill out application materials, which the group administrator
may obtain from the group's financial adviser, by calling Nuveen toll-free at
800-257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds
You may also purchase Class A Shares at net asset value without a sales
charge if the purchase takes place through an Authorized Dealer and represents
the reinvestment of the proceeds of the redemption of shares of one or more
registered investment companies not affiliated with Nuveen. You must provide
appropriate documentation that the redemption occurred not more than one year
prior to the reinvestment of the proceeds in Class A Shares, and that you
either paid an up-front sales charge or were subject to a contingent deferred
sales charge in respect of the redemption of such shares of such other
investment company.
Elimination of Sales Charge on Class A Shares
Class A Shares of 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;
. officers, trustees and former trustees of the Trust or any Nuveen-spon-
sored registered investment company;
. bona fide, full-time and retired employees of Nuveen, Rittenhouse, or
Rittenhouse Trust Company ("RTC"), any parent company of Nuveen, and
subsidiaries of those companies, 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 eligible employer-sponsored qualified defined contribution retire-
ment 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 pur-
chase 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.
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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 million
and the Authorized Dealer did not waive the sales commission, a contingent
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 the Fund. You or your
financial adviser must notify Nuveen or the Fund's transfer agent whenever you
make a purchase of Class A Shares of the Fund that you wish to be covered under
these special sales charge waivers.
Class A Shares of the Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment
company. All purchases under the special sales charge waivers will be subject
to minimum purchase requirements as established by the Fund.
In determining the amount of your purchases of Class A Shares of the Fund
that may qualify for a reduced sales charge, the following purchases may be
combined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their
immediate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons-and daughters-in-law, siblings, a sibling's
spouse, and a spouse's siblings); or (3) all purchases made through a group
purchase program as described above.
Class R Share Purchase Eligibility
Class R Shares are available for purchases of $2.5 million or more and for
purchases using dividends and capital gains distributions on Class R Shares.
Class R Shares also are available for the following categories of investors and
pension, 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, Rittenhouse or
RTC, any parent company of Nuveen, and subsidiaries of those companies,
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;
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<PAGE>
. any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by a Fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their
distributions 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). Shareholders may exchange their Class R Shares of any Nuveen Fund into
Class R Shares of any other Nuveen Fund. You may also exchange Class R Shares
of the Fund for Class A Shares without a sales charge if the current net asset
value of your Class R Shares is at least $3,000 (or you already own Class A
Shares).
The reduced sales charge programs may be modified or discontinued by the
Funds at any time. To encourage their participation, the Fund waives the sales
charge on Class A Shares and offers Class R Shares to trustees and officers of
the Trust and other affiliated persons of the Trust and Nuveen as noted above.
If you are eligible to purchase either Class R Shares or Class A Shares
without a sales charge at net asset value, you should be aware of the
differences between these two classes of shares. Class A Shares are subject to
an annual service fee to compensate Authorized Dealers for providing you with
ongoing account services. Class R Shares are not subject to a distribution or
service fee and, consequently, holders of Class R Shares may not receive the
sale types or levels of services from Authorized Dealers. In choosing between
Class A Shares and Class R Shares, you should weigh the benefits of the
services to be provided by Authorized Dealers against the annual service fee
imposed upon the Class A Shares.
For more information about the purchase of Class A Shares or reduced sales
charge program, or to obtain the required application forms, call Nuveen toll-
free at (800) 257-8787.
CLASS B SHARES
You may purchase Class B Shares at a public offering price equal to the
applicable net asset value per share without any up-front sales charge. Since
Class B Shares are sold without an initial sales charge, the full amount of
your purchase payment will be invested in Class B Shares. Class B Shares are
subject to an annual distribution fee to compensate Nuveen for its costs in
connection with the sale of Class B shares, and are also subject to an annual
service fee to compensate Authorized Dealers for providing you with ongoing
financial advice and other account services.
You may be subject to a CDSC if you redeem your Class B shares prior to the
end of the sixth year after purchase. See "Reduction or Elimination of
Contingent Deferred Sales Charge" below. Nuveen compensates Authorized Dealers
for sales of Class B Shares at the time of sale at the rate of 4.00% of the
amount of Class B Shares purchased, which represents a sales commission of
3.75% plus an advance on the first year's annual service fee of .25%.
Class B Shares acquired through the reinvestment of dividends are not subject
to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares' cost
or net asset value at the time of redemption.
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Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any
conversion of Class B Shares into Class A Shares will be subject to the
continuing availability of an opinion of counsel or a private letter ruling
from the Internal Revenue Service to the effect that the conversion of shares
would not constitute a taxable event under federal income tax law. Conversion
of Class B Shares into Class A Shares might be suspended if such an opinion or
ruling were no longer available.
CLASS C SHARES
You may purchase Class C Shares at a public offering price equal to the
applicable net asset value per share without any up-front sales charge. Class C
Shares are subject to an annual distribution fee of .75% to compensate Nuveen
for its costs in connection with the sale of Class C Shares. Class C Shares are
also subject to an annual service fee of .25% to compensate Authorized Dealers
for providing you with on-going financial advice and other account services.
Nuveen compensates Authorized Dealers for sales of Class C Shares at the time
of the sale at a rate of 1% of the amount of Class C Shares purchased, which
represents a sales commission of .75% plus an advance on the first year's
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.
However, 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
employer-sponsored defined contribution plan described above, where the
Authorized Dealer did not waive the sales commission, a CDSC of 1% is imposed
on any redemption within 18 months of purchase. In the case of Class B Shares
redeemed within six years of purchase, a CDSC is imposed, beginning at 5% for
redemptions within the first year, declining to 4% for redemptions within years
two and three, and declining by 1% each year thereafter until disappearing
after the sixth year. Class C Shares are redeemed at net asset value, without
any CDSC, except that a CDSC of 1% is imposed upon redemption of Class C Shares
that are redeemed within 12 months of purchase.
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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
account due to capital appreciation, and then will redeem shares held for the
longest period, unless the shareholder specifies another order. No CDSC is
charged on shares purchased as a result of automatic reinvestment of dividends
or capital gains paid. In addition, no CDSC will be charged on exchanges of
shares into another Nuveen Mutual Fund or Nuveen money market fund. The holding
period is calculated on a monthly basis and begins the first day of the month
in which the order for investment is received. The CDSC is calculated based on
the lower of the redeemed shares' cost or net asset value at the time of the
redemption and is deducted from the redemption proceeds. Nuveen receives the
amount of any CDSC shareholders pay. If Class A, Class B or Class C shares
subject to a CDSC are exchanged for shares of a Nuveen money market fund, the
CDSC would be imposed on the subsequent redemption of those money market fund
shares, and the period during which the shareholder holds the money market fund
shares would be counted in determining the remaining duration of the CDSC. The
Fund may elect not to so count the period during which the shareholder held the
money market fund shares, in which event the amount of any applicable CDSC
would be reduced in accordance with applicable SEC rules by the amount of any
12b-1 plan payments to which those money market funds shares may be subject.
The CDSC may be waived or reduced under the following circumstances: (i) in
the event of total disability (as evidenced by a determination by the federal
Social Security Administration) of the shareholder (including a registered
joint owner) occurring after the purchase of the shares being redeemed; (ii) in
the event of the death of the shareholder (including a registered joint owner);
(iii) for redemptions made pursuant to a systematic withdrawal plan, up to 12%
annually of the current market value; (iv) involuntary redemptions caused by
operation of law; (v) redemptions in connection with a payment of account or
plan fees; (vi) redemptions in connection with the exercise of a reinstatement
privilege whereby the proceeds of a redemption of the Fund's shares subject to
a sales charge are reinvested in shares of certain funds within a specified
number of days; and (vii) redemptions in connection with the exercise of the
Fund's right to redeem all shares in an account that does not maintain a
certain minimum balance or that the applicable board has determined may have
material adverse consequences to the shareholders of the Fund.
In addition, the CDSC will be waived in connection with the following
redemptions of shares held by an employer-sponsored qualified defined
contribution retirement plan: (i) partial or complete redemptions in connection
with a distribution without penalty under Section 72(t) of the Internal Revenue
Code ("Code") from a retirement plan: (a) upon attaining age 59 1/2, (b) as
part of a series of substantially equal periodic payments, or (c) upon
separation from service and attaining age 55; (ii) partial or complete
redemptions in connection with a qualifying loan or hardship withdrawal; (iii)
complete redemptions in connection with termination of employment, plan
termination or transfer to another employer's plan or IRA; and (iv) redemptions
resulting from the return of an excess contribution. The CDSC will also be
waived in connection with the following redemptions of shares held in an IRA
account: (i) for redemptions made pursuant to an IRA systematic withdrawal
based on the shareholder's life expectancy including, but not limited to,
substantially equal periodic payments described in Code Section 72(t)(A)(iv)
prior to age 59; and (ii) for redemptions to satisfy required minimum
distributions after age 70 from an IRA account (with the maximum amount subject
to this waiver being based only upon the shareholder's Nuveen IRA accounts).
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SHAREHOLDER PROGRAMS
Exchange Privilege
You may exchange shares of a class of the Fund for shares of the same class
of any other Nuveen Mutual Fund with reciprocal exchange privileges, at net
asset value without a sales charge, by sending a written request to the Fund,
c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New York,
NY 10274-5186. Similarly, Class A, Class B, Class C and Class R Shares of other
Nuveen Mutual Funds may be exchanged for the same class of shares of the Fund
at net asset value without a sales charge. Exchanges of shares from any Nuveen
money market fund will be made into Class A Shares, Class B Shares, Class C
Shares or Class R Shares (if eligible) of the Fund at the public offering
price. If, however, a sales charge has previously been paid on the investment
represented by the exchanged shares (i.e., the shares to be exchanged were
originally issued in exchange for shares on which a sales charge was paid), the
exchange of shares from a Nuveen money market fund will be made into shares of
the Fund at net asset value. 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
requirement of the Nuveen Mutual Fund being purchased. For federal income tax
purposes, 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
Prospectus for the Nuveen Mutual Fund you are purchasing and read it carefully.
If the registration of the account for the Fund you are purchasing is not
exactly the same as that of the fund account from which the exchange is made,
written instructions from all holders of the account from which the exchange is
being made must be received, with signatures guaranteed by a member of an
approved Medallion Guarantee Program or in such other manner as may be
acceptable to the Fund. You may also exchange shares by telephone if you
authorize telephone exchanges by checking the applicable box on the Application
Form or by calling Nuveen toll-free at 800-257-8787 to obtain an authorization
form. The exchange privilege may be modified or discontinued by the Fund at any
time.
The exchange privilege is not intended to permit the Fund to be used as a
vehicle for short-term trading. Excessive exchange activity may interfere with
portfolio management, raise expenses, and otherwise have an adverse effect on
all shareholders. In order to limit excessive exchange activity and in other
circumstances where Fund management believes doing so would be in the best
interest of the Fund, the Fund reserves the right to revise or terminate the
exchange privilege, or limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to the extent
required by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of the Fund or any other
Nuveen Mutual Fund that were subject to a sales charge or a CDSC, you have up
to one year to reinvest all or part of the full amount of the redemption in the
same class of shares of the Fund at net asset value. This reinstatement
privilege can be exercised only once for any redemption, and reinvestment will
be made at the net asset value next calculated after reinstatement of the
appropriate class of Fund shares. If you reinstate shares that were subject to
a CDSC, your holding period as of the redemption date also will be reinstated
for purposes of calculating a CDSC. The
B-39
<PAGE>
federal income tax consequences of any capital gain realized on a redemption
will not be affected by reinstatement, but a capital loss may be disallowed in
whole or in part depending on the timing, the amount of the reinvestment and
the fund from which the redemption occurred.
Fund DirectSM
You can use Fund Direct to link your fund account to your account at a bank
or other financial institution. Fund Direct enables you to transfer money
electronically between these accounts and perform a variety of account
transactions. These include purchasing shares by telephone, investing through a
Systematic Investment Plan, and sending dividends, distributions, redemption
payments or Systematic Withdrawal Plan payments directly to your bank account.
Please refer to the Application Form for details, or call Nuveen Investor
Services at 800-257-8787 for more information.
Fund Direct privileges may be requested via an application you obtain by
calling 800-257-8787. Fund Direct privileges will apply to each shareholder
listed in the registration on your account as well as to your Authorized Dealer
representative of record unless and until Nuveen Investor Services receives
written instructions terminating or changing those privileges. After you
establish Fund Direct for your account, any change of bank account information
must be made by signature-guaranteed instructions to Nuveen Investor Services
signed by all shareholders who own the account.
Purchases may be made by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call Nuveen Investor Services at 800-257-8787. The purchase
payment will be debited from your bank account.
REDEMPTION
You may redeem shares by sending a written request for redemption directly to
the Fund, c/o, Nuveen Investor Services, P.O. Box 5186, Bowling Green Station,
New York, New York 10274-5186, accompanied by duly endorsed certificates, if
issued. Requests for redemption and share certificates, if issued, must be
signed by each shareholder and, if the redemption proceeds exceed $50,000 or
are payable other than to the shareholder of record at the address of record
(which address may not have changed in the preceding 60 days), the signature
must be guaranteed by a member of an approved Medallion Guarantee Program or in
such other manner as may be acceptable to the Fund. You will receive payment
based on the net asset value per share next determined after receipt by the
Fund of a properly executed redemption request in proper form. A check for the
redemption proceeds will be mailed to you within seven days after receipt of
your redemption request. For accounts registered in the name of a broker-
dealer, payment will be forwarded within three business days. However, if any
shares to be redeemed were purchased by check within 15 days prior to the date
the redemption request is received, the Fund will not mail the redemption
proceeds until the check received for the purchase of shares has cleared, which
may take up to 15 days.
Telephone and Electronic Redemptions
If you have authorized telephone redemption and your account address has not
changed within the last 60 days, you can redeem shares that are held in non-
certificate form by calling Nuveen Investor Services at 800-257-8787. While you
or anyone authorized by you may make telephone redemption requests, redemption
checks will be issued only in the name of the shareholder of record and will be
mailed to the address of record. If your telephone request is received prior to
4:00 p.m. eastern time, the redemption check will normally be
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<PAGE>
mailed the next business day. For requests received after 4:00 p.m. eastern
time, the redemption will be effected at 4:00 p.m. eastern time the following
business day and the check will normally be mailed on the second business day
after the request.
If you have authorized electronic fund redemption or established Fund Direct
privileges, you can take advantage of the following expedited redemption
procedures to redeem shares held in non-certificate form that are worth at
least $1,000. You may make electronic fund redemption requests through a phone
representative or Fund Direct redemption requests by calling Nuveen Investor
Services at 800-257-8787. If a redemption request is received by 4:00 p.m.
eastern time, the redemption will be made as of 4:00 p.m. that day. If the
redemption request is received after 4:00 p.m. eastern time, the redemption
will be made as of 4:00 p.m. the following business day. Proceeds of electronic
fund redemptions will normally be wired on the second business day following
the redemption, but may be delayed one additional business day if the Federal
Reserve Bank of Boston or the Federal Reserve Bank of New York is closed on the
day redemption proceeds would ordinarily be wired. The Fund reserves the right
to charge a fee for electronic fund redemption. Proceeds of redemptions through
Fund Direct will normally be wired to your Fund Direct bank account on the
second or third business day after the redemption.
Before you may redeem shares electronically by phone or through Fund Direct,
you need to complete the telephone redemption authorization section of the
Application Form or the Fund Direct application form and return it to Nuveen
Investor Services. If you did not authorize telephone redemption when you
opened your account, you may obtain a telephone redemption authorization form
by writing the Fund or by calling Nuveen Investor Services toll-free at 800-
257-8787. Proceeds from electronic share redemptions will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
shareholder on the Application Form. You need to send a written request to
Nuveen Investor Services in order to establish multiple accounts, or to change
the account or accounts designated to receive redemption proceeds. These
requests must be signed by each account owner with signatures guaranteed by a
member of an approved Medallion Guarantee Program or in such other manner as
may be acceptable to a Fund. Further documentation may be required from
corporations, executors, trustees or personal representatives.
For the convenience of shareholders, the Fund has authorized Nuveen as its
agent to accept orders from financial advisers by wire or telephone for the
redemption of Fund shares. The redemption price is the first net asset value of
the appropriate share class determined following receipt of an order placed by
the financial adviser. The Fund makes payment for the redeemed shares to the
securities representatives who placed the order promptly upon presentation of
required documents with signatures guaranteed as described above. Neither the
Fund nor Nuveen charges any redemption fees other than any CDSC as described
above. However, your financial adviser may charge you for serving as agent in
the redemption of shares.
The Fund reserves the right to refuse telephone redemptions and, at its
option, may limit the timing, amount or frequency of these redemptions.
Telephone redemption procedures may be modified or terminated at any time, on
30 days' notice, by the Fund. The Fund, Chase Global Funds Services Company,
the Fund's shareholder services agent ("Chase Global"), and Nuveen will not be
liable for following telephone instructions reasonably believed to be genuine.
The Fund employs procedures reasonably designed to confirm that telephone
instructions are genuine. These procedures include recording all telephone
instructions and requiring up to three forms of identification prior to acting
upon a caller's instructions. If the Fund does not follow reasonable procedures
for protecting shareholders against loss on telephone transactions, it may be
liable for any losses due to unauthorized or fraudulent telephone instructions.
B-41
<PAGE>
Systematic Withdrawal Plan.
If you own Fund shares currently worth at least $10,000, you may establish a
Systematic Withdrawal Plan by completing an application form for the Plan. You
may obtain an application form by checking the applicable box on the
Application Form or by calling Nuveen toll-free at 800-257-8787.
The Plan permits you to request periodic withdrawals on a monthly, quarterly,
semi-annual or annual basis in an amount of $50 or more. Depending upon the
size of the withdrawals requested under the Plan and fluctuations in the net
asset value of Fund shares, these withdrawals may reduce or even exhaust your
account.
The purchase of Class A Shares, other than through reinvestment, while you
are participating in the Systematic Withdrawal Plan with respect to Class A
Shares will usually be disadvantageous because you will be paying a sales
charge on any Class A Shares you purchase at the same time you are redeeming
shares. Similarly, use of the Systematic Withdrawal Plan for Class B Shares
held for less than six years or Class C Shares held for less than 12 months may
be disadvantageous because the newly-purchased Class B or Class C Shares will
be subject to the CDSC.
Suspension of Right of Redemption
The Fund may suspend the right of redemption of Fund shares or delay payment
more than seven days (a) during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that trading of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for any other periods that the Securities and Exchange
Commission by order may permit for protection of Fund shareholders.
Involuntary Redemption
The Fund may, from time to time, establish a minimum total investment for
Fund shareholders, and each Fund reserves the right to redeem your shares if
your investment is less than the minimum after giving you at least 30 days'
notice. If any minimum total investment is established, and if your account is
below the minimum, you will be allowed 30 days following the notice in which to
purchase sufficient shares to meet the minimum. So long as the Fund continues
to offer shares at net asset value to holders of Nuveen Defined Portfolios who
are investing their Nuveen Defined Portfolios distributions, no minimum total
investment will be established for those investors.
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 voluntarily 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 Fund may encourage registered representatives and their firms to help
apportion their assets among bonds, stocks and cash, and may seek to
participate in programs that recommend a portion of their assets be invested in
equity securities, equity and debt securities, or equity and municipal
securities.
B-42
<PAGE>
Upon notice to all Authorized Dealers, Nuveen may reallow to Authorized
Dealers electing to participate up to the full applicable Class A Share up-
front sales charge during periods and for transactions specified in the notice.
The reallowances made during these periods may be based upon attainment of
minimum sales levels.
In addition to the types of compensation to dealers to promote sales of fund
shares that are described in the Fund's Prospectus, Nuveen may from time to
time make additional reallowances only to certain authorized dealers who sell
or are expected to sell certain minimum amounts of shares of the Nuveen Mutual
Funds and Nuveen Defined Portfolios during specified time periods. Promotional
support may include providing sales literature to and holding informational or
educational programs for the benefit of such Authorized Dealers'
representatives, seminars for the public, and advertising and sales campaigns.
Nuveen may reimburse a participating Authorized Dealer for up to one-half of
specified media costs incurred in the placement of advertisements which jointly
feature the Authorized Dealer and Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of its financial advisers who
have sold Nuveen Fund shares and Nuveen Defined Portfolios units during the
prior calendar year according to an established schedule. Any such support or
reimbursement would be provided by Nuveen out of its own assets, and not out of
the assets of the Fund, and will not change the price an investor pays for
shares or the amount that the Fund will receive from such a sale. The staff of
the Securities and Exchange Commission takes the position that dealers who
receive 90% or more of the applicable sales charge may be deemed underwriters
under the Securities Act of 1933, as amended.
To help advisers and investors better understand and more efficiently use the
Fund to reach their investment goals, the Fund may advertise and create
specific investment programs and systems. For example, this may include
information on how to use the Fund to accumulate assets for future education
needs or periodic payments such as insurance premiums. The Fund may produce
software, electronic information sites, or additional sales literature to
promote the advantages of using the Fund to meet these and other specific
investor needs.
The Fund has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund 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 Fund's net asset value next computed after they are accepted by
an authorized broker (or their designee). Orders accepted by an authorized
broker (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
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen
money market funds observe and will not make fund shares available for purchase
on the following holidays: Martin Luther King's Birthday, Columbus Day and
Veterans Day.
In addition, you may exchange Class R Shares of the Fund for Class A Shares
of the Fund without a sales charge if the current net asset value of those
Class R Shares is at least $3,000 or you already own Class A Shares of the
Fund.
B-43
<PAGE>
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Fund's transfer agent. No share
certificates will be issued for fractional shares.
For more information on the procedure for purchasing shares of the Fund and
on the special purchase programs available thereunder, see "How to Buy Shares"
and "Systematic Investing" in the Fund's Prospectus.
If you choose to invest in the Fund, an account will be opened and maintained
for you by Chase Global, the Fund's shareholder services agent. Share
certificates will be issued to you only upon written request to Nuveen Investor
Services, and, as noted, no certificates will be issued for fractional shares.
The Fund reserves the right to reject any purchase order and to waive or
increase minimum investment requirements. A change in registration or transfer
of shares held in the name of your financial adviser's firm can only be made by
an order in good form from the financial adviser acting on your behalf.
Authorized Dealers are encouraged to open single master accounts. However,
some Authorized Dealers may wish to use 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
required to enter into a separate agreement with another agent for these
services for a fee that will depend upon the level of services to be provided.
The Shares are offered continuously. However, subject to the rules and
regulations of the Securities and Exchange Commission, the Fund reserves the
right to suspend the continuous offering of it shares at any time, but no
suspension shall affect your right of redemption.
Nuveen serves as the principal underwriter of the shares of the Fund pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement,
the Trust appointed Nuveen to be its agent for the distribution of the Fund's
shares on a continuous offering basis. Nuveen sells shares to or through
brokers, dealers, banks or other qualified financial intermediaries
(collectively referred to as "Dealers"), or others, in a manner consistent with
the then effective registration statement of the Trust. Pursuant to the
Distribution Agreement, Nuveen, at its own expense, finances certain activities
incident to the sale and distribution of the Fund's shares, including printing
and distributing of prospectuses and statements of additional information to
other than existing shareholders, the printing and distributing of sales
literature, advertising and payment of compensation and giving of concessions
to dealers. Nuveen receives for its services the excess, if any, of the sales
price of the Fund's shares less the net asset value of those shares, and
reallows a majority or all of such amounts to the Dealers who sold the shares;
Nuveen may act as such a Dealer. Nuveen also receives compensation pursuant to
a distribution plan adopted by the Trust pursuant to Rule 12b-1 and described
herein under "Distribution and Service Plans." Nuveen receives any CDSCs
imposed on redemptions of Shares, but any amounts as to which a reinstatement
privilege is not exercised are set off against and reduce amounts otherwise
payable to Nuveen pursuant to the distribution plan.
B-44
<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 the Fund for the period from inception (December 31, 1997) to the
fiscal year ended July 31, 1998. All figures are to the nearest thousand.
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF AMOUNT COMPENSATION
UNDERWRITING RETAINED ON REDEMPTIONS
COMMISSIONS BY NUVEEN AND REPURCHASES
------------ --------- ---------------
<S> <C> <C> <C>
Nuveen Rittenhouse Growth Fund........... $1,617 $55 $32
</TABLE>
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which provides that Class B Shares and Class C
Shares are subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares are all subject to an annual service fee.
Class R Shares are not subject to either distribution or service fees.
The distribution fee applicable to Class B Shares and Class C Shares under
the Fund's Plan will be payable to reimburse Nuveen for services and expenses
incurred in connection with the distribution of Class B and Class C Shares,
respectively. 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
preparing, 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 the Plan is payable to Authorized Dealers in connection with the
provision of ongoing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering
shareholder inquiries and providing other personal services to shareholders.
The Fund may spend up to .25 of 1% per year of the average daily net assets
of Class A Shares as a service fee under the Plan as applicable to Class A
Shares. The Fund may spend up to .75 of 1% per year of the average daily net
assets of each of the Class B Shares and Class C Shares as a distribution fee
and up to .25 of 1% per year of the average daily net assets of each of the
Class B Shares and Class C Shares as a service fee under the Plan as applicable
to such classes.
B-45
<PAGE>
For the period from inception (December 31, 1997) to the fiscal year ended
July 31, 1998, the Fund paid 12b-1 fees pursuant to its 12b-1 Plan in the
amounts set forth in the table below. For this period, all of the 12b-1 service
fees on Class A Shares were paid out as compensation to Authorized Dealers for
providing services to shareholders relating to their investments. All 12b-1
distribution and service fees on Class B and Class C Shares were retained by
the Distributor as compensation for commissions advanced to Authorized Dealers.
<TABLE>
<CAPTION>
12B-1 FEES
PAID BY
THE FUND FROM
INCEPTION TO
JULY 31, 1998
-------------
<S> <C>
Nuveen Rittenhouse Growth Fund
Class A......................................................... $ 32,240
Class B......................................................... 229,464
Class C......................................................... 114,323
--------
Total......................................................... $376,027
========
</TABLE>
Under the Plan, the Fund will report quarterly to the Board of Trustees for
its review all amounts expended per class of shares under the Plan. The Plan
may be terminated at any time with respect to any class of shares, without the
payment of any penalty, by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding voting securities of such
class. The Plan may be renewed from year to year if approved by a vote of the
Board of Trustees and a vote of the non-interested Trustees who have no direct
or indirect financial interest in the Plan cast in person at a meeting called
for the purpose of voting on the Plan. The Plan may be continued only if the
trustees who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under
applicable law, that there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders. The Plan may not be amended to increase
materially the cost which a class of shares may bear under the Plan without the
approval of the shareholders of the affected class, and any other material
amendments of the Plan must be approved by the non-interested trustees by a
vote cast in person at a meeting called for the purpose of considering such
amendments. During the continuance of the Plan, the selection and nomination of
the non-interested trustees of the Trust will be committed to the discretion of
the non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS, 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
addition to audit services, Arthur Andersen will provide consultation and
assistance on accounting, internal control, tax and related matters.
The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
The Fund's transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
B-46
<PAGE>
FINANCIAL INFORMATION
The audited financial statements for the Fund's most recent fiscal year
appear in the Fund's Annual Report and are incorporated herein by reference.
The Annual Report accompanies this Statement of Additional Information.
GENERAL TRUST INFORMATION
The Fund is a series of the Trust. The Trust is an open-end diversified
management investment company under the Investment Company Act of 1940. The
Trust was organized as a Massachusetts business trust on June 27, 1997. The
Board of Trustees of the Trust is authorized to issue an unlimited number of
shares in one or more series or "Funds," which may be divided into classes of
shares. Currently, the Fund is the only series authorized and outstanding,
which is divided into four classes of shares designated as Class A Shares,
Class B Shares, Class C Shares and Class R Shares. Each class of shares
represents an interest in the same portfolio of investments of the Fund. Each
class of shares has equal rights as to voting, redemption, dividends and
liquidation, except that each bears different class expenses, including
different distribution and service fees, and each has exclusive voting rights
with respect to any distribution or service plan applicable to its shares.
There are no conversion, preemptive or other subscription rights, except that
Class B Shares automatically convert into Class A Shares, as described herein.
The Board of Trustees of the Trust has the right to establish additional series
and classes of shares in the future, to change those series or classes and to
determine the preferences, voting powers, rights and privileges thereof.
The Trust is not required and does not intend to hold annual meetings of
shareholders. Shareholders owning more than 10% of the outstanding shares of
the Fund have the right to call a special meeting to remove Trustees or for any
other purpose.
Under Massachusetts law applicable to Massachusetts business trusts,
shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, the Declaration of
Trust of the Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Fund's Declaration of Trust further provides for
indemnification out of the assets and property of the Trust for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these
circumstances is remote.
B-47
<PAGE>
APPENDIX A--RATINGS OF INVESTMENTS
STANDARD & POOR'S RATINGS GROUP--A brief description of the applicable
Standard & Poor's Ratings Group ("S&P") rating symbols and their meanings (as
published by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorgani- zation, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
Debt rated "AAA' has the highest rating assigned by S&P. Capacity to
AAA pay interest and repay principal is extremely strong.
AA Debt rated "AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small de-
gree.
A Debt rated "A' has a strong capacity to pay interest and repay princi-
pal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB Debt rated "BBB' is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate pro-
tection parameters, adverse economic conditions or changing circum-
stances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated
categories.
SPECULATIVE GRADE RATING
Debt rated "BB', "B', "CCC', "CC' and "C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB' indicates the least degree of speculation and "C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
BB
Debt rated "BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions
A-1
<PAGE>
which could lead to inadequate capacity to meet timely interest and
principal payments. The "BB' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
"BBB-' rating.
B Debt rated "B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.
The "B' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB' or "BB-' rating.
CCC Debt rated "CCC' has a currently identifiable vulnerability to de-
fault, and is dependent upon favorable business, financial, and eco-
nomic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B' or "B-' rating.
CC The rating "CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC' debt rating.
C The rating "C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-' debt rating. The
"C' rating may be used to cover a situation where a bankruptcy peti-
tion has been filed, but debt service payments are continued.
CI The rating "CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
"D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA' to "CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project financed
by the debt being rated and indicates that payment of debt service requirements
is largely or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood of, or the
risk of default upon failure of, such completion. The investor should exercise
judgment with respect to such likelihood and risk.
L The letter "L' indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit col-
lateral is federally insured by the Federal Savings & Loan Insurance
Corp. or the Federal Deposit Insurance Corp.* and interest is ade-
quately collateralized. In the case of certificates of deposit the
letter "L' indicates that the deposit, combined with other deposits
being held in the same right and capacity will be honored for princi-
pal and accrued pre-default interest up to the federal insurance lim-
its within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution,
upon maturity.
NR Indicates no rating has been requested, that there is insufficient in-
formation on which to base a rating, or that S&P does not rate a par-
ticular type of obligation as a matter of policy.
A-2
<PAGE>
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flow.
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satis-
factory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished
to S&P by the issuer or obtained by S&P from other sources it considers
reliable. S&P does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in or unavailability of
such information or based on other circumstances.
VALUE LINE--FINANCIAL STRENGTH RATING (A++, A+, A, B++, B+, B, C++, C+, C)--
The financial strength of each of the more than 1,600 companies in the VS II
data base is rated relative to all the others. The ratings range from A++ to C
in nine steps. (For screening purposes, think of an A rating as "greater than"
a B). Companies that have the best relative financial strength are given an A++
rating, indicating an ability to weather hard times better than the vast
majority of other companies. Those who don't quite merit the top rating are
given an A+ grade, and so on. A rating as low as C++ is considered
satisfactory. A rating of C+ is well below average, and C is reserved for
companies with very serious financial problems. The ratings are based upon a
computer analysis of a number of key variables that determine (a) financial
leverage, (b) business risk, and (c) company size, plus the judgment of Value
Line's analysts and senior editors regarding factors that cannot be quantified
across-the-board for all companies. The primary variables that are indexed and
studied include equity coverage of debt, equity coverage of intangibles, "quick
ratio", accounting methods, variability of return, fixed charge coverage, stock
price stability, and company size.
MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:
A-3
<PAGE>
LONG-TERM DEBT
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally re-
ferred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated 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 Bonds which are rated A possess many 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.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristi-
cally unrealiable over any great length of time. Such bonds lack out-
standing investment characteristics and in fact have speculative char-
acteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protec-
tion of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desir-
able investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and is-
sues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Con( . . . ) Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed,
or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the sym-
bols Aa1, A1, Baa1, Ba1, and B1.
A-4
<PAGE>
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of senior short-term promissory obligations. Prime-1
repayment capacity will often be evidenced by many of the following
characteristics:
--Leading market positions in well-established industries.
--High rates of return on 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
capacity for repayment of senior short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
DUFF & PHELPS, INC.--A brief description of the applicable Duff & Phelps,
Inc. ("D&P") ratings symbols and their meanings (as published by D&P) follows:
LONG-TERM DEBT
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle is
a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of "BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings)
addresses the likelihood that aggregate principal and interest will equal or
exceed the rated amount under appropriate stress conditions.
A-5
<PAGE>
<TABLE>
<CAPTION>
RATING
SCALE DEFINITION
- ------ ----------------------------------------------------------------------------------------------------
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest, but may vary slightly from time
AA to time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are more variable and greater in
A periods of economic stress.
A-
BBB+ Below average protection factors but still considered sufficient for prudent investment.
BBB Considerable variability in risk during economic cycles.
BBB-
BB+ Below investment grade but deemed likely to meet obligations when due. Present or prospective
BB financial protection factors fluctuate according to industry conditions or company fortunes.
BB- Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not be met when due. Financial
BB- protection factors will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
</TABLE>
SHORT-TERM DEBT RATINGS
Duff & Phelps short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with
maturities of under one year, including commercial paper, the uninsured portion
of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.
Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term
ratings is the refinement of the traditional "1' category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. As a consequence, Duff & Phelps Credit Rating has
incorporated gradations of "1+' (one plus) and "1-' (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements,
specifically capital computation guidelines. These ratings meet Department of
Labor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for
insurance company investment portfolios.
A-6
<PAGE>
RATING SCALE:
DEFINITION
HIGH GRADE
D-1+ Highest certainty of timely payment. Short-term liquidity, includ-
ing internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-
free U.S. Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are ex-
cellent and supported by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
GOOD GRADE
D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good.
Risk factors are small.
SATISFACTORY GRADE
D-3 Satisfactory liquidity and other protection factors qualify issue
as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
NON-INVESTMENT GRADE
D-4 Speculative investment characteristics. Liquidity is not suffi-
cient to insured against disruption in debt service. Operating
factors and market access may be subject to a high degree of vari-
ation.
DEFAULT
D-5 Issuer failed to meet scheduled principal and/or interest pay-
ments.
FITCH IBCA, INC.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
LONG-TERM DEBT
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
A-7
<PAGE>
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay inter-
est and repay principal, which is unlikely to be affected by reasona-
bly foreseeable events.
AA Bonds considered to be investment grade and of very high credit quali-
ty. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA'. Because
bonds rated in the "AAA' and "AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of the
issuers is generally rated "F-1+'.
A Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is consid-
ered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these bonds and, therefore, impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB' to "C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD' to "D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories cannot fully reflect the differences
in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay inter-
est and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identi-
fied which could assist the obligor in satisfying its debt service re-
quirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of con-
tinued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and eco-
nomic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not reme-
died, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
A-8
<PAGE>
DDD, Bonds are in default on interest and/or principal payments. Such bonds
DD are extremely speculative and should be valued on the basis of their
AND ultimate recovery value in liquidation or reorganization of the obli-
D gor. "DDD' represents the highest potential for recovery of these
bonds, and "D' represents the lowest potential for recovery.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+ EXCEPTIONALLY STRONG CREDIT QUALITY Issues assigned this rating are
regarded as having the strongest degree of assurance for timely pay-
ment.
F-1 VERY STRONG CREDIT QUALITY Issues assigned this rating reflect an as-
surance of timely payment only slightly less in degree than issues
rated "F-1+'.
F-2 GOOD CREDIT QUALITY Issues assigned this rating have a satisfactory
degree of assurance for timely payment but the margin of safety is not
as great as for issues assigned "F-1+' and "F-1' ratings.
F-3 FAIR CREDIT QUALITY Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is ade-
quate; however, near-term adverse changes could cause these securities
to be rated below investment grade.
F-S WEAK CREDIT QUALITY Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic con-
ditions.
D DEFAULT Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
EAI-RIT 11-98
A-9
<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
<PAGE>
PART C--OTHER INFORMATION
ITEM 23: EXHIBITS:
<TABLE>
<C> <S> <C>
(a)(1). Declaration of Trust of Registrant.(1)
(a)(2). Certificate for the Establishment and Designation of Series
dated June 27, 1997.(1)
(a)(3). Certificate for the Establishment and Designation of Classes
dated June 27, 1997.(1)
(a)(4). Amended and Restated Establishment and Designation of Series
dated August 13, 1997.(1)
(b). By-Laws of Registrant.(1)
(c). Specimen certificate of Shares of Nuveen Rittenhouse Growth
Fund.(2)
(d)(1). Management Agreement between Registrant and Nuveen
Institutional Advisory Corp.(2)
(d)(2). Sub-Advisory Agreement between Nuveen Institutional Advisory
Corp. and Rittenhouse.(2)
(e). Distribution Agreement between Registrant and John Nuveen & Co.
Incorporated.(4)
(f). Not applicable.
(g). Form of Custodian Agreement between Registrant and Chase
Manhattan Bank.(2)
(h). Transfer Agency Agreement between Registrant and Chase Global
Funds Services Company.(3)
(i)(1). Opinion and consent of Bell, Boyd & Lloyd, dated November 12,
1997.(2)
(i)(2). Opinion and consent of Bingham, Dana & Gould, dated November
13, 1997.(2)
(j). Consent of Independent Public Accountants.(4)
(k). Not applicable.
(l). Subscription Agreement with Nuveen Institutional Advisory
Corp.(2)
(m). Plan of Distribution and Service Pursuant to Rule 12b-1 for the
Class A Shares, Class B Shares and Class C Shares for Nuveen
Rittenhouse Growth Fund dated July 24, 1997 (as amended May 17,
1998).(3)
(n). Financial Data Schedule.(3)
(o). Multi-Class Plan.(2)
(z)(1). Original Powers of Attorney for Messrs. Schwertfeger, Dean,
Leafstrand, Bacon, Kissick, and Ms. Wellington, Trustees,
authorizing, among others, Larry W. Martin and Gifford R.
Zimmerman to execute the Registration Statement.(1)
</TABLE>
- --------
(1) Incorporated by reference to the initial registration statement filed on
Form N-1A for Registrant.
(2) Incorporated by reference to the pre-effective amendment no. 1 filed on
Form N-1A for Registrant.
(3) Incorporated by reference to the post-effective amendment no. 1 filed on
Form N-1A for Registrant.
(4) Filed herewith.
ITEM 24: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND.
Not applicable.
ITEM 25: INDEMNIFICATION
Section 4 of Article XII of Registrant's Declaration of Trust provides as
follows:
Subject to the exceptions and limitations contained in this Section 4, every
person who is, or has been, a Trustee, officer, employee or agent of the Trust,
including persons who serve at the request of the Trust as directors, trustees,
officers, employees or agents of another organization in which the Trust has an
interest as a shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person"), shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against
amounts paid or incurred by him in settlement thereof.
II-1
<PAGE>
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding
was brought that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in
office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Covered Person may now or hereafter be entitled,
shall continue as to a person who has ceased to be such a Covered Person and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it
is ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any
such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the word
"liability" and "expenses" shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
----------------
The trustees and officers of the Registrant are covered by Investment Trust
Errors and Omission policies in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, trustees or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
ITEM 26: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Nuveen Institutional Advisory Corp. ("NIAC") manages the Registrant and
serves as investment adviser or manager to other open-end and closed-end
management investment companies and to separately managed accounts. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
A description of any other business, profession, vocation or employment of a
substantial nature in which the directors and officers of NIAC who serve as
officers or Trustees of the Registrant have engaged during the last two years
for his or her account or in the capacity of director, officer, employee,
partner or trustee appears under "Management" in the Statement of Additional
Information. Such information for the remaining senior officers of NIAC appears
below:
<TABLE>
<CAPTION>
OTHER BUSINESS, PROFESSION, VOCATION OR
NAME AND POSITION WITH NIAC EMPLOYMENT DURING PAST TWO YEARS
--------------------------- ---------------------------------------
<C> <S>
John P. Amboian, Executive Vice President..... Executive Vice President and Secretary of The
John Nuveen Company; Executive Vice President of
John Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Asset Management, Inc. and
Executive Vice President and Director of
Rittenhouse Financial Services, Inc.
Bruce P. Bedford, Executive Vice President.... Executive Vice President of John Nuveen & Co.
Incorporated, Nuveen Advisory Corp. (since
January 1997); prior thereto, Chairman and CEO
of Flagship Resources Inc. and Flagship
Financial Inc. and the Flagship funds.
Jerome S. Contro, Vice President.............. Vice President of Nuveen Asset Management, Inc.
Michael S. Davern, Vice President............. Vice President of Nuveen Advisory Corp. (since
January 1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial.
Clifton L. Fenton, Vice President............. Vice President of John Nuveen & Co. Incorporated
Richard A. Huber, Vice President.............. Vice President of Nuveen Advisory Corp. (since
January 1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial.
Thomas C. Spalding, Vice President............ Vice President of Nuveen Advisory Corp.
Margaret E. Wilson, Vice President and Con- Vice President and Controller of The John Nuveen
troller...................................... Company, John Nuveen & Co. Incorporated and
Nuveen Advisory Corp.
</TABLE>
(b) Rittenhouse acts as sub-investment adviser to the Registrant and serves as
investment adviser to separately managed accounts. The following is a listing
of each director and officer of Rittenhouse. The principal business address for
each person is Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, except
Messrs. Dean and Amboian's address is 333 W. Wacker Drive, Chicago, IL 60606:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH RITTENHOUSE WITH REGISTRANT
- ---- ------------------------ ------------------------------------
<S> <C> <C>
John P. Amboian Director None
George W. Connell Chief Investment Officer None
William L. Conrad Vice President, Director None
Anthony T. Dean Director Chairman and Trustee
Richard D. Hughes President, Director None
Michael H. Lewers Vice President, Director None
Deborah D. Manning Vice President, Director None
Marion R. Metzbower Chief Compliance Officer None
Cynthia A. Stains Chief Financial Officer None
John P. Waterman Vice President, Director None
</TABLE>
II-3
<PAGE>
ITEM 27: PRINCIPAL UNDERWRITERS
(a) John Nuveen & Co. Incorporated ("Nuveen") acts as principal underwriter to
the following open-end management type investment companies: Nuveen Flagship
Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship
Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship
Municipal Trust, Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., Nuveen Tax-Free
Reserves, Inc., Flagship Admiral Funds Inc., Nuveen Investment Trust, and the
Registrant. Nuveen also acts as depositor and principal underwriter of the
Nuveen Tax-Free Unit Trust and the Nuveen Unit Trust, registered unit
investment trusts. Nuveen has also served or is serving as co-managing
underwriter to the following closed-end management type investment companies:
Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund,
Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income Fund,
Inc., Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus
Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc.,
Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal
Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen
California Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality
Municipal Fund, Inc., Nuveen California Investment Quality Municipal Fund,
Inc., Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured
Quality Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund,
Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania
Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc.,
Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select
Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc.,
Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income
Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen
Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal
Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York
Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund,
Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund 2, Inc., Nuveen Insured California Premium Income Municipal
Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen
Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund,
Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan
Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured
California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium
Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen
Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income
Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North
Carolina Premium Income Municipal Fund, Nuveen California Premium Income
Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen Select
Tax-Free Income Portfolio, Nuveen Select Tax-Free Income Portfolio 2, Nuveen
Insured California Select Tax-Free Income Portfolio, Nuveen Insured New York
Select Tax-Free Income Portfolio and Nuveen Select Tax-Free Income Portfolio 3.
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS UNDERWRITER WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Anthony T. Dean President, Chief Operating Chairman and Trustee
333 West Wacker Drive Officer and Director
Chicago, IL 60606
Timothy R. Schwertfeger Chairman of the Board, President and Trustee
333 West Wacker Drive Chief Executive Officer,
Chicago, IL 60606 and Director
John P. Amboian Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bruce P. Bedford Executive Vice President None
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Alan G. Berkshire Vice President Vice President and
333 West Wacker Drive and Secretary Assistant Secretary
Chicago, IL 60606
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES OFFICES WITH
BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT
- ------------------------------------------------------------------------------------
<S> <C> <C>
Clifton L. Fenton Vice President None
333 West Wacker Drive
Chicago, IL 60606
Kathleen M. Flanagan Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Drive Controller
Chicago, IL 60606
Michael G. Gaffney Vice President None
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis Vice President None
333 West Wacker Drive
Chicago, IL 60606
Robert B. Kuppenheimer Vice President None
333 West Wacker Drive
Chicago, IL 60606
Larry W. Martin Vice President Vice President
333 West Wacker Drive and Assistant and Assistant
Chicago, IL 60606 Secretary Secretary
Thomas C. Muntz Vice President None
333 West Wacker Drive
Chicago, IL 60606
Stuart W. Rogers Vice President None
333 West Wacker Drive
Chicago, IL 60606
Bradford W. Shaw, Jr. Vice President None
333 West Wacker Drive
Chicago, IL 60606
H. William Stabenow Vice President Vice President and
333 West Wacker Drive and Treasurer Treasurer
Chicago, IL 60606
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President None
333 West Wacker Drive and Corporate
Chicago, IL 60606 Controller
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
II-5
<PAGE>
ITEM 28: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago, Illinois
60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Institutional Advisory Corp., or Chase Global Fund
Services Company.
Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108,
maintains all the required records in its capacity as transfer, dividend
paying, and shareholder service agent for the Registrant.
ITEM 29: MANAGEMENT SERVICES
Not applicable.
ITEM 30: UNDERTAKINGS
(a)Not applicable.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT, THE FUND CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR EF-
FECTIVENESS OF THIS REGISTRATION STATEMENT UNDER 485(B) UNDER THE SECURITIES
ACT AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRA-
TION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, DULY AUTHORIZED,
IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON THE 25TH DAY OF NOVEMBER,
1998.
NUVEEN INVESTMENT TRUST II
/s/ Gifford R. Zimmerman
__________________________________________
Gifford R. Zimmerman
Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-EFFEC-
TIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Stephen D. Foy Vice President and November 25, 1998
________________________________ Controller (Principal
Stephen D. Foy Financial and
Accounting Officer)
Timothy R. Schwertfeger President and Trustee )
)
Thomas E. Leafstrand Trustee )
) /s/ Gifford R. Zimmerman
James E. Bacon Trustee } By_________________________
) Gifford R. Zimmerman
William L. Kissick Trustee ) Attorney-in-Fact
)
Sheila W. Wellington Trustee )
)
Anthony T. Dean Chairman and Trustee ) November 25, 1998
(Principal Executive )
Officer) )
</TABLE>
AN ORIGINAL POWER OF ATTORNEY AUTHORIZING, AMONG OTHERS, LARRY W. MARTIN AND
GIFFORD R. ZIMMERMAN TO EXECUTE THIS REGISTRATION STATEMENT, AND AMENDMENTS
THERETO, FOR EACH OF THE TRUSTEES OF REGISTRANT ON WHOSE BEHALF THIS REGISTRA-
TION STATEMENT IS FILED, HAS BEEN EXECUTED AND FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT NUMBERED PAGE
------- ------- -------------
<C> <S> <C>
(e). Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated.
(j). Consent of Independent Public Accountants.
</TABLE>
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 1st of August, 1998 between NUVEEN INVESTMENT TRUST
II, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), and JOHN NUVEEN & CO. INCORPORATED, a Delaware
corporation (the "Underwriter").
WITNESSETH
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for the
distribution of shares of beneficial interest, par value $.01 per share,
including such series or classes of shares as may now or hereinafter be
authorized, (the "Shares") in jurisdictions wherein Shares may legally be
offered for sale; provided, however, that the Fund, in its absolute
discretion, may: (a) issue or sell Shares directly to holders of Shares of
the Fund upon such terms and conditions and for such consideration, if any,
as it may determine, whether in connection with the distribution of
subscription or purchase rights, the payment or reinvestment of dividends
or distributions, or otherwise; and (b) issue or sell Shares at net asset
value in connection with merger or consolidation with, or acquisition of
the assets of, other investment companies or similar companies.
2. The Underwriter hereby accepts appointment as agent for the
distribution of the Shares and agrees that it will use its best efforts to
sell such part of the authorized Shares remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on
terms hereinafter set forth, all subject to applicable Federal and State
laws and regulations and to the Declaration of Trust of the Fund.
3. The Fund agrees that it will use its best efforts to keep effectively
registered under the Securities Act for sale, as herein contemplated, such
Shares as the Underwriter shall reasonably request and as the Securities
and Exchange Commission shall permit to be so registered.
4. Notwithstanding any other provision hereof, the Fund may terminate,
suspend, or withdraw the offering of the Shares, or Shares of any series or
class, whenever, in its sole discretion, it deems such action to be
desirable.
5. The Underwriter shall sell Shares to, or through, brokers, dealers,
banks or other qualified financial intermediaries (hereinafter referred to
as "dealers"), or others, in such manner not inconsistent with the
provisions hereof and the then effective Registration Statement of the Fund
under the Securities Act (and related Prospectus and Statement of
Additional Information) as the Underwriter may determine from time to time,
provided that no dealer, or other person, shall be appointed nor authorized
to act as agent of the Fund without the prior consent of the Fund. The
Underwriter shall have the right to enter into agreements with brokers,
dealers and banks (referred to herein as "dealers") of its choice for the
sale of Shares and fix therein the portion of the sales charge which may be
allocated to such dealers; provided that the Fund shall approve the form of
such agreements and shall evidence such approval by filing said form and
any amendments thereto as attachments to this Agreement, which shall be
filed as an exhibit to the Fund's currently effective registration
statement under the Securities Act. Shares sold to dealers shall be for
resale by such dealers only at the public offering price(s) set forth in
the Fund's then current Prospectus. The current forms of such agreements
are attached hereto as Exhibits 1, 2 and 3.
6. Shares offered for sale, or sold by the Underwriter, shall be so
offered or sold at a price per Share determined in accordance with the then
current Prospectus relating to the sale of Shares except as departure
<PAGE>
from such prices shall be permitted the rules and regulations of the
Securities and Exchange Commission. Any public offering price shall be the
net asset value per Share plus a sales charge of not more than 5.75% of
such public offering price. Shares may be sold at net asset value without a
sales charge to such class or classes of investors or in such class or
classes of transactions as may be permitted under applicable rules of the
Securities and Exchange Commission and as described in the then current
Prospectus of the Fund. The net asset value per Share of each series or
class shall be calculated in accordance with the Declaration of Trust of
the Fund and shall be determined in the manner, and at the time, set forth
in the then current Prospectus of the Fund relating to such Shares.
7. The price the Fund shall receive for all Shares purchased from the
Fund shall be the net asset value used in determining the public offering
price applicable to the sale of such Shares. The excess, if any, of the
sales price over the net asset value of Shares sold by the Underwriter as
agent shall be retained by the Underwriter as a commission for its services
hereunder. Out of such commission, the Underwriter may allow commissions or
concessions or concessions to dealers in such amounts as the Underwriter
shall determine from time to time. Except as may be otherwise determined by
the Underwriter and the Fund from time to time, such commissions or
concessions shall be uniform to all dealers.
8. The Underwriter shall issue and deliver, or cause to be issued and
delivered, on behalf of the Fund such confirmations of sales made by it as
agent, pursuant to this Agreement, as may be required. At, or prior to, the
time of issuance of Shares, the Underwriter will pay, or cause to be paid,
to the Fund the amount due the Fund for the sale of such Shares.
Certificates shall be issued, or Shares registered on the transfer books of
the Fund, in such names and denominations as the Underwriter may specify.
9. The Fund will execute any and all documents, and furnish any and all
information, which may be reasonably necessary in connection with the
qualification of the Shares for sale (including the qualification of the
Fund as a dealer, where necessary or advisable) in such states as the
Underwriter may reasonably request (if being understood that the Fund shall
not be required, without its consent, to comply with any requirement which,
in its opinion, is unduly burdensome).
10. The Fund will furnish to the Underwriter, from time to time, such
information with respect to the Fund and the Shares as the Underwriter may
reasonably request for use in connection with the sale of Shares. The
Underwriter agrees that it will not use or distribute, nor will it
authorize dealers or others to use, distribute or disseminate, in
connection with the sale of such Shares, any statements other than those
contained in the Fund's current Prospectus and Statement of Additional
Information, except such supplemental literature or advertising as shall be
lawful under Federal and State securities laws and regulations, and that it
will furnish the Fund with copies of all such material.
11. The Underwriter shall order Shares from the Fund only to the extent
that it shall have received purchase orders therefor. The Underwriter will
not make, nor authorize any dealers or others, to make: (a) any short sale
of Shares; or (b) any sale of Shares to any officer or trustee of the Fund,
nor to any officer or trustee of the Underwriter, or of any corporation or
association furnishing investment advisory, managerial, or supervisory
services to the Fund, nor to any such corporation or association, unless
such sales are made in accordance with the then current Prospectus relating
to the sale of such Shares.
12. In selling Shares for the account of the Fund, the Underwriter will
in all respects conform to the requirements of all Federal and State laws
and the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. relating to such sales, and will indemnify and save harmless
the Fund from any damage or expense on account of any wrongful act by the
Underwriter or any employee, representative, or agent of the Underwriter.
The Underwriter will observe and be bound by all the provisions of the
Declaration of Trust of the Fund (and of any fundamental policies adopted
by the Fund pursuant to the
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Investment Company Act of 1940, notice of which shall have been given by
the Fund to the Underwriter) which at the time in any way require, limit,
restrict, prohibit or otherwise regulate any action on the part of the
Underwriter.
13. The Underwriter will require each dealer to conform to the provisions
hereof and of the Registration Statement (and related Prospectus) at the
time in effect under the Securities Act with respect to the public offering
price of the Shares, and neither the Underwriter nor any such dealer shall
withhold the placing of purchase orders so as to make a profit thereby.
14. The Fund will pay, or cause to be paid, expenses (including the fees
and disbursements of its own counsel) of any registration of Shares under
the Securities Act, expenses of qualifying or continuing the qualification
of the Shares for sale and, in connection therewith, of qualifying or
continuing the qualification of the Fund as a dealer or broker under the
laws of such states as may be designated by the Underwriter under the
conditions herein specified, and expenses incident to the issuance of the
Shares such as the cost of Share certificates, issue taxes, and fees of the
transfer and shareholder service agent. The Underwriter will pay, or cause
to be paid, all expenses (other than expenses which any dealer may bear
pursuant to any agreement with the Underwriter) incident to the sale and
distribution of the Shares issued or sold hereunder, including, without
limiting the generality of the foregoing, all: (a) expenses of printing and
distributing any Prospectus and Statement of Additional Information and of
preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with such offering of the Shares
for sale (except that such expenses need not include expenses incurred by
the Fund in connection with the preparation, printing and distribution of
any report or other communication to holders of Shares in their capacity as
such), and (b) expenses of advertising in connection with such offering. No
transfer taxes, if any, which may be payable in connection with the issue
or delivery of Shares sold as herein contemplated, or of the certificates
for such Shares, shall be borne by the Fund, and the Underwriter will
indemnify and hold harmless the Fund against liability for all such
transfer taxes.
15. This agreement shall continue in effect until August 1, 1999, unless
and until terminated by either party as hereinafter provided, and will
continue from year to year thereafter, but only so long as such continuance
is specifically approved, at least annually, in the manner required by the
Investment Company Act of 1940. Either party hereto may terminate this
agreement on any date by giving the other party at least six months' prior
written notice of such termination, specifying the date fixed therefor.
Without prejudice to any other remedies of the Fund in any such event, the
Fund may terminate this agreement at any time immediately upon any failure
of fulfillment of any of the obligations of the Underwriter hereunder.
Without prejudice to any other remedies of the Fund in any such event,
the Fund may terminate this Agreement at any time immediately upon any
failure of fulfillment of any of the obligations of the Underwriter
hereunder.
16. This agreement shall automatically terminate in the event of its
assignment.
17. Any notice under this agreement shall be in writing, addressed, and
delivered or mailed, postage pre-paid, to the other party at such address
as such other party may designate for the receipt of such notice.
18. The Declaration of Trust of the Fund on file with the Secretary of
State of the Commonwealth of Massachusetts was executed on behalf of the
Fund by the initial trustees of the Fund and not individually, and any
obligation of the Fund shall be binding only upon the assets of the Fund
(or applicable series thereof) and shall not be binding upon any trustee,
officer or shareholder of the Fund. Neither the authorization of any action
by the trustees or shareholders of the Fund nor the execution of this
agreement on behalf of the Fund shall impose any liability upon any
Trustee, officer or shareholder of the Fund.
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IN WITNESS WHEREOF, the Fund and the Underwriter have each caused this
agreement to be executed on its behalf as of the day and year first above
written.
Nuveen Investment Trust II
By /s/ Gifford R. Zimmerman
-----------------------------
Gifford R. Zimmerman
Vice President
Attest:
/s/ Karen L. Healy
- ----------------------------------
Karen L. Healy
Assistant Secretary
John Nuveen & Co. Incorporated
By /s/ Alan G. Berkshire
-----------------------------
Alan G. Berkshire
Vice President
Attest:
/s/ Larry Martin
- ----------------------------------
Larry Martin
Assistant Secretary
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<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated September 17, 1998, and to all references to our Firm included in or made
a part of this registration statement of Nuveen Investment Trust II (comprised
of the Nuveen Rittenhouse Growth Fund).
Arthur Andersen LLP
Chicago, Illinois
November 20, 1998
