<PAGE>
As filed with the Securities and Exchange Commission on or about July 17, 2000
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UNITED STATES
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. [_]
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[X]
Post-Effective Amendment No. 6
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
Registration No. 811-8333
[X]
Amendment No. 7
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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 Eric F. Fess
and Chapman and Cutler
Secretary 111 W. Monroe
333 West Wacker Drive Chicago, Illinois 60603
Chicago, Illinois 60606
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the post-effective amendment.
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to [_] on (date) pursuant to paragraph
paragraph (b) (a)(1)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to [X] 75 days after filing pursuant to
paragraph (a)(1) paragraph (a)(2)
[_] on (date) pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CONTENTS
OF
POST-EFFECTIVE AMENDMENT NO. 6
This Post-Effective Amendment to the Registration Statement comprises the
following papers and contents:
The Facing Sheet
Part A--Prospectus for Nuveen Select Stock Fund (the
"Fund")
Part B--Statement of Additional Information
Part C--Other Information
Signatures
Index to Exhibits
Exhibits
The Nuveen Rittenhouse Growth Fund, Nuveen Innovation Fund and the Nuveen
International Growth Fund are not affected by and therefore not included in
this Post-Effective Amendment No. 6.
<PAGE>
Prospectus ______________, 2000
NUVEEN
Investments
NUVEEN
Select Stock
FUND
A portfolio of companies that are well-positioned to benefit from what the
fund believes will be the investment themes underlying stock market
leadership over the next twelve to eighteen months.
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The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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A Nuveen Equity Fund
New Photo TK
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<PAGE>
We have used the icons below throughout this prospectus to make it easy for you
to find the type of information you need.
[logo] Investment Strategy
[logo] Risks
[logo] Fees, Charges and Expenses
[logo] Shareholder Instructions
[logo] Performance and Current Portfolio Information
Table of Contents
<TABLE>
<S> <C>
Section 1 The Fund
This section provides you with an overview of the fund including investment
objectives, expenses and portfolio holdings.
Introduction 1
Nuveen Select Stock 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
What Securities We Invest In 5
How We Select Investments 6
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.
What Share Classes We Offer 9
How to Reduce Your Sales Charge 10
How to Buy Shares 11
Systematic Investing 11
Systematic Withdrawal 12
Special Services 12
How to Sell Shares 13
Section 4 General Information
This section summarizes the fund's distribution policies and other
general fund information.
Dividends, Distributions and Taxes 15
Distribution and Service Plan 16
Net Asset Value 16
Fund Service Providers 17
</TABLE>
<PAGE>
_____, 2000
Section 1 The Fund
Nuveen Select Stock Fund
Introduction
This prospectus is intended to provide important information to help
you evaluate whether the fund may be right for you. Please read it
carefully before investing and keep it for future reference.
NOT FDIC OR GOVERNMENT INSURED MAY LOSE VALUE NO BANK GUARANTEE
Section 1 The Fund 1
<PAGE>
[LOGO] Nuveen Select Stock Fund
Fund Overview
Investment Objective
The investment objective of the fund is to provide long-term capital growth.
How the Fund Pursues Its Objective
The fund will normally invest substantially all (at least 80%) of its assets in
a portfolio of the 25-35 most attractive stocks of companies included in the
"Peroni Select Stock List." The Peroni Select Stock List is based upon the
research of Nuveen's Director of Equity Research, Eugene E. Peroni Jr.
The stocks in the Peroni Select Stock List represent the 40-60 most attractive
companies from those sectors well-positioned to benefit from the investment
themes Mr. Peroni believes will underlie stock market leadership over the next
12 to 18 months.
The fund may invest a portion of its assets in securities of foreign issuers
traded in U.S. securities markets.
What are the Risks of Investing in the Fund?
The fund exposes you to market risk. Market risk is the risk that stocks will
decline in response to such factors as adverse company news or industry
developments or a general economic decline. The fund may be exposed to
additional market risk because it is a non-diversified fund. A non-diversified
fund may invest a relatively high percentage of its assets in a limited number
of issuers. Non-diversified funds are more susceptible to any single monetary,
regulatory or economic occurrence and to the financial condition of individual
issuers in which it invests. The fund's potential investment in foreign stocks
also presents additional risk. Foreign risk is the risk that foreign stocks will
be more volatile than U.S. stocks due to such factors as adverse economic,
currency, political or regulatory changes in a country. As with any mutual fund
investment, loss of money is a risk of investing.
Is This Fund Right For You?
This fund may be right for you if you are seeking:
. a growth stock portfolio;
. the higher potential returns of a concentrated stock portfolio;
. 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;
. seeking regular income;
. investing to meet short-term financial goals.
What are the Costs of Investing?+
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
Shareholder Transaction Expenses/1/
Paid Directly From Your Investment
Share Class A B C R/2/
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Maximum Sales Charge Imposed
on Purchase 5.75%/3/ None None None
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Maximum Sales Charge Imposed
on Reinvested Dividends None None None None
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Exchange Fees None None None None
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Deferred Sales Charge/4/ None/3/ 5%/5/ 1%/6/ None
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Annual Fund Operating Expenses/7/
Paid From Fund Assets
Share Class A B C R
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Management Fees 1.10% 1.10% 1.10% 1.10%
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12b-1 Distribution and Service Fees/8/ 0.25% 1.00% 1.00% --%
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Other Expenses/9/ 1.43% 1.43% 1.43% 1.43%
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Total Operating
Expenses--Gross* 2.78% 3.53% 3.53% 2.53%
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* After Expense Reimbursements
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Expense Reimbursements (1.23%) (1.23%) (1.23%) (1.23%)
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Total Operating Expense--Net 1.55% 2.30% 2.30% 1.30%
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Reflects a voluntary expense limitation by the fund's investment adviser that
may be modified at any time. However, the investment adviser has agreed to
waive fees and reimburse expenses through July 31, 2002 in order to prevent
total operating expenses (excluding any 12b-1 distribution and service fees
and extraordinary expenses) from exceeding 1.50% of the average daily net
assets of any class of fund shares.
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The following example is intended to help you compare the cost of investing in
the fund with the costs of investing in other mutual funds. The example assumes
you invest $10,000 in the fund for the time 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
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 840 $ 743 $ 356 $ 256 $ 840 $ 356 $ 356 $ 256
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3 Years $ 1,388 $ 1,384 $ 1,083 $ 788 $ 1,388 $ 1,083 $ 1,083 $ 788
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</TABLE>
+ Fund Performance
Performance information is not included in this prospectus because the fund
is newly created.
2 Section 1 The Fund
<PAGE>
How the Fund Is Invested (as of __/__/00)
Portfolio Allocation
Stocks %
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Cash Equivalents %
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Top 10 Stock Holdings/10/
%
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%
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%
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%
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%
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%
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%
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%
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%
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%
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Sector Diversification (Top 5)/10/
%
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%
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%
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%
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%
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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 be subject to 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 are subject to a
CDSC of 5% during the first year, 4% during the second and third years,
3% during the fourth, 2% during the fifth, and 1% during the sixth
year.
6. Class C shares redeemed within one year of purchase are subject to a 1%
CDSC.
7. The percentages shown are based on estimated amounts for the current
fiscal year and are reflected as percentages of average net assets.
Actual expenses may be higher or lower.
8. Long-term holders of Class B and C shares may pay more in 12b-1 fees
and CDSCs than the economic equivalent of the maximum front-end sales
charge permitted under the National Association of Securities Dealers
Conduct Rules.
9. Other operating expenses include an estimated one-time organization and
offering expense of .51% of fund assets.
10. As a percentage of the fund's stock holdings. Holdings may vary.
Investing in a Concentrated Stock Portfolio
The fund pursues a concentrated approach to investing in stocks. Focus or
concentrated funds invest in a limited number of stocks (typically less than 50)
as an explicit part of their investment policies. By enabling the portfolio
manager to invest in stocks that represent his best ideas, these funds offer the
potential for higher returns than funds with more broadly diversified investment
portfolios, but with commensurately higher risk. Consequently, these funds are
best suited to investors looking to supplement their core portfolio holdings
with a higher risk/higher return investment. As the following chart illustrates,
focus funds like the Nuveen Select Stock Fund that pursue a large-cap growth
investment style historically have significantly outperformed more broadly
diversified funds with the same investment style:
The Historical Performance Advantage of Large-Cap Growth Focus Funds vs. Large-
Cap Growth Funds (Periods Ending April 30, 2000)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Annualized Return Advantage (%)
1 YR 3 YR 5 YR 10 YR
<S> <C> <C> <C>
15.88% 12.55% 6.50% 3.84%
</TABLE>
Source: Lipper, Morningstar, Financial Research Corp. The return differential
for each respective period shown represents the difference between the average
annual return for all large-cap growth funds within the Morningstar large-cap
growth fund category that were categorized by Financial Research Corp. (FRC) as
focus funds, versus the average annual return for all funds within the
Morningstar large-cap growth category. Large-cap growth focus funds (as defined
by FRC) are all domestic equity funds within the Morningstar large-cap growth
category that invest in 50 or fewer stocks and pursue a concentrated investment
approach as an explicit investment policy. There were 15, 6, 5 and 2 large-cap
growth focus funds, as categorized by FRC, and 654, 429, 288 and 99 large-cap
growth funds in the Morningstar category for the respective one, three, five and
ten year periods shown. The average annual return numbers for the funds in each
category were obtained from Lipper Analytical Services.
The performance of large-cap growth focus funds does not represent actual or
anticipated performance of the Nuveen Select Stock Fund. Past performance is no
guarantee of future results, and future return differentials may be more or less
than those shown above.
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"), the fund's investment
adviser, together with its advisory affiliate, Nuveen Advisory Corp.,
offer premier advisory and investment management services to a broad
range of mutual fund clients. In the Nuveen family, these advisers are
commonly referred to as Nuveen Investment Management or NIM. NIAC has
overall responsibility for management of the fund. NIAC manages the
fund's portfolio and business affairs and provides certain clerical,
bookkeeping and other administrative services. The NIM advisers are
located at 333 West Wacker Drive, Chicago, IL 60606.
The NIM advisers are wholly-owned subsidiaries of John Nuveen & Co.
Incorporated ("Nuveen"). Founded in 1898, Nuveen has been synonymous
with investments that withstand the test of time. Today, we provide
managed assets and structured investment products and services to help
financial advisors serve the wealth management needs of individuals
and families. Nuveen manages or oversees $71 billion in assets.
NIAC has selected Eugene E. Peroni, Jr. to serve as the portfolio
manager of the fund. Mr. Peroni is responsible for the day-to-day
management of the fund's portfolio. Mr. Peroni joined Nuveen in 1999
and is currently Vice President, Director of Equity Research. Prior to
being employed by Nuveen, Mr. Peroni served as Senior Vice President,
Director of Technical Research of Janney Montgomery Scott LLC.
4 Section 2 How We Manage Your Money
<PAGE>
For providing these services, NIAC is paid an annual fund management
fee according to the following schedule:
Average Daily Net Assets Management Fee
For the first $125 million 1.1000%
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For the next $125 million 1.0875%
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For the next $250 million 1.0750%
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For the next $500 million 1.0625%
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For the next $1 billion 1.0500%
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For assets over $2 billion 1.0250%
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The fund pays for its own operating expenses such as custodial,
transfer agent, accounting and legal fees; brokerage commissions;
distribution and service fees; and extraordinary expenses.
What Securities We Invest In
The fund's investment objective may not be changed without shareholder
approval. The following investment policies may be changed by the
Board of Trustees without shareholder approval unless otherwise noted
in this prospectus or the Statement of Additional Information.
Peroni Select Stock List
The fund will invest substantially all (at least 80%) of its assets in
a portfolio of 25-35 stocks of companies included in the "Peroni
Select Stock List," based upon the research of Mr. Peroni. The Peroni
Select Stock List is chosen using a time-tested strategy that combines
bottom-up evaluation of a stock's technical characteristics with a
top-down, thematic investment approach. The stocks in the Peroni
Select Stock List represent the 40-60 most attractive companies from
those sectors well positioned to benefit from the investment themes
Mr. Peroni believes will underlie stock market leadership over the
next 12 to 18 months.
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; and other securities with equity characteristics.
Convertible bonds and debentures must be rated at least BBB by
Standard & Poor's, Duff & Phelps, or Fitch IBCA, Inc., or Baa by
Moody's Investors Service when purchased.
Foreign Securities
The fund may invest up to 20% of its assets in equity securities of
foreign issuers that are traded in United States securities markets
and American Depositary Receipts ("ADRs") or other types of depositary
receipts denominated in U.S. dollars. ADR's represent indirect
ownership interests in securities of foreign issuers. All foreign
investments involve certain risks in addition to those associated with
U.S. investments (see "What the Risks Are -- Foreign investment
risk").
Short-term Investments
Under normal market conditions, the fund may invest up to 20% of its
assets in short-term investments including U.S. government securities,
quality commercial paper or similar fixed-income securities with
remaining
Section 2 How We Manage Your Money 5
<PAGE>
maturities of one year or less. For more information on eligible
short-term investments, see the Statement of Additional Information.
Delayed Delivery Transactions
The fund may buy or sell securities on a when-issued or delayed-
delivery basis, paying for or taking delivery of the securities at a
later date, normally within 15 to 45 days of the trade. Such
transactions involve an element of risk because the value of the
security to be purchased may decline to a level below its purchase
price before the settlement date.
How We Select Investments
Investing in Market Leaders for Capital Growth
The fund will invest substantially all of its assets in a portfolio of
25-35 stocks of companies included in the Peroni Select Stock List.
Mr. Peroni and Nuveen's Technical Equity Research Group currently
cover over 1,500 companies world-wide whose stocks are actively traded
on a U.S. exchange. From this universe, a bottom-up evaluation
identifies approximately 500-600 stocks with strong future growth
potential based upon their technical characteristics. These
characteristics include the stock's current price relative to an
integral support level, the strength of investor money flows and the
sector's relative attractiveness. This bottom-up evaluation is then
blended with a top-down, thematic analysis of market psychology as
well as broad economic, monetary and political trends to identify
those current and emerging investment themes most likely to underlie
long-term (generally 12 to 18 months) market leadership. From the 100-
200 companies well-positioned to benefit from these identified themes,
the most attractive 40-60 investment opportunities are then chosen for
the Peroni Select Stock List.
When selecting stocks for the fund from this list, the portfolio
manager will evaluate an individual security's potential contribution
and risk to the portfolio's return. The manager will also consider
investing across a range of sectors in order to diversify holdings and
limit investment risk. The portfolio manager will continually monitor
stocks in the fund's portfolio and may sell a stock if its price rises
too far above its integral support level, the strength of the stock or
sector deteriorates, or a more attractive investment opportunity is
identified.
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 not exceed 60%.
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.
6 Section 2 How We Manage Your Money
<PAGE>
What the Risk 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 the fund. Because of these and other risks, you should
consider an investment in the fund to be a long-term investment.
Market risk: As a mutual fund investing its assets in stocks, the fund
is subject to market risk. Market risk is the risk that a particular
stock, an industry, or stocks in general may fall in value. The value
of your investment in the fund will go up and down with the prices of
the securities in which the fund invests. The prices of stocks change
in response to many factors, including the historical and prospective
earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
Concentration risk: The fund is classified as "non-diversified." As a
result, the fund is only limited as to the percentage of its assets
which may be invested in the securities of any one issuer by its own
investment restrictions and by the diversification requirements
imposed by the Internal Revenue Code of 1986, as amended. Since the
fund may invest a relatively high percentage on its assets in a
limited number of issuers, the fund may be more susceptible to any
single economic, political or regulatory occurrence and to the
financial conditions of the issuers in which it invests.
Although the following risk factors are not principal risks, they may
still affect your investment in the fund:
Inflation risk: Like all mutual funds, the fund is subject to
inflation risk. This is the risk that the value of assets or income
from investments will be less in the future as inflation decreases the
value of money. As inflation increases, the value of the fund's assets
can decline as can the value of the fund's distributions.
Foreign investment risk: Securities of foreign issuers present risks
beyond those of domestic securities. The prices of foreign securities
are more volatile than U.S. stocks due to such factors as political or
economic instability, less publicly available information, exchange
rate changes, relatively low market liquidity and the potential lack
of strict financial and accounting controls and standards.
Section 2 How We Manage Your Money 7
<PAGE>
How We Manage Risk
We use time-tested risk management strategies designed to help protect your
capital during periods of market uncertainty or weakness: broad portfolio
diversification and a rigorous sell discipline. While we use these
strategies to control or reduce risk, there is no assurance that we will
succeed.
Investment Limitations
The fund has adopted certain investment limitations that cannot be changed
without shareholder approval and are designed to limit your investment risk
and maintain portfolio diversification. In addition, as a non-fundamental
policy, the fund may not have more than 5% of its total assets in
securities of any one issuer, or 10% of the voting securities of that
issuer (except for U.S. government securities or for 50% of the fund's
total assets). 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 and 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 fund may not achieve its investment objective.
Although these are not principal investment strategies, we may also use
various investment strategies designed to limit the risk of price
fluctuations and to preserve capital. These hedging strategies include
using financial futures contracts, options on financial futures, or stock
index options. These strategies may reduce fund returns and will benefit
the fund largely to the extent we are able to use them successfully. The
fund could lose money on futures transactions or an option can expire
worthless.
8 Section 2 How We Manage Your Money
<PAGE>
Section 3 How You Can Buy and Sell Shares
We offer four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other
features. Your financial advisor can help you determine which class is
best for you. We offer a number of features for your convenience.
Please see the Statement of Additional Information for further
details.
What Share Classes We Offer
Class A Shares
You can buy Class A shares at the offering price, which is the net
asset value per share plus an up-front sales charge. You may qualify
for a reduced sales charge, or the sales charge may be waived, as
described in "How to Reduce Your Sales Charge." Class A shares are
also subject to an annual service fee of .25% of the fund's average
daily assets which compensates your financial advisor for providing
ongoing service to you. Nuveen retains the up-front sales charge and
the service fee on accounts with no authorized dealer of record. The
up-front Class A sales charge for the fund is as follows:
<TABLE>
<CAPTION>
Authorized Dealer
Sales Charge as % of Sales Charge as % of Commission as % of
Amount of Purchase Public Offering Price Net Amount Invested Public Offering Price
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<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
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$50,000 but less than $100,000 4.50% 4.71% 4.00%
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$100,000 but less than $250,000 3.75% 3.90% 3.25%
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$250,000 but less than $500,000 2.75% 2.83% 2.50%
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$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
---------------------------------------------------------------------------------------------------
$1,000,000 and over --/1/ -- --/1/
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</TABLE>
/1/ You can buy $1 million or more of Class A shares at net asset
value without an up-front sales charge. Nuveen pays authorized dealers
a commission equal to the sum of 1% of the first $2.5 million, plus
0.50% of the next $2.5 million, plus 0.25% of any amount over $5
million. Unless the authorized dealer waived the commission, you may
be assessed a contingent deferred sales charge ("CDSC") of 1% if you
redeem any of your shares within 18 months of purchase. The CDSC is
calculated on the lower of your purchase price or your redemption
proceeds. You do not pay a CDSC on any Class A shares you purchase by
reinvesting dividends.
Class B Shares
You can buy Class B shares at the offering price, which is the net
asset value per share without any up-front sales charge so that the
full amount of your purchase is invested in the fund. However, you
will pay annual distribution and service fees of 1.00% of the fund's
average daily assets. The annual .25% service fee compensates your
financial advisor for providing ongoing service to you. Nuveen retains
the service and distribution fees on accounts with no authorized
dealer of record. The annual .75% distribution fee compensates Nuveen
for paying your financial advisor a 4% up-front sales commission,
which includes an advance of the first year's service fee. If you sell
your shares within six years of purchase, you will normally pay a CDSC
as shown in the schedule below. The CDSC is based on your purchase or
sale price, whichever is lower. You do not pay a CDSC on any Class B
shares you purchase by reinvesting dividends.
Section 3 How You Can Buy and Sell Shares 9
<PAGE>
Class B shares automatically convert to Class A shares [seven] years
after you buy them so that the distribution fees you pay over the life
of your investment are limited. You will continue to pay an annual
service fee on any converted Class B shares.
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5-6
CDSC 5% 4% 4% 3% 2% 1%
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Class C Shares
You can buy Class C shares at the offering price, which is the net
asset value per share without any up-front sales charge so that the
full amount of your purchase is invested in the fund. However, you
will pay annual distribution and service fees of 1% of the fund's
average daily assets. The annual .25% service fee compensates your
financial advisor for providing ongoing service to you. Nuveen retains
the service and distribution fees on accounts with no authorized
dealer of record. The annual .75% distribution fee reimburses Nuveen
for paying your financial advisor an ongoing sales commission. Nuveen
advances the first year's service and distribution fees. If you sell
your shares within 12 months of purchase, you will normally pay a 1%
CDSC based on either your purchase or sale price, whichever is lower.
You do not pay a CDSC on any Class C shares you purchase by
reinvesting dividends.
Class R Shares
You may purchase Class R shares only under limited circumstances at
the net asset value on the day of purchase. In order to qualify, you
must be eligible under one of the programs described in "How to Reduce
Your Sales Charge" (below) or meet certain other purchase size
criteria. Class R shares are not subject to sales charges or ongoing
service or distribution fees. Class R shares have lower ongoing
expenses than the other classes.
How to Reduce Your Sales Charge
We offer a number of ways to reduce or eliminate the up-front sales
charge on Class A shares or to qualify to purchase Class R shares.
<TABLE>
<S> <C> <C>
Class A Sales Charge Reductions Class A Sales Charge Waivers Class R Eligibility
. Rights of accumulation . Nuveen Defined Portfolio or . Certain employees and directors of
. Letter of intent Exchange-Traded Fund reinvestment Nuveen or employees of
. Group purchase . Retirement plans . authorized dealers
. Certain employees and directors of Bank trust departments
Nuveen or employees of authorized dealers
. Bank trust departments
</TABLE>
In addition, Class A shares at net asset value and Class R shares may
be purchased through registered investment advisers, certified
financial planners and registered broker-dealers who charge asset-
based or comprehensive "wrap" fees for their services. Please refer to
the Statement of Additional Information for detailed program
descriptions and eligibility
10 Section 3 How You Can Buy and Sell Shares
<PAGE>
requirements. Additional information is available from your financial
advisor or by calling (800) 257-8787. Your financial advisor can also
help you prepare any necessary application forms. You or your
financial advisor must notify Nuveen at the time of each purchase if
you are eligible for any of these programs. The fund may modify or
discontinue these programs at any time.
How to Buy Shares
Fund shares may be purchased on any business day, which is any day the
New York Stock Exchange is open for business and normally ends at 4
p.m. New York time. Generally, the Exchange is closed on weekends and
national holidays. The share price you pay will depend on when Nuveen
receives your order. Orders received before the close of trading on a
business day will receive that day's closing share price, otherwise
you will receive the next business day's price.
Through a Financial Advisor
You may buy shares through your financial advisor, who can handle all
the details for you, including opening a new account. Financial
advisors can also help you review your financial needs and formulate
long-term investment goals and objectives. In addition, financial
advisors generally can help you develop a customized financial plan,
select investments and monitor and review your portfolio on an ongoing
basis to help assure your investments continue to meet your needs as
circumstances change. Financial advisors are paid for ongoing
investment advice and services either from fund sales charges and fees
or by charging you a separate fee in lieu of a sales charge. If you do
not have a financial advisor, call (800) 257-8787 and Nuveen can refer
you to one in your area.
By Mail
You may open an account and buy shares by mail by completing the
enclosed application and mailing it along with your check to: Nuveen
Investor Services, P.O. Box 5186, Bowling Green Station, New York, NY
10274-5186. No third party checks will be accepted.
Investment Minimums
The minimum initial investment is $3,000 ($1,000 for a
Traditional/Roth IRA account; $500 for an Education IRA account; $50
through systematic investment plan accounts) and may be lower for
accounts opened through certain fee-based programs. Subsequent
investments must be in amounts of $50 or more. The fund reserves the
right to reject purchase orders and to waive or increase the minimum
investment requirements.
Systematic Investing
Systematic investing allows you to make regular investments through
automatic deductions from your bank account, directly from your
paycheck or exchanging shares from another identically registered
mutual fund account of the same share class (simply complete the
appropriate section of the account application form). Systematic
investing may also make you eligible for reduced sales charges.
Section 3 How You Can Buy and Sell Shares 11
<PAGE>
The minimum automatic deduction is $50 per month. There is no charge
to participate in the fund's systematic investment plan. You can stop
the deductions at any time by notifying the fund in writing.
From Your Bank Account
You can make systematic investments of $50 or more per by authorizing
us to draw preauthorized checks on your bank account.
From Your Paycheck
With your employer's consent, you can make systematic investments of
$25 or more per pay period (meeting the monthly minimum of $50) by
authorizing your employer to deduct monies from your paycheck.
Systematic Exchanging
You can make systematic investments by authorizing Nuveen to exchange
shares from one Nuveen mutual fund account into another identically
registered Nuveen account of the same share class.
One of the benefits of systematic investing is dollar cost averaging.
Because you regularly invest a fixed amount of money over a period of
years regardless of the share price, you buy more shares when the
price is low and fewer shares when the price is high. As a result, the
average share price you pay should be less than the average share
price of fund shares over the same period. To be effective, dollar
cost averaging requires that you invest over a long period of time,
and does not assure that you will profit.
Systematic Withdrawal
If the value of your fund account is at least $10,000, you may request
to have $50 or more withdrawn automatically from your account. You may
elect to receive payments monthly, quarterly, semi-annually or
annually, and may choose to receive a check, have the monies
transferred directly into your bank account (see "Special
Services--Fund Direct" below), paid to a third party or sent payable
to you at an address other than your address of record. You must
complete the appropriate section of the account application or Account
Update Form to participate in 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 an appropriate class of another Nuveen mutual fund
available in your state. Your exchange must meet the minimum purchase
requirements of the fund into which you are exchanging. You may have
to pay a sales charge when exchanging shares that you purchased
without a sales charge for shares that are sold with a sales charge.
Please consult the Statement of Additional Information for details.
12 Section 3 How You Can Buy and Sell Shares
<PAGE>
The exchange privilege is not intended to allow you to use the fund
for short-term trading. Because excessive exchanges may interfere with
portfolio management, raise fund operating expenses or otherwise have
an adverse effect on other shareholders, the fund reserves the right
to revise or suspend the exchange privilege, limit the amount or
number of exchanges, or reject any exchange.
The fund may change or cancel its exchange policy at any time upon 60
days' notice. Because an exchange is treated for tax purposes as a
purchase and sale, and any gain may be subject to tax, you should
consult your tax advisor about the tax consequences of exchanging your
shares.
Fund Direct(SM)
The Fund Direct Program allows you to link your fund account to your
bank account and transfer money electronically between these accounts
and perform a variety of account transactions, including purchasing
shares by telephone and investing through a systematic investment
plan. You may also have dividends, distributions, redemption payments
or systematic withdrawal plan payments sent directly to your bank
account. Your financial advisor can help you complete the forms for
these services, or you can call Nuveen at (800) 257-8787 for copies of
the necessary forms.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your
redemption proceeds up to one year later without incurring any
additional charges. You may only reinvest into the same share class
you redeemed. If you paid a CDSC, we will refund your CDSC and
reinstate your holding period. You may use this reinstatement
privilege only once for any redemption.
How to Sell Shares
You may sell (redeem) your shares on any business day. You will
receive the share price next determined after Nuveen has received your
properly completed redemption request. Your redemption request must be
received before the close of trading for you to receive that day's
price. If you are selling shares purchased recently with a check, you
will not receive your redemption proceeds until your check has
cleared. This may take up to ten business days from your purchase
date. While the 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, 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 Advisor
You may sell your shares through your financial advisor who can
prepare the necessary documentation. Your financial advisor may charge
for this.
Section 3 How You Can Buy and Sell Shares 13
<PAGE>
An Important Note About Telephone Transactions
Although Nuveen Investor Services has certain safeguards and
procedures to confirm the identity of callers, it will not be liable
for losses resulting from following telephone instructions it
reasonably believes to be genuine. Also, you should verify your trade
confirmations immediately upon receipt.
By Telephone
If you have authorized telephone redemption privileges, you can redeem
your shares by calling (800) 257-8787. Telephone redemptions are not
available if you own shares in certificate form and may not exceed
$50,000. Checks will only be issued to you as the shareholder of
record and mailed to your address of record. If you have established
Fund Direct privileges, you may have redemption proceeds transferred
electronically to your bank account. We will normally mail your check
the next business day.
By Mail
You can sell your shares at any time by sending a written request to
the fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green
Station, New York, NY 10274-5186. Your request must include the
following information:
. The fund's name;
. Your name and account number;
. The dollar or share amount you wish to redeem;
. The signature of each owner exactly as it appears on the account;
. The name of the person to whom you want your redemption proceeds
paid (if other than to the shareholder of record);
. The address where you want your redemption proceeds sent (if other
than the address of record);
. Any certificates you have for the shares; and
. Any required signature guarantees.
We will normally mail your check the next business day, but in no
event more than seven days after we receive your request. If you
purchased your shares by check, your redemption proceeds will not be
mailed until your check has cleared. Guaranteed signatures are
required if you are redeeming more than $50,000, you want the check
payable to someone other than the shareholder of record or you want
the check sent to another address (or the address of record has been
changed within the last 60 days). Signature guarantees must be
obtained from a bank, brokerage firm or other financial intermediary
that is a member of an approved Medallion Guarantee Program or that is
otherwise approved by the fund. A notary public cannot provide a
signature guarantee.
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.
Redemptions In-Kind
The fund generally pays redemption proceeds in cash. Under unusual
conditions that make cash payment unwise and for the protection of
existing shareholders, the fund may pay all or a portion of your
redemption proceeds in securities or other fund assets. Although it is
unlikely that your shares would be redeemed in-kind, you would
probably have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any capital gains from that
sale.
14 Section 3 How You Can Buy and Sell Shares
<PAGE>
Section 4 General Information
To help you understand the tax implications of investing in the fund,
this section includes important details about how the fund makes
distributions to shareholders. We discuss some other fund policies, as
well.
Dividends, Distributions and Taxes
The fund pays income dividends and any taxable 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 advisor or call
Nuveen at (800)257-8787.
Foreign Income Tax Considerations
Investment income that the fund receives from its foreign investments
may be subject to foreign income taxes, which generally will reduce
the fund's distributions. However, the U.S. has entered into tax
treaties with many foreign countries that may entitle you to certain
tax benefits.
Taxes and Tax Reporting
The fund's distributions are taxed as ordinary income or capital gains
(which may be taxable at different rates depending on the length of
time the fund holds its assets). Dividends from the fund's long-term
capital gains are taxable as capital gains, while dividends from
short-term capital gains and net investment income are generally
taxable as ordinary income. The tax you pay on a given capital gains
distribution depends generally on how long the fund has held the
portfolio securities it sold. It does not depend on how long you have
owned your fund shares.
Early in each year, you will receive a statement detailing the amount
and nature of all dividends and capital gains that you were paid
during the prior year. If you hold your investment at the firm where
you purchased your fund shares, you will receive the statement from
that firm. If you hold your shares directly at the fund, Nuveen will
send you the statement. The tax status of your dividends is the same
whether you reinvest your dividends or elect to receive them in cash.
The sale of shares in your account may produce a gain or loss, and is
a taxable event. For tax purposes, an exchange is the same as a sale.
Please note that if you do not furnish the fund with your correct
Social Security number or employer identification number, federal law
requires the fund to withhold federal income tax from your
distributions and redemption proceeds, currently at a rate of 31%.
Section 4 General Information 15
<PAGE>
Please consult the Statement of Additional Information and your tax
advisor for more information about taxes.
Buying or Selling Shares Close to a Record Date
Buying fund shares shortly before the record date for a taxable
dividend is commonly known as "buying the dividend." The entire
dividend may be taxable to you even though a portion of the dividend
effectively represents a return of your purchase price.
Distribution and Service Plan
Nuveen serves as the selling agent and distributor of the fund's
shares. In this capacity, Nuveen manages the offering of the fund's
shares and is responsible for all sales and promotional activities. In
order to reimburse Nuveen for its costs in connection with these
activities, including compensation paid to authorized dealers, the
fund has adopted a distribution and service plan in accordance with
Rule 12b-1 under the Investment Company Act of 1940. (See "How You Can
Buy and Sell Shares" for a description of the distribution and service
fees paid under this plan.)
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to authorized dealers, including
Nuveen, in connection with the distribution of shares. Nuveen uses the
service fee for Class A, Class B, and Class C shares to compensate
authorized dealers, including Nuveen, for providing ongoing account
services to shareholders. These services may include establishing and
maintaining shareholder accounts, answering shareholder inquiries, and
providing other personal services to shareholders. These fees also
compensate Nuveen for other expenses, including printing and
distributing prospectuses to persons other than shareholders, and
preparing, printing, and distributing advertising and sales literature
and reports to shareholders used in connection with the sale of
shares. Because these fees are paid out of the fund's assets on an
ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales
charges.
Nuveen periodically undertakes sales promotion programs with
authorized dealers and may pay them the full applicable sales charge
as a commission. In addition, Nuveen may provide support at its own
expense to authorized dealers in connection with sales meetings,
seminars, prospecting seminars and other events at which Nuveen
presents its products and services. Under certain circumstances,
Nuveen also will share with authorized dealers up to half the costs of
advertising that features the products and services of both parties.
The Statement of Additional Information contains further information
about these programs.
Net Asset Value
The price you pay for your shares is based on the fund's net asset
value per share which is determined as of the close of trading
(normally 4:00 p.m. New York time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated for each
class by taking the
16 Section 4 General Information
<PAGE>
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 securities exchange or
Nasdaq are valued at the most recent bid prices. When price quotes are
not readily available, the fund establishes a fair value.
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.
Section 4 General Information 17
<PAGE>
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
Nuveen Mutual Funds
Nuveen offers a variety of mutual funds designed to help you
reach your financial goals. The funds below are grouped by
investment objectives.
Growth
International Growth Fund
Innovation Fund
Nuveen Rittenhouse Growth Fund
Select Stock Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income Fund
Floating Rate Fund/1/
Tax-Free Income
National Municipal Bond Funds
High Yield
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/2/ Maryland Ohio
Colorado Massachusetts/2/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/2/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to
you. The Statement of Additional Information ("SAI"),
incorporated by reference into this prospectus, contains
detailed information on the Nuveen Select Stock Fund's
policies and operation. Call Nuveen at (800) 257-8787 to
request a free copy of the SAI or other fund information; or
ask your financial adviser for copies.
You may also obtain this and other fund information,
including the codes of ethics adopted by the fund, Nuveen
and NIAC directly from the Securities and Exchange
Commission ("SEC"). The SEC may charge a copying fee for
this information. Visit the SEC on-line at
http://www.sec.gov or in person at the SEC's Public
Reference Room in Washington, D.C. Call the SEC at
1-202-942-8090 for room hours and operation. You may also
request fund information by sending an e-mail request to
[email protected] or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C.
20549. The fund's Investment Company file number is 811-
08333.
1. This is a continuously-offered closed-end interval fund.
As such, redemptions are only available during quarterly
repurchase periods. See fund prospectus for additional
information.
2. Long-term and insured long-term portfolios.
EPR-XX X-00
<PAGE>
Statement of Additional Information
, 2000
Nuveen Investment Trust II
333 West Wacker Drive
Chicago, Illinois 60606
NUVEEN INNOVATION FUND
NUVEEN INTERNATIONAL GROWTH FUND
NUVEEN SELECT STOCK FUND
This Statement of Additional Information is not a prospectus. A prospectus may
be obtained without charge from certain securities representatives, banks and
other financial institutions that have entered into sales agreements with John
Nuveen & Co. Incorporated ("Nuveen"), or from the Funds by written request to
the applicable 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
Prospectuses for the Funds. The Prospectuses for the Nuveen Innovation Fund and
Nuveen International Growth Fund are dated January 10, 2000 and the Prospectus
for the Nuveen Select Stock Fund is dated , 2000.
<TABLE>
<S> <C>
Table of Contents Page
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General Information B-2
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Investment Policies and Restrictions B-2
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Investment Policies and Techniques B-4
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Management B-25
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Trust Manager and Fund Manager B-30
------------------------------------------------------------------------------
Portfolio Transactions B-31
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Net Asset Value B-33
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Tax Matters B-33
------------------------------------------------------------------------------
Performance Information B-39
------------------------------------------------------------------------------
Additional Information on the Purchase And Redemption of Fund Shares and
Shareholder Programs B-43
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Distribution and Service Plan B-56
------------------------------------------------------------------------------
Independent Public Accountants, Custodian and Transfer Agent B-57
------------------------------------------------------------------------------
General Trust Information B-57
------------------------------------------------------------------------------
Appendix A--Ratings of Investments A-1
------------------------------------------------------------------------------
</TABLE>
<PAGE>
GENERAL INFORMATION
The Nuveen Innovation Fund (the "Innovation Fund"), the Nuveen International
Growth Fund (the "International Fund") and the Nuveen Select Stock Fund (the
"Select Stock Fund") (collectively, the "Funds") are open-end management in-
vestment companies and are series of the Nuveen Investment Trust II (the
"Trust"), an open-end management series investment company. The Innovation Fund
and the International Fund are diversified funds. The Select Stock Fund is a
non-diversified fund. Each series of the Trust represents shares of beneficial
interests in a separate portfolio of securities and other assets, with its own
objectives and policies. Currently, four series of the Trust are authorized and
outstanding.
Certain matters under the Investment Company Act of 1940 which must be submit-
ted to a vote of the holders of the outstanding voting securities of a series
company shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding voting securities of each se-
ries affected by such matter.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Restrictions
The investment objective and certain fundamental investment policies of the
Funds are described in the Prospectuses for the Funds. The Funds , as a funda-
mental policy, may not, without the approval of the holders of a majority of
the shares of the Funds:
(1) With respect to the Innovation Fund and the International Fund and 75% of
each of their total assets, purchase the securities of any issuer (except secu-
rities issued or guaranteed by the United States government or any agency or
instrumentality thereof) if, as a result, (i) more than 5% of a Fund's total
assets would be invested in securities of that issuer, or (ii) a Fund would
hold more than 10% of the outstanding voting securities of that issuer.
(2) Borrow money, except that a Fund may (i) borrow money from banks for tempo-
rary or emergency purposes (but not for leverage or the purchase of invest-
ments) and (ii) engage in other transactions permissible under the Investment
Company Act of 1940 that may involve a borrowing (such as obtaining such short-
term credits as are necessary for the clearance of transactions, engaging in
delayed- delivery transactions, or purchasing certain futures and options),
provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the
value of a Fund's total assets (including the amount borrowed), less a Fund's
liabilities (other than borrowings).
(3) Act as an underwriter of another issuer's securities, except to the extent
that a Fund may be deemed to be an underwriter within the meaning of the Secu-
rities Act of 1933 in connection with the purchase and sale of portfolio secu-
rities.
(4) Make loans to other persons, except through (i) the purchase of debt secu-
rities permissible under a Fund's investment policies, (ii) repurchase agree-
ments, or (iii) the lending of portfolio securities, provided that no such loan
of portfolio securities may be made by a 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 owner-
ship of securities or other instruments (but this shall not prevent a Fund from
purchasing or selling options, futures contracts, or
B-2
<PAGE>
other derivative instruments, or from investing in securities or other instru-
ments 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 a Fund from pur-
chasing or selling securities or other instruments backed by real estate or of
issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the Investment Company
Act of 1940.
(8) Purchase the securities of any issuer if, as a result, 25% or more of a
Fund's total assets would be invested in the securities of issuers whose prin-
cipal business activities are in the same industry; except that this restric-
tion shall not be applicable to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof and that the Innovation
Fund will concentrate more than 25% of its assets in companies that use innova-
tive technologies to gain a strategic, competitive advantage in their indus-
tries as well as companies that develop, provide and service those technolo-
gies.
If a percentage restriction is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the invest-
ment or the total assets will not constitute a violation of that restriction.
The foregoing fundamental investment policies, together with the investment ob-
jective of each Fund and certain other policies specifically identified in the
applicable Prospectus, cannot be changed without approval by holders of a "ma-
jority 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 Funds are
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Funds may not:
(1) Sell securities short, unless a Fund owns or has the right to obtain secu-
rities 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 a Fund may obtain such short
term credits as are necessary for the clearance of transactions; and provided
that margin deposits in connection with futures contracts, options on futures
contracts, or other derivative instruments shall not constitute purchasing se-
curities on margin.
(3) Pledge, mortgage or hypothecate any assets owned by a Fund except as may be
necessary in connection with permissible borrowings or investments and then
such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of a Fund's
total assets at the time of the borrowing or investment.
(4) Purchase securities of open-end or closed-end investment companies except
in compliance with the Investment Company Act of 1940 and applicable state law.
B-3
<PAGE>
(5) Enter into futures contracts or related options if more than 30% of a
Fund's net assets would be represented by futures contracts or more than 5% of
a Fund's net assets would be committed to initial margin deposits and premiums
on futures contracts and related options.
(6) Invest in direct interests in oil, gas or other mineral exploration pro-
grams or leases; however, a Fund may invest in the securities of issuers that
engage in these activities.
(7) Purchase securities when borrowings exceed 5% of its total assets. If due
to market fluctuations or other reasons, the value of a Fund's assets falls be-
low 300% of its borrowings, the Fund will reduce its borrowings within 3 busi-
ness 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.
(8) Invest in illiquid securities if, as a result of such investment, more than
15% of a Fund's net assets would be invested in illiquid securities.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Funds' investment
objectives, policies, and techniques that are described in the Prospectuses for
the Funds.
Cash Equivalents and Short-Term Investments
Short-Term Taxable Fixed Income Securities
The Innovation Fund and the International Fund may invest up to 35% of their
total assets and the Select Stock Fund may invest up to 20% of its total as-
sets, and for temporary defensive purposes or to keep cash on hand fully in-
vested up to 100% of their total assets, in cash equivalents, money market
funds and short-term taxable fixed income securities from issuers having a
long-term rating of at least A or higher by S&P, Moody's or Fitch, or A- or
higher by Duff & Phelps, Inc. ("D&P"), or determined by the portfolio manager
to be of comparable quality, and having a maturity of one year or less. Short-
term taxable fixed income securities are defined to include, without limita-
tion, the following for the applicable Fund:
(1) Each Fund may invest in U.S. government securities, including bills, notes
and bonds differing as to maturity and rates of interest, which are either is-
sued or guaranteed by the U.S. Treasury or by U.S. government agencies or in-
strumentalities. U.S. government agency securities include securities issued by
(a) the Federal Housing Administration, Farmers Home Administration, Export-Im-
port Bank of the United States, Small Business Administration, and the Govern-
ment National Mortgage Association, whose securities are supported by the full
faith and credit of the United States; (b) the Federal Home Loan Banks, Federal
Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities
are supported by the right of the agency to borrow from the U.S. Treasury; (c)
the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain obliga-
tions of the agency or instrumentality; and (d) the Student Loan Marketing As-
sociation, whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored agen-
cies or instrumentalities, no assurance can be given that it always will do so
since it is not so obligated by law. The U.S. government, its agencies, and in-
strumentalities do not guarantee the market value of their securities, and con-
sequently, the value of such securities may fluctuate. In addition, a Fund may
invest in sovereign debt obligations of foreign
B-4
<PAGE>
countries. A sovereign debtor's willingness or ability to repay principal and
interest in a timely manner may be affected by a number of factors, including
its cash flow situation, the extent of its foreign reserves, the availability
of sufficient foreign exchange on the date a payment is due, the relative size
of the debt service burden to the economy as a whole, the sovereign debtor's
policy toward principal international lenders and the political constraints to
which it may be subject.
(2) Each Fund may invest in certificates of deposit issued against funds depos-
ited in a bank or savings and loan association. Such certificates are for a
definite period of time, earn a specified rate of return, and are normally ne-
gotiable. If such certificates of deposit are non-negotiable, they will be con-
sidered illiquid securities and be subject to the Fund's 15% restriction on in-
vestments in illiquid securities. Pursuant to the certificate of deposit, the
issuer agrees to pay the amount deposited plus interest to the bearer of the
certificate on the date specified thereon. Under current FDIC regulations, the
maximum insurance payable as to any one certificate of deposit is $100,000;
therefore, certificates of deposit purchased by a Fund may not be fully in-
sured.
(3) Each Fund may invest in bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions. Generally, an acceptance
is a time draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The draft is then "ac-
cepted" 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) The Nuveen Innovation Fund may invest in Eurodollar certificates of depos-
it, which are certificates of deposit issued by foreign banks that are denomi-
nated in U.S. dollars.
(5) Each Fund may invest in repurchase agreements, which involve purchases of
debt securities. In such an action, at the time the Fund purchases the securi-
ty, it simultaneously agrees to resell and redeliver the security to the sell-
er, who also simultaneously agrees to buy back the security at a fixed price
and time. This assures a predetermined yield for the Fund during its holding
period since the resale price is always greater than the purchase price and re-
flects an agreed-upon market rate. Such actions afford an opportunity for a
Fund to invest temporarily available cash. A Fund may enter into repurchase
agreements only with respect to obligations of the U.S. government, its agen-
cies or instrumentalities; certificates of deposit; or bankers' acceptances in
which the Fund may invest. Repurchase agreements may be considered loans to the
seller, collateralized by the underlying securities. The risk to the Fund is
limited to the ability of the seller to pay the agreed-upon sum on the repur-
chase 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 under-
lying collateral is less than the repurchase price, the Fund could incur a loss
of both principal and interest. The portfolio manager monitors the value of the
collateral at the time the action is entered into and at all times during the
term of the repurchase agreement. The portfolio manager does so in an effort to
determine that the value of the collateral always equals or exceeds the agreed-
upon repurchase price to be paid to the Fund. If the seller were to be subject
to a federal bankruptcy proceeding, the ability of the Fund to liquidate the
collateral could be delayed or impaired because of certain provisions of the
bankruptcy laws.
(6) Each Fund may invest in bank time deposits, which are monies kept on de-
posit with banks or savings and loan associations for a stated period of time
at a fixed rate of interest. There may be penal-
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ties for the early withdrawal of such time deposits, in which case the yields
of these investments will be reduced.
(7) Each Fund may invest in commercial paper, which are short-term unsecured
promissory notes, including variable rate master demand notes issued by corpo-
rations to finance their current operations. Master demand notes are direct
lending arrangements between a Fund and a corporation. There is no second-
ary market for the notes. However, they are redeemable by the Fund at any time.
The Fund manager will consider the financial condition of the corporation
(e.g., earning power, cash flow, and other liquidity ratios) and will continu-
ously monitor the corporation's ability to meet all of its financial obliga-
tions, because the Fund's liquidity might be impaired if the corporation were
unable to pay principal and interest on demand. A Fund may only invest in com-
mercial paper rated A-2 or better by S&P, Prime-2 or higher by Moody's, Duff 2
or higher by D&P or Fitch 2 or higher by Fitch, or unrated commercial paper
which is, in the opinion of the Fund manager, of comparable quality.
Foreign Investments
Indirect Foreign Investment--Depositary Receipts. The Funds may invest in for-
eign securities by purchasing depositary receipts, including American Deposi-
tary Receipts ("ADRs"), European Depository Receipts ("EDRs"), or Global Depos-
itary Receipts ("GDRs"), or other securities representing indirect ownership
interests in the securities of foreign issuers. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S. se-
curities markets, while EDRs and GDRs, in bearer form, may be denominated in
other currencies and are designed for use in European and other markets. For
purposes of a Fund's investment policies, ADRs, EDRs, and GDRs are deemed to
have the same classification as the underlying securities they represent, ex-
cept that ADRs, EDRs, and GDRs shall be treated as indirect foreign invest-
ments. Thus, an ADR, EDR, or GDR representing ownership of common stock will be
treated as common stock. ADRs, EDRs, and GDRs do not eliminate all of the risks
associated with directly investing in the securities of foreign issuers.
Other types of depositary receipts include American Depositary Shares ("ADSs"),
Global Depositary Certificates ("GDCs"), and International Depositary Receipts
("IDRs"). ADSs are shares issued under a deposit agreement representing the un-
derlying ordinary shares that trade in the issuer's home market. An ADR, de-
scribed above, is a certificate that represents a number of ADSs. GDCs and IDRs
are typically issued by a foreign bank or trust company, although they may
sometimes also be issued by a U.S. bank or trust company. GDCs and IDRs are de-
positary receipts that evidence ownership of underlying securities issued by
either a foreign or a U.S. corporation.
Depositary receipts may be available through "sponsored" or "unsponsored" fa-
cilities. A sponsored facility is established jointly by a depositary and the
issuer of the security underlying the receipt. An unsponsored facility may be
established by a depositary without participation by the issuer of the security
underlying the receipt. There are greater risks associated with holding
unsponsored depositary receipts. For example, if a Fund holds an unsponsored
depositary receipt, it will generally bear all of the costs of establishing the
unsponsored facility. In addition, the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications re-
ceived from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
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Direct Foreign Investments. The Innovation Fund and the International Fund may
invest directly in the securities of foreign issuers. The Select Stock Fund
may invest only in the securities of foreign issuers traded in U.S. security
markets, ADRs, or other depositary receipts denominated in U.S. dollars (lim-
ited to 20% of net assets). In considering whether to invest in the securities
of a foreign company, the Fund manager considers such factors as the charac-
teristics of the particular company, differences between economic trends, and
the performance of securities markets within the U.S. and those within other
countries. The Fund manager also considers factors relating to the general
economic, governmental, and social conditions of the country or countries
where the company is located.
The Innovation Fund and the International Fund may purchase debt obligations
issued or guaranteed by governments (including states, provinces or municipal-
ities) of countries other than the United States, or by their agencies, au-
thorities, or instrumentalities. Each Fund also may purchase debt obligations
issued or guaranteed by supranational entities organized or supported by sev-
eral national governments, such as the International Bank for Reconstruction
and Development (the "World Bank"), the Inter-American Development Bank, the
Asian Development Bank, and the European Investment Bank. In addition, the In-
novation Fund and the International Fund may purchase debt obligations of for-
eign corporations or financial institutions, such as Yankee bonds (dollar-de-
nominated bonds sold in the United States by non-U.S. issuers), Samurai bonds
(yen-denominated bonds sold in Japan by non-Japanese issuers), and Euro bonds
(bonds not issued in the country (and possibly not the currency of the coun-
try) of the issuer).
The investments of the Innovation Fund and the International Fund may be allo-
cated among securities denominated in the currencies of a number of foreign
countries and, within each such country, among different types of securities.
The percentage of assets invested in securities of a particular country or de-
nominated in a particular currency will vary in accordance with the Fund man-
ager's assessment of the country's gross domestic product, purchasing power
parity and market capitalization and the relationship of a country's currency
to the United States dollar.
Securities transactions conducted outside the U.S. may not be regulated as
rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities, currencies and other instru-
ments. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading decisions,
(iii) delays in a Fund's ability to act upon economic events occurring in for-
eign markets during non-business hours in the U.S., (iv) the imposition of
different exercise and settlement terms and procedures and the margin require-
ments than in the U.S., (v) currency exchange rate changes, and (vi) lower
trading volume and liquidity.
The Innovation Fund and the International Fund may invest in Eurodollar
convertibles. Eurodollar convertibles are fixed-income securities of a foreign
issuer that are issued in U.S. dollars outside the U.S. and are convertible
into or exchangeable for specified equity securities.
Emerging Markets. The Funds may invest in companies located in developing
countries. The risks of investing in foreign securities are particularly high
when securities of issuers based in developing (or "emerging market") coun-
tries are involved. Investing in emerging market countries involves certain
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<PAGE>
risks not typically associated with investing in U.S. securities, and imposes
risks greater than, or in addition to, risks of investing in foreign, developed
countries. A number of emerging market countries restrict, to varying degrees,
foreign investment in securities. Repatriation of investment income, capital,
and the proceeds of sales by foreign investors may require governmental regis-
tration and/or approval in some emerging market countries. A number of the cur-
rencies of emerging market countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent
to investments in these currencies by a Fund. Inflation and rapid fluctuations
in inflation rates have had, and may continue to have, negative effects on the
economies and securities markets of certain emerging market countries. Many of
the emerging securities markets are relatively small, have low trading volumes,
suffer periods of relative illiquidity, and are characterized by significant
price volatility. There is a risk in emerging market countries that a future
economic or political crisis could lead to price controls, forced mergers of
companies, expropriation or confiscatory taxation, seizure, nationalization, or
creation of government monopolies, any of which may have a detrimental effect
on a Fund's investment.
Additional risks of investing in emerging market countries may include: cur-
rency exchange rate fluctuations; greater social, economic and political uncer-
tainty and instability (including the risk of war); more substantial governmen-
tal involvement in the economy; less governmental supervision and regulation of
the securities markets and participants in those markets; unavailability of
currency hedging techniques in certain emerging market countries; the fact that
companies in emerging market countries may be newly organized and may be
smaller and less seasoned companies; the difference in, or lack of, auditing
and financial reporting standards, which may result in unavailability of mate-
rial information about issuers; the risk that it may be more difficult to ob-
tain and/or enforce a judgment in a court outside the United States; and sig-
nificantly smaller market capitalization of securities markets. Also, any
change in the leadership or policies of emerging market countries, or the coun-
tries that exercise a significant influence over those countries, may halt the
expansion of or reverse the liberalization of foreign investment policies now
occurring and adversely affect existing investment opportunities.
In addition, emerging securities markets may have different clearance and set-
tlement procedures, which may be unable to keep pace with the volume of securi-
ties transactions or otherwise make it difficult to engage in such transac-
tions. Settlement problems may cause a Fund to miss attractive investment op-
portunities, hold a portion of its assets in cash pending investment, or delay
in disposing of a portfolio security. Such a delay could result in possible li-
ability to a purchaser of the security.
Special Risks of Investing in Russian and Other Eastern European Securities.
The Funds may invest a portion of their assets in securities of issuers located
in Russia and in other Eastern European countries. The political, legal and op-
erational risks of investing in the securities of Russian and other Eastern Eu-
ropean issuers, and of having assets custodied within these countries, may be
particularly acute. Investments in Eastern European countries may involve acute
risks of nationalization, expropriation and confiscatory taxation. The commu-
nist governments of a number of Eastern European countries appropriated large
amounts of private property in the past, in many cases without adequate compen-
sation, and there can be no assurance that such expropriation will not occur in
the future. Also, certain Eastern European countries, which do not have market
economies, are characterized by an absence of developed legal structures gov-
erning private and foreign investments and private property.
In addition, governments in certain Eastern European countries may require that
a governmental or quasi-governmental authority act as custodian of a Fund's as-
sets invested in such country. To the extent
B-8
<PAGE>
such governmental or quasi-governmental authorities do not satisfy the re-
quirements of the 1940 Act to act as foreign custodians of the Fund's cash and
securities, the Fund's investment in such countries may be limited or may be
required to be effected through intermediaries. The risk of loss through gov-
ernmental confiscation may be increased in such circumstances.
Investments in securities of Russian issuers may involve a particularly high
degree of risk and special considerations not typically associated with in-
vesting in U.S. and other more developed markets, many of which stem from
Russia's continuing political and economic instability and the slow-paced de-
velopment of its market economy. Investments in Russian securities should be
considered highly speculative. Such risks and special considerations include:
(a) delays in settling portfolio transactions and the risk of loss arising out
of Russia's system of share registration and custody (see below); (b) perva-
siveness of corruption, insider trading, and crime in the Russian economic
system; (c) difficulties associated in obtaining accurate market valuations of
many Russian securities, based partly on the limited amount of publicly avail-
able information; (d) the general financial condition of Russian companies,
which may involve particularly large amounts of inter-company debt; and (e)
the risk that the Russian tax system will not be reformed to prevent inconsis-
tent, retroactive and/or exorbitant taxation or, in the alternative, the risk
that a reformed tax system may result in the inconsistent and unpredictable
enforcement of the new tax laws. Also, there is the risk that the government
of Russia or other executive or legislative bodies may decide not to continue
to support the economic reform programs implemented since the dissolution of
the Soviet Union and could follow radically different political and/or eco-
nomic policies to the detriment of investors, including non-market-oriented
policies such as the support of certain industries at the expense of other
sectors or investors, a return to the centrally planned economy that existed
prior to the dissolution of the Soviet Union, or the nationalization of
privatized enterprises.
A risk of particular note with respect to direct investment in Russian securi-
ties is the way in which ownership of shares of companies is normally record-
ed. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by extracts from the reg-
ister or, in certain limited circumstances, by formal share certificates. How-
ever, there is no central registration system for shareholders and these serv-
ices are carried out by the companies themselves or by registrars located
throughout Russia. These registrars are not necessarily subject to effective
state supervision nor are they licensed with any governmental entity. It is
possible for a Fund to lose its registration through fraud, negligence or even
mere oversight. While a Fund will endeavor to ensure that its interest contin-
ues to be appropriately recorded, which may involve a custodian or other agent
inspecting the share register and obtaining extracts of share registers
through regular confirmations, these extracts have no legal enforceability and
it is possible that subsequent illegal amendment or other fraudulent act may
deprive the Fund of its ownership rights or improperly dilute its interests.
In addition, while applicable Russian regulations impose liability on regis-
trars for losses resulting from their errors, it may be difficult for a Fund
to enforce any rights it may have against the registrar or issuer of the secu-
rities in the event of loss of share registration.
Also, although a Russian public enterprise with more than 500 shareholders is
required by law to contract out the maintenance of its shareholder register to
an independent entity that meets certain criteria, this regulation has not al-
ways been strictly enforced in practice. Because of this lack of independence,
management of a company may be able to exert considerable influence over who
can purchase and sell the company's shares by illegally instructing the regis-
trar to refuse to record transactions in the
B-9
<PAGE>
share register. In addition, so-called "financial-industrial groups" have
emerged in recent years that seek to deter outside investors from interfering
in the management of companies they control. These practices may prevent a
Fund from investing in the securities of certain Russian companies deemed
suitable by the Fund's portfolio manager. Further, this also could cause a de-
lay in the sale of Russian securities held by a Fund if a potential purchaser
is deemed unsuitable, which may expose the Fund to potential loss on the in-
vestment.
Special Risks Associated with the Introduction of the Euro. The introduction
of a single currency, the euro, on January 1, 1999 for participating European
nations in the European Economic and Monetary Union presents unique uncertain-
ties for European securities in the markets in which they trade and with re-
spect to the operation of the Funds that invest in securities denominated in
European currencies and other European securities. The introduction of the
euro will result in the redenomination of European debt and equity securities
over a period of time. Uncertainties raised by the introduction of the euro
include the creation of suitable clearing and settlement payment systems for
the new currency, the valuation and legal treatment of outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro, and adverse accounting or tax consequences that may arise from the
transition to the euro. These or other factors could cause market disruptions
and could adversely affect the value of securities and foreign currencies held
by the Funds.
Foreign Currency Transactions. The Innovation Fund and the International Fund
may engage in foreign currency forward contracts, options, and futures trans-
actions. A Fund will enter into foreign currency transactions for hedging and
other permissible risk management purposes only. Foreign currency futures and
options contracts are traded in the U.S. on regulated exchanges such as the
Chicago Mercantile Exchange, the Mid-America Commodities Exchange, and the
Philadelphia Stock Exchange. If a Fund invests in a currency futures or op-
tions contract, it must make a margin deposit to secure performance of such
contract. With respect to investments in currency futures contracts, a Fund
may also be required to make a variation margin deposit because the value of
futures contracts fluctuates from purchase to maturity. In addition, a Fund
may segregate assets to cover its futures contracts obligations.
(1) Currency Risks. To the extent that a Fund invests in securities that are
denominated in a currency other than U.S. dollars, the Fund will be subject to
currency risk, which is the risk that an increase in the U.S. dollar relative
to the foreign currency will reduce returns or portfolio value. Generally,
when the U.S. dollar rises in value relative to a foreign currency, a Fund's
investment in securities denominated in that currency will lose value because
its currency is worth fewer U.S. dollars. On the other hand, when the value of
the U.S. dollar falls relative to a foreign currency, a Fund's investments de-
nominated in that currency will tend to increase in value because that cur-
rency is worth more U.S. dollars. The exchange rates between the U. S. dollar
and foreign currencies depend upon such factors as supply and demand in the
currency exchange markets, international balances of payments, governmental
intervention, speculation, and other economic and political conditions. Al-
though each Fund values its assets daily in U.S. dollars, a Fund may not con-
vert its holdings of foreign currencies to U.S. dollars daily. A Fund may in-
cur conversion costs when it converts its holdings to another currency. For-
eign exchange dealers may realize a profit on the difference between the price
at which the Fund buys and sells currencies. A Fund may engage in foreign cur-
rency exchange transactions in connection with its portfolio investments. A
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency ex-
change market or through forward contracts to purchase or sell foreign con-
tracts.
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<PAGE>
(2) Forward Foreign Currency Exchange Contracts. The Innovation Fund and the
International Fund may enter into forward currency exchange contracts. Forward
foreign currency exchange contracts may limit potential gains that could result
from a positive change in such currency relationships. The Fund manager be-
lieves that it is important to have the flexibility to enter into forward for-
eign currency exchange contracts whenever it determines that it is in the
Fund's best interest to do so. A Fund will not speculate in foreign currency
exchange.
A Fund will not enter into forward currency exchange contracts or maintain a
net exposure in such contracts that it would be obligated to deliver an amount
of foreign currency in excess of the value of its portfolio securities or other
assets denominated in that currency or, in the case of a "cross-hedge," denomi-
nated in a currency or currencies that the Fund manager believes will tend to
be closely correlated with that currency with regard to price movements. Gener-
ally, a Fund will not enter into a forward foreign currency exchange contract
with a term longer than one year.
(3) Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price on a specified date or during the option period. The owner of a
call option has the right, but not the obligation, to buy the currency. Con-
versely, the owner of a put option has the right, but not the obligation, to
sell the currency. When the option is exercised, the seller (i.e., writer) of
the option is obligated to fulfill the terms of the sold option. However, ei-
ther the seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on a foreign currency generally
rises in value if the underlying currency depreciates in value. Although pur-
chasing a foreign currency option can protect a Fund against an adverse move-
ment in the value of a foreign currency, the option will not limit the movement
in the value of such currency. For example, if a Fund held securities denomi-
nated in a foreign currency that was appreciating and had purchased a foreign
currency put to hedge against a decline in the value of the currency, the Fund
would not have to exercise its put option. Likewise, if a Fund entered into a
contract to purchase a
security denominated in foreign currency and, in conjunction with that pur-
chase, purchased a foreign currency call option to hedge against a rise in
value of the currency, and if the value of the currency instead depreciated be-
tween the date of purchase and the settlement date, the Fund would not have to
exercise its call. Instead, the Fund could acquire in the spot market the
amount of foreign currency needed for settlement.
(4) Special Risks Associated with Foreign Currency Options. Buyers and sellers
of foreign currency options are subject to the same risks that apply to options
generally. In addition, there are certain risks associated with foreign cur-
rency options. The markets in foreign currency options are relatively new, and
a Fund's ability to establish and close out positions on such options is sub-
ject to the maintenance of a liquid secondary market. Although a Fund will not
purchase or write such options unless and until, in the opinion of the Fund
manager, the market for them has developed sufficiently to ensure that the
risks in connection with such options are not greater than the risks in connec-
tion with the underlying currency, there can be no assurance that a liquid sec-
ondary market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally. The value of a
foreign currency option depends upon the value of the underlying currency rela-
tive to the U. S. dollar. As a result, the price of the option position
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<PAGE>
may vary with changes in the value of either or both currencies and may have no
relationship to the investment merits of a foreign security. Because foreign
currency transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
(generally consisting of transactions of less than $1 million) for the under-
lying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign curren-
cies or any regulatory requirements that quotations available through dealers
or other market sources be firm or revised on a timely basis. Available quota-
tion information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the ex-
tent that the U. S. options markets are closed while the markets for the under-
lying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets
until they reopen.
(5) Foreign Currency Futures Transactions. By using foreign currency futures
contracts and options on such contracts, a Fund may be able to achieve many of
the same objectives as it would through the use of forward foreign currency ex-
change contracts. A Fund may be able to achieve these objectives possibly more
effectively and at a lower cost by using futures transactions instead of for-
ward foreign currency exchange contracts.
(6) Special Risks Associated with Foreign Currency Futures Contracts and Re-
lated Options. Buyers and sellers of foreign currency futures contacts are sub-
ject to the same risks that apply to the use of futures generally. In addition,
there are risks associated with foreign currency futures contracts and their
use as a hedging device similar to those associated with options on currencies,
as described above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, a Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the opinion of its Fund manager, the market for such options has de-
veloped sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying for-
eign currency futures contracts. Compared to the purchase or sale of foreign
currency futures contracts, the purchase of call or put options on futures con-
tracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the option (plus transaction costs). However,
there may be circumstances when the purchase of a call or put option on a
futures contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.
Small and Medium Market Capitalizations
The Funds may invest in common stock of companies with market capitalizations
that are small compared to other publicly traded companies. Generally, small
market capitalization is considered to be less than $1.5 billion and large mar-
ket capitalization is considered to be more than $5 billion. Investments in
larger companies present certain advantages in that such companies generally
have greater financial resources, more extensive research and development, man-
ufacturing, marketing and service capabilities, and more stability and greater
depth of management and personnel. Investments in smaller, less sea-
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<PAGE>
soned companies may present greater opportunities for growth but also may in-
volve greater risks than customarily are associated with more established com-
panies. The securities of smaller companies may be subject to more abrupt or
erratic market movements than larger, more established companies. These compa-
nies may have limited product lines, markets or financial resources, or they
may be dependent upon a limited management group. Their securities may be
traded in the over-the-counter market or on a regional exchange, or may other-
wise have limited liquidity. As a result of owning large positions in this
type of security, a Fund is subject to the additional risk of possibly having
to sell portfolio securities at disadvantageous times and prices if redemp-
tions require the Fund to liquidate its securities positions. In addition, it
may be prudent for a Fund with a relatively large asset size to limit the num-
ber of relatively small positions it holds in securities having limited li-
quidity in order to minimize its exposure to such risks, to minimize transac-
tion costs, and to maximize the benefits of research. As a consequence, as a
Fund's asset size increases, the Fund may reduce its exposure to illiquid
small capitalization securities, which could adversely affect performance.
The Funds may also invest in stocks of companies with medium market capital-
izations. Whether a U.S. issuer's market capitalization is medium is deter-
mined by reference to the capitalization for all issuers whose equity securi-
ties are listed on a United States national securities exchange or which are
reported on NASDAQ. Issuers with market capitalizations within the range of
capitalization of companies included in the S&P Mid Cap 400 Index may be re-
garded as being issuers with medium market capitalizations. Such investments
share some of the risk characteristics of investments in stocks of companies
with small market capitalizations described above, although such companies
tend to have longer operating histories, broader product lines and greater fi-
nancial resources and their stocks tend to be more liquid and less volatile
than those of smaller capitalization issuers.
Innovation Fund Technology Risks
The Innovation Fund is concentrated in the technology sector. There are risks
associated with investments in this sector, and an investment in the Innova-
tion Fund should be made with an understanding of the characteristics of the
technology industry and the risks which such an investment may entail.
Technology companies generally include companies involved in the development,
design, manufacture and sale of computers, computer-related equipment, com-
puter networks, communications systems, telecommunications products, elec-
tronic products and other related products, systems and services. The market
for these products, especially those specifically related to the Internet, is
characterized by rapidly changing technology, rapid product obsolescence, cy-
clical market patterns, evolving industry standards and frequent new product
introductions. The success of certain issuers of the equity securities in-
cluded in the Innovation Fund depends in substantial part on the timely and
successful introduction of new products. An unexpected change in one or more
of the technologies affecting an issuer's products or in the market for prod-
ucts based on a particular technology could have a material adverse affect on
an issuer's operating results. Furthermore, there can be no assurance that the
issuers of the equity securities included in the Innovation Fund will be able
to respond in a timely manner to compete in the rapidly developing market-
place.
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Based on the trading history of common stocks, factors such as announcements of
new products or development of new technologies and general conditions of the
industry have caused and are likely to cause the market price of high-technol-
ogy common stocks to fluctuate substantially. In addition, technology company
stocks have experienced extreme price and volume fluctuations that often have
been unrelated to the operating performance of such companies. This market vol-
atility may adversely affect the market price of the equity securities held in
the Innovation Fund.
Some key components of certain products of technology issuers are currently
available only from single sources. There can be no assurance that in the fu-
ture suppliers will be able to meet the demand for components in a timely and
cost effective manner. Accordingly, an issuer's operating results and customer
relationships could be adversely affected by either an increase in price for,
or an interruption or reduction in supply of, any key components. Additionally,
many technology issuers are characterized by a highly concentrated customer
base consisting of a limited number of large customers who may require product
vendors to comply with rigorous industry standards. Any failure to comply with
such standards may result in a significant loss or reduction of sales. Because
many products and technologies of technology companies are incorporated into
other related products, such companies are often highly dependent on the per-
formance of the personal computer, electronics and telecommunications indus-
tries. There can be no assurance that these customers will place additional or-
ders, or that an issuer of equity securities held by the Innovation Fund will
obtain orders of a similar magnitude as past orders from other customers. Simi-
larly, the success of certain technology companies is tied to a relatively
small concentration of products or technologies. Accordingly, a decline in de-
mand of such products, technologies or from such customers could have a mate-
rial adverse impact on issuers of equity securities held in the Innovation
Fund.
Many technology companies rely on a combination of patents, copyrights, trade-
marks and trade secret laws to establish and protect their proprietary rights
in their products and technologies. There can be no assurance that the steps
taken by the issuers of the equity securities held by the Innovation Fund to
protect their proprietary rights will be adequate to prevent misappropriation
of their technology or that competitors will not independently develop technol-
ogies that are substantially equivalent or superior to such issuers' technolo-
gy. In addition, due to the increasing public use of the Internet, it is possi-
ble that other laws and regulations may be adopted to address issues such as
privacy, pricing, characteristics, and quality of Internet products and servic-
es.
Hedging Strategies
General Description of Hedging Strategies
Each Fund may engage in hedging activities. Nuveen Institutional Advisor Corp.
("NIAC") or "Columbus Circle Investors" ("CCI") may cause a Fund to utilize a
variety of financial instruments, including options, futures contracts (some-
times referred to as "futures") and options on futures contracts to attempt to
hedge the Fund's holdings.
Hedging or derivative instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that a
Fund owns or intends to acquire. Such instruments
B-14
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may also be used to "lock-in" realized but unrecognized gains in the value of
portfolio securities. Hedging instruments on stock indices, in contrast, gener-
ally are used to hedge against price movements in broad equity market sectors
in which a Fund has invested or expects to invest. Hedging strategies, if suc-
cessful, can reduce the risk of loss by wholly or partially offsetting the neg-
ative effect of unfavorable price movements in the investments being hedged.
However, hedging strategies can also reduce the opportunity for gain by offset-
ting the positive effect of favorable price movements in the hedged invest-
ments. A Fund may also use derivative instruments to manage the risks of its
assets. Risk management strategies include, but are not limited to, facilitat-
ing 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 a Fund to invest than would "traditional" securi-
ties (i.e., stocks or bonds). The use of hedging instruments is subject to ap-
plicable 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 authori-
ties. In addition, a 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 a Fund includes the representation that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations. A Fund will not enter into futures and
options transactions if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of the Fund's total assets. In addition,
a Fund will not enter into futures contracts and options transactions if more
than 30% of its net assets would be committed to such instruments.
The foregoing limitations are not fundamental policies of a Fund and may be
changed without shareholder approval as regulatory agencies permit. Various ex-
changes and regulatory authorities have undertaken reviews of options and
futures trading in light of market volatility. Among the possible actions that
have been presented are proposals to adopt new or more stringent daily price
fluctuation limits for futures and options transactions and proposals to in-
crease the margin requirements for various types of futures transactions.
Asset Coverage for Futures and Options Positions
Each Fund will comply with the regulatory requirements of the SEC and the CFTC
with respect to coverage of options and futures positions by registered invest-
ment companies and, if the guidelines so
require, will set aside cash, U.S. government securities, high grade liquid
debt securities and/or other liquid assets permitted by the SEC and CFTC in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or options position is out-
standing, unless replaced with other permissible assets, and will be marked-to-
market daily.
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Certain Considerations Regarding Options
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If a Fund is
unable to close out a call option on securities that it has written before the
option is exercised, the Fund may be required to purchase the optioned securi-
ties in order to satisfy its obligation under the option to deliver such secu-
rities. If a Fund is unable to effect a closing sale transaction with respect
to options on securities that it has purchased, it would have to exercise the
option in order to realize any profit and would incur transaction costs upon
the purchase and sale of the underlying securities.
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Imperfect correlation between the
options and securities markets may detract from the effectiveness of attempted
hedging. Options transactions may result in significantly higher transaction
costs and portfolio turnover for a Fund.
Federal Income Tax Treatment of Options
Certain option transactions have special federal income tax results for the
Funds. Expiration of a call option written by a Fund will result in short-term
capital gain. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the security covering the call option and, in determining
such gain or loss, the option premium will be included in the proceeds of the
sale.
If a Fund writes options, or purchases puts that are subject to the loss defer-
ral rules of Section 1092 of the Internal Revenue Code of 1986, as amended (the
"Code"), any losses on such options transactions, to the extent they do not ex-
ceed the unrecognized gains on the securities covering the options, may be sub-
ject to deferral until the securities covering the options have been sold.
In the case of transactions involving "nonequity options," as defined in Code
Section 1256, a Fund will treat any gain or loss arising from the lapse, clos-
ing out or exercise of such positions as 60% long-term and 40% short-term capi-
tal 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 in-
dexes. For example, options involving stock indexes such as the S&P 500 Index
would be "nonequity options" within the meaning of Code Section 1256.
Futures Contracts
Each Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge against
movements in the equity markets, in order to establish more definitely the ef-
fective return on securities held or intended to be acquired by a Fund or for
other purposes permissible under the CEA. A 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
B-16
<PAGE>
expected increases in stock prices. A Fund will not enter into Futures Con-
tracts 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 under-
lying 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 instru-
ment (e.g., a debt security) or currency for a specified price at a designated
date, time and place. An index Futures Contract is an agreement pursuant to
which the parties agree to take or make delivery of an amount of cash equal to
the difference between the value of the index at the close of the last trading
day of the contract and the price at which the index Futures Contract was orig-
inally written. Transaction costs are incurred when a Futures Contract is
bought or sold and margin deposits must be maintained. A Futures Contract may
be satisfied by delivery or purchase, as the case may be, of the instrument or
by payment of the change in the cash value of the index. More commonly, Futures
Contracts are closed out prior to delivery by entering into an offsetting
transaction in a matching Futures Contract. Although the value of an index
might be a function of the value of certain specified securities, no physical
delivery of those securities is made. If the offsetting purchase price is less
than the original sale price, a gain will be realized; if it is more, a loss
will be realized. Conversely, if the offsetting sale price is more than the
original purchase price, a gain will be realized; if it is less, a loss will be
realized. The transaction costs must also be included in these calculations.
There can be no assurance, however, that a Fund will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a par-
ticular time. If a Fund is not able to enter into an offsetting transaction,
the Fund will continue to be required to maintain the margin deposits on the
Futures Contract.
Margin is the amount of funds that must be deposited by a Fund with its custo-
dian 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 a 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 sig-
nificantly modified from time to time by the exchange during the term of the
Futures Contract. Futures Contracts are customarily purchased and sold on mar-
gins that may range upward from less than 5% of the value of the Futures Con-
tract 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, a
Fund will mark to market the current value of its open Futures Contracts. The
Funds expect to earn interest income on their margin deposits.
B-17
<PAGE>
Because of the low margin deposits required, Futures trading involves an ex-
tremely high degree of leverage. As a result, a relatively small price movement
in a Futures Contract may result in immediate and substantial loss, as well as
gain, to the investor. For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a subsequent 10% decrease
in the value of the Futures Contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the Futures Contract were closed out. Thus, a pur-
chase or sale of a Futures Contract may result in losses in excess of the
amount initially invested in the Futures Contract. However, a Fund would pre-
sumably have sustained comparable losses if, instead of the Futures Contract,
it had invested in the underlying financial instrument and sold it after the
decline.
Most United States Futures exchanges limit the amount of fluctuation permitted
in Futures Contract prices during a single trading day. The day limit estab-
lishes the maximum amount that the price of a Futures Contract may vary either
up or down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular type of Futures
Contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of Futures positions and sub-
jecting some Futures traders to substantial losses.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a Futures position. The Fund would continue to be required
to meet margin requirements until the position is closed, possibly resulting in
a decline in the Fund's net asset value. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.
A public market exists in Futures Contracts covering a number of indexes, in-
cluding, but not limited to, the Standard & Poor's 500 Index, the Standard &
Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite Index and the
New York Stock Exchange Composite Index.
Options on Futures
Each Fund may also purchase or write put and call options on Futures Contracts
and enter into closing transactions with respect to such options to terminate
an existing position. A futures option gives the holder the right, in return of
the premium paid, to assume a long position (call) or short position (put) in a
Futures Contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the Futures Contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or expira-
tion, a futures option may be closed out by an offsetting purchase or sale of a
futures option of the same series.
Each Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same market
and market sector conditions in which the Fund uses put and call options on se-
curities or indexes. The purchase of put options on Futures Contracts is analo-
gous to the purchase of puts on securities or indexes so as to hedge a Fund's
securities holdings
B-18
<PAGE>
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 ex-
ercise of the Futures Contract. If the futures price at expiration of a written
call option is below the exercise price, a 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, a Fund will incur
a loss, which may be offset, in whole or in part, by the increase in the value
of the securities held by the Fund that were being hedged. Writing a put option
or purchasing a call option on a Futures Contract serves as a partial hedge
against an increase in the value of the securities the Fund intends to acquire.
As with investments in Futures Contracts, a Fund is required to deposit and
maintain margin with respect to put and call options on Futures Contracts writ-
ten by it. Such margin deposits will vary depending on the nature of the under-
lying Futures Contract (and the related initial margin requirements), the cur-
rent market value of the option, and other futures positions held by the Fund.
A Fund will set aside in a segregated account at the Fund's custodian liquid
assets, such as cash, U.S. government securities or other high grade liquid
debt obligations equal in value to the amount due on the underlying obligation.
Such segregated assets will be marked-to-market daily, and additional assets
will be placed in the segregated account whenever the total value of the segre-
gated account falls below the amount due on the underlying obligation.
The risks associated with the use of options on Futures Contracts include the
risk that a Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. A
Fund's successful use of options on Futures Contracts depends on NIAC's or
CCI'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 in-
crease 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 con-
tracts 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 de-
posit requirements in markets, there might be increased participation by specu-
lators 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 in-
vestment strategies might result in temporary price distortions.
Stock Index Options
Each Fund may (i) purchase stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions, and/or (iii) write cov-
ered options on stock indexes for hedging purposes. Stock index options are put
options and call options on various stock indexes. In most respects, they are
identical to listed options on common stocks. The primary difference between
stock options and index
B-19
<PAGE>
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 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 dif-
ference between the closing price of the stock index and the exercise price of
the option expressed in dollars times a specified multiple.
A stock index fluctuates with changes in the market values of the stock in-
cluded in the index. For example, some stock index options are based on a broad
market index, such as the Standard & Poor's 500 or the Value Line Composite In-
dex or a narrower market index, such as the Standard & Poor's 100. Indexes may
also be based on an industry or market segment, such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indexes
are currently traded on the following exchanges: the Chicago Board of Options
Exchange, the New York Stock Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
Each Fund's use of stock index options is subject to certain risks. Successful
use by a Fund of options on stock indexes will be subject to the ability of
NIAC or CCI to correctly predict movements in the direction of the stock mar-
ket. This requires different skills and techniques than predicting changes in
the prices of individual securities. In addition, a Fund's ability to effec-
tively hedge all or a portion of the securities in its portfolio, in anticipa-
tion 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 a Fund's securities will not duplicate the components of an index, the cor-
relation will not be perfect. Consequently, a Fund will bear the risk that the
prices of its securities being hedged will not move in the same amount as the
prices of its put options on the stock indexes. It is also possible that there
may be a negative correlation between the index and a Fund's securities which
would result in a loss on both such securities and the options on stock indexes
acquired by the Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions.
The purchase of stock index options involves the risk that the premium and
transaction costs paid by a Fund in purchasing an option will be lost as a re-
sult of unanticipated movements in prices of the securities comprising the
stock index on which the option is based.
Federal Income Tax Treatment of Futures Contracts
For federal income tax purposes, each Fund is required to recognize as income,
for each taxable year, its net unrealized gains and losses on Futures Contracts
as of the end of the year, as well as gains and losses actually realized during
the year. Except for transactions in Futures Contracts that are classified as
part of a "mixed straddle" under Code Section 1256, any gain or loss recognized
with respect to a Futures
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<PAGE>
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 secu-
rities and, consequently, the nature of the gain or loss on such securities
upon disposition.
Each Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on Futures transactions. Such dis-
tributions will be combined with distributions of capital gains realized on 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 consid-
erations 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 as-
sets may go up or down. Adverse movements in the value of an underlying asset
can expose the Fund to losses. Market risk is the primary risk associated with
derivative transactions. Derivative instruments may include elements of lever-
age and, accordingly, fluctuations in the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of deriv-
ative instruments depends upon a variety of factors, particularly the portfolio
manager's ability to predict movements of the securities, currencies, and com-
modities markets, which may require different skills than predicting changes in
the prices of individual securities. There can be no assurance that any partic-
ular strategy adopted will succeed. A decision to engage in a derivative trans-
action will reflect the portfolio manager's judgment that the derivative trans-
action will provide value to the applicable Fund and its shareholders and is
consistent with the Fund's objectives, investment limitations, and operating
policies. In making such a judgment, the portfolio manager will analyze the
benefits and risks of the derivative transactions and weigh them in the context
of the Fund's overall investments and investment objective.
(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 clear-
ing agency, which is the issuer or counterparty to each exchange-traded instru-
ment, provides a guarantee of performance. For privately-negotiated instru-
ments, there is no similar clearing agency guarantee. In all transactions, a
Fund will bear the risk that the counterparty will default, and this could re-
sult in a loss of the expected benefit of the derivative transactions and pos-
sibly other losses to the Fund. A Fund will enter into transactions in deriva-
tive instruments only with counterparties that their respective portfolio man-
ager reasonably believes are capable of performing under the contract.
(3) Correlation Risk. Correlation risk is the risk that there might be an im-
perfect correlation, or even no correlation, between price movements of a de-
rivative instrument and price movements of investments being hedged. When a de-
rivative transaction is used to completely hedge another position,
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<PAGE>
changes in the market value of the combined position (the derivative instru-
ment plus the position being hedged) result from an imperfect correlation be-
tween 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
perfectly correlated. This might occur due to factors unrelated to the value
of the investments being hedged, such as speculative or other pressures on the
markets in which these instruments are traded. The effectiveness of hedges us-
ing instruments on indices will depend, in part, on the degree of correlation
between price movements in the index and the price movements in the invest-
ments being hedged.
(4) Liquidity Risk. Liquidity risk is the risk that a derivative instrument
cannot be sold, closed out, or replaced quickly at or very close to its funda-
mental value. Generally, exchange contracts are very liquid because the ex-
change clearinghouse is the counterparty of every contract. OTC transactions
are less liquid than exchange-traded derivatives since they often can only be
closed out with the other party to the transaction. A Fund might be required
by applicable regulatory requirements to maintain assets as "cover," maintain
segregated accounts, and/or make margin payments when it takes positions in
derivative instruments involving obligations to third parties (i.e., instru-
ments other than purchase options). If a Fund is unable to close out its posi-
tions in such instruments, it might be required to continue to maintain such
assets or accounts 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 disadvanta-
geous time. A Fund's ability to sell or close out a position in an instrument
prior to expiration or maturity depends upon the existence of a liquid second-
ary market or, in the absence of such a market, the ability and willingness of
the counterparty to enter into a transaction closing out the position. Due to
liquidity risk, there is no assurance that any derivatives position can be
sold or closed out at a time and price that is favorable to a Fund.
(5) Legal Risk. Legal risk is the risk of loss caused by the unenforceabil-
ity of a party's obligations under the derivative. While a party seeking price
certainty agrees to surrender the potential upside in exchange for downside
protection, the party taking the risk is looking for a positive payoff. De-
spite this voluntary assumption of risk, a counterparty that has lost money in
a derivative transaction may try to avoid payment by exploiting various legal
uncertainties about certain derivative products.
(6) Systemic or "Interconnection" Risk. Systemic or interconnection risk is
the risk that a disruption in the financial markets will cause difficulties
for all market participants. In other words, a disruption in one market will
spill over into other markets, perhaps creating a chain reaction. Much of the
OTC derivatives market takes place among the OTC dealers themselves, thus cre-
ating a large interconnected web of financial obligations. This
interconnectedness raises the possibility that a default by one large dealer
could create losses for other dealers and destabilize the entire market for
OTC derivative instruments.
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Other Investment Policies and Techniques
Delayed-Delivery Transactions
Each Fund may from time to time purchase securities on a "when-issued" or other
delayed-delivery basis. The price of securities purchased in such transactions
is fixed at the time the commitment to purchase is made, but delivery and pay-
ment for the securities take place at a later date. Normally, the settlement
date occurs within 45 days of the purchase. During the period between the pur-
chase and settlement, no payment is made by a Fund to the issuer and no inter-
est is accrued on debt securities or dividend income is earned on equity secu-
rities. Delayed-delivery 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 a Fund's other assets. While se-
curities purchased in delayed-delivery transactions 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 a Fund makes the commitment to purchase
a security in a delayed-delivery transaction, it will record the transaction
and reflect the value of the security in determining its net asset value. The
Funds do not believe that net asset value will be adversely affected by pur-
chases of securities in delayed-delivery transactions.
Each Fund will maintain in a segregated account cash, U.S. government securi-
ties, and high grade liquid debt securities equal in value to commitments for
delayed-delivery securities. Such segregated securities will mature or, if nec-
essary, be sold on or before the settlement date. When the time comes to pay
for delayed-delivery securities, a Fund will meet its obligations from then-
available cash flow, sale of the securities held in the segregated account de-
scribed above, sale of other securities, or, although it would not normally ex-
pect to do so, from the sale of the delayed-delivery securities themselves
(which may have a market value greater or less than the Fund's payment obliga-
tion).
Illiquid Securities
Each Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction, illiquid securities in-
clude, but are not limited to, restricted securities (securities the disposi-
tion of which is restricted under the federal securities laws), securities that
may only be resold pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), but that are deemed to be illiquid; and repur-
chase agreements with maturities in excess of seven days. However, a Fund will
not acquire illiquid securities if, as a result, such securities would comprise
more than 15% of the value of the Fund's net assets. The Board of Trustees or
its delegate has the ultimate authority to determine, to the extent permissible
under the federal securities laws, which securities are liquid or illiquid for
purposes of this 15% limitation. The Board of Trustees has delegated to CCI and
NIAC the day-to-day determination of the illiquidity of any security held by
the Funds, although it has retained oversight and ultimate responsibility for
such determinations. Although no definitive liquidity criteria are used, the
Board of Trustees has directed CCI and NIAC 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 and quotes for the security; the number of
dealers willing to purchase or sell the security; and the amount of time nor-
mally needed to dispose of the security, the method of soliciting offers and
the mechanics of transfer), (ii) the terms of certain securities or other in-
struments allowing for the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand instruments), and (iii) other
permissible relevant factors.
B-23
<PAGE>
Restricted securities may be sold only in privately negotiated transactions or
in a public offering with respect to which a registration statement is in ef-
fect under the Securities Act. Where registration is required, a Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Fund may be permitted to sell a security under an effective registration state-
ment. If, during such a period, adverse market conditions were to develop, a
Fund might obtain a less favorable price than that which prevailed when it de-
cided to sell. Illiquid securities will be priced at fair value as determined
in good faith by the Board of Trustees or its delegate. If, through the appre-
ciation of illiquid securities or the depreciation of liquid securities, a Fund
should be in a position where more than 15% of the value of its net assets are
invested in illiquid securities, including restricted securities which are not
readily marketable, the affected Fund will take such steps as is deemed advis-
able, if any, to protect liquidity.
Short Sales Against the Box
When CCI believes that the price of a particular security held by a Fund may
decline, it may make "short sales against the box" to hedge the unrealized gain
on such security. Selling short against the box involves selling a security
which the Fund owns for delivery at a specified date in the future. Each Fund
will limit its transactions in short sales against the box to 5% of its net as-
sets. In addition, each Fund will limit its transactions such that the value of
the securities of any issuer in which it is short will not exceed the lesser of
2% of the value of the Fund's net assets or 2% of the securities of any class
of the issuer. If, for example, a Fund bought 100 shares of ABC at $40 per
share in January and the price appreciates to $50 in March, the Fund might
"sell short" the 100 shares at $50 for delivery the following July. Thereafter,
if the price of the stock declines to $45, it will realize the full $1,000 gain
rather than the $500 gain it would have received had it sold the stock in the
market. On the other hand, if the price appreciates to $55 per share, the Fund
would be required to sell at $50 and thus receive a $1,000 gain rather than the
$1,500 gain it would have received had it sold the stock in the market. A Fund
may also be required to pay a premium for short sales which would partially
offset any gain.
Warrants
Each Fund may invest in warrants if, after giving effect thereto, not more than
5% of its net assets will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5%, not more than 2% of its
assets at the time of purchase may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. Investing in
warrants is purely speculative in that they have no voting rights, pay no divi-
dends, and have no rights with respect to the assets of the corporation issuing
them. Warrants basically are options to purchase equity securities at a spe-
cific price for a specific period of time. They do not represent ownership of
the securities but only the right to buy them. Warrants are issued by the is-
suer of the security, which may be purchased on their exercise. The prices of
warrants do not necessarily parallel the prices of the underlying securities.
Lending of Portfolio Securities
Each Fund may lend its portfolio securities, up to 33 1/3% of its total assets,
to broker-dealers or institutional investors. The loans will be secured contin-
uously by collateral at least equal to the value of the securities lent by
"marking to market" daily. A Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer of the securities lent and will
retain the right to call, upon
B-24
<PAGE>
notice, the lent securities. A Fund may also receive interest on the investment
of the collateral or a fee from the borrower as compensation for the loan. As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the collateral should the borrower of the securities fail fi-
nancially. However, loans will be made only to firms deemed by the portfolio
manager to be of good standing.
MANAGEMENT
The management of the Trust, including general supervision of the duties per-
formed for the Funds under the Management Agreement, is the responsibility of
its Board of Trustees. The number of trustees of the Trust is six, one of whom
is an "interested persons" (as the term "interested persons" is defined in the
Investment Company Act of 1940) and five of whom are "disinterested persons."
The names and business addresses of the trustees and officers of the Trust and
their principal occupations and other affiliations during the past five years
are set forth below, with those trustees who are "interested persons" of the
Trust indicated by an asterisk.
<TABLE>
-------------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------------
<C> <C> <C> <S>
Timothy R. Schwertfeger* 3/28/49 Chairman, President and Chairman (since July
333 West Wacker Drive Trustee 1996) and Director,
Chicago, IL 60606 formerly Executive Vice
President, of The John
Nuveen Company (from
March 1992 to July 1996)
and of John Nuveen & Co.
Incorporated; Director
and Chairman (since July
1996), formerly
Executive Vice President
(from May 1994 to July
1996) of Nuveen
Institutional Advisory
Corp and Nuveen Advisory
Corp.; Chairman and
Director (since January
1997) of Nuveen Asset
Management, Inc.;
Director (since 1996) of
Institutional Capital
Corporation; Chairman
and Director of
Rittenhouse Financial
Services Inc. (since
1999); Chief Executive
Officer (since September
1999) of Nuveen Senior
Loan Asset Management
Inc.
-------------------------------------------------------------------------------------
James E. Bacon 2/27/31 Trustee Business consultant;
114 W. 47th St. retired.
New York, NY 10036
-------------------------------------------------------------------------------------
Jack B. Evans 10/22/48 Trustee President, The Hall-
115 Third Street, S.E. Perrine Foundation, a
Cedar Rapids, IA 52401 private philanthropic
corporation (since
1996); formerly
President and Chief
Operating Officer, SCI
Financial Group, Inc., a
regional financial
services firm.
-------------------------------------------------------------------------------------
William L. Kissick 7/29/32 Trustee Professor, School of
University of Pennsylvania Medicine and the Wharton
224 NEB/2L School of Management and
Philadelphia, PA 19104 Chairman, Leonard Davis
Institute of Health
Economics, University of
Pennsylvania.
-------------------------------------------------------------------------------------
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice
412 W. Franklin President in charge of
Wheaton, IL 60187 Municipal Underwriting
and Dealer Sales at The
Northern Trust Company.
</TABLE>
--------------------------------------------------------------------------------
B-25
<PAGE>
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
--------------------------------------------------------------------------------
<C> <C> <C> <S>
Sheila W. Wellington 2/24/32 Trustee President (since 1993)
250 Park Avenue of Catalyst (a not-for-
New York, NY 10003 profit organization
focusing on women's
leadership development
in business and the
professions).
--------------------------------------------------------------------------------
Alan G. Berkshire 12/28/60 Senior Vice President Senior Vice President
333 West Wacker Drive and Assistant Secretary (since May 1999,
Chicago, IL 60606 formerly Vice President)
and General Counsel
(since September 1997)
and Secretary (since May
1998) of The John Nuveen
Company and John Nuveen
& Co. Incorporated; Vice
President (since
September 1997) and
Secretary (since May
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.; Senior Vice
President and Secretary
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.;
prior thereto, Partner
in the law firm of
Kirkland & Ellis.
--------------------------------------------------------------------------------
Peter H. D'Arrigo 11/28/67 Vice President Vice President of John
333 West Wacker Drive and Treasurer Nuveen & Co.
Chicago, IL 60606 Incorporated; (January
1999), prior thereto,
Assistant Vice President
(January 1997);
formerly, Associate of
John Nuveen & Co.
Incorporated; Vice
President and Treasurer
(since September 1999)
of Nuveen Senior Loan
Asset Management Inc.
Chartered, Financial
Analyst.
--------------------------------------------------------------------------------
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 January 1997); prior
thereto, Vice President
and Portfolio Manager
(since September 1991)
of Flagship Financial.
--------------------------------------------------------------------------------
Lorna C. Ferguson 10/24/45 Vice President Vice President of John
333 West Wacker Drive Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since January
1998) of Nuveen Advisory
Corp. and Nuveen
Institutional Advisory
Corp.
--------------------------------------------------------------------------------
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. (since
Chicago, IL 60606 December 1995);
Assistant Vice President
of Nuveen Advisory Corp.
(from September 1992 to
December 1995), prior
thereto Assistant
Portfolio Manager of
Nuveen Advisory Corp.
--------------------------------------------------------------------------------
Stephen D. Foy 5/31/54 Vice President and Vice President of John
333 West Wacker Drive Controller Nuveen & Co.
Chicago, IL 60606 Incorporated; Vice
President (since
September 1999) of
Nuveen Senior Loan Asset
Management Inc.;
Certified Public
Accountant.
--------------------------------------------------------------------------------
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.;
Chicago, IL 60606 Chartered Financial
Analyst.
--------------------------------------------------------------------------------
Richard A. Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory
Chicago IL 60606 Corp. (since March 1998)
and Nuveen Advisory
Corp. (since January
1997); prior thereto,
Vice President and
Portfolio Manager of
Flagship Financial.
</TABLE>
--------------------------------------------------------------------------------
B-26
<PAGE>
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Date of Position and Principal Occupations
Name and Address Birth Offices with Trust During Past Five Years
-------------------------------------------------------------------------------
<C> <C> <C> <S>
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp.
Chicago IL 60606
-------------------------------------------------------------------------------
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant
333 West Wacker Drive Assistant Secretary Secretary and Assistant
Chicago, IL 60606 General Counsel of John
Nuveen & Co. Incorporated;
Vice President (since May
1993) and Assistant
Secretary of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory
Corp.; Vice President and
Assistant Secretary of
Nuveen Asset Management,
Inc.; Assistant Secretary
of The John Nuveen
Company; Vice President
and Assistant Secretary
(since September 1999) of
Nuveen Senior Loan Asset
Management Inc.
-------------------------------------------------------------------------------
Edward F. Neild, IV 7/7/65 Vice President Vice President (since
333 West Wacker Drive September 1996),
Chicago, IL 60606 previously Assistant Vice
President (since December
1993) of Nuveen Advisory
Corp., Portfolio Manager
prior thereto; Vice
President (since September
1996), previously
Assistant Vice President
(since May 1995) of Nuveen
Institutional Advisory
Corp., Portfolio Manager
prior thereto; Chartered
Financial Analyst.
-------------------------------------------------------------------------------
Stephen S. Peterson 9/20/57 Vice President Vice President (since
333 West Wacker Drive September 1997 of Nuveen
Chicago IL 60606 Advisory Corp.),
previously Assistant Vice
President (since September
1996 of Nuveen Advisory
Corp.), Portfolio Manager
prior thereto; Chartered
Financial Analyst.
-------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen
333 West Wacker Drive Advisory Corp. and Nuveen
Chicago, IL 60606 Institutional Advisory
Corp.; Chartered Financial
Analyst.
-------------------------------------------------------------------------------
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant
333 West Wacker Drive Secretary Secretary and Associate
Chicago, IL 60606 General Counsel,
previously Assistant
General Counsel of John
Nuveen & Co. Incorporated;
Vice President and
Assistant Secretary of
Nuveen Advisory Corp. and
Nuveen Institutional
Advisory Corp.; Assistant
Secretary (since May 1994)
of The John Nuveen
Company; Vice President
and Assistant Secretary
(since September 1999) of
Nuveen Senior Loan Asset
Management Inc.; Chartered
Financial Analyst.
</TABLE>
--------------------------------------------------------------------------------
William L. Kissick and Timothy R. Schwertfeger serve as members of the Execu-
tive 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 fourteen open-end and closed-end
funds advised by NIAC and two funds advised by Nuveen Senior Loan Asset Manage-
ment Inc. None of the independent trustees has ever been a director, officer,
or employee of, or a consultant to, NIAC, Nuveen or their affiliates.
B-27
<PAGE>
Mr. Schwertfeger is a director or trustee, as the case may be, of 91 Nuveen
open-end funds and closed-end funds advised by Nuveen Advisory Corp.
The following table sets forth the compensation that is estimated to be paid by
the Funds to each of the trustees who are not designated as "interested per-
sons" during the Trust's fiscal year ending , and the total compen-
sation that the Nuveen Funds paid to such trustees during fiscal year ending
, . The Trust has no retirement or pension plans. The officers and
trustees affiliate with Nuveen serve without any compensation from the Trust.
<TABLE>
<CAPTION>
Estimated Total Compensation
Aggregate From Funds and
Compensation Fund Complex
Name of Trustee from the Funds* Paid to Trustees**
--------------- --------------- ------------------
<S> <C> <C>
James E. Bacon....................... $ $
Jack B. Evans........................
William L. Kissick...................
Thomas E. Leafstrand.................
Sheila W. Wellington.................
</TABLE>
* The compensation estimated to be paid by the Funds to independent trustees
for the current fiscal year is a pro rata portion of the total compensation
estimated to be paid by the Funds and the Fund Complex to the independent
trustees based upon the estimated relative net asset values of the Funds as
compared to the Fund Complex.
** Based on the compensation paid to the independent trustees for the fiscal
year ended , for services to eleven open-end and closed-end
funds advised by NIAC.
Each trustee who is not affiliated with NIAC or CCI receives a $35,000 annual
retainer for serving as a director or trustee of all funds for which NIAC
serves as investment adviser or manager and a $1,000 fee per day plus expenses
for attendance at all meetings held on a day on which a regularly scheduled
Board meeting is held, a $500 fee per day plus expenses for attendance in per-
son or a $500 fee per day plus expenses for attendance by telephone at a meet-
ing held on a day on which no regular Board meeting is held and a $100 fee per
day plus expenses for attendance in person or by telephone at a meeting of the
Executive Committee held solely to declare dividends. The annual retainer, fees
and expenses are allocated among the funds for which NIAC serves as investment
adviser or manager on the basis of relative net asset sizes. The Trust requires
no employees other than its officers, all of whom are compensated by NIAC or
Nuveen.
The John Nuveen Company ("JNC") maintains its charitable contributions programs
to encourage the active support and involvement of individuals in the civic ac-
tivities of their community. These programs include a matching contributions
program and a direct contributions program.
The independent directors of the funds managed by the NIAC are eligible to par-
ticipate in the charitable contributions program of JNC. Under the matching
program, JNC will match the personal contributions of a director to Section
501(c)(3) organizations up to an aggregate maximum amount of $10,000 during any
calendar year. Under its direct (non-matching) program, JNC makes contributions
to qualifying Section 501(c)(3) organizations, as approved by the Corporate
Contributions Committee of JNC. The independent directors are also eligible to
submit proposals to the committee requesting that contributions be made under
this program to Section 501(c)(3) organizations identified by the director, in
an
B-28
<PAGE>
aggregate amount not to exceed $5,000 during any calendar year. Any contribu-
tion made by JNC under the direct program is made solely at the discretion of
the Corporate Contributions Committee.
As of , , the officers and directors of each Fund, in the aggre-
gate, own less than 1% of the shares of each Fund.
As of , , NIAC owned 100% of the outstanding shares of the Se-
lect Stock Fund. Accordingly, NIAC may have the ability to significantly influ-
ence the outcome of any item voted on by shareholders of the Fund. NIAC will be
deemed to control the Select Stock Fund so long as it owns more than 25% of the
Fund's voting securities.
B-29
<PAGE>
TRUST MANAGER AND FUND MANAGER
Investment Adviser
Nuveen Institutional Advisory Corp. ("NIAC") acts as the manager of the Trust,
with responsibility for the overall management of the Funds. NIAC is a Delaware
corporation and its address is 333 West Wacker Drive, Chicago, Illinois 60606.
For the Innovation Fund and International Fund, NIAC has entered into a Sub-Ad-
visory Agreement with CCI under which CCI, subject to NIAC's supervision, man-
ages each Fund's investment portfolio. NIAC is also responsible for managing
each Fund's business affairs and providing day-to-day administrative services
to each Fund. For additional information regarding the management services per-
formed by NIAC and CCI, see "Who Manages the Fund" in the Prospectus.
NIAC is a wholly-owned subsidiary of Nuveen, 333 West Wacker Drive, Chicago,
Illinois 60606, which is also the principal underwriter of each 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 JNC 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 pro-
viding property-liability insurance through subsidiaries.
For the fund management services and facilities furnished by NIAC, each Fund
has agreed to pay an annual management fee at rates set forth in the Prospectus
under "Who Manages the Fund." In addition, NIAC may agree to waive all or a
portion of its management fee or reimburse certain expenses of each Fund as
specified in the Prospectus. In addition to the management fee, each Fund also
pays its portion of the Nuveen Investment Trust II's general administrative ex-
penses allocated in proportion to its net assets. All fees and expenses are ac-
crued daily and deducted before payment of dividends to investors.
The Funds, the other Nuveen funds, NIAC, and other related entities have
adopted a code of ethics which essentially prohibits all Nuveen fund management
personnel, including Nuveen fund portfolio managers, from engaging in personal
investments which compete or interfere with, or attempt to take advantage of a
Fund's anticipated or actual portfolio transactions, and is designed to assure
that the interests of Fund shareholders are placed before the interests of
Nuveen personnel in connection with personal investment transactions.
Sub-Adviser
Columbus Circle Investors ("CCI") was founded in 1975 and is located at Metro
Center, One Station Place, Stamford, CT 06902. Under the Sub-Advisory Agreement
for the Innovation Fund and International Fund, CCI is compensated by NIAC for
its investment advisory services with respect to the Innovation Fund and Inter-
national Fund. Under a Sub-Advisory Agreement with NIAC, CCI manages the in-
vestment portfolio of the Innovation Fund and International Fund. CCI is an in-
vestment management firm organized as a general partnership. CCI has two part-
ners: CCIP LLC and Columbus Circle Investor Management Inc. The predecessors of
CCI, including the Columbus Circle Investors Division of Thomson Advisory Group
L.P. ("TAG"), commenced operations in 1975. CCI is registered as an investment
advisor with the Securities and Exchange Commission.
At the center of CCI's equity investment strategy is its theory of Positive Mo-
mentum & Positive Surprise. This theory asserts that a good company doing bet-
ter than generally expected will experience a rise in its stock price, and con-
versely, a company falling short of expectations will experience a drop in
B-30
<PAGE>
its stock price. Based on this theory, CCI attempts to manage the Funds with a
view to investing in growing companies that are surprising the market with
business results that are better than anticipated.
Investment decisions made by CCI are generally made by one or more committees,
although Anthony Rizza and Clifford G. Fox have primary responsibility for the
day-to-day management of the Innovation Fund and International Fund, respec-
tively. Mr. Rizza was the portfolio manager for the Pimco Innovation Fund from
1994 to 1999. The Pimco Innovation Fund was named Mutual Fund Magazine's 1998
Fund of the Year.
Out of the fund management fee, NIAC pays CCI a portfolio management fee based
on the average daily market value of the applicable Fund for which it serves as
the portfolio manager, according to the following base schedule:
<TABLE>
<CAPTION>
Innovation International
Fund Fund
---------- -------------
<S> <C> <C>
For assets less than $1 billion.................. 0.37% 0.30%
For assets of $1 billion and over................ 0.30% 0.25%
</TABLE>
CCI provides continuous advice and recommendations concerning the Funds' in-
vestments, and is responsible for selecting the broker/dealers who execute the
portfolio transactions. CCI also serves as investment to pension and profit-
sharing plans, and other institutional and private investors. As of December
31, 1999, CCI had approximately $6.1 billion under management.
Select Stock Fund Portfolio Manager
NIAC has select Eugene E. Peroni, Jr. to serve as the portfolio manager of the
Select Stock Fund. Mr. Peroni is responsible for the day-to-day management of
the Fund's portfolio. Mr. Peroni joined Nuveen in 1999 and is currently Vice
President, Director of Equity Research. Mr. Peroni is widely recognized as one
of Wall Street's most respected investment strategists whose insights and rec-
ommendations are frequently sought by the Wall Street Journal, CNBC, Bloomberg
TV and Nightly Business Report. Over a quarter century of ongoing research and
analysis has shown Mr. Peroni that investors' trading behavior may help reveal
emerging investment themes that can power the future growth potential of indi-
vidual stocks, industry sectors and the overall market.
PORTFOLIO TRANSACTIONS
CCI is responsible for decisions to buy and sell securities for the Innovation
Fund and International Fund and NIAC is responsible for such decisions for the
Select Stock Fund. CCI and NIAC are also responsible for the applicable Fund,
for the placement of the Funds' securities business, the negotiation of the
commissions to be paid on brokered transactions, the prices for principal
trades in securities, and the allocation of portfolio brokerage and principal
business. It is the policy of CCI and NIAC to seek the best execution at the
best security price available with respect to each transaction, and with re-
spect to brokered transactions, in light of the overall quality of brokerage
and research services provided to the respective advisor and its advisees. The
best price to the Funds means the best net price without regard to the mix be-
tween 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 a Fund's futures and options transactions, if any. The purchase price of
portfolio securities purchased from an underwriter or dealer may include under-
writing commissions and dealer spreads. The Funds may pay mark-ups on principal
transactions. In selecting broker-dealers and in negotiating commissions, CCI
and NIAC consider the firm's reliability, the quality of its execution services
on a continuing basis and its financial condition. Brokerage will not be allo-
cated based on the sale of a Fund's shares.
B-31
<PAGE>
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)") permits
an investment adviser, under certain circumstances, to cause an account to pay
a broker or dealer who supplies brokerage and research services a commission
for effecting a transaction in excess of the amount of commission another bro-
ker or dealer would have charged for effecting the transaction. Brokerage and
research services include (a) furnishing advice as to the value of securities,
the advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b) fur-
nishing analyses and reports concerning issuers, industries, securities, eco-
nomic factors and trends, portfolio strategy, and the performance of accounts;
and (c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement, and custody).
In light of the above, in selecting brokers, CCI and NIAC consider 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, perfor-
mance, and financial responsibility. Accordingly, the commissions charged by
any such broker may be greater than the amount another firm might charge if
CCI or NIAC determine 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 CCI or NIAC or a Fund. CCI and NIAC be-
lieve that the research information received in this manner provides a Fund
with benefits by supplementing the research otherwise available to the Fund.
The Management Agreement and the Sub-Advisory Agreement, if applicable, pro-
vide that such higher commissions will not be paid by a Fund unless the appli-
cable adviser determines in good faith that the amount is reasonable in rela-
tion to the services provided. The investment advisory fees paid by a Fund to
NIAC under the Management Agreement or the subadvisory fees paid by NIAC to
CCI under the Sub-Advisory Agreement are not reduced as a result of receipt by
either NIAC or CCI of research services.
CCI and NIAC place portfolio transactions for other advisory accounts managed
by them. Research services furnished by firms through which each Fund effects
its securities transactions may be used by CCI and NIAC in servicing all of
its accounts; not all of such services may be used by CCI or NIAC in connec-
tion with a Fund. CCI and NIAC believe it is not possible to measure sepa-
rately the benefits from research services to each of the accounts (including
each Fund) managed by it. Because the volume and nature of the trading activi-
ties 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 re-
search services will vary. However, CCI and NIAC believe such costs to each
Fund will not be disproportionate to the benefits received by a Fund on a con-
tinuing basis. CCI and NIAC seek to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by a
Fund and another advisory account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities available to a Fund.
In making such allocations between a Fund and other advisory accounts, the
main factors considered by CCI and NIAC are the respective investment objec-
tives, the relative size of portfolio holdings of the same or comparable secu-
rities, the availability of cash for investment and the size of investment
commitments generally held.
Under the Investment Company Act of 1940, a Fund may not purchase portfolio
securities from any underwriting syndicate of which Nuveen is a member except
under certain limited conditions set forth in Rule 10f-3. The Rule sets forth
requirements relating to, among other things, the terms of a security pur-
chased by a Fund, the amount of securities that may be purchased in any one
issue and the assets of the Fund that may be invested in a particular issue.
In addition, purchases of securities made pursuant to the terms of the Rule
must be approved at least quarterly by the Board of Trustees, including a ma-
jority of the trustees who are not interested persons of the Trust.
B-32
<PAGE>
NET ASSET VALUE
Each Fund's net asset value per share is determined separately for each class
of a Fund's shares as of the close of trading (normally 4:00 p.m. eastern
time) on each day the New York Stock Exchange (the "Exchange") is open for
business. The Exchange is not open for trading on New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. A Fund's net asset value may not be calculated on days
during which the Fund receives no orders to purchase shares and no shares are
tendered for redemption. Net asset value per share of a class of a Fund is
calculated by taking the value of the pro rata portion of the Fund's total as-
sets attributable to that class, including interest or dividends accrued but
not yet collected, less all liabilities attributable to that 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 securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a securities exchange or
Nasdaq for which there were no transactions on a given day or securities not
listed on a securities exchange or Nasdaq are valued at the most recent bid
prices. Securities for which quotations are not readily available are valued
at fair value as determined by the Fund using methods that include considera-
tion of the following: yields or prices of securities of comparable quality,
type of issue, coupon, maturity and rating; indications as to value from secu-
rities dealers; and general market conditions. The Fund 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 Funds' Board of Trustees
or its delegate who may determine the appropriate value of a security whenever
the value as calculated is significantly different from the previous day's
calculated value.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the ad-
vice of Chapman and Cutler, counsel to the Trust.
Each 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, each 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.
B-33
<PAGE>
First, each Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to securi-
ties loans, gains from the sale or other disposition of stock or securities,
foreign currencies or other income (including but not limited to gains from op-
tions, futures, or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "90% gross income
test"). Second, each 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 in-
vestment companies) or two or more issuers controlled by the Fund and engaged
in the same, similar or related trades or businesses.
As a regulated investment company, each Fund will not be subject to federal in-
come 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 capi-
tal 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 addi-
tion, to the extent a 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 com-
panies." Each Fund intends to make timely distributions in compliance with
these requirements and consequently it is anticipated that they generally will
not be required to pay the excise tax. A Fund may retain for investment its net
capital gain. However, if a Fund retains any net capital gain or any investment
company taxable income, it will be subject to federal income tax at regular
corporate rates on the amount retained. If a Fund retains any net capital gain,
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 a Fund will be
increased by an amount equal to the difference between the amount of such in-
cludible gains and the tax deemed paid by such shareholder in respect of such
shares. Each Fund intends to distribute at least annually to its shareholders
all or substantially all of its investment company taxable income and net capi-
tal gain.
Treasury regulations permit a regulated investment company, in determining its
investment company taxable income and net capital gain, to elect (unless it has
made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or
any net foreign currency loss incurred after October 31 as if they had been in-
curred in the succeeding year.
If a Fund engages in hedging transactions involving financial futures and op-
tions, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the
B-34
<PAGE>
Fund's losses, cause adjustments in the holding periods of the Fund's securi-
ties, 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 share-
holders.
Prior to purchasing shares in a Fund, the impact of dividends or distributions
which are expected to be or have been declared, but not paid, should be care-
fully considered. Any dividend or distribution declared shortly after a pur-
chase 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 dis-
tribution and will be subject to federal income tax to the extent it is a dis-
tribution of ordinary income or capital gain.
In any taxable year of a Fund, distributions from the Fund, other than distri-
butions which are designated as capital gains dividends, 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 ex-
tent that distributions to a shareholder in any year exceed a Fund's current
and accumulated earnings and profits, they will be treated as a return of capi-
tal 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 a Fund's net capital gain
which are properly designated as capital gain dividends by the Fund will be
taxable to the shareholders as long-term capital gain, regardless of the length
of time the shares have been held by a shareholder. Distributions will be taxed
in the manner described (i.e., as ordinary income, long-term capital gain, re-
turn of capital or exempt-interest dividends) even if reinvested in additional
shares of a Fund.
Although dividends generally will be treated as distributed when paid, divi-
dends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by a Fund (and received by
the shareholders) on December 31 of the year such dividends are declared.
The redemption or exchange of the shares of a Fund normally will result in cap-
ital gain or loss to the shareholders. Generally, a shareholder's gain or loss
will be long-term gain or loss if the shares have been held for more than one
year. Present law taxes both long- and short-term capital gains of corporations
at the rates applicable to ordinary income. The Internal Revenue Service Re-
structuring and Reform Act for 1998 (the "1998 Tax Act") provides that for tax-
payers other than corporations, net capital gain (which is defined as net long-
term capital gain over net short-term capital loss for the taxable year) real-
ized from property (with certain exclusions) is generally 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 for determining the holding period
of the share. Capital gains realized from assets held for one year or less are
taxed at the same rates as ordinary income. Note that if a sale of shares held
for less than six months results in loss, the loss will be treated as a long-
term capital loss to the extent of any capital gain distribution made with re-
spect to such shares during the period those shares are held by the
shareholder.
B-35
<PAGE>
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered "con-
version transactions" effective for transactions entered into after April 30,
1993. Shareholders and prospective investors should consult with their tax ad-
visers regarding the potential effect of this provision on their investment in
shares of a Fund.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by a Fund as long as the shares of
the Fund are held by or for 500 or more persons at all times during the taxable
year or another exception is met. In the event the shares of a Fund are held by
fewer than 500 persons, additional taxable income may be realized by the indi-
vidual (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 a Fund cannot be
taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of 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 rein-
vestment or exchange privilege. Any disregarded portion of such load will re-
sult in an increase in the shareholder's tax basis in the shares subsequently
acquired. Moreover, losses recognized by a shareholder on the
redemption or exchange of shares of a Fund held for six months or less are dis-
allowed 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 capi-
tal gains made with respect to such shares. In addition, no loss will be al-
lowed on the redemption or exchange of shares of a Fund if the shareholder pur-
chases 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 a Fund should fail to qualify under Subchapter M for tax treat-
ment as a regulated investment company, the Fund would incur a regular corpo-
rate federal income tax upon its income for that year, 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.
Each Fund is required in certain circumstances to withhold 31% of taxable divi-
dends 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 certifica-
tions, or who are otherwise subject to backup withholding.
A shareholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from a Fund which constitute dividends for Federal income tax
B-36
<PAGE>
purposes (other than dividends which a Fund designates as capital gain divi-
dends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from a Fund that
are designated by a Fund as capital gain dividends should not be subject to
United States Federal income taxes, including withholding taxes, if all of the
following conditions are met: (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor of a trade or business
within the United States, (ii) the foreign investor (if an individual) is not
present in the United States for 183 days or more during his or her taxable
year, and (iii) the foreign investor provides all certification which may be
required of his status (foreign investors may contact the Fund to obtain a
Form W-8 which must be filed with such Fund and refiled every three calendar
years thereafter). Foreign investors should consult their tax advisors with
respect to United States tax consequences of ownership of Shares. Units in a
Fund and Fund distribution may also be subject to state and local taxation and
Shareholders should consult their tax advisors in this regard.
A corporate shareholder may be entitled to a 70% dividends received deduction
with respect to any portion of such shareholder's ordinary income dividends
which are attributable to dividends received by a Fund on certain Equity Secu-
rities (other than corporate shareholders, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding corporation tax). Each Fund will designate the por-
tion 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% div-
idends received deduction. These limitations include a requirement that stock
(and therefore Shares of a Fund) must generally be held at least 46 days (as
determined under, and during the period specified in, Section 246(c) of the
Code). Regulations have been issued which address special rules that must be
considered in determining whether the 46 day holding requirement is met. More-
over, the allowable percentage of the deduction will generally be reduced from
70% if a corporate shareholder owns Shares of a Fund the financing of which is
directly attributable to indebtedness incurred by such corporation. To the ex-
tent dividends received by a 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 re-
ceived deduction is generally available only with respect to dividends paid by
domestic corporations. It should be noted that payments to a Fund of dividends
on equity Securities that are attributable to foreign corporations may be sub-
ject to foreign withholding taxes. Corporate shareholders should consult with
their tax advisers with respect to the limitations on, and possible modifica-
tions to, the dividends received deduction.
A Fund may elect to pass through to the shareholders the foreign income and
similar taxes paid by the Fund in order to enable such shareholders to take a
credit (or deduction) for foreign income taxes paid by a Fund. If such an
election is made, shareholders of a Fund, because they are deemed to own a pro
rata portion of the foreign securities held by the Fund, must include in their
gross income, for federal income tax purposes, both their portion of dividends
received by such Fund and also their portion of the amount which the Fund
deems to be the shareholders' portion of foreign income taxes paid with re-
spect to, or withheld from, dividends, interest or other income of the Fund
from its foreign investments. Shareholders may then subtract from their fed-
eral income tax the amount of such taxes withheld, or else treat such foreign
taxes as deductions from gross income; however, as in the case of investors
receiving
B-37
<PAGE>
income directly from foreign sources, the above described tax credit or deduc-
tion is subject to certain limitations. The 1997 Act imposes a required holding
period for such credits. Shareholders should consult their tax advisers regard-
ing this election and its consequences to them.
Foreign currency gains and losses realized by a Fund in connection with certain
transactions that involve foreign currency-denominated debt securities, certain
foreign currency options, foreign currency forward contracts, foreign curren-
cies, or payables or receivables denominated in a foreign currency are subject
to Section 988 of the Code, which generally causes such gains and losses to be
treated as ordinary income and losses and may affect the amount, timing and
character of distributions to shareholders. For example, if a Fund sold a for-
eign stock or bond and part of the gain or loss on the sale was attributable to
an increase or decrease in the value of a foreign currency, then the currency
gain or loss may be treated as ordinary income or loss. If such transactions
result in higher net ordinary income, the dividends paid by the Fund will be
increased; if such transactions result in lower net ordinary income, a portion
of dividends paid could be classified as a return of capital.
Each Fund may qualify for and make an election permitted under the "pass
through" provisions of Section 853 of the Internal Revenue Code, which allows a
regulated investment company to elect to have its foreign tax credit taken by
its shareholders instead of on its own tax return. To be eligible for this
credit, more than 50% of the value of a Fund's total assets at the close of its
taxable year must consist of stock or other securities in foreign corporations,
and the Fund must meet certain other requirements.
If a Fund makes this election, it may not take any foreign tax credit and may
not take a deduction for foreign taxes paid. However, each Fund is allowed to
include the amount of foreign taxes paid in a taxable year in its dividends
paid deduction. Each shareholder would then include in his gross income, and
treat as paid by him, his proportionate share of the foreign taxes paid by the
Fund.
If the U.S. government were to impose any restrictions, through taxation or
other means, on foreign investments by U.S. investors such as those to be made
through a Fund, the Board of Trustees of each Fund will promptly review the
policies of the Fund to determine whether significant changes in its invest-
ments are appropriate.
General
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
federal income taxation of a Fund and its shareholders and relates only to the
federal income tax status of a Fund and to the tax treatment of distributions
by a 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 adminis-
trative action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisors for
more detailed information concerning the federal taxation of a Fund and the in-
come tax consequences to its shareholders, as well as with respect to foreign,
state and local tax consequences of ownership of Fund shares.
B-38
<PAGE>
PERFORMANCE INFORMATION
Each Fund may quote its yield, distribution rate, beta, average annual total
return or cumulative total return in reports to shareholders, sales literature
and advertisements each of which will be calculated separately for each class
of shares.
In accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission ("SEC"), yield is computed by dividing the net invest-
ment income per share earned during the specified one month or 30-day period by
the maximum offering price per share on the last day of the period, according
to the following formula:
Yield=2[(a-b +1)/6/ -1]
cd
In the above formula, a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of the
period. In the case of Class A shares, the maximum offering price includes the
current maximum front-end sales charge of 5.75%.
In computing yield, each 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 a Fund's
financial statements.
Each 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 dis-
tribution rate differs from yield and total return and therefore is not in-
tended to be a complete measure of performance. Distribution rate may sometimes
differ from yield because a Fund may be paying out more than it is earning and
because it may not include the effect of amortization of bond premiums to the
extent such premiums arise after the bonds were purchased.
Each 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 defi-
nition 1.00.
B-39
<PAGE>
The formula for beta is given by:
Beta = S A * B / C
where
A = (Xi - X), i=1,..., N
B = (Yi - Y), i=1,..., N
C = S (Xi - X)/2/, i=1,..., N
Xi = Security Return in period i
Yi = Market Return in period i
X = Average of all observations Xi
Y = Average of all observations Yi
N = Number of observations in the measurement period
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 each
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 Funds and are not necessarily representa-
tive of the future performance of the Funds.
The average annual total return quotation is computed in accordance with a
standardized method prescribed by SEC rules. The average annual total return
for a specific period is found by taking a hypothetical $1,000 investment
("initial investment") in Fund shares on the first day of the period, reducing
the amount to reflect the maximum sales charge, and computing the "redeemable
value" of that investment at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. The calculation as-
sumes that all income and capital gains distributions have been reinvested in
Fund shares at net asset value on the reinvestment dates during the period.
Calculation of cumulative total return is not subject to a prescribed formula.
Cumulative total return for a specific period is calculated by first taking a
hypothetical initial investment in Fund shares on the first day of the period,
deducting (in some cases) the maximum sales charge, and computing the "redeem-
able value" of that investment at the end of the period. The cumulative total
return percentage is then determined by subtracting the initial investment
from the redeemable value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that all
income and capital gains distributions by each 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 in-
vestment over the period. Cumulative total return calculations that do not
B-40
<PAGE>
include the effect of the sales charge would be reduced if such charge were in-
cluded. Average annual and cumulative total returns may also be presented in
advertising and sales literature without the inclusion of sales charges.
From time to time, each Fund may compare its risk-adjusted performance with
other investments that may provide different levels of risk and return. For ex-
ample, a Fund may compare its risk level, as measured by the variability of its
periodic returns, or its risk-adjusted total return, with those of other funds
or groups of funds. Risk-adjusted total return would be calculated by adjusting
each investment's total return to account for the risk level of the investment.
The risk level for a class of shares of each Fund, and any of the other invest-
ments used for comparison, would be evaluated by measuring the variability of
the investment's return, as indicated by the standard deviation of the invest-
ment's monthly returns over a specified measurement period (e.g., two years).
An investment with a higher standard deviation of monthly returns would indi-
cate that the 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 each Fund and for other
investments over a specified period would be evaluated by dividing (a) the re-
mainder of the investment's annualized two-year total return, minus the
annualized total return of an investment in Treasury bill securities (essen-
tially a risk-free return) over that period, by (b) the standard deviation of
the investment's monthly returns for the period. This ratio is sometimes re-
ferred to as the "Sharpe measure" of return. An investment with a higher Sharpe
measure would be regarded as producing a higher return for the amount of risk
assumed during the measurement period than an investment with a lower Sharpe
measure.
Class A Shares of the Funds are sold at net asset value plus a current maximum
sales charge of 5.75% of the offering price. This current maximum sales charge
will typically be used for purposes of calculating performance figures. Returns
and net asset value of each class of shares of the Funds will fluctuate. Fac-
tors affecting the performance of a Fund include general market conditions, op-
erating expenses and investment management. Any additional fees charged by a
securities representative or other financial services firm would reduce returns
described in this section. Shares of the Funds are redeemable at net asset val-
ue, which may be more or less than original cost.
In reports and other communications to shareholders or in advertising and sales
literature, the Funds may also present economic statistics obtained from gov-
ernmental agencies or industry or financial publications comparing foreign
countries to the U.S. Additionally, a Fund may discuss certain economic and fi-
nancial trends existing in foreign countries in order to illustrate the general
investment opportunities in those countries. A Fund may present historical per-
formance of certain countries, as reported by independent data providers, as a
way to show the opportunities provided by such countries. A Fund may also show
the historical performance of certain foreign equity market indicies to compare
against other international equity market indices and to show how maintaining
investments in both foreign stocks and U.S. stocks may moderate risk. This data
is obtained from independent services such as Morgan Stanley Capital Interna-
tional and Ibbotson Associates, Inc.
B-41
<PAGE>
In reports or other communications to shareholders or in advertising and sales
literature, a Fund may also compare its performance or the performance of its
portfolio manager with that of, or reflect the performance of: (1) the Consumer
Price Index; (2) equity mutual funds or mutual fund indexes as reported by
Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Inc. ("Morningstar"),
Wiesenberger Investment Companies Service ("Wiesenberger") and CDA Investment
Technologies, Inc. ("CDA") or similar independent services which monitor the
performance of mutual funds, or other industry or financial publications such
as Barron's, Changing Times, Forbes and Money Magazine; and/or (3) the S&P
500 Index or other unmanaged indices reported by Lehman Brothers. Performance
comparisons by these indexes, services or publications may rank mutual funds
over different periods of time by means of aggregate, average, year-by-year, or
other types of total return and performance figures. Any given performance quo-
tation or performance comparison should not be considered as representative of
the performance of the Fund for any future period.
There are differences and similarities between the investments which a Fund may
purchase and the investments measured by the indexes and reporting services
which are described herein. The Consumer Price Index is generally considered to
be a measure of inflation. Lipper, Morningstar, Wiesenberger and CDA are widely
recognized mutual fund reporting services whose performance calculations are
based upon changes in net asset value with all dividends reinvested and which
do not include the effect of any sales charges.
Each Fund may also from time to time in its advertising and sales literature
compare its current yield or total return with the yield or total return on
taxable investments such as corporate or U.S. Government bonds, bank certifi-
cates of deposit (CDs) or money market funds or indices that represent these
types of investments. U.S. Government bonds are long-term investments backed by
the full faith and credit of the U.S. Government. Bank CDs are generally short-
term, FDIC-insured investments, which pay fixed principal and interest but are
subject to fluctuating rollover rates. Money market funds are short-term in-
vestments with stable net asset values, fluctuating yields and special features
enhancing liquidity.
Nuveen Innovation Fund
The table below presents annual investment returns for the CCI Technology Com-
posite between January 1, 1995 and December 31, 1999. The CCI Technology Com-
posite represents the composite performance of the two managed accounts total-
ling approximately $65.6 million as of December 31, 1999, for which CCI serves
as investment advisor and that have substantially the same investment objec-
tives and policies as the Innovation Fund.
<TABLE>
<CAPTION>
Annual Total Returns for the Year
Ending December 31,
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CCI Technology Composite (Gross). 177.82% 81.13% 10.45% 25.43% 45.40%
CCI Technology Composite (Net)... 173.13% 77.95% 8.44% 23.16% 42.81%
S&P 500.......................... 21.04% 28.58% 33.38% 22.96% 37.58%
Lipper Science and Technology
Fund Index...................... 113.90% 46.95% 7.83% 16.93% 38.57%
</TABLE>
B-42
<PAGE>
Nuveen International Growth Fund
The table below presents annual investment returns for the CCI International
Composite between June 30, 1996 and December 31, 1999. The CCI International
Composite represents the composite performance of the three managed accounts
totalling approximately $66.5 million as of December 31, 1999, for which CCI
serves as investment advisor and that have substantially the same investment
objectives and policies as the International Fund.
<TABLE>
<CAPTION>
Annual Total Returns
for the Year Ending
December 31,
1999 1998 1997
--------------------------------------------------------------------------------
<S> <C> <C> <C>
CCI International Composite (Gross)....................... 146.04% 40.18% 43.71%
CCI International Composite (Net)......................... 141.73% 37.60% 41.08%
MSCI All Country World Index ex USA....................... 31.80% 14.11% 1.70%
Lipper International Fund Index........................... 37.83% 12.66% 7.26%
</TABLE>
The gross performance results of the CCI Technology Composite and the CCI In-
ternational Composite reflect the investment performance of the respective com-
posites before deduction of any investment advisory fees or other expenses. The
net performance results of the Composite's reflect the deduction of the annual
operating expenses for the most recent fiscal year (without waivers or reim-
bursements) for Class A shares of the Funds as summarized in the What are the
Costs of Investing? section of the respective Fund's Prospectus and may be com-
pared to the performance of the indices referenced below. The performance in-
formation of a Composite should not be interpreted as indicative of future per-
formance of a fund. The MSCI All Country World Index ex USA is a capitalization
weighted index of listed securities in 46 markets around the world, including
both developed and emerging markets, but excluding the United States. The
Lipper International Fund Index is a managed index that represents the average
annualized returns of the 30 largest funds in the Lipper International Fund
category. The Lipper Science and Technology Fund Index is a managed index that
represents the 10 largest funds in the Lipper Science and Technology Fund Cate-
gory. 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 information shown reflects the past performance achieved by CCI's managed
accounts, and does not reflect past performance of the Funds. Past performance
is not predictive of future results.
ADDITIONAL INFORMATION ON THE PURCHASE AND REDEMPTION OF FUND SHARES AND
SHAREHOLDER PROGRAMS
As described in the Prospectuses, the Funds provide you with alternative ways
of purchasing Fund shares based upon your individual investment needs and pref-
erences.
Each class of shares of a Fund represents an interest in the same portfolio of
investments. Each class of shares is identical in all respects except that each
class bears its own class expenses, including distribu-
B-43
<PAGE>
tion 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 a Fund's classes of shares. There are no conversion, preemptive or other
subscription rights, except that Class B shares automatically convert into
Class A shares as described below.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares
will bear only those expenses that are directly attributable to that class,
where the type or amount of services received by a class varies from one class
to another. For example, class-specific expenses generally will include distri-
bution and service fees.
The expenses to be borne by specific classes of shares may include (i) transfer
agency fees attributable to a specific class of shares, (ii) printing and post-
age expenses related to preparing and distributing materials such as share-
holder reports, prospectuses and proxy statements to current shareholders of a
specific class of shares, (iii) Securities and Exchange Commission ("SEC") and
state securities registration fees incurred by a specific class of shares, (iv)
the expense of administrative personnel and services required to support the
shareholders of a specific class of shares, (v) litigation or other legal ex-
penses relating to a specific class of shares, (vi) directors' fees or expenses
incurred as a result of issues relating to a specific class of shares, (vii)
accounting expenses relating to a specific class of shares and (viii) any addi-
tional incremental expenses subsequently identified and determined to be prop-
erly allocated to one or more classes of shares.
Class A Shares
You may purchase Class A Shares at a public offering price equal to the appli-
cable net asset value per share plus an up-front sales charge imposed at the
time of purchase as set forth in the Prospectus. You may qualify for a reduced
sales charge, or the sales charge may be waived in its entirety, as described
below. Class A Shares are also subject to an annual service fee of .25%. See
"Distribution and Service Plan." Set forth below is an example of the method of
computing the offering price of the Class A shares of a Fund. The example as-
sumes a purchase on December 31, 1999, December 31, 1999 and , 2000 of
Class A shares from the Innovation Fund, International Fund and Select Stock
Fund, respectively, 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>
Innovation International Select Stock
Fund Fund Fund
---------- ------------- ------------
<S> <C> <C> <C>
Net Asset Value per share................ $21.56 $21.89
Per Share Sales Charge--5.75% of public
offering price (6.10% of net asset value
per share).............................. $ 1.32 $ 1.34
------ ------ ---
Per Share Offering Price to the Public... $22.88 $23.23
------ ------ ---
Shares Outstanding....................... 2,232 1,250
------ ------ ---
</TABLE>
Each Fund receives the entire net asset value of all Class A Shares that are
sold. Nuveen retains the full applicable sales charge from which it pays the
uniform reallowances shown in the Prospectus to Authorized Dealers.
B-44
<PAGE>
Certain commercial banks may make Class A Shares of the Funds available to
their customers on an agency basis. Pursuant to the agreements between Nuveen
and these banks, some or all of the sales charge paid by a bank customer in
connection with a purchase of Class A Shares may be retained by or paid to the
bank. Certain banks and other financial institutions may be required to regis-
ter as securities dealers in certain states.
Reduction or Elimination of Up-Front Sales Charge on Class A Shares and Class R
Share Purchase Availability
Rights of Accumulation
You may qualify for a reduced sales charge on a purchase of Class A Shares of a
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, 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 com-
missions table in "How to Choose a Share Class" in the Prospectus. You or your
financial advisor must notify Nuveen or the Fund's transfer agent of any cumu-
lative discount whenever you plan to purchase Class A Shares of a Fund that you
wish to qualify for a reduced sales charge.
Letter of Intent
You may qualify for a reduced sales charge on a purchase of Class A Shares of a
Fund if you plan to purchase Class A Shares of Nuveen Mutual Funds over the
next 13 months and the total amount of your purchases would, if purchased at
one time, qualify you for one of the reduced sales charges shown in the Class A
sales charges and commissions table in "How You Can Buy and Sell Shares" in the
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 Au-
thorized Dealer or to the Fund's transfer agent a written Letter of Intent that
contains the same information and representations contained in the Application
Form. A Letter of Intent states that you intend, but are not obligated, to pur-
chase 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 com-
pletion 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, Nuveen Exchange Traded Fund or a Nuveen Defined
Portfolio, or otherwise.
By establishing a Letter of Intent, you agree that your first purchase of Class
A Shares of a Fund following execution of the Letter of Intent will be at least
5% of the total amount of your intended purchases. You further agree that
shares representing 5% of the total amount of your intended purchases will be
held in escrow pending completion of these purchases. All dividends and capital
gains distributions on Class A Shares held in escrow will be credited to your
account. If total purchases, less redemptions, prior to the expiration of the
13 month period equal or exceed the amount specified in your Letter of Intent,
the Class A Shares held in escrow will be transferred to your account. If the
total purchases,
B-45
<PAGE>
less redemptions, exceed the amount specified in your Letter of Intent and
thereby qualify for a lower sales charge than the sales charge specified in
your Letter of Intent, you will receive this lower sales charge retroactively,
and the difference between it and the higher sales charge paid will be used to
purchase additional Class A Shares on your behalf. If the total purchases,
less redemptions, are less than the amount specified, you must pay Nuveen an
amount equal to the difference between the amounts paid for these purchases
and the amounts which would have been paid if the higher sales charge had been
applied. If you do not pay the additional amount within 20 days after written
request by Nuveen or your financial adviser, Nuveen will redeem an appropriate
number of your escrowed Class A Shares to meet the required payment. By estab-
lishing a Letter of Intent, you irrevocably appoint Nuveen as attorney to give
instructions to redeem any or all of your escrowed shares, with full power of
substitution in the premises.
You or your financial adviser must notify Nuveen or the Funds' transfer agent
whenever you make a purchase of Fund shares that you wish to be covered under
the Letter of Intent option.
Reinvestment of Nuveen Defined Portfolio Distributions
You may purchase Class A Shares without an up-front sales charge by reinvest-
ment of distributions from any of the various defined portfolios sponsored by
Nuveen. There is no initial or subsequent minimum investment requirement for
such reinvestment purchases.
Group Purchase Programs
If you are a member of a qualified group, you may purchase Class A Shares of a
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 a Fund or portfolio for each participant in the program is $50 per
share class per Fund provided that the group initially invests at least $3,000
in the Fund and the minimum monthly investment in Class A Shares of 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 a Fund will be
reinvested in additional Class A Shares of the Fund. No participant may uti-
lize a systematic withdrawal program.
To establish a group purchase program, both the group itself and each partici-
pant must fill out application materials, which the group administrator may
obtain from the group's financial adviser, by calling Nuveen toll-free at 800-
257-8787.
Reinvestment of Redemption Proceeds from Unaffiliated Funds Subject to Merger
or Closure
You may also purchase Class A Shares at net asset value without a sales charge
if the purchase takes place through an Authorized Dealer and represents the
reinvestment of the proceeds of the redemption of shares of one or more regis-
tered investment companies not affiliated with Nuveen that are subject to
merger or closure. You must provide appropriate documentation that the redemp-
tion occurred not more
B-46
<PAGE>
than one year prior to the reinvestment of the proceeds in Class A Shares, and
that you either paid an up-front sales charge or were subject to a contingent
deferred sales charge in respect of the redemption of such shares of such other
investment company.
Elimination of Sales Charge on Class A Shares
Class A Shares of a Fund may be purchased at net asset value without a sales
charge by the following categories of investors:
. investors purchasing $1,000,000 or more; Nuveen may pay Authorized Deal-
ers on Class A sales of $1.0 million and above up to an additional 0.25%
of the purchase amount;
. officers, trustees and former trustees of the Nuveen Funds;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. 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.
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 de-
ferred 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
B-47
<PAGE>
a Fund. You or your financial advisor 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 a Fund may be issued at net asset value without a sales
charge in connection with the acquisition by a Fund of another investment com-
pany. All purchases under the special sales charge waivers will be subject to
minimum purchase requirements as established by each Fund.
In determining the amount of your purchases of Class A Shares of a Fund that
may qualify for a reduced sales charge, the following purchases may be com-
bined: (1) all purchases by a trustee or other fiduciary for a single trust,
estate or fiduciary account; (2) all purchases by individuals and their immedi-
ate family members (i.e., their spouses, parents, children, grandparents,
grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sib-
ling's spouse, and a spouse's siblings); or (3) all purchases made through a
group purchase program as described above.
Class R Share Purchase Eligibility
Class R Shares are available for purchases of $10 million or more and for pur-
chases using dividends and capital gains distributions on Class R Shares. Class
R Shares also are available for the following categories of investors and pen-
sion, profit-sharing, 401(k), IRA or other similar plans maintained by or for
the benefit of such persons:
. officers, trustees and former trustees of the Trust or any Nuveen-spon-
sored registered investment company and their immediate family members
or trustees/directors of any fund sponsored by Nuveen, any parent com-
pany of Nuveen and subsidiaries thereof and their immediate family mem-
bers;
. bona fide, full-time and retired employees of Nuveen, any parent company
of Nuveen, and subsidiaries thereof, or their immediate family members;
. officers, directors or bona fide employees of any investment advisory
partner of Nuveen that provides sub-advisory services for a Nuveen prod-
uct, or their immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or their
immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are
held in a fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no transac-
tion fee basis through a broker-dealer sponsored mutual fund purchase
program;
B-48
<PAGE>
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their serv-
ices; and
. any shares purchased by investors falling within any of the first five
categories listed above must be acquired for investment purposes and on
the condition that they will not be transferred or resold except through
redemption by the Fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their distri-
butions from such defined portfolios in Class R Shares, if, before September 6,
1994, such purchasers had elected to reinvest distributions in Nuveen Fund
shares (before June 13, 1995 for Nuveen Municipal Bond Fund shares). Sharehold-
ers may exchange their Class R Shares of any Nuveen Fund into Class R Shares of
any other Nuveen Fund. You may also exchange Class R Shares of a 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 a Fund at
any time. To encourage their participation, each Fund waives the sales charge
on Class A Shares and offers Class R Shares to trustees and officers of the
Trust and other affiliated persons of the Trust and Nuveen as noted above.
If you are eligible to purchase either Class R Shares or Class A Shares without
a sales charge at net asset value, you should be aware of the differences be-
tween these two classes of shares. Class A Shares are subject to an annual
service fee to compensate Authorized Dealers for providing you with ongoing ac-
count services. Class R Shares are not subject to a distribution or service fee
and, consequently, holders of Class R Shares may not receive the sale types or
levels of services from Authorized Dealers. In choosing between Class A Shares
and Class R Shares, you should weigh the benefits of the services to be pro-
vided by Authorized Dealers against the annual service fee imposed upon the
Class A Shares.
For more information about the purchase of Class A Shares or the reduced sales
charge program, or to obtain the required application forms, call Nuveen In-
vestor Services toll-free at (800) 257-8787.
Class B Shares
You may purchase Class B Shares at a public offering price equal to the appli-
cable net asset value per share without any up-front sales charge. Since Class
B Shares are sold without an initial sales charge, the full amount of your pur-
chase payment will be invested in Class B Shares. Class B Shares are subject to
an annual distribution fee to compensate Nuveen for its costs in connection
with the sale of Class B shares, and are also subject to an annual service fee
to compensate Authorized Dealers for providing you with ongoing financial ad-
vice and other account services.
You may be subject to a CDSC if you redeem your Class B shares prior to the end
of the sixth year after purchase. See "Reduction or Elimination of Contingent
Deferred Sales Charge" below. Nuveen compensates Authorized Dealers for sales
of Class B Shares at the time of sale at the rate of 4.00% of the amount of
Class B Shares purchased, which represents a sales commission of 3.75% plus an
advance on the first year's annual service fee of .25%.
B-49
<PAGE>
Class B Shares acquired through the reinvestment of dividends are not subject
to a CDSC. Any CDSC will be imposed on the lower of the redeemed shares' cost
or net asset value at the time of redemption.
Class B Shares will automatically convert to Class A Shares eight years after
purchase. The purpose of the conversion is to limit the distribution fees you
pay over the life of your investment. All conversions will be done at net asset
value without the imposition of any sales load, fee, or other charge, so that
the value of each shareholder's account immediately before conversion will be
the same as the value of the account immediately after conversion. Class B
Shares acquired through reinvestment of distributions will convert into Class A
Shares based on the date of the initial purchase to which such shares relate.
For this purpose, Class B Shares acquired through reinvestment of distributions
will be attributed to particular purchases of Class B Shares in accordance with
such procedures as the Board of Trustees may determine from time to time. Class
B Shares that are converted to Class A Shares will remain subject to an annual
service fee that is identical in amount for both Class B Shares and Class A
Shares. Since net asset value per share of the Class B Shares and the Class A
Shares may differ at the time of conversion, a shareholder may receive more or
fewer Class A Shares than the number of Class B Shares converted. Any conver-
sion of Class B Shares into Class A Shares will be subject to the continuing
availability of an opinion of counsel or a private letter ruling from the In-
ternal Revenue Service to the effect that the conversion of shares would not
constitute a taxable event under federal income tax law. Conversion of Class B
Shares into Class A Shares might be suspended if such an opinion or ruling were
no longer available.
Class C Shares
You may purchase Class C Shares at a public offering price equal to the appli-
cable net asset value per share without any up-front sales charge. Class C
Shares are subject to an annual distribution fee of .75% to compensate Nuveen
for paying your financial adviser an ongoing sales commission. Class C Shares
are also subject to an annual service fee of .25% to compensate Authorized
Dealers for providing you with on-going financial advice and other account
services. Nuveen compensates Authorized Dealers for sales of Class C Shares at
the time of the sale at a rate of 1% of the amount of Class C Shares purchased,
which represents an advance of the first year's distribution fee of .75% plus
an advance on the first year's service fee of .25%. See "Distribution and Serv-
ice Plan."
Redemptions of Class C Shares within 12 months of purchase may be subject to a
CDSC of 1% of the lower of the purchase price or redemption proceeds. Because
Class C Shares do not convert to Class A Shares and continue to pay an annual
distribution fee indefinitely, Class C Shares should normally not be purchased
by an investor who expects to hold shares for significantly longer than eight
years.
Reduction or Elimination of Contingent Deferred Sales Charge
Class A Shares are normally redeemed at net asset value, without any CDSC. How-
ever, in the case of Class A Shares purchased at net asset value because the
purchase amount equaled or exceeded $1 million or pursuant to an eligible em-
ployer-sponsored defined contribution plan described above, where the
B-50
<PAGE>
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 disappear-
ing
after the sixth year. Class C Shares are redeemed at net asset value, without
any CDSC, except that a CDSC of 1% is imposed upon redemption of Class C
Shares that are redeemed within 12 months of purchase.
In determining whether a CDSC is payable, each 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 hold-
ing 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 re-
ceives 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 dura-
tion of the CDSC. A Fund may elect not to so count the period during which the
shareholder held the money market fund shares, in which event the amount of
any applicable CDSC would be reduced in accordance with 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 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an ac-
count's net asset value depending on the frequency of the plan as designated
by the shareholder; (iv) involuntary redemptions caused by operation of law;
(v) redemptions in connection with a payment of account or plan fees; (vi) re-
demptions in connection with the exercise of a reinstatement privilege whereby
the proceeds of a redemption of a Fund's shares subject to a sales charge are
reinvested in shares of certain Funds within a specified number of days; (vii)
redemptions in connection with the exercise of a Fund's right to redeem all
shares in an account that does not maintain a certain minimum balance or that
the applicable board has determined may have material adverse consequences to
the shareholders of the Fund; (viii) in whole or in part for redemptions of
shares by shareholders with accounts in excess of specified breakpoints that
correspond to the breakpoints under which the up-front sales charge on Class A
Shares is reduced pursuant to Rule 22d-1 under the Act; (ix) redemptions of
shares purchased under circumstances or by a category of investors for which
Class A Shares could be purchased at net asset value without a sales charge;
and (x) redemptions of Class A, Class B or Class C Shares if the proceeds are
transferred to an account managed by another Nuveen Adviser and the adviser
refunds the advanced service and distribution fees to Nuveen.
B-51
<PAGE>
In addition, the CDSC will be waived in connection with the following redemp-
tions of shares held by an employer-sponsored qualified defined contribution
retirement plan: (i) partial or complete redemptions in connection with a dis-
tribution without penalty under Section 72(t) of the Internal Revenue Code
("Code") from a retirement plan: (a) upon attaining age 59 1/2, (b) as part of
a series of substantially equal periodic payments, or (c) upon separation from
service and attaining age 55; (ii) partial or complete redemptions in connec-
tion with a qualifying loan or hardship withdrawal; (iii) complete redemptions
in connection with termination of employment, plan termination or transfer to
another employer's plan or IRA; and (iv) redemptions resulting from the return
of an excess contribution. The CDSC will also be waived in connection with the
following redemptions of shares held in an IRA account: (i) for redemptions
made pursuant to an IRA systematic withdrawal based on the shareholder's life
expectancy including, but not limited to, substantially equal periodic payments
described in Code Section 72(t)(A)(iv) prior to age 59; and (ii) for redemp-
tions to satisfy required minimum distributions after age 70 from an IRA ac-
count (with the maximum amount subject to this waiver being based only upon the
shareholder's Nuveen IRA accounts).
Shareholder Programs
Exchange Privilege
You may exchange shares of a class of a 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 applicable
Fund, c/o Nuveen Investor Services, P.O. Box 5186, Bowling Green Station, New
York, New York 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 one of the Funds at net asset value without a sales charge. Exchanges
of shares from any Nuveen money market fund will be made into Class A Shares,
Class B Shares, Class C Shares or Class R Shares (if eligible) of a Fund at the
public offering price. If, however, a sales charge has previously been paid on
the investment represented by the exchanged shares (i.e., the shares to be ex-
changed were originally issued in exchange for shares on which a sales charge
was paid), the exchange of shares from a Nuveen money market fund will be made
into shares of a Fund at net asset value. All shares may be exchanged for
shares of any Nuveen money market fund.
If you exchange shares subject to a CDSC, no CDSC will be charged at the time
of the exchange. However, if you subsequently redeem the shares acquired
through the exchange, the redemption may be subject to a CDSC, depending on
when you purchased your original shares and the CDSC schedule of the fund from
which you exchanged your shares.
The shares to be purchased must be offered in your state of residence and you
must have held the shares you are exchanging for at least 15 days. The total
value of exchanged shares must at least equal the minimum investment require-
ment of the Nuveen Mutual Fund being purchased. For federal income tax purpos-
es, any exchange constitutes a sale and purchase of shares and may result in
capital gain or loss. Before making any exchange, you should obtain the Pro-
spectus for the Nuveen Mutual Fund you are purchasing and read it carefully. If
the registration of the account for the Fund you are purchasing is not exactly
the same as that of the fund account from which the exchange is made, written
instructions from all holders of the account from which the exchange is being
made must be received, with signatures guaranteed by a member of an approved
Medallion Guarantee Program or in such other manner as may be acceptable to the
Fund. You may also exchange shares by telephone if you authorize telephone
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exchanges by checking the applicable box on the Application Form or by calling
Nuveen Investor Services toll-free at 800-257-8787 to obtain an authorization
form. The exchange privilege may be modified or discontinued by the Fund at any
time.
The exchange privilege is not intended to permit a Fund to be used as a vehicle
for short-term trading. Excessive exchange activity may interfere with portfo-
lio management, raise expenses, and otherwise have an adverse effect on all
shareholders. In order to limit excessive exchange activity and in other cir-
cumstances where Fund management believes doing so would be in the best inter-
est of the Fund, each Fund reserves the right to revise or terminate the ex-
change privilege, or limit the amount or number of exchanges or reject any ex-
change. Shareholders would be notified of any such action to the extent re-
quired by law.
Reinstatement Privilege
If you redeemed Class A, Class B or Class C Shares of one of the Funds 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 redemp-
tion in the same class of shares of the Fund at net asset value. This rein-
statement privilege can be exercised only once for any redemption, and rein-
vestment will be made at the net asset value next calculated after reinstate-
ment 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 and the CDSC paid at redemption
will be refunded. The federal income tax consequences of any capital gain real-
ized 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.
Suspension of Right of Redemption
Each Fund may suspend the right of redemption of Fund shares or delay payment
more than seven days (a) during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that trading of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for any other periods that the Securities and Exchange Com-
mission by order may permit for protection of Fund shareholders.
Redemption In Kind
Each Fund has reserved the right to redeem in kind (that is, to pay redemption
requests in cash and portfolio securities, or wholly in portfolio securities),
although each Fund has no present intention to
redeem in kind. Each Fund voluntarily has 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 the
Fund at the beginning of the ninety-day period.
General Matters
Each Fund may encourage registered representatives and their firms to help ap-
portion their assets among bonds, stocks and cash, and may seek to participate
in programs that recommend a portion of their assets be invested in equity se-
curities, equity and debt securities, or equity and municipal securities.
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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 Prospectus, Nuveen may from time to time make
additional reallowances only to certain authorized dealers who sell or are ex-
pected 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 educa-
tional programs for the benefit of such Authorized Dealers' representatives,
seminars for the public, and advertising and sales campaigns. Nuveen may reim-
burse a participating Authorized Dealer for up to one-half of specified media
costs incurred in the placement of advertisements which jointly feature the Au-
thorized Dealer and Nuveen Funds and Nuveen Defined Portfolios.
Such reimbursement will be based on the number of its financial advisors who
have sold Nuveen Fund shares and Nuveen Defined Portfolio 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 a Fund, and will not change the price an investor pays for shares
or the amount that a Fund will receive from such a sale. The staff of the Secu-
rities and Exchange Commission takes the position that dealers who receive 90%
or more of the applicable sales charge may be deemed underwriters under the Se-
curities Act of 1933, as amended.
To help advisors and investors better understand and most efficiently use the
Funds to reach their investment goals, each Fund may advertise and create spe-
cific investment programs and systems. For example, this may include informa-
tion on how to use a Fund to accumulate assets for future education needs or
periodic payments such as insurance premiums. A Fund may produce software,
electronic information sites, or additional sales literature to promote the ad-
vantages of using the Fund to meet these and other specific investor needs.
Each Fund has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other interme-
diaries to accept purchase and redemption orders on the Fund's behalf. A Fund
will be deemed to have received a purchase or redemption order when an autho-
rized broker or, if applicable, a broker's authorized designee accepts the or-
der. 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 au-
thorized 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 avail-
able for public purchase. Shares of the Nuveen money market fund may be pur-
chased on days on which the Federal Reserve Bank of Boston is normally open for
business. In addition to the holidays observed by the Funds, the Nuveen money
market funds observe and will not make fund shares available for purchase on
the following holidays: Martin Luther King's Birthday, Columbus Day and Veter-
ans' Day.
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<PAGE>
In addition, you may exchange Class R Shares of one of the Funds 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.
Shares will be registered in the name of the investor or the investor's finan-
cial advisor. A change in registration or transfer of shares held in the name
of a financial advisor may only be made by an order in good form from the fi-
nancial advisor acting on the investor's behalf.
For more information on the procedure for purchasing shares of the Funds and
on the special purchase programs available thereunder, see "How to Buy Shares"
and "Systematic Investing" in the Prospectus.
If you choose to invest in a Fund, an account will be opened and maintained
for you by Chase Global, the Funds' shareholder services agent. Share certifi-
cates will be issued to you only upon written request to Nuveen Investor Serv-
ices, and no certificates will be issued for fractional shares. The Funds re-
serve the right to reject any purchase order and to waive or increase minimum
investment requirements. A change in registration or transfer of shares held
in the name of your financial advisor's firm can only be made by an order in
good form from the financial adviser acting on your behalf.
A fee of 1% of the current market value of any shares represented by a certif-
icate will be charged if the certificate is lost, stolen, or destroyed. The
fee is paid to Seaboard Surety Company for insurance of the lost, stolen, or
destroyed certificate.
Authorized Dealers are encouraged to open single master accounts. However,
some Authorized Dealers may wish to use Chase Global's sub-accounting system
to minimize their internal recordkeeping requirements. An Authorized Dealer or
other investor requesting shareholder servicing or accounting other than the
master account or sub-accounting service offered by Chase Global will be re-
quired to enter into a separate agreement with another agent for these serv-
ices for a fee that will depend upon the level of services to be provided.
The Shares are offered continuously. However, subject to the rules and regula-
tions of the Securities and Exchange Commission, the Funds reserve the right
to suspend the continuous offering of its shares at any time, but no suspen-
sion shall affect your right of redemption.
Nuveen serves as the principal underwriter of the shares of the Funds pursuant
to a "best efforts" arrangement as provided by a distribution agreement with
the Trust ("Distribution Agreement"). Pursuant to the Distribution Agreement,
the Trust appointed Nuveen to be its agent for the distribution of the Funds'
shares on a continuous offering basis. Nuveen sells shares to or through bro-
kers, dealers, banks or other qualified financial intermediaries (collectively
referred to as "Dealers"), or others, in a manner consistent with the then ef-
fective registration statement of the Trust. Pursuant to the Distribution
Agreement, Nuveen, at its own expense, finances certain activities incident to
the sale and distribution of the Funds' shares, including printing and dis-
tributing of prospectuses and statements of additional information to other
than existing shareholders, the printing and distributing of sales literature,
advertising and payment of compensation and giving of concessions to dealers.
Nuveen receives for its services the excess, if any, of the sales price of the
Funds' shares less the net asset value of those shares,
B-55
<PAGE>
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 pur-
suant to a distribution plan adopted by the Trust pursuant to Rule 12b-1 and
described herein under "Distribution and Service Plan." Nuveen receives any
CDSCs imposed on redemptions of Shares, but any amounts as to which a rein-
statement privilege is not exercised are set off against and reduce amounts
otherwise payable to Nuveen pursuant to the distribution plan.
DISTRIBUTION AND SERVICE PLAN
Each Fund has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the In-
vestment Company Act of 1940, which provides that Class B Shares and Class C
Shares will be subject to an annual distribution fee, and that Class A Shares,
Class B Shares and Class C Shares will all be subject to an annual service fee.
Class R Shares will not be subject to either distribution or service fees.
The distribution fee applicable to Class B Shares and Class C Shares under the
Funds' Plans will be payable to reimburse Nuveen for services and expenses in-
curred in connection with the distribution of Class B and Class C Shares, re-
spectively. These expenses include payments to Authorized Dealers, including
Nuveen, who are brokers of record with respect to the Class B and Class C
Shares, as well as, without limitation, expenses of printing and distributing
prospectuses to persons other than shareholders of the Funds, expenses of pre-
paring, printing and distributing advertising and sales literature and reports
to shareholders used in connection with the sale of Class B and Class C Shares,
certain other expenses associated with the distribution of Class B and Class C
Shares, and any distribution-related expenses that may be authorized from time
to time by the Board of Trustees.
The service fee applicable to Class A Shares, Class B Shares and Class C Shares
under the Funds' Plans will be payable to Authorized Dealers in connection with
the provision of ongoing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering share-
holder inquiries and providing other personal services to shareholders.
Each Fund may spend up to .25 of 1% per year of the average daily net assets of
Class A Shares as a service fee under the Plan as applicable to Class A Shares.
A Fund may spend up to .75 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a distribution fee which con-
stitutes an asset-based sales charge whose purpose is the same as an up-front
sales charge and up to .25 of 1% per year of the average daily net assets of
each of the Class B Shares and Class C Shares as a service fee under the Plan
as applicable to such classes.
Under each Fund's Plan, the Fund will report quarterly to the Board of Trustees
for its review all amounts expended per class of shares under the Plan. The
Plan may be terminated at any time with respect to any class of shares, without
the payment of any penalty, by a vote of a majority of the
Trustees who are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the outstanding vot-
ing securities of such class. The Plan may be renewed from year to year if ap-
proved 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
B-56
<PAGE>
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 ap-
plicable 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 materi-
ally the cost which a class of shares may bear under the Plan without the ap-
proval of the shareholders of the affected class, and any other material amend-
ments 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 amend-
ments. During the continuance of the Plan, the selection and nomination of the
non-interested Trustees of the Trust will be committed to the discretion of the
non-interested trustees then in office.
INDEPENDENT PUBLIC ACCOUNTANTS, CUSTODIAN AND TRANSFER AGENT
Arthur Andersen LLP, independent public accountants, 33 West Monroe Street,
Chicago, Illinois 60603 have been selected as auditors for the Trust. In addi-
tion to audit services, Arthur Andersen LLP will provide consultation and as-
sistance on accounting, internal control, tax and related matters.
The custodian of the assets of the Funds is The Chase Manhattan Bank, 4 New
York Plaza, New York, New York 10004. The custodian performs custodial, fund
accounting and portfolio accounting services.
The Funds' transfer, shareholder services, and dividend paying agent is Chase
Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts 02108.
GENERAL TRUST INFORMATION
The Funds are series of the Trust. The Trust is an open-end management invest-
ment company under the Investment Company Act of 1940. The Trust was organized
as a Massachusetts business trust on 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,
there are four series authorized and outstanding, each of which is divided into
four classes of shares designated as Class A Shares, Class B Shares, Class C
Shares and Class R Shares. Each class of shares represents an interest in the
same portfolio of investments of a Fund. Each class of shares has equal rights
as to voting, redemption, dividends and liquidation, except that each bears
different class expenses, including different distribution and service fees,
and each has exclusive voting rights with respect to any distribution or serv-
ice 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 share-
holders. Shareholders owning more than 10% of the outstanding shares of a Fund
have the right to call a special meeting to remove Trustees or for any other
purpose.
B-57
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Under Massachusetts law applicable to Massachusetts business trusts, sharehold-
ers of such a trust may, under certain circumstances, be held personally liable
as partners for its obligations. However, the Declaration of Trust of the Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or
the Trustees. The Trust's Declaration of Trust further provides for indemnifi-
cation 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 share-
holder 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 re-
mote.
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APPENDIX A--RATINGS OF INVESTMENTS
Standard & Poor's Ratings Group--A brief description of the applicable Stan-
dard & Poor's Ratings Group ("S&P") rating symbols and their meanings (as pub-
lished by S&P) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the cred-
itworthiness of an obligor with respect to a specific obligation. This assess-
ment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a par-
ticular investor.
The ratings are based on current information furnished by the issuer or ob-
tained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
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, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated "AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated "AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small de-
gree.
A
Debt rated "A' has a strong capacity to pay interest and repay princi-
pal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB
Debt rated "BBB' is regarded as having an adequate capacity to pay in-
terest and repay principal. Whereas it normally exhibits adequate pro-
tection parameters, adverse economic conditions or changing circum-
stances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated
categories.
<PAGE>
Speculative Grade Rating
Debt rated "BB', "B', "CCC', "CC' and "C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. "BB' indicates the least degree of speculation and "C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse con-
ditions.
BB Debt rated "BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and princi-
pal payments. The "BB' rating category is also used for debt subordi-
nated to senior debt that is assigned an actual or implied "BBB-' rat-
ing.
B Debt rated "B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.
The "B' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB' or "BB-' rating.
CCC Debt rated "CCC' has a currently identifiable vulnerability to de-
fault, and is dependent upon favorable business, financial, and eco-
nomic conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "B' or "B-' rating.
CC The rating "CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC' debt rating.
C The rating "C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-' debt rating. The
"C' rating may be used to cover a situation where a bankruptcy peti-
tion has been filed, but debt service payments are continued.
CI The rating "CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
"D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA' to "CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
comple-
A-2
<PAGE>
tion of the project, makes no comment on the likelihood of, or the risk of de-
fault upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L The letter "L' indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit col-
lateral is federally insured by the Federal Savings & Loan Insurance
Corp. or the Federal Deposit Insurance Corp.* and interest is ade-
quately collateralized. In the case of certificates of deposit the
letter "L' indicates that the deposit, combined with other deposits
being held in the same right and capacity will be honored for princi-
pal and accrued pre-default interest up to the federal insurance lim-
its within 30 days after closing of the insured institution or, in the
event that the deposit is assumed by a successor insured institution,
upon maturity.
NR Indicates no rating has been requested, that there is insufficient in-
formation on which to base a rating, or that S&P does not rate a par-
ticular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note rat-
ing. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to
other maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest with some vulnera-
bility to adverse financial and economic changes over the term of the
notes.
SP-3
Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security in-
asmuch as it does not comment as to market price or suitability for a particu-
lar investor. The ratings are based on current information furnished to S&P by
the issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended,
or withdrawn as a result of changes in or unavailability of such information or
based on other circumstances.
*Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flow.
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<PAGE>
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1' for the highest
quality obligations to "D' for the lowest. These categories are as follows:
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satis-
factory. However, the relative degree of safety is not as high as for
issues designated "A-1.'
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.
B Issues rated "B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D' is in payment default. The "D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a secu-
rity inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on occa-
sion, rely on unaudited financial information. The ratings may be changed, sus-
pended, or withdrawn as a result of changes in or unavailability of such infor-
mation or based on other circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as pub-
lished by Moody's) follows:
Long Term Debt
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally re-
ferred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated
A-4
<PAGE>
lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa securi-
ties.
A Bonds which are rated A possess may favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Moody's bond rating symbols may contain numerical modifiers of a ge-
neric rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking, and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
Baa Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristi-
cally unreliable over any great length of time. Such bonds lack out-
standing investment characteristics and in fact have speculative char-
acteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protec-
tion of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desir-
able investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and is-
sues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Con(...)
Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
Note:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the sym-
bols Aa1, A1, Baa1, Ba1, and B1.
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<PAGE>
Municipal Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquid-
ity support or demonstrated broad based access to the market
for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins or protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security ele-
ments are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection com-
monly regarded as required of an investment security is pres-
ent and although not distinctly or predominantly speculative,
there is specific risk.
Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior ca-
pacity for repayment of senior short-term promissory obligations. Prime-1 re-
payment capacity will often be evidenced by many of the following characteris-
tics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong capac-
ity for repayment of senior short-term promissory obligations. This will nor-
mally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of senior short-term promissory obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial lever-
age. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
A-6
<PAGE>
Duff & Phelps, Inc.--A brief description of the applicable Duff & Phelps, Inc.
("D&P") ratings symbols and their meanings (as published by D&P) follows:
Long Term Debt
These ratings represent a summary opinion of the issuer's long-term fundamental
quality. Rating determination is based on qualitative and quantitative factors
which may vary according to the basic economic and financial characteristics of
each industry and each issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such factors as competition, gov-
ernment action, regulation, technological obsolescence, demand shifts, cost
structure, and management depth and expertise. The projected viability of the
obligor at the trough of the cycle is a critical determination.
Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by sev-
eral factors including relative weightings of the different security classes in
the capital structure, the overall credit strength of the issuer, and the na-
ture of covenant protection.
The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of "BBB-' and higher fall within the defini-
tion of investment grade securities, as defined by bank and insurance supervi-
sory authorities. Structured finance issues, including real estate, asset-
backed and mortgage-backed financings, use this same rating scale. Duff &
Phelps Credit Rating claims paying ability ratings of insurance companies use
the same scale with minor modification in the definitions. Thus, an investor
can compare the credit quality of investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for specific ratings) ad-
dresses the likelihood that aggregate principal and interest will equal or ex-
ceed the rated amount under appropriate stress conditions.
A-7
<PAGE>
Rating ScaleDefinition
-------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
-------------------------------------------------------------------------------
AA+ AA AA- High credit quality. Protection factors are strong. Risk is mod-
est, but may vary slightly from time to time because of economic
conditions.
-------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors
AA are more variable and greater in periods of economic stress.
AA-
-------------------------------------------------------------------------------
BBB+ Below average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
-------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
-------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
-------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substan-
tial with unfavorable economic/industry conditions, and/or with
unfavorable company developments.
-------------------------------------------------------------------------------
DD
Defaulted debt obligations. Issuer failed to meet scheduled prin-
cipal and/or interest payments.
-------------------------------------------------------------------------------
DP
Preferred stock with dividend arrearages.
-------------------------------------------------------------------------------
Short-Term Debt Ratings
Duff & Phelps' short-term ratings are consistent with the rating criteria used
by money market participants. The ratings apply to all obligations with matu-
rities of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
A-8
<PAGE>
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 opera-
tions, but also access to alternative sources of funds including trade credit,
bank lines, and the capital markets. An important consideration is the level
of an obligor's reliance on short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit Ratings' short-term ratings
is the refinement of the traditional "1' category. The majority of short-term
debt issuers carry the highest rating, yet quality differences exist within
that tier. As a consequence, Duff & Phelps Credit Rating has incorporated gra-
dations of "1+' (one plus) and "1-' (one minus) to assist investors in recog-
nizing those differences.
These ratings are recognized by the SEC for broker-dealer requirements, spe-
cifically capital computation guidelines. These ratings meet Department of La-
bor ERISA guidelines governing pension and profit sharing investments. State
regulators also recognize the ratings of Duff & Phelps Credit Rating for in-
surance company investment portfolios.
Rating ScaleDefinition
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.
A-9
<PAGE>
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long Term Debt
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a spe-
cific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective finan-
cial condition and operating performance of the issuer and any guarantor, as
well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by in-
surance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small differ-
ences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Rat-
ings do not comment on the adequacy of market price, the suitability of any se-
curity for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information. Rat-
ings may be changed, suspended, or withdrawn as a result of changes in, or the
unavailability of, information or for other reasons.
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. 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 sig-
nificantly 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 quali-
ty. The obligor's ability to pay interest and repay principal is
considered 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 condi-
tions and circumstances, however, are more likely to have
A-10
<PAGE>
adverse impact on these bonds and, therefore, impair timely pay-
ment. The likelihood that the ratings of these bonds will fall be-
low investment grade is higher than for bonds with higher ratings.
Fitch speculative grade bond ratings provide a guide to investors in determin-
ing the credit risk associated with a particular security. The ratings ("BB'
to "C') represent Fitch's assessment of the likelihood of timely payment of
principal and interest in accordance with the terms of obligation for bond is-
sues not in default. For defaulted bonds, the rating ("DDD' to "D') is an as-
sessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its rela-
tionship to other obligations of the issuer, the current and prospective fi-
nancial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the is-
suer'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 differ-
ences in the degrees of credit risk.
BB Bonds are considered speculative. The obligor's ability to pay in-
terest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can
be identified which could assist the obligor in satisfying its
debt service requirements.
B Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability
of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not rem-
edied, may lead to default. The ability to meet obligations re-
quires an advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds are in imminent default in payment of interest or principal.
DDD, DD
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization
of the obligor. "DDD' represents the highest potential for recov-
ery of these bonds, and "D' represents the lowest potential for
recovery.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on de-
mand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
A-11
<PAGE>
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 payment.
F-1 Very Strong Credit Quality Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than is-
sues rated "F-1+'.
F-2 Good Credit Quality Issues assigned this rating have a satisfac-
tory 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 characteris-
tics suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these se-
curities to be rated below investment grade.
F-S Weak Credit Quality Issues assigned this rating have characteris-
tics suggesting a minimal degree of assurance for timely payment
and are vulnerable to near-term adverse changes in financial and
economic conditions.
D Default Issues assigned this rating are in actual or imminent pay-
ment default.
LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
A-12
<PAGE>
EAI-XX-XX X-00
<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)
(d)(3). Renewal of Management Agreement between Registrant and Nuveen
Institutional Advisory Corp.(6)
(d)(4). Management Agreement between Registrant and Nuveen
Institutional Advisory Corp.(7)
(d)(5). Investment Sub-Advisory Agreements between Nuveen Institutional
Advisory Corp. and Columbus Circle Investors, LLC.(7)
(e)(1). Distribution Agreement between Registrant and John Nuveen & Co.
Incorporated.(4)
(e)(2). Renewal of Distribution Agreement between Registrant and John
Nuveen & Co. Incorporated.(6)
(f). Not applicable.
(g)(1). Custodian Agreement between Registrant and The Chase Manhattan
Bank.(7)
(g)(2). Global Custody Agreement between Registrant and The Chase
Manhattan Bank.(7)
(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)
(i)(3). Opinion and Consent of Chapman and Cutler dated
November 24, 1999.(6)
(i)(4). Opinion and Consent of Chapman and Cutler dated December 17,
1999.(7)
(i)(5). Opinion and Consent of Bingham, Dana and Gould dated December
17, 1999.(7)
(i)(6). Opinion and Consent of Chapman and Cutler dated January 11,
2000.(7)
(i)(7). Opinion and Consent of Chapman and Cutler dated , 2000.(9)
(j). Consent of Independent Public Accountants.(9)
(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). Multi-Class Plan.(2)
(p). Code of Ethics of the Registrant, Principal Underwriter and
Investment Adviser.(8)
(z). Original Powers of Attorney for Messrs. Schwertfeger, Evans,
Leafstrand, Bacon, Kissick, and Ms. Wellington, Trustees,
authorizing, among others, Alan G. Berkshire, Nicholas Dalmaso,
Jessica R. Droeger, Larry W. Martin and Gifford R. Zimmerman to
execute the Registration Statement.(8)
</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) Incorporated by reference to the post-effective amendment no. 2 filed on
Form N-1A for Registrant.
(5) Incorporated by reference to the post effective amendment no. 3 filed on
Form N-1A for Registrant.
(6) Incorporated by reference to the post-effective amendment no. 4 filed on
Form N-1A for Registrant.
(7) Incorporated by reference to the post-effective amendment no. 5 filed on
Form N-1A for Registrant.
(8) Filed herewith.
(9) To be filed by amendment.
II-1
<PAGE>
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.
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 $40,000,000 (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).
II-2
<PAGE>
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.
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, President.................... President, formerly Executive Vice President, of
The John Nuveen Company, John Nuveen & Co.
Incorporated, Nuveen Advisory Corp., Nuveen
Asset Management, Inc. and Nuveen Senior Loan
Asset Management Inc. and Executive Vice
President and Director of Rittenhouse Financial
Services, Inc.
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. and Senior Vice President
and Controller of Nuveen Senior Loan Asset
Management Inc.; formerly CFO of Sara Lee Corp.,
Bakery Division.
</TABLE>
(b) Rittenhouse acts as sub-investment adviser to the Registrant for the Nuveen
Rittenhouse Growth Fund 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 Mr. Schwertfeger's and
Mr. Amboian's address is 333 W. Wacker Drive, Chicago, IL 60606:
<TABLE>
<CAPTION>
Other Business, Profession, Vocation
Positions and Offices or
Name with Rittenhouse Employment During Past Two Years
---- ----------------------- ------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger Chairman, President and Chairman (since July 1996) and
Trustee Director, formerly Executive Vice
President, of The John Nuveen
Company (from March 1992 to July
1996) and of John Nuveen & Co.
Incorporated; Director and Chairman
(since July 1996), formerly
Executive Vice President (from May
1994 to July 1996) of Nuveen
Institutional Advisory Corp and
Nuveen Advisory Corp.; Chairman and
Director (since January 1997) of
Nuveen Asset Management, Inc.;
Director (since 1996) of
Institutional Capital Corporation;
Chairman and Director of Rittenhouse
Financial Services Inc. (since
1999); Chief Executive Officer
(since September 1999) of Nuveen
Senior Loan Asset Management Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Other Business, Profession, Vocation
Positions and Offices or
Name with Rittenhouse Employment During Past Two Years
---- ------------------------ ------------------------------------
<S> <C> <C>
John P. Amboian Executive Vice President President, formerly Executive Vice
and Director President, of The John Nuveen
Company, John Nuveen & Co.
Incorporated, Nuveen Advisory Corp.,
Nuveen Asset Management, Inc. and
Nuveen Senior Loan Asset Management
Inc.
George W. Connell Senior Advisor None
William L. Conrad Managing Director None
Richard D. Hughes President, Director Director, Philadelphia Depository
Trust Co. (from April 1994 to
October 1998), Philadelphia, PA.
Michael H. Lewers Managing Director None
Deborah D. Manning Managing Director None
Cynthia A. Stains Chief Operating Officer, None
Secretary and Treasurer
John P. Waterman Managing Director Director, Modern Group Ltd.,
Bristol, PA.
Leonard H. McCandless Vice President None
Marion R. Metzbower Vice President None
James S. Smith Vice President None
</TABLE>
(c) Columbus Circle Investors acts as sub-investment adviser to the Registrant
for the Nuveen Innovation Fund and the Nuveen International Growth Fund and
serves as investment adviser to separately managed accounts. The following is a
listing of each managing director of Columbus Circle Investors. Columbus Circle
Investors is a general partnership having two partners, CCIP LLC and Columbus
Circle Investors Management Inc., the outstanding securities of which are owned
by Messrs. Donald A. Chiboucas, Anthony Rizza, Marc S. Felman, Clifford G. Fox
and Robert W. Fehrmann. The day-to-day management of Columbus Circle Investors
is carried out under the direction of a management board consisting of the
individuals named below, pursuant to an irrevocable delegation from the
Columbus Circle Investors, managing general partner, Columbus Circle Investors
Management Inc. The principal business address for each person is Metro Center,
One Station Place, Stamford, CT 06902:
<TABLE>
<CAPTION>
Positions and
Offices Other Business, Profession, Vocation
with Columbus or
Name Circle Investors Employment During Past Two Years
---- ----------------- ------------------------------------
<S> <C> <C>
Donald A. Chiboucas Managing Director None
Anthony Rizza Managing Director Portfolio Manager, Nuveen Innovation
Fund
Marc S. Felman Managing Director None
Clifford G. Fox Managing Director Portfolio Manager, Nuveen
International Growth Fund
</TABLE>
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 Money Market Trust, Nuveen Municipal Money Market Fund,
Inc., Nuveen Taxable Funds Inc., Nuveen Investment Trust, Nuveen Investment
Trust III, 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
II-4
<PAGE>
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 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, Nuveen Select Tax-Free Income Portfolio 3, Nuveen Dividend Advantage
Municipal Fund, Nuveen California Dividend Advantage Municipal Fund and Nuveen
New York Dividend Advantage Municipal Fund.
(b)
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices with Offices
Business Address Underwriter with Registrant
-------------------------------------------------------------------------------
<S> <C> <C>
Chairman, President
Timothy R. Schwertfeger Chairman of the Board, and Trustee
333 West Wacker Drive Chief Executive Officer,
Chicago, IL 60606 and Director
John P. Amboian President and Director None
333 West Wacker Drive
Chicago, IL 60606
William Adams IV Vice President None
333 West Wacker Drive
Chicago, IL 60606
Alan G. Berkshire Senior Vice President Vice President and
333 West Wacker Drive and Secretary Assistant Secretary
Chicago, IL 60606
Robert K. Burke Vice President None
333 West Wacker Drive
Chicago, IL 60606
Peter H. D'Arrigo Vice President and Treasurer None
333 West Wacker Drive
Chicago, IL 60606
Stephen D. Foy Vice President Vice President and
333 West Wacker Drive Controller
Chicago, IL 60606
Benjamin T. Fulton Vice President None
333 West Wacker Drive
Chicago, IL 60606
</TABLE>
II-5
<PAGE>
(b)
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices with Offices
Business Address Underwriter with Registrant
---------------------------------------------------------------------------------
<S> <C> <C>
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
Paul C. Williams Vice President None
333 West Wacker Drive
Chicago, IL 60606
Margaret E. Wilson Vice President None
333 West Wacker Drive and Corporate
Chicago, IL 60606 Controller
Gifford R. Zimmerman Vice President Vice President and
333 West Wacker Drive and Assistant Secretary Secretary
Chicago, IL 60606
</TABLE>
(c) Not applicable.
Item 28: Location of Accounts and Records
Nuveen Institutional Advisory Corp., 333 West Wacker Drive, Chicago, Illinois
60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholder meetings and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
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 and the Investment Company
Act, the Fund has duly caused this Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Chicago, and State
of Illinois, on the 17th day of July, 2000.
NUVEEN INVESTMENT TRUST II
/s/ Gifford R. Zimmerman
__________________________________________
Gifford R. Zimmerman
Vice President
Pursuant to the requirements of the Securities Act, this Registration State-
ment 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 July 17, 2000
________________________ Controller (Principal
Stephen D. Foy Financial and
Accounting Officer)
Timothy R. Schwertfeger Chairman,
President and Trustee
James E. Bacon Trustee
Jack B. Evans Trustee By /s/ Gifford R. Zimmerman
-------------------------
William L. Kissick Trustee Gifford R. Zimmerman
Attorney-in-Fact
Thomas E. Leafstrand Trustee
Sheila W. Wellington Trustee July 17, 2000
</TABLE>
Original powers of attorney authorizing, among others, Alan G. Berkshire,
Nicholas Dalmaso, Jessica R. Droeger, Larry W. Martin and Gifford R. Zimmerman
to execute this Registration Statement, and Amendments thereto, for each of
the trustees of Registrant on whose behalf this Registration Statement is
filed, have been executed and are being filed with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
(p). Code of Ethics of the Registrant, Principal Underwriter and
Investment Adviser.
(z). Original Powers of Attorney of the Trustees.
</TABLE>
