<PAGE>
Nuveen Investments
Rittenhouse
Growth Fund
ANNUAL REPORT JULY 31, 2000
A blue chip portfolio for investors seeking a tax-efficient way to build and
sustain wealth.
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
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Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective Nuveen Rittenhouse Growth Fund
7 Nuveen Rittenhouse Growth Fund Spotlight
8 Portfolio of Investments
10 Statement of Net Assets
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Notes to Financial Statements
18 Financial Highlights
19 Report of Independent Public Accountants
21 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[Photo of Timothy R. Schwertfeger appears here]
Timothy R. Schwertfeger
Chairman of the Board
Harvard University, Tiffany's and Dom Perignon are each the Rolls-Royce of its
market. Each is synonymous with "quality." Each has established, reinforced and
marketed its brand as one that consistently delivers a quality product -- be it
education, fine jewelry or champagne. Each has made a promise to its customers,
and each works hard to keep that promise, year after year.
Webster defines quality as the degree of excellence that a thing possesses.
Nuveen Investments defines quality by the excellence of our portfolio
management and products as well as of the financial advisors you, and our firm,
work with.
Quality Portfolio Management and Products Nuveen Rittenhouse Growth Fund is
managed by Rittenhouse Financial Services, Inc. The investment philosophy
Rittenhouse established years ago remains firmly in place today -- pursue long-
term growth with high-quality, large capitalization blue chip stocks. We believe
this singular focus translates into consistently strong risk-adjusted returns
and productive, long-lasting relationships.
Rittenhouse's approach focuses not merely on blue chips, but on those
select blue chips they believe have the prospects of providing sustainable,
long-term growth -- ultimately, to limit risk without restricting return
potential.
Rittenhouse is just one of the quality money managers Nuveen works with
to bring investors specialized expertise, judgment and resources that might
otherwise be beyond reach. We believe in the power of focused effort, which is
why we sought out extraordinary talent in each asset class and investment style
-- professionals who we feel have mastered the nuances of the markets they know
best.
We believe this focus leads to a better quality product for you.
Quality Financial Advisors Nuveen Investments works through financial advisors
because we believe in quality advice. Today, you face an unprecedented array of
investment choices, opportunities -- and risks. Your investment advisor can
offer you the professional assistance that will help bring to life your
aspirations -- for yourself and your family, today and in the future.
The potential presence of inflation and price swings in the markets
reinforces the importance of working with an advisor, staying focused on the
long term and adhering to your financial plan. With a sound plan in place, you
may be better positioned to weather the markets' ups and downs.
Looking Ahead The following interview with the portfolio management team of
Nuveen Rittenhouse Growth Fund is intended to give you a review of your fund's
performance during its fiscal year, as well as an overview of the economic
environment in which it operated.
ANNUAL REPORT page 1
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I'd like to share a few words looking ahead. Looking to the latter part
of 2000, we anticipate continued investor uncertainty in the wake of recent
market volatility. The challenge for Nuveen Investments is to help financial
advisors work with you to rebalance portfolios with your greater family wealth
management goals in mind.
We are poised to help you reach your goals with equity and fixed-income
investments that are designed to provide high quality and consistent growth. We
plan to continue to enhance and diversify the investment choices we offer.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
September 18, 2000
ANNUAL REPORT page 2
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NUVEEN RITTENHOUSE GROWTH FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Throughout Nuveen Rittenhouse Growth Fund's fiscal year, the fund's manager
continued to focus on companies, in both the "new" and "old" economies, with
dominant market leadership, strong financial conditions and prospects for
consistent and sustainable earnings growth. In this interview, John P. Waterman,
managing director of investments at Rittenhouse Financial Services, Inc. and
portfolio manager of Nuveen Rittenhouse Growth Fund, discusses the fund's
performance during the fiscal year ended July 31, 2000.
Q You and your team were able to take advantage of the fund's modified
investment policy that went into effect prior to the start of the fiscal
year -- the ability to invest in non-dividend paying stocks. This change allowed
the fund to access the burgeoning technology sector. Technology companies, to a
greater extent than companies in other sectors, have opted not to pay dividends
and to use excess cash either for new investment or share repurchases.
Technology makes up the largest sector weighting in the fund -- at 35.2%.
Just 12 months ago, at July 31, 1999, technology was 23.2% of the portfolio. How
were you able to introduce more technology to the portfolio and stay true to
Rittenhouse's conservative growth orientation?
A We remained selective in our approach to technology companies. In fact, we
used very much the same philosophy in choosing stocks for our technology
holdings as we did for our non-technology holdings. We sought strong, well-
positioned companies -- companies that are dominant market leaders in their
industries.
Over the years, technology stocks have proven to be volatile. Given the
rapid change and acute competition to which technology companies have been
exposed, history has shown that survival is often a function of a company's
ability to manage rapid change. We took a prudent approach to investing in these
companies and focused on the most stable, solid performers with market
leadership in technology industries projected to grow at high rates for years to
come.
Q What are some examples of such leading technology companies?
A We added several names during the fund's fiscal year. EMC Corporation was
added and at July 31, 2000, was the fund's third largest holding. EMC is the
market-leading data storage company. Businesses embracing the Internet and e-
commerce must manage an infinite amount of information, and EMC's leading
product solutions offer the intelligence, flexibility and leverage businesses
need to manage this data. We believe the company's commitment to research and
development, combined with the positive long-term outlook for the data storage
industry, has positioned EMC to deliver solid, consistent earnings growth.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, chosen for their rigorously disciplined
investment approaches.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's advisor for large-cap growth investing, Rittenhouse Financial Services,
Inc., a wholly owned subsidiary of Nuveen, has more than 20 years of investment
experience through a variety of market conditions. With approximately $17
billion in assets under management, Rittenhouse has developed an expertise in
selecting high-quality, large-cap companies that the fund managers believe will
perform well over the long term.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the fiscal year ended July 31, 2000. The views expressed reflect those of
the portfolio management team and are subject to change at any time, based on
market and other conditions.
Annual Report page 3
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"The fund's outperformance of its peer group in part can be attributed to its
focus on leading global companies with strong, sustainable earnings growth."
Another leading technology addition was Oracle Corporation. Oracle is the
dominant supplier of fully integrated software products to businesses. Oracle's
Internet-friendly software is designed to enhance enterprise resource planning,
customer relationship management and supply chain management. The strong vision
of Oracle's management team is likely to drive the continual growth of the
company's Internet-enabling software, in our opinion.
Intel, Texas Instruments and Sun Microsystems--all leaders in their
industries--also did very well for the fund during the period.
NUVEEN RITTENHOUSE GROWTH FUND
Top Ten Stock Holdings
American International Group, Inc. 5.7%
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General Electric Company 4.9%
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EMC Corporation 4.9%
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Pfizer Inc. 4.6%
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The Coca-Cola Company 4.3%
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Automatic Data Processing, Inc. 4.3%
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Intel Corporation 4.2%
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Colgate-Palmolive Company 4.0%
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Cisco Systems, Inc. 3.8%
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Merck & Co., Inc. 3.6%
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The companies listed represent their respective percentages of stock holdings as
of July 31, 2000. Over time, the fund's holdings and their percentages will
vary.
Q How did the fund perform during its fiscal year?
A The fund delivered to its shareholders another strong year. The fund reported
a one-year total return for the fiscal year ended July 31, 2000, of 15.93%. The
fund's return compares favorably against its benchmark, the Lipper Large Cap
Core Funds Index, which returned 12.01% and the Standard & Poor's 500 Index
return of 8.97% for the same time period.*
The fund's outperformance of its peer group in part can be attributed to
its focus on leading global companies with s trong, sustainable earnings growth.
Q Much of the market's gains during the year were attributable to the "hot dot"
or "new" economy. Why do you believe your focus on historically more stable,
conservative companies had such a positive effect on the fund's performance?
A The economy and markets experienced the Federal Reserve's series of interest
rate hikes during the period. There is usually a six-to-nine month lag from the
time the increase is made to when the economy slows. The challenge of the Fed is
to slow economic growth sufficiently to relax inflationary pressures. The risk
is always that the Fed steps on the brakes too hard and puts the economy in a
recession.
Since the 1991 recession, Mr. Greenspan and the Fed have proven to be very
capable of managing this historic period of U.S. economic growth. They have
instituted economic measures akin to slowing the economy with "anti-lock" brakes
as opposed to old-fashion drum brakes and to date have avoided putting the
economy into a "skid."
Still, the larger-than-expected half point interest rate hike in May sent
the markets reeling. This was to be expected, however, since the stock market
typically has not performed well in periods of rising interest rates. Volatility
not seen in years, the result of investors' worst fears that corporate profits
would slow in the wake of a slowing economy, reared its ugly head.
* The Lipper Large Cap Core Funds Index is a managed index representing the
average annualized total returns of the 30 largest funds in the Lipper Large Cap
Core Funds category. The S&P 500 Index is an unmanaged index comprising 500
stocks generally considered representative of the U.S. stock market. The returns
assume reinvestment of dividends and do not reflect any applicable sales
charges.
ANNUAL REPORT page 4
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It is during times of market volatility and uncertainty regarding
corporate profit growth that our focus on the historically more stable, market-
leading companies -- companies such as Pfizer, Automatic Data Processing, Coca-
Cola, General Electric and Colgate-Palmolive -- can benefit the fund the most.
This is because investors, in similar economic scenarios -- where they faced
rising interest rates and slowing growth -- have sought out companies that were
positioned to continue to grow their earnings on a consistent basis.
Q Besides the addition of several technology names, what other significant
changes were made to the portfolio during the year?
A We sold our entire position in Procter & Gamble in March when we grew
uncertain about the company's ability to meet its long-term earnings growth
target of 13% to 15%. Procter & Gamble had pre-announced a major earnings
shortfall for the first half of 2000. The news stunned the market, coming after
an analyst meeting at which Procter & Gamble said earnings were on track.
In February, we reduced our position in Johnson & Johnson, and then in
April, we sold the balance of it. We feared Johnson & Johnson's earnings growth
rate would slow due to a lean near-term product pipeline, competitive products,
including one from Amgen, and regulatory setbacks relating to the company's
pharmaceutical business.
We used the proceeds to purchase shares of Amgen, a biotechnology
company expecting to launch three new drugs in early 2001 to 2002, and two in
2003. We also added to the portfolio Bristol-Meyers Squibb, a leading
diversified healthcare company with an increased focus on pharmaceutical
products and a commitment to research we believe has made it a leader in the
fields of hematology, therapeutic protein design, cancer and neuroscience.
Q How did some of the other sectors represented in the fund perform over
the period?
A Consumer cyclicals benefited from a robust economy as well as the
insatiable spending by consumers. Our holdings in this sector include The Home
Depot and Wal-Mart Stores. Both companies have increasingly taken advantage of
technology to stay connected to their customers, which has helped contribute to
their success.
More recently, the performance of retail stocks has lagged due to
concerns as to how slowing economic growth will impact their business. We are
underweighted in the consumer cyclicals sector and believe both Wal-Mart and
Home Depot will continue to deliver strong earnings performance, which should
translate into long-term stock price performance. Consumer staples for the most
part have lagged, but stocks such as Walgreen Co. and Colgate-Palmolive
continued to deliver solid earnings, and they are poised to do better, in our
opinion, particularly if the economy slows.
"We are underweighted in the consumer cyclicals sector and believe both Wal-Mart
and Home Depot will continue to deliver strong earnings performance, which
should translate into long-term stock price performance."
NUVEEN RITTENHOUSE GROWTH FUND
Sector Diversification
[PIE CHART APPEARS HERE]
Technology..............35.2%
Healthcare..............18.2%
Financials..............16.1%
Consumer Staples........14.6%
Capital Goods........... 7.5%
Consumer Cyclicals...... 6.0%
Utilities............... 2.4%
Portfolio composition is as of July 31, 2000, and is subject to change.
Composition is based on the fund's stock holdings. Over time, the fund's
holdings and their percentages will vary.
ANNUAL REPORT page 5
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Q What is your outlook for the market environment and the fund for the
coming months?
A The interest rate and the economic outlook are key factors. Looking out
one to two years, we continue to expect low inflation and moderate economic
growth, which is an ideal environment for the stock market. In the near future,
the Fed has made it clear that a 5% or higher growth rate is not sustainable
without inflation rekindling. The Fed has said it wants to slow growth to a
sustainable 3% to 3.5% rate. Therefore, we expect several more rate increases,
which may create uncertainty and volatility.
Beyond that, we look for slower economic growth and lower interest
rates, which should boost stocks, particularly stable growth stocks with
earnings that have low economic sensitivity.
ANNUAL REPORT page 6
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NUVEEN RITTENHOUSE GROWTH FUND
Fund Spotlight as of July 31, 2000
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $29.09 $28.55 $28.56 $29.29
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Fund Symbol NRGAX NRGBX NRGCX NRGRX
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CUSIP 67065W100 67065W209 67065W308 67065W407
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Inception Date 12/97 12/97 12/97 12/97
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</TABLE>
Total Returns as of 7/31/00/1/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
<S> <C> <C> <C> <C> <C> <C> <C>
YTD* 2.07% -3.80% 1.60% -3.40% 1.60% 0.60% 2.20%
------------------------------------------------------------------------------------------------
1-Year 15.93% 9.27% 15.01% 11.01% 15.01% 15.01% 16.17%
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Since Inception++ 15.73% 13.11% 14.89% 13.64% 14.91% 14.91% 16.03%
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</TABLE>
Total Returns as of 6/30/00+
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
<S> <C> <C> <C> <C> <C> <C> <C>
YTD* 4.95% -1.09% 4.52% -0.48% 4.55% 3.55% 5.06%
------------------------------------------------------------------------------------------------
Since Inception++ 17.60% 14.86% 16.75% 15.47% 16.78% 16.78% 17.92%
------------------------------------------------------------------------------------------------
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines periodically to 0% over the following six years. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year.
* Cumulative
++Annualized
Index Comparison/./
[MOUNTAIN CHART APPEARS HERE]
Standard
Nuveen Rittenhouse Nuveen Rittenhouse and Poor's
Growth Fund (Offer) Growth Fund (NAV) 500 Index
12/1997 $ 9,425 $10,000 $10,000
7/1998 $10,720 $11,374 $11,645
7/1999 $11,860 $12,584 $13,999
7/2000 $13,752 $14,591 $15,258
_____ Nuveen Rittenhouse Growth Fund (Offer) $13,752
_____ Nuveen Rittenhouse Growth Fund (NAV) $14,591
_____ Standard and Poor's 500 Index $15,258
/./ The Index Comparison shows the change in value of a $10,000 investment in
the Class A shares of the Nuveen fund, adjusted for the maximum sales charge
(5.75%) and all ongoing fund expenses. It also shows the Nuveen fund at NAV.
Both are compared to the Standard and Poor's 500 Index, which does not
reflect any initial or ongoing expenses. An index is not available for
direct investment.
Portfolio Allocation/./
[PIE CHART APPEARS HERE]
Equity.............97%
Cash Equivalents... 3%
/./ The fund is actively managed, and its holdings, diversification and
allocation will vary over time.
Portfolio Statistics
Total Net Assets $649.4 million
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Beta 0.92
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Average Market
Capitalization (Stocks) $172 billion
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Number of Stocks 32
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Turnover Rate (for reporting period) 28%
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Expense Ratio* 1.35%
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* Class A shares after credit/reimbursement
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Terms To Know
The following are a few terms used throughout this report.
Beta is a measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market Capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped in these main categories:
Large cap: over $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return is a measure of a fund's performance that takes into account income
dividends, capital gains distribution and change in net asset value.
ANNUAL REPORT page 7
<PAGE>
Portfolio of Investments
Nuveen Rittenhouse Growth Fund
July 31, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
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<S> <C> <C>
COMMON STOCKS -- 97.0%
Capital Goods -- 7.3%
606,000 General Electric Company $ 31,171,125
305,000 Tyco International Ltd. 16,317,500
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Consumer Cyclicals -- 5.9%
437,000 The Home Depot, Inc. 22,614,750
280,000 Wal-Mart Stores, Inc. 15,382,500
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Consumer Staples -- 14.2%
446,000 The Coca-Cola Company 27,345,375
458,000 Colgate-Palmolive Company 25,504,875
640,000 Walgreen Co. 19,960,000
497,000 The Walt Disney Company 19,227,688
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Financials -- 15.7%
406,500 American International Group, Inc. 35,644,969
304,000 Fannie Mae 15,162,000
350,000 MBNA Corporation 11,681,250
170,000 State Street Corporation 17,063,750
535,000 Wells Fargo & Company 22,102,188
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Healthcare -- 17.7%
230,000 Amgen Inc. # 14,935,625
262,000 Bristol-Myers Squibb Company 13,001,750
381,000 Medtronic, Inc. 19,454,813
317,000 Merck & Co., Inc. 22,724,938
670,250 Pfizer Inc. 28,904,531
367,000 Schering-Plough Corporation 15,849,813
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Technology -- 33.9%
544,000 Automatic Data Processing, Inc. 26,962,000
362,000 Cisco Systems, Inc. # 23,688,375
359,000 EMC Corporation # 30,559,875
161,000 Hewlett-Packard Company 17,579,188
394,000 Intel Corporation 26,299,500
144,000 International Business Machines Corporation 16,191,000
325,000 Lucent Technologies Inc. 14,218,750
185,000 Microsoft Corporation # 12,915,313
170,000 Nokia Oyj Sponsored ADR 7,533,125
180,000 Oracle Corporation # 13,533,750
165,000 Sun Microsystems, Inc. # 17,397,188
240,000 Texas Instruments Incorporated 14,085,000
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Utilities -- 2.3%
382,000 Worldcom, Inc. # 14,921,871
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Total Common Stocks (cost $506,919,021) 629,934,375
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</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount (000) Description Value
------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.9%
$19,018 Swiss Bank Repurchase Agreement, 6.46%, 8/01/00 $ 19,018,000
============------------------------------------------------------------------------------------
Total Short-Term Investments (cost $19,018,000) 19,018,000
----------------------------------------------------------------------------------
Total Investments (cost $525,937,021) - 99.9% 648,952,375
----------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.1% 427,735
----------------------------------------------------------------------------------
Net Assets - 100% $649,380,110
==================================================================================
</TABLE>
# Non-income producing.
See accompanying notes to financial statements.
9
<PAGE>
Statement of Net Assets
Nuveen Rittenhouse Growth Fund
July 31, 2000
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------------------------
Assets
Investment securities, at market value (cost $525,937,021) $648,952,375
Cash 1,413,330
Receivables:
Dividends and interest 237,388
Shares sold 1,809,836
Organizational assets 69,555
Other assets 161,803
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Total assets 652,644,287
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Liabilities
Payables:
Investments purchased 1,417,613
Shares redeemed 622,560
Accrued expenses:
Management fees 584,719
12b-1 distribution and service fees 440,803
Other liabilities 198,482
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Total liabilities 3,264,177
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Net assets $649,380,110
=========================================================================================================
Class A Shares
Net assets $121,610,499
Shares outstanding 4,180,725
Net asset value and redemption price per share $ 29.09
Offering price per share (net asset value per share plus
maximum sales charge of 5.75% of offering price) $ 30.86
=========================================================================================================
Class B Shares
Net assets $287,992,905
Shares outstanding 10,087,915
Net asset value, offering and redemption price per share $ 28.55
=========================================================================================================
Class C Shares
Net assets $190,520,259
Shares outstanding 6,669,803
Net asset value, offering and redemption price per share $ 28.56
=========================================================================================================
Class R Shares
Net assets $ 49,256,447
Shares outstanding 1,681,697
Net asset value, offering and redemption price per share $ 29.29
=========================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
Statement of Operations
Nuveen Rittenhouse Growth Fund
Year Ended July 31, 2000
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------------------------
Investment Income
Dividends $ 4,327,504
Interest 1,044,663
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Total investment income 5,372,167
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Expenses
Management fees 4,967,193
12b-1 service fees -- Class A 284,238
12b-1 distribution and service fees -- Class B 2,638,505
12b-1 distribution and service fees -- Class C 1,732,199
Shareholders' servicing agent fees and expenses 1,094,186
Custodian's fees and expenses 96,639
Trustees' fees and expenses 68,290
Professional fees 49,924
Shareholders' reports -- printing and mailing expenses 287,265
Federal and state registration fees 97,108
Organizational expenses 36,099
Other expenses 29,420
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Total expenses before custodian fee credit and expense reimbursement 11,381,066
Custodian fee credit (487)
Expense reimbursement (149,870)
---------------------------------------------------------------------------------------------------------
Net expenses 11,230,709
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (5,858,542)
---------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions 1,143,490
Net change in unrealized appreciation or depreciation of investments 85,946,069
---------------------------------------------------------------------------------------------------------
Net gain from investments 87,089,559
---------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $81,231,017
=========================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Statement of Changes in Net Assets
Nuveen Rittenhouse Growth Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
7/31/00 7/31/99
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income (loss) $ (5,858,542) $ (2,462,919)
Net realized gain from investment transactions 1,143,490 2,654,612
Net change in unrealized appreciation or depreciation of investments 85,946,069 30,332,273
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Net increase in net assets from operations 81,231,017 30,523,966
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Distributions to Shareholders
From accumulated net realized gains from investment transactions:
Class A (30,276) (162,515)
Class B (72,146) (332,952)
Class C (47,034) (189,464)
Class R (12,078) (103,805)
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Decrease in net assets from distributions to shareholders (161,534) (788,736)
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Fund Share Transactions
Net proceeds from sale of shares 164,747,675 329,272,030
Net proceeds from shares issued to shareholders due to reinvestment
of distributions 77,998 352,550
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164,825,673 329,624,580
Cost of shares redeemed (111,889,392) (49,825,219)
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Net increase in net assets from Fund share transactions 52,936,281 279,799,361
-------------------------------------------------------------------------------------------------------
Net increase in net assets 134,005,764 309,534,591
Net assets at the beginning of year 515,374,346 205,839,755
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Net assets at the end of year $649,380,110 $515,374,346
=======================================================================================================
Balance of undistributed net investment income at the end of year $ -- $ --
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Investment Trust II (the "Trust") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940. The Trust comprises the Nuveen Rittenhouse Growth Fund (the "Fund"), among
others. The Trust was organized as a Massachusetts business trust in 1997.
The Fund invests in a diversified portfolio consisting primarily of equity
securities traded in U.S. securities markets of large capitalization companies
that have a history of consistent earnings and dividend growth ("blue chip
companies") in order to provide long-term growth of capital.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Common stocks and other equity-type securities are valued at the last sales
price on the securities exchange or Nasdaq on which such securities are
primarily traded; however, securities traded on a securities exchange or Nasdaq
for which there are no transactions on a given day or securities not listed on a
securities exchange or Nasdaq are valued at the most recent bid prices. The
prices of fixed-income securities are provided by a pricing service and based
on the mean between the bid and asked price. When price quotes are not readily
available, the pricing service establishes fair market value based on prices of
comparable securities. Short-term securities are valued at amortized cost,
which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject
to market fluctuation during this period. The Fund has instructed the custodian
to segregate assets in a separate account with a current value at least equal
to the amount of the when-issued and delayed delivery purchase commitments. At
July 31, 2000, the Fund had no such outstanding purchase commitments.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discounts.
Dividends and Distributions to Shareholders
Net investment income and net realized capital gains from investment
transactions, if any, are declared and distributed to shareholders annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income and/or distributions in excess of net realized gains
from investment transactions, where applicable.
13
<PAGE>
Notes to Financial Statements (continued)
Federal Income Taxes
The Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares are sold with a sales
charge and incur an annual 12b-1 service fee. Class A Share purchases of $1
million or more are sold at net asset value without an up-front sales charge but
may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances.
Derivative Financial Instruments
The Fund may invest in options and futures contracts, which are sometimes
referred to as derivative transactions. Although the Fund is authorized to
invest in such financial instruments, and may do so in the future, it did not
make any such investments during the fiscal year ended July 31, 2000.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
14
<PAGE>
Custodian Fee Credit
The Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on the Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Deferred Organization Costs
The Fund's share of costs incurred by the Trust in connection with its
organization and initial registration of shares was deferred and is being
amortized over a 60-month period beginning December 31, 1997 (commencement of
operations). If any of the initial shares of the Fund are redeemed during this
period, the proceeds of the redemption will be reduced by the pro-rata share of
the unamortized organization costs as of the date of redemption.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires man agement to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
7/31/00 7/31/99
--------------------------- ---------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,409,570 $ 39,108,141 2,927,355 $ 70,955,142
Class B 2,392,325 64,717,015 5,856,226 140,460,433
Class C 2,034,952 55,321,768 4,601,620 110,898,865
Class R 195,022 5,600,751 285,712 6,957,590
Shares issued to shareholders due to reinvestment of distributions:
Class A 697 19,255 4,037 97,207
Class B 1,256 34,214 6,527 156,121
Class C 747 20,375 3,092 73,983
Class R 149 4,154 1,045 25,239
------------------------------------------------------------------------------------------------------------------------------------
6,034,718 164,825,673 13,685,614 329,624,580
------------------------------------------------------------------------------------------------------------------------------------
Shares redeemed:
Class A (1,256,508) (34,693,266) (798,461) (19,308,120)
Class B (1,255,776) (34,031,518) (523,896) (12,612,079)
Class C (1,281,803) (34,808,161) (596,853) (14,525,925)
Class R (306,338) (8,356,447) (146,221) (3,379,095)
------------------------------------------------------------------------------------------------------------------------------------
(4,100,425) (111,889,392) (2,065,431) (49,825,219)
------------------------------------------------------------------------------------------------------------------------------------
Net increase 1,934,293 $ 52,936,281 11,620,183 $279,799,361
====================================================================================================================================
</TABLE>
15
<PAGE>
Notes to Financial Statements (continued)
3. Securities Transactions
Purchases and sales (including maturities) of common stocks and short-term
investments for the fiscal year ended July 31, 2000, were as follows:
<TABLE>
------------------------------------------------------------------------------
<S> <C>
Purchases:
Common stocks $ 197,605,251
Short-term investments 4,595,774,000
Sales and maturities:
Common stocks 160,124,809
Short-term investments 4,595,996,000
==============================================================================
</TABLE>
At July 31, 2000, the identified cost of investments owned for federal income
tax purposes was $529,413,773.
4. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at July 31, 2000, were as follows:
<TABLE>
------------------------------------------------------------------------------
<S> <C>
Gross unrealized:
appreciation $145,554,853
depreciation (26,016,251)
------------------------------------------------------------------------------
Net unrealized appreciation $119,538,602
==============================================================================
</TABLE>
5. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Institutional
Advisory Corp. (the "Adviser"), the Fund pays an annual management fee, payable
monthly, which is based upon the average daily net assets of the Fund as
follows:
<TABLE>
------------------------------------------------------------------------------
<S> <C>
For the first $125 million .8500%
For the next $125 million .8375
For the next $250 million .8250
For the next $500 million .8125
For the next $1 billion .8000
For net assets over $2 billion .7750
==============================================================================
</TABLE>
16
<PAGE>
The Adviser had agreed to waive fees and reimburse expenses through July 31,
2000, in order to prevent total operating expenses (excluding any 12b-1
distribution or service fees and extraordinary expenses) from exceeding 1.10% of
the average daily net assets of any class of Fund shares. The Adviser may
voluntarily agree to reimburse expenses from time to time, which may be
terminated at any time at its discretion.
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Rittenhouse Financial Services, Inc.
("Rittenhouse"), a wholly owned subsidiary of The John Nuveen Company, under
which Rittenhouse manages the Fund's investment portfolio. Rittenhouse is
compensated for its services from the management fee paid to the Adviser. The
Fund pays no compensation directly to those of its Trustees who are affiliated
with the Adviser or to its officers, all of whom receive remuneration for their
services to the Fund from the Adviser.
During the fiscal year ended July 31, 2000, Nuveen Investments (the
"Distributor"), a wholly owned subsidiary of The John Nuveen Company, collected
sales charges on purchases of Class A Shares of approximately $373,200, of which
approximately $340,300 were paid out as concessions to authorized dealers. The
Distributor also received 12b-1 service fees on Class A Shares, substantially
all of which were paid to compensate authorized dealers for providing services
to shareholders relating to their investments.
During the fiscal year ended July 31, 2000, the Distributor compensated
authorized dealers directly with approximately $2,807,200 in commission advances
at the time of purchase. To compensate for commissions advanced to authorized
dealers, all 12b-1 service fees collected on Class B Shares during the first
year following a purchase, all 12b-1 distribution fees collected on Class B
Shares, and all 12b-1 service and distribution fees collected on Class C Shares
during the first year following a purchase are retained by the Distributor.
During the fiscal year ended July 31, 2000, the Distributor retained
approximately $3,101,600 in such 12b-1 fees. The remaining 12b-1 fees charged to
the Fund were paid to compensate authorized dealers for providing services to
shareholders relating to their investments. The Distributor also collected and
retained approximately $966,500 of CDSC on share redemptions during the fiscal
year ended July 31, 2000.
6. Composition of Net Assets
At July 31, 2000, the Fund had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
<TABLE>
--------------------------------------------------------------------------------
<S> <C>
Capital paid-in $529,841,508
Balance of undistributed net investment income --
Accumulated net realized gain (loss) from investment transactions (3,476,752)
Net unrealized appreciation of investments 123,015,354
--------------------------------------------------------------------------------
Net assets $649,380,110
================================================================================
</TABLE>
17
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
----------------------- --------------------
Net
Realized/
Net Unrealized
Beginning Invest- Invest- Net Ending
Net ment ment Invest- Net
Year Ended Asset Income/ Gain ment Capital Asset Total
July 31, Value (Loss) (Loss) Total Income Gains Total Value Return(a)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/97)
2000 $25.10 $(.12) 4.12 $4.00 $-- $(.01) $(.01) $29.09 15.93%
1999 22.75 (.04) 2.45 2.41 -- (.06) (.06) 25.10 10.62
1998(d) 20.00 (.01) 2.76 2.75 -- -- -- 22.75 13.75
Class B (12/97)
2000 24.82 (.33) 4.07 3.74 -- (.01) (.01) 28.55 15.01
1999 22.66 (.23) 2.45 2.22 -- (.06) (.06) 24.82 9.86
1998(d) 20.00 (.11) 2.77 2.66 -- -- -- 22.66 13.30
Class C (12/97)
2000 24.84 (.33) 4.06 3.73 -- (.01) (.01) 28.56 15.01
1999 22.67 (.23) 2.46 2.23 -- (.06) (.06) 24.84 9.86
1998(d) 20.00 (.11) 2.78 2.67 -- -- -- 22.67 13.35
Class R (12/97)
2000 25.22 (.05) 4.13 4.08 -- (.01) (.01) 29.29 16.17
1999 22.79 .02 2.47 2.49 -- (.06) (.06) 25.22 10.95
1998(d) 20.00 .03 2.76 2.79 -- -- -- 22.79 13.95
------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement(b) Reimbursement(c)
----------------- ----------------- -----------------
Ratio Ratio Ratio
of Net of Net of Net
Invest- Invest- Invest-
Ratio of ment Ratio of ment Ratio of ment
Expenses Income Expenses Income Expenses Income
Ending to to to to to to
Net Average Average Average Average Average Average Portfolio
Assets Net Net Net Net Net Net Turnover
(000) Assets Assets Assets Assets Assets Assets Rate
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/97)
2000 $121,610 1.37% (.47)% 1.35% (.45)% 1.35% (.45)% 28%
1999 101,080 1.27 (.18) 1.27 (.18) 1.27 (.18) 22
1998(d) 43,092 1.42* (.16)* 1.35* (.09)* 1.35* (.09)* 4
Class B (12/97)
2000 287,993 2.13 (1.23) 2.10 (1.20) 2.10 (1.20) 28
1999 222,156 2.02 (.93) 2.01 (.93) 2.01 (.93) 22
1998(d) 81,823 2.17* (.91)* 2.10* (.84)* 2.10* (.84)* 4
Class C (12/97)
2000 190,520 2.13 (1.23) 2.10 (1.20) 2.10 (1.20) 28
1999 146,927 2.01 (.93) 2.01 (.93) 2.01 (.93) 22
1998(d) 43,260 2.17* (.91)* 2.10* (.84)* 2.10* (.84)* 4
Class R (12/97)
2000 49,256 1.12 (.21) 1.10 (.19) 1.10 (.19) 28
1999 45,211 1.03 .08 1.03 .08 1.03 .08 22
1998(d) 37,664 1.19* .11* 1.10* .20* 1.10* .20* 4
------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) From commencement of class operations as noted.
18
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Rittenhouse Growth Fund
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Rittenhouse Growth Fund (one of the
portfolios constituting the Nuveen Investment Trust II (a Massachusetts business
trust)), as of July 31, 2000, and the related statements of operations for the
year then ended, the statement of changes in net assets for each of the two
years then ended and the financial highlights for the periods indicated thereon.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 2000, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of Nuveen
Rittenhouse Growth Fund as of July 31, 2000, the results of its operations for
the year then ended, the change in its net assets for each of the two years then
ended and its financial highlights for the periods indicated thereon in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 20, 2000
19
<PAGE>
Notes
20
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Investment Manager
Rittenhouse Financial Services, Inc.
Two Radnor Corporate Center
Suite 400
Radnor, PA 19087-4570
Transfer Agent and Shareholder Services
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public Accountants
Arthur Andersen LLP
Chicago, IL
NASD Regulation, Inc. provides a Public Disclosure Program which supplies
certain information regarding the disciplinary history of NASD members and their
associated persons in response to either telephone inquiries at (800) 289-9999
or written inquiries at www.nasdr.com. NASD Regulation, Inc. also provides an
investor brochure that includes information describing the Public Disclosure
Program.
21
<PAGE>
Serving
Investors
For Generations
[Photo of John Nuveen, Sr. appears here]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, Nuveen Investments has been synonymous with investments that
withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
NUVEEN
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
<PAGE>
Nuveen Investments
Growth Funds
ANNUAL REPORT JULY 31, 2000
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
Innovation
International Growth
<PAGE>
Contents
1 Dear Shareholder
3 From the Portfolio Manager's Perspective Nuveen Innovation Fund
7 Nuveen Innovation Fund Spotlight
8 From the Portfolio Manager's Perspective Nuveen International Growth
Fund
11 Nuveen International Growth Fund Spotlight
12 Portfolio of Investments
16 Statement of Net Assets
17 Statement of Operations
18 Statement of Changes in Net Assets
19 Notes to Financial Statements
24 Financial Highlights
26 Report of Independent Public Accountants
29 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[PHOTO OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
Harvard University, Tiffany's and Dom Perignon are each the Rolls-Royce of its
market. Each is synonymous with "quality." Each has established, reinforced and
marketed its brand as one that consistently delivers a quality product -- be it
education, fine jewelry or champagne. Each has made a promise to its customers,
and each works hard to keep that promise, year after year.
Webster defines quality as the degree of excellence that a thing possesses.
Nuveen Investments defines quality by the excellence of our portfolio management
and products as well as of the financial advisors you, and our firm, work with.
Quality Portfolio Management and Products In December 1999, Nuveen Investments
launched the Nuveen Innovation and Nuveen International Growth funds, which
this report discusses. These funds are managed by Columbus Circle Investors
(CCI), a firm that has been managing money for more than 25 years and has used
a single, disciplined investment philosophy called "Positive Momentum and
Positive Surprise." This philosophy is based on the premise that:
. Strong companies tend to get stronger. CCI believes a company that
demonstrates positive momentum in its business fundamentals tends to generate
superior returns through rising stock prices. This represents the Positive
Momentum CCI seeks.
. Companies positively surprise when their business fundamentals and reported
results exceed investor and analyst expectations. CCI believes this is often
accompanied by strong, accelerating growth. This represents the Positive
Surprise CCI seeks.
I invite you to read the following interviews with the CCI management
teams for the details about how this philosophy has played out for the Nuveen
International Growth and Nuveen Innovation funds.
Quality Financial Advisors Nuveen Investments works through financial advisors
because we believe in quality advice. Today, you face an unprecedented array of
investment choices, opportunities -- and risks. Your investment advisor can
offer you the professional assistance that will help bring to life your
aspirations -- for yourself and your family, today and in the future.
The potential presence of inflation and price swings in the markets
reinforces the importance of working with an advisor, staying focused on the
long term and adhering to your financial plan. With a sound plan in place, you
may be better positioned to weather the markets' ups and downs.
Looking Ahead The following interviews with the portfolio management teams of
the Nuveen Innovation and Nuveen International Growth funds are intended to give
you a review of your fund's performance during its fiscal period, as well as an
overview of the economic environment in which it operated.
ANNUAL REPORT page 1
<PAGE>
I'd like to share a few words looking ahead. Looking to the latter part
of 2000, we anticipate continued investor uncertainty in the wake of recent
market volatility. The challenge for Nuveen Investments is to help financial
advisors work with you to re-balance portfolios with your greater family wealth
management goals in mind.
We are poised to help you reach your goals with equity and fixed-income
investments that are designed to provide high quality and consistent growth. We
plan to continue to enhance and diversify the investment choices we offer.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Thank you for your continued confidence.
Sincerely,
[SIGNATURE OF TIMOTHY R. SCHWERTFEGER APPEARS HERE]
Timothy R. Schwertfeger
Chairman of the Board
September 18, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN INNOVATION FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen Innovation Fund features portfolio management by Columbus Circle
Investors (CCI), an institutional management firm with more than $6 billion in
assets under management. For more than 25 years, CCI has sought to produce
excellent investment results using a single, disciplined investment process for
all asset classes. To help you understand the fund's performance during the
fiscal period ended July 31, 2000, we spoke with Parke Logan, co-portfolio
manager of the fund and managing director of CCI, the subadvisor of the fund.
Q We'll start with a performance recap: from the fund's actual inception on
December 20, 1999, its total return as of the end of its first fiscal period --
July 31, 2000 -- was 16.30%.
For comparison purposes, we will measure the fund's performance in the
period from December 31, 1999 to July 31, 2000, during which it returned 7.88%.
The Lipper Science and Technology Funds Index returned 3.16%/1/ in that period,
and the S&P 500 Index returned -1.98%./2/
At the fund's inception, the stock market was riding high, and
technology stocks were on top. The new millenium began in much the same manner,
with stocks climbing relentlessly. But as spring began, that feverish investor
optimism waned as the markets corrected. For the first time in a while, both
the so-called "new economy" and "old economy" stocks followed similar paths --
downward. What happened to cause such a dramatic turnaround?
A Despite the seemingly endless gains to be had in the stock market in 1999
and the beginning of 2000, investor sentiment was probably on shaky ground. The
Federal Reserve's interest rate hikes over the last year didn't seem to be
having the intended effect of slowing down the overheated economy. As more
positive economic news came, the more people realized the rate hikes probably
would not cease and that continued rate hikes would cause company stock
valuations to suffer. That was enough to get the ball rolling downhill.
This reality check hit the technology world particularly hard, where
many high-flying start-ups with zero profits had reaped enormous gains in stock
prices. Investors may have suddenly realized that those gains perhaps were
simply a result of a "bandwagon" effect, and that company fundamentals do
matter. The Nasdaq Composite Index fell into bear market territory./3/
The market rebounded in June, though, as economic reports showing
evidence of a slowing economy caused investors to hope the Fed would end its
year-long strategy of interest rate hikes.
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. This select group of asset management firms direct
the investment activities of the Nuveen Mutual Funds, and Nuveen has chosen
them for their rigorously disciplined investment approaches and their consistent
long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's advisor for growth investing, Columbus Circle Investors (CCI), is an
institutional investment management firm with approximately $6 billion in
assets under management. For more than 25 years, CCI has sought to produce
excellent investment results using a single, disciplined investment process for
all asset classes.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the period from the fund's inception, December 20, 1999, through July 31,
2000. The views expressed reflect those of the portfolio management team and are
subject to change at any time, based on market and other conditions.
/1/ The Lipper Science & Technology Funds Index is a managed index representing
the average annualized total returns of the 30 largest funds in the Lipper
Science & Technology Funds category. An index is not available for direct
investment.
/2/ The S&P 500 Index is an unmanaged index comprising 500 stocks generally
considered representative of the U.S. stock market. The returns assume
reinvestment of dividends and do not reflect any applicable sales charges.
An index is not available for direct investment.
/3/ The Nasdaq Composite Index is an unmanaged index that measures the more
than 5,000 companies listed on the Nasdaq Stock Market Inc. An index is
not available for direct investment.
ANNUAL REPORT page 3
<PAGE>
"The objective of the fund is to seek out what we term the 'innovators' --
companies that use innovative technologies to gain a competitive advantage in
their industries, whatever they may be."
Q So, do you think price levels in technology stocks are more reasonable as a
result of the 2000 bear market?
A Price levels definitely fell, but we're not concerned with prices when we're
looking at companies. We look at changes in fundamentals, because we believe
that the fundamentals lead the prices. Our goal is to find companies showing
positive momentum and positive surprise. That is, companies with strengthening
growth that repeatedly have exceeded investors' earnings expectations. We
believe these types of companies generally will have rising stock prices.
Q How is "positive momentum and positive surprise" different from other styles
of investing?
A Basically, this style is unique in that we focus on change. I mentioned
looking for positive changes, but it works the other way too: if a company
surprises the market with news of deteriorating fundamentals, we try to avoid
it. Current stock price is based on historical results and current expectations.
Stock prices change when earnings results differ from consensus expectations, or
when the expectations themselves change. Those are the factors we look for.
Q Did you adjust your portfolio strategy as the market began to fall?
A As the market fell in March and April, we eliminated positions in companies
with short track records that traded at high prices compared to earnings. Then
we focused on the highest quality and most established firms. Although these
more established firms showed less true positive momentum and surprise, they
also traded at much more reasonable prices and were highly recognized for their
past success. We believed investors would be more likely to return to leaders
like Cisco and Oracle than to the newer companies.
It's not that we abandoned positive momentum and surprise during that
period. We were just careful that any less-established holdings in the portfolio
were showing such compelling momentum and surprise that investors would not
ignore their accomplishments, in our opinion.
Q Are the best days for technology stocks over, in your opinion?
A Technology in our world should continue to improve and proliferate. But it is
important to remember that the fund has a much broader focus than on "typical"
computer-related technology stocks. The objective of the fund is to seek out
what we term the "innovators" -- companies that use innovative technologies to
gain a competitive advantage in their industries, whatever they may be. These
types of companies aren't what you'd think of as typical tech companies, and
they definitely helped cushion the portfolio against the losses seen in the
Nasdaq in the second quarter of 2000. We think investing in a mix of tech
companies and innovators will remain a very viable way to invest in continuing
technological advances.
ANNUAL REPORT page 4
<PAGE>
NUVEEN INNOVATION FUND
Sector Diversification
[PIE CHART APPEARS HERE]
Technology..... 82.4%
Utilities...... 7.4%
Healthcare..... 6.5%
Consumer
Cyclicals...... 1.6%
Energy......... 2.1%
Portfolio composition is as of July 31, 2000, and is subject to change.
Composition is based on the fund's stock holdings. Over time, the fund's
holdings and their percentages will vary.
See Industry Diversification chart on page 6 for a further breakdown of the
fund's technology holdings.
Q Can you give some examples of these "innovators" that helped boost the
fund's returns during the technology rout?
A Calpine Corp. is a great example. Calpine is a non-traditional power
generation company that dominates the efficient natural gas-fired power
generation segment of the energy industry. It continued to surprise investors
with better-than expected results, driven by its acquisition and expansion
strategies that have helped the company grow its earnings. We have been rewarded
by these improving results with higher stock prices.
One innovator in biotechnology also did well over the period: a company
called Affymetrix. Affymetrix developed the GeneChip system, which is used for
gathering, analyzing and managing complex genetic information to make better
diagnoses and treatments of disease. Its customers include pharmaceutical and
biotech companies who will use their product to analyze DNA data.
Abgenix, another biotech-oriented firm that focuses on genomics, also
did extremely well.
Q Were there any "traditional" technology holdings that actually performed
well in this period?
A BEA Systems is a software developer that performed well and has continually
surprised investors with positive earnings news. BEA has quickly become the
leader in business-to-business and Internet infrastructure systems and
applications. It has a core franchise as the leader in middleware, which is
software that connects different systems.
Siebel Systems is software developer of client relationship management
packages. Relationship management has been a priority with companies in many
industries, and we believe software systems catering to that should continue to
positively surprise.
A third example is CIENA Corporation, which provides long-distance
fiberoptic telecommunications networks. Its system is designed to alleviate
capacity constraints, and the company has supply contracts with Sprint and
Worldcom.
NUVEEN INNOVATION FUND
Top Ten Stock Holdings
Calpine Corporation 4.7%
CIENA Corporation 3.5%
Siebel Systems, Inc. 3.5%
i2 Technologies Inc. 3.5%
Check Point Software Technologies Ltd. 3.4%
JDS Uniphase Corporation 3.3%
Applied Micro Circuits Corporation 3.2%
Oracle Corporation 3.1%
BEA Systems, Inc. 3.0%
Nortel Networks Corporation 2.9%
The companies listed represent their respective percentages of stock holdings as
of July 31, 2000. Over time, the fund's holdings and their percentages will
vary.
"BEA Systems is a software developer that performed well and has continually
surprised investors with positive earnings news."
ANNUAL REPORT page 5
<PAGE>
"We will continue to track the changes in the industry and in the markets, and,
regardless of interest rates, plan to stick to our strategy of seeking fast-
growing companies that exceed market expectations."
Q You followed a set of interesting themes. What were some of those themes?
A One of our technological themes has been bandwidth, a cheaper and faster way
to improve the "throughput" or information-carrying capacity on any given line
in a network. There is not enough bandwidth available and demand has been
increasing and insatiable.
Client relationship management software was an important theme, as was
business-to-business Internet applications. It has been a great time for the
semiconductor industry too, as it builds on its cyclical recovery.
The wireless theme was strong through the first quarter, but the
cellular phone industry has begun a product transition from second-generation
digital networks to wireless Internet. Since it takes a certain period of time
for these transitions to play out, product capability began to lag, so people
buying new phones have been limited for the most part to the lower-priced -- and
lower-profit margin -- second-generation products. Although the market has seen
disappointing results from companies like Nokia and Ericsson, we believe that
wireless will come back again as capability catches up.
NUVEEN INNOVATION FUND
Industry Diversification (Top 5)
Computer Software & Services 31.8%
----------------------------------------
Communication Equipment 10.1%
----------------------------------------
Computer Networking 8.9%
----------------------------------------
Electronics Semiconductors 8.3%
----------------------------------------
Electronic Companies 7.4%
----------------------------------------
The Industries listed represent their respective percentages of stock holdings
as of July 31, 2000. Over time, the fund's holdings and their percentages will
vary.
Q What is your outlook for the fund going into its next fiscal year?
A As I said, technology and innovation are trends that are not going away
anytime soon. Obviously, we will be watching closely to see what the Fed's next
moves are, because more interest rate increases could mean more market
volatility. We don't predict the future, but we do follow market sentiment and
expectations very closely, and act on changes. (Editor's note: the Fed kept
rates unchanged at its August 22, 2000, meeting).
We will continue to track the changes in the industry and in the
markets, and, regardless of interest rates, plan to stick to our strategy of
seeking fast-growing companies that exceed market expectations.
Annual Report page 6
<PAGE>
NUVEEN INNOVATION FUND
Fund Spotlight as of July 31, 2000
<TABLE>
<CAPTION>
Quick Facts
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $23.27 $23.15 $23.17 $23.29
----------------------------------------------------------------------------
Fund Symbol N/A NIFBX NIFCX N/A
----------------------------------------------------------------------------
CUSIP 67065W886 67065W878 67065W860 67065W852
----------------------------------------------------------------------------
Inception Date 12/99 12/99 12/99 12/99
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns as of 7/31/00/1/
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
YTD* 7.88% 1.66% 7.38% 2.38% 7.42% 6.42% 8.02%
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Since Inception* 16.30% 9.61% 15.70% 10.70% 15.80% 14.80% 16.45%
--------------------------------------------------------------------------------
Total Returns as of 6/30/00/1/
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
YTD* 12.06% 5.59% 11.60% 6.60% 11.64% 10.64% 12.15%
--------------------------------------------------------------------------------
Since Inception* 20.80% 13.87% 20.25% 15.25% 20.35% 19.35% 20.90%
--------------------------------------------------------------------------------
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares have
a CDSC that begins at 5% for redemptions during the first year after purchase
and declines periodically to 0% over the following six years. Class B shares
convert to Class A shares after eight years. Class C shares have a 1% CDSC for
redemptions within one year.
* Cumulative
Index Comparison
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
LIPPER SCIENCE
NUVEEN INNOVATION NUVEEN INNOVATION STANDARD AND POOR'S AND TECHNOLOGY FUND
FUND (NAV) FUND (OFFER) 500 INDEX INDEX
<S> <C> <C> <C> <C>
12/1999 10,000 9,425 10,000 10,000
7/2000 10,789 10,169 9,803 10,317
</TABLE>
----- Nuveen Innovation Fund (NAV) $10,789
----- Nuveen Innovation Fund (Offer) $10,169
----- Standard and Poor's 500 Index $9,803
----- Lipper Science & Technology Fund Index $10,317
. The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund, adjusted for the maximum sales charge
(5.75%) and all ongoing fund expenses. It also shows the Nuveen fund at NAV.
Both are compared to the Standard and Poor's Index and the Lipper Science &
Technology Fund Index, which do not reflect any initial or ongoing expenses.
An index is not available for direct investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Allocation
[PIE CHART APPEARS HERE]
Equity....100%
. The fund is actively managed, and its holdings, diversification and allocation
will vary over time.
<TABLE>
<CAPTION>
Portfolio Statistics
<S> <C>
Total Net Assets $100.1 million
--------------------------------------------
Beta 1.21
--------------------------------------------
Average Market
Capitalization (Stocks) $48 billion
--------------------------------------------
Number of Stocks 43
--------------------------------------------
Turnover Rate (for reporting period) 117%
--------------------------------------------
Expense Ratio* 1.86%
--------------------------------------------
</TABLE>
* Class A shares after credit/reimbursement
Terms To Know
The following are a few terms used throughout this report.
Beta is a measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market Capitalization Also referred to as market cap, market capitalization is a
measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped in these main categories:
Large cap: over $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return is a measure of a fund's performance that takes into account income
dividends, capital gains distribution and change in net asset value.
Annual Report page 7
<PAGE>
NUVEEN INTERNATIONAL GROWTH FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Nuveen is dedicated to providing investors access to a team of highly
experienced investment managers, each overseeing portfolios within their
specific areas of expertise. This select group of asset management firms direct
the investment activities of the Nuveen Mutual Funds, and Nuveen has chosen
them for their rigorously disciplined investment approaches and their consistent
long-term performance.
Drawing on decades of experience and specialized knowledge, these skilled asset
managers have earned reputations for excellence in their fields of expertise,
whether it is blue-chip growth stocks, large-cap value stocks, bonds or
international securities.
Nuveen's advisor for growth investing, Columbus Circle Investors (CCI), is an
institutional investment management firm with approximately $6 billion in
assets under management. For more than 25 years, CCI has sought to produce
excellent investment results using a single, disciplined investment process for
all asset classes.
Performance figures are quoted for Class A shares at net asset value. Comments
cover the period from the fund's inception, December 20, 1999, through July 31,
2000. The views expressed reflect those of the portfolio management team and are
subject to change at any time, based on market and other conditions.
*The Lipper International Funds Index is a managed index representing the
average annualized total returns of the 30 largest funds in the Lipper
International Funds category. The Morgan Stanley All Country World Index ex-USA
is an unmanaged index comprised of a capitalization-weighted sampling of the
companies listed on the stock exchanges of 14 European countries. The returns
assume reinvestment of dividends and do not reflect any applicable sales
charges. Indices are not available for direct investment.
The fund's investments in foreign stocks present additional risks, including
currency risk. In addition, investing in securities of developing countries
involves risks greater than, or in addition to, investing in foreign developed
countries.
Performance for very short periods of time should not be the sole factor in your
investment decision.
Nuveen International Growth Fund features portfolio management by Columbus
Circle Investors (CCI), an institutional management firm with more than $6
billion in assets under management. For more than 25 years, CCI has sought to
produce excellent investment results using a single, disciplined investment
process for all asset classes. To help you understand the fund's performance
during its first fiscal period ended July 31, 2000, we spoke with Matthew
Goldsmith, co-portfolio manager of the fund and managing director of CCI, the
subadvisor of the fund.
Q It was certainly an interesting period in history for the fund's debut at the
end of 1999. Can you describe the worldwide financial market environment?
A The fund opened in December 1999 amid explosive performance in the equity
markets worldwide, led by technology stocks which seemed to know no limits. But
the U.S. Federal Reserve's series of interest rate increases resumed in January,
and within two months market volatility not seen in years set in around the
world as investors feared the rate hikes would begin to hurt corporate profits.
"Old economy" and "new economy" stocks alike were dragged down.
The world will have to wait to see whether the Fed and other central banks'
interest rate hikes have had their intended effect of slowing the economy. If
not, more hikes may be in store and, most likely, more volatility. Despite all
this, the fund met its objectives.
Q Let's talk about the fund's performance. Remarkable performance in the first
11 days of the fund's life boosted the fund's actual since-inception total
return (from December 20, 1999) to 14.65%. For comparison purposes, we will
measure performance in the period from December 31, 1999 to July 31, 2000,
during which it returned 4.75% against its benchmarks: the Lipper International
Funds Index, which returned -7.22%, and the Morgan Stanley All Country World
Index ex-USA, which returned -6.89%*. How do you explain the fund's
outperformance over its benchmarks given its overweighting in technology?
A Technology was still important, in fact it was one of the most important
themes that we followed -- we were just very selective about what kinds of
technology companies we chose for the fund. The difference was we focused on
what we believed were quality stocks whose positive reports had been
consistent. We are not willing to commit to the lower-tier, unproven names.
One example of a high-quality technology company included
STMicroelectronics, a French producer of semiconductor integrated circuits and
devices. The semiconductor industry has been enjoying a strong rebound, and
although it originated in the U.S., our approach allowed us to pick up on it in
other regions of the world that house promising companies in this sector.
ANNUAL REPORT page 8
<PAGE>
Another example was Check Point Software Technologies, an Israeli company
specializing in Internet firewalls -- or protection of company systems from
intruders -- and virtual private networks. Check Point is an example of a
company that has benefited from the explosive growth of the Internet, and of the
security that companies need when their resources are at stake.
The fund was basically positioned more defensively than usual, though, in
response to the turbulent markets.
NUVEEN INTERNATIONAL GROWTH FUND
Top Ten Stock Holdings
Anritsu Corporation 3.3%
--------------------------------------------
Nortel Networks Corporation 3.3%
--------------------------------------------
Alcatel 3.2%
--------------------------------------------
Schering AG 2.8%
--------------------------------------------
Thomson Multimedia Sponsored ADR 2.7%
--------------------------------------------
Vestas Wind Systems A/S 2.7%
--------------------------------------------
ARM Holdings plc 2.6%
--------------------------------------------
Heineken NV 2.6%
--------------------------------------------
William Demant A/S 2.6%
--------------------------------------------
Tecan AG 2.6%
--------------------------------------------
The companies listed represent their respective percentages of stock holdings as
of July 31, 2000. Over time, the fund's holdings and their percentages will
vary. The fund's investments in foreign stocks present additional risks,
including currency risk. In addition, investing in securities of developing
countries involves risks greater than, or in addition to, investing in foreign
developed countries.
Q What do you mean by "defensive?"
A It was actually the natural result of our positive momentum/positive surprise
approach, not a conscious change in strategy to "defensive." Again, because of
our approach, we were able to single out holdings in sectors that we believed
were more likely to hold up very well amid the turmoil due to the "positively"
surprising nature of the fundamentals.
NUVEEN INTERNATIONAL GROWTH FUND
Sector Diversification
[PIE CHART APPEARS HERE]
Technology..............38.8%
Capital Goods...........18.0%
Healthcare..............14.4%
Consumer Staples.........9.3%
Consumer Cyclicals.......6.8%
Transportation...........5.8%
Energy...................3.6%
Financials...............2.0%
Utilities................1.3%
Portfolio composition is as of July 31, 2000, and is subject to change.
Composition is based on the fund's stock holdings.
Examples of defensive holdings that our research turned up include healthcare
stocks -- which so far have made a strong comeback in 2000 -- such as Takeda,
Schering and SmithKline Beecham, and energy stocks such as Total Fina Elf.
(SmithKline Beecham and Total Fina Elf were sold out of the portfolio before
the end of the period.) Precision Drilling Corporation of Canada was an example
of an old economy stock that performed very well. Precision provides oil field
and industrial services in the U.S. and Canada, and has benefitted from the
industrial supply/demand imbalance stemming from the lack of investment in gas
fields over the last couple of years.
Q How is the "positive momentum and positive surprise" approach different from
other styles of investing?
A In our discipline, we try to invest in good companies believed to be getting
stronger, exhibited by improving fundamentals and positively surprising results.
We believe companies with these attributes are usually accompanied by
consistently rising stock prices. We don't just look at "cheap" stocks and wait
for prices to rise.
"Because of our approach, we were able to single out holdings in sectors that we
believed were more likely to hold up very well amid the turmoil due to the
`positively' surprising nature of the fundamentals."
ANNUAL REPORT page 9
<PAGE>
"In our discipline, we try to invest in good companies believed to be getting
stronger, exhibited by improving fundamentals and positively surprising results.
. . . We don't just look at `cheap' stocks and wait for prices to rise."
Current stock price is based on historical operating results and related
news, as well as consensus expectations for the company, industry and economy.
Changes in stock price can occur for one of two reasons: earnings results are
different from consensus expectations, or the expectations themselves change.
Change -- perceived and real change -- is a very important factor that we
look at when selecting stocks. That's true for the negative side as well as the
positive: if a company surprises the market with negative news, we try to avoid
it.
Q Let's talk about Europe, whose new currency passed the one-year mark in
January. The euro has mainly been newsworthy because of its weakness against the
dollar and yen. What does this mean for those who invest in Europe?
A The euro has been weak mainly as a result of the strength of the dollar and
yen. The irony is we should start seeing stronger earnings from European
companies as the weak euro makes their products more competitive abroad. Short
term, it may increase inflation expectations and may cause central banks to
raise rates to reduce inflation, which may slow down the economy. But the
European economy is fundamentally strong, and we believe the weak euro is a
temporary condition and nothing to be alarmed about in the long-term.
Q What is your outlook for the world's financial markets in the coming months?
A Worldwide interest rates will be a big determinant of what the markets will
do, and rates will be a key factor we'll be watching closely. Our job is to
track expectations as they change. How the world's central banks choose to react
to unfolding economic news will have an effect on corporate profits.
One area we'll be paying close attention to is the Japanese economy,
because of its tremendous impact on Asian markets. Japan has convinced the world
that their economy has improved -- they just haven't convinced their own
residents. Consumer spending, which is absolutely essential to Japan's economic
recovery, has not dramatically improved.
In the technology arena, many wonder if the turbulence recently indicates
that the best days are over. But we believe technology and technology spending
are still extremely important. Tech companies are a big part of the market, and
companies in all industries are using technology more than ever.
Going forward, we are very optimistic about our technology themes such as
broadband and wireless data. In healthcare, we see technological improvement
becoming more important with the growth of genomics and the rapidity with which
new, more powerful drugs are brought to market.
ANNUAL REPORT page 10
<PAGE>
NUVEEN INTERNATIONAL GROWTH FUND
Fund Spotlight as of July 31, 2000
Quick Facts
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
NAV $22.93 $22.82 $22.82 $22.96
-------------------------------------------------------------------------------
Fund Symbol N/A N/A N/A N/A
-------------------------------------------------------------------------------
CUSIP 67065W506 67065W605 67065W704 67065W803
-------------------------------------------------------------------------------
Inception Date 12/99 12/99 12/99 12/99
-------------------------------------------------------------------------------
</TABLE>
Total Returns as of 7/31/00/+/
<TABLE>
<CAPTION>
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
<S> <C> <C> <C> <C> <C> <C> <C>
YTD* 4.75% -1.29% 4.30% -0.70% 4.30% 3.30% 4.89%
-------------------------------------------------------------------------------
Since Inception* 14.65% 8.06% 14.10% 9.10% 14.10% 13.10% 14.80%
Total Returns as of 6/30/00/+/
A Shares B Shares C Shares R Shares
NAV Offer NAV w/CDSC NAV w/CDSC NAV
YTD* 6.62% 0.47% 6.22% 1.22% 6.22% 5.22% 6.76%
--------------------------------------------------------------------------------
Since Inception* 16.70% 10.01% 16.20% 11.20% 16.20% 15.20% 16.85%
</TABLE>
+ Returns reflect differences in sales charges and expenses among the share
classes. Class A shares have a 5.75% maximum sales charge. Class B shares
have a CDSC that begins at 5% for redemptions during the first year after
purchase and declines periodically to 0% over the following six years. Class B
shares convert to Class A shares after eight years. Class C shares have a 1%
CDSC for redemptions within one year.
* Cumulative
Portfolio Statistics
<TABLE>
<CAPTION>
<S> <C>
Total Net Assets $38.3 million
------------------------------------------------
Beta 1.29
------------------------------------------------
Average Market
Capitalization (Stocks) $28 billion
------------------------------------------------
Number of Stocks 56
------------------------------------------------
Turnover Rate (for reporting period) 111%
------------------------------------------------
Expense Ratio* 1.83%
------------------------------------------------
</TABLE>
* Class A shares after credit/reimbursement
Index Comparison.
[MOUNTAIN CHART APPEARS HERE]
<TABLE>
<CAPTION>
NUVEEN INTERNATIONAL NUVEEN INTERNATIONAL MSCI ALL COUNTRY LIPPER INTERNATIONAL
GROWTH FUND (OFFER) GROWTH FUND (NAV) WORLD INDEX EX-USA FUND INDEX
<S> <C> <C> <C> <C>
12/1999 9,425 10,000 10,000 10,000
7/2000 9,874 10,476 9,312 9,279
</TABLE>
---Nuveen International Growth Fund (Offer) $9,874
---Nuveen International Growth Fund (NAV) $10,476
---MSCI All Country World Index ex-USA $9,312
---Lipper International Fund Index $9,279
. The Index Comparison shows the change in value of a $10,000 investment in the
Class A shares of the Nuveen fund, adjusted for the maximum sales charge
(5.75%) and all ongoing fund expenses. It also shows the Nuveen fund at NAV.
Both are compared to the Lipper International Fund Index and the MSCI All
Country World Index ex-USA, which do not reflect any initial or ongoing
expenses. An index is not available for direct investment.
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
Portfolio Allocation.
[PIE CHART APPEARS HERE]
Equity......100%
. The fund is actively managed, and its holdings, diversification and allocation
will vary over time.
Country Allocation (Top 10)*
Japan 16.7%
----------------------------
United Kingdom 15.2%
----------------------------
France 13.6%
----------------------------
Germany 8.2%
----------------------------
Canada 6.9%
----------------------------
Denmark 6.5%
----------------------------
Norway 4.5%
----------------------------
Israel 4.0%
----------------------------
Hong Kong 4.0%
----------------------------
Sweden 3.3%
----------------------------
*As a percentage of stock holdings as of July 31, 2000. Holdings are subject to
change.
The fund's investments in foreign stocks present additional risks including
currency risk. In addition, investing in securities of developing countries
involves risks greater than, or in addition to, investing in foreign developed
countries.
Terms To Know
The following are a few terms used throughout this report.
Beta is a measure of a fund's volatility compared to the market's. A fund with a
beta of 1.20 is approximately 20% more volatile than the market, while a fund
with a beta of 0.80 is approximately 20% less volatile than the market.
Market Capitalization Also referred to as market cap, market capitalization is
a measure of a corporation's value, calculated by multiplying the number of
outstanding shares of common stock by the current market price per share. Market
capitalization is usually grouped in these main categories:
Large cap: over $5 billion in market capitalization
Mid cap: between $1 billion and $5 billion
Small cap: $1 billion or less
Price/Earnings Ratio (P/E) The P/E ratio of a stock is calculated by dividing
the current price of the stock by its trailing 12 months' earnings per share. A
high P/E generally indicates that the market will pay more to obtain the
company's stock because investors have confidence in the company's ability to
increase its earnings over time. Conversely, a low P/E indicates that investors
are less confident that the company's earnings will increase, and therefore are
not willing to pay as much for its stock. The weighted average of the
price/earnings ratios of the stocks in a mutual fund's portfolio can act as a
gauge of the fund's investment strategy in the current market climate by
indicating a value orientation (low P/E ratios) or a growth orientation (high
P/E ratios).
Total Return is a measure of a fund's performance that takes into account income
dividends, capital gains distribution and change in net asset value.
ANNUAL REPORT page 11
<PAGE>
Portfolio of Investments
Nuveen Innovation Fund
July 31, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 89.8%
Consumer Cyclicals - 1.4%
23,400 Gemstar-TV Guide International, Inc. # $ 1,423,013
--------------------------------------------------------------------------------
Energy - 1.9%
27,200 Dynegy Inc. 1,914,200
--------------------------------------------------------------------------------
Healthcare - 5.8%
38,000 Abgenix, Inc. # 1,904,750
13,975 Affymetrix, Inc. # 1,908,243
30,500 First Health Group Corp. # 934,063
10,700 United Therapeutics Corporation # 1,048,600
--------------------------------------------------------------------------------
Technology - 74.1%
18,500 Altera Corporation # 1,816,469
21,000 Amdocs Limited # 1,410,938
24,550 Analog Devices, Inc. # 1,641,781
24,700 Applied Materials, Inc. # 1,874,113
19,000 Applied Micro Circuits Corporation # 2,835,750
21,875 Ariba, Inc. # 2,536,133
61,800 BEA Systems, Inc. # 2,661,263
10,000 Broadcom Corporation # 2,242,500
27,950 Business Objects S.A. Sponsored ADR # 2,641,275
26,600 Check Point Software Technologies Ltd. # 3,085,600
22,325 CIENA Corporation # 3,172,941
36,050 Cisco Systems, Inc. # 2,359,022
29,500 Commerce One, Inc. # 1,240,844
78,700 Compaq Computer Corporation 2,208,519
19,700 Copper Mountain Networks, Inc. # 1,553,530
10,575 Cree, Inc. # 1,189,027
59,650 Dynatech Corporation # 1,700,025
12,425 Extreme Networks, Inc. # 1,735,035
24,130 i2 Technologies, Inc. # 3,130,868
24,900 JDS Uniphase Corporation # 2,941,313
36,000 KLA-Tencor Corporation # 1,917,000
13,250 Mercury Interactive Corporation # 1,315,270
12,750 Micromuse Inc. # 1,654,113
23,400 Network Appliance, Inc. # 2,016,788
35,550 Nortel Networks Corporation 2,644,031
37,525 Oracle Corporation # 2,821,411
56,550 Palm, Inc. # 2,205,450
32,525 Portal Software, Inc. # 1,637,939
14,550 Redback Networks Inc. # 1,891,500
21,850 Siebel Systems, Inc. # 3,168,250
21,300 Sun Microsystems, Inc. # 2,245,819
26,450 Teradyne, Inc. # 1,676,269
34,725 Vitria Technology, Inc. # 1,640,756
18,575 Waters Corporation # 2,203,459
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
--------------------------------------------------------------------------------
<C> <S> <C>
Technology (continued)
8,200 Yahoo! Inc. # $ 1,055,238
--------------------------------------------------------------------------------
Utilities - 6.6%
45,425 The AES Corporation # 2,427,392
59,200 Calpine Corporation # 4,218,000
--------------------------------------------------------------------------------
Total Investments (cost $80,251,066) - 89.8% 89,848,500
------------------------------------------------------------------
Other Assets Less Liabilities - 10.2% 10,204,882
------------------------------------------------------------------
Net Assets - 100% $ 100,053,382
==================================================================
</TABLE>
# Non-income producing.
13 See accompanying notes to financial statements.
<PAGE>
Portfolio of Investments
Nuveen International Growth Fund
July 31, 2000
<TABLE>
<CAPTION>
Market
Shares Description Value
------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 89.1%
Capital Goods - 16.1%
38,000 Asahi Glass Company, Limited $364,118
29,000 Assa Abloy AB 550,207
49 CRH plc 831
126,000 ERG Limited 703,275
62,000 Johnson Electric Holdings Limited 602,231
67,000 Nippon Sheet Glass Company, Limited 855,995
12,000 Singulus Technologies AG 766,672
17,100 Skanska AB 566,824
31,000 Tomra Systems ASA 815,467
21,300 Vestas Wind Systems A/S 926,375
-----------------------------------------------------------------------
Consumer Cyclicals - 6.0%
14,000 Pioneer Corporation 459,938
55,000 Sanyo Electric Co., Ltd. 405,046
14,000 Thomson Multimedia Sponsored ADR # 930,125
7,500 WPP Group plc Sponsored ADR 517,500
-----------------------------------------------------------------------
Consumer Staples - 8.3%
3,800 Groupe Danone 570,769
15,600 Heineken NV 891,875
23,000 Kirin Beverage Corporation 548,868
22,100 Mediaset S.p.A. 349,149
10,000 Promotora de Informaciones S.A. # 228,408
8,100 Societe Television Francaise 1 601,940
-----------------------------------------------------------------------
Energy - 3.2%
10,000 Alberta Energy Company Ltd. 361,758
25,200 Precision Drilling Corporation # 859,950
-----------------------------------------------------------------------
Financials - 1.8%
41,000 Bipop-Carire S.p.A. 333,179
29,000 DBS Group Holdings Limited 349,539
-----------------------------------------------------------------------
Healthcare - 12.9%
8,900 Aventis S.A. (DD) 669,169
18,000 Chugai Pharmaceutical Co., Ltd. 327,377
15,000 deCode Genetics, Inc. # 385,313
2,050 Novo Nordisk A/S 399,683
16,500 Schering AG 961,676
7,000 Takeda Chemical Industries, Ltd. 415,222
850 Tecan AG 881,523
25,500 William Demant A/S 884,064
-----------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Description Value
-------------------------------------------------------------------------
<C> <S> <C>
Technology - 34.4%
15,000 Alcatel $ 1,106,365
56,000 Anritsu Corporation 1,121,738
79,200 ARM Holdings plc # 897,345
6,000 AudioCodes Ltd. # 594,000
80,000 Baltimore Technologies plc # 763,229
11,800 Bookham Technology plc Sponsored ADR # 740,450
6,600 Check Point Software Technologies Ltd. # 765,600
90,000 China Unicom Limited # 209,463
16,000 China Unicom Limited Sponsored ADR # 377,000
82,168 Datacraft Asia Limited 612,152
20,800 Jenoptik AG 549,291
28,400 Logica plc 735,851
1 Macronix International Co., Ltd. Sponsored ADR # 13
44,800 Marconi plc (DD) 715,904
28,000 NEC Corporation 746,122
1 Net One Systems Co., Ltd. 10,723
13,180 Nokia Oyj Sponsored ADR 584,039
15,000 Nortel Networks Corporation 1,115,625
107,100 Spirent plc 799,212
13,500 STMicroelectronics N.V. 768,656
-------------------------------------------------------------------------
Transportation - 5.2%
360,000 Cathay Pacific Airways 757,068
20,500 Deutsche Lufthansa AG 506,607
57,500 Frontline Limited # 717,330
-------------------------------------------------------------------------
Utilities - 1.2%
18 NTT DeCoMo, Inc. # 451,720
-------------------------------------------------------------------------
Total Investments (cost $31,535,441) - 89.1% 34,129,569
----------------------------------------------------------------
Other Assets Less Liabilities - 10.9% 4,172,857
----------------------------------------------------------------
Net Assets - 100% $38,302,426
================================================================
Country Allocation (as a percentage of the fund's net assets)
----------------------------------------------------------------
Japan 15.0% Singapore 2.5%
----------------------------------------------------------------
United Kingdom 13.6 Netherlands 2.3
----------------------------------------------------------------
France 12.1 Switzerland 2.3
----------------------------------------------------------------
Germany 7.3 Australia 1.8
----------------------------------------------------------------
Canada 6.1 Italy 1.8
----------------------------------------------------------------
Denmark 5.8 China 1.5
----------------------------------------------------------------
Norway 4.0 Finland 1.5
----------------------------------------------------------------
Israel 3.5 Iceland 1.0
----------------------------------------------------------------
Hong Kong 3.5 Spain 0.6
----------------------------------------------------------------
Sweden 2.9
----------------------------------------------------------------
</TABLE>
# Non-income producing.
(DD) Security purchased on a delayed delivery basis.
See accompanying notes to financial statements.
15
<PAGE>
Statement of Net Assets
July 31, 2000
<TABLE>
<CAPTION>
International
Innovation Growth
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investment securities, at market value
(cost $80,251,066 and $31,535,441, respectively) $ 89,848,500 $ 34,129,569
Cash 5,540,104 3,478,826
Receivables:
Dividends -- 13,414
Investments sold 6,761,328 475,297
Shares sold 796,477 1,706,848
Other assets 180 2,623
-----------------------------------------------------------------------------------------------
Total assets 102,946,589 39,806,577
-----------------------------------------------------------------------------------------------
Liabilities
Payables:
Investments purchased 2,452,432 1,385,582
Net unrealized depreciation on unsettled foreign currency
forward contracts from transaction hedges -- 714
Shares redeemed 187,084 60,643
Accrued expenses:
Management fees 89,510 8,653
12b-1 distribution and service fees 70,636 12,892
Other liabilities 93,545 35,667
-----------------------------------------------------------------------------------------------
Total liabilities 2,893,207 1,504,151
-----------------------------------------------------------------------------------------------
Net assets $100,053,382 $38,302,426
===============================================================================================
Class A Shares
Net assets $ 22,837,927 $10,676,344
Shares outstanding 981,587 465,631
Net asset value and redemption price per share $ 23.27 $ 22.93
Offering price per share (net asset value per share plus
maximum sales charge of 5.75% of offering price) $ 24.69 $ 24.33
===============================================================================================
Class B Shares
Net assets $ 33,288,220 $ 6,435,408
Shares outstanding 1,438,109 281,969
Net asset value, offering and redemption price per share $ 23.15 $ 22.82
===============================================================================================
Class C Shares
Net assets $ 39,907,012 $ 6,925,300
Shares outstanding 1,722,673 303,451
Net asset value, offering and redemption price per share $ 23.17 $ 22.82
===============================================================================================
Class R Shares
Net assets $ 4,020,223 $14,265,374
Shares outstanding 172,608 621,217
Net asset value, offering and redemption price per share $ 23.29 $ 22.96
===============================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Statement of Operations
December 20, 1999 (commencement of operations) through July 31, 2000
<TABLE>
<CAPTION>
International
Innovation Growth
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Dividends (net of foreign tax expense of $0 and $12,128, respectively) $ 30,121 $ 111,394
-------------------------------------------------------------------------------------------------------
Expenses
Management fees 434,325 169,836
12b-1 service fees -- Class A 22,150 8,801
12b-1 distribution and service fees -- Class B 132,504 20,293
12b-1 distribution and service fees -- Class C 183,716 21,048
Shareholders' servicing agent fees and expenses 65,512 18,037
Custodian's fees and expenses 94,143 63,747
Trustees' fees and expenses 2,316 1,210
Professional fees 37,297 37,433
Shareholders' reports -- printing and mailing expenses 23,597 23,794
Federal and state registration fees 12,791 2,727
Organizational expenses 87,759 87,759
Other expenses 1,432 930
-------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit and expense reimbursement 1,097,542 455,615
Custodian fee credit (13,046) (10,201)
Expense reimbursement (57,200) (157,005)
-------------------------------------------------------------------------------------------------------
Net expenses 1,027,296 288,409
-------------------------------------------------------------------------------------------------------
Net investment income (loss) (997,175) (177,015)
-------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss):
Investment transactions (14,271,235) (2,917,173)
Foreign currency transactions -- (82,006)
Net change in unrealized appreciation or depreciation of investments 9,597,434 2,594,128
Net change in unrealized gain (loss) on translation of assets and
liabilities denominated in foreign currencies -- (707)
-------------------------------------------------------------------------------------------------------
Net gain (loss) (4,673,801) (405,758)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations $(5,670,976) $ (582,773)
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Statement of Changes in Net Assets
December 20, 1999 (commencement of operations) through July 31, 2000
<TABLE>
<CAPTION>
International
Innovation Growth
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income (loss) $ (997,175) $ (177,015)
Net realized gain (loss):
Investment transactions (14,271,235) (2,917,173)
Foreign currency transactions -- (82,006)
Net change in unrealized appreciation or depreciation of investments 9,597,434 2,594,128
Net change in unrealized gain (loss) on translation of assets and
liabilities denominated in foreign currencies -- (707)
-------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations (5,670,976) (582,773)
-------------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 121,319,755 44,607,727
Cost of shares redeemed (15,595,397) (5,722,528)
-------------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 105,724,358 38,885,199
-------------------------------------------------------------------------------------------------------
Net increase in net assets 100,053,382 38,302,426
Net assets at the beginning of year -- --
-------------------------------------------------------------------------------------------------------
Net assets at the end of year $100,053,382 $38,302,426
=======================================================================================================
Balance of undistributed net investment income at the end of year $ -- $ --
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Investment Trust II (the "Trust") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940. The Trust comprises the Nuveen Innovation Fund ("Innovation") and the
Nuveen International Growth Fund ("International Growth") (collectively, the
"Funds"), among others. The Trust was organized as a Massachusetts business
trust in 1997.
The Innovation Fund will invest at least 65% of its total assets in stocks of
companies which utilize innovative technologies to gain a strategic competitive
advantage in their industry and in companies that develop, provide and service
those technologies in order to provide capital appreciation without
consideration for income.
The International Growth Fund primarily invests in common stocks of medium and
large capitalization companies domiciled in countries other than the United
States in order to provide long-term capital appreciation.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
accounting principles generally accepted in the United States.
Securities Valuation
Common stocks and other equity-type securities held by the Funds are valued at
the last sales price on the securities exchange on which such securities are
primarily traded; however, securities traded on a securities exchange for which
there are no transactions on a given day or securities not listed on a
securities exchange are valued at the most recent bid prices.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. Any securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At July
31, 2000, the International Growth Fund had outstanding delayed delivery
purchase commitments of $1,385,582.
Investment Income
Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders
Net investment income and net realized capital gains from investment
transactions, if any, are declared and distributed to shareholders annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
Distributions to shareholders of net investment income and net realized capital
gains are recorded on the ex-dividend date. The amount and timing of
distributions are determined in accordance with federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income and/or distributions in excess of net realized gains
from investment transactions, where applicable.
19
<PAGE>
Notes to Financial Statements (continued)
Federal Income Taxes
Each Fund intends to distribute all taxable income and capital gains to
shareholders and to otherwise comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
Therefore, no federal tax provision is required.
Flexible Sales Charge Program
Each Fund offers Class A, B, C and R Shares. Class A Shares are sold with a
sales charge and incur an annual 12b-1 service fee. Class A Share purchases of
$1 million or more are sold at net asset value without an up-front sales charge
but may be subject to a contingent deferred sales charge ("CDSC") if redeemed
within 18 months of purchase. Class B Shares are sold without a sales charge but
incur annual 12b-1 distribution and service fees. An investor purchasing Class B
Shares agrees to pay a CDSC of up to 5% depending upon the length of time the
shares are held by the investor (CDSC is reduced to 0% at the end of six years).
Class B Shares convert to Class A Shares eight years after purchase. Class C
Shares are sold without a sales charge but incur annual 12b-1 distribution and
service fees. An investor purchasing Class C Shares agrees to pay a CDSC of 1%
if Class C Shares are redeemed within one year of purchase. Class R Shares are
not subject to any sales charge or 12b-1 distribution or service fees. Class R
Shares are available only under limited circumstances.
Derivative Financial Instruments
The Funds may invest in options and futures contracts, which are sometimes
referred to as derivative transactions. Although the Funds are authorized to
invest in such financial instruments, and may do so in the future, they did not
make any such investments during the period December 20, 1999 (commencement of
operations) through July 31, 2000. The International Growth Fund has entered
into foreign currency forward contracts for hedging purposes as described in the
Foreign Currency Transactions paragraph below.
Expense Allocation
Expenses of the Funds that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes 12b-1 distribution and service fees, are recorded to the specific
class.
Foreign Currency Translations
To the extent that the Funds invest in securities that are denominated in a
currency other than U.S. dollars, each Fund will be subject to currency risk,
which is the risk that an increase in the U.S. dollar relative to the foreign
currency will reduce returns or portfolio value. Generally, when the U.S. dollar
rises in value against a foreign currency, the Fund's investment in securities
denominated in that currency will lose value because its currency is worth fewer
U.S. dollars; the opposite effect occurs if U.S. dollars fall in relative value.
Investments and other assets and liabilities denominated in foreign currencies
are converted into U.S. dollars on a spot (i.e. cash) basis at the spot rate
prevailing in the foreign currency exchange market at the time of valuation.
Purchases and sales of investments and dividend income denominated in foreign
currencies are translated into U.S. dollars on the respective dates of such
transactions.
Foreign Currency Transactions
The Funds may engage in foreign currency exchange transactions in connection
with their portfolio investments and assets and liabilities denominated in
foreign currencies. Each Fund may engage in foreign currency forward contracts,
options and futures transactions. Each Fund will enter into foreign currency
transactions for hedging and other permissible risk management purposes only. If
the Fund invests in a currency futures or options contract, it must make a
margin deposit to secure performance of such contract. With respect to
investments in currency futures contracts, each Fund may also be required to
make a variation margin deposit because the value of futures contracts
fluctuates daily. In addition, each Fund may segregate assets to cover its
futures contracts obligations.
20
<PAGE>
The objective of each Fund's foreign currency hedging transactions is to reduce
the risk that the U.S. dollar value of the Fund's foreign currency denominated
securities and other assets and liabilities will decline in value due to changes
in foreign currency exchange rates. All foreign currency forward contracts,
options and futures transactions are "marked-to-market" daily at the applicable
market rates and any resulting unrealized gains or losses are recorded in the
Fund's financial statements. Each Fund records realized gains and losses at the
time the forward contract is offset by entering into a closing transaction or
extinguished by delivery of the currency. The contractual amounts of forward
foreign currency exchange contracts does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered. As of July 31, 2000, the International Growth Fund had outstanding
foreign currency forward contracts as follows:
<TABLE>
<CAPTION>
Unrealized
U.S. Dollars Settlement Depreciation
Sold Foreign Currency Purchased Date at July 31, 2000
--------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 434,858 Japanese Yen (47,729,968) August 2000 $ 714
================================================================================
</TABLE>
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may differ from those estimates.
2. Fund Shares
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Innovation International Growth
--------------------------- ---------------------------
12/20/99 (commencement of 12/20/99 (commencement of
operations) through 7/31/00 operations) through 7/31/00
--------------------------- ---------------------------
Shares Amount Shares Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold:
Class A 1,094,867 $ 28,031,334 688,138 $16,789,418
Class B 1,515,026 39,404,769 291,764 7,292,298
Class C 1,858,190 44,893,290 306,615 7,652,475
Class R 424,389 8,990,362 623,340 12,873,536
----------------------------------------------------------------------------------
4,892,472 121,319,755 1,909,857 44,607,727
----------------------------------------------------------------------------------
Shares redeemed:
Class A (113,280) (2,721,654) (222,507) (5,355,338)
Class B (76,917) (1,798,217) (9,795) (241,683)
Class C (135,517) (3,156,576) (3,164) (76,201)
Class R (251,781) (7,918,950) (2,123) (49,306)
----------------------------------------------------------------------------------
(577,495) (15,595,397) (237,589) (5,722,528)
----------------------------------------------------------------------------------
Net increase 4,314,977 $105,724,358 1,672,268 $38,885,199
==================================================================================
</TABLE>
21
<PAGE>
Notes to Financial Statements (continued)
3. Securities Transactions
Purchases and sales of common stocks for the period December 20, 1999
(commencement of operations) through July 31, 2000, were as follows:
<TABLE>
<CAPTION>
Innovation International Growth
------------------------------------------------------------------------------------
<S> <C> <C>
Purchases $ 169,264,886 $ 61,361,093
Sales 74,742,586 26,908,478
====================================================================================
</TABLE>
At July 31, 2000, the identified cost of investments owned for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
Innovation International Growth
------------------------------------------------------------------------------------
<S> <C> <C>
$ 94,522,300 $ 34,452,614
====================================================================================
</TABLE>
4. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
for federal income tax purposes at July 31, 2000, were as follows:
<TABLE>
<CAPTION>
Innovation International Growth
------------------------------------------------------------------------------------
<S> <C> <C>
Gross unrealized:
appreciation $ 13,315,729 $ 3,887,634
depreciation (17,989,529) (4,210,679)
------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $ (4,673,800) $ (323,045)
====================================================================================
</TABLE>
5. Management Fee and Other Transactions with Affiliates
Under the Trust's investment management agreement with Nuveen Institutional
Advisory Corp. (the "Adviser"), each Fund pays an annual management fee, payable
monthly, which is based upon the average daily net assets of each Fund as
follows:
<TABLE>
<CAPTION>
Innovation International Growth
------------------------------------------------------------------------------------
<S> <C> <C>
For the first $125 million 1.0000% 1.0500%
For the next $125 million .9875 1.0375
For the next $250 million .9750 1.0250
For the next $500 million .9625 1.0125
For the next $1 billion .9500 1.0000
For net assets over $2 billion .9250 .9750
====================================================================================
</TABLE>
The Adviser may voluntarily agree to reimburse expenses from time to time, which
may be terminated at any time at its discretion.
22
<PAGE>
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Adviser has entered
into a Sub-Advisory Agreement with Columbus Circle Investors ("CCI") under which
CCI manages the investment portfolios of the Funds. CCI is compensated for its
services from the management fee paid to the Adviser. The Funds pay no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Fund from the Adviser.
During the period December 20, 1999 (commencement of operations) through July
31, 2000, Nuveen Investments (the "Distributor"), a wholly owned subsidiary of
The John Nuveen Company, collected sales charges on purchases of Class A Shares,
the majority of which were paid out as concessions to authorized dealers as
follows:
Innovation International Growth
------------------------------------------------------------------------------
Sales charges collected $ 243,750 $ 105,241
Paid to authorized dealers 218,715 93,370
==============================================================================
The Distributor also received 12b-1 service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the period December 20, 1999 (commencement of operations) through July
31, 2000, the Distributor compensated authorized dealers directly with
commission advances at the time of purchase as follows:
Innovation International Growth
------------------------------------------------------------------------------
Commission advances $ 1,650,773 $ 310,961
==============================================================================
To compensate for commissions advanced to authorized dealers, all 12b-1 service
fees collected on Class B Shares during the first year following a purchase,
all 12b-1 distribution fees collected on Class B Shares, and all 12b-1 service
and distribution fees collected on Class C Shares during the first year
following a purchase are retained by the Distributor. During the period December
20, 1999 (commencement of operations) through July 31, 2000, the Distributor
retained such 12b-1 fees as follows:
Innovation International Growth
------------------------------------------------------------------------------
12b-1 fees retained $ 277,249 $ 34,783
==============================================================================
The remaining 12b-1 fees charged to the Funds were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained CDSC on share redemptions during
the period December 20, 1999 (commencement of operations) through July 31, 2000,
as follows:
Innovation International Growth
------------------------------------------------------------------------------
CDSC retained $ 86,661 $ 3,235
==============================================================================
At July 31, 2000, the Distributor owned 1,250 shares of the International Growth
Fund's Class A, B, and C and The John Nuveen Company owned 496,250 shares of
Class R.
6. Composition of Net Assets
At July 31, 2000, the Funds had an unlimited number of $.01 par value per share
common stock authorized. Net assets consisted of:
Innovation International Growth
------------------------------------------------------------------------------
Capital paid-in $ 104,727,183 $ 38,708,184
Balance of undistributed net
investment income -- --
Accumulated net realized gain (loss)
from investment transactions and
foreign currency transactions (14,271,235) (2,999,179)
Net unrealized appreciation of
investments 9,597,434 2,594,128
Net unrealized gain (loss) on
translation of assets and liabilities
denominated in foreign currencies -- (707)
------------------------------------------------------------------------------
Net assets $ 100,053,382 $ 38,302,426
==============================================================================
23
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout the period December 20, 1999
(commencement of operations) through July 31, 2000:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ----------------------------
Innovation Net
Realized/
Beginning Net Unrealized Ending
Net Investment Investment Net Net Total
Year Ended Asset Income/ Gain Investment Capital Asset Return
July 31, Value (Loss) (Loss) Total Income Gains Total Value (a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/99)
2000 (d) $20.00 $(.26) $3.53 $3.27 $ -- $ -- $ -- $23.27 16.30%
Class B (12/99)
2000 (d) 20.00 (.37) 3.52 3.15 -- -- -- 23.15 15.70
Class C (12/99)
2000 (d) 20.00 (.37) 3.54 3.17 -- -- -- 23.17 15.80
Class R (12/99)
2000 (d) 20.00 (.21) 3.50 3.29 -- -- -- 23.29 16.45
===============================================================================================================
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
--------------------- --------------------- ---------------------
Ratio Ratio Ratio
Innovation of Net of Net of Net
Ratio of Investment Ratio of Investment Ratio of Investment
Expenses Income Expenses Income Expenses Income
Ending to (Loss) to to (Loss) to to (Loss) to
Net Average Average Average Average Average Average Portfolio
Year Ended Asset Net Net Net Net Net Net Turnover
July 31, (000) Assets Assets Assets Assets Assets Assets Rate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/99)
2000 (d) $22,838 1.97%* (1.89)%* 1.89%* (1.82)%* 1.86%* (1.79)%* 117%
Class B (12/99)
2000 (d) 33,288 2.72* (2.65)* 2.63* (2.56)* 2.60* (2.53)* 117
Class C (12/99)
2000 (d) 39,907 2.75* (2.68)* 2.60* (2.53)* 2.57* (2.50)* 117
Class R (12/99)
2000 (d) 4,020 1.87* (1.83)* 1.51* (1.47)* 1.48* (1.44)* 117
===============================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the period December 20, 1999 (commencement of operations) through
July 31, 2000.
24
<PAGE>
Selected data for a share outstanding throughout the period December 20, 1999
(commencement of operations) through July 31, 2000:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
------------------------------- ----------------------------
International Growth Net
Realized/
Beginning Net Unrealized Ending
Net Investment Investment Net Net Total
Year Ended Asset Income/ Gain Investment Capital Asset Return
July 31, Value (Loss) (Loss) Total Income Gains Total Value (a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/99)
2000 (d) $20.00 $(.15) $3.08 $2.93 $ -- $ -- $ -- $22.93 14.65%
Class B (12/99)
2000 (d) 20.00 (.25) 3.07 2.82 -- -- -- 22.82 14.10
Class C (12/99)
2000 (d) 20.00 (.24) 3.06 2.82 -- -- -- 22.82 14.10
Class R (12/99)
2000 (d) 20.00 (.12) 3.08 2.96 -- -- -- 22.96 14.80
===============================================================================================================
<CAPTION>
Class (Inception Date)
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------
Before Credit/ After After Credit/
Reimbursement Reimbursement (b) Reimbursement (c)
--------------------- --------------------- ---------------------
Ratio Ratio Ratio
International Growth of Net of Net of Net
Ratio of Investment Ratio of Investment Ratio of Investment
Expenses Income Expenses Income Expenses Income
Ending to (Loss) to to (Loss) to to (Loss) to
Net Average Average Average Average Average Average Portfolio
Year Ended Asset Net Net Net Net Net Net Turnover
July 31, (000) Assets Assets Assets Assets Assets Assets Rate
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (12/99)
2000 (d) $10,676 2.66%* (1.90)%* 1.82%* (1.05)%* 1.75%* (.99)%* 111%
Class B (12/99)
2000 (d) 6,435 3.41* (2.61)* 2.57* (1.76)* 2.50* (1.70)* 111
Class C (12/99)
2000 (d) 6,925 3.40* (2.58)* 2.58* (1.75)* 2.51* (1.69)* 111
Class R (12/99)
2000 (d) 14,265 2.58* (1.99)* 1.50* (.90)* 1.43* (.84)* 111
===============================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value without any sales charge
and are not annualized.
(b) After expense reimbursement from the investment adviser, where applicable.
(c) After custodian fee credit and expense reimbursement, where applicable.
(d) For the period December 20, 1999 (commencement of operations) through
July 31, 2000.
25
<PAGE>
Report of Independent Public Accountants
To the Board of Trustees and Shareholders of
Nuveen Investment Trust II
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Innovation Fund, and Nuveen International
Growth Fund (two of the portfolios constituting the Nuveen Investment Trust II
(a Massachusetts business trust)), as of July 31, 2000 and the related
statements of operations, the statements of changes in net assets, and the
financial highlights for the period from December 20, 1999 (commencement of
operations) through July 31, 2000. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 2000, by correspondence with the custodian and brokers. As
to securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the net assets of the Nuveen
Innovation Fund, and Nuveen International Growth Fund of the Nuveen Investment
Trust II as of July 31, 2000, the results of their operations, the changes in
their net assets, and the financial highlights for the period from December 20,
1999 (commencement of operations) through July 31, 2000 in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 20, 2000
26
<PAGE>
Notes
-----
27
<PAGE>
Notes
28
<PAGE>
Fund Information
Board of Trustees
James E. Bacon
Jack B. Evans
William T. Kissick
Thomas E. Leafstrand
Timothy R. Schwertfeger
Sheila W. Wellington
Fund Manager
Nuveen Institutional Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Investment Manager
Columbus Circle Investors
Metro Center
One Station Place
Stanford, CT 06902
Transfer Agent and
Shareholder Services
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 257-8787
Legal Counsel
Chapman and Cutler
Chicago, IL
Independent Public
Accountants
Arthur Andersen LLP
Chicago, IL
NASD Regulation, Inc. provides a Public Disclosure Program which supplies
certain information regarding the disciplinary history of NASD members and their
associated persons in response to either telephone inquiries at (800) 289-9999
or written inquiries at www.nasdr.com. NASD Regulation, Inc. also provides an
investor brochure that includes information describing the Public Disclosure
Program.
29
<PAGE>
Serving
Investors
For Generations
-------------------------------------------------------------------------
[PHOTO OF JOHN NUVEEN, SR. APPEARS HERE]
John Nuveen, Sr.
A 100-Year Tradition of Quality Investments
Since 1898, Nuveen Investments has been synonymous with investments that
withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
NUVEEN
Investments
Nuveen Investments
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
